Tata Sons’ attempts to call truce with Japanese telecom major NTT DoCoMo over a two-year-old legal dispute over the latter’s stake sale in the Tata-Docomo joint venture has been challenged before the Delhi High Court.
The RBI, which has previously rejected DoCoMo’s exit proposal, reiterated its 2014 norms that specified that foreign companies can only exit investments at a valuation based on the return on equity, and that norms set out by the central bank barred foreign companies from a stake sale ata price beyond it.
Tatas and NTT Docomo had jointly filed an application last month stating that they had reached an agreement to go with the $1.17-billion (Rs 7,800 crore approx) award given by London Court of International Arbitration.
NTT had informed court then that as per the agreement, it would not enforce the award within the next six months in any jurisdiction.
In April 2014, NTT DoCoMo had decided to sell its entire 26.5 per cent stake in Tata Teleservices and withdraw from mobile telephony in India.
The HC court, on its part, asked the RBI whether its permission was required if there was no other objection to the enforcement of the arbitral award in favour of NTT Docomo in its case with Tata Sons. The Tatas have already deposited the amount of $1.17 billion with the Delhi High Court.
"Is the RBI's special permission required for paying damages for failing to fulfill contractual obligations? Say yes or no. If yes, then quote the circular, regulation or rule under which permission is required. If not, then say no," Justice S Muralidhar said and added, "make your stand clear".
The central bank’s opposition came after Tata Sons and Docomo agreed on the enforceability of the award granted in favour of the Japanese telecom major by the London Court of International Arbitration (LCIA) in June 2016.
The RBI said it will submit its stand before the court on the next date of hearing on March 14.
In November 2009, Docomo had acquired a 26.5 per cent stake in Tata Teleservices for about Rs 12,740 crore. The agreement between the two stated that in case Docomo exited the venture within five years, it would be paid a minimum 50 per cent of the acquisition price through the purchase of its shares by a buyer who would be found by the Tatas.
The other option was the Tatas purchasing the shares at fair market value.
Consequently, in 2014, the Tatas had sought to buy back NTT's shares at the acquisition price of Rs 58.05 per share instead of the fair market value determined independently at Rs 23.34 per share.
The RBI, however, did not allow the sale, leading to the legal tussle.
