Tata Sons said it has agreed to pay Japanese telecom firm NTT Docomo USD 1.18 billion to settle the 2-year old dispute over their Indian telecom joint venture.
In a statement, Tata Sons said it has reached an agreement with NTT Docomo “on a joint approach to enable enforcement” of June 22, 2016, compensation award granted by the London Court of International Arbitration (LCIA) in favour of the Japanese company.
“As a gesture of good faith and in accordance with the Tata Group’s long-standing record of adherence to contractual commitments that it has always enjoyed both in India and abroad, the board of Tata Sons has decided to withdraw its objections to the enforcement of the award in India,” it said.
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The parties have jointly applied to the Delhi High Court, requesting that it accept their agreed terms of settlement, subject to such further orders as the court sees fit, it said.
In September last year, Tata Sons had filed an objection in the high court seeking to prevent enforcement of the arbitration award of USD 1.17 billion.
Tata Sons said that as per the agreement, the settlement terms, if approved, “clear the way for the USD 1.18 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 Ltd”.
“As part of this joint application, and in anticipation of the matter being finally resolved in India, Docomo has agreed to suspend its related enforcement proceedings in the United Kingdom and the United States for a period of time,” it added.
Tata Sons further said: “This agreement between the parties is a significant step towards resolution of this dispute, and both Tata Sons and Docomo are hopeful that they will continue to work together constructively to achieve a resolution of this case as well as will look to further
collaboration in future.”
The promoter of the major operating Tata companies further said it took the decision in the interest of putting an end to the dispute and also “in the larger national interest of preserving a fair investment environment in India”.
The handling of the dispute with Docomo was one of the major issues between Tata Sons and its ousted chairman Cyrus Mistry, whose camp stated that “insinuations that the issue was handled in a manner inconsistent with Tata culture and values are baseless”.
NTT Docomo, in November 2008, acquired 26.5 per cent stake in Tata Teleservices for about Rs 12,740 crore (at Rs 117 per share), offering services under the Tata Docomo brand.
This was as per an understanding that in case the Japanese partner exits the venture within five years, it will be paid a minimum 50 per cent of the acquisition price.
Docomo in April 2014 decided to exit the joint venture that struggled to grow subscribers quickly. It sought Rs 58 per share, or Rs 7,200 crore, from the Tatas.
The Indian group, however, offered Rs 23.34 a share in line with RBI guidelines that states that an international firm can only exit its investment at a valuation “not exceeding that arrived at on the basis of return on equity”.
The Japanese firm then dragged Tata Sons to international arbitration where it won a USD 1.17 billion award. To honour that award, an application was made to the RBI seeking exemption from the Foreign Exchange Act.
The RBI, in turn, wrote to the finance ministry for exemption from the rules as such a measure would boost investor confidence. The finance ministry, however, turned down the plea.
According to the ministry, it is not only Tata-Docomo but many other legacy issues that will have to be given exemption if one case is allowed.