Cairn Energy Allowed To Takeover Indian Assets in Paris To Recover Part of $ 1.2 Billion Arbitration Award

Moneylife Digital Team/IANS 08 July 2021

Economy & Nation

UK's Cairn Energy has secured an order from a French court to seize about 20 properties in Paris belonging to Indian government for recovering a portion of $1.2 billion from India against the backdrop of the arbitration victory of the company. In December 2020, an international arbitration tribunal ruled that India's tax claim of Rs10,247 crore in past taxes over internal reorganisation of Cairn's India business was not a valid demand and had awarded damages of $1.2 billion along with interest and costs to the UK energy company.

According to the people in the know and reports, French courts completed the legal process on Indian asset takeover on Wednesday that started last month when it had ordered the takeover in favour of the energy company.

Cairn Energy told CNBC-TV18 that its strong preference remains an agreed, amicable settlement with the government of India. “In the absence of settlement, will take all actions to protect international shareholders’ interest,” it adds.

Cairn's claim was brought under the terms of the UK-India Bilateral Investment Treaty, the legal seat of the tribunal was The Netherlands and the proceedings were under the registry of the Permanent Court of Arbitration.

In 2010-11, Cairn Energy had sold Cairn India to Vedanta. Post the merger of Cairn India and Vedanta in April 2017, the UK company's shareholding in Cairn India was replaced by a shareholding of about 5% in Vedanta issued together with preference shares.

Along with attaching its shares in Vedanta, the income tax (I-T) department from India seized dividends of around Rs1,140 crore due to it from the shareholdings and set off a Rs1,590-crore tax refund against the demand.

In 2015, Cairn initiated an international arbitration to challenge retrospective taxation.

The British energy company has said that it may file lawsuits across several countries to make government firms and banks liable to pay the dues.

The company is targeting assets abroad of more State-run companies in a bid to recover dues from the Indian government.

Cairn Energy already moved courts in the US, UK, Canada, France, Singapore, The Netherlands and three other countries to register the December 2020 arbitration tribunal ruling that overturned the Indian government's Rs10,247 crore demand in back taxes and ordered New Delhi to return $1.2 billion in value of shares it had sold, dividends seized and tax refunds withheld to recover the tax demand.

After reports of identification of Indian assets overseas worth $70 billion by Cairn for potential seizure came out, government sources said that India is aware of its legal rights and will defend its case in courts if such proceedings materialise.

Official sources told IANS that the Indian government is confident of winning its appeal in The Hague.

Sources further pointed out that Cairn Energy did not pay a single rupee tax anywhere in the world in respect of the impugned transactions. Cairn had also lost its appeal before the income-tax (I-T) tribunal in India.

In September last year, Vodafone Group Plc had also won an international arbitration case against the Indian government.

Comments

User

umeshs62

4 years ago

Anything retrospective is bad in law & spirit. It’s a dampener for any investment, foreign or domestic. Government should understand this to be able to attract investment, grow economy and increase employment opportunities for it’s people. Egoistic stand won’t take it too far.