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Notes to Accounts of The Hi-Tech Gears Ltd.

Mar 31, 2015

NOTE 1 – FUNDED STATUS OF GRATUITY PLAN & LEAVE ENCASHMENT

The following tables set out the funded and unfunded status of the gratuity plan and leave encashment amounts recognized in the Company's financial statements as at 31st March, 2015:

NOTE 2. – CONTINGENT LIABILITIES & COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)

A. Commitments:

Estimated amount of contracts remaining to be executed on capital accounts Rs.62,206,931/- after adjusting advances (Previous year Rs. 924,080/-)

B. Contingent Liabilities:

1) Haryana State Industrial & Infrastructure Development Corporation Ltd ('HSIIDC') had demanded an enhanced amount from the industrial plot owners in Manesar, Haryana, based on the Hon'ble Supreme Court's order. The Company, being a plot owner, received a demand notice of Rs. 3,552/- per sq mtr on it total plot of 12150 mtrs., totaling to Rs.4,31,56,800/-, including interest. Out of above, Rs.1,20,76,614/- was paid in previous years, at the time of registration of conveyance deed. The calculation method of demand raised by HSIIDC was contested by the Company through the Manesar Industries Welfare Association at the Hon'ble High Court at Chandigarh. The Court, while staying the calculation made by HSIIDC, has asked the plot owners to deposit five installments, as per new schedule, till further orders. The company paid Rs.3,20,70,471/- up to 2013-14 (including payments at the time of registration, as aforesaid) and Rs. 67,50,000/- in 2014-15. The Hon'ble court has pleased to reduce the demand to Rs. 3,313/- per sq mtrs.in its order dt. Nov 11, 2014, totaling to Rs. 4,02,52,950/- together with interest. The Company has not received the final demand notice from HSIIDC after adjustment for the balance enhanced amount payable. Any additional compensation, if payable, will have the effect of enhancing the asset value of the land.

(5) There are four separate legal cases filed by past employees against the Company for re-instatement/settlement of their remuneration matters, which are currently running in the Camp Court, Bhiwadi, Rajasthan. The financial impact of these cases, if any, is not identifiable and hence the same has not been provided in the financial statements.

(6) The Company has disputed entry tax liability being levied by the Rajasthan Government from the financial year 2007-08 onwards. The Hon'ble Supreme Court of India vide order dated 13.03.2015, has granted stay to the Company on this matter and has given direction to deposit 50% of the entry tax arrears, remaining 50% balance in the form of bank guarantee and full payment of future payments, subject to the outcome of the case, which is still pending before the Hon'ble Supreme Court of India. Accordingly, the company has deposited a sum of Rs. 64,36,111/- to the credit of the Rajasthan State Government up to the current year ended 31.03.2015. The Company has made provision in its books of accounts for the balance also.

NOTE '3 – LEASEHOLD PROPERTY

The company owns 9 flats on leasehold basis allotted by Ashiana Group in Bhiwadi. Flats are not registered in name of company in view of applicability of local laws.

NOTE 4 – CORPORATE SOCIAL RESPONSIBILITY (CSR) EXPENDITURE

The Company was required to spend Rs.7,214,067/- for the current financial year on CSR activities, i.e. 2% of its average net profits of the last three previous financial years, according to the provision of Section 135 of Companies Act, 2013 and rules made hereunder.

NOTE 5

In the opinion of the Board of Directors, the Current Assets, Loans and Advances are having the value at which they are stated in the Balance Sheet, if realized in the ordinary course of business.

NOTE 6

Claims received against shortage / damage of materials which are not of significant values are not being shown separately. The same are accounted for on receipt basis.

NOTE 7

The figures have been rounded off to the nearest rupee.

NOTE 8 – PREVIOUS YEAR FIGURES

Previous year figures have been regrouped/ reclassified wherever found necessary to correspond with the current year classification/ disclosure.


Mar 31, 2014

NOTE ''1'' - SEGMENT INFORMATION (AS-17)

The Company is primarily engaged in the business of Gears and transmission components. Inherent nature of both the activities is governed by the same set of risk and returns; these have been grouped as a single segment in the above disclosures. Hi-Tech (E- Soft) is a division of the Company engaged in the business of engineering software solutions. But, its total revenue does not exceed 10% of total revenue. Hence, Hi-Tech (E-Soft) cannot be a primarily segment for disclosure under AS-17 and Geographical segment can be considered as the primary segment. Geographical revenues are allocated based on the location of the customer. Geographic segments of the Company are America, India and Others.

NOTE ''2'' - CONTINGENT LIABILITIES & PROVISIONS

A. Contingent Liabilities not provided for:

1) Estimated amount of contracts remaining to be executed on capital accounts Rs.924,080/- after adjusting advances (Previous year Rs. 30,334,709)

2) Haryana State Industrial & Infrastructure Development Corporation Ltd (''HSIIDC'') had demanded an enhanced amount from the industrial plot owners in Manesar, Haryana, based on the Hon''ble Supreme Court''s order. The Company, being a plot owner, received a demand notice of Rs.4,31,56,800/-, including interest. Out of above, Rs.1,20,76,614/- was paid in previous years, at the time of registration of conveyance deed. The calculation method of demand raised by HSIIDC is being contested by the Company through the Manesar Industries Welfare Association at the Hon''ble High Court at Chandigarh. The Court, while staying the calculation made by HSIIDC, has asked the plot owners to deposit three installments, as per new schedule, till further orders. Accordingly, the company deposited the first installment of Rs.62,50,000/- in 2012-13. The second and third installments of Rs.70,32,537/- & Rs.67,11,320/- were paid as per court schedule in 2013-14. In view of above, till March 31, 2014, the company has paid Rs.3,20,70,471/- and balance demand of Rs. 1,10,86,329/- is considered as contingent liability, which is subjudice. Any additional compensation, if payable, will have the effect of enhancing the asset value of the land.

NOTE ''3'' - FINANCIAL INSTRUMENTS: RECOGNITION & MEASUREMENT

Company is following the principles of Accounting Standard (''AS'') 30 "Financial Instruments: Recognition and Measurement" in respect of its derivative financial instruments.

Derivative financial instruments, which qualify for cash flow hedge accounting and where the Company has met all the conditions of effective Cash Flow hedge accounting, are fair valued at March 31, 2014. Consequently Hedging Reserve/Fair Valuation Loss on Derivative balances is decreased to Rs NIL as on 31.03.2014 (Previous Year Rs NIL).

Details on derivatives instruments and un-hedged foreign currency exposures

I. The following derivative positions are open as at 31 March, 2014. These transactions have been undertaken to act as economic hedges for the Company''s exposures to various risks in foreign exchange markets and may / may not qualify or be designated as hedging instruments.

(a) Forward exchange contracts and options [being derivative instruments], which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.

(i) Outstanding forward exchange contracts entered into by the Company as on 31 March, 2014: NIL (Previous Year Nil)

(ii) Outstanding option contracts entered into by the Company as on 31 March, 2014: NIL

NOTE ''4''

In the opinion of the Board of Directors, the Current Assets, Loans and Advances are having the value at which they are stated in the Balance Sheet, if realized in the ordinary course of business.

NOTE ''5''

Claims received against shortage / damage of materials which are not of significant values are not being shown separately. The same are accounted for on receipt basis.

NOTE ''6''

The figures have been rounded off to the nearest rupee.

NOTE ''7'' - PREVIOUS YEAR FIGURES

Previous year figures have been regrouped and rearranged wherever found necessary.


Mar 31, 2013

NOTE ''1'' – SEGMENT INFORMATION (AS-17)

The Company is primarily engaged in the business of Gears and transmission components. Inherent nature of both the activities is governed by the same set of risk and returns; these have been grouped as a single segment in the above disclosures. Hi-Tech (E-Soft) is a division of the Company engaged in the business of engineering software solutions. But, its total revenue does not exceed 10% of total revenue. Hence Hi-Tech (E-Soft) cannot be a primarily segment for discloser under AS-17 and Geographical segment can be considered as the primary segment. Geographical revenues are allocated based on the location of the customer. Geographic segments of the Company are Americas, Europe, India and Others.

Since all the manufacturing activity is done at India, therefore segregation of expenses/result/assets/liabilities to each of the geographic location is not practicable. The geographic segments individually contributing 10 percent or more of the Company''s revenues are given below:

NOTE ''2'' – RELATED PARTY DISCLOSURES (AS-18)

(a) Enterprise in which company has control -NIL

(b) Key Management Personnel

1 Sh. Deep Kapuria Executive Chairman

2 Sh. Pranav Kapuria Managing Director

3 Sh. Anuj Kapuria Whole Time Director

(c) Details of related parties:

NOTE ''3'' – CONTINGENT LIABILITIES & PROVISIONS

A. Contingent Liabilities not provided for:

1) Estimated amount of contracts remaining to be executed on capital accounts Rs.30,334,709 after adjusting advances (Previous year Rs. 23,232,458)

2) Haryana State Industrial & Infrastructure Development Corporation Ltd (''HSIIDC'') has demanded an enhanced amount from the industrial plot owners in Manesar, Haryana, based on the Hon''ble Supreme Court''s order. The Company received a demand notice of Rs. 4,31,56,800/-, including interest. Out of above, Rs. 1,20,76,614/- was paid in previous year. The calculation method of demand raised by HSIIDC is being contested by the Company through the Manesar Industries Welfare Association in the Hon''ble High Court at Chandigarh. The Court, while staying the calculation made by HSIIDC, has asked the plot owners to deposit two installments, one in March, 2013 and second in June 2013, till further orders. Accordingly, the company has deposited the first installment of Rs. 62,50,000/- during the year after due adjustments. The second installment will be paid separately in financial year 2013 - 14. Any additional compensation, if payable, will have the effect of enhancing the asset value of the land. In view of above, till March 31, 2013, the company has paid Rs. 1,83,26,614/- and balance demand of Rs. 2,48,30,186/- is considered as contingent liability, which is subjudice, as explained above.

NOTE ''4'' – FINANCIAL INSTRUMENTS: RECOGNITION & MEASUREMENT:

Company is following the principles of Accounting Standard (''AS'') 30 "Financial Instruments: Recognition and Measurement" in respect of its derivative financial instruments.

Derivative financial instruments, which qualify for cash flow hedge accounting and where the Company has met all the conditions of effective Cash Flow hedge accounting, are fair valued at March 31, 2013. Consequently Hedging Reserve/Fair Valuation Loss on Derivative balances is decreased to Rs NIL as on 31.03.2013(Previous Year Rs 1,837,837).

Details on derivatives instruments and un-hedged foreign currency exposures

I. The following derivative positions are open as at 31 March, 2013. These transactions have been undertaken to act as economic hedges for the Company''s exposures to various risks in foreign exchange markets and may / may not qualify or be designated as hedging instruments.

(a) Forward exchange contracts and options [being derivative instruments], which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.

(i) Outstanding forward exchange contracts entered into by the Company as on 31 March, 2013 : NIL (Previous Year Nil)

NOTE ''5''

In the opinion of the Board of Directors, the Current Assets, Loans and Advances are having the value at which they are stated in the Balance Sheet, if realized in the ordinary course of business.

NOTE ''6''

Claims received against shortage / damage of materials which are not of significant values are not being shown separately. The same are accounted for on receipt basis.

NOTE ''7''

The figures have been rounded off to the nearest rupee.

NOTE ''8'' – PREVIOUS YEAR FIGURES:

Previous year figures have been regrouped and rearranged wherever found necessary.

NOTE ''9'' – PRIOR PERIOD EXPENSES:

Other Expenses includes Prior Period Expenses of Rs. 255,841 (Refer Note:- 24), details of which are as under:-


Mar 31, 2012

NOTE '1' - CONTINGENT LIABILITIES & PROVISIONS

A. Contingent Liabilities not provided for:

1) Estimated amount of contracts remaining to be executed on capital accounts Rs. 23,232,458 after adjusting advances (Previous year Rs. 106,830,418)

2) Bank Guarantees issued in favour of Asst./Dy. Commissioners of Customs for Export Obligation isRs. 5,654,224 (Previous year Rs. 5,554,000)

NOTE '2'- FINANCIAL INSTRUMENTS: RECOGNITION & MEASUREMENT:

Company is following the principles of Accounting Standard ('AS') 30 "Financial Instruments: Recognition and Measurement" in respect of its derivative financial instruments.

Derivative financial instruments, which qualify for cash flow hedge accounting and where the Company has met all the conditions of effective Cash Flow hedge accounting, are fairvalued at March 31,2012 Consequently Hedging Reserve/ Fair Valuation Loss on Derivative balances is increased to Rs 1,837,837.(Previous Year Rs 1,444,208)

Details on derivatives instruments and un-hedged foreign currency exposures

I. The following derivative positions are open as at 31 March, 2012. These transactions have been undertaken to act as economic hedges for the Company's exposures to various risks in foreign exchange markets and may / may not qualify or be designated as hedging instruments.

(a) Forward exchange contracts and options [being derivative instruments], which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.

(i) Outstanding forward exchange contracts entered into bythe Company as on 31 March, 2012 : NIL

NOTE '3'- LEASEHOLD PROPERTY:

The company owns 9 flats on leasehold basis allotted by Ashiana Group in Bhiwadi. Flats are not registered in name of company in view of applicability of local laws.

NOTE '4'

In the opinion of the Board of Directors, the Current Assets, Loans and Advances are having the value at which they are stated in the Balance Sheet, if realized in the ordinary course of business.

NOTE '5'

Claims received against shortage/damage of materials which are not of significant values are not being shown separately. The same are accounted for on receipt basis.

NOTE '6'

The figures have been rounded off to the nearest rupee.

NOTE '7' - PREVIOUS YEAR FIGURES:

During the year 31 March 2012 the revised Schedule VI notified under the Company Act 1956, has become applicable to the Company. The Company has reclassified previous year figures to conform to this year's classification. The Revised Schedule VI does not require presentation of a reconciliation explaining the impact of the reclassification of the previous year figures in the financial statements.


Mar 31, 2011

1. Contingent Liabilities

Depending on the facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are disclosed as contingent liabilities. In respect of the statutory matters, contingent liabilities are disclosed only for those demand(s) that are contested by the Company.

Contingent Liabilities not provided for :

A. Estimated amount of contracts remaining to be executed on capital accounts Rs. 106,830,418 after adjusting advances (Previous year Rs. 117,700,000)

B. Bank Guarantees issued in favour of Asst./ Dy. Commissioners of Customs, Mumbai & New Delhi for Export Obligation is Rs. 5,554,000 (Previous year Rs. 12,132,980)

Opening Released during Year Fresh Guarantees Closing during the Year

Rs. 12,131,980 Rs. 6,578,980 Nil Rs.5,554,000

C. Disputed statutory demands in appeals before Rajasthan High Court:

Rajasthan Tax on Entry of Goods into Local Area Act 1999 , Rs1,716,840/- & Rs1,351,717/- for FY 2007-08 & 2008-09 respectively.

3. In the opinion of the Board of Directors, the Current Assets, Loans and Advances are having the value at which they are stated in the Balance Sheet, if realized in the ordinary course of business.

4. Claims received against shortage / damage of materials which are not of significant value are not being shown separately. The same are accounted for on receipt basis.

5. In pursuance of Micro, Small & Medium Enterprises Development Act, 2006, the names of the Enterprises to whom the Company owes any sum which is outstanding at the year end are as follows:-

b) We have make payment to MSME within permissible time limit under Micro, Small & Medium Enterprises Development Act, 2006 during FY 2010-2011 so there is no interest due on MSME.

c) There is no interest due & payable to MSME as on 31.03.2011.

6. Title of HSIDC plot no. 24, 25, 26, sector 7 IMT Manesar Gurgaon has not been registered in the name of the Company. HSIDC had allotted the land in the name of the Company vide its letter of allotment no. HSIIDC 1441 dated 10.07.2003.

7. Company opted for the option to follow principles of notification of the Companies (Accounting Standards) Amendment Rules 2006 on 31st March 2009. Thereby exchange differences relating to long-term monetary items, arising during the year, in so far as they relate to the acquisition of a depreciable capital asset are added to/ deducted from the cost of the asset under the head “Addition” of Schedule 4 and depreciated over the balance life of the asset.

Accordingly, Rs. 197,661 have been deducted from the cost of fixed assets and the profit for the year is lower by Rs. 197,661.

8. The Company is primarily engaged in the business of gears and transmission components. Inherent nature of both the activities is governed by the same set of risk and returns, these have been grouped as a single segment in the above disclosures. Hi-Tech (E-Soft) is a division of the Company engaged in the business of engineering software solutions. Since this business is not required to be reported as per AS-17 on Segment Reporting, separate figures of the software division are not reported.

9. During the year the company has allotted 9,384,000 Bonus equity shares of Rs.10/- each fully paid up in the ratio of 1:1, out of General Reserve.

10. A part of Land owned by Company situated at Village Sihi, Gurgaon was acquired during the year by the Government of Haryana and amount of Rs. 35,20,396 was received as compensation against 3 Kanal and 8 Marla land. Revaluation Reserve amounting to Rs. 1,56,57,846 pertaining to the acquired part of the land has been reversed.

11. Company is following the principles of Accounting Standard ('AS') 30 “Financial Instruments: Recognition and Measurement” in respect of its derivative financial instruments.

Derivative financial instruments, which qualify for cash flow hedge accounting and where the Company has met all the conditions of effective Cash Flow hedge accounting, are fair valued at March 31, 2011 Consequently Hedging Reserve/Fair Valuation Loss on Derivative balances is reduced to Rs 1,444,208.(Previous Year Rs 6,715,728 )

12. Related Party Disclosures (AS-18)

(a) Enterprise in which company has control-Nil

(b) Key Management Personnel

1 Sh. Deep Kapuria Chairman&Whole Time Director

2 Sh. Pranav Kapuria Managing Director

3 Sh. Anuj Kapuria Whole Time Director

(c) Transactions with the related parties during the year are as per Annexure attached.

13. Funded status of Gratuity Plan & Leave Encashment

The following tables set out the funded and unfunded status of the gratuity plan and leave encashment amounts recognized in the Company's financial statements as at 31March, 2011:


Mar 31, 2010

1. Contingent Liabilities

Depending on the facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are disclosed as contingent liabilities. In respect of the statutory matters, contin gent liabilities are disclosed only for those demand(s) that are contested by the Company.

Contingent Liabilities not provided for:

(Amount Rs. in Lacs)

A As on 31sMarch 2009 As on 31sMarch 2010

Rs 623.46 Rs 1,173.00

(Amount Rs. in Lacs)

Opening Released during the Year Fresh Guarantees During the Year Closing

B. Rs 68.87 Rs4.58 Rs 57.04 Rs. 121.32

2. In the opinion of the Board of Directors, the Current Assets, Loans and Advances are having the value at which they are stated in the Balance Sheet, if realized in the ordinary course of business.

3. Claims received against shortage/ damage of materials which are not of significant value are not being shown separately. The same are accounted for on receipt basis.

4. Title of HSIDC plot no. 24,25,26, sector 7 IMTManesarGurgaon has not been registered in the name of the Company. HSIDC had allotted the land in the name of the Company vide its letter of allotment no. HSIIDC 1441 dated 10.07.2003.

5. Last year Company opted for the option to follow principles of notification of the Companies (Accounting Standards) Amendment Rules 2006 on 31st March 2009. Thereby exchange differences relating to long-term monetary items, arising during the year, in so far as they relate to the acquisition of a depreciable capital asset are added to/ deducted from the cost of the asset under the head "Addition"of Schedule 4 and depreciated over the balance life of the asset.

Accordingly, Rs.106.56 Lacs have been deducted from the cost of fixed assets and the profit for the year is lower by Rs.106.56 Lacs.

6. The Company is primarily engaged in the business of gears and transmissioncomponents. Inherent nature of both the activities is governed by the same set of risk and returns, these have been grouped as a single segment in the above disclosures. Hi-Tech (E-Soft) is a division of the Company engaged in the business of engineering software solutions. Since this business is not required to be reported as per AS-17 on Segment Reporting, separate figures of the software division are not reported.

7. Company is following the principles of Accounting Standard (AS) 30 "Financial Instruments: Recognition and Measure- ment" in respect of its derivative financial instruments.

Derivative financial instruments, which qualify for cash flow hedge accounting and where the Company has met all the condi- tions of effective Cash Flow hedge accounting, are fair valued at March 31, 2010 .Consequently Hedging Reserve/Fair Valua- tion Loss on Derivative balances is reduced to Rs67.15 lacs.(PreviousYear Rs920.71 lacs)

8 The figures have been rounded off to the nearest rupee.

9 Previous year figures have been regrouped and rearranged wherever found necessary.

10 Schedule 1 to 17 form an integral part of Balance Sheet and Profit and Loss Account.