The British oil company Cairn Energy confirmed on Saturday that it has initiated a process to seize Indian assets to enforce the $1.2 billion international arbitration award it has won against India in a tax dispute involving retrospective taxation. In a lawsuit filed in a U.S. court it has sought to make the country’s national carrier Air India liable for paying the damages in an U.S. Court.
The lawsuit argued that the carrier, as a state-owned company, is “legally indistinct from the state itself”. “The nominal distinction between India and Air India is illusory and serves only to aid India in improperly shielding its assets from creditors like (Cairn),” the filing said.
An official from Cairn told The Hindu that the company is taking the necessary preliminary legal steps to protect shareholders’ interests in the absence of a resolution to the arbitral award. Cairn remains open to talks with the government to resolve the dispute, but it is not unusual in legal proceedings of this nature to seek attachment of the alleged assets of the debtor in foreign jurisdictions. Air India operates flights from India to New York, Chicago, Washington DC and other cities in the US. The suit brought by Cairn would seek to seize airplanes or other immovable assets like sales offices that the carrier operates in some of these locations.
Air India has long been a loss-making entity and the government has indicated that it is in an advanced stage of being disinvested with multiple parties having submitted offers, including the Tata Group. This action against Air India could put a roadblock to that process as the government was hoping to conclude the sale by September this year. Secondly, this can be seen as yet another setback in a continuing story of the retrospective tax law damaging India’s international reputation when it comes to doing business. The Centre has challenged the December 2020 arbitration tribunal award in favour of Cairn as it has a previous ruling in favour of Vodafone. However, hopes for those verdicts being overturned are slim.(Hindu)
