Tata, Docomo dispute inches closer to resolution
Both companies have agreed to follow the verdict by the London Court of International Arbitration in June 2016, but RBI rules could upset their plans.
The long pending dispute between India’s largest conglomerate Tata Group and Japan’s NTT Docomo moved closer to resolution with both companies announcing that they have reached an agreement over NTT DoCoMo’s efforts to exit the Tata Teleservices joint venture.
The dispute was over Tata paying $1.17 billion to Docomo for the Japanese company’s 26% stake in Tata Teleservices.
Both parties told the Delhi High Court that they have reached a settlement based on an arbitration award by the London Court of International Arbitration (LCIA) in June 2016, reported the Financial Express.
However, the final resolution of the dispute and eventual payment by Tata to Docomo hinges on what stand the government, Reserve Bank of India (RBI), and the high court takes on the matter. Tata has not specified how it would get around the RBI’s rule that allows only fair market valuation of shares and prevents any pre-determined valuation.
Though the RBI twice sought the advice of the government on an exception to the rule in Docomo’s case, the government disagreed, stating that providing an exception to one firm would open up several other similar cases, the Financial Express reported.
“The settlement terms clear the way for the $1.17 billion already deposited by Tata Sons with the court to be paid to Docomo, and would allow Docomo to transfer its shares in Tata Teleservices, Inc,” the Japanese firm said in a statement. It also said the settlement will enable it to “consider reinvestment of an amount in India, under a new cooperative relationship with Tata Sons”.
NTT Docomo had entered into a joint venture with TTSL in 2009 for $2.7 billion and in April, 2014, Docomo decided to sell its entire 26% stake in Tata Teleservices because the agreed upon parameters could not be met.