Faced with lawsuits filed by Cairn Energy and investors of Devas Multimedia — both seeking to recover their dues from the Indian government by attempting to seize Air India’s overseas assets — the government has lined up a two-pronged approach.
First, the Centre has assembled a team of lawyers and legal consultants to challenge the premise that Air India is an “alter-ego” of the Government of India. Second, it is preparing a list of the airline’s overseas assets that could face potential seizure from the lawsuits and could even pose a risk to the carrier’s disinvestment process, top government officials and Air India executives said.
Last week, investors of Devas Multimedia moved a US federal court seeking the takeover of Air India assets to enforce payments awarded in a $160 million arbitration compensation over a failed satellite deal with the Indian Space Research Organisation (ISRO). This lawsuit is on the lines of Cairn Energy’s case, which is seeking seizure of Air India’s assets to enforce the $1.2 billion arbitration award granted to it by a Dutch court in a tax dispute against the Indian government.
According to a senior Air India official, the Ministry of Civil Aviation is learnt to be “monitoring” both these cases from the disinvestment point of view and is “coordinating” with the Ministry of Finance and Department of Space.
“The precedence makes it tricky and therefore the attempt is to challenge the lawsuit on the grounds that the (Cairn) case is under appeal (at The Hague). If there is a favourable verdict (for Indian government) in the US court, that can be used as precedence to protect our assets in other countries as well,” the Air India official said.
The Indian government had challenged in a court in The Hague the arbitration tribunal verdict that overturned its demand for back taxes from Cairn. The Permanent Court of Arbitration (PCA) at The Hague in December 2020 had ruled that the Indian government’s retrospective tax demand on Cairn Energy was “in breach of the guarantee of fair and equitable treatment”, and against the India-UK bilateral treaty.
The case is expected to be heard at The Hague on September 1.
“In the case of Devas, an Indian court has approved winding up of the company (Devas) based on account of fraud. The case against GoI is against it, it’s a separate entity than a company and should be dealt with like that. Air India should not be treated as an alter ego.
Just having an office in the US makes it easier to target. Will a company be targeted in other countries if the case is against the government?” a finance ministry official told The Indian Express.
However, there is precedence of parties attempting to seize assets of government-owned entities to strong-arm the State into paying their dues.
In 2019, American firm ConocoPhillips had moved US courts to seize assets of Venezuelan state-owned oil company PDVSA to recover $2 billion it had won in arbitration against Venezuela’s 2007 takeover of its assets. Thereafter, PDVSA paid its dues to the ConocoPhillips.
Similarly, a cargo-agent at Amsterdam’s Schiphol Airport had seized a Jet Airways aircraft in 2019 over unpaid dues.
Also, earlier this year, a Malaysian court had allowed Dublin-based aircraft lessor AerCap to seize a Pakistan International Airlines-owned Boeing 777 plane in Kuala Lumpur over unpaid dues.
The Finance Ministry official, however, played down any impact of the lawsuits on Air India’s disinvestment process.
“The Ministry of Civil Aviation and Ministry of Finance are monitoring the developments. Air India has hired legal defence to respond to the notice. It’ll be mounting its defence. They will fight it out and take the necessary legal steps. One should not speculate if it will delay the disinvestment process. At any given point, any company going for disinvestment will have some pending case, but because of that the divestment process does not get stalled … Disinvestment process will not stall, there is no need to be concerned on that front”.
Currently, Air India flies wide-bodied planes from India to New York, Newark, San Francisco, Chicago and Washington DC in the US, and has sales offices in some of these locations. It is also the only Indian airline to fly to these destinations. The loss-making airline is also in advanced stages of being disinvested by the government, with the Centre saying multiple entities had submitted expressions of interest. This included Mumbai-based conglomerate Tata group.
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines
- The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.