Government afraid of Cairn Energy:Government banks asked to withdraw money deposited in foreign accounts, the government is afraid of being seized
- Finance Ministry sent guidelines to all public sector banks
- Cairn Energy filed a case to seize the property
The central government has asked government banks to withdraw money from foreign currency accounts. The government fears that Cairn Energy may seize banks’ money in the retrospective tax case. There is a dispute between the government and Cairn Energy over the tax. In this case, in December 2020, the Arbitration Court of Singapore ruled in favor of Cairn Energy. The court ordered the Government of India to pay 1.2 billion rupees with interest-penalty to Cairn Energy. This amount increases to $ 1.4 billion with interest and penalty.
Cairn filed a case to seize India’s assets
Cairn has said that if the Indian government does not pay the amount of $ 1.4 billion, the company will seize its overseas assets. It also includes deposits in bank accounts. For this, the company has filed cases in the courts of US, UK, France, Netherlands, Singapore and Quebec. However, the Government of India has appealed against the decision of the Arbitration Court of Singapore.
Finance Ministry sent guidelines to banks
Reuters report quoted a source as saying that the finance ministry has sent guidelines to all public sector banks to withdraw money from foreign accounts. These guidelines were sent earlier this week. A nostro account is one in which a bank keeps its money. This account comes under the jurisdiction of another bank and is used for international trade. Apart from this, this account is also used for foreign exchange transactions.
Bank official confirmed
The Finance Ministry has not responded to the guidelines to withdraw money from foreign banks. However, a banker associated with one of the 12 state-owned banks has confirmed receiving directions from the Finance Ministry. According to the banker, the government is concerned that Cairn Energy may seize banks’ money to implement the arbitration court’s ruling. The banker says that our property is treated like the property of the government because we are owned by the government.
Cairn had said – ongoing talks with the government
In February, Cairn Energy said that talks were going on with the government on this issue. Cairn said that it was ready to settle the matter with mutual consent in the interest of the shareholders of the company. On the other hand, a government official says that there has been little interaction with Cairn Energy. But it seems from the guidelines of the ministry that the government is apprehensive about the possibility of property being seized.
What was the order of the arbitration court?
According to the arbitration court order, India has violated the trade agreement with Britain. The court said that Cairn’s Indian tax claim of Rs 10,247 crore on internal reorganisation of business in India in 2006-07 is not correct. The arbitration ordered the government to hold back the refund of the shares it had sold, forfeit the dividend and withheld tax refunds for recovery of tax demand.
