Viceroy rebuts former Chief Justice D.Y. Chandrachud's legal opinion on its Vedanta report
Viceroy argued that Chandrachud's legal opinion did not answer questions raised by it with regards to dividend payments and alleged financial mismanagement at the mining and minerals conglomerate.
Justice Chandrachud's opinion 'fails to refute, investigate, or even engage with a single substantive financial allegation in our reports,' the short-seller said in a report on Monday, 21 July, its eighth note on Vedanta in 13 days.
Vedanta has consistently denied Viceroy's allegations, terming the accusations baseless.
Justice Chandrachud in his legal opinion to Vedanta, which was made public on Friday, said Viceroy's first report on billionaire Anil Agarwal's group, published on 9 July, lacked credibility, and the researchers behind the report had 'dubious credentials'. He said he relied on information shared by Vedanta to arrive at this opinion since Viceroy's website had no information in this regard.
The former Chief Justice also highlighted Viceroy's interest in profiteering from a possible rout in Vedanta Resources' commercial papers as a result of the short-seller's reports. He also said he suspected the timing of the report, coming just as India-listed Vedanta Ltd is headed for a demerger.
In April, Viceroy Research took a short position on the bonds of Vedanta Resources Ltd, the London-based unlisted holding company of the Vedanta Group, according to Fraser Perring, founder of Viceroy Research, who didn't disclose the quantum of his firm's exposure.
Viceroy argued that Chandrachud's legal opinion relied entirely on 'management representations without questioning', the short-seller said, adding that the opinion failed to dispute any of its findings, conclusions, or concerns.
'When faced with serious allegations backed by detailed financial evidence, the company responded not with transparency, but with a character assassination attempt dressed in legal language,' the short-seller said in its latest report.
Viceroy also claimed Vedanta had to pay for a legal opinion to defend its parent company against claims of stealing money or misusing the subsidiary's funds. Vedanta Resources holds a majority stake in India-listed Vedanta Ltd through several intermediaries. Hindustan Zinc Ltd is a subsidiary of Vedanta Ltd.
Justice Chandrachud declined to comment on the matter. He explained that his role was professional in nature and the opinion given was protected by professional privilege.
'It is inappropriate to discuss anything pertaining to it in the public realm,' he said.
Vedanta Group did not immediately reply to Mint's emailed queries on Viceroy's rebuttal.
In his legal opinion, Justice Chandrachud said the transactions disclosed in financial statements and regulatory filings by Vedanta showed there was transparency and compliance with regulations. Such disclosures should be presumed legitimate unless there was clear evidence to prove otherwise, he opined.
To this, Viceroy argued that mere disclosure did not confirm legality of the transactions.
Justice Chandrachud also said Viceroy Research's report contained serious allegations tarnishing the Vedanta Group's image and reputation. 'The report contains serious imputations such as 'ponzi scheme' and 'parasite', which have caused harm to querist's (here Vedanta Ltd) business and reputation,' he said, adding that Vedanta was well placed to seek legal remedies under such circumstances.
Former trial court judge Rishabh Gandhi said dismissing Chandrachud's report as just an opinion was reductive and misleading.
'A legal opinion—an opinion rendered by a legal expert based on applicable law and the facts presented—when issued by a highly regarded authority like the former Chief Justice of India, carries considerable legal and institutional credibility,' said Gandhi, who is also the founder of law firm Rishabh Gandhi & Associates.
Gandhi explained that most legal opinions are based on a detailed review of documents, statutory interpretation, and precedent, primarily to confirm legal compliance, and enforceability of corporate actions such as dividend declarations, inter-company transactions, or board resolutions.
Gandhi, however, clarified that while Chandrachud's legal opinion likely affirmed the legal permissibility of Vedanta's transactions and dividend policies under Indian corporate law, it did not address the broader concerns around financial prudence, related-party dynamics, or cash flow impact.
'If Vedanta wishes to credibly address Viceroy's allegations and rebut the perception that the legal opinion is merely a public relations exercise, it would be prudentto commission an independent financial or forensic audit,' Gandhi said.
Viceroy has accused Vedanta Group of alleged financial misconduct and misrepresentation, making empty promises to shore up share prices, manipulating asset values, raising off-balance sheet loans, and corporate governance lapses, Mint reported on 9 July.
At Vedanta's annual general meeting on 10 July, shareholders reposed their confidence in the company.
'Different investors have different concerns as they view things differently,' said Shriram Subramanian, managing director of proxy advisory firm InGovern. 'Viceroy is a short seller and has a thesis and a short position. Other investors and stakeholders may have a different thesis.'
If investors were truly concerned about Viceroy's allegations, Vedanta's stock would have seen a sharp decline, which hasn't happened, he said.
On 9 July, when Viceroy published its first report on the mining conglomerate, Vedanta Ltd shares declined as much as 8% intraday to ₹ 420.65 apiece before recouping some of the losses following a clarification from the company to settle at ₹ 441.30, down 3.29% on the NSE.
The shares have since recovered. On Monday, Vedanta ended 2% higher at ₹ 454.90 per share.
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