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Notes to Accounts of Manipal Finance Corporation Ltd.

Mar 31, 2015

Corporate Information:

The Registered Office of the Company is at Manipal (State: Karnataka). The Company had commenced its business as Non- Banking Financial Company registered with Reserve Bank of India as "Hire Purchase & Leasing Company". However the Reserve Bank of India has since cancelled the registration of the Company. The Company has stopped activities of accepting deposits from public/debentures/subordinated debts, extending loans, Hire Purchase and leasing activities since 1st day of July, 2002. The present activity of the Company is being mainly restricted to recovery of dues and repayment of the debts. The other necessary details are being given under note 5.01.

Note 1: Rights, Preferences and Restrictions attached to Shares Equity Shares:

The equity shares having a par value of Rs.10 per share. Each shareholder is eligible for one vote per each share held. The dividend if any, proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in the case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company (after distribution of all preferential amounts including payment to the preference shareholders) in proportion to their shareholding.

SHARE CAPITAL

Preference Shares:

Non-Cumulative Redeemable Preference Shares shall be redeemable at par after the expiry of 12 months but not later than 20 years from the respective dates of allotment at the option of the holders of such Shares by giving 3 months notice or at the discretion of the Board of Directors. The shares are entitled for preferential right over dividend (before the equity shareholders) at the rate of 11%, which is to be proposed by the Board of Directors, which is subject to the approval of the shareholders, in the ensuing Annual General Meeting, except in the case of payment of dividend as "interim dividend". However the shares are Non- Cumulative and therefore the shareholders are not entitled to carry forward the dividend of a year to the forthcoming year/s, in case the same is not declared in a year. In the event of liquidation, the such shareholders are eligible to receive the face value (after distribution of all preferential amounts) before the distribution of assets to the equity shareholders. In case the assets available are not sufficient to cover up the face value, then the same will be distributed in proportion to their shareholding, if the surplus available, after distribution of all preferential amounts.

Note 2: The Company during the year with a view towards restructuring its liabilities has settled deposits/debentures/ subordinated debts at discounted rates. The same has been done with due consent of the parties to deposits, debentures and debts. The interest write back pertaining to deposits/debentures/subordinated debts Rs. 522 thousands (P. Y. Rs. 367 thousands) is treated as Extraordinary Income in the Profit and Loss Account. Principal write back arising out of such settlement Rs. 22,72 Thousands (P. Y. Rs. 14,96 thousands) is considered as capital receipt and taken directly to Capital Reserve (viz: Capital Reserve 2) as above. This has been done as per the accounting policy followed by the Company, as stated in Note No. 23.01 (J). The Company had made similar settlements during the earlier years also, by giving the similar accounting treatment.

Note 3 Special reserve was created during earlier year/s, pursuant to Reserve Bank of India (Amendment) Act, 1997

Note 4. Advance for Sale of Property as disclosed above represents amount received in advance in respect of the immovable property (Land and Building Free Hold) agreed to be sold. The proceeds of the Advance amount has been utilised by the Company to reduce its debts.

Note 5.The breakup lease security deposit(premises) is as follows: due to related parties Rs. 75,00 thousands, (P.Y. Rs. 75,00 thousands), due to others Rs. 29,12 thousands (P.Y. Rs. 25,03 thousands).

Note 6: The liability in respect of leave encashment, provision made on an estimated basis, considering the fact the amount involved therein is not material.

Note 7: The Company has made the provision of Rs. 353 thousands towards gratuity in respect of deficit of Present value of obligations over the fair value of Plan Assets, during the year ending 31st March, 2009. The Management is of the opinion that the provisions so made is adequate, considering the fact that "Fair value of Plan Assets" is more than the "deficit of Present value of obligations" as on 31st March, 2015.

Note 8: The Company has stopped accepting/renewing deposits, debentures and subordinated debts with effect from 1st day of July, 2002. Therefore and also considering the fact that the public deposits accepted by the Company are fully matured, the Company has not created the floating charge in favour of the depositors, on the statutory liquid assets invested in terms of directives issued by Reserve Bank of India.

During the year ending 31st March, 2005 the Scheme of Compromise and Arrangement under Section 391 of the Companies Act, 1956 to effect the restructure of Company's debts particularly Debentures and Subordinated Debts of the Company was framed and presented before the Honorable High Court of Karnataka accordingly the meeting of the Shareholders, Debentures Holders and Subordinated Debt holders were held on 20th April, 2005. The scheme as proposed had provided for payment of principal in a phased manner over 60 months from the effective date and payment of interest accrued till 30th June, 2002, within 72 months from the effective date. The scheme as proposed, do not provide for accrual of interest after 30th June, 2002. (For the above purpose the effective date means the date on which the Order of the High Court of Karnataka sanctioning the Scheme of Arrangement is filed with the Registrar of Companies in Karnataka.)

On 10th July, 2009, Honorable High Court of Karnataka has directed the Company to submit the details of payments made to Non Convertible Debenture holders and subordinated debt holders from 1st April, 2005. Accordingly the details were furnished to Honorable Court. It was submitted before the Honorable Court that the Company has settled substantial portion of Non Convertible Debentures and subordinated Debts and it was therefore felt that the scheme requires to be changed having regard to the settlements already made and quantum of non convertible debentures and subordinated debts remaining to be settled. Therefore the Company had proposed to withdraw the scheme of arrangement from the Honorable High Court of Karnataka, with an option to present a new scheme of arrangement. The Honorable High Court of Karnataka has permitted the Company to withdraw the petition, with liberty to file a fresh petition, vide its order dated 28th October, 2009. Accordingly the Company is exploring the possibility of proposing a fresh petition to be filed before the Honorable High Court of Karnataka.

The total of the principal sum and interest due in respect of Public deposits/debentures/subrodinated debts as on 31st March, 2002 (i.e. as on the last date of the financial year, immediately preceding the year in which the Company has stopped payment of its debts) was Rs. 1,07,44,26 thousands. The Company has settled the major portion of the aforesaid dues from time to time, at the discounted rates (which includes settlement of principal at discounted rates and partial/full waiver of interest). Out of the aforesaid amount, a sum of Rs. 27,23,91 thousands (P.Y. Rs. 27,79,40 thousands) is remained unpaid as on the date of the Balance Sheet, thereby the liability of the Company reduced considerably over the period of time.

Further there are many instances, where the Company has received the orders from various Consumer Courts (including the Appellate Authorities/Courts acting under the Consumer Protection Act), regarding the repayment or proceeds of debentures/debts/deposits with interest and other costs. However the many of such depositors/debenture holders/debt holders have approached the Company and Company has settled their dues at the mutually agreed rates, which also includes settlement at discounted rates. Many of the remaining such customers have approached the Company for settlement.

The Company is continuing to put more efforts on realisation of the dues, sale of assets etc., so that its debts can be settled at the earliest possible date. The remaining depositors/debenture holders/debt holders have approached the Company for settlement of their dues and the Company is in the process for the same. Considering the above facts, the Company has not provided/recognised for interest after 30th June, 2002, on deposits/debentures/subordinated debts and interest on advances taken on such instruments. All the aforesaid deposits/debentures/subordinated debts are fully matured for repayment. Any interest paid over and above the provision made till 30th June, 2002, charged to statement of profit and loss as Finance cost under Note No.17.

Considering the facts that the Company has settled the dues of depositors/debenture holders/debt holders at the discounted rates as stated above, that the remaining customers have approached the Company for settlement of their dues, that the orders issued by the various consumer courts including the appellate authorities/courts therein, that the Company has settled the many of such consumer court cases, that the total debts of the Company reduced considerably because of settlement as aforesaid and that the Company is exploring the possibility of framing the new scheme of arrangement, it is not feasible for the Company to ascertain accurately its liability on any given date.

The Company has In view of the above and also considering the fact that there are no unclaimed liabilities, the matured debentures, matured deposits, matured subordinated debts and interest payable including unencashed interest cheques on such deposits/debentures/debts has been considered as "not due to be transferred to Investor Education and Protection Fund".

Other items include balance lying unpaid after adjusting deposits with loans borrowed against it. For the reasons as given above, the same has not been considered as amount due to Investor Education and Protection Fund.

Note 9: Unpaid Secured Non-convertible Debentures are secured by mortgage on Land & Buildings (Free Hold and Lease Hold) situated at Udupi District of State of Karnataka, State of Goa, Nasik District & Mumbai in State of Maharashtra and floating charge on receivables and book debts. The debentures were redeemable at par. The whole of the debentures are matured for repayment. Further the Company has not provided any interest on such debentures after 1st day of July, 2002, as detailed in Note 5.01 above. Therefore the question of disclosure as to rate of interest etc. does not arise. In the opinion of the Management, the Market Value of the security after considering provisions made in the books and also the property agreed to be sold as detailed in note 3.01, offered to the holders of the aforesaid Debenture is sufficient to cover the liability.

Note 10: The balances held under "unpaid matured unsecured public deposits", "unpaid matured secured non- convertible debentures", "unpaid unsecured subordinated debts", interest accrued on the aforesaid deposit/ debenture/subordinated debts and "Other Payables" are subject to confirmation.

Note 11: The Company has not received information from vendors regarding their status under Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosure relating to amounts unpaid as at the year end together with interest paid/payable under the aforesaid Act has not been given.

Note 12. Other item also includes balance lying unpaid after adjusting deposits with loans borrowed against it, tax deducted at source remitted subsequently, other amounts received in the ordinary course of business, which are not material in nature etc.

Note 13: The Inventories are valued at lower of cost and net realisable value except in the case of unquoted shares. Unquoted Shares held as inventories valued at lower of cost and breakup value. The list of Shares held as stock in trade is as below:

Note 14: Cash and Cash equivalents does not include Term Deposits kept with a maturity period of beyond 3 months, earmarked balances with banks and bank deposits held as margin money or security against borrowings etc. The same are being disclosed in Note No. 7 or 12 as the case may be, as detailed in note no. 10.02 below.

Note 15: The details of total cash and bank balances is as below (including earmarked bank balances, bank deposits held as security etc.)

Note 16:The Company had assigned under an assignment deed certain debts & recoverable consisting inter-alia stock on hire along with equal liabilities of the Company to the extent of Rs. 26,62,92 thousand on 30.09.1998 to Vedachala Electronics & Financial Services Private Limited (VEFSPL). The company had discharged the assigned liabilities of VEFSPL on its failure to service the same in terms of the Assignment deed, which has resulted in Rs. 21,13,32 thousand (P.Y. Rs. 21,13,25 thousands) receivable from VEFSPL. The company based on the estimated recovery has made a provision of Rs. 21,13,32 thousand (P.Y. Rs. 21,13,25 thousands) against the receivables of VEFSPL. The unsecured Loans as disclosed in the above schedule includes this amount.

Note 17: The balances in Secured Loans, Unsecured Loans and Other Loans & Advances as above are subject to confirmation.

Note 18: Other Loans and advances represents departmental deposit, tour advances, and other petty advances made in the ordinary course of business.

Note 19: Other receivables represents sundry amounts due from borrowers, hirers etc., which are not material in nature.

Note 20: There are no purchases/sales of stock in trade during the year and also during the immediate previous year.

Note 21: Disclosure as required under Accounting Standard 15 i.e. Employee benefits, given under Note No. 23.09.

Note 22: Note No. 5.01 forms part of this note, which may also be referred to.

Note 23: Depreciation as above comprises of depreciation on the assets of which the useful life is determined to be Nil as on 1st April, 2014 Rs. 14985 thousands and depreciation for the year Rs. 1320 thousands.

Note 24: The present activity of the Company is being restricted to recovery of dues and repayment of the debts. Accordingly the income of the Company depends upon the recoveries made during the period, which varies substantially on year to year basis. Therefore the Company has disclosed the amount of Bad debts recovered, reversal of provisions for NPA and Bad debts written off under the head "Exceptional Item".


Mar 31, 2014

Note 1.02: Rights, preferences and restrictions attached to shares Equity Shares:

The equity shares having a par value of Rs. 10 per share. Each shareholder is eligible for one vote per each share held. The dividend proposed if any, by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in the case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company (after distribution of all preferential amounts including payment to the preference shareholders) in proportion to their shareholding.

Preference Shares:

Non-Cumulative Redeemable Preference Shares shall be redeemable at par after the expiry of 12 months but not later than 20 years from the respective dates of allotment at the option of the holders of such Shares by giving 3 months notice or at the discretion of the Board of Directors. The shares are entitled for preferential right over dividend (before the equity shareholders) at the rate of 11%, which is to be proposed by the Board of Directors, which is subject to the approval of the shareholders, in the ensuing Annual General Meeting, except in the case of payment of dividend as "interim dividend". However the shares are Non-Cumulative and therefore the shareholders are not entitled to carry forward the dividend of a year to the forthcoming year/s, in case the same is not declared in a year. In the event of liquidation, the such shareholders are eligible to receive the face value (after distribution of all preferential amounts) before the distribution of assets to the equity shareholders. In case the assets available are not sufficient to cover up the face value, then the same will be distributed in proportion to their shareholding, if the surplus available, after distribution of all preferential amounts.

Note 2.01: The Company during the year with a view towards restructuring its liabilities has settled deposits/ debentures/subordinated debts at discounted rates. The same has been done with due consent of the parties to deposits, debentures and debts. The interest write back pertaining to deposits/debentures/ subordinated debts Rs. 367 thousands (P.Y. Rs. 197 thousands) is treated as Extraordinary Incpme in the Profit and Loss Account. Principal write back arising out of such settlement Rs. 14,96 Thousands (P.Y. Rs. 61,94 thousands) is considered as capital receipt and taken directly to Capital Reserve (viz: Capital Reserve 2) as above. This has been done as per the accounting policy followed by the Company, as stated in note no. 24.01 (J). The Company had made similar settlements during the earlier years also, by giving the similar accounting treatment.

Note 2.02: Special reserve was created during earlier year/s, pursuant to Reserve Bank of India (Amendment) Act, 1997. .

Note 3.01: Advance for Sale of Property as disclosed above represents amount received in advance in respect of the immovable property (Land & Building - Free Hold) agreed to be sold.

Note 3.02: The breakup lease security deposit (premises) is as follows: due to related parties Rs. 75,00 thousands, (P.Y. Rs. 75,00 thousands), due to others Rs. 25,03 thousands (P.Y Rs. 30,00 thousands).

Note 4.01: The liability in respect of leave encashment, provision made on an estimated basis., considering the fact the amount involved therein is not material.

Note 4.02: The Company has made the provision of Rs. 353 thousands towards gratuity in respect of deficit of Present value of obligations over the fair value of Plan Assets, during the year ending 31st March, 2009. The Management is of the opinion that the provisions so made is adequate, considering the fact that "Fair value of Plan Assets is more than the Present value of obligations" as on 31st March, 2014.

Note 5.01: The Company has stopped accepting/renewing deposits, debentures and subordinated debts with effect from 1st day of July, 2002. Therefore and also considering the fact that the public deposits accepted by the Company are fully matured, the Company has not created the floating charge in favour of the depositors, on the statutory liquid assets invested in terms of directives issued by Reserve Bank of India.

During the year ending 31 st March, 2005 the Scheme of Compromise and Arrangement under Section 391 Of the Companies Act, 1956 to effect the restructure of Company''s debts particularly Debentures and Subordinated Debts of the Company was framed and presented before the Honorable High Court of Karnataka Accordingly the meeting of the Shareholders, Debentures Holders and Subordinated Debt holders were held on 20th April, 2005. The scheme as proposed had provided for payment of principal in a phased manner over 60 months from the effective date and payment of interest accrued till 30th June, 2002, within 72 months from the effective date. The scheme as proposed, do not provide for accrual of interest after 30th June, 2002. (For the above purpose the effective date means the date on which the Order of the High Court of Karnataka sanctioning the Scheme of Arrangement is filed with the Registrar of Companies in Karnataka.)

On 10th July, 2009, Honorable High Court of Karnataka has directed the Company to submit the details of payments made to Non-Convertible Debenture holders and subordinated debt holders from 1st April, 2005. Accordingly the details were furnished to Honorable Court. It was submitted before the Honorable Court that the Company has settled substantial portion of Non-Convertible Debentures and Subordinated Debts and it was therefore felt that the scheme requires to be changed having regard to the settlements already made and quantum of non convertible debentures and subordinated debts remaining to be settled. Therefore the Company had proposed to withdraw the scheme of arrangement from the Honorable High Court of Karnataka, with an option to present a new scheme of arrangement. The Honorable High Court of Karnataka has permitted the Company to withdraw the petition, with liberty to file a fresh petition, vide its order dated 28th October, 2009. Accordingly the Company is exploring the possibility of proposing a fresh petition to be filed before the Honorable High Court of Karnataka.

The total of the principal sum and interest due in respect of Public deposits/debentures/subordinated debts as on 31st March, 2002 (i.e. as on the last date of the financial year, immediately preceding the year in which the Company has stopped payment of its debts) was Rs. 1,07,44,26 thousands. The Company has settled the major portion of the aforesaid dues from time to time, at the discounted rates (which includes settlement of principal at discounted rates and partial/full waiver of interest). Out of the aforesaid amount, a sum of Rs. 27,79,40 thousands (P,Y. Rs. 28,19,89 thousands) is remained unpaid as on the date of the Balance Sheet, thereby the liability of the Company reduced considerably over the period of time.

Further there are many instances, where the Company has received the orders from various Consumer Courts (including the Appellate Authorities/Courts acting under the Consumer Protection Act), regarding the repayment or proceeds of debentures/debts/deposits with interest and other costs. However the many of such depositors/debentureholders/debt holders have approached the Company and Company has settled their dues at the mutually agreed rates, which also includes settlement at discounted rates. Many of the remaining customers have approached the Company for settlement. The Company is continuing to put more efforts on realisation of the dues, sale of assets etc., so that its debts can be settled at the earliest possible date. Many of the remaining depositors/debenture holders/debt holders have approached the Company for settlement of their dues and the Company is in the process for the same. ''

Considering the above facts, the Company has not provided/recognised for interest after 30th June, 2002, on deposits/debentures/subordinated debts and interest on advances taken on such instruments. All the aforesaid deposits/debentures/subordinated debts are fully matured for repayment. Considering the facts that the Company has settled the dues of depositors/debenture holders/debt holders at the discounted rates as stated above, that the many of the remaining customers have approached the Company for settlement of their dues, that the orders issued by the various consumer courts including the appellate authorities/courts therein, that the Company has settled the many of such consumer court cases, that the total debts of the Company reduced considerably because of settlement as aforesaid and that the Company is exploring the possibility of framing the new scheme of arrangement, it is not feasible for the Company to ascertain accurately its liability on any given date. The Company has. in view of the above and also considering the fact that there are no unclaimed liabilities, the matured debentures, matured deposits, matured subordinated debts and interest payable including unencashed interest cheques on such deposits/debentures/debts has been , considered as "not due to be transferred to Investor Education and Protection Fund".

Note 5.02: Other Payables include balance lying unpaid after adjusting deposits with loans borrowed against it and unencashed stale interest cheques. Pending reconciliation of the same for which the Company has initiated a process and also for reasons as given in note 5.01 above, the same has not been considered as amount due to Investor Education and Protection Fund.

Note 5.03: Unpaid Secured Non-convertible Debentures are secured by mortgage on Land & Buildings (Free hold and Lease Hold) situated at Udupi District of State of Karnataka, State of Goa, Nasik District & Mumbai in State of Maharashtra and floating charge on receivables and book debts. The debentures- were redeemable at par. The whole of the debentures are matured for repayment. Further the Company has not provided any interest on such debentures after 1st day of July, 2002, as detailed in Note 5.01 above. Therefore the question of disclosure as to rate of interest etc. does not arise. In the opinion of the Management, the Market Value of the security after considering provisions made in the books and also the property agreed to be sold as detailed in note 3.01, offered to the holders of the aforesaid Debenture is sufficient to cover the liability.

Note 5.04: The balances held under "unpaid matured unsecured public deposits", "unpaid matured secured non-convertible debentures",, "unpaid unsecured subordinated debts", interest accrued on the aforesaid deposit/debenture/subordinated debts and "Other Payables" are subject to confirmation.

Note 5.05: The Company has not received information from vendors regarding their status under Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosure relating to amounts unpaid as at the year end together with interest paid/payable under the aforesaid Act has not been given.

Note 5.06: Other Payable represents balance lying unpaid after adjusting deposits with loans borrowed against it, tax deducted at source remitted subsequently, other amounts received in the ordinary course of business, which are not material in nature etc.

Note 6.01: The Company had revalued its Land and Buildings as at 01.10.1998 by approved valuer and the resultant increase of Rs 3,93,71 thousand was credited to Revaluation Reserve. Incremental depreciation on revaluation is transferred to Profit and Loss Account. Accordingly the whole value of lease hold land Rs. 22,620 thousands represents revalued portion, which has not been amortised till the date of Balance Sheet. Accordingly the revalued portion of lease hold land still stands to the credit of "Revaluation Reserve", which would be adjusted on termination of the lease. .

Note 6.02: Land and Building (freehold) also includes the property agreed to be sold, as detailed in Note No. 3.01.

Note 6.03: Note 24.07, with regard to impairment of Assets, also forms part of this Note, which may be referred to.

Note 9.01: The Inventories are valued at lower of cost and net realisable value except In the case of unquoted shares. Unquoted Shares held as inventories valued at lower of cost and breakup value. The list of Shares held as stock in trade is as below: ''

Aggregate Value of 1. Unquoted Shares Rs. 91,43 thousands (P.Y. Rs. 91,43 thousands).

2. Quoted Shares Rs. 1 thousands (P.Y. Rs. 1 thousands). Market value of quoted Shares Rs. 1 thousands (P.Y. Rs. 1 thousands).

Note 7.01: Cash and Cash equivalents does not include Term Deposits kept with a maturity period of beyond 3 months, earmarked balances with banks and bank deposits held as margin money or security against borrowings etc. The same are being disclosed in Note No. 8 or 13 as the case may be, as detailed in note no. 11.02 below.

Note 7.02: The details of total cash and bank balances is as below (including earmarked bank balances, bank deposits held as security etc.)

Note 8.01: The Company had assigned under an assignment deed certain debts & recoverable consisting inter alia stock on hire along with equal liabilities of the Company to the extent of Rs. 26,62,92 , thousand on 30.09.1998 to Vedachala Electronics & Financial Services Private Limited (VEFSPL).

The company had discharged the assigned liabilities of VEFSPL on its failure to service the same in terms of the Assignment deed, which has resulted in Rs. 21,13,25 thousand (P.Y. Rs. 21,13,15 thousands) receivable from VEFSPL. The company based on the estimated recovery has made a provision of Rs. 21,13,25 thousand (P.Y. Rs. 21,13,15 thousands) against the receivables of VEFSPL. The unsecured Loans as disclosed in the above schedule includes this amount.

Note 8.02: The balances in Secured Loans, Unsecured Loans and Other Loans & Advances as above are subject to confirmation. .

Note 8.03: Other Loans and advances represents departmental deposit, tour advances, and other petty advances made in the ordinary course of business.

Note 9.01: Disclosure as required under Accounting Standard 15 i.e. Employee benefits, given under . Note No. 24.09.

Note 10.01: Note No. 5.01 forms part of this note, which may also be referred to.

Note 11.01: The present activity of the Company is being restricted to recovery of dues and repayment of the debts. Accordingly the income of the Company depends upon the recoveries made during the period, which varies substantially on year to year basis. Therefore the Company has disclosed the amount of Bad debts recovered, reversal of provisions for NPA and Bad debts written off under the head "Exceptional Item".

Note 11.02: Prior Period Adjustments (Expenses) of previous year has arisen on account of settlement of debts done during the earlier year/s.

11.03: The company has been incurring substantial losses over the last few years and major portion of its funds are blocked in non-performing assets. In view of the same there is considerable uncertainty that the company will continue as a going concern and meet its commitments to its creditors. The accounts however have been prepared on the going concern basis in view of management''s efforts, to settle the liabilities with the debenture holders and subordinated debt holders by exploring the possibility of submitting a new scheme as detailed in Note No. 5.01 and the management is being hopeful of recovery of dues from borrowers so that dues of creditors can be settled.

11.04: The company has not recognised the net deferred tax asset which constitutes mainly of carry forward losses, excess depreciation claimed in Income Tax and Provisions for doubtful debts, as a matter of prudence.

11.05: Disclosures in respect of related parties with whom transactions have taken place during the year:

A. Key Management Personnel and his relatives Sri T. Narayan M. Pai,

Sri T. Sanjay Pai

11.05: Contingent & other Liabilities ;

a. Liability on debentures assigned to Vedachala Electronics and Financial Services Private Limited inclusive of interest accrued is Rs. 17,99 thousand (P.Y. Rs. 17,95 thousand.), without considering interest due on or after 1st day of July, 2002.

b. Liability in respect of damages and others in respect of suits against the Company before various Courts, Consumer Courts etc. (in respect of repayment of deposits/debentures/debts with interest & other costs) has not been quantified and provided, due to lack of information with the company and also considering the fact that many of such customers have approached the Company for settlement at discounted rates. The collection of information is under process.

c. No provision made for disputed income tax liability for various years wherever department has preferred an appeal before the Tribunal, High Court. The question of quantification of liability thereon, does not arise, for the reason that the cases were allowed in favour of the Company, by the lower appellate authorities.

11.06: The Management of the Company is of the opinion that the director of the Company are not disqualified u/s 274(1) (g) of Companies Act, 1956, [in spite of the fact that the Company has stopped repaying matured Debentures/debts/deposits and interest thereon as detailed in Note No. 5.01], for the reason that the Company is exploring the possibility of presenting a new scheme of arrangement, as detailed in the aforesaid note.

The Director of the Company Sri Chandappa R. Sherigar is the director of another Company. As evident from the records/documents produced before the Company, the another company has also stopped payment of matured deposits/debentures and interest thereon after 30th June, 2002. The Company has received a letter from him that he is not disqualified u/s 274(1) (g) of Companies Act, 1956 for the reason that the another Company is exploring the possibility of making an application before the Honourable High Court of Karnataka U/S 391 of the Companies Act, 1956 for restructuring of its debts.

11.07: The assets of the Company are not valued, considering the cost involved therein. However the management is of the opinion that the carrying cost of the asset (including that of leased assets after considering the Lease equalization Charge) does not exceed its recoverable value. Further the Company does not have any information whether internal or external, that indicates that "impairment loss may have occurred". Accordingly the question of impairment of assets does not arise.

11.08: The Company has not carried on any non banking business other than repayment of liability out of recoveries. All the payments have been centralized in head office. Powers are not given to the Branches to incur the expenses. In the prevailing circumstances there is no need for internal audit either at the H O level or at the Branch Level. Therefore the management has took a decision not to have internafaudit system.

11.09: Employee Benefits:

Brief description of the Plans:

a) The Company has two schemes for long term benefits such as provident fund and gratuity. In case of funded schemes, the funds are recognized by the Income tax authorities and administered through trustees/ appropriate authorities. The Company''s defined contribution plan is employees'' provident fund (under the provisions of the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952) wherein the Company has no further obligation beyond making the contributions.

The Company is also contributing towards Employee State Insurance Plan, as per statutory requirements, wherein the Company has no further obligation beyond making the contributions.

The Company is also providing employee benefit by way of encashment of earned leave. The provision for the same has been made on estimated basis. The amount involved therein is not material, considering the size of the Company. The Company has not opted for actuarial valuation, considering the cost involved and also the concept of materiality.

The Company''s defined benefit plan is gratuity.

b) Charge to the Profit and Loss Account based on contributions:

The Company''s contribution to Provident Fund charged to Statement of Profit and Loss during the year is Rs. 58 thousands (P.Y. Rs. 56 thousands).

The Company''s Contribution to Employee State Insurance Plan charged to Statement Profit and Loss during the year is Rs. 20 thousands (P.Y. Rs. 17 thousands).

The Companies liability towards gratuity to employees covered by group gratuity policy with LIC of India. Premium paid on this account is Rs. 36 thousands (P.Y. Rs. 36 thousands)!

The detail of provision for leave encashment is as under: Provision as on 1st April, 2013 Rs. 88 thousands (P.Y. Rs. 1,09 thousands) Amount charged to the Statement profit & loss during the year Rs. Nil (P.Y. Rs. Nil). Actual payment during the year is NIL (P.Y, Rs. 21 thousands). Provision as on 31st March, 2014 Rs. 88 thousands (P.Y. Rs. 88 thousands). -

c) Disclosures for defined gratuity benefit plans based on actuarial reports obtained from Life Insurance Corporation of India as on 31st March, 2014:

Valuation Method: Projected Unit Credit Method.

(*) The Life Insurance Corporation of India has not given these information.

The Company has written to Life Insurance Corporation of India to furnish information of the Defined Gratuity Benefit Plan, in the manner required under Accounting Standard 15. Accordingly the Life Insurance Corporation of India has given the information as given above, which has been relied by the Auditors.

(#) The Company has made the provision of Rs. 353 thousands in respect of deficit of Present value of obligations over the fair value of Plan Assets, during the year ending 31st March, 2009 and therefore the question of making further provision does not arise.

12.1: In the opinion of the Board of Directors, the assets listed under the head Non Current Assets & Current Assets (other than Fixed Assets and Non Current Investments) in the Balance Sheet (viz: assets covered under Note No. 8 to 13), have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated.

12.2: The Company has earned profit during the financial year i.e. year ending 31st March, 2014, due to Exceptional Income as stated in Note 21 and Extraordinary Income as stated in Note 22. The Company would have incurred loss, if the income as aforesaid were not earned.

12.3: The Company is operating under one Geographical and Business segment. Therefore the question of making disclosures as required under Accounting Standard 17 does not arise.

12.4 Previous Year''s amounts are regrouped/reclassified/rearranged, wherever necessary.

Notes:

1. Previous Year''s figures are regrouped, rearranged and reclassified wherever necessary.

2. Cash Flow statement is being prepared under "Indirect -Method" as laid down under Accounting Standard 3 of, Companies (Accounting Standards) Rules 2006.

3. Cash and Cash equivalents does not include term deposit kept with Banks which are kept for maturity period beyond 3 months/earmarked bank balances. These are disclosed in Note No. 8 & 13 of Balance Sheet.


Mar 31, 2013

Note 1.01: The present activity of the Company is being restricted to recovery of dues and repayment of the debts. Accordingly the income of the Company depends upon the recoveries made during the period, which varies substantially on year to year basis. Therefore the Company has disclosed the amount of Bad debts recovered, reversal of provisions for NPA and Bad debts written off under the head "Exceptional Item".

Note 1.02: Prior Period Adjustments has arisen on acocunt of settlement of debts done during the earlier year/s.

2.01 The company has been incurring substantial losses over the last few years and major portion of its funds are blocked in non-performing assets. In view of the same there is considerable uncertainty that the company will continue as a going concern and meet its commitments to its creditors. The accounts however have been prepared on the going concern basis in view of management''s efforts to settle the liabilities with the debenture holders and subordinated debt holders by exploring the possibility of submitting a new scheme as detailed in Note No. 5.01 and the management is being hopeful of recovery of dues from borrowers so that dues of creditors can be settled.

2.02 The company has not recognised the net deferred tax asset which constitutes mainly of carry forward losses, excess depreciation claimed in Income Tax and Provisions for doubtful debts, as a matter of prudence.

2.03 Disclosures in respect of related parties with whom transactions have taken place during the year:

A. Key Management Personnel and his relatives Sri T. Narayana M. Pai

Sri T. Sanjay Pai

B. Associate Companies

Vedachala Electronics and Financial Services Pvt. Limited Manipal Housing Finance Syndicate Limited

2.04 Contingent & other Liabilities :

a. Liability on debentures assigned to Vedachala Electronics and Financial Services Private Limited inclusive of interest accrued is Rs.17,99 thousand. (P.Y. Rs.18,11 thousand), without considering interest due on or after 1st day of July, 2002.

b. Liability in respect of damages and others in respect of suits against the Company before various Courts, Consumer Courts etc. (in respect of repayment of deposits/debentures/debts with interest & other costs) has not been quantified and provided, due to lack of information with the company and also considering the fact that many of such customers have approached the Company for settlement at discounted rates. The collection of information is under process.

c. No provision made for disputed income tax liability for various years wherever department has preferred an appeal before the Tribunal, High Court. The question of quantification of liability thereon, does not arise, for the reason that the cases were allowed in favour of the Company, by the lower appellate authorities.

2.05 The Management of the Company is of the opinion that the directors of the Company are not disqualified u/s 274(1) (g) of Companies Act, 1956, [in spite of the fact that the Company has stopped repaying matured Debentures/debts/deposits and interest thereon as detailed in Note No. 5.01], for the reason that the Company is exploring the possibility of presenting a new scheme of arrangement, as detailed in the aforesaid note.

The Director of the Company Sri Chandappa R. Sherigar is the directors of another Company. As evident from the records/documents produced before the Company, the another company has also stopped payment of matured deposits/debentures and interest thereon after 30th June, 2002. The Company has received a letter from him that he is not disqualified u/s 274(1) (g) of Companies Act, 1956 for the reason that the another Company is exploring the possibility of making an application before the Honourable High Court of Karnataka u/s 391 of the Companies Act, 1956 for restructuring of its debts.

2.06 The assets of the Company are not valued, considering the cost involved therein. However the management is of the opinion that the carrying cost of the asset (including that of leased assets after considering the Lease equalization Charge) does not exceed its recoverable value. Further the Company does not have any information whether internal or external, that indicates that "impairment loss may have occurred". Accordingly the question of impairment of assets does not arise.

2.07 The Company has not carried on any non-banking business other than repayment of liability out of recoveries. All the payments have been centralized in head office. Powers are not given to the Branches to incur the expenses. In the prevailing circumstances there is no need for internal audit either at the H.O. level or at the Branch Level. Therefore the management has took a decision not to have internal audit system. ''

2.08 Employee Benefits:

Brief description of the Plans :

a) The Company has two schemes for long-term benefits such as provident fund and gratuity. In case of funded schemes, the funds are recognized by the Income tax authorities and administered through trustees / appropriate authorities. The Company''s defined contribution plan is employees'' provident fund (under the provisions of the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952) wherein the Company has no further obligation beyond making the contributions.

The Company is also contributing towards Employee State Insurance Plan, as per statutory requirements, wherein the Company has no further obligation beyond making the contributions.

The Company is also providing employee benefit by way of encashment of earned leave. The provision for the same has been made on estimated basis. The amount involved therein is not material, considering the size of the Company. The Company has not opted for actuarial valuation, considering the cost involved and also the concept of materiality.

The Company''s defined benefit plan is gratuity.

b) Charge to the Profit and Loss Account based on contributions:

The Company''s contribution to Provident Fund charged to Statement of Profit and Loss during the year is Rs.56 thousands. (P.Y.: Rs.58 thousands)

The Company''s Contribution to Employee State Insurance Plan charged to Statement Profit and Loss during the year is Rs.17 thousands (P.Y. Rs.18 thousands)

The Companies liability towards gratuity to employees covered by group gratuity policy with LIC of India. Premium paid on this account is Rs.36 thousands (P.Y. Rs.1,67 thousands).

The detail of provision for leave encashment is as under: Provision as on 1s'' April, 2012 Rs.1,09 thousands (P.Y. Rs.1,09 thousands). Amount charged to the Statement profit & loss during the year Rs. Nil (P.Y. Rs. Nil). Actual payment during the year Rs.21 thousands (P.Y. Rs. Nil). Provision as on 31s1 March, 2013 Rs.88 thousands (P.Y. Rs.1,09 thousands).

2.09 In the opinion of the Board of Directors, the assets listed under the head Non Current Assets & Current Assets (other than Fixed Assets and Non-Current Investments) in the Balance Sheet (viz. assets covered under Note No. 8 to 13), have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated.

2.10 The Company has earned profit during the immediate previous financial year i.e. year ending 31s'' March, 2012, mainly due to Exceptional Income as stated in Note 21 and Extra Ordinary Income as stated in Note 22.

2.11 The Company is operating under one Geographical and Business segment. Therefore the question of making disclosures as required under Accounting Standard 17 does not arise.

2.12 Previous Year''s amounts are regrouped/reclassified/rearranged, wherever necessary.


Mar 31, 2012

Note 1.02: Rights, preferences and restrictions attached to shares Equity Shares:

The equity shares having a par value of Rs. 10 per share. Each shareholder is eligible for one vote per each share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in the case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company (after distribution of all preferential amounts including payment to the preference shareholders) in proportion to their shareholding.

Preference Shares:

Non-Cumulative Redeemable Preference Shares shall be redeemable at par after the expiry of 12 months but not later than 20 years from the respective dates of allotment at the option of the holders of such Shares by giving 3 months notice or at the discretion of the Board of Directors. The shares are entitled for preferential right over dividend (before the equity shareholders) at the rate of 11%, which is to be proposed by the Board of Directors, which Is subject to the approval of the shareholders, in the ensuing Annual General Meeting, except In the case of payment of dividend as "interim dividend". However the shares are Non-Cumulative and therefore the shareholders are not entitled to carry forward the dividend of a year to the forth coming year/s, in case the same is not declared in a year. In the event of liquidation, the such shareholders are eligible to receive the face value (after distribution of all preferential amounts) before the distribution of assets to the equity shareholders. In case the assets available are not sufficient to cover up the face value, then the same will be distributed in proportion to their shareholding, if the surplus available, after distribution of all preferential amounts.

Note 2.01: The Company during the year with a view towards restructuring its liabilities has settled deposits/ debentures/subordinated debts at discounted rates without interest. The same has been done with due consent of the parties to deposits, debentures and debts. The interest write back pertaining to deposits/debentures/subordinated debts Rs.41,25 thousands (P Y Rs.36,91 thousands) is treated as Extra-Ordinary Income in the Profit and Loss Account. Principal write back arising out of such settlement Rs.1,67,11 thousands (P Y Rs. 1,46,31 thousands) is considered as capital receipt and taken directly to Capital Reserve (viz: Capital Reserve 2) as above. This has been done as per the accounting policy followed by the Company, as stated in Note No. 24.01 (J).

Note 2.02 Special reserve was created during earlier year/s, pursuant to Reserve Bank of India (Amendment) Act 1997.

Note 3.01: Advance for Sale of Property as disclosed above represents amount received in advance in respect of the immovable property agreed to be sold. This immovable property is being charged to debentures as detailed in note no.5.03 and therefore will be transferred at a future date, after obtaining the necessary approvals from the appropriate authorities.

3.02: The break-up lease security deposit (premises) is as follows: due to related parties Rs.75,00 thousands, (P Y Rs.75,00 thousands), due to others Rs.30,00 thousands (P Y Rs.30,00 thousands).

Note 4.01: The liability in respect of leave encashment, provision made on an estimated basis., considering the fact the amount involved therein is not material.

4.02: The Company has made the provision of Rs.353 thousands towards gratuity in respect of deficit of Present value of obligations over the fair value of Plan Assets, during the year ending 31st March 2009.

Note 5.01: During the year ending 31st March 2005 the Scheme of Compromise and Arrangement under Section 391 of the Companies Act 1956 to effect the restructure of Company's debts particularly Debentures and subordinated debts of the Company was framed and presented before the Honorable High Court of Karnataka. Accordingly the meeting of the Shareholders, Debenture Holders and Subordinated Debt holders were held on 20th April, 2005. The scheme as proposed had provided for payment of principal in a phased manner over 60 months from the effective date and payment of interest accrued till 30lfl June 2002, within 72 months from the effective date. The scheme as proposed, do not provide for accrual of interest after 30th June 2002. (For the above purpose the effective date means the date on which the Order of the High Court of Karnataka sanctioning the Scheme of Arrangement is filed with the Registrar of Companies in Karnataka.)

On 10th July 2009, Honorable High Court of Karnataka has directed the Company to submit the details of payments made to Non Convertible Debenture holders and subordinated debt holders from 1st April 2005. Accordingly the details were furnished to Honorable Court. It was submitted before the Honorable Court that the Company has settled substantial portion of Non Convertible Debentures and Subordinated Debts and It was therefore felt that the scheme requires to be changed having regard to the settlements already made and quantum of non convertible debentures and subordinated debts remaining to be settled. Therefore the Company had proposed to withdraw the scheme of arrangement from the Honorable High Court of Karnataka, with an option to present a new scheme of arrangement. The Honorable High Court of Karnataka has permitted the Company to withdraw the petition, with liberty to file a fresh petition, vide its order dated 28th October 2009. Accordingly the Company is exploring the possibility of proposing a fresh petition to be filed before the Honorable High Court of Karnataka.

"Considering the above, the Company has not provided/recognized for interest after 30th June 2002, on debentures/subordinated debts and interest on advances taken on such instruments. Pending presentation of fresh proposal as aforesaid and final outcome of the new Scheme (to be prepared and presented), the contingent Liability on account of Interest on Deposits/Debentures etc. accruing after30th June 2002,is not quantifiable.

The public deposits accepted by the Company are fully matured. The Company has not provided for interest on these deposits after 3Oth June 2002. The interest not so provided for is not accurately quantifiable.

In view of the above and also considering the fact that there are no unclaimed liabilities, the matured debentures, matured deposits, matured subordinated debts and interest payable including unencashed interest cheques on such deposits/debentures/debts has been considered as "not due to be transferred to Investor Education and Protection Fund".

The Company has stopped accepting/renewing deposits, debentures and subordinated debts with effect from 1st day of July 2002. Therefore and also considering the fact that the public deposits accepted by the Company are fully matured, the Company has not created the floating charge in favour of the depositors, on the statutory liquid assets invested in terms of directives issued by Reserve Bank of India.

5.02 Other Payables include balance lying unpaid after adjusting deposits with loans borrowed against it and unencashed stale interest cheques. Pending reconciliation of the same for which the Company has initiated a process and also for reasons as given in note 5.01 above, the same has not been considered as amount due to Investor Education and Protection Fund.

5.03 Unpaid Secured Non-convertible Debentures are secured by mortgage on Land - Freehold & Buildings - Freehold, as disclosed in Note No.6 and floating charge on receivables and book debts. The debentures were redeemable at par. The whole of the debentures are matured for repayment. Further the Company has not provided any interest on such debentures after 1st day of July 2002, as detailed in Note 5.01 above. Therefore the question of disclosure as to rate of interest etc. does not arise. In the opinion of the Management, the Market Value of the security after considering provisions made in the books and also the property agreed to be sold as detailed in note 3.01, offered to the holders of the aforesaid Debenture is sufficient to cover the liability.

5.04 The balances held under "unpaid matured unsecured public deposits", "unpaid matured secured non- convertible debentures", "unpaid unsecured subordinated debts", interest accrued on the aforesaid deposit/debenture/subordinated debts and "Other Payables" are subject to confirmation.

5.05 The Company has not received information from vendors regarding their status under Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosure relating to amounts unpaid as at the year end together with interest paid/payable under the aforesaid Act has not been given.

5.06 Other Payable represents balance lying unpaid after adjusting deposits with loans borrowed against it, tax deducted at source remitted subsequently, other amounts received in the ordinary course of

Note 6.01: The Company had revalued its Land and Buildings as at 01.10.1998 by approved valuer and the resultant increase of Rs.3,93,71 thousand was credited to Revaluation Reserve. Incremental depreciation on revaluation is transferred to Profit and Loss Account. Accordingly the whole value of leasehold land Rs.22620 thousands represents revalued portion, which has not been amortized till the date of Balance Sheet. Accordingly the revalued portion of leasehold land still stands to the credit of "Revaluation Reserve", which would be adjusted on termination of the lease.

Note 6.02: Land and Building (freehold) also includes the property agreed to be sold, as detailed in note no. 3.01.

Note 7.01: Cash and Cash equivalents does not include Term Deposits kept with a maturity period of beyond 3 months, earmarked balances with banks and bank deposits held as margin money or security against borrowings etc. The same are being disclosed in Note No.8 or 13 as the case may be, as detailed in note no. 11.02 below.

Note 8.01: The Company had assigned under an assignment deed certain debts & recoverable consisting inter alia stock on hire along with equal liabilities of the Company to the extent of Rs. 26,62,92 thousand on 30.09.1998 to Vedachala Electronics & Financial Services Private Limited (VEFSPL). The company had discharged the assigned liabilities of VEFSPL on its failure to service the same in terms of the Assignment deed, which has resulted in Rs. 21,13,03 thousand (P Y Rs. 21,36,74 thousands) receivable from VEFSPL. The company based on the estimated recovery has made a provision of Rs.21,13,03 thousand (P Y Rs.21,36,74 thousands) against the receivables of VEFSPL. The unsecured Loans as disclosed in the above schedule includes this amount.

8.02 The balances in Secured Loans, Unsecured Loans and Other Loans & Advances as above are subject to confirmation.

8.03 Other Loans and advances represents departmental deposit, tour advances, and other petty advances made in the ordinary course of business.

Note 9.01: The present activity of the Company is being restricted to recovery of dues and repayment of the debts. Accordingly the income of the Company depends upon the recoveries made during the period, which varies substantially on year to year basis. Therefore the Company has disclosed the amount of Bad debts recovered, reversal of provisions for NPA and Bad debts written off under the head "Exceptional Item".

9.02 The company has been incurring substantial losses over the last few years and major portion of its funds are blocked in non-performing assets. In view of the same there is considerable uncertainty that the company will continue as a going concern and meet its commitments to its creditors. The accounts however have been prepared on the going concern basis in view of management's efforts to settle the liabilities with the debenture holders and subordinated debt holders by exploring the possibility of submitting a new scheme as detailed in Note No. 5.01 and the management is being hopeful of recovery of dues from borrowers so that dues of creditors can be settled.

9.03 The company has not recognized the net deferred tax asset which constitutes mainly of carry forward losses, excess depreciation claimed in Income Tax and Provisions for doubtful debts, as a matter of prudence.

9.04 Contingent & Other Liabilities:

a. Liability on debentures assigned to Vedachala Electronics and Financial Services Private Limited inclusive of interest accrued is Rs. 16,41 thousand. (P.Y. Rs. 22,23 thousand.), without considering interest due on or after 1st day of July 2002.

b. Liability in respect of damages and others in respect of suits against the Company before various Courts, Consumer Courts etc. (in respect of repayment of deposits/debentures/debts with interest & other costs) has not been quantified and provided, due to lack of information with the company. The collection of information is under process.

c. No provision made for disputed income tax liability for various years wherever department has preferred an appeal before the Tribunal, High Court for the reason that the appeal preferred before CIT (Appeals) and Tribunal were allowed in favour of the company. The amounts involved there in are not quantifiable.

9.05 The Management of the Company is of the opinion that the directors of the Company are not disqualified u/s 274(1) (g) of Companies Act, 1956 [in spite of the fact that the Company has stopped repaying matured Debentures/debts/deposits and interest thereon as detailed in note no. 5.01], for the reason that the Company is exploring the possibility of presenting a new scheme of arrangement, as detailed in the aforesaid note.

The Managing Director of the Company Sri T. Narayan M. Pai & the other director Sri Chandappa R. Sherigar are the directors of another Company. As evident from the records/documents produced before the Company, the another company has also stopped payment of matured deposits/debentures/debts and interest thereon after SO"1 June 2002. The Company has received a letter from them that they are not disqualified u/s 274(1) (g) of Companies Act, 1956 for the reason that the another Company is exploring the possibility of making an application before the Honourable High Court of Karnataka U/s 391 of Companies Act,1956 for restructuring of its debts.

9.06 The assets of the Company are not valued, considering the cost involved therein. However the management is of the opinion that the carrying cost of the asset (including that of leased assets after considering the Lease Equalization Charge) does not exceed its recoverable value. Further the Company does not have any information whether internal or external, that indicates that "impairment loss may have occurred". Accordingly the question of impairment of assets does not arise.

9.07 The Company has not carried on any non-banking business other than repayment of liability out of recoveries. All the payments have been centralized in head office. Powers are not given to the Branches to incur the expenses. In the prevailing circumstances there is no need for internal audit either at the H.O. level or at the Branch Level. Therefore the management has took a decision not to have internal audit

a) The Company has two schemes for long-term benefits such as provident fund and gratuity. In case of funded schemes, the funds are recognized by the Income tax authorities and administered through trustees / appropriate authorities. The Company's defined contribution plan is employees' provident fund (under the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952) where in the Company has no further obligation beyond making the contributions.

The Company is also contributing towards Employee State Insurance Plan, as per statutory requirements, wherein the Company has no further obligation beyond making the contributions. The Company is also providing employee benefit by way of encashment of earned leave. The provision for the same has been made on estimated basis. The amount involved therein is not material, considering the size of the Company. The Company has not opted for actuarial valuation, considering the cost involved and also the concept of materiality.

b) Charge to the Profit and Loss Account based on contributions:

The Company's contribution to Provident Fund charged to Statement of Profit and Loss during the year is Rs.58 thousands. (P Y : Rs.67 thousands).

The Company's Contribution to Employee State Insurance Plan charged to Statement of Profit and Loss during the year is Rs.18 thousands (P Y Rs.20 thousands).

The Companies liability towards gratuity to employees covered by group gratuity policy with LIC of India. Premium paid on this account is Rs.1,67 thousands ( P Y Rs. 1,72 thousands).

The detail of provision for leave encashment is as under: Provision as on 1st April 2011 Rs. 1,09 thousands ( P Y Rs.1,09 thousands). Amount charged to the Statement of Profit & Loss during the year Rs. Nil (P Y Rs. Nil). Actual payment during the year Rs. Nil. (P Y Rs.Nil). Provision as on 31st March 2012 Rs. 1,09 thousands (P Y Rs.1,09 thousands).

(*) The Life Insurance Corporation of India has not given these in formations.

The Company has written to Life Insurance Corporation of India to furnish information of the Defined Gratuity Benefit Plan, in the manner required under Accounting 15. Accordingly the Life Insurance Corporation of India has given the information as given above, which has been relied by the Auditors.

(#) The Company has made the provision of Rs.353 thousands in respect of deficit of Present value of obligations over the fair value of Plan Assets, during the year ending 31st March 2009 and therefore the question of making further provision does not arise.

9.8 The Company has incurred the profit during the year under audit mainly due to Exceptional income as stated in Note No. 21, extra ordinary income as stated in Note No.22 and also considering the fact that the revenue from operations earned on settlement with the borrower customers. The Company would have incurred loss, if the income as aforesaid were not earned.

9.9 In the opinion of the Board of Directors, the assets listed under the head Non-Current Assets & Current Assets (other than Fixed Assets and Non-Current Investments) in the Balance Sheet (viz: assets covered under Note No.8 to 13), have a value on realization in the ordinary course of business at least equal to the amount at which they are stated.

9.10 The Company is operating under one Geographical and Business segment. Therefore the question of making disclosures as required under Accounting Standard 17 does not arise.

9.11 Consequent to the notification of Revised Schedule VI under the Companies Act, 1956, the Balance Sheet & Statement of Profit and Loss for the year ended 31st March 2012 are prepared as per revised Schedule VI. The Company has prepared the aforesaid statements under pre-revised Schedule VI for the year ended 31st March 2011. Therefore for the purpose of disclosing the previous year's amounts (for the year ended 31st March 2011) in this financial statement, the Company has regrouped/reclassified the accounts of that year as per revised Schedule VI.


Mar 31, 2010

1. During the year ending 31st March, 2005 the Scheme of Compromise and Arrangement under Section 391 of the Companies Act, 1956 to effect the restructure of Companys debts particularly Debentures and subordinated debts of the Company was framed and presented before the Honorable High Court of Karnataka Accordingly the meeting of the Shareholders, Debentures Holders and Subordinated Debt holders were held on 20th April, 2005. The scheme as proposed had provided for payment of principal in a phased manner over 60 months from the effective date and payment of interest accrued till 30th June, 2002, within 72 months from the effective date. The scheme as proposed, do not provide for accrual of interest after 30th June, 2002. (For the above purpose the effective date means the date on which the Order of the High Court of Karnataka sanctioning the Scheme of Arrangement is filed with the Registrar of Companies in Karnataka.)

On 10th July, 2009, Honorable High Court of Karnataka has directed the Company to submit the details of payments made to Non Convertible Debenture holders and subordinated debt holders from 1st April, 2005. Accordingly the details were furnished to Honorable Court. It was submitted before the Honorable Court that the Company has settled substantial portion of Non Convertible Debentures and Subordinated Debts and it was therefore felt that the scheme requires to be changed having regard to the settlements already made and quantum of non convertible debentures and subordinated debts remaining to be settled. Therefore the Company had proposed to withdraw the scheme of arrangement from the Honorable High Court of Karnataka, with an option to present a new scheme of arrangement. The Honorable High Court of Karnataka has permitted the Company to withdraw the petition, with liberty to file a fresh petition, vide its order dated 28th October, 2009.

Accordingly the Company is exploring the possibility of proposing a fresh petition to be filed before the Honorable High Court of Karnataka.

Considering the above, the Company has not provided/recognised for interest after 30th June, 2002, on debentures/subordinated debts and interest on advances taken on such instruments. Pending presentation of fresh proposal as aforesaid and final outcome of the new Scheme (to be prepared and presented), the contingent Liability on account of Interest on Deposits/Debentures etc. accruing after 30th June, 2002, is not quantifiable.

The public deposits accepted by the Company are fully matured. The Company has not provided for interest on these deposits after 30th June, 2002. The interest not so provided for is not accurately quantifiable.

In view of the above and also considering the fact that there are no unclaimed liabilities, the matured debentures, matured deposits, matured subordinated debts and interest payable including unencashed interest cheques on such deposits/debentures/debts has been considered as "not due to be transferred to Investor Education and Protection Fund".

The Company has stopped accepting/renewing deposits, debentures and subordinated debts with effect from 1sl day of July, 2002. Therefore and also considering the fact that the public deposits accepted by the Company are fully matured, the Company has not created the floating charge in favour of the depositors, on the statutory liquid assets invested in terms of directives issued by Reserve Bank of India.

2. The company has been incurring substantial losses over the last few years and major portion of its funds are blocked in non-performing assets. In view of the same there is considerable uncertainty that the company will continue as a going concern and meet its commitments to its creditors. The accounts however have been prepared on the going concern basis in view of managements efforts to settle the liabilities with the debenture holders and subordinated debt holders by exploring the possibility of submitting a new scheme as detailed in Note No. 1 above and the management is being hopeful of recovery of dues from borrowers so that dues of creditors can be settled.

3. The Company had assigned under an assignment deed certain debts & recoverable consisting inter alia stock on hire along with equal liabilities of the Company to the extent of Rs. 26,62,92 thousand on 30-09-1998 to Vedachala Electronics & Financial Services Private Limited (VEFSPL). The company had discharged the assigned liabilities of VEFSPL on its failure to service the same in terms of the Assignment deed, which has resulted in Rs. 21,36,03 thousand (P.Y. Rs. 22,26,73 thousands) receivable from VEFSPL. The company based on the estimated recovery has made a provision of Rs.19,71,99 thousand (P.Y. Rs.16,95,36 thousands) against the receivables of VEFSPL.

4. The Company has not made provision for Non Performing Assets to the extent of Rs.1,70,00 thousands (P.Y. Rs. 5,41,82 thousands) including balance due from VEFSPL as required under RBI norms.

5. The Company during the year with a view towards restructuring its liabilities has settled deposits/debentures/ subordinated debts at discounted rates without interest. The same has been done with due consent of the parties to deposits, debentures and debts. The interest write back pertaining to deposits/debentures/ subordinated debts Rs.71,27 thousands (P.Y. Rs. 66,91 thousands) is treated as Extra-Ordinary Income in the Profit and Loss Account. Principal write back arising out of such settlement Rs.3,79,11 Thousands (P.Y. Rs. 3,48,62 thousands) is considered as capital receipt and taken directly to Capital Reserve in the Balance Sheet. This has been done as per the accounting policy followed by the Company, as stated in Note No. I (j) above.

6. Sundry Creditors include balance lying unpaid after adjusting deposits with loans borrowed against it and unencashed stale interest cheques. Pending reconciliation of the same for which the Company has initiated a process and also for reasons as given in para II (1) of this notes, the same has not been shown under Investor Education Protection Fund.

7. Debentures are secured by mortgage on immovable property and floating charge on receivables and book debts other than those specifically charged. The debentures are redeemable at par. In the opinion of the Management, the Market Value of the security after considering provisions made in the books and also the property agreed to be sold as detailed in Note No. Il(8) below, offered to the holders of the Secured Non-Convertible Debenture is sufficient to cover the liability. However the debentures are classified as Current Liabilities, for the reason that all such debentures are matured for repayment.

8. Advance for Sale of Property as disclosed in Schedule G of the Balance Sheet Rs.266 thousands (P.Y. Rs. 266 thousands), represents amount received in advance in respect of the immovable property agreed to be sold. This immovable property is being charged to debentures as detailed in Note No. II (7) above and therefore will be transferred at a future date, after obtaining the necessary approvals from the appropriate authorities.

9. Balances considered good under sundry debtors, unsecured loans, advances include accounts classified as Non Performing Assets and also where suits have been filed in the ordinary course of business. The management is of the opinion that the same are good and recoverable and are of the value stated.

10. Balances in Non Scheduled Bank comprises of Manipal Co-operative Bank Ltd. Rs. 41 (P.Y. Rs. 341). Maximum balance outstanding during the year Rs. 341 (P.Y. Rs. 341).

11. The Company had revalued its Land and Buildings as at 01-10-1998 by approved valuer and the resultant increase of Rs. 3,93,71 thousand was credited to Revaluation Reserve. Incremental depreciation on revaluation is transferred to Profit and Loss Account. The revalued portion of lease hold land amounting to Rs. 22620 thousands (P.Y. Rs. 22620 thousands) has not been amortized and accordingly the revalued portion of land still stands to the credit of "Revaluation Reserve". The same would be adjusted to the revaluation reserve on termination of the lease.

12. The balances of various parties in Hire purchase, Lease rent receivables, Bills purchased, Loans, Advances, Debtors, Deposits, Debentures, Subordinated Debts and Creditors are subject to confirmation.

13. Remuneration paid to the Managing Director during the year: Rs. Nil (RY. Rs. Nil).

14. The company has not recognised the net deferred tax asset which constitutes mainly of carry forward losses, excess depreciation claimed in Income Tax and Provisions for doubtful debts, as a matter of prudence.

15. Disclosures in respect of related parties with whom transactions have taken place during the year:

A. Key Management Personnel and his relatives

Sri T. Narayan M. Pai

Sri T. Sanjay Pai



B. Associate Companies

Vedachala Electronics and Financial Services Pvt. Limited

Manipal Housing Finance Syndicate Limited

16. Contingent and other Liabilities and liability towards retirement benefits:

a) Liability on debentures assigned to Vedachala Electronics and Financial Services Private Limited inclusive of interest accrued is Rs 22,48 thousand. (P.Y. Rs. 22,48 thousand), without considering interest due on or after 1st day of July, 2002.

b) Liability in respect of damages and others in respect of suits against the Company before various Courts, Consumer Courts etc. (in respect of repayment of deposits/debentures/debts with interest & other costs) has not been quantified and provided, due to lack of information with the company. The collection of information is under process.

c) No provision made for disputed income tax liability for various years wherever department has preferred an appeal before the Tribunal, High Court for the reason that the appeal preferred before CIT (Appeals) and Tribunal were allowed in favour of the company. The amounts involved there in are not quantifiable.

d) In respect of Gratuity, Companys liability is covered by Group Liability Policy of LIC of India. The Company has made the provision of Rs. Nil (P.Y.: Rs. 3,53,465/-), being the deficit in Present Value of Gratuity obligations over the Fair value of the Plan Assets held by LIC. The information as aforesaid has been obtained from M/s Life Insurance Corporation of India.

e) The liability in respect of leave encashment (if any) are provided on an estimated basis., considering the fact the amount involved therein is not material.

17. The Management of the Company is of the opinion that the directors of the Company are not disqualified u/s 274(1) (g) of Companies Act, 1956, [in spite of the fact that the Company has stopped repaying matured Debentures/debts/deposits and interest thereon as detailed in Note 11(1)], for the reason that the Company is exploring the possibility of presenting a new scheme of arrangement, as detailed in Note No. 11(1).

The Managing Director of the Company Sri T. Narayan M. Pai & the other director Sri Chandrappa R. Sherigar are the directors of another Company. As evident from the records/documents produced before the Company, the another company has also stopped payment of matured deposits/debentures/debts and interest thereon after 30th June, 2002. The Company has received a letter from them that they are not disqualified u/s 274(1) (g) of Companies Act, 1956 for the reason that the another Company is exploring the possibility of making an application before the Honourable High Court of Karnataka U/s 391 of Companies Act, 1956 for restructuring of its debts.

18. The assets of the Company are not valued, considering the cost involved therein. However the management is of the opinion that the carrying cost of the asset (including that of leased assets after considering the Lease equalization Charge) does not exceed its recoverable value. Therefore the assets are not impaired during the year.

19. The Company has not received information from vendors regarding their status under Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosure relating to amounts unpaid as at the year end together with interest paid/payable under this Act and also as required under Schedule VI to the Companies Act 1956, have not been given.

20. The Company has not carried on any non-banking business other than repayment of liability out of recoveries. All the payments have been centralized in head office. Powers are not given to the Branches to incur the expenses. In the prevailing circumstances there is no need for internal audit either at the HO level or at the Branch Level. Therefore internal audit is not found necessary.

21. Employee Benefits:

Brief description of the Plans:

a) The Company has two schemes for long-term benefits such as provident fund and gratuity. In case of funded schemes, the funds are recognized by the Income tax authorities and administered through trustees/ appropriate authorities. The Companys defined contribution plan is employees provident fund (under the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952) wherein the Company has no further obligation beyond making the contributions.

The Company is also contributing towards Employee State Insurance Plan, as per statutory requirements, wherein the Company has no further obligation beyond making the contributions.

The Company is also providing employee benefit by way of encashment of earned leave. The provision for the same has been made on estimated basis. The amount involved therein is not material, considering the size of the Company. The Company has not opted for actuarial valuation, considering the cost involved and also the concept of materiality.

The Companys defined benefit plan is gratuity.

b) Charge to the Profit and Loss Account based on contributions: The Companys contribution to Provident Fund charged to Profit and Loss Account during the year is Rs.74 thousands. (P.Y.: Rs. 112 thousands) The Companys Contribution to Employee State Insurance Plan charged to Profit and Loss Account during the year is Rs. 19. Thousands (P.Y. Rs. 49 thousands).

The Companies liability towards gratuity to employees covered by group gratuity policy with LIC of India.

Premium paid on this account is Rs. 47 thousands (P.Y. Rs. 195 thousands) and provisions made in respect of deficit of Present value of obligations over the fair value of Plan Assets Rs. Nil thousands (P.Y. Rs. 353 thousands) charged to profit and loss account during the year.

The detail of provision for leave encashment is as under: Provision as on 1st April, 2009 Rs. 1,09 thousands (P.Y. Rs. 109 thousands). Amount charged to the Profit & Loss Account during the year Rs. Nil (P.Y. Rs. Nil).

Actual payment during the year Rs. NiL (P.Y. Rs. Nil). Provision as on 31st March, 2010 Rs. 1,09 thousands (P.Y. Rs. 1,09 thousands).

The Company has written to Life Insurance Corporation of India to furnish information of the Defined Gratuity Benefit Plan, in the manner required under Accounting 15. Accordingly the Life Insurance Corporation of India has given the information as given above, which has been relied by the Auditors.

(#) The Company has made the provision of Rs.353 thousands in respect of deficit of Present value of obligations over the fair value of Plan Assets , during the year ending 31st March, 2009 and therefore the question of making further provision does not arise.

22. In the opinion of Board of Directors, Current Assets and Loans and Advances unless stated otherwise are of the value stated, if realized in the ordinary course of business, provisions for all known liabilities are adequate.

23. The Company is operating under one Geographical and Business segment. Therefore the question of making disclosures as required under Accounting Standard 17 does not arise.

24. Figures for the previous year are regrouped, rearranged and reclassified wherever necessary.













 
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