As lawsuits attempt to clip Air India wings, govt readies ‘not alter ego’ case

Faced with lawsuits filed by Cairn Energy and traders of Devas Multimedia — each looking for to get better their dues from the Indian authorities by trying to grab Air India’s abroad belongings — the federal government has lined up a two-pronged strategy.
First, the Centre has assembled a crew of legal professionals and authorized consultants to problem the premise that Air India is an “alter-ego” of the Government of India. Second, it’s getting ready an inventory of the airline’s abroad belongings that might face potential seizure from the lawsuits and will even pose a threat to the provider’s disinvestment course of, high authorities officers and Air India executives stated.
Last week, traders of Devas Multimedia moved a US federal court docket looking for the takeover of Air India belongings to implement funds awarded in a $160 million arbitration compensation over a failed satellite tv for pc take care of the Indian Space Research Organisation (ISRO). This lawsuit is on the strains of Cairn Energy’s case, which is looking for seizure of Air India’s belongings to implement the $1.2 billion arbitration award granted to it by a Dutch court docket in a tax dispute in opposition to the Indian authorities.
According to a senior Air India official, the Ministry of Civil Aviation is learnt to be “monitoring” each these circumstances from the disinvestment standpoint and is “coordinating” with the Ministry of Finance and Department of Space.
“The precedence makes it tricky and therefore the attempt is to challenge the lawsuit on the grounds that the (Cairn) case is under appeal (at The Hague). If there is a favourable verdict (for Indian government) in the US court, that can be used as precedence to protect our assets in other countries as well,” the Air India official stated.
The Indian authorities had challenged in a court docket in The Hague the arbitration tribunal verdict that overturned its demand for again taxes from Cairn. The Permanent Court of Arbitration (PCA) at The Hague in December 2020 had dominated that the Indian authorities’s retrospective tax demand on Cairn Energy was “in breach of the guarantee of fair and equitable treatment”, and in opposition to the India-UK bilateral treaty.
The case is anticipated to be heard at The Hague on September 1.
“In the case of Devas, an Indian court docket has accredited winding up of the corporate (Devas) primarily based on account of fraud. The case in opposition to GoI is in opposition to it, it’s a separate entity than an organization and needs to be handled like that. Air India shouldn’t be handled as an alter ego.
Just having an workplace within the US makes it simpler to focus on. Will an organization be focused in different nations if the case is in opposition to the federal government?” a finance ministry official instructed The Indian Express.
However, there may be priority of events trying to grab belongings of government-owned entities to strong-arm the State into paying their dues.
In 2019, American agency ConocoPhillips had moved US courts to grab belongings of Venezuelan state-owned oil firm PDVSA to get better $2 billion it had received in arbitration in opposition to Venezuela’s 2007 takeover of its belongings. Thereafter, PDVSA paid its dues to the ConocoPhillips.
Similarly, a cargo-agent at Amsterdam’s Schiphol Airport had seized a Jet Airways plane in 2019 over unpaid dues.
Also, earlier this 12 months, a Malaysian court docket had allowed Dublin-based plane lessor AerCap to grab a Pakistan International Airlines-owned Boeing 777 airplane in Kuala Lumpur over unpaid dues.
The Finance Ministry official, nevertheless, performed down any influence of the lawsuits on Air India’s disinvestment course of.
“The Ministry of Civil Aviation and Ministry of Finance are monitoring the developments. Air India has hired legal defence to respond to the notice. It’ll be mounting its defence. They will fight it out and take the necessary legal steps. One should not speculate if it will delay the disinvestment process. At any given point, any company going for disinvestment will have some pending case, but because of that the divestment process does not get stalled … Disinvestment process will not stall, there is no need to be concerned on that front”.

Currently, Air India flies wide-bodied planes from India to New York, Newark, San Francisco, Chicago and Washington DC within the US, and has gross sales places of work in a few of these places. It can be the one Indian airline to fly to those locations. The loss-making airline can be in superior phases of being disinvested by the federal government, with the Centre saying a number of entities had submitted expressions of curiosity. This included Mumbai-based conglomerate Tata group.