India refunds Rs 7,900 cr to Cairn Energy to settle retro tax dispute

The government of India has refunded Rs 7,900 crore to Britain's Cairn Energy Plc in order to settle the retrospective tax dispute, the company said on Thursday.

Cairn, which is now known as Capricorn Energy Plc, in a statement, stated that the tax refund has been paid and "net proceeds of $1.06 billion have been received."

"A circular is expected to be issued in early March detailing the shareholder resolutions required in connection with the proposed shareholder return of up to $700 million, comprising a $500 million tender offer and US$200 million ongoing share repurchase programme," noted Cairn. 

As part of the settlement reached with the government in the seven-year-old dispute over the levy of back taxes, Cairn had earlier said that it has withdrawn all cases that were brought to collect the tax refund ordered by an international arbitration tribunal after rescinding retrospective raising of demand.

The company on November 26, 2021, initiated proceedings to withdraw lawsuits it had filed in several jurisdictions to enforce an international arbitration award which had overturned the levy of Rs 10,247 crore retrospective taxes and ordered India to refund the money already collected.

First the lawsuit brought in Mauritius for recognition of the arbitration award was withdrawn, followed by similar measures in courts in Singapore, the UK, and Canada.

On December 15, it sought and got 'voluntary dismissal' of a lawsuit it had brought in a New York court to seize assets of Air India to recover the money due from the government. On the same day, it made a similar move in a Washington court where it was seeking recognition of the arbitration award.

Recognition of arbitration award is the first step before any enforcement proceedings like the seizure of assets can be brought.

The critical lawsuit in a French court, which had attached Indian properties on the petition of Cairn, was withdrawn thereafter and the one in the Netherlands too was dropped.

Meanwhile, about Rs 8,100 crore collected from companies under the scrapped tax provision are to be refunded if the firms agreed to drop outstanding litigation, including claims for interest and penalties. Of this, Rs 7,900 crore was due only to Cairn.