India asks PSBs to withdraw cash held abroad over dispute with Cairn Energy: Report

Indian authorities have asked the state-run banks to withdraw funds from their foreign currency accounts amid fears that Cairn Energy may try to seize the cash following an arbitration ruling in a tax dispute. In December last year , a Hague-based international arbitration tribunal held that New Delhi must return USD 1.2 billion plus interest and cost to UK’s Cairn Energy Plc following the British firm’s long drawn-out legal tussle with the Indian government over its retrospective tax claims.

While New Delhi has filed an appeal, the London-listed firm 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, news agency Reuters reported.

Cairn CEO Simon Thomson in the January 22 letter to Indian High Commissioner in London, with copies marked to Prime Minister”s Office, Finance Minister Nirmala Sitharaman and External Affairs Minister S Jaishankar, the arbitration award is “final and binding” and “the Government of India has an obligation to comply with its terms.”

The company has registered its claim against India in courts in the United States, Britain, France, the Netherlands, Singapore and Quebec, moves that could make it easier to seize assets and enforce the arbitration award.

The 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. In 2006, it listed its Indian assets on the BSE.

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Five years after that, the government passed a retroactive tax law and billed Cairn Rs 10,247 crore plus interest and penalty for the reorganisation tied to the flotation.

The state then expropriated and liquidated Cairn’s remaining shares in the Indian entity, seized dividends and withheld tax refunds to recover a part of the demand.

Cairn challenged the move before an arbitration tribunal in The Hague, which in December awarded it USD 1.2 billion (over Rs 8,800 crore) plus costs and interest, which totals USD 1.725 billion (Rs 12,600 crore) as of December 2020. The company has since then been in talks with the finance ministry to get the government to pay the award.