FinMin asks PSU banks to keep high vigil on any effort to seize funds by Cairn

The finance ministry has asked public sector banks (PSBs) to be on high vigil against any effort being made to take their abroad deposits to recuperate USD 1.2 billion that the UK’s Cairn Energy plc has actually been awarded versus India imposing retrospective taxes, sources stated. Cairn had actually previously mentioned that it can seize Indian properties abroad if it is not paid USD 1.2 billion plus interest and cost that an international arbitration panel had granted versus levy of retrospective taxes.

Cash of Indian banks lying in countries such as the US and the UK are stated to be simple target for seizing and imposing the arbitration award.

To defend against such cash being taken over, the financing ministry has actually asked PSBs to be additional watchful and immediately report back any attempt Cairn makes to legally attach the deposits, two sources aware of the matter said.

This will enable the Indian government to quickly take legal recourse to prevent the assets from being taken control of, they said including that this has been done out of abundant caution and funds with banks are not of Government of India but of public.

A nodal officer has actually been appointed to handle this subject in the financing ministry for escalating the matter to the proficient authorities for the further action, the sources included.

The sources also stated banks are keeping sufficient funds in their nastro account so that they can continue activity of trade financing and other abroad companies.

A nostro account refers to an account a bank holds overseas at another bank in the currency of that jurisdiction. Such accounts are used for global trade and to settle other forex deals.

Last year, Cairn Energy Plc won two prominent international arbitrations over the levy of taxes on the UK-based business utilizing legislation that gave India power to impose taxes with retrospective effect.

The UK-based company has actually currently taken actions to have the arbitration award recognised in nine significant jurisdictions such as the US, UK, France, the Netherlands, Singapore and Canada’s Quebec province, where Indian sovereign properties have actually been determined.

It has not stated what it may go after but possessions might include Air India‘s planes, vessels belonging to the Shipping Corporation of India and residential or commercial property owned by state banks.

On the other hand, the federal government, which participated in a worldwide arbitration brought by the Scottish firm against being taxed retrospectively, has actually appealed against The Hague-based tribunal’s ruling. The judgment asked the government to return the value of shares expropriated and liquidated, tax refunds kept and dividend took to recuperate a mistakenly levied retroactive tax demand.

The Scottish firm invested in the oil and gas sector in India in 1994 and a decade later on, it made a big oil discovery in Rajasthan. In 2006, it noted its Indian possessions on the BSE

5 years after that, the government passed a retroactive tax law and billed Cairn Rs 10,247 crore plus interest and charge for the reorganisation connected to the flotation.

The state then expropriated and liquidated Cairn’s remaining shares in the Indian entity, seized dividends and withheld tax refunds to recover a part of the need.

Cairn challenged the move before an arbitration tribunal in The Hague, which in December awarded it USD 1.2 billion (over Rs 8,800 crore) plus expenses and interest, which amounts to USD 1.725 billion (Rs 12,600 crore) as of December2020

The business has actually since then been in talks with the finance ministry to get the federal government to pay the award.

Its authorities held 3 in person meetings with the then Revenue Secretary Ajay Bhushan Pandey in February and a minimum of one video call with his successor Tarun Bajaj.

had actually previously reported that the business had in the meetings provided to forego USD 500 million out of the USD 1.7 billion award and invest that amount in any oil and gas or renewable energy task recognized by the Centre after turning down a federal government deal to get paid simply one-fourth of the award.

It wants the principal of USD 1.2 billion to be paid and is open to re-investing the interest and expense in India.

The Indian federal government, which appointed one of the 3 arbitrators on The Hague panel and completely participated in the arbitration proceedings considering that 2015, wanted Cairn to settle the issue through its now-closed tax conflict resolution scheme, Vivad se Vishwas.

The Vivad se Vishwas plan, which closed on March 31, provided for dropping of tax case if 50 per cent of the need was paid, which the business declined, the sources said.

Even if it were to have accepted the scheme, the Indian federal government had to refund about Rs 2,500 crore to the British company, they stated. The worth of shares seized and offered, dividend confiscated and tax refund kept totalled to over Rs 7,600 crore, which was more than 50 per cent of the Rs 10,247 crore principal tax demand raised, the sources added.

Cairn believes that the unanimous judgment of the tribunal was enforceable versus Indian-owned assets in over 160 nations that have actually signed and validated the 1958 New York City Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The business has actually likewise worked with asset-tracing companies to investigate the abroad properties that could be seized to recover the quantity due.

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