SEBI ignoring code in Sri Vishnu

MUMBAI, SEPT 22: The Securities and Exchange Board of India SEBI has chosen to ignore numerous violations of the takeover code by B V R...

MUMBAI, SEPT 22: The Securities and Exchange Board of India SEBI has chosen to ignore numerous violations of the takeover code by B V Raju and associates which is taking over Sri Vishnu Cements, a shareholder of Raasi Cement, M Z Khan has complained to the Finance Ministry.

8220;The basic issue is how the SEBI could allow a group of persons acting in concert to float an open offer under the takeover code when the same group is being investigated by the SEBI for contravening the provision of its takeover code,8221; Khan said while moving the Finance Ministry8217;s appellate authority against the SEBI order to let B V Raju to go ahead with the open offer for Sri Vishnu Cement. The offer will open on September 24.

Khan has contended that the former management of Raasi Cement, controlled by B V Raju had transferred Raasi8217;s 39.5 per cent stake in Sri Vishnu at Rs 10 share to nine group companies in December 1997 on the eve of India Cement8217;s bid for Raasi Cements. The SEBI has now allowed an open offer by B V Raju at10 times the price. 8220;There has been a serious allegations of irregularities committed by the previous Raasi Cement management under Raju,8221; he said.

Khan has submitted extensive data to the SEBI in July to support his allegation that the nine companies which have bought shares in Sri Vishnu were Raju8217;s front companies. Khan said it was surprising that the SEBI should allow an open offer by the same group without first deciding on these violations.

8220;As per SEBI Act, once prima facie material regarding an offense is made available, the regulatory body must make an investigation and prevent further acquisition of shares by the alleged offenders. SEBI has not complied with this requirement,8221; Khan said.

Besides, the former B V Raju-controlled management of Raasi Cement has also allegedly transferred over 100 acres of company-owned mines to Sri Vishnu Cement Ltd in November 1997 without any monetary considerations after the Raasi board had decided to divest its holding in Sri Vishnu.

Raasi board had, onSeptember 20, 1997, decided to divest 50 per cent of its holding in Sri Vishnu Cement. At a later board meeting, it decided to sell the rest of its shares in Sri Vishnu, a company it had promoted, nurtured and rehabilitated.

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On November 15 the same year, Raasi Cement proceeded to transfer over 100 acres of mining lease owned by Raasi Cement to Sri Vishnu Cement without any consideration.

Among many irregularities detected by the new Raasi management after it took control over the company, is that the B V Raju-controlled management diverted over Rs 30 crore of Raasi funds to various entities controlled by himself and other original promoters. The new management, which took over charge in June 1998, has recovered about Rs 8.50 crore of the diverted funds after it initiated recovery proceedings.