New Delhi/Mumbai: India’s finance ministry has asked a federal agency to probe if a deal by Tata Sons Ltd. to sell a stake in its wireless unit for about $2.5 billion to NTT Docomo Inc. violated the nation’s foreign exchange rules, people familiar with the matter said.
The Enforcement Directorate (ED) will probe if the transaction, which took place in 2009, breached India’s Foreign Exchange Management Act, the people said, asking not to be identified as the matter is private. Tata Sons in an e-mail said it wasn’t aware of any referral to the directorate. Under the deal, Docomo has the right to request a buyer for its stake in Tata Teleservices Ltd. at a fair market price or 50% of its acquisition cost, whichever is higher.
Indian authorities say Docomo can only sell its stake at a “fair value.” Accumulated losses at Tata Teleservices mean Docomo’s stake is valued at less than 50% of the acquisition cost. In June, the London Court of International Arbitration ordered that Tata Sons pay $1.17 billion to the Japanese wireless carrier for failing to uphold the contract.
“The shareholders’ agreement between Tata Sons and Docomo is governed by the laws of India and there is an express clause in the agreement under which parties had undertaken not to take any action or have any right which would violate the applicable law,” Tata Sons said in the e-mailed response to queries. “No remittance of foreign exchange has taken place. Enforcement of the award is currently pending adjudication before the Delhi high court and London’s Commercial Court.”
The ED is a specialized investigation agency in the finance ministry focused on foreign exchange and anti-money laundering laws. Finance ministry spokesman D. S. Malik couldn’t be reached for comment. Docomo’s external press office couldn’t immediately comment.
Tata has deposited $1.17 billion with the Delhi high court to show its intent to pay the amount, subject to Indian rules. Bloomberg