In December, an arbitration body awarded the British firm damages of $1.2 billion plus interest and costs, after ruling India had breached its obligations to Cairn under the U.K.-India Bilateral Investment Treaty.

This month, Cairn filed a case in a U.S. district court to enforce the arbitration award, taking an initial step in its efforts toward recovering dues. The U.S. court this week issued electronic summons to the Indian government to file its response to the lawsuit within 60 days or face a judgment by default.

In a release on Sunday, Cairn said it had held "cordial and constructive discussions" with officials from the Indian finance ministry.

"We remain hopeful that an acceptable solution can be found, in order to avoid further prolonging and exacerbating this negative issue for all parties," the company said, adding it is also ready to take all necessary steps to protect the interests of its shareholders.

The Indian government welcomes Cairn's move to reach out for a resolution but plans to file an appeal against the arbitration award and contest its sovereign right to tax, said a government official in New Delhi, who asked not to be identified.

Cairn took the case to arbitration in 2015 to fight a demand from Indian authorities in 2014 for 102 billion rupees ($1.4 billion) in taxes that India said it was owed on capital gains related to the 2007 listing of its local unit.

India lost another major international arbitration case last September against telecommunications giant Vodafone over a $2 billion retrospective tax dispute.

(Reporting by Aftab Ahmed and Devjyot Ghoshal; Editing by Euan Rocha and Lincoln Feast.)

By Devjyot Ghoshal