The Reserve Bank of India on Wednesday put a spanner in the recent settlement of a long-running bitter dispute between Tata Teleservices and Japan’s NTT DoCoMo, opposing the terms of consent between both the companies, which would have facilitated remission of $1.2 billion payout due to the Japanese firm by Indian telecom operator.
The RBI reportedly told the Delhi High Court that the arbitral award by the London court cannot be enforced in the current form, as the ‘put’ clause in the Tata-DoCoMo agreement was illegal, and that the remission of money from Tata Teleservices to DoCoMo involves transfer of shares under an illegal agreement, TV news channels reported.
The Delhi High Court, on its part, asked the central bank to clarify by March 14 if it has powers to oppose an arbitral award. The court has asked RBI to clarify if the company even needs its permission when it’s willing to pay the money.
The RBI is reportedly of the view that allowing the consent terms between Tata and DoCoMo may set a precedent and have ramifications on other disputes.
Earlier last week, Tata Teleservices said it has agreed to end an over two-year-old bitter spat with Japanese telecom firm NTT DoCoMo over $1.2-billion payout.
Tata Teleservices, a group company of India’s largest business house Tata Sons, and its former telecom joint venture partner NTT DoCoMo told the Delhi High Court that both the companies have agreed to settle their dispute, with the former withdrawing its objection to a London-based arbitration court’s award of damages in favour of the latter.
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NTT DoCoMo had exited equity shareholding in Tata Teleservices in March 2014, after a continuous fall in the value of its 26% stake in the Indian telecom services operator. However, the fair value of Tata Teleservices at the time of DoCoMo’s exit at Rs 23 per share was sharply lower than the sell option price of Rs 58 per share agreed at the time of its entry.
While DoCoMo insisted on exercising its sell option at the agreed upon price, the Reserve Bank of India intervened and disallowed Tata Sons from buying shares at Rs 58/share, saying that the sale at the option price would violate Indian foreign exchange rules under a new amendment.
Following this, DoCoMo proceeded to initiate arbitration in a London court, which awarded $1.17 billion in damages to DoCoMo to be recovered from Tata Sons. The Tata group on its part, under the chairmanship of Cyrus Mistry, expressed its inability to abide by the arbitration award citing RBI mandate.
In the filing to the Delhi High Court, Tata and DoCoMo have reportedly submitted that the companies would not oppose RBI intervention in settlement terms. Instead, both were learned to have proposed a way out which would allow Tata Sons to pay the entire $1.17 billion to DoCoMo, without violating the foreign exchange rules as set by the RBI.