NCLT Chennai Sanctions Merger Of Encore IT Services Solution With Sonata Software

The Chennai Bench of the National Company Law Tribunal (NCLT) on 5 June approved the amalgamation of Encore I.T Services Solution Private Limited with its holding company Sonata Software Limited, holding that the scheme did not prejudice the interests of the companies' members.

Judicial Member Jyoti Kumar Tripathi and Technical Member Ravichandran Ramasamy allowed a joint company petition seeking sanction of the Scheme of Amalgamation. It observed:

“This Tribunal is of the view that the scheme as contemplated by the Petitioner companies seems to be prima facie not, in any way detrimental to the interest of the members of the Companies.”

The Tribunal recorded that Encore, a wholly owned subsidiary of Sonata, would merge with Sonata to streamline the corporate structure, reduce administrative costs, eliminate multiplicity of compliances, and improve operational efficiency through business synergies.

It also noted that, by its order dated 5 March 2025, it had dispensed with meetings of shareholders and creditors and directed the convening of meetings of unsecured creditors of Sonata.

The Bench issued notices to the Regional Director, Official Liquidator, Income Tax Department, and other regulatory authorities. The Regional Director and Official Liquidator raised observations regarding the appointed date, employee protection, and compliance requirements but did not object to the scheme. The Income Tax Department pointed to pending tax demands against Encore while clarifying that such liabilities would devolve upon Sonata and that approval of the scheme would not prejudice pending tax proceedings.

It found no material objection from statutory authorities and sanctioned the scheme of amalgamation. It clarified that the approval would not amount to exemption from stamp duty, taxes, or other statutory dues, or from compliance with any other legal requirements. It observed:

“….this order should not be construed as an order in any way granting exemption from payment of stamp duty, taxes or any other charges, if any, payment is due or required in accordance with law or in respect to any permission/ compliance with any other requirement which may be specifically required under any law”

Accordingly, the NCLT allowed the application and approved the amalgamation.

For Petitioner: Advocate Parameshwar G Bhat

For Income Tax Department: Advocate Raj Jhabakh

For Official Liquidator: Advocate B. Palani

For Regional Director: Advocate Avinash Krishnan Ravi