Tata-DoCoMo arbitration deal: RBI wants re-look, Delhi HC refuses to agree

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New Delhi | Published: March 15, 2017 5:54:19 AM

The RBI has told the Delhi High Court that it wants to have a another look at the joint settlement filed Tata Sons and its erstwhile Japanese telecom partner NTT DoCoMo for enforcement of the $1.17-billion arbitration award by the London Court of International Arbitration

The RBI has opposed the consent terms arrived at between Tata Sons and DoCoMo with regard to the enforceability of the award granted in favour of the Japanese telecom major by the LCIA in June 2016. (PTI)

The Reserve Bank of India (RBI) on Tuesday told the Delhi High Court that it wants to have a another look at the joint settlement filed Tata Sons and its erstwhile Japanese telecom partner NTT DoCoMo for enforcement of the $1.17-billion arbitration award by the London Court of International Arbitration (LCIA). Justice S Muralidhar, however, refused to agree with the RBI stand on revisiting the issue, saying “there is no point in going over it all over again”. “RBI has already undertaken the exercise (of looking into the award) twice over. It might be better to tell the court whether there is any statutory provision or regulation barring transfer of money overseas under the award,” the judge said, adding that while both companies had agreed on a settlement, the only issue left to be decided is whether the RBI saw any impediment in the transfer of money.

“We are asking you (RBI) specifically, do you foresee any impediment to the transfer of money under the arbitral award?” the judge asked, observing that the RBI cannot step into the enforcement of a private award.

The bench asked the central bank to submit any rule, regulation or circular by Wednesday to establish its stand on anything that comes in the way of the implementation of the award.

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The LCIA’s order on June 24 last year directed Tata Sons to pay $1.17 billion in damages for breach of contract on the grounds that the Indian group neither found a buyer nor bought back the Japanese partner’s 26% stake in their telecom joint venture Tata Teleservices.

Pursuant to the Japanese telco moving the HC for enforcement of the award, Tata Sons had deposited $1.17 billion (around Rs 7,750 crore) with the registrar of the high court.

Senior advocate Soli Sorabjee, appearing for the RBI, told the court that the bank would not press its application to intervene in the matter if it can take a fresh look into the award granted in favour of DoCoMo.

This contention was opposed by senior advocates Kapil Sibal and Darius Khambata, appearing for DoCoMo and Tata Sons, respectively.

The court also agreed with the companies contention saying the RBI cannot go round and round on the same issue.

The RBI has opposed the consent terms arrived at between Tata Sons and DoCoMo with regard to the enforceability of the award granted in favour of the Japanese telecom major by the LCIA in June 2016.

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The RBI has also contended that that the shareholding agreement between the two companies permitting transfer of funds abroad was illegal as it violated the Foreign Exchange Management Act (FEMA).

On February 28, Tata Sons and NTT DoCoMo had informed the high court, in a joint petition, that they have reached a settlement regarding enforcement of the arbitration award and would not oppose the RBI’s intervention in the case. Tata Sons also withdrew its objection to the award.

The Tata Group has agreed to pay $1.18 billion to DoCoMo to settle the dispute between them. As part of the settlement, both the parties would withdraw cases against each other, and the Japanese company would transfer its shares in Tata Teleservices, it said.

DoCoMo bought 20% equity in Tata Teleservices in 2009 for $2.7 billion after the Indian telco was granted a dual-technology licence that allowed CDMA-based operators to offer rival GSM-based services as well. The agreement had a clause that after three years the Japanese company could exit by selling its 26% stake in a public listing or a sale back to the Tata Group. The sale price was safeguarded at half of its original investment. However, the Tatas couldn’t uphold their part of the contract because of an RBI stipulation that no pre-agreement on price was acceptable for stake sales at a later date. The central bank instead said the price of any such sale must be at a market-determined rate.March 14

The Reserve Bank of India (RBI) on Tuesday told the Delhi High Court that it wants to have a another look at the joint settlement filed Tata Sons and its erstwhile Japanese telecom partner NTT DoCoMo for enforcement of the $1.17-billion arbitration award by the London Court of International Arbitration (LCIA).

Justice S Muralidhar, however, refused to agree with the RBI stand on revisiting the issue, saying “there is no point in going over it all over again”.

“RBI has already undertaken the exercise (of looking into the award) twice over. It might be better to tell the court whether there is any statutory provision or regulation barring transfer of money overseas under the award,” the judge said, adding that while both companies had agreed on a settlement, the only issue left to be decided is whether the RBI saw any impediment in the transfer of money.

“We are asking you (RBI) specifically, do you foresee any impediment to the transfer of money under the arbitral award?” the judge asked, observing that the RBI cannot step into the enforcement of a private award.

The bench asked the central bank to submit any rule, regulation or circular by Wednesday to establish its stand on anything that comes in the way of the implementation of the award.

The LCIA’s order on June 24 last year directed Tata Sons to pay $1.17 billion in damages for breach of contract on the grounds that the Indian group neither found a buyer nor bought back the Japanese partner’s 26% stake in their telecom joint venture Tata Teleservices. Pursuant to the Japanese telco moving the HC for enforcement of the award, Tata Sons had deposited $1.17 billion (around Rs 7,750 crore) with the registrar of the high court.

Senior advocate Soli Sorabjee, appearing for the RBI, told the court that the bank would not press its application to intervene in the matter if it can take a fresh look into the award granted in favour of DoCoMo.

This contention was opposed by senior advocates Kapil Sibal and Darius Khambata, appearing for DoCoMo and Tata Sons, respectively.

The court also agreed with the companies contention saying the RBI cannot go round and round on the same issue.

The RBI has opposed the consent terms arrived at between Tata Sons and DoCoMo with regard to the enforceability of the award granted in favour of the Japanese telecom major by the LCIA in June 2016.

The RBI has also contended that that the shareholding agreement between the two companies permitting transfer of funds abroad was illegal as it violated the Foreign Exchange Management Act (FEMA).

On February 28, Tata Sons and NTT DoCoMo had informed the high court, in a joint petition, that they have reached a settlement regarding enforcement of the arbitration award and would not oppose the RBI’s intervention in the case. Tata Sons also withdrew its objection to the award.

The Tata Group has agreed to pay $1.18 billion to DoCoMo to settle the dispute between them. As part of the settlement, both the parties would withdraw cases against each other, and the Japanese company would transfer its shares in Tata Teleservices, it said.

DoCoMo bought 20% equity in Tata Teleservices in 2009 for $2.7 billion after the Indian telco was granted a dual-technology licence that allowed CDMA-based operators to offer rival GSM-based services as well. The agreement had a clause that after three years the Japanese company could exit by selling its 26% stake in a public listing or a sale back to the Tata Group. The sale price was safeguarded at half of its original investment. However, the Tatas couldn’t uphold their part of the contract because of an RBI stipulation that no pre-agreement on price was acceptable for stake sales at a later date. The central bank instead said the price of any such sale must be at a market-determined rate.

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