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Accounting Policies of Modipon Ltd. Company

Mar 31, 2014

1. REVENUE RECOGNITION

Rental Income is accounted for on cash basis where there is unascertainty in realization.

2. INVESTMENTS

Investments, being long term, are carried at cost less provision for diminution, other than temporary, in the value of such investments.

3. RETIREMENT BENEFITS TO EMPLOYEES

(a) Company''s contribution to provident/pension is charged to the Statement of Profit and Loss on accrual basis.

(b) Provision for leave encashment benefits and gratuity of the continuing employees is provided on accrual basis based on actual computation instead of computing on actuarial basis as the company has only two employees at the year end.

B. CONTINGENT LIABILITIES AND NOTES

1. (a) Claims against the company not acknowledged as debts (excluding unascertainable amounts) in respect of :

As at As at 31st March, 31st March, 2014 2013

Rs. Lakhs Rs. Lakhs

(i) Income Tax (See note 1(c) below) 816.93 870.24

(ii) Sales Tax/Excise/CustomsDuty 218.54 206.11

(iii) Water Tax 7.11 7.11

(iv) Others 156.28 157.08

(v) The following are the particulars of above Dues on account of Sales Tax, Excise Duty, Customs Duty, Water Tax and Income Tax as at 31st March, 2014 that have been disputed by the Company in Appeals pending before the Appellate Authorities:

Nature Nature Period Forum of the Statue of the Dues to which where Dispute is the Amount Pending relates

Sales Tax Laws Sales Tax 1991-92 High Court

Sales Tax Laws Sales Tax 2005-06 & Asst. Comissioner 06-07

Sales Tax Laws Sales Tax 2006-07 Addl. Commissioner

Sales Tax Laws Sales Tax 2005-06 & Addl. Commissioner 06-07

Sales Tax Laws Sales Tax 2004-05 Dy. Commissioner (Asst)

Sales Tax Laws Sales Tax 2007-08 Addl. Commissioner

Customs Law Customs Duty 1982-83 Asst. Commissioner

2002-03 Appellate Tribunal

The Uttar Water Tax 1997-98 & Additional Civil Judge Pradesh Water 1998-99 Supply and Sewerage (Amendment) Act, 1999

Central Excise Duty 1983-84 Commissioner (Appeal) Excise Law (on-account payment of Rs. 125.00 lakhs)

Income tax Act, Non-Deduction 2006-07 to High Court 1961 of TDS 2008-09 ITAT/Commissioner (Appeal)

Nature Amount of of the Statue Disputed Dues (Rs. Lakhs)

Sales Tax Laws 1.41

Sales Tax Laws 1.35 Sales Tax Laws 7.00

Sales Tax Laws 8.00 Sales Tax Laws 94.30

Sales Tax Laws 12.43

Customs Law 74.66

19.39

The Uttar 7.11 Pradesh Water Supply and Sewerage (Amendment) Act, 1999

Central 115.75 Excise Law (on-account payment of Rs. 125.00 lakhs)

Income tax Act, 207.33 1961 609.60 (b) There is a balance sales tax liability of Rs. 183.90 lakhs (plus interest/penalty, if any) imposed by Commercial Tax Authorities, Modinagar on Punjab National Bank on account of tax payable on auction held by the bank for old plant & machinery of the company. The company has undertaken to reimburse the same to Punjab National Bank, in case the bank is required to pay the same to the sales tax authorities. In the meantime, the Company shall continue to keep mortgage/charge over the administrative block(with land) of the Company, as security, in favour of the bank till final disposal of the above tax case.

(c) For Assessment years 2006-07 to 2008-09, a demand of Rs. 816.93 lakhs was raised by Income Tax department towards non-deduction of TDS Rs. 260.77 lakhs plus interest and penalty amounting to Rs. 556.16 lakhs. On an appeal filed by the Company,Hon''ble Allahabad High court has stayed recovery of demand of Rs. 181.87 lakhs along with interest of Rs. 25.46 lakhs and the matter is pending. Company has also filed appeals before Commissioner of Income Tax (Appeals) which are pending. The Commissioner (Appeal), GZB had reduced penalty amount by Rs. 53.21 lakhs and conformed the penalty Rs. 335.55 lakhs vide order dated 09.02.2012. Company had filed appeal before ITAT, New Delhi against the said order and matter is still pending. During the previous year ITO (TDS & Survey) GZB had rejected our application under section 154 of IT Act. Against the said order, we had filed appeal before the Commissioner (Appeal) GZB, which is pending

(d) Guarantees executed in favour of Banks and Government Authorities on behalf of the following Companies against their Counter Guarantees:

(i) Modi Industries Limited, a Company under the same Management Rs. 10.63 lakhs (Previous year Rs. 10.63 lakhs);

(ii) Other Corporate Body Rs. 28.00 lakhs (Previous year Rs. 28.00 lakhs).

The amounts outstanding against these Guarantees are not available.

2. Balance confirmation certificates from Creditors, house/ shop security depositors, and Banks (for cash credit, certain current accounts & fixed deposits including interest accrued with one bank) etc. as on 31st March, 2008 and onwards were not obtained and consequently adjustment required on reconciliations, if any, will be carried out subsequently as and when reconciled/confirmed.

3. The Accounts of the Company have not been prepared on a going concern basis in view of Closure of Manufacturing Operations of the Company during the year ended 30th September, 2007 and sale of all moveable assets including Plant & machinery during the year 2009-10. However, once the liabilities of the Company towards secured creditors are cleared, the Company will start business operations.

4. Claims from a supplier towards Interest on late payments etc. amounting to Rs. 1000.54 lakhs upto 31st March, 2008, has not been provided in the Books of Account as the same are being disputed by the Company. The amount of interest for the 72 month period ended 31st March, 2014 is not ascertainable.

5. The members of the Company have, in their meeting held on 27th September 2013, approved payment of remuneration to Mr. Manish K. Modi Managing Director for a period of five years w.e.f. 1st June, 2013. The approval of the Central Government to the above remuneration is awaited. The estimated amount as per the above approval of members for the year ended 31.03.2014 amount to Rs. 27.83 lakhs which will be accounted for/charged to revenue in the books on receipt of approval from the central government.

6. No Provision for Income Tax under the Income Tax Act, 1961 is considered necessary for current financial year on account of unabsorbed depreciation, unabsorbed business losses and capital loss.

7. Under the Micro, Small and Medium Enterprises Development Act, 2006, which came into force on 2nd October, 2006, certain disclosures are required to be made relating to Micro, Small and Medium Enterprises. The Company has not collected the relevant information. Since the information is not readily available, no disclosures/provision for interest has been made in the Books of Account.

8. In view of Unabsorbed Depreciation, carry forward business losses incurred by the Company in the previous year, sale of Fibers Division and Closure of Manufacturing Operations of the Company in the year 2007, the recognition of Deferred Tax Assets (Net) has been postponed on consideration of prudence.

9. The Manufacturing Operations of the Company have been closed with effect from 19th May, 2007. In terms of the provisions of the Uttar Pradesh Industrial Disputes Act, 1947, the Closure has become operative from the date of expiration of the period of 90 days from the date of application i.e. on 8th September, 2007.

10. (A) Exceptional Items in Statement of Profit and Loss includes :

(a) For the year ended 31st March, 2014:

Profit on sale of Non factory building Rs. 339.95 lakhs being excess of amount received over cost Rs. 30.08 lakhs.

(b) For the year ended 31st March, 2013:

(i) Income received Rs. 423.73 lakhs being excess of amount received over cost of land of Rs. 1.27 lakhs sold on "As is where is" basis.

(ii) Payment to PF Trust for deficit for earlier year Rs. 11.01 lakhs.

11. (a) Since the Net Book value of Land, Residential buildings at Modinagar, Office premises outside Modinagar and factory/ administrative building in Modinagar are lower than the Net Realisable Value as per Valuer''s Report / Management''s estimate, no provision for diminution is required to be made and the net book Value of Rs. 292.49 lakhs as on 31st March 2014 has been clubbed with "Fixed Assets held for Disposal" on the face of the Balance Sheet.

(b) The Company has sold 65,743 sq. yds. and 2299 sq. yds. of its vacant land at Modinagar for Rs. 986.15 lakhs (original cost Rs. 1.88 lakhs) and Rs. 35.00 lakhs (original cost Rs. 0.07 lakhs) respectively which resulted in Profit on Sale of Land amounting to Rs. 1019.20 lakhs during the year ended 31st March 2009. Approval of banks to whom immovable properties of the Company, including the above Land, are charged is pending.

12. In view of Valuation of fixed assets at lower of cost and net realizable value, no provision for Depreciation has been made since 1st April, 2007, except for office equipment.

13. (a) Cash credit/Working Capital Demand Loans (including interest accrued and due) taken from Punjab National Bank was out of order and has been classified by Bank as Non-Performing Assets.The Bank issued notice to the Company under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) for the recovery of its dues and has also issued notice under section 13(4) of the SARFAESI to the company for taking possession of the secured assets of the company.

(b) The Punjab National Bank has approved one time settlement of its outstanding dues vide its approval letters dated 02.04.2014 and 12.04.2014. In terms of the settlement, OTS amount of Rs. 1710 lakhs (Net of upfront payment of Rs. 190 lakhs) shall be paid by the Company in four quarterly installments with interest during financial year 2014-15. The balance of PNB as per books of accounts of the Company is Rs. 2083.90 lakhs and the excess amount of Rs. 183.90 lakhs would be dealt with upon final payment of the OTS amount. In view of the OTS as above, no provision for interest has been made for the current year ended 31.03.2014. Further in terms of the OTS, consent decree has been passed by Hon'' ble Debt Recovery Tribunal, Delhi on 29th April, 2014 incorporating there in the terms of settlement.

(c) In view of the above, pending implementation of the OTS with PNB, simple interest @ 10 % on the balance outstanding of the year end, after taking into account the amounts received by banks from sale of movable assets of the Company, has been provided for till the previous year and has been credited to the cash credit accounts of banks. Has the interest been provided as per past practice followed upto 31st March 2009, interest expenses for the current year would have been higher by Rs. 304.93 lakhs (upto 31st March, 2014 Rs. 1004.95 lakhs)

(d) (i) Loan liability of Rs. 749.20 lakhs to Karnatka Bank has been discharged by the Company under OTS (one time settlement), in arrangement with Ashoka Mercantile Limited paying the settled sum of Rs. 410 lakhs to the said bank. The settlement resulted into remission of liability by Rs. 339.20 lakhs. As per the terms approved by the Board of Directors of the Company on 16th August,2012 with Ashoka Mercantile Ltd, they shall be entitled to so much of the waived-off amount under OTS as agreeable, but to the extent such sum does not exceed the sum as worked out by applying the ratio of waiver agreed by the Company for settlement under OTS with Punjab National Bank (PNB). Pending the successful implementation of OTS with PNB as stated in para 13(b) above, the amount of Rs. 339.20 lakhs being the subject matter of OTS arrangement with Ashoka Mercantile Limited and liable to be dealt with later has been kept aside and shown in Balance Sheet under the head "Short term borrowings".

No provision of interest has been made on loan repaid by Ashoka Mercantile Limited, pending finalization of Debt Assignment Agreement under this OTS deal and/or successful implementation of the OTS with Punjab National Bank.

(ii) Loan liability of Rs. 832.04 lakhs to Bank of Baroda has been discharged by the company under OTS (one time settlement), in arrangement with Ashoka Mercantile Limited and Asset Reconstruction Company paying Rs. 95 lakhs being part of the settled sum of Rs. 600 lakhs to the said bank. The settlement resulted into remission of liability by Rs. 232.04 lakhs. As per the terms approved by the Board of Directors of the Company on 11th February, 2013 with Ashoka Mercantile Ltd., they shall be entitled to so much of the waived-off amount under OTS as agreeable, but to the extent such sum does not exceed the sum as worked out by applying the ratio of waiver agreed by the company for settlement under OTS with Punjab National Bank (PNB). Pending the successful implementation of OTS with PNB as stated in para 13(b) above, the amount of Rs. 232.04 lakhs being the subject matter of OTS arrangement with Ashoka Mercantile Limited and liable to be dealt with later has been kept aside and shown in Balance Sheet under the head "Short term borrowings".

No provision of interest has been made on loan repaid by Ashoka Mercantile Limited, pending finalization of Debt Assignment Agreement under this OTS deal and/or successful implementation of the OTS with Punjab National Bank.

(iii) Pending finalisation of terms of loan agreements with Ashoka Mercantile Limited (AML) who has given unsecured loans of Rs. 1131.80 lakhs for payment of OTS dues of banks, no provision of Interest on loan taken of Rs. 410 lakhs has been made for the year ended 31st March, 2011 to 31st March, 2014, on loan taken of Rs. 540 lakhs, for the years ended 31st March, 2012 to 31st March, 2014 and on loan taken of Rs. 100 lakhs for the year ended 31st March, 2013 and on loan taken (net)of Rs. 81.80 lakhs for the year ended 31st March,2014.

(e) (i) The Abu Dhabi Commercial Bank Limited has settled its Dues of Rs. 351.05 lakhs under One Time Settlement (OTS) as conveyed vide its letter dated 23rd September,2008. Since the Company did not have funds to pay the settled dues, it had approached M/s Ashoka Mercantile Limited (AML) for making payment of settled dues to the Banks. Further, it has also been agreed with AML that it shall not be entitled to settlement of its claim better than what is agreed by the Company with PNB.

(ii) Since successful implementation of settlement of dues of PNB is still pending, the amount paid towards OTS by AML of Rs. 157.13 lakhs (net of Rs. 40 lakhs paid to AML upto 31st March,2011) is shown as secured loan in Note 5 i.e. as on 31st March, 2014 and the balance amount of Rs. 153.92 lakhs (Rs. 351.05 lakhs - Rs. 197.13 lakhs) outstanding in the books of accounts has also been shown as unsecured loan, to be written back or credited to AML at the time of OTS with PNB as stated in (i) above.

(iii) As the OTS with PNB as stated above is yet to be implemented as on date, no interest has been provided on the balances mentioned in the 13 (e) (ii) above during the current year as well as in the previous years, amount unascertained.

14. Debts Recovery Tribunal (DRT) has, vide its order dt. 19th May,2011, confirmed/approved sale of a piece of agricultural land admeasuring 40827sq. mtr., owned by the Company to M/s GDC Buildcon Pvt. Ltd., Mumbai for a consideration of Rs. 425.00 lakhs (Estimated cost Rs. 1.27lakhs)to be deposited with DRT. Consequent upon finalization of OTS with Bank of Baroda, the balance amount of the purchase consideration was directly paid to Bank of Baroda against OTS and accordingly an affidavit to this effect was filed with DRT on 03.03.2013. The sale of the said land stands concluded and accounted for during the year ended 31st March, 2013.


Mar 31, 2012

1. REVENUE RECOGNITION

(a) Rental Income is accounted for on cash basis where there is unascertainty in realization.

2. INVESTMENTS

Investments, being long term, are carried at cost less provision for diminution, other than temporary, in the value of such investments.

3. RETIREMENT BENEFITS TO EMPLOYEES

(a) Company's contribution to provident/pension is charged to the Profit & Loss Account on accrual basis.

(b) Provision for leave encashment benefits and gratuity of the continuing employees is provided on accrual basis based on actual computation instead of computing on actuarial basis as the company has only two employees at the year end.


Mar 31, 2010

1. REVENUE RECOGNITION

Interest Income on Refunds from Income Tax/Sales Tax Department(s) is accounted for in the year of receipt of the Order(s) of the Assessing Authority.

2. INVESTMENTS

Investments being Long Term are carried at Cost less Provision for Diminution, other than temporary, in the Value of such Investments.

3. RETIREMENT BENEFITS TO EMPLOYEES

(a) Companys Contribution to Provident/Pension Funds is charged to the Profit & Loss Account.

(b) Provision for Leave Encashment Benefits and Gratuity of the continuing employees is provided on accrual basis based on actual computation.

 
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