Written by Anagha Suresh Manian,
Lex Lumen Research Journal Summer Intern,
June 2026
INTRODUCTION
Decisions within companies shift when artificial intelligence speeds up how information is studied and patterns are spotted. Because machine learning relies on real-time inputs, judgment improves without depending on assumptions. As systems refresh continuously, static processes fade forecasting grows faster, inventory stays aligned, risks emerge sooner, assistance becomes more accurate. Hidden accuracy like this allows organizations to move through complicated economies with greater ease. What results is less guesswork, more clarity, where timing often decides outcomes[1].
Use of artificial intelligence grows, bringing attention to issues in law, ethics, and supervision outcomes may turn unjust when systems carry bias, hide reasoning, or mismanage output. Because of such risks, openness matters; so does defined accountability alongside steady participation by people. Oversight cannot pause. Firms examine outputs often, allowing team insight to meet machine findings, balancing both toward equitable results that reflect those affected[2].
AI does not only provide opportunities for unprecedented innovations and increased efficiency; it also poses a fundamental ethical and legal question as to whether the duty of accountableness can be handed over to algorithms or human decision-makers must always be responsible?
THE RISE OF AI IN CORPORATE DECISION MAKING
Making decisions is a fundamental aspect of human lives and even affects the choices in various situations whether it is a simple decision or a complex business strategy. The development of Artificial Intelligence (AI) has provided a very useful tool to improve decision-making processes in almost all sectors. Decision-making in AI refers to the process of computationally selecting the optimal actions from a set of alternatives by employing data and algorithms. This process involves collecting data, preprocessing, analyzing, and predicting to either assist or fully automate decision-making[3].
Artificial Intelligence (AI) in various forms has been changing the way businesses operate and is instrumental in making the processes efficient and more productive including the level of decision-making by automating mundane tasks like data entry, scheduling, and invoicing. Besides, AI aids in customer service through chatbots, sharpens marketing and sales by analyzing data, and enhances supply chain forecasting and cybersecurity. Finance, healthcare, and software development are among the sectors that greatly enjoy the benefit of AI through improved accuracy, cost reduction, and enablement of data-driven decisions[4].
WHEN AI GOES WRONG: THE LIABILITY PROBLEM
Though artificial intelligence aids decision-making, real-world performance frequently falls short when deployed beyond lab conditions, data imbalances, excessive reliance, and vulnerabilities play a role. When inputs lack accuracy or ownership remains undefined, complications grow sharper. Oversight that adapts, openness in process, steady evaluation, along with clear human responsibility, shape whether such systems function well. Success leans heavily on these elements remaining active throughout use[5].
Organizations now face rising legal accountability issues because they use Artificial Intelligence (AI) systems to make business decisions. AI does not have legal status which prevents it from being directly accountable for any actions it performs. AI systems which generate harmful results through discriminatory hiring practices and wrong financial decisions make it difficult to determine who should bear responsibility. Organizations stay responsible because they must treat AI as a tool which needs appropriate supervision and risk evaluation and adherence to all applicable laws and ethical standards[6].
CORPORATE LIABILITY AND DIRECTOR’S DUTIES
Artificial Intelligence tools now help corporate governance teams to make choices about risk evaluation and financial prediction and strategic development and operational management. However, AI operates as a supportive system which lacks the ability to substitute human decision-making processes. Under Section 166(3) of the Companies Act, 2013[7], directors must exercise due care, skill, diligence, and independent judgment. Organizations must check AI output results instead of depending on them because they lack the ability to assess them effectively. AI operates without legal personality which means directors and companies must take full responsibility for its actions so they need to monitor AI systems for proper management of their stakeholders and organizational governance.
AI is a useful tool for directors. It can, for instance, retrieve and analyse a lot of data, check compliance with regulations and come up with business suggestions. However, under Indian corporate law, the director continues to be responsible for human oversight. In fact, the Companies Act, 2013 considers directors as individuals who are capable of making independent judgments and who can be held accountable legally. In other words, a director cannot be an AI and AI cannot have fiduciary duties. Directors need to perform their duties with integrity and proper attention because Section 166[8] demands these qualities which cannot be handled by automated systems. Directors must accept full responsibility for their actions which requires them to establish proper management systems for AI technology oversight[9].
EXISTING LEGAL FRAMEWORK AND REGULATORY GAPS
Guidance within India’s legal system regarding artificial intelligence in business decisions appears scattered. The Companies Act, along with the Information Technology Act, does not include clear rules about managing or assigning responsibility for AI. Order in markets takes precedence within SEBI’s algorithm rules, yet clarity and impartiality receive little attention. Where older legal frameworks still govern AI-based business choices in India, skewed results often follow unseen logic. Evolving oversight becomes necessary when fairness and openness remain unaddressed by current standards[10].
Should gaps appear in current laws, reliance shifts toward prior frameworks like the Companies Act, 2013, especially regarding corporate decisions influenced by AI. As artificial intelligence plays a growing role in business behaviour, ambiguous results follow outcomes may carry bias, operate through obscured reasoning, while offering little insight into their formation. Although current rules attempt oversight, responsibility remains loosely defined whenever automated systems are involved. Therefore, revised laws focused solely on AI behaviour in enterprises become difficult to delay[11].
WAY FORWARD
Organizations need to implement governance systems which unite innovation with accountability because artificial intelligence now controls most of their decision-making processes. Organizations need to maintain proper human control over AI systems which handle essential choices that affect employees and customers and all organizational stakeholders. Boards need to create internal AI governance rules while they should perform scheduled AI system assessments and they must demand organizations to disclose their decision-making data sources and algorithmic systems. Directors need to possess basic technological understanding which enables them to identify potential AI system deployment threats. Organizations must use AI to boost human decision-making processes instead of replacing them because this approach maintains operational efficiency while safeguarding both corporate accountability and social responsibility[12].
CONCLUSION
Even as artificial intelligence transforms business operations, improvements in pace, accuracy, and evidence-based judgments appear together with intricate challenges. Responsibility for outcomes, ethical oversight, yet compliance demands blur once automated systems operate beyond familiar frameworks. India’s present laws, including provisions from the 2013 Companies Act or the older Information Technology Act of 2000, assumed human decision-makers at the core. Once machine reasoning integrates into corporate functions, duty remains fixed upon institutions along with their governing figures. When it comes to matters that need human judgment, businesses simply can’t sidestep it. The clarity, fairness, and the delicate balance between advancing technology and being responsible all depend on having a solid framework in place. This oversight is essential for steering how technology functions within our economies.
REFERENCES
[1] Chaitanya Laxminarayana, How AI Is Reshaping Corporate Decision-Making: From Data to Insights, Forbes Tech. Council (Apr. 14, 2025), https://www.forbes.com/councils/forbestechcouncil/2025/04/14/how-ai-is-reshaping-corporate-decision-making-from-data-to-insights/
[2] David Mallon, Julie Duda, Stefano Besana & Maya Bodan, AI and the Future of Human Decision Making, Deloitte Insights, 2026 Global Human Capital Trends (Mar. 4, 2026),https://www.deloitte.com/us/en/insights/topics/talent/human-capital-trends/2026/decision-making-with-ai.html
[3] Decision Making in AI, GeeksforGeeks, https://www.geeksforgeeks.org/artificial-intelligence/decision-making-in-ai/ (last visited June 14, 2026)
[4] Amanda McGrath & Amanda Downie, What Is Artificial Intelligence (AI) in Business?, IBM Think (June 5, 2026), https://www.ibm.com/think/topics/artificial-intelligence-business? (last visited June 14, 2026)
[5] Amanda Athuraliya, Understanding AI in Decision-Making: What It Is, Benefits, and Practical Examples, Creately Guides (May 28, 2026), https://creately.com/guides/ai-in-decision-making/ (last visited June 14, 2026)
[6] Roman Eloshvili, When AI Makes a Bad Decision, Who’s Liable?, Built In (Dec. 31, 2025), https://builtin.com/articles/ai-legal-liability?. (last visited June 14, 2026)
[7] Companies Act, 2013, § 166(3), No. 18, Acts of Parliament, 2013 (India)
[8] Companies Act, 2013, No. 18, Acts of Parliament, 2013 (India)
[9] Mustafa Rajkotwala, Artificial Intelligence in the Indian Corporate Boardroom: Preserving Fiduciary Accountability in an Algorithmic Age, IndiaCorpLaw (Apr. 8, 2026), https://indiacorplaw.in/2026/04/08/artificial-intelligence-in-the-indian-corporate-boardroom-preserving-fiduciary-accountability-in-an-algorithmic-age/ (last visited June 15, 2026)
[10] Pratyasha Chaudhuri, AI Accountability and the Law: Bridging the Regulatory Gap for Corporate Decision-Making in India, Legal Service India, https://www.legalserviceindia.com/Legal-Articles/ai-accountability-and-the-law-bridging-the-regulatory-gap-for-corporate-decision-making-in-india/ (last visited June 15, 2026)
[11] G. Harini, Corporate Governance and Artificial Intelligence: A Legal and Ethical Framework for Responsible AI Adoption in India, Indian J. Res. L. & Mgmt. (Aug. 30, 2025), https://ijrlm.com/journal/corporate-governance-and-artificial-intelligence-a-legal-and-ethical-framework-for-responsible-ai-adoption-in-india/ (last visited June 15, 2026)
[12] Philip Meissner & Yusuke Narita, Artificial Intelligence Will Transform Decision-Making. Here’s How, World Economic Forum (Sept. 27, 2023), https://www.weforum.org/stories/2023/09/how-artificial-intelligence-will-transform-decision-making/ (last visited June 15, 2026)