Tata Sons had looked at the option of filing for bankruptcy for its loss-making telecom services arm Tata Teleservices but decided against it due to possible negative fallout on the group.

According to disclosures made by ousted Chairman of Tata Sons Cyrus Mistry, one of the Tata Trusts nominees had suggested filing for bankruptcy.

“It is a matter of record that doing a merger deal for Tata Teleservices was challenging because of the high number of contingent liabilities that already existed in the business, as well as due to the litigation surrounding dual technology 2G issue. In addition, the entire sector lacked clarity in M&A regulations,” states the affidavit filed by Mistry with the National Company Law Tribunal.

But, despite these challenges, it was finally decided against filing for bankruptcy and push for a M&A deal.

According to industry sources, Tata Teleservices had discussions with a number of the other telecom operators, including Vodafone, for a possible merger but these talks did not lead to anything concrete due to regulatory issues.

The recent dispute with Japanese joint venture partner NTT DoCoMo is only one such issue which has come in the way of a merger deal. According to sources close to the Mistry camp, options to settle the dispute with DoCoMo through an out-of-court arrangement was also discussed even before Mistry was ousted.

“Mistry wanted to resolve the dispute with DoCoMo because this was coming in the way of any meaningful restructuring plan for Tata Teleservices. The impression that only his ouster has created a situation for a resolution is incorrect. Efforts were on to get an agreement with DoCoMo even when Mistry was Chairman,” said a source close to Mistry.

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