Government to appeal against arbitration award in Cairn Energy Issue

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Tanvi Sinha

Following the meeting of Finance Secretary Ajay B Pandey and Cairn Energy Chief Executive Office Simon Thomson, the Centre confirmed that they’d be appealing the arbitration award and also pushing other related legal suits. 

The issue involved over $1.2 billion of money to be paid by the Indian Government with interest and cost. 

The issue started regarding a 15 year old transfer of shares from Cairn India Holdings to Cairn India in 2006-2007. 

Cairn UK had at that point made capital gains and Income Tax authorities stated that regarding such, they should pay tax up to 24,500 crore INR, however Cairn UK disagreed.

They lost the case at the Income-Tax Appellate Tribunal (ITAT) with their case in Delhi High Court remaining pending. 

As Cairn was selling the most of its business in India to mining giant Vedanta, 10% of it was restricted from being sold by the Indian government regarding pending taxation issues.

However, this was contested by Cairn in a case before the Hague in December 2020, where the court ruled that the Indian government’s retrospective tax demand was breaching the India-UK bilateral treaty and was violating guarantee of fair and equitable treatment. 

This brought the two parties to a meeting where Cairn Executive Thomson landed in Delhi to meet the Finance minister but only met with the Finance Secretary. The ending of the meeting had the Indian government stating their decision to appeal against the arbitration award.

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