The Delhi High Court today asked the RBI whether its permission was required if there is no other objection to the enforcement of the USD 1.17 billion arbitral award in favour of Japanese telecom major NTT Docomo in its case with Tata Sons.
"Is RBI's special permission required for paying damages for failing to fulfil contractual obligations? Say yes or no. If yes, then quote the circular, regulation or rule under which permission is required. If not, then say no," Justice S Muralidhar said and added, "make your stand clear".
The query from the court came as the RBI opposed the consent terms arrived at between Tata Sons and Docomo with regard to the enforceability of the award granted in favour of the Japanese telecom major by the London Court of International Arbitration (LCIA) in June 2016.
The RBI said it will submit its stand before the court on the next date of hearing on March 14.
Tata has already deposited the amount of USD 1.17 billion with the Delhi High Court.
Tata and Docomo have decided to settle their two-year old dispute regarding their telecom joint venture, Tata Teleservices Ltd (TTSL), with the Indian company withdrawing its objections to the enforcement of the award.
The Japanese company in turn has said it will "suspend its related enforcement proceedings in the United Kingdom and the United States" for a period of six months.
The Reserve Bank of India (RBI) has objected to the consent terms saying if Docomo fails to succeed in enforcement of its award in India, it cannot say it will try and enforce it in some other jurisdiction after six months.
The court, however, disagreed with the contention and termed it "absurd". It said that if Docomo does not succeed here, it can take the award for enforcement of the award to the US or the UK and "RBI has no jurisdiction outside India".
"How can you object to enforceability anywhere else in the world? If they (Tata) have assets anywhere else, they (Docomo) can move a court there for the enforcement of the award. There is no law prohibiting it," the judge said.
The judge said "all I will say is that objections to enforceability of the award stand withdrawn. ... So it won't be a precedent as I have not adjudicated on the correctness of the tribunal's ruling.
The court asked RBI whether it will still say that
special permission was required for remission of the award amount if the central bank fails to succeed in its intervention application filed in the matter.
RBI has sought to intervene in the matter contending that that the shareholding agreement between the two companies permitting transfer of funds abroad was illegal as it violated Foreign Exchange Management Act (FEMA) Regulations.
Tata, in the past, has been consistently maintaining that while it has every intention to pay the arbitral award to Docomo, it has been unable to do so due to lack of permission from RBI.
The issue pertains to Docomo's exit from the joint venture, TTSL, for alleged breach of agreement by the Tatas and the subsequent enforcement of the damages awarded by LCIA in favour of the Japanese company for it.
The matter had gone to arbitration as Tata was unable to find a buyer for Docomo's 26.5 per cent stake in TTSL for 50 per cent of the acquisition price, which came to around Rs 58.45 per share, and the Japanese company was not willing to accept the "fair market value" of Rs 23.44 that the Indian company was willing to pay as per the shareholding agreement.
Under the agreement between the two companies, either Tata had to find a buyer for Docomo's shares at 50 per cent of acquisition price or buy its shares at fair market value, both leading to transfer of funds outside India, which RBI has termed as illegal.
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 through the purchase of its shares by a buyer who would be found by Tata.
The other option was Tata purchasing the shares at fair market value.
LCIA had awarded the damages in favour of Docomo for Tata's alleged breach of the agreement regarding buying of the Japanese company's stake on its exit.
Docomo moved the Delhi High Court for enforcement of the award after Tata cited refusal of permission by RBI to make the payment.
Docomo in an affidavit had said that RBI's permission was not required for paying the damages.
