INSUBCONTINENT EXCLUSIVE:
Dispute began after the previous government imposed capital gains tax on some companiesIndia has asked state-run banks to withdraw funds
from their foreign currency accounts abroad, two government officials and a banker said, as New Delhi fears Cairn Energy may try to seize
the cash after an arbitration ruling in a tax dispute
Cairn was awarded damages of more than $1.2 billion plus interest and costs in December in a long-drawn-out tussle with the Indian
government over its retrospective tax claims.While New Delhi has filed an appeal, the London-listed firm has started identifying Indian
assets overseas, including bank accounts, that could be seized in the absence of a settlement, which Cairn says it is still pursuing.The
company has registered its claim against India in courts in the United States, Britain, France, the Netherlands, Singapore and Quebec, moves
that could make it easier to seize assets and enforce the arbitration award."Earlier this week a guidance was sent to state-run banks to
withdraw funds from their nostro accounts," one of the government officials, who asked not to be named, told Reuters, adding that the
finance ministry had issued the guidance.A nostro account refers to an account a bank holds overseas at another bank in the currency of that
Such accounts are used for international trade and to settle other foreign exchange transactions
The finance ministry did not immediately respond to requests for comment.A banker from one of India's 12 state banks, who also asked not
be identified, confirmed the ministry had sent the guidance and said the government was concerned courts abroad could order funds in their
jurisdiction be remitted to Cairn."There was an apprehension that some courts may take a drastic measure saying whatever the offshore funds
of the government of India, those may be taken over or frozen for the time being," the banker told Reuters
"Our assets are tantamount to assets of the government of India as we are owned by them."The Indian Banks' Association, an industry body
representing lenders, did not immediately reply to a request for comment
At least two state banks also did not respond, while others could not be reached outside of regular office hours
Cairn said in February it was discussing several proposals with the government to find a solution."Cairn continues to have constructive
engagement with the government of India," a spokesman for the company said when asked about the case on Thursday.But the second Indian
government official said talks between New Delhi and Cairn were making little progress and said the ministry's request to banks showed the
government was worried that the British firm could move quickly to seize assets.The dispute began after a previous Indian government decided
to impose capital gains tax retrospectively on some companies, such as Cairn and telecoms operator Vodafone Plc, which also took its case to
arbitration and won.The cases scared off foreign investors and dealt a blow to the government of Manmohan Singh, who lost power in a 2014
election to Prime Minister Narendra Modi
The government has said it would not make retrospective tax claims in future but it has defended outstanding cases.
