SHARES in Cairn Energy have plunged 11 per cent after the company revealed a long-running tax dispute in India is set to drag on months longer than expected.

Read more: Cairn Energy thriving in North Sea as Indian judgement day approaches

The Edinburgh-based oil and gas firm said an international tribunal that is considering a $1.4 billion (£1.1bn) claim it made against the Indian government is not expected to deliver a decision before late 2019.

In January Cairn had said it expected a judgement in the near term and remained confident of success.

The prospect of the latest delay will be unwelcome to shareholders in Cairn and to its directors.

Cairn Energy’s chief executive Simon Thomson has said the company could make significant payouts to shareholders if it wins.

Read more: Cairn boss highlights prospect of big payouts to investors in Edinburgh oil firm

The dispute has taken up valuable management time and resulted in legal bills since it broke out in 2014.

It has also prevented Cairn from exiting India as the company looks to focus on the interests it has developed in areas ranging from the North Sea to Senegal.

The dispute may distract investor attention from recent achievements at Cairn, which announces annual results today.

Cairn entered the big league after making a series of bumper finds in India in the early twenty first century India under its founder, former Scotland rugby internationalist Sir Bill Gammell.

Read more: Gammell – My sadness over India tax dispute

However, the rift with the Indian government has posed big challenges for Cairn in recent years.

The firm has been prevented by the government from selling the last of its holding in the former Cairn India business to raise cash pending resolution of the dispute.

In 2015 Mr Thomson, accused the Indian government of forcing Cairn to shed jobs and sell off assets to save cash because of the tax claim.

Cairn has since moved into a much stronger financial position following a successful return to the North Sea under Mr Thomson.

The company is generating huge amounts of cash from the Kraken and Catcher fields off Scotland, which it brought into production with partners.

Read more: Green light for Cairn’s £1bn North Sea plan

However, Mr Thomson has made clear that the company attaches great importance to the outcome of the dispute.

He has insisted repeatedly that Cairn has behaved properly in India and has paid all taxes due.

Mr Thomson spent time in India trying to seek a resolution of the dispute before arbitration proceedings started in 2016, under the UK-India Investment Treaty.

Cairn was initially seeking $600m compensation for the fall in value of its remaining holding in the former Indian subsidiary.

The government has played hardball since then by selling off some of Cairn’s holding in the Indian business, withholding $155m dividends due to the firm and a $234m tax refund in respect of another matter.

Defeat in the case would be bad news for the Indian Government, which is keen to attract investors to the country.

It launched a $1.6bn claim against Cairn in 2014, regarding events leading up to the flotation of Cairn India in 2007.

Cairn Energy sold a majority stake in the Indian firm to Vedanta Resources for $5.5bn in 2011, and paid $3.5bn of the proceeds to shareholders.

The proceedings of the three person panel started in the Hague in August last year.

Cairn noted yesterday that the panel had originally guided that it expected to issue an award expeditiously following the conclusion of the main merits hearings in August until procedural matters cropped up.

After seeking an update in February Cairn was told the court was mindful of the firm’s need for a swift decision but, given its workload, unable to provide specific guidance on timing.

Cairn said as a result it expected the timetable for issuing the award would be more protracted than originally anticipated and was unlikely to be before late 2019.

Shares in the firm closed down 21.5p at 174.7p.