Cairn sues Air India in US to recover $ 1.2 billion retroactive tax indemnity from government
NEW DELHI: Scottish explorer Cairn Energy Plc sued loss-making Air India in a U.S. court to force recovery of a $ 1.2 billion international arbitration award won in December against the Indian government’s retrospective tax claim, a move that could stall the national carrier’s divestment managed by the state.
Cairn filed the lawsuit in the US District Court for the Southern District of New York, asking Air India to be declared “the alter ego of the Indian government” under its control and “legally indistinct from the state- itself ”as a state-owned company, according to agency reports.
The petition also pleads for Air India to be “held jointly and severally liable for India’s debts, including any judgment resulting from the recognition of the (arbitration) award”.
“Cairn is taking the necessary legal steps to protect the interests of shareholders in the absence of resolution of the arbitration award. Cairn remains open to continuing a constructive dialogue with the Indian government to achieve a satisfactory outcome to this long-standing issue, ”a Cairn spokesperson told TOI, confirming the lawsuit.
Government officials said they had not received any notice, but had seen “information in the media”. “The government / PSU (public sector unit) did not receive such notice. As such notification is received, the government / organization concerned should take all necessary measures to defend against such illegal law enforcement action, ”said an official.
“It can be mentioned that the government challenged the sentence in the Cairn case before the competent court in The Hague and that the government is convinced that the sentence will be overturned. The government has also hired a team of advisers, who are ready to defend themselves against any enforcement action if and when it is initiated by Cairn anywhere in the world, ”the official said.
The government had recently asked state-owned banks to withdraw their stacks of overseas cash after Cairn announced it would launch lawsuits in third countries to seize Indian government assets in order to recover the arbitration award.
Air India is currently the only Indian carrier operating non-stop flights to the United States. It is unlikely that the carrier will immediately lose access to any of the planes or other assets in the United States. But the lawsuit will cast a shadow over the submission of financial offers by the revised September deadline. Provisional figures presented to Parliament on March 25 estimated Air India’s losses during the 2020-2021 fiscal year at Rs 10,000 crore.
The dispute started with the Indian government in 2011 demanding Cairn Rs 10,247 crore, plus interest and penalties, as income tax from a restructuring of the company’s Indian operations prior to the 2006 IPO. The tax department also seized and sold the residual shares of the Scottish company in Cairn India, which had then been bought by the Vedanta group from NRI Anil Agarwal.