India: The TATA DOCOMO Case: A Coping Mechanism Or A Cop Out Plan?

Last Updated: 18 May 2017
Article by Vikrant Rana and Sudipto Mitra

There has always been a binary truss between enforcement of and maintaining sanctity of private contracts and complying with sometimes "overzealous" laws of the country. In the recent case of NTT Docomo Inc. v. Tata Sons Limited1 the Honorable Delhi High Court addressed similar concerns and denied the Reserve Bank of India's (hereinafter referred to as the 'RBI') right to intervene in enforcement of foreign arbitral awards.

Though the judgment given by the Delhi High Court is seen by many as a positive message for foreign investors ensuring that the sanctity of private contracts and enforcement of foreign arbitral awards are safeguarded in India, it also highlights an anomaly between the Foreign Exchange Management Mechanism (hereinafter referred to as 'FEMA') in India and the global trend of creating contracts with pre-determined exit clauses.

Background of Facts

NTT Docomo, Inc. (hereinafter referred to as 'Docomo') the Japanese telecom giant bought 26 % stakes in Tata Teleservices Limited (hereinafter referred to as 'TTSL') in 2009 for USD 2.7 billion.

In furtherance of the same, a Shareholders Agreement (hereinafter referred to as 'SHA') was entered into between Docomo and TTSL. Clause 5.7 of SHA stated that if in any case, TTSL fails to comply with certain 'Second Key Performance Indicators', Docomo could request Tata to find a buyer for its stake at a fair market price or 50% of its acquired price, whichever was higher. In other words, under the SHA, if TTSL failed to touch upon certain mentioned performance targets, the TATA group would either have to find a buyer for Docomo's shares or buy the shares themselves at minimum 50% acquisition price, which amounted to a price of INR 58.45 (USD 0.91) per share.2

There was also an option wherein Tata could acquire the shares at the fair market price of INR 23.44 (USD 0.36), which was eventually deemed unacceptable by Docomo.

On March 31, 2014, TTSL failed to comply with the terms of the agreement, and Docomo had sent them a notice for enforcement of their contract obligations. The dispute arose when Tata failed to fulfill its obligation due to RBI's objections.

The matter was thereby placed before the London Court of International Arbitration (hereinafter referred to as 'LCIA') on January 3, 2015.

The Award

The LCIA heard the parties and unanimously held that there existed absolute obligation on Tata for performance of Clause 5.7 of the SHA. In view thereof, Tata was under an obligation to either find a new buyer for Docomo's Stake or procure/acquire those stakes itself. Therefore, the requirement of seeking special permission from RBI did not arise.

In view of the foregoing, the LCIA held that since Tata failed to fulfill its obligation it resulted in a breach of contract and Tata was liable to pay damages to Docomo and therefore, Docomo is entitled to damages in the amount claimed, namely US$ 1,172,137,717.

As under the aforementioned Award, Tata was obligated to pay Docomo the stated dues within 21 days of passing of the award which included interest impositions at rate of 3.5%.

Enforcement of the Award

For enforcing the Award, Docomo moved to the Delhi High Court wherein Tata had approached the RBI for obtaining its approval under the FEMA regime. The Award was vehemently opposed and the transaction was ultimately denied by the RBI. In the court proceedings, Tata cited its inability to make the payment because of RBI's refusal of enforcing the buyback provisions mentioned in the SHA.

RBI's plea was that, it is beyond the provisions of the Foreign Exchange Management Mechanism to allow any guaranteed return on equity investment. RBI filed intervention plea3 stating that as per Foreign Exchange Management Act (hereinafter referred to as the 'Act') overseas share transfer, being a capital account transaction requires approval of RBI. RBI also objected to the SHA and stated that it was illegal and void in accordance of Indian Contract Act, 1872.

RBI also objected to the consent terms arrived between parties and therefore, asked that no damages could be awarded.

The Delhi High Court's Decision

The Delhi High Court rejected the RBI's plea of intervention in the case as the Arbitration and Conciliation Act, 1996 does not allow intervention of any entity not a party to the award, with regard to enforcement of such award. Section 48 (1) of the Arbitration and Conciliation Act,1996 mentions that the enforcement of foreign award can be refused only by a party against whom it has been passed, and as per section 2 (h) of the legislation, "party" means party to the arbitration agreement. Therefore, the RBI not being party to the agreement, had no right to object to the enforcement of arbitral award.

The court further held that the consent terms between TTSL and Docomo as valid and not contrary to any provisions of the Indian Contract Act, 1872. The court was also of the opinion that non fulfilment of a valid contract with a foreign party will impact the country's reputation internationally and consequently impact Foreign Direct Investment and international business relations.

Also, as per the court's view, FEMA contains no absolute prohibition on contractual obligations. Therefore, the relevant clause of Agreement was capable of being performed with the mere general permission of RBI. The Court held that Tata could have lawfully performed its obligation to find a buyer at any price, including at a price above the shares' market value. However, it's failure to do so was, according to the tribunal, a breach entitling Docomo to damages.

Further, it was held that the award is for damages for breach of contract and not for overseas purchase of shares. The Court held that no purchase of shares is taking place, so question of taking RBI's permission did not arise.

On April 28, 20174, the Court ordered enforcement of arbitral award and allowed them to take all steps and provide all documents as required for remitting funds, after deducting taxes, if any and ordered transfer of shares of Tata Teleservices Limited from Docomo to Tata. The Court allowed any of the party to apply to the Court in case of any difficulty in complying with the directions. Docomo was asked to withdraw any other similar proceeding subject to compliance of obligations by Tata.

Concluding Remark

In a similar judgement in the case5 of Mauritius based Cruz City 1 Maruti Holdings and Unitech Limited it was held that the enforcement of the foreign award will make favorable impact on Foreign Direct Investment in India, as it will show India's commitment to enforce arbitral awards given outside its jurisdiction.

However, it is also pertinent to note that at present there is an anomaly between the global trend wherein companies enter into agreements with a defined put option with agreed valuation that the FEMA and RBI Regulations vehemently bars. Therefore, many private equity and insurance firms were looking at exercising the option of easy exits.6 In view of the same, the former RBI Governor, Mr. Raghuram Rajan had affirmed7 that FEMA needs to be in sync with the global trend of accepting contracts with pre-determined exits wherein the investors would be allowed to exit with a stop loss clause. In all, this judgment presents a remarkable example wherein the jurisdiction of a Regulatory Authority is not only challenged but ruled over by the Judiciary, suggestive of a possible change in the existing laws.


1. O.M.P. (EFA) (COMM.) 7/2016

2. TATA Sons to Seek Competition Commission of India, I-T Nod for Dcocmo Payout, THE ECONOMICS TIMES, May 2, 2017.

3. IA No. 14897 of 2016



6. Tata Docomo Case: Here's how Delhi HC order will help similar stalled deals, BUSINESS STANDARD, April 29, 2017.

7. Supra note 6.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Vikrant Rana
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions