Market regulator SEBI has so far not found any violations of law by the Maruti Suzuki management on its decision to hand over the proposed Gujarat plant to parent Suzuki but will examine the issues, source said.
Top sources said that the market regulator, while finding no technical violation in the car company's board decision of January 28, has decided to look into the matter, following the outcry by institutional investors that include at least four insurance firms and 12 mutual funds.
SEBIi is understood to have sought details about the development from Maruti, which have been answered to by the carmaker.
"The situation appears to be ethically wrong," senior officials with the regulator told TOI. "Violations, if any, are being investigated although technically there appears to be no violation of law," a source said.
The board of the company will meet on Saturday against the backdrop of the intense battle between the firm and institutional investors.
The market regulator has gone on an alert after a series of complaints by the institutional investors who fear that the move — which will see Suzuki set up the Gujarat plant through a fully-owned subsidiary — may reduce Maruti to a mere trading company, while benefiting Suzuki.
SEBI is understood to have taken up the issue seriously and is even considering to call the senior management of the carmaker. "We may call the Maruti management if there is a legal violation to make it known that we are not happy with the development," the source said.
Fund houses are contemplating legal action over the move and may move the Company Law Board (CLB) to have it reversed. They are saying that the response of the Maruti management to their concerns has been unsatisfactory and the company has not responded to six of their seven questions.
All eyes are now on Saturday's board meet that will also be attended by Suzuki chairman Osamu Suzuki, who is also on the Maruti board. Suzuki is one of the instrumental force behind the decision and is being briefed on the developments on a daily basis.
While the board meeting has been called to fix budgetary allocations for the next fiscal, sources said the Gujarat issue is expected to take centre-stage, especially at the behest of the independent directors.
A majority of the independent directors on Maruti's board are understood to have opposed the decision to give the new plant to Suzuki and have also made their displeasure known to the company management by lodging a "strong protest".
The independent directors are corporate lawyer Pallavi Shroff, former Ranbaxy chief executive D S Brar, NHAI chairman R P Singh and ex-PwC head Amal Ganguli.
Maruti management, however, is steadfast in its insistence that the deal remains profitable for the company and investors. "It is a win-win proposition and we are not re-considering it," company MD & CEO Keinichi Ayukawa told TOI. "We are not hiding anything, and have nothing to hide. We are ready to explain our position again if the need be," he said when asked if the company is prepared to explain its po sition to SEBI.