United Kingdom-based oil and gas company Cairn Energy on Thursday said it has withdrawn all global legal proceedings against the Indian government in the final stage of its undertaking with New Delhi.

The central government has been in dispute with firms like Cairn Energy and Vodafone over retrospective tax. Both firms had won international arbitrations against the levy of retrospective taxes on them.

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. Amendments to the law brought in August had withdrawn retrospective tax demands made on indirect transfer of Indian assets prior to May 28, 2012.

In September, the Cairn Energy had agreed to drop cases to seize Indian properties in foreign countries after the Indian government said it would give a tax refund of $1.06 billion (around Rs 7,885 crore).

In a statement on Thursday, the oil and gas company said that by withdrawing all global proceedings against the Indian government, it has concluded all the necessary steps it needs to do under the rules of the India Taxation (Amendment Act) 2021.

“Upon its acceptance of the Company’s submission that all of those requirements have been satisfied, the Government of India will pay the Company a tax refund of approximately Rs 79 billion (US $1.06 billion),” the statement said.

It said the company was working with the Indian government towards expediting the refund process. “The previously announced special dividend is expected to be paid in early 2022,” the statement added.

The amendment introduced in August had effectively nullified all retrospective tax demands made on transactions before 2012 on the fulfilment 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.

The case

In the Cairn Energy case, a three-member international arbitration tribunal ruled in December 2020 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 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.

In September, the company’s Chief Executive Officer Simon Thomson had 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 had said. “It will clear the matter up.”