Cairn expects $1.06 billion in refund from India, plans to return $700 million to shareholders

Cairn Energy expects a “near-term” resolution on retrospective tax issue with India and a refund of ₹7,900 crore ($1.06 billion), the company said in its earnings presentation on Tuesday.

It plans to return $700 million to shareholders via a special dividend and a share buyback upon receiving its money from India. The company said it is "working with the Government of India to expedite documentation and payment of refund", adding that it is required to withdraw all related legal claims against India under the amended law.

Last December, an arbitration tribunal had ordered India to pay the UK firm $1.2 billion plus interest and cost. Cairn Energy’s expectations of a refund of $1.06 billion suggest the company is willing to forego its claim for the balance amount.


Cairn Energy and the government are seeking reconciliation after being on warpath for more than six years.

Dispute With Cairn
India’s recent decision to scrap a controversial 2012 tax law that empowered authorities to claim retrospective capital gains taxes from companies is paving the way for a quicker resolution.

The 2012 law was used by the government in 2014 to demand capital gains tax of Rs 10,200 crore plus interest and penalty for a reorganisation of assets that Cairn Energy undertook at its India unit in 2006, ahead of the listing of its shares in 2007. The government attached the company’s shares in the India unit, dividends and tax refunds to meet tax demand. Cairn Energy challenged the government tax demand in an arbitration tribunal, which ruled in favour of the UK firm. The government appealed the award.

But to implement the award, the company filed lawsuits in several countries, seeking to seize Indian assets in foreign countries. It targeted Air India as well as the Indian government-owned real estate properties in foreign lands. A French court recently accepted Cairn Energy’s plea to freeze $24 million worth of real estate assets owned by the Indian government in Paris. This brought immense pressure on the government, which then decided to repeal the retrospective tax provisions that were at the heart of the dispute with Cairn Energy and other companies.