The securities watchdog - represented by chairman DR Mehta, senior executive director OP Gahrotra, executive director (legal) Dharmistha Rawal and division chief Usha Narayan - is understood to have questioned Raju on the transfer of shares in Shri Vishnu Cements to associate firms, in order to delink Shri Vishnu Cements from parent company Raasi Cement.

Sebi has objected to the manner in which Shri Vishnu Cements shares were transferred to nine group firms in which Raju was the principal promoter.

The market regulator has also sought clarification on how the transfer was effected without triggering the takeover code. At today's meeting, Raju sought more time to respond to Sebi's objections to the share transfer, and will meetSebi officials again on August 20 to explain his position.

"Today's meeting was called to clarify whether the transaction was in violation of the spirit of the takeover code. But the meeting remained inconclusive as BV Raju sought more time to respond to our showcause notice," a senior Sebi official said.

It is also learnt that the auditors of Raasi Cement, now an India Cements associate company, have qualified the transfer of Shri Vishnu shares to the Raju-controlled firms as "improper".

The share transfer in Sri Vishnu came under scrutiny following the open offer by the Rajus for an additional 20 per cent stake in the company. India Cements objected to the open offer, saying the transfer of 93.68 lakh shares to nine group companies (in which Raju was the principal promoter) was a "fraudulent" transaction violating the takeover code. About today's meeting, sources close to the Rajus said: "It was mutually agreed to have a full hearing on August 20. The meeting was very cordial and Sebi chairman DRMehta gave a patient hearing." BV Raju, reportedly, told Sebi that since the showcause notice reached him only on Wednesday, he would furnish the clarification at the next meeting, on August 20.

India Cements has also alleged that the shares were transferred at Rs 10 each, even as the effective value should have been Rs 100 per share. "The transaction was designed to defraud the shareholders of both Raasi and India Cements," said sources close to India Cements. The N Srinivasan-promoted India Cements has already taken over controlling stake of Raasi.

This was after a negotiated deal with the Rajus and financial institutions, and a subsequent open offer to minority shareholders at Rs 300 per share.

"More importantly, BV Raju did not inform the board of directors at Raasi Cements that the Shri Vishnu holding was being transferred to companies in which he holds absolute control. The directors, including institutional nominees, were not told that Raju was an interested party in the transaction," saidsources close to India Cements.

The Rajus are, however, in no mood to accept that the Shri Vishnu shares transferred at Rs 10 per share were under-priced. "The intrinsic worth is irrelevant, as the transfer price was higher than the prevailing market price of Rs 6-7," said sources close to the Rajus.