AI AND CORPORATE GOVERNANCE IN INDIA: EXAMINING DIRECTORS’ DUTIES, FIDUCIARY RESPONSIBILITIES AND LIABILITY FOR AI-ASSISTED DECISIONS

Artificial intelligence (AI) is increasingly used to support corporate decisions involving finance, compliance, recruitment, risk assessment, cybersecurity and business strategy. These tools can improve speed and help directors process large amounts of information, but they can also produce inaccurate, biased or difficult-to-explain recommendations. This creates a central corporate-law question: when a director relies on an AI-generated recommendation, does that reliance satisfy the director’s existing legal duties, and who should be accountable if the decision causes harm? This paper examines the question through a doctrinal and comparative legal method. It analyses the Companies Act, 2013, particularly section 166, relevant principles emerging from Indian decisions on directors’ fiduciary obligations and oversight and selected regulatory approaches to AI governance. It argues that Indian company law already provides a meaningful foundation for accountability through duties of good faith, care, diligence, independent judgment and avoidance of conflicts of interest. Those duties do not disappear when a company uses technology. However, the application of traditional standards to opaque or probabilistic AI systems raises practical questions about reasonable reliance, explainability, documentation and board-level supervision. The paper recommends a proportionate, risk-based approach: directors should not be strictly liable merely because an AI-assisted decision fails, but they should be expected to understand material risks, test important outputs, preserve meaningful human judgment and ensure appropriate oversight. The aim should be responsible innovation rather than either unrestricted automation or a blanket prohibition on AI-assisted governance.