Sources in the Ludhiana Stock Exchange (LSE) confirmed to The Financial Express that the matter will be resolved in the next few hearings.

``Delay in arbitration was largely due to non-cooperation by the company. It was indulging in delaying tactics and not coming forward with requisite information at the arbitration proceedings. Now they have changed their attitude,'' an exchange official revealed.

Sources said the arbitration panel would conduct its hearing in an unbiased manner and not beinfluenced by a recent order issued by SEBI chairman D R Mehta which had absolved SBBJ in the Girnar Fibres case.

The 7-member arbitration panel constituted by LSE is chaired by retired sessions court judge D N Sharma. Sources said the cost of the arbitration proceedings would have to be shared equally by the issuing company and the underwriters to the issue.

LSE sources said SEBI had given the go-ahead to proceed with arbitration irrespective of the order of the SEBI chairman. ``It is not a court order and hence not binding on the parties to the dispute. The arbitration panel will decide on the merits of the case and it will be binding on all the parties concerned,'' he added.

Acting on a specific complaint of Girnar Fibres against SBBJ for its `failure' to fulfil its devolvement obligations, SEBI chairman D R Mehta appointed D Ravikumar as enquiry officer to probe the contraventions, if any, of the SEBI (Merchant Bankers) Rules and Regulations, 1992 vide order dated May 21, 1997.

Replying toshowcause notices issued by the enquiry officer, SBBJ stated that the public issue of Girnar Fibres opened on October 12, 1995 and was to close not later than October 25, 1995 with October 17 being the earliest closing date.

SBBJ maintained that the publication of a pointer advertisement in The Indian Express dated October 17, 1995 to the effect that the public issue would close on the earliest closing date (though the issue had not been fully subscribed) was a breach of the underwriting agreement entered into by the issuer and the bank. SBBJ, on legal advice, did not accept the devolvement and brought the fact to the notice of SEBI.

Subsequently, LSE (being the regional stock exchange) began the arbitration process on August 17, 1996 in terms of clause 20 of the underwriting agreement. In his report submitted on March 2, 1998, the enquiry officer pointed out that the advertisement appearing in The Indian Express on October 17 was only a pointer and not a statutory closureadvertisement.

He added that the company had written to the underwriters on October 17 advising them to ignore the pointer advertisement. Besides, the company released an advertisement on October 18 which said the issue was still open. The enquiry officer concluded that since the issue had remained open for the maximum period of 10 days from the date of opening and the pointer advertisement had been negated by a counter advertisement, no underwriter could be absolved of his underwriting obligations.

The enquiry officer recommended a penalty of suspension of certificate of registration to act as a merchant banker for a period of six months on SBBJ under regulation 36(1) of SEBI (Merchant Bankers) Rules and Regulations.

Following a personal hearing granted to SBBJ on May 12, 1998, SEBI chairman D R Mehta considered the enquiry officer's findings, oral and written representations of SBBJ and facts available on record and ordered that the issuer company `cannot take benefit of its own fault'.

Invokingpowers conferred on him by virtue of section 4(3) of the Securities and Exchange Board of India Act, 1992 read with regulation 40(3) of SEBI (Merchant Bankers) Rules and Regulations, 1992 Mehta ruled on June 15, 1998 that `no action in the matter is called for and the case is accordingly disposed off.'