Cairn Energy to Drop Case Against India: The announcement comes a month after India proposed repealing the contentious 2012 law.
The company located in the United Kingdom announced on Tuesday that Cairn Energy will drop case against India and Indian properties in nations ranging from France to the United States within days after obtaining a $1 billion refund from the repeal of a retrospective tax law.
The company that produced India’s greatest on-land oil discovery dubbed the reversal of a 2012 policy “bold.” This gave the tax department the option to go back 50 years and apply capital gains taxation wherever ownership had changed hands overseas but business assets were in India
Cairn CEO Simon Thomson told PTI in an interview from London that the offer to refund money seized to execute a retrospective tax demand in exchange for withdrawing all litigation against the government “is acceptable to us.”
Cairn will abandon efforts to seize diplomatic houses in Paris and Air India planes in the US in “a matter of a couple of days” after the reimbursement, he said, adding that Cairn’s shareholders had agreed to accept the deal and move on.
“Some of our core shareholders likes BlackRock and Franklin Templeton agree (to this). Our view is supported by our core shareholders (that) on balance it is better to accept and move on and be pragmatic. Rather than continue with something negative for all parties which could last for many years,” he said.
In an effort to rehabilitate India’s tarnished image as an investment destination, the government passed new legislation last month that allowed multinationals such as Vodafone, Sanofi, and SABMiller, which is now controlled by AB InBev, and Cairn to drop Rs. 1.1 lakh crore in outstanding claims.
Companies would be paid almost Rs 8,100 crore collected under the now-defunct tax provision if they agree to withdraw all existing litigation, including demands for interest and penalties. Out of this Cairn alone is owed a total of 7,900 crores.
“Once we get to final resolution, part of that resolution is us dropping everything in terms of litigation. We can do that within a very short period of time, just a matter of a couple of days or something,” Thomson said. “So we are preparing on the basis of getting this resolution quickly, all these cases being dropped, and putting all this behind.”
He stated that all enforcement proceedings filed as a result of the Indian government’s reluctance to comply with an international arbitration ruling ordering it to refund the value of money seized to execute the retrospective tax demand would be dismissed.
“Everything will be dropped. There will be no more litigation, that will be it. It will clear the matter up,” he said.
Cairn said in its half-yearly report on Tuesday that out of the 7,900 crores (USD 1.06 billion) it expects to earn from the Indian government, it will return up to USD 700 million to “shareholders via special dividend and buyback.”
The resolution will put an end to the spectre of the retro tax and allow us to move on. “We are keen to get back to Cairn being talked about in terms of success in Rajasthan. I think moving on from this will allow us to do that,” he said referring to the prolific oil discovery the firm made in Barmer.
