THE HON'BLE SRI JUSTICE B.SESHASAYANA REDDY Company Petitions No.168 of 2010 17th August, 2011 Between :- Electronic Arts Games (India) Private Limited, Plot No.17, 7th floor, Vega Building, Software Units Layout, Hitech city, Madhapur, Hyderabad ..Petitioner THE HON'BLE SRI JUSTICE B.SESHASAYANA REDDY Company Petitions No.168 of 2010 ORDER:- This petition has been taken out by Electronic Arts Games (India) Private Limited under Section 394 read with 391 (2) of the Companies Act, 1956 read with Rule 79 of the Companies (Court) Rules, 1959 seeking sanction of the Scheme of Arrangement and Amalgamation. The petitioner Company - Electronic Arts Games (India) Private Limited (hereinafter referred to as ‘the Transferee Company”) was originally incorporated on 28-7-2004 under the provisions of the Companies Act, 1956 under the name and style of Jamdat Mobile (India) Private Limited w.e.f. 17-1-2007 and subsequently changed its name to Electronic Arts Games (India) Privae Limited on 12-5-2009. The registered Office of the Transferee Company is at Plot No.17, 7th floor, Vega Building, Software Units Layout, Hitech City, Madhapur, Hyderabad. The authorized capital of the Transferee Company is 11,25,000 equity shares of Rs.10/- each amounting to Rs.1,12,50,000/- . The Issued, Subscribed and Paid-up capital is 10,000 equity shares of Rs.10/- each amounting to Rs.1,00,000/-. The main objects of the Transferee Company as set out in the Memorandum of Articles of Association are to carry on the business of developing, publishing and distributing application software for video games on any platform such as personal computers, games consoles or wireless devices, games, ring tones and images and related activities, more fully described in para 5 of the Company Petition. M/s. EA Games India Private Limited (hereinafter referred to as “the Transferor Company”) was incorporated on 24-8-2006. The Authorised Share Capital of the Transferor Company is 50,000 equity shares of Rs.10/- each amounting to Rs.5,00,000/- and 22,00,000 5% Non-cumulative Preference Shares of Rs.10/- each amounting to Rs.2,20,00,000/-. The Issued, Subscribed and Paid-up Capital is 10,000 Equity Shares of Rs.10/- each amounting to Rs.1,00,000/- and 900,500 – 5% Non-cumulative Preference Shares of Rs.10/- each amounting to Rs.90,00,000/-. The objects of the Transferor Company as set out in the Memorandum of Articles of Association are to provide all kinds of marketing services inter alia including sales, promotion, advertising and channel partner management support and for this purpose to place advertisements, press releases, organize promotions and events, seminars, exhibitions, fairs and award prizes and other similar activities for customers and channel partners, more fully described in para 11 of the Company Petition. Under Scheme of Amalgamation, the Transferor Company is proposed to amalgamate or merge with the Transferee Company. The reasons for the proposed scheme of amalgamation are set out in detail in the scheme and are extracted in the Company Petition. It is stated that the amalgamation would enable the Amalgamated Company to carry on the combined business more economically and efficiently and will have the benefit of the combined reserves, manufacturing assets and cash flows of both the companies as both the companies belong to the same business group. The Board of Directors of the Transferor Company and the Transferee Company in their meetings held on 14-6-2010 and 15-6-2010 respectively approved the scheme subject to the approval of the shareholders and confirmation by this Court. The Transferee Company moved Company Application No.673 of 2010 to dispense with the meeting of the shareholders since the two shareholders have placed on record their affidavits stating no objection for the proposed scheme of amalgamation. The said application came to be allowed on 23-8- 2010. Similar application filed by the Transferor Company before the High Court of Delhi has been allowed. Hence, this petition seeking the relief stated supra. The petitioner has been directed to take out notice to the Regional Director, Ministry of Corporate Affairs, Chennai, and the Registrar of Companies, Andhra Pradesh, Hyderabad and General Notice of Publication in Business Standard (English Daily) of Hyderabad edition, and Andhra Bhoomi (Telugu Daily) came to be ordered on 15-9-2010. The petitioner carried out the publication and placed on record copies of the same.. The Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad, placed on record his affidavit. It is stated in the affidavit that the Transferor Company has sold its fixed assets as on 31-3-2009 and suspended its business activities w.e.f. 1-4-2009 and retrenched all its employees. It is also stated in the affidavit that there are no complaints against the affairs of the Transferee Company. The Transferor Company filed C.P.No.399 of 2010 before the High Court of Delhi. The said application is pending consideration. Para 12 of the affidavit needs to be noted and it reads thus:- “I further submit that as per information furnished in valuation report of the valuer, the Equity Shares Capital of the Transferor Company is held by Electronics Arts (India Holdings) Inc.Marutius and its nominee and said Electronics Arts (India Holdings) Inc. Martisus Limited is ultimately owned by EA Bermuda Partnership which eventually is 100% owned by Electronics Arts Inc. (A Delwara Corporation), USA. Similarly the paid up equity capital of Transferee Company (99.9%) is held by Electronics Arts (India Holdings) Inc. Marutius and M/s.Electronics Arts Asia Pacific private Limited (Singapore) (0.01%) and preference share capital (100%) is held by M/s.Electronics Arts (India Holdings) Inc Marutius and these companies are 100% owned by EA Bermuda Partnership which is ultimately 100% owned by Electronics Arts Inc. (A Delwara Corporation) USA. It is observed from the above, both the Transferor and Transferee companies are 100% subsidiaries of Foreign Body Corporate namely Electronics Arts Inc. (A Delwara Corporation) USA. Since Transferor Company has sold its all fixed assets as on 31-3- 2009 and suspended its business activities with effect from 1-4-2009, and this scenario the proposed scheme is only for consolidating the interest of ultimate holding Company of the petitioner Company.” The petitioner placed on record reply affidavit. It is stated in the reply affidavit that the Transferor Company has net current assets worth INR 13,566,541 including bank balance of INR 12,189,780, which, upon, merger, shall be transferred to the Transferee Company and thereby strengthening the financial position of the Transferee Company and hence resulting into additional funding for the business operations and expansion of the Transferee Company. It is also stated in the reply affidavit that the Valuation Reports have been approved by the Board of Directors and the Shareholders of the Transferor and Transferee companies that the Transferee Company accepted the claims of retrenched employees of the Transferor Company in the event of any such claims. Despite publication being carried out, no objections have been received from any quarter. Heard learned Counsel appearing for the petitioner and the learned Asst.Solicitor General representing the Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad. The Transferor Company is situated within the jurisdiction of High Court of Delhi. It appears the Transferor Company has filed Company Petition No.399 of 2010 before the High Court of Delhi seeking approval of the Scheme of Arrangement and Amalgamation. As seen from the material placed on record, the Transferor Company has net current assets worth INR 13,566,541 including bank balance of INR 12,189,780 as on this day. By virtue of this sceheme of Arrangement and Amalgamation, the bank balance of the Transferor Company shall stand transferred to the Transferee Company. It is stated that the transfer of funds from the Transferor Company to the Transferee Company shall financially strengthens the Transferee Company. Since all the statutory requirements have been complied with, I do not see any impediment in sanctioning the Scheme of Arrangement and Amalgamation subject to the Transferor Company getting similar approval from the High Court of Delhi. Accordingly, the Company Petition is allowed. The parties to the scheme of Arrangement and Amalgamation or other persons interested shall be at liberty to apply for any directions that may be necessary in regard to the working of the Scheme of Arrangement and Amalgamation. The petitioner Company to lodge an authenticated copy of the scheme and copy of this order with the Registrar of Companies within 60 days from the date of the order. The petitioner company shall pay a sum of Rs.10,000/- (Rs.Ten thousand only) to the Regional Director, Ministry of Corporate Affairs, South East Region, Hyderabad. _________________________ B.Seshasayana Reddy, J 17th August, 2011 smr