Resolution of HZL’s Board of Directors on acquisition of THL Zinc Ltd, Mauritius- Role of Independent Directors

Hindustan Zinc Ltd


Dr Manoj Govil

Secretary (Corporate Affairs)

Govt of India

Dear Dr Govil,

The Vedanta Group, the majority shareholder of Hindustan Zinc Ltd. (HZL), informed the national stock exchanges on 19-1-2023 vide their communication No.HZL/2023-SECY/ dated January 19, 2023, as required by SEBI’s Listing Regulations, that HZL’s Board met on the same day and passed a resolution to acquire THL Zinc Ltd, Mauritius for a consideration of $2.981 billion.

Apparently, the Government of India, represented by its three nominee Directors on HZL’s Board, did not approve that resolution, as evident from the Ministry of Mines communication No. Met2-Z09/1/2021-Metal II(Part-I) dated 17-2-2023 addressed to HZL’s Company Secretary.

In this connection, I invite your attention to my letter dated 24-2-2023 (copy marked to you) addressed to the Cabinet Secretary (readily accessible at in which I questioned HZL’s decision to acquire THL Zinc Ltd (THLZL), Mauritius on the following grounds:

  1. The proposed acquisition is in the nature of a “related party” transaction, as the Vedanta Group is the majority shareholderin both HZL and THLZL Evidently, the Vedanta Group failed to seek prior approval of the government, the main minority shareholder of the HZL, represented by its three nominee Directors on HZL’s Board, before HZL passed the resolution.
  2. Related-party transactions attract the provisions of Section 188 of the Companies Act. As per that Section, “no member of the company shall vote on such [resolution], to approve any contract or arrangement which may be entered into by the company, if such member is a related party:”, which implies that the representatives of the Vedanta Group, a related party, ought to have recused themselves from the Board proceedings, in which case, the Board would not have been in a position to pass such a resolution opposed by the three Government Directors
  3. Buying THLZL for $2.981 billion appeared to be a highly non-transparent transaction, not based on any evaluation of the networth of THLZL, implying that it could impact adversely on HZL’s net worth.
  4. THLZL itself seems to be embroiled in multiple related-party transactions and that company is outside the regulatory reach of SEBI and the other Indian regulators. HZL’s Board ought to have considered this aspect before taking the above cited decision.
  5. THLZL’s zinc assets are held by two other companies, namely, Black Mountain Mining Pty Ltd, South Africa (in which THZL has a 69.6%share) and THL Zinc Namibia Holdings (Pty) Ltd (in which THLZL has a 100% share), both involved, in turn, in multiple related party transactions outside the ambit of SEBI and the other Indian regulators.

Considering that all the three Government nominees on HZL Board expressed their dissent, as evident from the Ministry of Mines letter dated 24-2-2023 (cited above), the three Independent Directors on HZL’s Board, as required by Section 149(8) of the Companies Act and, as per the Code stipulated in Schedule IV of that Act, obligated not only to safeguard HZL’s interests but also to safeguard the minority shareholders’ interests, would have raised the above cited concerns and recorded their dissent to HZL’s Board resolution dated 19-1-2023 on the above subject. How did the Vedanta Group then unilaterally inform the national stock exchanges that HZL’s Board passed a resolution agreeing to acquisition of THLZL?

This calls for a thorough investigation by your Ministry into the circumstances under which the Vedanta Group had failed to place the matter initially before HZL’s Audit & Risk Management Committee, before bringing up the matter before the full Board, without its own Directors recusing themselves from the Board proceedings, and without the Board seeking the views on such an important matter from both the government Directors and the Independent Directors.

While examining the proceedings of HZL’s Board meeting, the Ministry may find the dissenting views expressed by the three Government Directors and also the views expressed by the three Independent Directors.

In case the Independent Directors had also failed to raise the above cited concerns on the subject, it calls for an investigation into whether they failed to discharge their responsibility to safeguard HZL’s interests and the minority shareholders’ interests, as required by the Companies Act.

Those who failed to safeguard HZL’s interests, those who failed to safeguard the minority shareholders’ interests and those who infringed the requirements of the Companies Act need to proceed against forthwith.

May I request your Ministry to undertake a thorough investigation into this without delay?


Yours sincerely,

E A S Sarma
Former Secretary to Government of India

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