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Notes to Accounts of Coventry Coil-O-Matic (Haryana) Ltd.

Mar 31, 2013

I) Account Reconciliation/Confirmation in respect of certain accounts of Vendor''s have not been received and they are subject to confirmations and reconciliation.The management is of the opinion that adjustment, if any arising out of such reconciliation would not have material effect on the financial statement of current year.

ii) Due to multiplicity of processes and items, it is not possible for the Company to maintain record or movement of stock in process on the shop floor on perpetual basis. The Company however, physically verifies such stocks at the end of year and valuation is made on the basis of such physical verification.

iii) The company is engaged in the manufacturing of Springs, which in the context of Accounting Standard 17 is considered the only primary business segment. However, secondary segment reporting is performed on the basis of location of the customer. All the business assets of the company are situated in India.

iv) Secured Loan

The Company is contesting in various Courts and Tribunals the exaggerated claims by the assignees of the various Term Loans availed between 1990 and 1992 from a consortium of 3 Financial Institutions (FIs) namely ICICI, IDBI and IFCI. The Company availed Term Loans of Rs. 9,25,66,743 between 1990 and 1992 from the consortium, with ICICI as the lead Institution. However the total amount so received was only Rs. 8,94,02,900 and the balance was adjusted against Interest payable. Due to recession in the market and accumulated losses which were partly occasioned by high interest rates and partly by time over-run and cost over-run, and despite best efforts of the promoters and the management, the Company turned into a sick company and was referred to the Board for Industrial and Financial Reconstruction (BIFR) vide Reference Case No. 197/97

A Rehabilitation Scheme/Package formulated and agreed upon by all the FIs was approved by the BIFR on 27-12-1999 wherein the dues were freshly determined and fixed as Rs. 1178 lakhs to be paid by 31 -03-2002.

The Net Worth of the Company turned positive and after considering the Balance Sheet for the year ended on 31st March 2000, the BIFR closed the reference case on 04-10-2001.

As per the package, one of the sources of finance to repay the FIs was Working Capital facilities. Since the Company was under RBI''s defaulters list, no banks were willing to extend the required working capital limits. This was duly brought to the notice of the BIFR. However, despite the best efforts, the Company could not arrange the working capital limits thereby leading to delayed repayments to the Financial Institutions.

In all, however, over the years, the Company made a total repayment of Rs. 12,86,76,952 out which Rs. 11,01,88,705 was made under/after the BIFR Scheme to the consortium members. The major portion of this was paid to the lead institution, ICICI, as part of approval for the BIFR Rehabilitation Scheme/Package. As the Company did not have the details of amounts adjusted by and amongst members of the Consortium out of the various repayments made by it and since, ICICI had filed a winding-up petition in the High Court of Punjab & Haryana at Chandigarh on 08-10-2004 for recovery of Rs. 3,29,92,998, the Company, after October 2005, preferred not to make any further payments to the FIs since the matter was sub-judice. In 2005, the RBI released a Scheme / Guidelines for One-Time Settlement of loan accounts of Small and Medium Companies. Since the Company fulfilled the criteria for availing the benefits under the said Scheme, which is binding upon the Banks and FIs, the Company re-calculated the payments made under the said Scheme, and after adjusting the amounts already paid to the consortium members, the dues towards the consortium came out to be Rs. 2,62,126 only. The Company accordingly made an application under the OTS Scheme to the FIs before the deadline of end March 2006 and offered to pay the said amount of t 2,62,126.

However, the Financial Institutions did not settle the Company''s matter under RBI''s OTS Guidelines and demanded unreasonably high amounts.

In the meanwhile, ICICI assigned its debts to Kotak Mahindra Bank Ltd. (KMBL) on 25-04-2005, and both IFCI and IDBI assigned their debts to Dhir & Dhir Asset Reconstruction and Securitisation Company Ltd. (now known as Alchemist Assets Reconstruction Company Ltd. (AARCL)) on 05-03-2008 for Rs. 3,04,00,000 and 12-08-2008 for Rs. 4,11,50,000 respectively.

Thereafter, the assignees filed various Applications under section 19 of The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 for recovery of debts as follows:

- In DRT-II, New Delhi by KMBL on 23-01-2007 for recovery of Rs. 4,72,06,961

- In DRT-I, New Delhi by AARCL on 11-12-2008 for recovery of Rs. 133,70,25,581 for dues calculated on the IFCI debts.

- In DRT-I, New Delhi by AARCL on 21-05-2012 for recovery of Rs. 93,15,19,000 for dues calculated on the IDBI debts. The Company has also filed counter claims of more than Rs. 500 crores on both KMBL and AARCL.

The final adjudication of the debt liability is yet to be completed.

AARCL (formerly D&DARSCL) also issued notice on 12-12-2008 under Section 13(2) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002 demanding an amount of Rs. 144,46,60,272 against dues calculated on both IFCI and IDBI debts. With an application filed on 29-07-2009 u/s 14 of the SARFAESI Act with Dy. Commissioner, Rewari, they made an attempt to take possession of the Company''s Assets. However, with timely actions, the Company has obtained from the Hon''ble Punjab & Haryana High Court, Chandigarh Stay Order against any coercive action, if any, taken under SARFAESI Act for taking over the possession of the property in dispute.

The Hon''ble Punjab & Haryana High Court, Chandigarh had through interim orders dated 21-01 -2011 and 11 -03-2011 directed the Company to deposit a sum of X 5 crores in the High Court, which the Company complied with.

As per further directions of the Hon''ble High Court vide order dated 09-08-2011 the sum of f 5 crores was appropriated as follows:

- Rs. 3 crores to Alchemist Assets Reconstruction Company Ltd., and

- Rs. 2 crores to Kotak Mahindra Bank Ltd.

Apart from the aforesaid payment of ^ 5 crores the assignees were also given the liberty to recover further sum of Rs. 13.50 crores from the sale of the extra land appurtenant to the factory premises. This had further been re-affirmed by the Hon''ble Supreme Court with modifications vide Orders dated 07-05-2012,30-07-2012 and 01-03-2013. As per the directions of the Hon''ble Supreme Court on 01-03-2013, the Company has given physical possession of a part of the property comprising of approx. 10 acres of land to Alchemist Assets Reconstruction Company Ltd. on 08-03-2013.

Since this was only an Interim Order and the amount is yet to be adjudicated, no provision for differential Interest has been made by the Company, nor has any effect been given in the Fixed Assets Schedule of the Accounts. The matter is expected to come up for hearing for final orders soon.

Also, in compliance to the directions given by Hon''ble Debts Recovery Appellate Tribunal, Delhi (DRAT), the Company depos- ited with the Debts Recovery Tribunal -1, Delhi (DRT-I) a sum of Rs. 51,80,619, which was received from the District Revenue Offteer-cum-Competent Authority, Rewari as land acquisition compensation for acquisition of approx. 0.69 acres of the Company''s land for widening of the Delhi-Jaipur NH-8 Highway.

However, the Company is of the view that after applying the Reserve Bank of India One-Time Settlement (RBI OTS) Guidelines and after adjusting amounts already paid, physical possession of part property given and amount deposited with the DRT, the Company is of the opinion that nothing will be due and payable by the Company to the Lenders/Assignees. On the contrary amounts may become recoverable for which claims have been filed by the Company.

v) RELATED PARTY INFORMATION:

(As identified by the Management and not verified by the Auditors.) Relationships:

a) Key Managerial Personnel

Shri R.M. Bafna (Whole Time Director)

b) Promoter and Enterprise significantly influenced by key managerrerit personnel and their relatives: i) Coventry Spring & Engineering Co. Ltd.

ii) Bangalaxmi Steel Trading Co. Ltd. iii) Castleton Tea Company (P) Ltd. Note: Related Party relationship on the basis of requirement of Accounting Standard 18 (AS-18) as in (a), l(b)(i), l(b) (ii) & l(b)(iii) above are certified by the management and relied upon by Auditors.

vi) Disclosure as requirement by Accounting Standard-19 (AS-19) are as follows:-

(a) Operating Leases:

The Company''s significant leasing arrangements are in respect of residential flats, plant and machinery and equipments taken on lease. The arrangements range is about 11 months and generally are renewable by mutual consent or mutually agreeable terms. Under these arrangements, generally refundable interest free deposits have been given.

vii) Contingent Liabilities not provided for:

2012-2013 2011-2012

(i) Notice involving Excise Duty demand against Appeal No. E/3581/10-SM. Order dated 20.01.2011 amounting to Rs. 5,60,613/- pre deposited Rs. 1,50Rs.000/- on dated 18.02.2011 410,613 410,613

(ii) Notice involving Excise duty demand against Appeal No. E/919/11-SM. Order dated 28.07.2011 amounting to Rs. 2,22,212/-

pre deposited Rs. 1,50,000/-on dated 12.08.2011 72,212

(iii) Outstanding Bank Guaranty 3,00,000

(iv) Claims under adjudication

[Refer Note No. 21 (B)(viii)]

* In DRT-II, New Delhi by KMBL for recovery of 4,72,06,961 4,72,06,961

* In DRT-I, New Delhi by AARCLfor recovery of dues calculated on the IFCI debts 133,70,25,581 ,70,25,581

* In DRT-I, New Delhi by AARCL for recovery of dues calculated on the IDBI debts 93,15,19,000

(The Company has also filed counter claims of more than Rs. 500 crores on both KMBL and AARCL)

viii) Previous year figures have been re-grouped, re-arranged wherever considered necessary. As per our Report of even date attached


Mar 31, 2010

(Amount in Rupees)

1. CONTINGENT LIABILITIES NOT PROVIDED FOR:

As at 31st As at 31st

March, 2010 March, 2009

Estimated amount of contracts remaining to be executed 39,48,500 39,48,500

on Capital account and not provided for (net of Advance)

2. SECURED LOAN:

A) Term Loans from Financial Institutions are secured by first mortgage ranking pari-passu of all the immovable properties both present and future and a first charge by way of hypothecation of all the movables (save & except book debts) including movable machinery, spares, tools & accessories, present & future subject to prior charge to be created in favour of the companys bankers on the stock of raw materials, semi-finished and finished goods, consumable stock and such movables as may be agreed by the lead institution for securing the working capital requirements.

B) Lenders have at their option a right to convert the 20% of outstanding amount into fully paid equity shares, in the event of default by the Company in payment of principal and / or interest.

C) The Company, in 1990 availed Term Loans of Rs. 9,25,66,743 from a consortium of three financial institutions namely ICICI, IDBI and IFCI, with ICICI as the lead institution. Due to recession in the market and accumulated losses which were partly occasioned by high interest rates and partly by time over-run and cost over-run, and despite best efforts of the promoters and the management, the Company turned into a sick company and was referred to Board for Industrial and Financial Reconstruction (BIFR) vide Reference Case No. 197/97.

A Rehabilitation Scheme/Package formulated and agreed upon by all the FIs was approved by the BIFR on 27.12.1999 where under the dues were freshly determined and fixed as Rs. 11,78,00,000. The net worth of the Company turned positive and after considering the Balance Sheet for the year ended on 31st March, 2000, the BIFR closed the reference case on 4.10.2001.

As per the package, one of the sources of finance to repay the FIs was working capital facilities. Since the Company was under RBIs defaulters list, no banks were willing to extend the required working capital limits. This was duly brought to the notice of the BIFR. However, despite the best efforts, the Company could not arrange the working capital limits thereby leading to delayed repayments to the Financial Institutions.

In all, however, over the years, the Company made a total repayment of Rs. 12,84,13,109 out which Rs. 11,01,88,705 was made under/after the BIFR Scheme to the consortium members. The major portion of this was paid to the lead institution, ICICI. As the Company did not have the details of amounts adjusted by and amongst members of the Consortium out of the various repayments made by it and since, ICICI had filed a winding-up petition in the High Court of Punjab & Haryana at Chandigarh on 8.10.2004 for recovery of Rs.3,29,92,998. the Company, after October 2005, preferred not to make any further payments to the FIs since the matter was sub-judice

D) In 2005, the RBI released a Scheme / Guidelines for One-Time Settlement of loan accounts of Small and Medium Companies. Since our Company fulfilled the criteria for availing the benefits under the said Scheme, which is binding upon the banks and FIs, our Company re-calculated the payments made under the said Scheme, and after adjusting the amounts already paid to the consortium members, the dues towards the consortium came out to be Rs.2,62,126/- only.

The Company accordingly made an application under the OTS Scheme to the FIs before the deadline of end March 2006 and offered to pay the said amount of Rs.2,62,126/-.

However, the Financial Institutions did not settle the Companys matter under RBIs OTS Guidelines and demanded unreasonably high amounts

In the meanwhile ICICI assigned its debts to Kotak Mahindra Bank Ltd (KMBL) on 25.04.2005. The Company was constrained to file Civil Suit No. 1569/2006 in Delhi High Court in August 2006 against ICICI, IDBI, IFCI and KMBL for declaring that RBI circulars in question are applicable to the Settlement of NPA dues of the Company and that in consequence thereto, the Company is liable to pay only Rs.2,62,126/- to the consortium and to restrain each of the FIs from taking any coercive steps for recovery against the Company till the judicial determination of alleged dues by the Honble Court. The said suit was disposed with the liberty to the Company to take all possible defences if and when any legal proceedings are resorted by the FIs.

The Company then filed Inter-Pleader suit offering to deposit the said amount in the court, which was disposed off on 10.05.2007, in view of the filing of the application by KMBL on 23.01.2007 in the Debts Recovery Tribunal-ll (DRT-II), New Delhi for recovery of Rs. 4,72,06,961. The said case is being con- tested by the Company and the adjudication of dues is sub-judice.

E) In 2008, IFCI and IDBI are stated to have assigned their loan accounts to Dhir & Dhir Asset Reconstruc- tion and Securitization Company Ltd. (D&DARSCL) for Rs.3,04,00,000 and Rs. 4,11,50,000 respectively. D&DARSCL filed an application in DRT-I, Delhi for recovery of Rs. 133,70,25,581, for the dues calculated , on the IFCI debts. The same is being contested by the Company.

D&DARSCL also issued notice under Section 13(2) of SARFAESI Act demanding an amount of Rs. 144,46,60,272 against dues calculated On both IFCI and IDBI debts. The same was duly replied to by the Company, raising vital questions of fact and law.

The winding-up petition which was filed by ICICI on 08.10.2004 in the High Court of Punjab & Haryana at Chandgarh, was admitted on 26.05.2005 and the Company judge in his order dated 29.05.2009 directed for advertisement to be issued as factum of admission which was published on 22.07.2009. On 29.07.2009 D&DARSCL filed an application u/s 14 of SARFAESI Act with Dy. Commissioner, Rewari in attempt to take possession of the Companys assets.

However, the High Court of Punjab & Haryana at Chandigarh vide its Order dated 21.8.2009 directed that, as an interim measure, the present management of the Company shall not be dispossessed. The said order was challenged by D&DARSCL (its name was subsequently changed to Alchemist Asset Reconstruction Company Ltd.) in the Division Bench, but its appeal was dismissed on 18.02.2010.

Meanwhite the DRT-II imposed a cost of Rs. 2000/- on Kotak Bank on 11.12.2009 for not filling their response to our reply and further imposed a cost of Rs. 25000/- on 01.02.2010 on ICICI Bank for not furnishing the details of the payments received by them from our Company.

An application for directing the lenders to calculate and settle our dues as per OtS guidelines of RBI as per the judgement of Supreme Court in Sardar Associates, case has been filled in DRT-I which is pending. The Company is hopeful that in view of Supreme Courts judgement, the liability would be settled as per the RBI guidelines, by which our liability would come to Rs. 2.62 lakhs only. Alchemist Assets Reconstruction Company Limited (formerly known as Dhir & Dhir Assets Reconstruc- tion and Securitization Company Limited) has sent letters on 05.05.2010 to seven customers of the Company for stopping payments of purchase consideration of goods purchased from the Company in breach of the High Court order dated 21.08.2009. In reply to this the Company has filed a contempt of Court petition on 27.05.2010. The matter is still pending in the Court.

F) Loan from HDFC Bank Ltd., against hypothecation of motor cars.

G) Loan from Maruti Suzuki India Ltd. against hypothecation of motor cars.

3. The Company has no process of sending confirmation to its Creditors and Debtors. But the management confirms that the receivables stated in the Balance Sheet is realizable & payable in the Balance Sheet are payable to the amount stated *

A) The Company has paid Rs. 5,53,423/- (From 01 August, 09 to 31st March, 10) towards remuneration including perquisites to whole time director Mr. R.M. Bafna without prior permission of Central Government in contravention of section 198, 309 & 349 under Companies Act 1956. The Company is in process of applying for permission to Central Government for post approval under these sections.

4. Deferred Tax: The details of the net Deferred Tax Asset of Rs. 88,52,497/- (Previous Year net Deferred Tax Assets of Rs. 1,09,68,108/-) are as under:

5. Due to multiplicity of processes and items, it is not possible for the Company to maintain record or movement of stock in process on the shop floor on perpetual basis. The Company however, physically verifies such stocks at the end of year and valuation is made on the basis of such physical verification.

6. The company is engaged in the manufacturing of Springs, which in the context of Accounting Standard 17 is considered the only primary business segment. However, secondary segment reporting is performed on the basis of location of the customer. All the business assets of the company are situated in India

7. RELATED PARTY INFORMATION:

(As identified by the Management and not verified by the Auditors.)

I. Relationships:

a) Key Managerial Personnel

Shri R.M. Bafna (Whole Time Director)

b) Promoter and Enterprise significantly influenced by key management personnel and their relatives:

i) Coventry Spring & Engineering Co, Ltd.

ii) Bangalaxmi Steel Trading Co. Ltd.

iii) Castleton Tea Company (P) Ltd. Note: Related Party relationship on the basis of requirement of Accounting Standard 18 (AS-18) as in l(a), l(b)(i),l(b)(ii) & l(b)(iii) above are certified by the management and relied upon by Auditors.

II. Transactions with related parties

b) Defined benefit plan:

The Employees Gratuity Fund is not funded and managed by the Company. The present value of , obligation is determined based on actuarial valuation using the projected unit credit method. The obligation for leave encashment is recognized in the same manner as gratuity.

8. In the absence of information about Sundry Creditors as regard to the status /classification of the relevant enterprises into Micro, Small and Medium Enterprises, information as required under Notification No. G.S.R.719(E) dated 16.11.2007 issued by the Department of Company affairs in respect of the total amount payable and the amount of interest thereon payable during the year and at the end of the year to them could not be ascertained.

9. The Company has odopted Accounting Standard-29 "Provisions, Contingent Liabilities and Contingent Assets" Issued by The Institute of Chartered Accountants of India with effect from 1st April 2004. The relevant disclosure as per AS-29 is as follows:-

10. Disclosure as required by Accounting Standard-19 (AS-i9) are as follows:- a) Operating Leases:

i) The Companys significant leasing arrangements are in respect of residential flats, plant and ma- chinery and equipments taken on lease. The arrangements range is about 11 months and generally are renewable by mutual consent or mutually agreeable terms. Under these arrangements, gener- ally refundable interest free deposits have been given.

The future minimum lease payments under non-cancellable operating lease of following periods are as under:-

ii) Commercial premises have been given on operating lease of Rs. 72,000/- 31st March, 2010 (Rs. 72,000/- 31st March 2009) having its original cost on pro-rata basis of Rs. 54,599/- (31st March, 2009 Rs. 54,599/-) and accumulated depreciation of Rs. 17,519/- (31st March, 2009 Rs. 16,628/-) as at 31st March 2010. Depreciation for above assets for the current year Rs. 890/- (31st March, 2009 Rs. 890/-). Under these arrangements, no refundable security has been taken. b) Finance Leases The Company has not entered into any material financial lease.

11. Previous year figures have been re-grouped, re-arranged wherever considered necessary.

 
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