UK-based Cairn Energy plc on Wednesday said it has agreed to drop its lawsuits to seize Indian properties abroad.

Meeting the requirements of a new legislation that scraps the levy of retrospective taxation, the company has given the required undertakings indemnifying the Indian government against future claims as well as agreeing to drop any cases anywhere in the world.

Cairn said the Indian government now has to accept this and issue the company a so-called Form-II, that will commit India to refund the tax collected to enforce the retrospective tax demand.

Following the issue of Form-II, Cairn will withdraw legal proceedings and will get a refund of Rs 7,900 crore.

Cairn said its undertaking shall be treated as having never been furnished if the Principal Commissioner

for Income Tax either rejects the undertaking given by it in Form No.1 under rule 11UE(1) or the intimation of withdrawal given under rule 11UF(3), or declines to grant the refund.

In a statement, Cairn said it has “entered into undertakings with the Government of India in order to participate in the scheme introduced by recent Indian legislation, the Taxation Laws (Amendment) Bill 2021, allowing the refund of taxes previously collected from Cairn in India”.

“Subject to certain conditions, the Taxation Amendment Act nullifies the tax assessment originally levied against Cairn in January 2016 and orders the refund of Rs 7,900 crore which was collected from Cairn in respect of that assessment,” it said.

“Cairn will commence the filing of the necessary documentation ... intimating the withdrawal, termination and/or discontinuance of various enforcement actions,” the company said in a statement.

Cairn added it expects to pay by early 2022 the special dividend announced in September. The dividend and a share buyback were contingent on the settlement of the dispute.

Seeking to repair India's damaged reputation as an investment destination, the government in August enacted new legislation to drop Rs 1.1 lakh crore in outstanding claims against multinationals such as telecom group Vodafone, pharmaceuticals company Sanofi and brewer SABMiller, now owned by AB InBev, and Cairn.

About Rs 8,100 crore collected from companies under the scrapped tax provision are to be refunded if the firms agreed to drop outstanding litigation, including claims for interest and penalties. Of this, Rs 7,900 crore is due only to Cairn.

Subsequent to this, the government last month notified rules that when adhered to will lead to the government withdrawing tax demands raised using the 2012 retrospective tax law and any tax collected in the enforcement of such demand is paid back.