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Notes to Accounts of Mukta Arts Ltd.

Mar 31, 2018

1 Corporate information

Mukta Arts Limited (‘Mukta'' or ‘the Company'') is a company incorporated in India under the Companies Act, 1956. The Company was incorporated on 7 September 1982 as Mukta Arts Private Limited and was converted to a public limited company on 30 September 2000 and renamed as Mukta Arts Limited. The Company is promoted by Mr. Subhash Ghai who holds 54.99% of the outstanding equity share capital as at 31 March 2018.

The Company is primarily engaged in the business of film production, distribution and exhibition (wherein it provides film content to multiplexes and single screen theatres across India). The Company also provides production equipment to other production houses and independent producers. On 31 March 2017, the Company has transferred its division that was operating cinemas to a wholly owned subsidiary, Mukta A2 Cinemas Limited by way of a slump sale. On 12 September 2016, the Company has through another wholly owned subsidiary Mukta A2 Multiplex SPC, opened a 6 screen multiplex theatre in The Kingdom of Bahrain.

The shares of the Company are listed on Bombay Stock Exchange Limited, National Stock Exchange of India Limited and Calcutta Stock Exchange Association Limited.

2 Critical estimates and judgements

The preparation of financial statements requires the use of accounting estimates which, may not equal the actual results. Management also needs to exercise judgement in applying the entity''s accounting policies.

This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.

Recognition and measurement of defined benefit obligations:

The obligation arising from defined benefit plan is determined on the basis of actuarial assumptions. Key actuarial assumptions include discount rate, trends in salary escalation and vested future benefits and life expectancy. The discount rate is determined by reference to market yields at the end of the reporting period on government bonds. The period to maturity of the underlying bonds correspond to the probable maturity of the post-employment benefit obligations.

Estimation of useful life:

Useful lives of PPE and intangible assets are based on the estimation by the management. The useful lives as estimated are the same as prescribed in Schedule II of the Companies Act, 2013. In such cases, where the useful lives are different from that prescribed in Schedule II, they are based on management estimates, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset and past history of replacement. Assumptions also need to be made, when the Company assesses, whether an asset may be capitalised and which components of the cost of the asset may be capitalised.

The useful lives and residual values of Company’s assets are determined by the management at the time the asset is acquired and reviewed annually for appropriateness. The lives are based on historical experience with similar assets.

3 New Pronouncements (Standards Issued but not yet Effective)

The Ministry of Corporate Affairs (MCA) notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 (the ‘Rules'') on March 28, 2018. The rules shall be effective from reporting periods beginning on or after April 1, 2018. Amendments to Ind AS as per these rules are mentioned below:

(a) Ind AS 115 - Revenue from Contracts from Customers

On March 28, 2018, the Ministry of Corporate Affairs issued Companies (Indian Accounting Standards) Amendment Rules, 2018, notifying Ind AS 115 - Revenue from Contracts with Customers. The accounting standard is applicable to the Company from April 1, 2018.

This will replace (i) Ind AS 18 which covers contracts for goods and services, (ii) Ind AS 11 which covers construction contracts, and (iii) Guidance Note on Accounting for Real Estate Transactions which covers revenue recognition for property development projects. The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.

(b) Appendix B to Ind AS 21 - Foreign currency transactions and advance consideration

The appendix clarifies how to determine the date of transaction for the exchange rate to be used on initial recognition of a related asset, expense or income where an entity pays or receives consideration in advance for foreign currency-denominated contracts. For a single payment or receipt, the date of the transaction should be the date on which the entity initially recognises the non-monetary asset or liability arising from the advance consideration (the prepayment or deferred income/contract liability). If there are multiple payments or receipts for one item, date of transaction should be determined as above for each payment or receipt.

The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.

(c) Ind AS 40 - Investment property - Transfers of investment property

The amendments clarify that transfers to, or from, investment property can only be made if there has been a change in use that is supported by evidence. A change in use occurs when the property meets, or ceases to meet, the definition of investment property. A change in intention alone is not sufficient to support a transfer. The list of evidence for a change of use in the standard was re-characterised as a non-exhaustive list of examples and scope of these examples have been expanded to include assets under construction/development and not only transfer of completed properties.

There are investment property, hence this standard is applicable.

4 First-time adoption of Ind AS

Transition to Ind AS

These are the Company''s first financial statements prepared in accordance with Ind AS.

These financial statements, for the year ended 31 March 2018, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31 March 2018, together with the comparative period data as at and for the year ended 31 March 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company''s opening balance sheet was prepared as at 1 April 2016, the Company''s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April 2016 and the financial statements as at and for the year ended 31 March 2017.

1 Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from Indian GAAP to Ind AS.

1.1 Ind AS optional exemptions

1.1.2 Deemed cost

Ind AS 101 permits a first -time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the Indian GAAP and use that as its deemed cost as at the date of transition. This exemption can also be used for intangible assets covered by Ind AS 38 - Intangible Assets and investment property covered by Ind AS 40 - Investment Properties.

Accordingly, the Company has elected to measure certain items of its property, plant and equipment, and all intangible assets and investment property at their Indian GAAP carrying value.

1.1.3 Investment in subsidiaries

The Company has elected to measure its investment in subsidiaries at its Indian GAAP carrying value which shall be the deemed cost as at the date of transition.

1.2 Ind AS mandatory exceptions

1.2.1 Estimates

An entity''s estimates in accordance with Ind AS at the date of transition shall be consistent with estimates made for the same date in accordance with Indian GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. Ind AS estimates as at April 1,

2016 are consistent with the estimates as at the same date made in conformity with Indian GAAP.

The company has made estimates for Impairment of financial assets based on expected credit loss model in accordance with Ind AS at the date of transition as these were not required under Indian GAAP.

1.2.2 classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS. Consequently, the company has applied the above assessment based on facts and circumstances existing at the transition date.

1.2.3 Impairment of financial assets

Ind AS 101 requires an entity to follow the expected credit loss method for financial assets prospectively from the date of transition to Ind AS.

2 Reconciliation between Indian GAAP and Ind-AS.

Ind AS 101 requires an entity to reconcile equity and total comprehensive income for prior periods. The following tables represent the reconciliations from Indian GAAP to Ind AS.

Note 1: Trade Receivables

As per Ind AS 109, the Company is required to apply expected credit loss model for recognising the allowance for doubtful debts. As a result, the allowance for doubtful debts increased by Rs 322,911 as at 31 March 2017 (1 April 2016 -increased by Rs NIL). Consequently, the retained earning as at 31 March 2017 decreased by Rs 322,911 (1 April 2016 - decreased by Rs NIL).

Note 2: Security Deposits given

Under the previous GAAP, deposits given were measured at amount payable. Under the Ind AS, these financial liabilities are measured at fair value on initial recognition. Thesecurity deposit as at March 31, 2017 decreased by Rs. 25,26,786 (1 April 2016: Rs 1,09,45,075) and the retained earning as at 31 March 2017 decreased by Rs 6,20,005 (1 April 2016 -decreased by Rs 2,45,229). Consequently deferred income as at March 31, 2017 Increased by Rs. 27,72,015 (1 April 2016: Rs 1,15,65,080)

Note 3: Security Deposits taken

Under the previous GAAP, deposits received were measured at amount receivabl. Under the Ind AS, these financial liabilities are measured at fair value on initial recognition. The deposit taken as at March 31, 2017 decreased by Rs. 87,74,570 (1 April 2016: Rs 53,28,982) and the retained earning as at 31 March 2017 increased by Rs 4,01494 (1 April 2016: Rs 3,41,108). Consequently deferred expenses as at March 31, 2017 Increased by Rs. 83,73,076 (1 April 2016: Rs 49,87,874)

Note 4: Guarantee

Under Ind AS, financial guarantee contract provided by the parent company against the liability of a subsidiary, even if no consideration is paid to the parent is measured at fair value with a corresponding Increase in the Other equity. This has resulted in increase in retained earning by Rs. 2,793,390 as on 31 March 2017(As on 1st April, 2016 : 56,29,315) and recognized as ‘finance income'' for the year ended 31 March 2017. Whereas under Previous GAAP, these were not recognized in the financial statements.

Note 5: Deferred tax

Under Ind AS, deferred taxes are computed for temporary differences between the carrying amount of an asset or liability in the Balance sheet and tax base. Previous GAAP requires deferred tax accounting using the income statement approach. This results in recognition of deferred tax on new temporary differences which was not required under Previous GAAP. On the date of transition, the impact on retained earnings is Rs. 3,09,06,849 (1 April 2016: Rs. 2,61,58,349) on account of non-recognition of deferred tax assets upto the year ended 1 April 2016 due to absence of reasonable certainty of set off of unabsorbed losses against taxable profits in the foreseeable future.

Note 6: Investment Property

Under the previous GAAP, investment properties were presented in the financials as part of Fixed assets. As per Ind AS 40, Investment properties have to be disclosed separately on the face of the balance sheet. Therefore, those properties owned by the Company that are held mainly for capital appreciation have been classified as Investment properties.

Note 7: Investment

The Company had invested in equity shares of Maya Digital Studios Private Limited, which were required to be presented at fair value as per Ind AS 109. On the basis of a valuation of the shares done by a firm of Chartered Accountants, the value of the shares had undergone a permanent diminution of Rs. 42,92,181 as on 31st March 2017( as on 1st April, 2016 - Rs. 42,92,181). Therefore, as on 31st March 2017, the restated statement of profit and loss recognised the diminution in value and the value as reported in the Balance Sheet under Ind AS were correspondingly restated.

Note 8: Borrowing

Under Indian GAAP, umamortised transaction costs relating to borrowings is recognised separately in assets, whereas under Ind AS such as cost is netted off against the borrowing. Due to that the borrowing is decreased by Rs.1,56,69,599(1 April 2016: Rs. 1,77,17,409) & prepaid expenses is decreased by Rs. -1,71,39,088 (1 April 2016: Rs. -1,40,03,647)

Note 9:

Fair valuation of other financial assets : Under Ind AS, other financial assets viz., loan has been accounted at fair value using EIR.

Note : 1. During the year ended on 31 March 2017 and 31 March 2016, there is no impairment loss determined at each level of CGU. The recoverable amount was based on value in use and was determined at the level of CGU.

Note : 2. Refer Note - 13(a) for information on moveable property, plant and equipment pledged as security by the Company

Note : 3. The Company has availed the deemed cost exemption and used the previous GAAP net carrying amount of property, plant and equipment as deemed cost except few PPE which is measured at fair value.

Note : 4. Ownership premises costing Rs 7,500,000 (31 March 2017: Rs 7,500,000) purchased by the Company during the previous year is not yet registered in the name of the Company.

Note : 5. Tangible/Intangible assets are subject to first charge to secure the Company''s term loan and cash credit loans (refer note 16(a) and 19(a))

Estimation of fair value

The Company has obtained independent valuation of its flats located at Bandra West based on current prices in an active market for properties of similar nature. The fair values of such investment flats have been determined by an independent valuer as on 1st April 2016. The main inputs used are the rental growth rates and a study of the micro market in discussion with industry experts. Resulting fair value estimate for investment property are included in level 2. Rest all investment properties are in accordance with the Ready Reckoner rates prescribed by the Government of Maharashtra for the purpose of levying stamp duty. The Independent Valuer has referred to the publications and government website for Ready Reckoner rates. Suitable adjustments have been made to account for availability of FSI in land parcels in Mumbai in accordance with the guidelines prescribed by the Department of Registrations and Stamps. Since the valuation is based on the published Ready Reckoner rates, the company has classified the same under Level 2.

Terms and rights attached to equity shares

The Company has one class of equity shares having a par value of Rs. 5 per share. Each shareholder is eligible for one vote per share held. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to shareholding.

Nature and purpose of other reserves Securities premium reserve :

Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Act.

Capital reserve :

Capital Reserve is the part of the profit or surplus, maintained as an account in the Balance Sheet that can be used only for special purposes.

* Loan against property is secured against entire Commercial Property located at Sharyans Audeus, Survey No.41, Fun Republic Cinema, Off Veera Desai Road, Oshiwara Village, Andheri West, Mumbai 400053. EMI payable is Rs. 4,186,960 (Sep-2015 to Aug-2018), Rs. 4,443,901 (Sep-2018 to Aug-2021), Rs. 5,179,413 (Sep-2021 to Sep-2025) and Rs. 6,831,277 (Oct-2025 to Aug-2028).

** Term loan against property is secured against current and movable fixed assets (including assets and lease hold rights of the cinemas division) and exclusive charge by way of mortage of the property located in Bandra West. Repayable in 60 monthly installments after 12 months moratorium.

*** Term loan against property is secured against two flats of the Company by way mortage of the property located in Bandra West. Repayable in 120 monthly installments of Rs. 5,37,225/-.

(i) Defined contribution Plan

The Company''s contributions to Defined Contribution Plans namely Employees Provident Fund and Employee''s State Insurance Fund (under the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952), which are Defined Contribution Plans, are charged to Statement of Profit and Loss on accrual basis. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation.

Amount of Rs. 2,483,623 (Previous year : Rs. 7,457,795 ) is recognised as expense and included in the above Note 27

(ii) Post Employment Obligations:

Gratuity : The Company provides for gratuity for employees as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and it is recognised by the Income-tax authorities and administered through LIC. Liability for Gratuity is provided on the basis of Valuations, as at Balance Sheet date, carried out by an independent actuary.

The above sensitivity analyses is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Expected contributions to post employment benefit plan for the year ending March 31, 2018 is Rs. 10 Lakhs (March 31, 2017 : Rs. 10 Lakhs and April 1, 2016: Rs. 30 Lakhs)

(F) Defined benefit liability and employer contributions

The weighted average duration of the Benefit Obligation is 8.32 years

(iii) Other Long Term Benefit Plans:

Compensated absences : The leave obligations cover the Company''s liability for earned leave. The amount of provision of Rs. (2,981,496) (March 31, 2017: Rs. 1,584,376, April 1, 2016: Rs. 865,884)

Liability for Leave Obligation is provided on the basis of Valuations, as at Balance Sheet date, carried out by an independent actuary.

(G) Risk exposure

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:

Asset volatility - The plan liabilities are calculated on the basis of the market yields at the valuation date on government bonds for the expected term. If plan assets underperform this yield, this will create a deficit.

Changes in bond yields - A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plan''s assets.

5 Income Tax

(A) Income Tax Expense

This note provides an analysis of the Company''s income tax expense and how the tax expense is affected by nonassessable and non-deductible items. It also explains significant estimates made in relation to the Company''s tax positions

6 Lease disclosure under AS 19 - ‘Leases’

Operating lease : company as lessee

The Company is obligated under non-cancellable leases primarily for office and residential premises which is renewable thereafter as per the terms of the respective agreement.

Lease rent expenses of Rs 15,628,077 (2017: Rs 76,082,228) have been included under ‘Rent'' in the Statement of profit and loss.

Operating lease : company as lessor

The Company has given office premises on lease which is renewable thereafter as per the terms of the respective agreement Lease rent income of Rs 52,173,594 (2017: Rs 27,966,195) has been included under ‘Rent and amenities charges'' in the Statement of profit and loss.

Operating lease : company as sub-lessor

The Company has subleased part of the office premises taken on lease which is renewable thereafter as per the terms of the respective agreement

Sublease rent income of Rs 36,970,923 (2017: Rs 26,505,048) has been included under ‘Rent and amenities charges'' in the Statement of profit and loss.

7 Capitalisation of expenditure

During the year, the Company has capitalised the salaries, wages and bonus amounting to Rs Nil (2017: Rs 9,271,239) to the cost of Fixed asset/ Capital work in progress (CWIP). Consequently, expenses disclosed under note no. 33 are net of amount capitalised by the Company.

(i) Fair value hierarchy

This section explains the judgements and estimates made in determining the fair value of financial instruments that are (a) recognised and measured at fair value (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three level prescribed under the accounting standard. An explanation each level follows underneath the table.

Financial instruments measured at Fair value

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices, for example listed equity instruments, traded bonds and mutual funds that have quoted prices.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques that maximise the use of observable market data and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

There are no recurring fair value measurements for any financial instruments as at April 1, 2016, March 31, 2017 and March 31, 2018.

The carrying amounts of trade receivables, cash and cash equivalents, loan to employees, interest accrued on fixed deposits, receivables from related party, unbilled revenue, other receivables, current maturity of borrowing, bank overdraft, book overdraft, interest accrued on borrowings, payable to related parties, capital creditors, trade payables and other financial liabilities are considered to be the same as fair values, due to their short term nature.

8 Financial risk management

The Company''s activities expose it to market risk, liquidity risk and credit risk. This note explains the sources of risk which the Company is exposed to and how it manages those risks.

(A) Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including cash and cash equivalents and deposits with banks.

(i) Credit risk management

(a) Trade receivable related credit risk

The Company evaluates the concentration of risk with respect to trade receivables as low. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets. The Company provides for expected credit loss on trade receivables based on expected credit loss method. The Company provides for expected credit loss on trade receivables based on expected credit loss method. Each outstanding customer receivables are regularly monitored and if outstanding is above due date the further shipments are controlled and can only be released if there is a proper justification.

(b) Others Financial Asset

Credit risk from balances with banks is managed by Company in accordance with the Company policy. The other financial assets are from various forum of Government authorities and are released by Government authorities on completion of relevant terms and conditions for the release of outstanding.

(B) Liquidity risk

The Company manages liquidity risk by continuously monitoring forecast and actual cash flows on daily, monthly and yearly basis. The Company ensures that there is a free credit limit available at the start of the year which is sufficient for repayments getting due in the ensuing year. Loan arrangements, credit limits with various banks including working capital and monitoring of operational and working capital issues are always kept in mind for better liquidity management

(i) Maturities of financial liabilities

The following tables detail the Company''s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The amount disclosed in the tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay.

The amounts disclosed in the table are the contractual cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

(C) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of two types of risks - interest rate risk & currency risk. Financial instrument affected by market risks includes loans and borrowings, deposits and other financials assets.

The Company has designed risk management frame work to control various risks effectively to achieve the business objectives. This includes identification of risk, its assessment, control and monitoring at timely intervals.

(i) Foreign currency risk

The Indian Rupee is the Company''s functional and reporting currency. The Company has limited foreign currency exposure which are mainly in cash. Foreign currency transaction exposures arising on internal and external trade flows are not material and therefore not hedged. Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate due to changes in foreign exchange rates. This is the risk that the Company may suffer losses as a result of adverse exchange rate movement during the relevant period.

Foreign Currency Sensitivity

The following tables demonstrate the sensitivity to a reasonably possible change in BHD exchange rates, with all other variables held constant. The impact on the Company''s profit before tax is due to changes in the fair value of monetary assets and liabilities including non-designated foreign currency derivatives. The Company''s exposure to foreign currency changes for all other currencies is not material.

(ii) Interest rate risk exposure

The Company manages interest rate risk by having a balanced portfolio of fixed and variable rate of interest on loans and borrowings. To manage this, Company has issued fixed rate bonds and loans taken from banks are linked to MCLR rate of the bank, which are variable. The exposure of the Company''s borrowing to interest rate changes at the end of the reporting period are as follows Below are borrowings excluding debt component of compound financial instruments and including current maturity of non current borrowings:

The percentage of total loans shows the proportion of loans that are currently at variable rates in relation to the total amount of borrowings.

9 Capital management

For the purpose of the Company''s capital management, equity includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company''s capital management is to maximise the shareholder value.The Company''s Capital Management objectives are to maintain equity including all reserves to protect economic viability and to finance any growth opportunities that may be available in future so as to maximize shareholders'' value. The Company is monitoring capital using debt equity ratio as its base, which is debt to equity. The company''s policy is to keep debt equity ratio below three and infuse capital if and when required through issue of new shares and/or better operational results and efficient working capital management. In order to achieve the aforesaid objectives, the Company has not sanctioned any major capex on new expansion projects in last two to three years There is constant endeavour to reduce debt as much as feasible and practical by improving operational and working capital management.

The Company''s objective when managing capital are to:

(i) Safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

(ii) Maintain an optimal capital structure to reduce the cost of capital

The Company currently has loans from holding company and banks.

(i) Loan covenants:

Under the terms of its major borrowing facilities, the Company is required to comply with the following financial covenants:

- all collections should be routed through the bank of the provider of the facility.

The Company has complied with the covenants throughout the reporting period. As at 31 March 2018.

10 Segment information

As per Indian Accounting Standard (Ind AS) 108 on “Operating Segment”, segment information has been provided in the Notes to consolidated financial statements.

Notes

1) Unless specified, the amounts are excluding penalty and interest, if any, that would be levied at the time of final conclusion.

2) The Company is party to various legal proceedings in the normal course of business and does not expect the outcome of these proceedings to have any adverse effect on the financial conditions, results of operations or cash flows.

3) In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liability, where applicable in its financial statements. The Company''s management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect of the Company''s results of operations or financial condition.

4) The Company has availed the benefit of payment of customs duty and other duties at a concessional rate on import of capital goods, under the Export Promotion Capital Goods (‘EPCG'') Scheme, against fulfillment of export commitment over eight years from the date of issue of the license. The Company''s bankers have provided guarantees amounting to Rs 18,859,028 (31 March 2017: Rs 18,859,028) to the Customs and other statutory authorities, on behalf of the Company, towards fulfilment of these commitments. The Company believes that the export commitment obligations will be fulfilled and accordingly does not expect any custom and other duties, penalty or interest to be levied with respect to non-fulfillment of the terms and conditions of the EPCG scheme.

11 Earnings in foreign exchange (on accrual basis)

Earnings in foreign currency for the year ended 31 March 2018 is Rs. Nil (31 March 2017: Rs Nil).

12 Managerial remuneration

Total remuneration paid to the erstwhile managing director (including as film director fees) for earlier financial years from 2005-06 to 2014-2015 aggregating to Rs 131,906,897 exceeds the limits prescribed under Schedule XIII to the Companies Act, 1956. During the year 2011-12, the Company had received approval for part of the excess remuneration paid (approval received for remuneration aggregating to Rs 25,200,000 for the financial years 2005-06, 2006-07 and 2007-08) and made applications to the authorities requesting reconsideration/ approval for the balance excess remuneration. Through its various communications, the Ministry of Corporate Affairs has ordered the Company to recover the excess remuneration paid during the financial years 2008-09 to 2011-12. The Company has requested the authorities to reconsider their Orders and also for his recognition as a professionally qualified person under the Act. Pending conclusion of this matter, no adjustment has been made in these financial results. The auditors continue to modify their report on the said matter.

13 Public Interest Litigations (‘PIL'') had been filed alleging that the Maharashtra Film, Stage and Cultural Development Corporation Limited (‘MFSCDCL'') had not followed proper procedure while entering into a Joint Venture Agreement (‘JVA'') with the Company and in the subsequent allotment of 20 acres of land to the said joint venture, Whistling Woods International Limited (‘WWI''), a subsidiary of the Company. During the year 2011-2012, pursuant to the Order of the Hon''ble High Court of Judicature at Bombay (‘High Court'') dated 9 February 2012, inter-alia, the JVA with MFSCDCL was quashed / rendered cancelled, WWI was ordered to return the land to MFSCDCL and pay rent (and interest on arrears) retrospectively on the entire land since the date of the JVA. Of the total land admeasuring 20 acres, 14.5 acres vacant unused land was handed over to MFSCDCL on 18 April 2012 and the balance was to be handed over on or before 31 July 2014. Pending discussion and / or agreement with MFSCDCL and / or clarifications to be sought from the concerned parties, no adjustments have been made to the Share Capital structure of WWI and the carrying value of the land rights in its books of account. However, in terms of the Order of the High Court, the said amount together with future rent till the date of vacation of the premises is adjustable against the market price of the Institute building of WWI on the said land. The valuation is to be carried out by an expert valuer to be appointed by the Government. During the year 2013-2014, the PWD Engineer has given his valuation report based on the Balance Sheet of WWI as at 31 March 2011. Further, the Company made an application to the Government of Maharashtra in February 2013 to appoint expert valuers to determine the market price. WWI''s petition for special leave to file appeal with the Supreme Court of India was dismissed. However, the Company and WWI filed review petitions with the High Court. In terms of Order dated 9 February 2012 passed by the High Court, MFSCDC raised net demand of Rs. 591,966,210 and asked WWI to vacate the premises. The Company''s and WWI''s Review Petitions were heard by High Court and a stay was granted on 30 July 2014. The High Court ordered the Company / WWI to pay arrears of rent for the years 2000-2001 to 2013-2014 aggregating to Rs 100,038,000 by January 2015 and to pay rent of Rs 4,500,000 per annum from the financial year 2014-2015. As per the terms of the said Order, till 31 March 2018 Rs 113,538,000 has been paid by the Company and Rs 4,500,000 has been paid by WWIL. The State Government of Maharashtra and MFSCDCL challenged the Order of the Bombay High Court in the Supreme Court which was dismissed by the court on 22nd September 2014 with recourse to the State Government of Maharashtra to make an application to the High Court. Pending final disposal of the review petitions and valuation of the building, and in view of the future plans for WWI which are being evaluated, management believes that the Company''s investments in WWI aggregating Rs 399,511,218 and amounts due therefrom aggregating Rs 246,116,550 are good and recoverable as management is hopeful of reliefs based on the issues involved and on merits of the case, as also of a high valuation of the building. The amounts so paid/ being paid by the Company have been treated as Deposits in the standalone financial statements to be adjusted on the settlement of the case.

b) Details of guarantee/security given:

The Company has provided security during the year by way of exclusive charge on mortgage of immovable property of the Company (WDV as on 31 March 2018: Rs 1,446,158 ) for the overdraft facility availed by Mukta V N Films Limited, a subsidiary company, as at 31 March 2018. The overdraft limit as per the arrangement is Rs 60,000,000 (31 March 2017: Rs 120,000,000). The subsidiary has accounted for book overdraft amounting to Rs 61,454,301 as on 31 March 2018. The overdraft facility is being utilised by the subsidiary for its business.

c) Details of investments made:

i) The Company has invested in 500 equity shares of BHD 100 each, fully paid up in Mukta A2 Multiplex SPC, a subsidiary of the Company during the previous year.

ii) The Company has invested in 50,000 equity shares of Rs 10 each, fully paid up in Mukta A2 Cinemas Ltd, a subsidiary of the Company during the previous year.

14 Discontinuing operations

Pursuant to the approval by way of postal ballot received from the shareholders of the Company on 22 December 2016, the Cinema Exhibition business has been transferred by way of a slump sale to a wholly owned subsidiary, Mukta A2 Cinemas Limited on 31 March 2017. The revenue from this business formed part of the “Theatrical exhibition division” segment. A business transfer agreement is being executed between the two entities confirming the transfer for a consideration of Rs 150,000,000.

By way of this slump sale, the Company has transferred all the assets and liabilities of the Cinema exhibition division. The liabilities so transferred and recorded in the books of the transferee company as on 31 March 2017 include Term loan and overdraft facilities granted by a bank. The bank is in the process of completing documentation for transferring the said facilities in the name of the transferee company. After completion of the said documentation, the records of the bank shall show the loans as granted in favour of the transferee company. The assets so transferred include current assets, movable assets and leasehold rights of the Cinema exhibition business which are hypothecated against the said loan facilities.

15 The Company has a process whereby periodically all long term contracts are assessed for material foreseeable losses. At the year end, the Company has reviewed that there are no long-term contracts including derivative contracts for which there were any material foreseeable losses.

16 Other information

Information with regard to other matters specified in Schedule III to the Act is either nil or not applicable to the Company for the year/period.

17 Prior period comparatives

The figures for the previous year have been re entityed/ rearranged as necessary to conform to the current year''s presentation.


Mar 31, 2015

1. Background

Mukta Arts Limited ('Mukta' or 'the Company') is a company incorporated in India under the Companies Act, 1956. The Company was incorporated on 7 September 1982 as Mukta Arts Private Limited and was converted to a public limited company on 30 September 2000 and renamed as Mukta Arts Limited. The Company is promoted by Mr. Subhash Ghai who holds 54.99% of the outstanding equity share capital as at 31 March 2015. The Company is primarily engaged in the business of film production, distribution and exhibition (wherein it provides film content to multiplexes and single screens across India as well as manages/ operates theatres). The Company also provides production equipment to other production houses and independent producers. The Company is listed on Bombay Stock Exchange Limited, National Stock Exchange of India Limited and Kolkata Stock Exchange Association Limited.

2. Rights, preferences and restrictions attached to equity shares

The Company has only one class of equity shares having par value of Rs 5 per share. Each equity shareholder is entitled to one vote per share. The voting rights of an equity shareholder are in proportion to its share of the paid-up equity capital of the Company.

In the event of liquidation of the Company, the holders of 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 number of equity shares held by the shareholders.

3. Short-term borrowings (Contd.)

* The Company has obtained a cash credit facility from Kotak Mahindra Bank Limited on 8 January 2010 at interest rate varying from 13% to 14% per annum. Along with the term loan mentioned above in Note 3.3, this facility is secured against all current assets, commercial property at Oshiwara, and three residential flats at Bandra. Personal guarantee of Mr Subhash Ghai, the Chairman of the Company and Mrs. Mukta Ghai, a relative of the Chairman and a shareholder, has also been given in respect of this liability.

** The Company has obtained a demand loan from Punjab National Bank against fixed deposit. The interest rate on this loan is 10.75% p.a.

*** Deposit of Rs. 102,200,000 accepted at interest rate of 10% p.a. repayable on demand provided 30 days advance notice is given to the borrower. Deposit of Rs. 50,000,000 accepted at interest rate of 24% p.a. repayable on demand.

4. Lease disclosure under AS 19 - 'Leases'

Operating lease : Company as lessee

The Company is obligated under non-cancellable leases primarily for office and residential premises which is renewable thereafter as per the terms of the respective agreement.

For certain cinema properties, rent is payable in accordance with the leasing agreement at the higher of:

1) Fixed minimum guarantee amount and/or

2) Revenue share percentage

Lease rent expenses of Rs 53,055,411 (31 March 2014: Rs 36,242,205) have been included under 'Rent' in the Statement of profit and loss.

Operating lease : Company as lessor

The Company has given office premises on lease which is renewable thereafter as per the terms of the respective agreement.

Lease rent income of Rs 19,731,971 (31 March 2014: Rs 20,791,454) has been included under 'Rent and amenities charges' in the Statement of profit and loss.

5. Capitalisation of expenditure

During the year, the Company has capitalised the salaries, wages and bonus amounting to Rs 4,031,186 (31 March 2014: Rs 3,627,737) and other expenses amounting to Rs 2,391,092 (31 March 2014 : Rs 2,267,244) to the cost of Fixed asset/ Capital work in progress (CWIP). Consequently, expenses disclosed under note 3.24 and note 3.26 are net of amount capitalised by the Company.

6. Segment information

As per Accounting Standard (AS) 17 on "Segment Reporting", segment information has been provided in the Notes to consolidated financial statements.

7. Related party disclosures

Details of related parties including summary of transactions entered into by the Company during the year ended 31 March 2015 are summarized below:

A Parties where control exists

(i) Shareholders holding more than 50%

* Subhash Ghai

(ii) Subsidiary companies

* Whistling Woods International Limited

* Connect.1 Limited

* Mukta Tele Media Limited

* Coruscant Tec Private Limited

* Mukta VN Films Limited

(iii) Key management personnel and relatives of such personnel

* Subhash Ghai - Chairman Director (and shareholder)

* Parvez Farooqui - Executive Director (and shareholder)

* Rahul Puri - Managing Director

* Mukta Ghai - Wife of Subhash Ghai (and shareholder)

* Ashok Ghai - Brother of Subhash Ghai

* Siraj Farooqui - Brother of Parvez Farooqui

* Sameer Farooqui - Brother of Parvez Farooqui

* Sajid Farooqui - Brother of Parvez Farooqui

* Meghna Ghai Puri - Daughter of Subhash Ghai (and shareholder)

(iv) Enterprise over which key management personnel have control/ substantial interest/ significant influence

* Mukta Arts - Proprietary concern of Subhash Ghai

* Mukta Tele Arts Private Limited - Enterprise in which Subhash Ghai exercises significant influence

8 Commitments

Estimated amounts of contracts remaining to be executed on capital account and not provided for aggregate to

Rs Nil (31 March 2014: Rs 6,129,756).

9. Contingent liabilities

31 March 2015 31 March 2014

a) Service tax liability in appeal (note 1) 1,675,000 1,675,000

b) Corporate guarantee given by the Company on behalf of its subsidiary 120,000,000 -

c) Support letter provided to Whistling Woods International Limited, a subsidiary of the Company.

Notes

1) Unless specified, the amounts are excluding penalty and interest, if any, that would be levied at the time of final conclusion.

2) The Company is party to various legal proceedings in the normal course of business and does not expect the outcome of these proceedings to have any adverse effect on the financial conditions, results of operations or cash flows.

3) In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liability, where applicable in its financial statements. The Company's management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect of the Company's results of operations or financial condition.

4) The Company has availed the benefit of payment of customs duty and other duties at a concessional rate on import of capital goods, under the Export Promotion Capital Goods ('EPCG') Scheme, against fulfillment of export commitment over eight years from the date of issue of the license. The Company's bankers have provided guarantees amounting to Rs 18,864,028 (31 March 2014: Rs 19,701,390) to the Customs and other statutory authorities, on behalf of the Company, towards fulfilment of these commitments. The Company believes that the export commitment obligations will be fulfilled and accordingly does not expect any custom and other duties, penalty or interest to be levied with respect to non-fulfillment of the terms and conditions of the EPCG scheme.

10. Managerial remuneration

Total remuneration paid to the erstwhile managing director (including as film director fees) for earlier financial years from 2005-06 to 2013-2014 (total remuneration paid aggregates to Rs 125,744,747) is in excess of the limits prescribed under Schedule XIII to the Companies Act, 1956. During the year 2011-12, the Company had received approval for part of the excess remuneration paid (approval received for remuneration aggregating to Rs 25,200,000 for the financial years 2005-06, 2006-07 and 2007-08) and made applications to the authorities requesting reconsideration/ approval for the balance excess remuneration and for recognition of the erstwhile managing director as a professionally qualified person under the Companies Act, 1956. Through its various communications, the Ministry of Corporate Affairs has directed the Company to recover the excess remuneration paid during the financial years 2008-09 to 2011-12. The Company has requested the authorities to reconsider their Orders in respect of the above and also for his recognition as a professionally qualified person under the Act. Pending conclusion of this matter, no adjustment has been made in these financial statements.

11. Public Interest Litigations ('PIL') had been filed alleging that the Maharashtra Film, Stage and Cultural Development Corporation Limited ('MFSCDCL') had not followed proper procedure while entering into a Joint Venture Agreement ('JVA') with the Company and subsequent allotment of 20 acre land to the said joint venture, Whistling Woods International Limited ('WWI'), a subsidiary of the Company. During the year 2011-12, pursuant to the Order of the Honourable High Court of Judicature at Bombay ('High Court') dated 9 February 2012, inter-alia, the JVA with MFSCDCL was quashed/ rendered cancelled, WWI was ordered to return the land to MFSCDCL and pay rent (including interest on arrears) retrospectively on the entire land since the date of the JVA. Of the total land admeasuring 20 acres, 14.5 acres vacant unused land was handed over to MFSCDCL on 18 April 2012 and the balance was handed over on or before 31 July 2014. Pending discussion and/ or agreement with MFSCDCL and/ or clarifications to be sought from the concerned parties, no adjustments have been made to the Share Capital structure of WWI and the carrying value of the land rights in its books of account. However, in terms of the Order of the High Court, the said amount together with future rent till the date of vacation of the premises is adjustable against the market price of the Institute building of WWI on the said land. The valuation is to be carried out by an expert valuer to be appointed by the Government. During the previous year, the PWD Engineer has given his valuation report based on the Balance Sheet of WWI as at 31 March 2011. Further, the Company made an application to the Government of Maharashtra in February 2013 to appoint expert valuers to determine the market price. WWI's petition for special leave to appeal filed with the Supreme Court of India has been dismissed. However, the Company and WWI filed review petitions with the High Court. In terms of Order dated 9 February 2012 passed by the High Court of Judicature at Bombay ('High Court'), Maharashtra Film Stage and Cultural Development Corporation ('MFSCDC') raised net demand of Rs. 591,966,210 and asked WWI to vacate the premises. The Company's and WWI's Review Petitions were heard by High Court and a stay was granted on 30 July 2014. The High Court ordered the Company/WWI to pay arrears of rent for the years 2000-01 to 2013-14 aggregating to Rs 100,038,000 by January 2015 and pay rent of Rs 4,500,000 per annum from the financial year 2014-15. As per the terms of the said Order, the Company has paid Rs 104,538,000 by 31 March 2015. The State Government of Maharashtra and MFSCDCL challenged the Order of the Bombay High Court in the Supreme Court which was dismissed by the court on 22nd September 2014 with recourse to the State Government of Maharashtra to make an application to Bombay High Court.Pending final disposal of the review petitions and valuation of the building, and in view of the future plans for WWI which are being evaluated, management believes that the Company's investments in WWI aggregating Rs 369.997,000 and amounts due therefrom aggregating Rs 394,188,264 are good and recoverable as management is hopeful of reliefs based on the issues involved and on merits of the case, as also of a high valuation of the building. The amounts so paid/ being paid by the Company have been treated as Deposits in the standalone financial statements to be adjusted on the settlement of the case.

12. Discontinuing operations

During the year ended 31 March 2013, the Company entered into an arrangement with VN Films Private Limited vide term sheet dated 11 September 2012 to form a Joint Venture Company under the name "MUKTA VN FILMS LIMITED" to conduct the business of exhibition and programming ('Exhibition') which was being conducted by the Company and forming part of the Company's revenue under 'Software' segment. The Board of Directors of the Company had passed a resolution at their meeting held on 5 March 2013, authorising the Company to enter into a shareholders' agreement. Further on 19 April 2013, the proposal had been approved by the shareholders through postal ballot. A share subscription cum shareholder agreement had been entered into on 19 March 2014 between the Company and Mukta VN Films Private Limited based on which they legally and beneficially own 3,300,000 (55%) and 2,699,950 (44.90%) equity shares respectively as at 31 March 2015.

During the financial year ended 31 March 2015, the Company has conducted the Exhibition business till 10 April 2014. The assets and liabilities pertaining to these business operations as on this date shall be realised and settled by the Company, as applicable, and shall not stand transferred to Mukta VN Films Limited.

Mukta VN Films Limited has conducted the Exhibition business from 11 April 2014 based on the agreement with the Company, VN Films Private Limited and Mukta VN Films Limited.

13. The Company has a process whereby periodically all long term contracts are assessed for material foreseeable losses. At the year end, the Company has reviewed that there are no long-term contracts including derivative contracts for which there were any material foreseeable losses.

14. Other information

Information with regard to other matters specified in Schedule III to the Act is either nil or not applicable to the Company for the year/period.

15. Prior period comparatives

The figures for the previous year have been regrouped/ rearranged as necessary to conform to the current year's presentation.


Mar 31, 2014

1. Background

Mukta Arts Limited (''Mukta'' or ''the Company'') is a company incorporated in India under the Companies Act, 1956 (''the Act''). The Company was incorporated on 7 September 1982 as Mukta Arts Private Limited and was converted to a public limited company on 30 September 2000 and renamed as Mukta Arts Limited. The Company is promoted by Mr. Subhash Ghai who holds approximately 54.99% of the outstanding equity share capital as at 31 March 2014. The Company is primarily engaged in the business of film production, distribution and exhibition (wherein it provides film content to multiplexes and single screens across India as well as manages/ operates theatres). The Company also provides production equipment to other production houses and independent producers.

a) Rights, preferences and restrictions attached to equity shares

The Company has only one class of equity shares having par value of Rs 5 per share. Each equity shareholder is entitled to one vote per share. The voting rights of an equity shareholder are in proportion to its share of the paid-up equity capital of the Company.

In the event of liquidation of the Company, the holders of 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 number of equity shares held by the shareholders.

(iii) *** Term loan from financial institution - Life Insurance Corporation loan was secured against keyman insurance policy of a director at an interest rate of 9% p.a. The loan was repaid on the maturity of the keyman policy in October 2013.

(iv) # The Company had obtained equipment on finance lease basis in December 2012. The agreements for the equipment were modified during the year.

* The Company has obtained a cash credit facility from Kotak Mahindra Bank Limited on 8 January 2010 at interest rate varying from 13% to 14% per annum. Along with the term loan mentioned above in Note 3.3, this facility is secured against all current assets, commercial property at Oshiwara, and three residential flats at Bandra. The facility is also secured by the personal guarantee of Mr Subhash Ghai, the Managing Director of the Company and Mrs. Mukta Ghai, a relative of the Managing Director and a shareholder.

** Deposit of Rs. 111,900,000 accepted at interest rate of 15% p.a. repayable on demand provided 30 days advance notice is given to the borrower. Deposit of Rs. 30,000,000 accepted at interest rate of 24% repayable on demand. Deposit of Rs. 30,000,000 accepted at interest rate of 24% repayable on demand.

2. Gratuity and other post employment benefit plans

(i) Defined contribution plans

Contribution to provident fund - amount of Rs 2,320,242 (2013: Rs 1,693,216) and ESIC- amount of Rs 690,471 (2013: Rs 326,244) is recognized as an expense and included in "Employee benefits expense" in the Statement of profit and loss.

(ii) Defined benefit plan and other long term employment benefit (a) Leave wages (other long term employment benefit)

The leave wages are payable to all eligible employees at the rate of daily salary for each day of accumulated leave on death or on resignation or upon retirement on attaining superannuation age. During the year, Rs 780,120 (2013: Rs 350,505) is recognized as an expense in the Statement of profit and loss.

The estimates of future salary increases considered in the actuarial valuation take into account inflation, seniority, promotion and other conditions in the employment market.

The Company expects Rs 2,000,000 in contribution to be paid to its defined benefit plan in the next year (2013: Rs 1,000,000)

3. Lease disclosure under AS 19 - ''Leases''

Operating lease : Company as lessee

The Company is obligated under non-cancellable leases primarily for office and residential premises which is renewable thereafter as per the terms of the respective agreement.

Lease rent expenses of Rs 36,242,205 (2013: Rs 15,622,294) have been included under ''Rent'' in the Statement of profit and loss.

Operating lease : Company as lessor

The Company has given office premises on lease which is renewable thereafter as per the terms of the respective agreement Lease rent income of Rs 20,791,454 (2013: Rs 19,056,395) has been included under ''Rent and amenities charges'' in the Statement of profit and loss.

Operating lease : Company as sub-lessor

The Company has subleased part of the office premises taken on lease which is renewable thereafter as per the terms of the respective agreement Sublease rent income of Rs 25,322,762 (2013: Rs 23,568,537) has been included under ''Rent and amenities charges'' in the Statement of profit and loss.

Finance lease : Company as lessee

The Company had obtained equipment on finance lease basis in December 2012. The agreements for the equipment were modified during the year and the lease is now in the nature of an operating lease.

Finance lease obligations are secured against the respective assets taken on lease

The Company has obtained plant and equipment on finance lease basis as at 31 March 2013. The carrying amount of assets was as follows.

4. Capitalisation of expenditure

During the year, the Company has capitalised the salaries, wages and bonus amounting to Rs 3,627,737 (2013: Rs 3,751,895) to the cost of Fixed asset/ Capital work in progress (CWIP). Consequently, expenses disclosed under note 3.24 are net of amount capitalised by the Company.

5. Segment information

As per Accounting Standard (AS) 17 on "Segment Reporting", segment information has been provided in the Notes to consolidated financial statements.

6. Contingent liabilities

31 March 2014 31 March 2013

a) Claims against the Company not acknowledge as debt

Service tax matters * 1,675,000 2,915,000

b)Guarantees given by bank on 19,701,390 21,651,390 behalf of the Company

c)Corporate guarantees for - 50,000,000 loans taken by subsidiary

d) The Company Law Board had passed an order directing Central Government to undertake the investigation under Section 237 of the Act. The Company aggrieved by the Order had moved the Bombay High Court and obtained stay on the Order. The hearing in this matter was completed on 7 January 2009 and Hon''ble Bombay High Court had quashed the investigation. The Central Government has on 25 February 2012 moved the Hon''ble Supreme Court challenging the Order passed by the Hon''ble Bombay High Court on 7 January 2009.

e) Support letter provided to Whistling Woods International Limited, a subsidiary of the Company.

* Notes

Unless specified, the amounts are excluding penalty and interest, if any, that would be levied at the time of final conclusion.

The Company is party to various legal proceedings in the normal course of business and does not expect the outcome of these proceedings to have any adverse effect on the financial conditions, results of operations or cash flows.

7. Managerial remuneration

The remuneration paid to the managing director (including fees as film director) of the Company for the year ended 31 March 2014 amounting to Rs 15,138,588 and for earlier financial years from 2005-06 to 2012-2013 aggregating to Rs 110,606,159, is in excess of the limits prescribed under Schedule XIII to the Act. The Company made applications to the Central Government seeking post-facto approval for earlier years, which is awaited; application for the current year is proposed to be made. During the financial year 2011-12, the Company had received approval for part of the excess remuneration paid (approval received for remuneration aggregating to Rs 25,200,000 for the financial years 2005-06, 2006-07and 2007-08). The Company had made an application to authorities requesting reconsideration/ approval for the balance excess remuneration. Pending final communication from the authorities in this regard and application for the current year, no adjustment has been made in these financial statements.

8. Public Interest Litigations (''PIL'') had been filed alleging that the Maharashtra Film, Stage and Cultural Development Corporation Limited (''MFSCDCL'') had not followed proper procedure while entering into a Joint Venture Agreement (''JVA'') with the Company and subsequent allotment of 20 acre land to the said joint venture, Whistling Woods International Limited (''WWI''), a subsidiary of the Company. During the year 2011-12, pursuant to the Order of the High Court of Judicature at Bombay (''High Court'') dated 9 February 2012, inter-alia, the JVA with MFSCDCL was quashed/ rendered cancelled, WWI was ordered to return the land to MFSCDCL and pay rent (including interest on arrears) retrospectively on the entire land since the date of the JVA. Of the total land admeasuring 20 acres, 14.5 acres vacant unused land was handed over to MFSCDCL on 18 April 2012 and the balance is to be handed over on or before 31 July 2014. Pending discussion and/or agreement with MFSCDCL and/or clarifications to be sought from the concerned parties, no adjustments have been made to the Share Capital structure of WWI and the carrying value of the land rights in its books of account. However, in terms of the Order of the High Court, the said amount together with future rent till the date of vacation of the premises is adjustable against the market price of the Institute building of WWI on the said land. The valuation is to be carried out by an expert valuer to be appointed by the Government. During the previous year, the PWD Engineer has given his valuation report based on the Balance Sheet of WWI as at 31 March 2011. Further, the Company made an application to the Government of Maharashtra in February 2013 to appoint expert valuers to determine the market price. WWI''s petition for special leave to appeal filed with the Supreme Court of India has been dismissed. However, the Company and WWI have filed review petitions with the High Court, which have not yet come up for hearing. Pending final disposal of the review petitions and valuation of the building, and in view of the future plans for WWI which are being evaluated, management believes that the Company''s investments in WWI and amounts due therefrom are good and recoverable as management is hopeful of reliefs based on the issues involved and on merits of the case, as also of a high valuation of the building.

9. Discontinuing operations

During the year ended 31 March 2013, the Company entered into an arrangement with VN Films Private Limited (formerly known as Allied Services Private Limited) vide term sheet dated 11 September 2012 to form a Joint Venture Company under the name "MUKTA VN FILMS LIMITED" to conduct the business of exhibition and programming presently being conducted by the Company and forming part of the Company''s revenue under ''Software'' segment. The Board of Directors of the Company had passed a resolution at their meeting held on 5 March 2013, authorising the Company to enter into a shareholders'' agreement. Further on 19 April 2013, the proposal has been approved by the shareholders through postal ballot. A share subscription cum shareholder agreement has been entered into on 19 March 2014 between the Company and Mukta VN Films Private Limited based on which they legally and beneficially own 27,500 (55%) and 22,500 (45%) equity shares respectively. Consequently, the exhibition and programming business is disclosed as a discontinuing operation.

10. Prior period comparatives

Up to the previous year, Rs 45,102,136 was classified under Trade payables'', this has now have been shown under ''Other current liabilities'' (Dues to venturer).

Up to the previous year, Rs 1,656,450 was classified under ''Other income'' (Excess provision written back), this has now been shown under ''Revenue from operations'' (Excess provision written back).

Up to the previous year, Rs 2,010,096 was classified under ''Other expenses'' (Miscellaneous expenses), this has now been shown under ''Other expenses'' (Security charges).

Up to the previous year, Rs 11,290,600 was classified under ''Other current liabilities'' (Dividend payable), this has now been shown under ''Short term provisions'' (Dividend payable).


Mar 31, 2013

1. Background

Mukta Arts Limited (''Mukta'' or ''the Company'') is a company incorporated in India under the Companies Act, 1956 (''the Act''). The Company was incorporated on 7 September 1982 as Mukta Arts Private Limited and was converted to a public limited company on 30 September 2000 and renamed as Mukta Arts Limited. The Company is promoted by Mr. Subhash Ghai who holds approximately 54.99% of the outstanding equity share capital as at 31 March 2013. The Company is primarily engaged in the business of flm production and distribution and flm exhibition (wherein it provides flm content to multiplexes and single screens across India) as also manages/ operates theatres. The Company also provides production equipment to other production houses and independent producers.

2.1 Gratuity and other post employment beneft plans

(i) Defned contribution plans

Contribution to provident fund - amount of Rs 1,693,216 (2012: Rs 1,663,970) and ESIC - amount of Rs 326,244 (2012: Rs 310,809) is recognized as an expense and included in "Employee beneft expenses" in the Statement of proft and loss.

(ii) Defned beneft plan and other long term employment beneft

(a) Leave wages (other long term employment beneft)

The leave wages are payable to all eligible employees at the rate of daily salary for each day of accumulated leave on death or on resignation or upon retirement on attaining superannuation age. During the year, Rs 350,505 (2012: Rs Nil) is recognized as an expense in the Statement of proft and loss.

2.2 Lease disclosure under AS 19 – ''Leases''

Operating lease : Company as lessee

The Company is obligated under non-cancellable leases primarily for offce and residential premises which is renewable thereafter as per the terms of the respective agreement.

Lease rent expenses of Rs 15,622,294 (2012: Rs 20,559,550) have been included under ''Rent'' in the Statement of proft and loss.

2.3 Capitalisation of expenditure

During the year, the Company has capitalised the salaries, wages and bonus amounting to Rs 3,751,895 (2012: Rs 2,876,920) to the cost of Fixed asset/Capital work in progress(CWIP). Consequently, expenses disclosed under note 3.24 are net of amount capitalised by the Company.

2.4 Segment information

As per Accounting Standard (AS) 17 on "Segment Reporting", segment information has been provided in the Notes to consolidated fnancial statements.

2.5 Related party disclosures

Details of related parties including summary of transactions entered into by the Company during the year ended 31 March 2013 are summarized below:

A Parties where control exists

(i) Shareholders holding more than 20%

- Subhash Ghai

(ii) Subsidiary companies

- Whistling Woods International Limited

- Connect.1 Limited

- Mukta Tele Media Limited

- Coruscant Tec Private Limited

(iii) Key management personnel and relatives of such personnel

- Subhash Ghai - Chairman and Managing Director (and shareholder)

- Parvez Farooqui - Executive Director

- Rahul Puri - Executive Director

- Mukta Ghai - Wife of Subhash Ghai (and shareholder)

- Ashok Ghai - Brother of Subhash Ghai

- Siraj Farooqui - Brother of Parvez Farooqui

- Sameer Farooqui - Brother of Parvez Farooqui

- Sajid Farooqui - Brother of Parvez Farooqui

- Meghna Ghai Puri - Daughter of Subhash Ghai (and shareholder)

2.6 Managerial remuneration

The remuneration paid to the managing director of the Company for the year ended 31 March 2013 amounting to Rs 9,979,490 (including fees as flm director) and for earlier fnancial years from 2005-06 to 2011-2012 aggregating to Rs 100,626,669, is in excess of the limits prescribed under Schedule XIII of the Act. The Company made applications to the Central Government seeking post-facto approval for earlier years, which is awaited; application for the current year is proposed to be made. During the previous year, the Company had received approval for part of the excess remuneration paid (approval received for remuneration aggregating to Rs 25,200,000 for the fnancial years 2005-06, 2006-07 and 2007-08). The Company had made an application to authorities requesting reconsideration/ approval for the balance excess remuneration. Pending fnal communication from the authorities in this regard and application for the current year, no adjustment has been made in these fnancial statements.

2.7 Public Interest Litigations (''PIL'') had been fled alleging that the Maharashtra Film, Stage and Cultural Development Corporation Limited (''MFSCDCL'') had not followed proper procedure while entering into a Joint Venture Agreement (''JVA'') with the Company and subsequent allotment of 20 acre land to the said joint venture, Whistling Woods International Limited (''WWI''), a subsidiary of the Company. During the previous year, pursuant to the Order of the High Court of Judicature at Bombay (''High Court'') dated 9 February 2012, inter-alia, the JVA with MFSCDCL has been quashed/ rendered cancelled, WWI has been ordered to return the land to MFSCDCL and pay rent (including interest on arrears) retrospectively on the entire land since the date of the JVA. Of the total land admeasuring 20 acres, 14.5 acres vacant unused land has been handed over to MFSCDCL on 18 April 2012 and the balance is to be handed over on or before 31 July 2014. Pending discussion and/ or agreement with MFSCDCL and/or clarifcations to be sought from the concerned parties, no adjustments have been made to the Share Capital structure of WWI and the carrying value of the Land rights in its books of account. Further, MFSCDCL had demanded Rs 832,062,611 towards arrears of rent and interest thereon vide letter dated 3 December 2012. However, in terms of the Order of the High Court, the said amount together with future rent till the date of vacation of the premises is adjustable against the market price of the Institute building of WWI on the said land. The valuation is to be carried out by an expert valuer to be appointed by the Government. During the year, the PWD Engineer has given his valuation report based on the Balance Sheet of WWI as at 31 March 2011. Further, the Company has made an application to the Government of Maharashtra in February 2013 to appoint expert valuers to determine the market price. WWI''s petition for special leave to appeal fled with the Supreme Court of India has been dismissed. However, the Company and WWI have fled review petitions with the High Court, which have not yet come up for hearing. Pending fnal disposal of the review petitions and valuation of the building, and in view of the future plans for WWI which are being evaluated, management believes that the Company''s investments in WWI and amounts due therefrom are good and recoverable as management is hopeful of reliefs based on the issues involved and on merits of the case, as also of a high valuation of the building.

2.8 Discontinuing operations

During the year, vide term sheet dated 11 September 2012, the Company entered into an agreement with VN Films Pvt. Ltd., (formerly known as Allied Services Private Limited,) to form a Joint Venture Company under the name "MUKTA V N FILMS LIMITED" to conduct the business of exhibition and programming presently being conducted by MAL and forming part of MAL''s revenue under ''Software'' segment. MAL will hold 55% in the Joint Venture Company. The Board of Directors of MAL had passed a resolution at their meeting held on 5 March 2013, authorising the Company to enter into a shareholders'' agreement. Further, on 19 April 2013, the proposal has been approved by the shareholders through postal ballot. Consequently, the exhibition and programming business is disclosed as a discontinuing operation.

2.9 Other information

Information with regard to other matters specifed in revised Schedule VI to the Act is either nil or not applicable to the Company for the year.

2.10 Prior period comparatives

Upto the previous year, Rs 37,283,265 was classifed under ''Long-term loans and advances'' (Advances to related parties), which has now have been shown as ''Short-term loan and advances'' (Advances to related parties).


Mar 31, 2012

1. Background

Mukta Arts Limited ('Mukta' or 'the Company') is a company incorporated in India under the Companies Act, 1956 ('the Act'). The Company was incorporated on 7 September 1982 as Mukta Arts Private Limited and was converted to a public limited company on 30 September 2000 and renamed as Mukta Arts Limited. The Company was promoted by Mr. Subhash Ghai who holds approximately 54.99% of the outstanding equity share capital as at 31 March 2012. The Company is primarily engaged in the business of film production and distribution and film exhibition (wherein it provides film content to multiplexes and single screens across India) as also manages/ operates theatres. The Company also provides production equipment to other production houses and independent producers.

a) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of Rs 5 per share. Each equity share holder is entitled to one vote per share.

In the event of liquidation of the Company, the holders of 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 number of equity shares held by the shareholders.

The Board of Directors, in their meeting on 4 August 2011, declared an interim dividend of Re 1 per equity share. The total dividend appropriation for the year ended 31 March 2012 amounted to Rs 26,244,435 including corporate dividend tax Rs 3,663,235.

(i) * Term loan was secured against the keyman insurance policy of Mr. Subhash Ghai. This has been repaid during the current year.

(ii) ** Term loan is secured against all current assets, commercial property at Oshiwara and residential flats (3 nos.) at Bandra. Loan is also secured by the personal guarantee of Mr Subhash Ghai, the Managing Director of the Company and Mrs. Mukta Ghai, a relative of the Managing Director and a shareholder. The term loan has been taken in various tranches, having separate maturity periods ranging from 3 to 5 years and at interest rate varying from 10% to 14%. The details of repayment and other terms are as follows:

(iv) ****Term loan from financial institution - Life Insurance Corporation loan is secured against keyman insurance policy of Mr. Parvez Farooqui at an interest rate of 9% p.a. Loan is repayable on or before the maturity of the keyman policy i.e. October 2013.

(v) ## The Company has entered into an agreement with Sarpanch of Gram Panchayat Badsa- Haryana for purchase of 20 acres land for setting up a film and TV institute and multimedia complex on October 2011 for Rs 80,316,000. As per the agreement, the land cost is to be paid in seven equal installments. The first payment should be made on the date of signing the agreement and the balance amount is to be paid in 6 installments, subject to condition that last installment should be paid on or before October 2016. 10% annual interest shall be payable for the payments deferred over a maximum period of seven years on a reducing balance basis. The Company has paid the first two installments till 31 March 2012 of Rs 29,818,286. Also refer Note 3.43.

*The Company has obtained a cash credit facility amounting to Rs 100,000,000 from Kotak Mahindra Bank Limited on 8 January 2010. Along with the term loan mentioned above in Note 3.3, this facility is secured against all current assets, commercial property at Oshiwara, and residential flats (3 nos) at Bandra. The facility is also secured by the personal guarantee of Mr Subhash Ghai, the Managing Director of the Company and Mrs. Mukta Ghai, a relative of the Managing Director and a shareholder.

"Comprises of inter-corporate deposits amounting to Rs 37,500,000 for a period of 3 months at interest rate of 12% p.a. Mr Subhash Ghai, the Managing Director of the Company, has provided a personal guarantee to the lender.

2.1 Gratuity and other post employment benefit plans

(i) Defined Contribution Plans

Contribution to provident fund - amount of Rs 1,663,970 (2011: Rs 1,383,849) and ESIC - amount of Rs 310,809 (2011: Rs 153,496) is recognized as an expense and included in "Employee benefit expenses" in the Statement of profit and loss.

(ii) Defined benefit plan and other long term employment benefit (a) Leave wages (other long term employment benefit)

The leave wages are payable to all eligible employees at the rate of daily salary for each day of accumulated leave on death or on resignation or upon retirement on attaining superannuation age. During the year, Rs Nil (2011: 4,484,731) is recognized as an expense in the Statement of profit and loss.

*Pursuant to the actuarial valuation, liability pertaining to prior years aggregating to Rs 3,495,320 in respect of gratuity and Rs 4,186,971 in respect of leave encashment was provided for during the year 2010-11.

The estimates of future salary increases considered in the actuarial valuation take into account inflation, seniority, promotion and other conditions in the employment market.

2.2 Lease disclosure under AS 19 - 'Leases'

(i) Operating lease : Company as lessee

The Company is obligated under non-cancellable leases primarily for office and residential premises which is renewable thereafter as per the terms of the respective agreement.

Lease rent expenses of Rs 20,559,550 (2011: Rs 17,032,149) have been included under 'Rent' in the Statement of profit and loss.

(ii) operating lease : Company as lessor

The Company has given office premises on lease which is renewable thereafter as per the terms of the respective agreement

Lease rent income of Rs 17,819,015 (2011: Rs 14,393,304) has been included under 'Rent and amenities charges' in the Statement of profit and loss.

(iii) operating lease : Company as sub-lessor

The Company has subleased part of the office premises taken on lease. The future minimum sublease payment expected to be received under non-cancellable sub-lease as at 31 March 2012 is Rs 58,618,140 (2011: Rs 42,834,885).

Sublease rent income of Rs 21,413,250 (2011: Rs 23,656,778) has been included under 'Rent and amenities charges' in the Statement of profit and loss.

2.3 Capitalisation of expenditure

During the year, the Company has capitalised the salaries, wages and bonus amounting to Rs 2,876,920 to the cost of Fixed asset/ Capital work in progress(CWIP). Consequently, expenses disclosed under note

2.4 are net of amount capitalised by the Company.

2.5 segment information

As per Accounting Standard (AS) 17 on "Segment Reporting", segment information has been provided in the Notes to consolidated financial statements.

2.6 Related party disclosures

Details of related parties including summary of transaction entered into by the Company during the year ended 31 March 2012 are summarized below:

A parties where control exists

(i) shareholders holding more than 20%

- Subhash Ghai

(ii) subsidiary companies

- Whistling Woods International Limited

- Connect.1 Limited

- Mukta Tele Media Limited

- Coruscant Tec Private Limited

(iii) Key management personnel and relatives of such personnel

- Subhash Ghai - Chairman and Managing Director

- Parvez Farooqui - Executive Director

- Rahul Puri - Executive Director

- Mukta Ghai - Wife of Subhash Ghai

- Ashok Ghai - Brother of Subhash Ghai

- Siraj Farooqui - Brother of Parvez Farooqui

- Sameer Farooqui - Brother of Parvez Farooqui

- Sajid Farooqui - Brother of Parvez Farooqui

- Meghna Ghai Puri - Daughter of Subhash Ghai

(iv) Enterprise over which key management personnel have control/substantial interest/significant influence

- Mukta Arts - Proprietary concern of Chairman and Managing Director

- MAL Employees Welfare Trust - Executive Director is settler and one of the director is Trustee

- Mukta Tele Arts Private Limited - Enterprise in which Subhash Ghai exercises significant influence

- Sharyans Resources Limited - Enterprise in which Vijay Choraria is the common director

2.7 Commitments

Estimated amounts of contracts remaining to be executed on capital account and not provided for aggregate to Rs 27,428,576 (2011:Rs 5,706,143).

2.8 Contingent liabilities

31 March 2012 31 March 2011

a) Claims against the Company not acknowledge as debt Service tax matters * 2,915,000 2,915,000

b) Guarantees given by bank on behalf of the Company 19,701,390 21,544,383

c) Corporate guarantees for loans taken by subsidiary 150,000,000 150,000,000

d) The Company Law Board had passed an order directing Central Government to undertake the investigation under Section 237 of the Companies Act, 1956. The Company aggrevied by the Order had moved the Bombay High Court and obtained stay on the Order.

The hearing in this matter was completed on 7 January 2009 and Hon'ble Bombay High Court had quashed the investigation. The Central Government has on 25 February 2012 moved the Hon'ble Supreme Court challenging the Order passed by the Hon'ble Bombay High Court on 7 January 2009.

e) Support letter provided to Whistling Woods International Limited, a subsidiary of the Company.

* Notes

Unless specified, the amounts are excluding penalty and interest, if any, that would be levied at the time of final conclusion.

The Company is party to various legal proceedings in the normal course of business and does not expect the outcome of these proceedings to have any adverse effect on the financial conditions, results of operations or cash flows.

2.9 Dues to Micro, Small amd Medium Enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED) which came into force from 2nd October 2006, certain disclosures are required to be made relating to Micro, Small and Medium Enterprises (MSME). On the basis of the information and records available with the Management, none of the Company's suppliers are covered, accordingly, disclosure of information with regards to principal, interest accruals and payments are not applicable.

2.10 Foreign currency exposures not covered by forward contracts

The Company has no foreign currency exposures as at 31 March 2012 (2011: Rs Nil).

2.11 Managerial remuneration

The remuneration paid to the managing director of the Company for the period 1 April 2011 to 31 March 2012 amounting to Rs 12,997,900 and for earlier financial years 2005-06, 2006-07, 2007-08, 2008-09, 2009-2010 and 2010-11 aggregating to Rs 87,628,769, is in excess of the limits prescribed under Section 198 of the Companies Act, 1956. The Company made applications to the Central Government seeking post-facto approval for earlier years, which is awaited; application for the current year is being made. During the year, the Company has received approval for part of the excess remuneration paid (approval received for remuneration aggregating to Rs 25,200,000 for the financial years 2005-06, 2006-07 and 2007-08). The Company has made an application to authorities requesting reconsideration/ approval for the balance excess remuneration. Pending final communication from the authorities in this regard and application for the current year, no adjustment has been made in these financial statements.

2.12 Public Interest Litigations ('PIL') had been filed alleging that the Maharashtra Film, Stage and Cultural Development Corporation Limited ('MFSCDCL') had not followed proper procedure while entering into a Joint Venture Agreement ('JVA') with the Company and subsequent allotment of 20 acre land to the said joint venture, Whistling Woods International Limited ('wWi'), a subsidiary of the Company. During the year, pursuant to the Order of the High Court of Judicature at Bombay ('High Court') dated 9 February 2012, inter-alia, the JVA with MFSCDCL has been quashed/ rendered cancelled, wWl has been ordered to return the land to MFSCDCL and pay rent (including interest on arrears) retrospectively on the entire land since the date of the JVA. Of the total land admeasuring 20 acres, 14.5 acres vacant unused land has been handed over to MFSCDCL on 18 April 2012 and the balance is to be handed over on or before 31 July 2014. Pending discussion and/ or agreement with MFSCDCL and/or clarifications to be sought from the concerned parties, no adjustments have been made to the Share Capital structure of WWI and the carrying value of the Land rights in its books of account. Further, MFSCDCL has demanded Rs 799,523,424 towards rent and interest arrears thereon for the period up to 18 April 2012. However, in terms of the Order of the High Court, the said amount together with future rent till the date of vacation of the premises is adjustable against the value of the Institute building of WWI on the said land. The valuation is to be carried out by an expert valuer to be appointed by the Government, which has not yet been commissioned. WWI's petition for special leave to appeal filed with the Supreme Court of India has been dismissed. However, the Company and WWI have filed review petitions with the High Court, which have not yet come up for hearing. Pending final disposal of the review petitions and valuation of the building, and in view of the future plans for WWI which are being evaluated, management believes that the Company's investments in WWI and amounts due therefrom are good and recoverable as management is hopeful of reliefs based on the issues involved and on merits of the case, as also of a high valuation of the building.

2.13 Public interest litigation ('PIL') has been filed with regards to sale agreement entered into by the Parent Company with the Sarpanch of Gram Panchayat Badsa- Haryana for sale of 20 acres of land in Badhsa village of Jhajjar district in Haryana to the Parent Company. The Punjab and Haryana High Court stayed the execution of the sale deed and the matter is yet to come for hearing. The management is in the process of preparing its response to the said order and believes that it has a good chance of wining the case.

2.14 prior period comparatives

The previous year's figures have been re-grouped/ re-arranged as necessary to conform to the present year's classification consequent to notification of Revised Schedule VI under the Companies Act, 1956.


Mar 31, 2011

1. Background

Mukta Arts Limited (‘Mukta' or ‘the Company'), is a company incorporated in India under the Companies Act, 1956 (‘the Act'). The Company was incorporated on 7 September 1982 as Mukta Arts Private Limited and was converted to a public limited company on 30 September 2000 and renamed as Mukta Arts Limited. The Company was promoted by Mr. Subhash Ghai who holds approximately 54.99% of the outstanding equity share capital as at 31 March 2011. The Company is primarily engaged in the business of film production and distribution. In addition, the Company is also involved in film exhibition wherein it provides film content to multiplexes and single screens across India. The Company also provides production equipment to other production houses and independent producers.

2.1 Contingent liabilities and commitment

Sr No Particulars 2011 2010

1 Service tax matters 2,115,000 2,115,000

2 Guarantees given by bank on behalf of the Company 21,544,383 57,766,927

3 Corporate guarantees for loans taken by subsidiary 150,000,000 120,000,000

4 Commitments

Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for 5,706,143 -

Notes:

1. Unless specifi ed the amounts are excluding penalty and interest, if any that would be levied at the time of final conclusion.

2. The Company is a party to various legal proceedings in the normal course of business and does not expect the outcome of these proceedings to have any adverse effect on its financial conditions, results of operations or cash fl ows.

22.2 Dues to Micro, Small and Medium Enterprises

On the basis of the information and records available with the Management, none of the Company's suppliers are covered by The Micro, Small and Medium Enterprises Development Act, 2006. Accordingly, the disclosures prescribed under the said Act are not applicable.

The managerial remuneration paid to a whole-time director of the Company for the year aggregating to Rs 23,209,717 and for earlier years ended 31 March 2010, 31 March 2009 and 31 March 2008 aggregating to Rs 42,465,506 is in excess of the limits prescribed under Section 198 of the Companies Act, 1956. The Company has made an application to the Central Government seeking post-facto approval, which is awaited.

Computation under Section 198 of the Act is not made since no commission is paid to the directors.

a) The Company is obligated under non-cancellable leases primarily for Office and residential premises which is renewable thereafter as per the terms of the respective agreement.

b) The Company has subleased part of the Office premises taken on lease. The future minimum sublease payment expected to be received under non-cancellable sub-lease as at 31 March 2011 is Rs 42,834,885.

Sublease rent income of Rs 23,656,778 has been included under ‘Rent and amenities charges' in the Profit and loss account.

c) The Company has given Office premises on lease which is renewable thereafter as per the terms of the respective agreement

Lease rent income of Rs 14,393,304 has been included under ‘Rent and amenities charges' in the Profit and loss account.

22.9 Related party disclosures

Details of related parties including summary of transaction entered into during the year ended 31 March 2011 are summarized below:

A Parties where control exists

(i) Shareholders holding more than 20%

- Subhash Ghai

(ii) Subsidiary companies

- Whistling Woods International Limited

- Connect.1 Limited

- Mukta Tele Media Limited

- Coruscant Tec Private Limited

(iii) Key management personnel and relatives of such personnel

- Subhash Ghai - Chairman and Managing Director

- Parvez Farooqui - Executive Director

- Rahul Puri - Executive Director

- Mukta Ghai - Wife of Subhash Ghai

- Ashok Ghai - Brother of Subhash Ghai

- Siraj Farooqui - Brother of Parvez Farooqui

- Sameer Farooqui - Brother of Parvez Farooqui

- Sajid Farooqui - Brother of Parvez Farooqui

- Meghna Ghai Puri - Daughter of Subhash Ghai

(iv) Enterprise over which key management personnel have a control/substantial interest/significant infl uence

- Mukta Arts - Proprietary concern of Subhash Ghai

- MAL Employees Welfare Trust - Executive Director is settler and one of the director is Trustee

- Mukta Tele Arts Private Limited - Enterprise in which Subhash Ghai exercises significant influence

22.11 Employee benefits:

(i) Defined Contribution Plans

Contribution to provident fund - amount of Rs 1,383,849 (2010: Rs 1,463,334) and ESIC amount of Rs 153,498 (2010: Rs110,916) is recognized as an expense and included in "Personnel costs" in the Profit and Loss account.

(ii) Defined benefit plan and other long term employment benefit

(a) Leave wages (other long term employment benefit)

The leave wages are payable to all eligible employees at the rate of daily salary for each day of accumulated leave on death or on resignation or upon retirement on attaining superannuation age. During the year, Rs. 4,484,731 (2010: Nil) is recognized as an expense in the Profit and Loss account

(b) Gratuity (Defined benefit plan)

The Company has a defined benefit gratuity plan. Every employee who has completed fi ve years or more of service gets a gratuity on death or resignation or retirement at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

22.12 Other information

Other matters specifi ed in Part II of Schedule VI to the Act are either Nil or not applicable to the Company and, as such, no details are given.

22.13 During the year, the Company recognized Rs. 84,799,660 being profit on redevelopment of property (possession obtained during the year) pursuant to agreement entered into on 20 January 2006.

22.14 Disclosure of Segment Reporting under AS 17 - ÂSegment disclosuresÊ

As per Accounting Standard (AS) 17 on "Segment Reporting", segment information has been provided in the notes to consolidated financial statements.

22.15 Prior period comparatives

a. Upto the previous year, negative and distribution rights in films (‘Rights') were classifi ed as ‘Inventory' and amortization of the same was forming part of ‘Cost of production, distribution and exhibition'. From the current year, management has decided to reclassify these rights as an ‘Intangible asset' after reassessing their nature and to bring it in line with the industry practice. Correspondingly, amortization of these rights is also part of the fi xed asset schedule. This re-classifi cation has no impact on the results for the year. Gross block and accumulated depreciation in respect of negative and distribution rights for films released prior to 31 March 2010, except movies released in the previous year, has not been restated as the same have been fully exploited as at 1 April 2009.

b. Provision for Value added tax (‘VAT') aggregating to Rs19,442,308 (2010: Rs13,200,000) which was earlier classifi ed as Taxation' in Schedule 15, has now been reclassifi ed as ‘Other liabilities' in Schedule 14.

c. VAT and Service tax receivable aggregating to Rs 12,859,435 (2010: Rs 10,970,113) and Rs 8,627,385 (2010: Rs 8,060,039) respectively, which were earlier classifi ed as ‘Advance tax ‘ in Schedule 13, have now been reclassifi ed as Advances recoverable in cash or in kind or for value to be received' in Schedule 13.

d. Provision for tax has been netted off against Advance tax; this was earlier presented at a gross level.

e. Upto the previous year, Cash credit facilities were classifi ed as ‘Other liabilities' in Schedule 14, have now been reclassifi ed as ‘Secured loans' in Schedule 6.

f. Inter-corporate deposits given aggregating to Rs.333,408,202 (2010: Rs 313,528,586) which were hitherto classifi ed as Investments, have been grouped under ‘Loans and advances' in Schedule 13.

g. Personnel costs and Interest and financial charges (net) were hitherto included as part of ‘Administrative and other expenses', these have been disclosed separately.

h. The Statement of cashfl ows has been regrouped in line with the above, as applicable. 22.16 Prior year figures were audited by a firm of Chartered Accountants other than B S R & Co.


Mar 31, 2010

CurrentYear Previous Year

1 Contingent Liabilities 31.03.2010 31.03.2009 Rupees Rupees

a Claims against the company not acknowledged as Debts Nil Nil

b Guarantees given by Bank on behalf of the company 57,766,927 75,743,508

c Letters of Credit given by bank on behalf of the company Nil Nil

d Estimated amount of contracts remaining to be executed on Nil Nil Capital Account & not provided for (net of advance)

e Legal suits fled against the company (having monetory implication) Nil Nil

f Department of Service Tax has levied service tax of Rs 2.12 million on sponsorship fees received for various flms treating the Company as an Advertising Agency. Further the department had issued show cause notice proposing to levy Rs 2.02 millions service tax on a similar issue.

Against the levy of Rs 2.12 million, the Company fled appeal before the Commissioner of Central Excise (Appeals) and subsequently before Honorable Tribunal, claiming that the provisions of Service Tax Act is not applicable in this matter.

The Company has paid Rs 1.24 millions under protest and the same is shown as advance recoverable in cash or kind since the matter is pending before the CESTAT and based on legal opinion sought, the management is of the opinion that the Company will have no liability on this account and that no provision is necessary.

Managerial remuneration paid to the Chairman is in excess of the limits prescribed under Section 198 of the Act.

The Company has made an application to the Central Government seeking post-fact approval, which is awaited.

The Company has given a Corporate guarantee for Term Loans taken by its subsidiary Whistling Woods International Limited from Punjab National Bank.

2 Additional information required to be given pursuant to Part II of Schedule VI to the Companies Act, 1956 is as follows :

The Company is in the business of production, distribution and exhibition of Entertainment software, hiring of equipments etc. which is not subject to any licence and as such information regarding consumption of Raw Materials, Production and sales is not applicable. Further the nature of business of the Company is such that the installed capacity is not quantifable.

3 a) Fixed deposits with scheduled banks include interest accrued (net of taxes) upto 31.03.10 Rs 1.52 million (Previous year Rs 2.17 million). Fixed deposits of Rs 27.13 million (Previous Year Rs 27.92 million) are pledged as security against bank guarantees given for the Company.

b) Lien has been marked on Investments to the extent of 1,913,720 units, previous year 1,913,720 units of LIC MF Floating Rate Fund - Dividend Re-investment Plan in favour of Punjab National Bank against bank guarantees given for the Company.

4 Taxes on Income

(a) Current Tax - Provision for Income Tax is determined in accordance with the provisions of Income Tax Act, 1961

(b) Deferred Tax Position - For the purpose of quantifying deferred tax amount as on Balance Sheet date deferred tax is recognised on timing differences being difference between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred Tax Liability till balance sheet date amounts to Rs 9,502,281 (Previous year Deferred Tax Liability Rs 9,244,513) .

5 Related Party Transaction

(A) The list of related parties and nature of their relationship is furnished below:

Companies under the same management-

Whistling Woods International Ltd. 84.99% - subsidiary

Connect.1 Limited 99% - subsidiary

Mukta Tele Media Ltd. 99.92% - subsidiary

Coruscant Tec Pvt. Ltd. 100% - subsidiary

Mukta Tele Arts Pvt. Ltd. CMD is director

Firms-

Mukta Arts Proprietory frm of CMD

Trusts-

MAL Employees Welfare Trust Executive Director is settler and One of the Directors is Trustee

Directors of the company-

Chairman & Managing Director Mr.Subhash Ghai

Executive Director Mr.Parvez A. Farooqui

Executive Director Mr.Rahul Puri

Non Executive Directors Mr. Anil Harish

Mr. Vijay Choraria

Mr. Pradeep Guha

Relatives of Directors-

Mr. Ashok Ghai Brother of CMD

Mr. Siraj Farooqui Brother of Executive Director

Mr. Sameer Farooqui Brother of Executive Director

Mr. Sajid Farooqui Brother of Executive Director

6 (a) There were no amounts payable to Small Scale Industrial Undertaking on the Balance Sheet date.

(b) The Company has no Suppliers under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid / payable as required under the said Act are not applicable.

7 Previous year fgures have been regrouped wherever necessary.

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