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Notes to Accounts of Winsome Diamonds and Jewellery Ltd.

Mar 31, 2015

1. The Fund Based (EPC/PSC) limits were generally availed for Diamond division whereas Non fund Based (SBLC/BG) limits were utilised for facilitating procurement of gold for manufacture of jewellery. The Company procured gold on loan basis. As per exant FTP & RBI Guidelines, the maximum tenor for which gold loan can be availed of is 270 days. Accordingly, SBLCs had validity of 270 days. This was adequate to cover manufacturing cycle of around 90 days and credit of 180 days that the Company extended to its overseas customers.

2. Owing to delay in receipt of inward remittances from overseas customers against export bills, the Company could not arrange for payments for liquidating gold loans which were due in March 2013. In view of these events of default, the bullion banks initially invoked SBLCs which had fallen due but later, as defaults persisted, invoked all SBLCs including even those in respect of which gold loans were not due (save and except State Bank of India which invoked SBLCs only when gold loans fell due for payments), as the Gold Loan Agreements executed by the Company with Bullion Banks provided cross default clause entitling them to recall all outstanding gold loans even in case of single event of default. All invoked SBLCs were paid by the Consortium Banks.

3. Further owing to continuing defaults by overseas customers and overdrawn accounts, the Company could not repay Export Packing Credits and Post Shipment Advances on due dates.

4. As a result of invocation and devolvement of SBLCs and defaults in clearance of EPC/PSC, the liabilities have got crystallized in rupee terms and the accounts are overdrawn. With no gold lines from bullion banks and no fresh SBLCs or FB credits from consortium banks, the operations have been materially affected after March 2013.

5 The bank has not provided with information on crystalisation of a foreign currency loan. The Company continues to restate the foreign currency liabilties at year/period end till 31st March 2014. The Company has not restated its foreign currency liabilities for year ending 31st March 2015. Had it been restated on the basis of exchange rate as at 31.03.2015, the amount payable would have been higher by Rs.7,467,778/-. (Previous Period Rs. Nil).

6 Few Banks have classified the Company and its directors as willful defaulters. However, the Company has vehemently denied the same and reiterated that they were victim of circumstances beyond their control and are taking all possible steps to recover the same. The Company, which had received from Standard Chartered Bank, Lead Bank of the Consortium, notice under the SARFAESI Act, has denied all the allegations made therein. Some of the banks have sent notices to the promoter/ guarantor and also to the companies who have provided corporate guarantees.

7 The Company has initiated legal proceedings before the Conciliation Committee of Sharjah Federal Court, the step preceding to filing of commercial cases before the Sharjah Court in May 2014. The case is under progress and the experts appointed by the UAE Court have sought explanations from the defaulting overseas customers. Your Company is hopeful of an early favourable outcome from the proceedings.

8 As the Company had not declared any dividend for the FY 2013-2014 (6 month period) and FY 2012-2013 (18 month period), the question of appropriating any amounts out of the same towards arrears of call or allotment monies in respect of shares which were not fully paid-up just did not arise.

9 There are no amounts of unclaimed dividend due and outstanding to be credited to Investor Education and Protection Fund. During the year, the Company transferred unclaimed dividend in respect of FY 2006-2007 amounting to Rs.2,168,537 (During the previous Period Rs.1,773,828 for FY 2005-2006) to Investor Education and Protection Fund.

10 The Overdue instalments of long term debt comprise principal outstanding amount and interest levied by bank till 30th September 2013, in respect of Axis Bank Term Loan for WindMill which was payable and the Company has defaulted in making payments to Axis Bank in respect of Principal Rs.7,918,400/- and Interest Rs. 1,191,525/- (Previous Period Rs. 535,108/-) due there on. The default is continuing as on the date of balance sheet.

11 There were minor delays for few days during the period in repayment of instalments of Loan and Interest to ICICI Bank for vehicle loan availed of by the Company.

Notes :

12. Impairment of Fixed Assets :

a) Please refere note no. 12 in Accounting Policy.

b) The Company has taken into consideration the Provisions of Accounting Standard 28 - Impairment of Assets.

The Company does not have any assets, which would require impairment and provisions.

13. Of the total WDV of Fixed Assets, Rs.9,999,629 represent WDV of Fixed Assets of Engineering division at Jodhpur which had discontinued operations since FY 2005-06.

The Company had provided for impairment of these assets during FY 2007-08 & 2008-09. No further provision for impairment is considered necessary.

The Company has not been providing depreciation in respect of these assets.

14. Assets in the Column Sold/Scrapped/Dispossed off above, includes Assets lying in the tenanted properties not recoverable due to vacation of such premises has been written off at WDV.

Similarly the assets also includes certain softwares /hardwares for business no longer in operation for eg. Commodity/Derivatives/ bullion.

The total WDV of such assets above is Rs.3,122,190/-.

15. The Company has considered depreciation as per Schedule II of the Companies Act,2013.Thus assets which have exceeded their estimated useful life have not been charged depreciation and are reflected at their realizable residual/scrap value.The other assets have been depreciated over their useful life as per Schedule II provisions.

16. The Company holds 49% of total paid-up equity share capital of Forever Precious Jewellery and Diamonds Limited (FPJDL). FPJDL’s operations including its retail Jewellery /Gold business is totally suspended. The auditors, for the period ended KH, X51DEG IaHb E5>' NF5$@*'< S0dU9 5, 5 )%)VA%@)A D%)D'1)L

17. FPJDL has also initiated legal action against its defaulting overseas cutomers.

18. The Company has accounted for permanent diminution in the value of long term investments in group concern as above.

19. As stated by the Management, entire inventory of diamonds and pearls at Surat & Mumbai which, though hypothecated in favour of consortium, was in Company's possession has been placed in the lockers in PNB and is in the joint custody with PNB since 18.06.2013. The banks had got inventory valued on 30.09.2013 and the total value of inventory, as per valuation report, was Rs.393,500,031.

20. The Stock at Chennai SEZ and Cochin SEZ unit are also in joint custody with PNB since November 2013 at Company's premises.

21. The Company has not carried out any fresh valuation of Diamonds during the year or as at 31st March 2015 as per requirement of AS -2. The Valuation of Diamonds as carried out as on 30th September 2013 to ascertain the market value has been adopted by the Company. The Company has valued its stock of Gold ar rates prevailing as at 31st March 2015.

22. All export receivables were restated on the basis of exchange rate as at 31.03.2013. In view of persistent defaults by overseas customers in clearing outstanding dues, it is deemed expedient not to take cognisance of depreciation of rupee vis-a-vis dollar since last restatement, especially as the outstanding amounts are expected to be realised in phased manner over an uncertain period of time. Accordingly, export receivables have been carried forward on the basis of exchange rate as at 31.03.2013 and have not been restated on the bais of exchange rate as at the end of the accounting year i.e. 31.03.2015.

23. Likewise, Trade Payables in respect of Imports have been carried forward on the bais of exchange rate as at 31.03.2013 and have not been restated on the basis of exchange rate as at the end of the accounting period i.e. 31.03.2015 as the same are expected to be paid off out of realisations from export receivables.

24. Had the export receivables and import payables been restated on the basis of exchange rate as at 31.03.2015, Net gain / (loss) on Foreign Currency Transactions / Translations would have been higher by Rs. 2,152,907,396 for the current year. (Previous period loss of Rs.1,355,674,462). The Total net gain till date would have been higher by Rs. 7,157,707,732 .

25. The board of directors of the Company in its meeting held on 30th May 2015 have decided not to provide Interest for the year on its outstandings / borrowings including Term loan for windmill as all their accounts are classified as NPAs. Most of the Banks do not charge any interest on the Company's borrowings as according to RBI prdential norms, interest is to be charged on NPA account on actual basis and not on accrual basis. The Interest Charged by some banks during the year which is not considered by the Company amounts to Rs.2,146,853,979/-. The Company used to provide for interest in its accounts @ 12.5 % of the outstanding amounts being the average rate for the rupee export finance. Thus the Interest that should have been charged to the Profit and loss for the year amounts to Rs. 565,86,78,505/-.This action has resulted in the loss for the year being lower by Rs. 5,658,678,505/-.

26. The Company has not restated its foreign currency liabilities for year ending 31st March 2015. Had it been restated on the basis of exchange rate as at 31.03.2015, the finance cost would have been higher by Rs.7,467,778/-. (Previous Period Rs. Nil).

27. The interest expenses includes Expenses for the prior period Rs. 77,771/-.

28.During the preceding 2 years, the Company witnessed unprecedented turn of events. The Company enjoyed credit facilities of Rs. 375 crores as Fund Based limits and Rs. 3470 crores as Non Fund Based limits, alongwith adhoc limits to the extent of 20% of the above limits for peak period, from 14 banks. The Non Fund Based limits were mainly used for purchase/ import of gold from overseas bullion banks as well as from nominated agencies in India against Standby Letters of Credit of the consortium banks.

29. During the end of March 2013, the overseas customers from the UAE defaulted in making payments for the Company's exports which resulted in the Company defaulting in meeting its obligations. The consortium banks were, however, obliged to pay to the bullion suppliers due to the enabling provision in the gold loan agreement, wherein a single default enables bullion suppliers to recall all the gold loan. The bankers appointed independent audit firms for forensic and investigative audit for which the Company offered explanations.

30. The Company sent notices to the defaulting overseas customers in October 2013. As no positive actions were received from the defaulting overseas customers, the Company initiated legal proceedings before the Conciliation Committee of Sharjah Federal Court, the step preceding to filing of commercial cases before the Sharjah Court in May 2014. The case is under progress and the experts appointed by the UAE Court have sought explanations from the defaulting overseas customers. Your Company is hopeful of an early favourable outcome from the proceedings.

31. Few bankers have classified the Company and its directors as willful defaulters. However, the Company has vehemently denied the same and reiterated that they were victim of circumstances beyond their control and are taking all possible steps to recover the same.

32. During the year the Company received notice from Debt Recovery Tribunal. The matter is in progress. The Company also received notice, under the SARFAESI Act, for attachment of its assets, at all locations, from Standard Chartered Bank, Lead Bank of the Consortium. The banks had lodged complaints with the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) to carry out investigations against the Company and its promoter. The management and the directors have fully cooperated with the agencies during their investigations.

33. During the year under review, the Directors in their meeting 20th December 2014 decided for closure of Goa unit. Accordingly the Company has paid / provided all statutory dues to employees and workers.

34. INTERNAL AUDIT

With the Company's business having come to standstill, the Company being declared NPA by the banks and the consequent financial crises, the Company has not appointed internal auditor for the year.

35.INVENTORY

Entire inventory of diamonds and pearls lying at Surat and Mumbai has been placed in the lockers in PNB and is in the joint custody with PNB since 18.06.2013. The banks arranged for valuation of inventory by Customs approved valuers on 30.09.2013 and as per their report, the total value of inventory was Rs.39,35,00,031. The stock at Chennai SEZ and Cochin SEZ are also in the joint custody with PNB since November 2013 at Company's premises.

36.The Inventory has not been verified by the management thereafter for the above location as the same is in the joint custody with the Bank. The Company has not carried out any fresh valuation of Diamonds and the valuation done on 30th September 2013 for ascertaining the market value has been adopted by the Company.

37.

The Company has only one segment and hence the question of reporting as per the provisions of Accounting Standard 17- "Segment Reporting" issued by the Institute of Chartered Accountants of India does not arise.

38.

As per the provisions of Accounting Standard 18 - "Related Party Transactions" issued by the Institute of Chartered Accountants of India, the details of Related Party Transactions based on disclosure certificate issued by the Directors, is as mentioned herein below:

i) List of Related Parties : Particulars

Associates Forever Precious Jewellery and Diamonds Limited

Revah Corporation Limited

Key Management Personnel Mr. Jaikumar Kapoor (Director upto 05.01.2015)

Mr.Ashish Narayan (Company Secretary)

39. The Engineering Division at Jodhpur has closed its operation. The carrying value of the total assets to be disposed off at Jodhpur is Rs. 10,054,219 (Rs. 10,063,880) as at the Balance Sheet date.

40. The Company had received Confirmations as on 31st March 2013 from those overseas customers who have defaulted in payments. Creditors and other debtor's confirmation are yet to be received.

41. Email by the Auditors to the overseas Sundry Debtors of the Company as well as to Major local debtors and creditors to confirm the balances as well as the transactions as on 31st March, 2015 had been sent. However the said debtors/creditors have not confirmed the same to the Auditors. Similarly letters have been sent by the Auditors to all banks asking for independent confirmations of the amounts outstanding and due to the Banks. The said confirmations have not been received by the Auditors from some of the Banks.

42. The provision for depreciation and for all known liabilities are adequate and not in excess of the amounts reasonably necessary.

43. As per the information available with the Company and certified by them, total outstanding due to Small Enterprises as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 at the end of the year is Rs. Nil (Nil).

44.Figures in brackets in notes 1 to 34 pertain to previous period which was for 6 months, it is not comparable, as the current year figures are for 12 months.

45. Previous Period figures have been re-arranged, re-grouped or re-classified wherever necessary.


Mar 31, 2014

1. SHARE CAPITAL

(A) Authorised, Issued, Subscribed and Paid-up Share Capital and Par Value Per Share.

Notes:

Of the above Paid-up Capital, Rs. NIL (Rs.300 Lacs) represents NIL (3,000,000) Equity Shares of Rs. 10/- each fully paid-up, issued upon conversion of NIL (3,000,000) Optionally Fully Convertible Share Warrants (OFCWs) into Equity Shares of Rs. 10/- each fully paid up at a premium of Rs. 60/- per share to the Promoter Group Company, viz. Kohinoor Diamonds P. Ltd., out of 3,400,000 Share warrants issued on 14.10.2010.

(B) Reconciliation of number of Equity Shares outstanding at the beginning and at the end of the period.

The Company has only one class of equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees.

The dividend proposed, if any, by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. Payment of dividend is also made in foreign currencies to shareholders outside India.

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the no. of equity shares held by the shareholders.

2. LONG-TERM BORROWINGS

There were minor delays for few days during the period in repayment of instalments of Loan and Interest to ICICI Bank for vehicle loan availed of by the Company. As at the end of the Period, there are no delays in repaytments of car loans.

3. DEFERRED TAX LIABILITIES(NET)

The Company has implemented ''Accounting Standard 22'' - "Accounting of Taxes on Income", issued by The Institute of Chartered Accountants of India, which is mandatory in nature.

The Company has recognised Deferred Taxes which result from the timing difference between the Book Profits and Tax Profits that originate in one period and are capable of reversal in one or more subsequent periods

As a result, the Deferred Tax Liability for the Period aggregating to Rs.13,234,687 (Deferred Tax Asset of Rs.18,528,429) has been recognised in the Statement of Profit and Loss for the Period.

4. TRADE PAYABLES

As stated in the Note no. 27, Export Receivables and Overseas Trade Payables had been restated based on exchange rate as at 31.03.2013. In view of persistent defaults by overseas customers in clearing outstanding dues, the same have been carried forward at the same rate (based on exchange rate as at 31.03.2013) as it is deemed expedient not to take cognizance of depreciation in rupee vis-a-vis US dollar on notional basis when outstanding amounts are expected to be realized over an uncertain period of time. Since the Company does not have any other cashflows to arrange for remittances to overseas trade creditors and expects to defray these liabilities out of realisation of export receivables, the same also have not been restated based on exchange rate as at the date of balance sheet but have been carried forward based on exchange rate as at 31.03.2013. Had it been restated on the basis of exchange rate as at 31.03.2014, the amount payable would have been higher by Rs. 57,158,767/-(Previous Period as at 30th Sept.,2013 Rs.72,175,623).

5. OTHER CURRENT LIABILITIES

(A). The Fund Based (EPC/PSC) limits were generally availed for Diamond division whereas Non fund Based (SBLC/BG) limits were utilised for facilitating procurement of gold for manufacture of jewellery. The company procured gold on loan basis. As per exant FTP & RBI Guidelines, the maximum tenor for which gold loan can be availed of is 270 days. Accordingly, SBLCs had validity of 270 days. This was adequate to cover manufacturing cycle of around 90 days and credit of 180 days that the company extended to its overseas customers.

(B). Owing to delay in receipt of inward remittances from overseas customers against export bills, the company could not arrange for payments for liquidating gold loans which were due in March 2013. In view of these events of default, the bullion banks initially invoked SBLCs which had fallen due but later, as defaults persisted, invoked all SBLCs including even those in respect of which gold loans were not due (save and except State Bank of India which invoked SBLCs only when gold loans fell due for payments), as the Gold Loan Agreements executed by the company with Bullion Banks provided cross default clause entitling them to recall all outstanding gold loans even in case of single event of default.All invoked SBLCs were paid by the Consortium Banks.

(C). Further owing to continuing defaults by overseas customers and overdrwan accounts, the company could not repay Export Packing Credits and Post Shipment Advances on due dates.

(D). As a result of invocation and devolvement of SBLCs and defaults in clearance of EPC/PSC, the liabilities have got crystallized in rupee terms and the accounts are overdrawn. With no gold lines from bullion banks and no fresh SBLCs or FB credits from consortium banks, the operations have been materially affected after March 2013.

(E). Few Banks have classified the company and its directors as willful defaulters. However, the company has vehemently denied the same and reiterated that they were victim of circumstances beyond their control and are taking all possible steps to recover the same. The company, which had received from Standard Chartered Bank, notice under the SARFAESI Act, has denied all the allegations made therein. Some of the banks have sent notices to the promoter/ guarantor and also to the companies who have provided corporate guarantees.

(F). The company has initiated legal proceedings before the Conciliation Committee of Sharjah Federal Court, the step preceding to filing of commercial cases before the Sharjah Court in May 2014. This definitely is a positive step for the company to ensure its bankers of their intentions to recover and pay their dues.

(G)> As the Company had not declared any dividend for the FY 2012-2013 (18 month period) and FY 2011-12, the question of appropriating any amounts out of the same towards arrears of call or allotment monies in respect of shares which were not fully paid-up just did not arise.

(H). There are no amounts of unclaimed dividend due and outstanding to be credited to Investor Education and Protection Fund. During the period, the Company transferred unclaimed dividend in respect of FY 2005-2006 amounting to Rs.1,773,828 (During the previous Period Rs.1,787,984 for FY 2004-2005) to Investor Education and Protection Fund. The Excess balance to the credit of unclaimed dividend for FY 2005-06 amounting to Rs. 269,456/- which were not liable to be transferred to Investor Education and Protection fund, has been apportioned by the bank against its dues.

(I)> The Overdue instalments of long term debt comprise outstanding amount in respect of Axis Bank Term Loan for Wind Mill which was payable and the Company has defaulted in making payments to Axis Bank in respect of Principal Rs.7,918,400/- and Interest Rs. 1,178,432/- (Previous Period Rs. 643,324/-) due there on. The default is continuing as on the date of balance sheet.

6. FIXED ASSETS_INTAGIBLE

1) Impairment of Fixed Assets.

(a) Please refere note no. 12 in Accounting Policy.

(b) The Company has taken into consideration the Provisions of Accounting Standard 28 - Impairment of Assets The Company does not have any assets, which would require impairment and provisions.

2) Of the total WDV of Fixed Assets, Rs.9,999,629 represent WDV of Fixed Assets of Engineering division at Jodhpur which had discontinued operations during FY 2005-06. The company had provided for impairment of these assets during FY 2007-08 & 2008- 09. No further provision for impairment is considered necessary The company has not been providing depreciation in respect of these assets.

3) Of the above, following assets are given on lease to various Companies as on 31st March 2014.

7. NON-CURRENT INVESTMENTS

(A). The company holds 49% of total paid-up equity share capital of Forever Precious Jewellery and Diamonds Limited (FPJDL). FPJDL''s operations including its retail Jewellery /Gold business is totally suspended. The auditors, for the period ended 30th September, 2013 have qualified FPJDL as a non-going concern.

(B). FPJDL is also in the process of initiating legal action against its defaulting overseas cutomers.

(C). The Company has accounted for permanent diminution in the value of long term investments in group concern as above.

8. OTHER NON-CURRENT ASSETS

(A) Export receivables had been restated based on exchange rate as at 31.03.2013. In view of persistent defaults by certain overseas customers in clearing outstanding dues, the same have been carried forward at the same rate (based on exchange rate as at 31.03.2013) while drawing up accounts for the period under review as it is deemed expedient not to take cognizance of depreciation in rupee vis-a-vis US dollar on notional basis when outstanding amounts are expected to be realized over an uncertain period of time. Had it been restated on the basis of exchange rate as at 31.03.2014, the export receivables (including the receivables considered as Trade Receivable in Note No. 16) would have been higher by Rs.5,061,959,103 (Previous Period as at 30th Sept., 2013 Rs. 643,26,50,421/-).

(B) The company was importing gold on loan basis and on unfixed price basis and likewise, the exports of jewellery were also on unfixed price basis as per FTP/EXIM policy. Accordingly, both the export invoices and the invoices for imports of gold used to be revised upon final settlement of liability in respect of gold loan. Considering facts and circumstances of the case, when export receivables are overdue and are expected to be realised over a long period, revised invoices have not been raised in view of uncertainty about realisation of additional revenue. If the invoices were to be revised, the export receivables would have been higher by Rs.119,35,00,046/- based on exchange rate as at 30.09.2013. The Company has frozen the receivable balances as on 31st March 2013 from the defaulting foreign debtors without considering the consistent method of accounting adopted in the past.

9. INVENTORIES

(A) As stated by the Management, entire inventory of diamonds and pearls at Surat & Mumbai which, though hypothecated in favour of consortium, was in company''s possession, has been placed in the lockers in PNB and is in the joint custody with PNB since 18.06.2013. The banks had got inventory valued on 30.09.2013 and the total value of inventory, as per valuation report, was Rs.393,500,031.

(B) The Stock at Chennai SEZ and Cochin SEZ unit are also in joint custody with PNB since November 2013 at Company''s premises.

(C) The Company has not carried out any fresh valuation of Diamonds as at 31st March 2014 as per requirement of AS -2. The Valuation of Diamonds as carried out as on 30th September 2013 to ascertain the market value has been adopted by the Company. The company has valued its stock of Gold as at March 31, 2014

10. REVENUE FROM OPERATION

(A) All export receivables were restated on the basis of exchange rate as at 31.03.2013. In view of persistent defaults by overseas customers in clearing outstanding dues, it is deemed expedient not to take cognisance of depreciation of rupee vis-a-vis dollar since last restatement, especially as the outstanding amounts are expected to be realised in phased manner over an uncertain period of time. Accordingly, export receivables have been carried forward on the basis of exchange rate as at 31.03.2013 and have not been restated on the bais of exchange rate as at the end of the accounting period i.e. 31.03.2014.

(B) Likewise, Trade Payables in respect of Imports have been carried forward on the bais of exchange rate as at 31.03.2013 and have not been restated on the basis of exchange rate as at the end of the accounting period i.e. 31.03.2014 as the same are expected to be paid off out of realisations from export receivables.

(C) Had the export receivables and import payables been restated on the basis of exchange rate as at 31.03.2014, Net gain/(loss) on Foreign Currency Transactions/Translations would have been higher by Rs. 5,004,800,336 (Previous Period Rs. 636,04,74,798/-).- for the period from April 2013 to March 2014, of which Rs. 636,04,74,798/- gain for period April 2013 to September 2013 and Loss of Rs.135,56,74,462 for the Current Period.

11. EMPLOYEE BENEFITS EXPENSES

The Accounting Standard - AS 15 (revised 2005) on Employee Benefits issued by the Institute of Chartered Accountants of India has been adopted by the Company.

The details as provided by the Insurance Company for the Period ended 31st March, 2014 are reproduced here below.

a) Defined Contribution Plan:

The Company has recognized Rs . 219,206 (Rs.1,388,606) towards contribution made to Employees Provident and family Pension Fund.

12) FINANCE COSTS

The advances to the Company have been classified as NPA by the banks. Accordingly, a few banks have not been charging interest since account turned NPA whereas some of the banks have reversed interest charged earlier while a few have still been charging interest albit at much higher rate. The Company has as a matter of prudence and to account for all probable liailites has considered a rate of Interest at 12.50% p.a. based on average rate for the rupee export fiance, for the purpose of providing for Interest expenses for the period. Accordingly, the Company would need to provide Rs.1,617,110,453 (Prev Period Rs.799,701,656) as interest where the banks have not debited Interest whereas there has been excess provision to the extent of Rs.382,060,311 (Prev Period Rs.460,889,564) where banks have debited interest at higher rates. The company has, accordingly, made additional provision of Rs.1,235,050,141(Previous Period Rs. 338,812,092) so as to recognise interest at 12.5% p.a. on entire outstanding amount.

Similarly in the case of Term loan for windmill where the Company has defaulted in payments of its EMI, the interest on the same have been provided by the Company at 12.5% amounting to Rs.535,108/-

13. OTHER EXPENSES MANUFACTURING EXPENSES

Notes :

1 Rates and Taxes include Rs. NIL (Previous Period Rs. 7,03,136) towards stamp duty.

2 Insurance charges include Rs. 11593/- (Previous Period Rs. 2,52,09,483) for ECGC Premium reimbursed to banks.

3 The Company has various operating leases for factory premises and office facilities that are renewable on a periodic basis and can be terminated at the option of either party. Rental expenses for operational leases recognized in the statement of Profit and Loss for the Period are Rs. 3,13,845/- (Rs.26,45,361).

14. CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR) Current Period Previous Period Rs. Rs. Contingent Liabilities

(a) EPCG Benefits 35,414,184 35,414,184

(Custom Duties payable if Export obligation not met)

(b) Guarantees 298,705,000 298,705,000

TOTAL 334,119,184 334,119,184

The company does not envisage any liability in respect of income tax as net gain on account of restatement of export receivables and overseas trade payable (Refer Note 14b and 7) is likely to get offset by additional interest provision if company were to pay interest at applicable rates including penal interest on compounding basis.

The Company had extended Corporate Guarantee for USD 5.5 million-Rs.298,705,000 for its erstwhile subsidiary to Standard Chartered Bank, London as additional collateral security for business transactions of Su-Raj Diamonds And Jewellery DMCC (SDJDMCC) (erstwhile subsidiary of the company). In the opinion of managment SDJDMCC has fully squared up all transactions and no liability is expected in respect of guarantee. However, SCB is yet to discharge the guarantee and hence the same has been considered as contingent liability for the present. The company has divested its entire holding in SDJDMCC during January 2013.

The Company has implemented the Provisions of Accounting Standard 29 - Provisions, Contingent Liabilities and Contingent Assets. The Company has recognised the above as Contingent liabilities and as such no provision is considered necessary. The Company does not have any Contingent Assets which require provision.

15. During the preceding period (18 months) the company witnessed unprecedented turn of events. The company enjoyed credit facilities of Rs. 3,750,000,000 as Fund Based limits and Rs. 34,700,000,000 as Non Fund Based limits, along with adhoc limits to the extent of 20% of the above limits for peak period, from 14 banks. The Non Fund Based limits were mainly used for purchase/ import of gold from overseas bullion banks as well as from nominated agencies in India against Standby Letters of Credit of the consortium banks.

During the end of March 2013, the overseas customers from the UAE defaulted in making payments for the company''s exports which resulted in the company defaulting in meeting its obligations. The consortium banks were, however, obliged to pay to the bullion suppliers due to the enabling provision in the gold loan agreement, wherein a single default enables bullion suppliers to recall all the gold loan.

The bankers appointed independent audit firms for forensic and investigative audit for which the company offered explanations.

All the directors resigned from the Board during the previous period. The whole time directors, Director Operations and Director Finance, resigned during the period under consideration. The new directors were not geared well to revive the company.

The company sent notices to the defaulting overseas customers in October 2013. As no positive actions were received the company considered filing of legal suit in Mumbai or in the UAE. As the filing of suit in Indian Court may not give any thrust in company''s endeavor to impress upon defaulting overseas customers to make payment, it was decided to file the same in the UAE Court. Accordingly the company has initiated legal proceedings before the Conciliation Committee of Sharjah Federal Court, the step preceding to filing of commercial cases before the Sharjah Court in May 2014. This definitely is a positive step for the company to ensure its bankers of their intentions to recover and pay their dues.

Few bankers have classified the company and its directors as willful defaulters. However, the company has vehemently denied the same and reiterated that they were victim of circumstances beyond their control and are taking all possible steps to recover the same. The company, which had received from Standard Chartered Bank, notice under the SARFAESI Act, has denied all the allegations made therein. Some of the banks have sent notices, calling up demanding payment of dues payable by Winsome, to the promoter/ guarantor and also to the companies who have provided corporate guarantees.

The banks have lodged complaints with the Central Bureau of Investigation (CBI) to carry out investigations against the company and its management. Subsequent to the balance sheet date, the agencies visited the premises of the directors and also its offices at Mumbai and Surat. The books of the Surat Branch were seized by the CBI during their search at the premises. The financial statements of the Surat branch were prepared from the back-up data of books available at Head office. However, the supporting vouchers were not available to auditors for their audit. The CBI has also seized the original import and export invoices of the Company from Mumbai office pertaining to previous period. The company has received notice from Economic Offence Wing (EOW) of Mumbai Police and has submitted statement for their observations. The management and the directors have fully cooperated with the agencies during their investigations.

INVENTORY

Entire inventory of diamonds and pearls lying at Surat and Mumbai has been placed in the lockers in PNB and is in the joint custody with PNB since 18.06.2013. The banks arranged for valuation of inventory by Customs approved valuers on 30.09.2013 and as per their report, the total value of inventory was Rs.39,35,00,031. The stock at Chennai SEZ and Cochin SEZ are also in the joint custody with PNB since November 2013 at Company''s premises.

The Inventory has not been verified by the management thereafter for the above location as the same is in the joint custody with the Bank. The Company has not carried out any fresh valuation of Diamonds and the valuation done on 30th September 2013 for ascertaining the market value has been adopted by the Company.

16. As the Diamond Segment revenue is less than 10% of total revenue, the Company has not reported segment reporting as per the provisions of Accounting Standard 17- "Segment Reporting" issued by the Institute of Chartered Accountants of India.

17. The Engineering Division at Jodhpur has closed its operation. The carrying value of the total assets to be disposed off at Jodhpur is Rs. 10,063,880 (Rs. 10,063,880) as at the Balance Sheet date.

18. The Company had received Confirmations as on 31st March 2013 from those overseas customers who have defaulted in payments. Creditors and other debtor''s confirmation are yet to be received. Email by the Auditors to the overseas Sundry Debtors of the Company to confirm the balances as well as the transactions as on 31st March, 2014 had been sent. However the said debtors have not confirmed the same to the Auditors. Similarly letters have been sent by the Auditors to all banks asking for independent confirmations of the amounts outstanding and due to the Banks. The said confirmations have not been received by the Auditors from majority of the Banks.

19. The provision for depreciation and for all known liabilities are adequate and not in excess of the amounts reasonably necessary.

20. As per the information available with the Company and certified by them, total outstanding due to Small Enterprises as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 at the end of the year is Rs. Nil (Nil).

21. Figures in brackets in notes 1 to 34 pertain to previous period which was for 18 months, it is not comparable, as the current period figures are for 6 months.

22. Previous Period''s figures have been re-arranged, re-grouped or re-classified wherever necessary.


Sep 30, 2013

A1 The Fund Based (EPC/PSC) limits were generally availed for Diamond division whereas Non fund Based (SBLC/BG) limits were utilised for facilitating procurement of gold for manufacture of jewellery. The company procured gold on loan basis. As per the extant FTP & RBI Guidelines, the maximum tenor for which gold loan can be availed of is 270 days. Accordingly, SBLCs had validity of 270 days. This was adequate to cover manufacturing cycle of around 90 days and credit of 180 days that the company extended to its overseas customers.

A2 Owing to delay in receipt of inward remittances from overseas customers against export bills, the company could not arrange for payments for liquidating gold loans which were due in March 2013. In view of these events of default, the bullion banks initially invoked SBLCs which had fallen due but later, as defaults persisted, invoked all SBLCs including even those in respect of which gold loans were not due (save and except State Bank of India which invoked SBLCs only when gold loans fell due for payments), as the Gold Loan Agreements executed by the company with Bullion Banks provided cross default clause entitling them to recall all outstanding gold loans even in case of single event of default. All invoked SBLCs were paid by the Consortium Banks.

A3 Further owing to continuing defaults by overseas customers and overdrawn accounts, the company could not repay Export Packing Credits and Post Shipment Advances on due dates.

A4 As a result of invocation and devolvement of SBLCs and defaults in clearance of EPC/PSC, the liabilities have got crystallized in rupee terms and the accounts are overdrawn. With no gold lines from bullion banks and no fresh SBLCs or FB credits from consortium banks, the operations have been materially affected after March 2013.

A5 The company had approached Corporate Debt Restructuring (CDR) Cell with requisite support from the lenders (banks). However, as the Promoter and overseas customers failed to comply with conditions stipulated by the Empowered Group of CDR Cell, the company''s proposal was rejected.

A6 Axis Bank, Bank of Maharashtra, Canara Bank, Central Bank of India, Expoer-Import Bank of India, IDBI Bank Ltd., Punjab National Bank and Vijaya Bank have issued Notice for recalling their advance. Standard Chartered Bank, the Lead Bank of the Consortium, has issued Notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002.

A7 On the basis of management''s assumption, it is expected that the company will have adequate cash infows from proceeds of export realisations to defray, in phased manner, its entire debt obligations. As such, although the inward remittances from overseas customers have not been very encouraging for the present owing to losses sustained by them, based essentially on their past track record, documents evidencing receipt of export consignments at their end and confrmation of debts, export receivables are considered as fully realisable and accordingly, amounts payable to banks are considered as fully secured.

B As the Company had not declared any dividend for the FY 2011-2012, the question of appropriating any amounts out of the same towards arrears of call or allotment monies in respect of shares which were not fully paid-up just did not arise. During FY 2011-2012, the Company had not appropriated any amount out of dividend payable for FY 2010-2011 in respect of shares which were not fully paid up against arrears of call / allotment monies due from the shareholders.

C There are no amounts of unclaimed dividend due and outstanding to be credited to Investor Education and Protection Fund. During the period, the Company transferred unclaimed dividend in respect of FY 2004-2005 amounting to Rs.1,787,984 (During the previous year Rs.1,298,181 for FY 2003-2004) to Investor Education and Protection Fund.

D The Overdue instalments of long term debt comprise outstanding amount in respect of Axis Bank Term Loan for Wind Mill which was payable during the period under review. The Company has defaulted in making payments to Axis Bank in respect of Principal Rs.7,918,400/- and Interest Rs. 643,324/- due there on. The default is continuing as on the date of balance sheet.

Current Period Previous Year

Note 29. CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)

(A) Contingent Liabilities

(a) EPCG Benefts 35,414,184 75,222,000

(Custom Duties payable if Export obligation not met)

(b) Guarantees 298,705,000 992,200,000

334,119,184 1,067,422,000

(B) Commitments

(a) Estimated amount of contracts remaining to be executed on capital 5,405,000

account and not provided for

TOTAL [(A) (B)] 334,119,184 1,072,827,000

The Company does not envisage any liability in respect of income tax as net gain on account of restatement of export receivables and overseas trade payable (Refer Note 16b and 8b) and due to revision of export invoices (Refer Note 16c) is likely to get offset by additional interest provision if Company were to pay interest at applicable rates including penal interest on compounding basis (Refer Note 26).

The Company has extended Corporate Guarantee for USD 5.5 million-Rs.298,705,000 during the period under review to Standard Chartered Bank, London as additional collateral security for business transactions of Su-Raj Diamonds And Jewellery DMCC (SDJDMCC) (erstwhile subsidiary of the Company). We understand that SDJDMCC has fully squared up all transactions and no liability is expected in respect of guarantee. However, SCB is yet to discharge the guarantee and hence the same has been considered as contingent liability for the present. The Company has divested its entire holding in SDJDMCC during January 2013.

The Company has implemented the Provisions of Accounting Standard 29 - Provisions, Contingent Liabilities and Contingent Assets. The Company has recognised the above as Contingent liabilities and as such no provision is considered necessary. The Company does not have any Contingent Assets which require provision.

Note 30. During the year under review the Company has entered into transactions in relation to dereivative instruments. As certifed by the management, the transactions were entered into for hedging based on underlying exposure and in accordance with Risk Management Policy of the Company and relevant guidelines issued by RBI. As disclosed by the Company, transactions outstanding on the balance sheet date which may entail loss in subsequent period were in respect of Forward Contracts for hedging foreign exchange exposure in relation to receivable and payable numbering to Nil (68) amounting to Rs. Nil (Rs.2847,50,00,000). Option Contracts numbering to Nil (49) amounting to Rs. Nil (Rs.364,33,00,000) are also outstanding as on the Balance Sheet date

Note 31. Background

The Company, incorporated in 1985, had been engaged in manufacture and export of cut and polished diamonds and plain and studded gold jewellery and also in imports and local sale of bullion as one of the Nominated Agencies.

Credit Facilities from Consortium of Banks

The Company had been sanctioned, by the Consortium of 14 banks, Fund Based (Export Packing Credit and Post Shipment Credit) and Non Fund Based (Stand-By Letters of Credit and Bank Guarantee) credit limits of Rs.375,00,00,000 and Rs.3470,00,00,000 respectively and had also been extended in principle approval for 20% thereof as ad-hoc (stand-by) limits to take care of peak / seasonal requirement as also to take care of additional need owing to increase in price of gold and depreciation of rupee vis-à-vis dollar. As at 31.03.2013, the Company had availed of additional ad-hoc FB and NFB limit of Rs.45,00,00,000 and Rs.490,00,00,000 respectively. The Fund Based limits were sanctioned for diamond division whereas Non Fund Based limits were sanctioned for procurement of gold for Jewellery division. Part of Non Fund Based (SBLC) limits were allowed to be used as Fund Based limits by 3 of the 14 consortium banks.

Invocations of SBLCs

Till March 2013, the Company was, inter-alia, engaged in manufacture and export of gold jewellery. For the purpose, it had been procuring gold, usually on loan basis and on unfxed price basis as per industry practice, from overseas bullion banks as also from nominated agencies / banks in India against Stand-By Letters of Credit (SBLCs) of Consortium of Banks which had sanctioned credit facilities to the Company.

As per the extant Foreign Trade Policy, maximum tenor for which gold loans can be availed has been 270 days and accordingly, the member banks of the consortium usually established SBLCs for 270 days. The tenor of gold loan was adequate to take care of manufacturing cycle and trade credit of 180 days that the Company usually extended to its overseas customers.

The Company had executed gold loan agreement with the bullion banks from whom it regularly procured gold. These agreements contained an enabling provision for recalling of all outstanding gold loans by the bullion banks in the event of (even single) default by the Company in discharging its obligations as per the terms of the agreements.

Owing to delay in receipt of inward remittances from overseas customers against export bills, the Company could not arrange for payments which were due in March 2013 to the bullion banks. In view of these events of default, the bullion banks initially invoked SBLCs which had fallen due, but, later, as defaults persisted, invoked all SBLCs, in April 2013, including even those in respect of which gold loans were not due. Of the aggregate outstanding SBLCs of Rs.3580,68,00,000 as at 31.03.2013, SBLCs of Rs.3485,18,00,000 (excluding SBLCs of Rs.95,50,00,000 established in favour of State Bank of India) had been invoked by April-end 2013, although SBLCs worth Rs.958,08,00,000 only were falling due till 30.04.2013 whereas SBLCs of Rs.2527,10,00,000 had been invoked ahead of the due dates of respective gold loans. State Bank of India had invoked SBLCs of Rs.95,50,00,000 as and when gold loans got matured.

All invoked SBLCs of Rs.3580,68,00,000 have been paid by the Consortium banks. Of the total invocations and amounts paid there against, Rs.2587,60,00,000 crores were against SBLCs which had fallen due as on the date of the balance sheet, whereas the balance Rs.993,08,00,000 are against SBLCs which would not have fallen due for payment as on the date of Balance Sheet, if not so invoked.

As a result of invocation and devolvement of SBLCs, the liabilities had got crystallized in rupee terms and the accounts were overdrawn. With no gold lines from bullion banks and no fresh SBLCs from the consortium banks, the operations had been signifcantly impacted and the Company has been constrained to suspend its manufacturing operations.

The Company did approach the Honorable Bombay High Court for an Order restraining the Consortium banks from making remittances against invocations of those SBLCs where Gold Loans had not fallen due. However, the Standard Bank, one of the bullion banks, obtained an order from UK Court that as the jurisdiction as per Gold Loan Agreement for any legal action is Court in London, it will be deemed Contempt of that Court if the Company persisted with its application in the Bombay High Court. The Company, accordingly, did not pursue its application.

Overseas Customers

The Company''s dealings with overseas customers, till March 2013, have been generally satisfactory and there were no commercial disputes of any sort. Although there were intermittent delays in receipt of moneys towards export bills occasionally in the past, there used to be regular fow of inward remittances and the Company did not have any major problem in realization of its export bills. However, inward remittances from the group of 13 customers in UAE were abruptly dried up.

Total amount due from overseas customers in UAE is approx. USD 875 million. As the amounts at stake were very large and as the same were not backed by any tangible security/ LCs, the Company''s recovery efforts in the beginning have been very measured. Immediately after invocations and devolvement of SBLCs, the Company''s Whole-time Director (Operations) went to Dubai and met Mr. Haytham, director/shareholder/owner of a few of defaulting UAE customers and also representing the other out of total of 13 defaulting customers (as they were introduced by him) on 21.03.2013. This was followed by another visit along with Offcial of Standard Chartered Bank, the Lead Bank of the Consortium, on 18.04.2013.

The Company had served formal legal notices, in the last week of April 2013, to all the 13 customers for payment of all export bills which had fallen due for payment as per the agreed credit terms by that time (08.04.2013). Although over dues were not cleared, all the customers did issue formal acknowledgement of debt for the outstanding amount in third week of May 2013.

The main promoter and guarantor, Mr. Jatin Mehta and Whole-time Director (Operations) along with the senior offcials of the Core Group of the Consortium (comprising Punjab National Bank, Central Bank of India, Canara Bank, Standard Chartered Bank and Union Bank of India) met Mr. Haytham on 23.05.2013. During the visit by the offcials of the Core group of the Consortium, Mr. Haytham had reportedly stated that delay in remittances was attributable to liquidity constraints (owing to fnancial loss incurred in foreign exchange and commodity trading) which are sought to be mitigated in due course and that the entire dues shall be paid in full in phased manner with the timeframe extending up to FY 2025-26. He produced copy of the Report of their Auditors for the extent of loss suffered by 3 of those customers. Mr. Haytham also assured the bankers that he would endeavour to arrange for remittances of USD 75 to 100 million every year for clearance of dues of the Company as well as of Forever Precious Jewellery And Dia monds Ltd. (FPJDL), another Company in the Group (the Company holds 49% of the equity share capital of FPJDL).

Despite regular follow-up for payments through telephonic talks, e-mails and formal communications, the Company, during six month period ended 30.09.2013, received only USD 1,268,118 from those 13 UAE customers as probably they have not been able to mitigate their liquidity constraints fully.

The Company, therefore, served legal notices, in October 2013, on all the 13 UAE customers as also on Mr.Haytham, through its Advocates, M/S. Economic Laws Practice, asking them for payment of the entire outstanding amount and has sought opinion of a reputed legal frm in Dubai as to what legal options are available for recovery of outstanding dues. The Company proposes to initiate legal action in Dubai and / or Summary suit in India, in case customers do not demonstrate urgency in sending remittances of larger sums.

As no signifcant amounts were realized from the overseas customers after second week of March 2013, CRISIL, the Credit Rating Agency, had downgraded rating from A1 to A3 in third week of April 2013 and to A4 in fourth week of April 2013 and further to D in frst week of May 2013.

Board of Directors

Mr. Jatin Mehta relinquished Managing Directorship of the Company to join as President of Su-Raj Diamonds And Jewellery DMCC (UAE), one of the Wholly Owned Subsidiaries of the Company, with effect from 19.04.2011, as it was felt at that time that owing to evolving business scenario and resultant opportunities vis-à-vis infrastructure and business profle of the Company and its subsidiaries, that was the appropriate time for further growth of business globally and that, for the purpose, Mr. Mehta would be required to engage himself comprehensively with overseas operations which would entail extensive travel away from India for execution of business plan. While Mr. Mehta continued as director and Non-Executive Chairman, Mr. Lakhpat Raj Bhansali, with over 35 years of experience in the industry, was appointed as Whole-time Director.

As part of further consolidation process and restructuring necessitated owing to substantial expansion of capacities by M/S. Su-Raj Diamond Industries Ltd. (SDIL), a group Company, Mr. Lakhpat Raj Bhansali resigned from the Board with effect from 09.05.2012 as he was appointed as Whole-time Director of SDIL. Mr. R Ravichandran and Mr. Ramesh I Parikh, employees of the Company, were inducted on the Board and appointed as Whole-time Directors (Operations) and (Finance) respectively.

Subsequently, Mr. Jatin Mehta submitted his resignation as Chairman and Director with effect from 09.11.2012 following his decision to reduce Board Commitments owing to unavoidable circumstances. The Board, while respecting his decision, suggested Mr. Mehta that he could endeavor to keep sharing critical inputs which are vital for it to discharge its functions effectively. Mr. Madan Khurjekar was, accordingly, appointed as Chairman.

After invocations and devolvement of SBLCs, all the independent directors on the Board, Mr. Rathnakar Hegde, Mr. Shard Bhagwat, Mrs. Urvashi Saxena, Mr. Dilip Tikle and Mr. Madan Khurjekar, resigned during the period 30.03.2013 to 10.06.2013. Accordingly, the Company''s Board, with effect from 10.06.2013, comprised only 2 Whole-time directors and did not have suffcient number of directors as required by the Companies Act, 1956. Mr. Satya Prakash Tanwar, Nominee of PNB and Mr. Harish Mehta have been inducted on the Board with effect from 16.10.2013. Mr. Jaikumar Kapoor and Mr. Harimohan Namdev have been inducted on the Board with effect from 10.01.2014. Mr. Ramesh Parikh, Director-Finance, resigned from the Board with effect from 28.02.2014.

Forensic Audits

Bankers had appointed M/S. Ernst & Young (EY) for forensic audit and M/S. Kroll Advisory Solutions (Kroll) for investigative audit. The report of EY did not contain any adverse remarks and with regard to certain observations, the Company had offered satisfactory explanations. While the banks considered Company''s explanations as satisfactory in respect of most of the observations of ''Kroll'', in case of a few observations, they considered explanations provided by the Company as not totally satisfactory and desired further clarifcations from Mr. Jatin Mehta. The Company is informed that the banks have not received any clarifcations from Mr. Mehta in this regard.

Corporate Debt Restructuring

The Company had submitted Financial Restructuring Plan to the CDR Cell. The Flash Report was fled on 17.06.2013. Although the Empowered Group of CDR (EG-CDR) had initially expressed certain reservations for admission of Flash Report (at its Meeting held on 24.06.2013), it reconsidered the Company''s proposal at its subsequent meeting held on 25.07.2013 where although the requisite no. of lenders (consortium banks) had conveyed their mandate (support for admission of fash report), a view emerged that certain issues were needed to be addressed and execution of legally enforceable tripartite agreement for repayment of debt between the Company, the overseas customers (debtors) and lenders (banks) was one of the issues that needed to be addressed. However, the UAE customers expressed reservations for execution of Tripartite Agreements as suggested by banks / CDR Cell. The other issues that needed to be addressed were (a) bringing promoters contribution upfront in consonance with RBI guidelines for CDR (b) re-induct ion of Mr. Jatin Mehta, the promoter and guarantor, on the Board of the Company and (d) explanation by Mr. Jatin Mehta for certain observations contained in the forensic audit reports. As Mr. Jatin Mehta''s response on the above was not as per the expectations of the banks, the Company''s Flash Report stands dismissed.

Export Receivables and Creditors for Imports

Entire outstanding export receivables of Rs. 47,534,403,307 as at 30.09.2013 represent debts outstanding for over 180 days.

Export receivables had been restated based on exchange rate as at 31.03.2013 (the end of the FY 2012-13). However, in view of persistent defaults by overseas customers in clearing outstanding dues, the same were carried forward at the same rate in the accounts for the quarter ended 30.06.2013 and, likewise, have been carried forward at the same rate (based on exchange rate as at 31.03.2013) as it is deemed expedient not to take cognizance of depreciation in rupee vis-à-vis US dollar on notional basis when outstanding amounts are expected to be realized over an uncertain period of time. Likewise, overseas trade creditors have also carried forward based on exchange rate as at 31.03.2013 (when they were last restated) as these are unsecured and are expected to be paid off out of realizations from overseas customers.

In accordance with Accounting Standard - 9 (Revenue Recognition), in terms of the EXIM policy for Gold Loans and as per the consistent practice followed by the Company in the past, it is required to raise revised invoices on its customers on account of the fnal settlement of its liability of gold loan. However the Company has not raised such revised invoices and hence not accounted for the same in the fnancial statements in view of the uncertainties of realisation of revenue as the overseas customers have defaulted in their payments.

Inventory

Entire inventory of diamonds and pearls lying at Surat and Mumbai has been placed in the lockers in PNB and is in the joint custody with PNB since 18.06.2013. The banks arranged for valuation of inventory by Customs approved valuers on 30.09.2013 and as per their report, the total value of inventory was Rs.39,35,00,031. (In this context, it may be stated that with negative reports about the Group continuing at regular intervals in diamond trade journals, the Company did not procure any diamonds – rough/semi-processed diamonds after September 2012 and polished diamonds after December 2012 and on the other hand, it endeavored, as part of damage control exercise, to export as much inventory as possible at best available prices. As such, the inventory that the Company had, as at the end of the FY 2012-13, mainly comprised of relatively lower grade of diamonds and / or residual quantity of different lots and as such, their realizable value could have been lower than their cost as per the inventory register based o n weighted average cost basis.) Since the valuation was carried out on the basis of examination of only part of the inventory selected on random basis, the Company has requested PNB to arrange for valuation of entire inventory. Nonetheless, the value of inventory has been adjusted, while drawing accounts for the 18 month period ended 30.09.2013, so as to take cognizance of depletion in the value of inventory of diamonds.

Overseas Subsidiaries

During the year, the Company disinvested its entire shareholding in its wholly owned subsidiaries in USA, Belgium, Hong Kong & UAE and part of the sale proceeds were utilized for investing in additional equity share capital of Forever Precious Jewellery & Diamonds Ltd.

Accounts

The Company had earlier anticipated that its Debt Restructuring Plan will get implemented under CDR mechanism by September 2013 and accordingly, had extended its fnancial year by 6 months. As such, the accounts have been prepared for 18 month period commencing 01.04.2012 and ending on 30.09.2013 for which it has received requisite approval from the Registrar of Companies, Ministry of Corporate Affairs.

Since the Company''s Board comprised only 2 Whole-time Directors during 10.06.2013 to 16.10.2013, its operating results forQ5, quarter ended 30.06.2013, which were published, in August 2013, for the information of the shareholders and for ensuring compliance with statutory provisions, were, at that time, not reviewed by the Audit Committee (which did not exit) and therefore were not considered by the Board and were not subjected to limited review by the auditors. The same were reviewed by Audit Committee upon its constitution and then considered by the Board.

Figures of the previous year have been re-grouped or re-classifed wherever necessary, to correspond with those of the current period''s / year''s classifcation for disclosure as per the revised format set out in clause 41 which corresponds to the revised Schedule VI of the Companies Act, 1956.

Present Status

The Company and its directors including directors who were on the Board when devolvement occurred have been issued, by Punjab National Bank, notices wherein it is stated that if entire defaulted amount is not paid within specifed time frame then they will be classifying us as ''Willful defaulters''. Vijaya Bank, Bank of Maharashtra and IDBI Bank Ltd. have issued Notices for recalling of outstanding loans/ advances. As on date, the Company''s account has been classifed as Non Performing Asset by all the consortium banks.

We have been given to understand by the banks that the Promoter & Guarantor, Mr. Jatin Mehta, has claimed that he was not involved in day-to-day management of the Company since April 2011, the said contention, however, is untrue. Though Mr. Jatin Mehta is not formally on the Board of the Company, he had been and is at the helm of the affairs.

The Company''s presumptions and assumptions are as under:

The promoter-guarantor, Mr. Jatin Mehta, is professionally expected eventually to lend tangible support by joining the Board, bringing funds for resumption of operations, arranging for funds to initiate legal actions against defaulting customers and with his active involvement and commitment in any exercise of revival / restructuring of the company''s business.

Investigations / substantive proceedings / audits that might be carried out overseas either through expert to be appointed through Court in Dubai or by any other agencies will endorse / substantiate claims of overseas customers about genuineness of (a) transactions so far as they relate to exports by the company and (b) loss incurred in commodity and currency transactions.

The defaulting UAE customers will eventually pay off their entire dues over a reasonable span of time.

Note 32. As the Diamond Segment revenue is less than 10% of total revenue, the Company has not reported segment reporting as per the provisions of Accounting Standard 17- "Segment Reporting" issued by the Institute of Chartered Accountants of India.


Mar 31, 2012

Basis of Preparation of Financial statements:

These financial statements have been prepared on an accrual basis and under historical cost convention and in compliance, in all material aspects, with the applicable accounting principles in India, the applicable accounting standards notified under section 211 (3C) and the other relevant provisions of the Companies Act, 1956.

All the assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in Schedule VI to the Companies Act, 1956. Based on the nature of the products and the time between the acquisition of assets for processing and their realization in cash and cash equivalent, the Company has ascertained its operating cycle to be less than 12 months.

Note 1. During the year under review the Company has entered into transactions in relation to derivative instruments. As certified by the management, the transactions were entered into for hedging based on underlying exposure and in accordance with Risk Management Policy of the Company and relevant guidelines issued by RBI. As disclosed by the Company, transactions outstanding on the balance sheet date which may entail loss in subsequent period were in respect of Forward Contracts for hedging foreign exchange exposure in relation to receivable and payable numbering to 68 (116) amounting to Rs. 284,750 lacs (Rs. 193,469 lacs). Option Contracts numbering to 49 (4) amounting to Rs. 346,330 lacs (Rs. 160,56 lacs) are also outstanding as on the Balance Sheet date.

Note 2. The Engineering Division at Jodhpur has closed its operation. During the year it has incurred a loss of Rs. Nil (Rs. Nil). The carrying value of the total assets to be disposed off at Jodhpur is Rs. 101 lacs (Rs. 101 lacs) as at the Balance Sheet date.

Note 3. Subsequent Events

Allotment of Equity Shares upon conversion of convertible warrants issued in October 2010.

The Company had issued 3,400,000 Optionally Fully Convertible Warrants with an issue price of Rs. 70/- to Kohinoor Diamonds Pvt. Ltd. (KDPL), a promotor group company, on 14th October, 2010. At the time of the issue and allotment of warrants, 25% of the issue price i.e. Rs. 17.50 per warrant was paid whereas the balance 75% i.e. Rs. 52.50 per warrant was payable while exercising option to have warrants converted into Equity Share of the company at any time within 18 months from the date of allotment of warrants i.e. on or before 13th April, 2012. KDPL exercised its ooption in respect of 400,000 warrants by paying up the balance 75% of the issue price in respect thereof and was alloted equal no. of fully paid up Equity Shares of Rs. 10/- each on 1st February, 2012. Subsequent to the date of balance sheet, on 13th April, 2012, KDPL exercised its option in respect of balance 3,000,000 warrants and paid Rs. 1,575 lacs, being balance 75% of the issue price in respect thereof and was alloted equal no. of fully paid-up Equity Shares of Rs. 10/- each. As a result, the paid- up equity share capital of the Company has increased from Rs. 10,361/- lacs to Rs. 10,661 lacs.

DISINVESTMENT OF HOLDING IN OVERSEAS SUBSIDIARIES

The Board at its Meeting held on 14th February, 2012, had mandated disinvestment by the Company of its holding in 3 of its Overseas Subsidiaries, viz. Su-Raj Diamonds & Jewelry USA Inc. (USA), Su-Raj Diamonds NV (Belgium) and Su-Raj Diamond (HK) Ltd. (Hong Kong). Accordingly, the Company has disinvested its total holdings in the above 3 subsidiaries during the current financial year (FY 2012-13) for aggregate consideration of USD 15.08 million (Rs. 7,673 lacs) against investment of USD 14.6 million (Rs. 6,619 lacs).

Note 4. Letters have been issued to Sundry Debtors and Sundry Creditors for confirmation. Confirmations have been received from some of the parties.

Note 5. The provision for depreciation and for all known liabilities are adequate and not in excess of the amounts reasonably necessary.

Note 6. As per the information available with the Company and certified by them, total outstanding due to Small Enterprises as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 at the end of the year is Rs. Nil (Nil).

Note 7. Figures in brackets in notes 1 to 35 pertain to previous year.

Note 8. The financial statements for the year ended 31st March 2012 are prepared under revised schedule VI and accordingly previous Year's figures have been re-arranged, re-grouped or re-classified wherever necessary.


Mar 31, 2011

1. Contingent Liabilities not provided for in respect of:

Rupees Rupees

(a) Estimated amounts of contracts remaining to be executed on Capital Account 985,453 835,770

(b) EPCG Benefits (Customs Duties payable if export obligations not met) 25,585,000 21,565,200

(c) Guarantees given to the banks for Foreign Subsidiaries 869,700,000 540,000,000

Total 896,270,453 724,400,970

2. In the opinion of the Directors:

(a) The Current Assets, Loans and Advances are approximately of the value stated, if realized in the ordinary course of business.

(b) The provision for depreciation and for all known liabilities are adequate and not in excess of the amounts reasonably necessary.

3. The Financial Charges includes Bank Charges of Rs.187,838,267 (Rs. 181,193,010) Bank Interest paid Rs.442,407,166 (Rs.429,808,969) and Bank Interest Received on Fixed Deposits Rs.473,978,466 (Rs. 317,770,385).

4. Letters have been addressed to Sundry Debtors and Sundry Creditors for confirmation. Confirmations have been received from some of the parties.

5. The Accounting Standard – AS 15 (revised 2005) on Employee Benefits issued by the Institute of Chartered Accountants of India has been adopted by the Company. The details as provided by the Insurance Company for the year ended 31st March, 2011 are reproduced here below :

a) Defined Contribution Plan:

The Company has recognized Rs. 926,263 (Rs. 1,852,403) towards contribution made to Employees Provident and family Pension Fund.

Note : The estimate of future salary increases considered in actuarial valuation taking into account inflation, seniority, promotion and other relevant factors.

6. The Company has taken gold on loan from various banks. The said gold has been processed and sales of jewellery made. The value of purchase and sale is taken on the basis of the provisional sale certificate of the bank. The final value of purchase and sale is recorded on the date of repayment of the loan or on final price confirmation of gold loan on the basis of forward contract booked with the difference of sale and purchase amount being recorded to respective accounts. The closing stock of Raw Materials-Gold includes Gold valued at Rs.1,004,747,767 (Rs.1,543,510,417) taken on loan from Banks under the EXIM-Gold Loan Scheme.

7. During the year a net gain on account of Foreign Exchange Fluctuation / Derivative Transactions including option contracts and forward contract, amounting to Rs. 4.54 Crores (Rs.8.41 Crores) has been recognized in the Profit and Loss Account along with underlying transactions.

8. During the year, the Company has adjusted the dividends payable against the amounts due from shareholders who have not paid their call monies in respect of shares subscribed by them. The amount of dividend adjusted against the Share Premium Account is Rs.273,887 (Rs. Nil).

9. The company has during the year issued 3,400,000 share warrants of Rs. 10 each at a premium of Rs. 60/- per warrant to their sister concern Kohinoor Diamonds Private Limited. The said warrants are to be exchanged for Equity shares within a period of 18 months from the date of issue i.e. 14th October, 2010. A sum of Rs.59,500,000 (cost of share warrants Rs. 8,500,000 and premium amounting Rs.51,000,000) has been received.

10. There are no amounts of unclaimed dividend due and outstanding to be credited to Investor Education and Protection Fund. The Company has transferred, unclaimed dividend in respect of financial year 2002-03 amounting to Rs.1,470,340/-; (2001-2002 Rs.1,020,294) to Investor Education and Protection Fund during the year.

11. During the year under review the Company has entered into transactions in relation to derivative instruments. As certified by the management, the transactions were entered into for hedging based on underlying exposure and in accordance with Risk Management Policy of the Company and relevant guidelines issued by RBI. As disclosed by the Company, transactions outstanding on the balance sheet date which may entail loss in subsequent period were in respect of Forward Contracts for hedging foreign exchange exposure in relation to receivable and payable numbering to 116 (55) amounting to Rs. 1,934.69 Crores (Rs.238.02 Crores) and Option Contracts numbering to 4 (Nil) amounting to Rs.160.56 Crores (Rs. Nil).

12. The Engineering Division at Jodhpur has closed its operation. During the year it has incurred a loss of Rs. Nil (Rs.0.06 lacs). The carrying value of the total assets to be disposed off at Jodhpur is Rs.100.64 lacs (Rs.100.64 lacs) as at the Balance Sheet date.

13. As per the provisions of Accounting Standard 18 - "Related Party Transactions" issued by the Institute of Chartered Accountants of India, the details of Related Party Transactions based on disclosure certificate issued by the Directors, is as mentioned herein below:

i) List of Related Parties : Particulars

Subsidiaries Su-Raj Diamonds N. V.

Su-Raj Diamonds & Jewelry USA, Inc.

Su-Raj Diamonds and Jewellery DMCC

Su-Raj Diamond (H.K.) Limited

Associates Forever Precious Jewellery and Diamonds Limited

Su-Raj Diamond Dealers Limited

Revah Corporation Limited

Key Management Personnel Jatin R. Mehta

Enterprise in which key management personnel J. R. Diamonds Private Limited

and their relatives have significant influence SJR Commodities and Consultancies Private Limited

Diadem Investment and Finance Private Limited

Bombay Diamonds Company Private Limited

Firstrate Diamonds Private Limited

Forever Diamonds Private Limited

Euro Auto Private Limited

Kohinoor Diamonds Private Limited

Oriental Expressions LLC.



Relative of key management personnel Sonia J. Mehta

14. The Company has various operating leases for factory premises and office facilities that are renewable on a periodic basis and can be terminated at the option of either party. Rental expenses for operational leases recognized in the Profit and Loss Account for the year are Rs. 2,592,444 (Rs. 3,330,773).

15. The Company has implemented Accounting Standard 22 - "Accounting of Taxes on Income", issued by the Institute of Chartered Accountants of India, which is mandatory in nature. The Company has recognized Deferred Taxes which result from the timing difference between the Book Profits and Tax Profits that originate in one period and are capable of reversal in one or more subsequent periods.

16. The Company has taken into consideration the Provisions of Accounting Standard 28 – Impairment of Assets. The Company does not have any assets, which would require impairment and provisions.

17. In accordance with Notification dated 8th February, 2011 issued by Ministry of Corporate Affairs, the Company has been exempted from disclosing quantitative details, etc. prescribed under Section 211 of the Companies Act, 1956 in Profit and Loss Account and Notes to Accounts thereon (Part II of Schedule VI).

18. Additional information pursuant to the provisions of Paragraph 3 and 4 of Part II of Schedule VI to the Companies Act, 1956 (as certified by a Director and accepted by Auditors) :

19. As per the information available with the Company and certified by them, total outstanding due to Small Enterprises as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 at the end of the year is Rs. Nil (Nil).

20. Figures in brackets in notes 1 to 26 pertain to previous year.

21. Previous Years figures have been re-arranged and re-grouped wherever necessary.


Mar 31, 2010

1. Contingent Liabilities not provided for in respect of :

Rupees Rupees

(a) Disputed Income Tax Liability NIL (NIL)

(b) Estimated amounts of contracts remaining to be executed on Capital Account 835,770 (67,500)

(c) EPCG Benefits (Customs Duties payable if export obligations not met) 2,15,65,200 (23,865,150)

(d) Guarantees given to the banks for foreign subsidiaries 540,000,000 (600,000,000)

Total 724,400,970 (623,932,650)

2. In the opinion of the Directors :

(a) The Current Assets, Loans and Advances are approximately of the value stated, if realized in the ordinary course of business.

(b) The provision for depreciation and for all known liabilities are adequate and not in excess of the amounts reasonably necessary.

3. The Financial charges include bank charges of Rs.181,193,010 (Rs.192,188,103) bank interest paid Rs.429,808,969 (Rs. 514,085,652) and bank interest received on fixed deposits Rs.317,770,385 (Rs. 380,265,111).

4. Letters have been addressed to Sundry Debtors and Sundry Creditors for confirmation. Confirmations have been received from some of the parties.

5. The Accounting Standard – AS 15 (revised 2005) on Employee Benefits issued by the Institute of Chartered Accountants of India has been adopted by the Company.

6. The Company has taken gold on loan from various banks. The said gold has been processed and sales of jewellery made. The value of purchase and sale is taken on the basis of the provisional sale certificate of the bank. The final value of purchase and sale is recorded on the date of repayment of the loan or on final price confirmation of gold loan on the basis of forward contract booked with the difference of sale and purchase amount being recorded to respective accounts. The closing stock of Raw Materials-Gold includes Gold valued at Rs.1,543,510,417 (Rs.612,060,095) taken on loan from Banks under the EXIM-Gold Loan Scheme.

7. During the year a net gain on account of Foreign Exchange Fluctuation/Derivative Transactions amounting to Rs.84,156,110 (Rs.92,215,178) has been recognized in the Profit and Loss Account along with underlying transactions.

8. During the year, the Company has adjusted the dividends payable against the amounts due from shareholders who have not paid their call monies in respect of shares subscribed by them. The amount of dividend adjusted against the Share Premium Account is Rs.Nil (Rs.558,050).

9. There are no amounts of unclaimed dividend due and outstanding to be credited to Investor Education and Protection Fund. The Company has transferred, unclaimed dividend in respect of financial year 2001-02 amounting to Rs.10,20,294 to Investor Education and Protection Fund during the year.

10. During the year under review the Company has entered into transactions in relation to derivative instruments. The following is the list of transactions outstanding on the Balance Sheet date as disclosed by the company (As certified by the management):

11. Transactions for forward contracts for hedging foreign exchange exposure in relation to receivable and payable numbering to 55 (81) amounting to Rs.238.02 crores (Rs.951.27 crores).

12. Transactions for option contracts for hedging foreign exchange exposure in relation to receivable and payable numbering to Nil (Nil) amounting to Rs.Nil (Rs.Nil).

13. The reclassification of values on the year end and marking them to market has been recognized on the above transaction. The loss on the same amounts to Rs.Nil (Rs.Nil).

14. During the year under review the Company has entered into Commodity Trading in Futures for precious metals to hedge the risks of price fluctuations in precious metal (raw materials).The initial margin on such derivative transactions has been paid in cash. Any gain/loss on such transactions made during the year has been charged to Profit and Loss Account along with the underlying transaction. The values of transaction numbering to Nil (1) amounting to Rs.Nil (Rs.25,705,700) are open as at balance sheet date.

15. The Engineering Division at Jodhpur which had closed its operation, during the year incurred a loss of Rs. 0.06 lacs (Rs.29.90 lacs) including impairment of certain Fixed Assets of Rs. Nil (Rs.29.99 lacs of Fixed Assets). The carrying value of the total assets to be disposed off at Jodhpur is Rs.100.64 lacs (Rs.100.90 lacs) as at the Balance Sheet date.

16. As per provisions of Accounting Standard 18 - “Related Party Transactions” issued by the Institute of Chartered Accountants of India, the details of Related Party Transactions based on disclosure certificate issued by the Directors, is as follows :

List of Related Parties :

Particulars

Subsidiaries Su-Raj Diamonds N.V., Su-Raj Diamonds & Jewelry USA Inc.,

Su-Raj Diamonds & Jewellery DMCC, Su-Raj Diamond (H.K.) Limited

Associates Forever Precious Jewellery & Diamonds Limited, Su-Raj Diamond Dealers Limited, SJR Jewelry Co. Limited, Revah Corporation Limited

Key Management Personnel Jatin R. Mehta

Enterprise in which key management personnel and J. R. Diamonds Private Limited, SJR Commodities & Consultancies Private

their relatives have significant influence Limited, Diadem Investment and Finance Private Limited, Bombay Diamonds

Company Private Limited, Firstrate Diamonds Private Limited, Forever Diamonds Private Limited, Euro Auto Private Limited, Kohinoor Diamonds Private Limited

Relative of key management personnel Sonia J. Mehta

17. The Company has implemented ‘Accounting Standard 22’ - “Accounting of Taxes on Income”, issued by the Institute of Chartered Accountants of India, which is mandatory in nature. The Company has recognized Deferred Taxes which result from the timing difference between the Book Profits and Tax Profits that originate in one period and are capable of reversal in one or more subsequent periods.

18. The Company has taken into consideration the Provisions of Accounting Standard 28 – Impairment of Assets. The Company does not have any assets, which would require impairment and provisions.

19. As per the information available with the Company and certified by them, total outstanding due to Small Enterprises as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 at the end of the year is Rs.Nil (Nil).

20. Figures in brackets in notes 1 to 25 pertain to previous year.

21. Previous Year’s figures have been re-arranged and re-grouped wherever necessary.

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