Delhi HC defreezes Nokia's assets, paves way for sale to Microsoft

New Delhi: In a major relief to handset maker Nokia, the Delhi High Court on Thursday defreezed the assets of the Finnish firm India, including the plant in Chennai, paving the way for their sale to Microsoft.

The court, however, imposed certain conditions on Nokia India and its parent firm Nokia Corporation Finland.

Nokia had pleaded before the high court for a direction to the Income Tax department for lifting of the stay on transfer of assets, including the Chennai manufacturing plant, in view of its USD 7.2 billion global deal with Microsoft.

A bench of justices Sanjiv Khanna and Sanjeev Sachdeva said, "We permit and allow sale of assets by Nokia India to Microsoft/Microsoft International." The bench at the same time asked Nokia India and Nokia Corporation(Corp) to fulfil certain conditions.

"Nokia Finland will be bound by the statement that they shall be jointly liable and shall pay tax demand determined and payable under Section 201/201(1A), interest and penalty thereon.

"Nokia Finland shall be liable to pay taxes including penalty and interest due and payable by them as determined under the Income Tax Act," the bench said.

Directing Nokia to deposit a minimum of Rs 2,250 crore in an escrow account, the court said "details of which will be furnished to the IT department within one month of the agreement with Microsoft/Microsoft International.

"The amount of deposit will go up or increase upon higher consideration being received from Microsoft as per valuation report."

The court also clarified saying "Rs 2250 crore or the higher amount, which will be deposited in the escrow account, at the option of the respondents may not be adjusted or appropriated against tax demands including interest and penalty relating to TDS/order under Section 201/201(1A) or tax demands determined and payable by Nokia Finland...."

The court further said that in case of an adverse assessment or re-assessment order or tax demand being created against Nokia India under I-T Act, the demand will be paid from the escrow account.

"... subject to stay order, if any, against recovery of the said demand from appellate authority or Indian courts and in case Nokia India pays any amount, or is appropriated from the escrow account, and Nokia India subsequently succeeds, the amount will be refunded with interest in accordance with the provisions of the Act.

"Interest earned on the escrow account will be also included in the amount payable," the bench said. The court asked Nokia Corp to give an undertaking to the department which the bench will treat as a guarantee to it.

"Nokia Finland, in addition to the undertaking or letter of guarantee quoted above, will file another letter in the form of guarantee/undertaking incorporating the terms and conditions mentioned herein and file the said letter/undertaking with the income tax authorities...."

"This will be treated as undertaking to the court," the bench said adding "the letter/undertaking will clearly state that Nokia Finland will abide by clauses... and will cooperate in payment of tax dues payable... or dues payable by Nokia Finland."

The court also made it clear that Nokia Finland will not be liable to pay the tax dues of Nokia India, except to the extent permissible and recoverable under the provisions of the Income Tax Act.

".... However, in case the total amount due and payable by Nokia Finland ... is less than Rs 3,500 crore and Nokia India is unable to pay dues... Nokia Finland will be liable to pay tax dues of Nokia India upto but, not exceeding Rs 3500 crore.

"The amount has been fixed as dividend of Rs 3,500 crore stands paid by Nokia India to Nokia Finland....," it added. The bench said Microsoft will not be liable to pay tax dues of Nokia India and Nokia Finland, except when any amount due and payable as per the provisions of the Act.

The court also said Nokia will continue and pay Rs 700 crore in instalments following June 21, 2013 order and this amount has no co-relation with Rs 2250 crores or higher amount, which will be deposited in the escrow account.

Next: Nokia, Chennai plant workers welcome Delhi HC order

Nokia, Chennai plant workers welcome Delhi HC order

Chennai: Workers of Nokia plant near here welcomed the Delhi High Court order that defroze the assets of the Finnish firm in India, paving the way for their sale to Microsoft.

"We all are happy. It is a welcome relief...," Nokia India Employees Union President Saravana Kumar told PTI.

Asked about the further course of action, he said: "We are yet to see the verdict. We are having our Executive Committee meeting tomorrow and on Monday. In that meeting we will decide on the further course of action. Currently, it (the verdict) is a relief to us."

The plant in Sriperumbudur is one of the biggest factories for Nokia India. A Delhi High Court bench of justices Sanjiv Khanna and Sanjeev Sachdeva said: "We permit and allow sale of assets by Nokia India to Microsoft/Microsoft International."

Recently, the Nokia India Employees Union, representing the 8,000 workers with 20 per cent of them representing women, moved the Delhi High Court seeking safeguarding their interests in view of the company's ongoing legal battle with the Income Tax department over its tax liabilities.

Many clearances still left: Nokia

New Delhi: Buoyed by the Delhi High Court's decision, Finnish handset maker Nokia on Thursday said it will now start the planned transfer of its Indian assets to Microsoft, but said various statutory clearances are required before the hand-over.

Nokia had earlier pleaded before the high court for a direction to the Income Tax Department for lifting of the stay on transfer of assets in view of its USD 7.2 billion global deal with Microsoft, which was announced in September 2013.

"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," the company said in a statement.