The Hague connection: Harish Salve, who once appeared for India at ICJ, deals blow to govt in Cairn arbitration case
Photo by ANI

In May 2017, Harish Salve represented India at the International Court of Justice, arguing India's stance in the Kulbhushan Jadhav case. The former Solicitor General of India had helped secure a provisional stay on Jadhav's execution until a final verdict could be declared. The fact that Salve had charged a token Re. 1 as legal fees had also made headlines at the time.

Considered one of the most influential figures in India, Salve had also represented Vodafone in its $2.5 billion tax dispute with the Indian administration. While he had initially lost the case at the Bombay High Court, he later won it at the Supreme Court.

Now, in 2020, Salve appears to have once again found himself on the winning side, against the Indian government. In a 582-page order, The Permanent Court of Arbitration at The Hague on Wednesday invalidated India’s $2.74-billion 2015 tax claim on Cairn Energy and also ordered the country to return up to $1.4 billion in funds withheld, interest and costs.

Salve incidentally had appeared for Cairn India when it moved the Delhi High Court against the massive tax demand imposed on it by the Income Tax Department. According to reports, had had been retained by the company alongside major law firms based in London and New York.

The ruling comes as a blow to the Narendra Modi-led government, following in the wake of a similar loss against Vodafone over the retrospective levy of taxes. While India continues to evaluating options on its loss in arbitration case against Vodafone, many had been of the opinion that the government was waiting to see the outcome of the Cairn Energy verdict.

For the unitiated, UK's Vodafone Group had won an international arbitration against the demand of Rs 22,100 crore in taxes in September.

Cairn Energy, which gave the country its biggest oil discovery, was in March 2015 slapped with a tax demand of Rs 10,247 crore over alleged capital gains it made by reorganising its India unit into a separate subsidiary for listing on local stock exchanges. Cairn Energy in 2010-11 sold Cairn India to Vedanta but held a small stake in the firm, which was sold by the tax department to partly recover the tax demand.

Cairn was the only company against which the government took action to recover retrospective taxes. During the pendency of the arbitration, the government sold Cairn's near 5 per cent holding in Vedanta Ltd, seized dividends totalling Rs 1,140 crore due to it from those shareholdings and set off a Rs 1,590-crore tax refund against the demand. Besides Cairn Energy, the government also slapped a similar tax demand on its erstwhile subsidiary Cairn India (which is now part of Vedanta Ltd). Cairn India too has challenged the demand through a separate arbitration.

(With inputs from agencies)

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