Sterlite also threatened to file a suit to claim damages against the regulator over its stand on the matter. Sterlite had failed to receive shareholder approval for going ahead with its open offer at an extraordinary general meeting and had cited this as the reason for withdrawal of its offer. Sebi, however, decided to freeze the escrow account of Sterlite and issued a showcause notice to it, asking it to justify the withdrawal.

In its petition, Sterlite contended that Sebi was biased against the company and hence the need to move the court. Sterlite had, a fortnight ago, written to the finance ministry bringing its contention tonotice, but had not yet received any reply.

The single-judge of the high court refused to admit the plea on the grounds that it was premature as Sebi was yet to deliver its verdict on the case. Later in the day, Sterlite sprung another surprise on Sebi when it sought an adjournment in the date of hearing to the showcause. Sebi agreed to the adjournment to September 9.

This is being interpreted as a move to give the company time to go in appeal against the single-judge verdict to a division bench and hope for a favourable verdict there. The company, however, contended that as its senior counsel was away to Delhi it could not present its case.

Earlier on in the day, Sebi officials, who happened to be present in the court in connection with another case, were taken by surprise when they found that Sterlite had moved the court and the matter was coming up for hearing. They managed to quickly get their act together and be represented at the hearing through a counsel.

Counsel for Sebi argued that the replyto the showcause was to be heard in Mumbai on Thursday. Having heard the two sides, the bench decided to dismiss the petition. The bench also sought to know why Sterlite filed the case before the Delhi high court when the hearing before Sebi, as well as the establishment of Sebi and Sterlite, was based in Mumbai.

Sterlite officials were not available for comment. The face-off between Sterlite and Sebi, the first of its kind, is expected to turn into a major controversy. Sterlite had made an open offer to shareholders of Indal, which was a mix of cash and optionally convertible debentures. Sebi had asked the company to comply with the preferential issue guidelines before issuing the debentures. This was conveyed to the company just before the close of the offer. Sterlite felt that it needed the approval of shareholders through an EGM. This approval was not granted.

Simultaneously, rival bidder Alcan hiked its offer price and succeeded in taking its stake up in Indal, making it unviable for Sterlite to takeover the company.

However, a number of investors had lodged their shares with Sterlite as per the offer. But the company refused to accept these shares leading to cries of help from investors. In response to this, Sebi had frozen the escrow account and slapped a showcause notice on Sterlite.