Cairn ups the ante in US court, asks Air India to pay security
Cairn’s latest salvo came in response to India asking for the case to be dismissed
NEW DELHI: Cairn Energy Plc. has asked a US court to make Air India deposit money in a case where it seeks a court’s approval to seize the planes of Air India as the Scottish energy giant believes New Delhi could possibly sell the flag carrier by the time a decision is reached.
In May, Cairn filed a case against Air India as the company looks to establish that Air India is “the alter ego of the Republic of India and therefore jointly and severally liable for the debts and obligations of India itself”. This is a legal process under which a favourable order allows Cairn Energy to seize aircraft and other assets of Air India.
“[P]rejudgment security is equitable because India has stated that it will indemnify Air India for any losses in this litigation. This shows in turn that Cairn is likely to prevail on the merits, as India is yet again disregarding corporate formalities and that any judgment entered against Air India would be ultimately borne by India—the origi nal debtor in this case,” wrote Dennis H. Hranitzky, the counsel for Cairn Energy, in a letter dated 2 September.
Mint reviewed a copy of the letter filed in the court.
“India has broadcast to the world that neither it nor Air India will respect any judgment by this Court: an Indian official said this case did not pose “a major issue” to Air India because “any judgment of a US court is not enforceable in India[],” and at best, Cairn could “attach an aircraft in the US.” Air India also intends to delay these proceedings to move assets overseas, as India intends to sell Air India, expecting that the “case will fall through automatically” as a result. Of course, a paper transaction will just pass along Air India’s liability to its new owners—but this shows that Air India intends only to buy time until it can develop a new strategy,” the letter said.
Hranitzky, who is the head of the Sovereign Litigation practice at Quinn Emanuel, which calls itself the largest law firm in the word, declined to comment on the quantum of money it seeks to be deposited in the court.
An email sent to Air India’s counsel seeking comment went unanswered.
Cairn’s latest salvo in the US Court was in response to India asking for the case to be dismissed as its appeal against the arbitration award was still pending.
Nonetheless, both Cairn and India’s toughening stance in the court is in contrast to both parties continuing to hold discussions to resolve this matter. Understandably, one representative from Cairn said that he remains hopeful of settlement reaching soon.
“Discussions are progressing well, and a settlement should happen sooner than later,” said an executive, on the condition of anonymity, declining to comment why the company had toughened its stance in the court.
A spokesperson for Cairn Energy too echoed this sentiment.
“Any legal activity on this matter does not preclude ongoing amicable discussions between Cairn and the Govt. of India regarding the new legislation to progress and resolve this matter swiftly,” said a spokesperson for Cairn Energy.
Cairn was forced to start a legal battle after India passed a law in 2012, under which New Delhi retroactively demanded about $1.4 billion in tax payments from Cairn Energy after it sold its stake in its Indian subsidiary to Vedanta.