The court awarded Cairn $ 1.2 billion (Rs 9,000 crore), plus interest and costs, the company said in a statement after the ruling. The total damages are estimated at 1.4 billion dollars for the government, which is studying the ruling.
“The government will study the award and all its aspects carefully in consultation with its attorney. After such consultations, the government will consider all options and make a decision on the further course of action, including legal recourse to the appropriate forums,” he said the Ministry of Finance. it said in a statement.
Three months ago, the government suffered great embarrassment when it lost a similar case involving Vodafone, where tax authorities had requested payment, through a retrospectively implemented clarifying amendment, for the telecom giant’s 67% acquisition of Hutch. in the mobile company of India. The deal involved two foreign entities, which escaped taxes, but the government insisted the tax is owed because the underlying assets were in India.
In the Cairn Energy case dating back to 2006-07, the three-member arbitration tribunal panel ruled that the government failed to accord “fair and equitable treatment” to the plaintiff’s investment, in violation of the treaty. The ruling is similar to the Vodafone case, which led to a retrospective amendment of the law by then-Finance Minister Pranab Mukherjee in 2012.
Although the Narendra Modi government has repeatedly spoken of its predecessor unleashing “fiscal terrorism”, it has only promised to avoid taking such measures, without reversing the decisions.
Unlike other cases, the government had acted against Cairn Energy to recover the tax debt. He sold Cairn’s 5% stake in Vedanta, seized dividends totaling Rs 1,140 crore due to it, and made a tax refund of Rs 1,590 against the lawsuit. Cairn claims that he had suffered a loss of $ 1 billion from a transaction that had been approved by the Foreign Investment Promotion Board, which also had the secretary of revenue as a member.
In 2014, Cairn faced a tax investigation eight years after the IPO-related reorganization. The income tax department asked Cairn to refrain from selling its remaining 10% stake in Cairn India, which has since merged with Vedanta. The tax authorities had claimed to have identified unvalued taxable income resulting from intra-group share transfers made in 2006 in preparation for the IPO. The notice concerned retrospective Indian tax legislation enacted in 2012, which the tax department had attempted to apply to 2006 transactions.
In 2015, Cairn Energy Plc had initiated international arbitration proceedings against the government.
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