Under a scheme submitted in the Calcutta high court, the RP Mody controlled company will hive off certain operations to a new outfit, Hindusthan Engineering & Industries Ltd. HEI will issue two fully paid-up equity shares of Rs 10 each at par for every nine shares of HDC.

Sources in the FIs, requesting anonymity, said the new company will get all the residual profitmaking and credit-worthy operations. Meanwhile, the banks and FIs will continue to have over Rs 100 crore stuck in HDC, they said.

The sources said HDC is trying to put all liquid and realisable assets out of the reach of the FIs and banks -- Industrial Development Bank of India, ICICI Ltd, Industrial Finance Corp of India, Exim Bank and Punjab National Bank.

HDC's scheme says none of the creditors will be affected adversely. Butthe sources said the claim does not stand scrutiny. Some minority shareholders have sent frantic messages to the chief executives of the FIs and banks.

HDC floated a Rs 250-crore issue of global depository receipts a few years ago. The GDR was listed on the Luxembourg Exchange and has done very poorly for investors.

Under the scheme, HDC will retain the closed steel plant at Malanpur in Madhya Pradesh and all its liabilities. Earlier borrowings from the market will be the sole responsibility of HDC.

As a result, all collateral securities pledged by HDC with the FIs and banks will disappear -- accept for the closed plant at Malanpur. The 1998-99 balancesheet shows that this plant ran into heavy weather and is now closed because of various factors. The final blow was the fire at its electrical installation a few months ago.

Steel industry observers said the Malanpur plant is unlikely to ever make profits, because of the lack of a market near the plant and uneconomic operations. They said the Malanpurplant cost nearly 50 per cent more than similar capacities set up by other companies.

The plant is far away from raw material sources as well as the steel market, giving it a severe freight disadvantage. The quality and supply of electricity in the area -- vital for steelmakers -- is very poor.

The plant is unlikely to re-start soon as replacement equipment is not likely to be delivered soon -- some of it is still subject to disputes and some has not been ordered.

Statutory auditor Lodha & Co has pointed out that HDC is yet to get the money from the insurance claims it filed.

The sources said the balancesheet does not disclose the fact that an arbiter has ruled against HDC in a dispute with a reputed electrical goods manufacturer over faulty equipment.