MUMBAI, Aug 14: Even as the Securities and Exchange Board of India (SEBI) has begun collecting information on the Asian Paints share deal, the Choksey family and DSP Merrill Lynch announced that "the block trade of 3.5 million shares of Asian Paints has been cancelled by and between the parties."The National Stock Exchange (NSE), where the deal was reported on August 1, has been informed accordingly.

The said Rs 127 crore deal was negotiated by DSP Merrill Lynch, brokers of Asian Paints MD Atul Choksey, with two foreign institutional investors Capital International and Morgan Stanley. FIIs backed out from the deal as they were unaware that the stake belonged to Atul Choksey.

SEBI officials said on Thursday that they will look into the way the said deal was negotiated and the news was leaked into the markets. ``There are indications of insider trading on the way the entire issue has been handled.

SEBI can look into the possibility for launching a probe,'' said a top SEBI official. The SEBI move is to find out whether the Chokseys move amounted to insider trading.

After the deal was announced, the Asian Paints scrip encountered a panic situation resulting in a selling spree on the bourses. The stock plummeted steadily to a low of Rs 308 from the ruling price of Rs 375 of the day when the deal was struck. Marketmen say the deal was deliberately negotiated and cancelled so that one of the interested promoter can hike his stake in the company.

Meanwhile, all the four promoters of Asian Paints the Danis, the Vakils, and the Choksis and Atul Choksey -- were closeted throughout the day trying to find a compromise formula to the impasse. The other three promoters were worried over the news that Atul Choksey was planning to sell his stake to a multinational paint company -- ICI.

In order to prevent entry of any hostile partners, the promoters decided to talk to Chokseys and find an amicable solution. Company insiders, however, say the Chokseys are still hunting for a buyer for their 9.5 per cent stake in Asian paints. DSP Merrill Lynch has been mandated again to find a suitable buyer.

Buoyed by the news that Atul Choksey has cancelled the deal, the Asian Paints scrip moved up on the BSE to a high of Rs 335 before closing at Rs 328, thus netting a gain of Rs 16 over the Wednesday's close.

Even though the said deal was a negotiated one, it was reported on the trade segment of the National Stock Exchange. However, when the market knew that it was promoter offloading, the price was hammered. Board may ask Atul to quit

MUMBAI: Asian Paints is all set to witness fireworks at its next board meeting, slated for August 22 in Mumbai, as the board of directors is likely to ask Atul Choksey to resign.Company sources say even as Choksey's agreement to continue as MD is valid for another 18 months, he will be asked to quit for bringing company's internal problems into the open.

``I can assure you from now on we will clip Choksey's wings,'' said a company director and one of the promoters of the company.``All the three promoters are united and I am sure very soon we will see the back of Choksey,'' he added. ``The news of ICI taking over Asian Paints was just a stunt to scare us,'' he added.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.