Source: News Bharati English25 Jun 2016 11:34:11
London, June 25: The London Court of Arbitration on Friday ordered Tata Sons to pay 1.17 billion dollars to Japan's largest mobile phone firm NTT DOCOMO as compensation for breaching an agreement on an Indian joint venture.
In January 2015, NTT DOCOMO Inc., a unit of Japan’s Nippon Telegraph and Telephone Corp., had filed a request with the court against Tata Sons, the promoter of the major operating Tata Group of companies, claiming the latter failed to fulfill its obligation despite DOCOMO’s repeated negotiations to find a buyer for DOCOMO’s entire stake in its telecommunications arm Tata Teleservices Limited (TTSL).
In November 2009, Docomo had acquired 26.5% stake in Tata Teleservices for about Rs. 12,740 crore. According to DoCoMo, the investment was with an understanding that it would get at least 50% of its acquisition price if it exits the joint venture in five years. Later, in April 2014, the company decided to exit after the joint venture struggled to grow subscribers quickly.
Under the terms of the shareholders agreement between DOCOMO, TTSL and Tata Sons Limited (Tata Sons), DOCOMO exercised on July 7, 2014 its right to request that a suitable buyer be found to purchase its TTSL shares for 50% of the acquired price, amounting to 72.5 billion Indian rupees (or US$ 1,172 million) or a fair market value, whichever is higher.
Thereafter, pursuant to the shareholders agreement, DOCOMO submitted its request for arbitration on January 3, 2015 to ensure that its right be exercised after Tata Sons had failed to fulfill its obligation, despite DOCOMO's repeated negotiations with Tata Sons regarding the sale of its entire stake in TTSL.
The order states that Tata Sons pay damages to DOCOMO in the amount of approximately US$ 1,172 million for Tata Sons' breach of the shareholders agreement, upon DOCOMO's tender of its entire stake in TTSL to Tata Sons or its designee.
A Tata Sons spokesperson said it had received the arbitration award, and it was 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,” the spokesperson said.
Japan’s largest communications service provider entered India in March 2009 by acquiring the stake in Tata Teleservices for $2.7 billion after the Indian telco was granted a dual-technology licence that allowed CDMA-based operators to offer rival GSM-based services as well.