The London Court of Arbitration has ordered Tata Sons, the promoter of the major operating Tata companies, to pay Japan's largest mobile phone firm NTT DOCOMO $ 1.17 billion in 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 Group holding company Tata Sons, claiming the latter failed to fulfil its obligation “despite DOCOMO’s repeated negotiations” to find a buyer for DOCOMO’s entire stake in its telecommunications arm Tata Teleservices Limited (TTSL).
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“The award orders that Tata Sons pay damages to DOCOMO in the amount of approximately $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,” according to a statement from NTT DOCOMO.
Under the terms of the shareholders agreement between NTT DOCOMO and Tata Sons, NTT DOCOMO on July 7, 2014 exercised its right to request that a suitable buyer be found to purchase its TTSL shares for 50 per cent of the acquired price, amounting to $ 1.17 billion, or a fair market value, whichever is higher
Tata Sons spokesperson confirmed that the firm has received the arbitration order and it is currently studying it.
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“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 Tata Sons 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.
Uncertainities“As of the date of this press release, some matters remain uncertain, including whether Tata Sons will pay the awarded damages and when the delivery of TTSL's shares will be made.
Accordingly, DOCOMO is not able to predict how events will unfold,” according to the statement.
“The effect on DOCOMO's corporate earnings for the fiscal year ending March 31, 2017 cannot be forecast at this time due to these uncertainties. DOCOMO will update this information in a timely fashion regarding any matters requiring disclosure.” After the Tatas failed to find a buyer for its stake, DoCoMo then asked Tatas to buyback the shares.