Hindustan Motors

1.  Contingent Liabilities not provided for in respect of :
 
 (a) Claims & Government demands against the Company not acknowledged as
 debts.
 
 i) Excise Duty         4619.53      5425.48
 ii) Sales Tax          9311.94      9224.28
 iii) Customs Duty       409.69       395.77
 iv) Others              985.82      1143.69
 
 The Company does not expect any major impact to arise out of the above
 claims / demands.
 
 Against the above claims / demands, payments have been made under
 protest and / or debts have been withheld by the respective parties, to
 the extent of Rs. 2565.31 lacs ( Rs. 2503.87 lacs ).
 
 Included in the above are contingent liabilities to the extent of Rs.
 1588.10 lacs (Rs.1647.55 lacs) relating to the pre transfer period for
 the erstwhile Power Unit Plant and Power Products Division of the
 Company, which were transferred to AVTEC Limited in June 2005. However,
 demands to the extent of Rs. 1155.55 lacs ( Rs. 1155.55 lacs ) are
 covered by counter guarantees by the customers.
 
 (b) Outstanding Bank Guarantees for import of materials and other
 accounts.  182.53 41.79
 
 (c) Duty on import of Capital goods under Export Promotion Capital
 Goods Scheme is Rs.16.48 lacs (Rs.14.33 lacs ).
 
 (d) Bonus for the years 1963-64 to 1967-68 at Hindmotor unit which is
 under adjudication ( amount indeterminate ). The Company contends that
 no liability exists in this regard under the Payment of Bonus Act,
 1965.
 
 (e) Demands for incremental Dearness Allowance during the years 2001 to
 2007 at Hindmotor unit which are under adjudication ( amount not
 ascertained ). However majority of the employee’s unions have filed
 joint petition for withdrawal of the case.
 
 2.  (a) Term Loans Rs. 3314.11 lacs ( Rs. 4910.68 lacs ) from the
 Financial Institutions and Banks together with
 
 interest and other charges thereon, are secured by a mortgage of a part
 of the Company’s land with other immovable assets thereon, both present
 and future and by way of a hypothecation charge over all the movable
 assets including book debts of the Company.
 
 (b) Cash Credit facilities from Banks Rs. 1223.33 lacs ( Rs.1396.80
 lacs ), together with interest and other charges thereon, are secured
 by a mortgage of a part of the Company’s land together with other
 immovable assets thereon, both present and future and by way of a
 hypothecation charge over all the movable assets including book debts
 of the Company.
 
 (c) The Charges referred to in (a) and (b) above rank pari passu
 amongst various Financial Institutions and Banks.
 
 3.  (a) Pending finalisation of agreements with workmen of Hindmotor
 unit, minimum bonus liability has been provided.
 
 (b) The Company’s agreement with workmen of Hindmotor unit has expired
 on 31st March, 2003. The company’s liability, if any, towards
 additional salaries / wages, being presently unascertainable, would be
 accounted for after finalisation of the said agreement.
 
 4.  In terms of accounting policy disclosed vide Note No.1 (XVII) (b)
 above, Net Deferred Tax Asset of Rs. 981.53 lacs ( Rs.3523.97 lacs )
 arising on account of carried forward unabsorbed business losses has
 not been recognised in the accounts.
 
 5.  Finance Lease agreement for assets valuing Rs. 45.11 Lacs has
 already expired. However these assets are yet to be transferred to the
 Company by the lessor pending compliance of necessary formalities.
 
 6.  Consumption of Raw materials, stores and spare parts includes
 profit / loss on sale thereof.
 
 7.  In certain cases, excise duty on items transferred from one
 division to another for captive use has been accounted for based on
 actual payments at provisional rates. Additional liability, if any, in
 this regard will be accounted for on determination of the final rates,
 but it will have no impact on the Company’s profitability, since the
 same will be claimable as Cenvat benefit by the transferee unit.
 
 8.  Excise duty on stocks represents differential excise duty on
 opening and closing inventories.
 
 9.  In terms of a Development Agreement entered by the Company, the
 Company has duly transferred land measuring 62.80 acres ( 126.90 acres
 ) at Hindmotor by handing over physical possession thereof against
 payment to the developer, and profit of Rs 5631.75 lacs ( Rs.10320.10
 lacs ) thereon has been included under the head Other Income in
 Schedule 15. The Company will transfer the last lot comprising 62.791
 acres to the developer in the future period at predetermined rates.
 
 The Company has given a non-compete undertaking to the developer for a
 period of five years from the date of agreement or three years from the
 date of the completion of the development of the property, whichever is
 earlier, for which it would receive non-compete fee @ 4 % of the sale
 proceeds of the developed property as and when sold by the developer.
 
 10.  Previous year’s figures ( including those which are in brackets )
 have been regrouped / rearranged wherever necessary.