Disappointed with lack of cooperation from DoCoMo, says Tata Sons
Tata Sons Ltd said on Sunday that Japan’s NTT DoCoMo was not cooperating in finding an amicable solution to ending their partnership.
The two companies are locked in a tussle over Tata Sons’s payment of $1.17 billion compensation to NTT DoCoMo for breaching an agreement over the duo’s wireless venture. A London arbitration court had imposed this award on 22 June, after which NTT DoCoMo filed an enforcement proceeding before the Delhi high court.
“We have been disappointed with the lack of cooperation from our partner in arriving at an amicable resolution. Despite several attempts on our part, our partner has refused to come together with us to engage the government and the regulator on the issue,” said Tata Sons in an emailed statement.
In April 2014, NTT DoCoMo had decided to sell its entire 26.5% stake in Tata Teleservices and exit India.
Under their agreement, DoCoMo had the right to request a buyer for its stake at a fair market price or 50% of its acquired price, amounting to Rs.7,250 crore, whichever was higher. That would have meant a higher price than what is allowed under current Reserve Bank of India rules, which state that foreign companies can only exit investments at a valuation based on the return on equity.
The promoter of major Tata operating companies said on 29 July it had deposited the $1.17 billion in a fixed deposit favouring the Delhi high court registrar after RBI denied its request to remit the money to DoCoMo. At that time, the court had given both companies time till 30 August to find a mutually acceptable solution.
RBI’s rejection, for the second time, seems to have been based on the fact that the London award looked like enforcement of the original contract (pay money, transfer shares) and the court didn’t consider Indian law.
The award “requires Tata Sons to pay to Docomo, damages of $1,172 million upon tender of shares held by Docomo in Tata Teleservices Limited, together with interest, arbitration costs and legal costs,” said Tata Teleservices in a 25 June stock exchange filing.
“Incidentally, perusal of the award dated 22 June 2016 given by the LCIA (London Court of International Arbitration) reveal that tribunal has not decided on the contested issue arising out of FEMA (Foreign Exchange Management Act) Regulations,” said RBI’s 25 July letter to Tata Sons.
“Thus, it is clear that LCIA is also cognizant of the fact that the SHA (shareholder’s agreement) was structured in such a manner that its compliance would entail contravening the provisions of FEMA,” it added.
On Friday, Tata Sons filed an affidavit in the Delhi high court, objecting to the enforcement of the award saying that it contravenes Indian laws. Its statement said the affidavit was in line with the position it has taken all along.
“Tata Sons is committed to honouring our contractual obligations to NTT Docomo, in compliance with Indian regulations and law. There is a judicial process that is underway and we need to pay due heed to the laws that bind us all,” the statement said.
“Docomo is unfortunately confusing our intent to pay with what is legally payable by us. Tata’s intent is to pay but within the confines of the law,” the statement added.
A DoCoMo spokesperson couldn’t be immediately reached for comment.
Late on Friday, a DoCoMo statement said the Tata affidavit “directly contradicts its statements of intent to meet its payment obligations”.
“The award by the LCIA (London Court of International Arbitration) is internationally recognized, including by India, and there is no reason to delay,” said an emailed statement from DoCoMo.
The fight between the Tatas and NTT DoCoMo dates back to January 2015 when the Japanese company placed a request for pursuing 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.
The next hearing in the Delhi high court case is scheduled for 5 October.