The Indian government has petitioned a federal court in Washington to dismiss Cairn Energy’s complaint seeking execution of a USD 1.2 billion arbitral award, claiming that it is immune from prosecution under US law. Cairn had petitioned a federal court in the United States in May to compel Air India to pay a USD 1.26 billion arbitration judgement it had received in December.
According to a record reviewed by PTI, the government filed a ‘Motion to Dismiss’ suit in the US District Court for the District of Colombia on August 13, claiming it lacked subject matter jurisdiction in the dispute between Cairn and the Indian tax office. This comes just a week after the government passed legislation to repeal a tax regulation that allowed the tax agency to go back 50 years and levy capital gains taxes on any business assets that had changed hands outside of India. This law was utilised to tax 17 entities for a total of Rs 1.10 lakh crore, including Rs 10,247 crore on Cairn.
Officials stated that procedures for the removal of such tax demands are currently being drafted.
“One of the conditions for the cancellation of the retrospective tax demands is that the parties involved promise to dismiss all cases against the government/tax department. So, while all of this is going on, the government is required to reply in any judicial issue where a deadline has been set “an official clarified.
Cairn disputed the tax demand in front of an international arbitration tribunal, which overturned it in December of last year and ordered the government to repay the money collected. The government first refused to refund the USD 1.2 billion, requiring Cairn to seize Indian assets abroad in order to reclaim the funds.
It sued Indian flag carrier Air India Ltd in a US court in May and received a French court order last month to take real estate owned by the Indian government in Paris.
It argued in front of a US court that Air India is so closely controlled by the Indian government that they are “alter egos” and that the airline should be held accountable for the arbitration decision.
In February, Cairn requested that a US court recognise and affirm the Permanent Court of Arbitration’s December 2020 ruling against India.
Finance Minister Nirmala Sitharaman said on Monday that the regulations for removing retrospective tax demands against businesses like Cairn Energy Plc and Vodafone Plc will be framed soon.
The Finance Minister stated that authorities from her ministry are in talks with Cairn and Vodafone about closing retro tax matters, refunds, and settlements.