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SEBI throws the book at Mallya, Chhabrias -- `Divest wrongfully acquired shares in Herbertsons'

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SEBI said the case arose from allegations that Mr Mallya had transferred approximately 27 per cent of his shareholding (held in the name of various investment companies) in Herbertsons to the Kishore Chhabria group in 1993, bringing his shareholding down to 21.38 per cent.

MUMBAI, Feb. 20

IN a landmark order, the Securities and Exchange Board of India (SEBI) has directed Mr Vijay Mallya, Chairman, UB group, and Mr Kishore Chhabria and Mr M.D. Chhabria to disinvest shares of Herbertsons Ltd that they acquired in violation of listing agreements and SEBI takeover regulations.

SEBI's order, dated February 19, directs that this be done through an offer for sale to the public "at the face value of the shares as on the date of the order or at the lowest price at which these shares were acquired, whichever is lower."

Both the parties concerned shall appoint merchant bankers for the same and file their offer documents for the sale of shares with SEBI within a period of three months.

Adjudication proceedings shall also be initiated against Mr Mallya, the Chhabrias as well as persons who may have acted in concert with them, said SEBI.

Mr Mallya has been directed to disinvest shares beyond the 21.38 per cent that he held in Herbertsons, prior to the acquisition of further shares in violation of SEBI regulations; the Chhabrias and persons acting in concert with them have been directed to disinvest the minimum number of shares so as to reduce their shareholding to less than 10 per cent, the then existing threshold limit under SEBI regulations (1994).

A news release from SEBI said the case arose from allegations that Mr Mallya had transferred approximately 27 per cent of his shareholding (held in the name of various investment companies) in Herbertsons to the Kishore Chhabria group in 1993, bringing his shareholding down to 21.38 per cent. By December 31, 1994, said SEBI, Mr Mallya, along with persons acting in concert, increased his shareholding to 25.66 per cent. In addition, Mr Mallya, through a scheme of merger and acquisition of six companies with United Breweries Ltd, acquired approximately 2.5 per cent shares of Herbertsons during December 1994 and September 1995. Mr Mallya, through grant of an interest-free loan to Prasam Trading and Finance Ltd, acquired approximately 2.06 per cent shares of Herbertsons.

In the case of the Chhabrias, they had acquired a total of 47.48 per cent shares in Herbertsons during 1993 - 1997 through various entities without making an open offer, said SEBI. The shares include 27.21 per cent acquired prior to SEBI takeover regulations 1994, through six companies belonging to the Chhabrias and 19.71 per cent during the currency of the Regulations 1994 by adopting a stratagem of granting interest-free loans to some companies that were later acquired by Mr M.D. Chhabria.

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