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Notes to Accounts of Suryalakshmi Cotton Mills Ltd.

Mar 31, 2016

Note 1. Significant Accounting Policies: 1 Accounting Convention

The financial statements are prepared under historical cost convention and on accrual basis in accordance with the generally accepted accounting principles.

2 Fixed Assets

Fixed Assets are stated at cost net of depreciation provided

The Company''s Insurance claim is processed and settled partly. The Company received an amount of RS,2,609 Lakhs from the Insurance Company including salvage. The part claim of RS,490 Lakhs which is still to be settled by the Insurance Company is shown under Claims receivable.

3 On 4th July, 2015, there was a major fire accident in Sizing Machine in Weaving department of denim division at Ramtek, Nagapur district, Maharashtra state, in which one of the Sizing Machines & its accessories, etc., was damaged. The factory was fully insured under reinstatement policy for fixed assets and under declaration policy for stocks. Due to this damage, there was production loss also. New sizing machine was purchased, installed and decommissioned on 23.02.2016. The Company has already filed its claim for reinstatement of assets damaged and also for loss of profit under Business Interruption (Fire) Policy.

4 During the financial year, the Company has successfully commissioned its state of art of Spinning unit of 25,344 spindles at Amravati District of Maharashtra on 25th September, 2015.

5 During the financial year 2014-15, the Company had revised the Useful life of its fixed assets to comply with the useful life as mentioned under Schedule II of the Companies Act, 2013.

6 Previous year''s figures : Figures for the previous year have been regrouped wherever necessary to correspond with the current year''s figures.

7 Except when otherwise stated, the figures are presented in Rupees Lakhs.

in the statements. Cost of acquisition of Fixed Assets is inclusive of all direct and indirect expenditure up to the date of commercial use.

Depreciation is provided in accordance with the Useful Life prescribed under Schedule II of the Companies Act, 2013

8 Inventories

Raw material and Stores & Spares are valued at cost on weighted average basis. Stock-in-process and Finished Goods are valued at lower of cost or net realizable value.

The Excise Duty payable on finished / Saleable goods is accounted for on clearance of goods from the factory premises, wherever applicable.

9 Investments

Investments are stated at cost and diminution / increase in the value, which is permanent in nature, is provided for.

10 Contingent Liabilities and Provisions

All Contingent liabilities are indicated by way of a note and will be paid / provided on crystallization.

6 Retirement Benefits

Provident Fund contribution is charged to the Profit and Loss Account as and when the contributions are due In respect of Gratuity, the Company has covered the gratuity liability by obtaining the group gratuity policy. The premium charged by Life Insurance Corporation of India is paid as stipulated and charged to Profit and Loss Account. The Company has also made required Gratuity & Leave encashment liability provision as per Actuarial valuation.

7 Foreign Exchange Transactions

a) Export Sales are initially accounted at the exchange rate prevailing on the date of documentation/invoicing and the same is adjusted with the difference in the rate of exchange arising on actual receipt of proceeds in foreign exchange.

b) Earnings in foreign currency other than export sales are accounted for at the rate of conversion on the date of realization.

c) Imports of material / capital equipment are accounted at the rates at which the actual payments are made.

d) Assets and liabilities arising out of foreign exchange transactions are translated at the rates of exchange ruling on the date of Balance Sheet and are suitably adjusted to the appropriate Revenue/Capital account.

8 Impairment of Assets

An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An impairment loss is charged to Profit and Loss Account in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting periods, is reversed if there has been a change in the estimate of recoverable amount.

9 Leasehold Land

Leasehold Land is treated as an asset for the period of its Lease as per the Lease Agreement entered, and the amount of lease will be amortized as depreciation on straight line basis and charged to Profit & Loss account over the lease term.

10 Sales

Sales represents the amount receivable for goods sold including excise duty and sales Tax thereon. Incentives on export sales are recognized as income on accrual basis.

11 Provision for Taxation

Provision for Taxation for the year is based on Tax liability computed in accordance with relevant Tax rates and Tax laws as at the Balance Sheet date. Provision for deferred Tax is made for all timing differences arising between Taxable income and accounting income at rates that have been enacted or substantively enacted as at the Balance Sheet date. Deferred Tax assets / MAT Credit are recognized only if there is a reasonable certainty that they will be realized and are reviewed for the appropriateness of their respective carrying value at each Balance Sheet date.


Mar 31, 2015

1.(a) During the financial year, the Authorised Capital of the Company has been reclassified consisting of 3,00,00,000 Equity Shares of Rs. 10/- each, 672,000 - 10% Cumulative Redeemable Preference Shares of Rs. 100 each and 2,00,000 - 5% Non Cumulative Preference Shares of Rs. 100 each, as approved by the members in the Annual General Meeting held on 4th August, 2014.

(b) During the current financial year, the Company has issued and allotted 2,150,000 fully paid up Equity shares of Rs. 10/- each at a Share premium of Rs. 65/- per Equity Share.

(c) During the current financial year, the Company has issued 500,000 - 10% Cumulative Redeemable Preference Shares of Rs. 100 each as issued, subscribed and paid up, to part finance Company's Spinning Project at Amravathi, near Nagpur, Maharashtra. The same will be redeemed on 18th August, 2026.

(d) 8,032,267/- Equity shares of Rs. 10 each are allotted as fully paid up by way of Bonus shares by capitalisation of reserves.

(e) During the previous financial year, the Company has issued 200,000 - 5% Non Cumulative Redeemable Preference Shares of Rs. 100 each as issued, subscribed and paid up, as per the Schme of Amalgamation, to the preference shareholders of erstwhile Suryakiran International Ltd. The same will be redeemed on 21st December, 2021.

# Persuant to Scheme of Amalgamation, the excess of Equity Share Capital Rs. 445.78 Lakhs, & Security Premium account Rs. 434.58 Lakhs, totaling to Rs. 880.36 Lakhs, of erstwhile Suryakiran International Ltd. over Investment by the Company amounting to Rs. 666.01 Lakhs in SKIL, i.e., Rs. 214.35 Lakhs is considered as Amalgamation / Capital Reserve during the previous financial year.

Note :

1. The Loans referred at I (a) to (i), (k) and (n) above are secured by mortgage of (present & future) movable and immovable properties of the Company on first charge pari passu basis & second pari passu charge on the current assets of the Company with existing term lenders and guaranteed by two Directors of the Company in their personal capacities.

2. The Loans referred at (l) to (m) and (II)(a) above are secured by mortgage of (present & future) movable and immovable properties of the Company on first charge pari passu basis & second pari passu charge on the current assets of the Company with existing term lenders and guaranteed by three Directors of the Company in their personal capacities.

3. The Loan referred at I (j) above is secured by mortgage of present and future movable and immovable properties of the Garment division of the Company and guaranteed by two Directors of the Company.

4. The Loan referred at I (o) above is secured by pari-passu first charge by way of hypothecation of entire current assets (existing & future) of the Company along with existing Working Capital credit lenders & guaranteed by three Directors of the Company in their personal capacities.

The Sales tax deferment liability amounting to Rs. 114.15 Lakhs shown under unsecured loans above, is due for repayment as under.

All Working Capital loans are secured by hypothecation of stocks of raw materials, yarn, fabric, stock-in-process, stores and spares and book debts and by a second mortgage over the (present and future) movable & immovable properties of the Company on pari-passu basis and further guaranteed by three Directors of the Company in their personal capacities.

Note 2

Notes forming part of Balance Sheet as at 31st March, 2015 and Statement of Profit and Loss for the year ended on that date.

(Figures in Rs. Lakhs)

Particulars As at As at 31st March 31st March

1 Contingent Liabilities not provided for

a) Contracts to be executed 7255.54 4450.65 on capital accounts.

b) Against Foreign & Inland 673.38 0.00 Letters of Credit

c) Against Bank Gaurantees 1627.34 1595.04

d) Against Bills discounted 515.75 1298.42

e) Demand against Reversal 32.89 32.89 of Excise duty on Finished goods and Cenvat Credit involved in the stock of inputs while opting for the Central Excise Notification No. 30/2004. Company's appeal was allowed by Appellate Commissioner of Customs & Central Excise, Nagpur. However, the Central Excise Department has filed an appeal against the above Order with CESTAT

f) Disputed demand from sales tax 28.82 28.82 department on subjecting the turnover of unit at Maharashtra to tax along with the turnover of Andhra Pradesh and set off. The company has filed appeal before STAT(A.P),Hyderabad against the revised demand issued by the DC(CT), Begumpet Division, Hyderabad.

g) Disputed demand from Central 11.43 11.43 Excise department on clearance of unbranded garments without payment of duty. Cenvat on exempted garments reversed and paid. The company has filed appeal before CESTAT, Bangalore

h) Disputed demand from Customs 61.49 61.49 department towards differential custom duty on garments exported. The Case is pending for hearing with Hon'ble High Court of Judicature of Andhra Pradesh at Hyderabad.

i) Disputed demand from DCIT, Range : 3.93 3.93 3(2), Hyderabad towards Income tax on disallowance of expenditure on account of Customs duty paid for previous year, during the Assessment Year 2008-09. The case is pending in appeal before the Commissioner of Income Tax (Appeals-IV), Hyderabad

j) Disallowance of Unpaid Leave 10.85 10.85 encashment provision in assessment proceedings for the Assessment Year 2011-12 by Addl. CIT, Range 3, Hyderabad. The case is pending in appeal before the Commissioner of Income Tax (Appeals-IV), Hyderabad

k) Disputed demand from DCIT, Range : 65.27 - 3(2), Hyderabad towards disallowance of Credit towards Surcharge and Education Cess as Minimum Alternate Tax credit. The case is pending in appeal before the Commissioner of Income Tax (Appeals-IV), Hyderabad

3 The legal proceedings against M/s.Rajvir Industries Ltd., for the recovery of the balance outstanding in the books of the company of Rs. 236.93 Lakhs (Previous year Rs. 236.93 Lakhs) are pending.

4 Three cases have been filed against the Company for amounts totaling to Rs. 1,348 Lakhs in respect of three cheques allegedly issued by the company. These claims are being resisted on the plea that these cheques have been misused and in the absence of any legally enforceable debt or liability the company has been advised that the complaints are not maintainable and no liability is likely to arise.

5 (i) Rajvir Industries Ltd., has filed an application before the Hon,ble High court of Andhra Pradesh for modification of the

Order of the High Court in the scheme of arrangement for transfer of the liability of Rs. 1,000 Lakhs to the company. The application has been dismissed with costs by the High Court and the applicant has preferred an appeal before the High Court which is pending.

(ii) Rajvir Industries Limited (RIL) had also filed criminal complaint against the Company, certain Directors, Sr. Executives and the Auditor of the company in the above matter which however was quashed by the Hon'ble High Court of A.P RIL has preferred a special leave petition before the Hon'ble Supreme Court which is pending.

6 An order has been received from the office of DGFT Hyderabad for alleged violation of Target plus scheme to recover Rs. 3,807 Lakhs including interest and penalties. Apart from this a penalty of Rs. 25 Lakhs each on CMD and MD and Rs. 5 Lakhs on some other Directors of the company has been imposed. The High Court of Andhra Pradesh has granted an interim stay of the dismissal of the appeal by the Company. The Company in compliance with the orders of the High Court has paid Rs. 500 Lakhs to DGFT, Hyderabad. (The Company has already paid Rs. 500 Lakhs to DRI in the same matter). A show cause notice on the same issue was issued by DRI. The Company has been advised that no liability is likely to arise under the notice as the allegations are unfounded and the company is taking adequate steps to defend itself.

7 The Company carried out a revaluation of its assets, i.e., Land, Buildings and Plant & Machinery in its Denim Division at Ramtek and Spinning Division at Amanagallu, by an approved valuer. Revaluation of Power Plant assets was not done, as it was relatively new Plant. The written up value of the assets on revaluation amounting to Rs. 174.58 Crores was added to the cost of the assets / Gross Block as on 31st March, 2014. The depreciation of Rs. 84.84 Crores for the previous financial year 2013- 14 and Rs. 12.89 crores for the financial year 2014-15, totalling to Rs. 97.73 crores on written up value of Gross Block has been added to depreciation, and the net increase in depreciated value Rs. 76.85 crores (Previous year Rs. 89.74 Crores), is considered as revaluation reserve and the same will be written off as per the depreication method followed by the company.

8 Employee Benefits : Gratuity

Consequent to the adoption of Accounting Standard on Employees Benefits (AS-15) (Revised 2005) issued by the Institute of Chartered Accountants of India, the following disclosures have been made as required by the Standard for Actuarial valuation of Gratuity.

Employee Benefits : Actuarial valuation of Leave encashment

Consequent to the adoption of Accounting Standard on Employees Benefits (AS-15) (Revised 2005) issued by the Institute of Chartered Accountants of India, the following disclosures have been made as required by the Standard for Actuarial valuation of Leave encashment.

9 In the opinion of the Board, the current assets and loans & advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

10 Vide Notification No.30/09.07.2004 of the Central Excise Department we can opt for zero rate of duty by not taking Cenvat credit on Inputs and vide Tariff rate (Previous year under Notification No.29/09.07.2004) of Central Excise Department option can be exercised for payment of duty on Final products by taking credit on inputs and capital items. Accordingly in case of Denim Fabric and Cotton yarn the Company has opted for Zero rate of duty and not availed Cenvat credit on the purchase of inputs and capital items, where as in case of Polyster yarn we have taken cenvat credit on part of the raw material which are used for production of polyster yarn meant for export, and cleared the material for export on payment of duty.

11 There was a major fire accident in spinning department of denim division at Ramtek, Nagapur district, Maharashtra state during January, 2008, in which the Building, Plant & Machinery, Electrical Installations and stocks were totally damaged. The factory was fully insured under reinstatement policy for fixed assets and under declaration policy for stocks. The Company's Insurance claim is processed and settled partly. The Company received an amount of Rs. 2609 Lakhs from the Insurance Company including salvage. The part claim of 490 Lakhs which is still to be settled by the Insurance Company is shown under Claims receivable.

12 During the financial year, the Company has revised the Useful life of its fixed assets to comply with the useful life as mentioned under Schedule II of the Companies Act, 2013 and in view of the transitional provisions, the Company has adjusted Rs. 366.77 lacs with the opening balances of retained earnings, i.e., surplus in the statement of profit and loss. Had the Company continued to follow the earlier useful life under the Companies Act,1956, the depreciation expense for the year to date would have been higher by Rs. 200.49 lacs and Profit before tax & the Net Block of Fixed Assets for the year to date would have been lower by Rs. 200.49 lacs.

13 Previous Year's Figures : Figures for the previous year have been regrouped wherever necessary to correspond with the current year's figures.


Mar 31, 2013

1. The legal proceedings againt M/s.rajvir Industries ltd., for the recovery of the balance outstanding in the books of the company of Rs.236.93 lakhs (Previous year Rs.236.93 lakhs) are pending.

2. Three cases have been filed against the Company for amounts totaling to Rs.1348 lakhs in respect of three cheques allegedly issued by the company. These claims are being resisted on the plea that these cheques have been misused and in the absence of any legally enforceable debt or liability the company has been advised that the complaints are not maintainable and no liability is likely to arise.

3. rajvir Industries ltd., has filed an application before the hon,ble high court of andhra Pradesh for modification of the Order of the high Court in the scheme of arrangement for transfer of the liability of Rs.1000 lakhs to the company. The application has been dismissed with costs by the high Court and the applicant has preferred an appeal before the high Court which is pending.

4. an order has been received from the office of dGFT hyderabad for alleged violation of Target plus scheme to recover Rs.3807 lakhs including interest and penalties. apart from this a penalty of Rs.25 lakhs each on CMd and Md and Rs.5 lakhs on some other directors of the company has been imposed. The high Court of andhra Pradesh has granted an interim stay of the dismissal of the appeal by the Company. The Company in compliance with the orders of the high Court has paid Rs.500 lakhs to dGFT, hyderabad. (The Company has already paid Rs.500 lakhs to drI in the same matter). a show cause notice on the same issue was issued by drI. The Company has been advised that no liability is likely to arise under the notice as the allegations are unfounded and the company is taking adequate steps to defend itself.

5 Employee Benefits : Gratuity

Consequent to the adoption of accounting Standard on Employees Benefits (aS-15) (revised 2005) issued by the Institute of Chartered accountants of India, the following disclosures have been made as required by the Standard for actuarial valuation of Gratuity

6. In the opinion of the Board, the current assets and loans & advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

7. Vide notification no.30/09.07.2004 of the Central Excise department we can opt for zero rate of duty by not taking Cenvat credit on Inputs and vide Tariff rate (Previous year under notification no.29/09.07.2004) of Central Excise department option can be exercised for payment of duty on Final products by taking credit on inputs and capital items. accordingly in case of denim Fabric and Cotton yarn the Company has opted for Zero rate of duty and not availed Cenvat credit on the purchase of inputs and capital items, where as in case of Polyster yarn we have taken cenvat credit on part of the rawmaterial which are used for production of polyster yarn meant for export, and cleared the material for export on payment of duty.

8. There was a major fire accident in spinning department of denim division at ramtek, nagapur district, Maharashtra state during January, 2008, in which the Building, Plant & Machinery, Electrical Installations and stocks were totally damaged. The factory was fully insured under reinstatement policy for fixed assets and under declaration policy for stocks. The Company''s Insurance claim is processed and settled partly. The Company received an amount of Rs.2609 lakhs from the Insurance Company including salvage.The part claim of Rs.490 lakhs which is still to be settled by the Insurance Company is shown under Claims receivable.

9. The company has given corporate guarantee to SBI on behalf of its subsidary M/s Surya kiran International limited, for 21.31 crores.


Mar 31, 2012

Note:

1. The Loans referred at (a) to (f), (h) to (i) above are secured by mortgage of (present & future) movable and immovable properties of the Company on first charge pari passu basis and guaranteed by two Directors of the Company in their personal capacities.

2. The Loan referred at (j) above is secured by mortgage of the fixed assets created by virtue of the said term loan for the present movable and immovable properties of the Company on first charge pari passu basis.

3. The Loan referred to in (g) above is secured by hypothecation of specified plant and machinery as per the scheme and guaranteed by two Directors of the Company.

4. The Loan referred to in (i)-(k) & (ii)-(a) are secured by pari passu first charge on the entire fixed assets (movable & immovable, present & future) of the Company & second pari passu charge on the current assets of the Company with existing term lenders, guaranteed by two Directors of the Company.

5. The Loan referred to in (i)-(l) is secured by pari passu first charge on the entire fixed assets (present & future) of the Company & second pari passu charge on the current assets of the Company with existing term lenders, guaranteed by two Directors of the Company.

As at As at 31.03.2012 31.03.2011

NOTES FORMING PART OF BALANCE SHEET AS AT 31ST MARCH, 2012 AND STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED ON THAT DATE.

1. Contingent Liabilities not provided for

a) Contracts to be executed on capital accounts. 5557.80 11532.39

b) Against Foreign & Inland Letters of Credit 257.05 96.44

c) Against Bank Guarantees 763.37 129.67

d) Against Bills discounted 2308.17 4489.84

e) Demand from Central Excise Department in connection with the clearance of 78.50 78.50 the goods disputed by the Company and allowed by the Commissioner Appeals, Nagpur in Company's favour. However the department has preferred an appeal against the Commissioner's order.

f) Demand against Reversal of Excise duty on Finished goods and Cenvat 32.89 32.89 Credit involved in the stock of inputs while opting for the Central Excise Notification No.30/2004. Company's appeal was allowed by Appellate Commissioner of Customs & Central Excise, Nagpur. However, the Central Excise Department has filed an appeal against the above Order with CESTAT

g) Disputed demand from sales tax department on Input tax credit, 58.74 58.74 Appeal remanded by Appellate Dy. Commissioner (CT). Pending for verification & orders with Dy./Asst. Commissioner (CT), Begumpet Division, Hyderabad

h) Disputed demand from sales tax department on subjecting the turnover of unit at Maharashtra to tax along with the turnover of Andhra Pradesh and set off. The company has filed appeal before STAT(A.P),Hyderabad against the revised demand issued by the DC(CT), Begumpet Division, Hyderabad. 28.82 28.82

2. The legal proceedings againt M/s.Rajvir Industries Ltd., for the recovery of the balance outstanding in the books of the compnay of Rs. 236.93 lakhs (Previous year Rs. 236.93 lakhs) are pending.

3. Claim against the company not acknowledged as debts :

M/s Rajvir Industries Limited has filed a suit against the company claiming export incentives allegedly due to them amounting to Rs. 295.70 Lakhs relating to export performance of erstwhile Mahabubnagar Unit of the periods prior to demerger. The Company has been advised that the claim is not admissible and is taking adequate steps to resist the claim.

4. Three cases have been filed against the Company for amounts totaling to Rs. 1348 lakhs in respect of three cheques allegedly issued by the company. These claims are being resisted on the plea that these cheques have been misused and in the absence of any legally enforceable debt or liability the company has been advised that the complaints are not maintainable and no liability is likely to arise.

5. Rajvir Industries Ltd., has filed an application before the Hon,ble High court of Andhra Pradesh for modification of the Order of the High Court in the scheme of arrangement for transfer of the liability of Rs. 1000 lakhs to the company. The application has been dismissed with costs by the High Court and the applicant has preferred an appeal before the High Court which is pending.

6. An order has been received from the office of DGFT Hyderabad for alleged violation of Target plus scheme to recover Rs. 3807 lakhs including interest and penalties. Apart from this a penalty of Rs. 25 lakhs each on CMD and MD and Rs. 5 lakhs on some other Directors of the company has been imposed. The High Court of Andhra Pradesh has granted an interim stay on the dismissal of the appeal by the Company. The Company in compliance with the orders of the High Court has paid Rs. 500 lakhs to DGFT, Hyderabad. (The Company has already paid Rs. 500 lakhs to DRI in the same matter). A show cause notice on the same issue was issued by DRI. The Company has been advised that no liability is likely to arise under the notice as the allegations are unfounded and the company is taking adequate steps to defend itself.

7. Employee Benefits : Gratuity

Consequent to the adoption of Accounting Standard on Employees Benefits (AS-15) (Revised 2005) issued by the Institute of Chartered Accountants of India, the following disclosures have been made as required by the Standard for Actuarial valuation of Gratuity

Employee Benefits : Actuarial valuation of Leave encashment

Consequent to the adoption of Accounting Standard on Employees Benefits (AS-15) (Revised 2005) issued by the Institute of Chartered Accountants of India, the following disclosures have been made as required by the Standard for Actuarial valuation of Leave encashment.

8. Pursuant to Scheme of restructuring package of Term Loans the Company has alloted 0.1% Cumulative Redeemable Preference Shares of Rs. 100/- each on 28th October, 2002 to IDBI and IFCI. Out of which the company has redeemed Rs. 271.60 Lakhs on 31.07.2011 to IFCI & the balance of Rs. 400 Lakhs to be redeemed to IDBI before May,2012.

9. In the opinion of the Board, the current assets and loans & advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

10. Vide Notification No.30/09.07.2004 of the Central Excise Department we can opt for zero rate of duty by not taking Cenvat credit on Inputs and vide Tariff rate (Previous year under Notification No.29/09.07.2004) of Central Excise Department option can be exercised for payment of duty on Final products by taking credit on inputs and capital items. Accordingly in case of Denim Fabric and Cotton yarn the Company has opted for Zero rate of duty and not availed Cenvat credit on the purchase of inputs and capital items, where as in case of polyster / viscose / blended yarn we have taken cenvat credit on part of the rawmaterial which are used for production of polyster / viscose / blended yarn meant for export, and cleared the material for export on payment of duty.

11. There was a major fire accident in spinning department of denim division at Ramtek, Nagapur district, Maharashtra state during January, 2008, in which the Building, Plant & Machinery, Electrical Installations and stocks were totally damaged. The factory was fully insured under reinstatement policy for fixed assets and under declaration policy for stocks. The Company's Insurance claim is processed and settled partly. The Company received an amount of Rs. 2609 lakhs from the Insurance Company including salvage.The part claim of Rs. 490 lakhs which is still to be settled by the Insurance Company is shown under Claims receivable.

12. The company has given corporate guarantee to its subsidary M/s SuryaKiran International Limited, to the extent of Rs. 500 Lakhs.

13. Consequent to the Notification under the Companies Act, 1956, the financial statements for the year ended 31st March,2012 are prepared under Revised Schedule VI accordingly. The Previous year's figures also have been reclassified to conform to this year's classification.


Mar 31, 2011

(Amount in Rs.) As at As at 31.03.2011 31.03.2010

1 Contingent Liabilities not provided for

a) Contracts to be executed on 1,153,239,045 130,279,355 capital accounts.

b) Against Foreign & Inland 9,643,815 4,533,043 Letters of Credit

c) Against Bank Gaurantees 12,966,600 466,940

d) Against Bills discounted 448,984,388 191,313,664

e) Demand from the Central Excise Department under Textiles and Textile Articles Act (TTA), disputed – 28,534,563 by the Company pending in appeals with the Commissioner, Customs and Central Excise, Nagpur, not provided for.

f) Demand from Central Excise 7,850,277 7,850,277 Department in connection with the clearance of the goods disputed by the Company and allowed by the Commissioner Appeals, Nagpur in Company's favour. However the department has preferred an appeal against the Commissioner's order.

g) Demand against Reversal of 3,288,688 3,288,688 Excise duty on Finished goods and Cenvat Credit involved in the stock of inputs while opting for the Central Excise Notification No.30/2004. Company's appeal was allowed by Appellate Commissioner of Customs & Central Excise, Nagpur. However, the Central Excise Department has filed an appeal against the above Order with CESTAT

h) Disputed demand from sales 5,874,266 5,874,266 tax department on Input tax credit,Appeal remanded by Appellate Dy. Commissioner (CT). Pending for verification & orders with Dy./Asst.Commissioner (CT), Begumpet Division, Hyderabad

i) Disputed demand from sales tax 2,881,750 2,163,938 department on subjecting the turnover of unit at Maharashtra to tax along with the turnover of Andhra Pradesh and set off. The company has filed appeal before STAT(A.P),Hyderabad against the revised demand issued by the DC(CT), Begumpet Division, Hyderabad.

j) Interest charged U/s.234B of – 11,866,089 the Income Tax Act,1961 - Interest waiver Petition filed before Hon'ble Chief Commissioner of Income Tax-I, Hyderabad

2 The legal proceedings against M/s Rajvir Industries Ltd., for the recovery of the balance outstanding in the books of the company of Rs.2,36,92,934/- (Previous Year Rs.2,36,92,934/-) are pending.

3 Claim against the company not acknowledged as debts :

M/s Rajvir Industries Limited has filed a suit against the company claiming export incentives allegedly due to them amounting to Rs.295.70 Lakhs relating to export performance of erstwhile Mahabubnagar Unit of the periods prior to demerger. The Company has been advised that the claim is not admissable and is taking adequate steps to resist the claim.

4 Three cases have been filed against the Company for amounts totaling to Rs. 13.48 crores in respect of three cheques allegedly issued by the company. These claims are being resisted on the plea that these cheques have been misused and in absence of any legally enforceable debt or liability the company has been advised that the complaints are not maintainable and no liability is likely to arise.

5 An order has been received from the office of DGFT Hyderabad for alleged violation of Target plus scheme (TPS) and to recover Rs.38.07 crores including interest and penalties. Apart from this a penalty of Rs.25 lakhs each on CMD and MD and Rs.5 lakhs on some other directors of the company has been imposed. A show cause notice on the same issue for Rs. 10.59 crores was issued by DRI The company has been advised that no liability is likely to arise under the notice as the allegations are unfounded and the company is taking adequate steps to defend itself. However, the Company has paid Rs.5 crores to DRI in this connection.

6 Information about Business Segments

Other Disclosures

Allocation of Corporate Office expenses to segment is at cost.

All Profit / (Losses) on inter segment transfers are eliminated at Company's level.

Types of Product and Services in each Business Segment.

Business Segment Type of Product

a) Spinning Cotton Yarn, Combed Yarn and P V Yarn

b) Denim Denim Fabric

c) Power Project & Others Power

7 Pursuant to Scheme of restructuring package of Term Loans the Company has alloted 0.1% Cumulative Redeemable Preference Shares of Rs.100/- each on 28th October, 2002 to IDBI and IFCI and the same will be redeemed to IDBI in March, 2012 (Rs.400 lacs) and to IFCI in July, 2011 (Rs.271.60 Lacs)

8 The amount of CRPS of 671.60 lakhs payable on redemption to IDBI and IFCI as stated in note No.27 is treated as deferred revenueRs. expenditure, to be written off over the term of the CRPS.

10 During the year 2005-06 the Company has incurred an amount of Rs.12,523,000/- being the expenditure incurred for raising equity. The same will be amortised over a period of 5 Years from the date of commencement of operations, i.e. from the financial year 2006-07.

11 In the opinion of the Board, the current assets and loans & advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

12 Vide Notification No.30/09.07.2004 of the Central Excise Department we can opt for zero rate of duty by not taking Cenvat credit on Inputs and vide Tariff rate (Previous year under Notification No.29/09.07.2004) of Central Excise Department option can be exercised for payment of duty on Final products by taking credit on inputs and capital items. Accordingly in case of Denim Fabric and Cotton yarn the Company has opted for Zero rate of duty and not availed Cenvat credit on the purchase of inputs and capital items, where as in case of Polyster yarn we have taken cenvat credit on part of the raw material which are used for production of polyster yarn meant for export, and cleared the material for export on payment of duty.

13 There was a major fire accident in spinning department of denim division at Ramtek, Nagapur district, Maharashtra state during January, 2008, in which the Building, Plant & Machinery, Electrical Installations and stocks were totally damaged. The factory was fully insured under reinstatement policy for fixed assets and under declaration policy for stocks. The Company's Insurance claim is processed and settled partly. The Company received an amount ofRs.26.09 crores from the Insurance Company including salvage.The part claim of Rs.4.90 crores which is still to be settled by the Insurance Company is shown under Claims receivable

14 The company has given corporate guarantee to its subsidiary M/s Surya Kiran International Limited, to the extent of Rs.5 crores.

15 Previous year's figures have been regrouped where ever necessary. Paise have been rounded off to the nearest rupee. Previous year Figures are shown in brackets.


Mar 31, 2010

(Amount in Rupees)

As at As at

31.03.2010 31.03.2009

1 Contingent Liabilities not provided for

a) Contracts to be executed on capital accounts. 130,279,355 122,509,299

b) Against Foreign & Inland Letter of Credits 4,533,043 34,087,616

c) Against Bank Gaurantees 466,940 466,940

d) Against Bills discounted 191,313,664 155,380,313

e) Demand from the Central Excise Department under Textiles and Textile Articles Act (TTA), disputed by the Company pending in appeals with the

Commissioner, Customs and Central Excise, Nagpur, not provided for. 28,534,563 28,534,563

f) Demand from Central Excise Department in connection with the clearance of the goods disputed by the Company and allowed by the Commissioner Appeals, Nagpur in Companys favour. However the department has

preferred an appeal against the Commissioners order. 7,850,277 7,850,277

g) Demand against Reversal of Excise duty on Finished goods and Cenvat Credit involved in the stock of inputs while opting for the Central Excise Notification No.30/2004. Companys appeal was allowed by Appellate Commissioner of Customs & Central Excise, Nagpur. However, the Central Excise Department has filed an appeal

against the above Order with CESTAT 3,288,688 -

h) Disputed demand from sales tax department on Input tax credit, Appeal remanded by 5,874,266 5,874,266

Appellate Dy. Commissioner (CT). Pending for verification & orders with

Dy./Asst. Commissioner (CT), Begumpet Division, Hyderabad

I) Disputed demand from sales tax department on subjecting the turnover of uni 12,163,938 2,163,938 at Maharashtra to tax along with the turnover of Andhra Pradesh and set off.The appleal filed before STAT(A.P) by the Company was partly allowed and the balance was remanded for verification by the department.

j) Interest charged U/s.234B of the Income Tax Act,1961 - Interest waiver Petition filed before Honble Chief Commissioner of Income Tax-I, Hyderabad 11,866,089 -



2 The legal proceedings against M/s Rajvir Industries Ltd., for the recovery of the balance oustanding in the books of the Company of Rs. 2,36,92,934/- (Previous Year Rs. 2,36,92,934/-) are pending.

3 Claim against the Company not acknowledged as debts :

M/s Rajvir Industries Limited has filed a suit against the Company claiming export incentives allegedly due to them amounting to Rs. 295.70 Lakhs relating to export performance of erstwhile Mahabubnagar Unit of the periods prior to demerger. The Company has been advised that the claim is not admissable and is taking adequate steps to resist the claim.

4 Three cases have been filed against the Company for amounts totalling to Rs.13.48 crores in respect of three cheques allegdly issued by the Company. These claims are being resisted on the plea that these cheques have been misused and in absence of any legally enforceable debt or liability the Company has been advised that the complaints are not maintainable and no liability is likely to arise.

5 Rajvir Industries Ltd has filed a compliant against the Company and its officers in connection with the transfer of liability of Rs. 10 crores in the scheme of arrangement. The Company has been advised that the complaint is not maintainable in law and is taking adequate steps to defend its position.

6 Rajvir Industries Ltd., has filed an application before the Honble High Court of Andhra Pradesh for modification of the Order of the Honble High Court of Andhra Pradesh in the scheme of arrangement for transfer of the liability of Rs.10 crores to the Company. The application is pending before the Honble High Court of Andhra Pradesh. The Company has been advised that the complaint is not maintainable in law and is taking adequate steps to defend its position.

7 A show cause notice has been received from the office of DGFT Hyderabad for alleged violation of Target plus scheme to recover Rs.17.29 crores and levy other penalties. The Company has been advised that no liability is likely to arise under the notice as the allegations are unfounded, and the Company is taking adequate steps to defend itself.

8 Employee Benefits : Gratuity

Consequent to the adoption of Accounting Standard on Employees Benefits (AS-15) (Revised 2005) issued by the Institute of Chartered Accountants of India, the following disclosures have been made as required by the Standard for Actuarial valuation of Gratuity.

9 Pursuant to Scheme of restructuring package of Term Loans the Company has alloted 0.1% Cumulative Redeemable Preference Shares of Rs. 100/- each on 28th October, 2002 to IDBI and IFCI and the same will be redeemed to IDBI in March, 2012 (Rs. 400 lacs) and to IFCI in July, 2011 (Rs. 271.60 Lacs).

10 The amount of CRPS of Rs. 671.60 lacs payable on redemption to IDBI and IFCI as stated in note No.30 is treated as deferred revenue expenditure, to be written off over the term of the CRPS.

11 During the year 2005-06 the Company has incurred an amount of Rs. 1,25,23,000/- being the expenditure incurred for raising equity.The same is being amortised over a period of 5 Years from the date of commencement of operations, i.e. from the financial year.

12 In the opinion of the Board, the current assets and loans & advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

13 Vide Notification No.30/09.07.2004 of the Central Excise Department we can opt for zero rate of duty by not taking Cenvat credit on Inputs and vide Tariff rate (Previous year under Notification No.29/09.07.2004) of Central Excise Department option can be exercised for payment of duty on Final products by taking credit on inputs and capital items. Accordingly in case of Denim Fabric and Cotton yarn the Company has opted for Zero rate of duty and not availed Cenvat credit on the purchase of inputs and capital items, where as in case of Polyster yarn we have taken cenvat credit on part of the rawmaterial which are used for production of polyster yarn meant for export, and cleared the material for export on payment of duty.

14 There was a major fire accident in spinning department of denim division at Ramtek, Nagapur district, Maharashtra state during January, 2008, in which the Building, Plant & Machinery, Electrical Installations and stocks were totally damaged. The factory was fully insured under reinstatement policy for fixed assets and under declaration policy for stocks. The Companys Insurance claim is processed and settled partly. The Company received an amount of Rs. 26.09 crores from the Insurance Company including salvage.The part claim of Rs. 4.90 crores which is still to be settled by the Insurance Company is shown under Claims receivable and the amount of loss of Rs. 2.45 crores which is not expected to be received, has been written off under Claims written off under the head Other expenses (Ref. Schedule 19 of the Annual Accounts).

15 Previous years figures have been regrouped wherever necessary. Paise have been rounded off to the nearest rupee. Previous year Figures are shown in brackets.

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