The proposed multi-billion dollar demerger of the Vedanta Group has encountered a significant legal hurdle. The Mumbai bench of the National Company Law Tribunal (NCLT) has reserved its order on the matter after hearing strong objections from the Indian government's Ministry of Petroleum and Natural Gas.
Government Raises Red Flags
During the hearing on Wednesday, the newly constituted bench of Justices Nilesh Sharma and Charanjeet Singh Gulati listened to arguments from both sides. The tribunal confirmed that after hearing the parties, the matter was reserved for orders.
The Ministry of Petroleum and Natural Gas presented substantial concerns that have become a major roadblock for Vedanta's restructuring plans. The ministry's legal representative, Additional Solicitor General Brijender Chahar, highlighted three primary issues: potential financial risks following the demerger, misrepresentation of India's hydrocarbon assets, and insufficient disclosure of liabilities.
"As a sectoral regulator, that is our primary concern," Chahar emphasized, adding that the tribunal must ensure adequate protection of the Indian government's interests during its deliberation.
Vedanta's Counter-Arguments and Demerger Plan
Vedanta, represented by senior counsel Ravi Kadam, countered the ministry's objections vigorously. The company informed the tribunal that it had already secured approval from the Securities and Exchange Board of India (SEBI) after revising its demerger scheme to meet regulatory requirements.
Vedanta argued that while the ministry functions as a sectoral regulator, it is neither a creditor nor a stakeholder in the company. "We are not supposed to meet some wishlist that is given by the MoPNG – we have to fulfil statutory shortcomings, if any," Kadam stated during the proceedings.
The Vedanta Group, led by billionaire Anil Agarwal, had announced its ambitious demerger plan in 2023. The proposal aims to split its extensive operations in India into five separate, publicly listed entities: Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Iron and Steel, and a restructured Vedanta Ltd. The restructured entity would hold the zinc and silver businesses through Hindustan Zinc and serve as an incubator for new technologies and ventures.
Extended Timeline and Future Implications
Due to the pending approvals from NCLT and other government authorities, Vedanta has already postponed its demerger deadline. The company has moved its target from September 2025 to March 2026, indicating the complexity of the regulatory clearance process.
A Vedanta spokesperson reaffirmed the company's commitment to the proposed demerger on Wednesday, stating that the move aims to create independent, sector-specific entities across aluminium, oil and gas, power, and iron and steel. The primary objective remains reducing the company's debt while creating independent businesses that provide enhanced value for stakeholders.
The NCLT's forthcoming decision will be crucial in determining whether Vedanta can proceed with what would be one of India's most significant corporate restructurings in recent years.
