DIRECTORS' REPORT To The Members, Directors of the company have pleasure in submitting the 29th Annual Report of the Company together with Audited Accounts for the period ended 31st March 2012. Restructuring of Secured Debts One Time Settlement (OTS) of all the secured debts of the Company was sanctioned at Rs. 32 Crores under Corporate Debt Restructuring (CDR) mechanism followed by individual sanction from the lenders. In the meanwhile, Asset Reconstruction Company (India) Ltd. (ARCIL) has acquired the debts of all the secured lenders except IIBI and have restructured the total secured debts of Rs.95.22 Crores as on 31.03.2008. As per ARCIL's sanction, the Company allotted 30,74,300 equity shares at par for Rs.3.07 Crores to ARCIL and the balance debt of Rs. 59 Crores would be repaid over a period of 5 years between 2008-2013. The Company in spite of all efforts could not infuse working capital into the system on time. The Company unable to bring n required working capital pruned down its structure to almost half by closing down various divisions other than the core business of fans, with only one Fan unit remaining. The Company has received letters under Section 13(2) & 13(4) of the SARFAESI Act, 2002 from ARCIL. The Company has considered One Time Settlement of dues with ARCIL and the same is under discussion. DIRECTORATE In accordance with the provisions of Article 98(1) of the Articles of Association of the Company, Mr. Sunil Agarwal will retire by rotation in the ensuing Annual General Meeting of the Company and being eligible, offers himself for re appointment. The Board recommends his re appointment. Mr. Shashank Prashad who had been appointed as Director in the last Annual General Meeting held on 28th September, 2011 after ceasing to be Additional Director resigned from the Directorship of the Company w.e.f. 14th January, 2012. Mr. Uday Chand Kungilwar resigned from the Directorship of the Company w.e.f. 25th January, 2012. In order to Broad Base the Board of Directors and to meet up with the requirement of section 252 of the Companies Act, 1956, Mr. Kishan Lal Sharma, was appointed as an Additional Director in the category of non-executive director of the Company w.e.f. 24th January, 2012 & holds office upto the ensuing Annual General Meeting of the Company. The Company has received notice from a member pursuant to Section 257(1) of the Companies Act, 1956 signifying his intention to propose the candidature of Mr. Kishan Lal Sharma for the office of Director. The Board recommends for the appointment of Mr. Kishan Lal Sharma as a candidate for the office of Director liable to retire by rotation. Mr. Anil Kumar Agarwal's tenure as the Chairman & Managing Director of the Company expires on 31.03.2012. The Company in its Board Meeting held on 14th November, 2011 has re-appointed him as the Chairman & Managing Director of the Company for a period of 3 years w.e.f. 01.04.2012 subject to the approval of the Shareholders in the ensuing Annual General Meeting of the Company. The Notice convening the Annual General Meeting contains the Ordinary Resolution along with the Explanatory Statement to that effect. The Board recommends his re appointment. The brief resume details relating to directors who are to be appointed/ re-appointed are furnished in the Corporate Governance Report which forms part of separate section of Annual Report. AUDITORS M/s. Singhi & Co., Chartered Accountants, (FRN 302049E) Statutory Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting, and being eligible, offer themselves for re-appointment as Statutory Auditor of the Company. A certificate, required under Section 224(1 B) of the Companies Act, 1956 to the effect that, the re-appointment, if made, shall be within the limits specified in the said section, has been obtained from them. AUDITOR'S OBSERVATIONS The company has been legally advised that as the company replaced the debt represented by the debentures by a Memorandum of Understanding entered into with the so-called Debenture Holder (references to Debenture Holder below are, therefore, only for ease of reference), the said MoU amounted to replacement of the debt acknowledged by the debentures by a new contractual debt, the terms of which were incorporated in the MoU. Such new terms were neither incorporated on the debenture certificate, nor done with the concurrence of the debenture trustee. Hence, the debentures have effectively been replaced by a new contractual debt, which is not a "security" as defined in sec. 2(45AA) of the Securities Contract Regulation Act, and hence, not a "debenture" as defined in sec. 2 (12) of the Companies Act. In any case the disqualification of Directors u/s 274(1) (g) of the Companies Act, 1956 is for a maximum period of 5 years. Two Directors of our Company attracted disqualification on 31.03.2006. Hence the period of 5 years expires on 31.03.2011. In respect of Auditor's Observations regarding debt acquired by ARCIL without prejudice to the contentions of the company as to legality of ARCIL's actions, ARCIL has enforced security interest on one of the company's property, effect of which has been given in this account. The right of ARCIL, if any, to recall the loan or demand any other payment is equivalent to rights of an unsecured creditor, which is no different from the rights of the original lenders from whom these loans were acquired by ARCIL. The loans/debts were reportedly acquired by ARCIL in year 2008, and the company has been carrying on business since then. In the opinion of the Board, there is no significant change in circumstances that impairs or affects the ability of the company to carry on its business. In respect of Auditor's Observation regarding sale of residential property by ARCIL it may be noted that the required information is pending from ARCIL w.r.t. the sale consideration of Company's residential property situated at A-8 Maharani Bagh, New Delhi - 110 065 the Company has considered a minimum reserve price of Rs. 27.50 crores for the purpose of provisional adjustment in the books of accounts. In respect of Auditor's observations regarding valuation of finished goods stock for Rs. 86,40,825 pertaining to the discontinued business segment and non provision of interest, demurrages etc. on the goods lying in the custom bonded warehouse it may be noted that the Company is taking necessary steps to liquidate the same at best resalable value In respect of Auditor's observations regarding the account has been prepared on going concern basis, it may be noted that the management feels that due to likely impact on the restructuring, induction of working capital and future profitability on the net worth, the Company will be able to revive itself. In respect of Auditor's Observations regarding non-provision and non-ascertainment of interest/penalties on various outstanding statutory dues it may be noted that the Company will provide the said liabilities if the same arises in future in the books of accounts. Regarding mortgage of property in favor of a corporative bank as a collateral security for obtaining loan by a body corporate for which share holder approval not obtained by the company, the Company is of the opinion that the mortgage created was an equitable mortgage and the provision of section 293(1)(a) of the Companies Act, 1956 requiring approval of the shareholders of the Company is not attracted when an equitable mortgage is created on a companies property, for the same does not amount to disposal of 'undertaking' of the Company. Hence the Shareholders approval was not taken. In respect of Auditor's observation that in accordance with the explanations given to them and considering their observations in vi above, the Company's accounts read together with notes thereon, do not give the information required by the Companies Act, 1956, in the manner so required and not give a true and fair view in conformity with the accounting principles generally accepted in India; it may be noted that mentioned above is the point wise explanation to all the Auditor's observation raised in pt. no. (vi) of the Auditor's Report which goes on to explain that the Company's accounts read together with the notes thereon, do give the information required by the Companies Act, 1956, in the manner so required and do give a true and fair view in conformity with the accounting principles generally accepted in India. In respect of Auditor's Observation regarding non filing of Return of Deposits it may be noted that the Company has discontinued accepting deposit from the public since long and all the remaining amount to be transferred to the Investor Education & Protection Fund account has been transferred in the last year itself and therefore nothing as on date is due to be transferred to the Investors Education and Protection Fund. In respect of Auditor's Observation regarding the Company having no internal audit system during the year, it may be noted that there were no such major activities in the company in the year concerned which might call for conducting internal audit in a major scale, the company do have internal audit, commensurate with the size and activity of the company. In respect of Auditor's Observation regarding Company not regular in depositing undisputed statutory dues, it may be noted that the Company despite of its best efforts, due to cash crunch, was not regular in payment of statutory dues. The Company is taking steps to pay undisputed outstanding statutory dues which are due for more than six months, out of the fresh funds to be infused. The other notes to the accounts referred to in the Auditor's Report are self-explanatory. COST AUDIT The Company has made an application to the Advisor Cost, Govt. of India, Ministry of Corporate Affairs, Cost Audit Branch, praying for exemption from maintaining the Cost records and for conducting of Cost Audit for the year 2009-10 and 2010-11 due to low operational activities of the Company. Central Government's relief to the same is awaited. Seeing through the company's continued low operational activities the company will also apply for exemption from conducting Cost Audit from the year 2011-12 and onwards. In the above view and also because of the Company's low operational activities the Company has taken a call of not appointing Cost Auditor for the Financial Year 2012-2013. SHARE CAPITAL The Final Listing approval for allotment of 30,74,300 equity shares to Asset Reconstruction Company (India) Ltd. (ARCIL) as a part settlement towards restructuring the total secured debts of the Company by ARCIL from Bombay Stock Exchange Limited and National Stock Exchange of India Limited is awaited. DEPOSITS The Company's Public deposit scheme closed long back. There was no failure to make repayments of Fixed Deposits on maturity and the interest due thereon in terms of the conditions of the Company's erstwhile schemes. MANAGEMENT DISCUSSION AND ANALYSIS REPORT A detailed report on Management Discussion and Analysis is provided as a separate chapter in the Annual Report. DIVIDEND In view of the huge losses incurred by the Company in the previous years, your Directors express regret for not declaring any dividend for the year under review. COMPLIANCE OF ALL LAWS The Company has devised a proper system to ensure compliance of all laws applicable to the Company. CORPORATE GOVERNANCE The Code of Corporate Governance has already been implemented as per the listing agreements and a separate note on Corporate Governance has been given. The certificate of the Auditors, M/s. Singhi & Co. regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchange in India is annexed along with this report. The Chairman & Managing Director has certified to the Board w.r.t financial reporting, in the manner required under the Clause 49 of the Listing Agreement concerning the annual financial statement. CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars required under Section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Director) Rules, 1988 are set out in Annexure-I forming part of this Report. PARTICULARS OF EMPLOYEES Information in accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 2011, as amended, regarding employees is given as Annexure II to the Directors' Report. DIRECTOR'S RESPONSIBILITY STATEMENT Pursuant to Sub-section (2AA) of section 217 of the Companies Act, 1956, the Board of Directors of the Company hereby state and confirm that: i) in the preparation of annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures; ii) the directors have selected such accounting policies 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 financial year and the profit and loss of the Company for that period; iii) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. iv) the directors have prepared the annual accounts on a going concern basis. ACKNOWLEDGEMENTS Your Directors take this opportunity to thank all investors, business partners, clients, banks, regulatory foreign authorities and Stock Exchanges for their continuous support. For and on behalf of the Board Anil Kumar Agarwal Chairman & Managing Director Kolkata - 700 001 Dated: 14th day of August, 2012 |