Court allows Nokia India to transfer their manufacturing unit to Microsoft so deal can go forward

The Delhi High Court in India has finally allowed Nokia India to sell its Chennai manufacturing unit to Microsoft. If the court had ruled otherwise, Nokia may have had to exclude Indian assets from the acquisition deal, forcing the closure of the factory.

Set up in 2006, the Chennai factory is one of their largest manufacturing units employing 5800 people and producing 200 million phones a year.

Nokia India has been in tax disputes in India with the Income Tax Department in recent past with a tax demand was around INR 200 million which inflated to over INR 2 billion due to penalties. The demand pertains to royalty payments by Nokia India to the parent company, Nokia Finland.

After the decision today, Nokia is free to sell the factory to Microsoft as part of their $7.2 billion sale of its global mobile phone business. The court has asked Nokia India to deposit INR 225 million ($367.17 million) value assets as security in an escrow account as it awaits the resolution of the case. If the company loses the case, it might be required to pay a fine of $3.4 billion for non-payment of tax and interest.

Nokia has shared the following statement on the Delhi High Court decision via email.

“Nokia acknowledges the decision by the Delhi High Court today to release Nokia’s Indian assets, including its Chennai facility, for the planned transfer to Microsoft.Our current understanding is that this decision allows for the transfer of the assets. However, Nokia has been asked to meet a number of conditions in the ruling, and still needs to provide the authorities with additional documentation. Nokia expects these conditions to be in line with international treaties and practices.The company will now start to prepare for the planned transfer of the assets, but notes that there are still a number of statutory clearances that remain before the assets can transfer. Nokia repeats its call for the Indian government to work with urgency to facilitate the other approvals needed for the transfer and secure employment for the tens of thousands of employees involved.Nokia continues to expect the transaction with Microsoft to close in the first quarter of 2014.”

Source: Live Mint; Image Credit: Nokia

Abhishek Baxi