INTRODUCTION
India has developed its ESG disclosure framework, which is based on Regulation 34(2)(f) of the SEBI Listing Obligations and Disclosure Requirements Regulations, 2015[1]in a rapid fashion and has built up a structural framework for disclosures. However, the laws surrounding liability for false disclosures have not evolved in a similar style. The intention of this article is to consider a specific question: if a listed company is aware that it is making a false ESG disclosure, is that simply a disclosure failure, or does it also amount to liability under the dimensions of SEBI’s system of regulation, corporate malpractice under Section 447 of the Companies Act, 2013, or unlawful conduct under several regimes?
THE REGULATORY BUILD UP IN BRIEF
The broader BRSR structure has been discussed in other publications on this website; this article will only highlight a timeline of occurrences that would provide the context for fraud considerations:
- Building upon the original BRSR framework, SEBI developed BRSR Core for major listed companies, which is a more limited set of formal ESG metrics subject to gradual third-party validation. It laid the foundation for establishing the disclosure criteria to assess any inaccuracies.
- The BRSR Core has put the requirement for the top 250 listed firms to unveil their value chain ESG data on a comply-or-explain principle. The SEBI circular on March 28, 2025, also restricted this requirement only to these 250 firms; however, it chose to make the compliance voluntary and decided to postpone external validation of these disclosures until FY 2026-27[2]. Validation is an important component for making data credible, [3]and its postponement leads to the lack of the possibility for preparation of reports that will help determine whether a mistake was made deliberately, as will be discussed below.
- On June 5, 2025, SEBI released an ESG Debt Security framework that covers social, sustainability, and sustainability-linked bonds except for Green Debt Securities. [4]The framework directly addresses purpose-washing prevalent in labelled ESG debt by providing clarity on what constitutes ESG debt and mandating disclosure and third-party validation. In other words, the framework is equivalent to BRSR in the context of fraud examination.
- Outside the scope of the securities market regulation, the CCPA’s Guidelines on Greenwashing in the year 2024 and the ASCI Code regard misleading green claims as relating to consumer protection and advertising rather than securities disclosure; they do not replace the SEBI mechanism.[5]
DOES GREENWASHING FIT WITHIN SECTION 447?
Section 447 of the Companies Act, 2013 outlines fraud as involving any action, malpractice, concealment of the truth as well as misuse of a particular status by a person, whether he or she is the director or not, with the intent to deceive and to create wrongful loss or gain regardless of the outcome of the actions of the party in question. [6]The most important element in such a definition is intent, not a result: no gains or losses have to be proved which shows that the person acted in a way to deceive and commit losses. This explains the difference between purposeful fraud and any honest mistake.
- Deliberate misrepresentation (a working definition here that is not yet an established legal term) is the deliberate exaggeration of a green claim, or suppression of a known adverse fact such as an ongoing violation of environmental law, which creates a false impression of compliance. Being focused on a false impression, rather than an innocent error, it is the class that is likely to meet the intent requirement of section 447.
- Methodological uncertainty includes indicators such as scope 3 emissions or ratios of recycled content that rely on methods that are still under construction; an error made with the help of a method that is accepted, but not flawless, does not qualify as fraud.
- Negligent mistakes mean failure to carefully check data without intention to deceive; it can give rise to other kinds of liability but not to the liability under section 447.
- Use of false third-party data – the use of credible information from interfirm partners that turns out later to be false – reduces the entity’s intent to deceive.
- Good-faith estimation made sincerely even if changed later, does not violate section 447.
On this distinction, a knowing falsehood or a seriously misleading ESG disclosure can, if intent can be proved, amount to the crime of fraud as defined in section 447, which is a reconstructed legal viewpoint rather than established law, owing to the fact that no Indian court, tribunal or regulator has applied section 447 to any instance of greenwashing till now.
For clarification, the Central Government cannot conduct investigation under section 447 itself; this section only defines the relevant crime and penalty for it. How the investigation will be carried out is set out in section 212.[7]
SECTION 447 OR THE SECURITIES-FRAUD ROUTE: A JURISDICTIONAL TENSION
That leads to a more interesting question: once intent is determined, which regime should be applied for intentional greenwashing?
- Greenwashing that has consumer impact is where the incorrect portrayal of ESG data through misleading offering documents and defective BRSR led the investor to transact the securities. This falls under SEBI PFUTP Regulations, 2003: Regulation 2(1)(c) broadly explains fraud to include misleading statements with intent to deal in securities; Regulations 3 and 4(1) prohibit any kind of fraudulent or manipulative practices; and Regulation 4(2)(f) and (k) refer basically to false or misleading information likely to result in purchasing activity. [8]SEBI used Regulation 4(2) to already address fraudulent financial misstatements that investors relied on.
- Company affairs greenwashing, on the other hand, happens when the information is provided wrongly in the boardroom or to auditors, and thus is more in line with the provisions of Section 447.
The recent analyses prefer the securities fraud method against the LODR Regulations and residual imposable fines under Section 15HB of the 1992 SEBI Act. This article, however, views the securities fraud method as ancillary to Section 447 and not as an alternative to it; in fact, a single act of deliberate greenwashing can be applied under both laws Parallel proceedings, nonetheless, are not equal to double jeopardy per se. Article 20(2) of the Constitution prohibits the second prosecution and punishment only on the same charge after the prior, valid prosecution. Parallel proceedings by two regulators under two different statutes, such as SEBI proceedings and SFIO inquiry under section 212 of the Companies Act, 1956, do not fulfill the requirement, as there is no need for them to relate to the same offence and the same set of facts. The Securities Appellate Tribunal had observed similar facts that SFIO proceedings under section 212(2) and the SEBI proceedings relate to different offences and are therefore not barred by the doctrine of double jeopardy since they are distinct[9]. What is still a puzzle is not a constitutional issue but a practical one, that is, which of the regimes should take the lead when both are applicable.
STRUCTURAL GAPS IN ENFORCEMENT
- There is no independent offence of greenwashing. The Companies Act and SEBI Act do not have a separate greenwashing crime creation. Regulators utilize existing laws related to disclosure, fraud, the protection of consumers, and the securities market to cover misleading ESG statements.
- The assurance is deferred, rather than absent. Since full third-party verification of ESG data will be unavailable until FY 2026-27, and therefore when a regulator probes into some old disclosure with a view to establishing knowledge of misleading disclosure or carelessness, he or she will have less evidence.[10]
- No relevant case law can be cited. To date, no Indian court or authority has deemed misleading ESG disclosure as a form of greenwashing.
- The Parliamentary committee has pointed out the gap in institutions: in its report on the budget of the Ministry of Corporate Affairs for 2025–26, the Lok Sabha Committee on Finance advised that a regulatory body that deals specifically with ESG issues should be set up and that the new body should be equipped with the powers to conduct investigations and impose serious penalties. The Ministry, on the contrary, found the recommendation totally unnecessary.[11]
CONCLUSION
In India, the issue of greenwashing is located at the crossroads of the law dealing with securities as well as corporate fraud law. The law on disclosures by the Securities and Exchange Board of India (SEBI) has developed swiftly, transitioning from the BRSR to the BRSR Core, all the way through its decision of March 2025, which provided some relaxation, until we have reached the ESG Debt Securities Framework. However, the matter relating to liability for making a knowingly wrong ESG declaration remains unresolved. Section 447 can provide a solution in cases relating to deception, which is in itself about the company; on the other hand, the PFUTP Regulations make possible the route through which the act of lying is directed towards investors.
Author(s) Name: Gagan P (Presidency University)
References:
[1] Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015, reg 34(2)(f); Securities and Exchange Board of India, ‘Business Responsibility and Sustainability Reporting by Listed Entities’ (Circular No SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122, 12 July 2023).
[2] Securities and Exchange Board of India, ‘Framework for Environment, Social and Governance (ESG) Debt Securities (other than Green Debt Securities)’ (Circular No SEBI/HO/DDHS/DDHS-POD-1/P/CIR/2025/84, 5 June 2025).
[3] Securities and Exchange Board of India, ‘Framework for Environment, Social and Governance (ESG) Debt Securities (other than Green Debt Securities)’ (Circular No SEBI/HO/DDHS/DDHS-POD-1/P/CIR/2025/84, 5 June 2025).
[4] Securities and Exchange Board of India, ‘Framework for Environment, Social and Governance (ESG) Debt Securities (other than Green Debt Securities)’ (Circular No SEBI/HO/DDHS/DDHS-POD-1/P/CIR/2025/84, 5 June 2025).
[5] Central Consumer Protection Authority, Guidelines for Prevention and Regulation of Greenwashing or Misleading Environmental Claims, 2024 (15 October 2024) issued under s 18 of the Consumer Protection Act 2019; Advertising Standards Council of India, Guidelines for Advertisements Making Environmental/Green Claims (effective 15 February 2024).
[6] Companies Act 2013, s 447, Explanation (i).
[7] Companies Act 2013, s 212.
[8] Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to
Securities Market) Regulations 2003, regs 2(1)(c), 3, 4(1), 4(2)(f) and (k); Dewan Housing Finance Corporation Ltd, In re, Order No WTM/GM/IVD/33/2020-21 (SEBI, 22 September 2020), 2020 SCC OnLine SEBI 138.
[9] Constitution of India, art 20(2); Seashore Securities Ltd v Securities and Exchange Board of India [2021] 128 taxmann.com 301 (SAT).
[10] SEBI (n 2).
[11] Standing Committee on Finance, Tenth Report: Demands for Grants (2025–26) of the Ministry of Corporate Affairs (Lok Sabha 2025); Press Trust of India, ‘Parliamentary Panel Pitches for ESG Oversight Body to Combat Greenwashing’ Business Standard (New Delhi, 5 August 2025) accessed 20 July 2026.