India to Offer Indemnity to Flag Carrier Bidder Over Cairn Claim

Source: This post is based on the article “India to Offer Indemnity to Flag Carrier Bidder Over Cairn Claim“ published in Livemint on 2nd September 2021.

What is the News?

The Indian Government has planned to offer indemnity to the financial bidders of Air India Ltd.

Note: Indemnity means security against a loss or other financial stress.

Why is India planning to provide indemnity to Air India bidders?

In 2020, Britain’s Cairn Energy Plc had won an arbitration award for $1.2 billion-plus interest over a controversial retrospective tax demand from the Indian government. Recently, Cairn has secured an order from a French court authorizing the freezing of 20 Indian government properties in Paris. This includes the assets of Air India also. Cairn Energy has also registered the arbitration award in several countries.

Similarly, Devas Multimedia has won a case against Antrix Corporation (a subsidiary of the Indian Space Research Organisation) for arbitrary cancellation of a contract. Devas Multimedia Pvt is also seeking to seize Air India’s assets abroad.

Due to this, the potential bidders of Air India are afraid of encountering any surprises on further liabilities. Hence, to give them assurance from any liability, the Government has planned to offer indemnity to the financial bidders of Air India Ltd.

Note: India has recently passed the Taxation Laws (Amendment) Bill, 2021, in Parliament. The bill allows firms relief from the retrospective tax demands if they agree to drop litigation. The government is also in talks with Cairn to settle the dispute.