Cairn identifies $70 billion in Indian assets that need to be seized to collect amounts owed from the government


Once a court recognizes Air India as an alter ego of the Indian government, Cairn can seek garnishment or confiscation of its assets in the US.

Once a court recognizes Air India as an alter ego of the Indian government, Cairn can seek garnishment or confiscation of its assets in the US.

British company Cairn Energy has identified $70 billion in Indian assets abroad for possible seizure to collect $1.72 billion due from the government – a move that succeeds linking India with Pakistan and Ally Venezuela, who faced similar enforcement actions for non-payment of arbitral awards.

The assets identified range from Air India planes to Shipping Corporation of India ships and real estate owned by state banks to oil and gas cargoes from PSUs, three people familiar with the matter said.

Those assets are located in multiple jurisdictions, they said, without giving further details.

Cairn plans to move US courts to Singapore to seize the assets as the Indian government refuses to honor an international arbitration award.

“The Indian government will of course contest such a seizure, but to salvage the assets it may need to pledge money equal to the assets’ value in a financial security such as a bank guarantee. The court will return such a guarantee to India if it finds no merit in the Cairns case. But the bond will be passed on to Cairn if the court finds India has failed in its commitment,” a source said.

Cairn has obtained an international arbitral award – overturning the collection of retrospective taxes and requiring New Delhi to return the value of shares sold, confiscated dividends and withheld tax refunds to recover such taxes – registered in the US, UK, France, the Netherlands, Singapore , Mauritius, the Canadian province of Quebec, Japan and the United Arab Emirates.

Now it has started moving courts to get a declaration that state-owned companies are alter egos of India and should be held liable for exonerating the award if the government fails to make payments.

Cairn filed a lawsuit in a New York court on May 14 to have Air India recognized as India’s alter ego and that “it should be held jointly and severally liable for India’s debts, including any judgments resulting from the acceptance of the arbitration award result”.

Once a court recognizes Air India as an alter ego of the Indian government, Cairn can seek garnishment or seizure of its assets in the US, such as aircraft, immovable property and bank accounts, to recover the amount awarded to it by the arbitration panel.

The move is similar to a British Virgin Islands court that ordered last December that hotels in New York and Paris owned by Pakistan International Airlines would be used to settle a claim by a Canadian-Chilean copper company against the Pakistani government.

Crystallex International Corp filed a similar lawsuit in Delaware a few years ago to seize property belonging to Petroleos de Venezuela, SA (PDVSA), Venezuela’s state oil company, after the Latin American country failed to pay the company $1.2 billion an arbitration panel had ordered payment in lieu of the 2011 confiscated gold deposits held and developed by the company.

In 2012, Elliott Management, a privateering American hedge fund that held Argentine distressed bonds, seized a handsome tall ship owned by the Argentine Navy. Recently, French courts ruled that a repressed creditor could seize a Congo-Brazzaville government business jet while it is being serviced at a French airport and $30 million from a bank account held by the country’s state oil company.

While the Treasury has not yet commented on Cairn’s move, sources said India will take all necessary steps to defend itself against such an “illegal enforcement action”.

India, they said, will contest the move on the grounds that the government has challenged the award in the competent court in The Hague and is confident the award will be overturned.

Sources said the government has also hired a legal team ready to defend against any enforcement action.

While they claimed that neither the government nor any PSU had received any such notice, people with knowledge of the Cairn lawsuit said the case was not brought until Friday and the authorities concerned will receive notices in due course.

The sources said that once such a notice is received, the government/concerned organization should take all necessary steps to defend itself against “such illegal enforcement actions”.

“Cairn is taking the necessary legal steps to protect the interests of shareholders pending a decision on the award,” a company spokesman said on the matter. “Cairn remains open to further constructive dialogue with the Government of India to reach a satisfactory outcome on this protracted issue.” The Scottish company invested in the oil and gas sector in India in 1994 and a decade later made a huge oil discovery in Rajasthan. In 2006 it listed its Indian assets on the BSE. Five years later, the government passed a retrospective tax bill, charging Cairn ₹10,247 crore plus interest and penalties for the IPO-related restructuring.

The state then expropriated and liquidated Cairn’s remaining interest in the Indian entity, confiscating dividends and withholding tax refunds to recover part of the claim.

Cairn challenged the move before an arbitration tribunal in The Hague, which awarded him US$1.2 billion (over 8,800 crore) plus costs and interest in December, which increased to US$1.725 million (12,600 crore ) amounts.

The company, which previously said the judgment was binding and enforceable under international contract law, has since courted Indian government officials to disburse the money. But the government has not agreed to pay.

Finance Minister Nirmala Sitharaman reiterated last month that an international arbitration ruling on India’s sovereign right to tax sets a wrong precedent, but said the government is considering how best to resolve the issue.

The government, which has been involved in an international arbitration brought by the Scottish company against ex-post taxation, has appealed the Hague tribunal’s decision.

Sources said the appeal does not prevent the company from seeking confiscation of Indian assets.

“While the appeal is pending, seizure of assets may not be at issue in the Netherlands, but assets may be at issue elsewhere,” a source said.


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