New Delhi, Japanese firm NTT DoCoMo today said the London arbitration court had found Tata Sons in breach of contractual obligations, and India, being a signatory to the New York Convention, is bound to enforce the USD 1.17 billion compensation award decision.
"The LCIA (London Court of International Arbitration) tribunal found that Tata Sons had breached its contractual obligations, which were legally capable of performance in ways that did not require permission from the RBI or Ministry of Finance," the Japanese telecom giant said in a statement.
The London-based tribunal last month ordered Tata Sons to pay DoCoMo USD 1.17 billion in compensation for breaching an agreement on India joint venture.
The statement comes at a time when the Finance Ministry has rejected RBI plea for exempting Tata-DoCoMo deal from the foreign exchange Act. The Ministry has taken the position that the two firms had entered into a share buyback contract in contravention of prevalent law and the case will now have to be legally settled.
DoCoMo, however, argued that "awards made in England by LCIA tribunals are recognised under the New York Convention, to which India was one of the original signatories on the 10th June 1958."
Hence, as a signatory to the New York Convention, "India is bound to enforce the award decision of the LCIA tribunal for Tata to pay USD 1.17 billion to DoCoMo", it said.
Also, the Japanese company said it was not aware of any recent decision from the Ministry of Finance on this matter since the award was issued by a tribunal of LCIA in favour of DoCoMo on June 22, 2016.
"...Docomo notes that the reports (news) cite correspondence between RBI and MOF from back in late 2014 and early 2015," it added.
NTT DoCoMo in November 2008 acquired 26.5 per cent stake in Tata Teleservices for about Rs 12,740 crore (at Rs 117 per share). This was as per a understanding that in case it exits the venture within five years, it will be paid a minimum 50 per cent of the acquisition price.
DoCoMo in April 2014 decided to exit the joint venture that struggled to grow subscribers quickly. It sought Rs 58 per share or Rs 7,200 crore from the Tatas.
But the Indian Group offered Rs 23.34 a share in line with RBI guidelines that states that an international firm can only exit its investment at a valuation "not exceeding that arrived at on the basis of return on equity".
The Japanese firm dragged Tata Group to international arbitration where it won a USD 1.17 billion award. To honour that award, an application was made to the RBI seeking exemption from the foreign exchange Act.
RBI, in turn, wrote to Finance Ministry for exemption from the rules as such a measure would boost investor confidence. The Finance Ministry, however, turned down RBI plea. According to the ministry, it's not only Tata-DoCoMo but many other legacy issues which will have to be given exemption if one case is allowed.