Cairn Energy says arbitration ruling expected soon on its challenge to Indian govt seeking Rs 10,247 crore
The three-member tribunal, which had in December 2018 completed main court hearings in Cairn’s challenge to the Indian government using a retrospective legislation to seek Rs 10,247 crore in taxes, was supposed to give an award by February 2019
Scottish oil firm Cairn Energy on Tuesday said an international arbitral tribunal is expected to give a decree by the end of summer on its challenge to the Indian government seeking Rs 10,247 crore in retrospective taxes.
Summer in Europe is from June to August.
“The arbitral tribunal has indicated that, whilst it has encountered some difficulties created by the COVID-19 pandemic, it does not expect significant delays and hopes to remain reasonably within the lead-time it had anticipated,” Cairn said in a statement.
The three-member tribunal, which had in December 2018 completed main court hearings in Cairn’s challenge to the Indian government using a retrospective legislation to seek Rs 10,247 crore in taxes, was supposed to give an award by February 2019. But in March 2019, it delayed it to 2019-end and then to the summer of 2020.
“Whilst it (the tribunal) is not yet able to commit to a specific date for its ruling, it expects a “release of the award after the end of the summer”,” the company said.
It, however, did not say which month the tribunal had indicated for giving of the award.
The company is seeking full restitution for losses totalling more than USD 1.4 billion resulting from government expropriation of its investments in India in 2014.
“Cairn continues to have a high level of confidence in the arbitration and is seeking full restitution for losses of more than USD 1.4 billion,” the statement said.
The company, which gave the country its biggest oil discovery, received a notice from the income tax department in January 2014, requesting information related to the group reorganisation done in 2006. Alongside, the department attached the company’s near 10 per cent shareholding in its erstwhile subsidiary, Cairn India.
In March 2015, the tax department sought Rs 10,247 crore in taxes on alleged capital gains made by the company in the internal reorganisation.
Cairn Energy had in 2010-11 sold Cairn India to Vedanta.
Following the merger of Cairn India and Vedanta in April 2017, the UK firm’s shareholding in Cairn India was replaced by a shareholding of about 5 per cent in Vedanta issued together with preference shares.
In addition to attaching its shares in Vedanta, the tax department seized dividends totalling Rs 1,140 crore due to it from those shareholdings and set off a Rs 1,590-crore tax refund against the demand.
Cairn Energy in 2015 initiated an international arbitration to challenge retrospective taxation.
Pending final award, the tax department sold Cairn Energy’s shares in Vedanta to recover part of the tax demand.
It had previously stated that the arbitration panel is expected to issue a binding and internationally-enforceable award.