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Docomo moves US district court against Tata Sons

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Japanese telco NTT Docomo, which has a partnership with Tata Teleservices and operates Tata DoCoMo, has moved to a United States district court to force Tata Group to pay the $1.17 billion in arbitrary order from a London court for breach of contract, reports India Live Today.

Docomo said that it would continue to ‘seek enforcement globally until it receives the full amount due’, while Tata Sons maintains that it will resist enforcement in India, and in any other jurisdiction that Docomo files for enforcement.

Tata cites RBI regulation for non-payment

NTT Docomo secured the arbitration from London Court of International Arbitration in June. Tata on the other hand resisted the enforcement of the arbitration award in India, stating 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,” a spokesperson told MediaNama in August.

While securing the arbitrary 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).” 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 if Tata failed to meet certain obligations.

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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 either party as TTL posted losses of Rs 79.64 crore loss for the quarter ended December 31, 2015 (Q3 FY16), which was the telco’s 22nd straight loss making quarter.

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

Case in the Delhi HC: 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. 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.”

Image Credits: Flickr user Brian Turner under CC BY 2.0

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