India and the enigma of Cairn’s energy: it’s a wrap


Cairn Energy PLC (“Cairn energy“), now renamed Capricorn Energy, is one of the Europe large independent oil and gas exploration and development companies. In recent years, the Government of India and Cairn energy were involved in a dispute over a retroactive tax that was imposed on Cairn energy speak Government of India. We have, in our previous article, summarized this dispute and the resulting arbitration order issued in favor of Cairn energy.

Since the conclusion of the arbitral proceedings, India and Cairn energy shuttled between different proposals to settle the dispute. Cairn energy also simultaneously attempted to enforce the arbitration award she had obtained against India in december 2020. Cairn energy has since contacted courts in several countries to enforce the arbitration award. The arbitral tribunal had ordered India pay around $ 1.2 billion plus interest and fees for Cairn energy.

In a final update, in accordance with the Tax Laws (Amendment) Act 2021 passed by the Indian legislature, Cairn energy withdrew all litigation in this retrospective tax case, allowing the Indian government to reverse the previous tax claim and refund the taxes collected therein to Cairn energy. Cairn energy, in a newspaper notice stated that he, “entered the final phase of its engagements with the Government of India removing Indian and global appeals and enforcement procedures. “1

Cairn energy filed a “notice of voluntary rejection” of his petition against India in the neighborhood of District Court of Columbia Wednesday. On the same day, she filed a similar appeal for the dismissal of her claim against Air India in the New York Southern District Court. The two above-mentioned requests were filed by Cairn energy to confirm the arbitration award she won against India. Cairn energy Empties its petitions across multiple jurisdictions sought to seize Indian government assets overseas to recover the money. Cairn energy agreed to drop litigation to seize Indian government properties in countries ranging from France to the UK, having accepted the offer of the Indian government to retroactively settle the tax dispute relating to the collection of taxes.

To meet the requirements of the new legislation (Tax Laws (Amendment) Act 2021) which abolished the levy of retroactive taxation (under certain conditions), Cairn energy has also pledged to indemnify the Indian government against future claims and has agreed to drop all legal proceedings anywhere in the world. the Government of India is now required to issue the required documentation to refund the tax collected in order to enforce the retrospective tax claim. Cairn energy expects a refund of approximately Rs. 7,900 crore from Government of India.

The Tax Laws (Amendment) Bill 2021 received the President’s assent on August 13, 2021. The bill which has now become law amends the 2012 Finance Act and the 1961 Income Tax Act and cancels the claims made on transactions prior to the May 28, 2012. The tax on the indirect transfer of Indian assets will be applied prospectively from that date. The Taxation Laws (Amendment) Act, 2021 provides a framework for resolving international arbitration cases against the government, namely those filed by Vodafone Plc Group and Cairn energy and 15 others from retroactive tax law. In accordance with the Tax Laws (Amendment) Act 2021, the government will withdraw all tax claims collected retrospectively, refund taxes collected and settle cases, if these companies withdraw challenges filed against the government in all legal instances.

Footnote

1 Choudhary, Sanjeev, Cairn energy withdraw all retroactive tax disputes, Economic time, January 5, 2021. Available at https://economictimes.indiatimes.com/news/economy/policy/cairn-energy-withdraws-all-litigations-in-retrospective-tax-case/articleshow/88705064.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst.

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Ms. Ashima Obhan
Obhan & Associates
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Email: [email protected]
URL: www.obhanandassociates.com

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