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Directors Report of Chitradurga Spintex Ltd.

Mar 31, 2015

To,

The Members,

The Directors have pleasure in presenting their 24* Annual Report on the business and operations of the Company and the accounts for the Financial Year ended 31s' March, 2015.

1. FINANCIAL SUMMARY OR HIGHLIGHTS/PERFORMANCE OF THE COMPANY

The Board's Report shall be prepared based on the standalone Financial Statements of the Company.

[In Rs.]

Particulars 2014-2015 2013-14

Gross Income 10,05,210 65,95,712

Profit / (Loss) Before Interest and 2,66,267 5617385 Depreciation

Finance Charges - -

Gross Profit/(Loss) 2,66,267 56,17,385

Provision for Depreciation - -

Extraordinary Item - -

Net Profit/(Loss) Before Tax 2,66,267 56,17,385

Provision for Tax - -

Net Profit/(Loss) After Tax 2,66,267 56,17,385

Balance of Profit brought forward - -

Balance available for appropriation - -

Proposed Dividend on Equity Shares - -

Tax on proposed Dividend - -

Transfer to General Reserve - -

Surplus carried to Balance Sheet 2,66,267 56,17,385

2. COMPANY'S PERFORMANCE AFFAIR

Your Directors are positive about the Company's operations and making best efforts to implement the cost reduction measures to the extent feasible.

3. DIVIDEND

Considering the present financial status of the Company, your directors do not recommend any dividend for the year under report.

4. RESERVES AND SURPLUS

The balance of Profit & Loss statement amounting to Rs. 2,66,267/- for Financial Year under review is transferred to reserves. The total reserves for the Financial Year 2014-15 is Rs. (3,39,03,613)/-

5. SHARE CAPITAL

The total paid up share capital of the Company as on 31s' March, 2015 is Rs. 4,61,03,000/- comprising of 46,10,300 Equity Shares of Rs. 10/- each.

The Karnataka High Court vide its order dated 10th July 2015 has approved the scheme of reduction of capital on account of which the equity share capital of company will be reduced from 46,10,300 equity shares of Rs 10 each aggregating Rs 4,61,03,000 to 4,61,030 equity shares of Rs. 10 each aggregating to Rs.46,10,300. Accordingly an amount of Rs. 4,14,92,700 will be reduced from the equity share capital by setting it off against the accumulated losses of the company. The appointed date for the scheme was Is' April 2013.

6. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Pursuant to Section 161 of Companies Act, 2013, Ms. Namrata Malu (DIN: 03583659), has been appointed as an Additional Independent Director in the Board Meeting held on 25'h March, 2015.

Pursuant to the provisions of Section 203 of the Companies Act, 2013, Mr. Shivanna Rajasekharappa has been appointed as Chief Financial Officer in the Board Meeting held on 25* March, 2015.

The Company has received declaration from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013.

7. MEETINGS

A calendar of Meetings is prepared and circulated in advance to the Directors. During the year 10 (Ten) Board Meetings and 6 (Six) Audit Committee Meetings were convened and held. The details of which are given as under.

Sr. No. Date Sr. No. Date

Board Meeting Audit Committee

1. 12th April, 2014 1. 19th April, 2014

2. 21st April, 2014 2. 21st May, 2014

3. 21st May, 2014 3. 23rd May, 2014

4. 23rd May, 2014 4. 06th August, 2014

5. 06th August, 2014 5. 13th November, 2014

6. 16th August, 2014 6. 11th February, 2015

7. 13th November, 2014

8. 12th January, 2015

9. 11th February, 2015

10. 25th March, 2015

The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.

8. BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit, Nomination & Remuneration Committee.

9. COMMITTEES OF THE BOARD

During the year, in accordance with provisions of Companies Act, 2013, the Board of Directors of the Company has re-named the existing committee i.e., Stakeholders Relationship Committee and constituted Nomination and Remuneration Committee.

There are currently three committees of the Board, as following:

1) Audit Committee

The Audit Committee of the Company reviews the reports to be submitted with the Board of Directors with respect of auditing and accounting matters. It also supervises the Company's financial reporting process.

The Audit Committee Comprises of 3 (Three) Directors. The Chairman of the Audit Committee is a Non-executive and Independent Director. The Composition of the Audit Committee is as under:

Sr. Name Category Designation No.

1 Mr. Prasannakumar Independent Director Chairman Siddappa

2 Mr. Thippeswamy Independent Director Member Siddappa Thippeswamy

3 Mr. Shivanna Non-Executive Director Member Chandrashekhar

2) Nomination and Remuneration Committee

The Company has constituted Nomination and Remuneration Committee and presently the Remuneration Committee comprises of 3 (Three) Directors.

The composition of the Nomination and Remuneration Committee is as under:

Sr. Name Category Designation No.

1 Mr. Prasannakumar Independent Director Chairman Siddappa

2 Mr. Thippeswamy Independent Director Member Siddappa Thippeswamy

3 Mr.Shivanna Non-Executive Member Chandrashekhar Director

3) Stakeholders Relationship Committee

It was apprised to the Board that pursuant to requirements of Section 178 of the Companies Act, 2013, Company which has more than 1000 (One Thousand) shareholders at any time during a Financial Year shall constitute a 'Stakeholders' Relationship Committee' consisting of a Chairperson who shall be a Non-Executive Director and such other members as may be decided by the Board.

In view of above, the 'Shareholders Grievance Committee' formed as per the requirements of the Listing Agreement requires to be re-named/ re-constituted as 'Stakeholders Relationship Committee' and to merge and redesign the Company's 'Share Transfer Committee' along with the Stakeholders' Relationship Committee. The Committee, inter-alia, deals with various matters relating to:

- Transfer/ transmission of shares;

- Issue of duplicate share certificates;

- Investors* grievances and redressal mechanism and recommend measures to improve the level of investor services.

Details of shares transfer/transmission approved by the Committee and Shareholders'/Investors' grievances are placed at the Board Meetings from time to time.

Sr. No. Name Category Designation

1 Mr.Shivanna Non-Executive Chairman Chandrashekhar Director

2 Mr. Prasannakumar Independent Director Member Siddappa

3 Mr. Thippeswamy Independent Director Member Siddappa Thippeswamy

10. REMUNERATION POLICY

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration.

11. DIRECTORS' RESPONSIBILITY STATEMENT

In terms of Section 134(5) of the Companies Act, 2013, the directors would like to state that:

a) In the preparation of the annual accounts, the applicable accounting standards have been followed.

b) The directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give true and fair view of the state of affairs of the Company for the year under review.

c) The directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d) The directors have prepared the annual accounts on a going concern basis.

e) The directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

f) The directors had devised proper system to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively.

12. AUDITORS

The Auditor, Mr. Chetan Dedhia, Chartered Accountant, Mumbai, retire at the ensuing Annual General Meeting and, being eligible, offer himself for reappointment for a period from the conclusion of this Annual General Meeting [AGM] till the conclusion of 27th (Twenty Seventh) AGM.

13. AUDITOR'S REPORT

The Board has duly examined the Statutory Auditor's report on accounts which is self explanatory and clarifications wherever necessary, have been included in the Notes to Financial Statements of the Annual Report.

Regarding Auditor's comment on 'ongoing concern' the Director contend that the Company will be able to continue as going concern, though the Company has not undertaken any business activity, its net worth remains negative and considering the fact that the Company has adequate resources to continue in operational existence for the foreseeable future and taking into account the management assessment of improvement in the economic condition in general and as borne out by AS16 issued by the Council of the ICAI, they continue to adopt the going concern basis in preparing the annual report and accounts.

Your Directors, continue to improve the financial viability of the Company and also take such steps as may be required under current laws and regulations in terms of disclosure and reporting required to be made to concerned statutory authorities.

14. SECRETARIAL AUDIT REPORT

In terms of Section 204 of the Act and Rules made there under, M/s. S G Parekh & Co., Practicing Company Secretary have been appointed Secretarial Auditors of the Company. The report of the Secretarial Auditors is enclosed as Annexure to this report. Secretarial Auditor's observation and Management's explanation to the Auditor's observation -

a) Non appointment of Company Secretary

The Board would like to bring to your notice that the Company has been trying to recruit a Company Secretary on best efforts basis since a long time but the Company has not been successful.

b) Clause 41 - Publication of Results audited and unaudited in news paper

The Company has not been doing that since the financial position of the Company does not allow Board to incur such expenditure keeping in mind that the results are made available for investors and market through Stock Exchange. The Company, on timely basis submits the results to the Exchange to bring the information in public domain.

c) Non appointment of Internal Auditor

Due to financial constraints the Board decided to appoint the Internal Auditor in Next Financial year keeping in mind revival of the Company in near future.

d) Delay in compliance with Clause 31 of the Listing Agreement

The Board would like to inform that there was a delay of 10 days in complying with the requirements of Clause 31.

e) Nonfiling of certain forms with ROC

With regard to non filing of some forms were mainly due to ambiguity and uncertainty of the applicability of the same for the relevant period.

However, the Company would ensure in future that all the provisions are complied to the fullest extent. The report of the Secretarial Auditors is enclosed as Annexure II to this report.

15. VIGIL MECHANISM

In pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013, a Vigil Mechanism for directors and employees to report genuine concerns has been established. The Vigil Mechanism Policy has been uploaded on the website of the Company at www.chitradurga.co.in under investors/policy documents/ Vigil Mechanism Policy link.

16. RISK MANAGEMENT POLICY

A statement indicating development and implementation of a risk management policy for the Company including identification therein of elements of risk, if any, this in the opinion of the Board may threaten the existence of the Company.

17. EXTRACT OF ANNUAL RETURN

As required pursuant to Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of Annual Return in MGT 9 as a part of this Annual Report as ANNEXURE I.

18. CODE OF CONDUCT

The Board of Directors has approved a Code of Conduct which is applicable to the Members of the Board and all employees in the course of day to day business operations of the Company. The code laid down by the Board is known as "Code of Business Conduct" which forms an Appendix to the Code. The Code has been posted on the Company's website www.chitradurga.co.in.

19. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Conservation of energy, technology absorption, foreign exchange earnings and outgo are nil during the year.

20. INDUSTRIAL RELATIONS:

During the year under review, your Company maintained cordial relationship with employees at all levels.

21. LISTING WITH STOCK EXCHANGES

The Company confirms that it has paid the Annual Listing Fees for the year 2015-2016 to BSE Limited where the Company's Shares are listed.

22. OTHER INFORMATION

Your Directors hereby states that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. During the year under the review, the Company has not given any new loans and not provided any Guarantees or made Investments under the provisions of Section 186 of the Companies Act, 2013;

2. The Provision of Section 135 of the Act with respect to Corporate Social Responsibility (CSR) is not applicable to the Company, hence, there is no need to develop policy on CSR and take initiative thereon;

3. The Company do not have any subsidiary, joint venture or, associate Company, hence, no need to state anything about the same;

4. The Company has not accepted deposits covered under Chapter V of the Act;

5. No significant material orders were passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future.

6. Since, the Company having paid-up capital less than the threshold provided under Clause 49 of the Listing Agreement, hence, the Company need not required to address Reports on Corporate Governance, certificate/s pertains thereto and, Management Discussion and Analysis Report

7. There are no employees who are in receipt of salary in excess of the limits prescribed under Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

8. The Company has not entered any contracts or arrangements with related parties specified under Section 188 of Companies Act, 2013.

23. ACKNOWLEDGEMENTS

An acknowledgement to all with whose help, cooperation and hard work the Company is able to achieve the results.

For and on behalf of the Board of Directors

Place: Challakere S. Rajasekharappa

Date: 13th August, 2015 Chairman


Mar 31, 2014

Dear Shareholders,

The Directors have pleasure in presenting the 23rd Annual Report of the Company together with audited financial statements and accounts for the year ended March 31,2014.

Financial Highlights

(Rupees in Lakhs) Particulars 2013-14 2012-13

Gross Revenue 65.96 4.08

PBITD 56.17 -2.10

Net Profit/(-)Loss 56.17 -2.10

Operations:

Due to delay in getting approval for the Scheme of Arrangement pursuant to section 391 to 393 of the Companies Act, 1956 the Company is not in a position to undertake any projects of manufacturing, trading or weaving of Textile and other goods, and due to paucity of working capital. The Company has also not been able to raise any loans from Financial Institutions, which is essential for expanding its business activities. Hence, due to the reasons beyond the control of your Directors, your Company has not undertaken any business during the year, but with a view to mobilize the funds your Company has sold all its unusable assets. The Directors are under the process of exploring other avenues of diversifying into new areas of business.

Though there is no business is undertaken, its net worth remains positive and considering the fact that the Company has adequate resources to continue in operational existence for the foreseeable future and taking into account the management assessment of improvement in the economic condition in general they continue to adopt the going concern basis in preparing the annual report and accounts.

Dividend

In view of inadequacy of profits, your Directors are unable to recommend any dividend for the year under report. Corporate Governance

A detailed report on Corporate Governance pursuant to the requirements of Clause 49 of the Listing Agreement forms part of the Annual Report. A certificate from the auditors of the Company, Chetan N Dedhia, Chartered Accountants, confirming compliance of conditions of corporate governance as stipulated under tie aforesaid Clause 49 is provided as annexure.

Management Discussion and Analysis Report

The management discussion and analysis of financial condition including the result of operation of the Company for the year under review as required under clause 49 of the listing agreement with the stock exchange is given as a separate statement in Annual Report.

Auditors:

The Statutory Auditors of the Company, Chetan N Dedhia, Chartered Accountants, Mumbai, retire at the conclusion of the ensuing Annual General Meeting of the Company and have confirmed their willingness and eligibility for re-appointment and have also confirmed that their reappointment, if made, will be within the limits under Section 224(1 B) of the Companies Act, 1956.

Auditors'' Report:

The Board has duly examined the Statutory Auditors'' report to accounts which is self explanatory and clarifications wherever necessary, have been included in the Notes to Financial Statements of the Annual Report.

Regarding Auditors comment on ''on going concern'' the Director contend that the Company will be able to continue as going concern, though the Company has not undertaken any business activity, its net worth remains positive and considering the fact that the Company has adequate resources to continue in operational existence for the foreseeable future and taking into account the management assessment of improvement in the economic condition in general and as borne out by AAS16 issued by the council of the ICAI, they continue to adopt the going concern basis in preparing the annual report and accounts.

Your Directors, continue their efforts to improve the financial viability of the Company and also take such steps as may be required under current laws and regulations in terms of disclosure and reporting required to be made to concerned statutory authorities.

Particulars of Employees

During the year there was no employee drawing remuneration beyond the limits prescribed under section 217 (2A) of the Companies Act, 1956, read with the Companies (Particu lars of Employees) Rules, 1975.

Conservation Of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo:

Disclosure in respect of conservation of energy as required under Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the report of the Board of Directors) Rules, 1988, as amended is given below.

Conservation Of Energy. Technology Absorption, Foreign Exchange Earnings and Outgo are Nil during the year.

Directors'' Responsibility Statement

Pursuant to the requirement under section 217(2 AA) of the Companies Act, 1956, with respect to the Directors'' responsibility statement it is hereby confirmed that:

i. In the preparation of he annual accounts for the financial year ended March 31, 2014, the applicable accounting standards read with requirements set out under Schedule VI to the Companies Act, 1956, have been followed and there are no material departures from the same;

ii. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31,2014 and of the Profit of the Company for the said period.

iii. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv. The Directors have prepared the annual accounts of the Company on a ''going concern basis''.

Acknowledgements

Your Directors wish to place on record their appreciation for the continued support and co-operation of the shareholders, Bankers, various regulatory and Government authorities and for the valuable contributions made by the employees of the Company.

On behalf of the Board of Directors S. Rajasekharappa Challakere, May 21,2014 Chairman


Mar 31, 2013

Dear Shareholders,

The directors have pleasure in presenting the 22nd Annual Report of the Company together with audited financial statements and accounts for the year ended March 31, 2013.

Financial Highlights

(Rupees in Lakhs)

Particulars 2012-13 2011-12

Gross Revenue 40.8 0.64

PBITD -2.10 -7.45

Cash Profit from operations -2.10 -7.45

Net Profit/(-)Loss -2.10 -7.45

Operations.

In view of the accumulated losses and erosion of more than 91% Net worth, the Company is not in position to undertake any projects of manufacturing, trading or weaving of Textile and other goods, and due to paucity of working capital, the Company has also not been able to raise any loans from Financial Institutions, which is essential for expanding its business activities. Hence, due to the reasons beyond the control of your directors your company has not undertaken any business during the year, but with a view to curtail the mounting losses the Company has leased the godown facilities on rent basis to State Warehouse Corporation and to private parties. But due to continued drought situation even demand for godown is also less hence building has been leased for part of the year. The directors are under the process of exploring other avenues of diversifying into new areas of business

In view of the above, the Company is seeking to reconstruct / restructure its capital by way of writing off its accumulated Capital loss against the reduction of its paid up capital which is not represented by available assets and to raise further capital through a preferential issue for infusing funds into the Company through a scheme of Arrangement pursuant to Section 391 to 393 of the Companies Act, 1956. The Board has accepted and recommended the scheme of Arrangement pursuant to Section 391 to 393 of the Companies Act, 1956 inter-alia : Reduction of Capital; Preference Allotment of Shares and Change of Management.

All remaining assets and liabilities are valued on a "Going Concern" basis. Though there is no business is undertaken, its net worth remains positive and considering the fact that the company has adequate resources to continue in operational existence for the foreseeable future and taking into account the management assessment of improvement in the economic condition in general they continue to adopt the going concern basis in preparing the annual report and accounts.

Dividend

In view of inadequacy of profits, your Directors are unable to recommend any dividend for the year under report.

Corporate Governance

A detailed report on Corporate Governance pursuant to the requirements of Clause 49 of the Listing Agreement forms part of the Annual Report. A certificate from the auditors of the Company, H.M.V. Murthy & Co., Chartered Accountants, confirming compliance of conditions of corporate governance as stipulated under the aforesaid Clause 49 is provided as annexure.

Management Discussion and Analysis Report

The management discussion and analysis of financial condition including the result of operation of the Company for the year under review as required under clause 49 of the listing agreement with the stock exchange is given as a separate statement in Annual Report.

Auditors:

The Statutory Auditors of the Company, M/s. H.M.V. Murthy & Co., Chartered Accountants, Bangalore, retire at the conclusion of the ensuing annual general meeting of the Company. Notice has been received u/s 224 of the Companies Act, proposing the appointment of M/s. Chetan N. Dedhia, Chartered Accountants, Mumbai, as Statutory Auditors of the company in place of the retiring Auditors who have expressed their inability to continue as Auditors of the company.

Auditors'' Report:

The Board has duly examined the statutory auditors'' report to accounts which is self explanatory and clarifications wherever necessary, have been included in the Notes to Financial Statements of the Annual Report.

Regarding Auditors comment on ''on going concern'' the Director contend that the Company will be able to continue as going concern, though the company has not undertaken any business activity, its net worth remains positive and considering the fact that the company has adequate resources to continue in operational existence for the foreseeable future and taking into account the management assessment of improvement in the economic condition in general and as borne out by AAS16 issued by the council of the ICAI, they continue to adopt the going concern basis in preparing the annual report and accounts.

The huge accumulated losses suffered till closure of spinning activity by the company have been mainly on account of unstable and erratic market conditions which had affected adversely the entire industry rather than the operational performance of the company. Your directors, however, continue their efforts to improve the financial viability of the company and also take such steps as may be required under current laws and regulations in terms of disclosure and reporting required to be made to concerned statutory authorities.

Particulars of Employees

During the year there was no employee drawing remuneration beyond the limits prescribed under section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975.

Conservation Of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo:

Disclosure in respect of conservation of energy as required under Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the report of the Board of Directors) Rules, 1988, as amended is given below.

Conservation Of Energy. Technology Absorption, Foreign Exchange Earnings and Outgo are Nil during the year.

Directors'' Responsibility Statement

Pursuant to the requirement under section 217(2 AA) of the Companies Act, 1956, with respect to the directors'' responsibility statement it is hereby confirmed that:

i. In the preparation of the annual accounts for the financial year ended March 31, 2013, the applicable accounting standards read with requirements set out under Schedule VI to the Companies Act, 1956, have been followed and there are no material departures from the same;

ii. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2013 and of the loss of the Company for the said period.

iii. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv. The Directors have prepared the annual accounts of the Company on a ''going concern basis''.

Acknowledgements

Your Directors wish to place on record their appreciation for the continued support and co-operation of the shareholders, Bankers, various regulatory and Government authorities and for the valuable contributions made by the employees of the Company. On behalf of the Board of Directors

S. Rajasekharappa

Challakere, June 24, 2013 Chairman


Mar 31, 2011

Dear Shareholders,

The directors have pleasure in presenting the Twentieth Annual Report of the Company together with audited financial statements and accounts for the year ended March 31, 2011.

Financial Highlights (Rupees in Lakhs)

Particulars 2010-11 2009-10

Gross Revenue 5.78 9.73

PBITD 0.85 (83.66)

Cash Profit from operations 0.84 (89.74)

Net Profit/(-)Loss 0.84 (89.74)

Operations:

Due to the reasons beyond the control of your directors your company has not undertaken any business, but with a view to curtail the mounting losses the Company has leased the godown facilities on rent basis to State and Central Warehouse Corporations. The directors are under the process of exploring other avenues of diversifying into new areas of business

All remaining assets and liabilities are valued on a "Going Concern" basis. Though there is no business is undertaken, its net worth remains positive and considering the fact that the company has adequate resources to continue in operational existence for the foreseeable future and taking into account the management assessment of improvement in the economic condition in general they continue to adopt the going concern basis in preparing the annual report and accounts.

Dividend

In view of inadequacy of profits, your Directors are unable to recommend any dividend for the year under report.

Corporate Governance

A detailed report on Corporate Governance pursuant to the requirements of Clause 49 of the Listing Agreement forms part of the Annual Report. A certificate from the auditors of the Company, H.M.V. Murthy & Co., Chartered Accountants, confirming compliance of conditions of corporate governance as stipulated under the aforesaid Clause 49 is provided as annexure.

Management Discussion and Analysis Report

The management discussion and analysis of financial condition including the result of operation of the Company for the year under review as required under clause 49 of the listing agreement with the stock exchange is given as a separate statement in Annual Report.

Auditors:

The Statutory Auditors of the Company, M/s. H.M.V. Murthy & Co., Chartered Accountants, Bangalore, retire at the conclusion of the ensuing annual general meeting of the Company and have confirmed his willingness and eligibility for re-appointment and has also confirmed that his re-appointment, if made, will be within the limits under Section 224(1 B) of the Companies Act, 1956.

Auditors' Report:

The Board has duly examined the statutory auditors' report to accounts which is self explanatory and clarifications wherever necessary, have been included in the Notes to Accounts section of the Annual Report. Regarding Auditors comment on 'on going concern' the Director contend that the Company will be able to continue as going concern, though the company has not undertaken any business activity, its net worth remains positive and considering the fact that the company has adequate resources to continue in operational existence for the foreseeable future and taking into account the management assessment of improvement in the economic condition in general and as borne out by AAS16 issued by the council of the ICAI, they continue to adopt the going concern basis in preparing the annual report and accounts.

Particulars of Employees

During the year there was no employee drawing remuneration beyond the limits prescribed under section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975.

Conservation Of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo:

Disclosure in respect of conservation of energy as required under Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the report of the Board of Directors) Rules, 1988, as amended is given below.

Conservation Of Energy. Technology Absorption, Foreign Exchange Earnings and Outgo are Nil during the year.

Directors' Responsibility Statement

Pursuant to the requirement under section 217(2 AA) of the Companies Act, 1956, with respect to the directors responsibility statement it is hereby confirmed that:

i. In the preparation of the annual accounts for the financial year ended March 31, 2011, the applicable accounting standards have been followed and there are no material departures from the same;

ii. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2011 and of the profit of the Company for the said period.

iii. The Directors have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv. The Directors have prepared the accounts for the financial year ended March 31, 2011 on a going concern basis.

Acknowledgements

Your Directors wish to place on record their appreciation for the continued support and co-operation of the shareholders, Bankers, various regulatory and Government authorities and for the valuable contributions made by the employees of the Company.

On behalf of the Board of Directors

S. Rajasekharappa Chairman

Challakere, 27th August 2011


Mar 31, 2010

The directors have pleasure in presenting the Ninteenth Annual Report of the Company together with audited financial statements and accounts for the year ended March 31, 2010.

Financial Highlights (Rupees in Lakhs)

Particulars 2009-10 2008-09

Gross Revenue 9.73 167.60

PBITD (83.66) (82.19)

Cash Profit from operations (89.74) (122.38)

Net Profit/(-)Loss (89.74) (137.96)

Operations:

Pursuant to the approval of the members through postal ballot on 30.10.2008, the Company has disposed of some of the textile machineries after stoppage of spinning activity, and taken steps to dispose of remaining textile machineries. On account of loss on sale of machineries, deteriorated rawmaterial stock and payment of huge amount of arrears of sales tax on account of non grant of Textile Policy by the State Government, the company has incurred huge loss during the year. With a view to curtail the mounting losses the Company has leased the godown facilities on rent basis to State and Central Warehouse Corporations. The Company has cleared all secured liabilities and as of now the Companies liability is very meager which is normal in normal course of business.

All other remaining assets and liabilities are valued on a "Going Concern" basis and the directors are under the process of exploring other avenues of diversifying into new areas of business. Though the manufacturing activity is stopped, its net worth remains positive and considering the fact that the company has adequate resources to continue in operational existence for the foreseeable future and taking into account the management assessment of improvement in the economic condition in general they continue to adopt the going concern basis in preparing the annual report and accounts.

Dividend

In view of inadequacy of profits, your Directors are unable to recommend any dividend for the year under report.

Directors

During the year Mr. B. Ekanthappa has resigned from the Board due to personal reasons and the Company has appointed Mr.S. Thippeswamy in his place to comply with the clause 49 of the listing agreement and other provisions. The Board places on record its sincere appreciation for the services rendered by Mr.B.Ekanthappa during his tenure on the Board. Mr. S. Rajasekharappa, Mr. S. Chandrashekar, Mr. S.T. Thippeswamy, Mr. S. Prasannakumar and Mr. S. Thippeswamy directors of the company retire by rotation at the ensuing annual general meeting, and being eligible, offer themselves for re-appointment

Corporate Governance

A detailed report on Corporate Governance pursuant to the requirements of Clause 49 of the Listing Agreement forms part of the Annual Report. A certificate from the auditors of the Company, H.M.V. Murthy & Co., Chartered Accountants, confirming compliance of conditions of corporate governance as stipulated under the aforesaid Clause 49 is provided as annexure.

Management Discussion and Analysis Report

The management discussion and analysis of financial condition including the result of operation of the Company for the year under review as required under clause 49 of the listing agreement with the stock exchange is given as a separate statement in Annual Report.

Auditors:

The Statutory Auditors of the Company, M/s. H.M.V. Murthy & Co., Chartered Accountants, Bangalore, retire at the conclusion of the ensuing annual general meeting of the Company and have confirmed his willingness and eligibility for re-appointment and has also confirmed that his re-appointment, if made, will be within the limits under Section 224(1 B) of the Companies Act, 1956.

Auditors Report:

The Board has duly examined the statutory auditors report to accounts which is self explanatory and clarifications wherever necessary, have been included in the Notes to Accounts section of the Annual Report. Regarding Auditors comment on on going concern the Director contend that the Company will be able to continue as going concern, though the manufacturing activity is stopped, its net worth remains positive and considering the fact that the company has adequate resources to continue in operational existence for the foreseeable future and taking into account the management assessment of improvement in the economic condition in general and as borne out by AAS16 issued by the council of the ICAI, they continue to adopt the going concern basis in preparing the annual report and accounts.

Particulars of Employees

During the year there was no employee drawing remuneration beyond the limits prescribed under section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975.

Conservation Of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo:

Disclosure in respect of conservation of energy as required under Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the report of the Board of Directors) Rules, 1988, as amended is given below.

Conservation Of Energy. Technology Absorption, Foreign Exchange Earnings and Outgo is Nil during the year.

Directors Responsibility Statement

Pursuant to the requirement under section 217(2 AA) of the Companies Act, 1956, with respect to the directors responsibilitystatement it is hereby confirmed that:

i. In the preparation of the annual accounts for the financial year ended March 31, 2010, the applicable accountingstandards have been followed and there are no material departures from the same; ii. The Directors have selected such accounting policies and applied them consistently and made judgments and estimatesthat are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31,2010 and of the loss of the Company for the said period. iii. The Directors have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and iv. The Directors have prepared the accounts for the financial year ended March 31, 2010 on a going concern basis.

Acknowledgements

Your Directors wish to place on record their appreciation for the continued support and co-operation of the shareholders, Bankers, various regulatory and Government authorities and for the valuable contributions made by the employees of the Company.



On behalf of the Board of Directors

S. Rajasekharappa

Challakere, 27th August 2010 Chairman