Senior advocate Darius Khambata, on behalf of Tata, said, “Tata Sons withdraws its objections to the enforcement of the arbitration award in favour of NTT DoCoMo.”
The settlement came within days of the Tata group getting a new chairman in N Chandrasekaran, following the ouster of Cyrus Mistry last year.
According to a statement by Tata Sons, the company had reached the settlement as a gesture of good faith in accordance with its longstanding record of adherence to contractual commitments.
As part of the understanding, DoCoMo has agreed not to press for enforcement of the award in any other court for six months, within which the two companies
are expected to resolve the issue in line with the terms of the settlement.
According to a NTT DoCoMo statement, the settlement terms clear the way for the payment of $1.18 billion, already deposited by Tata Sons.
It will allow DoCoMo to transfer its shares in Tata Teleservices.
“Today’s agreement is a significant step towards the resolution of this dispute, and DoCoMo is hopeful that the two parties will continue to work together constructively to achieve a resolution. Full satisfaction of the award through the Delhi High Court’s judgment will enable DoCoMo to consider reinvestment of an amount in India, under a new cooperative relationship with Tata Sons,” the statement said.
The two-year-long arbitration proceedings between the two companies relates to a dispute over Tata Sons inability to buy back NTT DoCoMo’s 26 per cent share in their joint venture (JV) Tata Teleservices, as had been initially agreed upon by the two groups in their JV agreement.
According to the terms of the JV, NTT DoCoMo had been allowed the option of exiting the venture after three years at a pre-determined share price, which were to be bought by Tata Sons or an external buyer to be arranged by the JV partner.
In 2014, after the collaboration consistently failed in generating the desired returns, NTT DoCoMo decided to exercise its exit option at a time when the share price of Tata Teleservices had plummeted far below the earlier agreed exit agreement. Unable to find a buyer, Tata Sons made an application to the Reserve Bank of India (RBI) to purchase the shares according to the terms of the venture.
RBI refused the application on the ground that such a transfer could not be made at a pre-determined share price on a later date, according to the existent foreign exchange and securities regulations.
The deadlock resulted in the international arbitral proceedings. LCIA ruled in favour of DoCoMo on June 22 last year.
After the award, Tata had approached RBI once again for permission to comply with the terms of the adjudication, but this application was also rejected by the regulator, leading to the current proceedings in the Delhi High Court.
With the announcement of this settlement between the two companies, the only hurdle that remains is the objection made by RBI before the court. This will be heard by Justice Muralidhar on March 8, the next date of hearing.
Timeline of events in the NTT Docomo-Tata Sons dispute
NTT Docomo purchases a 26 per cent stake in the Tata Teleservices for $ 2.22 billion in terms of the joint venture agreement
NTT Docomo decides not to invest a further $1 billion in the Teleservices venture
NTT Docomo exercises exit option against Tata Sons on previously agreed terms
Unable to find an external buyer, Tata Sons makes an application with RBI to purchase NTT Docomo stake
at Rs 58 per share amounting to Rs 27,000 crore
Tata Sons deadline to find external buyer/purchase shares expires
NTT Docomo approaches London Court of International Arbitration against breach of the joint venture agreement
RBI refuses Tata Sons November 2014 application to purchase NTT Docomo’s shares at the pre-determined rates
NTT Docomo refuses to accept Tata Sons offer to buy stake at fair market value of Rs 23 per share amounting to Rs 11,000 crore (less than half of the previously agreed price)
London Court of International Arbitration awards $1.17 in favour of NTT Docomo
NTT Docomo approaches Delhi High Court to enforce international arbitration award – RBI reiterates former stance against stake-sale via letter issued to Tata Sons – Tata Sons agrees to deposit full sum of the award with the Delhi High Court pending final determination
NTT Docomo obtains London Commercial Court ex-parte order allowing enforcement of award against Tata Son’s UK assets
Tata Sons files affidavit opposing the enforcement of the international award in Delhi High Court
RBI intervenes in Delhi High Court challenging the enforcement of the award
Tata Sons and NTT Docomo submit joint settlement plan in the Delhi High Court to put an end to the arbitral dispute