The SEBI chairman, DR Mehta, pronounced his order on Friday. The final hearing in the matter was concluded on September 1. The offer is scheduled to open on September 23.

According to sources, the regulator has decided to delink the two events. SEBI has said that while the current open offer will be allowed to go through, only the violation of takeover code aspect of the earlier deal will be looked into by the regulator. If the deal is found to have been illegal then suitable action would be taken against the erring party.

The erstwhile promoter of Raasi Cements, BV Raju, hadtransferred 39.5 per cent stake of the company's stake in Sri Vishnu Cements to nine investment companies, allegedly when it was faced with a hostile takeover bid by India Cements. The idea was to not let India Cements get control of Sri Vishnu Cements even if it were to acquire Raasi, hence rendering the takeover less attractive to the raider. The Raju camp, however, maintains that the transfer was made much ahead of the open offer by India Cements.

Subsequently, Raju made an open offer for another 20 per cent in Sri Vishnu at a now revised price of Rs 100. India Cements has challenged the earlier transaction in a civil court on several grounds which range from violation of the provisions of the Companies Act to the SEBI takeover code.

The current management of Raasi Cements and an individual investor have, however, contested the entire move saying that as the nine investment companies were persons acting in concert an open offer should have been made at that point itself. And as the earlier sharetransfer was in itself in violation of the laws the current open offer should also not be allowed to go through.

SEBI sources said that at the hearing the current management of Raasi Cements, now controlled by India Cements, clearly stated that they had not filed any complaint with SEBI and had only informed it could take suo moto action if it so desired.

SEBI felt that as the current open offer was by itself not legally incorrect there was no reason to debar the entity from going ahead with it.

The regulator also felt that preventing the offer was also detrimental to the interest of Sri Vishnu Cement shareholders who were getting an opportunity to receive Rs 100 per share for their holdings compared to the much lower value before the offer was announced.

It was also felt that the individual investor who had filed a complaint with SEBI was not even a shareholder in Sri Vishnu Cement.

When contacted, sources close to India Cement said that the company welcomed the move by SEBI to investigate theprevious deal as this would prove whether a violation had taken place or not.

SEBI sources pointed out that the current open offer by Raju was allowed to go through as it may not be legally tenable to debar an entity from making an open offer which by itself appears legally correct.

Moreover, to debar Raju from making the current offer without proving the allegations against him for an earlier transfer of 39.5 per cent stake of Raasi Cements in Shree Vishnu Cements to nine investment companies allegedly controlled by Raju, may not be legally tenable, sources feel.

It was also felt that in the event of the earlier transaction being held invalid, Raju would end up having paid Rs 100 per share for this 20 per cent but would at the same time end up losing his earlier 39.5 per cent stake (which would be revoked). This according to sources, is a good enough monetary penalty in itself on the acquirer if he is found guilty as this in effect would mean that he pays Rs 100 per share and still ends up having nocontrolling stake in the company.