New company to be formed with Air India, Indian merger

12 March 2007

New Delhi: The government is likely to form a 'new company' within a week of the merger of Air-India and Indian. The new company, into which the two carriers shall be merged, will be registered under the under the Companies Act of 1956. Out of the two legal route envisaged by the civil aviation ministry for the merger, the government has chosen the option of forming a new company under Sections 391 and 394 of the Companies Act.

Under this route, the ministry of company affairs will pass an order on an application filed by the board of directors of the two carriers, government sources said. Additionally, the government would require the two carriers to obtain approval of creditors - "majority" in number and representing at least 75 pc of credit in terms of value.

The other legal option that the civil aviation ministry had examined involves the central government passing an order, under Section 396 of the Companies Act, to merge the two companies in public interest. The second option requires the government to give "all" creditors of both carriers the 'right to object' to the merger. It also demanded the government to settle all their dues before executing the merger.

The Union Cabinet has given its nod for the merger on March 1 after the proposal was cleared last month by an empowered group of ministers (eGOM) headed by Pranab Mukherjee.

While the new company will be registered within the next week, the civil aviation ministry may require about 4 months to complete major legal and procedural formalities. However, the total integration process of two carriers may take about 2-3 years, sources said.