RBI opposes Tata’s decision to pay Docomo over two-year long dispute

Reserve Bank of India (RBI), the central banking authority of the country has opposed a pact between the Tata Group and NTT Docomo, which was made to resolve a long standing dispute between the two.

It was during a hearing in the Delhi High Court that RBI opposed Tata’s decision to pay Docomo, arguing that such payment would amount to transfer of shares, thus rendering it illegal.

The dispute was over the enforcement of a $1.17-billion arbitral award by an international court to Docomo.

Justice S Murlidhar, however, wanted to know if the banking authority could oppose the award's enforcement when both Tata and Docomo had agreed to settle down the matter. Tata group has already deposited the amount with the court, and the next hearing is on March 14. He also added that the case had international implications.

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To this, RBI lawyer Mukund C told the court that any step that led to payment being made to Docomo would set an example, and that Docomo he banking regulator was also concerned that the Japanese company may pursue similar enforcement in the US and the UK if it doesn't succeed in India.

The court held this argument as "absurd, as RBI's writ wouldn't run overseas in any case.

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"RBI has no jurisdiction outside India," the judge said. "How can you object to enforceability anywhere else in the world? If they (Tata) have assets anywhere else, they (Docomo) can move a court there for the enforcement of the award. There is no law prohibiting it," he added.

When asked if the deal required special permissions, Mukund sought for time to seek instructions about the same.

The case involves NTT Docomo fighting Tata Sons over the right to sell its stake in the Indian wireless venture for at least half the original value, according to the terms of the 2009 agreement. Even though Tata group said that it was willing to pay the award, Indian rules prohibited it, saying that valuation has to be based on present fair value.

(Image source: IB Times)