RBI seeks to intervene in Tata-NTT Docomo case in High Court

MUMBAI: The Reserve Bank of India has asked the Delhi High Court to be heard in a case where Japan’s NTT Docomo has sought implementation of a $1.2-billion arbitral award that it had won against the Tata Group.

The banking regulator on Wednesday made an oral request to the court to file an intervention application to explain its position on the international arbitration award that went against Tata Sons, lawyers representing one of the parties said.

NTT Docomo had opposed such a representation by the RBI. The Delhi High Court asked the central bank to file an intervention application and Japanese company to file its objection to such a request in writing and adjourned the matter to December 1.

“It is disturbing that a regulator should be involved in a matter between two private entities, and we expressed our anguish against it,” said one of the lawyers involved. RBI is expected to file an application explaining why foreign currency regulation comprises national policy and why exceptions on the fair price regulation on share sale cannot be afforded, said another person familiar with the matter.

Queries to the RBI remained unanswered as of press time Wednesday.

The RBI move has come in response to a filing made last week by Docomo stating that implementation of the international award is not subject to approval from any government body.

The 81-page filing by Docomo, seen by ET, made three points – first, that the foreign exchange laws did not apply to the award; second, that the foreign exchange law itself could not be termed public policy; and third, that implementation of the award isn’t subject to government approval.

“If payment of damages…is considered a capital account transaction, it would lead to an absurd result whereby every payment pursuant to a court judgment or arbitration award made to a non-resident would require special permission of RBI,” said the filing from DoCoMo.

The filing, which was in response to a Tata Group challenge against enforcement of the London arbitration award, repeatedly questioned RBI’s jurisdiction over the implementation of the order. This was in stark contrast with Tata’s earlier filing that it couldn’t pay lacking approval from RBI.

“Failure to obtain RBI permission does not excuse contractual performance nor can it prevent enforcement of an award,” said Docomo’s filing.

It also pointed out that the Supreme Court of India enforced an award in a case where the government had earlier denied permission under similar foreign exchange rules.

Docomo said the award had split the tendering of shares and the amount payable to Docomo. The amount payable to Docomo is now a penalty, irrespective of share transfer, it said.

The award separately awarded back the shares to Tata as a measure to prevent double gain for Docomo, the filing in court explained. “The award remains one for payment of damages with a separate order for the tender of shares to avoid double recovery,” it said.

The Tata Group has always maintained its desire to pay but its inability to do so due to Reserve Bank rules.