India has requested state-run banks to withdraw funds from their overseas forex accounts overseas, two authorities officers and a banker stated, as New Delhi fears Cairn Vitality might 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 an extended drawn-out tussle with the Indian authorities over its retrospective tax claims.
Whereas New Delhi has filed an enchantment, the London-listed agency has began figuring out Indian belongings abroad, together with financial institution accounts, that could possibly be seized within the absence of a settlement, which Cairn says it’s nonetheless pursuing.
The corporate has registered its declare towards India in courts in the USA, Britain, France, the Netherlands, Singapore and Quebec, strikes that might make it simpler to grab belongings and implement the arbitration award.
“Earlier this week a steerage was despatched to state-run banks to withdraw funds from their nostro accounts,” one of many authorities officers, who requested to not be named, instructed Reuters, including that the finance ministry had issued the steerage.
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 overseas change transactions. The finance ministry didn’t instantly reply to requests for remark.
A banker from certainly one of India’s 12 state banks, who additionally requested not be recognized, confirmed the ministry had despatched the steerage and stated the federal government was involved courts overseas might order funds of their jurisdiction be remitted to Cairn.
“There was a fear that some courts might 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 interim,” the banker instructed Reuters. “Our belongings are tantamount to belongings of the federal government of India as we’re owned by them.”
The Indian Banks’ Affiliation, an business physique representing lenders, didn’t instantly reply to a request for remark. At the very least two state banks additionally didn’t reply, whereas others couldn’t be reached exterior of normal workplace hours.
Cairn stated in February it was discussing a number of proposals with the federal government to discover a resolution.
“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 apprehensive that the British agency might transfer rapidly to grab belongings.
The dispute started after a earlier Indian authorities determined to impose capital positive aspects tax retrospectively on some firms, equivalent to Cairn and telecoms operator Vodafone Plc, which additionally took its case to arbitration and received.
The circumstances scared off overseas buyers and dealt a blow to the federal government of Manmohan Singh, who misplaced energy in a 2014 election to Prime Minister Narendra Modi.
Modi’s authorities has stated it might not make retrospective tax claims in future but it surely has defended excellent circumstances.