Mar 31, 2018
1 Corporate information
Mukta Arts Limited (âMukta'' or âthe 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 Companyâs 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 âRules'') 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 âfinance 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 Employeesâ 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 - âLeasesâ
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 âRent'' 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 âRent 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 âRent 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 âOperating Segmentâ, 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 (âEPCG'') 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 (âPIL'') had been filed alleging that the Maharashtra Film, Stage and Cultural Development Corporation Limited (âMFSCDCL'') had not followed proper procedure while entering into a Joint Venture Agreement (âJVA'') with the Company and in the subsequent allotment of 20 acres of land to the said joint venture, Whistling Woods International Limited (âWWI''), a subsidiary of the Company. During the year 2011-2012, pursuant to the Order of the Hon''ble High Court of Judicature at Bombay (âHigh 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 âTheatrical exhibition divisionâ 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 Â ''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 (ÃMukta' or Ãthe Company'), is a company
incorporated in India under the Companies Act, 1956 (Ãthe 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 ÃRent 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 ÃRent 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 - ÃSegment
disclosuresÃ
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
(ÃRights') were classifi ed as ÃInventory' and amortization of the same
was forming part of ÃCost of production, distribution and exhibition'.
From the current year, management has decided to reclassify these
rights as an ÃIntangible 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 (ÃVAT') 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 ÃOther 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 ÃAdvance tax à 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
ÃOther liabilities' in Schedule 14, have now been reclassifi ed as
ÃSecured 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 ÃLoans and advances' in Schedule 13.
g. Personnel costs and Interest and financial charges (net) were
hitherto included as part of ÃAdministrative 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.