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

The Supreme Court on Friday refused to take up a public interest lawsuit filed by American short-seller Viceroy Research seeking an investigation into Vedanta Group based on its allegations against the natural resources conglomerate.

However, a detailed order on the issue is awaited.

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

Referring to Viceroy’s allegations against Vedanta, Supreme Court Justice PS Narasimha on Friday observed that international organizations should not influence the Indian stock market in this way. “We will not go into the merits no matter what,” he said in his interim order.

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

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

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

Governor-General’s claims

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

It also raised concerns about Vedanta and Hindustan Zinc, accusing them of unauthorized foreign currency transfers, evading regulations, under-investing in their subsidiaries, incurring unsustainable debt, hiding liabilities, charging unfair brand fees, using opaque auditor networks and having poor governance practices.

The short seller claimed that Vedanta Resources chairman Anil Agarwal often announced ambitious plans in areas such as semiconductors and nuclear power, but most of these projects never materialized. Instead, the borrowed funds were allegedly transferred to the parent company, according to Viceroy.

The Viceroy-Vedanta affair was the second major incident after Hindenburg Research, another US short seller, accused Adani Group of financial misconduct in January 2023, causing significant damage to shares of the conglomerate’s listed companies.

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