Cairn Energy agrees to drop cases against India in exchange for $1.06 billion refund
The company had moved international courts to seize Indian properties in foreign countries as a result of a tax dispute.
United Kingdom-based oil and gas company Cairn Energy on Tuesday said that it would drop cases to seize Indian properties in foreign countries after getting a tax refund of $1.06 billion (Rs 7,900 crore) from the Union government.
In its half-yearly report, the company said that it was working with the Indian government to “expedite documentation and payment of refund”.
In an interview with PTI, the company’s Chief Executive Officer Simon Thomson said that the cases would be dropped in “a couple of days” after they receive the refund.
The refund is a result of the amendments in the Income Tax Act enacted by the Parliament in August. The amendments withdrew retrospective tax demands made on indirect transfer of Indian assets prior to May 28, 2012.
The retrospective tax, introduced in 2012, allowed the government to ask companies to pay taxes on mergers and acquisitions that happened before May 28 that year.
The tax has been at the centre of disputes between the Indian government and firms like Cairn Energy and Vodafone. Both firms had won international arbitrations against the levy of retrospective taxes on them.
The amendment introduced in August had effectively nullified all retrospective tax demands made on transactions before 2012 on the fulfillment of some conditions.
Among other things, these conditions included the withdrawal of pending litigation and an undertaking that no damage claims would be filed by the firms on whom the tax had been levied.
On Tuesday, Thomson told PTI that the Indian government’s offer to give them the tax refunds in lieu of dropping the legislations against it was acceptable to the company.
In the Cairn Energy case, a three-member international arbitration tribunal had ruled in December that the Indian government had violated the “guarantee of fair and equitable treatment”. This, the tribunal had said, was against the bilateral treaty between India and the United Kingdom.
The breach had resulted in losses for the Scottish oil company, the tribunal had said. It also ordered India to pay $1.2 billion (over Rs 8,715 crore) in damages along with other costs to Cairn Energy.
As a result of the recognition of the tax dispute by the courts, Cairn Energy was able to petition for seizing any Indian government asset such as bank accounts, payments to state-owned entities, airplanes and ships, to recover the amount.
In July, the Financial Times had reported that a French court had seized the Indian government’s properties in Paris in connection with the case.
However, the Union government had denied receiving a “notice, order or communication” from any French court. The oil and gas company had moved to seize Indian properties in the United States as well, according to PTI.
On Tuesday, Thomson told PTI that Cairn Energy will drop cases to seize diplomatic apartments in Paris and Air India airplanes in the US once they received the refund.
“Everything will be dropped...There will be no more litigation, that will be it...,” he said. “It will clear the matter up.”