The Ministry of Finance will now resolve the case pertaining to the valuation of Tata Teleservices Limited’s (TTSL) shares in the dispute between Japan-based NTT DOCOMO and Tata Sons. The ministry has been referred to by the Reserve Bank of India (RBI) which has sought clarity on the buy-back transaction of TTSL’s shares by Tata Sons based on an agreement signed by the two entities in 2008-09.

The case relates to the decision of DOCOMO to sell its stake in TTSL by exercising a put option, which was part of the stake acquisition agreement. As per the terms of the agreement, TTSL is required to buy back DOCOMO’s stake at 50 per cent of the transaction value or the prevailing market price, whichever is greater.

RBI has now asked the finance ministry to decide whether such a transaction based on a pre-determined valuation of stake can be cleared. According to RBI rules, a put option, when exercised, should be based on the prevailing return on equity when the option is exercised, and not on a pre-determined valuation. Therefore, the DOCOMO-Tata Sons agreement, which had prefixed the buy-back price, is against the norm.

However, in June 2014, RBI has agreed to link such options to market rates rather than return on equity. But the final decision on the same is still pending and therefore, amidst the ambiguity regarding the norms, RBI has sought help from the ministry.