Subsidiary status requires statutory shareholding or board-control conditions; financial support and business arrangements alone cannot establish the relationship.

A subsidiary relationship under Section 4(1) of the Companies Act, 1956 required the prescribed shareholding relationship or independent power to control the composition of the board. Educomp held no shares in ESSPL, all of whose shares were held by two individuals, and no material showed that Educomp could appoint or remove all or a majority of ESSPL's directors. Financial support, business arrangements and guarantees could not replace these statutory requirements. The Companies Act, 2013 definition of control was inapplicable to the relevant period. ESSPL was therefore not Educomp's subsidiary, and related-party transaction allegations based on the contrary finding could not stand.

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Issues: Whether ESSPL was a subsidiary of Educomp for the relevant financial years under Section 4(1) of the Companies Act, 1956.

Analysis: A subsidiary relationship under the applicable statutory framework required satisfaction of the prescribed conditions, including control over the composition of the board or the requisite shareholding relationship. Educomp held no shares in ESSPL, whose entire shareholding was held by two individuals. No material established that Educomp had the independent power to appoint or remove all or a majority of ESSPL's directors. Financial support, business arrangements and guarantees could not substitute the express statutory requirements. The definition of control under the Companies Act, 2013 was irrelevant to the period in question.

Conclusion: ESSPL was not a subsidiary of Educomp; the finding to the contrary and the consequential allegations concerning related party transactions could not be sustained.

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