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NTT Docomo sues Tata Sons in a US court for recovering $1.17 bn

07 October, 2016

Japanese telecom major NTT Docomo has sued Tata Sons, the holding firm for India’s top business conglomerate, in the US, seeking recovery of around $1.17 billion over a dispute related to its investment in Tata Teleservices Ltd (TTSL).

It has approached the Southern District Court in the New York against Tata Sons. The case was filed on October 6, filings show.

This is the third legal front that Japanese telecom major has opened against its joint venture partner turned bête noire, Tata Sons. Earlier, the company had filed the suit against the Indian company in the Delhi High Court as well as in a commercial court in the UK.

The Japanese company has engaged dispute and investigation specialised law firm Kobre & Kim LLP and its partner Steven Gary Kobre for the dispute.

“The company has approached the New York District Court to enforce the arbitration award it received in London and it is likely to file cases in other jurisdictions as well after tracing the assets of Tatas in other countries,” said a person privy to the development on the condition of the anonymity since he is not authorised to talk to media. “Since, India is signatory to New York Convention, NTT Docomo is filing in those jurisdictions covered under it,” the person added.

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention is an agreement between countries, where India is one of the signatory allows private parties to seek court’s intervention to enforce the awards passed in cross-border enforcement of arbitration. Under the convention, if one party fails to pay the dues, the petitioner can approach any other jurisdiction where the respondent has assets to recover the dues.

Tata Sons or NTT Docomo did not did not immediately respond to VCCircle email queries. However, another person also confirming the development said that the dispute will spread in other foreign jurisdictions as well.

The development related to NTT Docomo approaching the New York Southern District Court was first reported by the Business Standard earlier on Friday.

The newspaper said, Tatas contend that NTT Docomo cannot attach Tata properties in the UK as Tata Sons, the holding company of the group, is a minority shareholder in Tata Steel and Tata Motors-JLR, two firms with properties in UK.

The report further added citing an unnamed Tata Group executive that NTT Docomo’s hardline approach and continuous litigation in Indian and overseas courts is blocking any settlement with the Tatas over the former’s exit from Tata Teleservices, the loss-making joint venture between the two companies.

The same story also claims that the Japanese company had earlier warned that it would get courts across the world to attach Tata Sons properties to make sure that the Tatas pay it the exit price that was decided when it invested in Tata Teleservices in 2009.

The warring joint venture partners started litigations and other legal manoeuvring after a June order of the London Court of International Arbitration (LCIA) that asked Tata Group to pay $1.17 billion to NTT Docomo as per their agreement.

NTT DoCoMo had originally filed for arbitration on 3 January 2015.

The dispute

NTT entered India in March 2009 by acquiring a 26.5% stake in TTSL, which provided telecom services on the CDMA technology. The investment was made in two tranches; around Rs 13,280 crore ($2.57 billion then) in March 2009 and Rs 800 crore ($178 million) in May 2011. After the deal, TTSL co-branded its GSM service that it launched in 2009 as Tata DoCoMo.

At the time of signing the agreement, Tata and NTT DoCoMo agreed that the Japanese company could sell its shares if the Indian mobile phone joint venture failed to achieve the performance target for the financial year ending 31 March 2014.

In April 2014, NTT decided to exercise the option to unload its stake in loss-making TTSL. This would have led to its exit from India’s fiercely competitive and crowded telecom market. NTT exercised the option in July that year to sell the stake to either a third party or to Tata Sons. However, it filed for arbitration after the Tata group failed to find a buyer for the stake.

It had sought to sell its stake in the firm for Rs 7,250 crore (over $1.1 billion then) or more according to fair market price valuation. This was based on the understanding of the transaction being priced at least 50% of the original investment amount.

NTT had separately also picked up a stake in the listed firm Tata Teleservices (Maharashtra) Ltd for Rs 570 crore, which provides telecom services in Maharashtra and Goa. NTT DoCoMo owns over 11% of the TTSL associate firm and was also to sell this stake.

Separate media reports had earlier said that the Tata group was looking to exit the telecom business completely by selling both TTSL and Tata Communications in what could be a multi-tiered deal with the Indian unit of Vodafone Group Plc being a likely acquirer.

Tata group’s holding in TTSL is spread across various group firms such as Tata Industries, Tata Steel, Tata Communications, Tata Chemicals and Tata Power, besides Tata Sons. Other shareholders of the company include Singapore state investment arm Temasek, private equity firm 2i Capital and industrialist C Sivasankaran, chairman of Siva Group.

In terms of the subscriber base, TTSL does not figure among the top five mobile service providers in the country.

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NTT Docomo sues Tata Sons in a US court for recovering $1.17 bn

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