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Notes to Accounts of Cals Refineries Ltd.

Mar 31, 2015

1. Corporate information

Cals Refineries Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956 read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of section 133 of Companies Act, 2013. Its shares are listed on Bombay Stock Exchange in India.

2) Terms / rights attached to Equity Shares/ GDRs

* The Company has only one class of shares referred to as equity shares having a par value of Rs. 1/-. Each holder of equity shares is entitled to one vote per share. Holders of GDRs will have no voting rights with respect to the Deposited Shares.

* In case of Depositary receipts, the Depositary will, if so requested by the Board of Directors of the Company and subject to receipt from the Company of an opinion from the Company's legal counsel, (such counsel being reasonably satisfactory to the Depositary, that to do so will not be illegal or violate any applicable law of India, or subject the Depositary to liability to any Holder or any shareholder of the Company), either vote as directed by the Board or as conveyed by the Chairman of the Company or give a proxy or power of attorney to vote the Deposited Shares in favour of a Director of the Company or other person or vote in the same manner as those shareholders designated by the Board.

In the absence of receipt from the Company of an opinion from legal counsel as aforesaid, the Depositary shall not have any obligation to exercise any voting rights and shall have no liability to the Company or any holder.

* The Company declares and pays dividend in Indian rupees. During the year ended March 31,2015, the amount of dividend recognized as distribution to equity shareholders was Rs. Nil per share (Previous year : Rs. Nil).

* In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

3. Contingent Liabilities and Commitments (To The Extent Not Provided For) (Rs. in million)

Particulars As at As at March 31, 2015 March 31,2014

Contingent Liabilities :

Claim against the Company not acknowledged as debt 7.71 7.71

Capital & other commitments :

Estimated amount of contracts remaining to be executed

on capital accounts and not provided for (net of advances) - 25,723.01

4. Provident fund

Contribution made by the Company during the year is Rs. 0.40 million (Previous year Rs. 0.41 million).

5. In the opinion of the Board of Directors, current assets, loans and advances have a value on realization in the ordinary course of the business at least equal to the amounts at which they are stated and provision for all known liabilities have been made.

6. The Company has not received cofirmation from its vendors to confirm their status under Micro, Small and Medium Enterprises Development Act (MSMED), 2006. Based on this, we are not able to comment on amounts due to any micro or small enterprise under the MSMED Act, 2006.

7. Balances of Trade Payables and Loans are subject to confirmation.

8. Related deferred tax assets amounting Rs. 50.52 million were not recognized since utilization of the tax losses against future taxable profits is not deemed probable in the foreseeable future.

9. a) Related Party Disclosures

Nature of Relationship Name of Related Parties

Key managerial personnel Mr. Deep Kumar Rastogi (Executive Chairman)

Enterprises owned or significantly influenced by key management personnel or their Nyra Holding Private Limited relatives

10. Project Status

a The Company has a plan to set up crude oil refinery in Haldia, West Bengal. Ministry of Forest and Environment (MOEF) has accorded Environmental Clearance for 5 MMTPA refinery project. The Haldia Development Authority (HDA) / West Bengal Industrial Development Corporation (WBIDC) had allotted land in Haldia. The Government of West Bengal extended various concessions which included VAT incentives equivalent to the investment in Plant & Machinery. The Company raised Equity for US$ 200 million in Dec'07 by issuing Global Depositary Receipts (GDR) for part funding the project. The proceeds of the GDR issue were fully utilized to pay capital advances related to purchase of equipment of two used oil refineries and other corporate expenses incurred during construction period. The Company entered into contracts for relocation of one refinery from Ingolstadt, Germany and had also paid advances for such equipments. However, the Company could not achieve financial closure and fulfill the terms of the said contract, resulting in cancellation of the contract and forfeiture of the advances paid.

The Company had, on March 15, 2011, entered into an Asset Purchase Agreement with Tagore Investments SA (Tagore) (an affiliate of Hardt group) for the CENCO Petroleum Refinery at a cost of US$ 275 million. As per the said agreement, the cost of such equipments was to be settled by the Company by issue of Equity in the form of GDR to the extent of US$ 175 million to Tagore and balance US$ 100 million in cash on achievement of financial closure.

The Company had also contracted for another set of Refinery equipments from another affiliate of Hardt group namely Amber Energy SA (Amber) at a cost of US$ 142 million which was to be paid by issue of GDR of US$ 142 million to Amber.

Simultaneously, the Company had entered in to a 'Deed of Novation' with an affiliate of Hardt Group for assuming the contractual obligations envisaged on the supplier under an erstwhile agreement of plant & machinery for which an advance of Rs. 4,583.44 million had been paid.

Hardt Group had agreed to become a strategic investor in the Company and assist it in implementing the refinery project. Abboro Limited (affiliate of Hardt Group) had brought in Rs. 136.52 million as equity during March'11 to March'12 (out of which 120.76 million already allotted & the balance 15.76 million to be allotted as equity shares) to meet funding requirement for working capital and project activities. After signing the agreements with Hardt Group for purchase of refinery equipment and with the set of refining equipment for which the Company had already contracted and paid advances, the Company revised the capacity of refinery envisaged in Haldia to 10 MMTPA from 5 MMTPA. It filed an application to Ministry of Environment to enhance the approval for putting up 200,000 bpd equivalent to 10 MMTPA capacity refineries. However, the Ministry vide its letter dt. Sept 20, 2011 declined the request as Haldia has been notified as a critically polluted area and no new capacity or expansion can be permitted till it is de-notified. Meanwhile, the Company lost the Bayernoil equipment as it couldn't fulfill its contractual commitments.

The Company's proposal for issue of such GDRs to Tagore and Amber, aggregating US$ 317 million was approved by the Foreign Investment Promotion Board (FIPB) in their meeting held on May 20, 2011. Since the amount of issue had exceeded Rs. 12,000 million, the proposal was recommended to Cabinet Committee on Economic Affairs (CCEA). However, prior to receipt of the CCEA approval, SEBI Vide Interim Order in Sep'11 had issued directions to the Company not to issue equity or any other instruments convertible into equity or alter capital structure in any manner till further directions. The SEBI has issued a final order dated 23rd October, 2013 against the Company which mainly states that the Company will not issue equity shares or any other instruments convertible into equity shares or any other security, for a period of ten years.

Further, the Company has already undergone the prohibition imposed vide the Interim Order for a period of approximately two years. In view of this factual situation, it is clarified that the prohibition already undergone by the Company pursuant to the aforementioned SEBI Order shall be reduced while computing the period in respect of the prohibition imposed vide this order. Hence the restriction period of ten years will be reduced to eight years.

The Company's various efforts to restart the project also failed due to the embargo on issue of new equity by SEBI. Hardt Group has also stopped infusing further funds. The contracts entered with Hardt group have expired. However, the Company has filed an application to the Hon'ble Securities and Appellate Tribunal (SAT), against the abovementioned order of the SEBI, which process is undergoing. b Land- Haldia Development Authority (HDA), vide its memo dated March 25, 2008, offered land admeasuring about 400 acres at Haldia, West Bengal to the Company for setting up the refinery project ('the project'). As per the terms of the said memo, lease premium of Rs.600 million was stipulated, which could not be paid by the Company pending financial closure for the refinery project. Subsequently, the Company entered into a tripartite agreement dated March 19, 2010 along with HDA and West Bengal Industrial Development Corporation Limited (WBIDC). The Company was given permissive possession of the land for a period of six months from the date of the agreement with a condition that the land shall be sub-leased in favour of the Company at the end of six months, subject to compliance with certain conditions. Since the Company could not comply with these conditions, it had requested additional time from WBIDC for the same. WBIDC, while granting such extension, stipulated additional conditions relating to tie up of equity and achievement of financial closure for the project. The Company was not in a position to comply with these conditions as the SEBI order was subsisting and informed WBIDC accordingly requesting further extension. However, WBIDC had not acceded to the Company's request and had withdrawn the permissive possession of land.

In the absence of any development in the project and withdrawal of the permissive possession of land, Cost of leasehold land Rs. 990.71 million (including cost of land development Rs. 196.91 million) and civil work of factory building (included in capital work in progress) Rs.49.64 million are written off.

c In the absence of any development in the project and withdrawal of the permissive possession of land, expenses incurred on the projectwhich are 'Preoperative Expenses Pending Allocation' Rs. 432.51 million, 'Consultancy Fees' Rs. 65.62 million shown under 'Capital Work in Progress'and 'Capital Advances' Rs. 4,723.59 million shown under 'Loan and Advances' are written off.

It is pertinent to note here that the resources including the Capital raised through GDR issue etc. have been fully utilised to pay capital advances related to purchase of equipment of Refineries and other corporate expenses incurred during the construction period. At this moment the Company has no operational project and hence no operational revenues accrues to the Company. The Company has been funding its day to day operations and statutory requirements through the funding received by way of unsecured loans from one of the related parties. It has now become difficult to continue receiving funding support from any other sources including by way of unsecured loans. In view of the complex statutory requirements and financial position of the Company, no lender other than the related party, is ready to lend money to the Company.

Further the Company's ability to raise funds has been restricted due to the adverse order of SEBI as explained above. In view of the current scenario the project contemplated is difficult to be made viable at least until significant funding is possible to this effect.

The management has reviewed all capital advances given to various suppliers standing in the books of the company relating to their realisibility and value for the company going ahead. It also noted the possibility of recovery and cost / chances associated with it. Having considered the circumstances, project status, the chances of recovery and the costs associated therewith along with the legal opinions received on the matters, it has become imperative to write off the advances to reflect a true and fair view of the value of the assets of the Company.

It may also be noted that the aforesaid writing offs has given major impact on the Exceptional items and the Net Profit and Loss of the financial year 2014-15 and has also resulted into the negative net worth of the Company. Though such writing off was just and proper and also to meet with the pre-requisites to the existing circumstances of the Company and also to present the true and fair picture of the financial statements.

d The ability of the Company to continue as a going concern is significantly dependent on getting a favourable order from SAT and the management is confident for such favourable order. The promoter is committed to provide necessary funds to meet the Company's liabilities arising in the foreseeable future. These financial statements have been prepared on a going concern basis and do not include the adjustments that would result if the Company is unable to continue as a going concern.

11. Previous year figures have been re-classified/ re-grouped, wherever considered necessary to conform to current year's classification.


Mar 31, 2014

1. Corporate information

Cals Refineries Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on Bombay Stock Exchange in India.

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of dilutive potential equity shares.

a) Terms / rights attached to Equity Shares/ GDRs

# The Company has only one class of shares referred to as equity shares having par value of Rs. 1/-. Each holder of equity shares is entitled to one vote per share. Holders of GDRs will have no voting rights with respect to the Deposited Shares.

# In case of Depositary receipts, the Depositary will, if so requested by the Board of Directors of the Company and subject to receipt from the Company of an opinion from the Company''s legal counsel, (such counsel being reasonably satisfactory to the Depositary, that to do so will not be illegal or violate any applicable law of India, or subject the Depositary to liability to any Holder or any shareholder of the Company), either vote as directed by the Board or as conveyed by the Chairman of the Company or give a proxy or power of attorney to vote the Deposited Shares in favour of a Director of the Company or other person or vote in the same manner as those shareholders designated by the Board.

In the absence of receipt from the Company of an opinion from legal counsel as aforesaid, the Depositary shall not have any obligation to exercise any voting rights and shall have no liability to the Company or any holder.

# The Company declares and pays dividend in Indian rupees. During the year ended March 31, 2014, the amount of dividend recognized as distribution to equity shareholders was Rs. Nil per share (Previous year : Rs. Nil).

# In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

b) The Company has sufficient authorised capital to cover the share capital amount resulting from allotment of shares against share application money.

c) * The Securities and Exchange Board of India has issued an Order dated October 23, 2013 against the Company, which mainly states that:

* Cals shall not issue equity shares or any other instrument convertible into equity shares or any other security, for a period of ten years.

* Vide the Interim Order dated September 21, 2011 (later confirmed through the Confirmatory Order on December 30, 2011), Cals was directed not to issue equity shares or any other instrument convertible into equity shares or alter their capital structure in any manner till further directions. In this context, Cals has already undergone the prohibition imposed vide the Interim Order for a period of approximately two years. In view of this factual situation, it is clarified that the prohibition already undergone by Cals pursuant to the aforementioned SEBI Order shall be reduced while computing the period in respect of the prohibition imposed vide this order.

Trade Payable (others) includes Rs. 630 million as lease premium and interest Rs. 330.52 million, under an agreement for the permissive possession of the land, is not paid by the Company as per the terms of the agreement.

2 Contingent Liabilities and Commitments (To The Extent Not Provided For) (Rs. in million)

Particulars As at As at March 31, 2014 March 31, 2013

Contingent Liabilities :

Claim against the Company not acknowledged as debt 7.71 7.71

Capital & other commitments :

Estimated amount of contracts remaining to be executed on capital accounts and not provided for (net of advances) 25,723.01 23,278.89

Refer Note 30

The entire amount of plan obligation is unfunded therefore changes in the fair value of plan assets, categories of plan assets as a percentage of the fair value of total plan assets and the Company''s expected contribution to the plan assets in the next year is not given.

C. Provident fund

Contribution made by the Company during the year is Rs. 0.41 million (Previous year Rs. 0.46 million).

3 In the opinion of the Board of Directors, current assets, loans and advances have a value on realization in the ordinary course of the business at least equal to the amounts at which they are stated and provision for all known liabilities have been made.

4 The Company has been advised that as per the provisions of Central Excise Act, 1944, the Company is eligible to claim CENVAT Credit against the Excise Duty payable on the products to be manufactured by the Company and accordingly CENVAT credit of service tax has been considered as an asset and classified as "Cenvat receivable" in Note No. 12.

The Company has paid Service Tax liability under Service Tax Voluntary Compliance Encouragement Scheme, 2013 where interest and penalty is not chargeable. Therefore, interest provided thereon has been reversed in Note No. 20.

5 The Company has requested its vendors to confirm their status under Micro, Small and Medium Enterprises Development Act (MSMED), 2006. Based on the confirmations received, there are no amounts due to any micro or small enterprise under the MSMED Act, 2006.

6 The Company has taken office premise under operating lease agreement. This is cancellable and is renewable by mutual consent on mutually agreed terms. The Company has no obligation towards non-cancellable lease.

Rental expenses of Rs. 0.10 million (previous year Rs. 0.09 million) in respect of operating lease obligation have been recognised in "Statement of Profit and Loss "

7 Project Status

a The Company has a plan to set up crude oil refinery in Haldia, West Bengal. Ministry of Forest and Environment (MOEF) has accorded Environmental Clearance for 5 MMTPA refinery project. The Haldia Development Authority (HDA) / West Bengal Industrial Development Corporation (WBIDC) had allotted land in Haldia. The Government of West Bengal extended various concessions which included VAT incentives equivalent to the investment in Plant & Machinery. The Company raised Equity for US$ 200 million in Dec''07 by issuing Global Depositary Receipts (GDR) for part funding the project. The proceeds of the GDR issue were fully utilized to pay capital advances related to purchase of equipment of two used oil refineries and other corporate expenses incurred during construction period. The Company entered into contracts for relocation of one refinery from Ingolstadt Germany and had also paid advances for such equipments. However, the Company could not achieve financial closure and fulfill the terms of the said contract, resulting in cancellation of the contract and forfeiture of the advances paid.

The Company had, on March 15, 2011, entered into an Asset Purchase Agreement with Tagore Investments SA (Tagore) (an affiliate of Hardt group) for the CENCO Petroleum Refinery at a cost of US$ 275 million. As per the said agreement, the cost of such equipments was to be settled by the Company by issue of Equity in the form of GDR to the extent of US$ 175 million to Tagore and balance US$ 100 million in cash on achievement of financial closure.

The Company had also contracted for another set of Refinery equipments from another affiliate of Hardt group namely Amber Energy SA (Amber) at a cost of US$ 142 million which was to be paid by issue of GDR of US$ 142 million to Amber. Simultaneously, the Company had entered in to a ''Deed of Novation'' with an affiliate of Hardt Group for assuming the contractual obligations envisaged on the supplier under an erstwhile agreement of plant & machinery for which an advance of Rs. 4,583.44 million had been paid.

Hardt Group had agreed to become a strategic investor in the Company and assist it in implementing the refinery project. Abboro Limited (affiliate of Hardt Group) had brought in Rs. 136.52 million as equity during March''11 to March''12 (out of which 120.76 million already allotted & the balance 15.76 million to be allotted as equity shares) to meet funding requirement for working capital and project activities.

After signing the agreements with Hardt Group for purchase of refinery equipment and with the set of refining equipment for which the Company had already contracted and paid advances, the Company revised the capacity of refinery envisaged in Haldia to 10 MMTPA from 5 MMTPA. It filed an application to Ministry of Environment to enhance the approval for putting up 200,000 bpd equivalent to 10 MMTPA capacity refineries. However, the Ministry vide its letter dt. Sept 20, 2011 declined the request as Haldia has been notified as a critically polluted area and no new capacity or expansion can be permitted till it is de- notified. Meanwhile, the Company lost the Bayernoil equipment as it couldn''t fulfill its contractual commitments.

The Company''s proposal for issue of such GDRs to Tagore and Amber, aggregating US$ 317 million was approved by the Foreign Investment Promotion Board(FIPB) in their meeting held on May 20, 2011. Since the amount of issue had exceeded Rs. 12,000 million, the proposal was recommended to Cabinet Committee on Economic Affairs (CCEA). However, prior to receipt of the CCEA approval, SEBI Vide Interim Order dated in Sep''11 had issued directions to the Company not to issue equity or any other instruments convertible into equity or alter capital structure in any manner till further directions. The SEBI has issued a final order dated October 23, 2013 against the Company which mainly states that the Company will not issue equity shares or any other instruments convertible into equity shares or any other security, for a period of ten years.

Further, the Company has already undergone the prohibition imposed vide the Interim Order for a period of approximately two years. In view of this factual situation, it is clarified that the prohibition already undergone by the Company pursuant to the aforementioned SEBI Order shall be reduced while computing the period in respect of the prohibition imposed vide this order. Hence the restriction period of ten years will be reduced to eight years.

The Company''s various efforts to restart the project also failed due to the embargo on issue of new equity by SEBI. Hardt Group has also stopped infusing further funds pending revocation of the above mentioned SEBI order. In the light of the above the Company intends to proceed with only a 5 MMTPA refinery on receiving favourable orders from SEBI. The Project cost for setting up of 5 MMTPA refinery with equipments contracted from Hardt Group along with balancing equipments is estimated at around US $ 1 billion, which would be funded by a Debt: Equity ratio of 70:30. The equity requirement will be met by issue of GDRs to the Hardt group and the existing equity. The contracts entered with Hardt group have expired as of now but Hardt Group has indicated their willingness to extend the same once a favourable order from SEBI is received. However, the Company has filed an application to the Hon''ble Securities and Appellate Tribunal (SAT), against the abovementioned order of the SEBI, which process is undergoing. The management is confident of obtaining a favourable order soon and achieving financial closure for the project and confident of the support of Hardt Group in implementing the project.

a During the previous years, the Company had entered into agreements for supply of plant and machinery related to the project. The said agreement provided for certain milestones of performance on part of the parties to the contract which more specifically involved delivery of equipments by the supplier periodical payment by the Company. The Company paid certain advances as per the terms of the contract however, in view of the pending financial arrangements it could not fulfill other terms and conditions stipulated under the said agreements. The suppliers/contractors also could not fulfill their obligations under the said agreements.

b In view of the fact that the obligations of either party to the contracts in the aforementioned agreements for supply of plant and machinery related to the project are not fulfilled, the Company''s liability for payment of Rs. 477.49 million (as on March 31, 2013: Rs. 432.12 million) is not crystallized as at the balance sheet date and hence has not been recognised in these financial statements.

c Land- Haldia Development Authority (HDA), vide its memo dated March 25, 2008, offered land admeasuring about 400 acres at Haldia, West Bengal to the Company for setting up the refinery project (''the project''). As per the terms of the said memo, lease premium of Rs. 600 million was stipulated, which could not be paid by the company pending financial closure for the refinery project. Subsequently, the Company entered into a tripartite agreement dated March 19, 2010 along with HDA and West Bengal Industrial Development Corporation Limited (WBIDC), whereby, WBIDC has paid Rs. 630 million as lease premium for said land, development fee and other amounts to HDA and the Company was given permissive possession of the land for a period of six months from the date of the agreement with a condition that the land shall be sub-leased in favour of the Company at the end of six months, subject to compliance with certain conditions. Since the Company could not comply with these conditions, it had requested additional time from WBIDC for the same.

WBIDC, while granting such extension, stipulated additional conditions relating to tie up of equity and achievement of financial closure for the project. The Company was not in a position to comply with these conditions as the SEBI order was subsisting and informed WBIDC accordingly requesting further extension. However, WBIDC had not acceded to the Company''s request and had withdrawn the permissive possession of land. The Company has again represented to WBIDC requesting time for complying with the conditions.

The strategic investor Hardt group has agreed to provide the required funding to clear the dues of WBIDC, subject to the condition that the Company obtains a favourable order and gets the required extension from WBIDC. The management is confident of sourcing the required funds for clearance of the WBIDC dues and getting extensions on annulment of the SEBI order.

In the absence of any development in the project and withdrawal of the permissive possession of land, cost of land development and civil work amounting to Rs. 196.91million and Rs. 49.68 million respectively is included in the cost of leasehold land and capital work in progress.

The ability of the Company to continue as a going concern is significantly dependent on getting a favourable order from SAT achievement of financial closure and obtaining the extension of permissive possession and sub-lease of land from WBIDC. The management is confident of getting a favourable order from SAT and complying with the conditions of WBIDC for getting the land. In the event of any delay in arrangement of such funding, the promoter is committed to provide necessary funds to meet the Company''s liabilities arising in the foreseeable future. These financial statements have been prepared on a going concern basis on the assumption that the necessary funding and financial closure will be achieved and do not include the adjustments that would result if the Company is unable to continue as a going concern.

8 Previous year figures have been re-classified/ re-grouped, wherever considered necessary to conform to current year''s classification.


Mar 31, 2013

1. Corporate information

Cals Refineries Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on Bombay Stock Exchange in India. The Company is in the process of setting up a crude oil refinery in Haldia, West Bengal with total capacity of approximately 5 million metric tonnes per annum (MMTPA).

2 In the opinion of the Board of Directors, current assets, loans and advances have a value on realization in the ordinary course of the business at least equal to the amounts at which they are stated and provision for all known liabilities have been made.

3 The Service Tax liability has been ascertained and provided for in the books of accounts. The Company has been advised that as per the provisions of Central Excise Act, 1944, the Company is eligible to claim CENVAT Credit against the Excise Duty payable on the products to be manufactured by the Company and accordingly CENVAT credit of service tax has been considered as an asset and classified as "Cenvat recoverable" in Note No. 12.

4 The Company has requested its vendors to confirm their status under Micro, Small and Medium Enterprises Development Act (MSMED), 2006. Based on the confirmations received, there are no amounts due to any micro or small enterprise under the MSMED Act, 2006.

5 The Company has taken office premise under operating lease agreement. This is cancellable and is renewable by mutual consent on mutually agreed terms. The Company has no obligation towards non-cancellable lease.

Rental expenses of Rs. 0.09 million (previous year Rs. 1 million) in respect of operating lease obligation have been recognised in "Statement of Profit and Loss".

6 Project Status

a The Company has a plan to set up crude oil refinery in Haldia, West Bengal. Ministry of Forest and Environment (MOEF) has accorded Environmental Clearance for 5 MMTPA refinery project. The Haldia Development Authority (HDA) / West Bengal Industrial Development Corporation (WBIDC) had allotted land in Haldia. The Government of West Bengal extended various concessions which included VAT incentives equivalent to the investment in Plant & Machinery. The Company raised Equity for US$ 200 million in Dec''07 by issuing Global Depository Receipts (GDR) for part funding the project. The proceeds of the GDR issue were fully utilized to pay capital advances related to purchase of equipment of two used oil refineries and other corporate expenses incurred during construction period. One of the used refineries was located in Ingolstadt, Germany, owned by Bayernoil, which was getting de-commissioned in 2008. The Company entered into contracts for relocation of Bayernoil Refinery and had also paid advances for such equipments. However Company could not achieve financial closure and fulfill the terms of the said contract, resulting in cancellation of the contract and forfeiture of the advances paid. The Company has written off Rs. 3,457.79 million during the previous financial year.

The Company had on March 15, 2011 entered into an Asset Purchase Agreement with Tagore Investments SA (Tagore) (an affiliate of Hardt group) for the CENCO Petroleum Refinery at a cost of US$ 275 million. As per the said agreement, the cost of such equipments was to be settled by the Company by issue of Equity in the form of GDR to the extent of US$ 175 million to Tagore and balance US$ 100 million in cash on achievement of financial closure.

The Company had also contracted for another set of Refinery equipments from another affiliate of Hardt group namely Amber Energy SA (Amber) at a cost of US$ 142 million, which was to be paid by issue of GDR of US$ 142 million to Amber.

Simultaneously, the Company had entered in to a ''Deed of Novation'' with an affiliate of Hardt Group for assuming the contractual obligations envisaged on the supplier under an erstwhile agreement of plant & machinery for which an advance of Rs. 4,583.44 million had been paid.

Hardt Group had agreed to become a strategic investor in the Company and assist it in implementing the refinery project. Abboro Limited (affiliate of Hardt Group) had brought in Rs. 136.52 million as equity during March''11 to March ''12 (out of which 120.76 million already allotted & the balance 15.76 million to be allotted as equity shares) to meet funding requirement for working capital and project activities.

The Company''s proposal for issue of such GDRs to Tagore and Amber, aggregating US$ 317 million was approved by the Foreign Investment Promotion Board (FIPB) in their meeting held on May 20, 2011. Since the amount of issue had exceeded Rs. 12,000 million, the proposal was recommended to Cabinet Committee on Economic Affairs (CCEA). However, prior to receipt of the CCEA approval, SEBI in Sep''11 had issued directions to the Company not to issue equity or any other instruments convertible into equity or alter capital structure in any manner till further directions in this regard. The said order of SEBI is still subsisting and has resulted in the Company not being able to proceed with the issue of GDRs as aforesaid to Tagore and Amber.

After signing the agreements with Hardt Group for purchase of refinery equipment and with the set of refining equipment for which the Company had already contracted and paid advances, the Company revised the capacity of refinery envisaged in Haldia to 10 MMTPA from 5 MMTPA. It filed an application to Ministry of Environment to enhance the approval for putting up 200,000 bpd equivalent to 10 MMTPA capacity refineries. However, the Ministry vide its letter dt. Sept 20, 2011 declined the request as Haldia has been notified as a critically polluted area and no new capacity or expansion can be permitted till it is de-notified. Meanwhile, the Company lost the Bayernoil equipment as it couldn''t fulfill its contractual commitments. The Company''s various efforts to restart the project also failed due to the embargo on issue of new equity by SEBI. Hardt Group has also stopped infusing further funds pending revocation of SEBI order. In the light of the above the Company intends to proceed with only a 5 MMTPA refinery on receiving favourable orders from SEBI. The Project cost for setting up of 5 MMTPA refinery with equipments contracted from Hardt Group along with balancing equipments is estimated at around US $ 1 billion, which would be funded by a Debt: Equity ratio of 70:30. The equity requirement will be met by issue of GDRs to the Hardt group and the existing equity. The management is confident of obtaining a favourable order from SEBI soon and achieving financial closure for the project.

The contracts entered with Hardt group have expired as of now but Hardt Group has indicated their willingness to extend the same once a favourable order from SEBI is received. The Company is confident of the support of Hardt Group in implementing the project after receiving a favourable order from SEBI.

b During the previous years, the Company had entered into agreements for supply of plant and machinery related to the project. The said agreement provided for certain milestones of performance on part of the parties to the contract which more specifically involved delivery of equipments by the supplier and periodical payment by the Company. The Company paid certain advances as per the terms of the contract however, in view of the pending financial arrangements it could not fulfill other terms and conditions stipulated under the said agreements. The suppliers/contractors also could not fulfill their obligations under the said agreements.

c In view of the fact that the obligations of either party to the contracts in the aforementioned agreements for supply of plant and machinery related to the project are not fulfilled, the Company''s liability for payment of Rs. 432.12 million (as on March 31, 2012: Rs. 406.44 million) is not crystallized as at the balance sheet date and hence has not been recognised in these financial statements.

d Land- Haldia Development Authority (HDA), vide its memo dated March 25, 2008, offered land admeasuring about 400 acres at Haldia, West Bengal to the Company for setting up the refinery project (''the project''). As per the terms of the said memo, lease premium of Rs. 600 million was stipulated, which could not be paid by the Company pending financial closure for the refinery project. Subsequently, the Company entered into a tripartite agreement dated March 19, 2010 along with HDA and West Bengal Industrial Development Corporation Limited (WBIDC), whereby, WBIDC has paid Rs. 630 million as lease premium for said land, development fee and other amounts to HDA and the Company was given permissive possession of the land for a period of six months from the date of the agreement with a condition that the land shall be sub-leased in favour of the Company at the end of six months, subject to compliance with certain conditions. Since the Company could not comply with these conditions, it had requested additional time from WBIDC for the same.

WBIDC, while granting such extension, stipulated additional conditions relating to tie up of equity and achievement of financial closure for the project. The Company was not in a position to comply with these conditions as the SEBI order was subsisting and informed WBIDC accordingly requesting further extension. However, WBIDC had not acceded to the Company''s request and had withdrawn the permissive possession of land. The Company has again represented to WBIDC requesting time till March 2014 for complying with the conditions.

The strategic investor Hardt group has agreed to provide the required funding to clear the dues of WBIDC, subject to the condition that the Company obtains a favourable order from SEBI and gets the required extension from WBIDC. The management is confident of sourcing the required funds for clearance of the WBIDC dues and getting extensions on annulment of the SEBI order.

In the absence of any development in the project and withdrawal of the permissive possession of land, cost of land development and civil work amounting to Rs. 196.91 million and Rs. 49.64 million respectively is included in the cost of leasehold land and capital work in progress.

The ability of the Company to continue as a going concern is significantly dependent on getting a favourable order from SEBI, achievement of financial closure and obtaining the extension of permissive possession and sub-lease of land from WBIDC. The management is confident of getting a favourable order from SEBI and complying with the conditions of WBIDC for getting the land. In the event of any delay in arrangement of such funding, the promoter is committed to provide necessary funds to meet the Company''s liabilities arising in the foreseeable future. These financial statements have been prepared on a going concern basis on the assumption that the necessary funding and financial closure will be achieved and do not include the adjustments that would result if the Company is unable to continue as a going concern.

7 Previous year figures have been re-classified/ re-grouped, wherever considered necessary to conform to current year''s classification.


Mar 31, 2012

1. Corporate information

Cals Refineries Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on Bombay Stock Exchange in India. The Company is in process of setting up a crude oil refinery in Haldia, West Bengal with total capacity of approximately 10 million metric tonnes per annum (MMTPA).

a) Terms / rights attached to Equity Shares/ GDRs

# The Company has only one class of shares referred to as equity shares having a par value of Rs. 1/-. Each holder of equity shares is entitled to one vote per share. Holders of GDRs will have no voting rights with respect to the Deposited Shares.

# In case of Depository receipts, the Depositary will, if so requested by the Board of Directors of the Company and subject to receipt from the Company of an opinion from the Company's legal counsel, (such counsel being reasonably satisfactory to the Depositary, that to do so will not be illegal or violate any applicable law of India, or subject the Depositary to liability to any Holder or any shareholder of the Company), either vote as directed by the Board or as conveyed by the Chairman of the Company or give a proxy or power of attorney to vote the Deposited Shares in favour of a Director of the Company or other person or vote in the same manner as those shareholders designated by the Board.

In the absence of receipt from the Company of an opinion from legal counsel as aforesaid, the Depositary shall not have any obligation to exercise any voting rights and shall have no liability to the Company or any Holder.

# The Company declares and pays dividend in Indian rupees. During the year ended March 31, 2012, the amount of dividend recognized as distribution to equity shareholders was Rs. Nil per share (Previous year : Rs. Nil).

# In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

# The Company has made preferential allotment of 165.16 million equity shares of Rs. 1 each, it includes share application money of Rs. 146.83 million in previous year. The proceeds were utilised for payment of proposed GDR issue related expenses, project related expenses and other corporate expenses.

d) * Share Allotment date is 180 days from the receipt of Foreign Direct Investment (FDI) as prescribed under Foreign Exchange Management Regulation Act. However, the Company could not allot the Equity Shares against the pending Share Application Money by the stipulated date as Securities and Exchange Board of India (SEBI) vide order dated September 21, 2011 has directed not to issue equity shares or any other instrument convertible into equity shares or alter their capital structure in any manner till further directions in this regard.

# Includes Rs. 630 million as lease premium and interest Rs. 166.72 million, under an agreement for the permissive possession of the land, not paid by the Company as per the terms of the agreement.

2. In the opinion of the Board of Directors, current assets, loans and advances have a value on realization in the ordinary course of the business at least equal to the amounts at which they are stated and provision for all known liabilities have been made.

3. The service tax liability has been ascertained and provided for in the books of accounts. The Company has been advised that as per the provisions of Central Excise Act, 1944, the Company is eligible to claim CENVAT Credit against the excise duty payable on the products to be manufactured by the Company and accordingly CENVAT credit of service tax has been considered as an asset and classified as "Cenvat recoverable" in Note No. 12.

4. The Company has requested its vendors to confirm their status under Micro, Small and Medium Enterprises Development Act (MSMED), 2006. Based on the confirmations received, there are no amounts due to any micro or small enterprise under the MSMED Act, 2006.

5. The Company has taken offices premises under operating lease agreements. These are generally cancellable and are renewable by mutual consent on mutually agreed terms. The Company has no obligation towards non-cancellable lease.

Rental expenses of Rs. 1 million (previous year Rs. 9.52 million) in respect of operating lease obligation have been recognised in the "Statement of Profit and Loss".

6. Project Status

a. The Company has a plan to set up crude oil refineries in Haldia, West Bengal with total capacity of approximately 10 million metric tonnes per annum (MMTPA) with budgeted outlay of approximately Rs. 120,737 million. (USD 2683.04 million) of which Rs. 33,021 million is planned to be funded by way of equity capital and the balance Rs. 87,716 million by way of debt. A number of new equipments would have to be installed for achieving the desired configuration and complexity of the refinery which has resulted in the revision of the budgeted outlay of the project as compared to last year.

The equity component was partially funded by issue of Global Depositary Receipts (GDR) of USD 200 million (equivalent to Rs. 7,880 million) in December 2007. The proceeds of the GDR issue were utilized to pay capital advances related to purchase of equipments of two used oil refineries and other corporate expenses incurred during construction period.

The Company has inducted Hardt Group as a strategic investor for execution of this project. Abboro Limited (affiliates of HARDT Group) has subscribed to the equity capital by infusing funds in the Company to meet corporate and project related expenses.

On March 15, 2011, the Company has entered into two Assets Purchase agreements with Tagore Investments S.A. and Amber Energy S.A. (affiliate of HARDT group) for the purchase of certain petroleum refinery equipments and technical components for USD 275 million (equivalent to Rs. 12,375 million) and USD 142 million (equivalent to Rs. 6,390 million) respectively, aggregating to a total cost of USD 417 million (equivalent to Rs. 18,765 million). As per such agreements, the Company shall issue GDR, subject to the Central Government approval, for an amount of USD 175 million to Tagore Investments S.A. and USD 142 million to Amber Energy S.A. and also make cash payment amounting to USD 100 million to Tagore Investments S.A.

The Company's request to Foreign Investment Promotion Board (FIPB) for issuing GDR of US$ 317 million to Hardt group was approved in the meeting of FIPB held on May 20, 2011. Since the amount of issue had exceeded Rs. 12,000 million, the proposal was recommended to Cabinet Committee on Economic Affairs (CCEA). In the interim SEBI had issued directions to the Company not to issue equity shares or any other instruments convertible into equity shares or alter capital structure in any manner till further directions in this regard. The said order has been confirmed by SEBI on December 30, 2011, without taking into consideration the merits of the case. All querries of SEBI have been replied and final order is awaited.

The aforesaid SEBI order has resulted in the Company not being able to proceed with the proposed GDR issue and tie up its Equity. Consequent to SEBI's order, FIPB has also withdrawn its recommendation to CCEA and kept the proposal pending at its end.

The ability of the Company to continue as a going concern is significantly dependent on its ability to successfully arrange the balance funding and achieve financial closure to fund its project and to meet its contractual obligation under vaious contracts and obtain necessary extension for compliance of terms related to sub-lease of land required for the refinery project. The Company expects to receive favourable SEBI order soon which will pave the way for issuance of GDR/ equity as stated herein above and necessary approvals from FIPB/ CCEA and other statutory authorities. These financial statements have been prepared on a going concern basis on the basis that the necessary funding and financial closure will be achieved and do not include the adjustments that would result if the Company is unable to continue as a going concern.

b. During the previous years, the Company had entered into agreements for supply of plant and machinery related to the project. The said agreement provided for certain milestones of performance on part of the parties to the contract which more specifically involved delivery of equipments by the supplier periodical payment by the Company. The Company paid certain advances as per the terms of the contract, however, in view of the pending financial arrangements, it could not fulfill other terms and conditions stipulated under the said agreements. The suppliers/contractors also could not fulfill their obligations under the said agreements.

In view of the fact that the obligations of either party to the contracts in the aforementioned agreements for supply of plant and machinery related to the project are not fulfilled, the Company's contractual obligation for payment of Rs. 406.44 million (net of Rs. 5,007.22 million due to the termination with the party, refer note no. 29.c) (as on March 31, 2011: Rs. 5,361.96 million) is not crystallized as at the balance sheet date and hence has not been recognised in these financial statements. Fulfillment of the Company's contractual obligation is dependent on arrangement of balance funding.

c. Also, subsequent to March 31, 2011, the Company had successfully renegotiated one of the contracts for purchase and sale of refinery assets in respect of its refinery projects whereby the scope of the contract was amended to exclude auxiliary technical services and consultancy services besides reduction in the purchase price for the contract with the stipulation to make the balance payment by May 23, 2011. The Company could not meet the payment terms and the supplier forfeited the amounts paid earlier as advance amounting to Rs. 3,355.93 million. In view of cancellation of the said contract the affiliated engineering and consultancy services rendered have become redundant. Accordingly, the amount of Rs. 101.86 million paid to the consultants has been written off. No further liability arises on the Company on cancellation of the contracts.

d. The Company has paid advances amounting to Rs. 141.48 million (net of Rs. 169.92 million, refer note no. 29c) (as on March 31, 2011: Rs. 311.40 million) to the suppliers and auxiliary service providers. Due to delay in financial closure, the Company could not fulfil its financial obligations as stipulated in such agreements, resulting into delay in supply of plant and machinery and related services. As per these agreements, some of such advances may not be recoverable in the event of non-fulfilment of contractual obligations by the Company. Therefore fulfillment of the contractual obligations are dependent on arrangement of balance funding. However, based on the developments stated in Note No. 29a above, management is confident of achieving financial closure and fulfilling its obligations under various contracts in the foreseeable future.

e. An advance of Rs. 4,583.44 million was paid to a supplier of Plant and Machinary, subsequently the Company had entered in to a "Deed of Novation" with an affiliate of Hardt Group, who assumed the contractual obligations envisaged on the supplier under erstwhile agreement of plant and machinary. Such advance may not be recoverable in the event of non-fulfilment of obligations by the Company as per the terms of the agreement. Therefore fulfillment of contractual obligation are dependent on arrangement of balance funding as stated above.

f. Haldia Development Authority (HDA), vide its memo dated March 25, 2008, offered land admeasuring about 400 acres at Haldia, West Bengal to the Company for setting up the refinery project ('the project'). As per the terms of the said memo, lease premium of Rs. 600 million was stipulated.

Subsequently, vide its memo dated April 23, 2008, HDA granted permission to the Company for survey work, soil testing, land development work and construction work and accordingly the Company carried out such work. Pending financial closure for the refinery project, the Company could not pay the aforesaid lease premium in full. During the year ended March 31, 2010, the Company entered into a tripartite agreement dated March 19, 2010 along with HDA and West Bengal Industrial Development Corporation Limited (WBIDC).

As per the terms of the aforesaid agreement, WBIDC has paid Rs. 630 million as lease premium for land, development fee and other amounts to HDA and the Company was given permissive possession of the said land for a period of six months from the date of the agreement, for the purpose of implementing the project. Further, it was stipulated that the said land shall be sub-leased in favour of the Company at the end of six months from the date of the agreement subject to compliance with certain conditions.

The Company had requested WBIDC to allow time upto March 31, 2012 for complying with the conditions. WBIDC has vide their letter dated July 1, 2011, allowed extension of permissive possession of the said land to the Company on payment of interest upto June 30, 2011 and stipulated that the Company should complete equity tie-up and financial closure by September 30, 2011. Since the Company was not in a position to comply with these conditions, it had again requested WBIDC to extend the time limit upto March 31, 2012 for which WBIDC had asked the Company to submit a Detailed Project Report (DPR) which had been complied with.

WBIDC had not acceded to the Company's request vide its letter dated March 1, 2012 and had withdrawn the permissive possession of land. The Company has again requested WBIDC to allow time till September 30, 2012 for clearance of the dues and extend the permissive possession till September 30, 2012. The reply from WBIDC is awaited and management is confident of getting the lease renewed.

As stated above the acquisition of rights in the leasehold land depends on the arrangement of fund to meet the Company's obligations and successful negotiation with WBIDC. The expenses incurred on land development and civil work amounting to Rs. 198.31 million and Rs. 49.64 million respectively is included in the cost of leasehold land and capital work in progress.

7. The indirect expenditure/income not attributable to setting up of the Project detailed in Note no. 19.a heitherto have been included in the statement of "Pre-operative expenses pending allocation". During the Year the Company has prepared the Statement of Profit and Loss and such expenses/income have been recognised in the Statement of Profit and Loss. In the earlier years expenses/income have also been included in the Statement of Profit and Loss for the year and shown under the Exceptional Items (Note No.19). Therefore the disclosure of previous year figures in the Statement of Profit and Loss and notes thereof do not arise hence not given.

8. Based on the opinion from an independent eminent lawyer and in the light of certain court judgements, certain services, rendered by foreign suppliers mainly in connection with the purchase of plant and machinery, have been considered to be part of supply of plant and machinery and the Company has been advised that there would be no liability on account of tax deducted at source and service tax. Accordingly, service tax and tax deducted at source amounting to Rs. 5.44 million and Rs. 6.00 million respectively has been derecognised in the financial statements in the previous year and interest cost for non payment of the tax deducted at source for the period from January 1, 2011 to March 31, 2011 amounting to Rs. 0.22 million has not been provided for in the financial statements.

Further, in the light of certain court judgements and in line with the Company's position in its income-tax returns for the previous years, the interest income earned in those years has been considered to be capital in nature and accordingly the provision for income-tax (including of interest thereon) created in respect thereof amounting to Rs. 56.17 million in those years has been derecognized in the financial statements for the year ended March 31, 2011 and also the interest thereon for the period from January 1, 2011 to March 31, 2011 amounting to Rs. 2.39 million has not been provided for in the financial statements.

9. Previous year figures have been re-classified/ re-grouped, wherever considered necessary to conform to current year's classification.


Mar 31, 2011

1. Project status

The Company has a plan to set up crude oil refineries in Haldia, West Bengal with total capacity of approximately 10 million metric tonnes per annum (MMTPA) with budgeted outlay of approximately Rs. 83,000,000,000 (US $ 1.8 billion) of which Rs. 29,000,000,000 (US $ 0.63 billion) is planned to be funded by way of equity capital and the balance Rs. 54,000,000,000 (US $ 1.17 billion) by way of debt.

The equity component was partially funded by issue of Global Depositary Receipts (GDR) of US $ 200 million (equivalent to Rs. 7,880,000,000) in December 2007. The proceeds of the GDR issue were utilized to pay capital advances related to purchase of equipments of two used oil refineries and other corporate expenses incurred during construction period.

Further, on March 15, 2011, the Company has entered into two Assets Purchase agreements with Tagore Investments S.A. and Amber Energy S.A. (affiliates of HARDT Energy Limited) for the purchase of certain petroleum refinery equipments and technical components for US $ 275 million (equivalent to Rs. 12,375,000,000) and US $ 142 million (equivalent to Rs. 6,390,000,000) respectively, aggregating to a total cost of US $ 417 million (equivalent to Rs. 18,765,000,000). As per such agreements, the Company shall issue GDR, subject to the Central Government approval, for an amount of US $ 175 million to Tagore Investments S.A. and US $ 142 million to Amber Energy S.A. and also make cash payment amounting to US $ 100 million to Tagore Investments S.A. Pursuant to another agreement, Abboro Limited (affiliate of HARDT Energy Limited) has already infused Rs. 102,431,700 as share application money, pending allotment as on March 31, 2011. The Company is also in discussion with other investors to bring in the balance equity required for the project.

Further, as explained in more detail in note 8 below, the Company has sought an extension of period from the concerned authorities for compliance of certain conditions related to sub-lease of land required for the project at Haldia, West Bengal.

The ability of the Company to continue as a going concern is significantly dependent on its ability to successfully arrange the balance funding and achieve financial closure to fund its project and obtain the necessary extension for compliance of terms related to sub-lease of land required for the refinery project. In the event of any delay in the arrangement of the balance funding, the Management is confident of arranging the funds required for discharging the liabilities of the Company arising in the foreseeable future. These financial statements have been prepared on a going concern basis on the assumption that the necessary funding and financial closure will be achieved and do not include the adjustments that would result if the Company is unable to continue as a going concern.

2. Status of significant contracts

- During the previous years, the Company had entered into agreements for supply of plant and machinery, certain process units, and auxiliary technical services related to the project. The said agreement provided for certain milestones of performance on part of the parties to the contract which more specifically involved delivery of equipments by the supplier/ contractors against periodical opening of letters of credit and periodical payment by the Company. The Company paid certain advances as per the terms of the contract, however, in view of the pending financial closure, it could not fulfill other terms and conditions stipulated under the said agreement. The suppliers/ contractors also could not fulfill their obligations under the said agreements.

In view of the fact that the obligations of either party to the contracts in the aforementioned agreements for supply of plant and machinery, certain process units, auxiliary technical services and consultancy services related to the project are not fulfilled, the Company's liability for payment of Rs. 5,361,960,970 (as on March 31, 2010 : Rs. 5,153,656,980) is not crystallized as at the balance sheet date and hence has not been recognised in these financial statements. Further, based on the developments stated in Note 1 above, Management is confident of achieving the financial closure and fulfilling its obligation under the said contracts.

- Also, subsequent to March 31, 2011, the Company has successfully renegotiated one of the contracts (liability for which amounted to Rs. 5,007,216,720 and is included in the note above) for supply of plant and machinery and certain process units in respect of its refinery projects whereby the scope of the contract has been amended to exclude auxiliary technical services and consultancy services besides reduction in the purchase price for the contract. As per the terms of the amended contract, the Company was required to make certain payments as per the agreed payment schedule. The Company is in the process of negotiating an extension from the supplier for compliance with the payment terms. The Company has given advances amounting to Rs. 3,355,930,000 to such supplier in terms of the agreement executed by the Company for the said supply which will not be recoverable if the necessary extension is not granted by the supplier. Based on the development stated in Note 1 above, Management is confident of fulfilling the amended contractual liability.

-The Company has paid advances amounting to Rs. 311,400,048 (as on March 31, 2010 Rs. 8,360,400,558) to the suppliers and auxiliary service providers. Due to delay in financial closure, the Company could not fulfill its financial obligations as stipulated in such agreements, resulting into delay in supply of plant and machinery and related services. As per these agreements, some of such advances may not be recoverable in the event of non- fulfillment of obligations by the Company. Based on the developments stated in Note 1 above, Management is confident of achieving financial closure and fulfilling its obligations under various contracts in the foreseeable future.

3. In the opinion of the Board of Directors, current assets, loans and advances have a value on realization in the ordinary course of the business at least equal to the amounts at which they are stated and provision for all known liabilities have been made.

4. The expenses incurred during the construction period are classified as "Pre-operative expenses pending allocation" and will be apportioned to the assets on the completion of the project. In respect of such expenditure, necessary details as per Part II of Schedule VI of the Companies Act, 1956 have been disclosed under schedule 3(B)(ii).

5. Contingent Liabilities

(Rs.)

2011 2010

Claim against the 5,450,671 2,785,000 company not acknowledged as debt

6. The service tax liability has been ascertained and provided for in the books of accounts. The Company has been advised that as per the provisions of Central Excise Act, 1944, the Company is eligible to claim CENVAT Credit against the excise duty payable on the products to be manufactured by the Company and accordingly CENVAT credit of service tax has been considered as an asset and classified as "Cenvat recoverable" in Schedule 6.

7. Leasehold Land

Haldia Development Authority (HDA), vide its memo dated March 25, 2008, offered land admeasuring about 400 acres at Haldia, West Bengal to the Company for setting up the refinery project ('the project'). As per the terms of the said memo, lease premium of Rs. 600,000,000 was stipulated.

Subsequently, vide its memo dated April 23, 2008, HDA granted permission to the Company for survey work, soil testing, land development work and construction work and accordingly the Company carried out such work at a cost of Rs. 195,092,367. Also, the Company has incurred Rs. 49,637,110 for civil work carried out on such land. Pending financial closure for the refinery project, the Company could not pay the aforesaid lease premium in full. During the year ended March 31, 2010, the Company entered into a tripartite agreement dated March 19, 2010 along with HDA and West Bengal Industrial Development Corporation Limited (WBIDC).

As per the terms of the aforesaid agreement, WBIDC has paid Rs. 630,000,000 as lease premium for land, development fee and other amounts to HDA and the Company was given permissive possession of the said land for a period of six months from the date of the agreement, for the purpose of implementing the project. Further, it was stipulated that the said land shall be sub-leased in favour of the Company at the end of six months from the date of the agreement subject to compliance with certain conditions.

Since the Company is in the process of achieving financial closure for the project, it has requested WBIDC for granting an extension of period for compliance of the aforementioned conditions.

Based on the developments stated in Note 1 above, Management is confident of achieving the financial closure and obtaining the necessary extension and accordingly, aforementioned cost of land development and civil work amounting to Rs. 195,092,367 and Rs. 49,637,110 respectively is included in the cost of leasehold land and capital work in progress.

8. The Company has requested its vendors to confirm their status under Micro, Small and Medium Enterprises Development Act (MSMED), 2006. Based on the confirmations received, there are no amounts due to any micro or small enterprise under the MSMED Act, 2006.

9. The Company has taken various residential, office and warehouse premises under operating lease agreements. These are generally cancellable and are renewable by mutual consent on mutually agreed terms.

Rental expenses of Rs. 9,519,867 (previous year Rs. 18,830,947) in respect of operating lease obligation have been recognised in "Pre-operative expenses pending allocation".

10. Based on the opinion from an independent eminent lawyer and in the light of certain court judgements, certain services, rendered by foreign suppliers mainly in connection with the purchase of plant and machinery, have been considered to be part of supply of plant and machinery and the Company has been advised that there would be no liability on account of tax deducted at source and service tax. Accordingly, service tax and tax deducted at source amounting to Rs. 5,437,653 and Rs. 6,001,848 respectively has been derecognised in the financial statements and interest cost for non payment of the tax deducted at source for the period from January 1, 2011 to March 31, 2011 amounting to Rs. 218,407 has not been provided for in the financial statements.

Further, in the light of certain court judgements and in line with the Company's position in its income tax returns for the previous years, the interest income earned in those years has been considered to be capital in nature and accordingly the provision for income tax (including of interest thereon) created in respect thereof amounting to Rs. 56,165,790 in those years has been derecognized in the financial statements for the year ended March 31, 2011 and also the interest thereon for the period from January 1, 2011 to March 31, 2011 amounting to Rs. 2,389,182 has not been provided for in the financial statements.

11. Related party transactions

a. Name of Related Parties

Nature of Relationship : Name of Related Parties

Key Managerial Personnel : Mr. D. Sundararajan (Managing Director) from February 05, 2011

Mr.Deep Kumar Rastogi (Executive Chairman) Mr. Manabendra Guha Roy (Chief Executive Officer) upto January 14, 2011

Mr. Ramesh Bhosale (Chief Financial Officer) upto January 17, 2011

Relatives of key managerial : Mrs.Anuja Bhosale (wife of personnel Mr.Ramesh Bhosale)

12. Employee Benefits

C. Provident Fund

Contribution made by the Company during the year is Rs. 851,568 (previous year Rs. 1,524,392).

13. Additional information pursuant to the provisions of paragraphs 3, 4C and 4D of Part II of Schedule VI to the Companies Act, 1956.

i) Details of Capacity and Production

In the absence of manufacturing activity in the Company, aforesaid information is not applicable.

ii) Details of Trading Goods

In the absence of trading activity in the Company, aforesaid information is not applicable

iii) Expenditure in Foreign Currency

(On cash basis including amounts capitalized during the year)

14. Based on the opinion from an independent eminent lawyer, the Company would not be liable to pay income tax on foreign exchange gain amounting to Rs. 284,972 (Previous Year Rs. 69,667,513) being receipt on capital account. Accordingly, no provision for tax has been made on the exchange gain.

15. The Company is setting up a refinery project. The indirect expenditure/income during construction period has been recognised in "Pre-operative expenses pending allocation" account, which forms part of capital work-in-progress. The said account includes foreign exchange gain of Rs. 972,376,986 (including previous year Rs. 972,092,015), corporate expenses of Rs. 10,301,755 (including previous year Rs. 7,624,729), interest on statutory dues of Rs. 34,671,568 (including previous year Rs. 91,089,885), FCCB expenses written off of Rs. 54,053,605 (including previous year Rs. 54,053,605), capital advance/ balances written (back)/ off of Rs. (2,277,184) (including previous year Rs. 1,752,775) and leasehold improvements written off of Rs. 16,368,548 (including previous year Rs. 2,639,418) till March 31, 2011. At the time of allocation of pre-operative expenses to the respective assets on commissioning of the project, above mentioned expenses/income shall not be capitalized. The above accounting treatment is in accordance with the clarification given by the Department of Companies Affairs (Letter No. 2/17/64-PR, dated 29.01.1964) and accordingly Profit and Loss Account has not been prepared.

16. Previous year figures have been re-classified/re-grouped, wherever considered necessary to conform to current year's classification.


Mar 31, 2010

1. Project status

The Company has plan to set up crude oil refineries with total capacity of approximately 20 million metric tonnes per annum (MMTPA). The project is planned to be commissioned in phases over a period of time with an outlay of approximately Rs. 20,000 crores. Phase I of the project involves setting up of a refinery in Haldia, West Bengal, with a capacity of 5 MMTPA with an outlay of approximately Rs. 5,357 crores (USD 1.1 billion) of which Rs. 1,875 crores (USD 385 million) is planned to be funded by way of equity capital and the balance Rs. 3,482 crores (USD 715 million) by way of debt.

The equity component was partially funded by issue of Global Depositary Receipts (GDR) of USD 200 million (equivalent to Rs. 788 crores) in December 2007. Out of the proceeds of the GDR issue, USD 200 million were utilized to pay capital advances related to purchase of two used oil refineries with capacity of approximately 5 MMTPA each and other corporate expenses incurred during construction period. Contract for the second refinery was entered in order to improve the viability of the project and also to finalise product slate which was essential to conclude product offtake arrangement.

Due to weakening of the global economic scenario in late 2008, the balance equity funding requirements of the Company could not materialize in time. With the general stabilizing of the global economic scenario, the Company is aggressively pursuing the financial closure of the project and has obtained in-principle approval of a consortium of banks and financial institutions for debt funding aggregating to Rs. 2,225 crores. The Company is also in advanced stage of discussion with various investors to bring in the equity required for the project.

The ability of the Company to continue as a going concern is significantly dependent on its ability to successfully arrange the balance funding and achieve financial closure to fund its project. In the event of any delay in the arrangement of the balance funding, the management is confident of arranging the funds required for discharging the liabilities of the Company arising in the foreseeable future. These financial statements have been prepared on a going concern basis on the assumption that the necessary funding and financial closure will be achieved.

2. Status of significant contracts

The Company entered into agreements for supply of plant and machinery, certain process units, auxiliary technical services and consultancy services related to the project. The said agreement provided for certain milestones of performance on the part of the parties to the contract which more specifically involved delivery of equipments by the suppliers/contractors against periodical opening of letters of credit and periodical payment by the Company. The Company paid advances as per the terms of the contract, however, in view of the pending financial closure; it could not fulfill other terms and conditions stipulated under the said agreement. The suppliers/contractors also could not fulfill their obligations under the said agreements.

In view of the fact that the obligations of either party to the contracts in the aforementioned agreements for supply of plant and machinery, certain process units, auxiliary technical services and consultancy services related to the project are not fulfilled, the Companys liability for payment of Rs. 5,153,656,980 isnot crystallized as at the balance sheet date and hence has not been recognised in these financial statements. Further, based on the developments stated in Note 1 above, management is confident of achieving financial closure and fulfilling its obligations under the said contracts.

The Company has paid capital advances amounting to Rs. 8,360,400,558 to the suppliers and auxiliary service providers. Due to delay in financial closure, the Company could not fulfill its financial obligations as stipulated in such agreements, resulting into delay in supply of plant and machinery and related services. As per agreements some of such advances may not be recoverable in the event of non-fulfillment of obligations by the Company. Based on the developments stated in Note 1 above, management is confident of achieving financial closure and fulfilling its obligations under various contracts in the foreseeable future.

3. In the opinion of the board of directors, current assets, loans and advances have a value on realization in the ordinary course of the business at least equal to the amounts at which they are stated and provision for all known liabilities have been made.

4. The expenses incurred during the construction period are classified as "Pre-operative expenses pending allocation" and will be apportioned to the assets on the completion of the project. In respect of such expenditure, necessary details as per Part II of Schedule VI of the Companies Act, 1956 have been disclosed under schedule 3(B)(a).

5. Contingent Liabilities (Rs.) 2010 2009 Claim against the 2,785,000 - company not acknowledged as debt: Rent

The above matter is subject to legal proceedings in the ordinary course of business. The legal proceedings, when ultimately concluded will not, in the opinion of management, have a material effect on financial position of the company.

6. The service tax liability has been ascertained and provided for in the books of accounts. The Company has been advised that as per the provisions of Central Excise Act, 1944, the Company is eligible to claim CENVAT Credit against tire excise duty payable on the products to be manufactured by the Company and accordingly CENVAT credit of service tax has been considered as arrasset and classified as "Cenvat recoverable" in Schedule 7.

7. Leasehold land

Haldia Development Authority (HDA), vide its memo dated March 25, 2008, offered land admeasuring about 400 acres at Haldia to the Company for setting up the refinery project (the project). As per the terms of the said memo, a lease premium of Rs. 600,000,000 was stipulated.

Subsequently, vide its memo dated April 23, 2008, HDA granted permission to the Company for survey work, soil testing, land development work and construction work. Pending financial closure for the refinery project, the Company could not pay the aforesaid lease premium in full. During the year ended March 31, 2010, the company entered into a tripartite agreement dated March 19, 2010 along with HDA and West Bengal Industrial Development Corporation Limited (WBIDC).

As per the terms of the aforesaid agreement, WBIDC has paid Rs. 630,000,000 as lease premium for land, development fee and other amounts to HDA and the Company is holding the land in permissive possession for a period of six months, from the date of the agreement, for the purpose of implementing the project. Further, the said land shall be subleased in favour of the Company at the end of six months after meeting the following conditions:

Financial closure for the project - Payment of Rs. 630,000,000 along with

stipulated interest to WBIDC.

8. Based on the opinion from an eminent lawyer, the Company would not be liable to pay income tax on foreign exchange gain amounting to Rs. 69,667,513 (Previous Year Rs. 829,171,689) being receipt on capital account. Accordingly, no provision for tax has been made on the exchange gain.

9. The Company has requested its vendors to confirm their status under Micro, Small and Medium Enterprises Development Act (MSMED), 2006. Based on the confirmations received, there are no amounts due to any micro or small enterprise under the MSMED Act, 2006.

10. Managerial Remuneration

Whole time directors are covered under the Companys gratuity scheme along with the other employees of the Company. The gratuity and compensated absences liability is determined for all the employees on the basis of an independent actuarial valuation. The specific amount of gratuity for whole time directors cannot be ascertained separately and accordingly, the same has not been included in the above note.

11. The Company has taken various residential, office and warehouse premises under operating lease agreements. These are generally cancellable and are renewable by mutual consent on mutually agreed terms.

Rental expenses of Rs. 18,830,947 (previous year Rs. 40,985,695) and Rs. Nil (previous year Rs. 62,400) in respect of obligation under operating leases have been recognised in "Pre-operative expenses pending allocation" and Profit and Loss Account respectively.

12. The Company had taken office premises on leave and licence basis, which was later on vacated and the possession of the same was handed over to the Licensor. During the yearended March 31, 2010, the licensor raised a demand of Rs. 8,504,068 after forfeiting security deposit towards rent for the non- cancellable period (upto January 2010) and related municipal taxes. The management is in advance stages of discussion with the licensor and is confident that the aforesaid demand shall be waived. Accordingly, no provision in respect of the said amount has been made in the financial statements. Also, the amount accrued as on March 31, 2009, Rs. 793,500 for the period after vacation of the said premises has been derecognised during the current year.

13. Other liabilities presented in Schedule 8 to the financial statements include provision for withholding tax liability amounting to Rs. 143,177,001. Such withholding tax is in respect of certain services rendered, mainly in connection with the purchase of plant and machinery, by non- resident suppliers. Based on the opinion from an eminent lawyer and in the light of certain court judgements, these services are considered to be part of supply of plant and machinery and the Company has been advised that there would be no liability on account of withholding tax. However, considering prudence in preparation of financial statements the liability has not been derecognised in the financial statements.

14. Additional information pursuant to the provisions of paragraphs 3,4C and 4D of Part II of Schedule VI to the Companies Act, 1956.

i) Details of Capacity and Production

In the absence of manufacturing activity of the company, afore said information is not applicable.

15. The Company is setting up a refinery project. The indirect expenditure/income during construction period has been recognised in "Pre-operative expenses pending allocation" account, which forms part of capital work-in-progress. The said account includes foreign exchange gain of Rs. 972,092,015 (including previous year Rs. 902,424,502), corporate expenses of Rs. 7,624,729 (including previous year Rs. 4,614,709), interest on statutory dues of Rs. 91,089,885 (including previous year Rs. 41,951,407), FCCB expenses written off of Rs. 54,053,605 (including previous year Rs. Nil), capital advance written off of Rs. 1,752,775 (including previous year Rs. Nil) and leasehold improvements written off of Rs. 2,639,418 (including previous year Rs. Nil) till March 31, 2010. At the time of allocation of pre- operative expenses to the respective assets on commissioning of the project, above mentioned expenses/income shall not be capitalized. The above accounting treatment is in accordance with the clarification given by the Department of Companies Affairs (Letter No. 2/17/64-PR, dated 29-1-1964).

16. Previous year figures have been re-classified/ re-grouped, wherever considered necessary to conform to current years classification.