Supreme Court Justice K Vinod Chandran recuses from PIL seeking probe into Vedanta fraud allegations after Viceroy Research report, raising questions on corporate governance, SEBI, and shareholder rights.
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NEW DELHI: The Supreme Court of India on Monday witnessed an important development in a high-profile public interest litigation (PIL) concerning corporate governance, regulatory compliance, and shareholder protection.
Justice K Vinod Chandran recused himself from hearing a plea filed by advocate Shakti Bhatia seeking an investigation into allegations made by US-based short-seller Viceroy Research LLC against Vedanta Limited, Hindustan Zinc Limited (HZL), Vedanta Resources Limited (VRL), and associated entities. Following the recusal, the Bench, also comprising Chief Justice of India BR Gavai and Justice Atul Chandurkar, adjourned the matter.
Background of the Allegations
On July 9, 2025, Viceroy Research LLC released an 87-page report titled “Vedanta – Limited Resources”. The report accused Vedanta and its affiliates of large-scale fraud, financial manipulation, and regulatory violations. Among the serious claims were:
- Fraudulent and unfair trade practices under SEBI’s PFUTP Regulations, 2003.
- Misrepresentation of financial disclosures and diversion of funds via brand and management fee arrangements.
- Misuse of upstream dividends and creation of improper encumbrances undermine shareholder rights.
- Failure to disclose material events as per SEBI’s LODR Regulations, 2015.
- Opaque audit structures obscure liabilities and evade oversight.
The report also pointed to inflated asset valuations, undisclosed liabilities, systemic capitalization of expenses, and questionable donations to promoter-linked entities.
Following its findings, Viceroy Research sent detailed complaints to the Securities and Exchange Board of India (SEBI) on July 14 and the Reserve Bank of India (RBI) on July 15, 2025. The firm later published the letters online, citing the seriousness of the allegations and a lack of visible regulatory response.
Vedanta, on its part, obtained a legal opinion from former Chief Justice of India DY Chandrachud, who advised that the company could initiate a defamation case against Viceroy. However, Viceroy dismissed the legal opinion, continuing to stand by its report and criticisms.
The PIL by Advocate Shakti Bhatia
Advocate Shakti Bhatia filed the present PIL, naming the Union of India, SEBI, RBI, and the Ministry of Corporate Affairs (MCA) as respondents. In his petition, Bhatia claimed to have independently corroborated parts of the Viceroy report, especially concerning undisclosed related-party transactions. By analyzing MCA21 filings, SEBI disclosures, and Registrar of Companies records, he alleged that certain high-value transactions were conducted with undisclosed counterparties, bypassing mandatory shareholder approvals.
According to Bhatia, such practices, if proven, would constitute breaches of the Companies Act, 2013, and SEBI’s LODR Regulations. He argued that these actions amounted to financial fraud with the potential to significantly harm minority shareholders.
Case Title:
SHAKTI BHATIA vs. UNION OF INDIA
DIARY NUMBER 45245/2025
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