Woes mount for Air India as Devas joins Cairn to seize airline's assets abroad

Bengaluru-based Devas Multimedia Pvt Ltd, which had won more than $1.2 billion in international arbitration from India, has joined Cairn Energy Plc in its attempt to seize Air India Ltd's assets abroad.

Devas Multimedia has dubbed the country's flagship airline an "alter ego" of India that is liable for the sovereign's debts in a petition filed in New York, reveals a Bloomberg report. It has also asked Air India to pay the amount or forfeit its US property including planes, cargo handling equipment and artwork.

This move is likely to threaten India's plans to sell off the debt-ridden Air India and also tarnish the nation's image as an investment destination.

Last year, India saw two losses in international arbitrations -- the $3 billion tax dispute with Vodafone Group and the $1.2 billion dispute with Cairn Energy. India has challenged both rulings.

Indian authorities, at the time of Cairn's petition in May, asked state-run banks to protect dollar deposits on concern that these could be at risk of seizure, added the Bloomberg report.

Indian authorities are also engaged with Devas in multiple court cases globally that date back to 2011. The dispute had begun after government-owned Antrix Corp had annulled an agreement with Devas citing force majeure. Devas, following this, seeks the award money while India wants to investigate alleged fraud and liquidate the company.

Eventually, Devas won the case with an arbitration tribunal awarding the company more than $111 million (plus interest) besides the $562.5 million (plus interest) it had won in damages from a separate proceeding at the International Chamber of Commerce. As per Devas, Antrix has paid neither of these.

In addition to this, the country's Supreme Court, in November 2020, halted the implementation of the $1.2 billion award after Attorney General KK Venugopal denied the possibility of a settlement and said the authorities have "discovered a serious fraud in the entire series of transactions leading up to the disputes including the arbitration agreement."

The recent move by Devas eyeing Air India's assets is likely to delay the privatisation of the debt-ridden airline that the Centre has been trying to sell for the past few years.

On the other hand, Cairn has already got the arbitration award registered and recognised in the US, the UK, Netherlands, France, Canada and Singapore. In case of Air India, the national flag carrier has time till mid-July to file a plea contesting the Cairn lawsuit, sources aware of the matter said.

The airline, which is in the process of being privatised, is likely to argue that it is a separate entity and not the alter ego of the Indian government and cannot be forced to pay for any liability of the government, they said.

Cairn has identified $70 billion of Indian assets overseas for a potential seizure to collect award, which now totals to $1.72 billion after including interest and penalty.

The assets identified range from Air India's planes to vessels belonging to the Shipping Corporation of India, and properties owned by state banks to oil and gas cargoes of PSUs. Once a court recognises a state-owned firm or bank as the alter ego of the Indian government, Cairn can seek attachment or seizure of its assets including bank accounts to recover the amount it was awarded by the arbitration tribunal.

(Edited by Vivek Dubey)

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