Big Setback for Nokia as India's Supreme Court dismisses Nokia’s appeal

In a big setback to the Finnish handset maker, Nokia’s deal with Microsoft, the Supreme Court of India has dismissed Nokia's appeal against a Delhi High Court order which intended to direct the company to give a guarantee to cover the company’s tax liabilities in addition to the Rs 2,250 crore that it needs to deposit in an escrow account before allowing transfer of the handset maker's plant in Chennai to Microsoft.

The Nokia and Microsoft deal in India is a part of a recent global agreement which will see Microsoft buy Nokia's devices business among other assets. ith regards to its Indian operations, this may be a big turning point in the company’s deal as its willingness to agree to both the conditions will decide the future course of action for its operations in India.

It is important to note that, separately, Nokia is paying Rs 700 crore in installments to the tax authorities and the payment schedule ends in the month of March 2014. Nokia had agreed to give an undertaking to the department and the court to prevail upon the high court and lift an attachment order over its books and properties, this includes the company's manufacturing plant in Chennai, but had since gone back on it. It contended that Nokia was now only willing to deposit Rs 2,250 crore in an escrow account or give the price realised after sale of Nokia India's assets to Microsoft, whichever was higher.

It may be recalled that India's finance ministry had asked Nokia to pay Rs 2,080 crore when the income-tax department said the company evaded taxes on software downloaded on handsets manufactured at the unit in Sriperumbudur, Chennai, since 2006.

Nokia's manufacturing unit close to Chennai is regarded by many as one of the company's biggest phone-making factories in the world and employs about 8,000 people and generated revenue of more than Rs 1.51 lakh crore between 2006-07 and 2012-13. Nokia had been trying to end the dispute before closing the deal with Microsoft, expected this quarter ending March 31.

With this Supreme Court ruling, moving forward, its deal with Microsoft is set to move deeper into troubled waters now.