Cairn says taking action to access value of award

New Delhi: UK's Cairn Energy Plc on Tuesday said it is taking all necessary actions to access the $1.7 billion it was awarded by an international arbitration tribunal after overturning a retroactive tax demand slapped by the Indian government.

The Scottish firm invested in the oil and gas sector in India in 1994 and a decade later it made a huge oil discovery in Rajasthan. In 2006 it listed its Indian assets on the BSE. Five years after that the government passed retroactive tax law and billed Cairn Rs 10,247 crore plus interest and penalty for the reorganisation tied to the flotation.

The state then expropriated and liquidated Cairn's remaining shares in the Indian entity, seized dividends and withheld tax refunds to recover a part of the demand.

Cairn challenged the move before an arbitration tribunal in The Hague, which in December awarded it $1.2 billion (over Rs 8,800 crore) plus costs and interest, which totals $1.725 billion (Rs 12,600 crore) as of December 2020.

"In December last year the tribunal established to rule on our claim against the Government of India found in Cairn's favour and awarded us damages of $1.2 billion plus interest and costs," Cairn Energy CEO said at company annual shareholders meeting. This ruling, he said, is binding and enforceable under international treaty law.

"Whilst India has sought to challenge the basis of the award through set-aside proceedings in the Dutch courts, we remain confident of our position and continue constructive engagement with the Government of India whilst at the same time taking all necessary actions to protect our rights to the award and access the value of it as early as possible," he added.

While he did not elaborate, Cairn had previously threatened to seize overseas assets of state-controlled Indian firms to recover the money due to it.

Finance Minister Nirmala Sitharaman had last month reiterated that international arbitration ruling on India's sovereign right to taxation sets the wrong precedent, but had said that the government is looking at how best it can sort out the issue.

The government, which participated in an international arbitration brought by the Scottish firm against being taxed retrospectively, has appealed against The Hague based tribunal's ruling asking the government to return the value of shares expropriated and liquidated, tax refunds withheld and dividend seized to recover a wrongly levied retroactive tax demand.

The Indian government argues that tax levied by a sovereign power should not be subject to private arbitration, Cairn had previously said the award is binding and it can enforce it by seizing overseas

Indian assets. Cairn has been engaged with the finance ministry to get the government to pay the award. Its officials held three face to face meetings with the then Revenue Secretary Ajay Bhushan Pandey in February and at least one video call with his successor Tarun Bajaj.