Kapoor said Merchant, who had 50 "good films" under his belt in a career spanning four decades as director and producer, was simply "amazing".
He related how Merchant, who died in May, held back the making of his film "In Custody" because he (Kapoor) wasn't willing to accept one of the main roles.
"I was reluctant because I did not know Urdu," Kapoor said Sunday, noting that Merchant was one director who just could not take no from an actor.
"Be it me, Paul Newman or anyone else, Merchant wouldn't take 'no' for an answer," Kapoor said, fondly remembering Merchant who he described as his "friend for 40 years".
Besides Shashi Kapoor's words, a greater tribute was paid to Merchant at the IFFI - a packed house watched the screening of "In Custody", the first of five of Merchant's films to be screened at the festival.
Merchant, born in Mumbai in December 1936, shot to fame in 1961 when his film "The Creation Of Woman" earned a nomination for an Academy award and was also the official entry from the US at the Cannes Film Festival the same year.
On the way to that festival, Merchant met James Ivory and they decided to form a partnership - Merchant Ivory Productions.
Besides "In Custody", the four other Merchant Ivory productions being screened at IFFI are "Howard's End", "Heat And Dust", "A Room With A View" and "The Golden Bowl".
Besides Merchant, IFFI this year is also paying tribute to late actor-turned-politician Sunil Dutt by screening his 1963 milestone movie "Mujhe Jeene Dho". Veteran Tamil actor Gemini Ganesan too is being honoured posthumously.