The Delhi High Court today reserved its verdict on Japanese telecom major NTT Docomo's plea to enforce the USD 1.17 billion damages awarded to it for breach of contract by Tata Sons with regard to their joint venture TTSL.
Justice S Muralidhar in his judgement will also decide whether the intervention application of the RBI, opposing the award as well as the settlement arrived at between Tata and Docomo, was maintainable.
The court as well as Tata and Docomo were of the view that only those who were party to an arbitration can object to the award.
The court questioned the maintainability of the RBI's plea to intervene in the matter when it was not a party to the arbitration between Tata and Docomo.
Docomo and Tata had gone for arbitration as the Indian company was not able to find a buyer for the Japanese telecom major's 26.5 per cent stake in their joint venture, Tata Teleservices Ltd (TTSL), when it exited from it.
Under the shareholding agreement between them, on Docomo's exit from the venture within five years, Tata was to find a buyer who would purchase the Japanese company's stake at minimum 50 per cent of the acquisition price, which came to around Rs 58.45 per share.
The other option was Tata purchasing the shares at fair market value, which was Rs 23.44. However, this was not acceptable to Docomo and it had opted for arbitration.
Thereafter, the London Court of International Arbitration (LCIA) in June 2016 had awarded damages of USD 1.17 billion in favour of Docomo for Tata's inability to find a buyer as per the shareholding agreement.
Docomo had moved the Delhi High Court for enforcement of the award after Tata cited refusal of permission by the RBI to make the payment.
The RBI, during today's arguments, contended once it denied permission for transferring the money overseas, the issue had attained finality. It said that till date its decision has not been challenged.
During the arguments, Docomo's lawyers said that the
amount being sent overseas was in lieu of the damages and not for transfer of shares by way of sale.
Tata's lawyers argued that earlier the RBI was not opposed to grant of special permission for transfer of the money and it was only now the bank was saying that award was inconsistent with the Foreign Exchange Management Act (FEMA) Regulations.
Tata said that allowing Docomo to take back 50 per cent of their investment would send a good signal to other foreign companies to invest in India.
The RBI, in its intervention application, had contended that the shareholding agreement was illegal and has objected to the award of damages. It has said that Docomo's shares in TTSL be purchased only at the fair market value.
The central bank had later also opposed the settlement arrived at between Tata and Docomo.
Under the settlement agreement between the two companies, Tata and Docomo have decided to settle their two-year-old dispute regarding TTSL with the Indian company withdrawing its objections to the enforcement of the award. Tata has already deposited USD 1.17 billion with the high court.
The Japanese company in turn has said it will "suspend its related enforcement proceedings in the United Kingdom and the United States" for a period of six months.