Three rulings by India’s Securities Appellate Tribunal that could improve corporate governance

Collectively, they pose a larger question: What model of corporate governance enforcement is India converging towards—the letter of the law, substantive transparency or calibrated market pragmatism?

The first ruling, in the Varun Beverages case, sharpens the meaning of disclosure. The company had prominently announced board approval of a share purchase agreement to acquire SBC Tanzania. When the transaction collapsed because the conditions precedent were not met, no standalone disclosure followed.

Instead, the termination was mentioned in the notes to its quarterly results. SAT rejected that as adequate compliance. Its message: material information buried in fine print is no disclosure at all.

This is not a technical reprimand; it is a doctrinal clarification. Regulation 30 of the Listing Obligations and Disclosure Requirements (LODR) framework is intended to ensure that material events reach the market in a timely and intelligible manner.

An acquisition signals strategic direction and capital-allocation intent. Its failure is equally price-sensitive. To headline the deal’s approval and footnote its collapse distorts market understanding. By insisting that prominence and clarity are integral to compliance, SAT has elevated disclosure requirements from a mechanical inclusion to substantive communication.

The underlying principle is symmetry. Markets operate on full narratives, not curated optimism. If companies seek visibility when news is favourable, they must also accept equal visibility when developments reverse. Continuous disclosure cannot be reduced to textual inclusion in dense financial notes; it must be meaningful in presentation. With this ruling, SAT has made it clear that drafting ingenuity cannot defeat regulatory purpose.

Second, the Bombay Dyeing ruling drew a hard line around enforcement limits. The Securities and Exchange Board of India (Sebi) alleged revenue inflation through arrangements with Scal Services and argued that effective control over it triggered consolidation and related-party disclosure obligations, with non-compliance amounting to fraud under PFUTP regulations. The tribunal’s majority disagreed. With a 19% holding, below the 20% statutory threshold, Scal was not an associate company of Bombay Dyeing. The numerical line was decisive.

This was a clear endorsement of form over function. Despite indicators of economic integration—funding support, operational overlap, an eventual merger—the tribunal held that statutory benchmarks prevail. This approach promotes certainty, but also risks creating safe harbours for structures calibrated to sit just below bright-line thresholds.

Modern governance focuses on effective control, not equity arithmetic. Influence often flows through contractual leverage, financial dependence or operational alignment. But if substance is to override form, the statute must say so. Sebi, as both drafter and enforcer of the regulatory framework, cannot reinterpret thresholds to suit enforcement needs. If the law draws the line at 20%, it cannot be redrawn at 19%.

Equally significant was the tribunal’s restraint under PFUTP rules. Accounting treatment alone, absent a demonstrable securities nexus or inducement, does not automatically constitute fraud. Fraud demands clear linkage and rigorous proof; commercially suspect intra-group arrangements are not, by default, sham transactions.

While this safeguards due process, it narrows PFUTP’s reach against aggressive financial reporting untethered to a specific trading event. Also, liability cannot rest on designation alone—culpability must be individually established.

Third, the DroneAcharya ruling reveals another balancing exercise—between deterrence and economic continuity. Sebi had barred the company and its promoters for alleged mis-utilization of IPO proceeds and misleading disclosures. Pending appeal, the company sought permission to pledge shares, liquidate investments and raise fresh capital. SAT permitted capital raising through a preferential issue subject to prominent disclosure of Sebi’s findings and the pendency of appeal.

The tribunal’s approach reflects faith in informed investor choice. Rather than impose a blanket exclusion pending final adjudication, it opted for conditional access, relying on disclosure to mitigate asymmetry. This signals an informational model of investor protection: ensuring transparency and allowing capital to flow where investors are willing to assume risk.

Yet, this raises legitimate concerns. When serious allegations of IPO fund diversion are under challenge, should market access resume before appellate scrutiny concludes? Does disclosure sufficiently offset reputational advantages or informational gaps? Or does it transfer regulatory uncertainty squarely onto investors?

Taken together, these three decisions outline a discernible trajectory. Disclosure has been elevated from procedural compliance to substantive duty. Camouflage will not suffice; prominence matters.

At the same time, PFUTP compliance ought to be confined within definitional and evidentiary limits; accounting controversies will not automatically translate to fraud. And in interim contexts, tribunals may favour calibrated access over categorical prohibition, provided transparency is robust. The common thread is reliance on disclosure as the central regulatory currency.

For boards, the message is clear. Materiality must be assessed symmetrically. Structural arrangements that merely avoid statutory thresholds may survive formal scrutiny but invite deeper examination. Independent directors cannot assume insulation, although liability will hinge on their demonstrable role and oversight failure. Transparency is no longer defensive choreography; it is the foundation of governance credibility.

Capital markets survive on credibility—of disclosure, enforcement and adjudication. The Varun Beverages decision demands honest transparency; Bombay Dyeing draws a firm boundary to prevent regulatory overreach; and DroneAcharya signals conditional faith in market choice.

As the appellate authority across India’s financial sector, SAT is not merely reviewing orders but shaping the grammar of financial accountability. Whether this jurisprudence improves governance or reduces it to technical compliance will be determined by how firmly these principles hold when the stakes are high.

These are the authors’ personal views.

The authors are, respectively, chairperson, Excellence Enablers, and former chairman, Sebi, UTI and IDBI; and managing partner, Regstreet Law Advisors and a former Sebi officer.