Paving the way for NTT DoCoMo to exit Tata Teleservices (TTSL), the Delhi High Court on Friday approved the arbitration award of $1.18 billion to be paid by Tata Sons to the Japanese company.

The court rejected objections raised by the Reserve Bank of India. “There is no provision in law which permits RBI to intervene in a petition seeking enforcement of an arbitral award to which RBI is not a party. Its prayer for permission to intervene is rejected,” said the judgement by Justice S Muralidhar.

Tata Sons welcomed the High Court order.

The Delhi High Court’s order also paves the way for the Tata group to sell or merge the loss-making telecom venture to an incumbent player.

According to market sources, there could be a possibility of it being merged with the RCom-Aircel combine.

“The dispute between the joint venture partners was a major hurdle for the Tata group to take a decision on what they want to do with the telecom services business. With this court ruling they can now move forward,” said an industry observer. However, the RBI could still come in the way if it chooses to appeal in the Supreme Court.

Long saga In 2009, NTT DoCoMo had acquired a 26.5 per cent stake in TTSL for $2.7 billion (₹13,070 crore at the then exchange rate).

Under the shareholders’ agreement, if TTSL failed to achieve certain performance milestones over the subsequent five years, the Tata group would have to find a buyer for the shares held by the Japanese company at market price. If it failed to find a buyer then the Tata group itself had to buy the shares at a 50 per cent discounted price (termed a put option).

By 2014, TTSL not only failed to meet the performance benchmarks but also could not find a buyer for DoCoMo’s shares.

When the Tata group sought the RBI’s approval to pay the discounted rate for the shares, the central bank opposed it saying that when the put option is exercised, it should be based on the prevailing return on equity at the time the option is exercised and not based on a pre-determined valuation.

This forced DoCoMo to file for arbitration at the London Court of International Arbitration, which ordered the Tatas to pay $1.18 billion as damages for failing to comply with the shareholders’ agreement.

While the Tata group initially opposed the enforcement of this award at the Delhi High Court, it changed its line after the exit of Cyrus Mistry as Chairman.

Putting an end to the dispute, the Delhi court said: “The issue of an Indian entity honouring its commitment under a contract with a foreign entity, which was not entered into under any duress or coercion, will have a bearing on its goodwill and reputation in the international arena. It will indubitably have an impact on the foreign direct investment inflows”

Following the order both DoCoMo and Tata Sons said they would take steps to comply with the ruling. DoCoMo will have to withdraw all appeals filed in other countries in addition to surrendering the TTSL shares once it receives payment.

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