RBI seeks to intervene in Tata-NTT Docomo case in HC

The Reserve Bank of India (RBI) today sought to intervene in the ongoing litigation in Delhi High Court between Tata Sons and Japanese telecom major NTT Docomo over the enforcement of a USD 1.17 billion arbitral award in favour of the foreign company.
The London Court of International Arbitration (LCIA) had made the award in favour of Docomo for Tata's alleged breach of an agreement over their telecom joint venture (JV), Tata Teleservices Ltd (TTSL).
In November 2009, Docomo had acquired 26.5 per cent stake in TTSL for about Rs 12,740 crore. The two had also agreed that in case Docomo exits the venture within five years, it will be paid a minimum 50 per cent of the acquisition price.

Under the shareholding agreement between the two, Tata was obligated to find a buyer for Docomo's shares in TTSL if the Japanese company exited, the condition the Indian company is alleged to have breached.
As per Tata, when it asked for RBI's approval for payment of the damages, the central bank of the country had said the option was not valid and any payment would have to be made at fair market value.
Docomo had then moved Delhi High Court for enforcement of the award.

The lawyer for RBI today told Justice S Muralidhar, before whom the matter was listed, that it wanted to be heard also, but the plea was objected to by Docomo.

The court then asked RBI to file an application seeking intervention and listed the matter for hearing on December 1.
Tata Sons' lawyer, meanwhile, told the court it had filed a formal rejoinder "dealing with and denying certain specific false and incorrect allegations made by Docomo" for the first time in a recent affidavit filed by Japanese firm.
Tata, in its reply, has said that Docomo has "wrongly, falsely and irresponsibly alleged" that the Indian company misrepresented to RBI the nature of payment to be made to the Japanese company under the award and urged the court to refuse enforcement of the award.

In its short affidavit, Tata has also denied Docomo's
contention that the shares in TTSL had no realisable value and the Japanese company had already tendered its stake in the JV as required under the award.
Tata also denied "Docomo's assertion that RBI's special permission is not required to comply with or enforce the award".
Docomo, in its recent affidavit, has said that RBI's permission was not required for paying the damages and that it has tendered its shares to Tata, "so there is no impediment to Tata paying the damages".
The Japanese company has also said that LCIA's direction to tender the shares to Tata "does not change the nature of the award from one of damages to an allegedly impermissible share sale".

It has further said that non-residents can transfer shares to non-residents and for this, RBI's permission was not required. Therefore, Tata's "primary obligation" to find a buyer "was capable of performance" as such a transaction was not prohibited under FEMA regulations.
Docomo has said in its affidavit that Tata never contended that its contractual obligation to find a buyer was invalid or would require special RBI permission. Rather it had argued before LCIA that it had no absolute obligation to find a buyer, the Japanese company has claimed.
"According to Tata, if it did not find a buyer, its obligation to do so disappeared and it moved to the second part of the contractual clause, whereby its obligation was only to buy the shares itself at the agreed upon sale price (50 per cent of the value paid by Docomo), or find a buyer at any price," Docomo has said.