On Tuesday, UK's Cairn Energy said the arbitration process against India on the imposition of a ₹10,247-crore retrospective tax demand is likely to be protracted and a decision is not expected before late 2019.
"The formal hearings and submissions in respect of Cairn's claim under the UK-India Bilateral Investment Treaty concluded in 2018 and the arbitration panel is preparing its final award," the company said in its half-year results for 2019.
The three-member panel, it said, had originally indicated issuance of an award as expeditiously as possible. But "workload and the number of matters before the panel have meant that the timetable for issuing the award will be more protracted than originally anticipated and the award is, therefore, unlikely to be before late 2019," it said.
"Drafting of the award by the tribunal is ongoing and Cairn continues to have a high level of confidence in the merits of its claim," Cairn Energy said, adding that it was confident of success in the arbitration.
Cairn Energy is seeking full restitution for losses totaling more than USD 1.4 billion resulting from government "expropriation of its investments in India in 2014, and India's unfair and inequitable treatment of those investments, due to the imposition of retrospective tax measures."
The company, which gave the country its biggest oil discovery, received a notice from the Income Tax Department in Jan 2014, requesting information relating to the group re-organization done in 2006.
Alongside, the Income Tax Department attached the Company's near 10% shareholding in its erstwhile subsidiary, Cairn India. In Mar 2015, the tax department sought ₹10,247 crore in taxes on alleged capital gains made by the company in the internal reorganization.
Cairn Energy had in 2010-11 sold Cairn India to Vedanta. Following the merger in April 2017 of Cairn India and Vedanta, the UK firm's shareholding in Cairn India was replaced by a shareholding of about 5% in Vedanta issued together with preference shares.
In addition to attaching its shares in Vedanta, the tax department seized dividends due to it from those shareholdings totaling ₹1,140 crore and set off a ₹1,590 crore tax refund against the demand.
Cairn Energy in 2015 initiated an international arbitration to challenge retrospective taxation.
Pending final award, the tax department sold Cairn Energy's shares in Vedanta to recover part of the tax demand.
"The group also has legal advice confirming that the maximum amount that could ultimately be recovered from Cairn by the Income Tax Department, in excess of the assets already seized, is limited to the value of company's assets, including the remaining ordinary shares in Vedanta," it said.
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