Malicious accusation lead to unnecessary time wastage in investigating the claims, affects shareholder perception and tarnish the image of organisations, he added.
"I do think that genuine whistleblowers need to be encouraged by the regulators. However, there needs to be a mechanism put in place that penalises complaints by dishonest people," Mistry said in his address at a corporate governance summit organised by CII.
While there are individuals who are motivated by a sense of moral conscience and act for the organisation, there are those who act of greed and to take revenge, he said.
Mistry said certain instances in the past have shown that whistleblowers are either seeking ill of a company or looking for media attention.
"It is equally important to ensure that there are sufficient checks and balances in the system so that malafide intentions are discouraged," he noted.
Shareholder activism in the country is bound to become more pronounced as investors are exerting influence in governance both directly and through their proxy advisors, he said.
As India becomes more developed economy, there is a need to ensure that the corporate governance norms do not become so stringent and restricted that they inhibit a company's ability to take risks and contribute to economic growth, Mistry added.
"The safeguards and control structures should be done in a manner that allows organisations to flourish and focus on business," the banker said.
He said the corporate governance practices in the country will keep improving which will enable easier access to capital from global markets, increase transparency and enhanced investor confidence. HV BAL