 "A bird flies by the Vedanta office building in Mumbai")
The government has named Donald McRae, a member of the UN International Law Commission, to defend itself in the arbitration initiated by the London-listed Vedanta under the India-UK Bilateral Investment Protection Treaty, sources said.
The Singapore-based senior counsel and chartered arbitrator Michael Hawng will be the chairman and neutral judge of the three-member arbitration panel. In April 2014, Cairn India was slapped with a tax demand of Rs 20,495 crore for failing to deduct withholding tax on alleged capital gains made by its erstwhile parent company, Cairn Energy, in 2006-07 when it reorganised its India operations.
The tax notice on Cairn India came three months after the income-tax department issued a Rs 10,247-crore tax notice on Cairn Energy in January 2014 using a retrospective tax legislation. In February this year, the department issued a final assessment order seeking Rs 29,047 crore in tax from Cairn Energy, including Rs 18,800 crore in interest.
While Cairn India had moved the Delhi High Court against the tax demand in April last year, Vedanta sought resolution of the dispute under the bilateral investment protection treaty, the sources added.
Both Cairn India and Vedanta are contesting the tax demand.
Cairn Energy, too, has initiated a separate arbitration against the tax demand, and the three-member arbitration panel headed by Geneva-based arbitrator Laurent Levy held its first procedural hearing in Paris a few weeks ago, the sources said.
The British firm has challenged the tax notice by seeking international arbitration under the UK-India Investment Treaty.
It named former Bulgarian minister Stanimir Alexandrov as its arbitrator in the tax dispute while India appointed Singapore-based lawyer J Christopher Thomas as its arbitrator.
The tax department alleges that Cairn Energy made a capital gain of Rs 24,503.50 crore in 2006 when it transferred shares of Indian assets in a subsidiary set up in Jersey to the newly-incorporated Cairn India.
It listed Cairn India on the stock exchanges through an initial public offering (IPO) thereafter. Through the IPO, it raised Rs 8,616 crore and then in 2011 went on to sell a majority stake in Cairn India to mining giant Vedanta Group for USD 8.67 billion.
Cairn Energy still holds 9.8 per cent in Cairn India which has been barred by the I-T Department from selling.
