Narratives Over Disclosures: Is India's Material Disclosure Regime Designed To Be Believed Or Verified?

I. Introduction

"Corporate governance cannot be reactive..."

"...It must anticipate risk, recognise patterns, and intervene before damage is done."

These observations, made by the Chairperson of the Securities and Exchange Board of India ("SEBI") Mr. Pandey in the 25th ICSI National Awards for Excellence in Corporate Governance on December 19, 2025, in New Delhi¹ was not a casual remark but a well calculated caution capturing a broader regulatory truth.

The larger point, given his vision for SEBI, could not just be about compliance volume or box-ticking alone. Perhaps it was a call to move towards a proactive and accountable governance framework.

If one were to look back at SEBI's enforcement history, one would find that governance failures are more often than not found buried under the layers of grey-area conduct (maybe misconduct!) than clear-looking violations. For instance, actions that one could argue are technically permissible but, more probabilistically, are antithetical to the letter and/or spirit of the law and damaging to the disclosure-based transparency regime on which a large part of the market trust stands.

Where disclosure is reduced to narrative - believed as gospel, the governance framework inevitably becomes reactive. Where systems are designed to permit early verification of disclosures, the governance framework acquires the ability to prevent harm rather than merely respond to it.

Disclosure has long been the cornerstone of Indian securities regulation. But a question arises as to how well this disclosure-based regime works.

The question is worth consideration, as Indian capital markets have expanded rapidly in scale, complexity, and speed of information flow. In such an environment, the tolerance for governance uncertainty has diminished sharply. Markets may absorb business risk, but they struggle to absorb credibility risk, especially when disclosures shape perception.

Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI LODR") embodies a disclosure-based regime by mandating the timely and uniform dissemination of material information to the market. The objective is straightforward, i.e. to ensure that all investors operate on a level playing field and that price discovery reflects material developments within/concerning listed entities. However, Regulation 30 of SEBI LODR deserves a closer examination. Regulation 30 has provided much-needed structure and predictability to corporate disclosures. However, enforcement experience suggests that disclosure effectiveness is shaped not merely by speed or form, but by their inherent credibility and accuracy, i.e., the extent to which disclosures can be relied upon when they reach the market.

This article examines that issue through a narrow but significant lens. The Disclosure of Material Agreements.

The objective is not to allege misconduct en masse, nor suggest that listed companies, boards, or managements generally act in bad faith. Instead, to ask ourselves a structural question: does a disclosure regime that is largely narrative-driven and verification-light (at the point of disclosure!) leave room for half-truths, unintended or otherwise, to influence the market? Is there a better disclosure model for the Indian market, or a better alternative governance process?

II. The Purpose of Regulation 30 of SEBI LODR: Speed, Symmetry, and Market Confidence

Overlaying Regulation 30 of SEBI LODR is Regulation 4 of SEBI LODR, which embeds broader governance principles. Among them is the obligation that disclosures must be accurate, complete, fair and not misleading. Regulation 30, beyond any shadow of doubt, is one of the primary mechanisms for minimizing information asymmetry between a listed entity's management and its public shareholders, thereby facilitating efficient price discovery and maintaining market integrity. The evolution of Regulation 30 from the erstwhile Clause 36 of the Listing Agreement reflects a strategic shift from a subjective, management-driven disclosure regime to an objective and principle-based². Regulation 30 of SEBI LODR is a key part of a disclosure-based framework that aims at alleviating information asymmetry, keep things clear, and make sure that information is shared quickly and correctly.

The regulation acts as a signal in the context of material agreements. It lets the market know about deals, arrangements, and contractual obligations that could have an impact on the listed entity's operations, governance, or strategic direction. The regulator assume that once this information is made public, the market will be able to figure out what it means and act accordingly.

This is the doctrinal foundation and the assumption on which the present discussion rests.

III. The Existing Architecture of Disclosure and the Limits of "Significant Terms"

Schedule III³ of the SEBI LODR prescribes a detailed framework for disclosure of material agreements. The existing architecture requires disclosure, inter alia, of the following elements:

1. the identity and relationships of the parties, including promoter or related party linkages;
2. the commercial purpose and size of the agreement;
3. significant terms of the agreement (in brief), governance or capital structure implications, including special rights and share issuances; and
4. consequential changes, including amendments, terminations, or rescissions.

On paper, this framework is robust; however, the scope of the disclosure, particularly the requirement to disclose "significant terms (in brief)", leaves substantial discretion with the issuers/listed entities. In practice, this often results in the disclosure of the headline right, while commercial qualifiers that determine execution certainty remain summarised, omitted, or sometimes skewed.

For example, the purpose and size of an agreement may be made public, but the enforceability of that purpose is often dependent on conditions that must be met before the agreement can be enforced, the order in which obligations must be met, or performance-linked triggers that the issuer does not have to explain unless it thinks they are important. A summary of terms may not make it clear what termination rights, exit costs, or timelines that have a big impact on the arrangement's durability are.

So, even with a lot of detailed information, agreements with very different levels of execution risk and commercial certainty can look the same at the disclosure level. This shows how limited summary-based disclosure is on its own.

IV. Disclosures Without Contemporaneous Verification

Notwithstanding the depth of the prescribed format, the framework relies exclusively on issuer-prepared summaries, as there is no requirement for the listed entity to submit the underlying agreement to the stock exchange or SEBI at the time of disclosure, even on a confidential basis. So, compliance is based on the existence and content of the disclosure, not on an assessment of the agreement at the same time. This method shows that the first chance to verify something usually comes only after there are problems, like when investors complain, the market changes, or the exchange does a review.

The Urja Global Limited (January 29 2025, Adjudication Order No: Order/AS/RM/2024-25/31149-31166)⁴ case shows what this structure means. In this case, the company made several disclosures under Regulation 30 about MOUs and agreements with different counterparties. Although disclosures were made in the required way, a later regulatory review showed that some of the announcements were false, misleading, not well-supported by execution, or materially inconsistent with the underlying contractual position. These inconsistencies were identified only after regulatory scrutiny was triggered. At the time the disclosures entered the market, there was no mechanism for contemporaneous verification of the agreements.

The regulatory concern arising from narrative-based disclosure is not confined to Urja Global. Similar structural issues were examined earlier in the Global Depository Receipts ("GDRs") fraud cases which started as early as 2010s wherein multiple orders were issued by SEBI against multiple entities, one of such case is of Tulsi Extrusions Ltd. (27 October 2020, Adjudication Order No. PM/NR/2020-21/9444)[5], where the company reported that the issuance of GDRs went well but neglected to inform anyone about a pledge agreement that changed the deal's terms. Investors were told that the GDRs had been subscribed, but the company failed to disclose that the subscription was backed by a loan, with the proceeds used as collateral. This pledge agreement was important because it made a conditional liability and changed the risk profile of the deal directly. SEBI concluded that the non-disclosure led to a distorted representation of facts, thereby misleading investors about the authenticity of the issue. The case shows that even when disclosures are made, leaving out an important agreement may compromise the integrity of the market, especially if verification happens only after the information has impacted investors' decisions.

The lesson from the Urja Global and GDR Fraud cases is that verification arrived after the market had already absorbed and reacted to the information.

Material agreement disclosures are not merely procedural formalities. They are actively relied upon by a wide range of stakeholders, viz., investors, analysts, lenders, etc., to assess a listed entity's prospects and risk profile. When the agreement itself is not available, the disclosure summary becomes the sole reference point. The market necessarily assumes that the summary fairly represents the contract. This creates a reliance dynamic in which credibility is presumed rather than tested at the point of disclosure. As long as disclosures are accurate, this presumption poses no difficulty. When they are not, the absence of early verification increases both market distortion and regulatory cost.

V. The Half-Truth Disclosure Risk

A. What is a Half-Truth?

"Half-truth" disclosures, are misleading by omission, concealment, or misdirection, can attract regulatory consequences. Half-truths may:

1. correctly acknowledge the existence of a transaction or agreement; and/or
2. emphasize any transaction's/agreement's commercial upside or strategic rationale.

However, such disclosures might underplay, qualify away, omit or mislead on material downside/risk elements such as:

• termination penalties, or
• contingent liabilities, or
• control-altering rights, or
• asymmetric risk allocation, or
• conditions precedent that materially affect execution certainty.

B. Why It Matters

Capital markets operate on perception arising from information and from a lack of information. Another factor that affects perception is narrative, under which information is usually packed and pushed. Narrative disclosures can influence investor behaviour immediately, often producing short-term market responses, including price appreciation, before the underlying contractual substance is tested.

The long-term impact of such narrative disclosures (if they are later found to be false or misleading) is that they shatter investors' trust, regardless of the price/volume catapult they may have caused at the time of disclosure.

In a nutshell, the danger lies not only in deliberate deception, but also in the space between narrative and verification.

Historical market cases, including instances where funding arrangements or enabling conditions were not fully disclosed despite technically correct announcements, demonstrate how selective narratives can mislead even without false statements.

VI. Structural Constraints of the Current Regime

The present framework places significant weight on—

1. issuer discretion in identifying "significant terms,"
2. internal governance processes,
3. and post-event regulatory scrutiny.

The practical limits that may arise are:

1. Regulators and exchanges cannot manually verify thousands of disclosures in real time.
2. Enforcement must necessarily be selective; and
3. scrutiny is often reactive by design.

As a result, the system is robust against apparent/bare-on-face violations. Still, it may miss disclosures that seem compliant and narratively persuasive, yet embed latent risks that are not immediately apparent at the time of disclosure. These disclosures do not breach the gates of the regime. They pass through them. In that sense, the challenge is not one of obvious non-compliance, but of "Trojan Horse" disclosures.

VII. A Comparative Perspective

The United States confronts the same problem through a different structural choice. Under Regulation S-K of the United States, particularly Item 601(b)(10), material agreements are required to be filed as exhibits to periodic filings.

Importantly;

1. while issuers are permitted to redact commercially sensitive information, the agreement itself forms part of the regulatory record;⁶
2. the regulator retains the power to demand unredacted versions, and
3. the filings itself create an audit trail.

The US model does not assume bad faith. It assumes that visibility and reviewability influence behaviour. The result may not be perfect transparency (perfect market is only a Utopian model), but it will be verification-aware disclosure.

The U.S. framework shows that regulators consider narrative summaries are helpful but not enough to replace source documents or verify information. By putting agreements into the disclosure ecosystem, the system makes sure that important contracts stay within the view of regulators and that issuers meet their disclosure obligations with responsibility.

The difference between the disclosure systems in India and the US is how they are set up. One system thinks that good-faith summaries are enough, while the other thinks that verification needs to be built into the structure.

VIII. The Next Logical Step for a Growing Market

Indian securities regulation has reached a high degree of maturity. Regulation 30 represents a carefully constructed disclosure regime that has significantly improved transparency and market confidence. As the Indian economy grows and listing activity accelerates, the question is no longer whether disclosures are being made, but whether they are capable of being relied upon. The following points are not suggestions but food for thought for the regulator to ponder upon:

A. Confidential Backend Filing

1. Mandating confidential backend submission of material agreements to stock exchanges; and
2. Without mandating public dissemination or, if at all, public dissemination is required, then permitting the filing of redacted versions that preserve the required commercial confidentiality while enabling regulatory verification; and
3. Such information is only accessible to limited, Chinese-wall-protected teams at the exchange's end.

B. Technology-Enabled Red-Flagging

1. technology could flag anomalies, patterns, or inconsistencies,
2. random sampling could reinforce deterrence,
3. issuers would be cognizant that disclosures are reviewable, even if not immediately reviewed.

C. The Psychological Effect

Much like surveillance signage (You are under CCTV Surveillance), the value lies not only in detection, but also in behavioural restraint. Knowing that the full document exists in the system affects the perception of incentives/disincentives of pushing half-truths/narratives, at the disclosure stage itself.

Experience suggests that regulatory visibility itself has a behavioural effect. When issuers know that source documents/agreements are to be given for examination, drafting discipline improves, and the risk of overstatement reduces. This benefits not only investors but regulators as well, by enabling earlier and more efficient oversight.

D. Regulatory Demand Power

Where red flags arise, regulators and exchanges retain the ability to;

1. demand unredacted versions,
2. seek corrections, or
3. require supplemental disclosures.

Such steps would preserve commercial confidentiality while enabling timely verification within the disclosure lifecycle.

E. Addressing the Obvious Concerns

Concerns around confidentiality, competitive harm, insider-trading risk, and contract complexity are legitimate.

They can be addressed through:

1. backend confidentiality,
2. limited access protocols,
3. redaction discipline, and
4. demand-based dissemination rather than blanket public filing.

The objective is not disclosure maximalism, but disclosure credibility.

IX. From Reactive Compliance to Anticipatory Governance

Corporate governance is not merely about regulatory thresholds or procedural compliance. It is also about how information is shared, how trust is built, and how discretion is exercised.

In an environment where information travels faster than ever, a disclosure regime that is aware of verification, even if verification is selective, can strengthen confidence without stifling commerce.

The question is not whether the current framework is broken. The question is whether it can be designed to be better before reactive governance becomes reputational damage control.

Footnotes

1. https://www.sebi.gov.in/media/press-releases/nov-2014/sebi-board-meeting_28400.html

3. https://www.sebi.gov.in/legal/regulations/nov-2025/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirement-regulations-2015-last-amended-on-november-19-2025-_98010.html

4. https://www.sebi.gov.in/enforcement/orders/jan-2025/adjudication-order-in-the-matter-of-urja-global-limited_91353.html

5. https://www.sebi.gov.in/web/?file=/sebi_data/attachdocs/oct2020/1603800369204_5.pdf#page=3&zoom=page-width,-16,691

6. https://www.ecfr.gov/current/title-17/chapter-II/part-229

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