SC tosses Nokia appeal on asset transfers to Microsoft

Asks it to give a Rs 3,500-cr guarantee before it transfers its Chennai plant, other assets

The Supreme Court (SC) on Friday ordered Nokia to give a Rs 3,500-crore guarantee before it transferred one of its biggest mobile phone plants and other assets in the country to Microsoft.

The ruling upheld a high court verdict here on the plant in Chennai, the subject of a tax dispute, that had been challenged by the Finnish company.

Meanwhile, Nokia said it was disappointed. "On Friday, the SC declined to hear an appeal by Nokia on how its assets could be unfrozen and transferred to Microsoft. The decision means the case reverts to the February 5 Delhi high court ruling on the asset transfer. Nokia is disappointed by the decision. The company strongly believes its offer to the tax department is fair for all sides, allowing employees and assets to transfer to Microsoft while providing the necessary financial guarantees. Nokia regrets the anxiety this extended legal process has caused its employees. Nokia will now consider its next steps. It will not comment further at this point."

The court dismissed the appeal, as the judges were not satisfied with the proposal by the mobile maker and its response to their queries.

The judges suggested the company and the revenue authorities come to some workable plan in the interest of all parties. The tax demand of Rs 20,000 crore has stalled the transfer of the Chennai unit of the company to Microsoft.

The court had on Thursday asked the Indian subsidiary of the Finnish corporation to provide the valuation of its Indian assets. The company counsel produced a document, in which Nokia put the estimate at Rs 2,432 crore. Contrary to the judges' demand the estimate be authentic, evaluated by some independent authority, the company produced its own figure. The bench headed said it was of no use.

After hearing the Nokia counsel for some time, the judges observed: "You have not said anything all this time." Solicitor-General Mohan Parasaran also filed there was no proposal and the court was wasting its time by hearing the same arguments all over again. He said the tax demand was more than Rs 10,000 crore without interest and penalty. The company has repatriated Rs 3,500 crore after the demand was made. In 18 years, the company has paid only a paltry amount in tax for some years and no dividend. The judges observed there was something fishy there.

The high court, in its December order, had allowed the sale of Indian assets after imposing certain conditions, opposed by Nokia. Apart from depositing the tax dues in an escrow account, the order asked Nokia Finland to  be bound by the statement that they shall be jointly liable and shall pay tax demand determined under the Indian Act with interest and penalty.

The counsel for Nokia said valuation depended on what the value would be one year from now. By then, any expert report would be a "scrap of paper", Vikas Srivastava said. He submitted that the parent company could not give a bank guarantee on behalf of the Indian arm as demanded by the high court. Microsoft is giving the best offer and if the revenue authorities attach and sell the assets for a better price, they are welcome to do it. He added that no one will benefit if the Chennai unit is closed down because the company cannot pay the amount demanded by the tax authorities.