Cairn CEO meets top officials of finance ministry over tax dispute

NEW DELHI:  Nine days after stating that he would hold a meeting with India’s finance minister, Britain’s Cairn Energy Chief Executive Simon Thomson on Thursday met top officials of the ministry, including Finance Secretary AB Pandey and CBDT Chairman P C Mody.

The meeting holds big significance as Cairn is said to have filed cases in the US, the UK and the Netherlands courts to recover $1.4 billion in a tax dispute it won against India in an international arbitration tribunal. 

“We had a constructive dialogue and the dialogue is ongoing. I can’t comment more on the meeting,” said Thompson. In a video message last week, Thomson had sought a meeting with Finance Minister Nirmala Sitharaman during his visit to India. However, FM reportedly authorised the finance secretary to meet him and hear out the company.

Reports suggest that India may file an appeal against the December 21 ruling. Cairn shareholders, however, have been pressing the company management to get the $1.4 billion the tribunal had ordered India to return.  Cairn has threatened to seize Indian government assets overseas if the givey fails to return the value of the shares sold, dividend seized and tax refund withheld by the income tax department to recover part of the tax demand.

The firm has started identifying assets, including ships and planes, it could seize if the Indian government does not comply with the tribunal order. But, Cairn shareholders, after waiting patiently for seven years for resolution of the tax issue, now want action to recover the award.

The shareholders include big financial institutions such as BlackRock, Fidelity, Franklin Templeton, Schroders and Aviva. Meanwhile, the government has, so far since the judgment was issued, given no indication about whether it intends to honour the verdict.

WHAT IS THIS CASE?

• Like Vodafone, this dispute between the Indian government and Edinburgh-based company relates to retrospective taxation.
   
• In 2006-07, as a part of internal rearrangement, Cairn UK transferred shares of Cairn India Holdings to Cairn India. 
• Tax authorities then contented that Cairn UK had made capital gains and slapped it with a tax demand of Rs 24,500 crore.
• Cairn refused to pay the tax, which prompted cases being filed at I-T Appellate Tribunal 
• Cairn had lost the case at ITAT. An arbitration tribunal at the Hague awarded $1.2 billion in damages plus interest to Cairn.