M/s. E2Open Software India Private Limited Vs

Ajay Kumar Vatsavayi, Member (Judicial)

This  is  a  second  motion  petition filed  by  M/s.  E2Open  Software  India Private Limited ( for brevity, the "Petitioner/ Transferee Company"), under Sections 230 and 232 of the Companies Act, 2013 (for short to be referred hereinafter  as  the   'Act')   and  in  terms  of  Rule 15   of  the  Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (for brevity, 'Rules') by inter alia seeking for the sanction of Scheme of Amalgamation (for  brevity   'Scheme')   of  Steelwedge  Technologies  Private   Limited (First Transferor Company), Entomo Technologies India Private Limited (Second Transferor  Company)  and  Amber  Road  Software  Private  Limited  (Third Transferor  Company)  with  E2Open  Software  India Private  Limited (Transferee Company).

The petitioner company filed First Motion Application bearing CA (CAA) No. 50/BB/2020 before this Tribunal seeking for the dispensation of meeting of Equity Shareholders,  Secured and Unsecured Creditors of the Petitioner/ Transferee Company. Based on such application moved under section 230-232 of the Companies Act, 2013 necessary directions were issued vide order dated 16.12.2020. Details of the First Motion order are as under:

Company

Equity Share Holder Meeting

Secured

Creditors

Unsecured

Creditors

Transferee Company

Dispensed (Consent Obtained)

Nil

Nil

Further, the Petitioner Company was also directed to issue paper notification one in English Language "The Hindu"  and one in vernacular

language "Udayavani" about the dispensation of the meeting within a period of ten days from the date of receipt of the order.  Pursuant to the same, the notice was carried out in The Hindu' and `Udayavani' on 26.01.2021 about the dispensation of the meeting.  The original copies of newspaper are attached as Annexure I of the Petition.

When the Petition was listed on 25.09.2021, the following directions were issued:-

"Admit and Issue Notice. Registry is directed to prepare notice on all the Statutory  Authorities   viz.,.   The   Regional   Director (SER)  Hyderabad, Registrar  of  Companies,   Karnataka, The  Principal   Commissioner  of Income Tax,   Reserve Bank of India, The office of Official Liquidator; and the Competition Commission of India and the Petitioner is also permitted to take notice to all the Statutory Authorities along with material papers and Company petition personally and as well as by Speed Post.  The Petitioner is also directed to cause paper publication in  "The Financial Express" English Daily and "Udayavani" Kannada daily and to file proof of service  in  the  registry  well  before  the  next  date  of hearing.  The Petitioner is  also  directed  to file  reply  affidavit  to  the  observation  of aforesaid Statutory Authorities, if any, well before the next date of hearing with a copy served on the respective authority.

List the case on 13.11.2021."

In pursuant to the aforesaid notice, the Petitioner Company has filed copies of proof of service of notice vide diary No.  2999 dated  11.11.2021, to the aforesaid authorities i.e., The Reginal Director, Ministry of Corporate Affairs, Registrar  of  Companies,  Income  Tax  Department,  The  Principal Commissioner of Income Tax, Reserve Bank of India, Office of the Official Liquidator.

The  main  objects,  date of incorporation,  authorised,  issued and paid-up share capital, rationale of the Scheme and interest of employees have been discussed in detail in order disposing of the First Motion Application on 16.12.2020.

The   Board Resolution   of   the   Petitioner   Company   dated  03.03.2020 approving the Scheme is annexed as Annexure K of the Petition.

It is  further  submitted that the  Certificate  of Statutory Auditors  of the Petitioner Company has been placed as Annexure - J of the petition, stating that the accounting treatment contained in Clause 6.3 of Section 4 of Part B, is in compliance with the provisions of the Section 133 of the Companies Act, 2013, the   Companies (Accounting   Standards) Rules, 2006,   the Companies (Accounting Standards) Amendment Rules 2016 as Applicable on amalgamation and other generally accepted accounting principles. The aforesaid  certificate dated  05.01.2021  is  attached  as Annexure-J  of the Petition.

The  true  copy of the  Audited  Financial  Statements  for  the year  ended 31.03.2020  of Transferee  Company  is  attached  as  Annexure  B  to  the Petition.

As per the Scheme, the Appointed Date shall mean 01st April 2019, unless the First, Second and Third Transferor Company agree and the Transferee Company agree to any other date and approved by the National Company Law Tribunal. The effective date, as stated in the Scheme is as below:-

"Effective Date means the last of the dates on which the conditions referred to  in Clause  12.1  of Part C of the Scheme occurs,  unless waived by the Board of Directors of the Transferee Company."

On 14.03.2022, we have heard the learned Counsel for Petitioner Company, Counsel for the ROC and RD and Counsel for the IT.

a.  The  Transferee   Company  is  a  subsidiary  of  Serus  Corporation,   a Foreign  Company  holding  51.35%  of Share  capital.  The  remaining snares are neict by two Foreign Body Corporates, USA. The Ultimate Holding Company of Transferee Company is E2 Open LLC, a Foreign Body Corporate.  Hence,  the Transferee company is fully owned and controlled by 3 foreign entities

b. Transferor companies Nos. 1, 2 and 3 are wholly owned subsidiaries of  Visualbeeb  Inc,   Entomo  Inc,  Amber  Road  Inc  respectively.   Hence, Transferee   Company   needs   to   comply   applicable   FEMA   and   RBI Regulations while issuing fresh shares as per the Scheme.

c.  The Appointed date for the purpose of section 232(6) of the Companies Act, 2013 is 01/04/2019 which is very old and should be amended to a latest date.

d. The Transferor Companies and Transferee Company has not provided  supplementary accounting statement as required under Section 232(2)(e) of the Companies Act, 2013 since its last annual accounts are more than   6   months   before   the   first  meeting  held   for  the   purpose  of sanctioning the scheme.

e.  The Transferor Company No.1 has granted intercorporate loan of Rs.4 crores to the Transferee Company. However, the scheme is silent about accounting treatment for the same in the Transferee Company. Hence, detailed  clarification in this  regard be  furnished  before the  Hon'ble NCLT.

f.  The Transferor Company No. 3 has an outstanding amount of Rs.11.87 crore due  to its holding company,  Amber Road Inc.  the accounting treatment of the same in Transferee Company need to be explained as to whether it will be written off or any provision was made for the same before the Hon'ble NCLT.

g. The Transferee Company shall absorb all the statutory dues payable by Transferor  Companies 1, 2  and  3  post  amalgamation.  Hence,  the Transferee   Company  shall   furnish   an  undertaking  to  absorb  the statutory dues payable by Transferor Companies before the Hon'blc NCLT. P,111 n. Inc transferor Companies and the Transferee Company have Related  Party Transactions. Hence, an undertaking with regard to compliance of Section 188 of the Companies Act, 2013 be furnished before NCLT.

i.  Clause 6 of the Scheme provides for Clubbing of Authorised Capital  wherein it is stated that the authorized share capital of the Transferee Company shall automatically stand increased without any payment of stamp duty and fees. This term in the Scheme is not in line with the provisions  of Section  232(3)(i)  of the  Companies Act,  2013.  In this regard, the Transferee Company shall furnish an undertaking to pay the differential fee after setting of the fee already paid by the Transferor Companies.

In  response  to  the  report  of ROC  86  RD,   the  learned  Counsel  for  the Transferee company have filed  a separate reply affidavit vide Diary No.720 dated 28.02.2022 and submitted as follows:-

Reply to point 2(b) of report:  It is submitted that the Transferee Company shall do necessary compliance under the Foreign Exchange Management Act,   1999/RBI  regulations  for  issue  of shares  to  the shareholders of First and Second Transferor Companies.

Reply to point 2(c) of report: It is submitted that appointed date is significantly antedated beyond a year from the date of filing application due to Covid  19  Outbreak and lockdowns declared by Central and State Governments.  Pursuant to the General Circular No.  09/2019 dated on 21st August, 2019, the justification for the same is provided and its hereby confirmed that the Merger of First Transferor Company, Second  Transferor  Company  and  Third  Transferor  Company  with Transferee Company is not against the public interest or Stakeholders.

Reply  to  point  2(d)  of report:  It is  submitted  that the  copies  of supplementary  accounting  statement  of Transferor  and  Transferee Companies for the period from 01 April 2019 to 15th March 2020 have been duly submitted to this Hon'ble Tribunal along with application fied for dispensation of shareholders and creditors Meetings as per the provisions of Section 232 (2)(e) of the Companies Act, 2013. The copies of supplementary accounting statement will be submitted to the office of Registrar of Companies for records.

Reply to point 2(e) of report: It is submitted that Point No. 6.3.1 (e)   of Scheme of Amalgamation provided the below Accounting Treatment with respect to inter-company balances and loans: "the amount of any inter-company   balances   and  loans  or  advances  between  the  First Transferor Company, Second Transferor Company and Third Transferor Company and the Transferee Company, if any, investment in the shares of the First Transferor Company, Second Transferor Company and Third Transferor Company appearing in the books of Transferee Company, shall stand cancelled without any further act or deed, upon the Scheme coming into effect and the amounts so cancelled shall not be recorded in the  books  of account of the  Transferee  Company".  Hence,  the  loan amount of Rs.4 Crore will be cancelled from the books of Transferor Company.

Reply to point 2(f) of report:  It is submitted  that the outstanding  amount of INR Rs.11.87 crore will be transferred to books of Transferee Company pursuant to scheme of Amalgamation.

Reply to point 2(g) of report:  It is submitted that the Transferee Company shall absorb all the statutory dues payable by Transferor Companies 1, 2 and 3 post amalgamation.

Reply to point 2(h) of Report: It is submitted that the provisions of Section 188 of the Companies Act, 2013 with respect to related party transaction have been duly complied by Transferor Companies and Transferee Company.

Reply to point 2(i) of Report: It is submitted that the Transferee will pay the differential fees, if any after clubbing of authorized capital of the first & seconc1 Transferor Companies.

The reports of the Roc, RD, OL and IT are taken on record. Similarly, reply filed by the petitioner company to the Common report of RD and RoC vide diary No.720 dated 28.02.2022 are taken on record.

In  view  of  the  above  discussion,  we  conclude  that  the objections/observations to the Scheme received from RD &, ROC have been adequately   replied   by   the   petitioner  company  and   hence   there   is  no impediment in approval of the Scheme.

The  Scheme in question as annexed at Annexure-F is approved and we hereby declare that the same is to be binding on all the shareholders and creditors  of the  Petitioner  Company.  While  approving  the  Scheme,  it is clarified that this order should not be construed as an order in anyway granting exemption from payment of any stamp duty, taxes, or any other charges, if any, and payment in accordance with law or in respect of any permission/compliance with any other requirement which may be specifically required under any law.

AND THIS TRIBUNAL DOES FURTHER ORDER:

(i)   That the Petitioner Company do, within 30 days after the date of receipt  of this Order, cause a certified copy of this Order to be delivered to the Registrar  of Companies,  Karnataka for registration.  The  concerned Registrar  of  Companies  shall  place  all  documents  relating  to  the Transferor Companies registered with him on the file relating to the said  Transferee  Company  and  the  files  relating  to  Transferor  and Transferee Companies shall be consolidated accordingly, as the case may be; and

(ii)   That the Transferee Company shall deposit an amount of Rs.75,000/- with the Pay 86 Accounts Office, Chennai in respect of the Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad and Rs.25,000/- in favour of The Prime Minister's National Relief Fund, within a period of four  weeks from the date of receipt of certified copy of this Order; and

(ii)  That any person interested shall be at liberty to apply this Tribunal in the above matter for any directions that may be necessary.

(iii) The approval /sanctioning of the Scheme shall not be construed as an exemption from any of the provisions under. the Income Tax Act, 1961 or the Companies Act, 2013 and that the authorities under both the Acts, are at liberty to take appropriate action, in accordance with law, if so advised.

As   per   the   directions, Form   No.CAA-7   of   Companies  (Compromises, Arrangements and Amalgamations) Rules, 2016, formal orders be issued on the Petitioner Company on filing of the Schedule Property i.e., (i) freehold property of the Transferor Companies  and  (ii)  leasehold  property of the Transferor  Companies  by way  of affidavit  of the  Transferor  Companies respectively.

Accordingly, CP (CAA) No.34/BB/2021, is disposed of. Copy of this Order be communicated to the Counsel for the Petitioner Company.