New Delhi: In a setback to India, Britain's Cairn Energy Plc has secured a French court order to seize some 20 government properties in Paris to recover a part of the USD 1.7 billion (approx Rs 12,660 crore) due from New Delhi following an arbitration panel overturning levy of retrospective taxes. The centrally located properties mostly consist of flats. They are valued at more than EUR 20 million and were used by Indian government establishments in France, three people with direct knowledge of the matter said.
The French court, Tribunal judiciaire de Paris, on June 11 agreed to Cairn's application to freeze (through judicial mortgages) residential real estate owned by the Government of India in central Paris, they said adding the legal formalities for the same was completed on Wednesday evening. While Cairn is unlikely to evict the Indian officials residing in those properties, the government cannot sell them after the court order.
Commenting on the development, a Cairn spokesperson said: "Our strong preference remains an agreed, amicable settlement with the Government of India to draw this matter to a close, and to that end we have submitted a detailed series of proposals to them since February this year." "However, in the absence of such a settlement, Cairn must take all necessary legal actions to protect the interests of its international shareholders," the spokesperson told PTI.
Responding to the media reports on the issue, the government has said it has not received any communication from the French Court in this regard. “There have been news reports that Cairn Energy has seized/ frozen State owned property of Government of India in Paris. However, Govt. of India has not received any notice, order or communication, in this regard, from any French Court,” the Finance Ministry said in a statement on Thursday. 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 statement added.
Origin of the issue
Cairn Energy Plc, a 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. Cairn Energy Plc transferred all of its India assets, which were until then held by nine subsidiaries in various countries, to the newly-formed Cairn India Inc and listed it on the Bombay Stock Exchange (BSE) in 2006.
Five years after this rejig, the government passed a retroactive tax law and billed Cairn Rs 10,247 crore plus interest and penalty. According to tax authorities, Cairn Energy had made capital gains worth Rs 24,500 crores in the process of the reorganization. The Government expropriated and liquidated Cairn's remaining shares in the Indian entity, seized dividends, and withheld tax refunds to recover a part of the tax demand.
Cairn challenged the move before an arbitration tribunal in The Hague, which in December 2020 awarded it USD 1.2 billion (over Rs 8,800 crore) plus costs and interest, which totals USD 1.725 billion (approx Rs 12,600 crore). Government filed an application on March 22, 2021 to set aside the December 2020 international arbitral award in The Hague Court of Appeal.
Cairn's plan to secure India's assets abroad
Cairn has already taken steps to have the arbitration award recognised in nine major jurisdictions such as the US, UK, France, the Netherlands, Singapore, and Canada's Quebec province, where Indian sovereign assets have been identified. According to PTI, the company has also hired asset-tracing firms to investigate the overseas assets such as Air India's planes, vessels belonging to the Shipping Corporation of India and property owned by state banks that could be seized to recover the amount due. On May 14, Cairn sued Air India in a New York court stating the airline is an alter ego of the Government of India.
Discussions between Government and Cairn officials
Meanwhile, senior officials of Cairn 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. According to PTI, Cairn had in the meetings offered to forego USD 500 million out of the USD 1.7 billion award and invest that amount in any oil and gas or renewable energy project identified by the Centre. On the other hand, the Indian government wanted Cairn to settle the issue through its now-closed tax dispute resolution scheme, Vivad se Vishwas.
The Vivad se Vishwas scheme, which expired on March 31, provided for dropping of tax cases if 50 per cent of the demand was paid. Citing sources, PTI reported that the company rejected the offer. Cairn is of the opinion that the unanimous ruling of The Hague tribunal was enforceable against Indian-owned assets in over 160 countries that have signed and ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
(With PTI Inputs)
