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Notes to Accounts of KM Sugar Mills Ltd.

Mar 31, 2015

1. Other Disclosures:

1. Contingent liabilities and commitments (to the extent not provided for and as certified by the management)

(a) Contingent liabilities

(i) Claims against the Company not acknowledged as debts in respect of pending cases of employees under labour laws - Rs.150.14 lacs (Previous Year - Rs.128.72 lacs).

(ii) Claims against the company not acknowledged as debts in respect of criminal and Civil Cases Rs.35.43 lacs (Previous Year -Rs.31.17 lacs).

(iii) Bank guarantees given to the Central Government, Excise Department and Indian Oil Corporation Ltd., aggregating to Rs.373.76 lacs (Previous Year Rs.132.96 lacs).

(iv) Company has given guarantee to the banks, which provided vehicle loans to the employees of the company, outstanding loan as on 31.03.2015 NIL (Previous Year Rs. 0.42 lacs).

(v) Interest recompense payable to lenders under CDR scheme estimated amounting to Rs.676.43 lacs (Previous Year Rs.409.81 lacs). It is stipulated that minimum 75% of the recompense amount should be recovered by the lenders in terms of CDR circular.

(vi) Disputed sales tax, income tax and excise duty cases under appeal - Rs.24603.80 lacs (Previous Year Rs.8935.20 lacs)

The amount shown above represent the best possible estimates arrived at on the basis of available information. The uncertainties and timing of the cash flows are dependent on the outcome of different legal processes which have been invoked by the company or the claimants as the case may be and therefore cannot be ascertained accurately. The company does not expect any reimbursements in respect of above contingent liabilities.

In the opinion of the management, no provision is considered necessary for the disputes mentioned above on the grounds that there are fair chances of successful outcome of appeals filed by the company.

(b) Commitments :

(i) Estimated amount of contracts remaining to be executed on capital account and not provided for-Nil (Previous Year - Rs.211.33 lacs).

(ii) Advances paid against above- Nil (Previous Year -Rs.96.38 lacs).

2. Employee Benefits

As per Accounting Standard -15 'Employees Benefits' the disclosure of Employee Benefits as defined in the Accounting Standard are as follow :

a. Defined contribution plans

Employee benefits in the form of Provident Fund are considered as defined contribution plan. The contribution to defined contribution plan, recognized the following amounts in the Statement of Profit & Loss:

b. Defined benefits plans

Long term employee benefits in the form of gratuity and leave encashment are considered as defined benefit plan. The present value of obligation is determined based on actuarial valuation using projected unit credit method as at the balance sheet date. The amount of defined benefits recognized in the balance sheet represent the present value of obligation as adjusted for unrecognized past service cost as reduced by the fair value of plan assets.

In accordance with the Accounting Standard 15, actuarial valuation was done in respect of gratuity and leave encashment defined benefits plans and details of the same are given below:

Note: The Company funded the gratuity liability through a separate Gratuity Fund. The fair value of the plan assets is based on the information certified by the management. However, the gratuity liability of Rs.23,60,274/- of Co-Gen Division is not funded.

3. Short term loans and advances shown under Notes 2.18 includes certain advances given to suppliers of raw material and revenue purchases, which are adjustable against the supply of goods/services but are running due in the books since long. The management is of the opinion that these balances are recoverable/adjustable in future and accordingly, provision against the same has not been considered at this stage.

4. Certain bank accounts shown in Notes 2.17 of Cash and Bank balances under sub-head 'Balance with Banks' are non- operating for last some period and are also subject to reconciliation and receipt of confirmation. As such, the balance of Rs.1.99 lacs shown in respect of those bank accounts in the financial statements is as per books of account only.

5. In view of the decision of Hon'ble Supreme Court, extra price and excise duty realized on levy sugar in earlier years amounting to Rs.67.11 lacs for funding under the Sugar Price Equalization Fund Act, 1976 was transferred to Sugar Price Equalization Reserve Account. Later on as per the order dated 22.09.1993 of Hon'ble Supreme Court, a sum of Rs.17.90 lacs was paid to the Government out of bank guarantee furnished by the Company and further, during the year 1998- 99 a sum of Rs.1.00 lac was paid towards Excise Duty on the above. The company has further made a payment of Rs.35.81 lacs during the year 2005-06 to the Government of India against the bank guarantee furnished by it along with interest of Rs.118.25 lacs thereon. Still a sum of Rs.12.40 lacs is lying in the Sugar Price Equalization Reserve as on 31.03.15 shown under Note 2.2 of "Reserve & Surplus".

6. Certain balances in account of debtors, advances, deposit account, and creditors are subject to reconciliation and confirmation by the respective parties. In some of the cases, the amount is overdue for last some years and consequential revenue impact, if any, is not ascertainable. However, management has reviewed these advances from its realization point of view and based on the management's working, the required provisions in respect thereof has been considered in these financial statements, wherever necessary. As far as other balances are concerned, the management is of the opinion that these balances are recoverable/adjustable and accordingly, provision against the same has not been considered at this stage and these balances are disclosed in the financial statements as per books of account only. The management is of the view that the realization from these assets in the ordinary course of business would not be less than the amount at which they are stated in the books of account. Further, there is no system of charging interest as per market tradition on amount due from sundry debtors and the parties to whom advances extended in the ordinary course of business and which remains due for a substantial period.

7. Long term liabilities (Note No.2.5) includes a loan from U.P. Government amounting to Rs.14.50 lacs. The issue relating to interest payable thereon is under dispute and the matter is sub- judice before the Hon'ble Allahabad High Court. However, as per the interim order of the Court, a fixed deposit of Rs.14.50 lacs has been kept with the District Magistrate, Faizabad. In opinion of the management, the interest due on fixed deposit is sufficient to meet out the interest liability of the Company on the said loan and as such, no interest is being provided for in these financial statements.

8. For the purpose of computing deferred tax liability, amount of brought forward losses as claimed in the income tax returns filed has been considered for recognizing deferred tax assets.

On the basis of future projections taken on record by the management after considering improved performance of Cogen and Distillery Divisions, the management is confident that there is a virtual certainty that sufficient taxable income will be available in the forthcoming financials years against which, the deferred tax assets can be realized in the normal course of business of the company.

9. The Commissioner, Central Excise and Service Tax, Lucknow has passed the orders on 31.03.2015 in consequence to show cause notices issued earlier and raised a demand of Rs.13,55,29,759 on account of exemption of excise duty claimed on molasses consumed in house for distillery operations and also cenvat credit availed during the period from July, 2007 to March, 2013. Accordingly a provision of Rs.1154.18 lacs after adjusting brought forward provision has been made in the Statement of Profit & Loss.

10. Cost of material consumed for the 18 months period ended 31st March, 2015 is net of financial assistance of Rs.6/- per qtl. of cane purchased during sugar season 2013-14 amounting to Rs.555.19 lacs extended by the State Government. Further for the sugar season 2014-15, the Government of Uttar Pradesh has announced certain financial assistance including Rs.8.60 per qtl of cane linked to average selling price of sugar and its by products during the period 01.10.14 to 31.05.15 which is to be recommended by the Committee constituted by the Government of Uttar Pradesh as the average selling price of sugar is significantly lower than the thresh hold specified in the above announcement. Accordingly, the company has accounted for the above financial assistance of Rs.782.45 lacs for sugar season 2014-15 lacs and adjusted the same against the cost of material.

11. Since, the sugar industry is a seasonal industry; the cost of production of sugar is worked out on annualized basis.

c. The amount of interest due and payable for the period of delay in making payment which have been paid but beyond the appointed day during the year but without adding the interest specified under this Act. Rs. Nil.

d. The amount of interest accrued and remaining unpaid Rs. Nil.

e. The amount of further interest remaining due and payable even in succeeding year Rs. Nil.

The above mentioned outstanding are in normal course of business and the information regarding micro & small enterprises have been determined to the extent such parties have been identified on the basis of information available with the company.

12. Statement of additional information:-

a) Expenditure in Foreign Currency:

Traveling Expenses Rs.44.33 lacs (P.Y.-Rs.10.16 lacs)

Others Rs. 5.42 lacs (P.Y.- Rs.2.97 lacs)

b) Receipt of interest in Foreign Currency of old dues: Rs. 113.94 lacs (P.Y.- Nil)

13. The borrowings from banks were restructured under Corporate Debt Restructuring Mechanism (CDR) vide letter of approval dated 27.03.2012 issued by CDR EG. This CDR package has since been implemented and necessary effect to the extent allowed by the banks has been considered in the financial statements. Accordingly, interest refunded by the lenders has been adjusted against the finance cost of the period.

14. The company would be able to realize a sum of Rs.365.79 lacs against a debtor for which provision has been made in past on account of doubtful nature of the same. As the amount is realizable, the excess provision has been reversed.

15. There is no liability for the period ended on 31st March, 2015 towards Corporate Social Responsibility based on the performance of last 3 years as there is net loss computed for last 3 years.

15. Pursuant to the provisions of Companies Act, 2013, the company is required to close its financial year only on 31st March and accordingly to align its financial year as per amended provisions, the current financial year of the company has been extended till 31.03.2015 covering the period from 01.10.2013 to 31.03.2015 i.e. for 18 months and necessary compliance has been made in this regard. As such, the figures of current period are not comparable with previous year's figures.

16. The previous year's figures have been regrouped, reclassified, reworked and rearranged wherever necessary to correspond with the current period classification/disclosures. Amounts and other disclosures for the preceding year are included as an integral part of the current period financial statements and are to be read in relation to the amounts and other disclosures relating to current period.


Sep 30, 2013

Note: The Company funded the gratuity liability through a separate Gratuity Fund. The fair value of the plan assets is based on the information certified by the management. However, the gratuity liability of Rs.8,71,882/- of Distillery Division and Rs. 19,01,562/- of Co-Gen Division is notfunded.

1. Short term loans and advances shown under Notes 2.18 includes certain advances given to suppliers of raw material and revenue purchases, which are adjustable against the supply of goods/services but are running due in the books since long. The management is of the opinion that these balances are recoverable/adjustable in future and accordingly, provision against the same has not been considered at this stage.

This advance also includes an amount of Rs.Nil (Previous year Rs.99.00 lacs) due from U.P. State Government as per order of the Hon''ble Allahabad High Court on account of claim lodged by the Company for compensation towards acquisition by the State Government of one of the sugar mills owned by the company. The matter was sub-judice and was pending for execution before the Commissioner, Lucknow. Now, the matter has been settled and amount has been received during the year along with interest of Rs.116.26 lacs, which has been shown as income from others in Note 2.21.

2. Certain bank accounts shown in Notes 2.17 of Cash and Bank balances under sub-head ''Balance with Banks'' are non- operating for last some period and are also subject to reconciliation and receipt of confirmation. As such, the balance of Rs.2.31 lacs shown in respect of those bank accounts in the financial statements is as per books of account only.

3. In view of the decision of Hon''ble Supreme Court, extra price and excise duty realized on levy sugar in earlier years amounting to Rs.67.11 lacs for funding under the Sugar Price Equalization Fund Act, 1976 was transferred to Sugar Price Equalization Reserve Account. Later on as per the order dated 22.09.1993 of Hon''ble Supreme Court, a sum of Rs. 17.90 lacs was paid to the Government out of bank guarantee furnished by the Company and further, during the year 1998- 99 a sum of Rs.1.00 lac was paid towards Excise Duty on the above. The company has further made a payment of Rs.35.81 lacs during the year 2005-06 to the Government of India against the bank guarantee furnished by it along with interest of Rs.118.25 lacs thereon. Still a sum of Rs.12.40 lacs is lying in the Sugar Price Equalization Reserve as on 30.09.13 shown under Note 2.2 of "Reserve & Surplus".

4. Certain balances in account of various debtors, advances, deposit account, and creditors are subject to reconciliation and confirmation by the respective parties. In some of the cases, the amount is overdue for last some years and consequential revenue impact, if any, is not ascertainable. However, management has reviewed these advances from its realization point of view and based on the management''s working, the required provisions in respect thereof has been considered in these financial statements, wherever necessary. As far as other balances are concerned, the management is of the opinion that these balances are recoverable/adjustable and accordingly, provision against the same has not been considered at this stage and these balances are disclosed in the financial statements as per books of account only. The management is of the view that the realization from these assets in the ordinary course of business would not be less than the amount at which they are stated in the books of account. Further, there is no system of charging interest as per market tradition on amount due from sundry debtors and the parties to whom advances extended in the ordinary course of business and which remains due for a substantial period.

5. Long term liabilities (Note No.2.5) includes a loan from U.P. Government amounting to Rs.14.50 lacs. The issue relating to interest payable thereon is under dispute and the matter is sub- judice before the Hon''ble Allahabad High Court. However, as per the interim order of the Court, a fixed deposit of Rs.14.50 lacs has been kept with the District Magistrate, Faizabad. In opinion of the management, the interest due on fixed deposit is sufficient to meet out the interest liability of the Company on the said loan and as such, no interest is being provided for in these financial statements.

6. For the purpose of computing deferred tax liability, amount of brought forward losses as claimed in the income tax returns filed has been considered for recognizing deferred tax assets. On the basis of future projections taken on record by the management after considering improved performance of

Cogen and Distillery Divisions, the management is confident that there is a virtual certainty that sufficient taxable income will be available in the forthcoming financials years against which, the deferred tax assets can be realized in the normal course of business of the company.

7. No provision for current tax has been made in view of the availability of brought forward business loss and unabsorbed depreciation.

8. Since, the sugar industry is a seasonal industry; the cost of production of sugar is worked out on annualized basis.

9. Related Party Disclosures:-

Pursuant to compliance of Accounting Standard (AS 18) on related party disclosure, the relevant information is provided here below. -

a) Related party where control exist

- Shri L. K. Jhunjhunwala -Chairman ShriAditya Jhunjhunwala -Managing Director Shri Sanjay Jhunjhunwala -Joint Managing Director

b) Details of the related parties:

i. Key Management Persons (Group A)

Shri L. K. Jhunjhunwala -Chairman

ShriAditya Jhunjhunwala -Managing Director

Shri Sanjay Jhunjhunwala -Joint Managing Director

- ShriS.C.Agarwal -Executive Director

ii. Key Management Persons'' relatives (Group B)

- Shri PC. Jhunjhunwala L. K. Jhunjhunwala (HUF)

- A. K. Jhunjhunwala (HUF)

- S.K. Jhunjhunwala (HUF)

Smt. Naina Jhunjhunwala (Wife of Shri L.K. Jhunjhunwala) Smt. Priti Jhunjhunwala (Wife of Shri Aditya Jhunjhunwala)

- Smt. Priti Jhunjhunwala (Wife of Shri Sanjay Jhunjhunwala) Shri Vatsal Jhunjhunwala (Son of Shri A. K. Jhunjhunwala)

- Smt. Reena Agarwal (Wife of Shri S. C. Agarwal)

- Shri Ayush Agarwal (Son of ShriS.C.Agarwal) Shri Payoush Agarwal (Son of Shri S. C. Agarwal)

iii. Associates (Group C)

- K.M.Vyapar(P)Ltd. K.M. Plantations (P) Ltd.

- Marvel Business (P) Limited

- Francoise Commerce (P) Limited

- Nidhi Financial Services (P) Limited Shree Shakti Credits Limited Prakash Properties Limited

- Promising Logistics (P) Ltd. Shailja Propertied (P) Ltd.

- Zar International (P) Ltd.

iv. Companies/ Parties in which Key management person or his relatives have substantial interest/significant influence (Group

Virdhi Trust

- Shivam Trust

- Vatsal Trust

- Laxmi Public Charitable Trust Jhunjhunwala P G College

c) Details of the related parties with whom transactions have taken place during the year:

i. Key Management Persons (Group A)

ShriL K Jhunjhunwala -Chairman

ShriAditya Jhunjhunwala -Managing Director

- ShriSanjay Jhunjhunwala -Joint Managing Director

- ShriS.C.Agarwal -Executive Director

ii. Associates (Group C)

K.M.Vyapar(P)Ltd. Marvel Business (P) Limited Shree Shakti Credits Limited

- Zar International (P) Ltd.

i. The transactions with related parties have been entered at an amount, which are not materially different from those on normal commercial terms.

ii. No amount has been written back/written off during the year in respect to due to/due from related parties.

iii. The amount due from related parties are good and hence no provision for doubtful debts in respect of dues from such related parties is required.

10. Segment Reporting: Information on the Segment Reporting of the company for the year ended 30.09.2013:

The company has identified three primary business segments viz. Sugar, Distillery and Co-generation. Segments have been identified and reported taking into account the nature of products, the differing risks and returns, the organizational structure and internal business reposting system. Capital expenditure includes fixed assets capitalized during the year ani'' net increase/decrease in capital work-in-progress.

The transactions between segments are primarily for materials which are transferred at market determined prices. Common costs are apportioned on a reasonable basis.

Information about Secondary Geographical Segment: There is no secondary segment.

11. Following are the relevant disclosures as required under the Micro, Small & Medium Enterprises Development Act, 2006

a. Sundry creditors include a sum aggregating Rs.36.84 lacs (Rs.37.54 lacs) due to micro & small enterprises is on account of principal only.

b. The Amount of interest paid by the Company in terms of Section 16, along with the amount of payment made to the micro & small enterprises beyond the appointed date during the year Rs. Nil.

c. The amount of interest due and payable for the period of delay in making payment which have been paid but beyond the appointed day during the year but without adding the interest specified under this Act. Rs. Nil.

d. The amount of interest accrued and remaining unpaid Rs. Nil.

e. The amount of further interest remaining due and payable even in succeeding year Rs. Nil.

The above mentioned outstanding are in normal course of business and the information regarding micro & small enterprises have been determined to the extent such parties have been identified on the basis of information available with the company.

12. Payments to Auditors:

AuditFee Rs.2,00,000/- (Previous Year: Rs.2,00,000/-)

TaxAuditFee Rs.1,00,000/- (Previous Year: Rs.1,00,0007-)

13. The borrowings from banks were restructured under Corporate Debt Restructuring Mechanism (CDR) vide tetter of approval dated 27.03.2012 issued by CDR EG. This CDR package has since been implemented and necessary effect to the extent allowed by the banks has been considered in the financial statements.

14. The Cabinet Committee on Economic Affairs (CCEA) in its meeting held on 4th April, 2013 approved the dismantling of regulated release mechanism of sugar with immediate effect and also removed the obligation on the sugar manufactures to supply 10% of their sugar production as levy sugar for sugar produced on or after 1 st October, 2012. Necessary notification in this regard has been issued on 2nd May, 2013. Therefore, the company has given necessary effect totheannouncementofCCEAinits books of account for the year ended 30th September, 2013.

15. Amount of Rs.44 lacs withdrawn during the year from Bank Account represent the Molasses Storage Fund is to be utilized for construction and repairs of molasses storage tanks and will be used for specified purposes in next financial year in compliance of the statutory requirement.

16. The previous year''s figures have been regrouped, reclassified, reworked and rearranged wherever necessary to correspond with the current years'' classification/disclosures. Amounts and other disclosures for the preceding year are included as an integral part of the current year financial statements and are to be read in relation to the amounts and other disclosures relating to current year.


Sep 30, 2012

A. Nature of Securities

i. Rupee Term Loan of State Bank of India (SEFASU) and Punjab National Bank (SEFASU) are secured by residual 4th charge on entire fixed assets of the company on pari passu basis with other term lenders under scheme for extending Financial Assistance to Sugar Undertakings 2007 (SEAFSU).

ii. Punjab National Bank cogen loan is secured by first charge on entire fixed assets of the company on pari passu basis with otherterm lenders and personal guarantee of two directors.

ii. Rupee Term Loan of Punjab National Bank and Allhabad Bank are secured by 4th charge on entire fixed assets of the company on pari passu basis with otherterm lenders and personal guarantee of two directors.

iii. FITL of Punjab National Bank and Allahabad Bank are secured by first charge on entire fixed assets of the company on pari passu basis with otherterm lenders and personal guarantee of two directors.

iv. Rupee Term Loan from SDF are secured by second charge on Company''s immovable and movable properties both present and future.

v. Unsecured loan from related parties represent promoters contribution as per CDR approval.

b. The company has defaulted in repaymentof loans and interest in respect of the following:

From Punjab National Bank -Short term loan

Principal amount Rs.337 lacs has been repaid in June, 12 with average delay of 3 months.

Interest

Interest of Rs.0.25 lacs for the month September, 11 has been paid in December 11.

Interest in total of Rs.45.38 lacs charged on monthly basis for the period from October, 11 to June. 12 has been paid with average delay of 3 months.

Note:

The company has defaulted in repayment of principal sum and interest of unsecured loan taken from Punjab National Bank and Allahabad Bank.

Subsequently, these loans were restructured under Corporate Debt Restructuring Mechanism (CDR) vide letter of approval dated 27.03.2012 issued by CDR EG. Now default on these loans are ml at the year end.

1.1 Basis of Preparation of Financial Statements

These financial statements have been prepared on the accrual basis of accounting, under the historical cost convention except for revaluation of certain Fixed Assets, in accordance with the Companies Act, 1956 and the applicable Accounting Standards issued by the Institute of Chartered Accountants of India. There is no change in the system of accounting as being consistently followed from earlier years unless otherwise stated.

All assets and liabilities have been classified as current or non- current as per company''s normal operating cycle and other criteria set out in the Schedule VI to the Companies Act, 1956. Based on the nature of operations and time between procurement of raw material and realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.

2.1 Other Disclosures

1. Contingent liabilities (to the extent not provided for and as certified by the management)

(a) Claims against the Company not acknowledged as debts in respect of pending cases of employees under labour laws - Rs. 113.56 lacs (Previous Year - Rs. 108.80 lacs).

(b) Claims against the company not acknowledged as debts in respect of criminal and Civil Cases Rs.43.43 lacs (Previous Year-Rs.34.13 lacs).

(c) Estimated value of contracts remaining to be executed on capital account and not provided for Rs. Nil (Previous Year-Nil).

(d) Bank guarantees given to the Central Government, Excise Department, Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd. etc. aggregating to Rs.25.26 lacs (Previous Year Rs.122.38 lacs).

(e) Company has given guarantee to the banks, which provided vehicle loans to the employees of the company, outstanding loan as on 30.09.2012 Rs.0.41 lacs (Previous Year Rs 1.17 lacs).

(f) Disputed sales tax, income tax and excise duty cases under appeal - Rs.6484.84 lacs (Previous Year Rs.648.49 lacs)

In the opinion of the management, no provision is considered necessary for the disputes mentioned above on the grounds that there are fair chances of successful outcome of appeals filed by the company

2. Employee Benefits

The Company has during the year adopted Accounting Standard -15 (revised 2005) ''Employees Benefits'' for recognizing liability of employees benefits. The Company has classified the various benefits provided to employees as under:

a. Defined contribution plans

Employee benefits in the form of Provident Fund are considered as defined contribution plan. The contribution to

b. Defined benefits plans

Long term employee benefits in the form of gratuity and leave encashment are considered as defined benefit plan. The present value of obligation is determined based on actuarial valuation using projected unit credit method as at the balance sheet date. The amount of defined benefits recognized in the balance sheet represent the present value of obligation as adjusted for unrecognized past service cost as reduced by the fair value of plan assets.

In accordance with the Accounting Standard 15, actuarial valuation was done in respect of gratuity and leave encashment defined benefits plans and details of the same are given below:

Note: The Company funded the gratuity liability through a separate Gratuity Fund. The fair value of the plan assets is based on the information certified by the management However, the gratuity liability of Rs.7,92,757/- of Distillery Division & Rs 16,63,712/- of Co- Gen Division is notfunded.

3. Short term loans and advances shown under Notes 2.18 includes certain advances given to suppliers of raw material and revenue purchases, which are adjustable against the supply of goods/services but are running due in the books since long. The management is of the opinion that these balances are recoverable/adjustable in future and accordingly, provision against the same has not been considered at this stage.

This advance also includes an amount of Rs.99.00 lacs due from U P. State Government as per order of the Hon''ble Allahabad High Court on account of claim lodged by the Company for compensation towards acquisition by the State Government of one of the sugar mills owned by the company. The matter is sub-judice and is pending for execution before the Commissioner, Lucknow. The management is hopeful to recover the said amount along with interest. However, interest income on the same is not recognized in the accounts and it will be considered in the books on receipt basis in the year of its actual realization.

4. Certain bank accounts shown in Notes 2.17 of Cash and Bank balances under sub-head ''Balance with Banks'' are non- operating for last some period and are also subject to reconciliation and receipt of confirmation. As such, the balance of Rs.8.78 lacs shown in respect of those bank accounts in the financial statements is as per books of account only.

5. In view of the decision of Hon''ble Supreme Court, extra price and excise duty realized on levy sugar in earlier years amounting to Rs.67.11 lacs for funding under the Sugar Price Equalization Fund Act, 1976 was transferred to Sugar Price Equalization Reserve Account. Later on as per the order dated 22.09.1993 of Hon''ble Supreme Court, a sum of Rs.17.90 lacs was paid to the Government out of bank guarantee furnished by the Company and further, during the year 1998- 99 a sum of Rs. 1.00 lac was paid towards Excise Duty on the above. The company has further made a payment of Rs.35.81 lacs during the year 2005-06 to the Government of India against the bank guarantee furnished by it along with interest of Rs. 118.25 lacs thereon. Still a sum of Rs. 12.40 lacs is lying in the Sugar Price Equalization Reserve as on 30.09.12 shown under Note 2.2 of "Reserve & Surplus".

6. Certain balances in personal account of various debtors, advances, deposit account, and creditors are subject to reconciliation and confirmation by the respective parties. In some of the cases, the amount is overdue for last some years and consequential revenue impact, if any, is not ascertainable. However, management has reviewed these advances from its realization point of view and based on the management''s working, the required provisions in respect thereof has been considered in these financial statements, wherever necessary. As far as other balances are concerned, the management is of the opinion that these balances are recoverable/adjustable and accordingly, provision against the same has not been considered at this stage and these balances are disclosed in the financial statements as per books of account only. The management is of the view that the realization from these assets in the ordinary course of business would not be less than the amount at which they are stated in the books of account. Further, there is no system of charging interest as per market tradition on amount due from sundry debtors and the parties to whom advances extended in the ordinary course of business and which remains due for a substantial period.

7. The quantity of pressmud with Sugar Division has not been ascertained as on 30.09.2012 and therefore, the value of closing stock of pressmud with Sugar Division is shown at Nil.

8. Long term liabilities (Note No.2.5) includes a loan from U.P. Government amounting to Rs.14.50 lacs. The issue relating to interest payable thereon is under dispute and the matter is sub- judice before the Hon''ble Allahabad High Court. However, as per the interim order of the Court, a fixed deposit of Rs.14.50 lacs has been kept with the District Magistrate, Faizabad. In opinion of the management, the interest due on fixed deposit is sufficient to meet out the interest liability of the Company on the said loan and as such, no interest is being provided for in these financial statements.

9. Long term liabilities (Note No.2.13) includes excise duty paid under protest Rs.30.85 lakhs on clearance of Rectified Spirit (RS) and Extra Neutral Alcohol (ENA) on stock held on 28.02.02 and manufactured and cleared after 01.03.02 from the molasses stock.

10. The company has incurred loss of Rs.1.09 lacs from derivatives trading/transaction in commodities/currency, which is adjusted against Miscellaneous Income shown in Notes 2.21 ''Other Income''.

11. Differential cane price for the season 2007-08 aggregating Rs.669.55 lacs provided for in pursuance to order dated 17th January, 2012 of the Hon''ble Supreme Court is included in the amount of cane consumption of the year and is charged to Statement of Profit & Loss.

12. For the purpose of computing deferred tax liability, part amount of brought forward losses as claimed in the income tax returns filed has been considered for recognizing deferred tax assets. On the basis of future projections taken on record by the management after considering improved margins in sugar in current domestic sugar market scenario, the management is confident that there is a virtual certainty that sufficient future taxable income will be available against which, the deferred tax assets can be realized in the normal course of business of the company.

13. Since, the sugar industry is a seasonal industry; the cost of production of sugar is worked out on annualized basis.

14. Related Party Disclosures:-

Pursuant to compliance of Accounting Standard (AS 18) on related party disclosure, the relevant information is provided here below:-

a) Related party where control exist

- ShriL.K.Jhunjhunwala -Chairman

- Shri Aditya Jhunjhunwala -Managing Director

- Shri Sanjay Jhunjhunwala -Jt. Managing Director

- ShriS.C.Agarwal -Executive Director

b) Details of the related parties with whom transactions have taken place during the year:

i. Key Management Persons (Group A)

- ShriL.K.Jhunjhunwala -Chairman

- Shri Aditya Jhunjhunwala -Managing Director

- Shri Sanjay Jhunjhunwala -Joint Managing Director

- ShriS.C.Agarwal -Executive Director

ii. Key Management Persons'' relatives (Group B)

- Shri PC. Jhunjhunwala

- L.K. Jhunjhunwala (HUF)

- A. K. Jhunjhunwala (HUF)

- S. K. Jhunjhunwala (HUF)

- Smt. Naina Jhunjhunwala (Wife of Shri L.K. Jhunjhunwala)

- Smt Priti Jhunjhunwala (Wife of Shri Aditya Jhunjhunwala)

- Smt Priti Jhunjhunwala (Wife of Shri Sanjay Jhunjhunwala)

- Smt. Reena Agarwal (Wife of Shri S C. Agarwal)

- Shri Ayush Agarwal (Son of Shri S. C. Agarwal)

- Shri Payoush Agarwal (Son of Shri S C. Agarwal)

iii. Associates (Group C)

- K.M.Vyapar(P)Ltd.

- K.M. Plantations (P) Ltd.

- Marvel Business (P) Limited

- Francoise Commerce (P) Limited

- Nidhi Financial Services (P) Limited

- Shree Shakti Credits Limited

- Prakash Properties Limited .

- Promissing Logistics (P) Ltd. ''

- Shailja Propertied (P) Ltd.

- Zar International (P) Ltd.

iv. Companies/ Parties in which Key management person or his relatives have substantial interest/ significant influence (Group D)

- Virdhi Trust

- Shivam Trust

- Vatsal Trust

- Laxmi Public Charitable Trust

- JhunkhunwalaPG College

i. The transactions with related parties have been entered at an amount, which are not materially different from those on normal commercial terms.

ii. No amount has been written back/written off during the year in respect to due to/due from related parlies.

iii. The amount due from related parties are good and hence no provision for doubtful debts m respect of dues from such related parties is required.

15. Segment Reporting: Information on the Segment Reporting of the company for the year ended 30.09.2012:

The company has identified three primary business segments viz. Sugar, Distillery and Co-generation. Segments have been identified and reported taking into account the nature of products, the differing risks and returns, the organizational structure and internal business reposting system.

''Capital expenditure includes fixed assets capitalized during the year and net increase/decrease in capital work-in- progress.

The transactions between segments are primarily for materials which are transferred at market determined prices. Common costs are apportioned on a reasonable basis.

16. Following are the relevant disclosures as required under the Micro, Small & Medium Enterprises Development Act, 2006

(a) Sundry creditors include a sum aggregating Rs.37.54 lacs (Rs.43.60 lacs) due to micro & small enterprises is on account of principal only.

(b) The Amount of interest paid by the Company in terms of Section 16, along with the amount of payment made to the micro & small enterprises beyond the appointed date during the year Rs. Nil.

(c) The amount of interest due and payable for the period of delay in making payment which have been paid but beyond the appointed day during the year but without adding the interest specified under this Act. Rs. Nil.

(d) The amount of interest accrued and remaining unpaid Rs. Nil.

(e) The amount of further interest remaining due and payable even in succeeding year Rs. Nil.

The Above mentioned outstanding are in normal course of business and the information regarding micro & small enterprises have been determined to the extent such parties have been identified on the basis of information available with the company.

Note: The value of perquisites shown above is as per the income taB$| provisions.

Approval of Central Government for the remuneration paid to Chairman, Managing Director, Joint Managing Director and Executive Director pursuant to resolution passed in Annual General Meeting held on 19th March, 2012 is awaited.

17. Company has defaulted in repayment of instalments and interest of Term Loan taken from Punjab National Bank (PNB) and principal sum and interest towards Corporate Loans taken from PNB and Allahabad Bank. Subsequently, these loans were restructured under Corporate Debt Restructuring Mechanism (CDR) vide letter of approval dated 27.03.2012 issued by CDR EG. This CDR package has been partly implemented during the year and necessary effect to that extent is given in the financial statements.

18. The Revised Schedule VI has become effective from 1 stApril, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year''s figures have been regrouped/reclassified wherever necessary to correspond with the current years'' classification / disclosures.


Sep 30, 2009

1. CONTINGENT LIABILITIES {to the extent not provided for)

(a) Claims against the Company not acknowledged as debts (as certified by the management) in respect of pending cases of employees under labour laws - Rs.47.36 lacs. (Previous Year - Rs.44.16 lacs).

(b) Claims against the company not acknowledged as debts (as certified by the management) in respect of criminal and Civil Cases - Rs.42.10 lacs. (Previous Year-Rs.23.50 lacs).

(c) Estimated value of contracts remaining to be executed on capital account and not provided for- Rs.37.32 !acs.(Previous Year- Rs.99.57 lacs),

(d) Bank guarantees givers to the Central. Government, Excise. Department, Indian Oil Corporation and U.R Pollution Control Board aggregating to Rs.39.70 lacs. (Previous Year - Rs39.70 lac).

(e) Company has given guarantee to the banks, which provided vehicle loans to the employees of the company - outstanding loan as on 30.09.2009 - RS 10.48 lacs. (Previous Year-Rs.14.36 Iacs).

(f) Interest of Rs. 167.42 lacs on Short Term Loan of Rs.858 lacs received during the FY 2007-2008- under the Scheme. for Extending Financial Assistance to Sugar Undertaking, 2007 (SEFASU) payable in case, the terms and conditions of the loan are not complied with by the Company. (Previous Year-Rs. 64.46)

2. Advances recoverable in cash or in kind or for value fo be received shown under Schedule 8 includes certain advances given to suppliers of raw material, revenue purchases and of capital goods, which are adjustable against the supply of goods but are running due from the earlier years. The management has undertaken an extensive exercise for recovery of such advances and is confident of recovering the same in near future. Accordingly, provision against the same has not been considered at this stage.

These advances also include a sum of Rs.24.50 lacs sized by the Income Tax authorities from the possession of one of the staff member of the company three years back. The income tax proceedings subsequent thereto are under progress. The Company has also filed writ petition before the Honble Allahabad Court in this matter, which is pending for final hearing.

These advances also include an amount of Rs.99.00 lacs due from U.R State Government as per order of the Honble High Court of Allahabad on account of claim lodged by the Company for compensation towards acquisition by the State Govt, of one the sugar mills owned by the company. The matter is sub-jud:ce and is still pending for execution before the Commissioner, Lucknow. The management is hopeful to recover the said amount along with interest.

3. Certain bank accounts included in Schedule 7 of Current Assets under the sub-head Bank Balance are non- operating for last some period and are also subject to reconciliation and therefore, amount shown in respect of those bank accounts in the financial statements are as per books of account only.

4. The company has paid road transport freight amounting to Rs.835.47 lacs in relation to sugar trading activities undertaken by it during the F.Y, 2007-2008 without depositing service thereon. The estimated service tax liability of Rs,25.82 lacs is worked out on the same, which in the opinion of the management is not payable as the sugar sold by them has been ultimately consumed for export purposes and as per them there is complete exemption of service tax in case the services are used for export of goods.

5. In view of the decision of Honble Supreme Court, extra price and excise duty realized on levy sugar in earlier years amounting to Rs.67.11 lacs for funding under the Sugar Price Equalization Fund Act, 1976 was transferred to Sugar Price Equalization Reserve Account. Later on as per the order dated 22.09.1993 of Honble Supreme Court, a sum of Rs. 17.90 lacs was paid to the Government out of bank guarantee furnished by the Company and further, during the year 1998-99 a sum of Rs.1.00 lacs was paid towards Excise Duty on the above. The company has further made a payment of Rs.35.81 lacs during the year 2005-06 to the Government of India against the bank guarantee furnished by it along with interest of Rs. 118.25 lacs thereon. Still a sum of Rs 12,40 lac is lying in the Sugar Price Equalization Reserve season 2007-08 at Rs.110 per quintal, the rate at which it has made payment to the cane growers as per the interim order of the Honble Supreme Court, against the State Advised Price of Rs.125 per quintal fixed by Uttar Pradesh State Government. Necessary adjustments, if any. will be made in accordance with subsequent orders of the Honble Supreme Court in the matter.

6. Certain balances in personal account of various debtors, advances, deposits account, and creditors are subject to reconciliation and confirmation by the respective parties and in some of the cases, the amount is overdue for last some years. However, the balances disclosed in the financial statements are as per books of account only and no provision against them has been considered in the books by the management as in their view, the realization from these assets in the ordinary course of business would not be less than the amount at which they are stated in the books of account. Further, there is no system of charging any interest on amount due from sundry debtors and the parties to whom advances extended in the ordinary course of business and which remains due for a substantiaI period.

7. The company received a loan of Rs.858 lacs under the Scheme for Extending Financial Assistance to Sugar Undertaking, 2007 (SEFASU) during the year for payment of cane dues of the season 2006-07 at zero rate of interest. However, if company defaults in complying with the terms and conditions of the said loan, it would be liable to pay interest at the rate of 12% p.a., and therefore, the liability on this account for the accounting period has been shown as contingent liability in para 2 above.

8. The quantity of pressmud and bagasse has not been ascertained as on 30.09.2008 and therefore, the value of closing stock of pressmud and bagasse is shown at Nil.

9. Unsecured Loans includes a loan from U.P. Government amounting to Rs.14.50 lacs. The issue relating to interest payable thereon is under dispute and is sub-judice before the Honble High Court. However, as per the interim order of the Court a fixed deposit of Rs.14.50 lacs has been kept with the District Magistrate, Faizabad. In opinion of the management, the interest due on fixed deposit is sufficient to meet out the interest liability of the Company on the said loan and as such, no interest is being provided for in these financial statements,

10. Advance excise duty includes excise duty paid under protest Rs.30.85 lakhs on clearance of Rectified Spirit (RS) and Extra Neutral Alcohol (ENA) on stock held on 28.02,02 and manufactured and cleared from 01,03.02 onwards from the molasses stock.

11. Since, the sugar industry is a seasonal industry; the cost of , production of sugar is worked out on annualized basis,

12. In order to mitigate the risk of price fluctuations of the sugar being manufactured by the Company, it engaged itself in the commodity hedging contracts and resultant gains/(loss) is generally included in the sugar sales.

13. Related Party Disclosures:-

Pursuant to compliance of Accounting Standard (AS 18) on related party disclosure, the relevant information is provided here below:-

a) Related party where control exist

- Shri.L.K.Jhunjhunwala - Chairman

- Shri.Aditya Jhunjhunwala - Managing Director

- Shri, Sanjay Jhunjhunwala - Joint Managing Director

- Shri.S.C.Agarwal - Executive Director

b) Details of the related parties with whom transactions have taken place during the year

i. Key Management Persons (Group A)

- Shri.L.K.Jhunjhunwala -Chairman

- Shri.AdityaJhunjhunwala -Managing Director

- Shri, SanjayJhunjhunwala -Joint Managing Director

- Shri.S.C.Agarwal -Executive Director

ii. Key Management Persons relatives ( Group B)

- Smt. Reena Agarwal (Wife of Shri, S. C.Agarwal)

- P. C. Jhunjhunwala

- P. C. Jhunjhunwala (HUF)

- L.K. Jhunjhunwala (HUF)

- A, K. Jhunjhunwala (HUF)

- S.K. Jhunjhunwala (HUF)

» Ms. Naina Jhunjhunwala (Wife of Shri L.K. Jhunjhunwala)

- Ms. Priti Jhunjriunwala (Wife of A. K. Jhunjhunwala)

- Ms. Priti Jhunjhunwala (Wife of S.K. Jhunjhunwala)

iii. Associates (Group C)

K. M. Vyapar (P) Ltd. (Formerly K.M. Gases (P) Ltd.)

- K.M, Plantations (P) Ltd, (Formerly K. M. Constructions (P) Ltd,)

- Marvel Business (P) Limited.

- Francoise Commerce (P) Limited

- Nidhi Financial Services (P) Limited.

- ShreeShakti Credit Limited.

» Prakash Properties Limited.

» Promising Logistics (P) Ltd.

- K.R. Modi Drinks (P) Ltd,

- K.M. SakharKarkhana (P) Ltd.

- Shailja Propertied (P) Ltd.

- Zar International (P) Ltd.

v. Companies/ Parties in which Key management person or his relatives have substantial interest/significant influence (Group D)

- Virdhi Trust

- Shivam Trust

- Vatsal Trust

- Laxmi Public Charitable Trust

14. (a) Sundry Creditors (Schedule-9) includes a sum aggregating Rs.39.24 lacs 6m to small scale industrial undertakings out of which the parties from whom the Company owes any sum which is outstanding for more than 30 days from the Balance Sheet date are Annapurna Gases, Anshuman Industries, Austin Engineering Company, Baiaji Industries, Bharat Engineering & Castings, Brylplast Pvt. Ltd., Diffusion Engineers, Digital Utilities, Gita Flopumps India (P) Ltd., Imperial Gases Ltd., Kemtech Polymer, P.P.I Pumps (?) Ltd., Paltech Cooling Tower, Parveen Perforators, Pelicon Valves, Prem Chand Industry, Rajukesh Industry, S.R Enterprises, S.S. Chemicals, Sagar Rubber Udyog, Tri Squre Switch Gears, Universal Transformers, Vishal Conveyor System, The above information has been compiled in respect of the parties which could be certified as small scale industrial undertakings on the basis of information in possession of the company to the extent.

(b) The company is in the process of identifying the micro, small and medium enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2008 and therefore information to be disclosed in this regard is not given in the accounts.

15, Sales includes inter division transfer of molasses for Rs 754,42 lacs (PY RS. 974.97 lacs), bagasse for Rs.288.05 lacs (PY RS, 183.86 lacs)and power for Rs. 198.47 lacs (PY RS. 206.80 lacs) for own consumption at market price.

16, No current tax provision has been made during the year in these financial statements in view of the brought forward losses and benefits / deductions / allowances available for the year ending 30.09,2009 as per the provisions of the income tax act 1961.

17. The figures of production, sales and closing stock of Alcohol and molasses have been taken as per the records maintained under Central Excise Rules,

18. Figures of- previous year are regrouped or rearranged wherever necessary.

19. Schedule 1 to 17 forming part of the Balance Sheet as at 30th September, 2009and Profit & Loss Account for the period ended on that date.

 
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