SHAREHOLDER ACTIVISM AND CORPORATE GOVERNANCE IN INDIA: AN EVOLVING LEGAL LANDSCAPE

Abstract

Indian corporate law has, over the last decade, transformed the shareholder from a largely passive financial claimant into an assertive participant in corporate governance.[1] This article examines the statutory, regulatory, and judicial architecture underlying this shift, tracing the principal levers available to activist shareholders under the Companies Act, 2013[2] and the SEBI Listing Obligations and Disclosure Requirements Regulations, 2015,[3] as recalibrated by the Kotak Committee reforms[4] and the SEBI Stewardship Code, 2019.[5] Through a close reading of two defining disputes of the last decade — the Tata Sons–Cyrus Mistry litigation[6][7] and the Invesco–Zee Entertainment dispute[8] — the article argues that Indian courts have settled on a doctrinally coherent but structurally limited position: the procedural right to requisition meetings and demand accountability is robustly protected, while the substantive power to unseat board decisions remains tightly confined to demonstrable oppression or mismanagement.[3] It further argues that India’s promoter-concentrated ownership structure means that activism here operates chiefly as a mechanism of voice and reputational pressure rather than genuine electoral discipline, and proposes calibrated reforms — a functioning class-action remedy, an expanded Stewardship Code, and dedicated regulation of proxy advisory firms — to close this gap.[3]

Keywords: shareholder activism, corporate governance, Companies Act 2013, SEBI LODR Regulations, Stewardship Code, minority shareholder protection[3]

I. Introduction

For much of its post-liberalisation history, Indian corporate law treated the shareholder as a largely passive claimant on residual value — a financial stakeholder entitled to dividends and, occasionally, a vote, but rarely an active participant in the direction of the enterprise.[3] That picture no longer holds.[3] Over the last decade, a series of statutory reforms, regulatory codes, and high-profile boardroom disputes have transformed the Indian shareholder, particularly the institutional and foreign portfolio investor, into an assertive actor willing to requisition meetings, contest board appointments, and litigate governance failures.[3] This shift, commonly described as “shareholder activism”, sits at the intersection of company law, securities regulation, and the sociology of ownership concentration that is distinctive to the Indian market.[3]

This article examines the legal architecture that has enabled — and constrained — shareholder activism in India.[3] It argues that while the Companies Act, 2013[2] and the Securities and Exchange Board of India (SEBI) Listing Obligations and Disclosure Requirements Regulations, 2015 (“SEBI LODR Regulations”)[3] furnish shareholders with formidable procedural tools, the promoter-dominated structure of Indian listed companies, combined with an unsettled judicial approach to minority protection, means that activism in India remains structurally different from — and in important respects weaker than — its counterparts in the United Kingdom and the United States.[3] The central research problem this article addresses is whether India’s current legal framework strikes an appropriate balance between empowering non-promoter shareholders to hold management accountable and preserving the board’s legitimate autonomy to run the business without being subject to opportunistic or short-termist interference.[3]

The analysis proceeds in six parts.[3] Part II situates shareholder activism within the broader theory of corporate governance.[3] Part III maps the principal statutory and regulatory levers available to activist shareholders in India.[3] Part IV examines the two most significant judicial episodes of the last decade — the Tata Sons–Cyrus Mistry litigation[6][7] and the Invesco–Zee dispute[8] — to extract the judiciary’s evolving stance.[3] Part V considers the institutional ecosystem of proxy advisory firms and stewardship codes that has grown around activism.[3] Part VI offers a critical assessment of the gaps that persist, and Part VII concludes with targeted recommendations.[3]

II. Conceptual Framework: From Passive Ownership to Active Stewardship

Shareholder activism may be defined as the range of strategies through which shareholders — acting individually or in concert — seek to influence a company’s governance, strategy, or conduct without necessarily seeking outright control.[3] It spans a spectrum: at the softer end lies “voice” through voting, engagement letters, and say-on-pay style interventions; at the more assertive end lies the requisitioning of general meetings, board-seat contests, and litigation alleging oppression or mismanagement.[3] The theoretical justification for activism rests on agency-cost economics: where ownership is separated from control, managers (or, in the Indian context, promoters) may pursue private benefits at the expense of minority shareholders, and activism is one market-based mechanism for narrowing that gap.[3]

The Indian ownership landscape complicates this theory in a specific way.[3] Unlike the dispersed-ownership model of the United States and the United Kingdom, where activism is typically aimed at an entrenched but diffuse management, Indian listed companies are overwhelmingly promoter-controlled, with promoter shareholding frequently exceeding fifty per cent.[3] Activism in India is therefore less a contest between shareholders and managers and more often a contest between minority (frequently institutional or foreign) shareholders and a controlling promoter group that dominates both ownership and management.[3] This reorients the legal problem: the object of Indian corporate governance law is not merely to align management incentives with dispersed owners, but to constrain the extraction of private benefits of control by dominant shareholders at the expense of minority shareholders.[3]

III. Statutory Architecture Enabling Shareholder Activism

A. The Companies Act, 2013
The Companies Act, 2013[2] furnishes three principal tools of shareholder activism.[3] First, section 100 read with section 98 empowers shareholders holding the prescribed threshold of voting rights to requisition an extraordinary general meeting (EGM), compelling the board to place specified resolutions before members within twenty-one days, failing which the requisitionists may convene the meeting themselves.[2][3] Second, sections 241 and 242 provide a remedy against oppression of members and mismanagement of the company’s affairs, allowing the National Company Law Tribunal (NCLT) to grant a wide range of reliefs, including regulation of the conduct of the company’s affairs, alteration of the articles, and removal of directors.[2][3] Third, section 245 introduces, for the first time in Indian company law, a class-action mechanism permitting specified numbers of members or depositors to apply to the NCLT for relief where the affairs of the company are conducted in a manner prejudicial to the interests of the company or its members.[2][3]

Of these, the oppression-and-mismanagement remedy under sections 241–242 has historically been the workhorse of Indian shareholder disputes, but it carries an important limitation: it is fundamentally curative rather than participatory, activated only after a grievance has crystallised, and courts have consistently required conduct that is “burdensome, harsh and wrongful” rather than mere disagreement with board policy.[2][3]

Section 245, by contrast, was designed to democratise access to collective redress on the American class-action model, yet its practical utilisation has been strikingly limited — a point returned to in Part VI.[2][3]

B. SEBI LODR Regulations and the Kotak Committee Reforms
Corporate governance regulation for listed entities operates in parallel through the SEBI LODR Regulations,[3] whose current architecture owes much to the 2017 Committee on Corporate Governance chaired by Uday Kotak (“Kotak Committee”).[9]

SEBI accepted the majority of the Committee’s recommendations in 2018 and gave them effect through the SEBI (LODR) (Amendment) Regulations, 2018,[4] which tightened eligibility criteria for independent directors, mandated enhanced disclosure of related-party transactions, barred related parties from voting on resolutions concerning those transactions, and required separation of the roles of chairperson and managing director or chief executive officer in the top listed entities.[3][4] These reforms matter to activism because related-party transactions and board capture by promoter-nominated directors have historically been the principal channels through which controlling shareholders extract private benefits, and the disclosure and voting safeguards introduced post-Kotak give minority shareholders both the information and the voting leverage to contest such transactions before they occur, rather than litigating after the fact.[3][4]

C. The SEBI Stewardship Code, 2019
A distinct regulatory strand addresses not the target company but the activist itself.[3] The SEBI Stewardship Code for institutional investors, applicable to mutual funds and alternative investment funds investing in listed equities, came into force on 1 July 2020 and requires such investors to formulate a stewardship policy, monitor investee companies, engage on matters such as related-party transactions and executive remuneration, and disclose their voting rationale.[5]

The Code is modelled on the United Kingdom’s Stewardship Code but transplants a soft-law, comply-or-explain instrument into a jurisdiction whose corporate governance enforcement has traditionally relied on hard statutory and regulatory mandates.[3][5] Scholars have accordingly questioned whether a code addressed only to mutual funds and alternative investment funds — leaving foreign portfolio investors, insurance companies regulated separately, and promoter-adjacent institutions outside its direct ambit — can meaningfully coordinate institutional voice across the market.[3][5]

IV. Judicial Trends: Board Autonomy versus Minority Protection

A. Tata Sons v Cyrus Mistry
The most consequential judicial pronouncement on the limits of shareholder activism in India arose not from an activist fund but from a removed executive chairman.[3] Following Cyrus Mistry’s removal as Executive Chairman of Tata Sons in October 2016, entities associated with the Shapoorji Pallonji (Mistry) group petitioned the NCLT under sections 241–242, alleging oppression of minority shareholders and mismanagement.[2][6]

The NCLT dismissed the petition in 2017, finding no oppression.[6] The National Company Law Appellate Tribunal (NCLAT) reversed this finding in 2019, reinstating Mistry and additionally revoking Tata Sons’ conversion from a public to a private company — a relief the petitioners had not specifically sought.[3] The Supreme Court, in Tata Consultancy Services Ltd v Cyrus Investments Pvt Ltd,[7] set aside the NCLAT’s order in its entirety in March 2021, holding that the Board’s loss of confidence in Mistry constituted a valid and justifiable reason for removal that could not, without more, be characterised as oppressive or prejudicial conduct within the meaning of section 241.[2][7]

The judgment is significant for shareholder activism in two respects.[3] First, it reaffirmed that the oppression remedy is not a vehicle for second-guessing bona fide board decisions on management personnel, however contentious; the threshold remains conduct that is burdensome, harsh, and wrongful, not merely conduct that displeases a minority faction.[3] Second, and more structurally, the Court held that the NCLAT had exceeded its remedial jurisdiction under section 242[2] by granting relief — reinstatement and restraint on Article 75 — that had not been specifically pleaded, signalling a note of judicial caution against expansive tribunal-fashioned remedies in oppression proceedings.[3] Read together, the judgment tightens rather than loosens the pathway for minority shareholders (or removed office-holders invoking minority-shareholder language) to unsettle board decisions through the oppression jurisdiction, reinforcing board autonomy as the default position absent clear proof of prejudicial conduct.[3]

B. Invesco v Zee Entertainment Enterprises Ltd
A contrasting and more shareholder-favourable trajectory emerges from the dispute between Invesco Developing Markets Fund, together with OFI Global China Fund LLC, and Zee Entertainment Enterprises Ltd.[8]

Invesco, together with an affiliated fund, holding a meaningful minority stake in Zee, issued a requisition under section 100(2)(a) of the Companies Act[2] seeking the appointment of six independent directors and the removal of certain non-independent directors, citing governance concerns regarding related-party dealings.[3][8] Zee resisted the requisition and obtained an interim injunction from a Single Judge of the Bombay High Court restraining the investors from calling or holding the EGM, on the ground that the resolutions proposed were themselves invalid and ultra vires.[3][8]

On appeal, the Division Bench reversed the injunction, holding in substance that the statutory right of shareholders meeting the prescribed threshold to requisition and, upon board inaction, convene an EGM under sections 98 and 100[2] is a foundational element of shareholder democracy that courts should be slow to restrain on the basis of a company’s own assessment that the proposed resolutions are objectionable.[3][8] The ruling has been read by commentators as reasserting the primacy of the shareholder’s procedural right to place resolutions before the general body, leaving questions about the legality or propriety of the resolutions themselves to be tested through the ordinary voting process rather than pre-emptively foreclosed by injunction.[3] Taken together with Tata Sons v Mistry,[7] the two decisions suggest a judiciary drawing a distinction between the procedural right to activism — which is to be jealously protected — and the substantive remedy of unseating a board’s considered decision after the fact — which is to be granted sparingly and only on cogent proof of oppressive conduct.[3]

V. The Institutional Ecosystem: Proxy Advisors and Stewardship

Alongside the statutory and judicial framework, an institutional ecosystem has emerged to lower the coordination costs of activism.[3] Proxy advisory firms such as Institutional Investor Advisory Services (IiAS) and Stakeholders Empowerment Services (SES) issue independent voting recommendations to institutional shareholders on resolutions ranging from related-party transactions to director re-appointments, and have on occasion publicly urged independent directors of listed companies to investigate governance lapses or leadership conduct.[3] Because a large proportion of free-float shareholding in Indian listed companies is held by mutual funds, insurance companies, and foreign portfolio investors who rely on such recommendations, proxy advisors function as a de facto clearing house for institutional voice, translating the Stewardship Code’s[5] engagement obligations into concrete voting outcomes at scale.[3]

This ecosystem, however, remains lightly regulated.[3] Unlike credit rating agencies, proxy advisory firms in India are not subject to a dedicated, comprehensive licensing and conflict-of-interest regime under a specific SEBI regulation of general applicability, notwithstanding a 2020 SEBI working group report examining the issue.[3] The asymmetry is notable: the entities whose recommendations increasingly determine the outcome of contested shareholder votes are subject to considerably lighter regulatory oversight than the institutional investors whose stewardship obligations they help discharge.[3]

VI. Critical Analysis: Persistent Gaps in the Activism Framework

Three structural weaknesses temper the optimism that might otherwise attend India’s expanding activism toolkit.[3]

First, the section 245 class-action mechanism[2] has been substantially underutilised relative to its ambitious design.[3] High numerical thresholds for standing, procedural ambiguity regarding the interplay with the oppression remedy under sections 241–242,[2] and the absence of a developed contingency-fee or litigation-funding market for minority shareholders have combined to leave the remedy largely dormant more than a decade after its enactment.[3] A statutory tool intended to democratise collective redress has, in practice, been overshadowed by the older and narrower oppression jurisdiction.[2][3]

Second, the Stewardship Code’s[5] narrow personal scope — confined to mutual funds and alternative investment funds — leaves foreign portfolio investors, who are frequently the most vocal activists in high-profile Indian disputes, formally outside its ambit even though they are, in practice, central to the phenomenon the Code seeks to govern.[3] A code that regulates only a subset of the relevant institutional population risks creating an uneven playing field in which some investors bear disclosure and engagement burdens that others, pursuing functionally identical strategies, do not.[3]

Third, and most fundamentally, the promoter-concentration structure of Indian listed companies means that even a procedurally robust activism toolkit cannot, by itself, replicate the disciplining effect that activism has on dispersed-ownership markets.[3] Where a promoter group controls a majority of the votes, requisitioned resolutions can be defeated at the general meeting regardless of how compellingly a minority investor makes its case, and the practical value of the section 100 requisition right[2] — vindicated in Invesco v Zee[8] — lies chiefly in the reputational and disclosure pressure it generates rather than in a realistic prospect of a contested vote succeeding.[3] Indian activism, in other words, currently operates predominantly as a mechanism of voice and reputational constraint rather than one of electoral discipline, a distinction the existing academic literature on Indian stewardship has also flagged in cautioning against uncritical transplantation of UK-style codes.[3]

VII. Recommendations

Building on the foregoing analysis, this article proposes four calibrated reforms:[3]

1. Clarifying Class-Action Procedure: The NCLT Rules should be amended to clarify the procedural interface between sections 241–242 and section 245,[2] including express guidance on overlapping standing requirements, so that the class-action remedy is not perpetually eclipsed by the older oppression jurisdiction.[3]
2. Expanding Stewardship Code Jurisdiction: The Stewardship Code’s[5] personal scope should be extended, at minimum through a phased circular, to cover foreign portfolio investors above a materiality threshold, ensuring that engagement and disclosure obligations track actual market influence rather than institutional category.[3]
3. Regulating Proxy Advisory Entities: SEBI should consider a dedicated regulatory framework for proxy advisory firms addressing registration, conflict-of-interest disclosure, and methodology transparency, proportionate to the systemic influence such firms now exercise over contested votes.[3]
4. Prioritizing Disclosure-Based Reforms: Given the structural limits that promoter concentration places on electoral activism, disclosure-based reforms — particularly around related-party transactions and board independence, building on the Kotak Committee’s 2018 reforms[4][9] — should remain the primary regulatory lever, with the requisition and oppression remedies retained as a residual check rather than the principal mechanism of accountability.[2][3]

VIII. Conclusion

Shareholder activism in India has travelled a considerable distance from the largely dormant remedy it once was, propelled by the Companies Act, 2013’s[2] expanded toolkit, the Kotak Committee-driven overhaul of the SEBI LODR Regulations,[3][4][9] the Stewardship Code,[5] and a growing proxy advisory ecosystem.[3] The judiciary’s recent pronouncements in Tata Sons v Cyrus Mistry[7] and Invesco v Zee[8] together sketch a coherent, if cautious, doctrinal position: the procedural right of shareholders to requisition meetings and demand accountability is to be robustly protected, while the substantive power to overturn a board’s considered decisions remains tightly circumscribed to cases of demonstrable oppression or mismanagement.[2][3] Yet the promoter-concentrated ownership structure that characterises most Indian listed companies means that activism here functions chiefly as a mechanism of voice, disclosure, and reputational pressure rather than a genuine electoral check on incumbent control.[3] Closing that gap will require not a wholesale importation of Anglo-American activist templates, but a distinctly Indian recalibration — sharper disclosure mandates, a functioning class-action remedy, and a stewardship framework whose scope matches the market’s actual distribution of institutional influence.[3]

References

[1] Sujal Tyagi, Shareholder Activism and Corporate Governance in India: An Evolving Legal Landscape (2026).
[2] The Companies Act, No. 18 of 2013, INDIA CODE (2013).
[3] Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Gazette of India, pt. III sec. 4 (Sept. 2, 2015).
[4] Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, Gazette of India, pt. III sec. 4 (May 9, 2018).
[5] SEBI, Stewardship Code for all Mutual Funds and all categories of AIFs, in relation to their investment in listed equities, SEBI/HO/IMD/DF1/CIR/P/2019/42 (Dec. 24, 2019).
[6] Cyrus Investments Pvt Ltd v. Tata Sons Ltd, Company Petition No. 82 of 2016 (NCLT Mumbai).
[7] Tata Consultancy Services Ltd v. Cyrus Investments Pvt Ltd, (2021) 9 SCC 449.
[8] Invesco Developing Markets Fund v. Zee Entertainment Enterprises Ltd, Appeal (L) No. 20554 of 2021 (Bombay High Court).
[9] SEBI, Report of the Committee on Corporate Governance (Oct. 5, 2017) (“Kotak Committee Report”).
[10] Ministry of Corporate Affairs, Report of the Company Law Committee (2016).