RBI opposes $1.17 bn Tata-DoCoMo settlement

The Reserve Bank of India on Wednesday opposed the $1.17 billion deal pact between Tata Sons Ltd and Japan's NTT DoCoMo in connection with the termination of a joint venture in the country.

The two companies that had made a joint application in the Delhi High Court to resolve the matter had the hearing yesterday.

Steady with its earlier decisions in February 2015 and July 2016, RBI told the court that Tata Sons cannot pay DoCoMo despite the arbitration in a London court in June 2016.

The Central Bank's argument was that the settlement would amount to transferring of shares, which would be illegal.

Justice S Murlidhar questioned if the RBI could oppose the award's enforcement, considering both the companies have agreed to settle the dispute through the payment, to which the RBI said it would submit its stand in court at the next hearing on March 14.

The Apex bank fears that the Japanese firm may pursue the $1.7 bn award enforcement in US and UK if it doesn't succeed in India.

However, the court called this argument "absurd" and reminded that "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, reported by the Economic Times.

The payment to NTT DoCoMo has been on the hold because the RBI regulations do not allow any sale of shares at a predetermined price except at market value.

But the Tatas have already deposited the amount with the Delhi High Court's registrar.

The RBI twice sought government's advice over the matter asking for an exception to DoCoMo's case, but the government said that providing an exception to one company would open up other cases.

Further, the judged probed the RBI counsel: Is this (opposition to the agreement between Tata and Docomo) an independent stand, or is this advised by the government of India?

The RBI counsel did not respond to this comment.

Tata Teleservices and DoCoMo formed a telecoms partnership in 2009.

In the event of an exit, that deal guaranteed DoCoMo the higher of either half its original investment, or its fair value.

When DoCoMo decided to get out in 2014, Tata Sons was unable to find a buyer for the Japanese firm's stake and offered to buy the stake itself, for half DoCoMo's investment of $2.2 billion.

India's central bank blocked Tata Sons' offer, saying a rule change the previous year prevented foreign investors from selling stakes in Indian firms at a pre-determined price.

DoCoMo took the case to a London court and won the arbitration. Tata Sons was asked to pay a penalty of $1.17 billion, which it has deposited with the Delhi High Court in the Indian capital, where the case is being heard.