Centre Condemns ‘False Reporting’ on Cairns-Air India Legal Case

British Oil and Gas giant had sued Air India for the award as the airline is “legally indistinct from the state.”

The Centre on Sunday, 23 May, strongly condemned the false reporting in certain media by "some vested interests" claiming that the Centre has purportedly asked state-owned banks to withdraw funds from foreign currency accounts abroad in anticipation of the potential seizure of such accounts with regard to the British oil and gas firm Cairn Energy’s legal dispute awards.

Government of India, in a statement, stated that “certain vested parties” appear to have orchestrated misleading reports, which rely upon unnamed sources.

The oil and gas giant had, earlier on 14 May, moved a US court to sue Air India to enforce a $1.2 billion arbitration award that it won in December last year over a tax dispute with India, according to news agency Reuters.

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The lawsuit seeks to make the flagship Indian carrier liable for the amount it won in the judgment, arguing that Air India is a state-owned company and is therefore "legally indistinct from the state itself."

The report quoted the lawsuit, which states, “The nominal distinction between India and Air India is illusory and serves only to aid India in improperly shielding its assets from creditors like (Cairn).”

India had lost arbitration proceedings in December 2020 and was directed to pay $1.2 billion plus taxes to the oil and gas firm, which now amounts to about $1.7 billion. The payout is related to Indian government's initial tax demand of Rs 10,247 crore on Cairn UK Holdings Ltd, on alleged capital gains that it made in 2006 when it reorganised businesses of its Indian holdings under Cairn Energy India Pty Limited.

The government’s tax claim has risen to over Rs 22,000 crore, including penalties and interests. This amount was partly recovered by the Income Tax department via the sale of seized Cairn assets in India. The arbitral award includes this amount as well as damages to be paid to Cairn Energy.

Since January this year, Cairn had begun attempts to identify Indian assets abroad against which it could enforce the award. These assets include aircraft, ships and even bank accounts.

The organisation also moved to courts in the UK, Canada, Singapore, France, the Netherlands and three other countries to register its claim against India, some of which have recognised the arbitration award.