Triveni Engineering

1. Contingent liabilities (to the extent not provided for)
 
 (a) Guarantees/Surety given on behalf of subsidiary company Triveni
 Retail Ventures Ltd Rs.0.10 Million (Rs.0.10 Million) and on behalf of
 other companies Rs.8.77 Million (Rs.8.77 Million).
 
 (b) Claims against the Company not acknowledged as debts (as certified
 by the Management)
 
                                                      (Rs. in Million)
                                                  2008           2007
 
 i) Claims which are being contested by the 
 Company and in respect of which the            205.35         184.68
 Company has paid amounts aggregating to 
 Rs. 70.34 Million (Rs. 62.41 Million)
 under protest pending final 
 adjudication of the cases:
 
 Sl.  Particulars   Amount of Contingent         Amount Paid
 No.                Liability (Rs. in Million)  (Rs. in Million)
 
 01.  Sales Tax            51.75                    35.66
 
                          (51.38)                  (37.76)
 
 02.  Excise Duty         116.16                    30.35
 
                          (92.74)                   (5.84)
 
 03.  Others               37.44                     4.33
 
                          (40.56)                  (18.81)
 
 
 The outflow arising from these claims is uncertain and is after
 adjusting likelihood reimbursement of Rs. 12.02 Million (Rs. 9.08
 Million) from customers in respect of Central Excise demands on account
 of denial of benefit under Notification No.6/2000.
 
 ii) The Company is contingently liable 
 in respect of short provision against disputed      2.16        21.13
 income tax liabilities of Rs. 2.16 Million 
 (Rs. 21.13 Million).The amounts have not
 been provided in the accounts in view of 
 reliefs expected in appeals.
 
 iii) Excise duty paid by the Company under 
 protest in respect of certificates                 26.67        26.67
 issued by the Project Implementing Authority 
 (PIA) under Notifications 108/95CE
 dated 28.8.1995 (as amended) and 84/97 Cus 
 dated 11.11.1997 (as amended) which
 were later found to be invalid and based 
 on which, the suppliers had despatched
 the capital goods to Cogeneration Project at 
 Deoband without payment of duty.
 
 The Company is seeking court intervention 
 to direct Ministry of Finance (MOF) to
 nominate appropriate line ministry so that 
 certified true copies of certificates earlier
 issued by PIA could be signed by the concerned 
 line ministry to cure the procedural
 defect and have the exemption restored.
 
 iv) Indeterminate liability arising from claims / counter claims/
 Interest in arbitration/ Court cases, claims of some
 employees/ex-employees and in respect of service tax, if any, on
 certain activities of the Company which are being contested by the
 Company.
 
 (c) An amount of Rs.134.30 Million (Rs.133.57 Million) including bank
 guarantees encashed of Rs.93.82 Million (including cheque of Rs.2.00
 Million yet to be encashed) (Rs.93.82 Million), by customers are
 disputed either in arbitration, courts and/or is under settlement
 through negotiations. These amounts are stated under the head advances
 recoverable in Schedule 11 “Loans and Advances” and are considered good
 for recovery by the management except to the extent of provision made
 of Rs.4.96 Million (Rs.Nil). As the matters are subjudice and/ or under
 arbitration/settlement, contingent liability if any, is not
 determinable.
 
 2.  Advances recoverable in cash or in kind include
 
 a) Due from the Company Secretary-Rs.0.06 Million (Rs.0.12 Million).
 Maximum amount due at any time during the year Rs.0.25 Million (Rs.0.54
 Million).
 
 b) Rs.0.02 Million (Rs.0.02 Million) on account of Security Deposit
 paid to the Managing Director against leased property.
 
 3.  Outstanding commitments for capital expenditure amounting to
 Rs.487.22 Million (Rs.195.79 Million) after adjusting advance amounting
 to Rs.70.89 Million (Rs.69.44 Million).
 
 4.  The State Advised Price (SAP) of Rs.1250 per MT declared by the
 State Government for the season 2007-08 has been challenged before the
 Lucknow bench of the Allahabad High Court on the ground of it being
 arbitrary but the court has upheld the SAP.  In similar cases for the
 seasons 2006-07 and 2007- 08, the Allahabad High Court has quashed the
 SAP declared by the State Government and has directed the State
 Government to re-fix the SAP after following a mechanism laid down by
 the Court. The matter is now in the Supreme Court which in an interim
 order has directed payment of Rs.1100 per MT for the season 2007-08
 till the final decision in the matter.  Pending final outcome of the
 case, the accounts have been prepared considering cane price of Rs.1100
 per MT for the season 2007-08.
 
 5.  (a) The company has continued to account for the incentives under
 the U.P. Sugar Industry Promotion Policy, 2004, since it has been
 legally advised that it continues to be entitled to the benefits under
 the said Policy, even though the policy was withdrawn by the State
 Government w.e.f. June 4, 2007. The Company has also filed a writ
 petition before the Lucknow Bench of the High Court of Allahabad,
 challenging the action of the State Government in withdrawing the said
 Policy and not granting the incentives to the Company. The High Court
 vide its interim order dated May 9, 2008 has permitted limited
 protection of remissions which were being enjoyed on the date when the
 policy was revoked.  The company has during the year, accounted for
 incentives (receivable/recoverable from the Government) to the extent
 of Rs 160.16 Million (Rs.85.92 Million) which have been netted from the
 costs and availed remission of Rs.56.79 Million (Rs.37.42 Million)
 against prescribed levies. As on 30.09.2008 total incentive
 receivable/recoverable including Capital Subsidy are Rs.1293.08 Million
 and remissions availed are Rs.94.21 Million.
 
 (b) Financial Statements include buffer stock subsidy of Rs.116.93
 Million (Rs.38.63 Million) recoverable from the Central Government
 towards reimbursement of certain expenses and has been netted from the
 related expenses.
 
 (c) During the year company has availed loan amounting to Rs.943.20
 Million under the “Scheme for Extending Financial Assistance to Sugar
 Undertakings,2007” notified by the Government of India. Interest
 subvention on such loan is Rs.74.11 Million.
 
 6.  In accordance with the Accounting Standard (AS) 11 ‘The Effect of
 changes in Foreign Exchange Rates’ post capitalization gains or losses
 relating to variations in Foreign exchange rates in respect of fixed
 assets acquired from outside India have been charged to Profit & Loss
 Account during the accounting year.  Earlier as per Schedule VI to the
 Companies Act, 1956, such gains or losses were adjusted in the carrying
 cost of concerned fixed assets. As a result of the change in Accounting
 Policy, the profit before tax is lower by Rs.6.88 Million.
 
 7.  During the current year, Company has changed its accounting policy
 in respect of recognizing the income from carbon credits.The income
 from carbon credits is now recognised on the delivery of the carbon
 credits to the customers’ account as evidenced by the receipt of
 confirmation of execution of delivery instructions, as against the
 earlier policy where income from carbon credits was recognised on
 estimated basis after the quantum was verified by an approved third
 party agency. Consequent to the change in the accounting policy, profit
 before tax of the Company for the year is lower by Rs. 90.20 Million.
 
 8. (a) The Company has made provision for the employee benefits in
 accordance with the Accounting Standard (AS) 15 “Employee Benefits”
 which has become applicable to the Company during the year. Consequent
 to the change, the employee cost for the year is higher by Rs.7.61
 Million. Further in accordance with the transitional provision of
 Accounting Standard (AS) 15, the additional provision towards Employee
 Benefits as at October 1, 2007 amounting to Rs.14.23 Million (net of
 deferred tax credit of Rs.7.33 Million) has been adjusted with the
 General Reserve.
 
 (b) In compliance of Accounting Standard (AS) 15 “Employees Benefits”
 the company has recognized following amounts in the profit & loss
 account.
 
 The estimates of future salary increase, considered in actuarial
 valuation, take account of inflation, seniority, promotion and other
 relevant factors such as supply and demand in the employment market.
 
 The entire plan assets of the gratuity fund are invested in fixed
 interest yielding debt instruments.  The expected rate of return on
 plan assets of gratuity fund have been arrived at taking into
 consideration the prevalent returns on prescribed categories of
 investments authorized to be made by the fund.
 
 9. The Company has incurred an expenditure of Rs.33.95 Million
 (Rs.21.99 Million) in respect of Research and Development activities in
 respect of its turbine unit and such expenditure has been charged to
 Profit & Loss Account under various heads. Additionally, the Company
 has also incurred cane development expenditure of Rs.56.00 Million
 (Rs.68.87 Million) in respect of its sugar units.
 
 10. (a) The Company has taken various residential, office and godown
 premises under operating lease. These are generally not non-cancelable
 and the unexpired period ranges between 6 months to 6 years and are
 renewable by mutual consent on mutually agreeable terms. The Company
 has given refundable interest free security deposits under certain
 agreements.
 
 (b) Lease payments under operating lease are recognized in the Profit &
 Loss Account under “Rent” in Schedule 21.
 
 (c) The future minimum lease payments under non-cancelable operating
 lease :
 
 - Not later than one year Rs. 0.86 Million (Rs.4.71 Million).
 
 - Later than one year and not later than five years Rs.Nil (Rs.NIL).
 
 11. Accumulated losses of wholly owned subsidiary of the Company M/s
 Triveni Retail Ventures Limited (TRVL) have exceeded its paid up
 capital. Since the retail business being undertaken by the subsidiary
 is in the gestation period and considering the long term nature of the
 investment, in the opinion of the management, the decline in book value
 of investment is not permanent in nature and accordingly no provision
 for loss in respect of investment held in and loan given to TRVL by the
 Company, has been considered necessary.
 
 12. Previous period figures have been rearranged and regrouped wherever
 necessary to make them comparable with this year figures. The figures
 of the previous period are for the period 18 months while figures for
 the current year are for 12 months and hence are not comparable.
 Figures given in brackets relate to previous year.