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Notes to Accounts of Pioneer Embroideries Ltd.

Mar 31, 2015

NOTE -1

1. Rights, preferences and restrictions attached to Equity Shares:

The Company has one class of Equity Shares having a par value of RS.10 per share. Each shareholder is eligible for one vote per share held. The dividend, if any, proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In case of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

2. Rights, preferences and restrictions attached to Preference Shares:

The Company has one class of Optionally Convertible Cumulative Redeemable Preference Shares having a par value of RS.10 fully paid up per share issued consequent to Corporate Debt Restructuring. The preference shares do not carry voting rights, but carry right to a preference dividend at 9% p.a. effective October 2008. The preference shares are redeemable in 4 annual installments from September 30, 2015. Preference shares are convertible, as per the terms of issue, at a price to be competed as per SEBI guidelines.

NOTE -2

The Company has agreed to issue 8,50,000 equity shares on preferential basis to Edelweiss Assets Reconstruction Company Ltd. Trustee EARC Trust-SC 23 (assignee EXIM Bank) against unpaid interest of RS.297.50 lacs, payable on loan from EXIM Bank (since assigned to EARC).

NOTE -3 LONG TERM BORROWINGS

Term Loans and Funded Interest Term Loan from Kotak Mahindra Bank Ltd (assignee HDFC Bank Ltd.) and Edelweiss ARC (assignee EXIM Bank) (EARC) are secured by first pari passu charge over all fixed assets of the Company both present & future with other term lenders, except machinery under exclusive charge to Landes Bank Baden Wurttemberg, and further secured by second charge over current assets of the Company and by personal guarantee of the Chairman of the Company. Term Loan from Kodak Mahindra Bank Ltd. is further secured by personal guarantee of Mrs Bimla Devi Sekhani, wife of the chairman of the Company.

The Working Capital Term Loan from Union Bank of India is secured by first pari passu charge over fixed assets of the Company both present & future with other term lenders and is further secured by second charge over current assets of the Company & by personal guarantee of Chairman of the Company. Foreign Currency Term Loan from Landes Bank Baden Wurttemberg is secured by exclusive charge on machinery imported from Barmag of Germany for Dope Dyed Polyester Yarn Unit.

Terms of Repayment and interest:

I) Loan of EARC (RS.1515 lacs) is repayable over 5 years from February 2015 to March 2020 and carries no interest.

ii) Loan of Kotak Mahindra Bank Ltd (RS.1702 lacs) has been settled for RS.1300 lacs, is repayable over 4 years from September 2015 to February 2019 and carries interest @22% p.a.

iii) Working Capital Term Loan from Union Bank of India is repayable in 14 quarterly installments ending September 2018 and carries interest @16.75% p.a. presently.

iv) Foreign Currency Term Loan from Landes Bank Baden Wurttemberg is repayable in 7 half yearly instalments ending September 2018 and presently carries interest @0.60% p.a. presently.

NOTE -4 SHORT TERM BORROWINGS

Cash Credit Loans are secured by first pari passu charge by hypothecation of stocks, book debts and second charge on all fixed assets, both present and future and further secured by corporate guarantee of Hakoba Lifestyle Limited, a subsidiary of the Company and personal guarantee of the Chairman of the Company.

NOTE -5 TRADE PAYABLES

Trade Payables include outstanding from a related enterprise Kiran Industries Pvt. Limited of RS.22.03 lacs (Nil).

NOTE -6

The long term debt was restructured under CDR Scheme and was repayable over period from October 1,2010 to December 30, 2018. Consequent to Company''s inability to meet its commitments under CDR package, the CDR Scheme was withdrawn.

Save for the banks, where of term loans are being paid as per schedule, other term loans balances have been considered as current liabilities and included in Note 8(a) above. However, the interest on such loans is being provided as per CDR terms.

All these Secured Loans are secured by first pari passu charge over fixed assets of the Company both present & future with each other, except machinery under exclusive charge to Landes Bank Baden Wurttemberg, and further secured by second charge over current assets of the Company and by personal guarantee of the Chairman of the Company.

NOTE -7

Advance from customers includes advance of RS.35.16 lacs (RS.44.18 lacs) received from Kiran Industries Pvt. Limited, a related enterprise.

Depreciation is provided on fixed assets over the remaining useful life in accordance with the provisions of Schedule 11 of the Act.

NOTE -8

Capital Work in progress includes:

a) a sum of RS.22.15 lacs for renovation of machines at Kallakruchi till the assets of Arcot Textile Mill Limited are transferred in favor of the Company.

b) a sum of RS.471.97 lacs spent for ongoing expansion at Kala-amb and Sarigam unit.

a) Capital advance of RS.209.02 lacs has been given to building contractors and to suppliers of plant & machineries at Dope Dyed Yarn unit at Kala-amb.

b) Advances to Arcot Textile Mills Limited (ATML) (a BIFR Company) was given for purchase of movable and immovable assets situated at Kallakurichi, Tamilnadu for a total consideration of RS.1,105.00 lacs on lump sum sale basis out of FCCBs funds pursuant to MOU dated 20th December, 2007. The transfer of assets in favour of the Company was subject to deregistration of ATML from BIFR. Due to inordinate delay in deregistration from BIFR, it had been agreed that ATML will return the above advance vide their confirmation letter dated 5th October, 2012. Accordingly, RS.130.00 lacs has been returned by ATML till previous year.

NOTE -9

Other advances of RS.650.88 lacs (RS.650.88 lacs) given to various parties for purchase of properties. As the agreement are not taking place, the Company is seeking the refund of advances given. As per the management, said amounts are considered good and fully recoverable. These balances are subject to confirmation from the parties.

NOTE -10

Trade receivable include outstanding from:

a) Subsidiary Company Hakoba Lifestyle Ltd of RS.1,546.97 lacs (RS.1,546.97 lacs) since long time.

b) Related enterprise Thakurdas & Co. Pvt. Ltd. of RS.67.78 lacs (RS.46.69 lacs).

The Company has an investment of RS.1,147.00 lacs (RS.1,147.00 lacs) in Hakoba Lifestyle Limited (HLL), a subsidiary of the Company and it also has trade receivable of RS.1,546.97 lacs (RS.1,546.97 lacs) and loans and advances of RS.1,940.72 lacs (RS.1,314.51 lacs) recoverable from HLL. The accumulated losses of HLL as at 31st March, 2015 amounting to RS.7,363.74 lacs have exceeded the net worth of the said Company. Having regard to the long term strategic investment, the diminution in the value of investments is considered to be temporary and accordingly no provision has been made.

NOTE -11

The Company has an investment of RS.37.88 lacs (RS.37.88 lacs) in Mas Embroideries Private Limited (MAPL), a wholly owned subsidiary of the Company. It has also given loans and advances of RS.77.82 lacs (RS.78.79 lacs) to MAPL. The accumulated losses of MAPL as at 31st March, 2015 amounting to RS.328.70 lacs have exceeded the net worth of the said company. Having regard to the long term strategic investment, the diminution in the value of investments is considered to be temporary and accordingly no provision has been made.

NOTE -12

a) The Company had invested USD 2.585 mn. (RS.1,029.66 lacs) in its wholly owned overseas subsidiary S.R Investments Limited (SRIL). The accounting year of SRIL closes on 30th June every year.

b) The Company had advanced an optionally convertible loan of USD 2.20 mn. (RS.1,322.20 lacs) to SRIL out of FCCBs funds. The Company has written off USD 0.65 mn. (USD 0.65 mn.) as bad debts out of the same as per general permission under FEMA. The outstanding loan as at the year end is RS.163.52 lacs (RS.545.41 lacs).

NOTE -13

The Company had invested USD 1.26 mn. (RS.509.92 lacs) in an overseas Joint Venture with M/s Super Industries DMCC to acquire 10% stake thereof and further advanced an optionally convertible loan of USD 3.70 mn. (RS.2,315.86 lacs) out of FCCBs funds. As the Joint Venture failed, the said investment was treated as loan by the Company. This outstanding balance is subject to confirmation.

Interest free unsecured loans and advances of RS.1,045.47 lacs (RS.1,075.47 lacs) to Pioneer E-com Fashion Ltd, an associate company is considered good of recovery as per the management of the Company.

NOTE -14

Sales includes Sales made to related enterprises M/s J J Sons RS.63.54 lacs (RS.67.95 lacs), Thakurdas & Co. Pvt. Ltd. RS.280.46 lacs (RS.198.40 lacs) and Kiran Industries Pvt. Ltd RS.445.46 lacs.

i) Company has written off advances to subsidiary S R Investments Ltd of RS.404.49 lacs (RS.388.39 lacs) as per general permission under FEMA, as management find it non recoverable.

ii) Company has made provision for doubtful trade receivable related to export receivables under litigation of RS.701.06 lacs during the year.

NOTE -15 CONTINGENT LIABILITIES RS. in lacs Year Ended Year Ended Particulars 31.03.2015 31.03.2014

a) Bank Guarantees Outstanding. 54.24 52.64

b) Corporate Guarantee on behalf of Subsidiary to Banks. 750.00 3,050.00

c) Estimated amount of contracts remaining to be executed on Capital Accounts (Net of advances). 984.70 17.50

d) Assessment Order of Customs Duty for Import of second hand computerised embroidery machines - 18.40 for which appeal has been filed with Honorable Supreme Court (Net of advances).

e) Demand raised by Excise Department in respect of which appeal has been filed. 46.14 46.14

f) Demand raised by Income-tax Department in Block Assessment order U/s 158A for the period 49.01 49.01 from FY 1998-99 to FY 2003-04 in respect of which appeal has been filed with CIT (Appeal).

g) Other Income Tax matters pending in appeal. 13.33 106.76

h) Unpaid Dividend on 9% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS). 1,344,96 1,323.68

i) Custom Duty on Capital Goods and Raw Materials imported under Advance Licence / EPCG Scheme,gainst which export 46.00 32.12 obligation is to be fulfilled.

j) Service Tax demand raised by the Service Tax Department. 128.08 128.08

k) Sundry Cases in Labour Court and Industrial Court regarding overtime and backwages being N A* N A* contested by the Company. (*Quantum not ascertainable)

There is no contingent liability other than stated above and adequate provision have been made for all known liabilities, except interest and penalties as may arise.

NOTE 16 Some of the fixed deposits and bank accounts are subject to confirmations though reconciled with available bank statements. Some of the secured loans are also subject to confirmations though reconciled with bank statements.

NOTE 17 In the opinion of the management, there is no impairment of assets as on Balance Sheet date.

NOTE 18 a) As reported in earlier years, the Company had entered into a Corporate Debt Restructuring scheme (CDR Scheme) with its lenders. As the Company was unable to meet its obligations under CDR Scheme since second quarter of FY 2011-12, the lenders have revoked the CDR package, with approval of CDR-EG.

b) State Bank of India (SBI) had issued demand notice for recovery of their outstanding dues under SARFAESI. The Company has, however, arrived at one time settlement (OTS) with SBI.

In terms of a OTS with State Bank of India, the Company has to pay a sum of RS.3,500.00 lacs, in full and final settlement of the Bank''s dues on or before May 25, 2015. The Company has paid a sum of RS.1,881.87 lacs as against RS.2,966.00 lacs as per agreed repayment schedule. The necessary adjustment in the books will be done after the compliance of the terms and conditions of OTS.

c) The Company has fully paid off dues of State Bank of Patiala in terms of OTS arrived at with the bank. Accordingly the Company has reversed the interest liability of RS.397.21 lacs and the principal amount of RS.198.53 lacs. The OCCRPS held by the Bank were surrendered by them in terms of OTS and were cancelled. As per the legal expert opinion in the past, the Company has treated the interest reversal as monetary item and credited the same to Statement of Profit and Loss and the principal amount as non- monetary item and credited the same to Capital Reserve.

d) Loans of HDFC Bank Ltd and EXIM Bank have been assigned by the banks to Kotak Mahindra Bank Ltd (KMBL) and Edelweiss ARC (EARC) respectively, during the year. The Company as arrived at a settlement with KMBL and EARC. The necessary adjustment in the books will be done after the due compliance of the terms and conditions of the settlement.

e) The Company also continues to explore settlement / restructuring options with other individual lenders.

NOTE 20 During the year, the Company has paid a sum of RS.4.32 lacs (RS.7.20 lacs) as premium towards the Key man Insurance policy taken for Mr. Raj Kumar Sekhani, Chairman of the Company.

NOTE 21 As per management, realisable value of current assets, deposits, loans and advances in the ordinary course of business will be at least equal to the amount at which they have been stated in the financial statements.

NOTE 22 The sundry debit and credit balances including receivables, payables and advances to suppliers, advances from customers and deposits are subject to confirmation and reconciliations, the effect of which is not known.

NOTE 23 Dues to Small Scale Industries undertakings and dues to Micro Enterprises and Small Enterprises:

The Company is in the process of compiling relevant information from its suppliers about their coverage under the Micro, Small and Medium Enterprises Development Act, 2006. Since, the relevant information is not readily available; no disclosures have been made in the Accounts. However, in the view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act, is not expected to be material.

NOTE 24 The Company operates in a single segment of Textiles.

NOTE 25 Disclosures pursuant to Accounting Standard-15 "Employee Benefits"

a) The Company has recognized RS.108.00 lacs (RS.45.52 lacs) in the statement of Profit and Loss for the year ended 31st March, 2015 under Defined Contribution Plan.

b) Details of Defined Benefit Plan:

NOTE 26 Related Party Disclosures :

a) Names of Related Parties and Nature of Relationships

i Subsidiaries Hakoba Lifestyle Ltd.

Mas Embroideries Pvt. Ltd. Pioneer Realty Ltd. S.R Investments Ltd, Mauritius

ii Associate Concerns Pioneer E-Com Fashions Ltd. Reach Industries Pvt. Ltd. Crystal Lace (I) Ltd.

iii Joint Venture M/s Super Industries, DMCC

iv Key Management Personnel Shri Raj Kumar Sekhani Shri Harsh Vardhan Bassi

v Relative of Key Management Personnel & their Enterprises Smt. Bimla Devi Sekhani Shri Aarav Sekhani Shri Vishal Sekhani M/s J J Sons Kiran Industries Pvt. Ltd. & Co. Pvt Ltd.

NOTE -27 The previous year''s figure have been regrouped and reclassified to confirm to current year''s classification.


Mar 31, 2014

NOTE -1

Above Working Capital Term Loan from Union Bank of India is secured by first pari passu charge over fixed assets of the Company both present & future with each other lenders and is further secured by second charge over current assets of the Company & by personal guarantee of Chairman of the Company. Foreign Currency Term Loan from Lands Bank Baden Wurttemberg has exclusive charge on machinery imported from Barmag of Germany for Dope Dyed Polyester Yarn Unit.

Terms of Repayment : These secured loans were restructured under Corporate Debt Restructuring Scheme (CDR Scheme) w.e.f. 01.10.2008. Above Working Capital Term Loans are repayable in 32 quarterly instalments and Foreign Currency Term Loan is repayable in 16 half yearly instalments commenced from 01.10.2010 after a moratorium period of 2 years. Interest at 2% to10% p.a. is charged.

NOTE -2

Cash Credit Loans are secured by first pari passu charge by hypothecation of stocks, book debts and second charge on all fixed assets, both present and future and further secured by corporate guarantee of Subsidiary Hakoba Lifestyle Limited and personal guarantee of Chairman of the Company.

NOTE - 3

The long term debt were restructured under CDR Scheme and were repayable over period from October 1, 2010 to September 30, 2018. Consequent to Company''s inability to meet its commitments under CDR package, the CDR Scheme was withdrawn.

Save for the banks, where of term loans are being paid as per schedule, other term loans balances have been considered as current liabilities and included in Note 7(a) above. However, in absence of correspondence the interest has been continued to be provided as per CDR terms.

All these Secured Loans are secured by first pari passu charge over fixed assets of the Company both present & future with each other, except machinery imported from Barmag of Germany for Dope Dyed Polyester Yarn Unit, which is exclusively charged to Landes Bank Baden Wurttemberg, and further secured by second charge over current assets of the Company & by personal guarantee of Chairman of the Company.

NOTE - 4

Advance from customers includes advance of Rs.44.18 lacs (Rs.62.54 lacs) received from Kiran Industries Limited, a related enterprise.

NOTE 5

Capital Work in progress includes:

a) a sum of Rs.22.15 lacs for renovation of machines at Kallakruchi till the assets of Arcot Textile Mill Limited are transferred in favour of the Company.

b) a sum of Rs.323.70 lacs spent for ongoing expansion at Kala-amb and Sarigam unit.

NOTE - 6

a) Capital advance of Rs.127.43 lacs has been given to building contractors and to suppliers of plant & machineries for expansion project at Dope Dyed Yarn unit at Kala-amb and Embroidery unit at Naroli.

b) Advances to Arcot Textile Mills Limited (ATML) (a BIFR Company) was given for purchase of movable and immovable assets situated at Kallakurichi, Tamilnadu for a total consideration of Rs.1,105.00 lacs on lump sum sale basis out of FCCBs funds pursuant to MOU dated 20th December, 2007. The transfer of assets in favour of the Company was subject to deregistration of ATML from BIFR. Due to inordinate delay in deregistration from BIFR, it had been agreed that ATML will return the above advance within reasonable time period vide their confirmation letter dated 5th October, 2012 and accordingly Rs.105.00 lacs (Rs.25.00 lacs) has been returned by them during the year.

NOTE - 7

Other advances of Rs.650.88 lacs (Rs.855.88 lacs) given to six parties for various properties. As the expected land or properties in all cases may not be conveyanced in favour of the Company, necessary settlements are being made with them. As per the management, said amounts are considered good and fully recoverable. During the year, they have returned Rs.205.00 lacs to the Company. These balances are subject to confirmation from the parties.

NOTE -8

Trade receivable includes outstanding from:

a) Subsidiary Hakoba Lifestyle Ltd of Rs.1,546.97 lacs (Rs.1,546.97 lacs) since long time.

b) Related enterprise Kiran Industries Ltd. of Rs.0.35 lacs (Rs.3.87 lacs).

c) Related enterprise Thakurdas & Co. Pvt. Ltd. of Rs.49.69 lacs (Rs.21.88 lacs).

NOTE - 9

The Company has an investment of Rs.1,147.00 lacs (Rs.1,147.00 lacs) in Hakoba Lifestyle Limited (HLL), a subsidiary of the Company and it also has trade receivable of Rs.1,546.97 lacs (Rs.1,546.97 lacs) and loans and advances of Rs.1,314.51 lacs (Rs.1,291.04 lacs) recoverable from HLL. The accumulated losses of HLL as at 31st March, 2014 amounting to Rs.7,379.63 lacs have exceeded the net worth of the said Company. Having regard to the long term strategic investment, the diminution in the value of investments is considered to be temporary and accordingly no provision has been made.

NOTE - 10

The Company has an investment of Rs.37.88 lacs (Rs.37.88 lacs) in Mas Embroideries Private Limited (MAPL), a wholly owned subsidiary of the Company and it also has given loans and advances of Rs.78.79 lacs (Rs.81.01 lacs) to MAPL. The accumulated losses of MAPL as at 31st March, 2014 amounting to Rs.327.87 lacs have exceeded the net worth of the said company. Having regard to the long term strategic investment, the diminution in the value of investments is considered to be temporary and accordingly no provision has been made.

NOTE - 11

a) The Company had invested USD 2.585 mn. (Rs.1,029.66 lacs) in its wholly owned overseas subsidiary S.R Investments Limited (SRIL). The accounting year of SRIL closes on 30th June every year.

b) The Company had advanced an optionally convertible loan of USD 2.20 mn. to SRIL out of FCCBs funds. The Company has written off USD 0.65 mn. (USD 0.65 mn.) as bad debts out of the same as per permission given by RBI as SRIL has no resources / income to repay the same. The outstanding loan as at the year end is Rs.545.41 lacs (Rs.845.07 lacs).

NOTE - 12

a) The Company had invested USD 1.26 mn. (Rs.509.92 lacs) in an overseas Joint Venture with M/s Super Industries DMCC to acquire 10% stake thereof and further advanced an optionally convertible loan of USD 3.70 mn. (Rs.2,223.69 lacs) out of FCCBs funds. As the Joint Venture failed, the said investment was treated as loan by the Company.

b) As per the management, the said loan is good for recovery. In view of non receipt of service charges, the Company has not provided service charges during the year. This outstanding balance is subject to confirmation.

NOTE - 13

Interest free unsecured loans and advances of Rs.1,075.47 lacs (Rs.1,075.47 lacs) to Pioneer E-com Fashion Ltd, an associate company is considered good of recovery as per the management of the Company.

NOTE - 14

a) The loans and advances includes Rs.498.78 lacs (Rs.1,139.98 lacs) receivable from Crystal Lace (India) Ltd (CLIL) being the amount outstanding against a loan of Rs.1,534.00 lacs advanced to the said Company against proposed purchase of then Plant & Machineries in the period 2007-08. As the transaction did not materailize, the amount is being repaid by CLIL.

b) The Company has not provided the accumulated interest of Rs.1,012.48 lacs (Rs.883.33 lacs) on the aforesaid loan and income is understated to that extent in the current year.

NOTE -15

Sales includes Sales made to related enterprises M/s J J Sons Rs.67.96 lacs (Rs.111.29 lacs) and Thakurdas & Co. Ltd. Rs.198.40 lacs (Rs.16.25 lacs).

NOTE -16

Trade Purchases includes purchases made from related enterprises M/s J J Sons Rs.22.35 lacs (Rs.1.30 lacs) and Kiran Industries Ltd. Rs.28.81 lacs (Rs.4.04 lacs).

NOTE -17

Company has written off advances to subsidiary S R Investments Ltd of Rs.388.39 lacs (Rs.815.04 lacs) as per permission given by RBI as management find it non recoverable.

NOTE - 18 CONTINGENT LIABILITIES

(Rs. in lacs) Year Ended Year Ended Particulars 31.03.2014 31.03.2013

a) Bank Guarantees Outstanding. 52.64 29.98

b) Corporate Guarantees on behalf of Subsidiary to Banks. 3,050.00 3,050.00

c) Estimated amount of contracts remaining to be executed on Capital Accounts (Net of advances). 17.50 142.34

d) Assessment Order of Customs Duty for Import of second hand computerised embroidery machines 18.40 40.90 for which appeal has been filed with Honorable Supreme Court (Net of advances).

e) Demand raised by Excise Department in respect of which appeal has been filed. 46.14 46.14

f) Demand raised by Income-tax Department in Block Assessment order U/s 158A for the period from 49.01 49.01 FY 1998-99 to FY 2003-04 in respect of which appeal has been filed with CIT (Appeal).

g) Other Income Tax matters pending in appeal. 106.76 13.33

h) Unpaid Dividend on 9% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS). 1,323.68 1,083.01

i) Custom Duty on Capital Goods and Raw Materials imported under Advance Licence / EPCG Scheme, 32.12 345.24 against which export obligation is to be fulfilled.

j) Service Tax demand raised by the Service Tax Department. 128.08 128.08

k) Demand raised by Bennet Coleman & Co Ltd for converting equity options into debt of subsidiary 1,059.00 1,059.00 for which arbitration proceedings are pending.

l) There are some Labour Cases in Labour Court and Industrial Court regarding overtime, back wages N A N A and reinstatement to which the Company is contesting. Quantum is not ascertainable.

There is no contingent liability other than stated above and adequate provision have been made for all known liabilities, except interests and penalties as may arise.

NOTE 19 Foreign Currency Convertible Bonds (FCCBs) :

The Company has extinguished its balance outstanding FCCB''s of USD 11 million during the year by making payment of USD 0.7 million (Rs.434.14 lacs) being the amount of settlement arrived with the bond holders. The amount of USD 10.3 million (Rs.4,065.16 lacs) being the difference of face value and settlement amount has been waived off and is treated as non-monetary transaction and has been credited to Capital Reserve as per the expert opinion taken by the management in the past.

NOTE 20 An amount of Rs.88.36 lacs waived under OTS with Development Credit Bank Ltd. has been credited to Capital Reserve as per the expert opinion taken by the management in the past.

NOTE 21 A few of the fixed deposits, overdraft balances and bank accounts are subject to confirmations though reconciled with available bank statements. A few of the secured and unsecured loans are subject to confirmations though reconciled with bank statements.

NOTE 22 In the opinion of the management, there is no impairment of assets as on Balance Sheet date.

NOTE 23 a) As reported in earlier years, the Company had entered into a Corporate Debt Restructuring scheme (CDR Scheme) with its lenders. As the Company was unable to meet its obligations under CDR Scheme since second quarter of FY 2011-12, the lenders have revoked the CDR package, with approval of CDR-EG. State Bank of India (SBI) has issued demand notice for recovery of their outstanding dues under SARFAESI. The Company, however, continuous to explore settlement/restructuring options with individual lenders including SBI.

b) The Company has fully paid off dues of ICICI Bank Ltd., one of CDR lender, in terms of OTS arrived with the bank. Accordingly the Company has reversed the interest liability of Rs.171.97 lacs and the principal amount of Rs.517.81 lacs. As per the legal expert opinion in the past, the Company has treated the interest reversal as monetary item and has credited to Statement of Profit and Loss and has treated the principal amount as non- monetary item and has credited to Capital Reserve.

c) In terms of a OTS with State Bank of Patiala, another CDR lender, the Company has to pay a sum of Rs.850.00 lacs, in full and final settlement of the Bank''s dues on or before May 31, 2014. The Company has already paid a sum of Rs.580.00 lacs out of the said amount during the year. The necessary adjustment in the books will be done after the compliance of the terms and conditions of OTS.

NOTE 24 During the year, the Company has paid a sum of Rs.7.20 lacs (Rs.7.20 lacs) as premium towards the Key man Insurance policy taken for Mr. Raj Kumar Sekhani, Chairman of the Company.

NOTE 25 As per management, value of realization of current assets, deposits, loans and advances in the ordinary course of business will be at least equal to the amount at which they have been stated in the financial statements.

NOTE 26 The sundry debit and credit balances including receivables, payables and advances to suppliers, advances from customers either debit or credit and deposits are subject to confirmation and reconciliations, the effect of which is not known.

NOTE 27 Dues to Small Scale Industries undertakings and dues to Micro Enterprises and Small Enterprises:

The Company is in the process of compiling relevant information from its suppliers about their coverage under the Micro, Small and Medium Enterprises Development Act, 2006. Since, the relevant information is not readily available; no disclosures have been made in the Accounts. However, in the view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act, is not expected to be material.

NOTE 28 The Company operates in a single segment of Textiles.

NOTE 29 Disclosures pursuant to Accounting Standard-15 "Employee Benefits"

a) The Company has recognized Rs.45.52 lacs in the statement of Profit and Loss for the year ended 31st March, 2014 under Defined

Contribution Plan.

NOTE - 30 The previous year''s figure have been regrouped and reclassified to confirm to current year''s classification.


Mar 31, 2013

NOTE -1.1

During the year, the Company has alloted 47,83,929 equity shares to promoters against share application received earlier persuant to Corporate Debt Restructuring Scheme (CDR) vide their letter no CDR/(ABP)/No1072/2008-09 dated 17th February, 2009 in accordance with Chapter VII of the Securities & Exchange Board of India (Issue of Capital and Disclosure Requirement) Regulation, 2009 (ICDR Regulation) on preferential allotment basis at a price of Rs.21.11 per share (including a premium of Rs.11.11 per share) and Rs.19.77 (Including a premium of Rs.9.77 per share) for 16,57,981 and 31,25,948 equity shares respectively as per the guidelines.

NOTE -2.1

All above Secured Loans of except Vehicle and LIC Loans are secured by first pari passu charge over fixed assets of the Company both present & future with each other, except machineries imported from Barmag of Germany for Dope Dyed Polyester Yarn Unit, which has exclusive charge of Landes Bank Baden Wurttemberg, and further secured by second charge over current assets of the Company & by personal guarantee of Chairman of the Company.Loan from LIC is secured by assignment of Keyman Insurance Policy.

Terms of Repayment : These secured loans were restructured under CDR Scheme w.e.f. 01.10.2008. Above Term Loans except loans from Union Bank of India, Corporation Bank, Funded Interest Term Loan are repayable in 32 quarterly/16 half yearly installments and Working Capital Term Loans are repayable in 32 quarterly installments commenced from 01.10.2010 after a moratorium period of 2 years. Term Loans from Union Bank of India and Corporation Bank are payable in 24 and 28 quarterly installments respectively. Interest at 3% to10% p.a. is charged.Funded Interest Term Loans are repayable in 16 quarterly installments commenced from 01.10.2010. Interest at 8% p.a. is charged.Loan from LIC has not stipulated any repayment period.

Unsecured loan from Bank is secured by personal guarantee of Chairman of the Company, post dated cheques and pledge of shares by him in his individual capacity.

NOTE -3.1

Cash Credit is secured by first pari passu charge by hypothecation of stocks, book debts and second charge on all fixed assets, both present and future and further secured by corporate guarantee of Subsidiary Hakoba Lifestyle Limited and personal guarantee of Chairman of the Company.

NOTE - 4.1

Advance from customers includes advance of Rs.62.54 lacs (Rs.153.70 lacs) received from Kiran Industries Limited, a related enterprise.

NOTE 5.1

Capital Work in progress includes:

a) a sum of Rs.297.05 lacs for renovation of machines at Kallakruchi till the assets of Arcot Textile Mill Limited are transferred in favor of the Company.

b) a sum of Rs.298.48 lacs spent for ongoing expansion at Kala-amb and Sarigam unit.

NOTE - 6.1

a) Capital advance of Rs.152 lacs has been given for expansion project of Dope Dyed Yarn unit at Kala-amb, mainly to building contractors and to suppliers of plant & machineries, software etc.

b) Advances to Arcot Textile Mills Limited (BIFR Company) was given for purchase of movable and immovable assets situated at Kallakurichi, Tamilnadu for a total consideration of Rs.1,105.00 lacs on lump sum sale basis out of FCCBs funds pursuant to MOU dated 20th September, 2007. The transfer of assets in favour of the Company is pending for deregistration from BIFR. Subsequently due to inordinate delay for deregistration from BIFR, it has been agreed that Arcot will return the above advance within reasonable time period vide their confirmation letter dated 5th October, 2012 and accordingly Rs.25.00 lacs are returned by them.

NOTE - 6.2

Other advances of Rs.855.88 lacs (Rs.855.88 lacs) given to six parties for various properties for which necessary settlements are being made with them as the expected land or properties in all cases may not be conveyanced in favour of the Company, however as per the management, said amounts are considered good and fully recoverable. These balances are subject to confirmation from the parties.

NOTE -7.1

Trade receivable includes:

a) Outstanding from subsidiary Hakoba Lifestyle Ltd of Rs.1,546.97 lacs (Rs.1,546.97 lacs) since long time.

b) Outstanding from associate company Crystal Lace (I) Ltd of Rs.44.53 lacs (Rs.113.24 lacs) since long time.

c) Outstanding from related enterprise Kiran Industries Ltd. of Rs.3.87 lacs (Rs.7.67 lacs).

d) Outstanding from related enterprise Thakurdas & Co. Pvt. Ltd. of Rs.21.88 lacs (Rs. 13.82 lacs).

NOTE -8.1

The Company has an investment of Rs.1,147.00 lacs (Rs.1,147.00 lacs), a trade receivable of Rs.1,546.97 lacs (Rs.1,546.97 lacs) and loans and advances of Rs.1,291.04 lacs (Rs.1,270.62 lacs) from Hakoba Lifestyle Limited, a subsidiary of the Company. The accumulated losses as at 31st March, 2013 amounting to Rs.7,343.45 lacs has exceeded the net worth of the said Company. However, having regard to the long term strategic investment, the diminution in the value of investments is considered to be temporary and accordingly no provision has been made.

NOTE - 8.2

The Company has an investment of Rs.37.88 lacs (Rs.37.88 lacs) and has given loans and advances of Rs.81.01 lacs (Rs.84.99 lacs) to Mas Embroideries Private Limited, a wholly owned subsidiary of the Company. The accumulated losses as at 31st March, 2013 amounting to Rs.327.43 lacs has exceeded the net worth of the said company. However, having regard to the long term strategic investment, the diminution in the value of investments is considered to be temporary and accordingly no provision has been made.

NOTE - 8.3

a) The Company had invested USD 2.585 mn. (Rs.1,029.67 lacs) in its wholly owned overseas subsidiary S.R Investments Limited (SRIL). The accounting year of SRIL closes on 30th June every year. The accounts have been consolidated based on unaudited accounts of SRIL, which is not in compliance with Accounting Standard – 21.

b) The Company had advanced an optionally convertible loan of USD 2.20 mn. (Rs.1,196.66 lacs) (USD 2.20 mn. (Rs.1,125.44 lacs)) to SRIL out of FCCBs funds. The loan carried a service charge @ 9% p.a. until conversion or repayment. The Company has provided for USD 1.49 mn. including service charge of USD 0.84 mn. as bad debts as per general permision given by RBI as SRIL has no resources / income to repay the same. The outstanding loan as at the year end is Rs.845.07 lacs (Rs.1,556.01 lacs).

NOTE - 8.4

a) The Company had invested USD 1.26 mn. (Rs.509.92 lacs) in overseas Joint Venture M/s Super Industries DMCC, Dubai to acquire 10% stake there of and further advanced an optionally convertible loan of USD 3.70 mn. (Rs.2,012.40 lacs) (USD 3.70 mn. (Rs.1,892.79 lacs)) out of FCCBs funds in the October-November 2007, with a service charge @ 9% p.a. until conversion or repayment. In September, 2008, the said investment given for 10% stake was treated as loan by the Company and the outstanding loan amount including interest/service at the year end is Rs.4,027.02 lacs (Rs.3,559.30 lacs). Since, the Company doesn''t hold any stake in the said Joint Venture and therefore, no consolidation is made except disclosure of loan and service charges in the Joint Venture in compliance with Accounting Standard – 27 ‘Financial Reporting of Interest in Joint Venture'' issued by the Institute of Chartered Accountants of India.

b) The loan as aforesaid of Rs.4,027.02 lacs (USD 4.96 mn. plus service charges) advanced to M/s Super Industries, DMCC is considered good and as per

the management the said amount is fully recoverable and good in recovery though neither principal nor service charges are paid yet. This outstanding balance is subject to confirmation.

NOTE - 8.5

Interest free unsecured loans and advances of Rs.1,075.47 lacs (Rs.1,076.37 lacs) to Pioneer E-com Fashion Ltd, an associate company is considered good of recovery as per the management of the Company.

NOTE - 8.6

a) Loans and advances of Rs.1,534.00 lacs to Crystal Lace (India) Ltd in the period 2007-08 against Plant & Machineries, the title of which could not be transferred due to technical reasons and the said advance and obligation to buy Plant & Machineries was converted into loan bearing interest @15% p.a. vide agreement dated 20th March 2009 and has been further secured by charge on the factory Plot No. 27, at TTC Indl Area, MIDC, Mahape, Navi Mumbai, Dist Thane (admeasuring about 10687.32 sq mtrs) in favor of the Company. The front portion of the smaller plot (admeasuring 3167.20 sq mtrs) has been given for development, of which 25% of the proposed constructed area shall belong to Crystal Lace (India) Limited. The Company has registered the charge with ROC.In July 2012, the Company has got converted Rs.440.00 lacs into 44 lacs equity shares of Rs.10 each of Crystal Lace (I) Ltd. Outstanding at year end is Rs.1,139.98 lacs (Rs.1,569.65 lacs).

b) The aforesaid conversion of advance into loan though strictly not in compliance with FCCBs utilization rules of RBI, however the Company shall redeposit the same on repayment by the said Crystal Lace (India) Limited into FCCB account to comply the same.

c) The Company has not provided the accumulated interest of Rs.883.33 lacs (Rs.697.23 lacs) on the aforesaid loan and income is understated to that extent in the current year.

d) Rs.44.53 lacs (Rs.113.24 lacs) amount is recoverable from Crystal Lace (India) Limited as trade receivable since long time, but as per the management the amount is considered as good and recoverable.

NOTE -9.1

Trade Purchases includes purchases made from related enterprises M/s J J Sons Rs.1.30 lacs (Rs.2.95 lacs) and Kiran Industries Ltd. Rs.4.04 lacs (Rs.9.47 lacs).

NOTE -10.1

Company has written off advances to subsidiary S R Investments Ltd of Rs.815.04 lacs as per general permission given by RBI as management find it non recoverable.

NOTE - 11 CONTINGENT LIABILITIES

(Rs.in lacs)

Year Ended Year Ended

Particulars 31.03.2013 31.03.2012

a) Bank Guarantees Outstanding. 29.98 39.37

b) Corporate Guarantees on behalf of Subsidiary to Banks. 3,050.00 3,050.00

c) Estimated amount of contracts remaining to be executed on Capital Accounts (Net of advances). 142.34 166.96

d) Assessment Order of Customs Duty for Import of second hand computerised embroidery machines 40.90 46.90 for which appeal has been filed with Honorable Supreme Court (Net of advances)

e) Demand raised by Excise Department in respect of which appeal has been filed. 46.14 46.14

f) Demand raised by Income-tax Department in Block Assessment order U/s 158A for the period from 43.32 43.32 FY 1998-99 to FY 2003-04 in respect of which appeal has been filed with CIT (Appeal).

g) Other Income Tax matters pending in appeal. 13.33 13.33 h) Premium/Interest on Foreign Currency Convertible Bond. 3,465.17 2,588.74 I) Unpaid Dividend on 9% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS). 1,083.01 867.94 j) Custom Duty on Capital Goods and Raw Materials imported under Advance Licence / EPCG Scheme, 345.24 771.98 against which export obligation is to be fulfilled. k) Service Tax Liability 128.08 -

l) Demand raised by Bennet Coleman & Co Ltd for converting equity options into debt of subsidiary 1,059.00 1,059.00 for which arbitration proceedings are pending. m) There are some Labour Cases in Labour Court and Industrial Court regarding overtime, backwages N A N A and reinstatement to which the Company is contesting. Quantum is not ascertainable.

There is no contingent liability other than stated above and adequate provision have been made for all known liabilities, except interests and penalties as may arise

NOTE 12 Foreign Currency Convertible Bonds (FCCBs) :

a) The outstanding FCCBs as at 31st March, 2013 is US$ 11 million and had matured on 28th April, 2012, the effect of which will be given in the year of maturity. These balance FCCBs of value of US$ 11 million were settled at US$ 2.40 million as per the terms and conditions being agreed upon and the treatment thereof will be given as and when these are extinguished and paid.

b) In view of the above settlement, the Company is no longer liable for interest payable on FCCBs worth USD 11 million.

c) For the balance FCCBs value of USD 11 million, though the Company had entered in to settlement terms but it has exceeded the reasonable time period. The Company is further under re-negotiation for settlement. In view of this no provision has been made for premium/interest aggregating to Rs.3,465.17 lacs (Rs.2,588.74 lacs) on the outstanding FCCBs up to 31st March, 2013 calculated in terms of offer circular dated 27-04-2007 and the same has been considered as contingent liability. Had it not been treated so, current year profit would have been lower by Rs.876.43 lacs (Rs.857.97 lacs).

d) There is a foreign exchange loss of Rs.1,483.52 lacs (Rs.1,127.92 lacs) on outstanding FCCBs as on 31st March, 2013 arising out of revaluation, which has not been accounted for since FCCBs has been considered as Non-Monetary liability by the management.

e) In accordance with Accounting Standard - 11 ‘The Effect of Changes in Foreign Exchange Rates'' prescribed in the Company (Accounting Standard) Rules, 2006 issued by the Central Government in consultation with the National Advisory Committee on Accounting Standard, the Company should have provided foreign exchange loss on FCCBs and had the said liability been considered as a monetary liability, the accumulated losses would be higher by Rs.1,483.52 lacs (Rs.1,127.92 lacs) on account of exchange difference.

NOTE 13 An amount of Rs.195.59 lacs is payable as on 31st March, 2013 to Development Credit Bank Ltd., an unsecured lender, under a negotiated settlement. The bank has agreed to waive the interest on its outstanding, hence no interest has been provided on its balance in the books.The principal amount will be reversed after the compliance of the terms and conditions.

The bank is holding 705,582 equity shares of the Company pledged by the promoter as security, for the said loan.

NOTE 14 Few of the fixed deposits, overdraft balances and bank accounts are subject to confirmations though reconciled with available bank statements. Few of the secured and unsecured loans are subject to confirmations though reconciled with bank statements.

NOTE 15 The Company has charged exchange difference arising in relation to Fixed Assets, which are purchased out of the Foreign Currency Term Loans, in the carrying cost of the assets which is not in accordance with the Accounting Standard 11. Had the Company followed Accounting Standard 11, loss would have been higher by Rs.34.11 lacs (Rs.131.54 lacs).

NOTE 16 In accordance with the FEMA guidelines and applicable rules and regulations and as supported by the Lawyer''s Certificate in the earlier years for end use of FCCBs proceeds, these have been used towards expansion of business, overseas acquisition and towards other permitted use as per the ECB guidelines except Rs.563.36 lacs, which has been appropriated by Union Bank of India towards irregularity in cash credit account, which is not a permissible end use as per the ECB guidelines, to which the Company has made an objection and represented for reversal of transactions in the period 2007-08 and the matter is still pending. The balance unutilized amount of US$ 1824 has been retained overseas with Axis Bank, Hong Kong.

NOTE 17 In the opinion of the management, there is no impairment of assets as on Balance Sheet date.

NOTE 18 a) As per the Corporate Debt Restructuring scheme (CDR scheme) entered during the earlier years, the Company had after the necessary approvals in extra ordinary general meeting held on 26th June, 2010 and from other authorities and in the board meeting held on 27th August, 2010, the Company had allotted 27,553,610, 9% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) of Rs.10/- each aggregating to Rs.2,755.36 lacs to all the secured lenders, except to ICICI Bank Ltd for want of RBI approval to its restructured ECB, redeemable from 30th Sept, 2015 in four annual equal installments.

The dividend will accrue at the end of each year with effect from 1st October, 2008 as per the Appointed Date under the CDR scheme.

b) In the event of any default/ breach/ violation of any of the terms & conditions of the Financial Restructuring Package, the lenders with approval of CDR-EG shall have a right to revoke the CDR package and to reverse the waivers/ sacrifices.

c) In the event of default in compliance with the restructured package, the lenders shall have the right to convert entire/ part of defaulted interest and entire/ part of defaulted principal into equity as per SEBI pricing formula.

d) In case of debt outstanding beyond Seven years from the date of CDR LOA, the CDR lenders shall have a right to convert into equity up to 20% of such outstanding (as on the date of conversion) as per SEBI guidelines / loan covenants, whichever is applicable.

e) CDR Lenders shall have the right to recompense the relief/ sacrifices/ waivers extended by respective CDR lenders (as per CDR guidelines).

f) The Company has been unable to meet its commiitments to lenders under CDR Scheme since second quarter of FY 2011-12. The Company has submitted revised CDR Scheme to the lenders for their consideration.

g) In terms of a One Time Settlement entered into with Axis Bank Ltd., one of the CDR lenders, the Company has paid a sum of Rs.155.00 lacs, in full and final settlement of the Bank''s dues, including the OCCRPS. Accordingly the Company has reversed the interest liability of Rs.49.21 lacs and the principal amount of Rs.17.52 lacs. The OCCRPS allotted to the Bank has, accordingly, been surrendered by them and are cancelled. As per the legal expert opinion the Company has treated the interest reversal as monetary item and has credited to statement of profit and loss and has treated the principal amount including OCCRPS reversal as non- monetary item and has credited to Capital Reserve.

h) In terms of a One Time Settlement entered into with ICICI Bank Ltd., one of the CDR lenders, the Company has to pay a sum of Rs.500.00 lacs, in full and final settlement of the Bank''s dues on or before August 31, 2013. The Compnay has already paid a sum of Rs.125.00 lacs out of the said amount. The necessary adjustment in the books will be done after the compliance of the terms and conditions.

NOTE 19 During the year, the Company has paid a sum of Rs.7.20 lacs (Rs.4.32 lacs) as premium towards the Key man Insurance policy taken for Mr. Raj Kumar Sekhani, Chairman & Managing Director of the Company.

NOTE 20 As per management, value of realization of current assets, deposits, loans and advances in the ordinary course of business will be at least equal to the amount at which they have been stated in the financial statements.

NOTE 21 The sundry debit and credit balances including receivables, payables and advances to suppliers, advances from customers either debit or credit and deposits are subject to confirmation and reconciliations, the effect of which is not known.

NOTE 22 Dues to Small Scale Industries undertakings and dues to Micro Enterprises and Small Enterprises:

The Company is in the process of compiling relevant information from its suppliers about their coverage under the Micro, Small and Medium Enterprises Development Act, 2006. Since, the relevant information is not readily available; no disclosures have been made in the Accounts. However, in the view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act, is not expected to be material.

NOTE 23 The Company operates in a single segment of Textiles.

NOTE 24 Related Party Disclosures :

a) Names of Related Parties and Nature of Relationships

i Subsidiaries Hakoba Lifestyle Ltd.

Mas Embroideries Pvt. Ltd.

Pioneer Realty Ltd.

S.R Investments Ltd, Mauritius

ii Associate Concerns Pioneer E-Com Fashions Ltd.

Reach Industries Pvt. Ltd. Crystal Lace (I) Ltd

iii Joint Venture M/s Super Industries, DMCC, Dubai

iv Key Management Personnel Shri Raj Kumar Sekhani

Shri Harsh Vardhan Bassi

v Relative of Key Management Personnel & their Enterprises Shri Vishal Sekhani

M/s J J Sons Kiran Industries Ltd. Thakurdas & Co. Pvt Ltd.

NOTE -25 The previous year''s figure have been regrouped and reclassified to confirm to current year''s classification.


Mar 31, 2010

(Rs. in lacs)

As at As at

31-03-2010 30-09-2009

1. Contingent Liabilities not provided for in respect of :

a) Bank Guarantees Outstanding 98.91 62.81

b) Corporate Guarantees on behalf of Subsidiary 3050.00 3050.00

c) Corporate Guarantee on behalf of other Company NIL 109.00

d) Estimated amount of contracts remaining to be executed on Capital Accounts (Net of 27 02 8 26

e) Assessment Order of Customs Duty for Import of second hand computerised embroidery 4, qn 4, qn machines for which appeal has been filed with Honorable Supreme Court 46.90 46.90

f) Demand raised by Excise Department in respect of which appeal has been filed 94.73 94.73

g) Demand raised by Income-tax Department in Block Assessment order U/S158A for the

period from FY 1998 - 99 to FY 2003-04 in respect of which appeal has been filed with 47-87 NIL

CIT (Appeal).

h) Other Income Tax matters pending in appeal 13.33 13.33

1) Premium/Interest on Foreign Currency Convertible Bond 1256.81 2750.93 q3

j) There are some Labour Cases in Labour Court and Industrial Court regarding overtime, backwages and reinstatement to which the Company is contesting. Quantum is not ascertainable. NA NA

In the opinion of the management, there is no contingent liability other than stated above and adequate provision have been made for all known liabilities, except interests and penalties as may arise.

2. a) The Company has entered into an MOU dated 20th September, 2007 with Arcot Mills Limited (BIFR Company) for purchase of movable and immovable assets situated at Kallakurichi, Tamilnadu for a total consideration of Rs.1105 lacs (Rs.1105 lacs) on lump sum sale basis out of FCCBs funds. The transfer of assets in favourof the Company is pending for deregistration from BIFR.

Further, till the assets are transferred in favor of the Company, the Company has entered into a lease agreement dated 18.02.09 for usage of assets for a specific consideration and has also incurred a sum of Rs.69.16 lacs (Rs.69.16 lacs) for renovation of machines pending capitalization.

b) The Company is though Ipso Facto owner of movable and immovable assets of aforesaid factory however, pending deregistration and approval from BIFR, it has not capitalized the assets though full working of the unit is merged in the Companys results.

3. Capital work in progress also includes various advances aggregating to Rs.890.58 lacs (Rs.890.58 lacs) given against various properties for which necessary settlements are being made with parties as the expected land or properties in all cases may not be conveyanced in favour of the Company, however in the opinion of the management said amounts are considered good and fully recoverable.

4. Loans and advances includes an interest free loan of Rs. 1350 lacs (Rs. 1350 lacs) given to Pioneer E Com Fashions Limited, which was initially given as an advance to buy stake in its share in the project of Joint Development of property at Borivali, but now is converted as interest free loan being the said development rights are sold. According to the management of the Company it is considered good of recovery.

5. a) Loans and advances includes a sum of Rs. 1534 lacs (Rs. 1534 lacs) advanced to Crystal Lace (India) Ltd in earlier period against machinery, the title of which could not be transferred due to technical reasons and in the previous year the said advance and obligation to buy machine has been converted to loan bearing interest ®15 % p.a. and has been further secured by charge on the factory Plot No. 27, at TTC Indl Area, MIDC, Mahape, Navi Mumbai, Dist Thane (Area 10687.32 sq mtrs) in favor of the Company inclusive of 25 % of constructed area which the said Crystal Lace (India) Limited will be entitled for the development of front portion with a third party out of this total area. The Company has registered the charge with ROC.

b) The aforesaid conversion of advance into loan though strictly not in compliance with FCCBs utilization rules of RBI, however the Company shall redeposit the same on repayment by the said Crystal Lace (India) Limited into FCCB account to comply the same.

c) The Company has not provided the accumulated interest of Rs.237.03 lacs (Rs. 122.30 lacs) on the aforesaid loan and income is understated to this extent of current period.

6. a) The Company has a investment of Rs.1147 lacs (Rs.1147.00 lacs) and has given loans and advances of Rs.1397.35 lacs (Rs.1401.73 lacs) to Hakoba Lifestyle Limited, a subsidiary of the Company. The accumulated losses as at 31st March, 2010 amounting to Rs.5296.64 lacs (Rs.4528.16 lacs) has exceeded the net worth of the said Company. However, having regard to the long term strategic investment, the diminution in the value of investments is considered to be temporary and accordingly no provision has been made.

b) The Company has a investment of Rs.37.88 lacs (Rs.37.88 lacs) and has given loans and advances of Rs.427.86 lacs (Rs.408.49 lacs) to Mas Embroideries Private Limited, a wholly subsidiary of the Company. The accumulated losses as at 31 st March, 2010 amounting to Rs. 381.45 lacs (Rs.341.27 lacs) has exceeded the net worth of the said Company. However, having regard to the long term strategic investment, the diminution in the value of investments is considered to be temporary and accordingly no provision has been made.

c) The Company has a investment of Rs.937.72 lacs (Rs.937.72 lacs) and has given loan of Rs.993.08 lacs (Rs.1056.88 lacs) to S.R Investments Limited, Mauritius, a subsidiary of the Company. The accumulated losses as at 30th June, 2010 amounting to Rs.686.17 lacs (Rs.592.50 lacs) has exceeded the net worth of the said Company. However, having regard to the long term strategic investment, the diminution in the value of investments is considered to be temporary and accordingly no provision has been made.

The above share application money is received since one of the condition of Corporate Debt Restructuring Scheme (CDR) vide their letter no CDR/(ABP)/No1072/2008-09 dated 17th February, 2009 is that the Promoters of the Company has to bringa sum of Rs.3.50crores as contribution towards additional capital. In view of above the Board of Directors at its meeting held on 17th May, 2010 has decided to issue Equity shares to the Promoters of the Company, which was further approved in Extra Ordinary Meeting held on 22nd June, 2010 in accordance with Chapter VII of the Securities a Exchange Board of India (Issue of Capital and Disclosure Requirement) Regulation, 2009 (ICDR Regulation) for preferential issue of share to Promoters of the Company, at a price of Rs. 21.10 per share as per guide lines.

After induction of additional amount since close of the year to make total contribution of Rs. 3.50 crores, the number of shares to be subscribed by Mr. Raj Kumar Sekhani and Pioneer E-com Fashion Limited will be 2,44,168 and 14,14,600 respectively.

7. a) The Company had invested Rs.937.72 lacs (USD 2.38mn.) (Rs.937.72 lacs (USD2.38mn.)) inearlier period in then over seasJ oint Venture S.R Investments Limited to acquire 51% Equity thereof and further advanced a loan of Rs.993.08 lacs (USD 2.20 mn.)Rs.1056.88 lacs (USD 2.20 mn.)) (Optionally convertible) out of FCCBs funds, with a service charge ® 9% p.a. until conversion or repayment and thus the outstanding loan including interest as on the period end is Rs. 1216.29 lacs (Rs. 1247.01 lacs). The accounting year of the said Joint Venture Company is closed on 30th June every year and pending finalization of audit of the said Subsidiary including opening balances and until as on 31 st March, 2010, the accounts have been consolidated based on unaudited accounts of the said Subsidiary, which is not in compliance with Accounting Standard 21 Consolidated Financial Statement issued by the Institute of Chartered Accountants of India.

b) The option for conversion into Equity as aforesaid in S R Investment Ltd, Mauritius has expired within 18 months of Investments as per agreement and Company has chosen not to convert the same into Equity. The Company though accounted for the annual service charges @9% p.a. on the loan advanced, however, the said amount along with principal though not repaid timely considered good and no devaluation is accounted even though underlying assets held through Equity investment by the said overseas Company in the Indian Company Crystal Lace (India) Limited has been devalued.

8. a) The Company had invested Rs.509.92 lacs (USD 1.26 mn.) (Rs.509.92 lacs USD 1.26 mn.) in earlier period in overseas Joint Venture M/s Super Industries DMCC to acquire 10% stake thereof and further advanced a loan of Rs.1670.18 lacs (USD 3.70 mn.) (Rs.1777.48 lacs (USD 3.70 mn.)) (Optionally convertible) out of FCCBs funds, with a service charge ® 9% p.a. until conversion or repayment. Since in the earlier period the said 10% stake was treated as loan and the outstanding loan including interest as on period end is Rs.2737.68 lacs (Rs.2806.63 lacs). Since, the Company doesnt hold any shareholding in the said Joint Venture and therefore, no consolidation is made except disclosure of loan and service charges in the Joint Venture in compliance with Accounting Standard - 27 Financial Reporting of Interest in Joint Venture issued bythe Institute of Chartered Accountants of India.

b) The loan as aforesaid of Rs.2737.68 lacs (USD 4.96 mn. plus service charges) advanced to M/s Super Industries, DMCC is considered good and in the opinion of the management the said loan is fully recoverable and good in recovery though neither principal nor service charges are paid timely.

9. Foreign Currency Convertible Bonds (FCCBs):

a) Out of the total FCCBs of value of USD 30Million issued during the period ended 30th September, 2008, total conversions until previous year amounts to USD 2 million at the conversion price of Rs.223.96 per equity share with face value of Rs. 10 and a premium of Rs.213.96.

b) During the current period, the Company has entered in to agreement of settlement of USD 28 million with FCCB holders as follows:

i) The Company has extinguished the FCCBs of USD 4.75 million by payment of USD 1 million out of funds lying overseas before 31st March, 2010 and balance USD 3.75 million which is waived off is treated as non-monetary transaction and has been credited to Capital Reserve as per the expert opinion taken by the management. Had it been treated as monetary transaction than the profit would have increased by Rs.1506.65 (USD 3.75 million) on account of reversal of principal amount.

ii) Post- period end the Company has made further payment of USD 3.5 million against FCCBs worth USD 11.50 million and USD 8 million has been waived off as per the settlement and has also converted USD 0.75 million FCCBs at the conversion price of Rs.101.50 per equity share with face value of Rs. 10 and a premium of Rs.91.50byissuing 326,305 equity shares.

iii) The balance FCCBs of value of USD 11 million is settled at USD 2.40 million as per the terms and conditions being agreed upon.

The treatment of post period end settlement of FCCBs will be done as and when these are extinguished and paid.

c) In view of the above settlement, the Company is no longer liable for interest payable on FCCBs worth USD 17 million.

d) For the balance FCCBs value of USD 11 million, though the Company has entered in to settlement terms, but would continue to treat as Non- Monetary liability, until the final settlement is done. The Company has considered such balance FCCBs as Non-Monetary liability as the Company reasonably expects that if the settlement is not done on timely basis than these bonds would be converted into equity shares (without transfer of controlling interest) instead of redeeming them for cash at the end of the period of the bond. In view of this no provision has been made for premium/interest aggregating to Rs.1256.81 lacs (Rs.1071.39 lacs) on the outstanding FCCBs upto 31st March, 2010 calculated in terms of offer circular dated 27-04-2007 and the same has been considered as contingent liability. Had it not been treated so, current period loss would have been higher by Rs.185.42 lacs (Rs.476.31 lacs.)

e) There is a foreign exchange loss of Rs. 37.60 lacs and Rs. 141 lacs on account of repayment of FCCBs loan during the period and on account of write back to Capital Reserve respectively, which has not been accounted since FCCBs has been considered as Non- Monetary liability by the management.

f) There is a foreign exchange loss of Rs.951.20 lacs (Rs.1951.30 lacs) on outstanding FCCBs as on 31st March, 2010 arising out of revaluation, which has not been accounted for since FCCBs has been considered as Non-Monetary liability by the management.

g) In accordance with Accounting Standard - 11 The Effect of Changes in Foreign Exchange Rates prescribed in the Company (Accounting Standard) Rules, 2006 issued by the Central Government in consultation with the National Advisory Committee on Accounting Standard, the Company should have provided foreign exchange loss on FCCBs and had the said liability been considered as a monetary liability, the accumulated losses would be higher by Rs.951.20 lacs (Rs. 1951.30 lacs) on account of exchange difference.

10. During the earlier period, the share premium account is applied in writing off the FCCB issue expenses as per Section 78 of the Companies Act, 1956, which was not in accordance with the Accounting Standard- 26. Due to which the accumulated losses would have been higher by Rs.518.08 lacs.

11. The Company is in process of having negotiations / have done negotiations with unsecured lenders as below:

a) Barclays Bank: The total outstanding opening balance of Barclays Bank as on 1 st October, 2009 was Rs. 1186.06 lacs. Out of this the bank has agreed to reverse the interest liability of Rs.181.06 lacs and the principal amount of Rs.450 lacs. As per the legal expert opinion the Company has treated the interest reversal as monetary item and has credited to profit and loss account and has treated the principal amount reversal as non- monetary item and has credited to Capital Reserve. The outstanding balance after the above effects and repayment has become NILas per the confirmation dated 8th July, 2010 received from the bank.

b) DCB Bank: The total outstanding opening balance of DCB Bankas on 1 st October, 2009 was Rs.536.72 lacs. The bank has agreed to waive the interest on amount of Rs.268.36 lacs for the period from 1st October 2008 to 30th June 2012 subject to the compliance of the terms and conditions as per the agreement and therefore the interest has not been provided in the books. For the balance amount of Rs.268.36 lacs the bank has agreed for promoter directly paying the installments as per the agreed terms and conditions, if the repayment is done by the Company on timely manner and therefore the interest is not provided on the balance amount.

Out of above outstanding, the Company has repaid Rs.70.74 lacs during the period as per agreed installments. The bank is holding 705,582 equity shares of the Company pledged by the promoter as security and other terms and conditions as per the agreement .The confirmation as on period-end from the bank is awaited .

c) DBS Bank: As per the settlement terms and conditions dated 14 May, 2010 with the bank the total outstanding balance of the bank was Rs.494.01 lacs including bill discounting. The bank has agreed for the final settlement amount of Rs.175 lacs subject to the full-fillment of the terms and conditions as agreed. Thus accordingly the Company has reversed the interest amount of Rs.100.56 lacs as on period end and accounted in the profit and loss account. The principal amount will be reversed after the compliance of the terms and conditions.

d) All the secured loans, overdraft balances and few of the bank accounts are subject to confirmations, which is majorty due to entries are not effected by the banks though Master Restructuring Agreement of CDR Scheme have been signed.

12. The Company has charged exchange difference arising in relation to Fixed Assets, which are purchased out of the Foreign Currency Term Loans, in the carrying cost of the assets which is not in accordance with the Accounting Standard -11. Had the Company followed Accounting Standard -11, profit would have been higher by Rs.253.18 lacs (loss of Rs.64.08 lacs).

13. a) In accordance with the FEMAguidelines and applicable rules and regulations and as supported by the Lawyers Certificate in the earlier years for end use of FCCBs proceeds, these have been used towards expansion of business, overseas acquisition and towards other permitted use as per the ECB guidelines except Rs.563.36 lacs (Rs.563.36 lacs), which has been appropriated by Union Bank of India towards irregularity in cash credit account, which is not a permissible end use as per the ECB guidelines, to which the Company has made an objection and represented for reversal of transactions in last year and the matter is still pending. The balance unutilized amount has been retained overseas with Axis Bank, Hong Kong.

b) The utilisation of the FCCBs proceeds includes a sum of Rs.900.00 lacs towards acquisition of Yarn Unit of Kiran Industries Limited at Surat on slump sale basis. However, due to non-fulfillment of certain terms and covenants, the said acquisition was cancelled mutually and ultimate use of the same is intended to be within guidelines of ECB rules. The said amount is shown as advance recoverable and considered good and post period end has received a sum of Rs.90 lacs. The Company expects the recovery contingent upon its payment of dues to the said party for supply/ advances.

15. The previous year figures are for twelve months ended 30th September, 2009, while those of current period are for six months ended 31 st March 2010, hence same are not comparable. The previous year figures have been regrouped, wherever necessary, to confirm to the current periods presentation.

16. In the opinion of the management, there is no impairment of assets as on Balance Sheet date.

17. The Company has during the period sold its development rights along with the "Conveyance" of the property at Borivali through a Letter of I ntent for a consideration of Rs.1850 lacs. This consideration is over and above the non-refundable consideration of Rs.650 lacs received as per the development agreement and treated as other income in the previous year.

18. The total outstanding to ING Vysya bank Limited as on 1st October, 2009 was Rs. 1484.16 lacs as working capital loan and Rs.440.95 lacs as term loan. The Company has as per the consent terms dated 11.03.2010 filed before DRT has agreed to pay Rs.1200 lacs as full and final payment. The Company has during the period confirmed to sell the property at Bangalore in consensus with ING Vysya Bank Limited. The agreement is for a consideration of Rs. 16 crores out of which the buyer has directly paid ING Vysya Bank Limited an amount of Rs.4.25 crores.

19 Sundry Debtors includes export bills outstanding for more than 180 days for Rs.706.65 lacs (Rs.678.76 lacs), out of which Rs.638.92 lacs (Rs.652.42 lacs) are recoverable from Calyx International Ltd, Thailand. The recoveries are slow due to adverse economic conditions prevailing in overseas market. However, the same are considered good for recovery.

20 FINANCIAL RESTRUCTURING SCHEME

The Company has entered during the previous year in to Financial Restructuring Scheme under Corporate Debt Restructuring (CDR) mechanism, sanctioned by the CDR Empowered Group has been implemented interalia:.

a) ING Vysya Bank Ltd a Landes Bank Baden Wurttemberg (LBBW), which do not form part of CDR scheme, the former has agreed to the consent terms with the Company, which has been produced before DRT and the latter has agreed to enter in to the consent terms as per the CDR scheme.

b) i) After the necessary approvals in extra ordinary meeting held on 26th June, 2010 and from other authorities and in the board meeting

held on 27th August, 2010, the Company has allotted 2,75,53,610, 9% Optionally Convertible Redeemable Preference Shares (OCCRPS) of Rs 10/- each aggregating to Rs.27.55 crores to all the secured lenders, except to ICICI Bank Ltd for want of RBI approval to its restructured ECB. This amount is carved during the post-period end out of present Term Loan and WCTLand is redeemable from 7th to 10th year equally.

ii) The Company created Funded Interest Term Loan (FITL) of Rs.1409.97 (Rs.1131.27 lacs) towards interest accruing on Term Loans and WCTL from 1 st October, 2008 till 31 st March, 2010 as per the scheme (excluding ING Vysya Bank Ltd.). This loan is to be repaid, with 8% simple interest payable along with installments, over 16 quarters starting from the expiry of 2 years from Cut-off-date (COD), The balances of all the lending banks are subject to reconciliation a confirmations.

c) Promoters have brought Rs.3.50 crores as their contribution towards the Restructuring Scheme as per note No 8.

d) In the event of any default/ breach/ violation of any of the terms a conditions of the Financial Restructuring Package, the lenders with approval of CDR-EG shall have a right to revoke the CDR package and to reverse the waivers/ sacrifices.

e) In the event of default in compliance with the restructured package, the lenders shall have the right to convert entire/ part of defaulted interest and entire/part of defaulted principal into equity as per SEBI pricing formula.

f) In case of debt outstanding beyond Seven years from the date of CDR LOA, the CDR lenders shall have a right to convert into equity upto 20% of such outstanding (as on the date of conversion) as per SEBI guidelines / loan covenants, whichever is applicable.

g) CDR Lenders shall have the right to recompense the relief/ sacrifices/ waivers extended by respective CDR lenders (as per CDR guidelines).

21. During the period, the Company has provided a sum of Rs.5 lacs (Rs.10 lacs) towards gratuity in the Profit a Loss Account on adhoc basis for the Group Gratuity Scheme of Life Insurance Corporation of India, but no provision is done for leave salary in absence of any specific policy of the Company. Both the above provisions are not as per actuarial valuation, which is not in accordance with Accounting Standard -15.

22. During the period, the Company has paid a sum of Rs.2.88 lacs (Rs.4.32 lacs) as premium towards the Key man Insurance policy taken for Mr. Raj Kumar Sekhani, Chairman a Managing Director of the Company.

23. In the opinion of management, value of realization of current assets, deposits, loans and advances in the ordinary course of business will be at least equal to the amount at which they have been stated in the financial statements.

24. The sundry debit and credit balances including debtors, creditors and advances to suppliers, advances from customers either debit or credit and deposits are subject to confirmation and reconciliations, the effect of which not known.

25. Dues to Small Scale Industries undertakings and dues to Micro Enterprises and Small Enterprises:

The Company is in the process of compiling relevant information from its suppliers about their coverage under the Micro, Small and Medium Enterprises Development Act, 2006. Since, the relevant information is not readily available; no disclosures have been made in the Accounts. However, in the view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act, is not expected to be material.

26. The current accounting period of the Company is for six months i.e from 1st October, 2009 to 31st March, 2010, where as for the tax purpose the accounts will be prepared for a period of twelve months i.e from 1 st April, 2009 to 31 st March, 2010. The necessary tax provision in the six months period of accounting, if any, will be for that relevant period.

27. Related party transactions:

A] Name of related party and nature of relationship.

Subsidiaries

Hakoba Lifestyle Ltd.

Mas Embroideries Pvt. Ltd.

Pioneer Realty Ltd.

S.R Investments Ltd

Associate Concerns

Pioneer E-Com Fashions Ltd.

Reach Industries Pvt. Ltd.

Joint Venture

M/s Super Industries, DMCC, Dubai

Key Management Personnel

Shri Raj Kumar Sekhani

Shri Harsh VardhanBassi



Relative of Key Management Personnel & their Enterprises

M/sJ J Sons

ThakurdasaCo.Pvt.Ltd.

Aarav Sekhani

Quantity:

Management has explained that it is not possible for the Company to get quantitative details prepared and tallied with stock records in respect of embroidery business as its principal items such as laces, fabric and motifs etc. are sold in different units such as in pieces, meters, packets of different sizes etc., whereas purchase of raw materials required viz. yarn, fabric etc. for manufacturing of these items are procured in different units such as meters, kilograms, cones etc.

The above non disclosure of quantity details is not in accordance with Schedule VI, Part II, Para 3 of the Companies Act, 1956.


Sep 30, 2009

As at As at 30-09-2009 30-09-2008

1 Contingent liabilities not provided for in respect of:

a) Bank Guarantees outstanding 62.81 85.14

b) Letter of Credit outstanding. - 152.00

c) Corporate Guarantees on behalf of subsidiary company 3050.00 3050.00

d) Corporate Guarantees on behalf of other company 109.00 109.00

e) Estimated amount of contracts remaining to be executed on Capital 8.26 20.00 accounts. (Net of advances)

f) Assessment order of Customs Duty for Import of second hand computerized 46.90 46.90 embroidery machines for which appeal has been filed with Honorable Supreme Court.

g) Demand raised by excise department in respect of which appeal has been 94.73 83.03 filed.

h) Demand raised by Income-tax Department in Block assessment order u/s - 145.07 158A for the period from FY 1998-99 to FY 2003-04 in respect of which appeal has been filed with CIT (Appeal) .( Net of Advances )

J) Other Income tax matters pending in appeal. 13.33 13.33

j) Claims against the company not acknowledged as debts - 8.66

k) Premium/Interest on Foreign Currency Convertible Bond 2750.93 1527.94

k) There are some Labour Cases in Labour Court and Industrial Court regarding overtime, backwages and reinstatement to which the company is contesting. NA NA Quantum is not ascertainable.

In the opinion of the management, there is no contingent liability other than stated above and adequate provision have been made for all known liabilities, except interests and penalties as may arise.

2. i) The company has entered into an MOU dated 20th September, 2007 with Arcot Mills Limited (BIFR Company) for purchase of movable and immovable assets situated atKaUakurichi, Tamilnadu for a total consideration of Rs. 1105 lacs on lump sum sale basis out of FCCB funds. The transfer of assets in favour of the company is pending for deregistration from BIFR.

Further, till the assets are transferred in favor of the company, the company has entered into a tease agreement dated 18.02.09 for usage of assets for a specific consideration and has also incurred a sum of Rs. 69.16 lacs for renovation of machines pending capitalization.

ii) The company is though Ipso Facto owner of movable and immovable assets of aforesaid factory however, pending deregistration and approval from BIFR, it has not capitalized the assets though full working of the unit is merged in the companys results.

3. Capital work in progress also includes various advances aggregating to Rs. 690.58 lacs given against various properties for which necessary settlements are being made with parties as the expected land or properties in all cases may not be conveyanced in favour of the Company, however in the opinion of the management said amounts are considered good and fully recoverable.

4. Loans ana advances includes an advance of Rs. 1350 lacs given to Pioneer E Com Fashions Limited to buy stake in its share in the project of Joint Development of property at Borivali. However, in current year the said development rights are intended to be surrendered and sold and thus this advance is in the nature of loan recoverable from the said company, which is considered good of recovery.

5. The property of erstwhile Royal Embroideries Limited, a company which was amalgamated with the company on which attachment notice is received from the Commercial Taxes Office for the dues of Rs. 18.63 lacs, which is now fully provided for and being paid in installments.

6. i) Loans and advances includes a sum of Rs. 1534 lacs advanced to Crystal Lace (India) Ltd in previous period against machinery, the title of which could not be transferred due to technical reasons and in the current year the said advance and obligation to buy machine has been converted to loan bearing interest at the rate 15 % p.a. and has been further secured by charge on the factory Plot No. 27, at TTC Indl Area, MIDC, Mahape, Navi Mumbai, Dist Thane (Area 10687.32 sq mtrs) in favor of the company inclusive of 25 % of constructed area which the said Crystal Lace (India) Limited wilt be entitled for the development of front portion with a third party out of this total area. The company has registered the charge with ROC.

ii) The aforesaid conversion of advance into loan though strictly not in compliance with FCCB utilisation rules of RBI, however the company shall redeposit the same on repayment by the said Crystal Lace (India) Limited into FCCB account to comply the same.

iii) The company has not provided the interest of Rs.122.30 lacs on the aforesaid loan and income is understated to this extent of current year.

7. a) The Company has a investment of Rs.1147.00 lacs (Rs. 1147.00 lacs) and has given loans and advances of Rs. 1401.73 (Rs.1405.83 lacs) to Hakoba Lifestyle Limited, a subsidiary of the company. The accumulated losses as at 30th September, 2009 amounting to Rs. 4528.16 lacs (Rs. 3881.42 lacs) has exceeded the net worth of the said Company. However, having regard to the long term strategic investment, the diminution in the value of investments is considered to be temporary and accordingly no provision has been made.

b) The Company has a investment of Rs. 37.88 lacs (Rs. 37.88 lacs) and has given loans and advances of Rs.408.49 lacs (Rs. 445.16 lacs) to Mas Embroideries Private Limited, a wholly subsidiary of the company. The accumulated losses as at 30th September, 2009 amounting to Rs. 341.27 lacs (Rs. 349.30 lacs) has exceeded the net worth of the said company. However, having regard to the long term strategic investment, the diminution in the value of investments is considered to be temporary and accordingly no provision has been made.

c) The Company has a investment of Rs. 937.72 lacs (Rs. 937.72 lacs) and has given loan of Rs. 1056.88 lacs (Rs.1032.68 lacs) to S.R Investments Limited, Mauritius, a subsidiary of the Company. The accumulated losses as at 30th June, 2009 amounting to Rs.592.50 lacs (Rs. 491.86 lacs) has exceeded the net worth of the said Company. However, having regard to the long term strategic investment, the diminution in the value of investments is considered to be temporary and accordingly no provision has been made.

8. The Company in its extra ordinary General Body Meeting held on 10-12-2007 decided and authorized Board / Committee to issue 5,90,693 Equity Stock Options to the eligible present and future employees and / or Directors of the Company through Employee Stock Option Scheme at a predetermined price formula. However, in view of the non-response, the Board / Committee did not act on said resolution to carry out any Employee Stock Option Scheme and Board of Directors withdrew the said Equity Stock Options which lapsed during the current year and thus no accounting effect has been made.

9. i) The Company had invested Rs.937.72 lacs (USD 2.38 mn.) in previous period in overseas Joint Venture S.R Investments Limited to acquire 51% Equity thereof and further advanced a loan of Rs.1056.88 lacs (USD 2.20 mn.) (Optionally convertible) out of FCCB funds, with a service charge @ 9% p.a. until conversion or repayment and thus the outstanding loan including interest as on the year end is Rs. 1247.01 lacs. The accounting year of the said Joint Venture Company is closed on 30th June every year and pending finalization of audit of the said Joint Venture including opening balances and until as on 30th June, 2009, the accounts have been consolidated based on unaudited accounts of the said Joint Venture which is not in compliance with Accounting Standard 21 Consolidated Financial Statement issued by the Institute of Chartered Accountants of India.

ii) The option for conversion into Equity as aforesaid in S R Investment Ltd, Mauritius has expired within 18 months of Investments as per agreement and Company chose not to convert the same into Equity. The Company though accounted for the annual service charges @9% p.a. on the loan advanced, however, the said amount along with principal though not repaid timely considered good and no devaluation is accounted even though underlying assets held through Equity investment by the said overseas Company in the Indian Company Crystal Lace (India) Limited has been devalued.

10. i) The Company had invested Rs.509.92 lacs (USD 1.26 mn.) in previous period in overseas Joint Venture M/s Super Industries DMCC to acquire 10% stake thereof and further advanced a loan of Rs. 1777.48 lacs (USD 3.70 mn.) (Optionally convertible) out of FCCB funds, with a service charge @ 9% p.a. until conversion or repayment. Since the previous period the said 10% stake is treated as loan and the outstanding loan including interest as on year end is Rs. 2806.63 lacs. Since, the Company doesnt hold any shareholding in the said Joint Venture and therefore, no consolidation is made except disclosure of loan and service charges in the Joint Venture in compliance with Accounting Standard 27 Financial Reporting of Interest in Joint Venture issued by the Institute of Chartered Accountants of India.

ii) The toan as aforesaid of Rs. 2806.63 lacs (USD 4.96 mn. Plus service charges) advanced to M/s Super Industries, DMCC is considered good and in the opinion of the management the said loan is fully recoverable and good in recovery though neither principal nor service charges are paid timely.

11. Foreign Currency Convertible Bonds (FCCB):

Out of the total FCCB of value of USD 30 Million issued during the period ended 30th September, 2008, total conversions until last year amounts to USD 2 Million at the conversion price of Rs. 223.96 per equity share with face value of Rs. 10 and a premium of Rs. 213.96.

There were no conversions of FCCB during the year ended 30th September, 2009.

12. During the period ended 30th September, 2008, FCCB have been treated as issue of Securities (Shares / Debentures of the Company) and accordingly the share premium account is applied in writing off the FCCB issue expenses as per Section 78 of the Companies Act, 1956, which was not in accordance with the Accounting Standard 26. Due to which the accumulated loss would have been higher by Rs 518.08 lacs.

13. The Company has charged exchange difference arising in relation to Fixed Assets, which are purchased out of the Foreign Currency Term Loans, in the carrying cost of the assets which is not in accordance with the Accounting Standard 11. Had the Company followed Accounting Standard 11, loss would have been higher by Rs. 64.08 lacs (Rs. 252.37 lacs).

14. a) During the period ended 30th September, 2008, the Company has floated an issue of FCCB of USD 30 million out of which USD 2 Million was converted into equity shares. The Company has considered such FCCB as Non-Monetary liability as the Company reasonably expects that these bonds would be converted into equity shares (without transfer of controlling interest) instead of redeeming them for cash at the end of the period of the bond. In view of this no provision has been made for premium/interest aggregating to Rs. 2750.93 lacs (Rs. 1527.94 lacs) on the outstanding FCCB upto 30th September, 2009 calculated in terms of offer circular dated 27-04-2007 and the same has been considered as contingent liability. Had it not been treated so, current year loss would have been higher by Rs. 1222.99 lacs (Rs. 1527.94 lacs.) .

b) There was a foreign exchange loss of Rs. 1951.30 lacs (Rs.1643.30 lacs) on outstanding FCCB as on 30th September, 2009 arising out of revaluation which has not been accounted for since FCCB has been considered as Non-Monetary liability by the management.

c) An alternate view exist that the liability towards the FCCB is a monetary liability and should be revalued at the period-end exchange rate in accordance with Accounting Standard -11 The Effect of Changes in Foreign Exchange Rates prescribed in the Company (Accounting Standard) Rules, 2006 issued by the Central Government in consultation with the National Advisory Committee on Accounting Standard. Thus the Company should have provided interest on FCCB if the alternate view regarding FCCB as monetary liability was followed. But since there is no specific guidance of The Institute of Chartered Accountants of India on accounting for foreign currency bonds convertible into equity shares at the option of the holder, had the said liability been considered as a monetary liability as before, the accumulated loss would be higher by Rs. 1951.30 lacs (Rs. 1643.30 lacs) on account of exchange difference.

15. a) In accordance with the FEMA guidelines and applicable rules and regulations and as supported by the Lawyers Certificate in the previous period for end use of FCCB proceeds, these have been used towards expansion of business, overseas acquisition and towards other permitted use as per the ECB guidelines except Rs.563.36 lacs (Rs.563.36 lacs), which has been appropriated by Union Bank of India towards irregularity in cash credit account, which is not a permissible end use as per the ECB guidelines, to which the Company has made an objection and represented for reversal of transactions in last year and the matter is still pending. The balance unutilized amount has been retained overseas with Axis Bank, Hong Kong.

b) The utilisation of the FCCB proceeds includes a sum of Rs.900.00 lacs towards acquisition of Yarn Unit of Kiran Industries Limited at Surat on slump sale basis. However, due to non-fulfillment of certain terms and covenants, the said acquisition was cancelled mutually and ultimate use of the same is intended to be within guidelines of ECB rules. The said amount is shown as advance recoverable and considered good. The Company expects the recovery contingent upon its payment of dues to the said party for supply / advances.

16. The previous period figures are for eighteen months ended 30th September, 2008, while those of current year are for twelve months ended 30th September, 2009, hence same are not comparable. The previous period figures have been regrouped, wherever necessary, to confirm to the current years presentation.

17 The figures in the bracket () are relating to the previous period ended 30th September, 2008.

18. In the opinion of the management, there is no impairment of assets as on Balance Sheet date.

19. a) The company has during the year confirmed to sell its development rights along with the conveyance of the property at Borivali through a letter of intent for a consideration of Rs. 1850 lacs of which Rs. 200 lacs has been received as advance Et balance is receivable on execution of conveyance deed ft other documents. This consideration is over & above the non refundable consideration of Rs. 650 lacs received as per the development agreement 6 treated as other income in previous period.

b) In terms of CDR Package the aforesaid deal has been duly approved by CDR-EG on 30th September 2009.

c) Pending Execution of Conveyance deed & other document & also pending surrender of development rights in favour of buyers, the company has not treated the aforesaid sale as final and advance received is treated as liability in the current year.

d) Pending documentation as aforesaid and finality of the matter, the status quo of the title and companys right of development of 37.50% of FSI in Borivali property remains unchanged as per original development agreement with Sunteck Realty Ltd. with non refundable consideration of Rs. 650 lacs, treated as other income in previous period.

20. Sundry Debtors includes export bills outstanding for more than 180 days for Rs. 678.76 (Rs. 830.55 lacs), out of which Rs. 652.42 (Rs.788.51 lacs) are recoverable from Calyx International Ltd, Thailand. The recoveries are slow due to adverse economic conditions prevailing in overseas market. However, the same are considered good for recovery.

21. FINANCIAL RESTRUCTURING SCHEME

The Financial Restructuring Scheme under Corporate Debt Restructuring (CDR) mechanism, sanctioned by the CDR Empowered Group was implemented during the year.

a) All the secured lenders except ING Vysya bank Ltd & Landes Bank Baden Wurttemberg (LBBW) form part of CDR scheme.

b) In respect of ING Vysya Bank Ltd., who had initiated recovery proceedings before DRT, no effect has been given in the accounts as per the approved scheme and the outstanding dues as on 1 st October, 2008 (being the Cut Off Date) along with interest liability has been provided in accordance with the existing terms ft conditions while preparing the accounts.

c) LBBW Bank who do not form part of CDR group and is yet to agree for restructuring scheme approved by CDR, the outstanding dues as on 1 st October, 2008 has been continued as Term Loan in the accounts.

d) i) In accordance with the CDR Scheme, the Company has Created Working Capital Term Loan (WCTL) of Rs. 34.50 Crores by carving out the irregular portion of Working Capital limits as per the scheme (excluding the share of ING Vysya Bank Ltd.).

ii) As per the CDR scheme, a sum of Rs 32.89 crores is still to be carved out of present Term Loan and WCTL into 9% Optionally Convertible Cumulative Redeemable Preference Shares (0CCRPS) redeemable from 7th to 10th year equally and is pending for want of some clarification from Stock exchange and CDR- EG.

iii) The company created Funded Interest Term Loan (FITL) of Rs. 1131.27 lacs towards interest accruing on Term Loans and WCTL from 1 st October, 2008 till 30th September, 2009 as per the scheme (excluding ING Vysya Bank Ltd. and LBBW Bank). This loan is to be repaid, with 8% simple interest payable alongwith installments, over 16 quarters starting from the expiry of 2 years from Cut- off-date (COD), except in 6th quarter from COD in case of TUFs Loan. The balances of all the lending banks are subject to reconciliation a confirmations and the company has accounted interest as per CDR scheme and the difference of interest as per original Term loan sanction and CDR scheme is not recognized by the company as liability as they have signed the Master Restructuring Agreement of CDR scheme.

e) Promoters shall bring Rs. 3.50 crores as their contribution towards the Restructuring Scheme in the following manner: - Rs. 0.35 Crore : By 30th September, 2009

Rs. 3.15 Crores : By 30th September, 2010

The promoters have brought in a sum of Rs. 55.43 lacs till 30th September, 2009 as unsecured loan.

f) In the event of any default/ breach/ violation ofany of the terms a conditions of the Financial Restructuring Package, the lenders with approval of CDR-EG shall have a right to revoke the CDR package and to reverse the waivers/ sacrifices.

g) In the event of default in compliance with the restructured package, the lenders shall have the right to convert entire/ part of defaulted interest and entire/ part of defaulted principal into equity as per SEBI pricing formula.

h) In case of debt outstanding beyond Seven years from the date of CDR LOA, the CDR lenders shall have a right to convert into equity upto 20% of such outstanding (as on the date of conversion) as per SEBI guidelines / loan covenants, whichever is applicable.

i) CDR Lenders shall have the right to recompense the relief/ sacrifices/ waivers extended by respective CDR lenders (as per CDR guidelines).

j) ING Vysya Bank Limited who has filed recovery suit in DRT at Mumbai for the recovery of amounts due and payable under working capital arrangements against its pari passu charge.

22. During the year, the Company has provided a sum of Rs.10 lacs (Rs.20 lacs) towards gratuity in the Profit a Loss Account on adhoc basis for the Group Gratuity Scheme of Life Insurance Corporation of India, but no provision is done for leave salary in absence of any specific policy of the Company. Both the above provisions are not as per actuarial valuation, which is not in accordance with Accounting Standard 15.

23. During the year the company has changed the policy of Leasehold Land by amortizing it over a period of lease agreement in accordance with the Accounting Standard 6 and amortizing to profit and loss account. Had the company not changed the accounting policy the profit of the company would have been higher by Rs. 1.72 lacs.

24. During the year, the Company has paid a sum of Rs. 4.32 lacs (Rs.10.34 lacs) as premium towards the Key man Insurance policy taken for Mr. Raj KumarSekhani, Chairman a Managing Director of the Company.

25. In the opinion of management, value of realization of current assets, deposits, loans and advances in the ordinary course of business will be at least equal to the amount at which they have been stated in the financial statements.

26. The sundry debit and credit balances including debtors, creditors and advances to suppliers, advances from customers either debit or credit and deposits are subject to confirmation and reconciliations.

27. Dues to Small Scale Industries undertakings and dues to Micro Enterprises and Smalt Enterprises.

The Company is in the process of compiling relevant information from its suppliers about their coverage under the Micro, Small and Medium Enterprises Development Act, 2006. Since, the relevant information is not readily available, no disclosures have been made in the Accounts. However, m the view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act, is not expected to be material.

28. In view of Company"s accounting period is different than tax financial year, the provision for income tax has been made for the financial year ended 31 st March, 2009, corresponding to the assessment 2009-10, which is nil, in view of losses. However, current years Fringe Benefit Tax of Rs.4.89 lacs (Rs. 20 lacs) have been provided for the period. The necessary tax provision for the period which falls during the corresponding assessment year 2010-11, will be made next year since likely tax, if any, cannot be ascertained at this stage.

29. Related party transactions:

A] Name of related party and nature of relationship.

Subsidiary Companies

Hakoba Lifestyle Ltd.

Mas Embroideries Pvt. Ltd.

Pioneer Realty Ltd.

S.R Investments Ltd. (also a Joint Venture)

Associate Concerns

Pioneer E-Com Fashions Ltd. Reach Industries Pvt. Ltd.

Joint Venture

M/s Super Industries, DMCC, Dubai

Key Management Personnel

Shri Raj Kumar Sekhani Shri Harsh Vardhan Bassi

Relative of Key Management Personnel 6 their Enterprises

Shri Varun Sekhani M/s J J Sons Thakurdas&Co. Pvt. Ltd.

 
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