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Notes to Accounts of Hanung Toys & Textiles Ltd.

Mar 31, 2015

1. The Company has de-recognized deferred tax asset (DTA) of Rs. 5284 Lacs as the earnings of the Company are expected to stabilize after debt restructuring is implemented by all the lenders in its entirety, and that during such pendency the Company following Accounting Standard 22, is unable to estimate with certainty its ability to absorb the amount of losses against future taxable income and the tax savings are therefore, not quantifiable.

2. Suvidha Cooling Towers Pvt. Ltd. filed a civil suit in Karkardooma Court, Delhi for recovery of Rs. 8.00 Lacs including interest. . Since, the claim of the supplier is disputed by the Company, based on the legal advice in the matter, the Company does not consider it necessary to make any provision to this affect in its books of account.

3. Certain transactions between Standard Chartered Bank and the Company, considered void ab initio by the Company, are subject matter of suit filed by the Company against the said Bank before the Hon'ble Bombay High Court. The Company has claimed the refund of the amount of Rs. 3,666.38 lacs, including amounts paid to the said Bank along with cost, charges and interest incurred by the Company thereon as quantified in the said suit, and a declaration to the effect that no further payments are required to be made to the said Bank. In line with the claim filed by the Company, the latter has reversed the amount of payment due to Standard Chartered Bank in the books of account. The Hon'ble Bombay High Court has issued notice to parties in the matter of above suit, and subsequently the said Bank has filed an Original Application before the Hon'ble Debt Recovery Tribunal-II, Delhi for recovery of its claim amounting to Rs. 2,216.37 lacs.

4. The Company had taken a Short Term Revolving Loan from SICOM Ltd. against amounts accrued on account of Company's entitlement to receive interest subsidy under Technology Upgradation Fund (TUF's as available to Textile industry) and against export incentive pending release by the appropriate authorities. The Company had given a Power of Attorney to SICOM Ltd. to recover the amount directly from the concerned agencies, and therefore, and in this manner the borrowings from SICOM Ltd. would stand completely repaid.

SICOM Ltd. had filed a petition for winding-up of the Company before the Hon'ble High Court of Delhi for recovery of loan amount, and by way of interim orders dated 24.04.2014, the Hon'ble High Court of Delhi restrained the Company from selling, transferring, encumbering or in any manner alienating any of its immovable assets and also from selling of movable assets except in the normal course of business.

SICOM Ltd. filed a complaint u/s 138 R/w section 141 of the Negotiable Instrument Act, 1881 in the Court of Metropolitan Magistrate, Patiala House Court, Delhi, in respect of dishonor of 3 nos. cheques aggregating to Rs. 1500 lacs, being part of the amount of claim of SICOM referred above. The aforesaid cheques had been given by the Company to SICOM Ltd. as security and were not expected to be presented for encashment.

SICOM Ltd. filed an Original Application (O.A.) before Hon'ble Debt Recovery Tribunal-I, Delhi for recovery of its claim amounting to Rs. 1575.35 lacs in respect of Short Term Revolving Loan against export incentive receivable by the Company. The Hon'ble DRT vide its order dated 20.12.2013 has directed that in future all amounts recoverable by the Company be received and deposited in an escrow account in the name of the Company established with HDFC Bank and also by way of its interim order dated 27.02.2014 restrained the Company from dealing in any manner in respect of certain properties belonging to the Company as specified in the order.

5. UCO Bank filed a complaint u/s 138 R/w section 141 of the Negotiable Instrument Act, 1881 in the Court of Metropolitan Magistrate, Dwarka Court, Delhi, in respect of dishonor of a cheque of Rs. 300 lacs issued by the Company for payment of its liability towards letter of credit availed by the Company over and above the sanctioned limit. Part of the aforesaid outstanding towards UCO Bank has since been paid and the balance amount has been restructured as part of restructuring carried out by the CDR Forum, and has accordingly, been accounted for in the books of account of the Company and reflected in financial statements.

6. Notice from Tehsildar, Noida, UP, received by the Company against an outstanding amount on account of electricity dues relating to electric connection at property B-8,9,10 phase-II, Noida, UP, owned by the Company. The aforesaid amount was not informed to the knowledge of the Company at the time that the Company purchased this property. The Company is taking appropriate legal steps against the said recovery. For reasons that the recovery amount is disputed by the Company, no provision is considered necessary to be made in the books of account.

7. Certain transactions between Hongkong & Shanghai Banking Corp. and the Company, considered void ab initio by the Company, are subject matter of suit filed by the Company against the said Bank before the Hon'ble Bombay High Court. The Company has claimed the refund of the amount of Rs. 1022.45 lacs, including amounts paid to the said Bank along with cost, charges and interest incurred by the Company thereon as quantified in the above suit, and has sought a declaration from the Hon'ble Court to the effect that no further payments are required to be made to the said Bank.

8. The Citi Bank NA has claimed Rs. 196.32 lacs against the forex transaction which are considered void ab initio by the Company. Since, the claim by the bank is disputed; the Company has not made any provision in respect thereof in its books of account.

9. A Deed of guarantee executed by the Company in favour of Tata Capital Financial Services Ltd. against loan taken by an Associate of the Company did not take effect as the application of the Company made to the Central Government for grant of approval under the Companies Act, 1956 could not be processed as the provisions of Companies Act, 2013 were notified.

10. Segment Information

The Company is principally engaged in the business of Toys and Home Furnishings. Accordingly there are two reportable segments as per Accounting Standard (AS 17) issued by the Institute of Chartered Accountant of India on 'Segment Reporting', which have been disclosed below.

The Company's operating facilities are located in India

11. Related Party Transactions

As per AS-18, the Company's related parties and transactions with them are disclosed below

12. There are no amounts due and outstanding to be credited to Investor Education and Protection Fund as at March 31, 2015.

13. Debtors, Loans & Advances and Creditors in some cases are subject to reconciliation and confirmation.

14. Comparative figures for the previous year have been regrouped, recast and re-arranged wherever necessary.


Mar 31, 2014

1 Issued, Subscribed and Paid up Capital

26578775 (Pr. Yr. 26578775) Equity Shares of Rs. 10/- each fully paid up. Of the above 5117330 (Pr. Yr. 5117330) Equity Shares allotted as fully paid up by way of Bonus Shares and 7147835 (Pr. Yr. 7147835) Equity Shares allotted as fully paid up pursuant to a contract without payment being received in cash.

1.2 Company has allotted 1250000 warrants on a preferential basis to promoter group on 06.06.2010 upon payment of 25% upfront money of exercise price of Rs. 245.73 per warrant, paid at the time of allotment of warrants. The last date for the exercise of the conversion right of the warrant holder was December 6, 2011 (within 18 months from the date of their allotment). The warrant holders (Promoter''s Group Entity) have not exercise their option to convert the aforesaid 1250000 warrant in to equity shares of the company. Therefore the amount of Rs. 767.91 lacs being the initial 25% of the total consideration of Rs. 3071.63 lacs received by the company have been forfeited.

1.3 Equity Shares carry voting rights at the General Meeting of the Company and are entitled to dividend and to participate in surplus, if any, in the event of winding up.

2. Abhinav International Pvt. Ltd. had taken a loan from Tata Capital Financial Services Ltd. against pledge of their 2738000 shares of Hanung Toys & Textiles Limited and 1370000 shares of Hanung Toys & Textiles Limited owned by Hanung Furnishings Pvt. Ltd. The said loan had not been paid by the Abhinav International Pvt. Ltd. due to this Tata Capital Financial Services Ltd. sold the pledged shares in the open market and accordingly holding of promoter''s group company reduced to that extent.

3. The Board of Director at their meeting held on 26th June 2013 recommended the dividend for the Financial Year 2012-13. But as the company is facing liquidity crunch and approached CDR for restructuring existing debt, the lenders objected the same strongly, so the Board of Director has decided to withdraw its recommendation for payment of dividend of Rs. 531.58 lacs and dividend tax thereon of Rs. 86.25 lacs for the Financial Year 2012-13 at their meeting held on 14.08.2014. The same has been reversed during the financial year 2013-14.

4.1 The Company had approached it''s lead banker and lender, i.e., Punjab National Bank for restructuring of its debt under CDR mechanism, and accordingly, the lead banker referred the matter to CDR Empowered Group on 31st July, 2013. The case of the Company was admitted under CDR on 26th September, 2013, and the CDR scheme was discussed in CDR EG meeting held on 21.04.2014, and was approved in the meeting held on 23rd May, 2014 and the same was informed to the Company. As per the direction of the CDR Empowered Group, The forensic audit of the company was done by a chartered accountants firm and observations made by them, in respect of prior period foreign currency losses, have been incorporated in the books of accounts of the current year. The Company currently awaits confirmatory communication of the aforesaid approval of the CDR from the CDR Cell. The Company continues to reflect the charges executed in favour of its lenders as were prior to restructuring and has accounted the financial effect of debt restructuring in its books of account; the variances in balances of lenders, if any, as are known on execution of restructuring documentation will be accounted at the time of execution of modification of charges.

4.2 The main feature of CDR mechanism is as below:

1. Cut off date is 31st march 2013.

2. Moratorium period will be 2 years and repayment is 8 years.

3. Rate of interest on term loan is reduced to 11%.

4. Rate of interest on working capital and FITL (Funded interest Term Loan) is reduced to 10.50%.

5. Waiver of all liquidity damages and penal interest and penal charges etc.

6. Promoter''s contribution Rs.8000 Lacs to be brought in within one year.

7. Conversion of interest for initial 24 month into FITL (Funded interest Term Loan) with repayment period of 6 years.

4.3 The Term Loan, WCTL and FITL are secured against first pari-passu charge with other banks on present and future fixed assets of the Company, other than those exclusively financed by any other banks / financial institutions and second pari-passu charge with other banks on all present and future current assets of the Company, and personal guarantee of 2 of its Directors (Sh. A.K. Bansal and Smt. Anju Bansal) and corporate guarantee of associate concerns / others. The loans are collaterally secured by equitable mortgage of land and building of associate concerns / others on pari-passu basis with other member banks. The charges on assets of the Company and registered in favour of lenders will be modified on execution of documentation in relation to CDR restructuring.

4.4 The repayment of the Term Loan, WCTL, and FITL shall start from the 01.04.2015 onward as per the CDR scheme.

4.5 Vehicle Loan from banks for purchase of vehicle is secured by hypothecation of specific vehicle. The loans are repayable, in monthly installments.

5.1 Working Capital loans Comprising of Export Packing Credit, FDBP etc. from Banks, secured by hypothecation of stocks, book debts, bills and personal / corporate guarantee of whole time directors / Group Company / others. The borrowings (fund and non-fund based) are also collaterally secured by immovable properties owned by directors and associate concerns / others. The loans are collaterally secured by way of equitable mortgage on pari-passu basis with other banks of all present and future fixed assets of the Company. The charges on assets of the Company and registered in favour of lenders will be modified on execution of documentation in relation to CDR restructuring.

5.2 The promoters have given a deposit to the Company, which as per the CDR scheme, is adjustable as application money towards allotment of fresh equity by the Company.

6. Based on the information available with the company regarding the status of suppliers as defined under MSMED Act, 2006, there was no principle amount overdue and no interest was payable to the Micro Small and Medium Enterprises on 31st March, 2014 as per the terms of contract.

7. The current liabilities for the year 2013-14 includes outstanding dues of Rs.80.48 Lacs ( Rs. 2.58 Lacs, Rs.36.32 lacs and Rs. 41.58 Lacs on account of Service Tax, Sales Tax and TDS respectively.)

NOTE - 8 - DEPRECIATION

8.1 The company has sold some of its unusable, obsolete / surplus assets situated at different locations.

8.2 The depreciation on plant and machinery has been charged on the basis of shift operated during the year.

9.1 The Company has provided possible loss in value of its investment in Cody Direct Corp., USA, and the provision is included in General Expenses forming part of the Other Expenses appearing in Profit and Loss Account. The amount of provision has been reduced from the value of investment, and write-off of the amount is subject to obtaining approval of Reserve Bank of India.

9.2 The Company has not provided for possible loss in value of its investment in Hanung Shanghai Ltd., China though it is under winding up process whereby the investment made in it amounting to Rs. 69.82 lacs is likely to be non recoverable.

10. The Company had filed a petition with Hon''able Income tax Settlement Commission on 19.02.2014 in respect of income for the years ended March 31, 2011 to March 31, 2013, which was admitted vide its order dated 29.04.2014. The Company had discharged due and admitted liability of income tax based on favourable response from the Hon''ble Settlement Commission and further liability expected is dependent on outcome of disposal of the case by the Hon''ble Settlement Commission.

11.1 The Company has filed recovery suits against certain debtors, namely, Frontline Fashions Exports India Pvt. Ltd. for Rs. 50 lacs, V and S International Pvt. Ltd. for Rs. 10.90 lacs, Vastra International for Rs. 18.73 lacs and Gulati Exports House for Rs. 209.24 lacs (since settled in February 2013 for Rs. 150 lacs out of which Rs. 70 lacs has been received as per agreed schedule of payment and balance is yet receivable).

11.2 The Company had filed a claim with ECGC for Rs. 367.25 lacs ($ 6.14 lacs) relating to non-payment by its customer, namely, Extreme Linen LLC, USA, which was rejected by ECGC. The Company is of the view that the claim was incorrectly rejected, and is filing a recovery suit against ECGC for the amount of claim.

12. The Management considers its debtors are good and recoverable, and that realization from certain debtors is likely to be staggered over a period of 2-3 years except Hassan Abdula Ali Trading LLC whose outstanding is more than one year and the recovery for the same may not be fully realizable. The management has, however, only written off the interest income shown as due from said debtor in the current year.

13. Fixed deposits with banks include the deposits pledged with banks for bank guarantee / letter of credits etc.

14. Establishment Overheads include payments and provisions of remuneration to whole-time directors of Rs. Nil (previous year Rs. 388.18 Lacs) and directors'' sitting fee of Rs. 2.80 Lacs (previous year Rs. 3.25 Lacs). The management has decide not to give remuneration to the directors due to the company has losses in the current financial year.

15. The provision for deferred tax adjustments resulting from items of timing differences have been measured using the rates and tax laws enacted or substantially enacted as on 31.03.2014 and the same result into the Deferred Tax Assets (net), which has been recognized due to certainty of sufficient taxable income based on the future projection of taxable income as per TEV study done by Dun & Bradstreet Information Services India Pvt. Ltd.

16. The company has filed its Income Tax Return for the Assessment Year 2012-13 on 31st January 2014 (i.e. after the due date) and has claimed losses for Rs. 16780.57 Lacs. Accordingly necessary changes have been incorporated in the current year books of accounts.

17. CONTINGENT LIABILITIES AND COMMITMENTS

Bank Guarantees 5.46 8.46

Letter of Credits - 8,000.70

Bills Discounted - 4,406.38

Capital Commitments 2472.83 7,039.82

Debtors which may not be realized fully 10886.01 -

Claim against company not acknowledged as debts 2216.37 -

17.1 Suvidha Cooling Towers Pvt. Ltd. has issue a legal notice for recovery of Rs. 8.00 Lacs including the interest. The supplier has since filed a civil suit in Karkardooma Court, Delhi. Since the claim by the supplier is disputed, the company has not admitted the claim, and on the basis of the legal advice in the matter, no provision against these transactions is considered necessary.

17.2 Certain transactions between Standard Chartered Bank and the Company, considered void ab initio by the Company, are subject matter of suit filed by the Company against the said Bank before the Hon''ble Bombay High Court. The Company has claimed the refund of the amount of Rs. 3,666.38 lacs, including amounts paid to the said Bank along with cost, charges and interest incurred by the Company thereon as quantified in the above suit, and a declaration to the effect that no further payments are required to be made to the said Bank. In line with the claim filed by the company, The company has reversed the amount of payment due to Standard Chartered Bank in the books of accounts. The Hon''ble Bombay High Court has issued notice on above suit, subsequent whereto, the said Bank has filed an Original Application before the Hon''ble Debt Recovery Tribunal-II, Delhi for recovery of its claim amounting to Rs. 2,216.37 lacs.

17.3 The Company had taken a Short Term Revolving Loan from SICOM Ltd. against amounts accrued on account of Company''s entitlement to receive interest subsidy under Technology Upgradation Fund (TUF''s as available to Textile industry) and against export incentive pending release by the appropriate authorities. The Company had given a power of attorney to SICOM Ltd. to recover the amount directly from the concerned agencies, and therefore, in this manner the borrowings from SICOM Ltd. would stand completely repaid.

SICOM Ltd. filed a petition for winding-up of the Company before the Hon''ble High Court of Delhi for recovery of Revolving Short Term Loan referred, and by way of interim orders the Hon''ble High Court of Delhi has put restriction on selling of encumbered assets of the company.

SICOM Ltd. filed a complaint u/s 138 R/w section 141 of the Negotiable Instrument Act, 1881 in the Court of Metropolitan Magistrate, Patiala House Courts, Delhi, in respect of dishonor of 3 nos. cheques aggregating to a value of Rs. 1500 lacs, being part of the amount referred above. The aforesaid cheques had been given by the Company to SICOM Ltd. as security, and though not expected to be presented for encashment, could not in any case, be honoured due to insufficiency of funds.

SICOM Ltd. filed an Original Application (O.A.) before Hon''ble Debt Recovery Tribunal-I, Delhi for recovery of its claim amounting to Rs. 1575.35 lacs in respect of Revolving Short Term Loan against export incentive receivable by the Company. The Hon''ble DRT vide its order dated 20.12.2013 has directed that amount received in future be deposited in an escrow account with HDFC Bank and also by way of its interim order dated 27.02.2014 has put restriction on selling of certain immovable assets of the company.

17.4 UCO Bank filed a complaint u/s 138 R/w section 141 of the Negotiable Instrument Act, 1881 in the Court of Metropolitan Magistrate, Dwarka Courts, Delhi, in respect of dishonor of a cheque of Rs. 300 lacs issued by the Company for payment of its liability towards letter of credit over and above the sanctioned limit. Part of the aforesaid outstanding towards UCO Bank has since been recovered by the bank and the balance amount has been restructured as part of restructuring of dues in the CDR Forum, and has accordingly, been accounted far in the books of account of the Company and reflected in these financial statements.

17.5 Notice from Tehsildar, Noida received against recovery of electricity dues relating to the connection at property B-8, 9, 10 phase-II, Noida. The said due is not in the knowledge of the company at the time of acquiring of the property. Company is taking appropriate legal remedies against the said recovery. Since the recovery is disputed, no provision is for the same is considered necessary in the books of accounts.

17.6 Certain transactions between Hongkong & Shanghai Banking Corp. and the Company, considered void ab initio by the Company, are subject matter of suit filed by the Company against the said Bank before the Hon''ble Bombay High Court. The Company has claimed the refund of the amount of Rs. 1022.45 lacs, including amounts paid to the said Bank along with cost, charges and interest incurred by the Company thereon as quantified in the above suit, and a declaration to the effect that no further payments are required to be made to the said Bank.

18. Segment Information

The Company is principally engaged in the business of Toys and Home Furnishings. Accordingly there are two reportable segments as per Accounting Standard (AS 17) issued by the Institute of Chartered Accountant of India on ''Segment Reporting''.

The Company''s operating facilities are located in India

19. Related Party Transactions

As per AS-18, the Company''s related parties and transactions with them are disclosed below.

19.1 Related Parties

(a) Subsidiary Company 1. Hanung (Shanghai) Ltd. 2. Cody Direct Corp.

(b) Associate Companies 1. Hanung Furnishings Pvt. Ltd. 2. Hanung Processors Pvt. Ltd. 3. Praneet Softech Pvt. Ltd. 4. C K Software Pvt. Ltd. 5. Abhinav International Pvt. Ltd. 6. Hanung Retail Ltd. 7. Hanung Infra & Power Ltd. 8. Glofin Investment & Finance Co. Pvt. Ltd. (c) Key Management Personnel 1. Mr. Ashok Kumar Bansal (Chairman & Managing Director) 2. Mrs. Anju Bansal (Director) 3. Ms. Ena Bansal 4. Mr. Arvind Kumar Gupta 5. Mr. Umesh Dhal 6. Mr. K Ravindaran 7. Mr. Jaisheel Chaturvedi

20. There are no amounts due and outstanding to be credited to Investor Education and Protection Fund as at 31st March 2014.

21. In view of the revision to the Schedule VI as per notification issued by the Central Government, the financial statements for the year ended 31st March 2014 have been prepared as per the requirements of the Revised Schedule VI to the Companies Act, 1956. The previous year figures have been accordingly regrouped/ reclassified to confirm to the current year''s classification.


Mar 31, 2013

1 The Accounting Standard (AS-22) for accounting of deferred income tax has become applicable on the company w.e.f. 01.04.2002. Accordingly, provision for deferred tax liability has been made in accordance with the Accounting Standard (AS-22). ''

2 CONTINGENT LIABILITIES AND COMMITMENTS

Bank Guarantees 8.46 8.46

Letter of Credits 8,000.70 9,564.13

Bills Discounted 4,406.38 3,521.39

Capital Commitments 7,039.82 10,099.29

Total 19,455.36 23,193.27

3 SEGMENT INFORMATION

The Company is principally engaged in the business of Toys and Home Furnishings. Accordingly there are two reportable segments as per Accounting Standard (AS 17) issued by the Institute of Chartered Accountant of India on ''Segment Reporting'', which have been disclosed below.

4 Related Party Transactions

As per AS-18, the Company''s related parties and transactions with them are disclosed below.

4.1 Related Parties

(a) Subsidiary Company 1 Hanung (Shanghai) Ltd.

2 Cody Direct Corp.

(b) Associate Companies 1 Hanung Furnishings Pvt. Ltd.

2 Hanung Processors Pvt. Ltd.

3 Parneet Softech Pvt. Ltd.

4 C K Software Pvt. Ltd.

5 Abhinav International Pvt. Ltd.

6 Hanung Retail Ltd.

7 Hanung Infra & Power Ltd.

8 Glofin Investment & Finance Co. Pvt. Ltd.

(c) Key Management Personnel 1 Mr. Ashok Kumar Bansal

(Chairman & Managing Director)

2 Mrs. Anju Bansal (Director)

3 Ms. Ena Bansal

4. Mr. Arvind Kumar Gupta

5. Mr. Sanjeev Hota

6. Mr. K. Ravindran

7. Dr.Anil Kumar Jain

8. Mr. Jaisheel Chaturvedi

5 There are no amounts due and outstanding to be credited to Investor Education and Protection Fund as at 31st March 2013

6 In view of the revision to the Schedule VI as per notification issued by the Central Government, the financial statements for the year ended 31st March 2013 have been prepared as per the requirements of the Revised Schedule VI to the Companies Act, 1956. The previous year figures have been accordingly regrouped/ reclassified to confirm to the current year''s classification


Mar 31, 2012

1. The Accounting Standard (AS-22) for accounting of deferred income tax has become applicable on the company w.e.f. 01.04.2002. Accordingly, provision for deferred tax liability has been made in accordance with the Accounting Standard (AS-22).

2. CONTINGENT LIABILITIES AND COMMITMENTS

Bank Guarantees 8.46 2,308.46

Letter of Credits 9,564.13 5,665.00

Bills Discounted 3,521.39 1,726.48

Capital Commitments 10,099.29 1,006.21

Total 23,193.27 10,706.15

3. Take Over of Business under Slump Sale Agreement

Some of the immoveable properties acquired by the company under the agreement of slump sale are being registered in the name of the company.

4. There are no amounts due and outstanding to be credited to Investor Education and Protection Fund as at 31st March 2012.

5. In view of the revision to the Schedule VI as per notification issued by the Central Government, the financial statements for the year ended 31st March 2012 have been prepared as per the requirements of the Revised Schedule VI to the Companies Act, 1956. The previous year figures have been accordingly regrouped/ reclassified to confirm to the current year`s classification.

 
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