Govt will study arbitration case award, says FinMin after losing tax dispute against Cairn

The government has said it will study the arbitration case award invoked by Cairn Energy Plc and Cairn UK Holdings Ltd against the government of India. It said all options will be considered before taking a decision on the further course of action, including legal remedies.

"The Government will be studying the award and all its aspects carefully in consultation with its counsels. After such consultations, the Government will consider all options and take a decision on further course of action, including legal remedies before appropriate fora," said a statement by the finance ministry said.

On Tuesday night, India lost the arbitration case related to a tax dispute to the UK oil major Cairn Energy Plc. The international arbitration tribunal in its verdict asked India to pay Rs 8,000 crore as damages to Cairn.

The winning of the international arbitration case has ended one of the most high-profile disputes in India and comes three months after India lost another high profile Vodafone arbitration case.

Also read: India loses tax arbitration case against Cairn; told to pay Rs 8,000 cr

Meanwhile, Cairn has not come out with any official statement on the matter yet.

After the international arbitration tribunal's verdict, the government will have to pay the British firm Rs 8,000 crore to reverse the dividend and tax refund it ceased and shares it sold to recover part of the tax demand.

The international arbitration tribunal said the Cairn tax issue does not amount to "tax dispute" but a "tax-related investment" dispute, which is why it falls under its jurisdiction. It said India's tax demand from Cairn is not valid and amounts to a breach of fair treatment under the bilateral investment protection pact.

In March 2015, the tax department sought Rs 10,247 crore in taxes on alleged capital gains made by the company in the internal reorganisation. Cairn Energy in 2015 initiated an international arbitration to challenge retrospective taxation.

Meanwhile, just a few months back in September, India lost a tax arbitration case against Vodafone Plc after an international arbitration court ruled the Indian government, seeking Rs 22,100 crore in taxes from telecom giant Vodafone using retrospective legislation, was in "breach of the guarantee of fair and equitable treatment" under the bilateral investment protection pact between India and the Netherlands.

Also read: Centre may be waiting for Cairn arbitration award to decide on Vodafone appeal: report

Also read: Vodafone arbitration award: Issue discussed with PM Modi; Centre may challenge case