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). FPJDLÂs
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-Ã -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-Ã -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-Ã -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 à 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 Ã 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 à 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 - ÃRelated Party
Transactionsà 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 ÃAccounting Standard 22Ã - ÃAccounting
of Taxes on IncomeÃ, 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 Ã 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 YearÃs figures have been re-arranged and re-grouped
wherever necessary.
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