The Tata Group, under the leadership of interim chairman Ratan Tata, is exploring options of an early resolution to the legal dispute with erstwhile telecom joint venture partner NTT DoCoMo, which could include a consent decree, according to people connected with the development.
The legal options are being considered after the group factored in consequences of approaching the government, which has in the past shown its reluctance to involve in private legal disputes.
Consent decrees are typically resorted to amicably resolve disputes between parties and has had precedences.
The International Court of Arbitration had directed the Tatas to pay $1.17 billion to DoCoMo for alleged violation of a contract where the Tatas had agreed to buy the Japanese company’s equity stake, but could not. The Tatas have been unable to buy back the stake, which would involve $1.17 billion going out of the country as Indian laws do not permit share buyback at pre-fixed prices. The Reserve Bank of India has not approved the buyback either. The Tatas have already deposited the amount in an escrow account with the Delhi High Court.
“The dispute has been a sore point and is also said to be one of the factors that eventually led to Mistry being voted out,” said sources. Representatives of Tata Trust are keen on a resolution as it has dented the group’s reputation. After his ouster, Mistry, in a letter to the directors of Tata Sons, had said that the board was informed about the group’s decisions on the issue.
When contacted, a Tata Sons spokesperson said: “The matter is subjudice. We have no comments to offer.”
The RBI did not offer comments for the story
The consent decree has been adopted in the past where parties have consented together to get a matter disposed of in a court of law. Under the process the court is requested to pass the order so that regulatory impediment is removed. The Companies Act of 2013 allows options – financial instruments based on future prices and terms for closures – to be legally enforceable. In case of issues not retrospectively covered, court direction can be sought where the RBI is directed by the court to grant approval. In such cases reasons are offered, which in this case, will be the award from the International Court of Arbitration, London.
“Under the Companies Act there have been instances of buyback of shares where the law says that companies cannot buy back in excess of 25% of its paid-up capital. Courts have given direction to buy back even 30% or 40% of the equity at a value agreed by both parties,” said Suhas Tuljapurkar, managing partner of Legasis Partners and founder director of Legasis Services.
The government also cannot intervene in the issue since it is a dispute involving two private entities. It could also prompt the Japanese company to claim damages from the government on grounds of expropriation of its investments. “That is something the government will want to avoid as it is already handling similar claims related to 2G licences,” said another legal head who asked not to be named.