Government May Seek Out-Of-Court Settlement With Cairn Energy


Cairn Energy Plc.’s Chief Executive Officer Simon Thomson is set to meet Finance Secretary Ajay Bhushan Pandey on Feb. 18, two months after the British explorer won a $1.2-billion arbitration case against India.

The Indian government is going to offer the company an out-of-court settlement in the meeting, a person familiar with the matter said on the condition of anonymity citing sensitivity around the issue. The meeting will serve as an opportunity for the company to “settle” the long-pending matter, as the government plans to appeal against the three-member international arbitration tribunal order delivered in December, the person said.

India had lost arbitration proceedings and the tribunal directed the government to pay Cairn Energy over $1.2 billion. The payout stems from an initial tax demand of Rs 10,247 crore on Cairn U.K. Holdings Ltd. for alleged capital gains it made in the 2006 business reorganisation of its Indian holdings. With penalties and interest added the tax claim has risen to over Rs 22,000 crore, part of which the tax demand recovered via sale of Cairn assets they had seized. That, alongwith damages, is what the arbitral award has ordered be paid back.

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