Sec.

177(9) and (10) r/w The Companies (Meetings of Board and its
Powers) Rules 2014—Legislative Comment

Vigil Mechanism or Whistle Blowing, despite carrying a different meaning, from a sematic
sense, is used interchangeably under the Indian Corporate Law Regime. Vigil Mechanism, as
mentioned under Companies Act, 2013, is defined as arrangement which enables an
employee, director or even a third party to report any incidents of corporate misconduct while
retaining their anonymity. In addition, the ‘conduct’ which was said to be reported shall not
merely be speculative but based on actual facts. The legal provisions relating to Vigil
Mechanism/Whistle Blowing is extensively enumerated in Sec. 177(9) and (10) of the
companies act and the companies (meetings of Board and its Powers) Rules. 2014.

With respect to the aforesaid provisions, it is to be noted that certain companies shall
establish a Vigil Mechanism to determine any cases of corporate misconduct. But at the same
time, the company in question shall undertake steps to retain the anonymity and ‘well-being’
of the Whistle Blower. The company shall also publish any additional information pertaining
to the Vigil Mechanism on the companies’ website or the report submitted to the Board of
Directors. In an event where frivolous or unfounded claims are made repeatedly in a
deliberate fashion, the audit committee appointed by the company shall reprimand and take
actions if it deems necessary.
SEBI has mandated that all listed companies must set-up a Vigilance Mechanism and all the
employees should be made aware of all the information related to it. Recently, SEBI has
‘incentivised’ this mechanism where potential whistle blowers will be rewarded for
disclosing any incidents of insider trading violations. But recently, vide companies order
2020, the provision for setting up vigil mechanisms was extended to all types of
companies(including foreign companies).