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Notes to Accounts of Mukta Arts Ltd.

Mar 31, 2015

1. Background

Mukta Arts Limited ('Mukta' or 'the Company') is a company incorporated in India under the Companies Act, 1956. The Company was incorporated on 7 September 1982 as Mukta Arts Private Limited and was converted to a public limited company on 30 September 2000 and renamed as Mukta Arts Limited. The Company is promoted by Mr. Subhash Ghai who holds 54.99% of the outstanding equity share capital as at 31 March 2015. The Company is primarily engaged in the business of film production, distribution and exhibition (wherein it provides film content to multiplexes and single screens across India as well as manages/ operates theatres). The Company also provides production equipment to other production houses and independent producers. The Company is listed on Bombay Stock Exchange Limited, National Stock Exchange of India Limited and Kolkata Stock Exchange Association Limited.

2. Rights, preferences and restrictions attached to equity shares

The Company has only one class of equity shares having par value of Rs 5 per share. Each equity shareholder is entitled to one vote per share. The voting rights of an equity shareholder are in proportion to its share of the paid-up equity capital of the Company.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

3. Short-term borrowings (Contd.)

* The Company has obtained a cash credit facility from Kotak Mahindra Bank Limited on 8 January 2010 at interest rate varying from 13% to 14% per annum. Along with the term loan mentioned above in Note 3.3, this facility is secured against all current assets, commercial property at Oshiwara, and three residential flats at Bandra. Personal guarantee of Mr Subhash Ghai, the Chairman of the Company and Mrs. Mukta Ghai, a relative of the Chairman and a shareholder, has also been given in respect of this liability.

** The Company has obtained a demand loan from Punjab National Bank against fixed deposit. The interest rate on this loan is 10.75% p.a.

*** Deposit of Rs. 102,200,000 accepted at interest rate of 10% p.a. repayable on demand provided 30 days advance notice is given to the borrower. Deposit of Rs. 50,000,000 accepted at interest rate of 24% p.a. repayable on demand.

4. Lease disclosure under AS 19 - 'Leases'

Operating lease : Company as lessee

The Company is obligated under non-cancellable leases primarily for office and residential premises which is renewable thereafter as per the terms of the respective agreement.

For certain cinema properties, rent is payable in accordance with the leasing agreement at the higher of:

1) Fixed minimum guarantee amount and/or

2) Revenue share percentage

Lease rent expenses of Rs 53,055,411 (31 March 2014: Rs 36,242,205) have been included under 'Rent' in the Statement of profit and loss.

Operating lease : Company as lessor

The Company has given office premises on lease which is renewable thereafter as per the terms of the respective agreement.

Lease rent income of Rs 19,731,971 (31 March 2014: Rs 20,791,454) has been included under 'Rent and amenities charges' in the Statement of profit and loss.

5. Capitalisation of expenditure

During the year, the Company has capitalised the salaries, wages and bonus amounting to Rs 4,031,186 (31 March 2014: Rs 3,627,737) and other expenses amounting to Rs 2,391,092 (31 March 2014 : Rs 2,267,244) to the cost of Fixed asset/ Capital work in progress (CWIP). Consequently, expenses disclosed under note 3.24 and note 3.26 are net of amount capitalised by the Company.

6. Segment information

As per Accounting Standard (AS) 17 on "Segment Reporting", segment information has been provided in the Notes to consolidated financial statements.

7. Related party disclosures

Details of related parties including summary of transactions entered into by the Company during the year ended 31 March 2015 are summarized below:

A Parties where control exists

(i) Shareholders holding more than 50%

* Subhash Ghai

(ii) Subsidiary companies

* Whistling Woods International Limited

* Connect.1 Limited

* Mukta Tele Media Limited

* Coruscant Tec Private Limited

* Mukta VN Films Limited

(iii) Key management personnel and relatives of such personnel

* Subhash Ghai - Chairman Director (and shareholder)

* Parvez Farooqui - Executive Director (and shareholder)

* Rahul Puri - Managing Director

* Mukta Ghai - Wife of Subhash Ghai (and shareholder)

* Ashok Ghai - Brother of Subhash Ghai

* Siraj Farooqui - Brother of Parvez Farooqui

* Sameer Farooqui - Brother of Parvez Farooqui

* Sajid Farooqui - Brother of Parvez Farooqui

* Meghna Ghai Puri - Daughter of Subhash Ghai (and shareholder)

(iv) Enterprise over which key management personnel have control/ substantial interest/ significant influence

* Mukta Arts - Proprietary concern of Subhash Ghai

* Mukta Tele Arts Private Limited - Enterprise in which Subhash Ghai exercises significant influence

8 Commitments

Estimated amounts of contracts remaining to be executed on capital account and not provided for aggregate to

Rs Nil (31 March 2014: Rs 6,129,756).

9. Contingent liabilities

31 March 2015 31 March 2014

a) Service tax liability in appeal (note 1) 1,675,000 1,675,000

b) Corporate guarantee given by the Company on behalf of its subsidiary 120,000,000 -

c) Support letter provided to Whistling Woods International Limited, a subsidiary of the Company.

Notes

1) Unless specified, the amounts are excluding penalty and interest, if any, that would be levied at the time of final conclusion.

2) The Company is party to various legal proceedings in the normal course of business and does not expect the outcome of these proceedings to have any adverse effect on the financial conditions, results of operations or cash flows.

3) In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liability, where applicable in its financial statements. The Company's management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect of the Company's results of operations or financial condition.

4) The Company has availed the benefit of payment of customs duty and other duties at a concessional rate on import of capital goods, under the Export Promotion Capital Goods ('EPCG') Scheme, against fulfillment of export commitment over eight years from the date of issue of the license. The Company's bankers have provided guarantees amounting to Rs 18,864,028 (31 March 2014: Rs 19,701,390) to the Customs and other statutory authorities, on behalf of the Company, towards fulfilment of these commitments. The Company believes that the export commitment obligations will be fulfilled and accordingly does not expect any custom and other duties, penalty or interest to be levied with respect to non-fulfillment of the terms and conditions of the EPCG scheme.

10. Managerial remuneration

Total remuneration paid to the erstwhile managing director (including as film director fees) for earlier financial years from 2005-06 to 2013-2014 (total remuneration paid aggregates to Rs 125,744,747) is in excess of the limits prescribed under Schedule XIII to the Companies Act, 1956. During the year 2011-12, the Company had received approval for part of the excess remuneration paid (approval received for remuneration aggregating to Rs 25,200,000 for the financial years 2005-06, 2006-07 and 2007-08) and made applications to the authorities requesting reconsideration/ approval for the balance excess remuneration and for recognition of the erstwhile managing director as a professionally qualified person under the Companies Act, 1956. Through its various communications, the Ministry of Corporate Affairs has directed the Company to recover the excess remuneration paid during the financial years 2008-09 to 2011-12. The Company has requested the authorities to reconsider their Orders in respect of the above and also for his recognition as a professionally qualified person under the Act. Pending conclusion of this matter, no adjustment has been made in these financial statements.

11. Public Interest Litigations ('PIL') had been filed alleging that the Maharashtra Film, Stage and Cultural Development Corporation Limited ('MFSCDCL') had not followed proper procedure while entering into a Joint Venture Agreement ('JVA') with the Company and subsequent allotment of 20 acre land to the said joint venture, Whistling Woods International Limited ('WWI'), a subsidiary of the Company. During the year 2011-12, pursuant to the Order of the Honourable High Court of Judicature at Bombay ('High Court') dated 9 February 2012, inter-alia, the JVA with MFSCDCL was quashed/ rendered cancelled, WWI was ordered to return the land to MFSCDCL and pay rent (including interest on arrears) retrospectively on the entire land since the date of the JVA. Of the total land admeasuring 20 acres, 14.5 acres vacant unused land was handed over to MFSCDCL on 18 April 2012 and the balance was handed over on or before 31 July 2014. Pending discussion and/ or agreement with MFSCDCL and/ or clarifications to be sought from the concerned parties, no adjustments have been made to the Share Capital structure of WWI and the carrying value of the land rights in its books of account. However, in terms of the Order of the High Court, the said amount together with future rent till the date of vacation of the premises is adjustable against the market price of the Institute building of WWI on the said land. The valuation is to be carried out by an expert valuer to be appointed by the Government. During the previous year, the PWD Engineer has given his valuation report based on the Balance Sheet of WWI as at 31 March 2011. Further, the Company made an application to the Government of Maharashtra in February 2013 to appoint expert valuers to determine the market price. WWI's petition for special leave to appeal filed with the Supreme Court of India has been dismissed. However, the Company and WWI filed review petitions with the High Court. In terms of Order dated 9 February 2012 passed by the High Court of Judicature at Bombay ('High Court'), Maharashtra Film Stage and Cultural Development Corporation ('MFSCDC') raised net demand of Rs. 591,966,210 and asked WWI to vacate the premises. The Company's and WWI's Review Petitions were heard by High Court and a stay was granted on 30 July 2014. The High Court ordered the Company/WWI to pay arrears of rent for the years 2000-01 to 2013-14 aggregating to Rs 100,038,000 by January 2015 and pay rent of Rs 4,500,000 per annum from the financial year 2014-15. As per the terms of the said Order, the Company has paid Rs 104,538,000 by 31 March 2015. The State Government of Maharashtra and MFSCDCL challenged the Order of the Bombay High Court in the Supreme Court which was dismissed by the court on 22nd September 2014 with recourse to the State Government of Maharashtra to make an application to Bombay High Court.Pending final disposal of the review petitions and valuation of the building, and in view of the future plans for WWI which are being evaluated, management believes that the Company's investments in WWI aggregating Rs 369.997,000 and amounts due therefrom aggregating Rs 394,188,264 are good and recoverable as management is hopeful of reliefs based on the issues involved and on merits of the case, as also of a high valuation of the building. The amounts so paid/ being paid by the Company have been treated as Deposits in the standalone financial statements to be adjusted on the settlement of the case.

12. Discontinuing operations

During the year ended 31 March 2013, the Company entered into an arrangement with VN Films Private Limited vide term sheet dated 11 September 2012 to form a Joint Venture Company under the name "MUKTA VN FILMS LIMITED" to conduct the business of exhibition and programming ('Exhibition') which was being conducted by the Company and forming part of the Company's revenue under 'Software' segment. The Board of Directors of the Company had passed a resolution at their meeting held on 5 March 2013, authorising the Company to enter into a shareholders' agreement. Further on 19 April 2013, the proposal had been approved by the shareholders through postal ballot. A share subscription cum shareholder agreement had been entered into on 19 March 2014 between the Company and Mukta VN Films Private Limited based on which they legally and beneficially own 3,300,000 (55%) and 2,699,950 (44.90%) equity shares respectively as at 31 March 2015.

During the financial year ended 31 March 2015, the Company has conducted the Exhibition business till 10 April 2014. The assets and liabilities pertaining to these business operations as on this date shall be realised and settled by the Company, as applicable, and shall not stand transferred to Mukta VN Films Limited.

Mukta VN Films Limited has conducted the Exhibition business from 11 April 2014 based on the agreement with the Company, VN Films Private Limited and Mukta VN Films Limited.

13. The Company has a process whereby periodically all long term contracts are assessed for material foreseeable losses. At the year end, the Company has reviewed that there are no long-term contracts including derivative contracts for which there were any material foreseeable losses.

14. Other information

Information with regard to other matters specified in Schedule III to the Act is either nil or not applicable to the Company for the year/period.

15. Prior period comparatives

The figures for the previous year have been regrouped/ rearranged as necessary to conform to the current year's presentation.


Mar 31, 2014

1. Background

Mukta Arts Limited (''Mukta'' or ''the Company'') is a company incorporated in India under the Companies Act, 1956 (''the Act''). The Company was incorporated on 7 September 1982 as Mukta Arts Private Limited and was converted to a public limited company on 30 September 2000 and renamed as Mukta Arts Limited. The Company is promoted by Mr. Subhash Ghai who holds approximately 54.99% of the outstanding equity share capital as at 31 March 2014. The Company is primarily engaged in the business of film production, distribution and exhibition (wherein it provides film content to multiplexes and single screens across India as well as manages/ operates theatres). The Company also provides production equipment to other production houses and independent producers.

a) Rights, preferences and restrictions attached to equity shares

The Company has only one class of equity shares having par value of Rs 5 per share. Each equity shareholder is entitled to one vote per share. The voting rights of an equity shareholder are in proportion to its share of the paid-up equity capital of the Company.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(iii) *** Term loan from financial institution - Life Insurance Corporation loan was secured against keyman insurance policy of a director at an interest rate of 9% p.a. The loan was repaid on the maturity of the keyman policy in October 2013.

(iv) # The Company had obtained equipment on finance lease basis in December 2012. The agreements for the equipment were modified during the year.

* The Company has obtained a cash credit facility from Kotak Mahindra Bank Limited on 8 January 2010 at interest rate varying from 13% to 14% per annum. Along with the term loan mentioned above in Note 3.3, this facility is secured against all current assets, commercial property at Oshiwara, and three residential flats at Bandra. The facility is also secured by the personal guarantee of Mr Subhash Ghai, the Managing Director of the Company and Mrs. Mukta Ghai, a relative of the Managing Director and a shareholder.

** Deposit of Rs. 111,900,000 accepted at interest rate of 15% p.a. repayable on demand provided 30 days advance notice is given to the borrower. Deposit of Rs. 30,000,000 accepted at interest rate of 24% repayable on demand. Deposit of Rs. 30,000,000 accepted at interest rate of 24% repayable on demand.

2. Gratuity and other post employment benefit plans

(i) Defined contribution plans

Contribution to provident fund - amount of Rs 2,320,242 (2013: Rs 1,693,216) and ESIC- amount of Rs 690,471 (2013: Rs 326,244) is recognized as an expense and included in "Employee benefits expense" in the Statement of profit and loss.

(ii) Defined benefit plan and other long term employment benefit (a) Leave wages (other long term employment benefit)

The leave wages are payable to all eligible employees at the rate of daily salary for each day of accumulated leave on death or on resignation or upon retirement on attaining superannuation age. During the year, Rs 780,120 (2013: Rs 350,505) is recognized as an expense in the Statement of profit and loss.

The estimates of future salary increases considered in the actuarial valuation take into account inflation, seniority, promotion and other conditions in the employment market.

The Company expects Rs 2,000,000 in contribution to be paid to its defined benefit plan in the next year (2013: Rs 1,000,000)

3. Lease disclosure under AS 19 - ''Leases''

Operating lease : Company as lessee

The Company is obligated under non-cancellable leases primarily for office and residential premises which is renewable thereafter as per the terms of the respective agreement.

Lease rent expenses of Rs 36,242,205 (2013: Rs 15,622,294) have been included under ''Rent'' in the Statement of profit and loss.

Operating lease : Company as lessor

The Company has given office premises on lease which is renewable thereafter as per the terms of the respective agreement Lease rent income of Rs 20,791,454 (2013: Rs 19,056,395) has been included under ''Rent and amenities charges'' in the Statement of profit and loss.

Operating lease : Company as sub-lessor

The Company has subleased part of the office premises taken on lease which is renewable thereafter as per the terms of the respective agreement Sublease rent income of Rs 25,322,762 (2013: Rs 23,568,537) has been included under ''Rent and amenities charges'' in the Statement of profit and loss.

Finance lease : Company as lessee

The Company had obtained equipment on finance lease basis in December 2012. The agreements for the equipment were modified during the year and the lease is now in the nature of an operating lease.

Finance lease obligations are secured against the respective assets taken on lease

The Company has obtained plant and equipment on finance lease basis as at 31 March 2013. The carrying amount of assets was as follows.

4. Capitalisation of expenditure

During the year, the Company has capitalised the salaries, wages and bonus amounting to Rs 3,627,737 (2013: Rs 3,751,895) to the cost of Fixed asset/ Capital work in progress (CWIP). Consequently, expenses disclosed under note 3.24 are net of amount capitalised by the Company.

5. Segment information

As per Accounting Standard (AS) 17 on "Segment Reporting", segment information has been provided in the Notes to consolidated financial statements.

6. Contingent liabilities

31 March 2014 31 March 2013

a) Claims against the Company not acknowledge as debt

Service tax matters * 1,675,000 2,915,000

b)Guarantees given by bank on 19,701,390 21,651,390 behalf of the Company

c)Corporate guarantees for - 50,000,000 loans taken by subsidiary

d) The Company Law Board had passed an order directing Central Government to undertake the investigation under Section 237 of the Act. The Company aggrieved by the Order had moved the Bombay High Court and obtained stay on the Order. The hearing in this matter was completed on 7 January 2009 and Hon''ble Bombay High Court had quashed the investigation. The Central Government has on 25 February 2012 moved the Hon''ble Supreme Court challenging the Order passed by the Hon''ble Bombay High Court on 7 January 2009.

e) Support letter provided to Whistling Woods International Limited, a subsidiary of the Company.

* Notes

Unless specified, the amounts are excluding penalty and interest, if any, that would be levied at the time of final conclusion.

The Company is party to various legal proceedings in the normal course of business and does not expect the outcome of these proceedings to have any adverse effect on the financial conditions, results of operations or cash flows.

7. Managerial remuneration

The remuneration paid to the managing director (including fees as film director) of the Company for the year ended 31 March 2014 amounting to Rs 15,138,588 and for earlier financial years from 2005-06 to 2012-2013 aggregating to Rs 110,606,159, is in excess of the limits prescribed under Schedule XIII to the Act. The Company made applications to the Central Government seeking post-facto approval for earlier years, which is awaited; application for the current year is proposed to be made. During the financial year 2011-12, the Company had received approval for part of the excess remuneration paid (approval received for remuneration aggregating to Rs 25,200,000 for the financial years 2005-06, 2006-07and 2007-08). The Company had made an application to authorities requesting reconsideration/ approval for the balance excess remuneration. Pending final communication from the authorities in this regard and application for the current year, no adjustment has been made in these financial statements.

8. Public Interest Litigations (''PIL'') had been filed alleging that the Maharashtra Film, Stage and Cultural Development Corporation Limited (''MFSCDCL'') had not followed proper procedure while entering into a Joint Venture Agreement (''JVA'') with the Company and subsequent allotment of 20 acre land to the said joint venture, Whistling Woods International Limited (''WWI''), a subsidiary of the Company. During the year 2011-12, pursuant to the Order of the High Court of Judicature at Bombay (''High Court'') dated 9 February 2012, inter-alia, the JVA with MFSCDCL was quashed/ rendered cancelled, WWI was ordered to return the land to MFSCDCL and pay rent (including interest on arrears) retrospectively on the entire land since the date of the JVA. Of the total land admeasuring 20 acres, 14.5 acres vacant unused land was handed over to MFSCDCL on 18 April 2012 and the balance is to be handed over on or before 31 July 2014. Pending discussion and/or agreement with MFSCDCL and/or clarifications to be sought from the concerned parties, no adjustments have been made to the Share Capital structure of WWI and the carrying value of the land rights in its books of account. However, in terms of the Order of the High Court, the said amount together with future rent till the date of vacation of the premises is adjustable against the market price of the Institute building of WWI on the said land. The valuation is to be carried out by an expert valuer to be appointed by the Government. During the previous year, the PWD Engineer has given his valuation report based on the Balance Sheet of WWI as at 31 March 2011. Further, the Company made an application to the Government of Maharashtra in February 2013 to appoint expert valuers to determine the market price. WWI''s petition for special leave to appeal filed with the Supreme Court of India has been dismissed. However, the Company and WWI have filed review petitions with the High Court, which have not yet come up for hearing. Pending final disposal of the review petitions and valuation of the building, and in view of the future plans for WWI which are being evaluated, management believes that the Company''s investments in WWI and amounts due therefrom are good and recoverable as management is hopeful of reliefs based on the issues involved and on merits of the case, as also of a high valuation of the building.

9. Discontinuing operations

During the year ended 31 March 2013, the Company entered into an arrangement with VN Films Private Limited (formerly known as Allied Services Private Limited) vide term sheet dated 11 September 2012 to form a Joint Venture Company under the name "MUKTA VN FILMS LIMITED" to conduct the business of exhibition and programming presently being conducted by the Company and forming part of the Company''s revenue under ''Software'' segment. The Board of Directors of the Company had passed a resolution at their meeting held on 5 March 2013, authorising the Company to enter into a shareholders'' agreement. Further on 19 April 2013, the proposal has been approved by the shareholders through postal ballot. A share subscription cum shareholder agreement has been entered into on 19 March 2014 between the Company and Mukta VN Films Private Limited based on which they legally and beneficially own 27,500 (55%) and 22,500 (45%) equity shares respectively. Consequently, the exhibition and programming business is disclosed as a discontinuing operation.

10. Prior period comparatives

Up to the previous year, Rs 45,102,136 was classified under Trade payables'', this has now have been shown under ''Other current liabilities'' (Dues to venturer).

Up to the previous year, Rs 1,656,450 was classified under ''Other income'' (Excess provision written back), this has now been shown under ''Revenue from operations'' (Excess provision written back).

Up to the previous year, Rs 2,010,096 was classified under ''Other expenses'' (Miscellaneous expenses), this has now been shown under ''Other expenses'' (Security charges).

Up to the previous year, Rs 11,290,600 was classified under ''Other current liabilities'' (Dividend payable), this has now been shown under ''Short term provisions'' (Dividend payable).


Mar 31, 2013

1. Background

Mukta Arts Limited (''Mukta'' or ''the Company'') is a company incorporated in India under the Companies Act, 1956 (''the Act''). The Company was incorporated on 7 September 1982 as Mukta Arts Private Limited and was converted to a public limited company on 30 September 2000 and renamed as Mukta Arts Limited. The Company is promoted by Mr. Subhash Ghai who holds approximately 54.99% of the outstanding equity share capital as at 31 March 2013. The Company is primarily engaged in the business of flm production and distribution and flm exhibition (wherein it provides flm content to multiplexes and single screens across India) as also manages/ operates theatres. The Company also provides production equipment to other production houses and independent producers.

2.1 Gratuity and other post employment beneft plans

(i) Defned contribution plans

Contribution to provident fund - amount of Rs 1,693,216 (2012: Rs 1,663,970) and ESIC - amount of Rs 326,244 (2012: Rs 310,809) is recognized as an expense and included in "Employee beneft expenses" in the Statement of proft and loss.

(ii) Defned beneft plan and other long term employment beneft

(a) Leave wages (other long term employment beneft)

The leave wages are payable to all eligible employees at the rate of daily salary for each day of accumulated leave on death or on resignation or upon retirement on attaining superannuation age. During the year, Rs 350,505 (2012: Rs Nil) is recognized as an expense in the Statement of proft and loss.

2.2 Lease disclosure under AS 19 – ''Leases''

Operating lease : Company as lessee

The Company is obligated under non-cancellable leases primarily for offce and residential premises which is renewable thereafter as per the terms of the respective agreement.

Lease rent expenses of Rs 15,622,294 (2012: Rs 20,559,550) have been included under ''Rent'' in the Statement of proft and loss.

2.3 Capitalisation of expenditure

During the year, the Company has capitalised the salaries, wages and bonus amounting to Rs 3,751,895 (2012: Rs 2,876,920) to the cost of Fixed asset/Capital work in progress(CWIP). Consequently, expenses disclosed under note 3.24 are net of amount capitalised by the Company.

2.4 Segment information

As per Accounting Standard (AS) 17 on "Segment Reporting", segment information has been provided in the Notes to consolidated fnancial statements.

2.5 Related party disclosures

Details of related parties including summary of transactions entered into by the Company during the year ended 31 March 2013 are summarized below:

A Parties where control exists

(i) Shareholders holding more than 20%

- Subhash Ghai

(ii) Subsidiary companies

- Whistling Woods International Limited

- Connect.1 Limited

- Mukta Tele Media Limited

- Coruscant Tec Private Limited

(iii) Key management personnel and relatives of such personnel

- Subhash Ghai - Chairman and Managing Director (and shareholder)

- Parvez Farooqui - Executive Director

- Rahul Puri - Executive Director

- Mukta Ghai - Wife of Subhash Ghai (and shareholder)

- Ashok Ghai - Brother of Subhash Ghai

- Siraj Farooqui - Brother of Parvez Farooqui

- Sameer Farooqui - Brother of Parvez Farooqui

- Sajid Farooqui - Brother of Parvez Farooqui

- Meghna Ghai Puri - Daughter of Subhash Ghai (and shareholder)

2.6 Managerial remuneration

The remuneration paid to the managing director of the Company for the year ended 31 March 2013 amounting to Rs 9,979,490 (including fees as flm director) and for earlier fnancial years from 2005-06 to 2011-2012 aggregating to Rs 100,626,669, is in excess of the limits prescribed under Schedule XIII of the Act. The Company made applications to the Central Government seeking post-facto approval for earlier years, which is awaited; application for the current year is proposed to be made. During the previous year, the Company had received approval for part of the excess remuneration paid (approval received for remuneration aggregating to Rs 25,200,000 for the fnancial years 2005-06, 2006-07 and 2007-08). The Company had made an application to authorities requesting reconsideration/ approval for the balance excess remuneration. Pending fnal communication from the authorities in this regard and application for the current year, no adjustment has been made in these fnancial statements.

2.7 Public Interest Litigations (''PIL'') had been fled alleging that the Maharashtra Film, Stage and Cultural Development Corporation Limited (''MFSCDCL'') had not followed proper procedure while entering into a Joint Venture Agreement (''JVA'') with the Company and subsequent allotment of 20 acre land to the said joint venture, Whistling Woods International Limited (''WWI''), a subsidiary of the Company. During the previous year, pursuant to the Order of the High Court of Judicature at Bombay (''High Court'') dated 9 February 2012, inter-alia, the JVA with MFSCDCL has been quashed/ rendered cancelled, WWI has been ordered to return the land to MFSCDCL and pay rent (including interest on arrears) retrospectively on the entire land since the date of the JVA. Of the total land admeasuring 20 acres, 14.5 acres vacant unused land has been handed over to MFSCDCL on 18 April 2012 and the balance is to be handed over on or before 31 July 2014. Pending discussion and/ or agreement with MFSCDCL and/or clarifcations to be sought from the concerned parties, no adjustments have been made to the Share Capital structure of WWI and the carrying value of the Land rights in its books of account. Further, MFSCDCL had demanded Rs 832,062,611 towards arrears of rent and interest thereon vide letter dated 3 December 2012. However, in terms of the Order of the High Court, the said amount together with future rent till the date of vacation of the premises is adjustable against the market price of the Institute building of WWI on the said land. The valuation is to be carried out by an expert valuer to be appointed by the Government. During the year, the PWD Engineer has given his valuation report based on the Balance Sheet of WWI as at 31 March 2011. Further, the Company has made an application to the Government of Maharashtra in February 2013 to appoint expert valuers to determine the market price. WWI''s petition for special leave to appeal fled with the Supreme Court of India has been dismissed. However, the Company and WWI have fled review petitions with the High Court, which have not yet come up for hearing. Pending fnal disposal of the review petitions and valuation of the building, and in view of the future plans for WWI which are being evaluated, management believes that the Company''s investments in WWI and amounts due therefrom are good and recoverable as management is hopeful of reliefs based on the issues involved and on merits of the case, as also of a high valuation of the building.

2.8 Discontinuing operations

During the year, vide term sheet dated 11 September 2012, the Company entered into an agreement with VN Films Pvt. Ltd., (formerly known as Allied Services Private Limited,) to form a Joint Venture Company under the name "MUKTA V N FILMS LIMITED" to conduct the business of exhibition and programming presently being conducted by MAL and forming part of MAL''s revenue under ''Software'' segment. MAL will hold 55% in the Joint Venture Company. The Board of Directors of MAL had passed a resolution at their meeting held on 5 March 2013, authorising the Company to enter into a shareholders'' agreement. Further, on 19 April 2013, the proposal has been approved by the shareholders through postal ballot. Consequently, the exhibition and programming business is disclosed as a discontinuing operation.

2.9 Other information

Information with regard to other matters specifed in revised Schedule VI to the Act is either nil or not applicable to the Company for the year.

2.10 Prior period comparatives

Upto the previous year, Rs 37,283,265 was classifed under ''Long-term loans and advances'' (Advances to related parties), which has now have been shown as ''Short-term loan and advances'' (Advances to related parties).


Mar 31, 2012

1. Background

Mukta Arts Limited ('Mukta' or 'the Company') is a company incorporated in India under the Companies Act, 1956 ('the Act'). The Company was incorporated on 7 September 1982 as Mukta Arts Private Limited and was converted to a public limited company on 30 September 2000 and renamed as Mukta Arts Limited. The Company was promoted by Mr. Subhash Ghai who holds approximately 54.99% of the outstanding equity share capital as at 31 March 2012. The Company is primarily engaged in the business of film production and distribution and film exhibition (wherein it provides film content to multiplexes and single screens across India) as also manages/ operates theatres. The Company also provides production equipment to other production houses and independent producers.

a) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of Rs 5 per share. Each equity share holder is entitled to one vote per share.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

The Board of Directors, in their meeting on 4 August 2011, declared an interim dividend of Re 1 per equity share. The total dividend appropriation for the year ended 31 March 2012 amounted to Rs 26,244,435 including corporate dividend tax Rs 3,663,235.

(i) * Term loan was secured against the keyman insurance policy of Mr. Subhash Ghai. This has been repaid during the current year.

(ii) ** Term loan is secured against all current assets, commercial property at Oshiwara and residential flats (3 nos.) at Bandra. Loan is also secured by the personal guarantee of Mr Subhash Ghai, the Managing Director of the Company and Mrs. Mukta Ghai, a relative of the Managing Director and a shareholder. The term loan has been taken in various tranches, having separate maturity periods ranging from 3 to 5 years and at interest rate varying from 10% to 14%. The details of repayment and other terms are as follows:

(iv) ****Term loan from financial institution - Life Insurance Corporation loan is secured against keyman insurance policy of Mr. Parvez Farooqui at an interest rate of 9% p.a. Loan is repayable on or before the maturity of the keyman policy i.e. October 2013.

(v) ## The Company has entered into an agreement with Sarpanch of Gram Panchayat Badsa- Haryana for purchase of 20 acres land for setting up a film and TV institute and multimedia complex on October 2011 for Rs 80,316,000. As per the agreement, the land cost is to be paid in seven equal installments. The first payment should be made on the date of signing the agreement and the balance amount is to be paid in 6 installments, subject to condition that last installment should be paid on or before October 2016. 10% annual interest shall be payable for the payments deferred over a maximum period of seven years on a reducing balance basis. The Company has paid the first two installments till 31 March 2012 of Rs 29,818,286. Also refer Note 3.43.

*The Company has obtained a cash credit facility amounting to Rs 100,000,000 from Kotak Mahindra Bank Limited on 8 January 2010. Along with the term loan mentioned above in Note 3.3, this facility is secured against all current assets, commercial property at Oshiwara, and residential flats (3 nos) at Bandra. The facility is also secured by the personal guarantee of Mr Subhash Ghai, the Managing Director of the Company and Mrs. Mukta Ghai, a relative of the Managing Director and a shareholder.

"Comprises of inter-corporate deposits amounting to Rs 37,500,000 for a period of 3 months at interest rate of 12% p.a. Mr Subhash Ghai, the Managing Director of the Company, has provided a personal guarantee to the lender.

2.1 Gratuity and other post employment benefit plans

(i) Defined Contribution Plans

Contribution to provident fund - amount of Rs 1,663,970 (2011: Rs 1,383,849) and ESIC - amount of Rs 310,809 (2011: Rs 153,496) is recognized as an expense and included in "Employee benefit expenses" in the Statement of profit and loss.

(ii) Defined benefit plan and other long term employment benefit (a) Leave wages (other long term employment benefit)

The leave wages are payable to all eligible employees at the rate of daily salary for each day of accumulated leave on death or on resignation or upon retirement on attaining superannuation age. During the year, Rs Nil (2011: 4,484,731) is recognized as an expense in the Statement of profit and loss.

*Pursuant to the actuarial valuation, liability pertaining to prior years aggregating to Rs 3,495,320 in respect of gratuity and Rs 4,186,971 in respect of leave encashment was provided for during the year 2010-11.

The estimates of future salary increases considered in the actuarial valuation take into account inflation, seniority, promotion and other conditions in the employment market.

2.2 Lease disclosure under AS 19 - 'Leases'

(i) Operating lease : Company as lessee

The Company is obligated under non-cancellable leases primarily for office and residential premises which is renewable thereafter as per the terms of the respective agreement.

Lease rent expenses of Rs 20,559,550 (2011: Rs 17,032,149) have been included under 'Rent' in the Statement of profit and loss.

(ii) operating lease : Company as lessor

The Company has given office premises on lease which is renewable thereafter as per the terms of the respective agreement

Lease rent income of Rs 17,819,015 (2011: Rs 14,393,304) has been included under 'Rent and amenities charges' in the Statement of profit and loss.

(iii) operating lease : Company as sub-lessor

The Company has subleased part of the office premises taken on lease. The future minimum sublease payment expected to be received under non-cancellable sub-lease as at 31 March 2012 is Rs 58,618,140 (2011: Rs 42,834,885).

Sublease rent income of Rs 21,413,250 (2011: Rs 23,656,778) has been included under 'Rent and amenities charges' in the Statement of profit and loss.

2.3 Capitalisation of expenditure

During the year, the Company has capitalised the salaries, wages and bonus amounting to Rs 2,876,920 to the cost of Fixed asset/ Capital work in progress(CWIP). Consequently, expenses disclosed under note

2.4 are net of amount capitalised by the Company.

2.5 segment information

As per Accounting Standard (AS) 17 on "Segment Reporting", segment information has been provided in the Notes to consolidated financial statements.

2.6 Related party disclosures

Details of related parties including summary of transaction entered into by the Company during the year ended 31 March 2012 are summarized below:

A parties where control exists

(i) shareholders holding more than 20%

- Subhash Ghai

(ii) subsidiary companies

- Whistling Woods International Limited

- Connect.1 Limited

- Mukta Tele Media Limited

- Coruscant Tec Private Limited

(iii) Key management personnel and relatives of such personnel

- Subhash Ghai - Chairman and Managing Director

- Parvez Farooqui - Executive Director

- Rahul Puri - Executive Director

- Mukta Ghai - Wife of Subhash Ghai

- Ashok Ghai - Brother of Subhash Ghai

- Siraj Farooqui - Brother of Parvez Farooqui

- Sameer Farooqui - Brother of Parvez Farooqui

- Sajid Farooqui - Brother of Parvez Farooqui

- Meghna Ghai Puri - Daughter of Subhash Ghai

(iv) Enterprise over which key management personnel have control/substantial interest/significant influence

- Mukta Arts - Proprietary concern of Chairman and Managing Director

- MAL Employees Welfare Trust - Executive Director is settler and one of the director is Trustee

- Mukta Tele Arts Private Limited - Enterprise in which Subhash Ghai exercises significant influence

- Sharyans Resources Limited - Enterprise in which Vijay Choraria is the common director

2.7 Commitments

Estimated amounts of contracts remaining to be executed on capital account and not provided for aggregate to Rs 27,428,576 (2011:Rs 5,706,143).

2.8 Contingent liabilities

31 March 2012 31 March 2011

a) Claims against the Company not acknowledge as debt Service tax matters * 2,915,000 2,915,000

b) Guarantees given by bank on behalf of the Company 19,701,390 21,544,383

c) Corporate guarantees for loans taken by subsidiary 150,000,000 150,000,000

d) The Company Law Board had passed an order directing Central Government to undertake the investigation under Section 237 of the Companies Act, 1956. The Company aggrevied by the Order had moved the Bombay High Court and obtained stay on the Order.

The hearing in this matter was completed on 7 January 2009 and Hon'ble Bombay High Court had quashed the investigation. The Central Government has on 25 February 2012 moved the Hon'ble Supreme Court challenging the Order passed by the Hon'ble Bombay High Court on 7 January 2009.

e) Support letter provided to Whistling Woods International Limited, a subsidiary of the Company.

* Notes

Unless specified, the amounts are excluding penalty and interest, if any, that would be levied at the time of final conclusion.

The Company is party to various legal proceedings in the normal course of business and does not expect the outcome of these proceedings to have any adverse effect on the financial conditions, results of operations or cash flows.

2.9 Dues to Micro, Small amd Medium Enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED) which came into force from 2nd October 2006, certain disclosures are required to be made relating to Micro, Small and Medium Enterprises (MSME). On the basis of the information and records available with the Management, none of the Company's suppliers are covered, accordingly, disclosure of information with regards to principal, interest accruals and payments are not applicable.

2.10 Foreign currency exposures not covered by forward contracts

The Company has no foreign currency exposures as at 31 March 2012 (2011: Rs Nil).

2.11 Managerial remuneration

The remuneration paid to the managing director of the Company for the period 1 April 2011 to 31 March 2012 amounting to Rs 12,997,900 and for earlier financial years 2005-06, 2006-07, 2007-08, 2008-09, 2009-2010 and 2010-11 aggregating to Rs 87,628,769, is in excess of the limits prescribed under Section 198 of the Companies Act, 1956. The Company made applications to the Central Government seeking post-facto approval for earlier years, which is awaited; application for the current year is being made. During the year, the Company has received approval for part of the excess remuneration paid (approval received for remuneration aggregating to Rs 25,200,000 for the financial years 2005-06, 2006-07 and 2007-08). The Company has made an application to authorities requesting reconsideration/ approval for the balance excess remuneration. Pending final communication from the authorities in this regard and application for the current year, no adjustment has been made in these financial statements.

2.12 Public Interest Litigations ('PIL') had been filed alleging that the Maharashtra Film, Stage and Cultural Development Corporation Limited ('MFSCDCL') had not followed proper procedure while entering into a Joint Venture Agreement ('JVA') with the Company and subsequent allotment of 20 acre land to the said joint venture, Whistling Woods International Limited ('wWi'), a subsidiary of the Company. During the year, pursuant to the Order of the High Court of Judicature at Bombay ('High Court') dated 9 February 2012, inter-alia, the JVA with MFSCDCL has been quashed/ rendered cancelled, wWl has been ordered to return the land to MFSCDCL and pay rent (including interest on arrears) retrospectively on the entire land since the date of the JVA. Of the total land admeasuring 20 acres, 14.5 acres vacant unused land has been handed over to MFSCDCL on 18 April 2012 and the balance is to be handed over on or before 31 July 2014. Pending discussion and/ or agreement with MFSCDCL and/or clarifications to be sought from the concerned parties, no adjustments have been made to the Share Capital structure of WWI and the carrying value of the Land rights in its books of account. Further, MFSCDCL has demanded Rs 799,523,424 towards rent and interest arrears thereon for the period up to 18 April 2012. However, in terms of the Order of the High Court, the said amount together with future rent till the date of vacation of the premises is adjustable against the value of the Institute building of WWI on the said land. The valuation is to be carried out by an expert valuer to be appointed by the Government, which has not yet been commissioned. WWI's petition for special leave to appeal filed with the Supreme Court of India has been dismissed. However, the Company and WWI have filed review petitions with the High Court, which have not yet come up for hearing. Pending final disposal of the review petitions and valuation of the building, and in view of the future plans for WWI which are being evaluated, management believes that the Company's investments in WWI and amounts due therefrom are good and recoverable as management is hopeful of reliefs based on the issues involved and on merits of the case, as also of a high valuation of the building.

2.13 Public interest litigation ('PIL') has been filed with regards to sale agreement entered into by the Parent Company with the Sarpanch of Gram Panchayat Badsa- Haryana for sale of 20 acres of land in Badhsa village of Jhajjar district in Haryana to the Parent Company. The Punjab and Haryana High Court stayed the execution of the sale deed and the matter is yet to come for hearing. The management is in the process of preparing its response to the said order and believes that it has a good chance of wining the case.

2.14 prior period comparatives

The previous year's figures have been re-grouped/ re-arranged as necessary to conform to the present year's classification consequent to notification of Revised Schedule VI under the Companies Act, 1956.


Mar 31, 2010

CurrentYear Previous Year

1 Contingent Liabilities 31.03.2010 31.03.2009 Rupees Rupees

a Claims against the company not acknowledged as Debts Nil Nil

b Guarantees given by Bank on behalf of the company 57,766,927 75,743,508

c Letters of Credit given by bank on behalf of the company Nil Nil

d Estimated amount of contracts remaining to be executed on Nil Nil Capital Account & not provided for (net of advance)

e Legal suits fled against the company (having monetory implication) Nil Nil

f Department of Service Tax has levied service tax of Rs 2.12 million on sponsorship fees received for various flms treating the Company as an Advertising Agency. Further the department had issued show cause notice proposing to levy Rs 2.02 millions service tax on a similar issue.

Against the levy of Rs 2.12 million, the Company fled appeal before the Commissioner of Central Excise (Appeals) and subsequently before Honorable Tribunal, claiming that the provisions of Service Tax Act is not applicable in this matter.

The Company has paid Rs 1.24 millions under protest and the same is shown as advance recoverable in cash or kind since the matter is pending before the CESTAT and based on legal opinion sought, the management is of the opinion that the Company will have no liability on this account and that no provision is necessary.

Managerial remuneration paid to the Chairman is in excess of the limits prescribed under Section 198 of the Act.

The Company has made an application to the Central Government seeking post-fact approval, which is awaited.

The Company has given a Corporate guarantee for Term Loans taken by its subsidiary Whistling Woods International Limited from Punjab National Bank.

2 Additional information required to be given pursuant to Part II of Schedule VI to the Companies Act, 1956 is as follows :

The Company is in the business of production, distribution and exhibition of Entertainment software, hiring of equipments etc. which is not subject to any licence and as such information regarding consumption of Raw Materials, Production and sales is not applicable. Further the nature of business of the Company is such that the installed capacity is not quantifable.

3 a) Fixed deposits with scheduled banks include interest accrued (net of taxes) upto 31.03.10 Rs 1.52 million (Previous year Rs 2.17 million). Fixed deposits of Rs 27.13 million (Previous Year Rs 27.92 million) are pledged as security against bank guarantees given for the Company.

b) Lien has been marked on Investments to the extent of 1,913,720 units, previous year 1,913,720 units of LIC MF Floating Rate Fund - Dividend Re-investment Plan in favour of Punjab National Bank against bank guarantees given for the Company.

4 Taxes on Income

(a) Current Tax - Provision for Income Tax is determined in accordance with the provisions of Income Tax Act, 1961

(b) Deferred Tax Position - For the purpose of quantifying deferred tax amount as on Balance Sheet date deferred tax is recognised on timing differences being difference between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred Tax Liability till balance sheet date amounts to Rs 9,502,281 (Previous year Deferred Tax Liability Rs 9,244,513) .

5 Related Party Transaction

(A) The list of related parties and nature of their relationship is furnished below:

Companies under the same management-

Whistling Woods International Ltd. 84.99% - subsidiary

Connect.1 Limited 99% - subsidiary

Mukta Tele Media Ltd. 99.92% - subsidiary

Coruscant Tec Pvt. Ltd. 100% - subsidiary

Mukta Tele Arts Pvt. Ltd. CMD is director

Firms-

Mukta Arts Proprietory frm of CMD

Trusts-

MAL Employees Welfare Trust Executive Director is settler and One of the Directors is Trustee

Directors of the company-

Chairman & Managing Director Mr.Subhash Ghai

Executive Director Mr.Parvez A. Farooqui

Executive Director Mr.Rahul Puri

Non Executive Directors Mr. Anil Harish

Mr. Vijay Choraria

Mr. Pradeep Guha

Relatives of Directors-

Mr. Ashok Ghai Brother of CMD

Mr. Siraj Farooqui Brother of Executive Director

Mr. Sameer Farooqui Brother of Executive Director

Mr. Sajid Farooqui Brother of Executive Director

6 (a) There were no amounts payable to Small Scale Industrial Undertaking on the Balance Sheet date.

(b) The Company has no Suppliers under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid / payable as required under the said Act are not applicable.

7 Previous year fgures have been regrouped wherever necessary.

 
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