BackIndia govt may block Tata arbitration payment to DoCoMo
FT reports DoCoMo has served a court order against Tata Sons which allows it to enforce arbitration deal against Tata Sons' assets in the UK
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Mumbai: India plans to block Tata Sons Ltd’s payment of a $1.17 billion arbitration award to NTT DoCoMo Inc., which is seeking compensation for its stake in the Indian conglomerate’s wireless business, said people familiar with the matter.
The finance ministry won’t grant an exemption to the Indian foreign exchange act that Tata Sons Ltd would need to pay the money to its Japanese partner, according to the people. The government is wary of setting a precedent, as at least 10 other companies have sought waivers for similar deals, one of the people said, asking not to be identified as the information is private.
Japan’s NTT DoCoMo has meanwhile threatened to seize the Tata group’s London assets such as its steel plants or a slice of Tata-owned Jaguar Land Rover Plc to enforce the London arbitration court’s order, The Financial Times reported Thursday.
NTT DoCoMo is seeking compensation for its stake in Tata Teleservices Ltd as it tries to exit one of its worst overseas investments.
The London Court of International Arbitration ordered last month that Tata Sons, the holding company for India’s largest conglomerate, pay $1.17 billion to NTT DoCoMo for breaching an agreement over the wireless venture. The Japanese firm’s agreement with Tata Sons gives it the right to request a buyer for its stake at a fair market price or 50% of its acquisition cost, whichever is higher. That formula yields a greater price than what’s allowed by current Indian regulations, which state that foreign companies can only exit investments at a valuation based on the return on equity.
If the government blocks the transfer, NTT DoCoMo plans to take all available steps to recover the money from Tata Sons wherever the Indian company does business, one person said. A spokesperson for the finance ministry didn’t respond to calls to his mobile phone seeking comment. A representative for Tata Sons didn’t immediately reply to an e-mail seeking comment on the government’s plan.
NTT DoCoMo will take “various measures" to pursue the arbitration payment, Yousuke Oowada, a spokesman for NTT DoCoMo, said in an e-mailed response to questions.
The RBI rejected on 25 July an application for the transfer of the funds, a decision NTT DoCoMo thinks is “unfair," he said. A representative for RBI didn’t immediately respond to an e-mail seeking comment.
The London court order allows the Japanese company to enforce the arbitration deal against Tata Sons’s assets in the UK “as if it were a judgment", the FT report said. Tata Sons termed the FT report as speculative and said such a possibility does not exist. “DoCoMo has obtained an ex parte order from the Commercial Court in London for permission to enforce the award in the UK. Because the order was obtained ex parte Tata’s arguments have not yet been heard," a Tata Sons spokesman said.
“We would like to clarify that the London Commercial court has granted Tata Sons a period of 23 days, starting July 27th, 2016, to apply to set aside the ex parte order," the spokesperson said.
The spokesman said the arbitral award cannot be enforced until the end of that period, or until any application made by Tata has been decided upon.
“Further, the UK assets of Tata Steel and Jaguar Land Rover are not owned by Tata Sons. These are subsidiaries of Indian public listed companies of which Tata Sons is a promoter with a minority shareholding of not more than 30% to 35%. These companies are not party to the arbitration proceedings, and no award has been issued against them. It follows that the award cannot be enforced against those companies," the spokesperson said. Bloomberg
P.R. Sanjai of Mint contributed to this story.
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