Supreme Court Justice K Vinod Chandran recuses from PIL for probe into Viceroy's allegations against Vedanta

Justice K Vinod Chandran of the Supreme Court on Monday recused from hearing a public interest litigation (PIL) petition seeking directions to authorities to investigate the allegations made by US-based short-seller Viceroy Research LLC against Anil Agarwal-led Vedanta Limited, Hindustan Zinc Limited, Vedanta Resources Limited and related entities [Shakti Bhatia Vs Union of India].

Consequently, a Bench also comprising Chief Justice of India BR Gavai and Justice Atul Chandurkar adjourned the plea filed by advocate Shakti Bhatia.

On July 9, 2025, US-based short-seller Viceroy Research LLC released an 87-page report titled “Vedanta – Limited Resources”.

The report levelled serious allegations of large-scale fraud, financial manipulation and regulatory breaches by Vedanta Limited (VEDL), Hindustan Zinc Limited (HZL), Vedanta Resources Limited (VRL) and affiliated entities.

Viceroy’s report alleged that VRL functioned as a “parasite” holding company with no significant operations, kept alive by cash extracted from its “dying host” VEDL. The claims included:

• Fraudulent and unfair trade practices under SEBI’s PFUTP Regulations, 2003.

• Misrepresentation of financial disclosures and diversion of funds through related-party brand and management fee arrangements.

• Misuse of upstream dividends and creation of improper encumbrances, allegedly undermining shareholder rights.

• Failure to disclose material events as required under SEBI’s LODR Regulations, 2015.

• Opaque audit and corporate structures used to obscure liabilities and avoid regulatory oversight.

The report further highlighted inflated asset valuations, undisclosed liabilities, systemic capitalisation of expenses and questionable donations to promoter-linked entities.

The Viceroy report said that it sent complaint letters to SEBI on July 14 and the RBI on July 15 detailing its findings. The letters were published online after what it described as a lack of public response and citing the gravity of the issues involved.

Vedanta meanwhile obtained a legal opinion from former CJI Justice DY Chandrachud, who recommended that the company can initiate a defamation plea against the short-seller. However, Viceroy research criticised the legal opinion.

The petitioner Shakti Bhatia moved the Court claiming that he independently corroborated portions of the Viceroy report, particularly regarding undisclosed related-party transactions, by reviewing MCA21 filings, SEBI disclosures and Registrar of Companies records.

Therefore, he filed the present plea arraigning the Union of India, SEBI, RBI and MCA as respondents.

As per the plea, certain high-value transactions involved counterparties neither declared as related parties nor subjected to shareholder approval as mandated.

According to the petitioner, these acts if proven, would constitute material breaches of the Companies Act, 2013, and SEBI’s LODR Regulations, amounting to financial fraud and harming minority shareholders.

Senior Advocate Gopal Sankaranarayanan appeared for the petitioner.

Law Firm KJ John & Co appeared for SEBI.