US court sets timelines for Cairn-India legal case; India has filed a “Mission to Dismiss” petition in the US

A federal court in Washington has set timelines for responses to be filed to an Indian government petition seeking dismissal of a suit by Britain’s Cairn Energy that sought enforcement of a $ 1.2 billion arbitral award. Judge Richard J Leon of the US District Court for the District of Colombia has given Cairn time till 10 September to file a response to the government’s ‘Motion to Dismiss’ petition.

Thereafter, the Indian government can file a reply in support of its motion by 1 October. This can be countered by Cairn by 20 October and a further two months have been granted to the Indian government to file its reply in support of its motion, according to an August 25 order of the court.

In May this year, the British firm Cairn had asked the US federal court to force Air India to pay the $ 1.26 billion arbitration award the firm had won in December 2020. On 13 August, the Indian government filed a ‘Motion to Dismiss’ petition saying the district court lacked subject matter jurisdiction in the dispute between Cairn and the Indian tax authority.

The move came within days of the government enacting a legislation to scrap the retrospective tax rule that gave the tax department power to go 50 years back and slap capital gains levies wherever ownership had changed hands overseas but business assets were in India.

That rule had been used to levy a cumulative of Rs 1.10 lakh crore of taxes on 17 entities, including Rs 10,247 crore on Cairn. Cairn challenged the Rs 10,247 crore tax demand before an international arbitration tribunal, which in December last year overturned the same and ordered the government to refund the money collected.

The government initially refused to return the $ 1.2 billion, forcing Cairn to take action to recover that money through seizure of Indian assets overseas.

In May, Cairn UK took Air India to court in the US. It contended before the US court that Air India is controlled by the Indian government so much that they are “alter egos” and the airline company should be liable for the arbitration award. Last month, Cairn also got a French court order to seize real estate assets belonging to the Indian government in Paris.

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