Cairn Energy versus Indian government: Experts says amicable settlement best way forward

With the focus on the retrospective tax dispute between UK-based Cairn Energy and the Indian government, wherein following a ruling by a French court, the Scottish oil producer gained the right to seize residential properties owned by the Indian government in Paris.

According to government sources, New Delhi is exploring legal remedies to thwart the bid to seize residential properties in France, which is valued at more than Rs 177 crore (20 million euros).

The case pertains to the retrospective tax law amendment that allows the government to levy capital gains tax for the sale or transfer of assets located in India. In December 2020, an international tribunal had awarded Cairn $1.7 billion in costs and damages.

The arbitration tribunal has held that in asking Cairn to retrospectively pay tax, the Indian government has violated the provisions of an investment treaty with the UK. New Delhi had filed an appeal on March 22, 2021, challenging that arbitral award. Sources, however, tell CNBC-TV18 that the union finance ministry is assessing the implications of paying back Rs 7,600 crore or about $1.2 billion to Cairn Energy.

To discuss this further, CNBC-TV18 spoke with Prabhash Rajan, Assistant Professor, Faculty of Law, South Asian University, and Ajay Thoma, independent arbitrator.