The Delhi High Court today upheld the award of USD 1.17 billion damages to be paid to Japanese telecom major NTT Docomo by Tata Sons for its failure to find a buyer for the foreign company's stake in their joint venture.
The court said the award can be enforced in India and no special permission from the Reserve Bank of India (RBI) was required.
Justice S Muralidhar, in his verdict, also rejected the RBI's plea to intervene in the matter, saying it was not a party to the award.
"In the absence of a provision that expressly provides for it, the question of permitting RBI to intervene in such proceedings to oppose enforcement does not arise," the court said.
It said "if neither of the parties has any objection to the enforcement of the award, and the court finds no impediment to its enforcement, then the award which takes a view on the requirement of RBI's permission will be enforceable as such. RBI will be bound by such determination and cannot refuse permission".
The RBI, during the proceedings, had contended that once it had denied special permission for transferring the money overseas, the issue had attained finality.
It had said that till date, its decision has not been challenged.
Rejecting its argument, the court said as long as the award stands, there is no need for any special permission of the RBI for remission by the Tatas of the amount awarded to Docomo as damages.
"The refusal by RBI of such permission which is not required in the first place, or the fact that such refusal has not been challenged, would therefore not affect the enforceability of the award," the judgement held.
Docomo and Tata had gone for arbitration as the Indian company was not able to find a buyer for the Japanese telecom major's 26.5 per cent stake in their joint venture, Tata Teleservices Ltd (TTSL), when it exited from it.
The LCIA in June 2016 awarded damages of USD 1.17 billion in favour of Docomo for Tata's inability to find a buyer as per the shareholding agreement.
Docomo had moved the Delhi High Court for enforcement of the award after Tata cited refusal of permission by the RBI to make the payment.
Later the two companies entered into a settlement agreement to settle their two-year-old dispute regarding TTSL with the Indian company withdrawing its objections to the enforcement of the award.
Under the terms of the settlement, the Japanese company had said it will "suspend its related enforcement proceedings in the United Kingdom and the United States" for a period of six months. RBI had opposed the settlement agreement.
The court, however, upheld the terms of consent of the settlement arrived at between the two companies regarding enforcement of the award of damages by the London Court of International Arbitration (LCIA).
It said there was nothing in the terms which can be said to be contrary to any provision of Indian law "much less opposed to public policy or void or voidable under the Indian Contract Act (ICA)".
The court, in its 41-page verdict, said that an Indian company honouring its commitment under a contract with a foreign entity will have a bearing on Tata's goodwill and reputation in the international arena.
It said that Tata's actions will "indubitably" also have an impact on the foreign direct investment inflows and the strategic relationship between the countries where the parties to a contract are located.
The court also said that FDI inflows and strategic relationships with other countries are factors that have to be kept in view when examining whether the enforcement of an award would be consistent with the public policy of India.
The court disagreed with the RBI regarding its claim that the shareholding agreement between the two companies was illegal, saying it was not void or opposed to any Indian law including the Foreign Exchange Management Act or the ICA.
It said the LCIA had "rightly held" that the shareholders agreement was legally capable of performance without the special permission of the RBI.
"There is nothing in the Shareholding Agreement (SHA) as interpreted by the Award that renders it void or voidable under the Indian Contract Act (ICA) or opposed to either the public policy of India or the fundamental policy of Indian law," it said.
The RBI had opposed the award as it was of the view that the amount was the price of the shares held in TTSL by Docomo.
The court did not agree with this contention of the Indian central bank saying what was awarded to Docomo were damages and not the price of the shares.
"The order that the share scrips must be returned to Tata was only incidental and, in fact, Docomo itself was not interested in retaining the share scrips," it said.
"It is not open to RBI to re-characterise the nature of the payment in terms of the award to which there is no longer any opposition from Tata..," it added.
The court also gave directions with regard to remittance of the amount to Docomo and the return of shares to Tata.
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