Cairn Energy Plc on Wednesday announced that it has given undertakings to the Indian government that it is withdrawing all cases as part of the settlement of the dispute arising from the levy of retrospective taxes.
This will allow the company to get a refund of around Rs 7,900 crore, which it will use to give special dividend to shareholders and offer a share buyback programme.
“Cairn is pleased to announce that it has entered into undertakings with the Government of India in order to participate in the scheme introduced by recent Indian legislation, the Taxation Laws (Amendment) Act 2021, allowing the refund of taxes previously collected from Cairn in India,” the company said in a statement.
The statement said, subject to certain conditions, the new Act nullifies the tax assessment originally levied against Cairn in January 2016 and orders the refund of Rs 7,900 crore that was collected from Cairn in respect of that assessment.
The new rules require companies to give undertakings to the government that they and related parties will withdraw all pending legal cases, and will not claim damages, interest and cost from the government.
Cairn said in order to satisfy those conditions, it will commence the filing of the necessary documentation under rule 11UF (3) of the Income Tax Rules 1962. The rule provides the form and manner of furnishing the undertaking for withdrawing pending litigation, claiming no cost, damages and interest.
The company had won the $1.2-billion arbitration award against India in December 2020.
The company had registered the arbitration award in many jurisdictions, including the US, the UK, Canada, Singapore, Mauritius, France, and the Netherlands. It had even sought mortgaging of government properties in Paris and sought claim on Air India as “the alter ego of the Indian state”.
The company’s statement on Wednesday said Cairn UK Holdings and Cairn Energy PLC (and their related parties) have confirmed that they will treat any such awards, judgment and court orders as null and void and without legal effect to the same extent as if they had been set aside by a competent court and will not take any action or initiate any proceeding or bring any claim based on that.
Cairn said it is working collaboratively with the government towards expediting the refund within the process of the rules under the new Act. Earlier, the company had said it was planning to use $700 million out of the refund for special dividend and buyback, subject to the resolution of the dispute.
“Payment of the tax refund would enable a proposed return to shareholders of up to $700 million, via a special dividend of $500 million and a share buyback programme of up to $200 million. The remainder of the proceeds would be allocated to further expansion of the low cost, sustainable production base,” it had said.
In the statement on Wednesday, it said the previously announced special dividend is expected to be paid by early 2022.