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Tata cites RBI forex regulations over alleged non-payment to NTT Docomo

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Japanese telco NTT Docomo which operates Tata Docomo in India through a partnership with Tata Teleservices (TTL) has alleged that Tata is ‘not honoring’ payments of $1.17 billion in arbitral order from a London court, stating RBI regulations, as indicated by Economic Times. “Docomo does not think that Tata Sons has in truth shown its willingness to make the payment,” the Japanese telco said in a statement.

A spokesperson from Tata however denied these allegations and told MediaNama that the delay in payments was due to RBI’s foreign exchange regulations that prevents Tata from paying out the entire amount in a single transaction. “We have put the entire amount in a fixed deposit to the Delhi Court Registrar, which completely shows our commitment and intention to repay,” added the spokesperson

Tata Teleservices’ mounting losses: NTT Docomo had acquired a 26% stake in TTL for around $2.7 billion in 2008. The purchase didn’t go well for both parties as TTL posted losses of Rs 79.64 crore loss for the quarter ended December 31, 2015 (Q3 FY16), which is the telco’s 22nd straight loss making quarter. Following which, Tata was ordered to pay $1.17 billion in damages to NTT Docomo 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.

Note that Tata had approved an investment of Rs 3,000 crore into the company through redeemable preference shares last month, to revive the loss making telco unit.

While securing the arbitral order, NTT Docomo said in a statement that it took the case legally “after Tata Sons had failed to fulfill its obligation, despite DOCOMO’s repeated negotiations with Tata Sons regarding the sale of its entire stake in TTSL (Tata Teleservices).”

“As of the date of this press release, some matters remain uncertain, including whether Tata Sons will pay the awarded damages and when the delivery of TTSL’s shares will be made. Accordingly, DOCOMO is not able to predict how events will unfold,” NTT Docomo added.

To this, a Tata spokesperson said in statement:

Tata Sons wishes to clarify that it has in the past, as well as after the arbitral tribunal announced its award, invited DoCoMo to join it in representing this matter before the Reserve Bank of India (RBI) and the Ministry of Finance. In the meantime, we would caution against any stakeholders being misled by statements that are made in ignorance of India’s foreign exchange regulations.

Tata assets in London at stake

Interestingly, the ET report added that the London court order procured by NTT Docomo might allow the company to 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 this an ‘exparte order’ and NTT Docomo cannot use this route to secure the payment, as these assets are not direct ownership of Tata Sons. “These (Jaguar Land Rover) are subsidiaries of Indian public listed companies of which Tata Sons is a promoter with a minority shareholding of not more than 30% to 35%,” added the spokesperson.

Both companies are also fighting the case in Delhi HC, after NTT Docomo sought to apply the arbitrary order against Tata in India as well, and online filings (with Delhi HC) shows that a judgment is pending and could be delivered by August 30th. Tata had apparently produced a letter from RBI that explained delay in payments, although NTT Docomo reiterated that “It (RBI regulation) cannot be used to block payment from funds or assets outside India…Nor can it prevent enforcement against such assets of Tata outside India,” The Delhi HC has however set a deadline of August 30 for both companies resolute issues pertaining to the alleged non-payment, added the ET report.

Image Credits: Flickr user Brian Turner under CC BY 2.0

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