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Cairn Energy seeks $5.6 billion compensation from India

British explorer Cairn Energy has sought $5.6 billion in compensation from the Indian government for raising a retrospective tax demand of Rs 29,047 crore on 10-year old internal reorganisation of its India unit.In a 160-page 'Statement of Claim' filed with an international arbitration panel on June 28, the Edinburgh-based company sought withdrawal of the tax demand and declaring that India has "failed to uphold its obligations" under the UK-India Investment Treaty by not giving its investments in the country "fair and equitable treatment".

It sought $1.05 billion in compensation for the loss of value its 9.8%-shareholding in its erstwhile subsidiary Cairn India suffered following Income Tax(I-T) Department raising the tax demand in January 2014 and attaching the shares"In the alternative, and should the (arbitration) Tribunal determine not to order India to refrain from enforcing its unlawful tax demand", Cairn sought to be compensated of breaches of the investment treaty by being paid for the loss of value of its holding in Cairn India as well as interest and penalties, totalling $5.587 billion (Rs 37,400 crore).

The total compensation sought is equal to the tax demand raised and the value of Cairn Energy's 9.8%-shareholding in Cairn India."To accomplish what was to be one of the largest-ever IPOs in the Indian history, however, Cairn had to reorganise its corporate group structure significantly,"