UK-based Cairn energy claims completion of all steps for retro tax repeal law; entitled to Rs 7,900 crore tax refund

Britain’s Cairn Energy said it has complied with all rules of the retro tax repeal law to now become eligible for about Rs 7,900 crore refund of taxes that were collected from it to enforce a retrospective tax demand.

As part of the settlement reached with the government of India in the seven-year-old dispute over the levy of back taxes, the company – which is now known as Capricorn Energy PLC – has withdrawn all cases that were brought to collect the tax refund ordered by an international arbitration tribunal after rescinding retrospective raising of demand, according to an advertisement it issued in Indian newspapers last week.

The government had initially refused to honour the December 2020 arbitration award but in August 2021 brought a law to scrap all retrospective tax demands and refund money collected, after it faced prospects of assets – ranging from flats used by its diplomatic staff in Paris and Air India planes in the US – being seized to recover the refund due.

On November 26, 2021, Cairn Energy had initiated proceedings to withdraw lawsuits it had filed in several jurisdictions to enforce an international arbitration award, which had overturned the levy of Rs 10,247 crore retrospective taxes and ordered India to refund the money already collected.

First, the lawsuit brought in Mauritius for recognition of the arbitration award was withdrawn, followed by similar measures in the courts in Singapore, the UK, and Canada.

On December 15, it sought and got ‘voluntary dismissal’ of a lawsuit it had brought in a New York court to seize assets of Air India to recover the money due from the government. On the same day, it made a similar move in a Washington court where it was seeking recognition of the arbitration award. Recognition of arbitration award is the first step before any enforcement proceedings like the seizure of assets can be brought. The critical lawsuit in a French court, which had attached Indian properties on the petition of Cairn, was withdrawn thereafter and the one in the Netherlands too was dropped.

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