HC hangs up on RBI protest, lets Tatas pay Docomo $1.18b
NEW DELHI/MUMBAI: The Delhi High Court allowed Tata Sons to pay NTT Docomo a $1.18 billion arbitration award upon termination of their telecom joint venture, likely ending a prolonged corporate battle that had cast a shadow on Indo-Japanese economic ties.
The court dismissed the Reserve Bank of India’s intervention in the dispute after the central bank failed to back its opposition to the transaction on grounds that it would amount to a transfer of shares in violation of the law.
The award of June 22, 2016, passed by an arbitration court in London is “declared as enforceable in India and shall operate as a deemed decree of this court“, Justice S Muralidhar of the Delhi High Court said on Fri day in a 41-page order that was seen by ET.
. 8,750 The court will retain the ` crore ($1.36 billion) already deposited by Tata Sons until the parties get approval from the Competition Commission of India and obtain the withholding tax certificate. Docomo, which is seeking enforcement of an ag reement to be paid a guaranteed amount for its stake while exiting the Tata Teleservices joint venture, will nominate an authorised dealer for the remittance of the award, plus interest, legal and arbitration costs, to a designated bank account, after tax deduction.
“It is a watershed moment for foreign investments in India,“ said Subodh Prasad Deo, a partner at law firm Sai Krishna & Associates. “This will go a long way in boosting investor confidence and assuring them that their in vestments are safe. This very clearly establishes that the Indi an legal system is robust and ef ficient in ensuring that stake holders’ investments are safe and sound.“
Tata Sons welcomed the high court’s order and said the two parties are taking steps to implement the ruling. “The court noted that the shareholders’ agreement and the arbitration award were not opposed to any provision of Indian law or public policy. The consent terms too were not contrary to any Indian law, the order stated,“ Tata Sons said in a statement.
The Tatas added that the court held that “Tata Sons honouring its commitment `will have a bearing on its goodwill and reputation in the international arena’“ and will encourage foreign direct investment inflows and the strategic relationship between the countries where the parties to a contract are located.
Sources close to Docomo said the ruling is of significance for foreign investment in India because it shows that Indian courts will recognise their international obligations and enforce an award within months. Hoping that the final resolution will not be delayed by an appeal, Docomo said acceptance of the judgment will make this a landmark case, boosting investor confidence in India’s legal system.
RBI is discussing its options and an appeal to the Supreme Court hasn’t been ruled out for the moment, said a person familiar with the central banks plans.
Justice Muralidhar said in the order that Tata Sons will transfer Docomo’s stake in Tata Teleservices to itself andor its nominees.“Docomo is bound by its undertaking regarding keeping the other enforcement proceedings instituted by it against Tata elsewhere under suspension and to ultimately withdraw them, subject to compliance by Tata,“ he ruled.
The court said the award shall stand “fully and finally satisfied and discharged“ after Docomo receives the funds and its shares are credited to Tata.
“BOOST FOR FDI“
“The court has taken a strong stand that the regulator’s contrary view is not a public policy for it to refuse enforcement of an award in an international arbitration. This is a big boost for FDI (foreign direct investment),“ said Jayesh H, cofounder of Juris Corp, a law firm.
“This is very important,“ said HP Ranina, a senior advocate of Supreme Court, explaining that the ruling upheld the sanctity of an international arbitration award. “You cannot ride roughshod over them because otherwise we will have serious problems attracting investments.“
As per to HR Khan, former RBI deputy governor, litigation on such matters may not end unless there is a framework to deal with issues of shareholder returns.
“Dynamics of business are such that there are many who would like to exit at some point of time and would like to have some return. Point of view was to take a balance and put out a framework, which gives them a return, but not a very high return,“ said Khan.
Docomo has been fighting Tata Sons over the right to sell its stake in the Indian wireless venture for at least half the original value, as per terms of the 2009 agreement. In April 2014, Docomo decided to sell its entire 26.5% in Tata Teleservices and withdraw from mobile telephony in India.
