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Home / News / India /  Cairn dispute: Govt shares update on seizure of Indian properties, settlement

Cairn vs India: The government on Monday informed that it has not received any formal proposal from Britain's Cairn Energy to resolve the dispute within the country's legal framework. India is facing a payout of $1.2 billion-plus interest after an arbitration award went against it. In December last year, a three-member international arbitration tribunal unanimously overturned the levy of taxes on Cairn retrospectively and ordered refund of shares sold, dividend confiscated and tax refunds withheld to recover such demand.

Since then, the energy giant has been pressing India to pay the award money. However, the government is looking for possible solutions within the existing framework.

Congress leader Manish Tewari asked the Centre whether Cairn Energy had offered any kind of amicable solution to the dispute within the country’s legal framework and if so, whether the Government is willing to take it?

In a written reply to this in Lok Sabha, Minister of State for Finance Pankaj Chaudhary said: "No formal proposal for a solution within the country’s legal framework has been received in this regard."

The minister said the arbitral tribunal on December 31, 2020, ruled in favour of Cairn. "It has asked India to pay Cairn an award amount of USD 1.2328 billion-plus interest and USD 22.38 million towards arbitration and legal costs," he said.

When India refused to pay the award and challenged the order before a court in The Netherlands, Cairn Energy secured an order from a French tribunal for seizing 20 properties of the Indian government in that country.

When asked whether the government had received a list of Indian public assets in countries where Cairn had registered the enforcement and is pursuing efforts to monetize the arbitration award. To this, the minister said: "No such list has been received."

"An order has been passed by a French court freezing certain Indian Government properties...The same has been communicated through diplomatic channels," the minister said.

Initially, the government wanted the dispute to be settled under the 'Vivad se Vishwas' Scheme. The now-closed scheme provided for settling of a tax dispute if the taxpayer pays 50 per cent of the tax demand upfront in return for waiving of penalty and interest as well as the closing of the case.

For Cairn, this would have meant getting about a third of USD 1.2 billion claim.

This because the original tax demand that the government sought from it was 10,247 crore - half of this would be 5,123.5 crore. The government had recovered about 7,600 crore by selling shares belonging to Cairn, seizing its dividends and withholding tax refunds.

Netting it too, the due amount to be paid to Cairn would have been 2,477 crore or less than USD 400 million. As of present, there is no tax dispute resolution scheme in vogue.

Cairn has identified USD 70 billion of Indian assets overseas for the potential seizure to collect the award, which now totals to USD 1.72 billion after including interest and penalty.

In June, Cairn brought a lawsuit in the US District Court for the Southern District of New York pleading that Air India is controlled by the Indian government so much that they are 'alter egos' and the airline should be held liable for the arbitration award. Similar lawsuits are likely to be brought in other countries, primarily with high-value assets.

(With inputs from PTI)

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