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Notes to Accounts of Federal-Mogul Goetze (India) Ltd.

Mar 31, 2015

1. a) Corporate Information

Federal-Mogul Goetze (India) Limited (''FMGIL'' or ''the Company''), is inter-alia engaged in the manufacture, supply and distribution of ''automotive components'' used in two/three/four wheeler automobiles.

The principal facilities of the Company are located at Patiala (Punjab), Bangaluru (Karnataka) and Bhiwadi (Rajasthan), with its registered office in Delhi. The Company is listed at National Stock Exchange of India Ltd. and Bombay Stock Exchange.

Federal Mogul Holdings Limited, Mauritius, is the immediate parent company and ultimate parent company is Federal Mogul Corporation, USA.

b) Basis of Preparation

The financial statements of the company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Company (Accounts) Rules 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention.

Pursunat to the requirement of Compaines Act 2013, the Company has changed the financial year from Janurary to December every year to April to March every year. Accordingly, the current financial year for a period of fifteen months commencing from January 1,2014 and ending on March 31,2015.

The accounting policies adopted in the preparation of financial statment are consistent with those of previous year.

(a) There is no movement in equity share capital during the current and comparative period.

(b) Right/restriction attached to equity shares.

The Company has only one class of equity shares having par value of Rs.1 0 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all liabilities. The distribution will be in proportion to the number of equity shares held by the shareholders.

(e) The Company has not issued any equity shares pursuant to any contract without payment being received in cash, allotted as fully paid up by way of bonus issues and bought back during the current reporting period and immediately preceding four years.

"Note (a): Indian rupee loans amounting to Rs. 2,000 lacs from Yes Bank in two tranches of Rs 1,000 lacs each taken on 31 May 2013 and 28 June 2013 respectively, carries interest @ 1 2.20% p.a. Both tranches are repayable in 36 equal monthly instalments of Rs. 27.77 lacs each along with interest, after a moratorium period of 1 2 months from the date of disbursement of loan i.e. 31 May 2014 and 28 June 2014 respectively. The loan is secured by first parri passu charge on moveable assets of the Company including plant and machinery, spares, tools and accessories, furniture and fixtures and other movable assets of the Company, excluding vehicles."Current maturities of long term borrowings amounting to Rs. 666.67 lacs (Previous year: Rs. 444.44 lacs) are included under the head ''Other current liabilities (refer note 11).

Note (a) :

i. Indian rupees working capital loans and cash credit facilities are secured against hypothecation of current assets of the Company, both present and future with HDFC, Yes Bank, ING Vysya Bank, State Bank of India and Deutsche Bank. Cash credit facilities carries interest rate ranging from 10.00 % p.a to 12.50% p.a.

ii. Details of working capital loans

Note (b): Inter-corporate deposits are repayable on demand and carry rate of interest ranging between 9.35 % p.a to 10.50 % p.a

Note (c): Indian rupees working capital loan and cash credit facilities taken from Bank of America is at interest rate of 10.5% p.a., which was repayable in 30 days from the date of loan.

Note (d) : Indian rupees loan amounting to Rs 61 lacs taken from Goetze India employee welfare trust is at interest rate of 8% p.a. Entire loan is repayable on 31 March 2014.

2. Segment Information

Based on the guiding principles given in AS-17 ''Segmental Reporting'' notified under Companies (Accounting Standard) Rules, 2006, the Company''s primary business segment is manufacturing of auto components. Considering the nature of Company''s business and operations, there are no separate reportable business segment, as there is only one business segment and hence, there are no additional disclosures required to be provided other than those already been provided in the financial statements.

The analysis of geographical segment is based on the geographical location of the customers. The following table shows the distribution of the Company''s consolidated sales by geographical market, regardless of where the goods were produced.

The Company has common assets for producing goods for India and outside countries. Hence, separate figures for assets/ additions to fixed assets cannot be furnished.

3. Capital and other commitments (net of capital advances)

Total estimated amount of contracts, remaining to be executed on capital account and not provided for as at 31 March 2015 is Rs: 1,853.51 lacs ( as at 31 December 2013 : 1,093.67 lacs)

4. Contingent liabilities

(a) Bank guarantees 596.25 554.54

(b) Claims/notices contested by the Company

(i) Excise duty and service tax 4,051.40 687.20

(ii) Sales tax 2,250.91 1,781.70

(iii) Employee related cases 286.05 242.99

(iv) Electricity demand 52.24 52.24

(v) Income tax demands 800.28 609.55

1) In relation to b (i) above, Excise duty cases contested by the Company comprise of :

i) Matters are pending at Joint Commissioner, Central Excise , Bangalore where four show cause notice were received for the period 2000 to 2004 for the excise duty demand of Rs.76.42 lacs on the differential discount which was given to stockist. Matter is pending with Joint Commissioner, Central Excise, Bangalaru. (Previous period Rs.33.73 lacs).

ii) Matters are pending with CESTAT, Bangalaru wherein notice was received for the period of 2006-07 for disallowing the cenvat credit taken twice on the invoices for the excise demand of Rs.5.03 lacs The case is pending for hearing. (Previous period Rs. 5.03 lacs).

iii) Matter is pending with CESTAT, Delhi on the six show cause notices received for the period 2002 to 2006 for the excise duty demand of Rs. 189.48 raised on the Turnover Discount for the period of 2002-06. The cases are pending with the CESTAT, Delhi for hearing (Previous peri od Nil ) .

iv) Matters are pending for two show cause notices received on the Patiala plant for the interest amount of Rs.14.02 lacs on the reversal of Special additional duty taken wrongly. Cases are related to 2000-2001 and pending with the CESTAT, Delhi for hearing. (Previouse Year 14.02 lacs).

v) Matter is pending on the show cause notice received for the excise duty amounting Rs. 6.96 lacs on the classification issue related to the period of 1 998-99. After filing of reply, there is no movement in the case and pending before Joint Commissioner, Excise (Previous period Rs. 6.96 lacs).

vi) Matter is pending for a show cause notice received in 2002 for the excise duty of Rs. 3.32 lacs on scrap sale for the period 2001 -02. After filing of reply, there is no movement in the case and it is pending with Joint Commissioner, Excise, Patiala (Previous period 3.32 lacs).

vii) Matter is pending for a show cause notice on disallowance of excise credit of Rs.9.34 lacs on the ground that credit does not fall in the category of input category. The case is related to the period 1987 to 1990 and pending with Honourable High Court.

viii) Matter is pending with Joint Commissioner, Central Excise on five notices related to period of 1997-98,1998-99, 1995-96 and 2003-04 for the disallowance of Modvat Credit on the input raw material for amounting Rs.6.16 lacs (Previouse Year Nil).

ix) . Matter is pending before the Supreme Court in the valuation case where two notices were issued to Patiala plant where department

alleged on the job work valuation and demanded excise duty of Rs.15.13 lacs.(Previous period 15.13 lacs).

x) . Matter is pending before the Commissioner, Excise, Jaipur for taking excess credit of excise duty of Rs.3.19 lakhs for the period 2010-

5.(Previous period Nil).

xi) . Matter is pending before the Commissioner, Excise on issuance of show cause notice on the cenvat credit taken on LPG on the invoice addressed to Goetze India (technical errors) amounting to Rs. 0.97 lacs (Previous period Nil).

1) In relation to b (i) above, Service tax cases contested by the Company comprise of:

i) . Matter is pending with CESTAT, Bangaluru in respect of notice for the period FY 2006-2007 amounting to Rs. 86.44 lacs wherein disallowed the service tax credit taken on Input Service Distributor invoices received from Gurgaon. (Previous period Rs 86.44 lacs).

ii) . Nine matters are pending for the year 2009 to 2014 where company disallowed the service tax credit for Rs.2829 lacs for the common inputs used in the job work which are exempted activities as per the excise authorities.

iii) Matter is pending for a notice received for the period 2005-06 wherein service tax credit was disallowed for Rs.113.70 lacs on account of non-availability of service invoices. The case is pending before the CESTAT, Bangalaru for the decision. (Previous period Rs.113.70 lacs).

iv) Company received seven show cause notices at Patiala plants for the period 2005 to 2011 for disallowance of service tax credit on various services for the service tax amounting Rs.96.11 lacs. The case is pending with Joint Commissioner, Service Tax (Previous period Rs 96.11 lacs).

v) Matter is pending with the Commissioner (Appeals ), Central Excise, Chandigarh for two show cause notices received for the period 2009 to 2013 for demanding the service tax credit taken on the inward and outward freight amounting Rs.31.93 lacs (Previous period Nil).

vi) Matter is pending in Bangalaru unit for the period 2008 to 2011 for the service tax not paid on written off material for Rs.5.81 lacs The case is pending before Commissioner, Service Tax. Company is confident of favaourbale decision in this case. (Previous period Nil).

vii) Matters are pending for seven show cause notices for Patiala plant for the period 2006 to 2007 for disallowance of service tax credit on mediclaim services for the service tax amounting Rs.19.18 lacs. The case is pending before CESTAT, Delhi. (Previous period Nil).

viii) Matter are pending for seven show cause notices received for the period 2008 to 2012 for the disallowance of service tax credit amounting Rs.79.02 lacs on few certain services for Bhiwadi Plant for disallowance and demanding the service tax. Cases are pending with Joint Commissioner and Additional Commissioner, Service Tax, Jaipur for hearing. (Previous period Rs. 79.02 lacs).

ix) Matter is pending on the show cause notice received for corporate office for the period 2008 to 2011 for the service tax demand of Rs.134.18 lacs for disallowance of service tax credit on various services.(Previous period Rs. 134.18 lacs).

x) Matter is pending for the service tax demand on the Royalty and technical know how for Rs.16.79 lacs.(Previous period Nil).

xi) Service tax is pending for the service tax credit of Rs.1 0.71 lacs for disallowance of service tax credit for 2011 to 213 (Previous period Nil).

xii) Recently, service tax show casuse notice received on manpower recuritement services for Rs.4.54 lacs where service tax not paid on PF and ESI services in the year 2012-13 (Previous period Nil ).

xiii) Service tax show cause notice received for non-maintenaince of service tax register for past period for the demand Rs.294 lacs for the period 2009-13. Reply is to be filed for defending the case before Commissioner. (Previous period Nil).

2) In relation of b (ii) above, sales tax cases contested by the Company comprise of :

i) Sale tax matter is pending for assessment year 1 996-97 to 2001 -02 where sale tax demand was raised on the classification issue/rates difference on product "Groove Insert Casting" for amounting Rs.97 lacs. Company has deposited Rs.215.87 lacs. Recently, adverse verdict received and tax demand is 97 lacs with interest which will be adjusted from the deposited amount. Company has provided Rs.97 lacs in the books. (Previous period the total demand amount was Rs. 442.92 lacs).

ii) Matter is pending with Honb''ble High Court of Karnataka on sale tax demand notice for the period 2005-06 for the sale tax demand of Rs. 278.51 lacs for the sale tax rate difference charged on the Piston. Case is pending before the Honb''ble High court for the final decision. The Company so far has made an under protest payment of Rs.55 lacs in this matter (Previous period 278.51 lacs).

iii) Matter is pending with Karnataka Sale Tax Tribunal for the penalty of Rs.1.36 lacs for not paying CST on the central sale on the C form liability. Company has deposited Rs.1.36 lcas in this case. The case is related to 2007-08 pending before the Karnataka Sale tax Tribunal for decision. (Previous period Nil).

iv) Matters is pending with next DCCT, Audit Bangalaru for Full 2014-15 on account C Forms pendency for Rs. 293 lacs. The company has filed an appeal before the Joint Commissioner. (Previous period Nil).

v) Matter is pending with Joint Commissioner,Ghaziabad for the sale tax demand of Rs.82.78 lacs for the financial year 2007 -08 on account of several issues like rate differences, disallowance of central sales, stock transfer and best judgement sales. Company has deposited Rs.47.54 lacs in this case and provided Rs.30 in one of the tax issue (Previous period Rs. 82.78 lacs).

vi) Matter is pending with Sale Tax authorities, Patna for the sale tax demand of Rs.25.66 lacs on account of non-availabilities of few documents and pending for hearing. (Previous period Rs. 25.66 lacs).

vii) Four matters are pending at Kolkata sale tax authorities on various reason for the financial year 2001 -02, 2004-05 and 2006 -07 for the sale tax demand of Rs.6.37 lacs on account of disallowance of sale returns, warranty material and stock transfer forms. (Previous period Rs. 6.37 lacs).

viii) Tax demand notice received from Maharashtra Sale Tax Demand of Rs.30.1 9 lacs on non-submission of forms F and matter is pending with next appellate authorities. (Previous period 30.19 lacs).

ix) Matter is pending with Additional Commissioner, Delhi for the total sale tax demand of Rs. 613.92 lacs on the four notices issued on best judgement basis for various reasons including disallowance of stock transfer, Central sale and penalty on the above. One issue is related to sale of fixed assets where sale tax demand is Rs.175 lacs out of total tax demand. Company made a provision of Rs. 172 lacs for this. The case is pending with hearing and related to financial year 2007-08. Company is confident of favourable order on the remaining tax demand as case was adjudged wrongly without giving opportunity.(Previous period the total demand amount was Rs. 613.92 lacs).

x) Matter is pending with Joint Commissioner, Sale / Commercial Tax, Ghaziabad for the sale tax demand on the disallowance of stock transfer of Rs.32.68 lacs for the financial year 2012-13 (Previous period Rs. 32.11 lacs).

xi) Matter is pending with Additional Commissioner, Delhi for the financial year 2008-09 for the sale tax demand of Rs. 73.44 lacs which is demanded on the basis of best judgement (Previous period 73.44 lacs).

xii) Three matters are pending with next appellate authorities (Bhiwadi) for Full2008-09, 2009-10 and 2012-13 on account C Forms pendency. Amount involved Rs. 306.00 lacs.(Previous period Nil).

xiii) Entry tax not paid on imported machinery in the Bangalaru as similar case is pending before the Supreme Court on the decision that entry tax is unconstitutional and should not be levied. Afer 201 1, Company started paying entry tax and capitalising the amount of entry tax. Amount Involved is Rs 410 lacs.

3) In relation of b (iii) above, employee related cases comprise of:

Claims against the Company not acknowledged as debt, in respect of demands raised by the workers. The Company has done an analysis and is of the opinion that it has fair chance of a favourable decision. Amount involved is Rs. 286.05 lacs. (Previous period Rs. 242.99 lacs).

4) In relation to b (iv) above, electricity demand comprise of In respect of a demand raised by Punjab State Electricity Board (PSEB) for various years in relation to availment of additional load. The Company has done an analysis and is of the opinion that it has fair chance of a favourable decision. Amount involved is Rs. 52.24 lacs (Previous period Rs. 52.24 lacs).

5) In relation to b (v) above, income tax cases disputed by the Company comprise of:

i) In respect of Assessment Year 1998-99, certain additions were made on normal as well as on book profits. The matter is pending with Honourable High court. The Company has done an analysis and is of the opinion that it has fair chance of favourable decision. The amount involved is Rs 86.69 lacs (Previous period Rs 86.69 lacs).

ii) In respect of Assessment Year 2002-03, certain additions were made on normal income as well as on book profits. The matter is pending with Assessing Officer for appeal effect. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount for contingent liability for the year is Rs. 68.45 lacs. (Previous period Rs. 23.13 lacs).

iii) In respect of Assessment Year 2003-04, disallowance was made for carry forward losses as well as certain disallowances. The matter is subject to two different appeals. One is pending with the Assessing Officer and other with the Commissioner of Income Tax(Appeals). The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount involved is Rs.158.01 lacs. (Previous period Rs. 158.01 lacs).

iv) In respect of Assessment Year 2006-07, certain additions were made on normal as well as on book profit. The matter is pending with AO. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount for contingent liability for the year is Rs. 39.52 lacs (Previous period Rs. 39.52 lacs).

v) In respect of Assessment Year 2006-07, under Wealth tax assessment, debts relating to certain taxable assets were disallowed. The matter is pending with Income Tax Appellate Tribunal. The Company has done an analysis and is of the opinion that it has fair chance of favorable decision. The amount involved is Rs 3.90 lacs (Previous period Rs 3.90 lacs).

vi) In respect of Assessment Year 2008-09, certain additions were made on normal profits. The matter is pending with Income Tax Appellate Tribunal. The Company has done an analysis and is of the opinion that it has fair chance of favorable decision. The amount involved is Rs 72.68 lacs. (Previous period Rs 72.68 lacs).

vii) In respect of Assessment Year 2009-1 0, certain additions were made on normal profits. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of favorable decision. The amount involved is Rs 163.61 lacs. (Previous period Rs 163.61 lacs).

viii) In respect of period starting 01.04.2007 to 31.03.2015, Company has received TDS default notices on account of short deduction/ short payment of tax deduction at Source. The Company believes that defaults should have arisen due to some technical and clerical errors and could be corrected by filing of revised return/correction statements. The amount involved is Rs. 19.06 lacs. (Previous period Rs 27.71 lacs).

ix) In respect of Assessment Year 1999-2000, certain additions were made on normal as well as on book profit. The matter is pending with Honourable Supreme Court. The Company has done an analysis and is of the opinion that it has fair chance of a favourable decision. The amount for contingent liability for the year is Rs. 83.26 lacs (Previous period Rs. Nil).

x) In respect of Assessment Year 2010-11, certain additions were made on normal profits. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of favorable decision. The amount involved is Rs 87.26 lacs. (Previous period Rs NIL).

xi) In respect of Assessment Year 2011-12, certain additions were made on normal profits in the draft order. The matter is pending filling objection before DRP The Company has done an analysis and is of the opinion that it has fair chance of favorable decision. The amount involved is Rs 17.85 lacs. (Previous period Rs NIL).

6. Related Party Disclosures

(i) In accordance with the requirement of Accounting Standard (AS - 18) on related party disclosures where control exist and description of the relationship are as follows:

(a) Name of Parties where Control Exists

i) Holding Company

Federal Mogul Holdings Limited (Mauritius)

ii) Subsidiary

Federal-Mogul TPR (India) Limited

iii) Ultimate Holding Company Federal Mogul Corporation, USA

(b) Key managerial personnel

- Mr. Andreas Wilhelm Kolf, Managing Director

- Mr. Sachin Selot, CFO & Whole Time Director

- Mr. Khalid Iqbal Khan, Company Secretary

- Mr. Sunit Kapur, Director

- Mr. Dan Brugger, Whole Time Director (till Feb. 2013)

- Mr. Vikrant Sinha, Whole Time Director (till March 2013)

(c) Fellow subsidiaries

- Federal Mogul Burscheid GMBH, Germany

- Federal Mogul Nurnberg, GMBH (Germany)

- Federal Mogul Holding Deutschland (Germany)

- Federal Mogul Limited (U.K.)

- Federal Mogul Financial Services FRANCTNL (France)

- Federal Mogul Gorzyce, S.A. (Poland)

- Federal Mogul Friedberg, GMBH (Germany)

- Federal Mogul Sintered Products Ltd. (U.K.)

- Federal Mogul Friction Products Ltd (Thailand)

- Federal Mogul Thailand Manufacturina Ayutthaya, (Thailand)

- Federal Mogul France, S.A. (France)

- Federal Mogul Corporation, Garennes (France)

- Federal Mogul (Shanghai)

- Federal Mogul Friction Products Ltd.

- Federal Mogul Worldwide Aftermarket

- Federal Mogul Sistemas Brazil

-Federal Mogul Dongsuh Piston Co. Ltd. (China)

- Federal Mogul Bradford Ltd.

- Federal Mogul Powertrain Sparta, MII

- Federal Mogul KK Yokohama

- Federal Mogul Powertrain Inc, Southbend

- Federal Mogul Chasseneuil

- Federal Mogul Kontich

- Federal Mogul Bearings India Ltd (India)

- Federal-Mogul Ignition Products India Ltd (India) (Formerly Federal Mogul Automotive Product (India) Pvt Ltd.)

- Federal-Mogul Motorparts Ltd. (India) (Formerly known as Federal Mogul VSP India Ltd.)

- Federal-Mogul PTSB India Pvt. Ltd. (India) (Formerly known as Federal-Mogul Trading India Pvt. Ltd.)

(d) Associates

GI Power Ltd.

Those transactions along with related party balances for fifteen months ended 31 March 201 5 and year ended 31 December 201 3 are presented in the following table:

a) Assets taken under operating lease

The Company has taken office and residential facilities under cancellable and non-cancellable operating leases, which are renewable on a periodic basis and have escalations ranging from 5% to 15% per annum

37. Disclosures in accordance with AS-15 on "Employee Benefits"

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of services, gets a gratuity on departure at 15 days basic salary (last drawn) for each completed year of service on terms not less favourable than the provisions of the payment of Gratuity Act, 1972. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summaries the components of net benefit expense recognized in the Statement of Profit and Loss and the funded status and amounts recognized in the balance sheet for the plan.

Statement of Profit and Loss

Net employee benefit expense (recognized in Employee cost) [AS15 Revised (c) (i) to (x)]

The Company''s expected contribution to the fund in the next year is not presently ascertainable and hence, the contribution expected to be paid during the annual period beginning after the balance sheet date as required by para 120(o) of the accounting standard 15(revised) on employee benefits has not been disclosed.

The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:-

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

Note (a) : the overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

Amount for the current year and previous four years are as follows:

7. Details of dues to micro and small enterprises as defined under the MSMED Act, 2006

The Micro, small and medium enterprises have been identified by the Company from the available information, which has been relied upon by the auditors. According to such identification, the disclosures in respect to Micro and Small Enterprises as per MSMED Act, 2006 is as follows:

8. Expenses capitalised

The Company has capitalized various expenses incurred in the course of construction of self generated assets in accordance with AS 10 -Accounting for Fixed Assets, the details of expenses capitalized for the purpose of construction of self generated assets are as follows:

9. Provision for regulatory matters

The Company had commenced an evaluation process for various regulatory matters at its factories in December 2010. Based on more accurate information discovered, a provision, towards costs to be incurred to remediate these matters, of Rs. 355.05 lacs is included under Note no. 8 for provisions which are net of amounts utilized of Rs. 810.00 lacs during the year towards remediation.

In addition to the above, the provision for regulatory matters includes a provision of Rs.922.23 lacs towards certain other regulatory matters.

The Company is actively seeking to resolve these actual and potential statutory, taxation, regulatory and contractual obligations. In accordance with requirements of Accounting Standard 29 on ''Provisions, Contingent liability and Contingent assets'' issued by the Institute of Chartered Accountants of India, although difficult to quantify based on the complexity of the issues, the Company has accrued amounts corresponding to its best estimate of the costs associated with such regulatory and contractual obligations on the basis of available information and best professional judgment of experts appointed for this exercise.

Based on consultations obtained from the experts in respect of the said matters, in management''s view, no further costs are expected to be incurred for which a provision would be required at this stage and considers the provisions made to be adequate.

10. Management support charges

For the period 1 January 2014 till 31 March 2015, the Company has paid management support charges to its group companies of Rs 774.68 lacs in respect of certain application engineering services provided to the Company. The Company carries out its transfer pricing study annually for the tax period of April- March and updates its documentation, choice of methods and benchmarks to ascertain adequacy and compliance with the "arms length" principles prescribed under Income Tax Act. For the year April 1, 2014 to March 31, 2015, the process of updation is ongoing and management is confident of completing the same before filing tax return for the same. The provision for current tax has been made accordingly considering the said amounts of Rs. 774.68 lacs as "allowable expenditure".

11 Per transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961, the Company is required to use certain specific methods in computing arm''s length prices of international transactions with associated enterprises and maintain adequate documentation in this respect. Since law requires existence of such information and documentation to be contemporaneous in nature, the Company has appointed independent consultants for conducting a Transfer Pricing Study (the ''Study'') to determine whether the transactions with associate enterprises undertaken during the financial year are on an "arms length basis". Management is of the opinion that the Company''s domestic and international transactions are at arm''s length and that the results of the on-going study will not have any impact on the financial statements and the independent consultants appointed have also preliminarily confirmed that they do not expect any transfer pricing adjustments.

12. (a) Excess provision written back includes income on account of reversal of provision for diminution in value of investment in GI Power of Rs 876.44 Lacs.

The provision has been reversed during the period because the Company has sold the investment.

(b). During the period the Company has entered into Power Purchase Agreement with Real Captive Power Private Limited (RCP) and paid Rs 850 lacs as security deposit which is recoverable in 5 equal instalments beginning from 7th to 11th year. RCP is a newly incorporated enterprise and, as such, recoverability of the security deposit will solely be dependent on the financial position of RCP at the time of repayment. The management believes that purchase of power from RCP would result into savings. On conservative basis, the Company has created a provision for security deposit of Rs 850 Lacs.

13. Corporate social responsibility

a) Gross amount required to be spent by the company during the year in compliance with section 135 of the Act is Rs. 57.35 lacs.

b) Amount spent during the year on-

1. Name of the Subsidiary Companies Federal-Mogul TPR (India) Limited

2. Financial Year of the Subsidiary 31st March, 2015 Companies ended on

3. Holding Company''s Interest Holders of 51,00,000 Equity Shares out of the Subscribed and Paid up Capital of the 1,00,00,000 Equity shares of Rs.10/- each (51%)

4. Net Aggregate amount of Profit Less Losses of the subsidiary Companies so far as it concerns the Members of Federal-Mogul Goetze (India) Ltd

a] Not dealt with in the Accounts

of Federal-Mogul Goetze (India) Ltd.

i) for the subsidiary''s financial year above referred Rs. 1171.07 Lacs

ii) for previous financial years of subsidiary since it became subsidiary of Federal-Mogul Goetze (India) Ltd. Rs 2409.17 Lacs

b] Dealt with the Accounts of Federal -Mogul Goetze (India) Ltd.

i) for the subsidiary''s financial year above referred Nil

ii) for previous financial years of subsidiary since it became subsidiary of Federal-Mogul

Goetze (India) Ltd. Nil


Dec 31, 2013

1.Corporate Information

Federal-Mogul Goetze (India) Limited (''FMGIL'' or ''the Company''), is inter-alia engaged in the manufacture, supply and distribution of ''automotive components'' used in two/three/four wheeler automobiles.

The principal facilities of the Company are located at Patiala (Punjab), Bengaluru (Karnataka) and Bhiwadi (Rajasthan), with its registered office in Delhi. The Company is listed at National Stock Exchange and Bombay Stock Exchange of India.

Federal Mogul Holdings Limited, Mauritius, is the immediate parent company and ultimate parent company is Federal Mogul Corporation, USA.

2. Basis of Preparation

The financial statements of the company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The company has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956 read with the General Circular 15/ 2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013.The financial statements have been prepared on an accrual basis and under the historical cost convention.

3. Segment Information

Based on the guiding principles given in AS-17 ''Segmental Reporting'' notified under Companies (Accounting Standard) Rules, 2006, the Company''s primary business segment is manufacturing of auto components. Considering the nature of Company''s business and operations, there are no separate reportable business segment, as there is only one business segment and hence, there are no additional disclosures required to be provided other than those already been provided in the financial statements.

The analysis of geographical segment is based on the geographical location of the customers. The following table shows the distribution of the Company''s consolidated sales by geographical market, regardless of where the goods were produced.

4. Capital and other commitments

Total estimated amount of contracts, remaining to be executed on capital account and not provided for as at 31 December 2013 is Rs. 1,093.67 lacs (Previous year Rs. 982.57 lacs)

5. Contingent liabilities

(a) Bank guarantees 554.54 1,378.66

(b) Claims/notices contested by the Company

(i) Excise duty and service tax # 687.20 217.70

(ii) Sales tax # 1,781.70 579.88

(iii) Employee related cases 242.99 201.36

(iv) Electricity demand 52.24 52.24

(v) Income tax demands # 609.55 629.95

# The management is of the opinion that the appeals will be allowed in favor of the Company and hence no provision is required for the above.

1) In relation to b (i) above, Excise duty cases contested by the Company comprise of :

i) Matters pending with Joint Commissioner, Central Excise , Bangaluru in respect of four show cause notice amounting to Rs.33.73 lacs. in which excise duty was demanded on the differential discount which was given to stockiest for the period from FY 2000 to 2004.

ii) Matter is pending with CESTAT, Bangaluru is respect of notice issued towards disallowing the Cenvat Credit taken twice on the invoices for the period FY 2006-2007 amounting to Rs. 5.03 lacs.

iii) Matter is pending with CESTAT, Bangaluru in respect of show cause notice amounting to Rs. 8.57 lacs issued for non-payment of excise duty on the removal of obsolete items ( piston ) without payment of duty and permission for the period FY 2005-06.

iv) Matter is pending with CESTAT, Bangaluru in respect of show cause notice issued for turn over discount amounting to Rs. 42.71 lacs.

v) Matter is pending with CESTAT, Delhi in respect two show cause notices received at Patiala plant amounting to Rs. 14.02 lacs for the interest amount on the reversal of SAD taken wrongly for the period FY 2000-2001.

vi) Matter is pending with Joint Commissioner, Excise in respect of show cause notice received for the excise duty amounting to Rs. 6.96 lacs for the period FY 1998-99.

vii) Matter is pending with the High Court, in respect of a show cause notice amounting to Rs. 9.34 lacs on disallowance of excise credit on the ground that credit does not fall in the category of input category for the period from FY 1987 to 1990.

viii) Matter is pending with he Supreme Court in the valuation case where two notices were issued to Patiala plant where department alleged on the job work valuation for an amount of Rs.15.13 lacs.

1) In relation to b (i) above, Service tax cases contested by the Company comprise of:

i) Matter is pending with CESTAT, Bangaluru in respect of notice for the period FY 2006-2007 amounting to Rs. 86.44 lacs wherein disallowed the service tax credit taken on Input Service Distributor invoices received from Gurgaon.

ii) Matter is pending with CESTAT, Bangaluru in respect of notice for the period FY 2005-2006 amounting to Rs. 113.70 lacs wherein service tax credit was disallowed for on account of non-availability of service invoices.

iii) Matter is pending with Joint Commissioner, Service Tax, in respect of seven show cause notices at Patiala plant for disallowance of service tax credit on various services for the period from FY 2005 to 2011 amounting to Rs.96.11 Lacs.

iv) Matter is pending with the Commissioner (Appeal ), Central Excise, Chandigarh for a show cause notice for demanding the service tax credit taken on the inward and outward freight received for the period from FY 2005 to 2008 amounting to Rs.7.09 Lacs.

v) Matters are pending with Joint Commissioner & Additional Commissioner, Service Tax, Jaipur for seven show cause notices received for the disallowance of service tax credit amounting to Rs. 79.02 lacs for the period from FY 2009 to 2012.

vi) Matter is pending on the show cause notice received from Commissioner Gurgaon office for service tax demand for the period from FY 2005 to 2011 amounting to Rs.134.18 Lacs

vii) Matter is pending Additional Commissioner, in respect of a show cause notice for disallowing service tax credit of Rs.35.12 Lacs taken on the service tax payment on the royalty remittances made to overseas for the period 2008-2012.

2) In relation of b (ii) above, sales tax cases contested by the Company comprise of :

i) Matter is pending with Hon''ble Karnataka High Court where sales tax demand amounting to Rs. 442.92 lacs was raised on the classification issue/ rates difference on product "Groove Insert Casting" for Sales tax matter is pending for assessment year 1996-97 to 2001-02.

ii) Matter is pending with the Hon''ble High Court , Karnataka on sales tax demand notice for the period FY 2005-06 for the sales tax rate difference charged on the Piston amounting to Rs. 278.50 lacs. The company so far has made an under protest payment of Rs.55 Lacs in this matter.

iii) Matters are pending on the five sales tax demand order issued by Rajasthan Sales tax Department for amounting Rs.486.35 Lacs on account of non- submission of statutory form in the last five assessment of 2007-2012. Company has made a provision of Rs.17 Lacs for the forms and other issue where tax liability may arise.

iv) Matter is pending with Joint Commissioner, Ghaziabad for the sales tax demand of Rs.82.78 Lacs for the financial year 2007-08 on account of several issues like rate differences, disallowance of central sales, stock transfer and best judgment sales. Company has deposited Rs.47.54 Lacs in this case. Hearing awaited and company expect that tax demand may get reduce further after submission of documents.

v) Matter is pending with Joint Commissioner, Sales / Commercial Tax, Ghaziabad for the sales tax demand on the disallowance of stock transfer of Rs. 32.11 Lacs for the FY 2012-13.

vi) Matter is pending with Additional Commissioner, Delhi for the sales tax demand of Rs. 613.92 Lacs on the four notices issued on best judgment basis for various reasons including disallowance of stock transfer, Central sale and penalty on the above. One issue is related to sale of fixed assets where sales tax demand would be Rs.171 lacs out of total tax demand. Company made a provision of Rs. 171 lacs. The case is pending with hearing and related to financial year 2007-08.

vii) Matter is pending with Additional Commissioner, Delhi for the FY 2008-09 which issue demand notice amounting Rs. 73.44 lacs on the basis of best judgment.

viii) Matter is pending with Sales tax, Patna for the sales tax demand of Rs.25.66 Lacs on account of non-availabilities of few documents.

ix) Matter is pending with Kolkata sales tax authorities on various reason for period from FY 2001-02,2004-05 & 2006-07 for the sales tax demand of Rs.6.37 Lacs on account of disallowance of sale returns, warranty material and stock transfer forms.

x) Matter is pending with Maharashtra Sales tax in respect of Tax demand notice received amounting to Rs.30.19 Lacs on non-submission of forms F and matter is pending with next appellate authorities.

xi) Matters are pending before the Karnataka VAT on the entry tax payment on the capital assets where tax authorities demanding entry tax along with interest amount. Similar case is pending before the Supreme Court for decision. In this case, company started paying entry tax and only interest liability is remaining. Company made a provision in the books for the interest liability of Rs.227 lacs.

6) In relation of b (iii) above, employee related cases comprise of:

Claims against the Company not acknowledged as debt, in respect of demands raised by the workers. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 242.99 Lacs. (Previous year Rs. 201.36 Lacs)

7) In relation to b (iv) above, electricity demand comprise of in respect of a demand raised by Punjab State Electricity Board (PSEB) for various years in relation to availment of additional load. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 52.24 Lacs (Previous year Rs. 52.24 Lacs).

8) In relation to b (v) above, income tax cases disputed by the Company comprise of:

i) The matter is pending with High court in respect of Assessment Year 1998-99, certain additions were made on normal as well as on book profits. The amount involved is Rs 86.69 Lacs (Previous year Rs 86.69 Lacs).

ii) The matter is pending with Commissioner Income Tax (Appeals) in respect of Assessment Year 2002-03, certain additions were made on normal income as well as on book profits. The amount for contingent liability for the year is Rs. 23.13 Lacs. (Previous year Rs. 23.13 Lacs).

iii) The matter is pending with Income Tax Appellate Tribunal in respect of Assessment Year 2003-04, disallowance was made for carry forward losses as well as certain disallowances. The amount involved is Rs.158.01 Lacs. (Previous year Rs. 158.01 Lacs).

iv) The matter is pending with Income Tax Appellate Tribunal in respect of Assessment Year 2005-06, certain additions were made on normal as well as on book profit. The amount for contingent liability for the year is Rs. 2.00 Lacs (Previous year Rs. 38.42 Lacs).

v) The matter is pending with Income Tax Appellate Tribunal in respect of Assessment Year 2006-07, certain additions were made on normal as well as on book profit. The amount for contingent liability for the year is Rs. 39.52 Lacs (Previous year Rs. 39.52 Lacs)

vi) The matter is pending with Commissioner Income Tax (Appeals) in respect of Assessment Year 2007-08, certain additions were made on normal profits. The amount involved is Rs 32.79 Lacs (Previous Year Rs 32.79 Lacs).

vii) The matter is pending with Income Tax Appellate Tribunal in respect of Assessment Year 2007-08, under Wealth tax assessment, debts relating to certain taxable assets were disallowed. The amount involved is Rs 3.90 Lacs (Previous Year Rs NIL Lacs).

viii) The matter is pending with Income Tax Appellate Tribunal in respect of Assessment Year 2008-09, certain additions were made on normal profits. The amount involved is Rs 72.68 Lacs. (Previous Year Rs. 227.l3 Lacs).

ix) The matter is pending with Commissioner Income Tax (Appeals) in respect of Assessment Year 2009-10, certain additions were made on normal profits. The amount involved is Rs 163.61 Lacs. (Previous Year Rs NIL).

x) In respect of Assessment Year 2007-08, company has received TDS default notices on account of short deduction/ short payment of tax deduction at Source. The company believes that defaults should have arisen due to some technical and clerical errors and could be corrected by filing of revised return. The amount involved is Rs. 7.51 Lacs.

xi) In respect of Assessment Year 2013-14, company has received TDS default notices on account of short deduction/ short payment of tax deduction at Source. The company believes that defaults should have arisen due to some technical and clerical errors and could be corrected by filing of revised return. The amount involved is Rs. 19.71 Lacs.

xii) In respect of Assessment Year 2000-01, certain additions were made on normal as well as on book profits. The matter is pending with Honorable High Court is Rs. Nil (Previous year Rs. 21.21 Lacs).

xiii) In respect of Assessment Year 2001-02, certain additions were made on normal as well as on book profit. The matter is pending with Honorable High Court is Rs. Nil (Previous year Rs. 3.05 Lacs).

9. Related Party Disclosures

(i) In accordance with the requirement of Accounting Standard (AS - 18) on related party disclosures where control exist and description of the relationship are as follows:

(a) Name of Parties where Control Exists

i) Holding Company Federal Mogul Holdings Limited (Mauritius)

ii) Subsidiary Federal-Mogul TPR (India) Limited

iii) Ultimate Holding Company Federal Mogul Corporation, USA

(b) Key managerial personnel

- Mr. Sunit Kapur, Managing Director & President (Till 5 November 2013)

- Mr. Dan Brugger, Whole Time Director & CFO (Till 28 February 2013)

- Mr. Vikrant Sinha, Whole time Director & CFO (w.e.f. 28 February 2013 till 31 March 2013)

- Mr. Andreas Kolf, Managing Director (w.e.f. 6 November 2013)

- Mr. Sachin Selot, Whole time Director & CFO (w.e.f. 6 November 2013)

(c) Fellow subsidiaries

- Federal Mogul Burscheid GMBH, Germany

- Federal Mogul Nurnberg, GMBH (Germany)

- Federal Mogul Holding Deutschland (Germany)

- Federal Mogul Financial Services FRANCTNL (France)

- Federal Mogul Gorzyce, S.A. (Poland)

- Federal Mogul Sintered Products Ltd. (U.K.)

- Federal Mogul Friction Products Ltd (Thailand)

- Federal Mogul Bearings India Ltd (India)

- Federal-Mogul Automotive Products India Ltd (India)

- Federal-Mogul VSP India Ltd. (India)

- Federal-Mogul PTSB India Pvt. Ltd. (India)

(d) Associates

GTZ Securities Limited

10. Disclosures in accordance with AS-15 on "Employee Benefits"

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of services, gets a gratuity on departure at 15 days basic salary (last drawn) for each completed year of service on terms not less favorable than the provisions of the payment of Gratuity Act, 1972. The scheme is funded with an insurance company in the form of a qualifying insurance policy. The following tables summaries the components of net benefit expense recognized in the Statement of Profit and Loss and the funded status and amounts recognized in the balance sheet for the plan.

11. Non fulfillment of export obligation under Export promotion Capital Goods (EPCG) Licenses

The Company had obtained certain licenses under Export Promotion Capital Goods scheme against which the Company has fulfilled the entire export obligation (levied in lieu of permission to import fixed assets at a concessional rate of import duty). Accordingly, provision created in the books for shortfall in export obligation if any,(included as ''Provision for non fulfillment of export obligation'' in provisions under note 8) has been reversed in August 2013.

12. Provision for regulatory matters

The Company had commenced an evaluation process for various regulatory matters at its factories in December 2010. Based on more accurate information discovered, a provision, towards costs to be incurred to remediate these matters, of Rs. 370.80 lacs is included under note no. 8 for provisions which are net of amounts utilized of Rs. 539.15 lacs during the year towards remediation.

In addition to the above, the provision for regulatory matters includes a provision of Rs.842.51 lacs towards certain other regulatory matters.

The Company is actively seeking to resolve these actual and potential statutory, taxation, regulatory and contractual obligations. In accordance with requirements of Accounting Standard 29 on ''Provisions, Contingent liability and Contingent assets'' issued by the Institute of Chartered Accountants of India, although difficult to quantify based on the complexity of the issues, the Company has accrued amounts corresponding to its best estimate of the costs associated with such regulatory and contractual obligations on the basis of available information and best professional judgment of experts appointed for this exercise.

Based on consultations obtained from the experts in respect of the said matters, in management''s view, no further costs are expected to be incurred for which a provision would be required at this stage and considers the provisions made to be adequate.

13. Management support charges and other transactions with associated entities

In December 2013, the Company has paid management support charges to its group companies of Rs 631.51 lacs in respect of certain application engineering services provided to the Company. The Company has also purchased/supplied goods/services to other group entiites. The Company carries out its transfer pricing study annually for the tax period of April-March and updates its documentation, choice of methods and benchmarks to ascertain adequacy and compliance with the "arms length" principles prescribed under Income Tax Act. For the year 1 April 2013 to 31 March 2014, the process of updating is ongoing and management is confident of completing the same and is of the view that no additional tax provision is required to be recorded in this regard.

14. Investments in G.I. Power Corporation Limited

The Company is holding an investment of Rs. 1,070.92 lacs (equity shares: Rs. 194.48 lacs and preference shares: Rs. 876.44 lacs) in GI Power Corporation Limited (GIPCL). Since the Company is not confident that it would be able to recover the entire carrying value of these investments a provision of Rs. 1070.92 lacs (representing the full cost of these investments) had been created during the previous year. The Company has been assessing various options for liquidating these investments as these are not related to the core business of the Company.

15. Per transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961, the Company is required to use certain specific methods in computing arm''s length prices of international transactions with associated enterprises and maintain adequate documentation in this respect. Since law requires existence of such information and documentation to be contemporaneous in nature, the Company has appointed independent consultants for conducting a Transfer Pricing Study (the ''Study'') to determine whether the transactions with associate enterprises undertaken during the financial year are on an "arms length basis". Management is of the opinion that the Company''s international transactions are at arm''s length and that the results of the on-going study will not have any impact on the financial statements and the independent consultants appointed have also preliminarily confirmed that they do not expect any transfer pricing adjustments.

16. Previous year number has been regrouped/reclassified wherever considered necessary.


Dec 31, 2012

1. a) Corporate Information

Federal-Mogul Goetze (India) Limited (''FMGIL'' or ''the Company''), is inter-alia engaged in the manufacture, supply and distribution of ''automotive components'' used in two/three/four wheeler automobiles.

The principal facilities of the Company are located at Patiala (Punjab), Bengaluru (Karnataka) and Bhiwadi (Rajasthan), with its registered office in Delhi. The Company is listed at National Stock Exchange of India Limited and Bombay Stock Exchange.

Federal Mogul Holdings Limited, Mauritius, is the immediate parent company and ultimate parent company is Federal Mogul Corporation, USA.

b) Basis of Preparation

The financial statements of the company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The company has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared on an accrual basis and under the historical cost convention.

During the year ended 31 December 2012, the revised Schedule VI notified under the Companies Act 1956, has become applicable to the company, for preparation and presentation of its financial statements. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it has significant impact on presentation and disclosures made in the financial statements. The company has also reclassified the previous year figures in accordance with the requirements applicable in the current year

(a) There is no movement in equity share capital during the current year and previous year.

(b) Right/preferences/restriction attached to equity shares.

The Company has only one class of equity shares having par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(c) List of shareholders holding more than 5% of the equity share capital of the Company at the beginning and at the end of the reporting year.

(e) The Company has not issued any equity shares pursuant to any contract without payment being received in cash, allotted as fully paid up by way of bonus issues and bought back during the last five years

1. Indian rupee loan from banks carries interest @ 15.70% p.a. The loan is repayable in monthly instalments of Rs. 33.33 lacs each along with interest, from the date of the loan, viz., December 15, 2009. The loan is secured by first parri passu charge on entire fixed assets of the Company including land and building and whole of moveable assets of the Company including plant & machinery, spares, tools and accessories, furniture & fixtures and other moveable assets of the Company.

2. Current maturities of long term borrowings amounting to Rs. 400 lacs (Previous year: Rs. 400 lacs) are included under the head (''Other current liabilities'').

3. Segment Information

Based on the guiding principles given in AS-17 ''Segmental Reporting'' notified under Companies (Accounting Standard) Rules, 2006, the Company''s primary business segment is manufacturing of auto components. Considering the nature of Company''s business and operations, there are no separate reportable business segment, as there is only one business segment and hence, there are no additional disclosures required to be provided other than those already been provided in the financial statements.

The analysis of geographical segment is based on the geographical location of the customers. The following table shows the distribution of the Company''s consolidated sales by geographical market, regardless of where the goods were produced.

Geographical segment

Net sales revenue (including trading sales but excluding excise duty) by geographical market

The Company has common assets for producing goods for India and outside countries. Hence, separate figures for assets/ additions to fixed assets cannot be furnished.

4. Capital and other commitments

Total estimated amount of contracts, remaining to be executed on capital account and not provided for as at 31 December 2012 is Rs: 982.57 lacs (Previous year Rs: 4,359.65 lacs)

5. Contingent liabilities

(a) Bank guarantees 1,378.66 949.88

(b) Claims/notices contested by the Company

(i) Excise duty 217.70 155.27

(ii) Sales tax 579.88 405.91

(iii) Employee related cases 201.36 136.18

(iv) Electricity demand 52.24 52.24

(v) Income tax demands 629.95 648.13

1) In relation to b (i) above, Excise duty cases contested by the Company comprise of:

i) The deputy commissioner of Central Excise, Banguluru, confirming the demand in respect of excess availment of Cenvat credit during the FY 2005-06.The Company has not filed an appeal against this decision and paid the demand. Since, the amount of demand is already paid, contingency existing as on date is NIL (Previous year Rs. 0.93 lacs)

ii) Matter was pending with Central Excise & Service Tax Appellate Tribunal, Chandigarh in respect of service tax on transport services for the period 2007-08 and which was favourably decided in Company''s favour. Contingency existing as on date is NIL (Previous year Rs.2.92 lacs).

iii) Matters pending with Central Excise & Service Tax Appellate Tribunal in respect of interest on reversal of special additional duty (SAD) for 2000-01. The Company has done an analysis and is of the opinion that it has fair chance of a favourable decision. Amount involved is Rs. 14.02 lacs. (Previous year Rs. 14.02 lacs).

iv) Miscellaneous service tax cases with respect to disallowance of Cenvat credit claimed on various input services are pending with Cestat Banguluru/ Joint Commissioner Jaipur/ Joint Commissioner Patiala for the period 2005-06 to 2010-11. The Company has done an analysis and is of the opinion that it has fair chance of a favourable decision. Amount involved is Rs. 203.68 lacs (Previous year Rs. 137.40 lacs).

2) In relation of b (ii) above, sales tax cases contested by the Company comprise of:

i) In respect of Assessment Year 1996-97 to 2001-02, the department raised a demand on account of differences in sales tax rates. The matter is pending with Karnataka Honourable Hight Court. The Company has taken legal opinion in this regard and is confident of success. Amount involved is Rs. 301.38 lacs. (Previous year Rs. 315.21 lacs). The Company has so far made an ''under protest payment'' of Rs. 215.87 lacs in this matter.

ii) In respect of Assessment Year 2005-06, the department raised a demand on account of differences in sales tax rates. The Honourable Hight Court has favourably decided this matter in Company''s favour, but later the department filed writ appeal against said order and this matter is pending with Karnataka Honourable Hight Court. The Company has taken legal opinion in this regard and is confident of favourable outcome. Amount involved is Rs.278.50 lacs. (Previous year Rs. 90.70 lacs). The Company so far has made an ''under protest payment'' of Rs.55 lacs in this matter.

3) In relation of b (iii) above, employee related cases comprise of:

Claims against the Company not acknowledged as debt, in respect of demands raised by the workers. The Company has done an analysis and is of the opinion that it has fair chance of a favourable decision. Amount involved is Rs.201.36 lacs. (Previous year Rs. 136.18 lacs)

4) In relation to b (iv) above, electricity demand comprise of:"In respect of a demand raised by Punjab Electricity Board (PSEB) for various years in relation to availment of additional load. The Company has done an analysis and is of the opinion that it has fair chance of a favourable decision. Amount involved is Rs. 52.24 lacs (Previous year Rs. 52.24 lacs).

5) In relation to b (v) above, income tax cases disputed by the Company comprise of:

i) In respect of Assessment Year 1998-99, certain additions were made on normal as well as on book profits. The matter is pending with Honourable Hight Court. The Company has done an analysis and is of the opinion that it has fair chance of favourable decision. The amount involved is Rs 86.69 Lacs (Previous year Rs 86.69 Lacs).

ii) In respect of Assessment Year 2000-01, certain additions were made on normal as well as on book profits. The matter is pending with Honourable Hight Court. The Company has done an analysis and is of the opinion that it has fair chance of favourable decision. The amount involved is Rs 21.21 Lacs (Previous year Rs 21.21 Lacs).

iii) In respect of Assessment Year 2001-02, certain additions were made on normal as well as on book profit. The matter is pending with Honourable Hight Court. The Company has done an analysis and is of the opinion that it has fair chance of a favourable decision. The amount for contingent liability for the year is Rs. 3.05 lacs (Previous year Rs. 8.14 lacs).

iv) In respect of Assessment Year 2002-03, certain additions were made on normal income as well as on book profits. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of a favourable decision. The amount for contingent liability for the year is Rs. 23.13 lacs. (Previous year Rs. 23.13 lacs).

v) In respect of Assessment Year 2003-04, disallowance was made for carry forward losses as well as certain disallowances. The matter is pending with Income Tax Appellate Tribunal. The Company has done an analysis and is of the opinion that it has fair chance of a favourable decision. The amount involved is Rs.158.01 lacs. (Previous year Rs. 158.01 lacs).

vi) In respect of Assessment Year 2004-05, certain additions were made on normal income. The Income Tax Appellate Tribunal has decided the matter in Company''s favour. The amount of contingency for the year is Rs. NIL. (Previous year Rs. 13.05 lacs)

vii) In respect of Assessment Year 2005-06, certain additions were made on normal as well as on book profit. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of a favourable decision. The amount for contingent liability for the year is Rs. 38.42 lacs (Previous year Rs. 38.42 lacs).

viii) In respect of Assessment Year 2006-07, certain additions were made on normal as well as on book profit. The matter is pending with Income Tax Appellate Tribunal. The Company has done an analysis and is of the opinion that it has fair chance of a favourable decision. The amount for contingent liability for the year is Rs. 39.52 lacs (Previous year Rs. 39.52 lacs).

ix) In respect of Assessment Year 2007-08, certain additions were made on normal profits. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of favourable decision. The amount involved is Rs 32.79 Lacs (Previous Year Rs 32.79 Lacs).

x) In respect of Assessment Year 2008-09, certain additions were made on normal profits. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of favourable decision. The amount involved is Rs 227.13 Lacs. (Previous Year Rs 227.13 lacs).

6. In accordance with the requirement of Accounting Standard (AS - 18) on related party disclosures where control exist and description of the relationship are as follows:

(a) Name of Parties where Control Exists

i) Holding Company

Federal Mogul Holdings Limited (Mauritius)

ii) Subsidiary

Federal-Mogul TPR (India) Limited

iii) Ultimate Holding Company

Federal Mogul Corporation, USA

(b) Key managerial personnel*

Mr. Sunit Kapur, Managing Director

Mr. Dan Brugger, Whole Time Director & CFO

(c) Fellow subsidiaries

Federal Mogul Burscheid GMBH, Germany

Federal Mogul Maysville (USA)

Federal Mogul Operation S.R.L (Italy)

Federal Mogul Bimet S.A. (Poland)

Federal Mogul Nurnberg, GMBH (Germany)

Federal Mogul Wiesbaden GMBH, (Germany)

Federal Mogul Power Train System (South Africa)

Federal Mogul Holding Deutschland (Germany)

Federal Mogul Valves (PTY) Ltd (South Africa)

Federal Mogul Limited (U.K.)

Federal Mogul KK (Japan)

SSCFRAN FM Financial Services SAS Veurey Voroize (France)

Federal Mogul Financial Services FRANCTNL (France)

Federal Mogul Gorzyce, S.A. (Poland)

Federal Mogul Friedberg, GMBH (Germany)

Federal Mogul Sintered Products Ltd. (U.K.)

Federal Mogul Sealing Systems, GMBH (Germany)

Federal Mogul Brasil do Limited (Brazil)

Federal Mogul Friction Products Ltd (Thailand)

Federal Mogul Corporation Power Train Systems (USA)

Federal Mogul Power Train Systems Schofield (USA)

Federal Mogul S.A.R.L. (Switzerland)

Federal Mogul France, S.A. (France)

Federal Mogul Corporation, Lake City (USA)

Federal Mogul Corporation, Garennes (France)

Federal Mogul Dongsuh Piston Co. Ltd. (China)

Federal Mogul Corp, Mgmoogus (USA)

KFM Bearing Company (South Korea)

Federal Mogul Bradford Ltd.

T&N Limited Manchester (England)

Federal Mogul Powertrain Spara, MII

Federal Mogul KK Yokohama

Federal Mogul Sintertech SVC Functionnels

Federal Mogul Powertrain Inc, Southbend

Federal Mogul Kontich

Federal Mogul Schofield

Federal Mogul Bearings India Ltd (India)

Federal-Mogul Automotive Products India Ltd (India) (Formerly Federal Mogul Automotive Product (India) Pvt Ltd.)

Federal-Mogul VSP India Ltd. (India) (Formerly known as Ferodo India Pvt. Ltd.)

Federal-Mogul PTSB India Pvt. Ltd. (India) (Formerly known as Federal-Mogul Trading India Pvt. Ltd.)

(d) Associates

GTZ Securities Limited

*Mr. Dan Brugger. Whole Time Director and CFO has resigned w.e.f 28 February 2013 and Mr. Vikrant Sinha has been appointed as Whole Time Director and CFO of the Company w.e.f 28 February 2013.

Those transactions along with related balances as at 31 December 2012 and 31 December 2011 and for the years then ended are presented in the following table:

7. Disclosures in accordance with AS-15 on "Employee Benefits"

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of services, gets a gratuity on departure at 15 days basic salary (last drawn) for each completed year of service on terms not less favourable than the provisions of the payment of Gratuity Act, 1972. The scheme is funded with an insurance company in the form of a qualifying insurance policy."The following tables summaries the components of net benefit expense recognized in the Statement of Profit and Loss and the funded status and amounts recognized in the balance sheet for the plan."

8. Non fulfilment of export obligation under Export promotion Capital Goods (EPCG) Licenses

The Company has identified some licenses obtained under Export Promotion Capital Goods scheme, which have expired and against which the Company has partially fulfilled the export obligation (levied in lieu of permission to import fixed assets at a concessional rate of import duty). In view of partial shortfall in fulfilling export obligation, the management has decided, on prudent basis, to make a provision aggregating to Rs. 186.22 lacs (Previous Year Rs. 214.89 lacs) in these financial statements which in view of the management, is adequate to cover any liability on this account at all its facilities'' and is included as ''Provision for non fulfilment of export obligation'' in Provisions under Note 8.

9. Provision for regulatory matters

During the year ended 31 December 2010, the Company had commenced an evaluation process for various regulatory matters at its factories. Based on more accurate information discovered, a provision, towards costs to be incurred to remediate these matters, of Rs. 383.60 lacs is included under Note no. 8 for provisions which are net of amounts utilized of Rs. 610.53 lacs during the year towards remediation.

During the year, the Company became aware of certain discrepancies regarding sales tax matters at one of its factories. It thereafter undertook a review and based on the information available at this stage of the ongoing evaluation, has paid / provided an amount of Rs. 625.81 lacs [included under Note no. 8 under the head provision for regulatory matters net of payments made of Rs. 398.03 lacs. Provision created during the year relating to this has been disclosed as an exceptional item in the Statement of Profit and Loss.

In addition to the above, the provision for regulatory matters include a provision of Rs.487.68 lacs (Previous Year Rs. 654.96 lacs ) towards certain other regulatory matters.

The Company is actively seeking to resolve these actual and potential statutory, taxation, regulatory and contractual obligations. In accordance with requirements of Accounting Standard 29 on ''Provisions, Contingent liability and Contingent assets'' issued by the Institute of Chartered Accountants of India, although difficult to quantify based on the complexity of the issues, the Company has accrued amounts corresponding to its best estimate of the costs associated with such regulatory and contractual obligations on the basis of available information and best professional judgment of experts appointed for this exercise.

Based on consultations obtained from the experts in respect of the said matters, in management''s view, no further costs are expected to be incurred for which a provision would be required at this stage and considers the provisions made to be adequate.

10. Management support charges

In December 2012, the Company has paid management support charges to its group companies of Rs 556.81 lacs in respect of certain application engineering services provided to the Company. The Company carries out its transfer pricing study annually for the tax period of April-March and updates its documentation, choice of methods and benchmarks to ascertain adequacy and compliance with the "arms length" principles prescribed under Income Tax Act. For the year April 1, 2012 to March 31, 2013, the process of updation is ongoing and management is confident of completing the same. The provision for current tax has been made accordingly considering the said amounts of Rs. 556.8 lacs as "allowable expenditure".

11. Change in accounting policy

Till the year ended 31 December 2011, the Company, in accordance with the pre-revised schedule VI requirement, was recognizing dividend declared by subsidiary company after the reporting date in the current year''s Statement of Profit and Loss if such dividend pertained to the period ending on or before the reporting date. The revised schedule VI, applicable for financial years commencing on or after 1 April 2011, does not contain this requirement. Hence, to comply with AS 9 Revenue Recognition, the company has changed its accounting policy for recognition of dividend income from subsidiary companies. In accordance with the revised policy, the company recognized dividend as income only when the right to receive the same is established by the reporting date. Pursuant to this change, loss for the year ended 31 December, 2012 is higher by Rs. 357 lacs

12. Investments in G.I. Power Corporation Limited

The Company is holding an investment of Rs. 1,070.92 lacs (Equity Shares: Rs. 194.48 lacs and Preference Shares: Rs. 876.44 lacs) in GI Power Corporation Limited (GIPCL). During the year ended 31 December 2011, the Company''s shareholding in GIPCL has reduced from 26.00% to 6.60% due to conversion of the preference shares held by other investors into equity shares. Accordingly GIPCL has discontinued to be an ''Associate'' of the Company in the previous year.

In addition to the above, the Company had changed the classification of the investment in GIPCL from long term investment to current investment in the previous year, as the Company had started assessing various options for liquidating these investments as these are not related to the core business of the Company. The recoverability of these Investments is being consistently evaluated and based on current assessment, the Company is not confident that it would be able to recover the entire carrying value of these investments and accordingly a provision of Rs. 1072.25 lacs (representing the full cost of these investments) has been created during the year.


Dec 31, 2011

1. Background

Federal-Mogul Goetze (India) Limited ('FMGIL' or 'the Company'), is inter-alia engaged in the manufacture, supply and distribution of 'automotive components' used in two/three/four wheeler automobiles.

The principal facilities of the company are located at Patiala (Punjab, Bangaluru (Karnataka) and Bhiwadi (Rajasthan), with its registered office in delhi. The Company is listed at National Stock Exchange of India Limited and Mumbai Stock Exchange.

Federal Mogul Holdings Limited, Mauritius, is the immediate parent company and ultimate parent company is Federal Mogul Corporation, USA.

2. Segment Information

Based on the guiding principles given in AS-17 'Segmental Reporting' notified under Companies (Accounting Standard) Rules, 2006, the Company's primary business segment is manufacturing of auto components. Considering the nature of Company's business and operations, there are no separate reportable business segment, as there is only one business segment and hence, there are no additional disclosures required to be provided other than those already provided in the financial statements.

The analysis of geographical segment is based on the geographical location of the customers. The following table shows the distribution of the Company's consolidated sales by geographical market, regardless of where the goods were produced.

3. Related party transactions

During the year under review, the Company has entered into transactions with related parties. Name of Parties where Control Exists

i) Holding Company

- Federal Mogul Holdings Limited (Mauritius)

ii) Subsidiary

- Federal-Mogul TPR (India) Limited

iii) Ultimate Holding Company

- Federal Mogul Corporation, USA.

Name of related Parties where transactions have taken place

i) Key managerial personnel

- Mr. Jean De Montleur, Managing Director & President

- Mr. Dan Brugger, Whole Time Director & CFO

4. Contingent liabilities not provided for:

Particulars Year ended Year ended December 31, 2011 December 31, 2010 (Rs in lacs) (Rs in lacs)

(a) Bank Guarantees 949.88 457.47

(b) Claims/notices contested by the company

i) Excise duty 155.27 17.87

ii) Sales Tax 405.91 405.91

iii) Employee Related Cases 136.18 102.44

iv) Electricity Demand 52.24 52.24

v) Income Tax Demands 648.13 420.96

vi) Consumer Cases (settled during the current year) - 30.91

c) In relation to b (i) above, Excise Duty cases contested by the Company comprise of:

a) Matter pending with Deputy Commissioner of Central Excise, Bangalore, in respect of excess availment of Cenvat credit. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount involved is Rs 0.93 lacs (Previous year Rs. 0.93 lacs)

b) Matters pending with Central Excise & Service Tax Appellate Tribunal, Chandigarh in respect of Service Tax on Transport Services for the period 2007-08. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 2.92 lacs (Previous year Rs.2.92 lacs).

c) Matters pending with Central Excise & Service Tax Appellate Tribunal in respect of interest on reversal of Special Additional Duty (SAD) for 2000-01. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 14.02 lacs. (Previous year Rs. 14.02 lacs).

d) Miscellaneous Service tax cases in respect disallowance of Cenvat Credit claimed on various input Services are pending with Cestat Bangalore/ Joint Commissioner Jaipur/ Joint Commissioner Patiala for the period 2005-06 to 2010-11. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 137.40 lacs (Previous year Rs. Nil).

d) In relation of b (ii) above, Sales Tax cases contested by the Company comprise of:

i) In respect of Assessment Year 1996-97 to 2001-02, on account of differences in sales tax rates, (the matter is pending with Karnataka High court. The Company has taken legal opinion in this regard and is confident of success). Amount involved is Rs. 315.21 lacs. (Previous year Rs. 315.21 lacs).

ii) In respect of Assessment Year 2005-06, on account of differences in sales tax rates, (the matter is pending with superintendent audit Banga- lore. The Company has taken legal opinion in this regard and is confident of success). Amount involved is Rs. 90.70 lacs. (Previous year Rs. 90.70 lacs).

e) In relation of b (iii) above, Employee related cases comprise of:

Claims against the Company not acknowledged as debt, in respect of demands raised by the workers. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs.136.18 lacs. (Previous year Rs. 102.44 lacs)

f) In relation to b (iv) above, Electricity demand comprise of:

In respect of a demand raised by Punjab Electricity Board (PSEB) for various years in relation to availment of additional load. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 52.24 lacs (Previous year Rs. 52.24 lacs).

g) In relation to b (v) above, Income Tax cases disputed by the Company comprise of:

i) In respect of Assessment Year 1998-99, certain additions were made on normal as well as on book profits. The matter is pending with High court. The Company has done an analysis and is of the opinion that it has fair chance of favourable decision. The amount involved is Rs 86.69 Lacs (Previous year Rs 86.69 Lacs).

ii) In respect of Assessment Year 2000-01, certain additions were made on normal as well as on book profits. The matter is pending with High court. The Company has done an analysis and is of the opinion that it has fair chance of favourable decision. The amount involved is Rs 21.21 Lacs (Previous year Rs 21.21 Lacs).

iii) In respect of Assessment Year 2001-02, certain additions were made on normal as well as on book profit. The matter is pending with High Court. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount for contingent liability for the year is Rs. 8.14 lacs (Previous year Rs. 8.14 lacs).

iv) In respect of Assessment Year 2002-03, certain additions were made on normal income as well as on book profits. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount for contingent liability for the year is Rs. 23.13 lacs. (Previous year Rs. 23.13 lacs).

v) In respect of Assessment year 2003-04, disallowance was made for carry forward losses as well as certain disallowances. The matter is pending with Income Tax Appellate Tribunal. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount involved is Rs.158.01 lacs. (Previous year Rs. 158.01 lacs).

vi) In respect of Assessment Year 2004-05, certain additions were made on normal income. The matter is pending with Income Tax Appellate Tribunal (the matter has been heard and the order is awaited). The amount of contingency for the year is Rs. 13.05 lacs. (Previous year Rs. 13.05 lacs)

vii) In respect of Assessment Year 2005-06, certain additions were made on normal as well as on book profit. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount for contingent liability for the year is Rs. 38.42 lacs (Previous year Rs. 38.42 lacs).

viii) In respect of Assessment Year 2006-07, certain additions were made on normal as well as on book profit. The matter is pending with Income Tax Appellate Tribunal. During the year, management has done an analysis and is of the opinion that chances of liability getting materialised are high. Hence the Company has created provision for the same. The amount for contingent liability for the year is Rs. 39.52 lacs (Previous year Rs. 39.52 lacs)

ix) In respect of Assessment Year 2007-08, certain additions were made on normal profits. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of favorable decision. The amount involved is Rs 32.79 Lacs (Previous Year Rs 32.79 Lacs).

x) In respect of Assessment Year 2008-09, certain additions were made on normal profits. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of favorable decision. The amount involved is Rs 227.17 Lacs. (Previous Year Rs Nil).

*As the liabilities for compensated absences are provided on an actuarial basis for the Company as a whole, the amounts pertaining to the directors are not included above.

b) Personal expenses under schedule 18 include Rs. 197.99 lacs (including Rs. 29.33 lacs pertaining to previous year) towards whole time Finance Direct or and CFO's remuneration for which the company has filed an application in January, 2011 with Central Government for appointment and payment of remuneration for the period November 12, 2010 to November 11, 2015, which was pending for the approval of the Central Govern- ment.

c) During an earlier year, the company has filed an application for approval of excess managerial remuneration to its erstwhile managing director of Rs. 84.14 lacs for the period January 1, 2007 to September 24, 2007 with the Central Government under section 309(3) of the Companies Act, 1956 which was in excess of permissible remuneration under schedule XIII of the Companies Act, 1956. The Company received an approval from Central Government for partial amount of Rs. 45.67 lacs on September 14, 2010, while the approval for balance amount of Rs. 38.47 lacs paid to the erstwhile managing director is awaited.

Pending such approvals, the management believes that no material adjustments are deemed necessary in financial statements in this regard.

5. In accordance with Explanation below Para 10 of Accounting standard 9 notified by Companies (Accounting Standards) Rules, 2006, excise duty on sales amounting to Rs. 9,398.49 lacs (Previous year Rs. 7,218.17 lacs) has been reduced from sales in profit & loss account and excise duty on (decrease)/increase in stock amounting to Rs. 170.40 lacs (Previous year Rs. 140.97) lacs has been considered as expense in the financial statements.

6. Gratuity and other post-employment benefit plans:

a) The Guidance Note on implementing AS-15, Employee Benefits (revised 2005) issued by the Accounting Standard Board (ASB) of the Institute of Chartered Accountants of India states that provident funds set up by employers, which requires interest shortfall to be met by the employer, needs to be treated as defined benefit plan. Pending the issuance of the Guidance Note from the Actuarial Society of India, the Company's actuary has expressed his inability to reliably measure the provident fund liability. However, the Company, on a conservative basis has made a provision for the deficit in the fund. The deficit accounted for the in the books as on December 31, 2011 is Rs. 50.57 lacs.

b) The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service.

The following table summarizes the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the respective plans.

7. Non fulfillment of export obligation under Export promotion Capital Goods (EPCG) Licenses

The Company has identified some licenses obtained under Export Promotion Capital Goods scheme, which have expired and against which the Company has partially fulfilled the export obligation (levied in lieu of permission to import fixed assets at a concessional rate of import duty). In view of partial shortfall in fulfilling export obligation, the management has decided, on prudent basis, to make a provision aggregating to Rs. 214.89 lacs (Previous Year Rs. 932.32 lacs) in these financial statements which in view of the management, is adequate to cover any liability on this account at alrits facilities' and is included as 'Provision for non fulfillment of export obligation' in Provisions under schedule 14.

As at December 31, 2011, the Company has export benefits receivable of Rs. 695.94 lacs, of which Rs 315.26 lacs is outstanding in respect of export invoices over one year, due to delay in fulfillment of export obligations as explained above. The management believes that such recognition is in accordance with relevant accounting guidance and basis an expert opinion, there is reasonable certainty of its ultimate realization and no adjustments are deemed necessary in financial statements in this regard.

8. Provision for regulatory matters

During the year ended December 31, 2010, the Company had commenced an evaluation process for various regulatory matters at its factories. Based on more accurate information discovered, a provision, towards costs to be incurred to remediate these matters, of Rs. 288.30 lacs is included under Schedule no. 14 for provisions which are net of amounts utilized of Rs. 269.75 lacs during the year towards remediation. Further, the Company has also recognized a provision of Rs 654.96 lacs (including interest of Rs. 357.37 lacs) against certain other regulatory matters. The Company is actively seeking to resolve these actual and potential statutory, taxation regulatory, and contractual obligations. In accordance with requirements of Accounting Standard 29 on 'Provisions, Contingent liability and Contingent assets' issued by the Institute of Chartered Accountants of India, although difficult to quantify based on the complexity of the issues, the Company has accrued amounts corresponding to its best estimate of the costs associated with such regulatory and contractual obligations on the basis of available information and best professional judgment of experts appointed for this exercise.

Based on consultations obtained from the experts in respect of the said matters, in management's view, no further costs are expected to be incurred to remediate for which a provision would be required at this stage and considers the provisions made to be adequate

9. Management support charges

In December 2011, the Company has received management support charges from its group companies of Rs 498.52 lacs in respect of certain application engineering rendered by the Company. Further, the charges amounting to Rs. 354.40 lacs (on net basis) in respect of certain other set of services received from the parent company, which were accounted for by the Company for the period January 1, 2011 to September 30, 2011, have been reversed as these charges have been discontinued by the parent company. The Company carries out its transfer pricing study annually for the tax period of April-March and updates its documentation, choice of methods and benchmarks to ascertain adequacy and compliance with the "arms length" principles prescribed under Income Tax Act. For the year April 1, 2011 to March 31, 2012, the process of updation is ongoing and management is confident of completing the same. The provision for current tax has been made accordingly considering the said amounts of Rs. 498.52 lacs as "allowable expenditure".

10. Investments in G.I. Power Corporation Limited

The Company is holding an investment of Rs. 1,070.92 lacs (Equity Shares: Rs. 194.48 lacs and Preference Shares: Rs. 876.44 lacs) in GI Power Corporation Limited (GIPCL). During the year, the Company's shareholding in GIPCL has reduced from 26.00% to 6.60% due to conversion of the preference shares held by other investors into equity shares. Accordingly GIPCL has discontinued to be an 'Associate' of the Company.

In addition to the above, the Company has now changed the classification the investment in GIPCL from long term investment to current investment, as the Company is assessing various options for liquidating these investments as these are not related to the core business of the Company. Based on current assessment, the Company is confident that it would be able to recover the entire carrying value of these investments and these investments have been carried at cost in the balance sheet in accordance with the requirements of AS-13 "Accounting for Investments".

11. Previous year figures have been regrouped and rearranged wherever necessary to make these comparable.


Dec 31, 2010

1. Background

Federal-Mogul Goetze (India) Limited (FMGIL or the Company1), is inter-alia engaged in the manufacture, supply and distribution of automotive components used in two/three/four wheeler automobiles.

The principal facilities of the Company are located at Patiala (Punjab), Bengaluru (Karnataka) and Bhiwadi (Rajasthan), with its registered office in Delhi. The Company is listed at National Stock Exchange of India Limited and Bombay Stock Exchange Limited.

Federal Mogul Holdings Limited, Mauritius, is the immediate parent company and ultimate parent company is Federal Mogul Corporation, USA.

2. Segment Information

Based on the guiding principles given in AS-17 Segmental Reporting notified under Companies (Accounting Standard) Rules, 2006, the Companys primary business segment is manufacturing of auto components. The Company operates in one geographical segment that is "India" and no further disclosures as per AS17 need to be made.

3. Related party transactions

During the year under review, the Company has entered into transactions with related parties. i) Key managerial personnel and their relatives Mr. Jean De Montlaur, Managing Director & President Mr. Rustin Murdock, Whole Time Director (upto June 30, 2010) Mr. Dan Brugger, Whole Time Finance Director (from November 12, 2010) ii) Holding Company

Federal Mogul Holdings Limited (Mauritius)

ii) Fellow subsidiaries

Federal Mogul Burscheid GMBH, Germany.

Federal Mogul Maysville (USA).

Federal Mogul Operation S.R.L (Italy)

Federal Mogul Bimet S.A. (Poland).

Federal Mogul Numberg, GMBH (Germany).

Federal Mogul Wiesbaden GMBH, (Germany)

Federal Mogul Power Train System (South Africa).

Federal Mogul Holding Deutschland (Germany).

Federal Mogul Valves (PTY) Ltd (South Africa).

Federal Mogul Limited (U.K)

Federal Mogul KK (Japan)

SSCFRAN FM Financial Services SAS Veurey Voroize (France).

Federal Mogul Financial Services FRANCTNL (France).

Federal Mogul Gorzyce, S.A (Poland).

Federal Mogul Friedberg, GMBH (Germany).

Federal Mogul Sintered Products Ltd. (U.K.).

Federal Mogul Sealing Systems, GMBH (Germany).

Federal Mogul Brasil do Limited (Brazil)

Federal Mogul Friction Products Ltd (India).

Federal Mogul Corporation Power Train Systems (USA).

- Federal Mogul Plant Van Wert (USA.)

Federal Mogul Power Train Systems Schofield (USA).

Federal Mogul S.A.R.L. (Switzerland)

Federal Mogul France, S.A. (France)

Federal Mogul Corporation, Lake City (USA)

Federal Mogul Corporation, Garennes (France)

Federal Mogul Dongsuh Piston Co. Ltd. (China)

Federal Mogul Corp, Mgmoogus (USA)

KFM Bearing Company (South Korea)

Federal Mogul Bradford Ltd.

Federal Mogul Bearing India Ltd (India)

Federal Mogul Automotive Product (India) Pvt Ltd. (India).

Ferodo India Private Ltd. (India)

Federal Mogul Trading India Pvt. Ltd. (India) iv) Associates

Gl Power Corporation Limited

GTZ Securities Limited

v) Subsidiaries

Federal-Mogul TPR (India) Limited

Satara Rubbers and Chemicals Limited (upto March 31, 2010)

vi) Ultimate Holding Company

Federal Mogul Corporation, USA.

4. Contingent liabilities not provided for:

Particulars Year ended Year ended December 31, 2010 December 31, 2009 (Rs in lacs) (Rs in lacs)

(a) Bank Guarantees 457.47 355.82

(b) Claims/notices contested by the company

i) Excise duty 34.96 47.80

ii) Sales Tax 59.23 59.23

iii) ESI Cases - 14.51

iv) Employee Related Cases 102.44 63.33

v) Electricity Demand 52.24 52.24

vi) Income tax Demands 464.83 651.98

vii) Consumer Cases 30.91 60.91

c) In relation to b (i) above Excise Duty cases contested by the Company comprise of:

i) Matter pending with Central Excise & Service Tax Appellate Tribunal (CESTAT) in respect of valuation rates employed for certain products sold by the Company for the period 2004-2005 & 2005-2006. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount involved is Rs 0.93 lacs (Previous year Rs. 0.93 lacs)

ii) Miscellaneous Excise Cases in respect of MODVAT credits are pending with Deputy Commissioner Central Excise Patiala (DCCE PTA)/ Addi- tional Commissioner/Punjab and Haryana High Court/Assistant Commissioner Central Excise for the period 1987-1988 to 2006-2007. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 16.46 lacs {Previous year Rs. 16.82 lacs).

iii) Matters pending with Additional Commissioner, Chandigarh in respect of Service Tax on Transport Services for the period 2005-06, 2006-07 & 2007-08. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 2.92 lacs (Previous year Rs. 15.40 lacs).

iv) Matters pending with Commissioner Appeals/ Joint Commissioner in respect of interest on reversal of Special Additional Duty (SAD) for 200001. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 9.37 lacs. (Previous year Rs. 9.37 lacs).

v) Matter pending with Central Excise & Service Tax Appellate Tribunal (CESTAT) in respect of valuation rates employed for certain products sold by the Company for the period 2001-2002 to 2004-2005. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs:5.28 lacs. (Previous year Rs. 5.28 lacs).

d) In relation of b (ii) Sales Tax cases contested by the Company comprise of:

i) In respect of Assessment Year 1996-97 to 2001-02, on account of differences in sales tax rates, (the matter is pending with Karnataka High court. The Company has taken legal opinion in this regard and is confident of success). Amount involved is Rs. 59.23 lacs. (Previous year Rs. 59.23 lacs)

e) In relation b (iii) above Employee State Insurance claims comprise on

i) In respect of demand from Employee State Insurance, relating to non deposit of Employee State Insurance on certain employee related expenses pending with the Assessing Officer. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. Nil (Previous year Rs. 14.51 lacs)

f) In relation of b (iv) above Employee related cases comprise of:

i) Claims against the Company not acknowledged as debt, in respect of demands raised by the workers. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs.102.44 lacs. (Previous year Rs. 63.33 lacs)

g) In relation to b (v) above Electricity demand relates to:

In respect of a demand raised by Punjab State Electricity Board (PSEB) for various years in relation to availment of additional load. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 52.24 lacs (Previous year Rs. 52.24 lacs). h) In relation to b (vi) above Income Tax cases disputed by the Company:

i) In respect of Assessment Year 2001-02, certain additions were made on normal as well as on book profit. The matter is pending with ITAT. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount for contingent liability for the year is Rs. 28.90 lacs (Previous year Rs. 28.90 lacs).

ii) In respect of Assessment Year 2002-03, certain additions were made on normal income as well as on book profits. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount for contingent liability for the year is Rs. 116.23 lacs. (Previous year Rs. 214.28 lacs)

iii) In respect of Assessment Year 2003-04, disallowance was made for carry forward losses as well as certain disallowances. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision.

The amount involved is Rs. 145.81 lacs. (Previous year Rs. 220.66 lacs)

iv) In respect of Assessment Year 2004-05, certain additions were made on normal income. The matter is pending with ITAT. During the year, Company has got the order in its favour, hence the amount involved is Rs. 16.02 lacs. (Previous year Rs. 24.07 lacs)

v) In respect of Assessment Year 2005-06, certain additions were made on normal as well as on book profit. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount for contingent liability for the year is Rs. 12.30 lacs (Previous year Rs. 47.19 lacs)

vi) In respect of Assessment Year 2006-07, certain additions were made on normal as well as on book profit. The matter is pending with Commissioner Income Tax (Appeals). During the year, management has done an analysis and is of the opinion that chances of liability getting materialised are high. Hence the Company has created provision for the same. The amount for contingent liability for the year is Rs. 78.21 lacs (Previous year Rs. 39.52 lacs)

vii) In respect of Assessment Year 1997-98, demand was raised due to disallowance of previous year expense made in regular assessment and also certain penalty proceedings on the above issue. The amount involved is Rs. 23.24 lacs. (Previous year Rs. 33.24 lacs)

viii) In respect of Assessment Year 2000-01, certain additions were made on normal as well as on book profits. The matter is pending with High court. The company has done an analysis and is of the opinion that it has fair chance of favourable decision. The amount involved is Rs 1 1.01 Lacs (Previous year Rs 11.01 Lacs).

ix) In respect of Assessment Year 2007-08, certain additions were made on normal profits. The matter is pending with Commissioner Income Tax (Appeals). The company has done an analysis and is of the opinion that it has fair chance of favourable decision. The amount involved is Rs 33.11 Lacs (Previous Year Rs 33.11 Lacs).

i) In relation to b (vii) above Consumer cases filed against the company:

i) Matter pending with Delhi High Court relating to cases filed by a customer of the Company relating to defective goods for the period 1995-1996.

The Company nas done an analysis and is of the opinion that it has fair chance of a favorable decision Amount involved is Rs. 30.91 lacs (Previous year Rs. 60.91 lacs).

(b) Personnel expenses under Schedule 18 include Rs. 333.28 lacs (including Rs.. 195.67 lacs in respect of earlier financial year) towards director remuneration which is in excess of permissible remuneration determined under Schedule XIII of the Companies Act, 1956. Management has filed an application with the Central government on June 23, 2009 for approval of payment of salary to the managing director for Rs. 54.96 lacs per month for 5 years. Pending approval from the government, management has taken a confirmation from the managing director that he shall refund the amounts in the event of such approvals being refused.

(c) Remuneration of Rs. 1 19.85 Lacs for the period April 1, 2006 to December 31, 2006, paid to the erstwhile managing director of the Company was in excess of permissible remuneration under Schedule XIII of the Companies Act, 1956. The Company had applied to the Central Government for the approval of such excess remuneration which was rejected by the Central Government vide letter dated May 26, 2009. The Company has filed an application on April 29, 2010 under Section 309(5B) of tne Companies Act, 1956 to waive the recovery of the aforesaid amount from the erstwhile managing director. Further during the year company has received an approval from Central Government for partial amount of Rs 45.67 lacs (total amount of Rs 84.14 iacs) on September 14, 2010 for the period January 01, 2007 to September 24, 2007. Company has again applied to Central Government on November 18, 2010 for waiver of recovery of balance amount of Rs 38.47 Lacs paid to the erstwhile managing director.

5. In accordance with Explanation below Para 10 of Accounting standard 9 notified by Companies (Accounting Standards^ Rules, 2006, excise duty on sales amounting to Rs. 7,218.17 lacs (Previous year Rs. 5,175.75 lacs) has been reduced from sales in profit & loss account and excise duty on (decrease) / increase in stock amounting to Rs. 140.97 lacs (Previous year Rs. (218.58) lacs has been considered as (income) / expense in the financial statements.

6. The Company has sold its entire investment amounting to Rs. 1,902 lacs in the shares of its wholly owned subsidiary company, Satara Rubbers and Chemicals Limited on March 31, 2010 for a consideration of Rs. 1,130 lacs (Rs. 200 lacs was received in the previous year ended December 31, 2009 as advance payment and the balance amount was received on March 31, 2010). The Company has accordingly considered an additional loss of Rs. 570.59 lacs on sale of this investment which has been recorded in Operating and other expenses.

7. Non fulfillment of export obligation under (Export promotion Capital Goods) EPCG Licenses

The Company has identified some licenses obtained under Export Promotion Capital Goods scheme, which have expired and against which the Company has partially fulfilled the export obligation [levied in lieu of permission to import fixed assets at a concessional rate of import duty), in view of partial shortfall in fulfilling export obligation, the management has decided, on prudent basis, to make a provision aggregating to Rs. 932.32 lacs (Previous Year Rs. 822.76 lacs) in these financial statements which in view of the management is adequate to cover any liability on this account at ail its facilities and is included as Provision for non fulfillment of export obligation in Provisions under schedule 14.

8. During the year ended December 31, 2010, the Company commenced an evaluation process for various regulatory matters at its factories. Based on more accurate information discovered, a provision, towards costs to be incurred to remediate these matters, of Rs. 424.91 lacs is included under Schedule no. 14 for provisions which are net of amounts utilized of Rs. 513.23 lacs towards remediation. The Company is actively seeking to resolve these actual and potential statutory, regulatory, and contractual obligations. accordance with requirements of Accounting Standard 29 on Provisions, Contingent liability and Contingent assets issued by the Institute of Chartered Accountants of India, although difficult to quantify based on the complexity of the issues, the Company has accrued amounts corresponding to its best estimate of the costs associated with such regulatory and contractual obligations on the basis of available information and best professional judgment of experts appointed for this exercise. Based on consultations obtained from these experts, in managements view/ no further costs are expected to be incurred to remediate for which a provision would be required at this stage and considers the provisions made to be adequate.

9, The Company carries out its transfer pricing study annualfy for the tax period of April-March and updates its documentation, choice of methods and benchmarks to ascertain adequacy and compliance with the "arms length" principles prescribed under Income Tax Act. For the year April 1, 2010 to March 31, 201 1, the process of updation is ongoing and management expects to complete this before March 31, 2011. Accordingly, the provision for current tax includes adequate amount to cover any additional liability till the completion of study.

10. Previous year figures have been regrouped and rearranged wherever necessary to make these comparable.




Dec 31, 2009

1. Background

Federal-Mogul Goetze (India) Limited (FMGIL or the Company), is inter-alia engaged in the manufacture, supply and distribution of automotive components used in two/three/four wheeler automobiles.

The principal facilities of the Company are located at Patiala (Punjab), Bengaluru (Karnataka) and Bhiwadi (Rajasthan), with its registered office in New Delhi. The Company is listed at National Stock Exchange of India Limited and Bombay Stock Exchange Limited.

Federal Mogul Holdings Limited, Mauritius, is the immediate parent company and ultimate parent company is Federal Mogul Corporation, USA.

2. Segment Information

Based on the guiding principles given in AS-17 Segmental Reporting notified under Companies (Accounting Standard) Rules, 2006, the Companys primary business segment is manufacturing of auto components. The Company operates in one geographical segment that is "India" and no further disclosures as per AS-17 need to be made.

3. Related party transactions

During the year under review, the Company has entered into transactions with related parties. i) Key managerial personnel and their relatives

Mr. Jean De Montlaur, Managing Director & President (w.e.f March 03, 2008)

Mr. Rustin Murdock, Whole Time Director & CFO

ii) Holding Company

Federal Mogul Holdings Limited (Mauritius)

iii) Fellow subsidiaries

Federal Mogul Burscheid GMBH, Germany.

Federal Mogul Vemogensuverwaltungs GMBH (Germany)

Federal Mogul Maysville (USA).

Federal Mogul Operation S.R.L (Italy)

Federal Mogul Bimet S.A. (Poland).

Federal Mogul Nurnberg, GMBH (Germany).

Federal Mogul Wiesbaden GMBH, (Germany)

Federal Mogul Power Train System (South Africa).

Federal Mogul Holding Deutschiand (Germany).

Federal Mogul Valves (PTY) Ltd (South Africa).

Federal Mogul Limited (formerly T & N Limited) (U.K)

Federal Mogul KK (Japan)

SSCFRAN FM Financial Services SAS Veurey Voroize (France).

Federal Mogul Financial Services FRANCTNL (France).

Federal Mogul Gorzyee, S.A (Poland).

Federal Mogul Friedberg, GMBH (Germany).

Federal Mogul Sintered Products Ltd. (U.K.).

Federal Mogul Sealing Systems, GMBH (Germany).

Federal Mogul Friction Products Ltd (India).

Federal Mogul Corporation Power Train Systems (USA).

Federal Mogul Plant Van Wert (USA.)

Federal Mogul Power Train Systems Schofield (USA).

Federal Mogul S.A.R.L. (Switzerland)

Federal Mogul France, S.A. (France)

Federal Mogul Corporation, Lake City (USA)

Federal-Mogul Chivasso. (Italy)

Federal Mogul Corporation, Garennes (France)

Federal Mogul Dongsuh Piston Co. Ltd. (China)

Federal Mogul Corp, Mgmoogus (USA).

KFM Bearing Company (South Korea).

Federal Mogul Bearings India Ltd (India).

Federal Mogul Automotive Products (India) Pvt Ltd. (India).

Ferodo India Private Ltd. (India).

Federal Mogul Trading India Pvt Ltd.(India)

iv) Associates

Gl Power Corporation Limited

GTZ Securities Limited

v) Subsidiaries

Federal-Mogul TPR (India) Limited

Satara Rubbers and Chemicals Limited

vi) Ultimate Holding Company

Federal Mogul Corporation, USA.

4. Contingent liabilities not provided for:

Particulars Year ended Year ended December 31, 2009 December 31, 2008 (Rs in lacs) (Rs in lacs)

(a) Bank Guarantees 355.82 518.06

(b) Claims/notices contested by the company

i) Excise duty 47.80 146.45

ii) Sales Tax 59.23 59.23

iii) ESI Cases 14.51 40.53

iv) Employee Related Cases 63.33 72.67

v) Electricity Demand 52.24 52.24

vi) Income Tax Demands 683.20 154.88

vii) Consumer Cases 60.91 60.91

c) In relation to b (i) above Excise Duty cases contested by the Company comprise of:

i) Matter pending with Central Excise & Service Tax Appellate Tribunal (CESTAT) in respect of valuation rates employed for certain products sold by the Company for the period 2004-2005 & 2005-2006. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount involved is Rs 0.93 lacs (Previous year Rs. 0.93 lacs) ii) Matter pending with Additional Commissioner of Central Excise (ADCCE) in respect of excise duty on scrap produced by the Company for the period 2000-2001 to 2002-2003. During the year, the order was passed in favour of the company. The amount involved is Rs. Nil (Previous year Rs. 34.11 lacs)

iii) Miscellaneous Excise Cases in respect of MODVAT credits are pending with Deputy Commissioner Central Excise Patiala (DCCE PTA)/ Additional Commissioner/Punjab and Haryana High Court/Assistant Commissioner Central Excise for the period 1987-1988 to 2006-2007. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 16.82 lacs (Previous year Rs. 16.82 lacs).

iv) Matters pending with Additional Commissioner, Chandigarh in respect of Service Tax on Transport Services for the period 2005-06, 2006-07 & 2007-08. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 15.40 lacs (Previous year Rs. 14.56 lacs).

v) Matters pending with CESTAT in respect of excise cases in relation cenvat credit availed on imported goods for the period 2006-07.During the year, the order was passed in the favour of the company. Amount involved is Rs. Nil (Previous year Rs. 55.72 lacs).

vi) Matters pending with Commissioner Chandigarh/ Deputy Commissioner Central Excise (DCCE) Patiala in respect of clearance of reprocessed goods without payment of duty for the period 2004-2005 to 2006-2007. During the year, the order was passed in the favour of the Company. Amount involved is Rs. Nil. (Previous year Rs. 8.82 lacs).

vii) Matters pending with Commissioner Appeals/ Joint Commissioner in respect of interest on reversal of Special Additional Duty (SAD) for 2000-01. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 9.37 lacs. (Previous year Rs. 9.3/ lacs).

viii) Matter pending with Central Excise & Service Tax Appellate Tribunal (CESTAT) in respect of valuation rates employed for certain products sold by the Company for the period 2001 -2002 to 2004-2005. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs.5.28 lacs. (Previous year Rs. 6.12 lacs).

d) In relation of b (ii) Sales Tax cases contested by the Company comprise of:

i) In respect of Assessment Year 1996-97 to 2001-02, on account of differences in sales tax rates, (the matter is pending with Karnataka High court. The Company has taken legal opinion in this regard and is confident of success). Amount involved is Rs. 59.23 lacs. (Previous year Rs. 59.23 lacs)

e) In relation b (iii) above Employee State Insurance claims comprise of:

i) In respect of demand from Employee State Insurance, relating to non deposit of Employee State Insurance on certain employee related expenses pending with the Assessing Officer. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 14.51 lacs. (Previous year Rs. 40.53 lacs)

f) In relation of b (iv) above Employee related cases comprise of:

i) Claims against the Company not acknowledged as debt, in respect of demands raised by the workers. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs.63.33 lacs. (Previous year Rs. 72.67 lacs)

g) In relation to b (v) above Electricity demand relates to:

In respect of a demand raised by Punjab Electricity Board (PSEB) for various years in relation to availment of additional load. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. Amount involved is Rs. 52.24 lacs (Previous year Rs. 52.24 lacs). h) In relation to b (vi) above Income Tax cases disputed by the Company:

i) In respect of Assessment Year 2001-02, certain additions were made on normal as well as on book profit. The matter is pending with ITAT The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount for contingent liability for the year is Rs. 104.24 lacs (Previous year Rs. Nil)

ii) In respect of Assessment Year 2002-03, certain additions were made on normal income as well as on book profits. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount for contingent liability for the year is Rs. 214,28 lacs. (Previous year Rs. 15.10 lacs)

iii) In respect of Assessment Year 2003-04, disallowance was made for carry forward losses as well as certain disallowances. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount involved is Rs.220.66 lacs. (Previous year Rs. 55.62 lacs)

iv) In respect of Assessment Year 2004-05, certain additions were made on normal income. The matter is pending with ITAT, during the year Company has got the order in its favour, hence the amount involved is Rs. 24.07 lacs. (Previous year Rs. 11.71 lacs)

v) In respect of Assessment Year 2005-06, certain additions were made on normal as well as on book profit. The matter is pending with Commissioner Income Tax (Appeals). The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision. The amount for contingent liability for the year is Rs. 47.19 lacs (Previous year Rs. 39.21 lacs)

vi) In respect of Assessment Year 2006-07, certain additions were made on normal as well as on book profit. The matter is pending with Commissioner Income Tax (Appeals). During the year, management has done an analysis and is of the opinion that chances of liability getting materialised are high. Hence the Company has created provision for the same. The amount for contingent liability for the year is Rs. 39.52 lacs (Previous year Rs. Nil)

vii) In respect of Assessment Year 1997-98, demand was raised due to disallowance of previous year expense made in regular assessment and also certain penalty proceedings on the above issue. The amount involved is Rs. 33.24 lacs. (Previous year Rs. 33.24 lacs)

i) In relation to b (vii) above Consumer cases filed against the company:

i) Matter pending with Delhi High Court relating to cases filed by Space 2000 a customer of the Company relating to defective goods for the period 1995-1996. The Company has done an analysis and is of the opinion that it has fair chance of a favorable decision Amount involved is Rs. 60.91 lacs (Previous year Rs. 60.91 lacs).

5. (a) (i) Payment made to Directors:

(b) Personnel expenses under Schedule 18 include Rs. 540.12 lacs (including Rs. 305.54 lacs in respect of earlier financial year) towards director remunera- tion which is in excess of permissible remuneration determined under Schedule XIII of the Companies Act, 1956. Management has filed an application with the Central government on June 23, 2009 for approval of payment of salary to the managing, director for Rs. 54.96 lacs per month for 5 years. Pending approval from the government, management has taken a confirmation from the managing director that he shall refund the amounts in the event of such approvals being refused.

(c) Remuneration of Rs. 119.85 lakhs for the period April 1, 2006 to December 31, 2006, paid to the erstwhile managing director of the Company was in excess of permissible remuneration under Schedule XIII of the Companies Act, 1956. the Company had applied to the Central Government for the approval of such excess remuneration which was rejected by the Central Government vide letter dated May 2o, 2009. The Company is in the process of filing an application under Section 309 (5B) of the Companies Act, 1956 to waive the recovery or the aforesaid amount from the erstwhile managing director. Further, there is another application for excess remuneration of Rs. 84.15 lakhs for the period January 1, 2007 to September 24, 2007 applied to the Central Government for its approval under Section 309 (3) of the Companies Act, 1956. The management has confirmed from the erstwhile managing director that he will refund this amount, to the extent of this being not approved by the Central Government. Pending above mentioned approvals by Central Govt, no adjustments have been made to these financial statements in this regard.

6. (a) In accordance with Explanation below Para 10 of Accounting standard 9 notified by Companies (Accounting Standards) Rules, 2006, excise duty on sales amounting to Rs. 5,175.75 lacs (Previous year Rs. 8,194.26 lacs) has been reduced from sales in profit & loss account and excise duty on (decrease) / increase in stock amounting to Rs. (218.58) lacs (Previous year Rs. (380.69) lacs has been considered as (income) / expense in the financial statements.

7. On December 31, 2009, the Company has entered into an agreement/memorandum of understanding with a third party to sell the investment made in one of the subsidiary for Rs 1,200 lacs. As per the terms of the agreement the Company will convert the loan recoverable of Rs 1,700 lacs into equity share capital with a face value of Rs 10 per share of subsidiary. Accordingly a provision of Rs 514.71 lacs has been made.

8. Non fulfillment of export obligation under (Export promotion Capital Goods) EPCG Licenses

During the year, the Company has identified some of the licenses, obtained under Export Promotion Capital Goods scheme under which Company had imported certain fixed assets without payment of relevant custom duties, on which the Company has fulfilled the export obligation partially. The Company, based on opinions by legal experts, is of the view that they will be able to apply for the extension of the time period and will be exploring various possibilities for completing the export obligations.

However, considering that these licenses have already expired, the management has decided, on prudent basis, to make a provision for the potential interest payable to the Government aggregating to Rs. 532.20 lacs in these financial statements and has also capitalized the duty portion to be paid for Rs. 380.06 lacs with the relevant fixed assets and has depreciated the same as if these were capitalized on the date of respective assets being put to use. This has resulted in Company charging the additional depreciation ana additional interest of Rs. 822.76 lacs during the year (including Rs. 351.25 lacs for earlier periods).

9. Previous year figures have been regrouped and rearranged wherever necessary to make these comparable.

 
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