New Delhi: A French court has ordered a freeze on residential properties owned by the Indian government in central Paris, in what is seen as a setback for the Centre in its tax dispute with London-listed Cairn Energy Plc.
Tribunal judiciaire de Paris’s ruling based on Cairn Energy’s application will impact some 20 properties, as part of a guarantee of the debt owed to the British company that exited India a few years ago.
The Cairn dispute started 15 years ago, in 2006-2007, after Cairn UK had transferred shares of Cairn India Holdings to its Indian counterpart, Cairn India.
Then, tax authorities decided that since Cairn UK had made capital gains, it ought to pay capital gains tax, which the company later refused to pay.
The UPA government decided to impose capital gains tax retrospectively on some companies, such as Cairn and telecoms operator Vodafone Plc.
India's retrospective tax was introduced in 2012 and made any capital gains resulting from the transfer of shares from a foreign entity whose assets were located in India taxable from 1962.
In December 2020, a permanent court of Arbitration at The Hague had ruled that the Indian government should pay damages worth $1.2 billion to Cairn Energy, since a case of retrospective tax was wrongly applied on the company.
The court cited that the claim by the Indian government was “in breach of the guarantee of fair and equitable treatment”. Including interests, the total dues that India owe to the company at this point are around $1.7 billion.
India has apparently asked state-run banks to withdraw funds from their foreign currency accounts abroad, news agency Reuters reported citing sources.
Cairn was awarded damages of more than $1.2 billion plus interest and costs in December in a long drawn-out tussle with the Indian government over its retrospective tax claims.
While the government has filed an appeal, Cairn has started identifying Indian assets overseas, including bank accounts, that could be seized in the absence of a settlement, which Cairn says it is still pursuing.
According to reports, an agency was hired by the company to find out what types of Indian assets could be seized, including Air India planes and Indian ships.
Diplomatic properties (Indian embassies), however, cannot be touched in such cases.
Cairn Energy — which has less than 200 employees and a market capitalisation of £755 million — has filed cases in several countries to pursue the unpaid international arbitration award of $1.7 billion.
The arbitration award has also been registered in other jurisdictions, including the US, the UK, Canada, Singapore, Mauritius, France and the Netherlands as the company intends to focus on high-value assets.
It had filed cases in the Southern District of New York, seeking judicial confirmation that Air India can be classed as the alter ego of the Indian state and thereby jointly liable for the arbitral award.
Cairn had said last month that regarding the controversial tax dispute case it won against India, it had already initiated the process of seizing Indian assets abroad. The case against Air India is part of that process.
The assets identified by Cairn range from Air India’s aircraft to vessels belonging to the Shipping Corporation of India, and properties owned by state-owned banks to oil & gas cargoes of PSUs, people familiar with the matter told news agency PTI.
09/07/21 Times of India
