The tax dispute centres on a restructuring Cairn Energy carried out ahead of the flotation of its Indian unit in 2007 on the Bombay Stock Exchange.

Cairn had sold a majority stake in its Cairn India subsidiary to Vedanta for $5.5bn (£4.29bn) in 2011. It retained a 10% holding in the India business following the Vedanta deal.

In January 2014, Cairn received notice from the Indian Income Tax Department (IITD) requesting information relating to the group reorganisation in 2006. The IITD attached the 10% shareholding in Cairn India Ltd, then valued at approximately $1bn.

Cairn received a draft assessment order from the IITD in March 2015 and subsequently filed a notice of dispute under the UK-India investment treaty, on the grounds the relevant tax legislation did not apply at the time of the reorganisation.

There then followed a lengthy period of legal argument at a tribunal in the Netherlands, where the proceedings were under the registry of the Permanent Court of Arbitration.

Now the company has announced that the tribunal established to rule on its claim against the Government of India has found in Cairn's favour, and has ruled unanimously that India had breached its obligations to Cairn.

In September this year, Vodafone won a long-running tax case in India over some £2.4bn of tax imposed by the authorities following the telecom giant’s acquisition of a local operator over a decade ago.