Abstract

This study aims at carrying out an analysis of the efficacy of the automated vigil mechanism in relation to Indian Corporate Law. Whistleblower protections governed by Section 177 of the Companies Act, 2013 and SEBI (LODR) Regulations are traditionally manual reporting procedures. By incorporating artificial intelligence tools, such as NLP technology, Machine Learning algorithms and predictive scoring systems, the process can be made more efficient by ensuring constant monitoring and anonymity. However, there are several legal issues which arise due to the use of algorithms such as bias, opaque scoring, ensuring that personal data regulations contained within the Digital Personal Data Protection Act, 2023 are complied with and evidential issues under the Bharatiya Sakshya Adhiniyam, 2023. In addition, under Section 166 statutory duty cannot be delegated therefore the company board cannot delegate the monitoring processes to an automated system. Therefore, this study recommends a balanced approach to regulation by enforcing mandatory algorithmic monitoring, tamper-proof audit trails and strict “Human-in-the-Loop” processes monitored by Audit Committees.

Keywords: Bharatiya Sakshya Adhiniyam; SEBI; Audit Committees; Digital Personal Data Protection Act.

1. Introduction

1.1 The Evolution of Corporate Transparency and Whistleblowing

Corporate governance has become a highly integral part to companies in modern day society. In traditional corporate governance transparency was achieved with limited reporting and regular audits. Whistleblowers could also report any issues they had, relating to financial misconduct, ethical and legal issues, within a company by using the traditional methods. These usually include an email address, drop box and/or external hotline. Individuals are often discouraged from taking the step of whistleblowing due to fear of facing repercussions at work, being blacklisted, having confidential information leaked and delays caused by humans investigating the issue. This can result in serious issues being missed within the company such as accounting manipulation and serious legal issues.^[1]

1.2 Defining Automated Vigil Mechanisms

An automated monitoring system is an advanced system incorporating company policy and using AI technology. The automated systems include secure portals with encryption which will use natural language processing to identify, remove any personal details such as IP addresses, time of speech, unique words and forward onto the correct oversight body such as the Audit Committee.

In engineering intensive companies such as listed IT service and product engineering companies like Mindteck (India) Limited, automated monitoring systems are used to review financial transactions, internal audit records, procurement charging and system weaknesses. By reviewing high risk scenarios, ensuring intercompany transactions are correct and reviewing vendor data against legal requirements automated alert systems can help with the internal audit function.^[2]

1.3 Technological Disruption vs. Legal Paradigms

This has led to a serious conflict between the traditional concepts of law and the new AI Compliance tools. Indian Corporate Law is governed mainly by the Companies Act, 2013 and various rules made by the SEBI. The Companies Act, 2013 is drafted on the assumption that human beings are performing these functions. Section relating to vigil mechanism assumes that humans will be filing Protected Disclosure under the vigil mechanism to the heads of the committee^[3]. The head of the committee thereafter will exercise his/her discretion and look into the facts of the case and apply principles of natural justice.

^[1] Ramya, E. (2026). Whistleblower Protection and Corporate Governance in India: A Critical Analysis of the Effectiveness of the Vigil Mechanism. International Journal of Legal Science and Innovation, 8(1), 1-14.https://doi.org/10.63108/IJLSI.7005

^[2] Government of India — Digital Personal Data Protection Act, 2023: Cyber Laws India Official Text Portal

^[3]Satarkar, G. S. (2026). Regulating artificial intelligence in India: Legal frameworks, governance challenges, and the path toward a dedicated AI law. https://www.academia.edu/download/132356505/ARTICLE.pdf