Obviously, Mallya is unlikely to give up control and has launched a massive defense to keep him out.Unfortunatelythe law does not bar hostile takeovers so long as the predator follows the takeover rules. The issue is simple. Have Chhabria and Mallya complied with the takeover code? If not what is the penalty?

Did I say simple? Not with SEBI in the picture. Under the regulators' watchful supervision, the takeover battle has turned into a dirty mud-slinging war which will probably damage SEBI's reputation the most.

Ranged on either side are the best legal brains in the country opining on whether or not the takeover code has been violated (Mallya too acquired a nine per centadditional stake during the battle). On Chhabria's side are opinions by former chief Justice of the Supreme Court Justice Ahmadi, former finance minister P.Chidambaram, Attorney General Soli Sorabjee, and legal luminaries such as Arun Jaitley. Vijay Mallya's line up stars another former Chief Justice of the Supreme Court -- Justice P.N.Bhagwati, who headed the committee drafting the takeover rules.

Chhabria has astutely used every legal loophole to avoid attracting the provisions for making an open offer under the takeover code. Firstly, his acquisitions are covered by the 1994 code not the 1997 one. A drafting flaw in the 1994 regulations created a loophole allowing him to use a two step route to raising his stake without attracting the open offer provision -- a view which is endorsed by the Securities Appellate Tribunal of Mumbai, and has remained unchallenged by SEBI. All of Chhabria's legal opinions, submitted to SEBI at regular intervals support this view. Mallya not only transferred Chabbria's 10.9per cent acquisition but seemed to endorse his stand that an open offer was not required.

SEBI reacted in May 1996 demanding that Chhabria make an open offer. On October 9, 1996, it issued a show cause notice to Chhabria for not failing to comply with its orders. The real drama began soon after. Mallya realised that Chhabria had acquired another nine per cent of equity through Mahameru Trading Co. and Shirish Finance before February 14, 1997 the new takeover code was notified later. In February 1997, he made a creeping acquisition of 54,000 shares under the new code.

On December 31, 1997 SEBI Chairman D.R.Mehta, at a meeting with Chhabria directed him to make an open offer and Chhabria agreed to comply with the orders via a letter dated January 20, 1998. Clearly, Chhabria was going for the kill. An open offer would have officially given him the majority required to takeover Herbertsons. Mallya did not even have any institutional shareholders to appeal to for support.

At this point, SEBI began toenact a sordid drama which calls to question its very function as a regulatory body. Firstly, Chabbria's letter of January 20, addressed to the SEBI chairman, got curiously converted into an investor complaint and was sent to Herbertsons. Mallya reacted immediately by filing a legal opinion by takeover committee chairman Justice Bhagwati saying that Chhabria should not only not be allowed to go ahead with the open ofer, but should, under the 1994 regulations be asked to divest his shares.

That is not all, the Herbertsons file and his earlier letters was simply lost from the SEBI's office. A wild goose inquiry was launched to find the missing file, and another to re-examine the issue. In August 1998, SEBI's divisional chief concludes that both Mallya and Chhabria had violated the code and recommended prosecution and penalty. While SEBI grappled with its lost files, the most detailed minutes, notes and letters from the SEBI office found their way into the hands of both warring parties and even intotheir official affidavits.

These include a personal hand written note written by Justice Bhagwati to a SEBI executive director. Clearly SEBI is leaking like a sieve. The implication is mischief and maybe corruption. The dirty tactics do not stop here. The propriety of Justice Bhagwati and Soli Sorabjee's opinion are questioned by both sides through media leaks.

Finally, the finance minister is approached and North Block begins asking questions. Amazingly, SEBI still can't make up its mind on what the rules are. It sends another lot of questions to Chhabria. Obviously, the regulator has forgotten that it has already demanded that Chhabria make an open offer. What should be the regulators role in such a situation? It should act swiftly, and in the interest of investors. SEBI has failed on all counts. Neither SEBI nor the investor is concerned about the Chhabria-Mallya battle. Clearly, the share price of Herbertsons' will collapse once Chhabria is asked to divest his holding and this is against investorinterest. The question is, what is stopping SEBI from defining its role and acting on it? Does it not beg scrutiny?