The finance ministry (FM) asked public sector banks (PSBs) to be on high vigil against any attempt being made to seize their overseas deposits by Cairn Energy.
“To guard against such cash being taken over, the finance ministry has asked PSBs to be extra vigilant and immediately report back any attempt Cairn makes to legally attach the deposits,” said two sources to PTI.
UK's Cairn Energy is looking at recovering USD 1.2 billion from Indian government as part of an arbitration tribunal verdict. The company has been mulling over different ways for recovery.
What will Indian government do if Cairn seizes assets of PSBs?
If Cairn makes such a move, the Indian government will quickly take legal recourse to prevent the assets from being taken over. The government is following the whole issue with utter caution as the funds with banks are not of the Government of India but of the public.
A nodal officer has been appointed to deal with this subject in the finance ministry for escalating the matter to the competent authorities for further action, the sources added.
Timeline of Indian government and Cairn Energy tussle ...
In 1994, the Scottish firm invested in the oil and gas sector in India and a decade later it made a huge oil discovery in Rajasthan.
In 2006-07, the company decided to transfer these assets to a new entity called Cairn India. Soon, it listed its Indian assets on the BSE.
Five years after that the government passed retroactive tax law and billed Cairn Rs 10,247 crore plus interest and penalty for the reorganisation tied to the flotation.
The government liquidated Cairn's remaining shares in the Indian entity, seized dividends and withheld tax refunds to recover a part of the demand.
The company dragged Indian government before an arbitration tribunal in The Hague against this asset seizure and other moves.
Cairn won against the Indian government in December 2020.
As part of the verdict, the tribunal asked Indian government to pay USD 1.2 billion (over Rs 8,800 crore) plus costs and interest, which totals USD 1.725 million (Rs 12,600 crore) as of December 2020, to the company.
The company won the case because the company claimed that India breached its obligations to Cairn under the UK-India Bilateral Investment Treaty.
With the Indian government refusing to pay up, the company decided to opt for ways in which it can make the Indian government pay and that was approaching multiple courts in the US, UK, Canada, France, Singapore, the Netherlands and three other countries to register the December 2020 arbitration tribunal verdict. These countries recognise Indian sovereign assets allowing the company to seize public sector companies' assets faster.
Cairn has also hired asset-tracing firms to investigate the overseas assets that could be seized to recover the amount due.
Recently, the company has in talks with finance ministry officials offered to forego the interest and cost, totalling over USD 500 million and invest that sum in any oil and gas or renewable energy project identified by the Indian government if the principal of USD 1.2 billion due to it is paid, sources with knowledge of the matter said.
In addition, the Indian government has appealed against the tribunal ruling on grounds that tax levied by a sovereign power should not be subject to private arbitration.
(With input from agencies)