Air India has until mid-July to respond to the lawsuit filed by UK’s Cairn Energy Plc in a US court demanding the airline pay up $1.26 billion which it won against the Indian government in December 2020 in a retrospective tax dispute, according to PTI.

A three-member international arbitration tribunal had ruled in favour of the oil major stating that the Indian government was in “breach of the guarantee of fair and equitable trade treatment” which was against the India-UK bilateral treaty which caused the energy company. It awarded $1.26 billion in losses to Cairn which India is liable to pay.

The tribunal, which consisted of one judge appointed by India, in December 2020, unanimously rejected the levy of taxes on Cairn retrospectively and ordered a refund of shares sold, dividend confiscated and tax refunds withheld to recover such demand.

The Indian government which had attended the arbitration proceedings for over four years did not accept the award and instead filed a ’setting aside’ petition in a court in The Netherlands —the seat of arbitration.

Cairn then moved a court in US District Court for the Southern District of New York against Air India, which it considers to be the “alter ego” of the Indian government, in order to enforce the order. It wants Air India to be held liable for arbitration award against the Indian government last year.

Cairn now seeks to recover the arbitration award from state-owned Indian entities such as Air India. Meanwhile, the Indian government said it will contest any such enforcement.

According to PTI, the debt-laden airline, which itself is in dire straits is trying to search for buyers to rescue it, has until mid-July to file a plea contesting Cairn’s lawsuit in US court, the PTI report added