Government Of India Vs Cairn Energy Standoff. 10 Points About It

Cairn Energy in 2015 had initiated an international arbitration to challenge retrospective taxation against it.

Government Of India Vs Cairn Energy Standoff. 10 Points About It

Government of India and Cairn Energy have been involved in a tax dispute case

The Government of India and British oil major Cairn Energy have had a long face-off. It has its origin in a retrospective tax amendment law, under which the company was asked to pay a tax liability by India. Cairn contested against the demand and this led to an arbitration case.

Here are the 10 main points related to the controversy:

  1. Cairn received a notice from India's Income Tax department in January 2014, raising a preliminary assessment of Rs 10,247 crore tax liability relating to the group reorganisation done in 2006, when Cairn UK transferred had about 10 per cent shares of Cairn India Holdings to Cairn India.

  2. In March 2015, the Income Tax department had contended that Cairn UK made a capital gain of Rs 24,503 crore in the internal reorganisation. The company launched international arbitration to challenge the retrospective taxation.

  3. On December 22, 2020 the Arbitration tribunal announces award in Cairn's favour and in the verdict Government of India is asked to pay Rs 8,000 crore in damages to the company.

  4. On March 22, 2021 Government of India files appeal against the arbitration verdict at The Hague.

  5. On July 8, 2021, Cairn Energy said that it has orders from a French court to seize around 20 properties belonging to Indian Government in France to recover a part of its arbitration award.

  6. The Government of India has responded by saying that it has not received any order from a French court.

  7. India says that if any such order is received, it will take legal remedies.

  8. The Government in a statement reminded that it has appealed against the arbitration award at The Hague Court of Appeal, where it will vigorously defend its case in “Set Aside” proceedings.

  9. India has said that Cairn Energy representatives have approached it for amicable settlement and constructive discussions have been held as the Government is also keen to resolve the matter amicably.

  10. A Cairn Energy spokesperson said that a series of proposals have been sent to the Indian Government since February 2021 for an amicable settlement, however in the absence of it, the company must take all legal actions to protect its shareholders' interests.