Chennai-based India Cements has raised questions over the transfer of Sri Vishnu Cement shares from Raasi Cement to nine independent investment companies in December 1997.

It is expected that Sri Vishnu Cement promoter B V Raju, who was till recently the promoter of Raasi Cement, will argue that the transaction was perfectly above board. Raju -- whose stake in Sri Vishnu has now gone above 50 per cent -- has argued before the SEBI that the deal was completed long before India Cements succeeded in wrenching Raasi Cement from his grip, Sri Vishnu Cement should not be transferred to India Cements along with the assets of Raasi.

Raju's lawyers have pointed out that N Srinivasan, India Cements' managing director, had in course of the successfultakeover of Raasi Cements gone on record in the media saying that the acquisition price of Rs 300 a share was based on Raasi's assets alone and did not take into account the assets of Sri Vishnu Cement, about which Srinivasan had then said he had "no regrets".

Infrastructure and power problems had forced Sri Vishnu Cement to record early losses. Raju had started the firm after successfully setting up Raasi Cement. The company went to the Board for Industrial & Financial Reconstruction (BIFR), and became a millstone round Raasi Cement's neck. With the interests of Raasi shareholders in mind, Raju decided to transfer the sick company's shares from Raasi Cement to nine "independent" investment companies, armed with an approval for the enabling resolution of three institutional nominees on the Raasi Cement board.

Raju says he was advised by experts that the acquisition by the nine investment companies did not trigger the takeover code, and no open offer was therefore made at the time to the remainingshareholders of Sri Vishnu Cement. The deal was completed by December 1997.

This was followed by the takeover of Raasi Cement by India Cements, where Raju was outgunned by India Cements promoters' access to company funds, something not allowed to domestic promoters defending their stakes.

Soon after the takeover, in July 1998, IDBI sought a non-disposal undertaking from the nine independent companies, and legal experts pointed out to Raju that joint signature of such an undertaking would pin the definition of "persons acting in concert" on them and trigger the takeover code.

An open offer was accordingly made for an additional 20 per cent of Sri Vishnu Cement shares by the nine investment companies.

India Cements has since objected to this, and raised the matter with SEBI, saying that the transfer of Sri Vishnu Cement shares amounted to a violation of the takeover code.

Raju, who recently lost the battle for control over Raasi Cement, however said he was confident of winning the one over Sri VishnuCement.