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Notes to Accounts of Eastern Silk Industries Ltd.

Mar 31, 2015

Note 1 Share Capital

a) No securities convertible into Equity/Preference shares issued by the Company during the year.

b) No calls are unpaid by any Director or Officer of the Company during the year.

i) During 1995-96 the company offered 1,18,13,725 Equity Shares of Rs. 2/- each to the existing Shareholders in the ratio of 1 share for every 2 shares held, at a premium of Rs. 6/- per share as per letter of offer dated December 21,1995 . Out of the above shares, allotment of 6,000 Equity Shares are kept in abeyance under Court Order.

c) 6,00,000 Redeemable Cumulative Preference Shares were allotted by the Company on 21.01.2004, 2,00,000 Redeemable Cumulative Preference Shares were allotted by Erstwhile Eastern Jingying Ltd. on 09.02.2004 & 6,00,000 Redeemable Cumulative Preference Shares were allotted by Erstwhile Sstella Silks Ltd. on 26.03.2005. All the Preference Shares are carrying dividend at the rate of 8%. The date of redemption of all the preference shares which were due for redemption on 25th March, 2010 and 1st April, 2010 have now been extended upto 1st April, 2020 with the consent of all the preference shareholders. Hence,the earliest date of redemption is 1st April, 2020.However the redemption of the preference shares can only be made after the entire dues of Banks & Institutions are repaid.

d) The Promoter’s shareholding remains encumbered in favour of Allahabad Bank, Leader Bank of consortium of Banks.

Term Loan

i) Pari passu first charge over entire movable fixed assets excluding assets charged to other lenders.

ii) Pari passu second charge over the company’s entire current assets excluding assets charged to other lenders

iii) Equitable Mortgage of the Company’s Property No. 84 in Sy. No. 39 measuring to an extent of 4 Acres 34 guntas situated at Kammasandra,Agrahara,Village- Kasaba Hobli,Anekal Taluk,Bangalore Dist together with all buildings & structures thereon and all plant & machinery attached to the earth;both present & future.

iv) Equitable mortgage of the Company’s property on Plot No: 209 in Bommasundra Industrial Area, Anekal Taluk,Hosur Road,Bangalore,admeasuring 10896 sq.mtrs together with all buildings & structures thereon.

v) Personal guarantee of Shri S.S.Shah and Shri Sundeep Shah.

Working Capital Term Loan

i) Secured against first pari-passu charge on all Assets,excluding assets exclusively charged to respective lenders.

ii) Equitable Mortgage of the Company’s Property at Plot No.11A of Nanjangud Industrial area situated in Sy No.184,185 and 169 of Kallahally Village,Chikkaiahna,Chatra,Hobli,Nanjangud Taluk,Mysore District containing by admeasurement 58686.00 sq. mtrs.

iii) Second charge on the Company’s property at 411, Telugarahalli Road,Anekal,Bangalore 562106

iv) Second charge on the Company’s property at Kammansandra Agrahara Kasaba Hobli,Anekal, Bangalore 562106.

v) Second Charge on the Company’s Plot No: 209 in Bommasundra Industrial Area, Anekal Taluk,Hosur Road, Bangalore,admeasuring 10896 sq.mtrs together with all buildings & structures thereon.

vi) Personal guarantee of Shri S.S.Shah and Shri Sundeep Shah.

Loan from others

Secured by residual charge on the Company’s Assets to the extent of satisfaction of charge under OTS with Banks.

Loan from Related Parties

Promoters Contribution (free of interest) to remain subordinate to the Bank Loans.

*Nature of Security

i) Hypothecation of entire current assets including book debts of the Company on first charge basis ranking pari passu with Bankers without any preference or priority of one over the other.

ii) Hypothecation of realizable non-current assets of the Company on first charge basis ranking pari passu.

iii) Hypothecation of all tangible,moveable plant & machineries,equipment,etc.located at the Company’s unit at Anekal Unit I & II on second charge basis ranking pari passu.

iv) Exclusive pari passu charge on specific plant and machinery installed at Anekal unit,Karnataka created out of sale proceeds of the Company’s Noida unit.

v) Second Charge on the company’s Plot No: 209 in Bommasundra Industrial Area, Anekal Taluk,Hosur Road,Bangalore,admeasuring 10896 sq.mtrs together with all buildings & structures thereon.

vi) Personal Guarantee of Shri S.S.Shah and Shri Sundeep Shah.

2) Contingent Liabilities not provided for in respect of :

2014-15 2013-14 Rs. In Lacs Rs. In Lacs

(a) Guarantees given by the Bankers 47.00 47.00

(b) Excise, Sales tax, Custom Duty, ESIC & Other Claims 389.44 184.44

(c) Dividend on Cumulative Preference Shares (Including tax) 655.07 520.68

3) As per the Court order dated 7th February, 2005 of Hon'ble Kolkata High Court and 14th December, 2005 of Hon'ble Karnataka High Court, all the assets and liabilities of Erstwhile Eastern Jingying Ltd. and Sstella Silks Ltd. automatically stand transferred in the name of the Company. Based on the Order, the Company has taken necessary steps to have the assets recorded with the relevant authorities in its name.

4) The Company had executed bonds worth Rs. 5,403.04 Lacs in favour of President of India being the customs duty for import of capital goods under the EPCG License. Under the said license it is obligatory on the part of the Company to export products worth Rs. 43,224.32 Lacs over a period of 8 years from the date of issue of the license i.e. between 20th December, 2002 to 19th February, 2019 for availing the concessional rate of customs duty on imports. The Company has completed the entire export obligation of Rs. 43,224.32 Lacs up to the year ended 31st March, 2012. On completion of the export obligation bonds executed by the Company to the extent of Rs. 5,273.79 Lacs (P.Y.Rs. 4,849.67 lacs) have been released and the balance bonds of Rs. 129.25 Lacs (P.Y. Rs. 553.37 lacs) is under process of being released by the Commissioner of Customs.

5) Claims against the Company not acknowledged as debts:

i) Demand by the Department of Commercial Taxes, Government of Karnataka, levying a sum of Rs. 20.00 lacs, as Entry Tax on Import of Plant & Machinery. The Company has obtained a Stay Order from the Hon'ble High Court of Karnataka during 1996.

ii) Demand by the Commissioner of Customs, Bangalore for Rs. 109.77 lacs have been stayed by the Customs, Excise and Service Tax Act Appellate Tribunal, Chennai. The Company has deposited a sum of Rs. 38.00 lacs with the Customs Authorities under protest.

6) Lining Fabrics valued at Rs. 93.78 Lacs were imported in 2002-03 for usage in manufacturing of products for export. Due to the non-acceptance by the Customs Department of the methodology adopted by the Company for the co-relation between the material used and the material imported, an amount of Rs. 154.50 Lacs was paid in protest towards Customs Duty on the said imports and shown under Advances. Since the final liability amount is unascertained and not acceptable by the Company in principle, no provision has been made in the accounts. The Adjudicating authority has passed an Order confirming the demand of the customs department. The Company's appeal before the CESTAT was heard and an Order has been passed setting aside the Order of the Adjudicating Authority. On remand of the Order, the Commissioner of Customs (Port) has once again confirmed the Order in original and the Company's second appeal before the CESTAT is being heard.

7) Export of goods made by the company from SEZ unit on specific order from the overseas customers have become subject of dispute in relation to its valuation. A show cause notice issued by DRI Kolkata was heard and adjudicated by the Customs Appellate and the matter was adjudicated imposing a fine and penalty amounting to Rs. 205.00 Lacs. The order of the Adjudicating authority has been challenged by the company before the CESTAT and a pre-deposit of Rs. 5.00 Lacs have been made and shown as an advance and no provision has been made against adjudicated liability of Rs. 205.00 Lacs in the statement of accounts.

8) a) After exit from the CDR Scheme on 20th August, 2014 the Company has bilaterally settled its dues with two Banks on one-time basis against the aggregated outstanding of Rs. 2,873.98 Lacs with a payment of Rs. 840.00 Lacs. The resultant amount of interest waiver is included as income under 'Other Incomes' and the rebate on principal is included under 'Exceptional Items'.

b) No provision in respect of interest payable to the banks and financial institutions for the period April'2014 to March'2015 amounting to Rs. 6,557.70 Lacs has been made in the Statement of Accounts in view of the reference made by the company to the BIFR on erosion of 100% net worth as at 31st March, 2015.

c) 'No Lien Term Deposit' with the consortium bankers for Rs. 2,400.00 Lacs towards 5% deposit of the amount outstanding against the offer of one time settlement were made, of which Rs. 1,809.40 Lacs have been appropriated by a few banks towards recovery of their overdue interest. The same has not been recognized by the company and no adjustment has been made and the principal amount of deposit is continued to be shown as 'No Lien Term Deposit' without accounting for interest accruals. In view of the arbitrary and unilateral decision of the Banks, no provision for interest accrued has been made in the Statement of Accounts.

9) Exceptional item represents

(a) The Rebate of Rs. 1,747.11 Lacs (P.Y. NIL) on the principal amount payable to the Banks on one time settlement.

(b) Payment made to Nanjangud workers amounting to Rs. 0.50 Lacs (P.Y. Rs. 306.21 Lacs)on account of their final settlement

10) As per provisions of the SICA Act 1985, the Company is a BIFR referred company pending registration.

11) (a) An amount of Rs. 3,697.22 Lacs has been provided during the year as bad & doubtful debts in addition to Rs. 10,648.85 Lacs provided in the earlier years. After writing off irrecoverable bad debts amounting to Rs. 1,680.97 the aggregate provision as at 31st March, 2015 stands at Rs. 12,665.10 Lacs which is considered adequate by the management for covering any shortfall in realization.

(b) The money suites filed before the Hon'ble Kolkata High Court are actively pursued to recover the amount from the overseas buyers towards sale consideration of the goods exported amounting to Rs. 25,203.90 Lacs(P.Y.? 26,427.08 lacs).

12) In terms of Accounting Standard-22, Deferred Tax Assets (DTA) of Rs. 429.77 lacs (P.Y. Rs. 1,828.81 lacs) is required to be recognized during the year. The Company has so far recognized DTA aggregating Rs. 4,572.98 lacs. Earlier recognitions were made based on future profitability and projections. The Company is of the opinion that net DTA of Rs. 4,572.98 lacs as recognized in the books is sufficient for future income and as such, the current year's DTA has not been recognized.

13) The dues to Micro, Small and Medium Enterprises as much to companies knowledge amounts to Rs. 3.87 lacs (since paid) which are outstanding for more than 45 days as at 31st March, 2015. This information as required to be disclosed under the Micro , Small and Medium Enterprises Development Act,2006 has been determined to the extent such parties have been identified on the basis of information provided by the supplier.

14) As per Accounting Standard 15 "Employees Benefits", the disclosures of Employee benefits as defined in the Accounting Standard are given below :

Defined Benefit Plan

The Employees' gratuity fund Scheme managed by The Life Insurance Corporation of India (LICI) is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation for leave encashment is recognized in the same manner as gratuity.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The expected rate of return on plan assets is based on the portfolio of assets held, investment strategy and market scenario. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are reasonably diversified.

15) As the Company's business activities falls within a single primary business segment viz. Silk, Textile yarn, Fabrics and Made-ups, no further reporting is necessary as per Accounting Standard - 17 issued by The Institute of Chartered Accountants of India.

16) Related Party Disclosure in accordance with Accounting Standard - 18 issued by The Institute of Chartered Accountants of India.

(I) List of Related Parties

a) Associates: -

(1) Ethics Commercials Ltd.

(2) Lucky Goldstar Company Ltd.

(3) P.K.Textiles Ltd.

(4) Tarun Fabrics Ltd.

(5) Gemini Overseas Ltd.

b) Key Management Personnel: -

Shri S. S. Shah (Chairman & Managing Director)

Shri Sundeep Shah (Executive Director)

Smt. Ginia Devi Shah (Wife of Mr.S.S.Shah)

17) As per the provisions of Schedule II of the Companies Act, 2013, depreciation for the year ended March 31, 2015 has been provided on the basis of the useful life of the assets. As a result of this the depreciation expenses in the statement of Profit & Loss Account is higher by Rs. 652.25 Lacs.

No depreciation has been provided on the assets located at the Falta & Nanjangud units. In the year 2012-2013, assets located at the said units were impaired and both the units are inoperative since then.


Mar 31, 2014

1) Contingent Liabilities not provided for in respect of :

2013-14 2012-13 Rs.In Lacs Rs.In Lacs

(a) Guarantees given by the Bankers 47.00 133.77

(b) Excise, Sales tax, Custom Duty, ESIC & Other Claims 184.44 184.44

(c) Dividend on Cumulative Preference Shares (Including tax) 520.68 390.51

(d) Corporate Guarantee to a Bank for an Associate Company - 650.00

2) As per the Court order dated 7th February'' 2005 of Hon''ble Kolkata High Court and 14th December'' 2005 of Hon''ble Karnataka High Court, all the assets and liabilities of Erstwhile Eastern Jingying Ltd. and Sstella Silks Ltd. automatically stand transferred in the name of the Company. Based on the Order, the Company has taken necessary steps to have the assets recorded with the relevant authorities in its name.

3) The Company had executed bonds worth Rs. 5,403.04 Lacs in favour of President of India being the customs duty for import of capital goods under the EPCG License. Under the said license it is obligatory on the part of the Company to export products worth Rs. 43,224.32 Lacs over a period of 8 years from the date of issue of the license i.e. between 20th December, 2002 to 19th February, 2019 for availing the concessional rate of customs duty on imports. The Company has completed the entire export obligation of Rs. 43,224.32 Lacs up to the year ended 31st March, 2012. On completion of the export obligation bonds executed by the Company to the extent of Rs. 4,849.67 Lacs (P.Y. Rs. 4,722.75 lacs) have been released and the balance bonds of Rs. 553.37 Lacs (P.Y. Rs. 680.29 lacs) is under process of being released by the Commissioner of Customs.

4) Claims against the Company not acknowledged as debts:

i) Demand by the Department of Commercial Taxes, Government of Karnataka, levying a sum of Rs. 20 lacs, as Entry Tax on Import of Plant & Machinery. The Company has obtained a Stay Order from the Hon''ble High Court of Karnataka during 1996.

ii) Demand by the Commissioner of Customs, Bangalore for Rs. 109.77 lacs have been stayed by the Customs, Excise and Service Tax Act Appellate Tribunal, Chennai. The Company has deposited a sum of Rs. 38 lacs with the Customs Authorities under protest.

5) Lining Fabrics valued at Rs. 93.78 Lacs were imported in 2002-03 for usage in manufacturing of products for export. Due to the non-acceptance by the Customs Department of the methodology adopted by the Company for the co- relation between the material used and the material imported, an amount of Rs. 154.50 Lacs was paid in protest towards Customs Duty on the said imports and shown under Advances. Since the final liability amount is unascertained and not acceptable by the Company in principle, no provision has been made in the accounts. The Adjudicating authority has passed an Order confirming the demand of the customs department. The Company''s appeal before the CESTAT was heard and an Order has been passed setting aside the Order of the Adjudicating Authority. On remand of the Order, the Commissioner of Customs (Port) has once again confirmed the Order in original and the Company''s second appeal before the CESTAT is being heard.

6) The Company was under CDR package effective from 1st April,2011, but the financials approved by CDR for 2013-14 have not been fully achieved. The Company has in the meantime given a proposal for One Time Settlement of the Banks and deposited a sum of Rs. 2,400.00 Lacs being 5% of the total outstanding as per RBI norms which is kept in No lien Fixed Deposit with the banks and proposal is pending before the banks.

7) Exceptional item represents Payment made to Nanjangud workers amounting to Rs. 306.21 lacs on account of their final settlement.

8) As at 31st March 2014 the Company''s net worth stands at Rs. (821.08) lacs. Taking the three years'' peak net worth of the Company, the current year''s loss has eroded the entire net worth. As per the provisions of the SICA Act, 1985 it is mandatory for the Company and the Board of Directors to refer the Company under the BIFR. Accordingly necessary action is being taken for the said purpose as provided in the Law.

9) Provision for bad & doubtful debts amounting to Rs. 8,981.39 lacs has been provided in the statement of Profit & Loss account for the year ended 31st March 2014 against the total Trade Receivables of Rs. 32,621.01 lacs. The aggregate of Rs.10,648.85 lacs stands as provision for doubtful debts in the books of accounts as at 31st March 2014. The said provision is considered adequate by the management for covering any short realization against money suite file accounts, against the Trade Receivables from overseas buyers towards sale consideration of goods exported amounting Rs. 21,681.81 lacs pending in the Kolkata High Court which are actively pursued for redressal.

10) Impairment :

During the year 2012-13, an amount of Rs. 3881.32 lacs have been impaired in respect of Plant & Machinery & Electrical Installation in the Unit located at Nanjangud and an amount of Rs. 23.28 lacs in respect of Plant & Machineries, Electrical Fittings, Furnitures and Office Equipments in the Unit located at Falta aggregating Rs. 3904.60 lacs. Both the units have become inoperative. The impairment of the Assets have been worked out on the basis of current market value that could be realized on the said Assets.An amount of Rs. 1205.21 lacs is charged to the profit & loss account during the year being the impaired value of the Assets net of revaluation and an amount of Rs. 2699.39 lacs being the impaired value of the revalued Assets have been withdrawn from the Reserve & Surplus.

11) In terms of Accounting Standard-22, Deferred Tax Assets (DTA) of Rs. 1828.81 lacs is required to be recognized during the year. The Company has so far recognized DTA aggregating Rs. 4,572.98 lacs. Earlier recognitions were made based on future profitability and projections. The Company is of the opinion that net DTA of Rs. 4,572.98 lacs as recognized in the books is sufficient for future income and as such, the current year''s DTA has not been recognized.

12) The dues to Micro, Small and Medium Enterprises as much to companies knowledge amounts to Rs. 11.64 lacs which are outstanding for more than 45 days as at 31st March 2014. This information as required to be disclosed under the Micro , Small and Medium Enterprises Development Act,2006 has been determined to the extent such parties have been identified on the basis of information provided by the supplier.

13) As per Accounting Standard 15 "Employees Benefits", the disclosures of Employee benefits as defined in the Accounting Standard are given below :

Defined Benefit Plan

The Employees'' gratuity fund Scheme managed by The Life Insurance Corporation of India (LICI) is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation for leave encashment is recognized in the same manner as gratuity.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The expected rate of return on plan assets is based on the portfolio of assets held, investment strategy and market scenario. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are reasonably diversified.

14) As the Company''s business activities falls within a single primary business segment viz. Silk, Textile yarn, Fabrics and Made-ups, no further reporting is necessary as per Accounting Standard – 17 issued by The Institute of Chartered Accountants of India.

15) Related Party Disclosure in-accordance with Accounting Standard - 18 issued by The Institute of Chartered Accountants of India.

(I) List of Related Parties Name of the Person/ Company

a) Associates: - (1) Ethics Commercials Ltd.

(2) Lucky Goldstar Company Ltd.

(3) P.K.Textiles Ltd.

(4) Tarun Fabrics Ltd.

(5) Gemini Overseas Ltd.

b) Key Management Personnel: - Shri S S Shah (Chairman & Managing Director)

Shri Sundeep Shah (Executive Director) Smt. Ginia Devi Shah (Wife of Mr. S. S. Shah)

16) The previous year figures have been re-arranged and / or regrouped wherever necessary.


Mar 31, 2013

1) Contingent Liabilities not provided for in respect of :

2012-2013 2011-2012 Rs. In Lacs Rs. In Lacs

(a) Guarantees given by the Bankers 133.77 132.52

(b) Excise, Sales tax, Custom Duty, ESIC & Other Claims 184.44 184.44

(c) Dividend on Cumulative Preference Shares (Including tax) 390.51 260.34

(d) Corporate Guarantee to a Bank for an Associate Company 650.00 650.00

2) As per the Court order dated 7th February'' 2005 of Hon''ble Kolkata High Court and 14th December'' 2005 of Hon''ble Karnataka High Court, all the assets and liabilities of erstwhile Eastern Jingying Ltd. and Sstella Silks Ltd. automatically stand transferred in the name of the Company. Based on the Order, the Company has taken necessary steps to have the assets recorded with the relevant authorities in its name.

3) Accounting Standard-14 states that the identity of the reserves has to be preserved as they appeared in the financial statement of the erstwhile Transferor Companies as on 31st March 2004 and after accounting for the share premium of Rs. 78/- per share as provided in the scheme, surplus, if any, arising after issuance of the new shares be credited to Capital Reserves of the Transferee Company and as such during 2004-05 a sum of Rs. 2,920.35 Lacs was credited to Capital Reserves.

4) The Company had executed bonds worth Rs. 5,403.04 Lacs in favour of President of India being the customs duty for import of capital goods under the EPCG License. Under the said license it is obligatory on the part of the Company to export products worth Rs. 43,224.32 Lacs over a period of 8 years from the date of issue of the license i.e. between 20th December, 2002 to 19th February, 2019 for availing the concessional rate of customs duty on imports. The Company has completed the entire export obligation of Rs. 43,224.32 Lacs up to the year ended 31st March, 2012. On completion of the export obligation bonds executed by the Company to the extent of Rs. 4,722.75 Lacs (P.Y. Rs. 4,065.17 lacs) have been released and the balance bonds of Rs. 680.29 Lacs (P.Y. Rs. 1,337.87 lacs)is under process of being released by the Commissioner of Customs.

5) Claims against the Company not acknowledged as debts:

i) Demand by the Department of Commercial Taxes, Government of Karnataka, levying a sum of Rs. 20 lacs, as

Entry Tax on Import of Plant & Machinery. The Company has obtained a Stay Order from the Hon''ble High Court of Karnataka during 1996.

ii) Demand by the Commissioner of Customs, Bangalore for Rs. 109.77 lacs have been stayed by the Customs,

Excise and Service Tax Act Appellate Tribunal, Chennai. The Company has deposited a sum of Rs. 38 lacs with the Customs Authorities under protest.

33) Lining Fabrics valued at Rs. 93.78 Lacs were imported in 2002-03 for usage in manufacturing of products for export. Due to the non-acceptance by the Customs Department of the methodology adopted by the Company for the co- relation between the material used and the material imported, an amount of Rs. 148.50 Lacs was paid in protest towards Customs Duty on the said imports and shown under Advances. Since the final liability amount is unascertained and not acceptable by the Company in principle, no provision has been made in the accounts. The Adjudicating authority has passed an Order confirming the demand of the customs department. The Company''s appeal before the CESTAT was heard and an Order has been passed setting aside the Order of the Adjudicating Authority. On remand of the Order, the Commissioner of Customs (Port) has once again confirmed the Order in original and the Company''s second appeal before the CESTAT is pending for hearing.

6) The Company is under CDR package effective from 1st April,2011

CDR Empowered Group has stipulated the following conditions:

i) Induction of fresh Promoters'' contribution to the extent of Rs. 1,466 Lacs to be brought in two installments of Rs. 734 Lacs in F.Y. 2011-12 and installment of Rs. 740 Lacs in F.Y. 2012-13 as unsecured loan (interest free) which will remain subordinate to the bank loans. ii) The Equity shares to the extent of 51% under Promoters'' holding shall be pledged with the lenders as security. It has been further stipulated that the Company shall not declare any dividend without permission of CDR Empowered Group and the bankers hold the right to convert the interest and principal to the extent of 20% in case of default in repayment to Equity shares of the Company as per SEBI guidelines.

iii) The Company has to mortgage the Bommasandra leasehold land before 31st March, 2013 or bring in the proceeds of Rs. 3,000 Lacs on sale of the land to reduce the Term Loan. iv) Further it also stipulates the sale of surplus assets and investments and the proceeds of which shall be used in reducing WCTL. v) The repayment of principal amount to commence from June, 2014. All the condition stipulated by the CDR Empowered Group have been complied with except point number iv which is under negotiation.

7) Exceptional item includes a sum of Rs. 186.88 Lacs being the final settlement of labours of the closed unit at Nanjangud. Final settlement of two unions have already been completed and the negotiation of the third union is going on. Once it is finalized, the final settlement of those workers will also be completed.

8) The Company incurred losses for the third year in succession and the accumulated loss of the Company stand at Rs.24,489.96 lacs(P.Y. Rs. 14,954.05 lacs) as on the balance sheet date and the shareholders fund amounts to Rs.12,897.98 lacs(P.Y. Rs. 25,232.33 lacs).

The feasibility and viability report as per study conducted by Dun & Bradstreet noted by the Board of Directors at its meeting held on 13th May 2011, could not be fully achieved because of the adverse market condition and the demand recession in both Europe and U.S. In the current manufacturing operation although there is a small cash surplus without considering the interest and depreciation but because of the high interest cost on carry over debts there is a huge deficit. In the current scenario repayment and servicing of the interest to the banks and financial institutions will be under severe stress going forward. The promoters have infused a sum of Rs. 1,466.00 Lacs as per stipulation of CDR. But this infusion has only helped in servicing the interest during the year 2012-13. But to meet the future cash flow requirement the marketing strategy, product mix and profitability will have to be reworked and the management expects that even in the present scenario the viability can be revived only by opting for one time settlement with the banks and financial institutions. The management is working in those lines and appropriate amount in respect of the settlement shall be negotiated with banks. Therefore, the financial statement has been taken as a going concern estimation which is appropriate in the opinion of the management. The current net worth of the Company is also positive as at 31st March 2013.

9) As against the total outstanding of Trade Receivables of Rs. 32,795.69 lacs(P.Y. Rs. 29,655.80) as on 31st March 2013, the Company has already filed the money suits against the concerned overseas buyers for recovery of outstanding dues amounting to Rs. 24,804.33 lacs(P.Y. Rs. 23,536.04) The money suits in the Court are actively pursued for taking this to the logical end.Since the matter is in the court and until a final decision is known, no provision for bad & doubtful debts has been considered necessary and hence no provision is made.

The balance amount of Rs. 7,991.36 Lacs includes Rs. 1,452.50 Lacs towards local debtors for which no provision is required and for the balance sundry debtors of Rs. 6,538.86 Lacs a provision of Rs. 1,667.46 Lacs have already been made in the previous year. In the opinion of the Company, this amount is estimated to be sufficient for short recovery of the export debtors if any.

10) Impairment :

During the year, an amount of Rs. 3881.32 lacs have been impaired in respect of Plant & Machinery & Electrical Installation in the Unit located at Nanjangud and an amount of Rs. 23.28 lacs in respect of Plant & Machineries, Electrical Fittings,Furintures and Office Equipments in the Unit located at Falta aggregating Rs. 3904.60 lacs. Both the units have become inoperative. The impairment of the Assets have been worked out on the basis of current market value that could be realized on the said Assets.An amount of Rs. 1205.21 lacs is charged to the profit & loss account during the year being the impaired value of the Assets nett of revaluation and an amount of Rs. 2699.39 lacs being the impaired value of the revalued Assets have been withdrawn from the Reserve & Surplus.

11) In terms of Accounting Standard – 22, Deferred Tax Assets (DTA) of Rs. 2,193.03 Lacs has been recognized during the year and consequently Net DTA stands at Rs. 4,572.98 Lacs. There is carried forward unabsorbed depreciation and business losses as at the Balance Sheet date. Based on the future profitability, projections, the Company is certain that there would be sufficient taxable income in future to claim the deferred tax credit.

12) There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31st March 2013. This information as required to be disclosed under the Micro , Small and Medium Enterprises Development Act,2006 has been determined to the extent such parties have been identified on the basis of information provided by the supplier.

13) As per Accounting Standard 15 "Employees Benefits", the disclosures of Employee benefits as defined in the

Accounting Standard are given below :

Defined Benefit Plan

The Employees'' gratuity fund Scheme managed by The Life Insurance Corporation of India (LICI) is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation for leave encashment is recognized in the same manner as gratuity.

14) As the Company''s business activities falls within a single primary business segment viz. Silk, Textile yarn, Fabrics and Made-ups, no further reporting is necessary as per Accounting Standard - 17 issued by The Institute of Chartered Accountants of India.

15) Related Party Disclosure in-accordance with Accounting Standard - 18 issued by The Institute of Chartered Accountants of India.

(I) List of Related Parties Name of the Person/ Company

a) Associates:- (1) Ethics Commercials Ltd.

(2) Lucky Goldstar Company Ltd.

(3) PK.TextilesLtd.

(4) Tarun Fabrics Ltd.

(5) Gemini Overseas Ltd.

b) Key Management Personnel:- ShriS S Shah (Chairman & Managing Director)

Shri Sundeep Shah (Executive Director) Smt. Ginia Devi Shah (Wife of Mr. S. S. Shah)

14) The Company''s request for waiver of interest on loans obtained from two NBFC Companies is under consideration by the lenders. In view of the above, no further interest payable has been provided for.

17) Estimated amount of contracts remaining to be executed on Capital account and not provided for Rs. NIL (Previous Year Rs.91.25 Lacs).


Mar 31, 2012

A) There is no change/movement in number of shares outstanding at the beginning and at the end of the reporting period.

b) The Company has two class of issued shares i.e. Equity Shares of Rs 2/- each and Redeemable Cumulative Preference Shares of Rs 100/- each. Each Equity Share is entitled to one vote per share and equal right for dividend after payment of preference dividend to preference share holders. The dividend proposed by the Board of Directors is subject to approval of shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the ordinary share holders are eligible to receive the remaining assets of the Company after payment of all preferential amounts and to preferential shareholders, in proportion to their shareholding.

c) The Company does not have any Holding Company

d) Details of shareholders holding more than 5% shares in the Company.

e) No Equity Shares have been reserved for issue under options and contracts/commitments for the sale of shares/disinvestment as at the Balance Sheet date.

f) No shares have been allotted or has been bought back by the Company during the 5 years preceeding the date as at which Balance Sheet is prepared.

g) No securities convertible into Equity/Preference shares issued by the Company during the year.

h) No calls are unpaid by any Director or Officer of the Company during the year.

i) During 1995-96 the company offered 1,18,13,725 Equity Shares of Rs 2/-each to the existing Shareholders in the ratio of 1 share for every 2 shares held, at a premium of Rs 6/- per share as per letter of offer dated December 21, 1995. Out of the above shares, allotment of6,000 Equity Shares are kept in abeyance under Court Order.

j) 6,00,000 Redeemable Cumulative Preference Shares were allotted by the Company on 21.01.2004, 2,00,000 Redeemable Cumulative Preference Shares were allotted by erstwhile Eastern Jingying Ltd. on 09.02.2004 & 6,00,000 Redeemable Cumulative Preference Shares were allotted by erstwhile Sstella Silks Ltd. on 26.03.2005. All the Preference Shares are carrying dividend at the rate of 8%. The date of redemption of all the preference shares which were due for redemption on 25th March, 2010 and 1st April, 2010 have now been extended upto 1st April, 2020 with the consent of all the preference shareholders. Hence, the earliest date of redemption is 1st April, 2020.However as per C.D.R. approval the redemption of the preference shares can only be made after the entire dues of Banks & Institutions are repaid.

k) The number of shares, face value and the premium has been reworked on sub division of shares from Rs 10/- each to Rs 2/-each.

Note 4 Long Term Borrowings (Contd.) Nature of Security Term Loan

I) Pari passu first charge over entire movable fixed assets excluding assets charged to other lenders.

ii) Pari passu second charge over the company’s entire current assets excluding assets charged to other lenders.

iii) Equitable Mortgage of the Company’s Property No. 84 in 54 No. 39 measuring to an extent of 4 Acres 34 guntas situated at Kammasandra, Agrahara, Village- Kasaba Hobli, Anekal Taluk, Bangalore Dist together with all buildings & structures thereon and all plant & machinery attached to the earth both present & future.

iv) Personal guarantee of Shri S.S.Shah and Sri Sundeep Shah.

Working Capital Term Loan

i) Secured against first pari-passu charge on all Assets, excluding assets exclusively charged to respective lenders.

ii) Equitable Mortgage of the Company’s Property at Plot No.11A of Nanjangud Industrial area situated in Sy No.184,185 and 169 of Kallahally Village, Chikkaiahna, Chatra, Hobli, Nanjangud Taluk, Mysore District containing by admeasurement 58686.00 sq. mtrs.

iii) Second charge on the Company’s property at 411, Telugarahalli Road, Anekal, Bangalore - 562106

iv) Second charge on the Company’s property at Kammansandra Agrahara Kasaba Hobli, Anekal, Bangalore - 562106.

v) Personal guarantee of Shri S.S.Shah and Sri Sundeep Shah.

Nature of Security Working Capital

i) Hypothecation of entire current assets including book debts of the company on first charge basis ranking pari passu with WC Consortium members without any preference or priority of one over the other.

ii) Hypothecation of realizable non-current assets of the company on first charge basis ranking pari passu.

iii) Hypothecation of all tangible, movable plant & machineries, equipment, etc. located at the Company’s unit at Anekal Unit I & II on second charge basis ranking pari passu.

iv) Exclusive pari passu charge on specific plant and machinery installed at Anekal unit, Karnataka created out of sale proceeds of the Company’s Noida unit.

v) Personal Guarantee of Shri S.S.Shah and Shri Sundeep Shah

(a) Leased Assets are stated at premium paid on such assets. Rentals, if any, are expensed with reference to the leased terms and other conditions. No amortization of the leased premium in respect of Land is done in cases where conditions are stipulated for conversion from leasehold to freehold.

(b) Depreciation includes depreciation on Revalued Asset amounting to Rs 147.73 lacs (Previous Year Rs 295.88 lacs).

(c) As per the Court Order dated 7th February, 2005 of Hon’ble Kolkata High Court and 14th December, 2005 of Hon’ble Karnataka High Court, all assets and liabilities of erstwhile Eastern Jingying Ltd. and Sstella Silks Ltd. automatically stand transferred in the name of the Company.

1) Contingent Liabilities not provided for in respect of :

2011-2012 2010-2011 Rs In Lacs Rs In Lacs

la) Letters of Credit - 5,579.26

(b) Guarantees given by the Bankers 132.52 132.52

(c) Bills receivable discounted with Bankers _ 13,487.71

(d) Excise, Sales tax, Custom Duty, ESIC & Other Claims 184.44 184.44

(e) Dividend on Cumulative Preference Shares (Including tax) 260.34 130.17

(f) Corporate Guarantee to a Bank for an Associate Company 650.00 650.00

2) As per the Court order dated 7th February' 2005 of Hon'ble Kolkata High Court and 14th December' 2005 of Hon'ble Karnataka High Court, all the assets and liabilities of erstwhile Eastern Jingying Ltd. and Sstella Silks Ltd. automatically stand transferred in the name of the Company. Based on the Order, the Company has taken necessary steps to have the assets recorded with the relevant authorities in its name.

3) Accounting Standard-14 states that the identity of the reserves has to be preserved as they appeared in the financial statement of the erstwhile Transferor Companies as on 31st March, 2004 and after accounting for the share premium of Rs 78/- per share as provided in the scheme, surplus, if any, arising after issuance of the new shares be credited to Capital Reserves of the Transferee Company and as such during 2004-05 a sum of Rs 2,920.35 Lacs was credited to Capital reserves.

4) The Company had executed bonds worth Rs 5,403.04 Lacs in favour of President of India being the customs duty for import of capital goods under the EPCG License. Under the said license it is obligatory on the part of the Company to export products worth Rs 43,224.32 Lacs over a period of 8 years from the date of issue of the license i.e. between 20th December, 2002 to 19th February, 2019 for availing the concessional rate of customs duty on imports. The Company has completed the entire export obligation of Rs 43,224.32 Lacs up to the year ended 31st March, 2012. On completion of the export obligation bonds executed by the Company to the extent of Rs 4,065.17 Lacs have been released and the balance bonds of Rs 1,337.87 Lacs is under process of being released by the Commissioner of Customs.

5) Claims against the Company not acknowledged as debts:

I) Demand by the Department of Commercial Taxes, Government of Karnataka, levying a sum of Rs 20 lacs, as Entry Tax on Import of Plant & Machinery. The Company has obtained a Stay Order from the Hon'ble High Court of Karnataka during 1996.

ii) Demand by the Commissioner of Customs, Bangalore for Rs 109.77 lacs have been stayed by the Customs, Excise and Service Tax Act Appellate Tribunal, Chennai. The Company has deposited a sum of Rs 38 lacs with the Customs Authorities under protest.

6) Lining Fabrics valued at RS 93.78 Lacs were imported in 2002-03 for usage in manufacturing of products for export. Due to the non-acceptance by the Customs Department of the methodology adopted by the Company for the co-relation between the material used and the material imported, an amount of Rs 148.50 Lacs was paid in protest towards Customs Duty on the said imports and shown under Advances. Since the final liability amount is unascertained and not acceptable by the Company in principle, no provision has been made in the accounts. The Adjudicating authority has passed an Order confirming the demand of the customs department. The Company's appeal before the CESTAT was heard and an Order has been passed setting aside the Order of the Adjudicating Authority. On remand of the Order, the Commissioner of Customs (Port) has once again confirmed the Order in original and the Company's second appeal before the CESTAT is pending for hearing.

7) On a reference made by Allahabad Bank, the lead bank in the consortium, the Corporate Debt Restructuring (CDR) has been approved by the Empowered Group on 4th February, 2012. The cut-off date of the package is 1st April, 2011. The salient features of the approval inter alia includes restructuring of debts. The total debt outstanding at Rs 46,723 Lacs were bifurcated into WCTL of Rs 29,600 Lacs, Working Capital of Rs 6,285 Lacs, Term Loan of Rs 5,380 Lacs and FITL of Rs 5,458 Lacs. The package also includes reduction of interest cost. Interest at the reduced rate up to 30th September, 2012 have been converted into FITL. The interest shall become payable from October, 2012 and the principal amount for repayment shall start from 2014.

CDR Empowered Group has stipulated other following conditions:

I) Induction of fresh Promoters' contribution to the extent of Rs 1,466 Lacs to be brought in two installments of Rs 734 Lacs in F.Y. 2011-12 and second installment in F.Y. 2012-13 as unsecured loan (interest free) which will remain subordinate to the bank loans.

ii) The Equity shares to the extent of 51% under Promoters' holding shall be pledged with the lenders as security. It has been further stipulated that the Company shall not declare any dividend without permission of CDR Empowered Group and the bankers hold the right to convert the interest and principal to the extent of 20% in case of default in repayment to Equity shareholders of the Company as per SEBI guidelines.

iii) The Company has to mortgage the Bommasandra leasehold land before 31st March, 2013 or bring in the proceeds of Rs 3000 Lacs on sale of the land to reduce the Term Loan.

iv) Further it also stipulates the sale of surplus assets and investments and the proceeds of which shall be used in reducing WCTL.

The banks are still in the process of readjusting the books on the basis of the CDR approval. The Company has passed the necessary entries in the books based on the CDR approval and accounted for the same as on the reporting date. Any difference in the interest/other charges charged by the banks and the actual worked out on the basis of CDR approval accounted for by the Company shall be adjusted on final determination.

8) The Company has incurred losses for the second year in succession and the accumulated loss of the Company stand at Rs 14,954.05 lacs as on balance sheet date and the shareholders fund amounts to Rs 25,232.33 lacs.

The business plan and future projections and profitability estimates as per study of Dun & Bradstreet considered for the CDR approval have been noted by the Board of Directors at its meeting held on 13th May 2011. The promoters have also infused a sum of Rs 734.00 Lacs during the year and another infusion of Rs 732.00 Lacs is slated to be made before 31st March 2013 to meet the long term working capital requirement of the Company. Besides this, the Company is also planning to sell some of the surplus assets, the proceeds of which shall be utilized for reducing the long term liability and thereby the interest cost.

Considering the marketing strategy and the future profitability projections this financial statement has been taken as going concern estimation which is appropriate in the opinion of the management. Further, the net worth of the Company is also positive as at 31st March 2012.

9) Exceptional item includes a sum of Rs 9,246 Lacs which was the balance of the rundown value of the inventories as of 31/03/2011 not accounted for by the Company since it was expected by the management that the market could improve thereby the realizable value will also increase. The current year of operations have not shown any sign of improvement, whereas markets have either stagnated and/or in certain areas have gone down further.

To take a wholesome view of the inventories as of 31 /03/2012 the Company appointed an independent auditor to verify the inventories and also to ascertain the market valuation. The report of the independent auditor, reported a depletion of a sum of Rs 10,478.33 Lacs as the diminution in the value of the stocks as of 31/03/2012. The residual of the depleted stocks of the previous year have also been accounted for in the aggregate of Rs 10,478.33 Lacs in the current year.

10) As against the total outstanding sundry debtors of Rs 29,655.80 Lacs as on 31st March, 2012 the Company has filed money suits against concerned overseas buyers for recovery of outstanding dues amounting to USD 451.20 Lacs, GBP 4.74 Lacs and Euro 14.08 Lacs aggregating Rs 23,536.04 Lacs (Net of recovery of Rs 636.72 Lacs during the year, in respect of old sundry debtors balance outstanding as at 31st March 2011). After instituting the money suits the Company is hopeful of fair recovery ofthe amounts outstanding as negotiations are going on with the parties concerned and therefore, no provision for bad and doubtful debts have been considered necessary and hence no provision is made.

The balance amount of Rs 6,119.76 Lacs includes Rs 104.58 Lacs towards local debtors for which no provision is required and for the balance sundry debtors of Rs 6,015.18 Lacs a provision of Rs 1,684.67 Lacs have already been made in the previous year. In the opinion of the Company, this amount is estimated to be sufficient for short recovery of the export debtors if any.

11) In terms of Accounting Standard - 22, Deferred Tax Assets (DTA) of Rs 2,394.78 Lacs has been recognized during the year and consequently Net DTA stands at Rs 2,379.95 Lacs. There is carried forward unabsorbed depreciation and business losses as at the Balance Sheet date. Based on the future profitability, projections, the Company is certain that there would be sufficient taxable income in future to claim the deferred tax credit.

12) As per Accounting Standard 15 "Employees Benefits", the disclosures of Employee benefits as defined in the Accounting Standard are given below:

Defined Benefit Plan

The Employees' gratuity fund Scheme managed by The Life Insurance Corporation of India (LICI) is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation for leave encashment is recognized in the same manner as gratuity.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The expected rate of return on plan assets is based on the portfolio of assets held, investment strategy and market scenario. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are reasonably diversified.

13) As the Company's business activities falls within a single primary business segment viz. Silk, Textile yarn, Fabrics and Made-ups, no further reporting is necessary as per Accounting Standard - 17 issued by The Institute of Chartered Accountants of India.

14) The Company's request for waiver of interest on loans obtained from two NBFC Companies is under consideration by the lenders. In view of the above, no further interest payable has been provided for.

15) Estimated amount of contracts remaining to be executed on Capital account and not provided for Rs 91.25 Lacs (Previous Year Rs 2.67 Lacs).

16) Donation includes payment to a Political Party-Nil (Previous Year- Bhartiya Janta Party Rs 6.00 Lacs)


Mar 31, 2011

1. As per the Court order dated 7th February' 2005 of Hon'ble Kolkata High Court and 14th December' 2005 of Hon'ble Kamataka High Court, all the assets and liabilities of erstwhile Eastern Jingying Ltd. and Sstella Silks Ltd. automatically stand transferred in the name of the Company. Based on the Order, the Company has taken necessary steps to have the assets recorded with the relevant authorities in its name.

2. Accounting Standard - 14 states that the identity of the reserves has to be preserved as they appeared in the financial statement of the erstwhile Transferor Companies in the same form. The treatment as per AS-14 has not been followed fully as the High Court approving the Scheme of Amalgamation provided that after taking over all the assets and liabilities of the Transferor Companies as on 31 st March 2004, and after accounting for the share premium of Rs.78/- per share as provided in the scheme, surplus, if any, arising after issuance of the new shares be credited to Capital Reserve of the Transferee Company and as such during 2004-05 a sum of Rs. 2,920.35 Lacs was credited in Capital Reserve.

3. Depreciation of Rs. 295.88 Lacs on revalued assets has been provided during the year and such depreciation has been reduced from cost of fixed assets and also from capital reserve created on amalgamation.

4. In respect of capital goods imported under EPCG Scheme, the Company has executed bonds of Rs 5 403 04 Lacs in favour of President of India for import at a concessional rate of custom duty. The Company is under an obhgation to export products for Rs 43,224.32 Lacs within a period of 8 years from the date of issue of licenses between 20th December, 2002 to 19th February, 2019. The Company has exported goods worth Rs 40 546 35 Lacs till 31st March, 2011.

5. Contingent Liabilities not provided for in respect of:

2010-11 2009-10 Rs. In Lacs Rs. In Lacs

(a) Letters of Credit 5,579.26 8,237.90

(b) Guarantees given by the Bankers 132.52 132 52

(c) Bills receivable discounted with Bankers 13,487.71 18,428.22

(d) Excise, Sales tax, Custom Duty, ESIC & Other Claims 184.44 18444

(e) Dividend on Cumulative Preference Shares (Including tax) 130.17 -

6. Claims against the Company not acknowledged as debts:

I) Demand by the Department of Commercial Taxes, Government of Kamataka, levying a sum of Rs 20 lacs as Entry Tax on Import of Plant & Machinery. The Company has obtained a Stay Order from the Hon'ble Hiah Court of Karnataka during 1996.

ii) Demand by the Commissioner of Customs, Bangalore for Rs. 109.77 lakhs have been stayed by the Customs and Service Tax Act Appellate Tribunal, Chennai. The Company has deposited a sum of Rs 38 lakhs with the Customs Authorities under protest.

7. Lining Fabrics valued at Rs.93.78 Lacs were imported in 2002-03 for usage in manufacturing of products for export. Due to the non-acceptance by the Customs Department of the methodology adopted by the Company for the co-relation between the material used and the material imported, an amount of Rs 148.50 Lacs was paid in protest towards Customs Duty on the said imports and shown under Advances. Since the final liability amount is unascertained and not acceptable by the Company in principle, no provision has been made in the accounts The Adjudicating authority has passed an Order confirming the demand of the customs department The Company's appeal before the CESTAT was heard and an Order has been passed setting aside the Order of the adjudicating authontyand remanded for fresh hearing.

8. During the year the Company has incurred substantial losses and the said losses before tax as on the date of the Balance Sheet aggregated Rs. 6,877.64 lacs.These losses have been incurred mainly due to the recessionary trends prevailed in US and European markets, change in the fashion needs of the western world, high input costs non-realization of payments from debtors in time which led to a liquidity crisis and depreciation of the value of the Indian rupee against various currencies.

Although the Company successfully commissioned modernization and expansion programme during the year for producing velvet fabrics and enhancing capacity of embroidered fabrics, the full benefit in the same could not be reaped during the year.

The outsourcing business of the Company has become unprofitable and unviable because of the withdrawal of certain export incentives by the Government in the recent budget and therefore, the Company has planned to downsize the business and only concentrate on in-house production. Accordingly the Company has submitted rehabilitation plan to corporate debt restructuring empowered group and the same has also been admitted in their meeting held on 24th June, 2011 The rehabilitation plan inter alia staggers the realization of non current assets overa period, thereby reducing the banks' liabilities. The revised business plan and profitability estimates have been noted by the Board of Directors of the Company in their meeting held on 13th May 2011 These projections reflect that the Company would be in a position to generate positive cash flow and operational surplus in the future years. The Company's net worth as on 31st March 2011 is positive. These financial statements have been drawn up as per the going concern assumption considering the future strategy and plans and profitability as appropriate in the opinion of the Board of Directors.

9. The Company's request for waiver of interest on loans obtained from two NBFC Companies is under consideration by the lenders. In view of the above, no further interest payable has been provided for.

10. Estimated amount of contracts remaining to be executed on Capital account and not provided for Rs2.67 Lacs (Previous Year Rs. 2062.62 Lacs).

11. As per standard practice, export debtors does not include bills discounted with banks but shown as a contingent liability as bills discounted. As at 31st March 2011 Export bills aggregating Rs 4501.30 lacs, were not realized within the due date and such bills were crystallized by the bank and hence the amount has been added back to export debtors by crediting the respective banks in the current year. The provision for bad and doubtful debts amounting to Rs1721.83 lacs have been made in the accounts during the year against export debtors. In the opinion of the Company this amount is estimated to be sufficient for short recovery of the export debtors and export bills discounted with the banks due to the adverse conditions prevailing in the export market.

12. There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31 st March 2011 This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information provided by the supplier.

13. Derivative Instruments:

(a) The company has re-evaluated its risk management program in respect of forecasted transactions. Upon completion of the formal documentation and testing for effectiveness, the company has designated certain foreign currency options in respect of forecasted transactions, which meet the criteria, as Cash Flow Hedges.

(b) Pursuant to The Institute of Chartered Accountants of India's (ICAI) announcement on the early adoption of Accounting Standard AS 30 "Financial Instruments recognition and measurements", the company has fully adjusted for mark to market losses aggregating to Rs. NIL (Previous Year Rs.48.10 lakhs) during the year, towards designated Foreign currency transactions. The same has been recognized directly under Reserves & Surplus.

14. As per Accounting Standard 15 "Employees Benefits", the disclosures of Employee benefits as defined in the Accounting Standard are given below:

Defined Benefit Plan

The Employees' gratuity fund Scheme managed by The Life Insurance Corporation of India (LICI) is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

V. Percentage of each Category of Plan Assets to total Fair value of Plan assets as at 31st March, 2011 100% with Life Insurance Corporation of India.

VII. Principal Actuarial Assumption as at 31st March, 2011

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The expected rate of return on plan assets is based on the portfolio of assets held, investment strategy and market scenario. in order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are reasonably diversified.

15. As the Company's business activities falls within a single primary business segment viz. Silk Textile yarn, Fabrics and Made-ups, no further reporting is necessary as per Accounting Standard - 17 issued by The Institute of Chartered Accountants of India.

16. Related Party Disclosure in-accordance with Accounting Standard - 18 issued by The Institute of Chartered Accountants of India.

(i) List of Related Parties Name of the Person/Company

a) Associates: - (1) Ethics Commercials Ltd.

(2) Lucky Goldstar Company Ltd.

(3) P.K.TextilesLtd.

(4) Tarun Fabrics Ltd.

(5) Gemini Overseas Ltd.

b) Key Management Personnel:- ShriS S Shah (Chairman & Managing Director)

Shri Sundeep Shah (Executive Director)

17. Managerial Remuneration:

(Remuneration to Managing Director & Executive Director)

Computation of Net Profit for the purpose of calculation of Managing Director's and Executive Director's Remuneration under Section 349 of the Companies Act, 1956 has not been given since no commission has been paid.

18. Donation includes payment to a Political Party- Bhartiya Janta Party Rs. 6.00 Lacs (Previous Year-Rs NIL)

19. Previous Year's figures have been re-arranged, and/or re-grouped wherever necessary.


Mar 31, 2010

1. As per the Court order dated 7th February 2005 of Honble Kolkata High Court and 14th December 2005 of Honble Karnataka High Court, all the assets and liabilities of erstwhile Eastern Jingying Ltd. and Sstella Silks Ltd. automatically stand transferred in the name of the Company. Based on the Order, the Company has taken necessary steps to have the assets recorded with the relevant authorities in its name.

2. Accounting Standard - 14 states that the identity of the reserves has to be preserved as they appeared in the financial statement of the erstwhile Transferor Companies in the same form. The treatment as per AS-14 has not been followed fully as the High Court approving the Scheme of Amalgamation provided that after taking over all the assets and liabilities of the Transferor Companies as on 31st March 2004, and after accounting for the share premium of Rs.78/- per share as provided in the scheme, surplus, if any, arising after issuance of the new shares be credited to Capital Reserve of the Transferee Company and as such during 2004-05 a sum of Rs. 2,920.35 Lacs was credited in Capital Reserve.

3. Depreciation of Rs.297.35 Lacs on revalued assets has been provided during the year and such depreciation has been reduced from cost of fixed assets and also from capital reserve created on amalgamation.

4. In respect of capital goods imported under EPCG Scheme, the Company has executed bonds of Rs 5,544.52 Lacs in favour of President of India for import at a concessional rate of custom duty. The Company is under an obligation to export products for Rs 44,356.12 Lacs within a period of 8 years from the date of issue of licenses between 20th December, 2002 to 30th June, 2018. The Company has exported goods worth Rs 20,705.48 Lacs till 31st March, 2010.

5. Contingent Liabilities not provided for in respect of:

2009-10 2008-09 Rs. In Lacs Rs. In Lacs

(a) Letters of Credit 8,237.90 5,903.15

(b) Guarantees given by the Bankers 132.52 141.27

(c) Bills receivable discounted with Bankers 18,428.22 17,958.75

(d) Excise, Sales tax, Custom Duty, ESIC & Other Claims 184.44 184.44

6. Claims against the Company not acknowledged as debts:

i) Demand by the Department of Commercial Taxes, Government of Karnataka, levying a sum of Rs.20 lacs, as Entry Tax on Import of Plant & Machinery. The Company has obtained a Stay Order from the Honble High Court of Karnataka during 1996.

ii) Demand by the Commissioner of Customs, Bangalore for Rs. 109.77 lakhs have been stayed by the Customs and Service Tax Act Appellate Tribunal, Chennai. The Company has deposited a sum of Rs. 38 lakhs with the Customs Authorities under protest.

7. Lining Fabrics valued at Rs.93.78 Lacs were imported in 2002-03 for usage in manufacturing of products for export. Due to the non-acceptance by the Customs Department of the methodology adopted by the Company for the co-relation between the material used and the material imported, an amount of Rs 148.50 Lacs was paid in protest towards Customs Duty on the said imports and shown under Advances. Since the final liability amount is unascertained and not acceptable by the Company in principle, no provision has been made in the accounts. The Adjudicating authority has passed an Order confirming the demand of the customs department. The Companys appeal before the CESTAT was heard and an Order has been passed setting aside the Order of the adjudicating authority and remanded for fresh hearing.

8. The Companys request for waiver of interest on loans obtained from two NBFC Companies is under consideration by the lenders. In view of the above, no further interest payable has been provided for.

9. Estimated amount of contracts remaining to be executed on Capital account and not provided for Rs. 2062.62 Lacs (Previous Year Rs. 7,087.23 Lacs).

10. There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31st March 2010.This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information provided by the supplier.

11. Derivative Instruments :

(a) The company has re-evaluated its risk management program in respect of forecasted transactions. Upon completion of the formal documentation and testing for effectiveness, the company has designated certain foreign currency options in respect of forecasted transactions, which meet the criteria, as Cash Flow Hedges.

(b) Pursuant to The Institute of Chartered Accountants of Indias (ICAI) announcement on the early adoption of Accounting Standard AS 30 “Financial Instruments recognition and measurements”, the company has fully adjusted for mark to market losses aggregating to Rs. 48.10 lakhs (Previous Year Rs.152.12 lakhs) during the year, towards designated Foreign currency transactions. The same has been recognized directly under Reserves & Surplus.

12. As per Accounting Standard 15 “Employees Benefits”, the disclosures of Employee benefits as defined in the Accounting Standard are given below :

Defined Benefit Plan

The Employees gratuity fund Scheme managed by The Life Insurance Corporation of India (LICI) is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognized in the same manner as gratuity.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The expected rate of return on plan assets is based on the portfolio of assets held, investment strategy and market scenario. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are reasonably diversified.

13. As the Companys business activities falls within a single primary business segment viz. Silk Textile yarn, Fabrics and Made-ups, no further reporting is necessary as per Accounting Standard - 17 issued by The Institute of Chartered Accountants of India.

14. Related Party Disclosure in-accordance with Accounting Standard - 18 issued by The Institute of Chartered Accountants of India.

(I) List of Related Parties Name of the Person/ Company

a) Associates: - (1) Ethics Commercials Ltd.

(2) Lucky Goldstar Company Ltd.

(3) P.K.Textiles Ltd.

(4) Tarun Fabrics Ltd.

(5) Gemini Overseas Ltd.

b) Key Management Personnel: -

Shri S S Shah (Chairman & Managing Director)

Shri Sundeep Shah (Executive Director)

Shri G.Venkatesh (President)

Shri Anil Jain (Chief Financial Officer)

(II) Transactions with Related Parties

15. During the Year 1,07,319.18 mtrs of Silk Fabrics valuing Rs.473.96 lacs were destroyed & burnt in pursuance of order of The Superintendent of Customs, EOU-VI, Bangalore, arising out of an Application & approval of debonding of the EOU status of Unit I at Anekal, Bangalore and the same has been accounted for in the Books. The Custom Department has also destroyed & burnt 11,426.820 Kgs of sample stock of fabrics and 9,000 Kgs of salvage /wastage /scrap which has accumulated over the years and were lying in the factory premises. These materials were accounted for in earlier years and were carried at Nil value.

16. Donation includes payment to a Political Party - Bhartiya Janta Party Rs. Nil Lacs (Previous Year - Rs 5.25 Lacs )

17. Previous Years figures have been re-arranged, and/or re-grouped wherever necessary.

18 Schedules 1 to 14 form an integral part of the Balance Sheet and Profit & Loss Account and have been duly authenticated . As per our report of even date annexed .