Scottish explorer Cairn Energy plc has sought shareholder approval to sell its 9.65 per cent stake in Cairn India after restrictions imposed by the Income-Tax Department are lifted.
The I-T Department had earlier this year restrained Cairn from selling the stake over alleged tax evasion on Rs 24,500 crore of capital gains made when it transfered its India assets to a new company, Cairn India, in 2006-07.
Cairn Energy had said in a regulatory filing after the annual general meeting on May 16, 2013, that shareholders had authorised the board to dispose of all or part of the company's residual interest in Cairn India.
"As previously announced, Cairn has at present been restricted by the Indian Income-Tax Department from selling its shares in Cairn India.
"However, Cairn believes it is appropriate to retain the flexibility to realise shareholder value from its residual interest in Cairn India in the event that the selling restriction is removed and is therefore seeking to renew the Residual Interest Disposal Authority," it said.
Its AGM is scheduled to be held in Edinburgh on May 15. Cairn sought shareholder approval to sell the residual stake through on-market transactions, including participation in any share buy-back by Cairn India.
At the current price, the residual stake of 9.65 per cent will fetch Cairn Energy over Rs 6,665.35 crore.
Cairn Energy previously operated the eastern offshore Ravva oil and gas field and discovered significant natural gas reserves in a block in the Krishna Godavari basin before striking oil in India's largest onland field in Rajasthan in January 2004.
Two years later in 2006, it transferred its India business from subsidiaries incorporated in places like Jersey, a tax haven, to the newly incorporated Cairn India.
After transferring the assets, the Scottish explorer listed Cairn India on the stock exchanges through an initial public offering (IPO) in 2006 that raised Rs 8,616 crore.
In 2011, it sold a majority stake in Cairn India to mining group Vedanta for USD 8.67 billion.
The I-T Department had in a January 22 order held that the Edinburgh-based firm made capital gains of Rs 24,503.50 crore in the 2006 transfer of assets to Cairn India.
According to the department, it received Rs 26,681.87 crore for the asset transfer against its entire investment of Rs 2,178.36 crore in the India business.
"This (group) reorganisation (of 2006) was compliant with tax legislation in place at the time in each relevant jurisdiction, including India," Cairn Energy said. "The Indian Income-Tax Department has cited legislation introduced in 2012 as the reason for these enquiries."
The firm said the actions of the Income-Tax Department were taken without any prior discussion.
"The Group will take whatever steps are necessary to protect its interests," it added.
Cairn said its board continues to believe that in order to obtain the best terms when disposing of all or part of its residual shareholding in Cairn India, it needs to be able to sell or agree to sell those shares on normal market terms without the sale being subject to prior approval from shareholders.
"The Board is therefore seeking to renew the existing authority from shareholders for the company to be able to sell its residual interest in Cairn India at or as close as reasonably possible to the prevailing market price if and when the company considers it appropriate to make such disposals and provided that the selling restriction is removed," it said.
The company said it only intends to utilise the Residual Interest Disposal Authority where, provided that the selling restriction is removed, it believes that a sale is in the best interests of shareholders as a whole.