New Delhi: The Delhi high court on Wednesday reserved its judgment in the Tata Sons-NTT Docomo dispute regarding enforcement of a $1.17 billion arbitral award in favour of the Japanese telco, which has been opposed by the Reserve Bank of India (RBI).
Both companies had reached a settlement concerning enforcement of the arbitration award and sought the court’s permission for transfer of funds under it.
RBI’s lawyer, C. Mukund told the court that mutual settlement between the companies permitting transfer of funds violated provisions of the Foreign Exchange Management Act (FEMA), 1999 and was against public policy.
This contention was, however, repeatedly questioned by Justice S. Muralidhar, who asked the regulator to point out reasons for the court to allow it to intervene in the matter.
“Can the court suo motu (on its own) allow such an intervention, considering you are not a party in the matter? Is it your contention that for every arbitral award where money is remitted outside India, RBI would have the right to intervene?" Justice Muralidhar asked RBI.
RBI’s intervention was opposed by both Tata and DoCoMo through their respective counsels.
Appearing for DoCoMo, lawyer Kapil Sibal told the court that RBI’s objection should be rejected as the regulator was challenging the pricing aspect and not the agreement between the companies.
“Any objection now or at a later stage is against the fundamental law of the country. It is a decree which should be enforced and cannot be objected to by the RBI," Sibal added.
On Tuesday, the court 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.
The settlement terms, if approved by the court, will clear the way for the $1.17 billion already deposited by Tata Sons with the court to be paid to DoCoMo, and allow the Japanese company to transfer its shares in Tata Teleservices Ltd.
On 28 February, Tata and Docomo informed the court they had reached a settlement on the Tata DoCoMo issue. (http://bit.ly/2mHOBYn)Subsequently, RBI opposed the consent terms.
Not satisfied with the reasons for its objections, given that neither Tata Sons nor DoCoMo had objected to the arbitral award, the court had given RBI time to bring on record any rules or circulars which could impede the transaction.
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 their 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 DoCoMo initiated arbitration proceedings against Tata Sons, claiming the latter had failed to fulfil its obligation.
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.