The courts in India will now need to legislate whether or not
paying out such amounts will amount to a breach of the
fundamental policy of Indian law.
Recently, many foreign investors have been closely following the
developments in the Indian telecom sector regarding the Tata-DoCoMo
arbitration with great interest. The crux of the matter stemmed
from a mid-2000s agreement between Tata and DoCoMo that permitted
DoCoMo to receive a pre-set amount if it were to exit the joint
venture at a certain point in time. A classic put option, in other
However, the Ministry of Finance (MoF) took a
view in 2013 that payouts by an Indian company of such amounts
would be in contravention of the extant foreign exchange norms. It
is another matter that the Reserve Bank of India
(RBI) was keen to permit the same since the legal
framework was not fleshed out at the time of entering into this
agreement in circa 2007.
The lessons for foreign investors to consider in this episode
Review any joint venture or
shareholder agreements in the 2000–2013 period for options or
pre-emption rights that confer an assured return to the foreign
Ascertain if the agreement can be
enforced against an overseas party, which would obviate the need to
remit funds from India in satisfaction of these covenants.
For those already in dispute
territory, ensure that sufficient interim security measures are in
If you are an Indian party on whom such an option can be
exercised by a foreign investor that fits the above bill, this is
likely to be an exciting development. The courts in India will now
need to legislate whether or not paying out such amounts will
amount to a breach of the fundamental policy of Indian
Disclaimer:This Alert has been
prepared and published for informational purposes only and is not
offered, nor should be construed, as legal advice. For more
information, please see the firm's
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Singhania & Partners LLP, Solicitors and Advocates
Under the Arbitration and Conciliation (Amendment) Act, 2015. There are two avenues available for the enforcement of foreign awards in India, viz., the New York Convention and the Geneva Convention, as the case may be.
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