UK’s Cairn Energy has brought a lawsuit in the US to pierce the corporate veil between the Indian government and its flag carrier Air India. The move is aimed at seizing India’s overseas assets to recover $1.7 billion that Cairn Energy has been awarded by an international arbitration tribunal for being taxed by the country retrospectively. 

The company has first moved courts in the US, the UK, Canada, France, Singapore, the Netherlands and three other countries to register the December 2020 arbitration tribunal ruling that had overturned the Indian government’s Rs 10,247 crore demand in back taxes. The tribunal had ordered New Delhi to return the value of shares it had sold, dividends seized and tax refunds withheld to recover the tax demand. 

The company has started bringing lawsuits in the US and other countries to pierce the corporate veil between the Indian government and companies by the government in oil and gas, shipping, airline and banking sectors to seize their overseas assets to recover the money awarded, three sources with direct knowledge of the development have said. 

In the first instance, it has filed a lawsuit on May 14 in the US District Court for the Southern District of New York, seeking to make Air India liable for the judgment. The lawsuit has argued that Air India as a State-owned company is “legally indistinct from the State itself”. 

The lawsuit is similar to the one brought by Crystallex International Corp to attach property of Petroleos de Venezuela, the State-owned oil company of Venezuela, in Delaware a couple of years ago after the Latin American country had failed to pay the company $1.2 billion that an arbitration tribunal had ordered to pay in lieu of the 2011 seizing of gold deposits held and developed by the firm. 

Sources in the government have said that India will take all necessary steps to defend against any such “illegal enforcement action”. India will contest the move on the grounds that the government has challenged the arbitration award in the appropriate court in The Hague and that it is confident that the award will be set aside, the sources have added.