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It was one of the most spectacular and heart-warming triumphs ever seen in the oil and gas sector.

Cairn Energy, a company set up in 1986 by the Scottish fund management firm Ivory & Sime to invest in the sector, had spent the first decade or so of its life hunting for the big strike that would transform its fortunes.

That hunt took it from the United States to the North Sea to Vietnam and then, eventually, to South Asia.

Early successes in Bangladesh were followed in 1996 by an expansion into India.

And it was here, in January 2004, that Cairn made the country's biggest onshore oil discovery in more than a quarter of a century at the Mangala field in Rajasthan.

The discovery in the desert region was all the sweeter because the field had previously been explored - and discarded - by Royal Dutch Shell.

Cairn's founder and chief executive Bill Gammell, a former school friend of Tony Blair and a former wing for the Scottish international rugby team, had drilled 15 wells in the field without success.

The discovery sent shares of Cairn into the stratosphere and, at the end of that year, the company won promotion to the FTSE-100 index.

Mr Gammell, whose fund manager father, Jimmy, had backed George HW Bush's Texan oil business in the 1950s before the former US president turned to politics, was knighted.

He subsequently floated Cairn's Indian assets on the Mumbai Stock Exchange in January 2007 as a separate company, raising almost £1bn in the process, valuing the business at £3.3bn.

These events form the backdrop to today - when shareholders in the original Cairn Energy were handed an early $1.2bn (£0.9bn) Christmas present that has sent its share price up by 27%.

The Indian tax authorities argued the creation of Cairn India, into which the company's Indian assets had been transferred in 2006 ahead of the IPO (initial public offering), had crystallised a capital gain and slapped the company with a $1.6bn (£1.2bn) tax demand in 2014.

That move has blighted Cairn's prospects ever since.

The company, which had retained a controlling stake in Cairn India at the time of the flotation, had in 2011 sold a 40% holding in the business to Vedanta Resources, an Indian mining firm then in the FTSE-100, for $5.5bn (£4.1bn).

But plans to sell its remaining 10% stake, worth another $1bn (£0.74bn), were also put on hold while other operations were also paralysed by the tax demand.

The Indian tax authorities also halted dividend payments from Vedanta to Cairn and later forcibly sold part of a shareholding Cairn received in Vedanta following the sale.

Sir Bill, who stepped down as chairman in May 2014, spoke of his sorrow that the tax dispute could not be resolved before his departure.

The issue also blighted relations between the British and Indian governments.

In 2015, the then-foreign secretary Philip Hammond raised the issue with India's finance ministry.

By then, India was gaining an unwanted reputation for its troublesome tax laws, its authorities also crossing swords with the likes of Microsoft, IBM, Shell and Vodafone.

Of particular irritation was that the relevant tax laws were introduced in 2012 and applied retrospectively - a principal always regarded as taboo in taxation.

Astonishingly, the changes to India's tax code in 2012 gave its authorities the right to pursue retrospective tax claims related to mergers and acquisitions dating all the way back to April 1962.

The row was referred to the Permanent Court of Arbitration in the Netherlands under the UK-India Bilateral Investment Treaty in 2015 and it found today for the Scottish company.

Cairn said today: "The tribunal ruled unanimously that India had breached its obligations to Cairn under the UK-India Bilateral Investment Treaty and has awarded to Cairn damages of $1.2bn plus interest and costs, which now becomes payable."

That may not be the end of the matter.

The Modi government may yet appeal against the verdict.

And there is more riding on this than just the possibility, created by today's ruling, of a windfall pay-out for Cairn's shareholders.

It has been widely reported in India that the Modi government was waiting on this verdict before deciding whether or not to appeal against an earlier international arbitration, in September this year, in which a controversial $3bn (£2.2bn) tax demand levied on Vodafone was overturned.

Weighed against that is the damage these tax laws have done to India's attractiveness as an investment destination.

Rising prosperity in the country has driven up demand for energy and New Delhi has set a target of attracting $100bn (£74bn) worth of investment to the sector by 2024.

Ironically, Cairn itself said last year it would be keen to invest in the country, once the dispute was resolved.

This second loss in international arbitration might be a good moment for India to rethink its approach to these tax cases and redouble its efforts to woo investors.

Cairn shareholders, as they raise a celebratory dram, would doubtless agree.