New Delhi, May 15

United Kingdom’s Cairn Energy Plc has brought a lawsuit in the US court that potentially can lead to seizing of Air India’s overseas assets such as airplanes to recover $1.72 billion from the Indian government which an international arbitration tribunal had awarded after overturning levy of retrospective taxes.

Retroactive tax case

  • In 2011, Indian Govt passed a retroactive tax law and billed Cairn Rs 10,247 cr plus interest and penalty for the reorganisation tied to the flotation
  • Cairn’s shares were liquidated, dividends seized and tax refunds withheld
  • Cairn challenged the move and Hague tribunal awarded it $1.725 million (Rs 12,600 cr)

Cairn had, on May 14, filed a lawsuit in the US district court for the southern district of New York, seeking declaration of Air India as the “alter ego of Indian government” by virtue of control and as a state-owned company it was “legally indistinct from the state itself”, sources said.

The May 14 lawsuit seeks to make Air India liable for discharge of the arbitration award against the Indian government. While Cairn said it was “taking necessary legal steps to protect shareholders’ interest in the absence of a resolution to the arbitral award”, sources in the government said India would take all necessary steps to defend against any such “illegal enforcement action”. The Indian government argues that tax levied by a sovereign power should not be subject to private arbitration. — PTI