Cairn drops case against Indian Government, accepts $1 Bn refund Offer
On what can be said one of the most controversial cases between the Indian Govt and a foreign entity, the outcome is finally here, alas not much in the favour of the govt. UK-based Cairn Energy PLC on Tuesday said it will drop litigations to seize Indian properties in countries ranging from France to the US, as soon as they get USD 1 billion refund resulting from the scrapping of a retrospective tax law.
Cairn gave India its biggest onland oil discovery, got embroiled in a case which, a legislation passed last month eventually resulted to cancel a 2012 policy that gave the tax department power to go back 50 years and slap capital gains levies wherever ownership had changed hands overseas but business assets were in India. This meant that the govt could open historical deals like the one in the case of Cairn and demand Capital Gains.
The Cairn CEO Simon Thomson told PTI in an interview from London “The offer to return money seized to enforce retrospective tax demand in lieu of dropping all litigations against the government and is acceptable to us". This meant that the Cairns will drop the litigations to seize Govt properties like Apartment in Paris, France and Air India planes in the US.
The 2012 legislation was used to levy a cumulative of Rs 1.10 lakh crore of tax on 17 entities including UK telecom giant Vodafone however almost majority of the Rs 8,100 crore recovered in enforcing such a demand was only from Cairn.An international arbitration tribunal was then set up and in December overturned a levy of Rs 10,247 crore in taxes on a 2006 reorganisation of Cairn's India prior to its listing, and asked the Indian government to return the value of shares seized and sold, dividend confiscated and tax refund with held. This totalled USD 1.2 billion-plus interest and penalty.
The Govt had to repair India's damaged reputation as an investment destination, and therefore last month enacted new legislation to drop Rs 1.1 lakh crore in outstanding claims against multinationals such as telecom group Vodafone, pharmaceuticals company Sanofi and brewer SABMiller and Cairn.
Hope the above brings the much required ease in the minds of foreign investors and also the capital which is vital for the growth especially with the impact that pandemic has made, the govt will need all the funds possible to put the economy back on its tracks to be the fastest in the world.
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