Allowed

Red Hat Software Services (India) Private Limited v. -

Bombay HC22 Aug 2014CSP/222/2014

Case brief

AI extract

What is this about?

The Bombay High Court sanctioned a Scheme of Amalgamation involving three Red Hat-related companies under Sections 391 to 394 of the Companies Act, 1956. The court accepted undertakings regarding accounting standards, tax compliance, FEMA regulations, and office modifications. Finding the scheme fair, reasonable, and compliant with law, the petitions were made absolute.

What did the court decide?

Company Scheme Petitions No. 222 and 223 of 2014 were made absolute. Petitioners directed to comply with stamp duty assessment and file the scheme with the Registrar of Companies.

Red Hat Software Services (India) Private Limited Vs - — Specific Performance | Bombay HC (2014)

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THE HIGH COURT OF JUDICATURE AT BOMBAY

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ORDINARY ORIGINAL CIVIL JURISDICTION

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COMPANY SCHEME PETITION NO 222 OF 2014 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO. 814 OF 2013.

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RED HAT SOFTWARE SERVICES INDIA PRIVATE LIMITED,

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....Petitioner/ First Transferor Company.

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WITH

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COMPANY SCHEME PETITION NO 223 OF 2014 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO. 813 OF 2013.

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RED HAT INDIA PRIVATE LIMITED ....Petitioner/ Transferee Company.

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In the matter of the Companies Act, 1 of 1956; AND

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In the matter of Sections 391 to 394 of the Companies Act, 1956; AND

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In the matter of Scheme of Amalgamation of Red Hat Software Services India Private Limited and Gluster Software India Private Limited with Red Hat India Private Limited and Their Respective Shareholders

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Called for hearing

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Mr. Rahul Oak, Advocate for the Petitioner

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Mr. S. Ramakantha, Official Liquidator, present in CSP No. 222 of 2014

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Mr. C. J. Joy i/b Dr. H.P.Chaturvedi for Regional Director in both Petitions.

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CORAM: S. J. Kathawalla, J. DATE : 22^nd August, 2014

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PC:

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Page 1 of 8

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Heard learned counsel for the parties. No objector has come before the court to oppose the Scheme and nor has any party controverted any averments made in the Petition.

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The sanction of the Court is sought to a Scheme of Amalgamation of Red Hat Software Services India Private Limited and Gluster Software India Private Limited with Red Hat India Private Limited and Their Respective Shareholders under Sections 391 to 394 of the Companies Act, 1956.

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Learned Counsel for the Petitioners states that the First Transferor Company is in business of providing support services to the worldwide customer base of the Red Hat Group and Second Transferor is in business of design and development of storage software and the Transferee Company is in business of distribution of Red Hat software solution and related training and consulting services. The proposed scheme of Amalgamation will have the benefit that the integration of the operations of the Transferor Companies and the Transferee Company would have the benefit of eliminating duplication of processes and structures resulting in cost savings and a single unified operating platform in India leading to better synergies and cost efficiencies and Centralizing the activities of the three companies is expected to lead to improvement in operational and cost efficiency through economies of scale, optimization of resources, expansion of asset base and a stronger balance sheet of the enlarged company, there would be less regulatory and legal compliance obligations including accounting, reporting

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Page 2 of 8

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requirements, statutory and internal audit requirements, tax filings, etc. and therefore reduction in administrative costs and The amalgamation would facilitate improvement in organizational capabilities arising from the pooling of human resources with diverse skills, talent and experience and The combined operations of the Transferor Companies and the Transferee Company are expected to give rise to capital efficiency and improved cash flows and Enhancing return on capital employed, earnings before interest, tax, depreciation and amortization and shareholder value .

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Transferor Companies and Transferee Company has approved the said Scheme of Amalgamation by passing the Board Resolutions which are annexed to the respective Company Scheme Petitions.

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The learned Advocate for the Petitioners further states that, Petitioner Companies have complied with all the directions passed in Company Summons for Directions and that the Company Scheme Petition have been filed in consonance with the orders passed in respective Company Summons for Directions.

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The learned counsel appearing on behalf of the Petitioners have stated that the Transferor Company and the Transferee Company have complied with all requirements as per directions of this Court and they have filed necessary Affidavits of compliance in the Court. Moreover, Petitioner Companies undertake to comply with all statutory requirements if any, as required under the Companies Act, 1956 / 2013 and rule made there under whichever is applicable. The said undertaking is accepted.

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Page 3 of 8

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The Official Liquidator has filed his report on 28^th July, 2014 in Company Scheme Petition No. 222 of 2014 stating that the affairs of the Transferor Company have been conducted in a proper manner and that the Transferor Company may be ordered to be dissolved.

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The Regional Director has filed an Affidavit on 30^th August, 2014 stating therein, save and except as stated in paragraph 6, it appears that the Scheme is not prejudicial to the interest of shareholders and public. In paragraph 6 of the said Affidavit, it is stated as under.

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‘6. That the Deponent further submits that:-

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(a) Clause 8.4 of the Scheme provides for accounting adjustments arising due to differences in Accounting Policies between Transferor companies and Transferee company. In this regard, it is submitted that Transferee company shall pass such accounting entries which are necessary in connection with Scheme to comply with other applicable Accounting Standard such as AS-5, etc.

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(b) It is respectfully submitted that the tax implication, if any, arising out of the Scheme is subject to final decision of Income Tax Authorities. The approval of the Scheme by this Hon'ble Court may not deter the Income Tax Authority to scrutinize the tax returns filed by the Transferee Company after giving effect to this scheme of amalgamation. The decision of the Income Tax Authority is binding on the Transferee Company.

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(c) The Registered office of Second Transferor Company is situated in the State of Karnataka. Hence, the present Scheme of Amalgamation between the Transferor and Transferee Company will be subject to the condition of obtaining similar approval from Hon'ble High Court of Karnataka in respect of Second Transferor Company.

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(d) The shares of the First Transferor company are held by foreign body corporate/ foreign shareholders/ non resident Page 4 of 8

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Indian. Hence, while giving effect to the scheme, by issuing shares by the Transferee Company to the shareholders of First Transferor Company, the Transferee company may be directed to comply with FEMA/RBI regulations as applicable in this regard.

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(e) Clause 15 of the Scheme provides for Modification of Scheme wherein the Board of Directors of the Transferor Companies and Transferee Company have been authorized to make any amendments to the Scheme, if necessary, after the Scheme is approved by the Hon'ble High Court. Such liberty shall not be exercised by the Board of Directors to without obtaining further approval from the Hon'ble High Court. The Transferor and Transferee Company shall be directed to undertake to this effect.

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So far as the observation in paragraph 6 (a) of the Affidavit of Regional Director is concerned, the Petitioner /Transferee Company through its counsel undertakes that in addition to compliance of Accounting Standard 14, the Transferee Company will pass such accounting entries which are necessary in connection with this Scheme to comply with any other Accounting Standards

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So far as the observation in paragraph 6(b) of the Affidavit of Regional Director is concerned, the Petitioner Companies are bound to comply with all applicable provision of Income Tax Act, and all tax issues arising out of Scheme will be met and answered in accordance with law.

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So far as the observation in paragraph 6 (c) of the Affidavit of Regional Director is concerned, the Petitioner /Transferee Company through its counsel undertakes that while giving effect to the scheme, by issuing shares by Transferee Company to the shareholders of Transferor Company,

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Page 5 of 8

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the companies will comply with FEMA/RBI regulations as applicable in this regard.

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So far as the observation in paragraph 6(d) of the Affidavit of Regional Director is concerned, Counsel for the Petitioner Companies states that The Registered office of Second Transferor Company is situated in the State of Karnataka and had filed Company Petition No 151 of 2013 before the said High Court for sanction of the proposed scheme and same is sanctioned vide Order dated 25 day of April 2014 passed in Company Petition No.151 of 2013.

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So far as the observation in paragraph 6(e) of the Affidavit of Regional Director is concerned, Counsel for the Petitioner Companies states that Clause 15 of the Scheme gives power to Board of Director of the Petitioner Companies to amend any part of the Scheme. The Learned Counsel for the Petitioner Companies on behalf of the Petitioner Company states power to the Board of Director with regard to clause 15 of the said Scheme will be subject to prior approval of the High Court. It is clarified that the power vested under clause 15 of the said Scheme will be subject to the approval of the High Court.

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The Learned Counsel for Regional Director on instructions of Mr. M. Chandana Muthu, Joint Director Legal in the office of the Regional Director, Ministry of Corporate Affairs, Western Region, Mumbai states that they are satisfied with the undertaking given by the Advocate for the

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Page 6 of 8

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Petitioner Companies. The undertaking given by the petitioner companies are accepted.

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From the material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy. Since all the requisite statutory compliances have been fulfilled, Company Scheme Petition No. 222 of 2014 and Company Scheme Petition No. 223 of 2014 are made absolute in terms of prayer clauses (a) to (c).

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The Petitioner Companies to lodge a copy of this order and the Scheme duly authenticated by the Company Registrar, High Court (O.S.), Bombay, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable, if any, on the same within 60 days from the date of the order.

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Petitioners are directed to file a copy of this order along with a copy of the Scheme of Amalgamation with the concerned Registrar of Companies, electronically, along with E-Form 21 or INC 28 in addition to physical copy as per the relevant provisions of the Companies Act, 1956/2013 whichever is applicable.

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The Petitioner Companies to pay costs of Rs.10,000/- each to the Regional Director, Western Region, Mumbai and the Petitioner in the Company Scheme Petition No. 223 of 2014 to pay costs of Rs.10,000/- each to the Official Liquidator, High Court, Bombay. Costs to be paid within four weeks from the date of the Order.

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Page 7 of 8

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Filing and issuance of the drawn up order is dispensed with.

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All concerned regulatory authorities to act on a copy of this order along with Scheme duly authenticated by the Company Registrar, High Court (O. S.), Bombay.

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(S. J. Kathawalla, J.)

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Page 8 of 8

Red Hat Software Services (India) Private Limited v. -

Case brief

What is this about?

What did the court decide?

Red Hat Software Services (India) Private Limited v. -

Case brief

What is this about?

What did the court decide?

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