Published On: December 16th 2025
Authored By: Tannu Mishra
Gopaldas Jhamatmal Advani Law College, Mumbai
ABSTRACT
In India, corporate governance is more than a compliance checklist; it requires an active interplay of law, ethics, and accountability. This article examines its development from colonial statutes to contemporary reforms, with a focus on the Companies Act of 2013 and the recent regulatory instruments of SEBI. The article analyses the compliance of corporate governance goals of transparency, board independence, and the trust of investors, while constantly confronting challenges associated with, among other things, promoter dominance and weak enforcement. Through well-known Indian case studies of corporate governance failures, it indicates that even the most eminent corporations face issues, and reform requires more than statutory legislation. This article is ultimately a legal analysis to mark a shift in corporate governance mechanisms as a living system reliant on moral leaders, stakeholders, and adaptation as and when required. Finally, it proposes that Indian corporates should embrace adherence to laws as an essential practice instead of viewing it as only a compliance practice.
KEYWORDS: Corporate Governance, Board Independence, Promoter Dominance, Transparency Norms.
INTRODUCTION
The phrase “corporate governance” implies transparency and integrity in governance systems across business entities, whether in the private or public sector. It is defined as the set of principles, ethics, values, morals, rules, and regulations to govern a corporate entity. It establishes a framework through which corporate entities are guided and controlled, ensuring responsibility, fairness, and transparency in their engagements with stakeholders, including shareholders, employees, customers, etc. Corporate governance entrusts directors and senior management with duties concerning the strategic direction and operational oversight of the company’s affairs. This includes setting corporate objectives, observing performance, managing risks, and protecting the interests of shareholders.
This article will explore the multidimensional landscape of corporate governance in India by tracing its historical evolution from colonial-era company laws to modern regulatory frameworks. It will also examine the statutory laws comprising the Companies Act, SEBI rules, and the government-initiated schemes. Key issues, such as promoter dominance, the absence of board independence, and difficulties in imposition, are analyzed to highlight systemic gaps. Through selected case studies, the article also illustrates the inconsistencies present in India’s corporate governance system.
EVOLUTION OF CORPORATE GOVERNANCE IN INDIA
The evolution of India’s corporate governance reflects a trajectory from colonial legislation to modern reforms emphasizing global standards. To understand this transition, it is essential to trace the distinct phases shaping India’s corporate governance regime. Each phase contributes to enhanced legal frameworks, institutions, and governance policies. The following timeline outlines these critical transformation points:
PRE INDEPENDENCE AND POST INDEPENDENCE UPTO THE 1980s
Indian organizations and corporate entities were governed by colonial regulations, and a significant portion of the rules catered to the preferences of the British employers. The Companies Act was introduced in 1866, with amendments made in 1882, 1913, and 1932. The Partnership Act was enacted in 1932. These legal frameworks focused on managing organizational models, as individuals and business firms entered into formal agreements with corporate entities. During this period, there was widespread mismanagement and exploitation of resources, along with a neglect of responsibilities by managing agents due to fragmented and unprofessional ownership. [1]
Following independence, industrialists expressed a keen interest in producing a variety of essential goods, prompting the Government to regulate and set fair pricing. This was when the Tariff Commission and the Bureau of Industrial Costs and Prices were established by the Government. The Industries Act[2] and the Companies Act[3] They were incorporated into the legal framework in the 1950s. The 1960s marked a period of establishing heavy industries, while the 1970s to the mid-1980s, the focus was on cost, volume, and profit analysis as critical aspects of cost accounting activities.[4]
POST 1980s TO 2000s
Following the worldwide emergence of corporate management in the 1980s, particularly after the Cadbury Committee’s landmark report in the UK, India started laying its own foundation for governance reform. The Chamber of Indian Industries (CII) introduced the first voluntary code in 1998, defining governance as a mixture of laws, practices, and moral principles guiding corporate decision-making. This momentum led to the formation of the Kumar Mangalam Birla Committee in 2000, which recommended the inclusion of Clause 49 in SEBI’s Listing Agreement, mandating board independence, audit committees, and disclosure norms. These developments marked India’s transition from promoter-centric management to a systematic, clear, and investor-conscious framework.[5]
2000s TO 2014
From 2000 to 2014, India witnessed a revolutionary phase in corporate governance, marked by regulatory evolution and high-profile scandals that reshaped public and organizational trust. The Kumar Mangalam Birla Committee’s recommendations led to the introduction of Clause 49 in SEBI’s enumerating agreement, mandating disclosures and board-level reforms. This was followed by the Naresh Chandra Committee (2002) and the Narayana Murthy Committee (2003), which emphasized auditor independence, director responsibility, and financial transparency. However, the Satyam scandal in 2009 exposed deep defects in governance practices, with inflated earnings and fabricated invoices. This prompted critical and imperative reforms, incorporating amendments to Clause 49 and the enactment of the Companies Act, 2013, which formalized management structures, improved disclosure norms, and reinforced the role of independent directors and audit committees. This period addressed the essential needs for moral leadership and resilient legal frameworks to safeguard corporate integrity.[6]
2015 TO 2025
From 2015 to 2025, India’s corporate governance regime matured through legislative refinement, enhanced board responsibility, and investor safeguards. Amendments to the Companies Act, 2013, and SEBI’s improved disclosure norms pushed firms toward transparency and moral conduct. Reports like “Stability Despite Headwinds”[7] illustrated that firms like Infosys and HDFC surpassed their peers due to resilient management. Whistleblower systems and conflict-of-interest policies acquired traction, while audit quality remained a concern, with less than half of firms meeting ICAI standards. [8]
LEGAL FRAMEWORK FOR CORPORATE GOVERNANCE IN INDIA
The corporate governance framework in India primarily consists of the following legislation and regulations:
COMPANIES ACT 2013[9]
The Companies Act, 2013, is India’s primary legislation for regulating company formation, management, and corporate governance, substituting the previous Companies Act, 1956, to modernize and simplify business procedures. It also introduced notable reforms such as the idea of One Person Companies (OPC), compulsory Corporate Social Responsibility (CSR) for eligible firms, efficient and optimized adherence through digital filing, and enhanced accounting and transparency standards. The National Company Law Tribunal (NCLT), created by the Act, was established on June 1, 2016. This legislation emphasized fraud avoidance, minority shareholder protection, and moral business conduct, all while aligning Indian corporate law with global norms and promoting swift and fair business procedures.
SEBI RULES
The Securities and Exchange Board of India (SEBI) is the primary regulatory authority overseeing India’s securities and capital markets. It plays a central role in corporate governance. SEBI exercises quasi-legislative, quasi-judicial, and quasi-executive powers, enabling it to frame rules, penalize violators, and uphold market integrity. Recent amendments have introduced same-day settlements for top stocks and reinforced transparency norms. Through the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, it codified and strengthened governance standards, aligning them with the Companies Act, 2013. These rules mandate board independence, audit, and risk management committees, whistleblower processes, and robust disclosure norms. SEBI enforces strict standards for related party transactions to ensure transparency and shield shareholder interests.
GOVERNMENTAL INITIATIVES
The Ministry of Corporate Affairs (MCA) plays a crucial role in forming India’s corporate governance landscape through a series of strategic interventions. In 2009, it introduced Voluntary Guidelines on Corporate Governance to encourage moral and responsible business practices, directing board composition, audit committees, and whistleblower processes. The MCA furthermore launched green initiatives such as electronic document delivery, video conferencing for gatherings, and safeguarded e-voting to enhance involvement and reduce costs. To address financial fraud, the Serious Fraud Investigation Office (SFIO) was established in 2003, empowered to examine multi-disciplinary instances referred by the Central Government. The Investor Grievances Management Cell (IGMC) was set up to resolve investor complaints via jurisdictional Registrars of Companies, now integrated with the MCA-21 online portal. Additionally, the National Foundation for Corporate Governance (NFCG) was developed as a joint platform involving MCA and other bodies to foster conversation and consciousness around effective governance, self-regulation, and director duties. Together, these initiatives reflect the government’s commitment to promoting transparency, enabling investor protection, and the development of moral corporate conduct in India’s developing corporate environment.[10]
CASE STUDIES
Several significant instances shaping the discourse on corporate governance in India led to legal reforms and highlighted glaring failures. By examining these landmark judgments and controversies, there is insight into the systemic gaps and reform opportunities that continue to shape India’s corporate governance regime.
- SATYAM COMPUTERS SCANDAL (2009)
The legal proceedings that followed the Satyam scandal had a significant impact on Indian corporate governance, even though there was not a single Supreme Court ruling. The scandal was committed by B. Ramalinga Raju, the chairman, who admitted to committing a huge fraud that had inflated the company’s assets and earnings for years. The consequences of this scandal caused a significant reevaluation of board duties, auditing procedures, and corporate ethics in India. Stricter rules and a stronger emphasis on the function of independent directors were the outcomes of this case. The significance of independent directors in protecting the interests of the business and its stakeholders was emphasized by the Supreme Court’s decisions and the ensuing legislative changes, including the Companies Act of 2013 and updated SEBI guidelines.
This case is a modern classic in the history of Indian corporate governance. The conflict started when Cyrus Mistry was fired from his position as Tata Sons’ chairman. Tata Sons and its board were accused of “oppression and mismanagement” by Mistry’s family-owned investment firms. The Supreme Court’s ruling made clear that dismissing a chairman does not always equate to oppression. It upheld the value of boardroom independence and the majority’s authority to run a business, provided that decisions are made in good faith.
- YES BANK CRISIS (2020)
The Yes Bank financial scam marks one of India’s most notable private sector banking crises, rooted in hostile lending practices, governance failures, and regulatory lapses. Under the leadership of Rana Kapoor, the bank expanded swiftly by extending high-risk loans to troubled business entities like DHFL, Jet Airways, and IL&FS, while misreporting its non-performing assets (NPAs). Despite repeated cautions from the Reserve Bank of India, internal risk controls remained weak. By 2020, the bank confronted a liquidity crunch, triggering a depositor panic and a moratorium on withdrawals. A ₹ 10,000 crore bailout led by SBI assisted in stabilizing processes and reforms, including digital innovation and strategic partnerships, which have since led to its recovery. The case emphasizes the essential need for transparent governance and vigilant regulatory oversight in India’s financial sector.
CHALLENGES IN IMPLEMENTATION OF CORPORATE GOVERNANCE FRAMEWORKS IN INDIA
India has made steady progress in establishing corporate governance frameworks, with comprehensive laws and regulations aimed at enhancing transparency, accountability, and stakeholder protection. But in practice, several businesses still face grave problems. Weak board independence, promoter control, corrupt business practices, and irregular imposition of laws leave room for misuse. There have been real instances that have shown how these gaps are exploited. The examples below demonstrate that, although frameworks exist, their implementation often falls short, resulting in exploitation. This section explores how these challenges affect the implementation of corporate governance mechanisms.
- PROMOTER DOMINANCE AND CONCENTRATED OWNERSHIP
Promoter dominance and concentrated ownership are significant problems for corporate governance in India, as promoters, often family groups, commonly hold notable control through majority shareholding and key board positions, allowing them to make crucial company decisions that can sideline minority shareholder interests and compromise board independence. This structure often results in management abuses, such as related-party transactions benefiting promoters, limited transparency, and the appointment of independent directors who lack genuine autonomy. Consequently, the concentrated power can compromise responsibility, undermine the intended inspections and balances, and lead to mismanagement that puts broader stakeholder and corporate interests at risk.
- WEAK ENFORCEMENT AND REGULATORY OVERSIGHT
Weak imposition and regulatory oversight persist as notable problems undermining corporate governance in India, where strong legislations like the Companies Act, 2013, and SEBI’s disclosure duties exist on paper, but true implementation remains weakened by inconsistent action, conflicts of interest, and promoter dominance. Regulatory officials frequently struggle to impose timely sanctions or conduct comprehensive inquiries, leading to repeated governance failures across both legacy conglomerates and modern startups, as seen in instances like the IL&FS case. Strengthening independent board oversight, reforming audit practices, and fostering a culture of responsibility rather than mere adherence is essential for guaranteeing relevant and substantial imposition and better and refined management standards in the country.
- TRANSPARENCY AND DISCLOSURE DEFICIENCIES
Deficiencies in transparency and disclosure continue to affect India’s corporate governance, as numerous firms still provide partial, delayed, or vague information regarding their financial outcomes, processes, and board activities. Regulatory frameworks like the Companies Act, 2013, and SEBI’s Listing Obligations and Disclosure Requirements have strengthened disclosure norms, yet implementation remains inconsistent, and governance failures are recurring, frequently leading to investor mistrust and corporate scandals. Effective remedies need not only resilient legislation but also genuine board independence, proactive shareholder engagement, and an adherence culture that transcends mere superficial compliance.
- CORRUPT BUSINESS PRACTICES
PwC’s Global Economic Crime Survey 2024 India outlook highlights that corruption and bribery account for 33% of economic offenses in India, with 26% of respondents ranking them among the top three disruptive problems. Despite 82% expressing confidence in their adherence programmes, 34% of businesses had not conducted anti-corruption audits of third-party vendors, and 13% lacked a third-party risk management programme. While 56% of Indian firms employ risk-scoring for third parties, only 46% consistently perform root cause analyses after corruption events. Additionally, 20% of leaders noticed an increase in corrupt payments, highlighting the need for stronger vendor oversight and transparency. The survey furthermore flags forced labor as an emerging management concern. Only 16% of Indian firms are actively tackling it, while 26% persist unaware of its relevance, posing serious concerns.[11]
CONCLUSION
In conclusion, corporate governance in India has evolved from colonial-era statutes to a resilient, multidimensional legal framework aimed at fostering transparency, responsibility, and moral conduct. Despite notable legislative advancements through the Companies Act, SEBI rules, and governmental initiatives, continuous challenges, such as promoter dominance and corrupt practices, continue to hinder effective implementation. Case studies like Satyam, Yes Bank, and Tata Sons highlight the systemic gaps and the immediate need for durable and tough oversight. Strengthening board independence, enhancing disclosure norms, and cultivating a culture of ethical leadership are necessary and fundamental for sustainable corporate integrity. As India’s corporate landscape matures, governance must transcend adherence and embrace proactive, stakeholder-driven reform to ensure long-term economic and social value.
REFERENCES
[1] Bhumesh Verma and Himani Singh, ‘Evolution of Corporate Governance in India’ (SCC Times, 13 November 2019) https://www.scconline.com/blog/post/2019/11/13/evolution-of-corporate-governance-in-india/ accessed 18 September 2025.
[2] The industries (Development and Regulation) Act, 1951 (Act No. 65 of 1951)
[3] THE COMPANIES ACT, 2013 ACT NO. 18 OF 2013
[4] Bhumesh Verma and Himani Singh, ‘Evolution of Corporate Governance in India’ (SCC Times, 13 November 2019)
[5] Abhishek R, ‘Analysing the Evolution of Corporate Governance Laws and Examining the Roles of Corporate Governance Lawyers in India’ (2025) 2(2) Indian Journal of Integrated Research in Law https://ijirl.com/wp-content/uploads/2022/05/ANALYSING-THE-EVOLUTION-OF-CORPORATE-GOVERNANCE-LAWS-AND-EXAMINING-THE-ROLES-OF-CORPORATE-GOVERNANCE-LAWYERS-IN-INDIA.pdf accessed 18 September 2025.
[6] Abhishek R, ‘Analysing the Evolution of Corporate Governance Laws and Examining the Roles of Corporate Governance Lawyers in India’ (2025) 2(2) Indian Journal of Integrated Research in Law
[7] Referred to the Reserve Bank of India June 2025 Financial Stability Report (FSR)
[8] Abhishek R, ‘Analysing the Evolution of Corporate Governance Laws and Examining the Roles of Corporate Governance Lawyers in India’ (2025) 2(2) Indian Journal of Integrated Research in Law
[9] THE COMPANIES ACT, 2013 ACT NO. 18 OF 2013
[10] G. Ponmani, ‘Beyond Regulation: A Jurisprudential Inquiry into the Normative Foundations of Corporate Governance in India’ (2025) International Journal for Multidisciplinary Research (IJFMR) 13-14 https://www.ijfmr.com/research-paper.php?id=53025 accessed 18 September 2025
[11] PwC India, ‘59% of Indian Organisations Faced Financial or Economic Fraud in the Past 24 Months, Where Procurement Fraud Emerged as the Top Threat: PwC Survey’ https://www.pwc.in/press-releases/2024/59-of-indian-organisations-faced-financial-or-economic-fraud-in-the-past-24-months-where-procurement-fraud-emerged-as-the-top-threat-pwc-survey.html accessed 20 September 2025
