The Indian government has lost arbitration case to energy giant Cairn and has been asked to pay damages worth Rs 8,000 crore to the UK oil major. The verdict, which came late night on Tuesday, is another setback for India, three months after a loss to Vodafone over the retrospective legislation.
According to the reports, an international arbitration tribunal ruled that India’s tax claim was not a valid demand. New Delhi can appeal against the ruling which serves a double-blow to Prime Minister Narendra Modi’s government after a similar loss against Vodafone.
Cairn in March 2015 filed a formal dispute against a demand for more than $1.6 billion from the Indian tax department that dates back to the 2007 listing of its then Indian operation. Cairn Energy’s victory will be a second loss for India in an international arbitration after Vodafone won a years-long tax dispute with the Indian government in September over a controversial $3 billion tax demand.
The Indian government’s 2012 budget retrospectively amended the tax code, giving itself the power to go after M&A deals all the way back to 1962 if the underlying asset was in India, the reports said.
It is earlier said that India will have to shell out more than Rs 7,500 crore to the energy company. This is with regards to the amount that it has ceased by denying Cairn its shares of dividend and income tax department liquidating portion residual shares that the company had in Cairn India post its merger with Vedanta.
India is already evaluating options on its loss in arbitration case against Vodafone. The options include bringing a new law to withdraw the 2012 amendment to settle its tax dispute with Vodafone after the Permanent Court of Arbitration (PCA) at The Hague ruled in favour of the company.
