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Tata Sons and NTT DOCOMO agree to settle $1.17 billion payment dispute

March 01, 2017
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Tata Sons and NTT DOCOMO have filed a joint application in the Delhi High Court saying they have decided to settle their two-year old dispute over their Indian telecom joint venture Tata Teleservices Limited (TTSL).

Tata Sons has told that the court that it has decided to withdraw its objections to the enforcement of the award of $1.17 billion granted by the London Court of International Arbitration (LCIA) in favour of DOCOMO in June 2016. Meanwhile, DOCOMO on its part has said that it will suspend its related enforcement proceedings in the UK and the US for a period of six months.

The high court will now hear the case on March 8, 2017 when it will also take up the Reserve Bank of India's (RBI) plea seeking to intervene in the matter. RBI has sought to intervene in the matter contending that that the shareholding agreement between the two companies permitting transfer of funds abroad was illegal as it violated Foreign Exchange Management Act (FEMA) Regulations.

In November 2009, DOCOMO had acquired a 26.5 per cent stake in TTSL for about Rs 127.4 billion. The two companies had also agreed that in case DOCOMO exits the venture within five years, it will be paid a minimum 50 per cent of the acquisition price through the purchase of its shares by a buyer who would be found by Tata. Else, Tata would take over DOCOMO’s shares at half the original value of investment.

DOCOMO exercised its exit option in 2014. However, Tata was unable to find a buyer for DOCOMO’s stake in TTSL for 50 per cent of the acquisition price, which came to around Rs 58.45 per share. Moreover, DOCOMO also declined to accept the fair market value of Rs 23.44 per share that DOCOMO was willing to pay as per the shareholding agreement.

Subsequently, LCIA asked Tata to pay $1.17 billion in to DOCOMO for alleged breach of the agreement. DOCOMO them moved the Delhi High Court for enforcement of the award after Tata cited refusal of permission by RBI to make the payment.

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