Cairn Drops Suits Against AI, GoI in US Decision Post Retro Tax Changes

UK’s Cairn Energy renamed Capricorn Energy this week, has withdrawn arbitration enforcement suits in the US courts as part of its settlement with the Indian government in the retrospective tax case.

Cairn Energy filed a “notice of voluntary dismissal” of its petition against India in the District of Columbia District Court on Wednesday, as per court filing. On the same day it filed a similar plea for dismissal of its petition against Air India in the New York Southern District Court. Both cases have been “terminated,” according to the Pacer Monitor website that tracks federal court cases in the US.

Cairn had filed a petition on February 12 in the District of Columbia court to confirm the arbitration award it won against India last December in the retrospective tax case. The arbitration tribunal had ordered India to pay $1.2 billion plus interest and costs to the UK firm in the seven-year old tax case. The company sought to seize the Indian government’s assets overseas to recover the money and hence also filed a petition on May 14 in the New York court against Air India. Cairn urged the court to hold Air India responsible for India’s debt, including obligations arising from the arbitration award.

“Pursuant to Rule 41(a)(1)(A)(I) of the Federal Rules of Civil Procedure, the plaintiff(s) and or their council(s), hereby give notice that the above-captioned action is voluntarily dismissed, with prejudice and without costs against the defendants(s) Air India Ltd,” said the summary of the dismissal notice on Pacer Monitor.

Cairn changed its stance after the government scrapped the retrospective tax law. The company said November 3 it had “entered undertakings with the government of India” to participate in the scheme and would drop all litigation for the enforcement of arbitration award.

The company expects to receive a refund of Rs 7900 crore. The government had seized Cairn’s shares, dividends, and tax refund to meet its tax demand.

The dispute with Cairn began in 2014 with the government demanding capital gains tax of Rs10200 crore plus interest and penalty for a reorganization of assets that the company under took at its India unit in 2006 ahead of the listing of its shares in 2007. Cairn Energy Sold the controlling stake in its India unit to billionaire Anil Agarwal’s Vedanta in 2011.

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