India to block Tata from paying compensation to Docomo: Report. In Picture: Tata group and HCL technology are among the companies with highest exposure to the UK market while Infosys has the least. (Representational image)Reuters

India is planning to block $1.17 billion settlement price that Tata Sons has agreed to pay NTT Docomo for bungling up its investment in Tata Teleservices business.

The finance ministry is wary of setting a novel precedence of exempting India's foreign exchange act allowing Tata to pay the Japanese telecom firm for its worst ever investment overseas, a source told Bloomberg.

In June, the London Court of International Arbitration ruled that Tata pay up a $1.17 billion compensation for violating the business agreement with Docomo on their joint Indian venture. However, the Indian government has said that a bilateral business agreement will not be allowed to overrule India's business regulations. It added that doing so would invite trouble as 10 other multinationals have lined up to seek similar waivers.

While Indian rules suggest that any exit payment for a partner be limited to valuation based on return on equity, Tata-NTT agreement, however, states the partner could request a buyer for its stake at a fair market price or 50 percent of its acquisition cost — whichever higher, noted Bloomberg. It added the yield on the latter was higher than Indian rules.

Source added that if Tata goes ahead with the payment, then it could invite the wrath of the Indian government, which may charge it with penalties. NTT Docomo, for its part, has approached the Delhi High Court for a quick redressal of its concern to seek its rightful arbitration award as ruled by the international court.

The report noted that if the Indian government blocks the payment, then NTT Docomo would seek to recover its dues from Tata Sons' overseas business offices.

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