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Notes to Accounts of STI India Ltd.

Mar 31, 2016

1. Expenditure during construction period

The expenditure incurred and attributable interest & financing costs incurred prior to commencement of commercial production including Trial Run Expenses in respect of new project & substantial expansion of existing facilities are capitalized.

2. The Hon’ble BIFR Bench, vide order dated 1st November, 2010 while accepting the report of Operating Agency directed the company to incorporate the dues of GUJCOT in Draft Rehabilitation Scheme (DRS).

3. The Company has preferred an appeal against the said order before Appellate Authority for Industrial & Financial Reconstruction (AAIFR) and the AAIFR vide their order dated 6th April, 2011 directed that impugned directions passed by the BIFR shall be subject to the final order passed by AAIFR in the Appeal.

4. In the final hearing dated 29fi April, 2013 the AAIFR agreed with the submissions of the Company and remanded the case to BIFR with a direction to hear matter on the points raised in appeal before AAIFR. The hearing was scheduled on 25“‘ March, 2015. However the same was not heard as the bench did not function on the said date. No further date of hearing has been notified.

5. The Board of Directors at its meeting dated 25fi November, 2010 has taken note of the Report of Independent Chartered Accountant firm elaborating the details of certain financial transactions of the Company. The Board has directed to take necessary action in this regard. As directed by the board, the efforts are being made for recovery of dues and issued legal notices to respective parties. There is no ascertainable effect on the financials except some non-recoverable advances for which provisions have already been made in the books & charged to Profit & Loss Account.

6. Managerial Remuneration

The remuneration paid to non executive chairman in earlier year (s) is subject to approval of Central Government for which application has been filed on 4th October, 2011 followed by the further applications on 30* October, 2012 & 22“* July, 2013 respectively. However, the approval of govt, is yet to be received. The same is pending before the Central Government till date.

7. On 8* July, 2011, the fire had broken out at the factory premises of the company. The company has filed an intimation about the total loss of Rs.. 5 crores on 9* July, 2011 to the insurance company and also requested for deputing surveyor for assessing losses. During the earlier years company had received Rs. 124.94 lacs as on account payment towards the insurance claim and Rs. 168.12 lacs towards salvage value. The remaining of the insurance claim would be processed after the company reinstates the damage assets, which according to the management is under process.

8. Segmental Reporting:

The Company is mainly engaged in the business of manufacturing of textiles consisting of yam and fabrics. Considering the nature of business and financial reporting of the Company, the Company has only one segment viz. textile segment. The company operates in one geographical segment.

9. Based on the information available with the Company, there are i no suppliers who are registered as micro or small enterprises under The Micro, Small and Medium Enterprises Development Act, 2006, as at 31“ March 2016.

10. As per Accounting Standard 15 “Employee Benefits”, the disclosure of Employee benefits as defined in the Accounting Standard are given below:

11. In view of the Management, in absence of the virtual certainty of the company making taxable/ operating profit in the near future, the management is of the company has decided to not to make a provision for the deferred tax asset during the year and accordingly they gave reversed the deferred tax assets of Rs. 1319.54 Lakhs standing on 1 April-15, this stand would be maintained by the company till there is reasonable certainty of Operating/ taxable profit.

12. Defined Benefit Plan:

13. Leave Encashment:

The present value of obligation under Leave Encashment is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

14. Gratuity

The employees’ Gratuity Fund Scheme, which is a defined plan, is managed by the Trust maintained with Life Insurance Corporation of India (LIC). The present value of obligation is determined based on actuarial valuation using Projected Unit Credit Method, which is recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

15. During the Year the company has sold the investment of 1,20,00,000 (One Crore Twenty Lacs) Equity Shares of STI Sanoh India Limited (the Joint Venture Company) to Sanoh Industrial Company Limited, Japan. Accordingly, Joint Venture Agreement with Sanoh Industrial Company Limited, Japan has come to an end.

16. The net worth of the company is eroded, the accounts have been prepared on the principle of going concern with a view to revive the operation of the Company in the future notwithstanding the fact that its net worth is completely eroded, and the Company is a Sick Industrial Company.

17. Pursuant to section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014 including further amendments thereto, a company has to spend, in every year, at least 2% of the average net profit of the company made during the last three years immediately preceding financial year, as per the objects mentioned in the Rules.

As the company has no average net profit during the immediately preceding last three financial years, therefore the provisions of section 135 of the Companies Act, 2013 are not applicable.


Mar 31, 2015

(I) BASIS OF PREPARATION OF FINANCIAL STATEMENTS:

The Company follows the mercantile system of accounting and recognizes income and expenditure on accrual basis. The accounts are prepared on historical cost basis as a going concern and are consistent with generally accepted accounting principles.

2. CONTINGENT LIABILITIES NOT PROVIDED FOR:

(Rs. In Lacs) S. As at As at N. Particulars 31.03.2015 31.03.2014

(i) Claims against the company towards 490.32 490.32 energy charges on Captive Generation.

(ii) Estimated Interest amount payable on 87.21 79.94 confirmed demand for sales and entry tax

(iii) Liability towards M/s Maharashtra 73.82 73.82 state Cotton Grower Mktg. Federation on account of pending dispute under court of law.

(iv) Disputed Sales Tax/ Entry Tax Demands 63.00 64.43

(v) Demand towards Show Cause Notice 11.02 11.02 Issued by Additional commissioner of Central excise in the matter of wrong availment of cenvat on packing material used in packing of cotton waste, amount inclusive of penalty.

(vi) Demand towards Show Cause Notice 65.49 65.49 issued by Excise Department for charging Additional Customs Duty including penalty, on the import of HSD on account of which dispute is pending in high court

(vii) Demand towards Show Cause Notice 27.03 27.03 issued by Excise Department for charging Additional Custom Duty including penalty, on the import of HSD on account of which dispute is pending under Appeal

(viii) Disputed Income tax demand 7.00 7.00

(ix) Claim of Gujarat State Co-operative 10384.84 10384.84

Cotton Federation Limited (GUJCOT) for cotton supplies, interest, carrying charges etc. disputed and not acknowledged by the Company. (Refer note No. 26)

Capital Commitments :

Estimated amount of Capital Contracts remaining to be executed (net of advances) is Rs. 264.63 Lacs. (P.Y. Rs. 730.01 Lacs)

3. a) The Hon'ble BIFR Bench, vide order dated 1st November, 2010 while accepting the report of Operating Agency directed the company to incorporate the dues of GUJCOT in Draft Rehabilitation Scheme (DRS).

b) The Company has preferred an appeal against the said order before Appellate Authority for Industrial & Financial Reconstruction (AAIFR) and the AAIFR vide their order dated 6th April, 2011 directed that impugned directions passed by the BIFR shall be subject to the final order passed by AAIFR in the Appeal.

c) In the final hearing dated 29th April, 2013 the AAIFR agreed with the submissions of the Company and remanded the case to BIFR with a direction to hear matter on the points raised in appeal before AAIFR. The hearing was scheduled on 25th March, 2015. However the same was not heard as the bench did not function on the said date. No further date of hearing has been notified.

4. The Board of Directors at its meeting dated 25th November, 2010 has taken note of the Report of Independent Chartered Accountant firm elaborating the details of certain financial transactions of the Company. The Board has directed to take necessary action in this regard. As directed by the board, the efforts are being made for recovery of dues and issued legal notices to respective parties. There is no ascertainable effect on the financials except some non-recoverable advances for which provisions have already been made in the books & charged to Profit & Loss Account.

5. Managerial Remuneration

The remuneration paid to non executive chairman is subject to approval of Central Government for which application has been filed on 04.10.2011 followed by the further applications on 30th October, 2012 & 22nd July, 2013 respectively. However, the approval of govt. is yet to be received. The same is pending before the Central Government till date.

6. On 08.07.2011, the fire incidence took place in the factory premises of the company. The company has filed an intimation about the total loss of Rs. 5 crores on 09.07.2011 to the insurance company and also requested for deputing surveyor for assessing losses. However, During the earlier years company has received Rs. 124.94 lacs as on account payment towards the insurance claim and Rs 168.12 lacs towards salvage value. Damaged assets will be re-instated at the earliest possible and soon thereafter remaining claim will be processed by insurance company.

7. Segmental Reporting:

The Company is mainly engaged in the business of manufacturing of textiles consisting of yarn and fabrics. Considering the nature of business and financial reporting of the Company, the Company has only one segment viz. textile segment. The company operates in one geographical segment.

8. Based on the information available with the Company, there are no suppliers who are registered as micro or small enterprises under The Micro, Small and Medium Enterprises Development Act, 2006, as at 31st March 2015.

9. As per Accounting Standard 15 "Employee Benefits", the disclosure of Employee benefits as defined in the Accounting Standard are given below:

10. Defined Benefit Plan:

A. Leave Encashment:

The present value of obligation under Leave Encashment is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

B. Gratuity

The employees' Gratuity Fund Scheme, which is a defined plan, is managed by the Trust maintained with Life Insurance Corporation of India (LIC). The present value of obligation is determined based on actuarial valuation using Projected Unit Credit Method, which is recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

11. The total amount of expenses incurred by the company has debited to Profit & loss accounts is Rs. 517.70 Lacs during the year (cumulative Rs. 574.90 Lacs), in respect of legal issues related to proposal for disposal of company's stake in STI Sanoh India Ltd.

12. The Company has incurred substantial losses and its net worth is eroded, the accounts have been prepared on the principle of going concern with a view to revive the operations of the Company in future notwithstanding the fact that its net worth is completely eroded, and the company is a Sick Industrial Company.

Previous year figures have been re-grouped / reclassified wherever necessary to make them comparable in accordance with revised schedule VI.

13. Pursuant to section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014 including further amendments thereto, a company has to spend, in every financial year, atleast 2% of the average net profits of the company made during the last three years immediately preceding financial year, as per the objects mentioned in the Rules.

The company has suffered a net loss for the current year and having no average net profits during the immediately preceding last three financial years, the provisions of section 135 of the Companies Act, 2013 are not applicable.


Mar 31, 2014

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS:

The company follows the mercantile system of accounting and recognizes income and expenditure on accrual basis. The accounts are prepared on historical cost basis as a going concern and are consistent with generally accepted accounting principles.

2. Expenditure during construction period

The expenditure incurred and attributable interest & financing costs incurred prior to commencement of commercial production including Trial Run Expenses in respect of new project & substantial expansion of existing facilities are capitalised.

3. CONTINGENT LIABILITIES NOT PROVIDED FOR:

(Rs. In Lacs)

S. As at As at N. Particulars 31.03.2014 31.03.2013

(i) Claims against the company towards 490.32 490.32 energy charges on Captive Generation.

(ii) Estimated Interest amount payable on 79.94 72.68 confirmed demand for sales and entry tax

(iii) Liability towards M/s Maharashtra State Cotton Grower Mktg. Federation 73.82 73.82 on account of pending dispute under court of law.

(iv) Disputed Sales Tax/ Entry Tax Demands 64.43 64.43

(v) Demand towards Show Cause Notice 11.02 11.02 Issued by Additional commissioner of Central excise in the matter of wrong availment of cenvat on packing material used in packing of cotton waste, amount inclusive of penalty.

(vi) Demand towards Show Cause Notice Issued 65.49 65.49 by Excise Department for charging Additional Customs Duty ,including penalty, on the import of HSD on account of which dispute is pending in high court

(vii) Demand towards Show Cause Notice Issued by Excise Department for charging Additional Custom Duty , 27.03 27.03 including penalty, on the import of HSD on account of which dispute is pending under Appeal

(viii) Disputed Income tax demand 7.00 7.00

(ix) Claim of Gujarat State Co-operative 10384.84 10384.84 Cotton Federation Limited (GUJCOT) for cotton supplies, interest, carrying charges etc. disputed and not acknowledged by the Company. (Refer note No. 4)

4. Capital Commitments :

Estimated amount of Capital Contracts remaining to be executed (net of advances) is Rs. 730.01 Lacs. (P.Y. Rs. 840.69 Lacs)

5. a) The Hon''ble BIFR Bench, vide order dated 1st November, 2010 while accepting the report of Operating Agency directed the company to incorporate the dues of GUJCOT in Draft Rehabilitation Scheme (DRS). b) The Company has preferred an appeal against the said order before Appellate Authority for Industrial & Financial Reconstruction (AAIFR) and the AAIFR vide their order dated 6th April, 2011 directed that impugned directions passed by the BIFR shall be subject to the final order passed by AAIFR in the Appeal. c) In the final hearing dated 29th April, 2013 the AAIFR agreed with the submissions of the Company and remanded the case to BIFR with a direction to hear matter on the points raised in appeal before AAIFR. The hearing was scheduled on 25th March, 2014. However the same was not heard as the bench did not function on the said date. No further date of hearing has been notified.

6. The Board of Directors at its meeting dated 25th November, 2010 has taken note of the Report of Independent Chartered Accountant firm elaborating the details of certain financial transactions of the Company. The Board has directed to take necessary action in this regard. As directed by the board, the efforts are being made for recovery of dues and issued legal notices to respective parties. There is no ascertainable effect on the financials except some non-recoverable advances for which provisions have already been made in the books & charged to Profit & Loss Account.

7. Managerial Remuneration

The remuneration paid to non executive chairman is subject to approval of Central Government for which application has been filed on 04.10.2011 followed by the further applications on 30th October, 2012 & 22nd July, 2013 respectively. However, the approval of govt. is yet to be received.

8. On 08.07.2011, the fire incidence took place in the factory premises of the company. The company has filed intimation about the total loss of Rs. 5 crores on 09.07.2011 to the insurance company and also requested for deputing surveyor for assessing losses. However, During the previous year company has received Rs. 124.94 lacs as on account payment towards the insurance claim and Rs. 168.12 lacs towards salvage value. Pending the processing of the insurance claim, the balance claim of the company remains to be crystallized therefore to that extent no effect has been given in books of accounts.

9. Segmental Reporting:

The Company is mainly engaged in the business of manufacturing of textiles consisting of yarn and fabrics. Considering the nature of business and financial reporting of the Company, the Company has only one segment viz. textile segment. The company operates in one geographical segment.

10. Based on the information available with the Company, there are no suppliers who are registered as micro or small enterprises under The Micro, Small and Medium Enterprises Development Act, 2006, as at 31st March 2014.

11. As per Accounting Standard 15 "Employee Benefits", the disclosure of Employee benefits as defined in the Accounting Standard are given below:

12. Defined Benefit Plan:

A. Leave Encashment:

The present value of obligation under Leave Encashment is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. Changes in present value of obligation

13. The Company has provided corporate guarantee for securing the term loans and working capital loan facilities availed by the holding company restricted upto the realizable value of assets provided as security.

14. Previous year figures have been re-grouped / reclassified wherever necessary to make them comparable in accordance with revised schedule VI.


Mar 31, 2013

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS:

The company follows the mercantile system of accounting and recognizes income and expenditure on accrual basis. The accounts are prepared on historical cost basis as a going concern and are consistent with generally accepted accounting principles.

2. Expenditure during construction period:

The expenditure incurred and attributable interest & financing costs incurred prior to commencement of commercial production including Trial Run Expenses in respect of new project & substantial expansion of existing facilities are capitalised.

3. CONTINGENT LIABILITIES NOT PROVIDED FOR:

(Rs In Lacs)

S. As at As at N Particulars 31.03.2013 31.03.2012

(i) Claims against the company towards 490.32 490.32 energy charges on Captive Generation.

(ii) Outstanding Amount of Madhya Pradesh - 31.72 Audyogik Kendra VikasNigam Limited (MPAKVN) towards Land Acquisition Settlement.

(iii) Estimated Interest amount payable 72.68 65.41 on confirmed demand for sales and entry tax

(iv) Liability towards M/s Maharashtra 73.82 73.82 State Cotton Grower Mktg. Federation on account of pending dispute under court

(V) DisputedSalcsTax/EntryTaxDemands 64.43 67.76

(vi) Demand towards Show Cause Notice 11.02 11.02 Issued by Additional commissioner of Central excise in the matter of wrong availment of cenvat on packmg material used in packing of cotton waste, amount inclusive of penalty.

(vii) Demand towards Show Cause Notice 65.49 65.49 Issued by Excise Department for charging Additional Customs Duty .including penalty, on the import of HSD on account of which dispute is pending in high court

(Vii) Demand towards Show Causc Notice 27.03 27.03 lssued by Excise Department for charging Additional Customs Duty, including penalty, on the import of HSD on account of which dispute is pending under appeal

(ix) Disputed Income tax demand 7.00 7.00

(x) Demand towards Show Cause Notice - 2129.07 Issued by Excise Department for rcmoval/Salc of waste in Domestic Tariff Area (DTA) in excess ofpermission granted to the company. Reply to show cause notices have already been filed before Commissioner (Customs & Excise), Indore.

(xi) ClaimofGujaratStatcCo-operativeCotton 10384.84 10384.84 Federation Limited (GUJCOT) for cotton supplies, interest, carrying charges etc. disputed and not acknowledged by the Company. (RcfcrnolcNo.4)

4. Capital Commitments:

Estimated amount of Capital Contracts remaining to be executed (net of advances) is ? 840.69 Lacs. (P.Y. 262.52 Lacs)

5. a) The Hon'ble BIFR Bench, vide order dated 1 st November, 2010 while accepting the report of Operating Agency directed the company to incorporate the dues of GUJCOT in Draft Rehabilitation Scheme (DRS). The next date of BIFR is fixed for 16th May, 2013.

b) The Company has preferred an appeal against the said order before Appellate Authority for Industrial & Financial Reconstruction (AAIFR) and the AAIFR vide their order dated 6th April, 2011 directed that impugned directions passed by the BIFR shall be subject to the final order passed by AAIFR in the Appeal. The matter is pending for hearing. The case is at final stage and final hearing from company side since completed, and on 29th April the AAIFR has remanded the case to BIFR with a direction to hear matter on the points raised in appeal before AAIFR.

6. The Board of Directors at its meeting dated 25th November, 2010 has taken note of the Report of Independent Chartered Accountant firm elaborating the details of certain financial transactions of the Company. The Board has directed to take necessary action in this regard. As directed by the board, the efforts are being made for recovery of dues and issued legal notices to respective parties. There is no ascertainable effect on the financials except some non-rccoverable advances for which provisions have already been made in the books & charged to Profit & Loss Account.

7. Managerial Remuneration

The remuneration paid to non executive chairman is subject to approval of Central Government for which application has been filed on 04.10.2011 but the approval is not yet received.

8. On 08.07.2011, the fire incidence took place in the factory premises of the company. The company has filed an intimation about the total loss of Rs 5 crores on 09.07.2011 to the insurance company and also requested for deputing surveyor for assessing losses. However, during the previous year company has received Rs 124.94 lacs as on account payment towards the insurance claim and RS 168.12 lacs towards salvage value. Pending the processing of the insurance claim, the balance claim of the company remains to be crystallized therefore to that extent no effect has been given in books of accounts.

9. Segmental Reporting:

The Company is mainly engaged in the business of manufacturing of textiles consisting of yam and fabrics. Considering the nature of business and financial reporting of the Company, the Company has only one segment viz. textile segment. The company operates in one geographical segment.

10. Based on the information available with the Company, there are no suppliers who are registered as micro or small enterprises under The Micro, Small and Medium Enterprises Development Act, 2006, as at 31 si March 2013.

11. As per Accounting Standard 15 "Employee Benefits", the disclosure of Employee benefits as defined in the Accounting Standard are given below:

12. Defined Benefit Plan:

A. Leave Encashment:

The present value of obligation under Leave Encashment is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

B. Gratuity

The employees' Gratuity Fund Scheme, which is a defined plan, is managed by the Trust maintained with Life Insurance Corporation of India (LIC). The present value of obligation is determined based on actuarial valuation using Projected Unit Credit Method, which is recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

13. Related Party Disclosures (As certified by Management)

a) List of Related Parties and Relationships: *

S. Name of Related Party Relationship No.

1. Bombay Rayon Fashions Limited Holding Company

2. STI Sanoh India Limited Incorporated Joint Venture

3. Key Management Personnel:

A. Dr. R.B.Baheti Non Executive Chairman

B. Mr. Prashant Agrawal Managing Director

C. Mr.AmanAgrawal Vice-Chairman

14. Company has provided corporate guarantee of? 155749 lakhs for secured loan facilities taken by the holding company.

15. Information inrespect of Joint Venture Company (JVC) - STI Sanoh India Limited, as per available financial statements as at 31st March, 2013 (Provisional) and 31 st March, 2012 (Audited), is provided hereunder:-

Country of Incorporation India

Proportion of Ownership Interest 43.48% (? 1199.93 lacs of paid up equity share capital out of Rs 2760 lacs)

Description of Interest Joint Venture Company (JVC) is established principally for manufacturing of Single Walled Copper Brazed Tubes and Break fuel components.

16. Previous year figures have been re-grouped / reclassified wherever necessary to make them comparable in accordance with revised schedule VI.


Mar 31, 2012

(I) BASIS OF PREPARATION OF FINANCIAL STATEMENTS:

The company follows the mercantile system of accounting and recognizes income and expenditure on accrual basis. The accounts are prepared on historical cost basis as a going concern and are consistent with generally accepted accounting principles.

1. CONTINGENT LIABILITIES NOT PROVIDED FOR:

(Rs In Lacs)

Sl. As at As at

No. Particulars 31.03.2012 31.03.2011

(i) Claims against the company towards 490.32 490.32 energy charges on Captive Generation.

(ii) Outstanding Amount of Madhya Pradesh 31.72 522.06 Audyogik Kendra Vikas Nigam Limited (MPAKVN) towards Land Acquisition Settlement.

(iii) Estimated Interest amount payable on 65.41 58.13 confirmed demand for sales and entry tax

(iv) Liability towards M/s Maharashtra 73.82 73.82 State Cotton Grower Mktg. Federation on account of pending dispute under court of law.

(v) Disputed Sales Tax/ Entry Tax Demands 67.76 67.31

(vi) Demand towards Show Cause Notice 11.02 - Issued by Additional commissioner of Central excise in the matter of wrong availment of cenvat on packing material used in packing of cotton waste, amount inclusive of penalty.

(vii) Demand towards Show Cause Notice Issued - 11.24 by Additional commissioner of Central excise & Service tax for wrong availment of cenvat credit of Service Tax on commission on export

(Viii)Demand towards Show Cause Notice Issued 65.49 65.49 by Excise Department for charging Additional Customs Duty ,including penalty, on the import of HSD on account of which dispute is pending in high court

(ix) Demand towards Show Cause Notice Issued 27.03 27.03 by Excise Department for charging Additional Custom Duty ,including penalty, on the import of HSD on account of which dispute is pending under Appeal

(x) Disputed Income tax demand 7.00 -

(xi) Demand towards Show Cause Notice issued 2129.07 2129.07 by Excise Department for removal/Sale of waste in Domestic Tariff Area (DTA) in excess of permission granted to the company. Reply to show cause notices have already been filed before Commissioner (Customs & Excise), Indore.

(xii) Claim of Gujarat State Co-operative Cotton 10384.84 10384.84 Federation Limited (GUJCOT) for cotton supplies, interest, carrying charges etc. disputed and not acknowledged by the Company. (Refer note No. 4)

2. Capital Commitments :

Estimated amount of Capital Contracts remaining to be executed (net of advances) is 262.52 Lacs. (P.Y. 565.86 Lacs)

3. a) The Hon'ble BIFR Bench, vide order dated 1st November,

2010 while accepting the report of Operating Agency directed the company to incorporate the dues of GUJCOT in Draft Rehabilitation Scheme (DRS). The next date of BIFR is fixed for 05t1' July, 2012.

b) The Company has preferred an appeal against the said order before Appellate Authority for Industrial & Financial Reconstruction (AAIFR) and the AAIFR vide their order dated 6th April, 2011 directed that impugned directions passed by the BIFR shall be subject to the final order passed by AAIFR in the Appeal. The matter is pending for hearing. The case is at final stage and final hearing from company side since completed. The next date of hearing is fixed for 28th May, 2012.

4. The Board of Directors at its meeting dated 25th November, 2010 has taken note of the Report of Independent Chartered Accountant firm elaborating the details of certain financial transactions of the Company. The Board has directed to take necessary action in this regard. As directed by the board, the efforts are being made for recovery of dues and issued legal notices to respective parties. There is no ascertainable effect on the financials except some non-recoverable advances for which provisions have already been made in the books & charged to Profit & Loss Account.

5. Managerial Remuneration

The remuneration paid to non executive chairman is subject to approval of Central Government for which application has been filed on 04.10.2011 but the approval is not yet received.

6. On 08.07.2011, the fire incidence took place in the factory premises of the company. The company has filed an intimation about the total loss of Rs 5 crores on 09.07.2011 to the insurance company and also requested for deputing surveyor for assessing losses. However, during the year the company has received Rs 124.94 lacs as on account payment towards the insurance claim and Rs 168.12 lacs towards salvage value. Pending the processing of the insurance claim, the balance claim of the company remains to be crystallized therefore to that extent no effect has been given in books of accounts.

7. Segmental Reporting:

The Company is mainly engaged in the business of manufacturing of textiles consisting of yarn and fabrics. Considering the nature of business and financial reporting of the Company, the Company has only one segment viz; textile as reportable segment. The Company operates in Local & Export segments Geographically. The sales for both are separately given, but due to the nature of business the assets / liabilities and expenses for these activities cannot be bifurcated separately.

8. Based on the information available with the Company, there are no suppliers who are registered as micro or small enterprises under The Micro, Small and Medium Enterprises Development Act, 2006, as at 31st March 2012.

9.As per Accounting Standard 15 "Employee Benefits", the disclosure of Employee benefits as defined in the Accounting Standard are given below:

10. Defined Benefit Plan:

A. Leave Encashment:

The present value of obligation under Leave Encashment is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

B. Gratuity

The employees' Gratuity Fund Scheme, which is a defined plan, is managed by the Trust maintained with Life Insurance Corporation of India (LIC). The present value of obligation is determined based on actuarial valuation using Projected Unit Credit Method, which is recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

11. Previous year figures have been re-grouped / reclassified wherever necessary to make them comparable in accordance with revised schedule VI.


Mar 31, 2011

1. CONTINGENT LIABILITIES NOT PROVIDED FOR:

(Rs. In Lacs)

As at As at Particulars 31.03.2011 31.03.2010

(i) Claims against the company 490.32 490.32 towards energy charges on Captive Generation.

(ii) Outstanding Amount of 522.06 28.80 Madhya Pradesh Audyogik Kendra Vikas Nigam Limited (MPAKVN) towards Land Acquisition Settlement.

(iii) Estimated Interest amount 58.13 39.55 payable on confirmed demand for sales and entry tax

(iv) Liability towards M/s 73.82 73.82 Maharashtra State Cotton Grower Mktg. Federation on account of pending dispute under court of law.

(v) Disputed Sales Tax/ Entry Tax Demands 67.31 67.31

(vi) Demand towards Show Cause 11.24 11.24 Notice Issued by Additional commissioner of Central excise & Service tax for wrong availment of cenvat credit of Service Tax on commission on export.

(vii) Demand towards Show Cause Notice 65.49 65.49 Issued by Excise Department for charging Additional Customs Duty , including penalty, on the import of HSD on account of which dispute is pending in high court

(viii)Demand towards Show Cause Notice 27.03 27.03 Issued by Excise Department for charging Additional Custom Duty , including penalty, on the import of HSD on account of which dispute is pending under Appeal

(ix) Demand towards Show Cause Notice 2129.07 2129.07 issued by Excise Department for removal/Sale of waste in Domestic Tariff Area (DTA) in excess of permission granted to the company. Reply to show cause notices have already been filed before Commissioner (Customs & Excise), Indore

(x) Claim of Gujarat State 10384.84 10384.84 Co-operative Cotton Federation Limited (GUJCOT) for cotton supplies, interest, carrying charges etc. disputed and not acknowledged by the Company. (Refer note No. 4)

2. Capital Commitments :

Estimated amount of Capital Contracts remaining to be executed (net of advances) is Rs. 565.86 Lacs.

3. a) The Hon'ble BIFR Bench, vide order dated 1st November,

2010 while accepting the report of Operating Agency directed the company to incorporate the dues of GUJCOT in Draft Rehabilitation Scheme (DRS).

b) The Company has preferred an appeal against the said order before Appellate Authority for Industrial & Financial Reconstruction (AAIFR) and the AAIFR vide their order dated 6th April, 2011 directed that impugned directions passed by the BIFR shall be subject to the final order passed by AAIFR in the Appeal. The matter is pending for hearing.

5. a) Bombay Rayon Fashions Limited (BRFL) has acquired 86,47,336 equity shares of Rs. 10 each fully paid-up and 32,180,000 OCDs (along with all the underlying security) from the erstwhile Private Equity share holders and OCD holders of Series 1, 2, 3 & 4 as intimated to the Company vide letter dated October 27, 2010. Further the underlying security including 1,18,14,114 equity shares of Rs. 10 each held by the IDBI Trusteeship Services Ltd. (on behalf of OCD holders) on invocation of the pledge were also transferred to BRFL.

b) Consequent to the acquisition by BRFL as above- mentioned, the Open offer was triggered pursuant to SEBI (Acquisition and Takeover) Regulation, 1997 and at present BRFL is holding 2,13,79,722 equity shares constituting 73.72% of the equity capital of the Company. On conclusion of Open Offer, BRFL has become now Promoter of the Company.

c) The erstwhile OCD holders have waived principal to the extent of Rs. 2828 Lacs against the principal outstanding on proportionate basis and the interest due on the OCDs from February 14, 2008 to October 26, 2010. Further BRFL has waived the interest due on the OCDs from October 27, 2010 to March 31, 2011.

d) Since the debentures are presently owned by Indian Resident Company, the RBI Circular A.P. (DIR Series) No. 74 dated June 8, 2007 is not be applicable.

4. During the year the Company has changed method of depreciation in respect of Motor Vehicles from Written Down Value Method to Straight Line Method prospectively w.e.f. 1st April 2010. However, there is no material impact on the financial statements.

5. The Board of Directors at its meeting dated 25th November, 2010 have taken note of the Report of Independent Chartered Accountant firm elaborating the details of certain financial transactions of the Company. The Board has directed to take necessary action in this regard. There is no ascertainable effect on the financials except some non-recoverable advances for which provisions have already been made in the books & charged to Profit & Loss Account.

6.Segmental Reporting:

The Company is mainly engaged in the business of manufacturing of textiles consisting of yarn and fabrics. Considering the nature of business and financial reporting of the Company, the Company has only one segment viz; textile as reportable segment. The Company operates in Local & Export segments Geographically. The sales for both are separately given, but due to the nature of business the assets / liabilities and expenses for these activities cannot be bifurcated separately.

7. Based on the information available with the Company, there are no suppliers who are registered as micro or small enterprises under The Micro, Small and Medium Enterprises Development Act, 2006, as at 31st March 2011.

8. As per Accounting Standard 15 "Employee Benefits", the disclosure of Employee benefits as defined in the Accounting Standard are given below:

Defined Benefit Plan:

A. Leave Encashment:

The present value of obligation under Leave Encashment is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

9. Related Party Disclosures (As certified by Management)

a) List of Related Parties and Relationships.

S.No. Name of Related Party Relationship

1. Eight Capital Master Fund Private Foreign upto 26.10.2010 Limited (Cayman Island) Investors jointly control 2. Spinnaker Global Opportunity ling 70.56% Fund Ltd. (British Virgin equity capital Islands) of the company

3. Spinnaker Global Emerging Markets Fund Ltd. (British Virgin Islands)

4. Spinnaker Global Strategic Fund Ltd. (British Virgin Islands)

5. Bombay Rayon Fashions Holding Company w.e.f. 27.10. Limited Incorporated 2010 Joint Venture 6. STI Sanoh India Limited

7. Key Management Personnel Whole time upto 31.10. Director 2010 A Dr. R.B .Baheti Non Executive w.e.f. 01.11. Chairman 2010 B Mr. Prashant Agrawal Managing Director C. Mr. Aman Agrawal Vice - Chairman w.e.f. 25.11. 2010

8. Associate Companies (Enterprises in which key management personnel / relatives exercises significant influence)

A STI Power India Pvt. Ltd. upto 31.10. 2010

B STI Fabricraft Pvt. Ltd.

C Hyson Investment & Finance Pvt. Limited

D East West Finance Pvt. Ltd

10. Information in respect of Joint Venture Company (JVC) - STI Sanoh India Limited, as per available financial statements as at 31st March, 2011 (Provisional) and 31st March, 2010 (Audited), is provided hereunder:-

Country of Incorporation India

Proportion of Ownership Interest 43.48% (Rs. 1199.93 lacs of paid up equity share capital out of Rs. 2760 lacs)

Description of Interest Joint Venture Company (JVC) is established principally for manufacturing of Single Walled Copper Brazed Tubes and Break fuel components.

11. The disclosures mandated by paragraphs 3(i)(a), 3(ii)(a), 3(ii)(b) and 3(ii)(d) of Part II, Schedule VI to the Companies Act, 1956 have not been provided in view of applicability of exemption vide General Notification No. S.O. 301(E) dated 8th February 2011 issued under Section 211(3) of the Companies Act, 1956 by The Ministry of Corporate Affairs, Government of India.

12. Previous year figures have been re-grouped reclassified wherever necessary to make them comparable.


Mar 31, 2010

1. CONTINGENT LIABILITIES:

As at As at Particulars 31.03.2010 31.03.2009

(Rs. In Lacs) (Rs. In Lacs)

(i) Claims against the company towards 490.32 490.32 energy charges on Captive Generation

(ii) Outstanding of MPAKVN 28.80 28.80 towards Land Acquisition Settlement.

(iii) Bonds executed in favour of President of NIL 5300.00 India towards Customs/Excise obligations.

(iv)Estimated amount of contracts NIL 21.78 remaining to be executed on capital account and not provided for

(v) Estimated Interest amount payable on 39.55 33.80 confirmed demand for sales and entry tax

(vi)*Liability towards Gujarat State 10384.84# 10384.84# Co-operative Cotton Federation Limited for cotton supplies, interest, carrying charges etc. under dispute.

(vii)Liability towards M/s Maharashtra state 73.82 73.82 Cotton Grower Mktg. Federation on account of pending dispute under court of law.

(viii)Disputed Sales Tax/Entry Tax Demands 67.31 67.31

(ix) Disputed Service Tax Demand NIL 6.12

(x) Demand towards Show Cause Notice 11.24 NIL

Issued by Additional commissioner of Central Excise & Service Tax for wrong availment of cenvat credit of Service Tax on commission on export.

(xi) Demand towards Show Cause Notice 65.49 NIL Issued by Excise Department for charging Additional Customs Duty, including penalty, on the import of HSD on account of which dispute is pending in high court

(xii)Demand towards Show Cause Notice 27.03 27.03 Issued by Excise Department for charging Additional Customs Duty, including penalty, on the import of HSD on account of which dispute is pending under Appeal

(xiii)Demand towards Show Cause Notice 2129.07 2129.07 Issued by Excise Department for removal/Sale of waste in Domestic Tariff Area (DTA) in excess of permission granted to the company. Reply to show cause notices have already been filed before Commissioner (Customs & Excise), Indore.

* Though the contingent liability towards Gujcot is appearing due to the case filed by them against the Company, as per records of the Company there is no such liability towards Gujcot as the principal liability has been assigned to the other company in the year 2004-05 after obtaining approval from the Gujcot for restructuring of the debt. #This amount includes interest amounting to Rs. 5529.84 lacs.

2. Investments include Rs. 1199.93 lacs representing equity shares of STI Sanoh India Limited (SSIL) held on long term basis and on perusal of available provisional financial statements of SSIL it appears that no permanent decline exists in value such of investments.

3. The Company has been declared as a Sick Industrial Undertaking under Section 3(l)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) vide Summary Record of proceedings of the hearing held on 23rd January 2006 against reference registration No. 743/2002 dated 30th December, 2002.

The Honble BIFR Bench has appointed State Bank of India as Operating Agency to prepare Draft Rehabilitation Scheme.

4. The Honble BIFR Bench, vide order dated 2nd January 2008 has reserved its decision on the action of the company in mortgaging the entire block assets of the company in favour of two foreign investors without the Boards permission. The Board has further recorded that till then, the mortgage shall be treated as unenforceable. The Appellate Authority for Industrial & Financial Reconstruction (AAIFR) vide order dated 12th January 2009 has set aside the order of BIFR and directed that permission of BIFR is not required for creation of mortgage. The Honble High Court vide order dated 2nd June 2010 has affirmed the above mentioned order of Appellate Authority for Industrial & Financial Reconstruction (AAIFR).

5. Due to adverse market conditions the Company has not been able to generate sufficient revenues to serve the interest on Optionally Convertible Debentures (OCD) issued to Private Foreign Investors from 1st July 07 onwards. The Company has also not been able to redeem Optionally Convertible Debentures-Series 1 to 4 for Rs. 141.00 crores.

6. As per A.P. (DIR Series) Circular No. 74 dated June 8, 2007 issued by RBI, it is clarified that henceforth, only instruments which are fully and mandatorily convertible into equity, within a specified time would be reckoned as part of equity under the FDI Policy and eligible to be issued to persons resident outside India under the Foreign Direct Investment Scheme in terms of Regulation 5 (1) of Foreign Exchange Management (Transfer and Issue of shares by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA 20/2000-RB dated May 3,2000. Optionally convertible debentures Series 1,2,3 & 4 had fallen due for redemption / conversion during the earlier years. Option to convert OCDs into equity shares had not been exercised. In light of the RBI Circular the said debentures cannot be rolled over, and are subjected to redemption.

7. The Optionally Convertible Debentures (OCDs) holders have intimated by their letter dated October 27,2010 of transfer to Bombay Rayon Fashions Limited of 32,180,000 Optionally Convertible Debentures (OCDs) held by them alongwith the underlying properties / securities including the invoked 1,18,14,114 equity shares held by IDBI Trusteeship Services Limited as debenture trustee on behalf of the aforesaid.

8. The Optionally Convertible Debentures (OCDs) holders have by their letter dated October 26,2010 also completely waived interest due on the Optionally Convertible Debentures (OCDs) from the date, i.e. February 14, 2008, of invocation of pledge of 1,18,14,114 shares.

9.The Optionally Convertible Debentures (OCDs) holders by their letter dated October 26, 2010 waived principal to the extent of Rs. 28,18,00,000 against the principal outstanding of OCD Series 1 to 4 on proportionate basis.

10.During the year, vide order no F.No.04/323/99-100% EOU/109 dated 24th April 2009, The Asstt. Development Commissioner, Indore Special Economic Zone, Indore has passed an order allowing the company for final debonding from 100% Export Oriented Unit (EOU) to DTAunit.

11. The company has changed its Accounting Policy of valuation of closing stock, i.e. excluding the indirect costs like Administrative expenses, selling expenses, depreciation on non factory building etc. As a result of change in the Accounting Policy, the value of closing stock has decreased by Rs. 14,47,399/-. Had these not been changed, the loss of the company would have been lower by the same amount.

12. Increase in raw cotton prices etc. company has suffered losses during the year. The management is hopeful, of better performance during coming years, and confident that company shall be able to wipe-off its accumulated losses in next few years and accordingly the accounts have been prepared on a going concernbasis.

13. Interest amounting to Rs. 2.41 crores (P. Year Rs.2.69 crores) on delayed payments to suppliers has been accounted for on cash basis.

14.Computer software has not been amortized over the useful expected life as recommended in Accounting Standards 26 "Intangible Asset".

15.Confirmation of balances from Debtors, Creditors and Advances given were not available, and reconciliation thereof is pending.

16.During the year, the following claim has filed by the company to various authorities, which has been settled in the favour of the company.

17. The management has taken a legal opinion on the non- applicability of wealth tax liability to the company and accordingly, no provision for wealth tax liability has been provided in the books of accounts.

18. The Board of Directors at its meeting dated 20th April 2010 took a note of the certain financial transactions and to carry out a further investigation into this, the Board therefore had appointed an independent Chartered Accountant firm, covering the period from 01-04-2004 to 31-03-2010. The scope of the audit was further extended to cover the financial year 2010-11 also and as on date there is no finality in the matter.

19. Segmental Reporting:

The Companys operating business is organized and managed according to a single primary reportable business segment namely yarn and fabric. As part of secondary reporting, revenues are attributed to geographic areas based on the location of the customer.

In accordance with Accounting Standards (AS)-17 on Segment Reporting, the following table presents information relating to the geographical segment for the year ended March 31,2010.

20. In the absence of taxable income during the year and due to huge brought forward losses, no provision for income tax has been made. Further the Deferred Tax Assets has also not been recognized as there is no reasonable certainty that sufficient future taxable income will be available against which such deferred assets can be realized.

21. The company is in process of identifying Micro & Small Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006. Consequently it is not possible for the company to give relevant disclosure under the said Act.

22. As per Accounting Standard 15 "Employee Benefits", the disclosure of Employee benefits as defined in the Accounting Standard are given below:

Defined Benefit Plan:

A. Leave Encashment:

The present value of obligation under Leave Encashment is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

23. Derivative Instruments

The company uses foreign currency forward contract to hedge its risk associated with foreign currency fluctuation relating to forecasted revenue receivable transaction. The company not uses the forward for speculative purpose.

24. Previous year figures have been re-grouped / rearranged wherever considered necessary to make them comparable with the current year.

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