Notes to Accounts of Classic Diamonds (India) Ltd.

Mar 31, 2014

CORPORATE INFORMATION

1 DESCRIPTION OF THE GROUP

Classic Diamonds (India) Limited is a leading exporter of cut and polished diamonds and jewellery. The principal operations of the company is located in India.

As at As at Particulars 31/03/2014 31/03/2013 (Rs.) (Rs.)

2 Contingent liabilities not provided for in respect of

a) Property tax 429,884 429,884

b) Disputed sales tax demand in respect of which the Company preferred an appeal - 60,624,377

c) Disputed income tax demand in respect of which the Company preferred an appeal 252,592,845 252,592,845

d) Guarantees given to bank and others:

ICICI Bank 254,724,500 254,724,500

Total 507,747,229 568,371,606

3. The Company''s production facilities at unit no. 138/139, SDF-V SEEPZ Andheri (E) has been locked out due to labour problems. The Company has suspended its operations from the said locations from 21st November 2011 and has not been functional yet. The company has effected an Out of Court settlement with the labour unions and has paid all the dues to the employees as per agreed terms between the labour union and the Company. Application has been submitted to the industrial court for withdrawal of appeals by the labour union on the basis of consensus agreed between the parties.

4. The Company''s Factory at Surat has been shut down completely we.f November 2011.

5. The consortium of bankers which had granted various working capital and export facilities have withdrawn these facilities and have called upon the Company to repay their outstanding. Further, the Company has informed that the Company is in the process of negotiation with the banks. The banks are covered by way of mortgagee of various properties / assets of the Company.

6. The year end monetary asset and liabilities which are in foreign currency have not been restated at closing exchange rate which is in non-compliance with the requirements of Accounting Standard (AS) 11 - "The Effects of Changes in Foreign Exchange Rates''.

7. During the year, as required by the Accounting Standard (AS) - 28 "Impairment of Assets", the Company has reviewed potential generation of economic benefits from fixed assets and concluded that entire plant and machinery. furniture & fixtures, office equipments, weighting machine, air conditioner and electrical installations (which were not in continuous use) aggregating to its written down value of Rs.30,701,096 as on 31 March 2014 are currently not foreseen to generate adequate economic returns over their useful lives. Consequently, these assets have been fully written off.

8. In the opinion of the management all assets, other than fixed assets and non current investments, have a value on realization in the ordinary course of business at least equal to the amount at which they are stated in the balance sheet. The provision for depreciation and for all known liabilities is adequate and not in excess of the amount reasonably stated.

Balances of certain debtors, creditors and advances are subject to confirmation / reconciliation''s if any. The management does not expect any material difference affecting the financial statements on such reconciliation / adjustments.

9. The Company has not made any provision for gratuity and towards leave encashment or Bonus as payable to its employees since the company has shut majority of its operations and has laid off all the employees as at 31st March 2013. Hence, the guidelines mentioned in AS-15 "Employee Benefits" are not applicable.

10. In the absence of any intimation received from vendors regarding the status of their registration under "Micro, Small and Medium Enterprises Development Act, 2006", the company is unable to comply with the disclosures required to be made under the said Act.

11. Disclosure regarding investment in Associates as required under Clause 32 of Listing Agreement has been given in Note No 11.

Notes:

i. Secondary segments identified are as per the requirements of Accounting Standard (AS) -17 "Segment Reporting" taking into account the organization structure as well as the differing risks and returns.

ii. The segment revenue and segment assets include the revenue and assets, respectively, which are identifiable with each segment and amounts allocated to the segments on a reasonable basis.

iii. Figures in the brackets pertain to the previous year.

12. Previous year''s figures

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

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Mar 31, 2013

1. DESCRIPTION OF THE GROUP

Classic Diamonds (India) Limited is a leading exporter of cut and polished diamonds and jewellery. The principal operations of the company is located in India. Classic Diamonds (India) Limited is listed on The Stock Exchange -Mumbai.

2. The Company''s production facilities at unit no. 138/139, SDF-V SEEPZ Andheri (E). has been locked out due to labour problems. The Company has suspended its operations from the said locations from 21st November 2011 and has not been functional yet. The company has effected an Out of Court settlement with the labour unions and has paid all the dues to the employees as per agreed terms between the labour union and the company. Application has been submitted to the industrial court for withdrawal of appeals by the labour union on the basis of consensus agreed between the parties.

3. The Company''s Factory at Surat has been shut down completely w.e.f November 2011.

4. The consortium of bankers which had granted various working capital and export facilities have withdrawn these facilities and have called upon the Company to repay their outstanding. Further the Company has informed that the Company is in the process of negotiation with the banks. The banks are covered by way of mortgagee of various properties / assets of the Company.

5. The yearend monetary asset and liabilities which are in foreign currency have not been restated at closing exchange rate which is in non-compliance with the requirements of Accounting Standard (AS) 11 - "The Effects of Changes in Foreign Exchange Rates''.

6. During the year, as required by the Accounting Standard (AS) - 28 "Impairment of Assets", the Company has reviewed potential generation of economic benefits from fixed assets and concluded that some of the plant and machinery (which were not in continuous use) aggregating to its written down value of Rs.41,264,498 as on 31 March 2013 are currently not foreseen to generate adequate economic returns over their useful lives. Consequently, these assets have been written down to their recoverable amount/value in use aggregating to Rs. 8,765,793.

7. In the opinion of the management all assets, other than fixed assets and noncurrent investments, have a value on realization in the ordinary course of business at least equal to the amount at which they are stated in the balance sheet. The provision for depreciation and for all known liabilities is adequate and not in excess of the amount reasonably stated.

8. The company has not made any provision for gratuity and towards leave encashment or Bonus as payable to its employees since the company has shut majority of its operations and has laid off all the employees as at 31st March 2013. Hence the guidelines mentioned in AS-15 "Employee Benefits" are not applicable.

9. In the absence of any intimation received from vendors regarding the status of their registration under "Micro, Small . and Medium Enterprises Development Act, 2006", the company is unable to comply with the disclosures required to be made under the said Act.

Note:

Previous year''s figures have been re-stated as per the list of related party as disclosed in Management Representation Letter

Armaan D&J DMCC was not disclosed as related party in the previous years Financial Statement, hence the previous year figures have been disclosed herein.

Notes:

i. Secondary segments identified are as per the requirements of Accounting Standard (AS) -17 "Segment Reporting" taking into account the organization structure as well as the differing risks and returns.

ii. The segment revenue and segment assets include the revenue and assets, respectively, which are identifiable with each segment and amounts allocated to the segments on a reasonable basis.

iii. Figures in the brackets pertain to the previous year.

Since there is no virtual / reasonable certainty of taxable income in future against which deferred tax assets can be realized, the Company has not recognized deferred tax assets (net) during the current year and has also derecognized deferred tax assets (net) Rs. 141,668,218 recognized up to 31 March 2012.

10. Previous year''s figures

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

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Mar 31, 2012

1. The Companyls factory at unit no-138/139, SDF-V SEEPZ Andheri (E) Mumbai-400096 has been facing labour problem due to various reasons. The Company had approached the Industrial court and filed a complaint against the Trade Union as also against the workmen. The Company had issued notice of lock-out dated 21st November 2011. The Industrial court has vide its order dated 25th November 2011 upheld the said notice of lock-out. The Company has suspended its operations from the said locations from 21st November 2011 as per the Notice of Lockout. Asa result, the books of accounts and other records of above-mentioned units could not be made available for audit. In the circumstances, the Company had to make certain provisions for expenses on estimated basis based on management's past experience.

2. The Company's Factory at Surat has been shutdown completely i.e. November 2011.

3. The consortium of bankers which had granted various working capital and export facilities have withdrawn these facilities and have called upon the Company to repay their outstanding. Further the Company has informed that the Company is in the process of negotiation with the banks. The banks are covered by way of mortgagee of various properties/ assets of the Company.

4. The company has changed the method of Accounting relating to foreign exchange transactions. The yearend assets and liabilities have not been converted at closing rate which is in violation of the method as prescribed by Accounting Standard 11 on Accounting for Foreign Exchange Transaction specified in the Companies (Accounting Standards) Rules, 2006.

5. In the opinion of Board of Directors all assets other than fixed assets and noncurrent investments, have a realizable value in the ordinary course of business which is not different from the amount at which it is stated and the provisions for all known liabilities are adequate and not in excess of the amounts reasonably necessary.

6. Prior period expenses of Rs. 0.14 Lakhs and income of Rs. 0.13 Lakhs (Previous year Prior period Expense of Rs. 1.75 Lakhs and income of Rs.0.40 Lakhs) are debited / credited to Miscellaneous Expenses / Miscellaneous Income.

7. The company has made provision amounting to Rs. 73.34 Lakhs for gratuity and Rs. 6.08 Lakhs towards leave encashment payable to its employees as at 31st March 2012. However they said sum is not actuarially valued as required byAS-15.

8. Details of foreign currency exposures that are hedged by option/forward instruments or otherwise:

9. The supplier's invoices or other documents furnished by them do not give any ostensible information about their status and in particular, whether a small scale industrial undertaking (SSI UNITS). Accordingly, it is not possible to disclose any authentic information about dues to SSI units.

10. In the absence of any intimation received from vendors regarding the status of their registration under "Micro, Small and Medium Enterprises Development Act, 2006", the company is unable to comply with the disclosures required to be made under the said Act.

11. The balance due to/from the parties are subject to confirmation.

12. Disclosure regarding investment in Associates as required under Clause 32 of Listing Agreement has been given in Note No 11.

13. A. List of Related Parties (As identified by Management)

Notes

1. The Company is predominantly engaged in the business of export of Diamonds and Gold studded Jewellery. These in the context of Accounting Standard 17 on Segment Reporting, as specified in The Companies (Accounting Standards) Rules, 2006, are considered to constitute one single primary segment. Further, there is no reportable secondary segment i.e. geographical segment.

2. The business segments have been identified considering:

i) The nature of the products

ii) The related risks and returns

iii) The internal financial reporting system

3. Inter segment transfers are made at the cost.

4. Interest expenses and interest income are reported as unallocated expense / income. Accordingly assets and liabilities relating to interest income and expenses are reported as in unallocated assets and liabilities respectively.

5. Segmental assets and liabilities does not include inter segment assets and liabilities.

14. Pevious year's Figures

The Revised Schedule VI has become effective from 1 April, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year's figures have been regrouped / reclassified wherever necessary to corresponded with the current year's classification / disclosure.

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Mar 31, 2011

I. CONTINGENT LIABILITIES NOT PROVIDED FOR IN RESPECT OF

31/03/2011 31/03/2010 Rupees Rapees

a) Property Tax 496,020 (429,884)

b) Guarantee* given to bank and others:

Sr. NAME OF THE BANK 31/03/2011 31/03/2010 No. Rupees Rupees

1. ICICIBANK 223,200,000 (225,550,000)

2. BANK OF INDIA 27,000,000 (27,000,000)

3. PUNJAB NATIONAL BANK 13,000,000 (13,000,000)

4. ABN AMRO BANK - (50,000,000)

Secured by counter gurantee of directors, lien on FDR Rs. I58,353,80l/- (Previous Year 159,686,689/-)

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 provisions for all known liabilities are adequate and not in excess of the amounts reasonably necessary.

3. Prior period expenses of Rs. 1,74,949/- and income of Rs. 40,034/- [Previous year Prior period Expense of Rs. 245,232/- and income of Rs. 896,954/-! are debited / credited to Miscellaneous Expenses / Miscellaneous Income.

4. The company has made provision amounting to Rs. 60,79,668/- for gratuity and Rs. 4,14,456/- towards leave encashment payable to its employees as at 31st March 2011. However the said sum is not actuarially valued as required by AS-15.

5. (a) The supplier's invoices or other documents furnished by them do not give any ostensible information about their status and in particular, whether a small scale industrial undertaking (SSI UNITS). Accordingly, it is not possible to disclose any authentic information about dues to SSI units.

(b) In the absence of any intimation received from vendors regarding the status of their registration under

"Micro, Small and Medium Enterprises Development Act, 2006", the company is unable to comply with the disclosures required to be made under the said Act.

6. RELATED PARTY DISCLOSURES:

Disclosures as required by the Accounting Standard 18 "Related Party Disclosures" are given below:

A. List of Related Parties ( As Per Managaement)

i) Associates

M/s. Rup Diamonds, M/s. Classic Gems, M/s. Pinky Diamonds, Comfort Investment Pvt. Ltd., M/s. Lazer Mac, Classic Jewellery Limited, Aarohi Diamonds Limited HK, Aarohi Diamonds Private Limited, Diamax Investment and Finance Private Limited, Armaan Diamonds Private Limited, Classic Gems and Jewels Pvt. Ltd., Rupen Diamonds Pvt. Ltd., Aarohi Diamonds LLC.

ii) Key Management Personnel and Relatives

Mr. Kumar C. Bhansali, Mr. Mayank R. Mehta, Mr. Nirav K. Bhansali, Mr. Hiren Shah, Mr. Chandrakant M. Bhansali.

7. SEGMENTAL INFORMATIONS:

A) Primary Segment

The Company's operations predominantly relate to export of Diamonds and Gold studded Jewellery.

Based on the guiding principle given in the Accounting Standard — 17 "Segment Reporting" issued by the Institute of Chartered Accountants of India, the Company's primary segments are Diamonds and Gold studded Jewellery.

The above business segments have been identified considering:

i) The nature of the products

it) The related risks and returns

iii) The internal financial reporting system.

B) Accounting policies

The accounting principles consistently used in preparation of financial statements are also consistently applied to record income and expenditure in individual segments. These are set out in the note on significant accounting policies.

Inter division transfers are made at the cost.

Interest expenses and interest income are reported as unallocated expense / income. Accordingly assets and liabilities relating to interest income and expenses are reported as in unallocated assets and liabilities respectively.

C) Secondary Segment

As the company operates significantly in export of the above-mentioned products, there is no secondary segment on the basis of geographical location or assets based locations.

8. Figures in Bracket are in respect of previous year.

9 Previous years figures have been rearranged and regrouped wherever considered necessary to make them comparable with the current year's figures. Signatures to Schedule I to XV

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Mar 31, 2010

1. CONTINGENT LIABILITIES NOT PROVIDED FOR IN RESPECT OF

Rupees Rupees

a) Income Tax Disputed in Appeal - (59,138,496)

b) Property Tax 429,884 -



c) Guarantees given to bank and others:

Sr.no. [NAME OF THE BANK CURRENT YR. PREVIOUS YR. AMOUNT (Rs.) AMOUNT (Rs.)

1 ICICI BANK 225,550,000 (357,630,000)

2 BANK OF INDIA 27,000,000 (20,500,000)

3 PUNJAB NATIONAL BANK 13,000,000 (19,500,000)

4 ABN AMRO BANK 50,000,000 (50,000,000)

TOTAL RS. 315,550,000 (447,630,000)



2. IN THE OPINION OF THE DIRECTORS

a) The current assets, loans and advances are approximately of the value stated, if realised in the ordinary course of business.

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

3. Prior period expense of Rs. 2,45,232/- and income of Rs.8,96,954/- [Previous year Prior period Expense of Rs. 320,285/- and income of Rs. 31,340/-] are debited / credited to Miscellaneous Expenses / Miscellaneous Income.

4. The company has made provision amounting to Rs. 58,87,624/- for gratuity and Rs. 6,54,734/- towards leave encashment payable to its employees as at 31st March 2010. However the said sum is not actuarially valued as required by AS-15.

5. (a) The suppliers invoices or other documents furnished by them do not give any ostensible information about their status and in particular, whether a small scale industrial undertaking (SSI UNITS). Accordingly, it is not possible to disclose any authentic information about dues to SSI units.

(b) In the absence of any intimation received from vendors regarding the status of their registration under

"Micro, Small and Medium Enterprises Development Act, 2006", the company is unable to comply with the disclosures required to be made under the said Act.

6. The balance due to / from the parties are subject to confirmation.

7. RELATED PARTY DISCLOSURES:

Disclosures as required by the Accounting Standard 18 "Related Party Disclosures" are given below.

C) Secondary Segment

As the company operates significantly in export of the above-mentioned products, there is no secondary segment on the basis of geographical location or assets based locations.

8. Figures in Brackets are in respect of previous year.

9. Previous years figures have been rearranged and regrouped wherever considered necessary to make them comparable with the current years figures.