NE BUSINESS SERVICE
NEW DELHI, FEB 10
Cairn Energy Plc CEO Simon Thomson has said he expects to meet Finance Minister Nirmala Sitharaman next week in an attempt to get India to ‘swiftly’ honour a US $1.4 billion tax verdict.
Last month, the Edinburg-based firm had written to the government saying it would be forced to seize Indian government assets if New Delhi fails to pay it US $1.4 billion after losing a bitter dispute over retrospective taxes.
“Cairn Energy CEO Simon Thomson is looking forward to meeting the Government of India Finance Minister in Delhi next week,” the company tweeted with a video of the chief executive urging a swift honour of the tax verdict.
An international tribunal had in December unanimously ruled that India violated its obligations under the UK-India Bilateral Investment Treaty in 2014, when the income tax department slapped a Rs 10,247 crore tax assessment using legislation that gave it powers to levy taxes retrospectively.
“The arbitration is now finalised and the award has been given and we would request along with others, that the Indian government moves swiftly to adhere to the award that has been given,” Thomson said in the video address.
This, he said, was important to Cairn’s shareholders, “who are global financial institutions and who want to see a positive investment climate in India.”
Soon after seeking Rs 10,247 crore in taxes over alleged capital gains made by the company over a 2006-07 reorganisation of India business before its listing, the tax department seized Cairn”s residual 10 percent stake in Cairn India.
In a ruling Cairn had previously described as “final and binding”, the tribunal ordered New Delhi to pay US $1.2 billion in damages, plus interest and costs, to compensate Cairn for the shares — long sold off by the tax department — as well as confiscated dividends and withheld tax refunds. This totals US $1.4 billion.
Cairn is seeking a meeting with the Finance Minister to understand the Indian government”s response to the arbitration award.
Its shareholders have been egging the management to take action to get the money back.
But one-and-a-half-month since the 582-page judgment was issued, the government has not indicated whether it intends to honour the verdict, though payment was due immediately.
Sitharaman’s office hasn’t yet given Thomson a time.
“I’m sure that in working together with the government, we can swiftly draw this to a conclusion, and reassure those investors as to the positive investment climate that India offers,” said Thomson in the video.
He said Cairn is a wonderful example of successful investment and partnership in India.
“Over decades we built a legacy business that’s generated so far over US $20 billion of revenue for the Government of India (and has) also shown massive benefit for the local populations where we operated in Gujarat, in Andhra Pradesh, and Rajasthan,” he said.
Cairn gave the country its biggest onland oil discovery in Rajasthan. It also developed the Ravva oil and gas field off the Andhra coast and smaller discoveries in Gujarat.
In the letter to the Indian government last month, Cairn had said its shareholders – including big financial institutions such as BlackRock, Fidelity, Franklin Templeton, Schroders, and Aviva – “expect an early resolution, failing which they will expect Cairn to pursue the award in conformity with its rights under the treaty”.
“The award can be enforced against Indian assets in numerous jurisdictions around the world for which the necessary preparations have been put in place,” it added.
The letter did not specify the assets that might be seized but it is widely speculated that the targets could include bank accounts as well as mobile and immobile property, including the assets of public sector enterprises such as state-owned Air India, but not diplomatic assets.
Earlier this week, Minister of State for Finance Anurag Singh Thakur had told Lok Sabha that the Cairn arbitration award was “under consideration of the government.”
