While it is just frustrating for voters of Prime Minister Narendra Modi to see most policies of the Indian National Congress-led United Progressive Alliance government continue for seven years, on the economic front, foreigners will not sit with their hands tied. The country is having to cough up penalties due to a 2012 law that neither Arun Jaitley nor Nirmala Sitharaman could let go: retrospective taxes. Now, Cairn Energy of the UK says it has won a French court order to attach over $ 24 million of Indian government assets in the country to force India to honour the international arbitration tribunal order of December 2020. Earlier, Cairn had explored American judicial remedies to demand that the company be allowed to attach Air India’s assets in the US. From recovering Indian black money stashed abroad to making public the Henderson-Brooks report on the 1962 India-China war to ending this idea of Pranab Mukherjee, the nation saw to its utter dismay how the Modi government found in each case a reversal of the previous regime’s policies near impossible. To make it clear to the lay, retrospective taxation is as preposterous an idea as inviting a friend home and, when he has left, suing him for trespassing in your property or seeking rental for the time he spent at your place. A foreign company arrives at our shores under certain terms and conditions that must be sacrosanct. Taxes that do not exist at the time of the agreement cannot be levied later and executed retrospectively. For reasons known best to the Modi government, it could not use this simple logic to scrap the 2012 law; instead, it told Vodafone, for example, it would no longer pursue the government’s case against it in Indian courts.
As such, the government had lost even in India during the UPA era when it had raised the demand for the ridiculous tax on Vodafone, which the Congress dispensation overturned using an amendment. This Shah Bano-like treatment to a court order would not but impress MNCs. It did not affect India’s ability to attract FDI from one company alone; the entire community of potential investors overseas got spooked. Then, the NDA government used the same Congress amendment to harass other companies like Cairn that received a tax demand for one transaction dated 2006 and for those between 2016 and 2018. With high-handedness and utter contempt for the private sector, the present government sold some financial assets of Cairn to recover the unfair tax. Cairn, like Vodafone, then moved international courts against the government, seeking an arbitration order against New Delhi’s violation of fair and equitable standards of bilateral investment treaties with the UK and the Netherlands respectively. The government lost both cases, never mind that it appealed each time.
The floodgates of erosion of India’s assets have just opened. All members of the New York Arbitration Convention will now appreciate the tribunal awards to let Cairn protect its interests. The case of the Government of India’s Antrix Corp against Devas Multimedia is, meanwhile, harming its reputation. After Devas won the arbitration in 2015, Antrix filed a winding-up petition in India’s NCLT, claiming the company had been formed for unlawful purposes. This is not to say that the government’s stand was wrong in this case. But globally, the NCLT, by ruling in Antrix’s favour, sent across a message that this country’s judicial interventions are erratic. The Modi government must repeal or amend the awful Congress-made law and settle issues with the foreign investors out of court in the spirit of a healthy business environment.