1. Contingent Liabilities not provided for in respect of :
 
 a) Encroachment charges with interest for the period 8th May, 1992 to
 30th June, 2006 payable to Maharashtra Industrial Development
 Corporation (MIDC) against which the Company has appealed before the
 concerned authority `Udyog Mitra Rs. 11,076,412 (Previous Year Rs.
 1,02,68,297). However, statements from MIDC are not available for
 confirmation of the said figure.
 
 b) The amount of Interest Liability, if any, in respect of Direct and
 Indirect taxation, are not ascertainable.
 
 3. a) The Company had received permission, in principle, from the
 Development Commissioner, SEEPZ, allowing the Company to withdraw from
 100% Export Oriented Unit (EOU) Scheme subject to payment of applicable
 customs duty on imported plant and machinery and excise duty on
 indigenously procured raw materials. The amount of duty and penalty
 payable had been adjudicated by the concerned authorities vide their
 order no. 04/VPS-34/2002/M-III dated 27th March, 2002 amounting to
 Rs.197,096,699 (amount of interest not ascertainable). The Company had
 filed an appeal with the CEGAT against the said order. CEGAT vide its
 decision dated 5th July, 2005 has dismissed the said appeal filed by
 the Company and upheld the above mentioned order passed by the
 Commissioner of Central Excise and Customs (Appeals)-Mumbai III.
 Pursuant to the order passed by the CEGAT Authorities, the Company has
 made the necessary provisions in the accounts pertaining to the above
 referred liability (excluding interest) during the year under review.
 
 b) Pending withdrawal of the Company from 100% EOU Scheme, the Company
 had obtained permission from the Ministry of Commerce to sell its
 products in Domestic Tariff Area (DTA) upto 31st December, 1997.
 However, the Company has continued to sell its products in DTA beyond
 31st December 1997. The amount of differential duty and penalty payable
 have. been adjudicated by the concerned Authorities vide their order
 no. 04/VPS-34/2002/M-III dated 27th March, 2002 amounting to
 Rs.464,054,965 (amount of interest not ascertainable). The Company had
 filed an appeal with the CEGAT against the said order. CEGAT vide its
 decision dated 5th July, 2005 has dismissed the said appeal filed by
 the Company and upheld the above mentioned order passed by the
 Commissioner of Central Excise and Customs (Appeals)-Mumbai III.
 Pursuant to the order passed by the CEGAT Authorities, the Company has
 made the necessary provisions in the accounts pertaining to the above
 referred liability (excluding interest) during the year under review.
 
 c) The Company as a 100% Export Oriented Unit (EOU) was procuring
 indigenous raw materials and capital goods without payment of excise
 duty. However, on obtaining letter of intent to withdraw from the 100%
 EOU scheme, the Company had to pay excise duty (charge to
 revenue/capitalised) without being allowed to claim MODVAT, pending
 completion of debonding formalities. In view thereof, the Company to
 date has MODVAT credit of Rs.3,11,94,040 not allowed by the
 authorities.
 
 The same will be dealt with in the accounts on completion of assessment
 with respect to debonding.
 
 4. a) Loans from Financial institutions [including guarantee
 commission, liquidated damages etc., of Rs.183,417,297 (Previous Year
 Rs. 154,320,885)] are repayable on demand and are secured by a first
 charge by way of mortgage/hypothecation of all the assets of the
 Company, immovable and/or moveable, present and future, wheresoever
 situated and ranking pari-passu but subject to the prior charges of
 the Companys bankers for working capital borrowings on specified
 movables and personally guaranteed by two Directors of the Company.
 (Also refer Note No.7 below).
 
 b) During the year under review, Interest on loans taken from financial
 institutions has been provided on the basis of rate of interest
 considered in the immediately preceding year. No statements have been
 received from financial institutions for confirmation of the figures
 pertaining to the principal outstanding and interest accrued till 30th
 June, 2006.
 
 c) i) Working capital facilities from a bank are secured by first
 charge by way of hypothecation of book debts and stocks and second
 charge (pending creation of security) on whole of the immovable assets
 of the company.
 
 ii) As per the consent terms dated 5th July, 2004 between the Company
 and Canara Bank, the total outstanding alongwith interest payable by
 the Company to Canara Bank was settled at Rs.98,00,000 as against
 Rs.3,12,26,621 claimed by the Bank as total outstandings alongwith
 interest from the Company. Out of the settled amount of Rs.98,00,000 a
 sum of Rs. 52,00,000 has already been paid by the Company during the
 year under review. In terms of the consent terms, the balance amount of
 Rs. 46,00,000 was due on 30th September, 2004 and in the event of the
 Company not adhering to the said deadline, the Bank would claim the
 entire amount of outstanding from the Company and not the settled
 amount. However, since the Company could not adhere to the clauses in
 the consent terms with respect to the payment of the balance amount of
 the settled amount before the stipulated date, the accounting
 adjustments, if any, according to the consent terms have not been given
 effect to in the books of account. The promoters are trying to mobilize
 the required funds through their personal resources for payment of the
 outstanding amount.
 
 d) The aforesaid loans, interest accrued and due thereon and working
 capital facilities are secured as at the close of the year to the
 extent of realisable value of the assets, the amount whereof has not
 been ascertained.
 
 5. a) Pursuant to the vacation of the stay granted by the Bombay High
 Court earlier, restraining Industrial Development Bank Of India (IDBI)
 from making any payment to Union Bank of Switzerland (UBS) (formerly
 Swiss Bank Corporation) under its guarantee and UBS from recovering any
 amount from IDBI, IDBI remitted SFR.7,339,672 (equivalent
 Rs.205,510,823) on 22nd December 2000 towards full and final settlement
 of UBS dues.
 
 b) The aforesaid payment by IDBI to UBS is disputed by the Company and
 is sub-judice in a suit filed by the Company in the Bombay High Court
 and also subject matter of recovery proceedings initiated by IDBI
 before debt recovery tribunal. However, as a matter of abundant
 caution and without prejudice to the Companys claim in the legal
 proceedings, the Company has accounted for the same.
 
 6. In terms of the Arbitration award delivered by the London Court of
 International Arbitration (LCIA) on 16th November, 2000, with respect
 to the total failure of the Plant and the Mura Process supplied by the
 foreign collaborators, the Company has till date not received the award
 amount of SFR 3,158,200 with simple interest @ 8.5% p.a. Based on a
 legal opinion obtained from an expert with respect to uncertainty in
 receipt of the aforesaid award money and relied upon by the auditors,
 the same will be dealt with appropriately in the year of actual
 receipt.
 
 7. a) The Companys net worth has been fully eroded due to losses which
 is mainly on account of the Company not being able to manufacture Super
 and Electro Conductive grade of carbon black in view of total failure
 on the part of the foreign collaborators to prove the performance of
 the plant and the process under the foreign collaboration agreement.
 Substantial modifications to the Plant and Process were carried out by
 the Companys indigenous technical team to manufacture rubber grade
 carbon black. Presently, the operations of the plant are under
 suspension interalia, due to financial constraints Further, BIFR has,
 vide its order dated 19th June, 2003 recommended winding up of the
 Company and the matter is pending at the Bombay High Court for
 consideration. On grant of relief and concessions from the Financial
 Institutions and Government, the management expects to revive the
 operations and therefore, the accounts are prepared on going concern
 basis.
 
 b) In view of the closure of Plant operations since April 2000, the
 Building, Plant & Machinery, Storage Tanks, Electrical installations,
 Factory Equipment, Furniture & Fittings and Vehicles etc. started
 deteriorating, however, since Companys indigenous technical team has
 successfully manufactured and sold rubber grades of Carbon Black, it
 may have reasonable value. However, considering uncertainty in the
 matter and in the absence of independent assessment, deterioration in
 respect of Building, Plant & Machinery, Storage Tanks, Electrical
 Installations, Factory Equipment, Furniture & Fittings and Vehicles
 etc. cannot be evaluated.
 
 c) Due to the continuing financial crisis, the insurance for Plant &
 Machinery etc could not be renewed after November 2002.
 
 8. As a matter of abundant caution and without prejudice to the
 Companys appeals pending before the Income Tax Appellate Tribunal
 (ITAT), the Company during the earlier years had made provision with
 respect to Income Tax liability of Rs. 109,579,890 for income earned
 during construction period, based on the orders of the
 Commissioner-Income Tax (Appeals).
 
 9. Sundry Creditors include Rs. 8,73,960 (Previous Year Rs.8,73,980)
 overdue to M/s Bhagwati Paper Industries a small scale Industrial Unit
 and is outstanding for more than 30 days. Interest liability, if any,
 will be provided for in the year of payment. This disclosure is based
 on the information available with the Company regarding the status of
 supplies under the Industries (Development and Regulation) Act, 1951
 and Interest on Delayed payments to Small Scale and Ancillary
 Industrial Undertaking Act, 1993.
 
 10. The Company was sanctioned deferment of Sales Tax liability of
 Rs.36,408,717 (excluding interest) upto 28th February, 2000 by the
 Maharashtra State Government under the Scheme of Sales Tax Incentives.
 In view of continuous suspension of plant operations, the said amount
 is due and payable under the. provisions of the Scheme and the same has
 been regrouped under Current Liabilities.
 
 11. The accounts of certain Creditors and Banks are subject to
 confirmation and reconciliation. The difference if any, as may be
 noticed on reconciliation will be duly accounted for on completion
 thereof. In the opinion of the Management, the ultimate difference will
 not be material.
 
 12. In the opinion of the Board of Directors, current assets, loans and
 advances have a value on realisation in the ordinary course of
 business, atleast equal to the amount at which they are stated and
 provision for all liabilities (except otherwise stated) are adequate
 and not in the excess of the amount reasonably necessary.
 
 13. As the Company is engaged in only one segment viz., manufacture and
 sale of carbon black and all of its fixed assets are situated in
 India, there is no segment-wise information to report as per Accounting
 Standard 17 issued by The Institute of Chartered Accountants of India.
 
 14. Related Parties Disclosure as per Accounting Standard 18:
 
 List of Related Parties : Nil
 
 Key Management Personnel : Nil
 
 15. The Computation of Earning Per Share:
 
                                           Year ended         Year ended
                                      30th June. 2006    30th June, 2005
 
 Loss for the year after Prior
 period adjustments (numerator) (Rs.)     712,359,612        153,229,094
 
 Weighted average number of
 equity shares (denominator)               28,888,000         28,888,000
 
 Basic and Diluted Earnings Per Share (Rs.)    (6.10)             (5.30)
 
 Nominal Value of Shares (Rs.)                  10.00              10.00
 
 16. The accumulated losses of the Company have far exceeded its net
 worth. Presently, the operations of the plant are under suspension
 interalia, due to financial constraints. There is no certainty as to
 whether the Company will be able to recoup the losses in near future
 and hence, as a matter of prudence, no deferred tax asset has been
 recognised in the accounts
 
 17 Inter Corporate Deposits of Rs. 33,100,805 (Previous Year Rs.
 32,794,767) included in Schedule 3 have been personally guaranteed by
 one of the Directors.
 
 18. Auditors Remuneration:
 
                                              Year ended      Year ended
                                         30th June, 2006 30th June, 2005
                                                 Rupees.         Rupees.
 
 Audit Fees 50,000                                     -          50,000
 
 Certification Fees                               10,000          10,000
 
 Service tax on above                              7,344           6,120
 
 Total                                            67,344          66,120
 
                                              Year ended      Year ended
                                          30th June 2006 30th June, 2005
                                                 Rupees.         Rupees.
 
 20. Raw Material consumed : (indigenous)            Nil             Nil
 
 21. Expenditure in foreign Currency
 Legal & Professional Fees                           Nil        2,90,254
 
 22. Earnings in foreign exchange                    Nil             Nil
 
 23 Previous Years figures have been regrouped/wherever necessary to
 conform to this years presentation