New Delhi: The Delhi high court on Friday is likely to pronounce its verdict on the ongoing legal dispute between Tata Sons and NTT Docomo regarding the enforcement of a $1.17 billion arbitration award.
The settlement terms, if approved by the court, will clear the way for the payment of $1.17 billion, which is already deposited by Tata Sons with the court, to Docomo, and would allow Docomo to transfer its shares in Tata Teleservices Ltd.
The verdict will have far-reaching implications not only for the stakeholders in the case, but on how India treats foreign investment and rules on tax laws. It will also help to define the role of the Reserve Bank of India (RBI) in the enforcement of an arbitral award where money is sought to be remitted outside India.
Both companies had reached a settlement concerning enforcement of the arbitration award in February itself and sought the court’s permission for transfer of funds under it.
The RBI had opposed the transfer of funds under mutual settlement between the companies and contended that permitting transfer of funds violated provisions of the Foreign Exchange Management Act (FEMA), 1999 and was against public policy.
The court in several hearings had asked the banking regulator to submit any rule, regulation or circular by Wednesday to establish its stand on anything coming in the way of transferring money under the award.
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 original agreement between Tata and NTT Docomo, 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.
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.
A London tribunal in 2016 ordered the promoter of major Tata operating companies to pay $1.17 billion as compensation to NTT DoCoMo in June for breaching the agreement. Thereafter, DoCoMo filed an enforcement proceeding before the Delhi high court.