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Court order may delay transfer of Nokia's India assets to Microsoft. Reuters

India's highest court has ordered Nokia to give a $572m guarantee before it transfers one of its largest mobile phone factories and other Indian assets to Microsoft.

Nokia is selling its mobile phones business to Microsoft and the €5.4bn (£4.5bn, $7.5bn) deal is expected to conclude this month. Nokia was hoping to transfer all its Indian assets, including its mega 8000-staff Chennai factory, to Microsoft by then.

Nokia has become embroiled in a tax dispute with Indian tax authorities. It had agreed to put away 22.5bn rupees in an escrow account while it contests the claims in Delhi's High Court.

Now the Supreme Court has ordered the Finnish phone maker to present an additional 35bn rupees ($572m, £345m, €412m) guarantee.

Chennai Factory

The Chennai plant is one of Nokia's biggest phone-making units.

If the plant is not allowed to be transferred, Nokia could run it as a contractor to Microsoft for a short while, the Finnish firm's lawyers have said in court.

Nokia was served with a tax demand of about 20.8bn rupees last March. Including the anticipated liability, interest and penalty, the bill could hover at 210bn rupees, a lawyer representing the tax office said in December.

Nokia, which is looking to shift its focus to network equipment, is not the only foreign firm battling tax demands in India.

Britain's Vodafone, IBM, Royal Dutch Shell and Cadbury have been targeted in a clampdown on perceived tax evasion by overseas companies.