Supreme Court refuses to take up petition against Vedanta on Viceroy’s allegations

The Supreme Court on Friday refused to accept a public interest litigation seeking an investigation into Vedanta Group based on American short-seller Viceroy Research’s allegations against the natural resources conglomerate.

A detailed order, however, is awaited in the matter.

Last month, Supreme Court judge Justice K. Vinod Chandran recused himself from hearing the petition against the Vedanta Group, after Supreme Court Justice Sanjay Kumar similarly recused himself from the case.

Referring to Viceroy’s allegations against Vedanta, Supreme Court Justice P.S. Narasimha on Friday observed that it was not how international agencies should influence the Indian stock market. “Be it as it may, we are not going into the merits,” he said in his interim order.

The petition, filed by advocate Shakti Bhatia in August, urged that the Securities and Exchange Board of India, other regulators, and the corporate affairs ministry investigate Viceroy’s allegations of fraud, financial manipulations, price rigging, and corporate governance issues against Vedanta Group companies, including Hindustan Zinc Ltd and Vedanta Resources Ltd.

Vedanta Group has denied all the allegations, calling Viceroy’s report a “malicious combination of selective misinformation and baseless allegations to discredit the Group”.

The petition added that Viceroy Research had submitted its findings to Sebi, the Reserve Bank of India, and the corporate affairs ministry but no action had been taken.

Viceroy's allegations

Viceroy Research, in an 87-page report released in July, accused Vedanta Resources, the group’s unlisted parent company, of having no significant operations of its own and relying on extracting cash from the Mumbai-listed Vedanta Ltd.

It also raised concerns about Vedanta and Hindustan Zinc, accusing them of making unauthorized foreign money transfers, evading regulations, underinvesting in their subsidiaries, taking on unsustainable debt, hiding liabilities, charging unfair brand fees, using opaque auditor networks, and having weak governance practices.

The short-seller also alleged that while Vedanta Resources chairman Anil Agarwal frequently announced ambitious plans in areas like semiconductors and nuclear power, most of those projects never materialized. Instead, according to Viceroy, the borrowed funds were allegedly diverted to the parent company.

The Viceroy-Vedanta episode was the second major instance after Hindenburg Research, another US short-seller, in January 2023 accused the Adani Group of financial misconduct, significantly hurting the stocks of the conglomerate’s listed companies.

Last month, Sebi cleared the Adani Group and its top executives in cases stemming from the Hindenburg allegations.