India reacts as Cairn eyes Air India, foreign assets to recover $1.72bn

REACTING to the reports that British oil company Cairn Energy is taking swift steps to seize India’s foreign assets including Air India, the government of India has said that it will defend its case. 

"The government is yet to receive formal notice of any such claims and hence these reports are purely in the realm of speculation. The government is well aware of its legal rights and will defend its case in courts should such proceedings materialize," government sources said.

Cairn has been reportedly identifying Indian assets overseas that can be seized as part of the $1.72 billion arbitration award it won against the country in December last year under a tax dispute case.

The assets identified reportedly range from Air India's planes to vessels belonging to the Shipping Corporation of India, and properties owned by state-owned banks to oil and gas cargoes of PSUs. 

The company had also filed a lawsuit on Friday (14) in the US District Court, seeking to make Air India liable for the judgment that was awarded to them, arguing that the carrier as a state-owned company is “legally indistinct from the state itself”.

Cairn India, Oil and Gas exploration plant at Barmer in Rajasthan. AFP PHOTO/Money SHARMA / AFP /getty images

The move ratchets up pressure on India to pay the sum of $1.72 billion plus interest and costs that Cairn was awarded by the arbitration tribunal.  Although the company had said previously it was pursuing a settlement with India, it appears that it has also been laying the grounds to seize Indian assets if talks fail.

Cairn's win in the international arbitration overturned the levy of retrospective taxes and ordered India to return the value of shares it had sold, dividends seized and tax refunds withheld to recover such taxes. The company has now started moving courts to get a declaration that state-owned entities are alter egos of India and they should be held liable for the discharge of the arbitration award in absence of the government making payments.    

It is yet unclear whether such a lawsuit could serve as a means for Cairn to seize an Air India aircraft that lands on US soil.