The agreement have NTT the right to sell its stake of 26.5 per cent, that it bought for $2.6 billion in 2009, at two rates, whichever is higher.
- At fair value
- Or at half of the acquisition price.
So when NTT wanted its investment back at the second option, problems arose.
Cut to 2014, the RBI has new ,FDI norms that do not allow this. So Tata said they could not pay and of course, NTT initiated arbitration proceedings.
Meanwhile, the parties moved the Delhi High Court contesting the RBI’s stand.
Now with both the parties decoding to bury the hatchet, it will be interesting to see if RBI’s stance will continue.
The case highlighted the issue with enforcing foreign awards on Indian parties. One frequent stance that the award falls in contradiction to “fundamental policy of India” is taken and the arbitration award is sought to set aside.
Although changes have been made to arbitration law to narrow down the scope of this fundamental policy of India, it is still very much for the court’s to interpret, making foreign investors wary of doing business with India.
Written and Published by http://www.livelaw.in/