If India agrees to make major payments, Cairn proposes to give $ 500 million

Britain’s Cairn Energy plc has offered to invest $ 500 million and invest that amount in any oil and gas or renewable energy project identified by the Government of India if New Delhi to honor an international arbitration award Agrees and returns the value of the loss due to tax. Retrospective sources said.

The Scottish firm invested in India in the oil and gas sector in 1994 and a decade later it made a major oil discovery in Rajasthan. In 2006–07, it listed its Indian assets on the BSE. Five years after this, the government passed a retrospective tax law and paid Cairn an interest of more than ₹ 10,247 crore and levied interest and penalties for restructuring related to floatation.

The state then regulated and liquidated Cairn’s remaining shares in the Indian entity, forfeiting a dividend to recover a portion of the demand, and withholding the tax refund.

Cairn challenged the move before an Arbitration Tribunal in The Hague, in which it was awarded $ 1.2 billion () in excess of $ 8,800 crore) in costs and interest in December, amounting to $ 1.725 million (, 12,600 crore) by December 2020. ) Is the sum of.

The company, in negotiations with officials of the Ministry of Finance, has offered to reduce interest and costs, offer more than $ 500 million and invest in any oil and gas or renewable energy project identified by the Government of India, if The principal owes $ 1.2 billion to it, three sources aware of the case said.

The Government of India, which appointed one of the three arbitrators to the Hague panel and fully participated in the arbitration proceedings since 2015, gave Cairn the issue through his now-closed dispute resolution plan, Confidence from Vivad Wanted to settle

The World Service Scheme, which closed on March 31, made a provision to waive the tax case if 50% of the demand was paid, which the company rejected, he said.

Even if the plan was agreed to, the Indian government had to return about ₹ 2,500 crore to the British firm, adding that it added to the value of the shares seized and sold, forfeiting dividends and withholding tax refunds, which Was over ₹ 7,600 crore. 24 was more than 50% of the 10,247 crore principal tax demand.

“The company has a tribunal which states that India has violated its obligations to Cairn under the UK-India bilateral investment treaty and has forfeited compensation, tax refunds and dividends as a return to the value of the seized shares. was taken. Instead, you are asking it to pay half the amount of tax that increases short-term capital gains tax, something that the marquee shareholders of the company would never agree to, ”one of them said.

Although Cairn declined to comment on the story, Finance Ministry officials could not immediately be reached for comments.

Cairn officials have since held three face-to-face meetings and made at least one video call with top finance ministry officials to be awarded the award.

Sources said that both sides are eager to resolve the issue soon without resorting to any drastic measures.

The Government of India has appealed against the decision of the Tribunal on the grounds that the tax levied by a sovereign authority should not be subject to private arbitration.

Meanwhile, Cairn, therefore, holds that the unanimous rule of the Tribunal was enforceable against Indian-owned properties in more than 160 countries that signed the Foreign Arbitration on the Recognition and Enforcement of the 1958 New York Convention and ratified it Had. The award, examining foreign assets for hiring asset-tracing firms, may be seized for recovery of dues.

Cairn has already taken steps to recognize the arbitration award in nine major courts, such as the US, UK, France, Netherlands, Singapore and the Province of Quebec, Canada, where Indian sovereign property has been identified.

It has not said what can happen next, but assets may include Air India aircraft, ships belonging to the Shipping Corporation and assets owned by state banks.