The company board will meet on Thursday to consider the transfer of securities lodged with the company. Almost without doubt, the transfer will be refused.

Mallya has alleged that the deals through which Chhabria raised his stake in the company were invalid, because they violate the takeover code. Chhabria has contested his allegation, and will seek to remove Mallya at a general body meeting of the company on December 30.

In fact, Mallya had already refused transfer of the last 4 per cent stake lodged with the company. If the disputed stake is held valid by authorities, through the purchase of the 1.5 per cent stake, Kishore Chhabriawill come to hold 51 per cent in the company. Mallya is not likely to permit this under any circumstances.

In a negotiated deal in December, 1993, Mallya sold around 27 per cent of Herbertsons shares to Kishore Chhabria. Unable to get the management control that Chhabria says Mallya had promised him along with the stake, Chhabria procured around 6 per cent shares from the market and lodged them with the company for registration in December, 1995.

At a board meeting held on January 3, 1996, Herbertsons refused registration of the shares on the grounds of Sebi takeover code violations. After Sebi intervened on the issue, and was all set to ask Chhabria to make an open offer for the remaining equity of the company, the Mallya camp in Herbertsons reversed the stand completely, and in a board meeting on May 30, 1996, observed that after an "in-depth study of the various provisions of Sebi takeover regulations of 1994", it found the transfer application valid.

Subsequently another 5 per cent shares ofHerbertsons held by Mahameru Trading Pvt Ltd, an investment company controlled by Kishore Chhabria's uncle MD Chhabria were also registered by Herbertsons.

Our Delhi Bureau adds: The Company Law Board (CLB) on Wednesday reserved its order on a petition filed by the Vijay Mallya faction of liquor major Herbertson against BDA Ltd seeking interim relief ahead of December 30 annual general meeting called by the Kishore Chhabria camp.

The Mallya faction had sought relief against oppression and mismanagement under Section 397/398 of the Companies Act. They had alleged that BDA was mismanaged and that the Chhabrias--Kishore and his uncle Madan Lal--had siphoned off money from the company to acquire additional shares in Herbertson.

The Mallya faction, in its petition, submitted that an independent administrator should be appointed by the Company Law Board to oversee the function of BDA. Additionally, they had sought return of the 22 BDA share certificates which had been retained by theChhabrias.

Declining to grant any immediate interim relief, the principal bench of the CLB comprising acting chairman S Balasubramanian and member AK Doshi felt Herbertson should ask its four nominees on BDA board to exert a more tight control. The bench further felt that in case the directors had not able to control mismanagement in future, it should approach the CLB for redressal. "You should ask your directors to tighten up," Balasubramanian said.

BDA is a 100 per cent subsidiary of Herbertson, and the Chhabria have five nominees on its board.

The Herbertson counsel Rohington Nariman stated that the Madan Lal Chhabria and Kishore Chhabria who were controlling BDA had mismanaged its affairs. The accounts of the company were not being prepared and as a result, Herbertson was unable to attach these to its results.

It was stated that Chhabrias used a marketing arrangement with Royal Wines Ltd to divert BDA funds to three companies. These companies, which in turn acquired Herbertson shares in the openmarket, were subsequently taken over by the Chhabrias.

The counsel for BDA, on the other hand, pointed out that arrangement between Royal Wines and BDA was entered into in 1994. This arrangement for marketing of certain brands had been terminated in May this year.

BDA cousel Kapil Sibal pointed out that this allegation of diversion of BDA funds to Royal Wines was matter for Securities and Exchange Board of India to investigate. As for the legitimacy of purchase of Herberson shares by BDA, Sibal pointed out that the Bombay high court was seized of the matter. This case would be heard next on February 3.

Sibal felt that bench should wait for the high court order on this matter instead of granting an interim relief.