New Delhi, May 08 (PTI): The finance ministry has asked public sector banks (PSBs) to be on high vigil against any attempt being made to seize their overseas deposits to recover USD 1.2 billion that the UK’s Cairn Energy plc has been awarded against India levying retrospective taxes, sources said.
Cairn had previously stated that it can seize Indian assets abroad if it is not paid USD 1.2 billion plus interest and cost that an international arbitration panel had awarded against levy of retrospective taxes.
Cash of Indian banks lying in nations such as the US and the UK are said to be easy target for seizing and enforcing the arbitration award.
To guard against such cash being taken over, the finance ministry has asked PSBs to be extra vigilant and immediately report back any attempt Cairn makes to legally attach the deposits, two sources aware of the matter said.
This will allow the Indian government to quickly take legal recourse to prevent the assets from being taken over, they said adding that this has been done out of abundant caution and funds with banks are not of Government of India but of public.
A nodal officer has been appointed to deal with this subject in the finance ministry for escalating the matter to the competent authorities for the further action, the sources added.
The sources also said banks are keeping enough funds in their nastro account so that they can carry on activity of trade finance and other overseas businesses.
A nostro account refers to an account a bank holds overseas at another bank in the currency of that jurisdiction. Such accounts are used for international trade and to settle other foreign exchange transactions.
Last year, Cairn Energy Plc won two high-profile international arbitrations over the levy of taxes on the UK-based company using legislation that gave India power to levy taxes with retrospective effect.
The UK-based firm has already taken steps to have the arbitration award recognised in nine major jurisdictions such as the US, UK, France, the Netherlands, Singapore and Canada’s Quebec province, where Indian sovereign assets have been identified.
It has not said what it might go after but assets could include Air India’s planes, vessels belonging to the Shipping Corporation of India and property owned by state banks.
On the other hand, the government, which participated in an international arbitration brought by the Scottish firm against being taxed retrospectively, has appealed against The Hague-based tribunal’s ruling. The ruling asked the government to return the value of shares expropriated and liquidated, tax refunds withheld and dividend seized to recover a wrongly levied retroactive tax demand.
