DIRECTORS' REPORT We have pleasure in presenting our 36th Annual Report together with the audited accounts of the Company for the year ended 31st March, 2015. Operation & Reason for Losses During the year under review, the Company has manufactured 7499 tons of paper with net sale of Rs.28.28 crores. In October, 2014, the Central Pollution Control Board (CPCB) vide its Letter No.D-23012/1/PCI-III/5944-5948 stopped the production on all the three paper machines of the Company. Due to which, the financial position further deteriorated due to Nil production in last five months of this financial year. Conditional clearance of the Pollution Board was received in March, 2015. The Company is exploring various avenues to infuse the funds for revival of the Company. Regarding market scenario, we would like to inform, that, due to unrestricted duty free import of Newsprint, the price of Newsprint has gone down by nearly 10% during the year. The new plant set up is mainly for Newsprint and favorable market condition is a necessity to restart the plant. The Company is making all effort to comply with Pollution Control norms, which now required continuous online monitoring and investment. Compliance of Sick Industrial Companies (Special Provisions) Act, 1985 The Company has filed a Reference Application under Section 15 (1) of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) with Hon'ble BIFR which was registered as Case No. 29/2013. In the hearing held on 26th September, 2013, the Hon'ble BIFR declared the Company as 'Sick' u/s 3 (1) (o) of SICA and appointed Bank of Baroda as the Operating Agency (OA) u/s 17 (3) of the Act to prepare a Rehabilitation Scheme for the Company. The Company has submitted the Draft Rehabilitation Scheme (DRS) to Bank of Baroda (OA) and other stakeholders with a copy to Hon'ble BIFR. The last date of hearing was to be held on 24th April, 2014, was postponed sine die. Indian Bank has sold its loan to the ARC M/s JM Financial Asset Reconstruction Company Pvt. Ltd who have filed miscellaneous application with Hon'ble BIFR substitution of its name in place of Indian Bank. The revival of the Company is dependent on approval of Draft Rehabilitation Scheme at the earliest. Share Capital The paid up Equity Share Capital as on 31st March, 2015 was Rs. 34,82,72,240/-. During the year under review, the Company has not issued shares with differential voting right nor granted stock options or sweat equity. Directors Shri Badri Vishal Tandon, Director, is retiring by rotation, being eligible for re-election, has given his consent for the same. Pursuant to Sections 161 of the Companies Act, 2013, Smt Lakshmi Kumari (DIN: 07134683) was appointed as Additional Director by the Board in the category of Non-Executive Director who is liable to retire by rotation with effect from 31st March, 2015. Smt Lakshmi Kumari will hold the office up to the date of ensuing Annual General Meeting of the Company and is eligible, offers herself for re-appointment. The Brief resume and other details relating to the Directors, who are to be appointed/ re-appointed as stipulated under Clause 49 of the Listing Agreement, are furnished in the Annual Report. Further, all independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149 (6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. None of the Director is disqualified under Section 164 (2) of the Companies Act, 2013 and Clause 49 of the Listing Agreement with the Stock Exchange. Corporate Governance Code Your Company has complied with all the mandatory requirements of Corporate Governance. The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Bombay Stock Exchange forms an integral part of the Directors' Report. The Statutory Auditors of the Company have examined the Company's compliance to the Code of Corporate Governance and have certified the same, as required under SEBI guidelines. The certificate is reproduced with Corporate Governance Report to the Members. Management's Discussion and Analysis Report Management's Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Bombay Stock Exchange, is presented in a separate section forming part of the Annual Report. Auditors and Auditor's Report Statutory Auditors M/s. P.L.Gupta & Co., Chartered Accountants, Statutory Auditors of the Company, retire from their Office at the conclusion of ensuing Annual General Meeting. They are, however, eligible for re-appointment and have furnished certificate to the effect that their appointment, if made, will be in accordance with the limits specified in Sub- Section (I-B) of Section 139 of the Companies Act, 2013. Your Directors recommend their re-appointment up to the conclusion of next annual general meeting. Auditor's Qualification/ Remarks With regard to qualifications/ remarks in Auditor's report and Annexure thereto, (a) as mentioned in Note No. 41 of financial statements, the balances of some of the trade receivables, trade payables, lender and loans and advances are subject to confirmation/ reconciliation and subsequent adjustments, if any. Due to closure of the Plant, necessary verification has been delayed, however, the Management is of the view that there is no material adjustment in this regard. With respect to qualification (b) as mentioned in Note No. 43 of financial statements, the Company became a sick industrial company within the meaning of Section 3 (1) (o) of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) due to erosion of its entire net worth and the Company was declared a Sick Industrial Company by Hon'ble BIFR on 26th September, 2013. The Company has submitted the Draft Rehabilitation Scheme (DRS) to operating agency, Bank of Baroda. The Company has provided interest on Term Loan and other loans of Indian Bank and Bank of Baroda @ 10.50% with effect from 1st January, 2013 in accordance with Guidelines and Checklist for preparation of Draft Rehabilitation Scheme as provided by Hon'ble BIFR. With respect to qualification (c) as mentioned in Note No. 29 of financial statements, the Company has not recognized additional net Deferred Tax Asset during the year. Net Deferred Tax Assets of Rs.14 crores was recognized for the year ended 31st March, 2012 based on the future profitability projections by the management. The financial statement has been drawn upon going concern assumption. Cost Auditor Pursuant to Section 148 of the Companies Act, 2013, read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company in respect of its paper activity is required to be audited. Your Directors had, on the recommendation of the Audit Committee, appointed Shri Rakesh Mishra, Cost Accountant, as Cost Auditor for auditing the cost accounts of the Company for the Financial Year 2015-16 at a remuneration of Rs.25,000/- (Rupees twenty five thousand only). As required under the Companies Act, 2013, the remuneration payable to the Cost Auditor is required to be placed before the Members in the general meeting for ratification. Accordingly, a Resolution seeking member's ratification for the remuneration payable to Shri Rakesh Misra , Cost Auditor is included in the Notice convening the Annual General Meeting. The Company has received a letter from him to the effect that his re-appointment would be within the limits prescribed under Section 141(3)(g) of the Companies Act, 2013 and that he is not disqualified for such re-appointment within the meaning of Section 141 of the Companies Act, 2013. Secretarial Auditor The Board of Directors of the Company have appointed M/s. Adesh Tandon & Associates, Company Secretaries , as the Secretarial Auditor of the Company for the financial year 2014-15, in terms of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The Report of the Secretarial Audit is annexed herewith as Annexure A and forms an integral part of this Report. The comments mentioned in Secretarial Audit Report are self explanatory. Extract of Annual Return Pursuant to Section 92 (3) of the Companies Act, 2013 and Rule 12(1) of the Company (Management & Administration) Rules, 2014, extract of Annual Return of the Company is annexed herewith as Annexure B in Form MGT-9 to this Report. Particulars of Employees None of the Employee of the Company was in receipt of total remuneration of Rs.60,00,000/- during the financial year under review or Rs.5,00,000/- per month. Information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith as Annexure C and form an integral part of this Report. Deposits The Company has not accepted any deposit under Section 73 or Section 76 of the Companies Act, 2013 read with the Companies (Acceptance of Deposit) Rules, 2014 during the year under review. Particulars of conservation of energy, technology absorption and foreign exchange earnings and outgo Particulars with respect to conservation of energy, technology absorption and foreign earnings and outgo pursuant to Section 134(3)(m) read with the Companies (Accounts) Rules, 2014 for the year ended 31st March, 2015 are provided in Annexure D to this Report. Directors' Responsibility Statement Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013 with respect to Directors' Responsibility Statement, it is hereby confirmed: I) that in the preparation of the annual accounts for the year ending 31st March, 2015 the applicable accounting standards had been followed along with proper explanation relating to material departures, if any; II) that such accounting policies have been selected and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31st March, 2015 and of the profit or loss of the Company for that period; III) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; IV) that the annual financial statements for the year ending 31st March, 2015 have been prepared on a 'going concern' basis; V) that proper internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; VI) that systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively. Disclosures Audit Committee The Audit Committee comprises of five Directors namely Shri Badri Vishal Tandon, non-executive non independent Director and four independent directors, namely Shri C.M. Krishna, Brig. (Retd.) Shri Rajeev Lochan Singh SC, Shri Saran Vinod and Shri Atul Seth. All the recommendations made by the Audit Committee were accepted by the Board. Particulars of Loans, Guarantees or Investments The Company has not given any loans or guarantees covered under the provisions of Section 186 of the Companies Act, 2013. The details of the investments made by Company are given in the notes to the financial statements. Risk Management Policy In compliance of Clause 49 of the Listing Agreement, the Board of Directors has constituted a Risk Management Committee to monitor and review the risk management plan and apprised the Board about Risk Management framework, methodology for categorization of risk and mitigation plan and such other function as directed by Board from time to time. The main objective of this policy is to ensure sustainable business growth with stability and to promote a proactive approach in reporting, evaluating and resolving risks associated with the business. In order to achieve the key objective, the policy establishes a structured and disciplined approach to Risk Management, in order to guide decisions on risk related issues. In today's challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the Company are imperative. The common risks inter alia are Regulations, competition, Business risk, Technology obsolescence, Investments, retention of talent and expansion of facilities. Business risk, inter-alia, further includes financial risk, political risk, fidelity risk, legal risk. As a matter of policy, these risks are assessed and steps as appropriate are taken to mitigate the same. Vigil Mechanism Pursuant to provisions of Section 177 of the Companies Act, 2013 read with Clause 49 of the Listing Agreement with stock exchange, the Company has adopted Vigil Mechanism of the Company, which also incorporates a whistle blower policy may be accessed on the Company's website at www.shbhawani.com Unclaimed Dividend Pursuant to the provisions of Section 205A (5) and 205C of the Companies Act, 1956, the Company has transferred the unpaid or unclaimed dividends for the financial year up to 2006-07 from time to time on due dates, to the Investor Education and Protection Fund (the IEPF) established by the Central Government. The Company has not declared any dividend thereafter till the year under review. Contracts and Arrangements with related parties During the year, the Company had not entered into any contract/ arrangement/ transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. The policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at www.shbhawani.com The particulars of every contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 are disclosed in Form No. AOC -2 is annexed herewith as Annexure E. Your Directors draw attention of the members to Note 31 to the financial statement which sets out related party disclosures. Meetings of the Board Six meetings of the Board of Directors were held during the year. For further details, please refer Report on Corporate Governance of this Annual Report. Subsidiary and Associate Companies The Company does not have any Subsidiary / Associate Company. Appointment Policy The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a policy for selection and appointment of Directors, Key managerial Personnel, Senior Management and their remuneration. The appointment Policy is stated in the Corporate Governance Report and is available on website of the Company at www.shbhawani.com Board Evaluation Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance and the performance of the individual Directors as well as the evaluation of the working of its Committees. The manner in which the evaluation was carried out has been explained in the Corporate Governance Report. Listing with Stock Exchange The Equity Shares of the Company are listed on Bombay Stock Exchange Limited. The annual listing fees for the financial year 2015-16 have been paid to the Bombay Stock Exchange. Disclosure under the Sexual Harassment of women at workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has in place an Anti Sexual Harassment Policy in line with the requirements of the sexual harassment of women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. Till date, the Company has not received any complaint there under. Acknowledgement The Directors would also like to record their appreciation to the members of staff and workers, who in spite of constraints have been working hard for the Company and are maintaining cordial relations. FOR AND ON BEHALF OF THE BOARD GIRISH TANDON MANAGING DIRECTOR ALANKAR TANDON EXECUTIVE DIRECTOR PLACE: ALLAHABAD DATED: 11th AUGUST, 2015 |