1. Contingent liability exists in respect of sales tax demand of Rs.
 25.05 lacs (As at 31.03.1999 Rs. 25.66 lacs) raised by the sales tax
 authorities pending in appeal.
 
 2. 8% Cumulative convertible preference shares - pending allotment and
 conversion are in respect of accrued interest on 17% Debentures agreed
 to be converted into shares in terms of the resolution of the debenture
 holders in their meeting held on 26th May, 1998 and to be converted
 into equity shares of Rs.10/- each at par on 31st March, 2000 ranking
 pari pasu with the existing equity shares of the Company.
 
 3. (a) 17% Debentures - non convertible portion (Part-C) are secured by
 way of first charge on the land and movable plant and machinery,
 fixtures, fittings etc., both present and future situate at Mouje
 Indrad, Taluka Kadi, Dist. Mehsana (Gujarat) and on immovable and
 movable properties both present and future (save and except book debts)
 situate at village Mukundarayapuram, Wallajah Taluk, Vellore Dist.,
 Tamil Nadu which rank pari pasu with term loans from financial
 institution and subject to the prior charges created/to be created
 thereon in terms of Debenture Trust Deed.
 
 (b) The whole of immovable and movable properties of the Company
 including movable plant & machinery, machinery spares, tools and
 accessories and other movables (save and except charges created by the
 Company in favour of its bankers on inventories and book debts in
 respect of working capital loans, both present and future) have been
 hypothecated to a financial institution for term loans ranking pari
 pasu with 17% Debentures - non convertible portion (Part-C). In
 addition, these loans are secured by way of irrevocable guarantee by
 Montari Industries Limited, the ultimate holding Company.
 
 (c) Working capital loans from banks are secured against inventories
 and book debts both present and future and second charge on whole of
 the immovable properties of the Company including its plant and
 machinery, machinery spares, tools and accessories and other movables
 both present and future.
 
 (d) Deferred payment credits are secured against the assets thus
 purchased.
 
 (e) 17% Debentures non convertible portion (Part - C) of Rs. 100/- each
 will be redeemed at par in three instalments of Rs. 33, Rs.33 and Rs.
 34/- each on 12th January, 2001, 2002 and 2003 respectively.
 
 4. The ultimate holding company namely Montari Industries Limited holds
 61,27,300 equity shares through its subsidiary namely Vimoni
 Investments Limited.
 
 5. Debenture redemption reserve has not been created in the absence of
 profits.
 
 6. No provision for technical know-how fees amounting to Rs. 60.17 lacs
 approx. (As at 31.03.1999 Rs.65.48 lacs) has been made in the accounts
 which is to be capitalised with cost of plant and machinery.
 Consequently the depreciation charged in the accounts is lower by Rs.
 17.39 lacs (As at 31.03.1999 Rs. 14.63 lacs) out of which Rs. 2.76 lacs
 (Rs. 3.57 lacs previous year) is for the current year.
 
 7. Pending finalisation of negotiation with lessor, no provision for
 lease rent of the Tannery amounting to Rs. 144 lacs (As at 31.03.1999
 Rs. 72 lacs) has been made in the accounts in view of the waiver of
 lease rent expected for earlier years.
 
 8. Machinery in transit Rs. 14.57 lacs (including exchange loss of
 Rs.0.22 lacs for the year) shown under capital work in progress since
 September, 1994 is lying in the bonded ware house pending clearance on
 payment of customs duty.
 
 9. As per the information available, small scale industry to whom the
 Company owes more than Rs. 1.00 lac, outstanding for more than 30 days
 as of 31.03.2000 - Ganesh Cartons.
 
 10. Previous year figures have been regrouped wherever necessary to
 conform to current year classification.