Dispute started after the earlier authorities imposed capital positive aspects tax on some corporations
India has requested state-run banks to withdraw funds from their international forex accounts overseas, two authorities officers and a banker stated, as New Delhi fears Cairn Power could attempt to seize the money after an arbitration ruling in a tax dispute. Cairn was awarded damages of greater than $1.2 billion plus curiosity and prices in December in a long-drawn-out tussle with the Indian authorities over its retrospective tax claims.
Whereas New Delhi has filed an attraction, the London-listed agency has began figuring out Indian belongings abroad, together with financial institution accounts, that might be seized within the absence of a settlement, which Cairn says it’s nonetheless pursuing.
The corporate has registered its declare in opposition to India in courts in the USA, Britain, France, the Netherlands, Singapore and Quebec, strikes that would make it simpler to grab belongings and implement the arbitration award.
“Earlier this week a steering was despatched to state-run banks to withdraw funds from their nostro accounts,” one of many authorities officers, who requested to not be named, advised Reuters, including that the finance ministry had issued the steering.
A nostro account refers to an account a financial institution holds abroad at one other financial institution within the forex of that jurisdiction. Such accounts are used for worldwide commerce and to settle different international trade transactions. The finance ministry didn’t instantly reply to requests for remark.
A banker from one in every of India’s 12 state banks, who additionally requested not be recognized, confirmed the ministry had despatched the steering and stated the federal government was involved courts overseas might order funds of their jurisdiction be remitted to Cairn.
“There was a terror that some courts could take a drastic measure saying regardless of the offshore funds of the federal government of India, these could also be taken over or frozen in the intervening time,” the banker advised Reuters. “Our belongings are tantamount to belongings of the federal government of India as we’re owned by them.”
The Indian Banks’ Affiliation, an trade physique representing lenders, didn’t instantly reply to a request for remark. At the least two state banks additionally didn’t reply, whereas others couldn’t be reached exterior of standard workplace hours. Cairn stated in February it was discussing a number of proposals with the federal government to discover a answer.
“Cairn continues to have constructive engagement with the federal government of India,” a spokesman for the corporate stated when requested concerning the case on Thursday.
However the second Indian authorities official stated talks between New Delhi and Cairn have been making little progress and stated the ministry’s request to banks confirmed the federal government was anxious that the British agency might transfer shortly to grab belongings.
The dispute started after a earlier Indian authorities determined to impose capital positive aspects tax retrospectively on some corporations, similar to Cairn and telecoms operator Vodafone Plc, which additionally took its case to arbitration and received.
The instances scared off international traders and dealt a blow to the federal government of Manmohan Singh, who misplaced energy in a 2014 election to Prime Minister Narendra Modi. The federal government has stated it might not make retrospective tax claims in future but it surely has defended excellent instances.