Cairn filed the lawsuit on Friday in the district court for the Southern District of New York seeking to make Air India liable for the arbitration award. To back its argument, Cairn has cited many reasons ranging from Air India’s nationalisation to the government’s control over its day-to-day business, appointment of executives, financial bailouts and a court ruling recognising the airline as the state.
The government has engaged a team of lawyers to fight any enforcement action by Cairn globally, officials told ET, responding to the UK-based company’s suit in a US court seeking to make state-owned Air India liable for a $1.2 billion arbitration award that it won in a tax matter against India.
A favourable court order could help Cairn seize Air India planes landing in the US.
The government appealed against the arbitration award last year and is confident of a positive outcome, said the officials cited above.
Cairn filed the lawsuit on Friday in the district court for the Southern District of New York seeking to make Air India liable for the arbitration award.
“The government has also engaged a counsel team which is ready to defend against any enforcement action, if and when initiated by Cairn anywhere in the world,” said one of the officials.
Air India as a state-owned company is “legally indistinct from the state itself,” according to the lawsuit. “The nominal distinction between India and Air India is illusory and serves only to aid India in improperly shielding its assets from creditors like (Cairn),” the filing said.
Neither the government nor Air India has received any notices, said the people cited above.
“As and when any such notice is received, the government or the concerned organisation shall take all necessary steps to defend against any such illegal enforcement action,” one of the officials said.
The government is in the process of privatising the airline as part of its asset-sale programme. “I do not see any impact on the divestment process,” an official said.
Air India didn’t respond to queries. Nor did the Tata Group andSpiceJetcofounder Ajay Singh — they have qualified for the next stage of the divestment and will submit financial bids for Air India as and when the government seeks these.
“Cairn is taking the necessary legal steps to protect shareholders’ interests in the absence of a resolution to the arbitral award,” a Cairn Energy executive said in response to ET’s query on the Air India lawsuit.
AI First Target for Enforcement
“Cairn remains open to continuing constructive dialogue with the Government of India to arrive at a satisfactory outcome to this long-running issue.” The company is seeking “a ruling that 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.”
To back its argument, Cairn has cited many reasons ranging from Air India’s nationalisation to the government’s control over its day-to-day business, appointment of executives, financial bailouts and a court ruling recognising the airline as the state.
The company had filed a suit in February in the District of Columbia for confirmation of the award, the first key step before a petition to seize assets can be filed. It has filed similar confirmation petitions in many other countries.
Confirmation of the petition and a money judgment in the DC court may take several months, as per the petition in the New York court.
“As soon as a judgment against India is issued in the District of Columbia, plaintiffs (Cairn) expect to register the judgment in this district and pursue enforcement efforts against India’s property located in New York,” the petition said.
Air India has become the first target for enforcement of the award because its easier to acquire assets such as airplanes, said people with knowledge of the matter. There are several precedents for the seizure of planes in case of disputes although bank assets or other properties are equally at risk, they said.
The government has been taking steps to prevent Cairn from seizing assets overseas. Banks have been asked to appoint nodal officers for quick correspondence with the government in the matter.