1. a) The Company had preferred and appeal before the Appellate
Authority against the impugned order dated 31st December, 1996 passed
by the BIFR recommending the winding up of the Company. The Appellate
Authority vide its order dated 15th January, 1998 has dismissed the
said appeal. The workers' Union has filed a petition with the Bombay
High Court against the order of AAIFR. The matter is pending for
decision of the High Court, Bombay.
b) SBI/IDBI have filed the civil suit against the Company in
satisfaction of their claims. Inview of court's order dated 16th
November, 1998, High Court of Bombay directed that Court Receiver has
been appointed to take the physical possession of the suit properties.
The matter is still pending with Court Receiver. High Court, Bombay
2. Contingent Liabilities
1998-99 1998-99 1997-98
Rs. in Lacs Rs. in Lacs Rs. in Lacs
(a) In respect of Counter-Guarantees
given to the bank 0.00 0.00
(b) In respect of arrears of
Dividends for the financial
years 1980 to 1998-99
On 5.1/4% First Cumulative
Preference Shares @ Rs.
250/- each 16.19 15.35
On 7% Second Cumulative
Preference Shares @ Rs.
500/- each 21.14 20.05
(c) In respect of claims not
acknowledged as debts 111.00 111.00
3. The Company has not determined the liability for gratuity payable to
its employees on acturial basis as on 31-03-99. However, the accrued
liability as on 31-03-95 determined on acturial basis amounting to Rs.
324.45 lacs has not been provided for as the Company accounts for
gratuity as and when due. Interest on gratuity payable amounting to
Rs. 132.04 lacs has also not been provided.
4. Depreciation in respect of multiple shift allowances amounting to
Rs. 255.32 lacs for the years 1983 to 1987 has not been provided since
the Company has been advised by an eminent Counsel that in respect of
Plant & Machinery it need not take into consideration extra and
multiple shift working for calculating depreciation charges as the
Company did not intend to claim the said allowances for the purpose of
computing taxable income under the Income Tax Act, 1961 in respect of
the said years. The Company was also advised by Counsel that
depreciation so provided by the Company was in accordance with the
provisions of Section 205 of the Companies Act, 1956.
Depreciation in respect of single shift allowance amounting to Rs.
70.85 lacs for the years 1997-98 and 1998-99 has not been provided.
5. Unsecured loans include intercorporate deposit of Rs. 200/- lacs
received on several dates during Oct/Nov. 94 for which the Company has
not entered into any formal agreement regarding the terms of repayment
and interest payable. Accordingly no provision for interest has been
made in the accounts.
Provision has not been made for interest on loan from Financial
Institutions and Banks amounting to Rs. 220.54 lacs and Rs. 1664.76
lacs respectively for the years 1997-98 and 1998-99.
6. The Company has sold land together with some of the industrial Units
situated at Haines Road, Mumbai in 1986 for a sale price of Rs. 25.96
lacs on deferred receivable basis. Out of the above sale price, a sum
of Rs. 1.42 lacs is outstanding as on 31st March, 1999.
7. The Bank of Maharashtra has given a guarantee of Rs. 75 lacs to
State Bank of India against security by way of hypothecation of book
debts as collateral security for outstanding in the cash credit account
in excess of the drawing power available from time to time.
8. (a) The Company's writ petition in High Court of Delhi against levy
of excise duty on yarn used for captive consumption has been decided
against the Mill Company, on 10-03-1993. The Company did not receive
any demand notice from the Excise authorities for payment of these
amounts in the past when the Stay order was in force or thereafter.
The total liability as on 31st March, 1999 since the date of stay order
amounts to Rs.962.27 lacs. Out of the said amount, no provision has
been made in the accounts for the principal amount of Rs. 402.68 lacs.
The Company has not able to ascertain interest, if any due on amounts
(b) A sum of Rs. 211.22 lacs collected from dealers has not been paid
to the Excise authorities pending receipt of expert opinion on the
point of limitation for raising a demand by the Excise authorities.
9. The Company has received exemption for the vacant land in the
Industrial Zone upto 3rd June, 1983. After considering this exemption,
the Competent Authority under the Urban Land Ceiling Act for Solapur
Urban Agglomeration declared 3,78,385.52 sq.mtrs. land from various
mill properties in Solapur as surplus. The surplus land continues to
be in Company's possession. The Company requested Maharashtra
Government to exempt all the vacant lands of the Company from the
provisions of the Urban Land (Ceiling & Regulation) Act, 1956 and allow
the Company to sell these lands for utilising the sale proceeds for
implementation of the Rehabilitation package to be sanctioned by
B.I.F.R. The Maharashtra Government exempted 2,94,430.37 sq. mtrs of
vacant lands and permitted the Company to sell the same. Company's
request for exempting further 83,928.15 sq. mtrs of land from the
remaining properties and for permission to sell the same has been
rejected by the authorities.
10. No provision has been made In respect of doubtful book debts of
amounting to Rs. 94.59 lacs and doubtful advances amounting to Rs. 4.04
11. No provision has been made for interest on statutory liabilities
(EPF, ESI, FP, EDLI, Prof. Tax, MST/CST) approximately amounting to Rs.
174.00 lacs for the years 1997-98 and 1998-99.
12. The Company has not redeemed Preference Shares as per Section 80A
of the Companies Act, 1956.
13. We are unable to express an opinion as to whether stock of stores
and spare parts valued at Rs. 28.80 lacs is relisable in view of the
fact that the company's operations have come to a standstill since
14. Due to closure of the Mills we were unable to physically verity
inventory as on 31-03-99, and have therefore relied On quantitative
details as par book records. Discrepancies if any between physical
stock and book records have not been dealt with in the accounts.
15. Provision for Salaries have been made only in respect of staff at
the Mill as the management contends that salary/ wages are not payable
thereafter in view of the Mills closure due to non availability of
Working Capital Finance.
16. The Company has acquired Plant and Machinery on lease basis on the
following terms and conditions :
Cost outstanding Lease period
Rs. in Lacs Rs. in Lacs
1998-99 20.59 3.18 8 years from August, 1986.
1997-98 20.59 3.18 8 years from August, 1986.
17. The Minimum remuneration paid to whole-time Director (Nominee)
approved by the Central Government under Section 198 of the Companies
Act, 1956 is as under :
Rs. in Lacs Rs. in Lacs
Salaries (Minimum) 0.00 3.75
Contribution to Provident & Superannuation Funds 0.00 0.00
It has not been considered necessary to furnish the computation of net
profits under Section 198 of the Companies Act, 1956 as no commission
is payable to the Whole-time Director in view of the absence of profits
for the year.
18. The Financial Institution have a right to convert at its option a
part of the loans not exceeding Rs. 134 lacs in to 13.40 lacs fully
paid up Equity Shares of Rs. 10/- each at par.
19. The Company has not sent request for confirmation of balances to
debtors, creditors and advances/deposits given by the Company.