Truce between Tata and Docomo, Delhi HC to decide on RBI's objections
Published: Mar 01, 2017
By TIOLCORP News Service
NEW DELHI, MAR 01, 2017: TATA Sons has announced that in the interests of putting an end to a dispute that had arisen with NTT DOCOMO, Japan, and in the larger national interest of preserving a fair investment environment in India, it has reached an agreement with NTT DOCOMO on a joint approach to enable enforcement of the June 22, 2016, London Court of International Arbitration (LCIA) award. As a gesture of good faith and in accordance with the Tata group's long-standing record of adherence to contractual commitments, the board of Tata Sons has decided to withdraw its objections to the enforcement of the award in India.
The parties have jointly applied to the Delhi High Court, requesting that it accept their agreed terms of settlement, subject to such further orders as the Court sees fit. The settlement terms, if approved by the Delhi High Court, clear the way for the $1.18 billion already deposited by Tata Sons with the Delhi High Court to be paid to DOCOMO, and would allow DOCOMO to transfer its shares in Tata Teleservices Limited. As part of this joint application, and in anticipation of the matter being finally resolved in India, DOCOMO has agreed to suspend its related enforcement proceedings in the United Kingdom and the United States for a period of time.
This agreement between the parties is a significant step towards resolution of this dispute, and both Tata Sons and DOCOMO are hopeful that they will continue to work together constructively to achieve a resolution of this case as well as will look to further collaboration in the future.
However, the High Court will have to adjudicate RBI's objections to Tata's application to buy back Docomo's stake at Rs58.5 a share.
The central bank, according to its 2014 norms that specified that foreign companies can only exit investments at a valuation based on the return on equity, rejected Docomo's exit proposal.
In January 2015, NTT initiated arbitration proceedings against Tata Sons, claiming the latter failed to fulfil its obligation to find a buyer for Docomo's stake in Tata Teleservices Ltd.
In April 2014, NTT Docomo had decided to sell its entire 26.5% stake in Tata Teleservices and withdraw from mobile telephony in India. Under the agreement between Tata and NTT, the latter had the right to request a buyer for its stake at a fair market price or 50% of its acquired price, amounting to Rs7,250 crore, whichever was higher. That would have meant a higher price than what is allowed under current rules which state that foreign companies can only exit investments at a valuation based on the return on equity.
A London tribunal had ordered the promoter of major Tata operating companies to pay $1.17 billion as compensation to NTT Docomo in June for breaching an agreement. Thereafter, Docomo filed an enforcement proceeding before the Delhi high court. It also approached London's Commercial Court seeking enforcement action assets such as Jaguar LandRover and Tata Steel, which it argued, are controlled by Tata Sons.
The Delhi High Court will next hear the Tata NTT DoCoMo case on 8 March.
