In a first, the Income Tax Department is considering to sell off 22 crore shares of Cairn Energy to recover its dues after a long litigation process between the UK company and the Indian government, sources told CNBC-TV18.
Cairn may be the first foreign company to face sale of its shareholding to recover dues of around Rs 8,000 crore.
Last month, the tax department had appropriated Rs 1,500 crore of tax refund due to Cairn Energy and another Rs 666 crore of dividend income due to it for three years from its erstwhile subsidiary Cairn India (now Vedanta Ltd) to recover the Rs 10,247 crore of tax plus interest.
The tax department has not yet decided on how it is going to sell the stake. It could either go for an auction or a buy back.
If the department goes for an auction, it will have to appoint lead managers for the purpose. The auction maybe conducted in tranches depending on available options.
The government does not want inject the entire stake of 2 crore shares at once into the market. Rather, it wants to realize the maximum value of this stake. The current market pricing pegs the value of the stake at Rs 4500 crore.
To adjust the remaining due, the Indian government might approach UK under the bilateral treaty between the two countries. But it is likely to be the last option after the government has exhausted others to realize the dues.
The move comes after the tax department had slapped a notice on Cairn Energy Plc earlier this month. In the notice, the IT department sought to take over the firm’s residual 9.8 per cent stake in its erstwhile Indian subsidiary to recover the retrospective tax demand.
In the notice, the I-T Department had given the British firm 15 days to repay or face attachment of shares.
The department had also written to Cairn Energy on June 26 asking it to repay the balance tax due, failing which it threatened to take over the company’s 9.8 percent shareholding in Cairn India.
The move to recover the tax took place after Cairn Energy had lost an appeal against the retrospective tax demand in tax tribunal ITAT. I-T department had first issued a notice on March 31, seeking Rs 10,247 crore tax by June 15. As the company failed to pay, it went ahead to take over the refund and dividend income.
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