Government of India instructs US court to dismiss Cairn's 1.2 billion lawsuit

- Cairn seeks implementation of ડો 1.2 billion arbitral award

- The Indian government recently repealed the controversial retrospective tax law under which it demanded tax of Rs 1.10 lakh crore from 17 companies, including Cairn.

New Delhi: The Indian government has asked a federal court in Washington to dismiss a case involving Britain's Cain Energy, in which the company sought અમ 1.5 billion in arbitral award and said it had sovereign protection under US law.

In May, Cairn asked a US federal court to force Air India to pay a 1.5 billion arbitration award, which the company won in December.

The government filed a "Motion to Dismiss" petition in the U.S. District Court for the District of Columbia on August 14, saying the dispute between Cairn and the Indian tax authority lacked subject matter jurisdiction.

The suggestion comes after the Indian government enacted legislation to abolish the disputed retrospective tax. The retrospective tax has been highly controversial, giving the tax department the power to go back 50 years where ownership has changed abroad and capital gains have been made, but business assets are in India. The use of this rule is Rs. 1.10 lakh crore was levied, including Rs. 10.5 crore.

Rules are being framed to withdraw such tax demands, officials said.

"One of the conditions for dropping the retro tax demand on companies is that the parties concerned have to give a guarantee to withdraw all the cases against the government / tax department. So, while all this is in process, the government is bound to respond to any legal matter, ”an official explained.

Cairn Energy challenged the tax demand before the International Arbitration Tribunal, which reversed the stakes in December last year and ordered the Indian government to return the money raised. The government initially refused to return 1.5 billion, forcing Cairn to confiscate Indian assets abroad and recover the money.

Cairn Energy sued India's state-owned airline Air India Limited in a US court in May and obtained permission from a French court in Paris last month to seize Indian government real estate.

On Monday, Finance Minister Nirmala Sitharaman said rules would soon be enacted that would lead to cancellation of retro tax demand on companies like Cairn Energy plc and Vodafone plc.

The government is to repay about Rs 2,100 crore collected using the retro tax law. Cairn Energy alone has the highest amount of Rs 2,500 crore. In other cases, the government did not take disciplinary action to recover the tax demand, the income tax department sold a 10 per cent stake in Cairn's former Indian subsidiary, seized a dividend of Rs 1,150 crore and withheld a tax refund of Rs 1,20 crore.