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Home  » Business » Cairn, Air India seek stay on New York court proceedings

Cairn, Air India seek stay on New York court proceedings

By Ammar Zaidi
September 15, 2021 16:05 IST
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Cairn Energy and Air India have jointly asked a New York federal court to stay further proceedings in the British firm's US lawsuit targeting the airline for enforcement of a $1.2-billion arbitral award.

The move follows the government enacting a law to scrap retrospective taxation in the country, which in effect will result in withdrawal of the Rs 10,247 crore tax demand on Cairn, according to court documents reviewed by PTI.

The British company had won an international arbitration award against levy of such taxes and sought to take over Air India assets when the government refused to honour the award and pay it $1.2 billion-plus interest and penalty.

 

But, last month, the government enacted the Taxation Laws (Amendment) Act, 2021, that scraps all such retrospective tax demands and has agreed to refund Rs 7,900 crore it had seized from Cairn to enforce such demand.

Cairn has indicated that the refund, without interest and penalty, was acceptable to it — opening an avenue to settle the seven-year-old dispute.

Cairn and Air India in a joint request to US District Judge Paul Gardephe on September 13 stated that a stay on proceedings would give them "additional time to evaluate the effects and implications" of legislation that repealed the retroactive tax.

In return for the Rs 7,900 crore, Cairn would drop lawsuits threatening court-ordered seizures of Indian government property abroad.

One of those suits was filed in May against state-owned Air India Ltd, which Cairn has said should be considered alter ego of the Indian government.

"The implementing regulations are in the rulemaking process and will take some time," the two said in the petition seeking extension of the October 21 deadline for the presentation of case papers and initial pretrial conference on October 28.

They requested the court to "stay any further proceedings in this matter through October 31, 2021, and reschedule the initial pretrial conference and, respectively, the deadline for the parties to submit their Joint Pretrial Letter and Proposed Case Management Plan, for new dates in November 2021."

"The Parties have conferred and agreed that the stay will facilitate the efficient resolution of the dispute, conserve the Court's and Parties' resources, and is not intended to obstruct or delay," they added.

Cairn had on May 14 brought a lawsuit in the New York district court to hold Air India liable as the alter ego of the Republic of India for the obligations the government owes under a foreign arbitral award.

The firm separately filed a petition before the District Court for the District of Columbia to recognise and enforce the arbitration award against India on February 12, 2021.

Seeking to repair India's damaged reputation as an investment destination, the government last month enacted new legislation to drop Rs 1.1 lakh crore in outstanding claims against multinationals such as telecom group Vodafone, pharmaceuticals company Sanofi and brewer SABMiller, now owned by AB InBev, and Cairn.

About Rs 8,100 crore collected from companies under the scrapped tax provision are to be refunded if the firms agreed to drop outstanding litigation, including claims for interest and penalties. Of this, Rs 7,900 crore is due only to Cairn.

An international arbitration tribunal in December overturned a levy of Rs 10,247 crore in taxes on a 2006 reorganisation of Cairn's India business prior to its listing.

It also asked the Indian government to return the value of shares seized and sold, dividend confiscated and tax refund withheld.

This totalled $1.2 billion-plus interest and penalty.

The government initially refused to honour the award, forcing Cairn to identify $70 billion of Indian assets from the US to Singapore to enforce the ruling, including taking flag carrier Air India Ltd to a US court in May.

A French court in July paved the way for Cairn to seize real estate belonging to the Indian government in Paris.

All these litigations will be dropped once Rs 7,900 crore is paid, Cairn CEO Simon Thomson had told PTI earlier this month.

Photograph: Francis Mascarenhas/Reuters

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Ammar Zaidi in New Delhi
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