Asia & Australia

May 03, 2017

Delhi HC Rejects RBI Plea, Clears $1.17 Billion Arbitration Award Between Tata Sons And NTT Docomo Inc.

Tata Sons, NTT Docomo Inc.

On April 28, Justice S. Muralidhar of the Delhi High Court rejected the Reserve Bank of India (RBI) intervention, paving the way for enforcement of $1.17 billion arbitration award passed by the London Court of International Arbitration (LCIA).

The court cleared the way for enforcement of the $1.17 billion arbitration award between Tata Sons and NTT Docomo Inc.

Accordingly, Tata Sons Ltd can proceed with the transfer of the amount to Docomo, and subsequently the Japanese firm can transfer its shares in Tata Teleservices Ltd to Tata Sons. The amount of $1.17 billion has already been deposited by Tata Sons with the court.

In 2009, Docomo entered India with an investment of $2.2 billion in Tata group’s Tata Teleservices for a 26.5% stake in the venture.

Related to this, a shareholder agreement (SHA) was entered into on March 25, 2009 between the two parties. The SHA states that in the event of Docomo’s exit from the venture within five years, Tata would be obligated to find a buyer who would purchase the Japanese Company’s shares in Tata Teleservices at a price equivalent to the fair value of those shares as on March 31 2014, or 50% of the price at which Docomo purchased its shares, whichever would be higher.

In January 2015, Docomo initiated arbitration proceedings in London against Tata Sons, claimed that Tata Sons failed to fulfil its obligation to find a buyer for Docomo’s stake in Tata Teleservices.

The LCIA awarded damages of USD 1.17 billion in favour of Docomo for Tata Son’s inability to find a buyer as per the SHA and stated that performance of the agreement did not necessarily require special permission from the RBI because certain methods of performance were already covered by general permissions.

After that Docomo approached the Delhi High Court for the enforcement of the Arbitral Award after Tata Sons refused to make the payment citing RBI’s refusal to give permission to transfer the funds.

At the same time, the RBI also filed an interim application seeking intervention in the matter, which was allowed by the Court.

However, in February 2017, Tata Sons withdrew its objections to the enforcement of the award and agreed to make the payment.

Through Advocate C. Mukund, RBI said that as the impugned Award requires remission of money to an entity outside India, RBI’s role cannot be negated. It was further stated that the agreement violated Section 9 of FEMA and was also hit by Section 23 of the Indian Contract Act and the award sought to be enforced was opposed to the public policy of India.

Whereas, Senior Advocate Kapil Sibal appearing for Docomo categorically said that “RBI had no locus standi to intervene or object to the enforcement of the Award in question. He submitted that entertaining such an objection at the instance of an entity which was not a party to the Award would itself be opposed to the fundamental policy of Indian law.”

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