According to a letter the government handed to the company on Monday, the Indian federal government is against Hindustan Zinc’s proposed $2.98 billion acquisition of Vedanta Ltd.’s zinc interests. The announcement of the deal was made on January 19, according to the news agency Reuters.

It proved that the directors of Hindustan Zinc who were chosen by the government did not agree with the agreement that had been made public. The government owns around 30% of Hindustan Zinc, despite Vedanta being the company’s largest shareholder.

The government allegedly reiterated its opposition to the “related party transaction” in the letter. “We firmly advise the corporation to investigate other cashless methods of acquiring these assets.”

The government also stated that it would pursue all legal options available to it and would oppose any subsequent resolutions on the agreement.

The HZL board’s acquisition of these properties in January is alleged to have violated the rights of minority shareholders by the Union Mines Ministry. The Indian government owns 29.5% of HZL, while Vedanta has 64.9% of the company.

THL Zinc Ventures Ltd (Mauritius), a fully owned subsidiary of Vedanta, and its Zinc International assets were approved by the HZL board on January 19 for purchase by THL Zinc Ltd. (Mauritius). THL Zinc Ltd. will join Hindustan Zinc as a fully-owned subsidiary. Officials from the government have reportedly stated that the plan was rejected at the meeting by its representative on the board.

Although the move is unlikely to take place in the near future and the disinvestment itself may be in limbo for some time, the government intends to sell the remaining interest in HZL in tranches of approximately 5–10% to begin with.

The company will seek shareholder approval in February, and further approvals are anticipated to be granted within 18 months, according to a JM Financial Institutional Securities report published on January 19th under the heading “Much needed expansion optionality, albeit at pricey pricing.”