Viceroy report on Vedanta triggers PIL in Supreme Court for probe into alleged fraud

A July 9 report by US-based short-seller Viceroy Research LLC alleging large-scale fraud, financial manipulation, price rigging and regulatory breaches by Anil Agarwal-led Vedanta Limited, Hindustan Zinc Limited (HZL), Vedanta Resources Limited (VRL) and related entities has prompted a public interest litigation (PIL) before the Supreme Court of India [Shakti Bhatia Vs Union of India].

The petition filed by advocate Shakti Bhatia under Article 32 of the Constitution has arraigned the Union of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Ministry of Corporate Affairs (MCA) as respondents.

The petitioner has sought directions to these authorities to investigate the allegations set out in Viceroy’s 87-page report title “Vedanta – Limited Resources”.

The report by Viceroy claimed that VRL is a “parasite” holding company with no significant operations, kept afloat entirely by cash extracted from its “dying host” VEDL.

It alleged that the group:

• Engaged in fraudulent and unfair trade practices under SEBI’s PFUTP Regulations, 2003;

• Misrepresented financial disclosures and siphoned funds via related-party brand and management fee arrangements;

• Misused upstream dividends and imposed improper encumbrances, undermining shareholder rights;

• Failed to disclose material events required under SEBI’s LODR Regulations, 2015;

• Used opaque audit and corporate structures to hide liabilities and avoid regulatory scrutiny.

It also pointed to inflated asset valuations, hidden liabilities, systemic capitalisation of expenses, and questionable donations to promoter-controlled 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.

Bhatia claims to have independently corroborated parts of the report — particularly the existence of undisclosed related-party transactions — by examining MCA21 filings, SEBI disclosures and Registrar of Companies records.

The petition before the top court has alleged some high-value transactions involved counterparties not declared as related parties or subjected to shareholder approval as required under law.

As per the petitioner, the allegations if proven, would be “material breaches” of the Companies Act, 2013 and SEBI’s LODR Regulations, amounting to financial fraud and harming minority shareholders.

The petition has prayed for directions to the SEBI, RBI and MCA to investigate the allegations and take appropriate action.

Failure to act could result in Indian investors being duped by an apprehended financial fraud, it has been submitted.