Mar 31, 2015
NOTE: 1.
The Company has incurred a net loss of M 22,25.46 lacs for the year
ended 31st March, 2015 and as of that date, the Company's total
liabilities exceeded its total assets by M 33,68.65 lacs. In the
opinion of the management, the unjust levy of milk cess and other
related operating factors has eroded the net worth of the Company. The
uncertainty of the outcome of litigation in connection with milk cess
and other related operating factors has cast doubts about the Company's
ability to continue as going concern. In the opinion of the management,
as the litigation currently stands sub-judice with the Hon'ble Supreme
Court of India, the management is hopeful that such milk cess imposed
by the Government of Haryana shall be waived off along with interest
and other dues there on. The Company is in the process of formulating
its revised business plans and negotiating with stakeholder so as to
ensure continuity of operations of the Company and is hopeful of
turning around and expects that the net worth of the Company shall
become positive in near future.
NOTE: 2.
SEGMENT INFORMATION Primary segment
The Company is primarily engaged in the business of
manufacturing/processing of milk and milk products like Casein,
Lactose, Skimmed milk powder, Cheese, Butter, Pure Ghee, Premix etc.,
management considers the risk and rewards associated with these
products to be similar in nature. Accordingly, the entire operations of
the company are governed by the same set of risk and rewards and thus,
it operates in a single primary segment.
Secondary segment
The Company's business is organized into two key geographic segments.
Revenues are attributable to individual geographic segments based upon
the location of customers.
Other information
The accounting policies consistently used in the preparation of
financials statements are also applied to revenues and expenditure of
individual segments.
Segment information disclosures as required under Accounting
Standard-17 " Segment Reporting" issued by Companies (Accounting
Standard) Rules, 2006 as prescribed by Institute of Chartered
Accountant of India.
NOTE: 3.
LEASES
The Company has leased facilities under cancellable operating leases
arrangements with a lease term ranging from one to three years, which
are subject to renewal at mutual consent thereafter. The cancellable
arrangements can be terminated by either party after giving due notice.
The lease rent expenses recognized during the year amounts to M 22.16
lacs (Previous year M 16.41 lacs).
NOTE: 4.
The Company through its internal control processes identified an
instance of one of the employees colluding with a vendor for supply of
raw milk and found him issuing incorrect lab test results, thereby
rating the milk to be of superior quality as opposed to its actual
quality. The management has fled a first information report against the
said employee and the vendor involved in this matter, stating an
estimated loss incurred of M 0.79 lacs, however, as the case is
sub-judice and under investigation, management is in the process of
quantifying its impact on the financial statements and believes that
such amount is not expected to be material to the financial statements.
Pending resolution of the matter, the management has terminated the
services of such employee, discontinued business with such vendor and
has initiated necessary steps, including pursuing the legal cases
against the employee and the vendor for ensuring appropriate
recoveries.
NOTE: 5.
Pursuant to the reference fled by the Company with Board for Industrial
and Financial Reconstruction (BIFR) under section 15(1) of the Sick
Industrial Companies (Special Provisions) Act, 1985 the BIFR vide its
order dated 8th February, 2012 declared the Company as sick and
appointed Punjab National Bank being the Lead Bank as Operating Agency
(OA) to formulate rehabilitation plan for the Company. As per the
meeting held on 15th April, 2013 Company has submitted Debt
Restructuring Scheme (DRS) on 25th February, 2013. During the year, the
matter came up for hearing on 28th May, 2014, and the Hon'ble BIFR
Board observed that in the light of the Milk Cess matter being pending
before the Supreme Court, the DRS of the Company could not be
formulated, the Hon'ble Bench directed the Company and the Haryana
Livestock Development Board to keep the BIFR Board updated. Thereafter
the matter is yet to come up for hearing.
NOTE: 6.
In the opinion of the board of directors, current assets, loans and
advances have a value on realization in the ordinary course of business
at least equal to the amounts at which they are stated and provision
for all knows liabilities have been made in accounts.
NOTE: 7.
Previous year figures have been regrouped /recasted, wherever considered
necessary to make them comparable with those of the current year.
Mar 31, 2014
NOTE : I As at As at
March 31,2014 March 31, 2013
CONTINGENT LIABILITIES AND PROVISIONS Amount in Lac Amount in Lac
a) Contingent liabilities:
Claims against the Company not 3,73.82 3,45.14
acknowledged as debts
i) Excise duty 2,61.25 2,61.25
ii) Service tax - 1.39
iii) Custom duty 10.60 -
iv) Entry tax 95.51 76.04
v) Income tax 6.46 6.46
Note:
i) Excise duty: During 2005-06, the Company had availed CENVAT credit
of Rs.77.21 lacs on certain steel and other similar items (i.e.
''supporting goods'') as inputs used in fabrication of storage tanks
other structures. As per the Excise Authorities, this credit of Rs.77.21
lacs pertains to inputs used in fabrication of milk storage tanks and
other supporting structures of storage tanks and has therefore denied
all the aforesaid credit on the ground that the inputs and goods
mentioned above neither qualify as capital goods nor inputs as per
CENVAT Credit Rules, 2004 for manufacture of the final products viz.
Casein and Lactose. However, the Company has deposited demand of Rs.77.21
lacs together with interest thereon of Rs.5.19 lacs under protest. The
case is pending in CESTAT and is awaited for regular hearing.
Further during the year 2007-08 to 2009-10 the Company also availed
CENVAT credit of T78.30 lacs on certain steel items & other items as
input used in fabrication of storage tanks. The excise authority
(Panchkula) issued show cause notice for denial of the
said CENVAT credit. The Company filed an appeal before Commissioner and
commissioner confirmed a demand of CEVAT Credit amounting to Rs.78.30
lacs along with a penalty of amount equal to the Cenvat Credit,
interest of Rs.4.57 lacs and Rs.17.68 lacs of CENVAT Credit wrongly taken
and reversed. The Company had filed appeal before CESTAT and hearing on
stay application was fixed on 14th October, 2012 which was adjourned to
11th December, 2012 and thereafter on the request of department
representative the same was adjourned to 12th February, 2013. On this
date, CESTAT ordered to deposit Rs.15 lacs as predeposit within 12 weeks
which was deposited by Company on 15th May, 2013.
Based upon the legal advise obtained by the Company, the management
believes that the Company has reasonably good chances of winning the
case and hence currently no provision has been recorded.
ii) Custom duty: During 2011-12, the Company had exported 17.070 MT of
Cheese Curd to a customer in Saudi Arabia and out of total 17.070 MT
Cheese Curd of 14.218 MT was rejected by customer due to some
functionality issues in stretching. The Company re-imported the goods.
The Additional Commissioner of Customs (Imports) vide its order dated
7th May, 2012 confiscated the goods and imposed a penalty of Rs.3.6 lacs
and redemption fine of Rs.7 lacs stating that re-imported goods had
violated the prescribed condition under the FSA Act and hence were
liable for confiscation. The Company deposited penalty of Rs.3.6 lacs and
redemption fine of Rs.7 lacs on and got the goods released. The Company
filed an appeal before Commissioner of Customs (Appeals), Mumbai
against the order of Additional Commissioner of Customs (Imports)
imposing penalty and fine stating that re-import was not against the
provisions of FSA Act. The Commissioner of Customs (Appeals), Mumbai
upheld the order of Additional Commissioner of Customs (Imports) and
rejected the claim of Company vide order dated 27th June, 2013. The
Company aggreived by the order of Commissioner of Customs (Appeals),
Mumbai has preferred an appeal before CESTAT, Mumbai on 10th October,
2013. The case is pending in CESTAT and is awaited for regular hearing.
iii) Entry tax: Local Area Development Tax (''LADT'') was imposed in
the state of Haryana with effect from 1st April, 2000. In 2007-08, the
LADT was quashed and declared ultra-virus by the Hon''ble High Court of
Punjab and Haryana in its order dated 1st April,2008. The State
Government replaced the LADT with Entry Tax and it was also declared
ultra-virus by the Hon''ble High Court of Punjab and Haryana. The State
Government filed an appeal in the Hon''ble Supreme Court. The Hon''ble
Supreme Court passed an order dated 30th October, 2009, directing all
assesses to file all the returns and staying recovery of tax till final
order. The final order is still awaited.
iv) Income tax: During the year ended 31st March, 2012, the Income Tax
Department carried out assessment for assessment years 2006-07 and
2008-09 and issued a notice of demand u/s 156 of the Income Tax Act,
1961 for Rs.6.06 lacs and Rs.0.40 lacs respectively. The Company has filed
an appeal with ITAT, New Delhi against the order of Commissioner
(Appeals).
i) The provisions of ''The Haryana Murrah Buffalo and Other Milch
Animal Breed (Preservation and Development of Animal Husbandry and
Dairy Development Sector) Act, 2001, requires every milk processing
company to pay milk cess not exceeding fifteen paisa per liter on
registered capacity of a milk plant under Milk and Milk Product Order,
1992. Accordingly Haryana State Government, vide its notification no.
6388-AH-4-2001/16142 dated 9th September, 2001, imposed a milk-cess of
ten paisa per liter on the registered capacity of plants.
In 2001, the Company filed a writ petition before the Hon''ble High
Court of Punjab and Haryana challenging the imposition of such cess as
against the Constitution of India. The Hon''ble High Court of Punjab and
Haryana issued a stay order dated 9th July, 2004 on such imposition and
directed the Company to continue to pay 1/3rd of the total milk-cess
amount to the State Government on registered capacity till the final
outcome of the case and Company provided the same in the books of
account. In 2004, a similar cess was levied in the state of Punjab by
the Government of Punjab under the Punjab Dairy Development Board
Ordinance, 2000, and was upheld unconstitutional by the Hon''ble Supreme
Court. Based upon this order of the Hon''ble Supreme Court, the stay
order imposed by Hon''ble High Court of Punjab and Haryana and as per
the legal advice obtained by the Company at that point of time, the
Company discontinued the provision of milk-cess in the books of
account.
On 28th May, 2010 the Hon''ble High Court of Punjab and Haryana
dismissed the Company''s writ petition and upheld the levy of cess by
State Government on milk plants. On 18th August, 2010 the Company filed
a review application with the Hon''ble High Court. But such application
was dismissed by Hon''ble High Court of Punjab and Haryana. On 18th
October, 2010 the Company filed a special leave petition before the
Hon''ble Supreme Court challenging the impugned judgment. The matter was
listed before the Hon''ble Supreme Court on 5th August, 2011. The
Hon''ble Supreme Court has issued a notice to the Govt. of Haryana on
Special Leave Petition filed by the Company as well as on the
application for interim stay. On 20th April, 2012, the Government of
Haryana filed its reply and Hon''ble Supreme Court has ordered the case
to be put before the Hon''ble Bench.
The Company had also received a notice dated 1st April, 2011 from Semen
Bank Officer, Haryana Livestock Development Board, Karnal demanding the
payment of Rs.21,25.75 lacs as arrears of Cess and Rs.1,28.72 lacs towards
interest on the full unpaid amount for the period 1st January, 2011 to
31st March, 2011.
The Hon''ble Supreme Court in its order dated 7th September, 2012
granted an interim stay on impugned judgment passed by The Hon''ble High
Court, subject to petitioners depositing 50% of the cess levied and
demanded by the State Government for expedited the hearing in this
case. Based on the order of The Hon''ble Supreme Court, the Company has
deposited 50% of milk cess liability amounting to Rs.5,91 lacs till 7th
September, 2012 and after that, there is no hearing held in the Supreme
Court till date. ii) In the opinion of the management, the unjust levy
of milk cess has eroded the net worth of the Company, and in view of
the erosion of the net worth, the Company has become a sick industrial
company in terms of section 3(1)(o) of Sick Industrial Companies
(Special Provisions) Act, 1985 in the hearing held on 8th February,
2012. The Company has worked out a business and debt restructuring plan
and submitted the draft of the same with the BIFR, which is based on
the following major assumptions:
- During last year, the Government of India lifted ban on export of
casein, a product manufactured by the Company, and since then the
Company is continuously exporting casein to various countries across
the world and the casein sales contribute good margins.
- In the opinion of the management, as the litigation currently
stands sub-judice with the Hon''ble Supreme Court of India, the milk
cess imposed by the Government of Haryana on the plant shall be waived
off along with interest there on.
- The Company has currently made draft submissions to the BIFR for
waiver of milk cess and interest thereon so that the viability of the
future operations of the Company could be maintained and the Company
could turn around its operations profitable.
In view of the above developments, coupled with the generation of cash
profits from its operations, the management of the Company believes
that even though there is significant uncertainty in connection with
the outstanding litigation and the Company''s net worth being fully
eroded, the Company is hopeful of turning around and expects that the
net worth of the Company shall become positive in near future.
c) Other matters incidental to milk cess related litigation:
The management of the Company has obtained an opinion from an
independent firm of attorneys in connection with the outstanding
litigation relating to the milk cess matter as referred to in Note
XXIX(b) above. In the opinion of the management, and upon consideration
of the opinion from an independent firm of attorneys, the Company
stands a good case to argue of obtaining a waiver on the interest on
milk cess liability from the Hon''ble Supreme Court. The Company also
has the discretion to make a submission with the BIFR for waiving the
interest on milk cess. Accordingly, the Company has written back the
provision for interest on milk cess aggregating Rs.11,44.36 lacs accrued
in prior years and disclosed the same as an exceptional item in the
statement of profit and loss.
d) Particulars of unhedged foreign currency exposure as at the
reporting date:
Unhedged foreign currency exposure as at year end
RELATED PARTY DISCLOSURES
a) Disclosure of related parties and relationship between the parties
Nature of relationship Name of related party
Entities in which Directors Modern Steels Limited, Chandigarh Finance
of the Company are able to Private Limited, Mala Builders Private
exercise control or have Limited, Modern Dairyfarms Limited, Times
significant influence Finvest & Commerce Limited, Shree Ganesh
Investments & Industries Limited, Smile
Finvest Private Limited, Bharat Forgings
Private Limited, Kamal Leasing Limited,
Punjab Financial Corporation, Haryana
Financial Corporation, North India
Technical Consultancy Organization Limited
Indian Acrylics Limited, Alps Industries
Key Management Personnel Mr. Krishan Kumar Goyal,
(KMP) Mr. A.K. Aggarwal, Dr. P.K. Jain
Relatives of KMP Mr. Amarjit Goyal, Father,
Mrs. Rattan Mala Goyal, Mother,
Mrs. Alka Goyal, Wife,
Mr. Aditya Goyal, Son,
Mrs. Sonam Jhunjhunwala, Daughter
SEGMENT INFORMATION Primary Segment
The Company is primarily engaged in the business of
manufacturing/processing of milk and milk products like Casein,
Lactose, Skimmed milk powder, Cheese, Butter, Pure Ghee, Premix etc.,
management considers the risk and rewards associated with these
products to be similar in nature. Accordingly, the entire operations of
the company are governed by the same set of risk and rewards and thus,
it operates in a single primary segment.
Secondary Segment
The Company''s business is organized into two key geographic segments.
Revenues are attributable to individual geographic segments based upon
the location of customers.
Other information
The accounting policies consistently used in the preparation of
financials statements are also applied to revenues and expenditure of
individual segments.
NOTE : II EARNING PER SHARE
The calculation of Earning Per Share (EPS) as disclosed in the
statement of profit and loss has been made in accordance with
Accounting Standard (AS)-20 on "Earning Per Share" issued by Companies
(Accounting Standards) Rules, 2006.
Pursuant to the approval for debt restructuring obtained from the
Corporate Debt Restructuring Empowered Group (CDREG) and the respective
banks within the consortium, Working capital term loan (WCTL) and
Funded interest term loan(FITL) are converted into Optionally
Convertible Debentures (OCD) at a coupon rate of 0.001% w.e.f 1st
April, 2013. During the year ended 31st March, 2014, Company has earned
profits and these potential equity shares (0.001% OCD) are dilutive,
hence these are considered for computation of earnings per share on
face value. Although the actual conversion of OCD''s into Equity Shares
shall be subject to the SEBI Guidelines and provisions of the
Memorandum & Articles of Association of the Company. During the last
year Company had incurred losses, these potential equity shares (0.001%
OCD) were anti dilutive, hence these were not considered for
computation of loss per share.
NOTE : III LEASES
The Company has leased facilities under cancellable operating leases
arrangements with a lease term ranging from one to three years, which
are subject to renewal at mutual consent thereafter. The cancellable
arrangements can be terminated by either party after giving due notice.
The lease rent expenses recognized during the year amounts to Rs.16.41
lacs (Previous year Rs.6.73 lacs).
NOTE : IV
Pursuant to the reference filed by the Company with BIFR under section
15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985
the BIFR vide its order dated 8th February, 2012 declared the Company
as sick and appointed Punjab National Bank being the Lead Bank as
Operating Agency (OA) to formulate rehabilitation plan for the Company.
As per the meeting held on 15th April, 2013, Company submitted Debt
Restructuring Scheme (DRS) on 25th February 2013. In the meeting held
on 10th September 2013, the OA informed that the DRS submitted by the
Company was not fully tied up and the Company has been asked to
re-submit the fully tied up DRS. The next hearing is scheduled for 28th
May, 2014.
NOTE : V
In the opinion of the board of directors, current assets, loans and
advances have a value on realization in the ordinary course of business
at least equal to the amounts at which they are stated and provision
for all knows liabilities have been made in accounts.
NOTE : VI
Previous year figures have been regrouped /recasted, wherever
considered necessary to make them comparable with those of the current
year.
Mar 31, 2013
NOTE:I
BACKGROUND AND NATURE OF OPERATIONS
Modern Dairies Limited (''the Company'') was incorporated in 1992 and is
primarily engaged in business of manufacturing/processing of milk and
milk products like Milk Powders, Cheese, Butter, Pure Ghee and other
milk based products like Casein, Whey Protein Concentrate and Lactose,
etc.
NOTE : II
As at As at
CONTINGENT LIABILITIES AND PROVISIONS March 31,2013 March 31, 2012
Amount in Rs. Lac Amount in
Rs. Lac
Particulars
i) Contingent liabilities:
a) Claims against the Company not
acknowledged as debts; 3,45.14 3,21.60
(i) Excise duty 2,61.25 2,56.06
(ii) Service tax 1.39 1.39
(iii) Entry tax 76.04 57.69
(iv) Income tax 6.46 6.46
(i) Excise duty: During 2005-06, the Company had availed CENVAT credit
of Rs. 77.21 lacs on certain steel and other similar items (i.e.
''supporting goods'') as inputs used in fabrication of storage tanks
other structures. As per the Excise Authorities, this credit of Rs. 77.21
lacs pertains to inputs used in fabrication of milk storage tanks and
other supporting structures of storage tanks and has therefore denied
all the aforesaid credit on the ground that the inputs and goods
mentioned above neither qualify as capital goods nor inputs as per
CENVAT Credit Rules, 2004 for manufacture of the final products viz.
Casein and Lactose. However, the Company has deposited demand of Rs.
77.21 lacs together with interest thereon of Rs. 5.19 lacs under protest.
The case is pending in CESTAT and is awaited for regular hearing.
Further during the year 2007-08 to 2009-10 the Company also availed
CENVAT credit of Rs. 78.30 lacs on certain steel items & other items as
input used in fabrication of storage tanks. The excise authority
(Panchkula) issued show cause notice for denial of the said CENVAT
credit. The Company filed an appeal before Commissioner and
commissioner confirmed a demand of CENVAT Credit amounting to Rs. 78.30
lacs along with a penalty of amount equal to the Cenvat Credit,
interest of Rs. 4.57 lacs and Rs. 17.68 lacs of CENVAT Credit wrongly taken
and reversed. The Company had filed appeal before CESTAT and hearing on
stay application was fixed on 14''" October, 2012 which was adjourned to
11* December, 2012 and thereafter on the request of department
representative the same was adjourned to 12" February, 2013. On this
date, CESTAT ordered to deposit Rs. 15 lacs as predeposit within 12 weeks
which was deposited by Company on 15mMay,2013.
Based upon the legal advise obtained by the Company, the management
believes that the Company has reasonably good chances of winning the
case and hence currently no provision has been recorded.
(ii) Service tax: A show cause notice was received from The Assistant
Commissioner Central Excise Division (Ambala) for denial of exemption
under notification no.18/2009 dated 7th July, 2009. The case is
pertaining to the period from 1*'' April, 2010 to 30"'' September, 2010.
The service tax involved in this case is Rs. 1.39 lacs. The Assistant
Commissioner Customs & Central Excise Division (Ambala) had passed an
Order vide Original No. 7/ST/AC/Amb/2012 dated 27''" July, 2011. The
Company has filed Appeal before Commissioner (Appeals), Gurgaon. The
case is awaiting for personal hearing. Based upon the legal advise
obtained by the Company, the management believes that the Company has
reasonably good chances of winning the case and hence currently no
provision has been recorded.
(iii) Entry tax: Local Area Development Tax (''LADT'') was imposed in the
state of Haryana with effect from 1" April, 2000. In 2007-08, the LADT
was quashed and declared ultra-virus by the Hon''ble High Court of
Punjab and Haryana in its order dated 1 "April, 2008. The State
Government replaced the LADT with Entry Tax and it was also declared
ultra-virus by the Hon''ble High Court of Punjab and Haryana. The State
Government filed an appeal in the Hon''ble Supreme Court. The Hon''ble
Supreme Court passed an order dated SO1" October, 2009, directing all
assesses to file all the returns and staying recovery of tax till final
order. The final order is still awaited.
(iv) Income tax: During the year ended 31" March, 2012, the Income Tax
Department carried out assessment for assessment years 2006- 07 and
2008-09 and issued a notice of demand u/s156 of the Income Tax Act,
1961 for Rs. 6.06 lacs and Rs. 0.40 lacs respectively. The Company has
filed an appeal with ITAT, New Delhi against the order of Commissioner
(Appeals).
The provisions of ''The Haryana Murrah Buffalo and Other Milch Animal
Breed (Preservation and Development of Animal Husbandry and Dairy
Development Sector) Act, 2001 (''Act'')'', requires every milk processing
company to pay milk cess not exceeding fifteen paisa per liter on
registered capacity of a milk plant under Milk and Milk Product Order,
1992. Accordingly Haryana State Government, vide its notification no.
6388-AH-4-2001/16142 dated 9''" September. 2001 imposed a milk-cess
often paisa per liter on the registered capacity of plants.
In 2001. the Company filed a writ petition before the Hon''ble High
Court of Punjab and Haryana challenging the imposition of such cess as
against the Constitution of India. The Hon''ble High Court of Punjab and
Haryana issued a stay order dated 9''" July, 2004 on such imposition and
directed the Company to continue to pay 1/3rd of the total milk-cess
amount to the State Government on registered capacity till the final
outcome of the case. Till 2004-05, the Company had provided milk-cess
amounting to Rs. 3,53.75 lacs in the books of account. In 2004. a similar
cess was levied in the state of Punjab by the Government of Punjab
under the Punjab Dairy Development Board Ordinance, 2000, and was
upheld unconstitutional by the Hon''ble Supreme Court. Based upon this
order of the Hon''ble Supreme Court, the stay order from the Hon''ble
High Court of Punjab and Haryana and as per the legal advice obtained
by the Company at that point of time, the Company discontinued the
provision of milk-cess in the books of account as it was believed that
the chances of cess being levied on the Company for the period after
the year 2004-2005 of Rs. 4,21.88 lacs would be remote and hence no
provision against this was considered necessary.
On 28''" May, 2010 the Hon''ble High Court of Punjab and Haryana
dismissed the Company''s writ petition and upheld the levy of cess by
State Government on milk plants. On 18''" August, 2010 the Company filed
a review application with the Hon''ble High Court. Subsequently, the
Company''s review application with Hon''ble High Court of Punjab and
Haryana has been dismissed. On IS* October, 2010 the Company also filed
a special leave petition before the Hon''ble Supreme Court challenging
the impugned judgment. The matter was listed before the Hon''ble Supreme
Court on 5''" August, 2011. The Hon''ble Supreme Court has issued a
notice to the Govt, of Haryana on Special Leave Petition filed by the
Company as well as on the application for interim stay. On 20,h April,
2012, the Government of Haryana filed its reply and The Hon''ble Supreme
Court has ordered the case to be put before the Hon''ble Bench.
The Company had also received a notice dated 1 "April ,2011 from Semen
Bank Officer, Haryana Livestock Development Board, Karnal demanding the
payment of Rs. 21,25.75 lacs as arrears of Cess and Rs. 1,28.72 lacs
towards interest on the full unpaid amount for the period 1" January,
2011 to 31 "March, 2011.
Further, The Hon''ble Supreme Court in its order dated 7''" September,
2012 granted an interim stay on impugned judgment passed by The Hon''ble
High Court, subject to petitioners depositing 50% of the cess levied
and demanded by the State Government for expedited the hearing in this
case.
Based on the order of The Hon''ble Supreme Court, the Company has
deposited 50% of milk cess liability amounting to Rs. 5,91 lacs till 7,h
September, 2012 (date of the order) and after that there is no hearing
held in the Supreme Court till date.
c) Other matters incidental to milk cess related litigation
Based upon a legal opinion obtained by the Company from an independent
law firm in connection with the method in which the Company had been
computing and recognizing the liability on account of interest on milk
cess in terms with the provisions of The Haryana Murrah Buffalo and
Other Milch Animal Breed (Preservation and Development of Animal
Husbandry and Dairy Development Sector) Act, 2001. the Company has,
during the year ended 31" March, 2013, written back the interest of Rs.
13,06.96 lacs being provided in excess in prior years.
d) In the opinion of the management, the unjust levy of milk cess has
completely eroded the net worth of the Company. In view of the complete
erosion of the net worth, the Company has become a sick industrial
company in terms of section 3(1)(o) of Sick Industrial Companies
(Special Provisions) Act, 1985 in the hearing held on 8''" February,
2012. The Company has worked out a business and debt restructuring plan
which is based on the following major assumptions:
i) During the year, Government of India lifted ban on export of casein,
since then the Company is continuously exporting casein to various
countries across the world and the casein sales contributes good
margin.
ii) In opinion of the management, the milk cess imposed by the
Government of Haryana on the plant shall be waived off along with
interest and other dues there on.
In view of the above, the management of the Company is hopeful of
turning around and expects that the net worth of the
Company shall become positive in near future.
NOTE : III SEGMENT INFORMATION
Primary Segment
The Company is primarily engaged in the business of
manufacturing/processing of milk and milk products like Casein,
Lactose, Skimmed milk powder, Cheese, Butter, Pure Ghee, Premix etc.,
management considers the risk and rewards associated with these
products to be similar in nature. Accordingly, the entire operations of
the company are governed by the same set of risk and rewards and thus,
it operates in a single primary segment.
Secondary Segment
The Company''s business is organized into two key geographic segments.
Revenues are attributable to individual geographic segments based upon
the location of customers.
Other information
The accounting policies consistently used in the preparation of
financials statements are also applied to revenues and expenditure of
individual segments.
Segment information disclosures as required under Accounting
Standard-17 " Segment Reporting" issued by Companies (Accounting
Standard) Rules, 2006 as prescribed by Institute of Chartered
Accountant of India.
NOTE : IV
LEASES
The Company has leased facilities under cancellable operating leases
arrangements with a lease term ranging from one to three years, which
are subject to renewal at mutual consent thereafter. The cancellable
arrangements can be terminated by either party after giving due notice.
The lease rent expenses recognized during the year amounts to f 6.73
lacs (Previous year Rs. 5.64 lacs).
NOTE :V
Pursuant to the reference filed by the Company with BIFR under section
15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985
the BIFR vide its order dated 8''" February, 2012 declared the Company
as sick and appointed Punjab National Bank being the Lead Bank as
authorised agency to formulate rehabilitation plan for the Company. As
per the meeting held on 15* April, 2013 Company has submitted Debt
Restructuring Scheme (DRS) on 25''" February, 2013.
NOTE : VI
In the opinion of the board of directors, current assets, loans and
advances have a value on realization in the ordinary course of business
at least equal to the amounts at which they are stated and provision
for all known liabilities have been made in accounts.
NOTE : VII
As per the transfer pricing legislation under sections 92-92F of the
Income Tax Act, 1961, the Company is required to use certain specific
methods in computing arm''s length prices of transactions with
associated enterprises and maintain adequate documentation in this
respect. Since law requires existence of such information and
documentation to be contemporaneous in nature, the Company is in the
process of appointing independent consultants for conducting a Transfer
Pricing Study (the ''Study'') to confirm that the transactions with
associate enterprises undertaken during the financial year are on an
"arms length basis". Management is of the opinion that the Company''s
transactions are at arm''s length and that the results of the proposed
study will not have any impact on the financial statements and that
they do not expect any transfer pricing adjustments.
NOTE : VIII SUBSEQUENT EVENTS
In pursuance to the CDR rework package sanctioned to the Company vide
Letter No. BY.CDR (SKK)No./5874/2011-12 dated 19" October, 2011 by
CDREG, the Allotment Committee of the Company in its meeting held on
3rd April, 2013 allotted 496530325 Optionally Convertible Debentures
(OCDs) of Rs. 1 each for an aggregate amount of Rs. 49,65,30,325 at par,
carrying a coupon rate of 0.001% to the lenders upon conversion of
outstanding amount of Working Capital Term Loan (WCTL) and Funded
Interest Term Loan (FITL).
NOTE:IX
Previous year figures have been regrouped /recasted, wherever
considered necessary to make them comparable with those of the current
year.
Mar 31, 2012
BACKGROUND AND NATURE OF OPERATIONS
Modern Dairies Limited ('the Company') was incorporated in 1992 and is
primarily engaged in business of manufacturing/processing of milk and
milk products like Milk Powders, Cheese, Butter, Pure Ghee and other
milk based products like Casein, Whey Protein Concentrate and Lactose,
etc.
a) Details of shares issued pursuant to contract without payment being
received in cash, allotted as fully paid up by way of bonus issues and
brought back during the last 5 years to be given for each class of
shares
During the last five years the Company has not issued any equity shares
pursuant to a contract without payment being received in cash, other
than issuance of bonus shares. The Company issued 8753100 bonus equity
shares in the year 2007-2008 in the ratio of 1:1. There has been no
buy-back of shares in the current year and preceding five years. On
23rd July, 2008, 1163661 equity shares were issued to the Promoters and
Promoters Group on conversion of warrants (on 29th November, 2007 the
Company had allotted 3000000 convertible share warrants to Promoters
and Promoters Group companies on preferential basis at a price ofRs. 81
per share).
a) Details of security for term loans from banks
Term loans from banks are secured by way of equitable mortgage of fixed
assets both present and future including land & building ofthe Company
on first pari-passu basis and are also guaranteed by the promoter ofthe
Company.
b) Details of security for corporate loans
Corporate loans are secured by way of mort age and charge of immovable
and movable assets both present and future and it is also secured by
way of charge/assignment on all bank accounts.
c) Terms of repayment
Pursuant to the rework proposal approved under the corporate debt
restructuring (CDR) scheme by CDR Empowered Group and sanctioned by
respective banks under the consortium, following interest rates and
schedules of repayment have been agreed with the Company:
i) Working capital term loans(WCTL):
At the end of two years, outstanding of WCTL shall be converted into
Optionally Convertible Debentures (OCD) at a coupon rate of 0.001%.
Holders of OCD shall have the right to convert the said OCD into fully
paid equity shares of the Company during 18 months from the date of
issuance of such OCD as per the then applicable SEBI guidelines. In the
event of OCD not being ' converted into equity, the same will be
redeemable at the end of restructuring package i.e. in financial year
2019 in one bullet payment.
ii) Funded interest term loans(FITL):
At the end of two years, outstanding of FITL shall be converted into
Optionally Convertible Debentures (OCD) at a coupon rate of 0.001%.
Holders of OCD shall have the right to convert the said OCD into fully
paid equity shares of the Company during 18 months from the date of
issuance of such OCD as per the then applicable SEBI guidelines. In the
event of OCD not being converted into equity, the same will be
redeemable at the end of restructuring package i.e. in financial year
2019 in one bullet payment.
iii) From others (unsecured):
Loans taken from others have interest rate ranging from 10% to 14.5%.
All these loans along with interest are due for repayment in the
financial year 2013-14.
Cash credit/export credit from banks is secured by way of hypothecation
of current assets ofthe company comprising of Raw Material, Stock in
process, finished goods , stores & spares, goods-in-transit,
receivables and any other security acceptable on pari passu basis. It
is also secured by equitable mortgage of fixed assets including land &
building ofthe Company on pari-passu basis with other banks and is also
guaranteed by the promoter ofthe Company.
NOTE : iv
CONTINGENT LIABILITIES AND PROVISIONS
As at As at
March 31, 2012 March 31, 2011
Amount in Rs. Lac Amount in Rs. Lac
a) Claims against the Company
not acknowledged as debts; 3,21.60 1,97.67
(i) Excise duty 2,56.06 1,55.51
(ii) Service tax 1.39 -
(iii) Entry tax 57.69 42.16
(iv) Income tax 6.46 -
(i) Excise duty: During 2005-06, the Company had availed CENVAT credit
ofRs. 77.21 lacs on certain steel and other similar items (i.e.
'supporting goods') as inputs used in fabrication of storage tanks
other structures. As per the Excise Authorities, this credit of Rs. 77.21
lacs pertains to inputs used in fabrication of milk storage tanks and
other supporting structures of storage tanks and has therefore denied
all the aforesaid credit on the ground that the inputs and goods
mentioned above neither qualify as capital goods nor inputs as per
CENVAT Credit Rules, 2004 for manufacture ofthe final products viz.
Casein and Lactose. However, the Company has deposited demand of Rs.
77.21 lacs together with interest thereon of 15.19 lacs under protest.
The case is pending in CESTAT and is awaited for regular hearing.
Further during the year 2007-08 to 2009-10 the Company also availed
CENVAT credit of Rs. 78.30 lacs on certain steel items & other items as
input used in fabrication of storage tanks. The excise authority
(Panchkula) issued show cause notice for denial of the said CENVAT
credit. The Company filed an appeal before the Commissioner and the
commissioner confirmed a demand of CENVAT Credit amounting to Rs.78.30
lacs along with a penalty of amount equal to the CENVAT Credit,
interest of Rs. 4.57 lacs and Rs.17.68 lacs of CENVAT Credit wrongly taken
and reversed. The Company had filed appeal before CESTAT and the case
is awaited for regular hearing.
Based upon the legal advice obtained by the Company, the management
believes that the Company has good chances of winning the case and
hence no provision against thereof is considered necessary at this
point in time
(ii) Service tax: A show cause notice was received from The Assistant
Commissioner Central Excise (Ambala) for denial of exemption under
notification no. 18/2009 dated 7th July, 2009. The case is pertaining
to the period from 1st April, 2010 to 30th September, 2010. The
service tax involved in this case is Rs. 1.39 lacs. The company had filed
reply to the Show Cause Notice. The personal hearing in the matter was
attended on 30st' April, 2012.
The Company will defend the matter, however chances of winning the case
is more hence, no provision has been considered necessary in the books
of accounts.
(iii) Entry tax: Local Area Development Tax ('LADT') was imposed in the
state of Haryana with effect from 1S! April 2000. In 2007-08, the LADT
was quashed and declared ultra-vires by the Hon'ble High Court of
Punjab and Haryana in its order dated 1 st April 2008. The State
Government replaced the LADT with Entry Tax and it was also declared
ultra-virus by the Hon'ble High Court of Punjab and Haryana. The State
Government filed an appeal in the Hon'ble Supreme Court. The Hon'ble
Supreme Court passed an order dated 30th October 2009, directing all
assesses to file all the returns and staying recovery of tax till final
order. The final order is still awaited.
(iv) Income tax: During the year ended 31st March, 2012, the Income
Tax Department carried out assessment for assessment years 2006-07 and
2008-09 and issued a notice of demand u/st56 ofthe Income Tax Act, 1961
for Rs. 6.06 lacs and Rs. 0.40 lacs respectively. The Company has filed
application for rectification of the order u/s 154 of the Income Tax
Act, 1961 with Assistant Commissioner of Income Tax as in its opinion,
the amount considered as inadmissible by the Income Tax Department
should be adjusted against the carry forward losses for the respective
years, and hence, the Company is not liable to make payment towards
such demands. Accordingly, no provision has been recognised in the
financial statements for these years.
The provisions of The Haryana Murrah Buffalo and Other Milch Animal
Breed (Preservation and Development of Animal Husbandry and Dairy
Development Sector) Act, 2001 ('Act')', requires every milk
processing company to pay milk cess not exceeding fifteen paisa per
litre on registered capacity of a milk plant under Milk and Milk
Product order, 1992.Accordingly Haryana State Government, vide its
notification no. 6388-AH-4-2001/16142 dated 9th September, 2001,
imposed a milk-cess often paisa per litre on the registered capacity of
plants.
In 2001, the Company filed a writ petition before the Hon'ble High
Court of Punjab and Haryana challenging the imposition of such cess as
against the Constitution of India. The Hon'ble High Court of Punjab and
Haryana issued a stay order dated 9thJuly, 2004 on such imposition and
directed the Company to continue to pay 1/3'" ofthe total milk-cess
amount to the State Government on registered capacity till the final
outcome ofthe case. Till 2004-05, the Company had provided milk-cess
amounting toRs. 3,53.75 lacs in the books of account. In 2004, a similar
cess was levied in the state of Punjab by the Government of Punjab
under the Punjab Dairy Development Board Ordinance, 2000, and was
upheld unconstitutional by the Hon'ble Supreme Court. Based upon this
order ofthe Hon'ble Supreme Court, the stay order from the Hon'ble High
Court of Punjab and Haryana and as per the legal advice obtained by the
Company at that point of time, the Company discontinued the provision
of milk-cess in the books of account as it believed that the chances of
cess being levied on the Company for the period after the year
2004-2005 of Rs. 4,21.88 lacs would be remote and hence no provision
against this was considered necessary.
On 28th May, 2010 the Hon'ble High Court of Punjab and Haryana
dismissed the Company's writ petition and upheld the levy ofcessby
state Government on milk plants. On 18th'August, 2010theCompanyfileda
review application with the Hon'ble High Court. Subsequently the
Company's review application with Hon'ble High Court of Punjab and
Haryana has been dismissed. On 18'th October, 2010 the Company also
filed a special leave petition before the Hon'ble Supreme Court
challenging the impugned judgment. The matter was listed before the
Hon'ble Supreme Court on Rs.August, 2011. The Hon'ble Supreme Court
has issued a notice to the Govt, of Haryana on Special Leave Petition
filed by the Company as well as on the application for interim stay. On
20th April, 2012 the Government of Haryana filed its reply and The
Hon'ble Supreme Court has ordered the case to be put before the
Hon'ble Bench. As the Hon'ble Supreme Court is closed from 14th May,
2012 till 1st July, 2012 the case shall come up for hearing before the
Hon'ble Bench after the Supreme Court re-opens.
The Company had also received a notice dated 1st April, 2011 from
Semen Bank Officer, Haryana Livestock Development Board, Karnal
demanding the payment ofRs. 21,25.75 lacs as arrears of Cess andRs. 1,28.72
lacs towards interest on the full unpaid amount for the period from
1st January, 2011 to 31st March, 2011. In view of the above
developments and as advised by legal attorneys, the Company, as at 31st
March, 2012 has accrued for Milk Cess liability amounting to Rs.32,15.27
lacs (previous year Rs. 25,18.63 lacs) as demanded by Haryana Livestock
Development Board.
During the year ended 31st March, 2012 the Company has recorded a
provision for milk cess liability ofRs. 84.38 lacs and interest thereon Rs.
6,12.25 lacs as disclosed under note XXVIII.
NOTE :v SEGMENT INFORMATION Primary Segment
The Company is primarily engaged in the business of
manufacturing/processing of milk and milk products like Casein,
Lactose, Skimmed milk powder, Cheese, Butter, Pure Ghee, Premix etc.,
management considers the risk and rewards associated with these
products to be similar in nature. Accordingly, the entire operations of
the company are governed by the same set of risk and rewards and thus,
it operates in a single primary segment.
Secondary Segment
The Company's business is organized into two key geographic segments.
Revenues are attributable to individual geographic segments based upon
the location of customers.
Other information
The accounting policies consistently used in the preparation of
financial statements are also applied to revenues and expenditure of
individual segments.
Segment information disclosures as required under Accounting Standard"
Segment Reporting" issued by The Institute of Chartered Accountant of
India.
NOTE : vi LOSS PER SHARE
The calculation of Earnings Per Share (EPS) as disclosed in the
statement of profit and loss has been made in accordance with
Accounting Standard (AS)-20 on "Earning Per Share" issued by Companies
(Accounting Standards) Rules, 2006.
Pursuant to the approval for debt restructuring obtained from the
Corporate Debt Restructuring Empowered Group (CDREG) and the respective
banks within the consortium, Working Capital Term Loan (WCTL) and
Funded Interest Term Loan (FITL) are convertible into Optionally
Convertible Debentures (OCD) at a coupon rate of 0.001 % from the year
2013-14. Since the Company has incurred losses during the current year,
these potential equity share (0.001% OCD) are anti dilutive, hence
these are not considered for the computation of loss per share.
NOTE : vii LEASES
The Company has leased facilities under cancellable operating leases
arrangements with a lease term ranging from one to three years, which
are subject to renewal at mutual consent thereafter. The cancellable
arrangements can be terminated by either party after giving due notice.
The lease rent expenses recognized during the year amounts to Rs. 5.65
lacs (Previous year Rs 6.52 lacs).
NOTE : viii
During the year, the Company has incurred net losses after tax of
Rs1,820.11 lacs (previous yearRs. 4,107.16 lacs). Due to losses in the
current year, indicators of impairment as per Accounting Standard - 28
Impairment of Assets, are present as at 31 March 2012. Accordingly,
the Company has reviewed the fixed assets for impairment and determined
that the value in use of its fixed assets exceeds its carrying value as
at 31 st March, 2012. Concluded that the value in use of the assets is
more than the recorded value of the assets and writing-down the
carrying value of the fixed assets is not required as at the date of
the balance sheet.
Subsequent to the year ended 31st March, 2012, Government vide
Notification no 112 (RE-2010)/2009-2014 dated 1stMay, 2012 has lifted
the ban on export of casein. Management believes that this event along
with the approval obtained during the year for restructuring of debt
from appropriate authorities further strengthen the going concern
status of the company.
NOTE : ix
Pursuant to the reference filed by the Company with BIFR under section
15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985
the BIFR vide its order dated 81st Feburary, 2012 declared the Company
as sick and appointed Punjab National Bank being the Lead Bank as
authorized agency to formulate rehabilitation plan for the Company.
NOTE : x
In the opinion of the board of directors, current assets, loans and
advances have a value on realization in the ordinary course of business
at least equal to the amounts at which they are stated and provision
for all known liabilities have been made in accounts.
NOTE : xi PREVIOUS YEAR FIGURES
Till the year 31st March, 2011, the Company was preparing and
presenting its financial statements in accordance with the erstwhile
Schedule VI to the Companies Act, 1956. During the year ended 31st
March, 2012, the revised Schedule VI notified under the Companies Act,
1956 has become applicable to the Company. Accordingly, the Company has
prepared and presented its financial statements for the year ended
31st March, 2012 in accordance with the provisions of revised Schedule
VI and has reclassified previous year figures to confirm to current
year's classification in terms with the said notification's
Mar 31, 2010
1. Nature of Operations
Modern Dairies Limited ["the Company"] was incorporated in 1992 and is
primarily engaged in the business of manufacturing/processing of milk
and milk products like casein, lactose, skimmed milk powder, cheese,
butter, pure ghee, etc.
2. Contingent Liabilities exist in respect of:
Amount inRs.000s
Particulars As at As at
31st March,
2010 31st
March,
2009
a) Milk Cess 4,21,88 3,37,50
b) Excise Duty 77,21 77,21
c) Claims not acknowledged as debts 33,73 38,15
d) Sales tax 14,62 Nil
e) Service tax 19,39 Nil
f) Entry tax 28,97 Nil
g) Bank guarantee Nil 4,55
(a) Milk Cess
The provisions of The Haryana Murrah Buffalo and Other Milch Animal
Breed (Presentation and Development of Animal Husbandry and Dairy
Development Sector) Act, 2001 (Act), requires every milk processing
company to pay milk cess not exceeding fifteen paisa per litre on
registered capacity of a milk plant under Milk and Milk Product Order,
1992. Accordingly Haryana State Government, vide its notification
no.6388-AH-4-2001/16142 dated 9th September, 2001, imposed a milk-cess
often paisa per litre on the registered capacity of plants.
In 2001, the Company filed a writ petition before the Honble High
Court of Punjab and Haryana challenging the imposition of such cess as
against the Constitution of India. The Honble High Court of Punjab and
Haryana issued a stay order dated 9* July, 2004 on such imposition and
directed the Company to continue to pay 1/3rd of the total milk-cess
amount to the State Government on registered capacity till the final
outcome of the case.
Until 2004-05, the Company had provided milk-cess amounting toRs.35,375
thousand in the books of account (refer Note 4 below). In 2004, a
similar cess was levied in the state of Punjab by the Government of
Punjab under the Punjab Dairy Development Board Ordinance, 2000, and
was upheld unconstitutional by the Honble Supreme Court. Based upon
this order of the Honble Supreme Court, the stay order from the
Honble High Court of Punjab and Haryana and as per the legal advice
obtained by the Company, the Company discontinued the provision of
milk-cess in the books of account as it believed that the chances of
cess being levied on the Company for the period after the year
2004-2005 of X 42,188 thousand would be remote and hence no provision
against this was considered necessary.
The Company received the final order of the Honble High Court of
Punjab and Haryana at Chandigarh dated 28,h May, 2010 in W.P.(C)
No.19828 of 2001 whereby the Honble Division Bench of the High Court
has dismissed the petition filed by the Company and upheld the levy of
cess by State Government on milk plants.
Subsequently the Company has filed a review application dated 18*
August, 2010 with the Honble High Court of Punjab and Haryana at
Chandigarh, for reviewing/recalling the order passed and for issuance
of an appropriate order or direction in favourof the Company, keeping
in view the facts and circumstances of the case.
In addition the Company has obtained a legal opinion of an independent
expert on the dismissal of its writ petition and has also filed a
Special Leave Petition dated 18"October, 2010, before the Honble
Supreme Court challenging the impugned judgment and final order passed
by the High Court of Punjab and Haryana.
Based on the opinion of an independent expert and keeping in view the
facts and circumstances of the above
case the Company believes that no financial liabilities are likely to
devolve and consequently no further provision has been made in the
financial statements.
(b) Excise Duty
In the year 2005-06, the Company had availed CENVAT credit ofRs.77,21
thousand (previous yearRs.77,21 thousand) on certain steel and other
similar items (i.e. supporting goods) as inputs used in fabrication
of storage tanks other structures. As per the Excise Authorities, this
credit ofRs.77,21 thousand pertains to inputs used in fabrication of
milk storage tanks and other supporting structures of storage tanks and
has therefore denied all the aforesaid credit on the ground that the
inputs and goods mentioned above neither qualify as capital goods nor
inputs as per CENVAT Credit Rules, 2004 for manufacture of the final
products viz. Casein and Lactose.
Based upon the legal advise obtained by the Company, the management
believes that the Company has good chances of winning the case and
hence no provision against thereof is considered necessary at this
point in time. However, the Company has deposited demand ofRs.77,21
thousand together with interest thereon ofRs.5,19 thousand under
protest.
(c) Claims not acknowledge as debts
An overseas vendor claimedRs.33,73 thousand (previous yearRs.38,15
thousand) for services provided to the Company in respect of capital
projects. The Company has alleged that the services provided by the
vendor are not as per the agreement and due to which the Company has
not been able to achieve the required production efficiency. Based upon
the discussion with the vendors, the Company is confident no liability
would devolve against the Company and hence no provision against
thereof is considered necessary at this point in time.
(d) Sales Tax
In sales-tax assessment for the financial year 2005-06, the sales-tax
department has raised demand ofRs.7,24 thousand and interest of? 7,38
thousand thereon. The Company has filed an appeal before the Sales-Tax
Tribunal Chandigarh (Haryana) (Tribunal) against this demand. The
decision of the Tribunal is awaited. However, the Company has
deposited an amount ofRs.6,00 thousand under protest in the current
year.
(e) Service Tax
A penalty equal to the amount of service tax was imposed by the Central
Excise and Customs Department (Department) for default in timely
deposit of service tax levied on import services. The Company has filed
an appeal before the Commissioner (Appeals). The Company has deposited
25% of the penalty amounting toRs.4,85 thousand in the current year.
(f) Entry Tax
Local Area Development Tax (LADT) was imposed in the state of Haryana
with effect from April 1, 2000. In 2007-08, the LADT was quashed and
declared ultra-virus by the Honorable High Court of Punjab and Haryana
in its order dated April 1, 2008. The State Government replaced the
LADT with Entry Tax and it was also declared ultra-virus by the
Honorable High Court of Punjab and Haryana. The state government filed
an appeal in the Honorable Supreme Court. The Honorable Supreme Court
passed an order dated October 30, 2009, directing all assesses to file
all the returns and staying recovery of tax till final order. The final
order is awaited.
3. Secured Loans
(a) Long-term loans ofRs.65,21,58 thousand (previous yearRs.55,50,33
thousand) include term loans of X 46,34,09 thousand (previous
yearRs.44,30,71 thousand) and a corporate loan ofRs.18,87,49 thousand
(previous yearRs.11,19,61 thousand). Term loans are secured byway of
equitable mortgage of fixed assets, present and future including land
and building of the Company on first pari-passu basis and also
guaranteed by managing director of the Company. Corporate loan is
sanctioned by the consortium of banks as a part of Corporate Debt
Restructuring scheme (Scheme). As per the Scheme, it is secured by
way of mortgage and charge of immovable and movable assets both present
and future. It is also secured by way of charge/assignment on all bank
accounts. Further, it is to be secured by way of pledge of entire
promoters shareholding after obtaining approval from International
Finance Corporation.
(b) Cash credit/export credit loans ofRs.32,83,23 thousand (previous
yearRs.46,51,33 thousand) from banks is secured by way of hypothecation
of current assets of the Company comprising of raw material, stock in
process, finished goods, stores & spares, goods in transit, receivables
and any other security acceptable on pari-passu basis. It is also
secured by equitable mortgage of fixed assets including land and
building of the Company on pari-passu basis with other banks. It is
also guaranteed by Managing Director of the Company.
4. Leases
The Company has taken various residential and offices under operating
lease agreements. In all the cases, the agreements are further
renewable at the option of the Company. There is no escalation clause
in the respective lease agreements. For all cases, there are no
restrictions imposed by lease arrangements and the rent is not
determined based on any contingency. These are generally not
non-cancelable and are renewable by mutual consent on mutually agreed
terms. The total lease payments in respect of such leases recognised in
the profit and loss account for the year areRs.6,44 thousand (previous
yearRs.8,72 thousand).
5. Paid-up equity share capital comprises 8753100 (previous year
8753100) equity shares allotted as fully paid up bonus shares by
capitalization out of accumulated Profit and Loss Account
6. Conversion of equity share warrants
On November 29, 2007, the Company had allotted 3000000 convertible
equity share warrants to Promoters and Promoters Group Companies on
preferential basis at a price ofRs.81 per share (Face value ofRs.10
each). These warrants were convertible into equivalent number of equity
shares within a period of eighteen months from the date of issue i.e.
upto May 29,2009 subject to receipt of full consideration. The Company
had receivedRs.8.10 per equity share warrant as application money.
During the previous year, Allotment Committee of the Company in its
meeting held on July 23, 2008, allotted 1163661 equity shares upon
conversion of equity share warrants to promoters and promoter group
companies amounting toRs.9,42,57 thousand.
In the current year till the due date of last day of conversion, the
Promoters and Promoters Group Company have not applied for conversion
of remaining equity share warrants and accordingly the Company has
forfeited 1836339 equity share warrants and share warrant application
money ofRs.1,48,74 thousand. This equity share warrant application
money has been transferred to Capital Reserve Account.
7. Loans and Advances includesRs.19,70 thousand (previous yearRs.94,92
thousand) due from Modem DairyFarms Limited, a company under same
management. Maximum amount outstanding during the yearRs.7,63,98
thousand (previousyear? 6,97,56thousand).
8. Related party disclosures A. Relationship
Enterprises owned or significantly influenced by key management
personnel or their relatives
Modern Steels Ltd.
Chandigarh Finance Pvt. Ltd
Mala Builders Pvt. Ltd.
Modern DairyFarms Ltd
Times Finvest & Commerce Limited (Formerly
known as Bhanu Investment & Commerce Ltd.)
Shree Ganesh Investments & Industries Ltd.
Smile Finvest Private Limited
(Formerly known as Smile Estates (P) Ltd)
Nabha Finance Pvt. Ltd.
Bharat Forgings Pvt. Ltd.
PHi Business Solutions Ltd.
Modern Automotives Ltd.
Indo Pacific Finlease Limited
Kamal Leasing Limited
Krishan Kumar Goyal (HUF)
Amarjit Goyal (HUF)
Key Management Personnel (KMP)
Mr. Krishan Kumar Goyal
Mr. A.K. Aggarwal
Mr. H. S. Oberoi (till the date of cessation)
Relatives of KMP (Mr. Krishan Kumar Goyal)
Mr. Amarjit Goyal, Father
Mrs. Rattan Mala Goyal, Mother
Mrs. Alka Goyal, Wife
Mr. Aditya Goyal, Son
Ms. Sonam Goyal, Daughter
The Company follows Accounting Standard-22, Accounting for Taxes on
Income, issued by the Institute of Chartered Accountants of India. The
Company has significant time differences between accounting and tax
records on account of losses and unabsorbed depreciation, which suggest
accounting for deferred tax asset. Since there is no convincing
evidence which demonstrates virtual certainty of realization of such
"deferred tax asset", the company has prudently decided not to
recognise any deferred tax asset. There is no case for accounting of
any deferred tax liability either.
9. During the year, the Company has incurred net losses after tax of?
1,77,52 thousand (previous year? 26,00,01 thousand). Due to losses in
the current year, indicators of impairment as per Accounting Standard -
28, Impairment of Assets, are present as at March 31, 2010.
Accordingly, the Company has reviewed the fixed assets for impairment
and determined that the value in use of its fixed assets exceeds its
carrying value as at March 31,2010. Concluded that the value in use of
the assets is more than the recorded value of the assets and
writing-down the carrying value of the fixed assets is not required as
at the date of the Balance Sheet.
10. In accordance with paragraph 10 of Accounting Standard-9, Revenue
Recognition notified under the Companies (Accounting Standard) Rules,
2006, excise duty amounting toRs.83,41 thousand (previous yearRs.57,22
thousand) on sales has been reduced from sales in profit and loss
account and excise duty on increase/decrease in stock amounting toRs.63
thousand (previous year? 35,07 thousand) has been adjusted in Schedule
19 of the financial statements.
11. Segment information
Primary segment
The Company is primarily engaged in the business of
manufacturing/processing of milk and milk products like casein,
lactose, skimmed milk powder, cheese, butter, pure ghee etc. Management
considers the risk and rewards associated with these products to be
similar in nature. Accordingly, the entire operations of the Company
are governed by the same set of risk and rewards and thus, it operates
in a single primary segment.
Secondary segment
The Companys business is organized into two key geographic segments.
Revenues are attributable to individual geographic segments based upon
the location of the customers
Other information
The accounting policies consistently used in the preparation of the
financial statements are also applied to revenues and expenditure of
individual segments
Segment information disclosures as required under accounting standard
on "Segment Reporting" issued by The Institute of Chartered Accountants
of India.
(a) Secondary segment information - Geographical
(b) The Company has common fixed assets for producing goods for
domestic market and overseas market. Hence, separate figures for fixed
assets / additions to fixed assets cannot be provided.
12. Employee benefits
The Company has a defined benefit gratuity plan. Every employee who has
completed five years or more of service gets a gratuity on departure at
15 days salary (last drawn salary) for each completed year of service
subject to maximum limit ofRs.3,50 thousand (previous yearRs.3,50
thousand).
The following table summarizes the components of net benefit expenses
recognized in the Profit & Loss Account and the funded status and
amount recognized in the Balance Sheet for respective plans.
13 Prior period adjustments
Prior period adjustment includes reversal of excess depreciation (net)
erroneously charged during the earlier years to the extent ofRs.1,24,97
thousand (previous year Nil)
14 During the previous year, the Corporate Debt Restructuring [CDR]
empowered group vide its letter dated March 24, 2009, which was further
revised vide letters dated March 30, 2009 and June 25, 2009, had
approved the loan restructuring scheme for the Company. One of the
important conditions of the Master Restructuring Agreement is that
entire shareholding in the Company held by the Promoters shall be
pledged with the CDR lenders on pari- passu basis. This pledging is
subject to approval from International Finance Corporation (IFC) by
virtue of its subscription agreement with promoters. The IFC has
disapproved this pledging. The Company has taken up matter with CDR
lenders and subsequently approached the IFC again for permission to
pledge such shares.
15 Previous year figures have been regrouped/recasted wherever
considered necessary to make them comparable with those of the current
year.
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