New Delhi (Agencies): Union Law Minister Veerappa Moily on Thursday formally announced the annulment of deal between Antrix, the commercial arm of the Indian space agency ISRO, and private company Devas on the allocation of S-band spectrum.

The Cabinet Committee on Security (CCS), chaired by Prime Minister Manmohan Singh, decided to annul the contract Antrix, the commercial arm of ISRO, had entered into with Devas Multimedia underwhich it was to lease out 90 per cent transponders on two of ISRO's satellites GSAT-6 and GSAT-6A.

"The Agreement for the lease of space segment capacity on ISRO/Antrix S-Band spacecraft by Devas Multimedia Pvt. Ltd. entered into between Antrix Corporation and Devas Multimedia Pvt. Ltd. on 28th January, 2005 shall be annulled forthwith," announced Law Minister Veerappa Moily after the meeting.

He said when the question of strategic requirement arises, the government cannot give S-band spectrum even to Antrix for commercial use.

"We have thoroughly examined this matter and ultimately we have come to the conclusion that under provisions of the agreement and the law governing that, it can be annulled," he said when asked whether the impact of the decision was discussed by the CCS.

Under the agreement signed in January 2005, Devas was to lease transponder capacity from the two satellites at a cost of USD 300 million (approximately Rs 1350 crore) spread over 12 years.

According to some estimates, the deal was heavily undervalued, which triggered uproar with the Opposition parties attacking Prime Minister Manmohan Singh, who is directly incharge of the Department of Space, over selling the precious spectrum to a private firm cheaply.

Devas Multimedia had yesterday threatened to move court if the government took any unilateral decision to terminate the deal.

"Even if they go to court, they are not likely to succeed," Moily said when asked whether the government was ready to face the legal challenges put up by Devas.

Mistake committed in deal: Antony

Joining issues on the deal, Defence Minister A K Antony told reporters today that a "mistake" was committed in reaching the deal without consulting the defence forces as S-Band spectrum was mainly for the strategic forces in which the country's three services got a major stake.

S-Band was a "very precious asset for us" and has to be given to the armed forces, paramilitary and other strategic forces, he said, adding that it was unfortunate that earlier they were not consulted at that time by those who took the decision (to enter into the deal) and added in the future the first
priority would be for the strategic forces and strategic organisations.

After news reports about the possible revenue loss appeared, the Government and ISRO said the project was already under review and action has been initiated for termination of the contract.

Deal was never operationalised: PM

The Prime Minister said yesterday that the deal had never been operationalised and rejected suggestions that his office had held "backroom" talks with Devas after the Space Commission's recommendation to scrap the deal.

He had said that if there has been delay in scrapping the deal, this has been "only procedural".

A brief official statement said there has been an increased demand for allocation of spectrum for national needs, including for the needs of defence, para-military forces, railways and other public utility services as well as
for societal needs.

"Having regard to the needs of the country's strategic requirements, the Government will not be able to provide orbit slot in S band to Antrix for commercial activities, including for those which are the subject matter of existing contractual obligations for S band," Moily said reading out from the
statement.
 
He said resorting to the force majeure clause of the agreement was one of the options before the government to cancel the deal.

The Law Ministry, in its opinion given on June 18, 2008, had made it clear that in event of termination Antrix shall be required to reimburse Devas all the upfront capacity reservation fees and corresponding service taxes received till that date.

The Agreement provided for an up-front capacity reservation fee of USD 20 million per satellite and annual lease charges starting at USD 9 million per satellite.

There are also penalty charges to be paid by Antrix in case of late delivery of satellite or performance failures/service interruptions.

Devas has so far made a payment of Rs 58.37 crore as upfront capacity reservation fee for the two satellites.

The launch of GSAT 6 has already been delayed by at least two years and ISRO Chairman K Radhakrishnan had said that the satellite was yet to be integrated.

Cong welcomes annulment

Meanwhile Congress on Thursday welcomed the annulment of the S-Band spectrum deal between ISRO's commercial arm Antrix and Devas Multimedia, saying that the decision was taken in national interest amid apprehensions about loss to the exchequer.

"If goverment has taken a decision in its wisdom in the national interest, it should be welcomed by all. If there were apprehensions that there will be loss to national exchequer with this deal, the decision (of scrapping it)
should be welcomed by all," party spokesperson Shakeel Ahmed
told reporters.

He also reacted strongly to Gujarat Chief Minister Narendra Modi's scathing attack on Prime Minister Manmohan Singh saying his remark on Amit Shah was the "biggest joke of 2011".

CBI quizzes Essar Group CEO

Continuing with its probe into the 2G scam, the CBI today questioned Essar Group CEO Prashant Ruia in connection with the alleged role of the company with Loop Telecom which got licences in 21 circles in January 2008.

His questioning comes a day after ADAG Chairman Anil Ambani was called to the CBI in connection with its probe into the 2G scam as the agency has to inform the Supreme Court by March 1 about the beneficiaries in the case.

According to official sources, Ruia was quizzed about the alleged association of Essar with Loop Telecom which came under scanner in the CBI case registered in October 2009.

The Essar CEO was called amid allegations that Loop Telecom acted as a front company for Essar which has nearly 33 per cent stake in Vodafone-Essar joint venture.

If the allegation were found to be true, it would make Loop Telecom ineligible to get telecom licences. As per the guidelines, the threshold of cross-holding is below 10 per cent.