The Supreme Court on September 8, 2025, witnessed a significant development in a high-profile case involving corporate governance and regulatory oversight in India. Justice K Vinod Chandran recused himself from hearing a public interest litigation (PIL) petition that sought an independent probe into serious allegations of fraud and financial mismanagement against Vedanta Limited, Hindustan Zinc Limited, and Vedanta Resources Limited, based on a report by US-based short-seller Viceroy Research LLC.
The matter, titled Shakti Bhatia v. Union of India, was listed before a Bench comprising Chief Justice of India (CJI) BR Gavai, Justice Vinod Chandran, and Justice Atul Chandurkar. Following the recusal, the case has been adjourned.
Background of the Case
On July 9, 2025, Viceroy Research LLC released an 87-page report titled “Vedanta – Limited Resources”, which alleged widespread financial irregularities, misrepresentation, and regulatory breaches within the Vedanta group of companies.
The report painted a grim picture of the financial health and corporate practices of Vedanta Resources Limited (VRL) and its subsidiaries. It claimed that VRL operated as a “parasite” holding company, surviving only on funds extracted from Vedanta Limited (VEDL), described as its “dying host.”
Following the report, Viceroy submitted detailed complaint letters to the Securities and Exchange Board of India (SEBI) on July 14 and to the Reserve Bank of India (RBI) on July 15, 2025. However, alleging inadequate response from regulators, Viceroy made its findings public.
Key Allegations in the Viceroy Report
The Viceroy report levelled several serious charges against Vedanta and its group companies, including:
- Fraudulent and unfair trade practices in violation of SEBI’s Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, 2003.
- Misrepresentation of financial disclosures and diversion of funds through related-party brand and management fee arrangements.
- Improper use of upstream dividends and creation of questionable encumbrances that undermined shareholder rights.
- Non-disclosure of material events in contravention of SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015.
- Opaque audit practices and complex corporate structures designed to obscure liabilities and avoid regulatory scrutiny.
- Inflated asset valuations, undisclosed liabilities, and systemic capitalization of expenses.
- Suspicious donations allegedly linked to entities associated with the promoters.
These allegations, if proven, would amount to severe breaches of corporate law, securities regulations, and shareholder protection norms in India.
The Petitioner’s Arguments
The PIL was filed by advocate Shakti Bhatia, who claimed that he had independently verified portions of Viceroy’s findings. He stated that by reviewing MCA21 filings, SEBI disclosures, and Registrar of Companies (RoC) records, he found evidence supporting the allegations of undisclosed related-party transactions.
According to the petitioner:
- Several high-value transactions involved counterparties who were neither declared as related parties nor subjected to shareholder approval as required under the Companies Act, 2013.
- These omissions constituted material violations of SEBI’s LODR Regulations and amounted to financial fraud.
- The alleged practices undermined the interests of minority shareholders and created risks to corporate governance in India.
The PIL arraigned the Union of India, SEBI, RBI, and Ministry of Corporate Affairs (MCA) as respondents, urging the Court to direct a comprehensive regulatory probe into Vedanta’s operations.
Vedanta’s Response
Vedanta Limited, on its part, strongly rejected the allegations. To counter the damage caused by the Viceroy report, the company sought legal opinion from former Chief Justice of India DY Chandrachud.
Justice Chandrachud, in his legal opinion, reportedly advised Vedanta that it could pursue a defamation action against Viceroy Research. This move was aimed at defending the company’s reputation and reassuring investors.
However, Viceroy Research criticised this stance, arguing that instead of addressing the substantive issues raised in the report, Vedanta was attempting to suppress critical scrutiny through legal means.
Legal Representation
During the proceedings, Senior Advocate Gopal Sankaranarayanan appeared for the petitioner, pressing for judicial intervention in light of the seriousness of the allegations.
On the other hand, the Securities and Exchange Board of India (SEBI) was represented by law firm KJ John & Co, indicating the regulator’s formal participation in the proceedings.
Importance of the Case
This case raises critical questions about corporate governance, regulatory enforcement, and shareholder protection in India. The allegations against Vedanta strike at the heart of investor confidence and financial transparency.
If substantiated, the claims could lead to:
- Enhanced scrutiny of related-party transactions and promoter-linked dealings.
- Reforms in disclosure practices mandated under SEBI regulations.
- Greater accountability of audit firms and corporate boards.
- Strengthening of regulatory oversight to prevent misuse of dividends, encumbrances, and opaque corporate structures.
Moreover, the PIL highlights the growing role of activist investors and short-sellers in exposing potential financial irregularities in major corporations.
Broader Context: Corporate Frauds and Indian Securities Law
The Vedanta case is not an isolated instance. India has witnessed several high-profile corporate frauds in recent decades—from Satyam Computers (2009) to allegations surrounding IL\&FS (2018). Each scandal has exposed gaps in corporate governance frameworks and pushed regulators to tighten compliance requirements.
The present case comes at a time when India is seeking to attract global investment and strengthen its capital markets. Regulatory inaction in the face of such allegations could damage the credibility of Indian markets internationally.
What Lies Ahead?
With Justice K Vinod Chandran’s recusal, the matter will likely be placed before a reconstituted Bench in the coming weeks. The Court will then decide whether to entertain the PIL and issue directions to SEBI, RBI, and MCA to investigate the allegations.
If the Supreme Court orders a probe, it could set a precedent for judicial oversight in cases involving systemic corporate misconduct and regulatory lapses. Conversely, if the Court declines intervention, the responsibility will fall squarely on regulators to act transparently and decisively.
Conclusion
The Supreme Court’s handling of Shakti Bhatia v. Union of India will be closely watched by investors, regulators, and corporate stakeholders alike. At stake is not just the reputation of Vedanta, but also the credibility of India’s regulatory ecosystem.
The allegations made by Viceroy Research underscore the urgent need for robust corporate governance, transparent disclosures, and vigilant regulatory action. As the case proceeds, it may well shape the future of corporate accountability and investor protection in India.
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