Cairn Energy on Wednesday said that it had agreed to drop litigation to seize Indian properties in countries ranging from France to the UK.  The UK-based oil and gas producer added that the decision was taken after it had accepted the government’s offer to settle a dispute relating to the levy of taxes retrospectively. 

Meeting the requirements of new legislation that scraps levy of retrospective taxation, the company has given required undertakings, indemnifying the government against future claims as well as agreeing to drop any legal proceedings anywhere in the world. 

The government now has to accept this and issue Cairn a so-called Form-II, which will commit it to refund the tax collected to enforce the retrospective tax demand. Following the issue of Form-II, Cairn will withdraw legal proceedings and will get a refund of Rs 7,900 crore. 

Cairn said that its undertaking would be treated as having never been furnished if the Principal Commissioner for Income Tax either rejected the undertaking given by it in Form No.1 under rule 11UE(1) or the intimation of withdrawal given under rule 11UF(3), or declined to grant the refund. 

Only after the refund is issued will the new legislation will be seen as working in the eyes of foreign investors. 

In a statement, Cairn said that it had “entered into undertakings with the Government of India in order to participate in the scheme introduced by recent Indian legislation, the Taxation Laws (Amendment) Bill 2021, allowing the refund of taxes previously collected from Cairn in India”. 

Seeking to repair India’s damaged reputation as an investment destination, the government in August enacted new legislation to drop Rs 1.1 lakh crore in outstanding claims against multinationals, such as telecom group Vodafone, pharmaceutical company Sanofi and brewer SABMiller, now owned by AB InBev, and Cairn. 

About Rs 8,100 crore collected from companies under the scrapped tax provision are to be refunded if the companies agreed to drop outstanding litigation, including claims for interest and penalties. Of this, Rs 7,900 crore is due to Cairn alone.