UK’s Cairn Energy sues Air India in US court to recover $1.72 bn

Air India
Air India

UK’s Cairn Energy Plc has brought a lawsuit in a US court that potentially can lead to seizing of Air India’s overseas assets such as airplanes to recover USD 1.72 billion from the Indian government which an international arbitration tribunal had awarded after overturning levy of retrospective taxes. 

Cairn on May 14 filed a lawsuit in the US District Court for the Southern District of New York seeking declaration of Air India as the ‘alter ego of Indian government’ by virtue of control and as a state-owned company it “legally indistinct from the state itself,” according to a copy of petition reviewed by PTI. 

The lawsuit seeks to establish the “Air India is the alter ego of India and that it should be held jointly and severally responsible for India’s debts, including from any judgment resulting from recognition of the Award.” 

Once a court recognises Air India as the alter ego of Indian government, Cairn can seek attachment or seizure of its assets in the US such as airplanes, immovable assets and bank accounts to recover the amount it was awarded by the arbitration tribunal. 

PTI had on March 28, 2021, reported that Cairn will bring lawsuits to pierce the corporate veil to establish that certain state-owned entities are India’s alter ego under Bancec for enforcing the arbitration award. 

The Bancec guidelines deal with determining when a judgment against a foreign state is enforceable against its agencies. 

The May 14 lawsuit seeks to make Air India liable for discharge of the arbitration award against the Indian government. It said, “Air India is not a typical state-owned airline. By operation of its internal law and the Articles of Association under which Air India was created, India has full functional, administrative, and economic control over Air India and controls its operations through its Ministry of Civil Aviation.” 

“From the time of its nationalisation to the present day, India has always treated Air India as an integral part of the state itself, not a separate company with independent personality,” it said. 

While Cairn said it is “taking necessary legal steps to protect shareholders’ interest in the absence of a resolution to the arbitral award”, sources said India will take all necessary steps to defend against any such “illegal enforcement action.” 

India, they said, will contest the move on grounds that the government has challenged the arbitration award in the appropriate court in The Hague and it is confident that the award will be set aside. 

Sources said the government has also engaged a counsel team which is ready to defend against any enforcement action. 

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