Centre trashes reports of forex withdrawal from PSBs to dodge Cairn seizure

Topics Cairn India | Arbitration

Photo: Bloomberg
The government has not asked any state-owned banks to withdraw funds from foreign currency accounts abroad in anticipation of the potential seizure with regard to the Cairn legal dispute, the Ministry of Finance clarified on Sunday.

"Government of India is vigorously defending its case in this legal dispute. It is a fact that the government has filed an application on March 22, 2021 to set aside the highly flawed December 2020 international arbitral award in The Hague Court of Appeal," it said.

The government further said it is committed to pursuing all legal avenues to defend its case in this dispute worldwide.

India has been ordered to return over $1.2 billion to Cairn Energy Plc after it lost arbitration proceedings in a tax dispute. An international arbitration tribunal ruled that India’s tax claim was not valid and asked the government to repay the funds, along with interest, to Cairn.

Cairn has sued India's flagship carrier Air India to enforce the arbitration award. Further, it has identified assets identified ranging from planes to vessels, and properties owned by state-owned banks to oil and gas cargoes of PSUs for seizure. 

The finance ministry further clarified that the government has raised several arguments that warrant setting aside of the award. 

For one, it says the arbitration tribunal improperly exercised jurisdiction over a national tax dispute that India never offered or agreed to arbitrate. 

"The claims underlying the award are based on an abusive tax avoidance scheme that were a gross violation of Indian tax laws, thereby depriving Cairn’s alleged investments of any protection under the India-UK bilateral investment treaty."

Further, the government said the award improperly ratifies Cairn’s scheme to achieve Double Non-Taxation, which was designed to avoid paying taxes anywhere in the world, a significant public policy concern for governments worldwide. This proceeding is pending. 

"The CEO and the representatives of Cairn have approached the Government of India for discussions to resolve the matter. Constructive discussions have been held and the government remains open for an amicable solution to the dispute within the country’s legal framework," the Ministry of Finance said.

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