The Companies Act, 2013 has several provisions which intend to promote vigilance and transparency in the Company and in case of a listed company in addition to this Act, they also have to follow the directions of SEBI and rules and regulation framed by it. Section 177 of the Companies Act read with SEBI LODR Regulations, 2015 make it mandatory for listed companies to have their own whistle-blower policy which should inter-alia provide for protection against victimization of the complainant.

The article will elucidate upon the law on whistle-blower complaints in India focussing more on their applicability on listed companies and thereafter whistle-blower policy of some of the listed companies and conclude with author’s opinion on the topic.


A company is a body corporate having artificial juridical personality incorporated under the Companies Act, 2013[1] (hereinafter, ‘Act’) and can be of various types such as private, section 8 company or public limited company. In case a company is a public limited company i.e. the shares/securities of the company are listed on the stock exchange then in that case apart from the Companies Act and other allied laws the company is also governed by the SEBI and the rules and regulations framed by it.

Securities and Exchange Board of India or SEBI a quasi- judicial capital market regulator which is a statutory body incorporated under the SEBI Act, 1992[2] and is entrusted with the duty of overseeing the effective development and promotion of capital market in India and to protect the interest of all the stakeholders in the system such as investors, creditors, directors of listed companies etc and for that purpose has enacted several rules and regulations such as the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter, SEBI LODR Regulations), SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 (hereinafter, SEBI ICDR Regulations) etc.

In addition to the statutory framework, there are also several governmental guidelines and committee reports which have called for strict vigilance in the company such as the National Guidelines on responsible Business conduct by the Ministry of Corporate Affairs (MCA) which have emphasised on transparency and ethical practises in the company and as a part of corporate governance has stated that the companies should  adopt a practise where corruption and bribery should not take place and in case of any transgression, legal action should be taken against the concerned person.


Since listed companies involve the money of investors and public, they are subjected to higher regulatory and legal framework as compared to private companies, also, listed companies have higher market capitalization than private companies and the money involved, risk and chances of unfair practices and wrongdoings are also much more. Accordingly, the listed companies in addition to Act also have to follow various SEBI regulations, some of these provisions are as under –

a. Companies Act, 2013 and rules and regulation framed thereunder

Section 177 (1) read with sub-section (2) and (9) of the Act w.e.f 1st April, 2014 states that every listed company and such other classes of companies as may be prescribed by the central government have to mandatorily established an audit committee and a vigilance mechanism. The Audit committee shall comprise of minimum three directors with independent directors forming the majority and is entrusted with the duty of overseeing that there is no illegality is being committed in the financial affairs of the company and to ensure the independence of the auditors of the company and other related details such as their appointment, renumeration etc.

The vigil mechanism of the company shall be established so that directors and employees of the company can use the same to report genuine grievances as may be prescribed by the government against the company. Sub-section (10) of section 177 further states that the vigil mechanism shall have sufficient procedure for safeguarding the informant against victimization and in exceptional cases the informant may also directly approach the chairperson of the audit committee. The vigil mechanism of the company has to be published on the website of the company and also on the board report of the company.

Under the enabling provision of section 177 i.e., as may be prescribed, the central government has enacted Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 which states that the audit committee shall oversee the vigilance mechanism in the company and in case an employee or director has repeated filled frivolous complaints then the audit committee may take appropriate action against such director or employee including reprimanding them. The afore-said rule further provides that the members of the audit committee should disclose if they have any conflict of interest in any case and should hereafter recuse form hearing the said case. Rule 7 also provides similar provision regarding protection of whistle-blower from any kind of victimization from the company.

Rule 7, in addition to listed companies, also makes it mandatory for companies that accept deposit from the public and companies that have borrowed money from the banks and financial institutions exceeding 50 crores to have its whistle-blower policy. Apart from this, Schedule IV of the Act enacted under section 149 (8) enlists the various duties of an independent duties which among other things states that an independent director shall ensure that the company has an effective and functional vigil mechanism in place and any person who reports any wrongdoings through the vigil mechanism is not prejudicially affected.

b. SEBI LODR Regulations, 2015

SEBI, which is the capital market regulator, has mandatory that all in Whistle-blower complaints, the complainant must be disclose its identity and the complainant should be reachable so as to substantiate the allegations made by it and should also be willing to give any supporting documents in favour of its allegations[3].

The SEBI LODR has several regulations which mandate the listed companies to disclose material events and ensure effective corporate governance in the company, some of these regulations are Regulation 22 of the SEBI LODR Regulations which is similar to section 177 of the Act and provides for establishment of vigil mechanism in every listed company for reporting genuine grievances of employees and directors and also provides for protection to them against victimization. Regulation 46 states that every listed company has to disseminate vigil mechanism and its whistle-blower policy on a separate section on its website. Further, as per regulation 34 and 53 the company under the heading corporate governance in its annual report also has to state the details of the vigil mechanism and its whistle-blower policy and also further mention that no personnel have been denied access to the audit committee.

Similarly, Regulation 4(2)(d)(iv) mandates every listed company to establish a vigil mechanism/ whistle-blower policy which would enable the stakeholder of the company such as employees and their representative bodies to lodge complaints against unethical and illegal practices in the company. Schedule II of the SEBI LODR Regulations states that the audit committee of the company shall be responsible for the reviewing the functioning of the vigilance mechanism.

Law Relating To Vigil Mechanism In Listed Companies

The mandate for having a vigil mechanism is mandatory for listed companies is based upon the recommendations of the SEBI Primary Advisory Committee. The Committee had recommended that vigil mechanism i.e. whistle-blower should be made accessible for all employees, directors and all other stakeholders, however, this recommendation was not accepted by SEBI and the vigil mechanism is only available to internal stakeholders of the company such as its employees and directors of the company and not to other stakeholders as SEBI was of the view that external shareholders are not within the power of the company and in any cases they already other legal remedies available[4].

c. Annexure I- D of the Clause 49 of the Listing Agreements

It also provides for establishment of vigil mechanism in the company for reporting any genuine grievances relating to any fraud being committed or any violation relating to code of conduct of the directors or employee of the company and in exceptional cases the employee may even have direct access to the chairman of the audit committee. It further states that the vigil mechanism established by the company has also to disclosed on the company’s website and in the board report.

d. General Provisions which are indirectly related to promote Vigilance in the Company – SEBI (Prohibition of Insider Trading) Regulations, 2015 (hereinafter, SEBI Insider Trading Regulations, 2015), other provisions under the Companies Act, 2013

The SEBI Insider Trading Regulations, 2015 provides for prohibiting insiders or connected persons of the company to trade on the bases of unpublished price sensitive information. The Regulation also provides for appointment of compliance officers, formulation of code of conduct and insider policy in the company, incentive in the form of monetary rewards to informant for correct information on insider trading, Voluntary Information Disclosure and protection to informant against victimization in any from etc.

Regulation 30 of the SEBI LODR Regulation provides for disclosure of specified events and information as specified under part A and part B of the schedule III of the regulations, further, the regulation also provides for framing policy on material events and such disclosures have to be disclosed both on the website of the company and to the stock exchange and also have to respond to any query being raised by the stock exchange. Schedule III of the regulations provides for events such as acquisition, merger, restructuring activities, outcome of board meetings, commencement or postponement of any commercial operations, disruptions in the operation of the company, ESOP schemes etc.

Apart from this, chapter XVI of the Act provides for investigation, inquiry and inspection of the affairs of the company and for that purpose establishes the office of Serious Fraud Investigation Office (SFIO) under section 211 which is responsible to investigate frauds in the company. The SFIO has the power to conduct search and seizure, freezing the assets of the company call for any information and document from any current or former employee of the company etc. and upon completion of its investigation submits its final report to the central government. In addition to this section 132 of the Act establishes the National Financial Reporting Authority which is responsible for overseeing uniformity in auditing standards in companies and is also empowered to take actions against defaulting auditors by imposing monetary penalty and imprisonment for violation of accounting standards.

In addition to this, the government has enacted the Right to Information Act, 2005 which enables any citizen to ask for information or document by filing an RTI and has also established the Central Vigilance Commission under the Central Vigilance Commission Act, 2003[5] wherein any person can lodge a complaint of corruption against a public servant. These two Acts aim at promoting transparency and accountability in functioning of government and are also applicable to listed PSUs/Companies.

Another related Act is the Whistle Blowers Protection Act, 2014[6] which seeks to grant protection to whistle-blower against victimization and enables them to lodge complaint before the competent authority of any illegal practices such as corruption by a public servant, however, as of now this Act is not in force. Once notified, it will increase vigilance in listed government companies since their employees are public servant.


In line with the statutory mandate almost all the listed companies have come out with their own whistle-blower policy for example the HCL Limited has gone a step ahead and their whistle-blower policy is not only for the internal stakeholders but also external stakeholders such as third-party vendors, internal or external auditors etc. In a case of violation of Company’s code of business ethics or breach of any of the company policy or insider trading, the complainant can lodge a complaint under the said policy. The Company has constituted an Ethics Committee and has a provision for Ombudsperson which is entrusted to investigate complaints and in exceptional cases the complainant can also have direct access to the chairman of the audit committee, the policy provides that the complaints are encouraged to be made in writing and may be can sent either electronically or by post at the address given in the policy[7].

Likewise, TATA Power Ltd also provides for Whistle-blower Policy wherein an employee, director or any other stakeholder of the company such as customers, vendor, suppliers etc. can make protected disclosures to the Chief Ethics Counsellor or to the Audit Committee, as the case may be, for violation of the TATA Code of Conduct. On the basis of this information, the Company will carry out an internal investigation under the supervision of the chairperson of the audit committee and identity of the Whistle-blower will be kept confidential and post investigation and after hearing the ‘subject’ i.e., against whom the complaint has been made, the management of the company will recommend appropriate action to the audit committee for its consideration and approval. In case of frivolous Protected Disclosures, the policy states that Audit Committee may take appropriate action against the Whistle-blower[8].


Corruption or any kind of illegal practices is a serious issue and all the more in listed companies since shares of the company are listed and tradeable therefore the investors and public must know that their money is not only safe but also that the company has good corporate governances’ practices and doing its business ethically and legally. Surprisingly, the Companies Act, 2013 has not made it mandatory for private companies to have its own whistle-blower policy and the focus has been more on listed companies or companies who accept deposits from the public; therefore, employees of private companies have no way of making anonymous complaints of illegal practices in the company despite the fact that the company might be indulging in illegal practices.

However, recently, in order to address the afore-said issue of lack of whistle-blower policy in private companies, the Ministry of Corporate Affairs has enacted the Companies (Auditor’s Report) Order, 2020[9] which under Order 2 mandates the auditor to make mention certain facts in his auditor report under section 143 of the Act such as whether the company is maintaining proper records of tangible and intangible properties, investments made by the company in the preceding year, outstanding balance in balance sheet, compliance of section 185, 148 and186 of the Act, defaults made by the company in repayment of loans, advances etc. This Order is applicable with effect from 25.02.2020 and is applicable to section 8 companies, private companies, One Person Company, insurance or banking companies. The Order further states the auditor must provide reasons if any matters listed under the order 2 is unfavourable or cannot be ascertainable.

Similarly, both the Companies Act and the SEBI have only mandated eligible companies to have their own whistle-blower policy but have not focused that much on technicalities that is what should be written or not in the policy but have not prescribed the procedure on investigations, power of investigative authorities etc.


As per section 177 of the Companies Act, 2013 read with the SEBI LODR Regulations it is necessary for every listed company to have a whistle-blower policy which would be overseen with the audit committee, the purpose of this is to promote transparency and accountability in the company, however, the law mandates whistle-blower policy only for the current employees and directors of the company and all other external stakeholders such as former employees, vendors, government are outside the ambit of the policy. Although, law mandates creation of vigil mechanism in listed company but it has not detailed out the technicalities as to the procedure of investigation.

In the recent past there have been several instances where complaints have been lodged under the whistle-blower policy resulting in wide media coverage and legal actions by regulatory bodies such as SEBI, however, without going into merits of such allegations any such complaints have cause serious irreparable injury to the reputation of the company and more so in listed companies as it may shake the confidence of the investors resulting in sharp fall in the prices of the share of the company, therefore, there is a need to balance of the interest of all the stakeholders and not just the interest of the complainant who is protected against any kind of victimization but the interest of the company also has to be considered. The intent of the lawmakers is nevertheless is laudable although some regulatory and legal changes are required in the existing legal framework.

[1]Act No. 18 of 2013.

[2]Act No. 15 of 1992.

[3]SEBI, available at https://www.sebi.gov.in/reports-and-statistics/information-to-public-on-complaints/dec-2019/information-to-public-on-complaints_45231.html. (last visited on 10th May, 2022)

[4]PTI, ‘Sebi makes setting up whistle-blower mechanism mandatory for companies’, BusinessToday.in, Feb 20, 2014. Available at https://www.businesstoday.in/latest/corporate/story/sebi-asks-companies-set-up-whistle-blower-mechanism-scams-133839-2014-02-20. (last visited on 10th May, 2022)

[5] Act No. 43 of 2003.

[6] Act No. 17 of 2004.

[7]Whistle-blower policy of HCL can be accessed at https://www.hcltech.com/investors/governance-policies. (last visited on 27th June, 2022)

[8]Whistle-blower policy of TATA Power Ltd can be accessed at https://www.tatapower.com/pdf/aboutus/whistle-blower-policy-and-vigil-mechanism.pdf. (last visited on 10th May, 2022)

[9]Ministry of Corporate Affairs, S.O. 849 (E) dated 25th February, 2020.

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Qualification: LL.B / Advocate
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Location: New Delhi, Delhi, India
Member Since: 10 Oct 2020 | Total Posts: 2

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