A top government official said the merger can go ahead if the 9.8 per cent shareholding of Cairn Energy attached by the I-T Department is paid for or an equivalent bank guarantee is furnished or approval is given for issue of fresh shares.
Agarwal's Vedanta Group had in 2011 acquired Cairn India from its British promoters, Cairn Energy Plc, and last year proposed to merge the cash-rich firm with BSE-listed Vedanta Ltd. However, a tax demand on both Cairn Energy Plc and Cairn India under a retrospective legislation is now posing as a hurdle to the merger.
"However, the merger can take place subject to the law of land once this issue of attachment is resolved... Under the Section 281 of the I-T Act, you cannot dispose of shares without permission of the Tax Department."
The I-T Department using the retrospective tax legislation had issued a Rs 10,247-crore tax notice to Cairn Energy in January 2014. In February this year, the department issued a final assessment order seeking over Rs 29,000 crore in tax from Cairn Energy, including Rs 18,800 crore in interest.
Also Read
The official said the merger of Cairn India with Vedanta can go ahead if the shares attached are paid for.
Cairn Energy's shareholding of 9.82 per cent at today's closing price of Rs 151.55 is worth Rs 2,790.42 crore.
On the government's offer to settle retrospective tax cases if the companies concerned paid the principal tax amount after interest and penalties are waived off, the official said it is up to companies to come forward to settle tax liability.
"The government will notify time limit for settling retrospective cases under the settlement window announced in the Budget," he said, adding that the government continues to follow the judicial process in Cairn as well as Vodafone cases.
The one-time settlement offer "will be a time-bound window. Notification to come after passage of the Finance Bill by mid-May," he said.
A Vedanta spokesperson later said: "We have spoken to the Revenue Secretary and he has clarified that the government is not against merger. This is a commercial matter. The government has said it does not want to come in the way of business and there is no such proposal not to allow merger of Cairn India with Vedanta Limited.
"The government is concerned with protecting 9.5 per cent share of Cairn Energy Plc, which is attached currently.