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A bitter $1.2bn dispute between India’s Tata Sons and the Japanese telecom group NTT DoCoMo is set to be resolved, after a New Delhi court approved an agreement between the two companies.

The feud erupted three years ago when DoCoMo called on Tata to buy out its stake in the struggling mobile operator Tata Teleservices, in line with a prior agreement between the two companies. After the central bank blocked the transaction, citing foreign exchange rules, DoCoMo won an international arbitration case that it then sought to enforce against Tata’s foreign assets.

On Friday, the Delhi High Court dismissed the Reserve Bank of India’s continuing objections to the transaction, which the RBI said would breach foreign exchange rules that prohibited guaranteed returns to overseas investors.

The court approved a February agreement between Tata and DoCoMo, under which DoCoMo agreed to suspend its legal action in the US and the UK, in exchange for Tata dropping its objections to the enforcement in India of a ruling by a London arbitration panel last June.

This clears the way for the enforcement of the London ruling, which ordered Tata to buy out DoCoMo’s 26 per cent stake in Tata Teleservices for $1.2bn.

A person close to DoCoMo said that Friday’s decision, if it proved final, could make this “a landmark case boosting investor confidence in India’s legal system”. But the person added that final resolution of the matter could be delayed if the RBI chose to appeal the judgment.

The RBI did not immediately answer a query on whether it planned to appeal. Tata and DoCoMo also declined to provide immediate comment.

The completion of the stake sale would mark an end to one of the most ill-fated foreign investments by a Japanese company in the past decade. DoCoMo bought its Tata Teleservices stake for $2.7bn in 2008 as part of a drive for international expansion, but the company was relegated to marginal status in a crowded market dominated by local rival Bharti Airtel and UK-based Vodafone.

Senior Tata insiders have said that the resolution of the dispute would clear the path for a sale of Tata Teleservices to a stronger rival, in a sector that is now undergoing a rash of consolidation – most notably with the planned merger of Vodafone India and third-placed player Idea Cellular.

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