Cairn pursues seizure of Air India's assets

Richa Mishra Ayushi Kar Mumbai/New Delhi | Updated on September 08, 2021

Meanwhile, the Indian government has taken a decision to scrap the tax claim

Notwithstanding the Government’s offer to scrap the retrospective tax demand on Cairn Energy, the Scottish firm is continuing to pursue the seizure of assets belonging to Air India in a bid to enforce the arbitration award.

Cairn Energy has submitted a response to Air India’s letter in the United States District Court in the Southern District of New York stating that it intends to ensure that the award is enforced.

“Air India notably does not deny that it is India’s alter ego. It instead makes legal arguments that the Second Circuit and Air India’s own cases reject. Air India asserts that this case is not ripe and that Cairn must confirm its award against India first before suing Air India under an alter ego theory. But Air India fails to cite a single case supporting this theory,” Cairn Energy’s legal counsel said in a court filing dated September 2, seen by BusinessLine.

On August 23, Air India had sent a letter to the court asking for Cairn Energy’s claims to be dismissed.

‘Enforce Cairn’s award’

In response to Air India’s letter, Cairn’s legal counsel said, “Cairn separately intends to cross-move to enforce Cairn’s arbitral award against Air India or, in the alternative, for an order requiring Air India to “give suitable security” in an amount equal to the entire judgment sought pursuant to Article VI of the Convention for the Enforcement and Recognition of Foreign Arbitral Awards,” it added.

The award was issued on December 21, 2020, by a tribunal in the Netherlands, based on its finding that India’s retroactive amendment to its taxation laws breached its obligation under the Agreement between the UK and India for the Promotion and Protection of Investment. The tribunal rendered an award in Cairn’s favour for $1.2 billion.

Meanwhile, the Indian government has taken a decision to scrap the tax claim. Cairn’s senior executive met Tarun Bajaj, Revenue Secretary, on Monday. When contacted, a Cairn Energy spokesperson told BusinessLine: “We have an ongoing open and transparent, amicable and constructive discussions with the Government of India to find a resolution under the new legislation.”

Sources aware of the development said the company will continue to keep the legal option open until a settlement with the Indian government is reached.

Devas joins Cairn

In the US court, Cairn was also joined by lawyers representing shareholders of Devas Multimedia, to respond to Air India’s filing. Devas is seeking over $1.2 billion it won in international arbitration from India.

The main contention being that the seizure of Air India assets is valid since the airline is the alter ego of India. Devas, in its September 2 letter, also rejected Air India’s claims that the SDNY court lacks jurisdiction to issue a judgment on the alter ego claims and said its case is similar to that of Cairn.

Published on September 06, 2021

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