Bank accounts, ships, planes: What all India stands to lose if it fails to pay up Cairn Energy

India is staring at a potential $1.2-billion loss of face as the long-running retro tax case against Cairn Energy, the British oil firm, nears its climax.

At risk of seizure are Indian assets such as airplanes, bank accounts and other foreign properties that could be snatched to pay for the arbitration award.

Simon Thomson, the chief of Cairn Energy, is set to call on finance secretary Ajay Bhushan Pandey today. A day earlier, the company had moved an American court to enforce the award it won in the case against India.

For some time, Cairn had been identifying India's foreign assets after strong hints emerged that Modi government may not honour the international arbitration award passed by a tribunal at the Permanent Court of Arbitration in The Hague.

The tribunal, which also had a judge appointed by India, had unanimously overturned India's Rs 10,247-crore demand on Cairn, and asked Modi government to "return value of the shares it sold, dividend it seized and tax refunds it stopped", along with interest.

India was also asked to pay Cairn the arbitration costs it incurred. The amount due on India would be $1.25 billion plus interest. With interest, it would come to $1.4 billion.

As per rules, if India fails to comply, it will fall foul of international norms on such matters, known as the New York Convention. "As India is a signatory to the New York Convention, the award can be enforced against Indian assets in numerous jurisdictions around the world for which the necessary preparations have been put in place," CEO Thomson's letter to India said.

According to reports, an agency was hired by the company to find out what types of Indian assets could be seized, including Air India planes and Indian ships. Diplomatic properties, however, cannot be touched in such cases.

So far, the claim against India has been registered in the Netherlands and France, which means assets in those two could come in for seizure first, potentially followed by those in America and Canada.

The case goes back to 2014 when Indian tax authorities slapped a Rs 10,247 crore tax demand on the company for capital gains it supposedly made in a 2006 business restructuring. In 2015, the taxmen had seized Cairn Energy's residual shareholding of 10% in Cairn India, then valued at around $1 billion.

Cairn later challenged India's demand in the arbitration court, saying it was liable to pay no such tax.

In early February, PTI had reported that the Indian government may hand over to Cairn one of the surrendered oil fields such as Ratna R-series field — taken away from the Essar-Premier consortium in 2016 — in lieu of its $1.4 billion dues. Rajasthan's Barmer field could be another option, the report had said.

India's three-month window to appeal against the arbitration order will end on March 21. Modi govt's stand in the matter so far has been that government’s right to tax cannot be questioned.