Tata Sons, Docomo Agree To Settle Arbitration Dispute, Companies Inform Delhi High Court
Tata Sons Ltd. and its estranged Japanese telecom partner NTT Docomo Inc. on Tuesday filed a joint petition, informing the Delhi High Court that they have reached a settlement agreement regarding enforcement of an arbitration award by the London Court of International Arbitration (LCIA).
NTT Docomo has been fighting Tata Sons over the right to sell its stake in the Indian wireless venture for at least 50 percent of the original investment, as per the terms of its original agreement. It had moved Delhi High Court to enforce an order it won in June last year from the LCIA, which ruled Tata should pay $1.17 billion to NTT Docomo as compensation for breaching the agreement.
The dispute between the two companies continued as the Reserve Bank of India (RBI) had signalled the payment Docomo sought would violate foreign investment rules.
On Tuesday, Tata Sons and NTT Docomo informed the high court that they would not oppose the RBI’s intervention in this case.
RBI’s lawyer SM Vivek Anand said he will seek instructions from the central bank on this and inform the court.
Justice S Muralidhar, who presided over the case, has adjourned the hearing till March 8.
Both companies issued statements later in the day saying they have agreed to a settlement to enable the enforcement of the London court’s ruling.
“As a gesture of good faith and in accordance with the Tata group’s long-standing record of adherence to contractual commitments that it has always enjoyed both in India and abroad, the Board of Tata Sons has decided to withdraw its objections to the enforcement of the Award in India,” Tata Sons said in statement.
It added that as part of the joint application filed by both the companies, and in anticipation of the matter being finally resolved in India, Docomo has agreed to suspend its related enforcement proceedings in the U.K. and the U.S. for a period of time.
NTT Docomo said in its statement that the joint petition is the result of recent discussions with Tata Sons under the leadership of Ratan Tata.
"The settlement terms clear the way for the $1.17 billion already deposited by Tata Sons with the court to be paid to Docomo, and would allow Docomo to transfer its shares in Tata Teleservices, Inc,” the statement added.
Full satisfaction of the award through the Delhi High Court’s judgment will enable Docomo to consider reinvestment of an amount in India, under a new cooperative relationship with Tata Sons. Docomo believes that such relationship could become a paradigm for India-Japan economic ties.NTT Docomo Statement
In 2009, Japanese entity NTT Docomo acquired a 20 percent stake in Tata Teleservices Ltd. under the agreement that in the event that NTT exercised a sale option to exit the Tata Teleservices investment, Tata Communications Ltd. and Tata Power Company Ltd. would acquire the shares held by NTT, in the same proportion as the shares it sold to NTT.
In June 2014, when NTT decided to use the exit option, it had the right to sell Tata Teleservices shares back to Tata Sons and the seven Tata group companies at 50 percent of the acquisition value or the fair market value, whichever was higher.
On June 30, 2014 the fair market value of Tata Teleservices stood at Rs 23.34 per share, much less than 50 percent of the acquisition price or Rs 58.05 per share. Tata Sons agreed to buy NTT’s stake in Tata Teleservices at Rs 58.05 per share and sought the permission of the Reserve Bank of India (RBI). At the time, the central bank’s regulation did not permit an Indian promoter to buy back, from foreign investors, shares in an unlisted Indian company at pre-determined prices. Any such buyback was only permitted at fair market value.
In October 2016, RBI entered the dispute as a third party, stating that the payout to NTT Docomo will be in violation of the foreign direct investment rules. The finance ministry maintained the RBI’s stance in the matter. Tata Sons, on the other hand, has already deposited $1.17 billion in a fixed deposit favouring the Delhi High Court.