An international arbitration panel has ordered Tata Sons to pay $1.17 billion (₹7,950 crore) in damages to Japan’s NTT DoCoMo Inc. for breaching an agreement related to their telecom joint venture – Tata Teleservices.

This could put further pressure on the Tata group to sell the telecom business, which has been reeling under losses and intense competition.

 The dispute dates back to January 2015 when Japan’s NTT DoCoMo filed an arbitration request with the London Court of International Arbitration against Tata Sons for failing to find a buyer for its stake in Tata Teleservices.

In April 2014, NTT DoCoMo announced plans to sell its entire stake in TTSL, exiting India five years after entering the country. The exit came after the Indian company failed to achieve certain performance targets.

Shareholder pact Under the terms of the shareholder agreement, the Tatas had to find a buyer by December 2014 and if it could not then buy DoCoMo’s stake.

NTT DoCoMo had acquired a 26.5 per cent stake in TTSL for $2.7 billion (₹13,070 crore at the then exchange rate). The Japanese company is entitled to get at least ₹7,250 crore (at ₹58 per share) for the entire stake, which is 50 per cent of its total acquisition price, from TTSL.

Tata Sons had applied to the RBI to purchase NTT DoCoMo’s stake but the central bank ruled 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.

Tata Teleservices had losses of over ₹6,000 crore at that time and its valuation would have been much lower than what the Tatas had agreed to pay the Japanese firm.

Debt worries The court ruling means that the Tatas will have to pay DoCoMo slightly more than what was agreed under the shareholders agreement.

This could also prompt the Tatas to put Tata Teleservices on the block provided it is able to settle some part of its huge debt pile of over ₹50,000 crore.

The other option for the Tata group would be to challenge the order in a higher court.

In a statement, DoCoMo said as of today certain matters remain unclear, including whether Tata Sons will pay the awarded damages and when the delivery of Tata Teleservices’ shares will be made.

A Tata Sons spokesperson said, “Tata Sons has received the arbitration award, and we are currently studying it. We will not be able to comment further at this stage, beyond maintaining our consistent position that Tata Sons has always been and continues to be committed to discharge its contractual obligations in a manner consistent with the law.”

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