New Delhi: UK’s Cairn Energy Plc has brought a lawsuit in the US court that potentially can lead to seizing of Air India’s overseas assets such as airplanes to recover $1.72 billion from the Indian government which an international arbitration tribunal had awarded after overturning levy of retrospective taxes.
Cairn on May 14 filed a lawsuit in the US District Court for the Southern District of New York seeking declaration of Air India as the ‘alter ego of Indian government’ by virtue of control and as a state-owned company it “legally indistinct from the state itself”, three sources with direct knowledge of the development said.
Sources said the May 14 lawsuit seeks to make Air India liable for discharge of the arbitration award against the Indian government. While Cairn said it is “taking necessary legal steps to protect shareholders’ interest in the absence of a resolution to the arbitral award”, sources in the government said India will take all necessary steps to defend against any such “illegal enforcement action”.
India, they said, will contest the move on grounds that the government has challenged the arbitration award in the appropriate court in The Hague and it is confident that the award will be set aside. Sources said the government has also engaged a counsel team which is ready to defend against any enforcement action.
While they maintained that neither the government nor any PSU has received any such notice, sources aware of the Cairn lawsuit said the case has been brought only on Friday and notices in due course will come to the concerned authorities.
The government sources said as and when any such notice is received, the government/concerned organisation shall take all necessary steps to defend against “any such illegal enforcement action”.
Cairn had first moved courts in the US, UK, Canada, France, Singapore, the Netherlands and three other countries to register the December 2020 arbitration tribunal ruling that overturned the Indian government’s Rs 10,247 crore demand in back taxes and ordered New Delhi to return the value of shares it had sold, dividends seized and tax refunds withheld to recover the tax demand.
Subsequent to the courts in the US and other places giving recognition to the arbitration award, the firm has now begun bringing lawsuits to pierce the corporate veil between the Indian government and its owned companies such as in oil and gas, shipping, airline and banking sectors, to seize their overseas assets to recover the money awarded.
Indian assets across several jurisdictions have been identified that Cairn will be seeking to seize to enforce the award, sources said. “Cairn is taking the necessary legal steps to protect shareholders’ interest in the absence of a resolution of the arbitral award,” a company spokesperson said commenting on the issue. “Cairn remains open to continuing constructive dialogue with the Government of India to arrive at a satisfactory outcome to this long-running issue.”