InvestorQ : Is it true that Cairn Energy is looking to file a case in the US courts to recover the dues from the Indian government?
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Is it true that Cairn Energy is looking to file a case in the US courts to recover the dues from the Indian government?

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sara Kunju answered.
2 months ago
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This pertains to the issue of retrospective tax that the Indian government had imposed on Cairn Energy for selling their stake in Cairn India to Vedanta Group of Anil Agarwal. The government had imposed retrospective capital gains tax on the transaction on the grounds that the structure was created purely to escape the tax and hence was taxable.

However, the matter went to an arbitration court which has since ruled in favour of Cairn Energy and asked the Indian government to immediately repay the amount of $1 billion to Cairn Energy, which it had retained in India paid in the form of dividends by Vedanta and also held back its tax refunds.

In the latest development in this case, now Cairn Energy is looking for quick actioning of the compensation payable by the Indian government as ordered by the Special Tribunal. To give effect to that order, Cairn Energy has filed a case in a US district court which seeks to enforce the $1.2 billion arbitration award on the issue of retrospective taxation.

Cairn had secured a favorable ruling in the order from the tribunal on grounds that the retrospective tax was contrary to the treaty between India and UK. Now Cairn Energy has requested the US court to recognise and confirm the award, including the payment of $1.2 billion due since 2014 along with interest.

A favorable ruling by the US district court gives Cairn the powers to seize global Indian assets to recover dues. These include, India’s overseas assets like bank accounts, airplanes and ships. The CEO of Cairn Energy will be meeting Nirmala Sitharaman next week. Cairn has been under pressure from it institutional investors. India has opted to contest this ruling.

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