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Notes to Accounts of Kitply Industries Ltd.

Mar 31, 2014

The Company has entered into a revised restructuring agreement with the current investor debenture holder where the company is to pay Rs, 1,831,439,879/- by 31st March, 2015, towards redemption of the said debentures, subject to terms & conditions.

All the above debentures are secured as under:

(i) First Exclusive Priority Charge on Immovable properties at, Margherita, Art Margherita, Long Island, Rampur and Gondia, Godown / Immovable Property at Thane, Trade mark ' Kitply', Movable and Current Assets (Inventories & Debtors), IFCI, IDBI and IIBI Financed equipments and Insurance contracts.

(ii) Third party Assets i.e. all that piece and parcel of agricultural land admeasuring 52.96 acres at Bhaiya Nagla, Muradabad.

(iii) Pledge of new promoter's shares proposed to be issued under the Scheme of Arrangement and a Second Parri Passu Charge on Third Party Assets I i.e. Office premises at 119, Park Street Kolkata - 700 016.

Further, of the above, series A debentures amounting to Rs, 1,000,000,000 are also secured by a First Exclusive Priority Charge on Agro Immovable Property, Agro Movable assets and pledge of existing promoters shares.

(b) 50,400 secured redeemable non-convertible debentures of Series 1, 2 and 3 of the face value of Rs, 10,000/- each aggregating to Rs, 504,000,000 (interest free) are redeemable at par as follows:-

On 15th September, 2013 Rs, 190,000,000 (Redemption could not be done since the Company is sick) On 15th September, 2014 Rs, 269,000,000 On 15th September, 2015 Rs, 45,000,000

Further, 5,440 Secured redeemable non-convertible debentures of the face value ofRs, 10,000/- each aggregating to Rs, 54,400,000 are convertible into Equity as envisaged in the Scheme of Arrangement.

Out of above, 13,160 debentures amounting to Rs, 131,600,000 are secured by a Second Pari-Passu Charge on Agro Immovable and Movable Assets and Third Exclusive Priority Charge on the Godown / Immovable Property at Thane. Further 5,440 debentures are secured by:

First Exclusive Charge on Third party Assets I i.e. premises at 119, Park Street Kolkata - 700 016.

Second Pari-Passu Charge on pledge of existing promoter shares.

Besides, 42,680 debentures amounting to Rs, 426,800,000 and 5,440 debentures amounting to Rs, 54,400,000 are further secured by:

Second exclusive priority Charge on the trade mark, Third Party Assets 1 i.e. Office premises at 119, Park Street Kolkata - 700 016 and Third Party Asset 2 i.e. all that piece and parcel of agricultural land admeasuring 52.96 acres at Bhaiya Nagla, Muradabad. (Provided that the claim should not exceeds Rs, 17.76 crores).

Second parri-Passu Charge on Movable Assets, Current Assets and Immovable property at Margherita, Art- Margherita, Long Island, Rampur, Gondia (Provided that the claim should not exceeds Rs, 19.46 crores) & other current assets of the Company.

42,680 debentures are further secured by Third Exclusive Priority Charge on the Godown / Immovable property at Thane.

Further, 55,840 debentures are also secured by a personal guarantee of Mr. P. K. Goenka (Chairman & Managing Director).

(c) 31,551 secured redeemable non-convertible debentures of the face value of Rs, 10,000/- each aggregating to Rs, 315,510,000 which carry interest @ 6.00% (6.00%) are redeemable at par along with interest in two equal installments on 31st March, 2013 & 31st March, 2014. Redemption could not be done since the Company is sick, however interest has been charged and are secured by:

Second Pari-Passu Charge on Agro Immovable Property, Agro movable assets and pledge of existing promoter shares.

Second Exclusive Priority Charge on the Godown / Immovable property at Thane and IDBI Financed Equipments

(d) 8,404 secured redeemable non-convertible debentures of the face value of Rs, 10,000/- each aggregating to Rs, 84,040,000 which carry interest @ 6.00% (6.00%) are redeemable at par along with interest in two equal installments of Rs 40,485,000 on 31st March, 2013 & of Rs 43,555,000 on 31st March, 2014. Redemption could not be done since the Company is sick, however interest has been charged.

400 secured redeemable non-convertible debentures valuing Rs, 4,000,000 (interest free) are redeemable at par in three yearly installments on 15th September, 2013, 15th September, 2014 & 15th September, 2015. Redemption could not be done since the Company is sick. The above debentures are secured by:

Second Pari-Passu Charge on the Movable Assets, Current Assets and Immovable property at Margherita, Art- Margherita, Gondia, Rampur & Long Island and other current assets of the Company.

Fourth Pari-Passu Charge on the Godown / Immovable property at Thane.

(e) 278 secured redeemable non-convertible debentures aggregating to Rs, 2,780,000 will be converted into equity as envisaged in Scheme of Arrangement and 1,436 secured redeemable non-convertible debentures aggregating to Rs, 14,360,000 which carry interest @ 8.40% (8.40%) are redeemable at par along with interest in three yearly installments on 30th September, 2013, 30th September, 2014 & 30th September, 2015. Redemption could not be done since the Company is sick. The above debentures are secured by:

Second Exclusive Priority Charge on IFCI Financed Equipments.

Fourth Pari-Passu Charge on the Godown immovable property at Thane.

(f) 1,111 secured redeemable non-convertible debentures aggregating to Rs, 11,110,000 which carry interest @ 6.00% (6.00%) are redeemable at par along with interest in two equal installments on 31st March, 2013 & 31st March, 2014. Redemption could not be done since the Company is sick, however interest has been charged and are secured by:

Second Pari-Passu Charge on Agro Immovable Property and Agro movable assets.

Second Exclusive Priority Charge on IIBI Financed Equipments.

(g) 166 secured redeemable non-convertible debentures aggregating to Rs, 1,660,000 will be converted into equity as envisaged in Scheme of Arrangement and 860 secured redeemable non-convertible debentures aggregating to Rs,8,600,000 which carry interest @ 8.40% (8.40%) are redeemable at par along with interest in three yearly installments on 30th September, 2013, 30th September, 2014 & 30th September, 2015. Redemption could not be done since the Company is sick, however interest has been charged. The above debentures are secured by:

Second Pari-Passu Charge on Movable Assets, Current Assets and Immovable property at, Margherita, Art- Margherita, Gondia, Rampur, & Long Island and other current assets of the Company.

Fourth Pari-Passu Charge on the Godown / Immovable property at Thane.

B. 8,800 unsecured redeemable non-convertible debentures aggregating to Rs, 88,000,000 will be converted into equity as envisaged in Scheme of Arrangement.

C. Unsecured loan from a scheduled bank (interest free) is repayable in eight quarterly installments ofRs, 4,887,000 each starting from July 01, 2015.

D. Unsecured loans from bodies corporate includes Rs, 70,300,000 which were proposed to be converted into equity as envisaged in the Scheme of Arrangement. The lender has recalled the loan in earlier years. However, since the Company's suit against the above lender for specific performance is pending before Hon'ble Calcutta High Court as stated in Note 39 (c), the above loan has been considered as Non-current.

E. Finance lease obligations were secured by hypothecation of the assets purchased there against and carried interest @ 10.00% to 13.00% (10.00% to 13.00%).

F. In the absence of profit, Debenture Redemption Reserve ofRs, 452,915,275 has not been created.

G. Period and amount of continuing default as on the balance sheet date in repayment of debentures, loans, interest and premium on debentures thereon:

(a) Debentures aggregating toRs, 767,216,446 (including interest) which has become due on 31st March 2014, has not been redeem by the Company due to sickness.

(b) Debentures aggregating to Rs, 4,413,769 (including interest and redemption premium) and loans of Rs, 70,300,000 have been recalled by the lenders, but the same is disputed by the Company as stated in Notes 38, 39 (c) and accordingly, not considered as a continuing default as on the Balance Sheet date.

1. Gratuity - Defined Benefit Plan

The Company has a defined benefit gratuity plan. Every employee who has completed at least five years or more of service is entitled to Gratuity on terms not less favorable than the provisions of The Payment of Gratuity Act, 1972. The scheme is not funded.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the plan.

* The management has relied on the overall actuarial valuation conducted by the actuary. However, experience adjustments on plan liabilities for earlier years are not readily available and hence not disclosed.

2. Segment information

The primary segment reporting format is determined to be business segments as the Company's risks and rates of return are affected predominantly by differences in the products and services produced. Secondary information is reported geographically. The operating businesses are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. Accordingly, the Company has identified "Plywood" and "Agro Forestry" as the business segments.

Plywood - Consists of manufacture and sale of plywood, block board, particle boards, Veneer, timber and Laminates.

Agro forestry - Consists of plantation timber.

The Company primarily operates in India and therefore the analysis of geographical segments is demarcated into its Indian and Overseas Operations.

3. Leases

Operating lease: Company as lessee

Certain office premises, go down etc are obtained on operating leases. The lease term is for 1-3 years and renewable for further period either mutually or at the option of the Company. There is no escalation clause in the lease agreements. There are no restrictions imposed by lease arrangements. There are no subleases. The leases are cancelable.

Finance lease: Company as lessee

Fixed Assets include certain Vehicles obtained on finance lease. The year-wise break-up and future obligation towards minimum lease payments of Rs, Nil (Rs, Nil) consisting of present value of lease payments of Rs, Nil (Rs, Nil) and financial charges of Rs, Nil (Rs, 5,703) under the respective agreements as on 31st March, 2014, is given below:

Note: Based on discussion with the solicitors / favorable decisions in similar cases / legal opinions taken by the Company, the management believe that the Company has a good chance of success in above mentioned cases and hence, no provision there against is considered necessary.

4. No provision against demand from a lender amounting to Rs, 321,037,000 towards principal and interest on withdrawal of One Time Settlement (OTS) entered in earlier years, due to alleged non fulfillment of agreed conditions by the Company, has been made in the accounts since the above amount is not payable by the Company and the Company has also been legally advised that the above demand is not tenable. Against the above, Rs, 3,110,000 and Rs, 13,03,769 is being carried forward in the books under the heads Long term borrowings and Interest accrued and due respectively as per the said OTS.

5. (a) The Company had filed a scheme of arrangement in an earlier year, u/s 391-394 read with section 78, 100 to 104 of the Companies Act, 1956 with the Hon'ble Guwahati High Court which envisages reduction of capital, conversion of debt into equity and restructuring of certain assets and liabilities of the Company with effect from 1st Day of March, 2008. Pending approval of the Hon'ble High Court of Guwahati, the effect of reduction in Share Capital and conversion of portion of a Debt into Equity has not been given in the books of account. However, the effect of restructuring of Assets and Liabilities has already been given in accounts in earlier years.

6. (b) No interest has been provided on loans/debentures amounting to Rs, 417,140,000 which are proposed to be converted into equity in terms of scheme of arrangement filed with the Hon'ble High Court of Guwahati under section 391-394 of the Companies Act, 1956 whose approval is pending as on date as stated above.

7. (c) Out of the above amount ofRs, 417,140,000 certain lenders whose dues as on the Balance Sheet date stands at Rs, 70,300,000 have recalled their loans and have also demanded interest amounting to Rs, 42,526,685 (including Rs, Nil for the year). In addition to above, they have also demanded overdue interest and liquidated damage charges amounting to Rs, 17,088,575. Further, the said lenders have filed petitions for winding up of the Company for nonpayment of their dues under the relevant provisions of the Companies Act, 1956. The Company has also filed a suit against the above lenders for specific performance and the matter is pending before Hon'ble Kolkata High Court and in the opinion of the management, no amount towards interest including overdue interest or liquidated damages is payable. Pending the High Court decision, no interest liability as stated above, has been provided in these accounts.

8. As at the Balance Sheet date, the net-worth of the Company has become negative, since the accumulated losses of the Company stands atRs, 3,974,841,289 as compared to the Shareholders fund ofRs, 575,645,590 (excluding revaluation reserve ofRs, 110,379,409). The Company has made a reference to the Hon'ble Board for Industrial & Financial Reconstruction (BIFR) pursuant to the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 and it has been registered u/s 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985.

Consequently, a revival plan would be formulated by the operating agency in due course under the BIFR Act and the Company is hopeful of working out a scheme for its rehabilitation. Further, the Company is in the process of resolving certain disputes/litigation in its favour, which are more fully discussed in Notes 33 and 34 (c) above. Considering the above, these financial statements have been drawn up as per the going concern assumption, which is appropriate in the opinion of the management.

9. The Company has entered into a revised restructuring agreement with the current invester debenture holder (Snowblue Shoppers Private Limited) where the company is to pay Rs, 1,831,439,879/- by 31st March, 2015, towards redemption of the debentures, subject to terms & conditions.

10. Interest amounting to Rs, 60,00 lacs on loan of Rs, 400 lacs from an unsecured creditor is not provided for as the Company has been restrained by the Hon'ble Board for Industrial & Financial Reconstruction (BIFR) by order dated 21.09.2012, had it not been for the standing order the Company would have paid the amount the matter currently is subjudice and hence no interest has been provided, pending outcome at Hon'ble Board for Industrial & Financial Reconstruction (BIFR).

11. Deferred tax asset (net) amounting to Rs, 385,522,033 (Rs, 1,367,760,080), as detailed below, has not been recognized in these accounts in view of the accounting policy specified in 1.1 (n) above.


Mar 31, 2013

1. Gratuity - Defined Benefit Plan

The Company has a defined benefit gratuity plan. Every employee who has completed at least five years or more of service is entitled to Gratuity on terms not less favorable than the provisions of The Payment of Gratuity Act, 1972. The scheme is not funded.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the plan.

* The management has relied on the overall actuarial valuation conducted by the actuary. However, experience adjustments on plan liabilities for earlier years are not readily available and hence not disclosed.

2. Segment information

The primary segment reporting format is determined to be business segments as the Company's risks and rates of return are affected predominantly by differences in the products and services produced. Secondary information is reported geographically. The operating businesses are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. Accordingly, the Company has identified "Plywood" and "Agro Forestry" as the business segments.

Plywood - Consists of manufacture and sale of plywood, block board, particle boards, Veneer, timber and Laminates.

Agro forestry - Consists of plantation timber.

The Company primarily operates in India and therefore the analysis of geographical segments is demarcated into its Indian and Overseas Operations.

Note : The Company has common fixed assets for producing goods for domestic and overseas markets. Hence, separate figures for fixed assets/additions to fixed assets have not been furnished.

Finance lease: Company as lessee

Fixed Assets include certain Vehicles obtained on finance lease. The year-wise break-up and future obligation towards minimum lease payments of Rs, Nil (Rs, 217,120) consisting of present value of lease payments of Rs, Nil (Rs, 209,638) and financial charges of Rs, 5,703 (Rs, 7,482) under the respective agreements as on 31st March, 2013, is given below:

3. Leases

Operating lease: Company as lessee

Certain office premises, go down etc are obtained on operating leases. The lease term is for 1-3 years and renewable for further period either mutually or at the option of the Company. There is no escalation clause in the lease agreements. There are no restrictions imposed by lease arrangements. There are no subleases. The leases are cancelable.

Note: Based on discussion with the solicitors / favorable decisions in similar cases / legal opinions taken by the Company, the management believe that the Company has a good chance of success in above mentioned cases and hence, no provision there against is considered necessary.

4. No provision against demand from a lender amounting to Rs, 321,037,000 towards principal and interest on withdrawal of One Time Settlement (OTS) entered in earlier years, due to alleged non fulfillment of agreed conditions by the Company, has been made in the accounts since the above amount is not payable by the Company and the Company has also been legally advised that the above demand is not tenable. Against the above, Rs, 3,110,000 and Rs, 818,240 is being carried forward in the books under the heads Long term borrowings and Interest accrued and due respectively as per the said OTS.

5. (a) The Company had filed a scheme of arrangement in an earlier year, u/s 391-394 read with section 78, 100 to 104 of the Companies Act, 1956 with the Hon'ble Guwahati High Court which envisages reduction of capital, conversion of debt into equity and restructuring of certain assets and liabilities of the Company with effect from 1st Day of March, 2008. Pending approval of the Hon'ble High Court of Guwahati, the effect of reduction in Share Capital and conversion of portion of a Debt into Equity has not been given in the books of account. However, the effect of restructuring of Assets and Liabilities has already been given in accounts in earlier years.

6. (b) No interest has been provided on loans/debentures amounting to Rs, 417,140,000 which are proposed to be converted into equity in terms of scheme of arrangement filed with the Hon'ble High Court of Guwahati under section 391-394 of the Companies Act, 1956 whose approval is pending as on date as stated above.

7. (c) Out of the above amount of Rs, 417,140,000 certain lenders whose dues as on the Balance Sheet date stands at Rs, 70,300,000 have recalled their loans and have also demanded interest amounting to Rs, 42,526,685 (including Rs, 8,436,000 for the year). In addition to above, they have also demanded overdue interest and liquidated damage charges amounting to Rs, 17,088,575. Further, the said lenders have filed petitions for winding up of the Company for non payment of their dues under the relevant provisions of the Companies Act, 1956. The Company has also filed a suit against the above lenders for specific performance and the matter is pending before Hon'ble Kolkata High Court and in the opinion of the management, no amount towards interest including overdue interest or liquidated damages is payable. Pending the High Court decision, no interest liability as stated above, has been provided in these accounts.

8. As at the Balance Sheet date, the net-worth of the Company has become negative, since the accumulated losses of the Company stands at Rs, 3,888,875,576 as compared to the Shareholders fund of Rs, 575,645,590 (excluding revaluation reserve of Rs, 110,379,409). The Company has made a reference to the Hon'ble Board for Industrial & Financial Reconstruction (BIFR) pursuant to the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 and it has been registered u/s 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985.

Consequently, a revival plan would be formulated by the operating agency in due course under the BIFR Act and the Company is hopeful of working out a scheme for its rehabilitation. Further, the Company is in the process of resolving certain disputes/litigation in its favor, which are more fully discussed in Notes 33 and 34 (c) above. Considering the above, these financial statements have been drawn up as per the going concern assumption, which is appropriate in the opinion of the management.

9. The Company in under discussion for the revision of terms and conditions with the current holder of 120,000 debenture of Rs, 10,000 each to whom the same were sold during the year by the erstwhile holders M/s India Debt Management Private Limited, whose outcome is pending as on date. In view of above, interest of Rs, 2,200,00 lacs (including Rs, 1,200,00 lacs for the year) and redemption premium Rs, 4,687,51 lacs (including Rs, 1,992,62 lacs for the year) on the said debentures has not been provided on and from April 01, 2011.

10. Interest amounting to Rs, 60,00 lacs on loan of Rs, 400 lacs from an unsecured creditor is not provided for as the Company has disputed the same and the matter is subjudice.

11. Based on the information/documents available with the Company, no Trade Payable is covered under The Micro, Small and Medium Enterprises Development Act, 2006. As a result, no interest provisions/payments have been made by the Company to such Trade Payables, if any, and no disclosures thereof are made in these accounts.

12. Previous year figures

Previous year's figures including those

 
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