Chambal Fertilisers and Chemicals

1.  Nature of Operations
 
 Chambal Fertilisers and Chemicals Limited was incorporated in May 1985
 as a public limited company in the name of Aravali Fertilisers Limited.
 The name of the Company was changed to Chambal Fertilisers and
 Chemicals Limited in January 1989.
 
 The Company was promoted by Zuari Industries Limited and is the largest
 manufacturer of Nitrogenous Fertilizers in private sector in India. The
 Company is also into manufacturing of Synthetic and Cotton Yarn.
 Shipping Division of the Company is engaged in the business of running
 of ships for cargo.
 
 2.  Contingent liabilities (not provided for) in respect of:
 
 (Rs. in lacs)
 
 S.No.              Particulars                         2008-09  2007-08
 
 a)   Outstanding amount against counter guarantees      690.35	 959.65
      given to Banks/Financial Institutions on 
      account of loans given by the said Banks/
      Financial Institutions to Bodies Corporate.
 
 b)   Demand raised by Customs, Sales Tax and Income    6871.01* 1707.38*
       Tax authorities being disputed by the Company
 
 c)   Differential amount of custom duty in respect of   796.16	1799.26
      machinery imported under EPCG Scheme including 
 				    interest there on.
 
 
 d)   Various labour cases                      Amount not   Amount not
 					    ascertainable  ascertainable
 
 e)   other claims against the Company not acknowledged   4.24	   4.24
 					     as debts.
 
 f)   Claim against Nihat Shipping Company Limited in 
      legal suits/notices, in which the Company has been
      made a party, is being contested, since the 
      Company acted as Agents/ Technical & Operational 
 					     managers. 222.04	 230.33
 
 
 
 
 * Brief Description of liabilities as per (b) above:
 
 (Rs. in lacs)
 
 S. No.  Particulars                              2008-09    2007-08
 
 1.	Income Tax:
 	Demand raised by IT authorities on 
 	account of various disallowances for 
 	A.Y. 2002-03 including penalties.       1290.62     864.77
 
 	Demand raised by IT authorities on 
 	account of various disallowances for 
 	A.Y. 2003-04 including penalties.       4673.35	       -
 
 	Demand raised by IT authorities on 
 	account of various disallowances for 
 	A.Y. 2005-06 including penalties.           -       563.07     
 
 	Demand raised by IT authorities on 
 	account of various disallowances for 
 	A.Y. 2006-07 including penalties.       560.84	     28.24
 
 Based on favaorable decision in similar case, legal opinion taken by
 the Company, discussions with the solicitors, etc., the Company
 believes that there is fair chance of decisions in its favour in
 respect of all the items listed in (b), (d), (e) and (f) above and
 hence no provision is considered necessary against the same.
 
 3.  The Company had received a demand of Rs. 352.34 lacs from Sales Tax
 Department, Kota in an earlier year towards use of natural gas for
 ammonia fuel, power and steam generation for the period of April, 1996
 to May, 2001. The Company has obtained a stay from Honble High Court
 of Rajasthan, Jodhpur on 11th July, 2001. However, in the event of the
 Company having to pay the above, it is reimbursable by FICC/ Government
 of India under Subsidy Scheme.
 
 4.  The Company as well as other users of natural gas under HBJ Gas
 Pipeline had in earlier years received letters from GAIL (India)
 Limited (erstwhile Gas Authority of India Ltd), informing about the
 possibility of levy of excise duty on natural gas (presently not
 levied) with retrospective effect.  The amount of such levy is not
 ascertainable. However, in the event of its levy, it is reimbursable by
 Fertlisers Industry Coordination Committee (FICC) of Ministry of
 Fertilisers, the Government of India under Subsidy Scheme.
 
 5.  The Company as well as other users of Natural Gas under HBJ Gas
 Pipeline had received a letter in an earlier year from GAIL (India)
 Limited (erstwhile Gas Authority of India Ltd), informing about the
 possibility of levy of Central Sales Tax.  The Company has been taking
 the delivery of Gas in the State of Rajasthan and has been accordingly
 paying Rajasthan Sales Tax on the supply.  Therefore, the Company feels
 that no Central Sales Tax is payable by it. Further, the amount of such
 levy is not ascertainable.  However, in the event of its levy, it is
 reimbursable by Fertlisers Industry Coordination Committee (FICC) of
 Ministry of Fertilisers, the Government of India under Subsidy Scheme.
 
 6.  Under the Jute Packaging Material (Compulsory use of Packing
 Commodities) Act, 1987, a specified percentage of fertilisers
 dispatched were required to be supplied in Jute bags up to z31.8.2001.
 The provisions of the said Act were challenged in the Supreme Court,
 which upheld the constitutional validity of this Act in its judgement
 in 1996. In spite of making conscious efforts to step up use of jute
 packaging material, the Company had been unable to adhere to the
 specified percentage, due to strong customer resistance to use of jute
 bags. The Company had received show cause notice from the Office of the
 Jute Commissioner, Kolkata, for levying a penalty of Rs. 7380.36 lacs
 for non compliance of the provisions of the said Act. The Company has
 obtained a stay order from Delhi High Court against the above show
 cause notice and has been advised that the said levy is not tenable in
 law and accordingly no provision has been considered.
 
 7.  Segment Information
 
 Primary Segment: Business Segment
 
 The Companys operating businesses are organized and managed separately
 according to the nature of products manufactured and services provided.
 The four identified reportable segments are Own Manufactured
 Fertilizers, Trading, Textile and Shipping. The Own Manufactured
 Fertilizers Segment includes manufacture and marketing of urea which
 is a controlled commodity, the price and distribution of which is
 decided by the Government of India (GOI). The Trading Segment
 includes the purchase and sale of Fertilizers and Agricultural Inputs
 and this activity, though different in risk perception from own
 manufactured urea, is carried out mainly with an objective of providing
 Fertilizers/Agricultural Inputs under one roof. The Textile Segment
 includes manufacturing and sale of synthetic and cotton yarn. The
 Shipping Segment includes transportation of crude oil and liquid
 products through vessels owned and/ or hired by the Shipping Division.
 
 Secondary Segment: Geographical Segment
 
 The analysis of geographical segment is based on the geographical
 location i.e., domestic and overseas markets, of the customers.
 
 8.  Gratuity and Other Post Employment Benefit Plans:
 
 The Company has a defined benefit gratuity plan. Every employee who has
 completed five years or more of service gets a gratuity on departure at
 15 days salary (last drawn salary) for each completed year of service.
 The Scheme is funded with an insurance company in the form of a
 qualifying insurance policy in respect of Fertiliser and Shipping
 division of the Company.  The following tables summarise the components
 of net benefit expense recognised in the profit and loss account and
 the funded status and amounts recognised in the balance sheet for the
 respective plans.
 
 9. The Company has set up provident funds trust, which is managed by
 the Company in respect of Fertiliser division of the Company and as per
 the Guidance Note on implementing AS-15, Employee Benefits (revised
 2005) issued by the Accounting Standard Board (ASB) states that
 provident funds set up by employers, which requires interest shortfall
 to be met by the employer, needs to be treated as defined benefit plan.
 Pending the issuance of the Guidance Note from the Actuarial Society of
 India, the Companys actuary has expressed his inability to reliably
 measure the provident fund liability. However, the Company has
 ascertained that at the year end there is no shortfall in the Provident
 Fund Trust.
 
 10.  Related Party Disclosures
 
 During the year, the Company entered into transactions with the related
 parties. Those transactions along with related balances as at March 31,
 2009 and for the year then ended are presented in the following table.
 
 List of related parties along with nature and volume of transactions is
 given below:
 
 (a) Subsidiaries
 
 CFCL Overseas Ltd., Cayman Islands Chambal Infrastructure Ventures
 Limited, India India Steamship Pte. Ltd., Singapore
 
 Subsidiaries and Step-down Subsidiaries of CFCL Overseas Limited
 
 * CFCL Technologies Limited, Cayman Islands
 
 * CFCL Ventures Limited, Cayman Islands
 
 * ISGN Corporation, USA (formerly known as NovaSoft Information
 Technology Corporation)
 
 Subsidiaries and Step-down Subsidiaries of ISGN Corporation, USA
 
 * NovaSoft Information Technology (Europe) Ltd., UK (ceased w.e.f March
 24, 2009)
 
 * Asia NovaSoft Technologies Pte Ltd, Singapore, (ceased w.e.f October
 31, 2008)
 
 * NovaSoft Information Technology Corporation GMBH, Germany
 
 * Dynatek Inc., USA
 
 * Richmond Investors, LLC
 
 * Richmond Title Genpar, LLC
 
 * Richmond Title Services, LP
 
 * Flex Agents Signing Team, LLC
 
 * Richmond Title Services, LLC (Alabama)
 
 Subsidiaries and Step-down Subsidiaries of CFCL Ventures Limited
 
 * ISG NovaSoft Technologies Limited, India
 
 * ISGN Solutions Limited, Ireland
 
 * Inuva Info Management Private Limited, India
 
 Subsidiaries of Chambal Infrastructure Ventures Limited
 
 * Gulbarga Cement Limited (ceased w.e.f. December 30, 2008)
 
 * Chambal Energy (Chhattisgarh) Limited
 
 * Chambal Energy (Orissa) Limited
 
 11 a.  During the year, the Company has made further investment of Rs.
 120 lacs in its wholly owned subsidiary company namely Chambal
 Infrastructure Ventures Limited (CIVL).
 
 b.  The Company has made further investment of Rs. 523.94 lacs in its
 wholly owned subsidiary CFCL Overseas Limited, Cayman Island.
 
 c.  During the year, the Company has sold one of its sub subsidiary
 Gulbarga Cement Limited to Zuari Industries Limited at a total
 consideration of Rs. 5 lacs.
 
 d.  During the year, the Company has sold partial stake in its
 associate Zuari Investments Limited at a consideration of Rs.
 1060.96 lacs and recognized gain on sale of investment of Rs.  436.87
 lacs.
 
 12. During the year, the Company has received fertilizers bonds of Rs.
 49715 lacs from the Ministry of Fertilisers, the Government of India
 against the outstanding amount of subsidy receivable, out of which
 bonds amounting to Rs. 36715.40 lacs are outstanding at the year end.
 The market value of above bonds are lower than book value therefore the
 diminution in the value of above bonds amounting to Rs. 2810 lacs has
 been accounted for. The aforesaid bonds have been classified as Other
 Current Assets in the financial statements.
 
 12.  Deferred payment liabilities
 
 a.  Deferred payment liabilities include:
 
 (i) Deferred Sales Tax amounting to Rs. 99.91 lacs (Previous Year Rs.
 199.82 lacs) This includes amount repayable within one
 
 year is Rs. 99.91 lacs (Previous Year Rs. 99.91 lacs).  (ii) Deferred
 Suppliers Credit amount to Rs. 6111.74 lacs (Previous Year Rs. 9572.43
 lacs). This includes amount repayable within one year Rs. 6111.74 lacs
 (Previous Year Rs. 4786.21 lacs).
 
 b.  Liability under Deferred Suppliers Credit amounting to Rs.
 6111.74 lacs (Previous Year Rs. 9572.43 lacs) and interest accrued
 thereon, is guaranteed by Banks and Financial Institutions which, in
 turn, are secured by mortgage by deposit of title deeds in respect of
 immovable properties and hypothecation of the movable fixed assets of
 the Company, both present and future, (save and except book debts and
 assets of Shipping Division), subject to prior charges created / to be
 created in favour of Banks / Financial Institutions on movables for
 securing working capital borrowings, ranking pari passu with the
 charges created / to be created in favour of Banks and Financial
 Institutions for securing various Loans/ Guarantee Assistance and in
 favour of trustees for Non Convertible Debentures.
 
 14.  The Board of Directors of erstwhile ISS Holdings Ltd (a subsidiary
 of erstwhile India Steamship Company Limited, acquired by the Company
 in 2003) had applied on November 11, 2003 to the Registrar of
 Companies, West Bengal to strike off the name of the erstwhile ISS
 Holdings Ltd. under Section 560 of the Companies Act, 1956 in terms of
 the Simplified Exit Scheme offered under General Circular No 1
 7/78/2001 - CL. V dated 25.03.2003 issued by the Department of Company
 Affairs.  Notification in this regard is awaited.
 
 C) Shipping activity:
 
 Shipping Division of the Company is engaged in the business of shipping
 activities. Shipping activities are not capable of being expressed in
 generic units. Hence quantitative details and related information
 required to be given under paragraphs 3 and 4C of Part II of Schedule
 VI of the Companies Act, 1956 are not applicable to this business.
 Further, the Company has been granted exemption vide notification no.
 46/116/2009-CL-ll 1 dated May 8, 2009 of the Ministry of Company
 Affairs, Government of India, from the disclosure of quantitative
 details (in respect of the Shipping division for the financial year
 ending on 31 st March, 2009) in compliance of Paragraph 4D(a), (b),
 (c), (e) of Part -II of Schedule VI to the Companies Act, 1956 as
 amended vide Notification No. GSR 494(E), Dated the 30th October, 1973.