New Delhi: Tata Sons and NTT Docomo Inc. told the Delhi high court on Tuesday that they have reached a settlement agreement concerning enforcement of an arbitration award on the Tata DoCoMo issue.

“Tata Sons withdraws objections to enforcement of the arbitration award in favour of NTT Docomo," Darius Khambatta, senior advocate representing Tata told the court. He also said that NTT Docomo, as per the agreement, would not enforce the award within the next six months in any jurisdiction.

Both Tata Sons and NTT Docomo have objected to the Reserve Bank of India’s (RBI) statement before the court terming the exit agreement as illegal.

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However, the high court will have to adjudicate RBI’s objections to Tata’s application to buy back Docomo’s stake at Rs58.5 a share.

The central bank, according to its 2014 norms that specified that foreign companies can only exit investments at a valuation based on the return on equity, rejected Docomo’s exit proposal.

In January 2015, NTT initiated arbitration proceedings against Tata Sons, claiming the latter failed to fulfil its obligation to find a buyer for Docomo’s stake in Tata Teleservices Ltd.

In April 2014, NTT Docomo had decided to sell its entire 26.5% stake in Tata Teleservices and withdraw from mobile telephony in India. Under the agreement between Tata and NTT, the latter had the right to request a buyer for its stake at a fair market price or 50% of its acquired price, amounting to Rs7,250 crore, whichever was higher. That would have meant a higher price than what is allowed under current rules which state that foreign companies can only exit investments at a valuation based on the return on equity.

A London tribunal had ordered the promoter of major Tata operating companies to pay $1.17 billion as compensation to NTT Docomo in June for breaching an agreement. Thereafter, Docomo filed an enforcement proceeding before the Delhi high court. It also approached London’s Commercial Court seeking enforcement action assets such as Jaguar LandRover and Tata Steel, which it argued, are controlled by Tata Sons.

“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," said Tata Sons in an emailed statement.

The settlement terms, if approved by the Delhi High Court, clear the way for the $1.18 billion already deposited by Tata Sons with the Delhi High Court to be paid to Docomo, and would allow Docomo to transfer its shares in Tata Teleservices Ltd, the statement added.

Tata Sons had all along maintained that while it was willing to pay NTT Docomo what it owned the company according to their agreement, Indian laws prevented it from doing so.

“This joint application is a successful result from recent discussions between Docomo and Tata Sons under the leadership of Ratan Tata, the former chairman of Tata Sons, which are ongoing. Today’s agreement is a significant step towards resolution of this dispute, and Docomo is hopeful that the two parties will continue to work together constructively to achieve a resolution," said a statement from NTT Docomo.

The statement added that receiving the full payment will enable Docomo to consider reinvestment of a part of it in India under a new cooperative relationship with Tata Sons. “Docomo believes that such relationship could become a paradigm for India-Japan economic ties," the statement said.

The Economic Times first reported on Tuesday that the two sides may find a way to do this now without flouting Indian laws.

Tata Sons chairman emeritus Ratan Tata was keen that the group stick to its agreement with the Japanese telecom firm and was not happy with the stalemate the dispute seemed to have reached before the courts.

Former chairman Cyrus Mistry’s handling of this dispute was reportedly one of the reasons for Tata’s growing displeasure with him—which eventually resulted in his ouster as chairman of Tata Sons on 24 October.

The Delhi high court will next hear the Tata NTT DoCoMo case on 8 March.

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