SECURED LOAN
 1. Cash Credits from Banks are secured by hypothecation of Movable
 Assets & Book Debts, and second charge by way of mortgage of immoveable
 assets of Nagda and Nanjangud Units.
 
 2. Term Loan from IDBI under Asset Credit Scheme is secured by
 hypothecation of machinery purchased under the scheme.
 
 3. Other Term Loan from IDBI is secured by First Charge by way of
 mortgage of immovable Assets and hypothecation of Movable Assets of
 Nagda Unit, both present and future, subject to prior charge of Banks
 on Movable Assets and Machinery purchased under Deferred Payment
 Guarantees.
 
 4. Term Loan from KSIIDC is secured by First Charge by way of mortgage
 of Immoveable Assets and hypothecation of Movable Assets of Nanjangud
 Unit, both present and future, subject to prior charge of Banks, on
 Moveable Assets, and a Financial Institution/Banks on Machinery
 purchased under Deferred Payment Guarantee and of IDBI on Machinery
 purchased under the Assets Credit Scheme.
 
 5. Term Loan from KSFC represents amount paid by the Corporation to
 Banks towards Deferred Payment Guarantees, which in turn has not been
 paid by the Company to KSFC. This is secured by First Charge by way of
 mortgage of machinery bought under the Scheme.
 
 6. Contingent Liabilities (not provided for) in respect of :
 
                                                         (Rs. in Lacs)
                                             2001-02           2000-01
 
 (a) Demands made by Income-tax
 Authorities being disputed                     7.54              7.54
 by the Company
 
 (b) Various pending Labour           Amt. not ascer-     Amt not ascer-
 related matters                      tainable            tainable
 
 (c) Claims against the Company                192.80             192.80
 not acknowledged as debts
 
 7. Estimated amount of contracts                   -                 -
 remaining to be executed on
 Capital Account
 
 8. Instalments of Term Loans and Deferred Payment Liabilities
 repayable within one year/overdue Rs.1215.57 lacs (Previous year
 Rs.1033.27 lacs).
 
 9. Appeals and counter appeals by the income Tax Department and She
 Company in respect of certain assessments are pending and additional
 tax liability/refunds consequent upon decision or the same are not
 determinable and hence, not accounted for.
 
 10. Pending finalization of the agreement with workmen, bonus liability
 as per the Payment of Bonus Act, 1965 has been provided.
 
 11. a) The accumulated losses of the Company as at 31.3.2002 stand at
 Rs. 5932.83 lacs (without considering the impact of non-provision of
 various liabilities as stated in Notes in Schedule 23 to the financial
 statements) as against the paid-up capital and reserves of Rs. 1158.06
 lacs. Further, as at 31.3.2002, there is a working capital deficiency
 of Rs.2296.65 lacs. Also, as at 31.03.2002, long term loans of
 Rs.1033.27 are overdue and further loans of Rs.182.30 lacs are payable
 by 31.3.2003.
 
 b) in view of the accumulated losses incurred by the Company exceeding
 its net worth, the Company had been declared a Sick Industrial Company
 within the meaning of Section 3(1) (O) of Sick Industrial Companies
 (Special Provisions) Act, 1985 by the Board for Industrial and
 Financial Reconstruction (BIFR) on 16.05.2000 and Industrial
 Development Bank of India (IDBI) was appointed as the Operating Agency
 (OA). The Company had further submitted a Rehabilitation Proposal to
 the OA on 22.08.2000, which was further revised and submitted on
 30.08.2001 on the directives of BIFR, which is still under
 consideration by OA.
 
 c) The Company had received permission for the Closure of Nanjangud
 Unit from the appropriate authority on 23rd August, 1999, against which
 the Workers union had filed a writ petition in the Honble Karnataka
 High Court. The same had been withdrawn by the Workers Union
 subsequently and the Honble Karnataka High Court allowed the Closure
 of the Unit vide its order dated 18th Feb., 2000. On an application
 filed by the Company, BIFR had directed IDBI to conduct the sale of the
 assets of Nanjangud Unit of the Company. Sale of the assets of the Unit
 has been finalized at the price of Rs.14.75 Crores and MOU entered with
 She Sri Sampoorna Syndicate on 01.07.2002. In view of the above, fixed
 assets of the Unit had been excluded from the Fixed Assets in the
 previous year and had been shown under the head Assets Held for
 Disposal at book values, as the realisable value of these assets, is
 higher than the book value. Accordingly, no depreciation has been
 provided since 1st July 1999 on these assets. Also, provision for
 gratuity, leave encashment and workmen compensation had been made on
 the basis of actual liabilities. However, no adjustments have been made
 to the book values of other assets, if any, to reflect the realisable
 value of these assets. In the opinion of the Management, such
 adjustments are not likely to be material.
 
 d) In respect of Thane Unit, the Closure matter referred for
 adjudication under the provisions of the Industrial Disputes Act, 1947
 on a review-application filed by the Workers Union, has been approved
 by the Industrial Tribunal vide order dated 29.11.2000. The Company
 has also entered into an agreement with the workers as regards the
 closure compensation and other dues. On an application filed by the
 Company to permit the sale of assets, the BIFR has approved the sale of
 assets vide order dated 14.06.2002. OA is taking necessary steps to
 sale the assets, in view of the above, fixed assets of the Unit have
 been excluded from the Fixed Assets and have been shown under the
 head `Assets Held for Disposal at book values, as the realisable value
 of these assets, as per the information available with the management,
 is higher than the book value. Accordingly, no depreciation has been
 provided on these assets since 1st July 2000. Also, provision for
 gratuity, leave encashment and workmen compensation has accordingly
 been made on the basis of actual liabilities. However, no adjustments
 have been made to the book values of other assets, if any, to reflect
 the realisable values of these assets. In the opinion of the
 Management, such adjustments are not likely to be material.
 
 e) in respect of Rajpura Unit, the management entered into an agreement
 with the Workers to close down the unit w.e.f. 31.10.2001. On an
 application filed by the Company to permit the sale of assets, the BIFR
 has approved the sale of assets vide order dated 06.05.2002. OA is
 taking necessary steps to sale the assets. In view of the above, fixed
 assets of the Unit have been excluded from the Fixed Assets and have
 been shown under the head `Assets Held for Disposal at book values, as
 the realisable value of these assets, as per the information available
 with the management, is higher than the book value. Accordingly, no
 depreciation has been provided on these assets for the closure period
 1st November 2001 to 31st March 2002. Also, provision for gratuity,
 leave encashment and workmen compensation has accordingly been made on
 the basis of actual liabilities. However, no adjustments have been made
 to the book values of other assets, if any, to reflect the realisable
 values of these assets. In the opinion of the Management, such
 adjustments are not likely to be material.
 
 f) At Nagda Unit, on account of continuous labour unrest, a temporary
 stoppage had been declared w.e.f. 3rd June, 2000. which is still
 continuing. The Workers Union had filed an application with Labour
 Commissioner requesting him to declare the Closure as illegal and also
 for recovery of wages for the closure period. The Labour Commissioner
 had vide his order dated 11th Sept., 2000 held the Closure as illegal
 and subsequently issued various Revenue Recovery Certificates (RRC) to
 recover the wages for the months of June 2000 to December 2001
 aggregating to Rs.1050.12 lacs. The Tehsildar, Nagda has attached
 117.877 hectares of Companys land, 3 Cars, 5 Computers and 3
 residential quarters, since the Company did not pay the RRC amount and
 issued notices to the Company for auction of the attached properties.
 The Tehsildar had put the aforesaid properties to auction on 19.03.2002
 but since none of the bidder could match the reserve price same could
 not be auctioned.
 
 In view of above, the accounts in respect Nagda Units continued to be
 prepared on the basis of a going concern. Accordingly, liability on
 account of retirement gratuity and leave encashment remains provided on
 the basis of actuarial valuation.
 
 12. Nagda Unit has applied to Madhya Pradesh Electricity Board (MPEB)
 for downward revision in the contracted power demand from time to time
 during the earlier years. However, MPEB had not effected the change and
 has continued to raise bills on the basis of contracted demand, in view
 of disconnection of Power supply, the Company is not making payment to
 MPEB, resulting in an outstanding demand from MPEB amounting to
 Rs.276.66 lacs, which remains unprovided in the books.
 
 13. In Rajpura Unit, Punjab National Bank had debited Rs.10.13 lacs in
 an earlier year towards DPG Commission Charges, which the Company is
 disputing as having been charged in excess. This amount along with
 further interest of Rs.17.84 lacs charged thereon aggregating to
 Rs.27.97 lacs remains unprovided in the books.
 
 14. In earlier years, the Company had been disallowed certain
 deductions under Chapter VI A of the Income Tax Act, 1961 by the
 assessing authorities resulting in tax liabilities of Rs.54.09 lacs. No
 provision for the same has been made in these accounts as She Company
 is in appeal there against and is hopeful of getting relief.
 
 15. No provision for doubtful loans and advances amounting to Rs.182.80
 lacs has been made in these accounts, since the Company is making
 efforts for their recovery.
 
 16. The Company has not made provision for interest payable to certain
 material suppliers/inter-corporate deposit holders aggregating to
 Rs.440.90 lacs since its is contemplating negotiations with these
 parties for waiver of the interest.
 
 17. The Company has not been able to compile the information on the
 amount payable to the parties covered under Interest on Delayed
 Payments to Small Scale and Ancillary industrial Undertakings Act,
 1993.
 
 18. In view of the non availability of the demand notes/confirmations
 from some bankers/financial institutions, the Company has made
 provision for interest on loans taken from them at the latest available
 normal rates to interest. No provision has been made for penal
 interest and liquidated damages in respect of default on repayment of
 principal and interest amounts nor the amount in respect thereof has
 been ascertained.
 
 19. In view of Accounting Standard 22 (AS-22) `Accounting for Taxes on
 income issued by the ICAI being made mandatory w.e.f. April 1 2001, no
 deferred tax assets/liability arises in view of losses during the year,
 brought forward losses and unabsorbed depreciation. Furthermore
 deferred tax asset is to be recognized and carried forward to the
 extent it is reasonably certain that there will be sufficient future
 income to recover such deferred tax asset. Considering the prevailing
 trends the company has taken sufficient prudence in not making a profit
 forecast and consequently has not considered it appropriate to
 recognise deferred tax asset/liability.
 
 20. The Company is engaged in the business of spinning of yarn, which
 is governed by the same set of risk and returns. The said treatment is
 in accordance with the guiding principle enunciated in the Accounting
 Standard on Segment Reporting (AS-17).
 
 21. Related Party Disclosure
 
 Related Party Disclosure as required under Accounting Standard-18 on
 Related Party Disclosure issued by the institute of Chartered
 Accountants of India are given below :
 
 Key Management Personal              Mr. S. N. Sharma (Executive
                                      Director-Finance)
                                      Mr. D. N. Srivastava (Whole
                                      Time Director)
                                      Mr. M. M. Sharma (Whole Time
                                      Director)
 
 Managerial remuneration paid         Rs. 6.53 lacs
 to above mentioned personnel
 
 22. Comparative corresponding figures for the previous period have been
 regrouped and/or rearranged wherever practicable.
 
 23. Current period figures in Profit & Loss Account are for a period of
 12 months as against 9 months in the previous period. Therefore, the
 same are not strictly comparable.
 
 24. Information pursuant to the provisions of Part II of Schedule VI to
 the Companies Act, 1956  :
 
                                          2001-2002          2000-2001
 
 (i) Licensed Capacity (A)                 1,44,112           1,44,112
 Spindles Looms
 
 (ii) Installed Capacity (A)             * 1,27,730        ** 1,27,730
 Spindles
 
 * Includes 672 Open End Rotors
 
 ** Includes 672 Open End Rotors
 
 (A) As certified by the Management.
 
 (B) The difference in quantitative tally of Finished Goods is on
 account of Samples, Insurance Claims, etc.
 
 (C) Excluding Yarn internally consumed and yarn processed for outside
 parties.
 
 (D) As included under Stores Consumption, Machinery Repairs and
 Aircraft Maintenance.