Published On: December 8th 2025
Authored By: Aishwarya R
Christ University Institute of Law
INTRODUCTION:
One of the most revolutionary tools for business expansion and reorganization is mergers and acquisitions (M&A). Acquisitions usually refer to the purchase of a controlling interest in another company, whereas mergers involve the combination of two or more entities into one. Businesses can obtain economies of scale, gain access to new technologies, enter international markets, and improve their overall competitiveness through M&A transactions in today’s globalized economy. However, despite their potential for economic gain, these kinds of transactions are always fraught with legal and regulatory complications. Numerous levels of corporate, securities, competition, foreign exchange, tax, and labor laws must be navigated. The main difficulty is striking a balance between businesses’ financial goals and the legal protections required to keep consumers, employees, creditors, and shareholders safe.
This study takes a novel approach by integrating policy critique, critical engagement with case law, comparative perspectives from the US and EU, and doctrinal analysis of Indian laws. The goal is to show how M&A law serves as an essential defender of justice, equity, and the public interest in addition to being a technical enabler of business transactions.
THEORETICAL FOUNDATIONS OF M&A REGULATION:
Two opposing schools of thought have historically influenced M&A regulation. In line with the Chicago School of Economics, the economic efficiency school promotes little government involvement and contends that mergers are primarily market-driven events that ought to be left to corporate judgment. The public interest school, on the other hand, places a strong emphasis on the necessity of rigorous legal oversight in order to stop consumer welfare from being eroded, economic power from being concentrated, and exploitation from occurring.
Indian law falls somewhere between the two schools. On the one hand, M&A has been promoted as a means of industrial growth by liberalization policies since the 1990s.
On the other hand, regulators such as the Securities and Exchange Board of India (SEBI), the Competition Commission of India (CCI), and the National Company Law Tribunal (NCLT) impose strict checks to protect shareholders, creditors, and the competitive fabric of the market.
LEGAL FRAMEWORK IN INDIA:
The framework for agreements, compromises, and mergers is outlined in the Companies Act of 2013, specifically Sections 230–240. In order to ensure equity in valuation, swap ratios, and creditor protection, mergers must receive NCLT approval. The Supreme Court emphasized judicial deference to business wisdom in Miheer H. Mafatlal v. Mafatlal Industries Ltd., (1997) 1 SCC 579, by ruling that courts should not impede a merger plan unless it is “patently unfair”.
Acquisitions of shares above specified thresholds are governed by the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, also referred to as the Takeover Code. To safeguard minority shareholders and maintain transparency, they require open offers. In order to prevent insider trading, SEBI’s Listing Obligations and Disclosure Requirements (LODR) further require listed companies to disclose information pertaining to mergers.
The Competition Act of 2002 gives the CCI the authority to examine combinations that might have a “significantly negative impact on competition.” For example, the CCI considered concerns regarding e-commerce dominance in the Walmart–Flipkart acquisition (CCI Combination Reg. No. C-2018/05/571) but ultimately approved the deal with conditions.
The Foreign Exchange Management Act (FEMA), 1999, must be followed in cross-border transactions. Under India’s FDI policy, the Reserve Bank of India (RBI) is in charge of sectoral caps and makes sure that reporting and pricing guidelines are followed. M&A is also influenced by tax considerations under the Income Tax Act of 1961, which grants tax neutrality to certain mergers as long as certain requirements are fulfilled.
GLOBAL REGULATORY PERSPECTIVES:
The Clayton Act of 1914 and the Sherman Antitrust Act of 1890 both examine M&A in the US. Mergers that could reduce competition are blocked by the Department of Justice (DOJ) and the Federal Trade Commission (FTC). The United States v. Microsoft Corp. case, 253 F.3d 34 (D.C. Cir. 2001), serves as an example of how antitrust law influenced the technology industry by establishing limits on monopolistic behavior.
The EU Merger Regulation (Council Regulation (EC) No. 139/2004) is the regulatory tool used by the European Union. Although US authorities had approved the merger of General Electric and Honeywell in GE/Honeywell (Case No. COMP/M.2220, 2001), the European Commission blocked it. This discrepancy demonstrates how the EU prioritizes maintaining market structure over merely increasing efficiency.
Although India struggles with consistent enforcement, it does borrow elements from both systems. India tries a hybrid approach, though there are still practical issues, in contrast to the US, which places a higher priority on consumer welfare, and the EU, which concentrates on preserving competition structure.
LEGAL AND REGULATORY CHALLENGES:
Competition scrutiny is one of the biggest obstacles. Big mergers run the risk of establishing monopolies. The Walmart–Flipkart case in India brought attention to issues with discriminatory e-commerce practices and predatory pricing. Although the merger was eventually approved by the CCI, the case highlighted the conflict between promoting foreign investment and avoiding market dominance.
Protecting minority shareholders is still a problem. SEBI questioned the fairness of valuation in the Reliance–Reliance Petroleum merger in Reliance Industries Ltd. v. SEBI, (2002) 4 SCC 146, emphasizing the necessity of thorough disclosure and independent evaluations. Although open offers offer some relief, disagreements over valuation continue.
Uncertainty across borders is a persistent problem. An important case is Vodafone International Holdings B.V. v. Union of India, (2012) 6 SCC 613. After acquiring Hutchison’s share in an Indian telecom business, Vodafone was held liable by India’s retroactively changed tax regulations. In the end, India lost the arbitration under the India-Netherlands Bilateral Investment Treaty. This instance demonstrates how investor trust in cross-border M&A is weakened by retrospective taxation.
M&A is further complicated by labour difficulties. Concerns over job stability were highlighted by the 2013 Jet Airways–Etihad transaction because workers were afraid of widespread rationalization. Although Indian labour rules, such as the Industrial Disputes Act, 1947, offer compensation, they do not guarantee that workers in a merger would have a smooth transition.
Another issue is regulatory delays. Time-sensitive transactions are slowed down by the frequent overlap of NCLT, SEBI, RBI, and CCI approvals. In order to overcome these inefficiencies, academics propose a “single-window clearance” approach.
Lastly, disagreements over valuation often end up in court. The Supreme Court acknowledged the importance of expert valuers in Miheer H. Mafatlal (above), but it also allowed for judicial intervention in situations where there was obvious injustice. This equilibrium aims to safeguard investors while honoring business expertise.
CASE STUDY: VODAFONE–IDEA MERGER:
The 2018 Vodafone–Idea merger is a prime example of India’s regulatory difficulties. Vodafone India and Idea Cellular merged to form the biggest telecom operator in response to pressure from Reliance Jio. After considering how the merger would affect telecom competition, the CCI approved it under specific restrictions. To ensure transparency, SEBI and NCLT carefully examined disclosures and swap ratios. However, the combined company was crippled by the Department of Telecommunications’ huge liabilities pertaining to adjusted gross revenue (AGR) dues.
Three important lessons are illustrated by this case. First, because different agencies impose overlapping obligations, regulatory multiplicity breeds ambiguity. Second, decision-making is fragmented since sectoral regulators like the DoT frequently function independently of the CCI or SEBI. Third, due diligence must anticipate contingent liabilities, not just existing obligations, as failure to account for AGR dues nearly bankrupted the merged entity.
CONCLUSION:
In addition to being financial transactions, mergers and acquisitions are also legally significant events that change markets, industries, and societies. By requiring regulators to balance economic efficiency with justice, openness, and the public interest, they push the limits of the law. Indian law has changed significantly as a result of the Companies Act, SEBI rules, and the CCI. However, there are still issues with labor, cross-border uncertainty, valuation disputes, and fragmentation.
Potential avenues are highlighted by comparative analysis from the US and the EU. India needs to strike its own balance between the US’s emphasis on consumer welfare and the EU’s focus on competition framework. Addressing mergers in the digital economy, bolstering shareholder remedies, standardizing clearance procedures, and guaranteeing predictability in cross-border transactions are key components of Indian M&A regulation’s future.
REFERENCES:
- Gower & Davies, Principles of Modern Company Law (10th ed. 2016).
- Avtar Singh, Company Law (17th ed. 2021).
- Umakanth Varottil, “The Evolution of Takeover Regulation in India: A Comparative Perspective,” 7 J. Bus. L. 493 (2015).
- Richard Whish & David Bailey, Competition Law (9th ed. 2018).
- Jonathan R. Macey, Mergers and Acquisitions: Law, Theory, and Practice (2004).
- Eleanor M. Fox, “The Efficiency Paradox in Antitrust,” 30 Antitrust Bull. 593 (1985).
- Arpita Mukherjee & Tanu M. Goyal, “FDI in Retail: Issues and Concerns in India,” Indian Council for Research on International Economic Relations (ICRIER) Working Paper No. 242 (2009).
