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India refuses to ask state banks to withdraw money abroad over Cairn dispute

© Reuters. FILE PHOTO: Cairn India employees work in a crude oil warehouse on the Mangala oil field in Barmer in the Indian desert state of Rajasthan on August 29, 2009. REUTERS / Parth Sanyal

NEW DELHI (Reuters) – The Indian government on Sunday declined to ask its state-owned banks to withdraw funds from their foreign currency accounts overseas, fearing Cairn Energy (OTC 🙂 might try to seize the money in a tax dispute, added New Delhi openly to resolve the matter.

Listed on the London Stock Exchange, Cairn is embroiled in a protracted dispute with the Indian government over tax claims and was awarded more than $ 1.2 billion in damages by an international tribunal late last year.

New Delhi has appealed the decision, which it describes as "highly flawed".

Citing government officials and a banker, Reuters and other media outlets reported May 6 that the Treasury Department had asked state banks to withdraw the foreign funds fearing that overseas courts could order transfers of assets in their jurisdiction, including bank accounts Cairn.

The ministry, which had not commented at the time, called the reports "false" in a statement on Sunday and said no such instructions had been given.

"The Indian government is vigorously defending its case in this litigation … Constructive discussions have been held and the government remains open to an amicable solution to the dispute," the statement said.

Separately that month, Cairn also sued India's flagship Air India to enforce the arbitration award. This is based on a Reuters filing from the U.S. District Court.

The international tribunal unanimously ruled that India had violated its obligations to Cairn under the bilateral investment treaty between Great Britain and India and awarded Cairn US $ 1.2 billion in damages plus interest and costs.

Indian authorities asked Cairn 102 billion rupees ($ 1.4 billion) in 2014 for taxes it claims it owed on capital gains related to the listing of the company's local entity in 2007.

"The government has put forward several arguments to justify revoking the award," said the Treasury Department's statement on Sunday.

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