Friday, 1 July, 2022
HomeEconomyIndia to take legal recourse over Cairn Energy’s confiscation of Paris assets...

India to take legal recourse over Cairn Energy’s confiscation of Paris assets worth Rs 180 cr

Cairn Energy has been moving aggressively to push the Modi govt to comply with the $1.7 billion arbitration award that it won in December 2020 in the retrospective taxation case.

Text Size:

New Delhi: The Indian government will take legal recourse over confiscation of some of its assets in Paris by Cairn Energy, the Ministry of Finance said in a statement Thursday, adding that it is, however, yet to receive any communication or notice from French courts in this regard.

Cairn Energy has been moving aggressively over the last few months to push the Indian government to comply with the arbitration award of $1.7 billion that it won in December 2020 in the retrospective taxation case.

On Wednesday, The Financial Times reported that Cairn Energy has won its first asset freeze application in Paris effectively transferring the ownership of 20 properties of the Indian government valued at over €20 million or around Rs 175-180 crore to the company.

The global energy firm had also sought to attach Air India’s assets in the US in May this year claiming that the latter is the “alter ego” of the Indian government.

The move had threatened to cast a shadow over Air India’s disinvestment but the government had expressed confidence at the time that there would be no impact on the privatisation process of the national carrier.

However, Cairn Energy’s latest move has caught the Indian government unawares.

“There have been news reports that Cairn Energy has seized/frozen State owned property of the Government of India in Paris,” the ministry said, adding that “it has not received any notice, order or communication, in this regard, from any French Court”.

It added, “Government is trying to ascertain the facts, and whenever such an order is received, appropriate legal remedies will be taken, in consultation with its Counsels, to protect the interests of India.”

The government filed an appeal on 22 March in The Hague Court of Appeal seeking to set aside the December 2020 international arbitral award in favour of Cairn energy.

The government “will vigorously defend its case in Set Aside proceedings at The Hague”, the statement said.

The Narendra Modi government has been of the view that Cairn’s attempts to enforce the claim are illegal as the government has filed an appeal in the The Hague. It also maintains that it remains open to an “amicable solution to the dispute within the country’s legal framework”.

Cairn’s top officials had met finance ministry officials earlier this year but there was no breakthrough.


Also read: Covid has undone years of gains India made after 1991 liberalisation


No end to the retrospective taxation row

The Modi government’s decision to pursue appeals in recent adverse arbitration awards has raised questions over its claims of not supporting the concept of retrospective taxation, a provision that was enacted in 2012 during the tenure of the Congress-led United Progressive Alliance government.

This has also meant that the two high-profile retrospective taxation cases that India is battling against Vodafone Plc and Cairn Energy Plc are nowhere near closure.

Last year, the government lost to Vodafone Plc and Cairn Energy Plc in two separate international arbitration cases relating to a retrospective levy of tax on capital gains.

However, the Modi government took a stand that the judgments question the sovereign right of the Indian government to impose a tax and filed appeals against both the awards.

India had retrospectively changed its tax laws in 2012 to levy a capital gains tax on transactions done outside India’s borders but for assets that were situated in India after losing a case against Vodafone Plc in the Supreme Court. This made Vodafone’s $11.2 billion purchase of Hutchison Essar in 2007 taxable in India.

Similarly, it also sought to tax a transaction between Cairn Energy and Cairn India.


Also read: Fitch Ratings cut India’s growth forecast to 10% from estimate of 12.8% for current fiscal


 

Subscribe to our channels on YouTube & Telegram

Why news media is in crisis & How you can fix it

India needs free, fair, non-hyphenated and questioning journalism even more as it faces multiple crises.

But the news media is in a crisis of its own. There have been brutal layoffs and pay-cuts. The best of journalism is shrinking, yielding to crude prime-time spectacle.

ThePrint has the finest young reporters, columnists and editors working for it. Sustaining journalism of this quality needs smart and thinking people like you to pay for it. Whether you live in India or overseas, you can do it here.

Support Our Journalism

Most Popular

×