India to defend assets in Cairn tax dispute
The Indian government is confident of winning its appeal against an arbitration award of more than $1.2 billion that British oil major Cairn Energy Plc has secured in an investment dispute and is determined to defend its case in foreign courts against enforcement of the arbitration award, a person aware of the government’s plans said on Sunday.
The government is yet to receive any formal notice from Cairn Energy regarding attachment of substantial Indian assets reportedly identified by the company, the person said, requesting anonymity.
The assertion about India defending its assets in overseas courts comes at a time Cairn Energy shareholders are keen to realize the award.
News agency PTI reported on Sunday that Cairn Energy has identified $70 billion of Indian assets overseas for potential seizure to collect $1.72 billion due from the government. The assets identified range from Air India’s planes to vessels and properties owned by state-owned banks to oil and gas cargoes of public sector undertakings, PTI reported citing three people familiar with the matter.
“The government is yet to receive formal notice of any such claims and hence these reports are purely in the realm of speculation. The government is well aware of its legal rights and will defend its case in courts should such proceedings materialize. It is equally confident of winning its appeal in The Hague,” one of the persons cited above said.
“Cairn did not pay a single rupee in tax anywhere in the world in respect of the impugned transactions. Cairn had also lost its appeal before the income-tax tribunal,” the person said.
There was no formal response till press time from Cairn Energy, Air India, or the finance ministry to emails seeking comments sent on Sunday.
The dispute is linked to a tax demand arising from the company’s 2006-07 internal reorganisation of Indian assets. The Indian government offered to resolve it under the Vivad Se Vishwas dispute resolution scheme earlier this year but did not see any progress.
A court filing showed that Cairn Energy had on Friday approached the US court for the southern district of New York against Air India, the loss-making national carrier.
The government believes it to be an illegal enforcement action. Air India owns several real estate properties across the world, including in London, Tokyo, Paris, and also in the US.
Air India has been on a state bailout for many years and is on the block. Past attempts to sell the company have not been successful given its accumulated debt and the intense competition in the aviation industry.
The carrier never made a net profit since its merger with Indian Airlines in 2007.