The shutdown of India's largest copper producer by the Madras High Court marked the second major blow in two months for London-listed Vedanta, whose plan to be a major global metals player rests heavily on its Indian assets.

"It's a difficult environment" for the company, said Kamlesh Bagmar, research analyst at Indian investment house Prabhudas Lilladher.

The court ordered Vedanta's 54-percent-owned subsidiary Sterlite on Tuesday to shut its Tuticorin smelter in a coastal area in southern Tamil Nadu state to protect "mother nature" from "unabated air and water pollution".

Shares of Vedanta, owned by billionaire Anil Agarwal, slid 6.33 percent, or 145 pence, to 2,151 pence in London trade while Sterlite's stock tumbled 8.5 percent, or 15 rupees, to 161.50 rupees on the Mumbai stock exchange.

The closure also pushed up global copper prices as the shutdown aggravated a tight global supply situation.

The court ruling came after India's environment ministry last month rejected controversial plans by Vedanta to mine bauxite in the eastern state of Orissa on land held sacred by an Indian tribe to feed a nearby aluminium refinery.

The Indian government has also threatened to scrap approval for the one-million-tonnes a year refinery in light of alleged "gross violation of environment norms".

The court ruling was the latest sign of a tougher approach by India to improving its green track record as concerns mount about the impact of growing industrialisation on air and water quality, forests, plants and wildlife.

The court said the smelter had polluted areas close to a bio-diverse national marine park and there were large amounts of heavy metals, arsenic and other toxic chemicals in the ground water.

The court order against Sterlite followed a petition from environmental activists challenging clearance given to the smelter that was lodged in 1996.

The smelter has been operating "in compliance with necessary rules and regulations and global standards", Sterlite said in a statement.

The company said it was awaiting the "full text" of the court order to decide on its next step but it was expected to appeal to the Supreme Court.

The judgement comes as India's government considers a proposal by Vedanta to buy a controlling stake in Cairn India, a unit of Edinburgh-based Cairn Energy.

Vedanta, which has declared it wants to be the country's "natural resources champion", has made an offer worth up to 9.6 billion dollars to buy the stake in Cairn India, whose biggest asset is the oil-rich Mangala field in the western state of Rajasthan.

Sterlite had hoped to double the annual capacity of the 400,000 tonnes Tuticorin smelter by mid-2011.

"This has put the ongoing expansion under a question mark" and "intensified the uncertainty on the stock", said Bagmar of Prabhudas Lilladher.

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