Tata Group officials to meet NTT Docomo brass to end deadlock in arbitration dispute
Tata Group officials are meeting their counterparts from NTT Docomo to resolve a dispute arising from a $1.2-billion arbitration award in favour of the Japanese firm, as per two sources aware of the matter.
The meeting is scheduled for this week and may even have taken place in Mumbai on Thursday, said one of the people mentioned above. But this could not be independently verified. The agenda is to discuss options for Tata to pay NTT Docomo, said one of the two. “This will be a crucial meeting. Depending on what transpires, NTT Docomo will formalise its strategy to approach RBI, finance ministry and even PMO,” said an official in the know.
“Even the Japanese aren’t happy with this situation. Docomo is listed in the US and it needs to take action accordingly,” said another person familiar with the details.
Late last month, NTT Docomo, Japan’s largest telecom company and Tata’s joint venture partner in their telecom business, served an order from London’s Commercial Court against Tata Sons, to enforce an arbitration award, made in London on June 22, against Tatas’ assets in the UK. The London court had granted Tata 23 days, ending August 19, to respond to the ex-parte order in favour of NTT Docomo allowing it to attach Tata’s overseas assets.
The two people cited above said the payment must be made, even if that involves applying to RBI or the government of India jointly. The Japanese government could also be involved in the exercise. A Tata Sons spokesperson declined to comment on a detailed questionnaire by ET.
A spokesperson for NTT Docomo said: “We cannot comment on any direct discussions with Tata, which would be confidential.”
In a press release, Docomo had earlier said it has identified assets on which it may “lift the corporate veil” and demonstrate those companies belong to Tata Sons, even though they are held through other group companies. Tatas strongly refuted this saying Tata Sons is a separate legal entity. Tata Sons has a minority shareholding in Tata Motors in India, which in turn owns Jaguar Land Rover. Similarly, Tata Sons has a minority shareholding in Tata Steel in India, which owns Tata Steel Europe through its Singapore and Netherlands arms.
News reports in the UK had suggested that assets such as Jaguar Land Rover or Tata Steel could possibly be attached, which both sides agree may be difficult, being part of separately listed companies. Japan’s Nikkei said Docomo might also ask US courts to seize Tata assets.
A three-member international arbitration panel had ordered Tatas to pay $1.17 billion (nearly Rs 7,956 crore) to NTT Docomo for breach of contract on the ground that the Indian group neither found a buyer nor bought back the Japanese partner’s 26% stake in Tata Teleservices (TTSL).
It is not clear who all are likely to participate in the crucial meeting, but senior leadership from both camps has so far been proactively involved in this high-profile case. As per arbitration records, the Tatas are being led by Tata Sons chairman Cyrus Mistry. Even chairman Emeritus Ratan Tata is believed to have got involved to find a speedy resolution. Others include group veterans such as Ishaat Hussain, finance director of Tata Sons from 2000-12; Farokh N Subedar, chief financial officer, Tata Sons; Bharat Vasani, chief legal officer of Tata Sons, and Srinath Narasimhan, managing director, TTSL and TTML.
NTT Docomo has been represented by, among others, Kaoru Kato, chief executive officer of Docomo, in the arbitration panel. Others from the Japanese camp include Hiroo Unouara, CEO, NTT; Kunieda Toshinari, senior vice-president, global business division, Docomo, and Hajime Kii, executive vice-president of Docomo.
Keen to resolve row
Both sides have been keen to resolve the kerfuffle. The Tatas have maintained they are willing to pay Docomo, but that RBI rules prevent any payment. The Tatas have deposited the money with the Delhi High court as a “gesture of good faith”. Post the arbitration award, Tatas, said sources, had also reached out to Docomo making it clear that they will not appeal against the order. They also sought a joint representation to RBI and finance ministry to look for a resolution. But so far the Japanese were believed to have been non-committal.
Docomo had called Tata’s decision to submit the dues with the court as lip service. The Delhi High Court heard the two parties on July 26 and asked the partners to resolve the situation before the next hearing on August 30.
According to sources, the top Tata leadership has in recent times met the Japanese ambassador to India, Kenji Hiramatsu, in Mumbai to seek diplomatic intervention and reinitiate a dialogue. The tussle between the two companies came about after NTT Docomo tried to exercise an option to sell its 26% stake in TTSL back to Tata Sons in 2014.
Docomo bought its shares in TTSL for $2.7 billion in early 2009, driven by a desire for overseas expansion as growth slowed in its home market. To limit its risk, it got into an agreement with the Tatas, under which it could sell back the stake for half the sum it paid if four key performance targets were not achieved.
In April 2014, with TTSL recording a run of steep losses, NTT Docomo decided to exit. But RBI ruled that the option was not valid and any payment would have to be made at fair market value. The finance ministry had also refused to make an exception. Docomo challenged the decision citing breach of contractual obligation.