Cairn Energy Initiates Arbitration Proceedings Against Indian Government
UK-based Cairn Energy on Wednesday said it has initiated arbitration proceedings against the Indian government to recover losses due to retrospective tax legislation.
“Cairn is currently unable to access the value of its 10 percent residual shareholding in Cairn India Ltd. (CIL) valued at $383 m at 30 June 2016, or accrued dividend payments of $50 m,” Cairn Energy stated in its half yearly earnings statement.
“International arbitration proceedings have commenced in respect of Cairn's claim under the UK-India Bilateral Investment Treaty. Cairn is seeking restitution for losses resulting from the attachment of its shares in CIL and failure to treat Cairn and its investments fairly and equitably,” it further noted.
Cairn Energy has been attempting to sell stake in Cairn India to Anil Aggarwal-led Vedanta resources since 2010. Under the original agreement with Vedanta, Cairn Energy sought to unload its entire 62 percent stake in Cairn India. This was to be conducted in an initial stake sale of 51.4 percent and then two tranches of residual stake sale of 5.3 percent each.
In 2015, the Ministry of Finance restricted Cairn Energy from selling its stake in Cairn India. The government alleged Cairn Energy owed Rs 29,000 crore in tax and interest demand. It then slapped a subsequent penalty of Rs 10,247 crore on Cairn Energy in 2016.
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