NEW DELHI: The Reserve Bank of India, on Wednesday, objected to the consent agreement between Tata Sons and NTT DoCoMo at the Delhi High Court, terming the conditions worked out in the deal as “unenforceable”. The central bank has also been directed to clarify its stand and detail its arguments in an affidavit it is set to file on March 14.
RBI’s stand, if strong, can throw a spanner in the works of a dispute that has dragged on and was one of the issues that cropped up in the Cyrus Mistry ouster. The RBI’s stand so far has been that the terms of agreement originally inked between Tata Sons and NTT DoCoMo in case of an exit by the latter violated FEMA regulations, since it did not permit an Indian promoter to buy back, from foreign investors, shares in an unlisted Indian company at pre-determined prices. Any such buyback was only permitted at fair market value.
However, the agreement inked by the two firms in 2009 stipulated that NTT DoCoMo had the right to sell Tata Teleservices shares back to Tata Sons and the seven Tata group companies at 50 per cent of the acquisition value or the fair market value, whichever was higher.
Tata Sons had stated that while they were open to paying the Japanese firm what it demanded, the RBI had not given its permission for the same.
In July last year, however, the London Court of International Arbitration had awarded NTT DoCoMo $1.17 billion for breach of contract by Tata Sons.
NTT DoCoMo subsequently took Tata Sons to court to demand payment of the same. The central bank entered the dispute as a third party in the same case citing FEMA violations in the event of a payout on DoCoMo’s terms, with the finance ministry backing its stance.
The Delhi High Court on Wednesday, however, questioned whether the RBI’s permission was even needed, now that the two parties have come to an agreement and Tata Sons is willing to make the payment.
While the RBI’s stance and arguments will only become clear when it files the affidavit on March 14, Tata Teleservices’ share prices took a slight tumble on Wednesday after ruling high post the announcement of the agreement between the two firms on February 28. Shares currently stand at `8.55, down 2.84 per cent from the previous day’s close and down 10.9 per cent from its high of `9.60 on March 1.