India has been ordered to return up to USD 1.4 billion to Cairn Energy plc of UK after an international arbitration overturned tax demanded retrospectively – an award the government indicated it may challenge.
The three-member tribunal, which also comprised of a nominee of the Indian government, unanimously ruled that India’s claim of Rs 10,247 crore in past taxes over a 2006-07 internal reorganisation of Cairn’s India business was not a valid demand.
India, it said, “failed to accord the Claimants’ (Cairn Energy’s) investments fair and equitable treatment” under the bilateral investment protection pact the nation had with the UK, it said in a 582-page order.
The tribunal ordered the government to desist from seeking such a tax and return the value of shares it had sold, dividends seized and tax refunds withheld to recover the tax demand.
