Cairn Energy has sued India's flagship carrier Air India to enforce a $1.2 billion arbitration award that it won in a tax dispute against India, according to a U.S. District Court filing reviewed by Reuters. The move ratchets up pressure on the Indian government to pay the sum of $1.2 billion plus interest and costs that the British firm Cairn was awarded by an arbitration tribunal in December. The body ruled India breached an investment treaty with Britain and said New Delhi was liable to pay.
Cairn filed the lawsuit on Friday in the U.S. District Court for the Southern District of New York, seeking to make Air India liable for the judgement that was awarded to Cairn. The lawsuit argued that the carrier, as a state-owned company, is "legally indistinct from the state itself."
"The nominal distinction between India and Air India is illusory and serves only to aid India in improperly shielding its assets from creditors like (Cairn)," the filing said.
Air India did not immediately respond to requests seeking comment.
However, a senior government official, who asked not to be named, said the government and Air India had not received any formal notice of such a suit. "As and when any such notice is received. The government shall take all necessary steps to defend against any such illegal enforcement action," the official said, adding New Delhi has engaged a team ready to defend against any enforcement action initiated by Cairn anywhere in the world.
Cairn's move could potentially jeopardize India's attempts to divest the state-owned carrier this year. New Delhi said in December that it had received multiple expressions of interest after it moved to privatise the loss-making entity. The senior government official noted New Delhi has filed an appeal against the arbitration award, and added "the government is confident that the award will be set aside."
