DIRECTORS' REPORT To, The Members The Directors present the Twenty-Ninth Annual Report together with the Audited Accounts for the year ended 31st March, 2015. OPERATIONAL REVIEW The total income of the Company during the current year was Rs. 638 lacs as against Rs. 535 lacs in the previous period (6 months). The Company continued to incur loss mainly due to higher depreciation as a result of new Company law provisions and legal expenses incurred During the preceding two years the Company witnessed unprecedented turn of events. The failure of overseas customers, from the UAE, in making payments for Company's exports resulted in the Company defaulting in meeting its obligations. This had resulted in the Company defaulting in meeting its obligations. The bankers appointed independent audit firms for forensic and investigative audit for which the Company offered explanations. The Company sent notices to the defaulting overseas customers in October 2013. As no positive actions were received from the defaulting overseas customers the Company initiated legal proceedings before the Conciliation Committee of Sharjah Federal Court, the step preceding to filing of commercial cases before the Sharjah Court in May 2014. The Reports of the Accounting Experts/ Banking Experts appointed by the Sharjah Federal Court of First Instance, First Plenary Commercial Department and the Sharjah Federal Court of First Instance, Second Plenary Commercial Department in various suits filed by the Company against 13 UAE companies that had defaulted in payment of dues amounting to USD 1.2 billion. These reports have been made available on the Company's website i.e. www.winsomejewellery.com and the summary of these reports have been made available on the website of the Bombay Stock Exchange i.e. www.bseindia.com . The Sharjah Federal Court has passed orders in respect of the legal proceedings instituted against the UAE based defaulting customers in the following 2 out of the 13 cases : Winsome & Al-Subhi - case no(3511/2014) Winsome & Al-Ihsan- case no(3431/2014) Orders of the Sharjah Court on the remaining 11 legal cases are awaited. DIVIDEND The Board of Directors do not recommend any dividend for the period under consideration due to loss incurred by the Company. SHARE CAPITAL The Paid up Equity Capital of the Company as at March 31, 2015 was Rs. 106.47 crores comprising of 10,66,07,894 shares of Rs. 10 each. The Company has not issued any shares during the year. FINANCE The cash and cash equivalent as at March 31, 2015 stood at ^ 16.29 crores. The Company's working capital facilities have been withheld by the consortium due to non-payment of dues of the banks, as its overseas customers failed to make payment towards exports made by the Company during the year 2012-13. NOTICES FROM BANKS The Company, which received notice from Standard Chartered Bank, under the SARFAESI Act, has denied all the allegations made therein. Some of the banks, in the consortium, have sent notices to the promoter/ guarantor and also to the companies who have provided corporate guarantees. The banks had lodged complaints with the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) to carry out investigations against the Company and its management. The management and the directors have fully cooperated with the agencies during their investigations and have submitted all the information available with them. LEGAL SUIT The Company has initiated legal proceedings against its defaulting overseas customers in Sharjah Federal Court to recover its outstanding dues. The case is under progress and the experts appointed by the UAE Court have sought explanations from the defaulting overseas customers. The court, in its order, has directed two of the defaulting customers to pay the outstanding amounts to the Company with interest. The decision against the remaining eleven overseas customers is yet to be decided/ confirmed by the Sharjah Court. Your Company is hopeful of an early favourable outcome from the proceedings. FIXED DEPOSITS The Company has not accepted any deposit, within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014 made thereunder. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS The Company has not given any loans or guarantees covered under the provision of section 186 of the Companies Act, 2013. The details of investments made by the Company is given in the notes to financial statements. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has no formal internal control system in place after the devolvement. All the locations have stopped its activities as at March 31, 2015. The Company, however, has in house internal controls for administrative and statutory outgoings commensurate with its size and volume. CORPORATE SOCIAL RESPONSIBILITY (CSR) The Company has formed a CSR committee. In light of continuing losses in the preceding two years and with no activities the Company has not made any contribution towards the same. The Company is committed to give its due contribution as soon as the situation improves. CONSERVATION OF ENERGY The particulars regarding conservation of energy are not applicable to the Company as the Company has stopped all its manufacturing activities. TECHNOLOGY ABSORPTION In the absence of any production activity there is no need for any technology absorption. FOREIGN EXCHANGE EARNINGS AND OUTGO During the year under review there was no foreign exchange earnings or outflow. INDUSTRIAL RELATIONS There are no activities in any of the units of the Company. However, in Goa Unit of the Company which was in operation till December, 2014, the relations with the workmen were cordial. DIRECTORS Mr. Harshad Udani (DIN: 07014853) was appointed as an Additional Director of the Company with effect from 13th January, 2015 under Section 161 of the Companies Act, 2013 and holds office upto the date of ensuing Annual General Meeting. In compliance with the provisions of section 203 of the Companies Act, 2013, Mr. Harshad Udani was appointed as Whole Time Director of the Company w.e.f 23rd March, 2015 subject to the requisite approvals of shareholders, banks and Central Govt. Ms. Ami Kothari ( DIN: 07104331) was appointed as an Additional Director of the Company w.e.f 23rd March 2015 fulfilling the requirement for the appointment of a Women Director as per requirements of Companies Act, 2013. Mr. Jaikumar Kapoor (DIN: 00337011) resigned from the Company due to ill-health w.e.f 02nd January, 2015. The Board wishes to place on record its appreciation of the contribution of Mr. Kapoor during his tenure as director. Declaration by Independent Director The Company has received necessary declarations from each independent Director under section 149(7) of the Companies Act, 2013 that he/she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. Board Evaluation The Companies Act, 2013 and Clause 49 of the Listing Agreement mandates that formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual Directors. Schedule IV of the Companies Act, 2013 states that performance evaluation of independent Directors shall be done by the entire Board, excluding the Director being evaluated. A separate meeting of the Independent Directors (Annual ID meeting) was convened which reviewed the performance of the Board (as a whole) and the non-independent Directors without the presence of any member of the management. Some of the key criteria for the performance evaluation are as follows: Performance evaluation of Directors : - Attendance at Board or Committee meetings - Contribution at the Board and committee meetings - Guidance/support to management outside Board /committee meetings. Performance evaluation of Board and Committees: - Degree of fulfillment of key responsibilities - Board structure and composition - Establishment and delineation of responsibilities to committees - Quality of relationship between Board and Management - Effectiveness of Board processes, information and functioning. Policy on Directors appointment and remuneration The current policy is to have an appropriate mix of executive and independent Directors to maintain the independence of the Board, and separate its functions of governance and management. The Board periodically evaluates the need for change in its composition and size. The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The policy of the Company on Director's appointment and remuneration, including criteria for determining qualification, positive attributes, independence of a Director and other matters provided under section 178(3) of the Companies Act, 2013, adopted by the Board is appended to Corporate Governance Report affirming part of the Directors Report. We affirm that the remuneration paid to the Directors is as per the terms laid out in the nomination and remuneration policy of the Company. Meetings A calendar of meetings is prepared and circulated in advance to the Directors. During the year nine Board Meetings (including adjourned meetings) and four Audit Committee Meetings (including adjourned meetings) were convened and held. The details of the same are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134(5) of the Companies Act, 2013, the Directors state that - • in the preparation of the Annual Accounts, the applicable accounting standards have been followed; • 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 the financial year and of the loss of the Company for the year under review; • that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and • the Directors have prepared the Annual Accounts on a going concern basis; • The directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively. • The directors had devised proper system to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively RELATED PARTY TRANSACTIONS All related party transactions, if any, that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Management Personnel or other designated persons which may have a potentially conflict with the interest of the Company at large. SUBSIDIARY COMPANIES The Company does not have any subsidiary during the year under review. CODE OF CONDUCT The Board has approved code of conduct in place which is applicable to all the members of the Board and its employees in the course of day to day operations of the Company. All the Board Members and Senior Management personnel have confirmed compliance with the Code. VIGIL MECHANISM/ WHISTLE BLOWER POLICY The Company has vigil mechanism / whistle blower policy in place to deal with instances of fraud or mismanagement, if any. A whistle blower may report any violation or any instances of fraud or mismanagement to the Chairman of the Audit Committee. The policy ensures that strict confidentiality is maintained whilst dealing with concerns also that no discrimination will be meted out to any person for a genuinely raised concern. PREVENTION OF INSIDER TRADING The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code required pre-clearance for dealing the Company's shares and prohibits the purchase or sale of Company's shares by the Directors and designated employees while in possession of unpublished sensitive information in relation to the Company and during the period when the Trading Window is closed. The Board is responsible for the implementation of the Code. All Board Directors and designated employees have complied with the Code. AUDITOR'S REPORT The qualifications in the Auditors Report (In Italics) are followed by appropriate Board's reply and explanations (in bold) as under: 1. Basis for Qualified Opinion A. In accordance with Accounting Standard -11 (Standard on The Effects of Changes in Foreign Exchange Rates), the Company is required to report the monetary items using the closing rate. Accordingly the Company is required to value the monetary assets and liabilities viz foreign currency trade receivables, trade payables and foreign currency loan at the foreign exchange rate prevailing as on the date of the balance sheet. The Company has not carried out such valuations as at the year end. Accordingly the exchange loss for the year is overstated thereby resulting in the total loss for the year being over stated/profit understated by Rs. 214,54,39,618(net). Trade receivables are understated by Rs. 723,73,84,562, trade payables are understated by Rs. 796,76,830as on the balance sheet date and foreign currency loan is understated by Rs.74,67,778(Refer Note No. 7, 8 (A5), 14(b),19(c) and 23(b)). Export Receivables and Overseas Trade Payables had been restated based on exchange rate as at 31.03.2013. In view of persistent defaults by overseas customers in clearing outstanding dues, the same have been carried forward at the same rate (based on exchange rate as at 31.03.2013) as it is deemed expedient not to take cognizance of depreciation in rupee vis-a-vis US dollar on notional basis when outstanding amounts are expected to be realized over an uncertain period of time. Since the Company does not have any other cash flows to arrange for remittances to overseas trade creditors and expects to defray these liabilities out of realisation of export receivables, the same also have not been restated based on exchange rate as at the date of balance sheet but have been carried forward based on exchange rate as at 31.03.2013. Had it been restated on the basis of exchange rate as at 31.03.2015, the amount payable would have been higher by Rs. 74,67,778/-. B. The Company has made long term investments in Forever Precious Diamonds and Jewellery Ltd. (Forever) amounting to Rs. 141,17,10,802, thereby resulting in it holding a 49 % stake in the equity of that Company. The said investments continue to be valued at cost. As stated in Note No. 12 A 1 & 2, in the view of the management, provision for diminution in value of investments as per the requirements of Accounting Standard -13 (Accounting for Investments) is not considered necessary and hence not made. We have been provided with the financial statements of Forever for the year ended 31st March 2014. We have observed that there are no significant business operations in Forever. Further the auditors of Forever have qualified the financial statements and termed the Company as a non-going concern. In view of the above the Company should have provided the diminution in value of investments amounting to Rs. 141,17,10,801. Accordingly the loss for the year have been understated and investments overstated by Rs. 141,17,10,801. Forever Precious Jewellery and Diamonds Limited has also initiated legal action against its defaulting overseas customers and is hopeful of recovering its dues and therefore no diminution in the value of investments is considered. As informed by the management of Forever Precious Jewellery and Diamonds Limited, the Sharjah Federal Court has directed four out of thirteen overseas defaulters to pay to the Company, its outstanding dues with interest. The Company is hopeful of getting a favourable decision in the case of remaining overseas defaulters. c. Due to the defaults of the Company to the banks, the Company's accounts have been classified as NPAs by the banks. Most of the banks have not charged interest on the Company's borrowings / loans, while some banks have been charging interest at higher rates. The Company was providing for interest at 12.5 % p.a. on all outstanding which was the average rate of rupee export finance. During the year under review no provisions have been made for such interest and provisions made during the year have been reversed at year end. Accordingly Interest for the year is understated resulting in total loss of the Company is understated by Rs. 565,86,78,505.(Refer Note 23 (a)). The Company has decided, not to provide interest on its outstanding / borrowings including term loan for windmill as all accounts are classified as NPA by the Banks. The Interest charged by some banks during the period under review which is not considered by the Company amounts to Rs.214,68,53,979. The Company used to provide interest in its accounts @ 12.5 % p.a. of the outstanding amounts being the average rate for rupee export finance. Thus interest that should have been charged to Profit and loss for the year under review amount to Rs. 565,86,78,505. 2. Basis for Disclaimer of Opinion A. In respect of Trade Receivables amounting to Rs. 4,743,24,55,740 the auditors have not received any confirmations of balances even after requesting for the confirmations. The management has obtained confirmation of balances from the respective parties only as on 31st March, 2013 and none thereafter. There have been defaults on the payment obligations by the debtors on the due dates. Various attempts have been made by the management and lenders for recovery, however such attempts have not resulted into any significant collections or getting commitment from the parties regarding schedule of payments which are acceptable to the management / lenders. In view of the above we are unable to comment on the realisability of the debts and any provision to be made for unrealisability in the carrying amounts of these balances and the consequential impact, on the financial statements. (Refer Note 14 and Note 16 to the financial statements) Against the defaulting overseas customers the Company had initiated proceedings before the Conciliation Committee of Sharjah Federal Court. The Court appointed Accounting and Financial Experts to look into the activities of the defaulting overseas customers. Based on the findings of the Experts the Court has directed two of the thirteen overseas customers to pay the outstanding amounts due to the Company alongwith interest. Decisions against the remaining defaulting overseas customers is expected soon and is likely to be favourable to the Company. B. As mentioned in Note No 1 regarding preparation of accounts on a Going Concern basis and the reasons stated therein and Note No. 27 of the financial statements detailing the developments that have happened in the last 2 years, the Company's operating results have been materially affected due to various factors including non availability of finance in view of the consortium bankers recalling the financial facilities granted. These events cast significant doubts on the ability of the Company to continue as a going concern since the volumes of business have also drastically dropped in the last 2 years. The appropriateness of the going concern assumption is dependent on the Company's ability to raise adequate finance from alternate means and/or recoveries from overseas debtors to meet its short term and long term obligations as well as to establish consistent business operations. In absence of any convincing audit evidences, no positive steps taken by the management, non recovery of trade receivables on due date, non-payment of liabilities including statutory dues, financial difficulties faced by the Company due to recalling of bank finance facilities and in view of multiple uncertainties stated above, we are unable to determine the possible effects on the financial statements. We are also unable to conclude on the ability of the Company to carry on as a going concern. Against the defaulting overseas customers the Company had initiated proceedings before the Conciliation Committee of Sharjah Federal Court. The Court appointed Accounting and Financial Experts to look into the activities of the defaulting overseas customers. Based on the findings of the Experts the Court has directed two of the thirteen overseas customers to pay the outstanding amounts due to the Company alongwith interest. Decisions against the remaining defaulting overseas customers is expected soon and is likely to be favourable to the Company. 3. Disclaimer of Opinion Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, specifically relating to the multiple uncertainties created due to factors such as non recovery of trade receivables on due dates, non payments of liabilities including statutory dues, financial difficulties faced by the Company due to recalling of bank finance, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements. Against the defaulting overseas customers the Company had initiated proceedings before the Conciliation Committee of Sharjah Federal Court. The Court appointed Accounting and Financial Experts to look into the activities of the defaulting overseas customers. Based on the findings of the Experts the Court has directed two of the thirteen overseas customers to pay the outstanding amounts due to the Company alongwith interest. Decisions against the remaining defaulting overseas customers is expected soon and is likely to be favourable to the Company. 4. Emphasis of Matter A. As mentioned in note no. 27(ii), the Company has not appointed any Internal Auditors for the year and accordingly no internal audits were carried out for the year. The Company has not appointed any internal auditor for the year under consideration as all the activities of the Company came to standstill, as the Company did not receive monies against its exports which resulted in the Company defaulting in its payments to the consortium banks. The Company is likely to appoint an internal auditor as soon as the situation improves. The Company, however, has internal control to check its administrative and statutory expenses. B. As mentioned in note no. 27 (iii), the Company has not done any valuation of stocks of Diamonds which are in the joint custody with the bank. To that extent the increase or decrease in the value of diamond stocks as at year end, as per AS-2 Valuation of Inventories, is not determined. As per point 2(a) of CARO Report In June 2013, the banks have placed the stock of diamonds belonging to the Head Office and the Mumbai Branch office of the Company valued at Rs. 39,35,00,031 in the joint custody. The bank had done a test check valuation as on 30th September, 2013 when officers of the Company were also present, of the said stock which has been then forwarded to the Company. During the period the stocks of Chennai & Cochin SEZ were valued and put in the joint custody of the banks. Confirmation of the stocks lying with the bank has been confirmed by the management on the basis of the letter obtained from the bank as on that date. For the period under consideration, except for the stock lying in joint custody of the banks at HO, Cochin & Chennai where the management has not carried out the physical verification of inventory, physical verification of inventory at other places has been done by the management at regular intervals. AUDITOR'S REPORT AND SECRETARIAL AUDIT REPORT As required under section 204 (1) of the Companies Act, 2013 the Company has obtained a secretarial audit report. Certain observations made in the report with regard to late filing of some forms were mainly due to ambiguity and uncertainty of the applicability of the same for the relevant period. However, the Company would ensure in future that all the provisions are complied to the fullest extent. AUDITORS The Auditors R C Reshamwala and Co., Chartered Accountants, Mumbai, retire at the conclusion of the ensuing Annual General Meeting and being eligible offer themselves for re-appointment. SECRETARIAL AUDIT Pursuant to provisions of section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Management Personnel ) Rules , 2014 the Company has appointed S G and Associates, a firm of Company Secretaries in practice to undertake the Secretarial Audit of the Company. The Secretarial Audit report is annexed herewith as "ANNEXURE A". EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as "ANNEXURE B". MEETINGS OF THE BOARD Nine Board Meetings (including adjourned Board Meetings) were held during the year. For further details please refer report on Corporate Governance on page no. 23 of this annual report. RISK MANAGEMENT Though the Company's operations has come to a grinding halt post devolvement of Letter of Credits issued in favour of bullion banks, the probability of any operational risks has come to a naught. However, pursuant to section 134 (3) of the Companies Act, 2013 & Clause 49 of the listing agreement, the Company had constituted business risk management committee. The details of the Committee and its terms of reference are set out in the corporate governance report forming part of the Board's report. PECUNIARY RELATIONSHIP OR TRANSACTIONS OF NONEXECUTIVE DIRECTORS During the year, the Non-Executive Directors of the Company had no pecuniary relationship or transactions with the Company. CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS REPORTS The Company has been in compliance with the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges, save and except those conditions which could not be complied with owing to lack of proper composition of Board of directors. Report on Corporate Governance, Management Discussion and Analysis and Secretarial Auditor's Certificate on compliance with the Corporate Governance requirements have been included in this Annual Report in separate sections. ACKNOWLEDGEMENTS Your Company and Board wish to thank the members of the Company and staff for their continued patience and co-operation. On behalf of the Board of Directors H. Udani Director H. Mehta Director Place: Mumbai Date: 12/08/2015 |