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Notes to Accounts of Modipon Ltd.

Mar 31, 2014

1 Foot Note:

1. Cash credit/ WCDL from banks and loan from Ashoka Mercantile Limited are secured by charge on block assets of the Company.

2. (a) Cash Credit/ Working Capital Demand Loans (including Interest Accrued and Due) taken from Punjab National Bank was out of order and classified by Bank as Non-Performing Assets since calender year 2007.

(b) Punjab National Bank issued Notices 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 their Dues and have also issued Notices under Section 13(4) of the SARFAESI to the Company for taking possession of the Secured Assets of the Company. OTS dues of PNB have to be fully paid by 28th March, 2015.

(c) 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.

2 Notes

1. Aggregate Market Value is exclusive of these Investments in view of non-availability of Current Market rates.

2. In view of Rehabilitation scheme of Modi Spg & Wvg Mills Co. Ltd. (MSWM), the company was alloted free of cost 15126 equity shares of Rs. 10 each during the previous year of Haryana Distillery Ltd. (HDL) and Rajputana Fertilizers Ltd. (RFL) on account of demerger of units of MSWM to HDL & RFL. Consequently the orignial cost of Rs. 1 has been allocated on notional basis among MSWM, HDL & RFL. Shares of HDL are yet to be received by the company.

3. 5,00,000 equity shares are yet to be transferred to the name of the company.


Mar 31, 2013

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

As at As at 31st March, 2013 31st March, 2012 Rs. lakhs Rs. lakhs

(I) Incom e T ax (S ee note 1(b) below ) 870.24 870.24

(ii) Sales Tax/ Excise/ Customs Duty 206.11 206.11

(iii) Water Tax 7.11 7.11

(iv) Others 157.08 157.08

(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, 2013 that have been disputed by the Company in Appeals pending before the Appellate Authorities:

(b) 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 fled by the company, the 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 fled appeals before Commissioner of Income Tax (Appeals) which are pending. The Commissioner (Appeal), GZB had reduced penalty amount by Rs. 53.21 lacs and conformed the penalty Rs. 335.55 lacs vide order dated 09.02.2012. Company had fled appeal before ITAT, New Delhi against the said order and matter is still pending. During the year ITO (TDS &SURVEY) GZB had rejected our application under section 154 of IT Act, against the said order we had fled appeal before the Commissioner (Appeal) GZB, which is pending.

(c) 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 confrmation certifcates from Creditors, house/ shop security depositors, and Banks (for cash credit, certain current accounts & fxed 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/confrmed.

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 60 month period ended 31st March, 2013 is not ascertainable.

5. The Remuneration of Dr. M. K. Modi, Chairman & Managing Director (C&MD) of Rs. 2.71 lakhs w.e.f. 12th February, 2007 to 31st May, 2007 is subject to the approval of the Central Government.

6. No Provision for Income Tax under the Income Tax Act, 1961 is considered necessary for current fnancial 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 have 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 Proft and Loss includes :

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

(i) Proft on sale of land 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 defcit for earlier year Rs. 11.01 lakhs.

(b) For the year ended 31st March, 2012:

(i) Income received Rs. 194.33 lakhs being excess of amount received over cost of land of Rs. 5.67 lakhs sold on ''As is where is'' basis.

(ii) Loss of Rs. 50 lakhs on Disposal of Factory Building in previous year.

(iii) Management has conducted detailed exercise during the year to identify: (i) inoperative credit balances outstanding for more than three years i.e. time-barred which are not payable and (ii) Old entries in amount recoverable account/ in-operative debit balances which are to be written off. Based on the above exercise, the following amounts have been written back/written off during the year:

(i) Excess Provision/ amount written back amounting to Rs. 330.11 lakhs.

(ii) Amount written off amounts to Rs. 53.16 lakhs against which provision made in earlier years.

11. (a) Since the Net Book value of Land, Residential buildings at Modinagar, Offce 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. 318.00 lakhs as on 31st March, 2013 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 2,299 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. 0.07lakhs) respectively which resulted in Proft on Sale of Land amounting to Rs. 1,019.20 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.

(c) Amount received from Modipon Welfare trust amounting to Rs. 361.86 lakhs shown as a Liability as on 30th September, 2007, which was utilized generally for payment of ''Worker''s Dues'', was treated as Revenue during the year ended 31st March, 2009 since the same is not payable to the Trust.

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

13. (a) Cash credit/Working Capital Demand Loans (including interest accrued and due) taken from Banks are out of order and have been classifed by Banks as Non- Performing Assets.

(b) Punjab National 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.

(c) Punjab National Bank has initiated recovery proceedings before Hon''ble DRT-II, Delhi, taken symbolic possession of Fixed Assets and proceeded to sell the charged Assets during the year 2009-10. Hon''ble DRT-II granted permission to the Bank to sell movable Assets of the Company and the bank has sold these assets during the year 2009-10. The amount of sale consideration of Rs. 3,361.00 lakhs paid to banks on sale of moveable assets has been adjusted in cash credit accounts of bank which also includes interest of Rs. 2,279.61 lakhs credited for the period from 1st April,2007 to 31st March, 2010.

(d) (i) Interest on Working Capital Facilities obtained from Banks was provided during the year ended 31st March, 2009 for the period from 1st April, 2007 to 31st March, 2009 and has been credited to cash credit accounts of the banks.

(ii) 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 determination of OTS with PNB, 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 fnalization of Debt Assignment Agreement under this OTS deal and/ or OTS with Punjab National Bank.

(iii) 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 determination of OTS with PNB, 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 fnalization of Debt Assignment Agreement under this OTS deal and/ or OTS with Punjab National Bank.

(iv) Pending fnalisation of terms of loan agreements with Ashoka Mercantile Limited (AML) who has given unsecured loans of Rs. 1,050 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, 2013, on loan taken of Rs. 540 lakhs, for the years ended 31st March, 2012 and 31st March, 2013 and on loan taken of Rs. 100 lakhs for the year ended 31st March, 2013.

(v) In view of the above, pending OTS with PNB, simple interest @ 10 % amounting to Rs. 144.08 lakhs on the balance outstanding as on 31st March, 2013, after taking into account the amounts received by banks from sale of movable assets of the company has been provided for during the current 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. 241.81 lakhs (upto 31st March, 2013 Rs. 944.34 lakhs).

(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 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, 2013 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 pending, 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, confrmed/approved sale of a piece of agricultural land admeasuring 40,827sq. mtr., owned by the Company to M/s GDC Buildcon Pvt. Ltd., Mumbai for a consideration of Rs. 425.00 lakhs (Estimated cost Rs. 1.27 lakhs). The payment was to be deposited by the buyer with DRT.Since part of the land was under encroachment of bad elements, the buyer was unable to carry out inspection even. Accordingly, they made an application before Hon''ble DRT seeking time for deposition of balance payment.

The company had also made an application before DRT seeking permission for utilization of sale proceeds of the said land for payment of settled dues of banks. The said application remained pending adjudication.

In the meantime, the company discussed with GDC Buildon Pvt. Ltd. for payment of balance amount & they agreed to make the payment if the possession and documentation of land was done by the company. The company has also fnalised OTS with Bank of Baroda and in terms of the application pending with DRT, it has collected the payment from M/S GDC Buildcon Pvt. Ltd. and paid directly to Bank of Baroda against OTS and has accordingly fled an affdavit to this effect on 03.03.2013 with DRT. The sale of the said land stands concluded and accounted for in the books of accounts for the year ended 31st March, 2013.

15. RELATED PARTIES DISCLOSURE:

A. KEY MANAGEMENT PERSONNEL:

Dr. Mahendra K. Modi – Chairman & Managing Director

B. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS ETC;

Enterprises over which the Key Management Personnel and their relatives are able to exercise signifcant infuence.

1. Ashoka Mercantile Limited (AML)

2. Modi Industries Limited (MIL)

C. DISCLOSURE OF TRANSCTIONS BETWEEN THE COMPANY AND RELATED PARTIES AND THE STATUS OF OUTSTANDING BALANCE AS ON 31ST MARCH, 2013 {(Refer Note 18(B)13 (e) } :


Mar 31, 2012

1. Cash credit/ WCDL from banks and loan from Ashoka Mercantile Limited are secured by charge on block assets of the company.

2. (a) Cash Credit/ Working Capital Demand Loans (including Interest Accrued and Due) taken from Banks are out of order and have been classified by Banks as Non-Performing Assets since calender year 2007.

(b) Punjab National Bank and Bank of Baroda issued Notices 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 their Dues and have also issued Notices under Section 13(4) of the SARFAESI to the Company for taking possession of the Secured Assets of the Company.

3. Loans from related parties : Terms of repayment are yet to be entered into with these Parties.

Notes :-

1. Aggregate Market Value is exclusive of these Investments in view of non-availability of Current Market rates.

2. Shares certificate of 6,599 equity shares is yet to be received.

3. In view of Rehabilitation scheme of Modi Spg & Wvg Mills Co. Ltd. (MSWM), the Company was alloted free of cost 15,126 equity shares of Rs.10 each during the previous year of Haryana Distillery Ltd. (HDL) and Rajputana Fertilizers Ltd. (RFL) on account of demerger of units of MSWM to HDL & RFL. Consequently the orignial cost of Rs. 1 has been allocated on notional basis among MSWM, HDL & RFL. Shares of HDL are yet to be received by the company.

4. 5,00,000 equity shares are yet to be transferred to the name of the company.

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

As at As at 31st March, 31st March, 2012 2011 Rs. Lakhs Rs. Lakhs

(i) Income Tax (See note 1(b) below) 870.24 870.24

(ii) Sales Tax/ Excise/ Customs Duty 206.11 191.11

(iii) Water Tax 7.11 7.11

(iv) Others 157.08 157.80

(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, 2012 that have been disputed by the Company in Appeals pending before the Appellate Authorities:

(b) For Assessment years 2006-07 to 2008-09, a demand of Rs. 870.24 Lakhs was raised by Income Tax department towards non-deduction of TDS Rs. 260.77 Lakhs plus interest and penalty amounting to Rs. 609.47 Lakhs. On an appeal filed by the company, the 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.

(c) 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 two banks) 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 48 month period ended 31st March, 2012 is not ascertainable.

5. The Ministry of Corporate Affairs has notified the revised Schedule VI to the Companies Act 1956 on 28th February 2011 vide notification number S.O. 447 (E) (as amended by Notification No. S.O. 653(E) dated 30th March, 2011) and the revised schedule VI has replaced the old schedule in respect of the Balance Sheet and Profit & Loss Account prepared for financial year commencing on or after 1st April 2011. Accordingly, the Balance Sheet of company as at 31st March, 2012 and its Profit & Loss for the year ended on 31st March, 2012 are prepared as per revised Schedule VI to the Companies Act 1956, and corresponding figures of previous year have been regrouped, rearranged to make them comparable with figures for current reporting period ended 31st March 2012.

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

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 have 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 Profit & Loss Account includes :

(a) For the year ended 31st March, 2012:

(i) Income received Rs. 194.33 Lakhs being excess of amount received over cost of land of Rs.5.67 Lakhs sold on "As is where is" basis.

(ii) Loss of Rs. 50 Lakhs on Disposal of Factory Building in previous year.

(iii) Management has conducted detailed exercise during the year to identify: (i) inoperative credit balances outstanding for more than three years i.e. time-barred which are not payable and (ii) Old entries in amount recoverable account/ in-operative debit balances which are to be written off. Based on the above exercise, the following amounts have been written back/written off during the year:

(i) Excess Provision/ amount written back amounting to Rs. 330.11 Lakhs.

(ii) Amount written off amounts to Rs.53.16 Lakhs against which provision made in earlier years.

(b) For the year ended 31st March, 2011:

(i) Provision made for diminution in value of investments in Lords Chloro Alkalies Ltd of Rs. 55.41 Lakhs in earlier year has been written back as the shares are now quoted and market value as on 31st March, 2011 was Rs. 125.31 Lakhs

(ii) Refer note 18B 13 (d) (ii) for write back of interest Rs. 370.59 Lakhs in view of payment of OTS dues of Allahabad Bank.

(B) Extraordinary Item for the year ended 31st March, 2011 represents Issue of 1,17,57,085 fully paid up equity shares of Rs. 10 each of Indofil Organic Industries Ltd (IOIL) for Rs. 4,899.00 Lakhs at a premium of Rs. 3,723.00 Lakhs which was treated as "Goodwill" on receipt of approval of Hon'ble Allahabad High court during the financial year ended 31 st March, 2011, has been written off as per Accounting Standard (AS) 26 i.e. Intangible Assets.

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. 319.28 Lakhs as on 31st March, 2012 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 2,299 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. 1,019.20 Lakhs during the year ended 31 st March, 2009. Approval of banks to whom immovable properties of the Company, including the above Land, are charged is pending.

(c) Amount received from Modipon Welfare trust amounting to Rs. 361.86 Lakhs shown as a Liability as on 30th September, 2007, Which was utilized generally for payment of " Worker's Dues", was treated as Revenue during the year ended 31st March, 2009 since the same is not payable to the Trust.

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

13. (a) Cash credit/Working Capital Demand Loans (including interest accrued and due) taken from Banks are out of order and have been classified by Banks as Non-Performing Assets.

(b) Punjab National Bank and Bank of Baroda issued notices 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 their dues and have also issued notices under section 13(4) of the SARFAESI to the company for taking possession of the secured assets of the company.

(c) Punjab National Bank has initiated recovery proceedings before Hon'ble DRT-II, Delhi, taken symbolic possession of Fixed Assets and proceeded to sell the charged Assets during the year 2009-10. Hon'ble DRT-II granted permission to the Bank to sell movable Assets of the Company and the bank has sold these assets during the year 2009-10. The amount of sale consideration of Rs. 3,361.00 Lakhs paid to banks on sale of moveable assets has been adjusted in cash credit accounts of bank which also includes interest of Rs. 2,279.61 Lakhs credited for the period from 1st April, 2007 to 31st March, 2010.

(d) (i) Interest on Working Capital Facilities obtained from Banks was provided during the year ended 31st March, 2009 for the period from 1st April, 2007 to 31st March, 2009 and has been credited to cash credit accounts of the banks.

(ii) The Management is taking up the matter of one time settlement (OTS) of dues of banks. Allahabad Bank has already approved one time settlement (OTS) of dues at Rs. 540.00 Lakhs which has been paid in 4 equal monthly installments w.e.f. July, 2010 by Ashoka Mercantile Limited (AML) a related party. In view of the above, Rs. 370.59 Lakhs being excess of balance outstanding in the books of account over OTS dues has been recognized as revenue during the previous year on full payment of OTS dues to Allahabad bank.

(iii) 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 draft M.O.U. 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 determination of OTS with PNB, 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.

(iv) Pending finalisation of terms of loan agreements with Ashoka Mercantile Limited (AML) who has given unsecured loans of Rs. 950 Lakhs for payment of OTS dues of banks, no provision of Interest on unsecured loan taken of Rs. 410 Lakhs has been made for the year ended 31st March, 2011 and 31st March, 2012 and on unsecured loan taken of Rs. 540 Lakhs, for the year ended 31st March, 2012.

(v) In view of the above, pending OTS with PNB and BOB simple interest @ 10 % amounting to Rs.212.16 Lakhs on the balance outstanding as on 31st March, 2012, after taking into account the amounts received by banks from sale of movable assets of the Company has been provided for during the current 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.286.15 Lakhs (upto 31st March, 2012 Rs. 702.53 Lakhs)

(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 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 2012 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 other banks as stated in (i) above.

(iii) As the OTS with PNB as stated above is pending, 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 40,827sq mtr, owned by the Company to M/s GDC Buildcon Pvt. Ltd., Mumbai for a consideration of Rs.425.00 Lakhs (Estimated cost Rs.1.27 Lakhs). The payment was to be deposited by the buyer with DRT.The balance payment of Rs. 400.00 Lakhs is yet to be deposited by the buyer with DRT and extension of time for deposit of balance amount sought by it is yet to be approved by the DRT. Accordingly, the Company has neither given physical possession of land to the buyer nor entered into any sale agreement/ sale deed etc. with the buyer/ any other party and accordingly, the sale of the land will be accounted for in the books of account of the Company on deposit of entire purchase consideration by the buyer after obtaining approval for extension of time for deposit of balance amount.

15. RELATED PARTIES DISCLOSURE:

A. KEY MANAGEMENT PERSONNEL:

Dr. Mahendra K. Modi - Chairman & Managing Director

B. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS ETC;

Enterprises over which the Key Management Personnel and their relatives are able to exercise significant influence.

1. Ashoka Mercantile Limited (AML)

2. Modi Industries Limited (MIL)

C. DISCLOSURE OF TRANSACTIONS BETWEEN THE COMPANY AND RELATED PARTIES AND THE STATUS OF OUTSTANDING BALANCE AS ON 31ST MARCH, 2012{(Refer Note 18(B)13(e):}

(a) Transactions with the Enterprises over which the Key Management Personnel and their Relatives are able to exercise significant influence:

Note: The Company has not been able to repay the loans as shown above given by Ashoka Mercantile Limited (AML), a related party. During the month of May, 2011, the Company has given tempo- rary physical possession with right of user of 59 residential houses owned by it at Modinagar to AML and the same is still continuing.

16. The Remuneration of Dr. M. K. Modi, Chairman & Managing Director (C&MD) of Rs. 2.71 Lakhs w.e.f. 12th February, 2007to 31 st May, 2007 is subject to the approval of the Central Government.


Mar 31, 2010

A. 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,

2010 2009

Rs. Lacs Rs. Lacs

(i) Sales Tax/ Excise/Customs Duty 110.46 110.46

(ii) Water Tax 7.11 7.11

(iii) Others 228.07 358.21

(iv) The following are the particulars of above Dues on account of Sales Tax, Excise Duty, Customs Duty and Water Tax as at 31st March, 2010 that have been disputed by the Company in Appeals pending before the Appellate Authorities:

(b) 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 lacs (Previous year Rs.10.63 lacs);

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

The amounts outstanding against these Guarantees are not available.

2. Balance confirmation certificates from the Debtors, Creditors, house security depositors, and Banks (for cash credit & fixed deposits) etc. as on 31st March, 2010 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 has 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 current year.

4. Claims from a supplier towards Interest on late payments etc. amounting to Rs.1,000.54 lacs upto 31st March, 2008, has not been provided in the Books of Account. The amount of non-provision for the 24 months period ended 31st March, 2010 is not ascertainable.

5. 1,45,495 15% Redeemable Convertible Cumulative Preference Shares of Rs.100 each, carrying a limited right of conversion into Equity Shares on the basis of 13 such Shares being convertible into 100 Equity Shares in case of further issue of Equity Shares, were due for redemption on 31st March, 1996 as per the Order of the Honble Allahabad High Court. Subsequently, the Company had filed an application for extension of time upto the year 2006 for Conversion/Redemption of the aforesaid Preference Shares. The said application was rejected by the Honble Allahabad High Court against which the Company filed a special appeal before the Division Bench. In terms of the Order dated 13th February, 2002, the entire 73,703 Preference Shares held by the Financial Institutions were redeemed on 28th June, 2002. Balance 71,792 Preference Shares are overdue for redemption.

6. (a) The figures for the Current year ended 31st March, 2010 are not comparable with the Previous years figures, as the current year is of 12 months period whereas previous year was extended to 18 months period.

(b) Previous years figures have been regrouped/ recast, wherever necessary.

7. Undertakings given to certain Financial Institutions and/ or Banks :

(a) in respect of Lords Chloro Alkali Limited and Spark Plugs Company (India) Limited to procure funds jointly/severally with others to meet (i) any shortfall in financing their Projects and/or for Working Capital and (ii) Cash Losses in case of Spark Plugs Company (India) Limited. The funds made available/ to be made available can only be withdrawn with the prior approval of the said Institutions and shall not involve any charge or lien on the Assets of the said Companies.

(b) who have given Loans to Lords Chloro Alkali Limited that the Company shall not transfer, assign, pledge, hypothecate or otherwise dispose off in any manner its Shareholding in the Capital of the Company without their prior consent in writing.

8. With the intention of restructuring the Operations, the Company vide Agreement dated 28th October, 2006 has sold its Chemicals Division alongwith certain other Immovable Properties and Investments in the Shares of Quick Investment (India) Limited and Good Investment (India) Limited, the two Wholly-owned Subsidiaries of the Company ("ICC Division") as a going concern with effect from 1st October, 2006 to Indofil Organic Industries Limited (IOIL) for a total consideration of Rs.124.66 crores (arrived at by aggregating Tax Written Down Value in case of depreciable Assets and Net Book Values for other Assets/Liabilities) pursuant to the Resolution passed at its Board Meeting held on 28th October, 2006 and subsequent approval of its Shareholders by Postal Ballots on 23rd December, 2006. Sale consideration has been discharged by IOIL by way of (a) Payment of Rs.17.83 crores by Cheques; (b) taking over the Liabilities of the Fibres Division of Rs.57.84 crores due to the Financial Institutions and (c) Subscription to 1,17,57,086 Fully Paid up Equity Shares of Rs.10 each of IOIL for Rs.48.99 crores i.e. at a Premium of Rs.37.23 crores which were issued and distributed directly to the Equity Shareholders of the Company. The Shareholders of the Company have approved the above transaction of Sale of ICC Division and Issue of Equity Shares of IOIL to themselves under Sections 293(1)(a) and 293(3) respectively of the Companies Act, 1956. The Company has also now sought approval under Section 391 of the Companies Act, 1956 of the Honble Allahabad High Court for treating Rs.48.99 crores as "Goodwill" in the Books of Account for which the approval of the Court is yet to be received. Pending final determination of the matter by the Honble Allahabad High Court, the above amount of Rs.48.99 crores has been shown as "Equity Shares of IOIL issued to Shareholders" on the face of the Balance Sheet under the head "Miscellaneous Expenditure (to the extent not written off or adjusted)". The Accounts for the year have been prepared without giving any effect to the above. Consequent adjustment in the Accounts, i.e. the above amount of Rs.48.99 crores will be charged to Revenue as per Accounting Standard (AS) 26 i.e. Intangible Assets on receipt of the final approval of Honble Allahabad High Court for treating/accounting Rs.48.99 crores as Goodwill in the Books of Account, is pending.

9. 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 have been made in the Books of Account.

10. Arrears of Dividend on Redeemable Convertible Cumulative Preference Shares for the Period from 1st April, 1998 to 31st March, 2010 amounts to Rs.176.11 lacs, excluding Tax on Distributed Profits, if any.

11. In view of Unabsorbed Depreciation, substantial Losses incurred by the Company, sale of Chemical Division and Closure of Manufacturing Operations of the Company (Refer Notes 8 and 12), the recognition of Deferred Tax Assets (Net) has been postponed on consideration of prudence.

12. 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.

13. Exceptional Items in Profit & Loss Account for the year ended 31st March 2010 include :

(a) (i) In view of Closure as stated in Note 12 above, the moveable assets (including Plant & Machinery, Office Equipments, Furniture and Fixtures and Electrical Equipments/ Installations etc.) (Book value as on 31st March 2009 Rs.3850 lacs), retired from active use and held for Disposal were sold by the bank which resulted in profit on sale of movable assets amounting to Rs.188.62 lacs during the current year. (ii) Further in the absence of break-up of sale value of movable assets, the net book value of inventory/ book debts(Net of Provision) of Rs.201.36 lacs has been treated as sale value in the books of accounts during the current year.

(b) Interest income amounting to Rs.228.13 lacs on Income Tax refunds received during the current year has been taken to revenue as per Accounting Policy No.1 of Schedule 14.

(c) Management has conducted detailed exercise during the current year to identify:(i) Provision for expenses made during the previous years which are no longer required,(ii) inoperative credit balances outstanding for more than three years i.e time-barred which are not payable and (iii) Old entries in amount recoverable account/ in-operative debit balances which are to be written off. Based on the above exercise, the following amounts have been written back/written off during the current year:

(i) Excess provision/amount written back amounting to Rs.346.62 lacs.

(ii) Amount written off amounts to Rs. 605.84 lacs against which provision made in earlier years amounting to Rs. 514.02 lacs has been netted off in the inner column in Schedule 13.

14 (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 Valuers Report / Managements estimate, no provision for Diminution is required to be made and the Net Book Value of Rs 426.05 lacs as on 31st March 2010 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 2,299 sq. yds. of its vacant Land at Modinagar for Rs.986.15 lacs (original cost Rs.1.88 lacs) and Rs.35.00 lacs (original cost Rs.0.07 lac) respectively which resulted in Profit on Sale of Land amounting to Rs.1,019.20 lacs during the previous year. Approval of Banks to whom immovable properties of the Company, including the above Land, are charged is pending.

(c) The Company has lodged Claim for Recovery of Rs.235.87 lacs being un-utilised CENVAT Credit available and shown as "CENVAT Receivable" in the Balance Sheet. The Excise Authorities have rejected the above Claim against which appeal has been filed before Honble CESTAT, which is pending. However, in view of the uncertainty, provision of the above amount was made during the previous year.

(d) Amount received from Modipon Welfare Trust amounting to Rs.361.86 lacs shown as a Liability as on 30th September, 2007, which was utilised generally for payment of "Workers Dues", was treated as Revenue during the previous year, since the same is not payable to the Trust.

15. In view of Valuation of Fixed Assets (excluding vehicles) at Lower of Cost and Net Realisable Value, no Provision for Depreciation has been made since 1st April, 2007. However,provision for depreciation on vehicles amounting to Rs.8.08 lacs (including Rs.6.55 lacs for previous year) has been made during the current year.

16. (a) Cash Credit/ Working Capital Demand Loans (including Interest Accrued and Due) taken from Banks are out of order and have been classified by Banks as Non-Performing Assets.

(b) Four Member Banks of the Consortium i.e. Punjab National Bank, Allahabad Bank, Bank of Baroda and Karnataka Bank issued Notices 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 their Dues amounting to Rs.5,831.20 lacs. Further, Punjab National Bank, Allahabad Bank and Bank of Baroda have also issued Notices under Section 13(4) of the SARFAESI Act to the Company for taking possession of the Secured Assets of the Company.

(c) Punjab National Bank has initiated Recovery proceedings before Honble DRT-II, Delhi, taken symbolic possession of Fixed Assets and proceeded to sell the charged Assets during the Current year. Honble DRT-II granted permission to the Bank to sell movable Assets of the Company and the bank has sold these assets during the current year as stated in note 13(a) above .The amount of sale consideration of Rs. 33.61 crores paid to banks on sale of moveable assets has been adjusted in cash credit accounts of bank which also includes interest of Rs.2279.61 lacs credited for the period 1st April, 2007 to 31stMarch,2010.

(d) (i) Interest on Working Capital facilities obtained from Banks was provided during the previous year for the period from 1st April, 2007 to 31st March, 2009 (including Interest Rs.419.46 lacs for the period from 1st April, 2007 to 30th September, 2007) and has been credited to cash credit accounts of the banks.

(ii) The Management is taking up the matter of One Time Settlement (OTS) of Dues of Banks. Allahabad Bank has already approved one time settlement (OTS) of dues at Rs.540.00 lacs which is to be paid in 4 equal monthly installments w.e.f. July 2010. In view of the above, no provision of interest for the current year has been made in cash credit dues payable to Allahabad Bank and excess of balance outstanding over OTS dues will be recognized as revenue during 2010-11 on full payment of OTS dues to Allahabad Bank.

(iii) In view of the above, pending OTS with PNB, BOB and Karnataka Bank, simple interest @ 10% amounting to Rs.390.80 lacs, on the balance outstanding as on 31st March 2009 after taking into account the amounts received by banks from sale of movable assets of the company has been provided for during the current 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. 250.52 lacs.

(e) (i) The Abu Dhabi Commercial Bank Limited has

settled its Dues of Rs.351.05 lacs under One Time Settlement (OTS) as conveyed vide its letter dated 23.09.2008. 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 Bank. 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 settlement of Dues of PNB is still pending, the amount paid towards OTS by AML of Rs161.13 lacs (net of Rs.36 lacs paid to AML during the current year) is shown as unsecured loan in Schedule 3 i.e. as on 31st March, 2010 and the balance amount of Rs.153.92 lacs (Rs.351.05 lacs – Rs.197.13 lacs) 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 other banks as stated in (i) above.

(iii) As the OTS with PNB as stated above is pending, no interest has been provided on the balances mentioned in the 16 (e)(ii) above during the current year as well as previous years, amount unascertained.

17. SEGMENT INFORMATION:

In view of closure of manufacturing Operations of the Fibres Divisions Plant in the 18 months period ended 30th September,2007, as stated in Note 12 above, there is no reportable Segment during the Current year, hence no information is required to be furnished.

18. RELATED PARTIES DISCLOSURE:

A . KEY MANAGEMENT PERSONNEL:

Dr. Mahendra K. Modi – Chairman & Managing Director

B. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS ETC; Enterprises over which the Key Management Personnel and their relatives are able to exercise significant influence:

1. Ashoka Mercnatile Limited

2. Modi Industries Limited

C. DISCLOSURE OF TRANSCTIONS BETWEEN THE COMPANY AND RELATED PARTIES AND THE STATUS OF OUTSTANDING BALANCE AS ON 31ST MARCH, 2010 {(Refer Note 16(e)}:

(a) Transactions with the Enterprises over which the Key Management Personnel and their Relatives are able to exercise significant influence :

19 The Remuneration of Dr. Mahendra K. Modi, Chairman & Managing Director (C&MD) of Rs. 2.71 lacs w.e.f. 12th February, 2007 to 31st May,2007 is subject to the approval of the Central Government.

20 No Provision for Income Tax under the Income Tax Act, 1961 is considered necessary for current financial year on account of substantial amount of unabsorbed depreciation, unabsorbed business losses and business loss for current financial year on account of substantial payment to banks towards interest.

21 Schedules 1 to 14 form an integral part of the Balance Sheet and the Profit & Loss Account and have been duly authenticated.

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