Tatas reiterate stance in court, say want to but can’t pay Docomo


NEW DELHI | MUMBAI: Tata Sons reiterated its stand in the Delhi High Court that its intent of paying a guaranteed value to NTT Docomo for the shares the Japanese firm owned in their telecom joint venture was prohibited by India’s foreign exchange regulations.

On Wednesday, Tata Sons’ lawyer told the court that though the company had got an initial approval from the Reserve Bank of India to pay the full value to Docomo, it was subsequently turned down by the finance ministry. He said despite requests from Tata Sons to jointly take up the matter with the central bank and the government, Docomo refused to be part of the discussions.

“We’re committed to perform our obligation, and we even solicited your (Docomo’s) cooperation before we made the application to RBI (for seeking special approval),” Darius Khambata said.

The court was hearing a petition filed by Docomo seeking enforcement of a $1.2 billion arbitration award in the company’s favour after it alleged Tatas of breaching their deal over the joint venture, Tata Teleservices.

Docomo had acquired a 26.5% stake in Tata Teleservices for about Rs 12,740 crore in November 2009 and the partners agreed that if the Japanese company exited the venture within five years, it would be paid a minimum 50% of the acquisition price. The value of Tata Teleservices subsequently fell significantly below the agreed valuation. The RBI ruled that the option was not valid under new rules and that the payment would have to be made at fair market value.

While the Japanese company won the arbitration, the Tata Group’s position is that it can’t pay because of the local law that doesn’t allow such payment under the terms of a joint venture agreement entered into several years ago.
Youll never buy furniture again!Rentomojo An Aussie tour deal that you cannot say no toTourism Australia Recommended By Colombia

Hearing of the case will continue on February 2, where submissions from both Tata and Docomo side will take place.

In the previous hearing, on December 1, the RBI had filed an intervention to make itself a party to the dispute, following which the court issued notices to both parties. The RBI said it did not support either party, adding that the share valuation that Docomo expected from Tata was not permissible by law. The central bank also questioned the validity of the original contract.

Tata’s counsel said the RBI had initially agreed to approve the payment on the original terms of the contract, inferring that the contract was indeed legal. However, he said “instructions from client” would be required on whether the group would oppose or agree to the RBI becoming party to the case.

Justice S Murlidhar observed that if there was an indemnity clause, then Tatas should abide by it, and told its legal counsel that the manner in which the application to the RBI was written could have prompted a negative response.

Khambata, in turn, said the central bank was shown all options for payment — indemnity and payment through overseas subsidiary — to honor the agreement, but was not allowed.

The high court also questioned in its observations the government and RBI’s decisions of not allowing the transaction, adding that the government’s stand didn’t appear to be consistent, since the Foreign Investment Promotion Board had given approval for the deal with the knowledge of the terms.

“If all this is refused, how do they envisage foreign investment in India,” he asked during the two-hour-long submission by Tatas.