Can Assets & Liabilities transferred under Debt Restructuring through Scheme of Arrangement amount to Demerger

Can Assets & Liabilities transferred under Debt Restructuring through a Scheme of Arrangement amount to Demerger

- Anirudha Jain

Facts of the Case:

1. Petitions were filed u/s 391(2) & 394 of the Companies Act,1956 praying sanction of scheme of arrangement regarding restructuring of corporate debt of M/s Siel Limited i.e., assessee which was duly approved by the Hon'ble High Court of Delhi vide its order dated 26-08-2003.

2. The four companies which filed the petitions were M/s Shivaji Marg Properties Ltd. (100% equity with M/s Siel Limited), M/s Siel Holdings Limited (100% equity with M/s Siel Sugar Limited), M/s Siel Sugar Limited and the assessee.

3. The debt restructuring was undertaken due to substantial accumulated losses of M/s Siel Limited

4. As a result of arrangement, the lenders of the assessee were given three options and as part of options selected by various lenders:

a. 32% of the total land valued at Rs.65 crores, was assigned to M/s Shivaji Marg Properties Limited along with the same amount of debt (Rs.65 crores). From the sale of the said land, the corresponding debt was to discharged i.e., M/s Shivaji Marg Properties Ltd. was a self-liquidated company.

b. The investments valued at Rs.35 crores were assigned to M/s Siel Holding Limited along with equivalent amount of debt and the said debt was to be discharged by selling the said shares i.e., Siel Holding Ltd. was also a self-liquidated company.

c. The two sugar units (supra) of the assessee company were vested in M/s Siel Sugar Limited for which the shareholders of the assessee company were granted the shares of M/s Siel Sugar Limited in the ratio mentioned in the order of the High Court.

d. M/s Siel Limited i.e., the assessee was to continue to operate the residual business of Chemicals and Vegetable Oils.