Cairn had challenged the Indian government seeking taxes over an internal business reorganisation using the 2012 retrospective tax law.
Cairn Energy has won an international arbitration case against the Indian government over a tax dispute on Wednesday.
What was the case?
Cairn took the case to arbitration in 2015 to fight against a demand in 2014 from the Indian tax department for Rs 10,247 crore ($1.4 billion) in taxes it said were owed on capital gains related to the 2007 listing of its Indian unit. Cairn had challenged the Indian government seeking taxes over an internal business reorganisation using the 2012 retrospective tax law, under the UK-India Bilateral Investment Treaty.
In 2011, Cairn Energy sold its majority stake in Cairn India to Vedanta Ltd, reducing its stake in the Indian company to about 10 per cent.
The Indian government seized the remaining shares in 2014 after the tax complaint was made, as well as dividends Vedanta owed to Cairn Energy for its holdings in the Indian firm.
In 2018, Cairn Energy said it would write down the value of its investment in Vedanta after Indian tax authorities sold $216 million worth of its shares in the Indian mining company.
What is the ruling?
The three-member tribunal, which also comprised a judge appointed by the Indian government, ruled that India's claim of Rs 10,247 crore in past taxes over a 2006-07 internal reorganisation of Cairn's India business was not a valid demand, sources said.
The tribunal asked India to pay the funds withheld along with the interest to the Scottish oil explorer for seizing dividend, tax refund, and sale of shares to partly recover the dues.
Cairn’s statement:
Cairn in a statement said, "the tribunal established to rule on its claim against the Government of India has found in Cairn's favour."
"The tribunal ruled unanimously that India had breached its obligations to Cairn under the UK-India Bilateral Investment Treaty and has awarded to Cairn damages of USD 1.2 billion-plus interest and costs, which now becomes payable," it said.
The Indian government did not immediately respond to a request for comment.
The development comes as a major setback for the Indian government after Vodafone Group Plc had won an international arbitration case against the Indian government in September.
(With agency inputs)
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