Delhi High Court Reserves Judgement On $1.17-Billion Tata-Docomo Settlement

The Delhi High Court on Wednesday reserved its decision on the $1.17-billion arbitral award to be paid by Tata Sons Ltd. to its erstwhile Japanese telecom partner NTT Docomo Inc., even as the Reserve Bank of India (RBI) maintained its objection to allowing the payout.

Senior advocate Kapil Sibal, appearing for Docomo, said since both the parties involved have no objection to the award by the London Court of International Arbitration (LCIA), the RBI does not have the right to oppose it. Tata Sons and Docomo told the court that it was an award for damages and doesn’t need the banking regulator’s permission.

Justice S Muralidhar, who presided over the hearing, questioned if the RBI had the right to intervene as only the parties involved in arbitration can object to enforcement of an award. And if it is allowed to intervene, which rule or law can the RBI bring on record that could impede the transaction, the bench asked.

The central bank’s counsel C Mukund said that the award is contrary to India’s public policy stated under the arbitration Act and, therefore, cannot be enforced. Under the Act, the court can refuse to allow enforcement of a foreign award if it is in conflict with the public policy.

Tata Sons and NTT Docomo had informed the high court on February 28 that they have reached a settlement regarding enforcement of the $1.17 billion arbitration award by the LCIA. To that effect, Tata Sons also withdrew their objection to the award. Both companies however, said they would not object to RBI filing an intervention plea in the matter regarding any possible violation of foreign investment rules.

The RBI later opposed the consent terms. Not satisfied with its reasons, the court gave RBI time to bring on record any rules or circulars which could impede the transaction.

The high court on March 9 questioned if the RBI's permission was needed after the two companies had reached a settlement, and whether the central bank had the power to overrule an arbitral award. The court on March 14 denied the central bank permission to re-examine the matter, saying the RBI had already gone through the process twice.

The settlement, if approved by the court, will clear the way for the $1.17 billion already deposited by Tata Sons with the court to be paid to Docomo, and would allow the Japanese company to transfer its shares in Tata Teleservices Ltd.

NTT Docomo had 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 the 2009 agreement.

Docomo had moved the high court to enforce the LCIA arbitral award it won in June last year. The arbitral tribunal had directed Tata Sons to pay $1.17 billion to NTT Docomo as compensation for breaching the agreement.

The dispute between the two companies had continued even as the RBI said the payment would violate foreign investment rules.

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