New Delhi: Faced with lawsuits filed by Cairn Energy and investors of Devas Multimedia — both seeking to recover their dues from the Indian government by attempting to seize Air India’s overseas assets — the government has lined up a two-pronged approach.
First, the Centre has assembled a team of lawyers and legal consultants to challenge the premise that Air India is an “alter-ego” of the Government of India. Second, it is preparing a list of the airline’s overseas assets that could face potential seizure from the lawsuits and could even pose a risk to the carrier’s disinvestment process, top government officials and Air India executives said.
Last week, investors of Devas Multimedia moved a US federal court seeking the takeover of Air India assets to enforce payments awarded in a $160 million arbitration compensation over a failed satellite deal with the Indian Space Research Organisation (ISRO). This lawsuit is on the lines of Cairn Energy’s case, which is seeking seizure of Air India’s assets to enforce the $1.2 billion arbitration award granted to it by a Dutch court in a tax dispute against the Indian government.
According to a senior Air India official, the Ministry of Civil Aviation is learnt to be “monitoring” both these cases from the disinvestment point of view and is “coordinating” with the Ministry of Finance and Department of Space.
“The precedence makes it tricky and therefore the attempt is to challenge the lawsuit on the grounds that the (Cairn) case is under appeal (at The Hague). If there is a favourable verdict (for Indian government) in the US court, that can be used as precedence to protect our assets in other countries as well,” the Air India official said.
The Indian government had challenged in a court in The Hague the arbitration tribunal verdict that overturned its demand for back taxes from Cairn. The Permanent Court of Arbitration (PCA) at The Hague in December 2020 had ruled that the Indian government’s retrospective tax demand on Cairn Energy was “in breach of the guarantee of fair and equitable treatment”, and against the India-UK bilateral treaty.
The case is expected to be heard at The Hague on September 1.
“In the case of Devas, an Indian court has approved winding up of the company (Devas) based on account of fraud. The case against GoI is against it, it’s a separate entity than a company and should be dealt with like that. Air India should not be treated as an alter ego.
Just having an office in the US makes it easier to target. Will a company be targeted in other countries if the case is against the government?” a finance ministry official told The Indian Express.
However, there is precedence of parties attempting to seize assets of government-owned entities to strong-arm the State into paying their dues.
04/07/21 Pranav Mukul , Aanchal Magazine/Indian Express
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