MS NokiaNokia has informed that it will suspend handset production at Chennai plant from November 1, as Microsoft has decided to terminate the service agreement signed earlier at the time of deal-closure between Nokia and Microsoft. This service agreement envisaged Microsoft continuing with orders for its low-end handsets to be manufactured by new Nokia, as the plant was not transferred to Microsoft, due to asset-freeze imposed by Supreme court over tax-issues.

“Microsoft has informed Nokia that it will be terminating the manufacturing services defined in the agreement with effect from 1 November 2014. In absence of further orders from Microsoft, Nokia will suspend handset production at the Sriperumbudur facility from 1st November,” Nokia said in a statement.

“Unfortunately, the continuing asset freeze imposed by the tax department prevents Nokia from exploring potential opportunities for the transfer of the factory to a successor to support the long term viability of the established, fully functional electronics manufacturing ecosystem,” the statement said.

Nokia said that it will be informing all stakeholders including the Labour Commissioner of the suspension.

“As a responsible employer, Nokia is currently evaluating options to minimize the impact on existing employees at the manufacturing facility. It will share further information once details have been finalized,” Nokia said.

Nokia had offered VRS to employees back in March, with about 5000 out of 6,600 permanent employees already opting for it. Microsoft recently decided to kill Nokia X, Asha and Nokia Feature Phones as part of its major restructuring post Nokia-Microsoft deal closure.