BACKGROUND AND NATURE OF OPERATIONS
 
 Modern Dairies Limited (''the Company'') was incorporated in 1992 and is
 primarily engaged in business of manufacturing/processing of milk and
 milk products like Milk Powders, Cheese, Butter, Pure Ghee and other
 milk based products like Casein, Whey Protein Concentrate and Lactose,
 etc.
 
 a) Details of shares issued pursuant to contract without payment being
 received in cash, allotted as fully paid up by way of bonus issues and
 brought back during the last 5 years to be given for each class of
 shares
 
 During the last five years the Company has not issued any equity shares
 pursuant to a contract without payment being received in cash, other
 than issuance of bonus shares. The Company issued 8753100 bonus equity
 shares in the year 2007-2008 in the ratio of 1:1. There has been no
 buy-back of shares in the current year and preceding five years. On
 23rd July, 2008, 1163661 equity shares were issued to the Promoters and
 Promoters Group on conversion of warrants (on 29th November, 2007 the
 Company had allotted 3000000 convertible share warrants to Promoters
 and Promoters Group companies on preferential basis at a price ofRs. 81
 per share).
 
 a) Details of security for term loans from banks
 
 Term loans from banks are secured by way of equitable mortgage of fixed
 assets both present and future including land & building ofthe Company
 on first pari-passu basis and are also guaranteed by the promoter ofthe
 Company.
 
 b) Details of security for corporate loans
 
 Corporate loans are secured by way of mort age and charge of immovable
 and movable assets both present and future and it is also secured by
 way of charge/assignment on all bank accounts.
 
 c) Terms of repayment
 
 Pursuant to the rework proposal approved under the corporate debt
 restructuring (CDR) scheme by CDR Empowered Group and sanctioned by
 respective banks under the consortium, following interest rates and
 schedules of repayment have been agreed with the Company:
 
 i) Working capital term loans(WCTL):
 
 At the end of two years, outstanding of WCTL shall be converted into
 Optionally Convertible Debentures (OCD) at a coupon rate of 0.001%.
 Holders of OCD shall have the right to convert the said OCD into fully
 paid equity shares of the Company during 18 months from the date of
 issuance of such OCD as per the then applicable SEBI guidelines. In the
 event of OCD not being '' converted into equity, the same will be
 redeemable at the end of restructuring package i.e. in financial year
 2019 in one bullet payment.
 
 ii) Funded interest term loans(FITL):
 
 At the end of two years, outstanding of FITL shall be converted into
 Optionally Convertible Debentures (OCD) at a coupon rate of 0.001%.
 Holders of OCD shall have the right to convert the said OCD into fully
 paid equity shares of the Company during 18 months from the date of
 issuance of such OCD as per the then applicable SEBI guidelines. In the
 event of OCD not being converted into equity, the same will be
 redeemable at the end of restructuring package i.e. in financial year
 2019 in one bullet payment.
 
 iii) From others (unsecured):
 
 Loans taken from others have interest rate ranging from 10% to 14.5%.
 All these loans along with interest are due for repayment in the
 financial year 2013-14.
 
 Cash credit/export credit from banks is secured by way of hypothecation
 of current assets ofthe company comprising of Raw Material, Stock in
 process, finished goods , stores & spares, goods-in-transit,
 receivables and any other security acceptable on pari passu basis. It
 is also secured by equitable mortgage of fixed assets including land &
 building ofthe Company on pari-passu basis with other banks and is also
 guaranteed by the promoter ofthe Company.
 
 NOTE : iv
 
 CONTINGENT LIABILITIES AND PROVISIONS 
 
                                               As at          As at
                                         March 31, 2012   March 31, 2011
 
                                        Amount in Rs. Lac  Amount in Rs. Lac
 
 a) Claims against the Company 
 not acknowledged as debts;                 3,21.60          1,97.67
 
 (i)  Excise duty                           2,56.06          1,55.51
 
 (ii) Service tax                              1.39                - 
 
 (iii)     Entry tax                          57.69            42.16
 
 (iv) Income tax                               6.46                -
 
 
 
 
 (i) Excise duty: During 2005-06, the Company had availed CENVAT credit
 ofRs. 77.21 lacs on certain steel and other similar items (i.e.
 ''supporting goods'') as inputs used in fabrication of storage tanks
 other structures. As per the Excise Authorities, this credit of Rs. 77.21
 lacs pertains to inputs used in fabrication of milk storage tanks and
 other supporting structures of storage tanks and has therefore denied
 all the aforesaid credit on the ground that the inputs and goods
 mentioned above neither qualify as capital goods nor inputs as per
 CENVAT Credit Rules, 2004 for manufacture ofthe final products viz.
 Casein and Lactose. However, the Company has deposited demand of Rs.
 77.21 lacs together with interest thereon of 15.19 lacs under protest.
 The case is pending in CESTAT and is awaited for regular hearing.
 
 Further during the year 2007-08 to 2009-10 the Company also availed
 CENVAT credit of Rs. 78.30 lacs on certain steel items & other items as
 input used in fabrication of storage tanks. The excise authority
 (Panchkula) issued show cause notice for denial of the said CENVAT
 credit. The Company filed an appeal before the Commissioner and the
 commissioner confirmed a demand of CENVAT Credit amounting to Rs.78.30
 lacs along with a penalty of amount equal to the CENVAT Credit,
 interest of Rs. 4.57 lacs and Rs.17.68 lacs of CENVAT Credit wrongly taken
 and reversed. The Company had filed appeal before CESTAT and the case
 is awaited for regular hearing.
 
 Based upon the legal advice obtained by the Company, the management
 believes that the Company has good chances of winning the case and
 hence no provision against thereof is considered necessary at this
 point in time
 
 (ii) Service tax: A show cause notice was received from The Assistant
 Commissioner Central Excise (Ambala) for denial of exemption under
 notification no. 18/2009 dated 7th July, 2009. The case is pertaining
 to the period from 1st April, 2010 to 30th September, 2010. The
 service tax involved in this case is Rs. 1.39 lacs. The company had filed
 reply to the Show Cause Notice. The personal hearing in the matter was
 attended on 30st'' April, 2012.
 
 The Company will defend the matter, however chances of winning the case
 is more hence, no provision has been considered necessary in the books
 of accounts.
 
 (iii) Entry tax: Local Area Development Tax (''LADT'') was imposed in the
 state of Haryana with effect from 1S! April 2000.  In 2007-08, the LADT
 was quashed and declared ultra-vires by the Hon''ble High Court of
 Punjab and Haryana in its order dated 1 st April 2008. The State
 Government replaced the LADT with Entry Tax and it was also declared
 ultra-virus by the Hon''ble High Court of Punjab and Haryana. The State
 Government filed an appeal in the Hon''ble Supreme Court. The Hon''ble
 Supreme Court passed an order dated 30th October 2009, directing all
 assesses to file all the returns and staying recovery of tax till final
 order. The final order is still awaited.
 
 (iv) Income tax: During the year ended 31st March, 2012, the Income
 Tax Department carried out assessment for assessment years 2006-07 and
 2008-09 and issued a notice of demand u/st56 ofthe Income Tax Act, 1961
 for Rs. 6.06 lacs and Rs. 0.40 lacs respectively. The Company has filed
 application for rectification of the order u/s 154 of the Income Tax
 Act, 1961 with Assistant Commissioner of Income Tax as in its opinion,
 the amount considered as inadmissible by the Income Tax Department
 should be adjusted against the carry forward losses for the respective
 years, and hence, the Company is not liable to make payment towards
 such demands. Accordingly, no provision has been recognised in the
 financial statements for these years.
 
 The provisions of The Haryana Murrah Buffalo and Other Milch Animal
 Breed (Preservation and Development of Animal Husbandry and Dairy
 Development Sector) Act, 2001 (''Act'')'', requires every milk
 processing company to pay milk cess not exceeding fifteen paisa per
 litre on registered capacity of a milk plant under Milk and Milk
 Product order, 1992.Accordingly Haryana State Government, vide its
 notification no. 6388-AH-4-2001/16142 dated 9th September, 2001,
 imposed a milk-cess often paisa per litre on the registered capacity of
 plants.
 
 In 2001, the Company filed a writ petition before the Hon''ble High
 Court of Punjab and Haryana challenging the imposition of such cess as
 against the Constitution of India. The Hon''ble High Court of Punjab and
 Haryana issued a stay order dated 9thJuly, 2004 on such imposition and
 directed the Company to continue to pay 1/3'' ofthe total milk-cess
 amount to the State Government on registered capacity till the final
 outcome ofthe case. Till 2004-05, the Company had provided milk-cess
 amounting toRs. 3,53.75 lacs in the books of account. In 2004, a similar
 cess was levied in the state of Punjab by the Government of Punjab
 under the Punjab Dairy Development Board Ordinance, 2000, and was
 upheld unconstitutional by the Hon''ble Supreme Court. Based upon this
 order ofthe Hon''ble Supreme Court, the stay order from the Hon''ble High
 Court of Punjab and Haryana and as per the legal advice obtained by the
 Company at that point of time, the Company discontinued the provision
 of milk-cess in the books of account as it believed that the chances of
 cess being levied on the Company for the period after the year
 2004-2005 of Rs. 4,21.88 lacs would be remote and hence no provision
 against this was considered necessary.
 
 On 28th May, 2010 the Hon''ble High Court of Punjab and Haryana
 dismissed the Company''s writ petition and upheld the levy ofcessby
 state Government on milk plants. On 18th''August, 2010theCompanyfileda
 review application with the Hon''ble High Court. Subsequently the
 Company''s review application with Hon''ble High Court of Punjab and
 Haryana has been dismissed. On 18''th October, 2010 the Company also
 filed a special leave petition before the Hon''ble Supreme Court
 challenging the impugned judgment. The matter was listed before the
 Hon''ble Supreme Court on Rs.August, 2011.  The Hon''ble Supreme Court
 has issued a notice to the Govt, of Haryana on Special Leave Petition
 filed by the Company as well as on the application for interim stay. On
 20th April, 2012 the Government of Haryana filed its reply and The
 Hon''ble Supreme Court has ordered the case to be put before the
 Hon''ble Bench. As the Hon''ble Supreme Court is closed from 14th May,
 2012 till 1st July, 2012 the case shall come up for hearing before the
 Hon''ble Bench after the Supreme Court re-opens.
 
 The Company had also received a notice dated 1st April, 2011 from
 Semen Bank Officer, Haryana Livestock Development Board, Karnal
 demanding the payment ofRs. 21,25.75 lacs as arrears of Cess andRs. 1,28.72
 lacs towards interest on the full unpaid amount for the period from
 1st January, 2011 to 31st March, 2011. In view of the above
 developments and as advised by legal attorneys, the Company, as at 31st
 March, 2012 has accrued for Milk Cess liability amounting to Rs.32,15.27
 lacs (previous year Rs. 25,18.63 lacs) as demanded by Haryana Livestock
 Development Board.
 
 During the year ended 31st March, 2012 the Company has recorded a
 provision for milk cess liability ofRs. 84.38 lacs and interest thereon Rs.
 6,12.25 lacs as disclosed under note XXVIII.
 
 NOTE :v SEGMENT INFORMATION Primary Segment
 
 The Company is primarily engaged in the business of
 manufacturing/processing of milk and milk products like Casein,
 Lactose, Skimmed milk powder, Cheese, Butter, Pure Ghee, Premix etc.,
 management considers the risk and rewards associated with these
 products to be similar in nature. Accordingly, the entire operations of
 the company are governed by the same set of risk and rewards and thus,
 it operates in a single primary segment.
 
 Secondary Segment
 
 The Company''s business is organized into two key geographic segments.
 Revenues are attributable to individual geographic segments based upon
 the location of customers.
 
 Other information
 
 The accounting policies consistently used in the preparation of
 financial statements are also applied to revenues and expenditure of
 individual segments.
 
 Segment information disclosures as required under Accounting Standard
 Segment Reporting issued by The Institute of Chartered Accountant of
 India.
 
 NOTE : vi LOSS PER SHARE
 
 The calculation of Earnings Per Share (EPS) as disclosed in the
 statement of profit and loss has been made in accordance with
 Accounting Standard (AS)-20 on Earning Per Share issued by Companies
 (Accounting Standards) Rules, 2006.
 
 Pursuant to the approval for debt restructuring obtained from the
 Corporate Debt Restructuring Empowered Group (CDREG) and the respective
 banks within the consortium, Working Capital Term Loan (WCTL) and
 Funded Interest Term Loan (FITL) are convertible into Optionally
 Convertible Debentures (OCD) at a coupon rate of 0.001 % from the year
 2013-14. Since the Company has incurred losses during the current year,
 these potential equity share (0.001% OCD) are anti dilutive, hence
 these are not considered for the computation of loss per share.
 
 NOTE : vii LEASES
 
 The Company has leased facilities under cancellable operating leases
 arrangements with a lease term ranging from one to three years, which
 are subject to renewal at mutual consent thereafter. The cancellable
 arrangements can be terminated by either party after giving due notice.
 The lease rent expenses recognized during the year amounts to Rs. 5.65
 lacs (Previous year Rs 6.52 lacs).
 
 NOTE : viii
 
 During the year, the Company has incurred net losses after tax of
 Rs1,820.11 lacs (previous yearRs. 4,107.16 lacs). Due to losses in the
 current year, indicators of impairment as per Accounting Standard - 28
 Impairment of Assets, are present as at 31 March 2012.  Accordingly,
 the Company has reviewed the fixed assets for impairment and determined
 that the value in use of its fixed assets exceeds its carrying value as
 at 31 st March, 2012. Concluded that the value in use of the assets is
 more than the recorded value of the assets and writing-down the
 carrying value of the fixed assets is not required as at the date of
 the balance sheet.
 
 Subsequent to the year ended 31st March, 2012, Government vide
 Notification no 112 (RE-2010)/2009-2014 dated 1stMay, 2012 has lifted
 the ban on export of casein. Management believes that this event along
 with the approval obtained during the year for restructuring of debt
 from appropriate authorities further strengthen the going concern
 status of the company.
 
 NOTE : ix
 
 Pursuant to the reference filed by the Company with BIFR under section
 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985
 the BIFR vide its order dated 81st Feburary, 2012 declared the Company
 as sick and appointed Punjab National Bank being the Lead Bank as
 authorized agency to formulate rehabilitation plan for the Company.
 
 NOTE : x
 
 In the opinion of the board of directors, current assets, loans and
 advances have a value on realization in the ordinary course of business
 at least equal to the amounts at which they are stated and provision
 for all known liabilities have been made in accounts.
 
 NOTE : xi PREVIOUS YEAR FIGURES
 
 Till the year 31st March, 2011, the Company was preparing and
 presenting its financial statements in accordance with the erstwhile
 Schedule VI to the Companies Act, 1956. During the year ended 31st
 March, 2012, the revised Schedule VI notified under the Companies Act,
 1956 has become applicable to the Company. Accordingly, the Company has
 prepared and presented its financial statements for the year ended
 31st March, 2012 in accordance with the provisions of revised Schedule
 VI and has reclassified previous year figures to confirm to current
 year''s classification in terms with the said notification''s