Karvy had earlier rejected the request of HongkongBank, the share custodian for Templeton, on the grounds that it had delivered the shares 10 minutes after the deadline for submission.

The issue had snowballed into a major controversy, with the head of Templeton's emerging market funds, Mark Mobius, taking strong exception to the rejection and following it up with a complaint to SEBI.

HongkongBank had throughout maintained that it had submitted the shares on time. Templeton was keen that the issue is resolved so that it does not suffer losses as the open offer price of Sterlite was fairly attractive at Rs 221.

At a hearing held last Friday, Sterlite, Karvy and HongkongBank stuck to their stand of the timing of the submission of the shares. In his order, passed on Thursday, SEBI chairmanDR Mehta has directed Karvy to accept the shares.

"Given the evidence on record by HongkongBank we deemed it fit to give them the benefit of the doubt. The evidence of having submitted the shares on time was not 100 per cent but was reasonable enough to merit acceptance of the shares," said a top SEBI source.

July 6 was the last date for the receipt of payment, which is to be made to shareholders within a month of the closure of the open offer.

"While HongkongBank maintained it submitted the shares before the deadline, Karvy continued to say that the shares were submitted at 4.10 pm, as against the official deadline of 4.00 pm. Taking the various aspects of the case into consideration we feel that Karvy should accept the shares," said a SEBI source.

However, what prompted HongkongBank to delay the delivery of shares right till the last moment could not be explained by SEBI. Officials at the custodial outfit refused to comment on the case.

"It is difficult to comprehend why the custodian had to waittill the last moment", said a source.

Mobius was recently reported to have said that they had issued instructions to the custodian to submit the shares to Sterlite at least three weeks before the closure of the offer.

The other issue that Mobius had raised was that of an FII not being allowed to submit the shares directly to the acquirer and instead having to go through a broker. This anomaly was, however, recently rectified by SEBI which has now allowed FIIs to furnish shares in an open offer without having to go through a broker.

"The amount of shares involved was high and the time of delay was too little. Moreover, there could have been a spate of litigation and loss to an investor if the shares had not been accepted," said a source.