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Directors Report of Kanel Industries Ltd.

Mar 31, 2015

The Directors are pleased to submit herewith their report together with the audited statement of accounts for the 23rd financial year ended 31st March, 2015.

[Amount in Rs.]

PARTICULARS 2014-15 2013-14

Income from Operation 226872301.00 86215954.00

Other Income 39304.00 290252.00

Increase/(Decrease) in stock NIL NIL

Total Income 226911605.00 86506206.00

Total Expenditure 229329382.00 88687758.00

Profit/ (Loss) before Tax (2417777.00) (2181552.00)

Provision for Tax NIL NIL

Tax for Earlier periods NIL NIL

Prior Period Extra Ordinary Items (Net) NIL NIL

Net Profit / (Loss) after Tax (2417777.00) (2181552.00)

Previous Year Debit Balance (419133866.00) (416952314.00)

Balance Carried to B/S (421551008.00) (419133866.00)

SHARE CAPITAL STRUCTURE :

During the year under review there were no changes in the Authorized, Issued, Subscribed and Paid up Share Capital Structure of the Company.

DIVIDEND :

As our company incurred heavy losses during the year under review and due to the accumulated losses our directors regret for their inability to declare dividend to the members.

TRANSFER OF UNPAID / UNCLAIMED DIVIDEND :

Your company's all the 4 previous years i.e. dividends declared in year 1995, 1996, 1997 and 1998 are due for transfer thereof to investors' education and protection fund as per the provision of the section 205c of the companies act 1956. However due to huge accumulated losses since the company could not meet its liabilities towards its bankers in time, the bankers are not co operating and so company will make representation of this fact to Registrar of the companies, Securities and exchange board of India. At the highest authorities of bankers, Reserve bank of India. In this situation the audit of the unclaimed unpaid dividend accounts could not be conducted and completed.

The company had received more than 2000 investor complaints for nonpayment of dividend or not revalidation of the dividend warrants of the investors. However due to non co operation of the bankers, the company could not resolve such complaints. Even the company's efforts to surrender of the original dividend warrants and in lieu of such dividend warrants requests for issue of demand draft in favor of investor concerned are not accepted by the bankers. In view of the above stated reasons the company could not make compliance with the provision of section 205c of the companies act 1956.Company however has almost solved most of the complaints related to non receipt of dividend warrants.

BUY BACK OF EQUITY SHARES :

The Company had not made any Buy Back of its paid up equity shares during the year 2014-15. Hence no specific disclosure is required to be made in this report.

YEAR UNDER REVIEW :

During the year under review the Company has made net loss of Rs. 24,17,777/- (Previous Year's loss of Rs. 21,81,552/ -) from business. The Company has earned total income Rs 22,69,11,605.00 (Previous year's income was 8,65,06,206.00) and the Total expense is Rs. 22,93,29,382.00 (Previous year's expense is Rs. 8,86,87,758.00)

DETAILS OF LOANS, GUARANTEES AND INVESTMENTS U/S 186 OF THE COMPANIES ACT, 2013 :

During the year under review the Company has not made any inter corporate loans, investments, given any corporate guarantee to any other body corporate, subsidiary, associate or any other company. However, the Company had in earlier years provided Long term Loans and Advances of Rs. 2817428. The Company has taken Secured Loan from Adani Enterprise Limited. The same is not yet registered with the ROC.

DEPOSITS :

During the year under review your company has neither invited nor accepted any public deposit as defined under Section 73 to 76 of the Companies Act, 2013.

DEMATERIALISATION OF SECURITIES :

Your Company's Equity shares are admitted in the System of Dematerialization by both the Depositories namely NSDL and CDSL. The Company has signed tripartite Agreement through Registrar and Share Transfer Agent System Support Service. The Investors are advised to take advantage of timely dematerialization of their securities. The ISIN allotted to your Company is INE 248C01013.Total Share dematerialized up to 31st March, 2015 were 12218176 which constitute 66.36% of total capital. Your Directors request all the shareholders to dematerialize their shareholding in the company as early as possible.

COMPLIANCE WITH THE STOCK EXCHANGE LISTING AGREEMENT :

The company is regular in making timely compliance of all the applicable clauses of the Listing Agreement from time to time whether it is event based compliance or time bound compliance of monthly, quarterly, half yearly or yearly compliances. Your Company has already paid Annual Listing fees of the Bombay stock exchange Limited for and up to the financial year 2015-16. The same is pending for Ahmadabad Stock Exchange. The Trading in equity shares of the Company is active on the Bombay Stock Exchange Limited and the same is not suspended for penal reasons by BSE during the year. The Trading platform of the Ahmadabad Stock Exchange Limited, Jaipur Stock Exchange Limited and Culcutta Stock Exchange Limited has been suspended/ cancelled by SEBI hence, no trading is recorded. The highest, lowest, average prices recorded on the Bombay Stock Exchange on every month of the financial year 2014-15 including the volume in shares traded is separately given in other information para of Corporate Governance report attached here to. During the year your company has neither issued any shares or stock options or ESOPs or other employee benefits.

MANAGEMENT'S DISCUSSION AND ANALYSIS :

Management's discussion and perceptions on existing business, future outlook of the industry, future expansion and diversification plans of the Company and future course of action for the development of the Company are fully explained in a separate para in Corporate Governance Report.

DIRECTORS :

Mr. Vinodchandra K. Pandya shall retire by rotation at the ensuing Annual General Meeting as per provisions of Law. He eligible for reappointment and have offered themselves for directorship of the company. Your directors recommend for their reappointment.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under Clause 49 of the Listing Agreement with the Stock Exchanges. Members are requested to refer to the Notice of the Annual General Meeting and the Explanatory Statement for details of the qualifications and experience of the Directors and the period of their appointment. The Board recommends the passing of the Resolutions at Item Nos. 5 to 9 of the Annual General Meeting Notice.

MANAGING DIRECTOR :

Mr. Dhiren K Thakkar is the Managing Director of the Company. Because of the Company's bad financial position as well as it is a loss making one he is not taking any managerial Remuneration.

FORMATION OF AUDIT COMMITTEE IN COMPLIANCE TO SECTION 177 OF THE COMPANIES ACT, 2013 AND CLAUSE 49 OF THE LISTING AGREEMENT ON CORPORATE GOVERNANCE :

In Compliance with the provisions of Section 177 of the Companies Act 2013 your company has formed an Audit Committee within the Organization consisting of 3 independent directors. An Internal Auditors have been appointed as Advisors in their professional capacity on this committee. The area of operations and functional responsibilities assigned to the committee are as per the guidelines provided in Clause 49 of the Listing Agreement for implementation of code of corporate governance. The Committee meets at least once in a quarter and gives its report of each meeting to the Board for its approval, record and information purposes. The detail of powers, responsibilities and system of functioning of this committee is given in report on Corporate Governance forming part of this report.

STATUTORY INFORMATION :

The Information required to be disclosed in the report of the Board of Directors as per the provisions of Section 134 of the Companies Act, 2013 and the Companies Rules regarding the conservation of energy, technology absorption, foreign exchange earnings and outgo is not applicable to the Company. As Company is not manufacturing any product or providing any services.

MATERIAL CHANGES :

Except the information given in this report, no material changes have taken place after completion of the financial year up to the date of this report which may have substantial effect on business and finances of the company.

EMPLOYEES :

There are no employees of the company who were in receipt of the remuneration of Rs.60,00,000/- annually in the Aggregate if employed for the year and in receipt of the Monthly remuneration of Rs. 5,00,000/- in the aggregate if employed for a part of the year under review. Hence the information required under being not applicable and hence not given in this report.

DISCLOUSER AS PER COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULE, 2014 :

i) The ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year :

Total Remuneration expenses Rs. 235,000/-

Managerial Remuneration Expenses Rs. Nil/- Other employees Remuneration Rs. 235,000/- ii) The percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any in the financial year :

No remuneration is increased during the year for any of the Key Managerial Personnel, CFO, CEO, CS or Manager.

iii) The percentage increase in the median remuneration of employees in the financial year :

During the year there was increase of Rs. 8500/- (03.75%) in remuneration of any employees during the financial year.

iv) The number of permanent employees on the rolls of company; 1 (One)*

*-However there are several other employees who are contractual and not permanent.

v) The explanation on the relationship between average increase in remuneration and company performance :

There is increase of 3.75% in the average Remuneration of the employees, whereas Company is still a loss making one. So there is no any direct relationship between the average increase in remuneration and company's performance.

vi) Comparison of the remuneration of the Key managerial personnel against the performance of the company;

The KMP i.e. Managing Director is not paid any managerial Remuneration. Hence, his remuneration is not comparable inter company, intra company or inter industry as a whole.

vii) Variations in the market capitalization of the company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the company as at the close of the current financial year and previous financial year;

Closing Market Price of shares of Company as on 31/03/2014 : Rs.14.25/- Closing Market Price of shares of Company as on 31/03/2015 : Rs.16.34/- viii) Average percentile increase made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration;

NOT APPLICABLE as there is increase of 03.75% in Remuneration of any employees of the company. But the Managerial Personnel of the Company are not paid any Managerial Remuneration.

ix) Comparison of the each remuneration of the key managerial personnel against the performance of the company; Not Comparable.

x) The key parameters for any variable component of remuneration availed by the directors; NOT APPLICABLE.

xi) The ratio of the remuneration of the highest paid director to the of the employees who are not directors but receive remuneration in excess of the highest paid director during the year; and No employee is receiving remuneration in excess or higher than the remuneration of Director or Key Managerial Personnel.

xii) Affirmation that the remuneration is as per the remuneration policy of the company.

All remuneration of the Employees and directors are decided by Nomination & Remuneration Committee and by the Board of Directors within the organization.

DIRECTORS' RESPONSIBILITY STATEMENT :

Pursuant to the provision contained in Section 134(5) of the Companies Act 2013 (Corresponding Section 217(2AA) of the Companies Act, 1956), the Directors of your Company confirm:

A. That in the preparation of the annual accounts, as far as possible and except the Accounting Standards which are mentioned by the Auditors in their Report and the Notes to the Accounts separately, the applicable accounting standards has been followed and no material departure has been made from the same;

B. That they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affair of the Company at the end of the financial year and of the profit or loss of the Company for that period;

C. That they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company for preventing and detecting fraud and other irregularities;

D. That they have prepared the annual accounts on a going concern basis.

E. The Directors, in the case of Listed Company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operative effectively.

F. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

DECLARATION AS TO INDEPENDENT DIRECTORS : (Pursuant to Provisions of section 149(6) OF the Companies Act 2013).

All the Independent Directors of the Company do hereby declare that:

(1) All the Independent Directors of the Company are neither Managing Director, nor a Whole Time Director nor a Manager or a Nominee Director.

(2) All the Independent Directors in the opinion of the Board, are persons of integrity and possesses relevant expertise and experience.

(3) Who are or were not a Promoter of the Company or its Holding or subsidiary or associate company.

(4) Who are or were not related to promoters or directors in the company, its holding, subsidiary or associate company.

(5) Who has or had no pecuniary relationship with the company, its holding, subsidiary or associate company or their promoters or directors, during the two immediately preceding financial years or during the current financial year.

(6) None of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary, or associate company, or their promoters, or directors, amounting to two per cent or more of its gross turnover or total income or fifty lacs rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year,

(7) Who neither himself, nor any of his relatives,

(a) Holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of three financial years immediately preceding the financial year in which ihe is proposed to be appointed.

(b) Is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial years in which he is proposed to be appointed of

(i) A firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; OR

(ii) Any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per cent, or more of the gross turnover of such firm;

(iii) Holds together with his relatives two per cent, or more of the total voting power of the company; OR

(iv) Is a Chief Executive or director, by whatever name called, or any non-profit organization that receives twenty five per cent or more of its receipts from the Company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent or more of the total voting power of the company; OR

(v) Who possesses such other qualifications as may be prescribed.

DECLARATION BY BOARD AS PER REQUIREMENT OF SECTION 178 :

In compliance with Section 178 (1) as also in compliance with Clause 49 of the Listing Agreement, the Board of Directors does hereby declare that:

a. The Company has proper constitution of the Board of Directors including independent directors in proportion as per requirement of clause 49 of the Listing Agreement. However, the Company is still in process for appointing a suitable person as woman director as required under Section 149 of the Companies Act, 2013 as well as the CEO and Company Secretary in Job.

b. The Company has constituted Nomination and Remuneration Committee, Stakeholders Relationship Committee, Audit Committee as per requirements of the Clause 49 of the Listing Agreement and provisions of the Companies Act 2013.

c. The Company has the policy for selection and appointment of independent directors who are persons of reputation in the society, have adequate educational qualification, sufficient business experience and have integrity & loyalty towards their duties.

d. The Company does not pay any managerial remuneration to its Managing Directors and Directors because of Company's weak financial position.

e. The Independent Directors are not paid any sitting fee for attending Board and other committee meetings as decided by the Board from time to time.

f. The Company is not paying any commission on net profits to any directors.

AUDITORS :

STATUTORY AUDITORS :

Shah Dinesh Dahyalal & Associates, Present Statutory Auditors of the company have given their letter of consent and confirmation under section 139 the Companies Act 2013 for reappointment as Statutory Auditors of the Company. The Board has now proposed to appoint the Statutory Auditors for a period of 1 year as per requirements of section 139 (1) of the Companies Act 2013 read with Companies (Audit and Auditors) Rules 2014. Necessary Resolution for their appointment as the Statutory Auditors and fixing their remuneration is proposed to be passed at the Annual General Meeting.

Internal Auditors :

The company is in process of appointing an independent Chartered Accountant to act as an Internal Auditor as per suggestion of auditors in order to strengthen the internal control system for the Company.

SECREATARIAL AUDITOR :

The Company has appointed M/s. KAMLESH SHAH & SHAH CO. as the secretarial auditor for the financial year 2014-15. They have given their report in the prescribed form MR-3 which is annexed to this report as an ANNEXURE.

OBSERVATION OF THE SECRETARIAL AUDITOR :

The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non- Executives Directors and Independent Directors except the woman director. The Company has still not appointed CFO and a Whole-time Company Secretary. The company is in process of finding of suitable woman director, CFO and Whole- time Company Secretary in Job looking at the financial status of the Company.

AUDITORS OBSERVATION :

The notes to the accounts of the company are self explanatory. However and clarification from the board of directors on the specific observation made by the Auditors in their report are as under"

1) NON CLARIFICATION ON LOAN FROM ADANI ENTERPRISES LIMITED :

The Company has taken secured/mortgage loan from Adani Enterprises Limited of Rs. 5 Crore in earlier year. However the Charge has not registered with the ROC.

2) NON FILLING OF INCOME TAX RETURN FROM F.Y. 2008-09 ONWARDS :

The Companies accounts are not yet Tax Audited. Thus, the Company has not filled the Income Tax Return of the Company. The Company will as soon as possible get its Accounts Tax Audited and fill Income Tax Return.

3) NON DEDUCTION OF TDS :

The Company has huge accumulated losses and expenses. Due to bad financial position as well as being sick unit the Company does not have sufficient funds for the TDS deduction. Now the Company started earning from the Naroda unit. So now Company is in the process of growing up. Now all the provisions will be followed by the Company.

4) BANK STATEMENT OF NO LIEN ACCOUNT :

Company had deposited Rs. 89.30 lacs as per BIFR directive in the No Lien A/C with the 4 consortium Banks. This amount was meant for rehabilitation of the Company. However in spite of the numerous communications by auditors of the Company with the Banks for providing stake of money deposited along with statements, the Banks have not responded. In absence of the response from bank, the Company has been helpless and unable to reconcile these no lien accounts.

5) OPERATIONS OF NARODA PLANT :

The Company has just restarted its Naroda Unit. The majority of Financial and Operating indicators are negative because the Company has just restarted the Naroda unit. The Company is working hard for making it profitable. Because of huge accumulated losses, with the passing of some years Company will start making profits.

6) NON COMPLIANCE OF THE ACCOUNTING STANDARD 28 :

The physical verification was not done by the Auditor at the Naroda unit. The Machinery at Naroda Unit is still operative for the Manufacturing process. The Company used the same for the Manufacturing so that Company doesn't have to bear the high cost of Machinery.

7) NON COMPLIANCE WITH THE ACCOUNTING STANDARD FOR TAXATION AS 22 :

As per Accounting Standard 22 the company is required to create Deferred Tax Liability / Assets each year. However the management is of the opinion that due to huge accumulated losses and until the formal plan for revival / rehabilitation is sanctioned, it is not considered prudent polity to create Deferred Tax liabilities / Assets.

8) TRANSFER OF UNPAID / UNCLAIMED DIVIDEND TO INVESTORS' EDUCATION AND PROTECTION FUNDS:

This has been fully explained separately in this report elsewhere under relevant Para.

9) NON PROVISION OF SALES TAX LIABILITIES :

The company has made a review application for assessment order under the Sales Tax act. The company is hopeful of remedial favorable assessment orders. Once the liabilities are crystallized, it will make necessary arrangement for its payment and make necessary provision in the books of account.

APPRECIATION :

Your Directors take this opportunity to acknowledge the trust reposed in your company by its Shareholders, Bankers and clients. Your Directors also keenly appreciate the dedication & commitment of all our employees, without which the continuing progress of the company would not have been possible.

For & On Behalf of the Board of Director of

Place : Ahmedabad (Vinodchandra Pandya) (Dhiren K Thakkar)

Date : 30th May, 2015 Director & Chairman of Audit Committee Chairman & Managing Director

(DIN: 02600107) (DIN: 00610001)


Mar 31, 2014

Dear Members,

The Directors are pleased to submit herewith their report together with the audited statement of accounts for the 22nd financial year ended 31st March, 2014.

[Amount in Rs.]

PARTICULARS 2013-14 2012-13

Income from Operation 86215954.00 NIL

Other Income 290252.00 1698293.00

Increase/ (Decrease) in stock NIL NIL

Total Income 86506206.00 1698293.00

Total Expenditure 88687758.00 5173589.00

Profit/ (Loss) before Tax (2181552.00) (3475296.00)

Provision for Tax NIL NIL

Taxws for Earlier periods NIL NIL

Prior Period Extra Ordinary Items NIL NIL (Net) Net Profit / (Loss) after Tax (2181552.00) (3475296.00)

Previous Year Debit Balance (416952314.00) (413477018.00)

Balance Carried to B/S (419133866.00) (416952314.00)

DIVIDEND:

As your company has incur loss during the year under review and due to the accumulated losses your directors regret for their inability to declare any amount as dividend to be paid.

TRANSFER OF UNPAID / UNCLAIMED DIVIDEND:

Your company''s all the 4 previous years i.e. dividends declared in year 1995, 1996, 1997 and 1998 are due for transfer thereof to investors'' education and protection fund as per the provision of the section 205c of the companies act 1956. However due to huge accumulated losses since the company could not meet its liabilities towards its bankers in time, the bankers are not co operating and so company will make representation of this fact to Registrar of the companies, Securities and exchange board of India. At the highest authorities of bankers, Reserve bank of India. In this situation the audit of the unclaimed unpaid dividend accounts could not be conducted and completed.

The company had received more than 2000 investor complaints for non payment of dividend or not revalidation of the dividend warrants of the investors. However due to non co operation of the bankers, the company could not resolve such complaints. Even the company''s efforts to surrender of the original dividend warrants and in lieu of such dividend warrants requests for issue of demand draft in favor of investor concerned are not accepted by the bankers. In view of the above stated reasons the company could not make compliance with the provision of section 205c of the companies act 1956.Company however has almost solved most of the complaints related to non receipt of dividend warrants.

SHARE CAPITAL STRUCTURE:

During the year under review there were no changes in the Authorized, Issued, Subscribed and Paid up Share Capital Structure of the Company.

BUY BACK OF EQUITY SHARES:

The Company had not made any Buy Back of its paid up equity shares during the year in terms of section 77A, 77 AA and 77B of the Companies Act 1956. Hence no specific disclosure is required to be made in this report

YEAR UNDER REVIEW:

During the year under review the Company has made total loss of Rs.21,80,916/- (Previous Year of Rs. 34,75,296/-) from business.

DEMATERIALISATION OF SECURITIES:

Your Company''s Equity shares are admitted in the System of Dematerialization by both the Depositories namely NSDL and CDSL. The Company has signed tripartite Agreement through Registrar and Share Transfer Agent System Support Service. The Investors are advised to take advantage of timely dematerialization of their securities. The ISIN allotted to your Company is INE 248C01013.Total Share dematerialized up to 31st March 2014 were 11380604 which constitute 61.81% of total capital. Your Directors request all the shareholders to dematerialize their shareholding in the company as early as possible.

COMPLIANCE TO CODE OF CORPORATE GOVERNANCE:

The Complete Report on Corporate Governance is given as ANNEXURE-A to this report.

MANAGEMENT''S DISCUSSION AND ANALYSIS

Management''s discussion and perceptions on existing business, future out look of the industry, future expansion and diversification plans of the Company and future course of action for the development of the Company are fully explained in a separate para in Corporate Governance Report.

DEPOSITS

During the year under review your company has neither invited nor accepted any public deposit as defined under Section 58A of the Companies Act-1956.

DIRECTORS

Mr. Kiritbhai C Patel and Mr. Yogeshkumar R. Patel shall retire by rotation at the ensuing Annual General Meeting as per provisions of Law. He eligible for reappointment and have offered themselves for directorship of the company. Your directors recommend for their reappointment.

MANAGING DIRECTOR

Mr. Dhiren K Thakkar, the Managing Director is due for reappointment as Managing Director for a further period of 3 years. The Remuneration Committee and the Board of Directors of the Company has approved his appointment as Managing Director for a further period of 3 years w.e.f. 8th October 2013 without any managerial Remuneration. An Ordinary Resolution is required to be passed for approval of his reappointment for the next 3 years. Your directors recommend to pass necessary resolution as mentioned in the notice for the Annual General Meeting.

DISCLOUSER AS PER COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULE, 2014

i) The ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year:

Total Remuneration expenses: Rs. 216,000/-

Managerial Remuneration Expenses: Rs. Nil/-

Other employees Remuneration: Rs. 216,000/-

ii) The percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any in the financial year:

No remuneration is increased during the year for any of the Key Managerial Personnel, CFO, CEO, CS or Manager.

iii) The percentage increase in the median remuneration of employees in the financial year

During the year there was no increase in remuneration of any employees during the financial year.

iv) The number of permanent employees on the rolls of company; 1 (One)*

* However there are several other employees who are contractual and not permanent.

v) The explanation on the relationship between average increase in remuneration and company performance; NOT APPLICABLE as there was no increase in remuneration of any employee during the year.

vi) Comparison of the remuneration of the Key managerial personnel against the performance of the company;

The KMP i.e. Managing Director is not paid any managerial Remuneration. Hence, his remuneration is not comparable inter company, intra company or inter industry as a whole.

vii) Variations in the market capitalization of the company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the company as at the close of the current financial year and previous financial year;

Closing Market Price of shares of Company as on 31/03/2013 : Rs.4.08/-

Closing Market Price of shares of Company as on 31/03/2014 : Rs.14.25/-

viii) Average percentile increase made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration;

NOT APPLICABLE as there was no increase in Remuneration of any employees of the company or the Managerial Personnel of the Company.

ix) Comparison of the each remuneration of the key managerial personnel against the performance of the company; Not Comparable.

x) The key parameters for any variable component of remuneration availed by the directors;

NOT APPLICABLE.

xi) The ratio of the remuneration of the highest paid director to the of the employees who are not directors but receive remuneration in excess of the highest paid director during the year; and No employee is receiving remuneration in excess or higher than the remuneration of Director or Key Managerial Personnel.

xii) Affirmation that the remuneration is as per the remuneration policy of the company.

All remuneration of the Employees and directors are decided by Nomination & Remuneration Committee and by the Board of Directors within the organization.

Directors'' Responsibility STATEMENT

Pursuant to the provision contained in Section 134(5) of the Companies Act 2013 (Corresponding Section 217(2AA)

of the Companies Act, 1956), the Directors of your Company confirm:

A. That in the preparation of the annual accounts, as far as possible and except the Accounting Standards which are mentioned by the Auditors in their Report and the Notes to the Accounts separately, the applicable accounting standards has been followed and no material departure has been made from the same;

B. That they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affair of the Company at the end of the financial year and of the profit or loss of the Company for that period;

C. That they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company for preventing and detecting fraud and other irregularities;

D. That they have prepared the annual accounts on a going concern basis.

E. The Directors, in the case of Listed Company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operative effectively.

F. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

DECLARATION AS TO INDEPENDENT DIRECTORS: (Pursuant to Provisions of section 149(6) OF the Companies

Act 2013).

All the Independent Directors of the Company do hereby declare that:

(1) All the Independent Directors of the Company are neither Managing Director, nor a Whole Time Director nor a Manager or a Nominee Director.

(2) All the Independent Directors in the opinion of the Board, are persons of integrity and possesses relevant expertise and experience.

(3) Who are or were not a Promoter of the Company or its Holding or subsidiary or associate company.

(4) Who are or were not related to promoters or directors in the company, its holding, subsidiary or associate company.

(5) Who has or had no pecuniary relationship with the company, its holding, subsidiary or associate company or their promoters or directors, during the two immediately preceding financial years or during the current financial year.

(6) None of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary, or associate company, or their promoters, or directors, amounting to two per cent or more of its gross turnover or total income or fifty lacs rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year,

(7) Who neither himself, nor any of his relatives,

(a) Holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of three financial years immediately preceding the financial year in which ihe is proposed to be appointed.

(b) Is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial years in which he is proposed to be appointed of

(i) A firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; OR

(ii) Any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per cent, or more of the gross turnover of such firm;

(iii) Holds together with his relatives two per cent, or more of the total voting power of the company;

OR

(iv) Is a Chief Executive or director, by whatever name called, or any non-profit organization that receives twenty five per cent or more of its receipts from the Company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent or more of the total voting power of the company; OR

(v) Who possesses such other qualifications as may be prescribed.

STATUTORY AUDITORS

Shah Dinesh Dahyalal & Associates, Present Statutory Auditors of the company have given their letter of consent and confirmation under section 141(1) the Companies Act 1956 for reappointment as Statutory Auditors of the Company. The Board has now proposed to appoint the Statutory Auditors for a period of 1 year as per requirements of section 139 (1) of the Companies Act 2013 read with Companies (Audit and Auditors) Rules 2014. Necessary Resolution for their appointment as the Statutory Auditors and fixing their remuneration is proposed to be passed at the Annual General Meeting.

INTERNAL AUDITORS

The company is in process of appointing an independent Chartered Accountant to act as an Internal Auditor as per suggestion of auditors in order to strengthen the internal control system for the Company.

AUDITORS OBSERVATION

The notes to the accounts of the company are self explanatory. However and clarification from the board of directors on the specific observation made by the Auditors in their report are as under"

1) PREPARTION OF ACCOUNTS ON GOING CONCERN BASIS:

The auditors of the company are of the opinion that due to huge accumulated losses and complete erosion of the net worth the company, the accounts of the company is not advised to be written on a going concern basis. But as the company has now settled all its working capital dues of banks in the year 2009-10 and is in process to submit a proper draft rehabilitation scheme in order to restart the production at its Naroda unit after required capital expenditure and the management is hopeful for the revival of the company in near future, hence the company have been written books of account ongoing concern basis.

2) CONFIRMATION OF ACCOUNTS PENDING:

The company has established the system of obtaining conformation of accounts from various parties. The financial transactions are numerous. Certain confirmations are pending including statement of secured Loan received from Adani Enterprise Limited. However the auditors have obtained all the information and explanations up to their best knowledge and behalf as were necessary for their purpose of their audit, except certain non receipt of conformation of balances in respect of loans and advances, deposits and creditors and form banks and financial institutions. This in fact does not affect financial statements.

3) NON OPERATIONAL NARODA PLANT:

The Naroda plant has been non operational since last many years due to lack of working capital and some minor changes in technology and other reasons. However the company has received proposals from one big industrial house to take the plant on lease/ rental basis for manufacture of Castor oil as well as the company is in process to prepare the draft rehabilitation scheme by which the company will restart the production at its Naroda unit henceforth after required capital expenditure. The proposals are under active consideration and if upon finalization it will not only add the revenue to the company but also recondition the plant., its life, its value, upgrade certain technology, replace certain parts etc. Hence the market value of old plant & machineries could be on lower side, the market value of land and building will offset the losses, so it is the view of the management to show the plant and machinery at a part of fixed assets in the balance sheet and not to written off the assets.

4) NON PROVISION OF SALES TAX LIABILITIES:

The company has made a review application for assessment order under the Sales Tax act. The company is hopeful of remedial favorable assessment orders. Once the liabilities are crystallized, it will make necessary arrangement for its payment and make necessary provision in the books of account.

5) INTEREST FREE LOANS AND ADVANCES:

The Company had given certain loans and advances to number of parties as interest free looking to the then prevailing business interests of the Company. The Company has been receiving good business orders from some of such parties still to date. So it is provided to such parties'' interest free and upon such terms and conditions as decided by both the parties. The Management is trying to recover the same either in cash or in kind and is doing the business with these parties. Other amount has been received by the company against cash or in kind. Hence no provisions as Bad loans and advances have been made. The company is hopeful for its recovery of its outstanding amount and it is trying commercially to recover the loan.

6) NON COMPLIANCE WITH THE ACCOUNTING STANDARD FOR TAXATION AS 22:

As per Accounting Standard 22 the company is required to create Deferred Tax Liability / Assets each year. However the management is of the opinion that due to huge accumulated losses and until the formal plan for revival / rehabilitation is sanctioned, it is not considered prudent polity to create Deferred Tax liabilities / Assets.

7) TRANSFER OF UNPAID / UNCLAIMED DIVIDEND TO INVESTORS'' EDUCATION AND PROTECTION FUNDS:

This has been fully explained separately in this report elsewhere under relevant Para.

8) NON PAYMENT OF CERTAIN DUES:

As the company is a sick unit and it has not enough funds with it so it has defaulted in depositing statutory dues towards Income Tax deducted at source, Professional Tax, Sales Tax, Income Tax and municipal Tax, However dues of provident fund have been cleared, certain municipal tax paid off and the company is gradually settling the old dues. At the same time the company as soon as it recovers any amount or any surplus has decided to give top priority to these dues.

9) BANK STATEMENT OF NO LIEN ACCOUNT:

Company had deposited Rs. 89.30 lacs as per BIFR directive in the No Lien A/C with the 4 consortium Banks. This amount was meant for rehabilitation of the Company. However in spite of the numerous communication by auditors of the Company with the Banks for providing stake of money deposited along with statements, the Banks have not responded. In absence of the response from bank, the Company has been helpless and unable to reconcile these no lien accounts.

Formation of Audit Committee in Compliance to Section 292 A of the Companies Act, 1956 AND CLAUSE 49 OF THE LISTING AGREEMENT ON CORPORATE GOVERNANCE:

In Compliance with the provisions of Section 292A of the Companies Act 1956 your company has formed an Audit Committee within the Organization consisting of 3 independent directors. An Internal Auditors have been appointed as Advisors in their professional capacity on this committee. The area of operations and functional responsibilities assigned to the committee are as per the guidelines provided in Clause 49 of the Listing Agreement for implementation of code of corporate governance. The Committee meets at least once in a quarter and gives its report of each meeting to the Board for its approval, record and information purposes. The detail of powers, responsibilities and system of functioning of this committee is given in report on Corporate Governance forming part of this report.

EMPLOYEES

There are no employees of the company who were in receipt of the remuneration of Rs.24,00,000/- annually in the Aggregate if employed for the year and in receipt of the Monthly remuneration of Rs. 2,00,000/- in the aggregate if employed for a part of the year under review. Hence the information required under Section 217 (2A) of the Companies Act, 1956 being not applicable and hence not given in this report.

STATUTORY INFORMATION

The Information required to be disclosed in the report of the Board of Directors as per the provisions of Section 217 (1) (e) of the Companies Act-1956 and the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988 regarding the conservation of energy, technology absorption, foreign exchange earnings and outgo are not applicable to the company hence are not given herewith. There were no foreign Exchange earnings or outgo during the year.

MATERIAL CHANGES

Except the information given in this report, no material changes have taken place after completion of the financial year up to the date of this report which may have substantial effect on business and finances of the company.

APPRECIATION

Your Directors take this opportunity to acknowledge the trust reposed in your company by its Shareholders, Bankers and clients. Your Directors also keenly appreciate the dedication & commitment of all our employees, without which the continuing progress of the company would not have been possible.

PLACE: AHMEDABAD BY ORDER OF THE BOARD OF DIRECTORS DATE: 31st MAY, 2014 OF KANEL INDUSTRIES LIMITED.

(DHIREN K THAKKAR) CHAIRMAN & MANAGING DIRECTOR (DIN : 00610001)


Mar 31, 2013

To, The Member of Kanel Industries Limited.

Dear Shareholders,

The Directors have pleasure herewith the 21th Audited Report together the audited statement of accounts of the year ended on 31st March, 2013.

FINANCIAL HIGHLIGHTS :

During the financial year period from 1st April, 2012 to 31st March, 2013 of financial year 2012-13 the financial operational result of the company is as follows:

PARTICULARS FOR THE YEAR FOR THE YEAR ENDED ON ENDED ON 31/03/2013 31/03/2012

Sales Income Nil 19,88,454.00

Other Income 16,98,293.00 16,55,917.00

Increase / ( Decrease ) in stock Nil Nil

Total Income 16,98,293.00 36,44,371.00

Total Expenditure 51,73,589.00 60,38,276.00

Profit / (Loss) before Tax (34,75,296.00) (23,93,905.00)

Provision for Tax Nil Nil

Taxes for Earlier periods Nil Nil

Prior Period Extra Ordinary Items (Net) Nil Nil

Net Profit / (Loss) after tax (34,75,296.00) (23,93,905.00)

Previous Year Debit Balance (41,34,77,018.00)(41,10,83,113.00)

Balance Carried to B/S (41,69,52,314.00)(41,34,77,018.00)

DIVIDEND :

As your company has incur loss during the year under review and due to the accumulated losses your directors regret for their inability to declare any amount as dividend to be paid.

TRANSFER OF UNPAID/UNCLAIMED DIVIDEND :

Your company''s all the 4 previous years i.e. dividends declared in year 1995, 1996, 1997 and 1998 are due for transfer thereof to investors'' education and protection fund as per the provision of the section 205c of the companies act 1956. However due to huge accumulated losses since the company could not meet its liabilities towards its bankers in time, the bankers are not co operating and so company will make representation of this fact to Registrar of the companies, Securities and exchange board of India. At the highest authorities of bankers, Reserve bank of India. In this situation the audit of the unclaimed unpaid dividend accounts could not be conducted and completed.

The company had received more than 2000 investor complaints for non payment of dividend or not revalidation of the dividend warrants of the investors. However due to non co operation of the bankers, the company could not resolve such complaints. Even the company''s efforts to surrender of the original dividend warrants and in lieu of such dividend warrants requests for issue of demand draft in favor of investor concerned are not accepted by the bankers. In view of the above stated reasons the company could not make compliance with the provision of section 205c of the companies act 1956.Company however has almost solved most of the complaints related to non receipt of dividend warrants.

SHARE CAPITAL DURING THE YEAR :

During the year under review your directors have not issued any equity or preference share to any persons. There has been no change in the issued, subscribed and paid up capital of the company during the year under review.

BUY BACK OF SHARES :

Your Director had not declared or announced or completed any procedure for buy back of its own shares during the year under review as per the provision of the section 77A, 77AA, and 77B of the companies'' act 1956. Further no buy back of the share if any announced in earlier years are still pending for implementation.

YEAR UNDER REVIEW :

During the year under review your company was engaged in the business of hedging future options of commodity market. The company has made efforts to put his plants.

NON OPERATION OF NARODA PLANT :

The company''s Naroda plant is not in use since 1998-99 due to inadequate financial resources, Even though the plant has become old, the company has proposed plans of capital expenditure for repairs and renovation and subsequently to restart the production activity at the unit and thereby the company has continued to show the same as fixed assets of the company in the books of accounts.

However, now the company is in advance stages of negotiating a proposal with few industrial groups to make operational the Naroda Plant of the company for the manufacturing, refining and packaging of the Castor oil on lease/rent basis /job basis as well as company''s own operation may also kick start simultaneously at Naroda Unit. Upon finalization the plant is expected to add the revenue to the company in cash from which the company will be able to meet not only administrative and operational expenses but generate surplus. In addition due to plant being made operational and its maintenance will be done by tenant, the plant will become renovated, upgraded and will be operational which will increase its life.

SEGMENTWISE REPORTING AS-17 :

The company is operating only in one segment of manufacturing of oil and sale of oil and it''s by product de-oiled cakes. Hence no separate segment wise accounting is required and given herewith.

PROVISION FOR DEFERRED TAX LIABILITIES / ASSETS AS-22 AND NON PROVISION OF INCOME TAX LIABILITIES.

The Company had huge accumulated and unabsorbed financial losses. The company''s total net worth had been eroded. In view of this the management has thought it fit and prudent not to make provision for deferred tax assets which if created would appear as intangible assets which could never be realized in future. The company is applying to sought various reliefs for allowing carry forward losses by making an application again with BIFR in the proposed DRS (Draft rehabilitation scheme). Company is taking various legal opinion with respect to assessment of exact income tax liabilities after the writing off the bank liabilities and has taken a view of providing the same after complete due diligence of past income tax returns filed by the legal experts with past case laws. The management is trying hard for revival and rehabilitation of the company, in fact it has already succeeded in settling the huge bank debts and is further negotiating with big industrial house to implement rehabilitation process by restarting operations at the Naroda unit of the company, but until the matter is finalized positively, the company has not accounted for deferred tax liability.

RELATED PARTY TRANSACTION AS-18 :

The company has been buying raw materials and selling some of the finished products, bye products through its group/associate concern in which director are either director or any of their relatives or the directors themselves are either partners/proprietors. All these business transaction are being done at the prevailing market prices on commercial terms and condition not favorable to any of the parties. There have been no contractual obligations between any of the related parties with the company to execute or enter in to any specific business transactions. However proper disclosure has been made in the notes to the accounts schedule R.

FOREIGN EXCHANGE EARNING AND OUTGO :

During the year under review the company had not done any import/export business and the total foreign exchange earning and outgo was NIL during the year.

INFORMATION PURSUANT TO THE LISTING AGREEMENT AND SEBI CIRCULAR NO. SMDRP/CIR-14/98 DATED APRIL 29TH, 1998.

The company''s shares are listed presently in Ahmedabad, Calcutta, Jaipur, and Mumbai Stock Exchange. The company has duly paid the annual listing fees up to and including the year 2012-2013 i.e. up to 31.03.2013 for the stock exchange of Mumbai. The company is not paying the annual listing fees of Calcutta and Jaipur stock exchanges since 1999-2000 onwards and for the ck industrial company and is not in a position to pay such heavy financial expenses. As the company has become a sick industrial company as per listing Ahmedabad stock exchange since 2003-04 onwards due to no trading volume recorded on the said stock exchanges. However the same is suspended on the Ahmedabad, Calcutta and Jaipur stock exchange for non payment of listing fees. Due to heavy financial losses, the company has not made provision for the annual listing fees payable to the Calcutta stock exchange, Jaipur stock exchange and Ahmedabad Stock Exchange. The Company has however already complied with all the clauses of the list agreement with the Bombay stock exchange, However the shares of the Company are currently being traded on BSE.

DEMATERIALIZATION OF SECURITIES :

SEBI has identified the securities of the company for compulsory trading in the dematerialized form w.e.f. 26th February 2001 by all investors on all the stock exchanges. In compliance with the same and to facilitate the shareholders, the company has already made arrangement to enter into the Tripartite Agreement with NSDL and CDSL. The investors are requested to take a note on the same and dematerialize their holding as early as possible. The ISIN Number allotted to your company is INE252 C 01015. Company has also appointed System Support Services- Mumbai Mumbai as RTA agent of the company.

COMPLIANCE TO CODE OF CORPORATE GOVERNANCE :

Your company is a sick industries company. It had approached BIFR and further a DRS (Draft rehabilitation scheme) is being prepared for submission with the BIFR for fresh consideration and will be submitted in due course The chairman of the company is executive managing director; the constitution of the present board is in compliance with the provisions of section 292a and also as per clause 49 of the listing agreement.

ENVIRONMENT PROTECTION :

The company is consistently maintaining high standards in the control, protection and discharge of effluents as per the strict standards fixed and prescribed in the environment and pollution control regulation for the industry in which it operates.

DEPOSITS :

During the year review your company has neither invited nor accepted any public deposit or deposits from the public as defined under section 58a of the Companies Act, 1956.

DIRECTORS :

Mr. Vinodbhai K. Pandya retires by rotation at the ensuing Annual General Meeting and being eligible offers him self for re-appointment. Your Directors recommends his re-appointment.

DIRECTORS'' RESPONSIBILITY STATEMENT :

Pursuant to the provision contained in section 217(2aa) of the Companies Act, 1956, the directors of your company confirm:

(A) That in the preparation of the annual accounts for financial year ended on 31/03/2013 the applicable accounting standards has been followed except as explained in point no. 8 hereafter.

(B) that they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affair of the company at the end of the financial year and of the profit or loss of the company for the year under review.

(C) That they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this act for safeguarding the assets of the company for preventing and detecting fraud and other irregularities.

(D) That they have prepared the annual accounts on a going concern basis.

STATUTORY AUDITORS :

M/s. Shah Dinesh Dahyalal & Associates, Chartered Accountants, Ahmedabad the retiring statutory auditors on this annual general meeting as per the act. The company has received a letter from the said auditors to the effect that their appointment shall be within the limits laid down under section 224(1 B) of the companies act. 1956. A resolution proposing their reappointment as the regular auditor of the company for the period from the conclusion of this annual general meeting up to the conclusion of the next annual general meeting is required to be passed. Your directors recommend passing the said resolution.

APPOINTMENT OF THE INTERNAL AUDITOR :

Due to volume of transaction substantially less and the company being a sick company the internal auditors have not been appointed for this year. However once the company resumes normal transaction volumes the internal auditors will be appointed again. At present the transaction entered in are under the direct control of management.

AUDITORS OBSERVATION :

The notes to the accounts of the company are self explanatory. However and clarification from the board of directors on the specific observation made by the Auditors in their report are as under"

(1) PREPARTION OF ACCOUNTS ON GOING CONCERN BASIS :

The auditors of the company are of the opinion that due to huge accumulated losses and complete erosion of the net worth the company, the accounts of the company is not advised to be written on a going concern basis. But as the company has now settled all its working capital dues of banks in the year 2009-10 and is in process to submit a proper draft rehabilitation scheme in order to restart the production at its Naroda unit after required capital expenditure and the management is hopeful for the revival of the company in near future, hence the company have been written books of account on going concern basis.

(2) CONFIRMATION OF ACCOUNTS PENDING :

The company has established the system of obtaining conformation of accounts from various parties. The financial transactions are numerous. Certain confirmations are pending however the auditors have obtained all the information and explanations up to their best knowledge and behalf as were necessary for their purpose of their audit, except certain non receipt of conformation of balances in respect of loans and advances, deposits and creditors and form banks and financial institutions. This in fact does not affect financial statements.

(3) NON OPERATIONAL NARODA PLANT :

The Naroda plant has been non operational since last many years due to lack of working capital and some minor changes in technology and other reasons. However the company has received proposals from one big industrial house to take the plant on lease/ rental basis for manufacture of Castor oil as well as the company is in process to prepare the draft rehabilitation scheme by which the company will restart the production at its Naroda unit henceforth after required capital expenditure. The proposals are under active consideration and if upon finalization it will not only add the revenue to the company but also recondition the plant., its life, its value, upgrade certain technology, replace certain parts etc. Hence the market value of old plant & machineries could be on lower side, the market value of land and building will offset the losses, so it is the view of the management to show the plant and machinery at a part of fixed assets in the balance sheet and not to written off the assets.

(4) NON PROVISION OF SALES TAX LIABILITIES :

The company has made a review application for assessment order under the Sales Tax act. The company is hopeful of remedial favorable assessment orders. Once the liabilities are crystallized, it will make necessary arrangement for its payment and make necessary provision in the books of account.

(5) INTEREST FREE LOANS AND ADVANCES :

The Company had given certain loans and advances to number of parties as interest free looking to the then prevailing business interests of the Company. The Company has been receiving good business orders from some of such parties still to date. So it is provided to such parties'' interest free and upon such terms and conditions as decided by both the parties. The Management is trying to recover the same either in cash or in kind and is doing the business with these parties. Other amount has been received by the company against cash or in kind. Hence no provisions as Bad loans and advances have been made. The company is hopeful for its recovery of its outstanding amount and it is trying commercially to recover the loan.

(6) NON COMPLIANCE WITH THE ACCOUNTING STANDARD FOR TAXATION AS 22 :

As per Accounting Standard 22 the company is required to create Deferred Tax Liability / Assets each year. However the management is of the opinion that due to huge accumulated losses and until the formal plan for revival / rehabilitation is sanctioned, it is not considered prudent polity to create Deferred Tax liabilities / Assets.

(7) NON PUBLISHING OF QUARTERLY RESULTS :

The company could not declare un-audited / audited results due to certain administrative problems but your management has taken care to publish result on the website of the Company.

(8) TRANSFER OF UNPAID / UNCLAIMED DIVIDEND TO INVESTORS'' EDUCATION AND PROTECTION FUNDS:

This has been fully explained separately in this report elsewhere under relevant Para.

(9) NON PAYMENT OF CERTAIN DUES :

As the company is a sick unit and it has not enough funds with it so it has defaulted in depositing statutory dues towards Income Tax deducted at source, Professional Tax, Sales Tax, Income Tax and municipal Tax, However dues of provident fund have been cleared, certain municipal tax paid and the company is gradually settling the old dues. At the same time the company as soon as it recovers any amount or any surplus has decided to give top priority to this dues.

OTHER OBSERVATIONS :

Other observations made by the auditors are self explanatory in nature and does not require further clarifications.

FORMULATION OF AUDIT COMMITTEE IN COMPLIANCE WITH THE PROVISIONS OF SECTION 292A OF THE COMPANIES ACT 1956.

The company has formed an audit committee within the organization under the Chairmanship of Mr. Vinodchandra Pandya an independent director. The committee consists of 2 independent directors who are not in any way related or interested with the promoters or the management. The company has also appointed professionals as advisors in this committee. The terms and reference of scope of work for the committee is as per clause 49 of listing agreement on code for corporate governance. Further details are given in complete report of corporate governance in Annexure- A to this report.

EMPLOYEES :

There are no employees of the company who were in receipt of the remuneration of Rs.24,00,000/- in the aggregate if employed for the year and in receipt of the Monthly remuneration of Rs.2,00,000/- in the aggregate if employed for a part of the year under review. Hence the information required under Section 217 (2A) of the Companies Act, 1956 being not applicable are not given in this report.

STATUTORY INFORMATION :

The statutory information relating to the Conservation of Energy, technology absorption, Adoption, Research and Development, Foreign Exchange Earnings and outgo required to be given as per the provisions of Section 217 (1) (e) of the Companies Act, 1956 and the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given herewith in an Annexure A.

APPRECIATION :

Your Directors take this opportunity to acknowledge the trust reposed in your company by its Shareholders, Bankers and clients. Your Directors also keenly appreciate the dedication & commitment of all our employees, without which the continuing progress of the company would not have been possible.

BY ORDER OF THE BOARD OF DIRECTOR OF

KANEL INDUSTRIES LTD.

PLACE : Ahmedabad (Dhiren K. Thakkar)

DATE : 2nd September, 2013 Chairman & Managing Director


Mar 31, 2012

To, The Member of Kanel Industries Limited.

Dear Shareholders,

The Directors have pleasure herewith the 20th Audited Report together the audited statement of accounts of the year ended on 31st March, 2012.

FINANCIAL HIGHLIGHTS:

During the financial year period from 1st April, 2011 to 31st March, 2012 of financial year 2011-12 the financial operational result of the company is as follows :

PARTICULARS FOR THE YEAR FOR THE YEAR ENDED ON ENDED ON 31/03/2012 31/03/2011

Sales Income 19,88,454.00 NIL

Other Income 16,55,917.00 4,85,64,787.00

Increase / (Decrease) in stock Nil NIL

Total Income 36,44,371.00 4,85,64,787.00

Total Expenditure 60,38,276.00 42,82,945.00

Profit / (Loss) before Tax (23,93,905.00) 4,42,81,842.00

Net Profit from Sale of Fixed Assets NIL NIL

Provision for Tax NIL NIL

Taxes for Earlier periods NIL NIL

Prior Period Extra Ordinary Items (Net) NIL 10,043.00

Net Profit / (Loss) after tax (23,93,905.00) 4,42,71,799.00

Previous Year Debit Balance (41,10,83,113.00) (45,53,54,912.00)

Balance Carried to B/S (41,34,77,018.00) (41,10,83,113.00)



STATUS ON BIFR APPLICATION :

The company's net worth is completely eroded. The company is in the process of preparing a revival and rehabilitation scheme as per BIFR order.

DIVIDEND:

As your company has incurred loss during the year under review and due to the accumulated losses your directors regret for their inability to declare any amount as dividend to be paid.

TRANSFER OF UNPAID/UNCLAIMED DIVIDEND :

Your company's all the 4 previous years i.e. dividends declared in year 1995, 1996, 1997 and 1998 are due for transfer thereof to investors' education and protection fund as per the provision of the section 205c of the Companies Act 1956. It has been informed by the management that details for unclaimed dividend are not provided by the nominated bank, SBI [Previously SBS], Industrial Finance Branch, Ellis bridge, Ahmadabad and SBI [Previously SBS Isanpur, Ahmadabad]. However due to huge accumulated losses since the company could not meet its liabilities towards its bankers in time, the bankers are not cooperating and so company will make representation of this fact to Registrar of the companies, Securities and exchange board of India. At the highest authorities of bankers, Reserve bank of India. In this situation the audit of the unclaimed unpaid dividend accounts could not be conducted and completed.

The company had received more than 2000 investor complaints for non payment of dividend or not revalidation of the dividend warrants of the investors. However due to non-cooperation of the bankers, the company could not resolve such complaints. Even the company's efforts to surrender of the original dividend warrants and in lieu of such dividend warrants requests for issue of demand draft in favor of investor concerned are not accepted by the bankers. In view of the above stated reasons the company could not make compliance with the provision of section 205c of the companies act 1956.Company however has almost solved most of the complaints related to non-receipt of dividend warrants.

SHARE CAPITAL DURING THE YEAR :

During the year under review your directors have not issued any equity or preference share to any persons. There has been no change in the issued, subscribed and paid up capital 'bf the company during the year under review.

BUY BACK OF SHARES :

Your Director had not declared or announced or completed any procedure for buy back of its own shares during the year under review as per the provision of the section 77A, 77AA, and 77B of the companies' act 1956. Further no buy back of the share if any announced in earlier years are still pending for implementation.

YEAR UNDER REVIEW :

During the year under review your company was engaged in the business of hedging future options of commodity market. The company has made efforts to put his plants.

NON OPERATION OF NARODA PLANT :

The company's Naroda plant is not in use since 1998-99 due to inadequate financial resources, Even though the plant has become old, the company has proposed plans of capital expenditure for repairs and renovation and subsequently to restart the production activity at the unit and thereby the company has continued to show the same as fixed assets of the company in the books of accounts.

However, now the company is in advance stages of negotiating a proposal with few industrial groups to make operational the Naroda Plant of the company for the manufacturing, refining and packaging of the Castor oil on lease/rent basis /job basis as well as company's own operation may also kick start simultaneously at Naroda Unit. Upon finalization the plant is expected- to add the revenue to the company in cash from which the company will be able to meet not only administrative; and operational expenses but generate surplus. In addition due to plant being made operational and its maintenance will be done by tenant, the plant will become renovated, upgraded and will be operational which will increase its life.

SEGMENTWISE REPORTING AS-17 :

The company is operating only in one segment of manufacturing of oil and sale of oil and it's by product de-oiled cakes. Hence no separate segment wise accounting is required and given herewith.

PROVISION FOR DEFERRED TAX LIABILITIES / ASSETS AS-22 AND NON PROVISION OF INCOME TAX LIABILITIES.

The Company had huge accumulated and unabsorbed financial losses. The company's total net worth had been eroded. In view of this the management has thought it fit and prudent not to make provision for deferred tax assets which if created would appear as intangible assets which could never be realized in future. The company is applying to sought various reliefs for allowing carry forward losses by making an application again with BIFR in the proposed DRS (Draft rehabilitation scheme). Company is taking various legal opinion with respect to assessment of exact income tax liabilities after the writing off the bank liabilities and has taken a view of providing the same after complete due diligence of past income tax returns filed by the legal experts with past case laws. The management is trying hard for revival and rehabilitation of the company, in fact it has already succeeded in settling the huge bank debts and is further negotiating with big industrial house to implement rehabilitation process by restarting operations at the Naroda unit of the company, but until the matter is finalized positively, the company has not accounted for deferred tax liability.

RELATED PARTY TRANSACTION AS-18

The company has been buying raw materials and selling some of the finished products, bye products through its group/associate concern in which director are either director or any of their relatives or the directors themselves are either partners/proprietors. All these business transaction are being done at the prevailing market prices on commercial terms and condition not favorable to any of the parties. There have been no contractual obligations between any of the related parties with the company to execute or enter in to any specific business transactions. However proper disclosure has been made in the notes to the accounts Point No. 20.

FOREIGN EXCHANGE EARNING AND OUTGO :

During the year under review the company had not done any import/export business and the total foreign exchange earning and outgo was NIL during the year.

INFORMATION PURSUANT TO THE LISTING AGREEMENT AND SEBI CIRCULAR NO. SMDRP/CIR-14/98 DATED APRIL 29th, 1998.

The company's shares are listed presently in Ahmadabad, Calcutta, Jaipur, and Mumbai Stock Exchange. The company has duly paid the annual listing fees up to and including the year 2011-2012 i.e. up to 31.03.2012 for the stock exchange of Mumbai. The company is not paying the annual listing fees of Calcutta and Jaipur stock exchanges since 1999-2000 onwards and for the ck industrial company and is not in a position to pay such heavy financial expenses. As the company has become a sick industrial company as listing Ahmadabad stock exchange since 2003-04 onwards due to no trading volume recorded on the said stock exchanges. Further the company is also agreement norms the shares of the company suspended for trading on all the stock exchange. However the same is suspended on the Ahmadabad, Calcutta and Jaipur stock exchange for nonpayment of listing fees. Due to heavy financial losses, the company has not made provision for the annual listing fees payable to the Calcutta stock exchange, Jaipur stock exchange and Ahmadabad Stock Exchange. The Company has however already complied with all the clauses of the list agreement with the Bombay stock exchange, paid the penalty as demanded by the Bombay stock Exchange. The company has made an application with the Bombay stock Exchange for revocation of trading in the shares of the company , which is under active consideration

DEMATERIALIZATION OF SECURITIES :

SEBI has identified the securities of the company for compulsory trading in the dematerialized form w.e.f. 26th February 2001 by all investors on all the stock exchanges. In compliance with the same and to facilitate the shareholders, the company has already made arrangement to enter into the Tripartite Agreement with NSDL and CDSL The investors are requested to take a note on the same and dematerialize their holding as early as possible. The ISIN Number allotted to your company is INE252 C 01015. Company has also appointed System Support Services- Mumbai Mumbai as RTA agent of the company.

COMPLIANCE TO CODE OF CORPORATE GOVERNANCE :

Your company is a sick industries company. It had approached BIFR and further a DRS

(Draft rehabilitation scheme) is being prepared for submission with the BIFR for fresh consideration and will be submitted in due course The chairman of the company is executive managing director; the constitution of the present board is in compliance with the provisions of section 292A and also as per clause 49 of the listing agreement.

ENVIRONMENT PROTECTION :

The company is consistently maintaining high standards in the control, protection and discharge of effluents as per the strict standards fixed and prescribed in the environment and pollution control regulation for the industry in which it operates.

DEPOSITS :

During the year review your company has neither invited nor accepted any public deposit or deposits from the public as defined under section 58a of the Companies Act, 1956.

DIRECTORS :

Mr. Dhiren K Thakkar retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment. Your Directors recommends his re-appointment. Mr. BACHUBHAI KACHARDAS PATEL filed his resignation on 01/08/2012. Mr. KIRITBHAI CHHAGANBHAI PATEL, Mr. ADITYA YOGESHBHAI PATEL and Mr. YOGESHKUMAR RAJNIKANT PATEL were appointed as Additional Directors of the Company w.e.f 16/04/2012. They all hold office as such director only up to the date of the ensuing AGM. However being eligible, it is proposed to appoint all of them as Independent Non Executive Directors on the Board. Complete details of each of the directors are given elsewhere in this report. Your directors recommend to appoint all of them by passing requisite resolutions as proposed in the Notice so that the company could make compliance with the Listing Agreement. Mr. Bachubhai Patel resigned on 01/08/2012 and form-32 was filed in ROC on 13/08/2012 vide SRN No. B45303096. Except the above, there is no change in the constitution of the Board of Directors of the Company.

DIRECTORS' RESPONSIBILITY STATEMENT :

Pursuant to the provision contained in section 217(2AA) of the Companies Act, 1956, the directors of your company confirm:

(A) That in the preparation of the annual accounts, as far as possible and except the to extent if any accounting standards mentioned by the auditors in their report as not complied with, all other applicable accounting standards had been followed along with proper explanation relating to material departures; except as explained in point no. 8 hereafter.

(B) that they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affair of the company at the end of the financial year and of the profit or loss of the company for the year under review.

(C) That they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this act for safeguarding the assets of the company for preventing and detecting fraud and other irregularities.

(D) That they have prepared the annual accounts on a going concern basis.

STATUTORY AUDITORS :

M/s. Shah Dinesh Dahyalal & Associates, Chartered Accountants, Ahmadabad the retiring statutory auditors on this annual general meeting as per the act. The company has received a letter from the said auditors to the effect that their appointment shall be within the limits laid down under section 224(1 B) of the companies act. 1956. A resolution proposing their reappointment as the regular auditor of the company for the period from the conclusion of this annual general meeting up to the conclusion of the next annual general meeting is required to be passed. Your directors recommend passing the said resolution.

APPOINTMENT OF THE INTERNAL AUDITOR :

Due to volume of transaction substantially less and the company being a sick company the internal auditors have not been appointed for this year. However once the company resumes normal transaction volumes the internal auditors will be appointed again. At present the transaction entered in are under the direct control of management.

AUDITORS OBSERVATION :

The notes to the accounts of the company are self explanatory. However and clarification from the board of directors on the specific observation made by the Auditors in their report are as under"

(1) PREPARTION OF ACCOUNTS ON GOING CONCERN BASIS :

The auditors of the company are of the opinion that due to huge accumulated losses and complete erosion of the net worth the company, the accounts of the company is not advised to be written on a going concern basis. But as the company has now settled all its working capital dues of banks in the year 2009-10 and is in process to submit a proper draft rehabilitation scheme in order to restart the production at its Naroda unit after required capital expenditure and the management is hopeful for the revival of the company in near future, hence the company have been written books of account ongoing concern basis.

(2) CONFIRMATION OF ACCOUNTS PENDING :

The company has established the system of obtaining conformation of accounts from various parties. The financial transactions are numerous. Certain confirmations are pending however the auditors have obtained all the information and explanations up to their best knowledge and behalf as were necessary for their purpose of their audit, except certain non receipt of conformation of balances in respect of loans and advances, deposits and creditors and form banks and financial institutions. This in fact does not affect financial statements.

(3) NON OPERATIONAL NARODA PLANT :

The Naroda plant has been non operational since last many years due to lack of working capital and some minor changes in technology and other reasons. However the company has received proposals from one big industrial house to take the plant on lease/ rental basis for manufacture of Castor oil as well as the company is in process to prepare the draft rehabilitation scheme by which the company will restart the production at its Naroda unit henceforth after required capital expenditure. The proposals are under active consideration and if upon finalization it will not only add the revenue to the company but also recondition the plant., its life, its value, upgrade certain technology, replace certain parts etc. Hence the market value of old plant & machineries could be on lower side, the market value of land and building will offset the losses, so it is the view of the management to show the plant and machinery at a part of fixed assets in the balance sheet and not to written off the assets.

(4) NON PROVISION OF SALES TAX LIABILITIES :

The company has made a review application for assessment order under the Sales Tax act. The company is hopeful of remedial favorable assessment orders. Once the liabilities are crystallized, it will make necessary arrangement for its payment and make necessary provision in the books of account.

(5) INTEREST FREE LOANS AND ADVANCES :

The Company had given certain loans and advances to number of parties as interest free looking to the then prevailing business interests of the Company. The Company has been receiving good business orders from some of such parties still to date. So it is provided to such parties' interest free and upon such terms and conditions as decided by both the parties. The Management is trying to recover the same either in cash or in kind and is doing the business with these parties. Other amount has been received by the company against cash or in kind. Hence no provisions as Bad loans and advances have been made. The company is hopeful for its recovery of its outstanding amount and it is trying commercially to recover the loan. For further details refer to the Point no. 3(e) of the Annexure to the Auditors Report.

(6) NON COMPLIANCE WITH THE ACCOUNTING STANDARD FOR RETIRE-MENT BENEFITS WHILE PREPARING FINANCIAL STATEMENTS (15).

As the company's plants are not operational round the year and most of the employees are temporary or on contractual basis. Due to these reasons no provisions for retirement benefits are made.

(7) NON COMPLIANCE WITH THE ACCOUNTING STANDARD FOR TAXATION AS 22 :

As per Accounting Standard 22 the company is required to create Deferred Tax Liability / Assets each year. However the management is of the opinion that due to huge accumulated losses and until the formal plan for revival / rehabilitation is sanctioned, it is not considered prudent polity to create Deferred Tax liabilities / Assets.

(8) NON PUBLISHING OF QUARTERLY RESULTS :

The company could not declare un-audited / audited results due to certain administrative problems but your management has taken care to publish result and the same are under process.

(9) TRANSFER OF UNPAID / UNCLAIMED DIVIDEND TO INVESTORS' EDUCATION AND PROTECTION FUNDS:

This has been fully explained separately in this report elsewhere under relevant Para.

(10) NON PAYMENT OF CERTAIN DUES :

As the company is a sick unit and it has not enough funds with it so it has defaulted in depositing statutory dues towards Income Tax deducted at source, Professional Tax, Sales Tax, Income Tax and municipal Tax, However dues of provident fund have been cleared, certain municipal tax paid and the company is gradually settling the old dues. At the same time the company as soon as it recovers any amount or any surplus has decided to give top priority to these dues.

(11) INSTANCE OF NON-COMPLIANCE :

Listing was under suspension from 03-02-2003 due to penal reason, since the Company has now complied with all compliances BSE has revoked suspension wide it letter ref no DCS/COMP/OT/TB/211/2010-2011 date 09-08-2011. The company's shares are currently being traded on BSE.

OTHER OBSERVATIONS :

The Company has not Complied with Accounting Standard-28, introduced w.e.f. 1st April, 2004 while preparing the financial statements. The Management has not assessed technically the Plant and Machineries at Naroda unit to decide about its impairment or carrying value. The carrying amount of the assets was not reviewed for indication of impairment of assets on basis of internal/external factors. Plant at Naroda Division has been inoperative for fourteen years. Plant and Machinery of book value of 25.14 Lacs has not been written off to the extent to come down to its carry value. Loss for the year has been understated to the extent of the book value of plant and machinery balance not written off.

Other observations made by the auditors are self explanatory in nature and does not require further clarifications.

FORMULATION OF AUDIT COMMITTEE IN COMPLIANCE WITH THE PROVISIONS OF SECTION 292A OF THE COMPANIES ACT 1956.

The company has formed an audit committee within the organization under the Chairmanship of Mr. Vinodchandra Pandya an independent director. The committee consists of 2 independent directors who are not in any way related or interested with the promoters or the management. The company has also appointed professionals as advisors in this committee. The terms and reference of scope of work for the committee is as per clause 49 of listing agreement on code for corporate governance. Further details are given in complete report of corporate governance in Annexure- A to this report.

Audit committee has been constituted on 8th October 2008 as under

Mr. Vinodchandra Pandya Chairman, Mr. Kiritbhai Patel & Mr. Dhiren K. Thakkar Member of the committee

EMPLOYEES:

There are no employees of the company who were in receipt of the remuneration of Rs.24,00,000/- in the aggregate if employed for the year and in receipt of the Monthly remuneration of Rs.2,00,000/- in the aggregate if employed for a part of the year under review. Hence the information required under Section 217 (2A) of the Companies Act, 1956 being not applicable are not given in this report.

STATUTORY INFORMATION :

The statutory information relating to the Conservation of Energy, technology absorption, Adoption, Research and Development, Foreign Exchange Earnings and outgo required to be given as per the provisions of Section 217 (1) (e) of the Companies Act, 1956 and the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given herewith in an Annexure A.

APPRECIATION :

Your Directors take this opportunity to acknowledge the trust reposed in your company by its Shareholders, Bankers and clients. Your Directors also keenly appreciate the dedication & commitment of all our employees, without which the continuing progress of the company would not have been possible.

BY ORDER OF THE BOARD OF DIRECTOR OF

KANEL INDUSTRIES LTD.

PLACE : Ahmadabad (Dhiren K. Thakkar)

DATE : 1st September, 2012 Chairman & Managing Director


Mar 31, 2010

The Directors have pleasure herewith the 18th audited report together the audited statement of accounts of the year ended on 31st March, 2010.

FINANCIAL HIGHLIGHTS

During the financial year period from 1st April, 2009 to 31st March, 2010 of financial year 2009-10 the financial operational result of the company is as follows:

PARTICULARS FOR THE YEAR FOR THE YEAR

ENDED ON ENDED ON

31/03/2010 31/03/2009

Sales Income NIL NIL

Other lncome 4,63,559 74,91,57,611

Increase/(Decrease) in stock NIL NIL

Total Income 4,63,559 74,91,57,611

Total Expenditure 47,85,887 2,11,62,359

Profit/(Loss) before Tax (43,22,328) 72,79,95,252

Net Profit from Sale of Fixed Assets 24,164 4,86,99,443

Provision for Tax NIL NIL

Taxes for Earlier periods NIL NIL

Prior Period Extra Ordinary Items (Net) 90,465 76,426

Net Profit/(Loss) aftertax (44,36,957) 77,67,71,121

Previous Year Debit

Balance (45,09,17,954) (122,77,15,298)

Balance Carried to B/S (45,53,54,911) (45,09,17,954)

STATUS ON BIFRAPLICATION:

The companys net worth is completely eroded. The companys application to BIFR for revival and rehabilitation has been rejected and BIFR has confirmed its prime facie opinion of winding up of the company. The companys appeal in AAIFR against this order was rejected on 18/05/2005. The company had filed a reference vide case no. 159/2003, which had became in fructuous by order dated -26/04/2005 on the ground of prima facie opinion of BIFR. Against this order the company has filed an appeal with AAIFR on 28/07/2005 vide case no.67/2003 for the second reference. Final hearing is awaited and the decision of the AAIFR is still pending.

STATUS OF CASES WITH DRT AND GUJARAT HIGH COURT

The secured lenders have withdrawn all recovery suits filed against the company since their debts have been settled by way of OTS . the financial year 2008-09. BI FRs Application with the Gujarat High Court with regards to winding up is pending but now due to the recent development of debt being paid off and Delhi High Court having remanded companys case back to BIFR the company has appealed the honorable court to dismiss the same.

The companys networth is completely eroded. The company is preparing a DRS (Draft rehabilition scheme) to be submitted with BIFR in its case no. 78/2001 which is under consideration by BIFR as per the order of the honourable Delhi High Court. The company has with drawn its appeal no. 67/05 from AAIFR as it has became infractuous, after the order passed by the honourable Delhi High Court in January - 2010.

DEBTRESTRUCTING & REHABILITION DEVLOPMENT

Kotak Mahindra Bank Ltd had taken over the debt of State Bank of Saurashtra. The debt of Dena Bank, SBBJ and SBP were taken over by ARCIL. Your directors are pleased to inform you that the company has settled all its debt with the KMBL ( Debt of SBS was taken over by KMBL ) & ARCIL ( Debt of Dena, SBBJ & SBP was taken over by ARCIL) by the way of OTS and obtained No Due Certificates from them in the financial year 2008-09. Further the company has plans of restarting its operations at Naroda Unit as a part of rehabilitation. The company is preparing DRS (Draft rehabilition scheme) to be submitted with BIFR, for various concessions.

DIVIDEND

As your company has not to earn much profit during the year under review and due to the accumulated losses your directors regret for their inability to declare any amount as dividend to be paid.

TRANSFER OF UNPAID/UNCLAIMED DIVIDEND:

Your companys all the 4 previous years i.e. dividends declared in year 1995, 1996, 1997 and 1998 are due for transfer thereof to investors education and protection fund as per the provision of the section 205c of the companies act 1956. However due to huge accumulated losses and the company could not meet its liabilities towards its bankers in time, the bankers are not co operating and so company has made representation of this fact to Registrar of the companies, Securities and exchange board of India. At the highest authorities of bankers, Reserve bank of India. In this situation the audit of the unclaimed unpaid dividend accounts could not be conducted and completed.

The company has received more than 2000 investor complaints for non payment of dividend or not revalidation of the dividend warrants of the investors. However due to non co operation of the bankers, the company could not resolve such complaints. Even the companys efforts to surrender of the original dividend warrants and in lieu of such dividend warrants requests for issue of demand draft in favor of investor concerned are not accepted by the bankers. In view of the above stated reasons the company could not make compliance with the provision of section 205c of the companies act 1956.

SHARE CAPITAL DURING THE YEAR:

During the year under review your directors have not issued any equity or preference share to any persons. There has been no change in the issued, subscribed and paid up capital of the company during the year under review.

BUY BACK OF SHARES:

Your Director had not declared or announced or completed any procedure for buy back of its own shares during the year under review as per the provision of the section 77A, 77AA, and 77B of the companies act 1956. Further no buy back of the share if any announced in earlier years are still pending for implementation.

YEAR UNDER REVIEW

During the year under review your company was engaged in the business of hedging future options of commodity market. The company has made efforts to put his plants.

NON OPERATION OF NARODA PLANT:

The companys Naroda plant is not in use since 1998-99 due to inadequate financial resources, Even though the plant has become old , the company has proposed plans of capital expenditure for repairs and renovation and subsequently to restart the production activity at the unit and thereby the company has continued to show the same as fixed assets cf the company in the books of accounts.

However, now the company is negotiating proposal with a big industrial group to make operational the Naroda Plant of the company for the manufacture, refining and packaging of the castor oil on lease/rent basis /job basis as well as companys own operation may also kick start simultaneously at Naroda Unit. If the deal is finalized the plant is expected to add the revenue to the company in cash from which will be able to meet with the cash administrative and operational exp. In addition due to plant being made operational and its maintenance will be done by tenant, the plant will become renovated, upgraded and will be operational which will increase its life.

SEGMENTWISE REPORTING AS-17

The company is operating only in one segment of manufacturing of oil and sale of oil and its by product de-oiled cakes. Hence no separate segment wise accounting is required and given herewith.

PROVISION FOR DEFERRED TAX LIABILITIES / ASSETS AS-22 AND NON PROVISION OF INCOME TAX LIABILITIES.

The Company had huge accumulated and unabsorbed financial losses. The companys total net worth had been eroded. In view of this the management has thought it fit and prudent not to make provision for deferred tax assets which if created would appear as intangible assets which could never be realized in future. The company has sought various relief for allowing carry forward losses by making an application again with BIFR in the proposed DRS (Draft rehabilitation scheme). Company is taking various legal opinion with respect to assessment of exact income tax liabilities after the writing off the bank liabilities and has taken a view of providing the same after complete due diligence of past income tax returns filed by the legal experts with past case laws. The management is trying hard for revival and rehabilitation of the company, in fact it has already succeeded in settling the huge bank debts and is further negotiating with big industrial house to implement rehabilitation process by restarting operations at the Naroda unit of the company, but until the matter is finalized positively, the company has not accounted for deferred tax liability.

RELATED PARTY TRANSACTION AS-18

The company has been buying raw materials and selling some of the finished products, bye products through its group/associate concern in which director are either director or any of their relatives or the directors themselves are either partners/proprietors. All these business transaction are being done at the prevailing market prices on commercial terms and condition not favorable to any of the parties. There have been no contractual obligations between any of the related parties with the company to execute or enter in to any specific business transactions. However proper disclosure has been made in the notes to the accounts schedule R.

FOREIGN EXCHANGE EARNING AND OUTGO:

During the year under review the company had not done any import/export business and the total foreign exchange earning and outgo was NIL during the year.

INFORMATION PURSUANT TO THE LISTING AGREEMENT AND SEBI CIRCULAR NO. SMDRP/CIR-14/98DATEDAPRIL 29th, 1998.

The companys shares are listed presently in Ahmedabad, Calcutta, Jaipur, and Mumbai Stock Exchange. The company has duly paid the annual listing fees up to and including the year 2010- 2010 i.e. up to 31.03.2011 for the stock exchange of Mumbai. The company is not paying the annual listing fees of Calcutta and Jaipur stock exchanges since 1999-2000 onwards and for the Ahmedabad stock exchange since 2003-04 onwards due to no trading volume recorded on the said stock exchanges. Further the company is also sick industrial company and is not in a position to pay such heavy financial expenses. As the company has become a sick industrial company as per listing agreement norms the shares of the company are suspended for trading on all the stock exchange. However the same is suspended on the Ahmedabad, Calcutta and Jaipur stock exchange for non payment of listing fees. Due to heavy financial losses, the company has not made provision for the annual listing fees payable to the Calcutta stock exchange, Jaipur stock exchange and Ahmedabad Stock Exchange.

DEMATERIALIZATION OF SECURITIES:

SEBI has identified the securities of the company for compulsory trading in the dematerialized form w.e.f. 26th February 2001 by all investors on all the stock exchanges. In compliance with the same and to facilitate the shareholders, the company has already made arrangement to enter into the Tripartite Agreement with NSDL and CDSL. The investors are requested to take a note on the same and dematerialize their holding as early as possible. The ISIN Number allotted to your company is INE252 C 01015. Company has also appointed System Support - Mumbai in place of Sharepro services-Mumbai as RTA agent of the company.

COMPLIANCE TO CODE OF CORPORATE GOVERNANCE:

Your company is a sick industries company. It had approached BIFR and further a DRS

(Draft rehabilitation scheme) is ready for submission with the BIFR for fresh consideration,

expected to be filed shortly

The chairman of the company is executive managing director; the constitution of the present board is in compliance with the provisions of section 292a and also as per clause 49 of the listing agreement.

Hence no committees could be formed as per requirements of the law due to non availability of non executive independent directors.

ENVIRONMENT PROTECTION:

The company is consistently maintaining high standards in the control, protection and discharge of effluents as per the strict standards fixed and prescribed in the environment and pollution control regulation for the industry in which it operates.

DEPOSITS:

During the year review your company has neither invited nor accepted any public deposit or deposits from the public as defined under section 58a of the Companies Act, 1956.

DIRECTORS:

Mr. Vinodchandra Pandya retires by i station at the ensuing Annual General Meeting and being eligible offers him self for re-appointment. Your Directors recommends his re- appointment.

DIRECTORSRESPONSIBILITY STATEMENT:

Pursuant to the provision contained in section 217(2aa) of the Companies Act, 1956, the directors of your company confirm:

(A) That in the preparation of the annual accounts for financial year ended on 31 /03/2010 the applicable accounting standards has been followed except as explained in point no. 8 hereafter.

(B) that they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affair o the company at the end of the financial year and of the profit or loss of the company for the year under review.

(C) That they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this act for safeguarding the assets of the company for preventing and detecting fraud and other irregularities.

(D) That they have prepared the annual accounts on a going concern basis.

STATUTORYAUDITORS

M/s. Shah Dinesh Dahyalal & Associates, Chartered Accountants, Ahmedabad the retiring statutory auditors on this annual general meeting as per the act. The company has received a letter from the said auditors to the effect that their appointment shall be within the limits laid down under section 224(1 B) of the companies act. 1956. A resolution proposing their reappointment as the regular auditor of the company for the period from the conclusion of this annual general meeting up to the conclusion of the next annual general meeting is required to be passed. Your directors recommend passing the said resolution.

APPOINTMENTOF THE INTERNALAUDITOR:

Due to volume of transaction substantially less and the company being a sick company the internal auditors have not been appointed for this year. However once the company resumes normal transaction volumes the internal auditors will be appointed again. At present the transaction entered in are under the direct control of management.

AUDITORS OBSERVATION:

The notes to the accounts of the company are self explanatory. However and clarification from the board of directors on the specific observation made by the Auditors in their report are as under"

(1) PREPARTION OF ACCOUNTS ON GOING CONCERN BASIS:

The auditors of the company are of the opinion that due to huge accumulated losses and complete erosion of the net worth the company, the accounts of the company is not advised to be written on a going concern basis. But as the company has now settled all its working capital dues of banks in the year 2009-10 and is in process to submit a proper draft rehabilitation scheme in order to restart the production at its Naroda unit after required capital expenditure and the management is hopeful for the revival of the company in near future, hence the company have been written books of account on going concern basis.

(2) CONFIRMATION OF ACCOUNTS PENDING:

The company has established the system of obtaining conformation of accounts from various parties. The financial transactions are numerous. Certain confirmations are pending however the auditors have obtained all the information and explanations up to their best knowledge and behalf as were necessary for their purpose of their audit, except certain non receipt of conformation of balances in respect of loans and advances,

deposits and creditors and form banks and financial institutions. This in fact does not affect financial statements.

(3) NON OPERATIONAL NARODA PLANT:

The Naroda plant has been non operational since last many years due to lack of working capital and some changes in technology and other reasons. However the company has : received proposals from one big industrial house to take the plant on lease/ rental basis ; for manufacture of Castor oil as well as the company is in process to prepare the draft rehabilitation scheme by which the company will restart the production at its Naroda unit ; henceforth after required capital expenditure. The proposals are under active j consideration and if materialized it will not only add the revenue to the company but also i revitalize the plant. Its life, its value, upgrades certain technology, replace certain parts i etc. Hence the market value of old plant & machineries could be on lower side, the market i value of land and building will offset the losses, so it is the view of the management to i show the plant and machinery at a part of fixed assets in the balance sheet and not to i written off the assets. :

(4) NON PROVISION OF SALES TAX LIABILITIES:

The company has made a review application for assessment order under the Sales Tax act. The company is hopeful of remedial favorable assessment orders. Once the liabilities are crystallized, it will make necessary arrangement for its payment and make necessary provision in the books of account.

(5) INTEREST FREE LOANS AND ADVANCES:

The Company had given certain loans and advances to number of parties as interest free i looking to the then prevailing business interests of the Company. The Company has been : receiving good business orders from some of such parties still to date. So it is provided to such parties interest free and upon such terms and conditions as decided by both the i parties. The Management is trying to recover the same either in cash or in kind and is : doing the business with these parties. Other amount has been received by the company against cash or in kind. Hence no provisions as Bad loans and advances have been i made. The company is hopeful for its recovery of its outstanding amount and it is trying i commercially to recover the loan. ¦

(6) NON COMPLIANCE WITH THE ACCOUNTING STANDARD FOR RETIRE-MENT BENEFITS WHILE PREPARING FINANCIAL STATEMENTS (15).

As the companys plants are not operational round the year and most of the employees : are temporary or on contractual basis. Due to these reasons no provisions for retirement benefits are made. ;

(7) NON COMPLIANCE WITH THE ACCOUNTING STANDARD FOR TAXATION AS 22:

As per Accounting Standard 22 the company is required to create Deferred Tax Liability / Assets each year. However the management is of the opinion that due to huge accumulated losses and until the formal plan for revival / rehabilitation is sanctioned, it is not considered prudent polity to create Deferred Tax liabilities /Assets.

(8) NON PUBLISHING OF QUARTERLY RESULTS:

The company could not declare un-audited / audited results due to certain administrative problems but your management has taken care to publish result and the same are under process.

(9)TRANSFER OF UNPAID / UNCLAIMED DIVIDEND TO INVESTORS EDUCATION AND PROTECTION FUNDS:

This has been fully explained separately in this report elsewhere under relevant Para.

(10) NON PAYMENT OF CERTAIN DUES:

As the company is a sick unit and it has not enough funds with it so it has defaulted in depositing statutory dues towards Professional Tax, Sales Tax, Income Tax and municipal Tax, However certain municipal tax is paid and the company is gradually settling the old dues. At the same time the company as soon as it recovers any amount or any surplus amount it deposits with the separate account maintained for this purpose.

OTHER OBSERVATIONS:

Other observations made by the auditors are self explanatory in nature and does not require further clarifications.

FORMULATION OF AUDIT COMMITTEE IN COMPLIANCE WITH THE PROVISIONS OF SECTION 292A OF THE COMPANIES ACT 1956.

The company has formed an audit committee within the organization under the Chairmanship of Mr. Vinodchandra Pandya an independent director. The committee consists of 2 independent directors who are not in any way related or interested with the promoters or the management. The company has also appointed professionals as advisors in this committee. The terms and reference of scope of work for the committee is as per clause 49 of listing agreement on code for corporate governance. Further details are given in complete report of corporate governance in Annexure-Ato this report.

Audit committee has been constituted on 8th October 2008 as under

Mr. Vinodchandra Pandya Chairman, Mr. Bachubhai Patel & Mr. Dhiren K. Thakkar Member of the committee

EMPLOYEES:

There are no employees of the company who were in receipt of the remuneration of Rs.24,00,000/- in the aggregate if employed for the year and in receipt of the Monthly remuneration of Rs.2,00,000/- in the aggregate if employed for a part of the year under review. Hence the information required under Section 217 (2A) of the Companies Act, 1956 being not applicable are not given in this report.

STATUTORY INFORMATION:

The statutory information relating to the Conservation of Energy, technology absorption, Adoption, Research and Development, Foreign Exchange Earnings and outgo required to be given as per the provisions of Section 217(1) (e) of the Companies Act, 1956 and the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given herewith in anAnnexureA.

APPRECIATION:

Your Directors take this opportunity to acknowledge the trust reposed in your company by its Shareholders, Bankers and clients. Your Directors also keenly appreciate the dedication & commitment of all our employees, without which the continuing progress of the company would not have been possible.

BYORDER OF THE BOARD OF DIRECTOR

OF KANEL OIL AND EXPORTINDUSTIERS LTD.

PLACE: Ahmedabad SD/-

DATE: 1st September, 2010 (Dhiren K. Thakkar) Chairman & Managing Director

 
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