The Reserve Bank of India (RBI) has stepped in and filed itself as a party in the ongoing arbitration case between Japanese telco NTT Docomo and Tata Sons, reports Economic Times. Following this, the Delhi HC has issued notices to both Tata and NTT and questioned the role of RBI in the case.
The court said that it will decide on RBI’s inclusion in the case after it hears responses from both NTT and Tata on 21st December.
NTT Docomo holds a 26% stake in the joint venture Tata Docomo in India with Tata Teleservices (TTL). After the venture started posting continuous losses, TTL was ordered to pay $1.17 billion in damages to NTT by a London court in June. The terms of agreement between both companies provides an option for the acquirer (NTT Docomo) to request a suitable buyer for at least 50% of the acquired price.
Tata cites RBI regulation for non-payment
Although NTT maintains that Tata is not ‘honoring’ the payment of $1.7 billion, Tata had earlier denied these allegations in August. Tata added that the delay in payments was due to RBI’s foreign exchange regulations that prevents it from paying out the entire amount in a single transaction. The company claimed to have deposited the entire amount with the Delhi Court registrar after it received the arbitrary order. Following these developments, NTT moved a United States district court last month to force Tata to pay the $1.17 billion in arbitrary order from the London court.
In yesterday’s hearing, the RBI told the court that the shareholding agreements between TTL and NTT do not permit the entire amount to be transferred to a foreign company, as it apparently violated the Foreign Exchange Management Act, according to this PTI report. “”It is not a question of permission, it is prohibition,” the lawyer representing RBI said during the hearing. RBI’s lawyer also requested intervention for the case.
Tata assets in London at stake
Earlier NTT said that it would continue to ‘seek enforcement globally until it receives the full amount due’, while Tata Sons maintained that it will resist enforcement in India, and in any other jurisdiction that NTT files for enforcement. In August, while procuring the London court order, NTT was examining whether it could seize Tata’s UK assets, including Jaguar Land Rover, a unit of Tata Motors, for recovering the $1.17 billion payout. However the Tata spokesperson told MediaNama that NTT cannot use this route to secure the payment, as the UK assets were not under direct ownership of Tata Sons.