(Bloomberg) -- India has sold a part of Cairn Energy Plc’s stake in mining major Vedanta Ltd. as part of a tax dispute.
India’s Income Tax Department told Cairn that it sold some seized shares of Vedanta, worth about $216 million, according to a statement by the London-listed company. The department may sell more shares in the future and Cairn’s stake in Vedanta stands reduced to about 3 percent, it said. Separately, the tax department has frozen dividends paid to Cairn by Vedanta totaling about $155 million and has also confiscated $234 million of tax refunds due to the company.
“Cairn will write down the carrying of its investment in Vedanta which will result in an impairment charge at the half year equal to the of the total shares notified as having been sold,” the company said in the statement, adding that the actions by India’s tax department are a violation of the U.K.-India Bilateral Investment Treaty.
Cairn shares traded 2.3 percent higher at 237.80 pence as of 10:46 a.m. in London on Monday. Cairn held about 5 percent stake in Vedanta as of December 31, according to Bombay Stock Exchange filings. This holding was frozen by the tax department during the quarter ended March.
Cairn has disputed the Indian tax department’s demands and an arbitration is on at The Hague. The company and Indian government both have made their written submissions and final arbitration hearings will take place over two weeks from August 20, the company said. Cairn Energy is seeking $1.3 billion from the Indian government, including the of its investments in India after they were seized in 2014.
The dispute arose following a restructuring of units by the then Cairn India in 2006 in preparation for the Indian unit’s initial public offering.
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