Cairn Energy to withdraw Legal Cases and Claims against India
Cairn has accepted the terms offered by Indian government to put an end to the legal dispute over retrospective taxation. One condition is that this would only apply in case the other party agrees to withdraw all legal suits and commits not to proceed legally in future.
The dispute goes back to the sale of Cairn India by its parent Cairn UK to Vedanta. The government had sent a tax bill of Rs.10,247 crore to Cairn UK for unpaid capital gains tax. It withheld dividends payable to Cairn UK, held back tax refunds and disposed of shares lying in Cairn demat account to recover dues.
To get back the money from Indian government, Cairn UK had approached the arbitral courts, which had given an order in their favour. With this order, Cairn was trying to recover monies from the Indian government by confiscating global Indian assets including foreign bank accounts, ships and Air India planes.
Things changed after the Indian cabinet approved rescinding retrospective tax legislation. Post scrapping retrospective tax legislation, Indian government offered to refund amounts withheld without interest or penalty. This entails paying back $1 billion to Cairn UK. This payment will be subject to Cairn UK withdrawing all legal cases filed in this regard.
The CEO of Cairn made a statement on 07th September that they were willing to accept the offer of the Indian government. The decision had the approval of institutional shareholders like Fidelity and Blackrock. As per the agreement, Cairn UK will also withdraw all relevant legal cases against Indian government.
This will put an end to the 10-year dispute between Cairn UK and the Indian government. Since Cairn UK was the most prominent retrospective taxation case, it also puts an end to such roadblocks to foreign investment. Interestingly, Cairn UK has committed to distribute 70% of the pay-out by the Indian government as special dividend to its shareholders.
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