NOTE 1 : SIGNIFICANT ACCOUNTING POLICIES, CONTINGENT LIABILITIES AND NOTES

A. SIGNIFICANT ACCOUNTING POLICIES

1. REVENUE RECOGNITION

Rental Income is accounted for on cash basis where there is unascertainty in realization.

2. INVESTMENTS

Investments, being long term, are carried at cost less provision for diminution, other than temporary, in the value of such investments.

3. RETIREMENT BENEFITS TO EMPLOYEES

(a) Company's contribution to provident/pension is charged to the Statement of Profit and Loss on accrual basis.

(b) Provision for leave encashment benefits and gratuity of the continuing employees is provided on accrual basis based on actual computation instead of computing on actuarial basis as the company has only two employees at the year end.

2. Balance confirmation certificates from Creditors, house/ shop security depositors, and Banks (for cash credit, certain current accounts & fixed deposits including interest accrued with one bank) etc. as on 31st March, 2008 and onwards were not obtained and consequently adjustment required on reconciliations, if any, will be carried out subsequently as and when reconciled/confirmed.

3. The Accounts of the Company have not been brpared on a going concern basis in view of Closure of Manufacturing Operations of the Company during the year ended 30th September, 2007 and sale of all moveable assets including Plant & machinery during the year 2009-10. However, once the liabilities of the Company towards secured creditors are cleared, the Company will start business operations.

4. Claims from a supplier towards Interest on late payments etc. amounting to f1000.54 lakhs upto 31st March, 2008, has not been provided in the Books of Account as the same are being disputed by the Company. The amount of interest for the 72 month period ended 31st March, 2014 is not ascertainable.

5. The members of the Company have, in their meeting held on 27th September 2013, approved payment of remuneration to Mr. Manish K. Modi Managing Director for a period of five years w.e.f. 1st June, 2013. The approval of the Central Government to the above remuneration is awaited. The estimated amount as per the above approval of members for the year ended 31.03.2014 amount to f27.83 lakhs which will be accounted for/charged to revenue in the books on receipt of approval from the central government.

6. No Provision for Income Tax under the Income Tax Act 1961 is considered  necessary  for current financial  year on account of unabsorbed debrciation, unabsorbed business losses and capital loss.

7. Under the Micro, Small and Medium Enterprises Development Act, 2006, which came into force on 2nd October, 2006,certain disclosures are required to be made relating to Micro, Small and Medium Enterprises. The Company has not collected the relevant information. Since the information is not readily available, no disclosures/provision for interest has been made in the Books of Account.

8. In view of Unabsorbed Debrciation, carry forward business losses incurred by the Company in the brvious year, sale of Fibers Division and Closure of Manufacturing Operations of the Company in the year 2007, the recognition of Deferred Tax Assets (Net) has been postponed on consideration of prudence.

9. The Manufacturing Operations of the Company have been closed with effect from 19th May, 2007. In terms of the provisions of the Uttar Pradesh Industrial Disputes Act, 1947, the Closure has become operative from the date of expiration of the period of 90 days from the date of application i.e. on 8th September, 2007.

11. (a) Since the Net Book value of Land, Residential buildings at Modinagar, Office brmises outside Modinagar and factory/ administrative building in Modinagar are lower than the Net Realisable Value as per Valuer's Report / Management's estimate, no provision for diminution is required to be made and the net book Value of Rs.292.49 lakhs as on 31st March 2014 has been clubbed with "Fixed Assets held for Disposal" on the face of the Balance Sheet.

(b) The Company has sold 65,743 sq. yds. and 2299 sq. yds. of its vacant land at Modinagar for Rs.986.15 lakhs (original cost Rs.1.88 lakhs) and Rs.35.00 lakhs (original cost Rs.0.07 lakhs) respectively which resulted in Profit on Sale of Land amounting to Rs.1019.20 lakhs during the year ended 31st March 2009. Approval of banks to whom immovable properties of the Company, including the above Land, are charged is pending.

12. In view of Valuation of fixed assets at lower of cost and net realizable value, no provision for Debrciation has been made since 1st April, 2007, except for office equipment.

13. (a) Cash credit/Working Capital Demand Loans (including interest accrued and due) taken from Punjab National Bank was out of order and has been classified by Bank as Non-Performing Assets.The Bank issued notice to the Companyits dues and has also issued notice under section 13(4) of the SARFAESI to the company for taking possession of the secured assets of the company.

(b) The Punjab National Bank has approved one time settlement of its outstanding dues vide its approval letters dated 02.04.2014 and 12.04.2014. In terms of the settlement, OTS amount of Rs.1710 lakhs (Net of upfront payment of Rs.190 lakhs) shall be paid by the Company in four quarterly installments with interest during financial year 2014-15. The balance of PNB as per books of accounts of the Company is Rs.2083.90 lakhs and the excess amount of Rs.183.90 lakhs would be dealt with upon final payment of the OTS amount. In view of the OTS as above, no provision for interest has been made for the current year ended 31.03.2014. Further in terms of the OTS, consent decree has been passed by Hon' ble Debt Recovery Tribunal, Delhi on 29th April, 2014 incorporating there in the terms of settlement.

(c) In view of the above, pending implementation of the OTS with PNB, simple interest @ 10 % on the balance outstanding of the year end, after taking into account the amounts received by banks from sale of movable assets of the Company, has been provided for till the brvious year and has been credited to the cash credit accounts of banks. Has the interest been provided as per past practice followed upto 31st March 2009, interest expenses for the current year would have been higher by Rs.304.93 lakhs (upto 31st March, 2014 Rs.1004.95 lakhs)

(d) (i) Loan liability of Rs.749.20 lakhs to Karnatka Bank has been discharged by the Company under OTS (one time settlement), in arrangement with Ashoka Mercantile Limited paying the settled sum of Rs.410 lakhs to the said bank. The settlement resulted into remission of liability by Rs.339.20 lakhs. As per the terms approved by the Board of Directors of the Company on 16th August,2012 with Ashoka Mercantile Ltd, they shall be entitled to so much of the waived-off amount under OTS as agreeable, but to the extent such sum does not exceed the sum as worked out by applying the ratio of waiver agreed by the Company for settlement under OTS with Punjab National Bank (PNB). Pending the successful implementation of OTS with PNB as stated in para 13(b) above, the amount of Rs.339.20 lakhs being the subject matter of OTS arrangement with Ashoka Mercantile Limited and liable to be dealt with later has been kept aside and shown in Balance Sheet under the head "Short term borrowings".

No provision of interest has been made on loan repaid by Ashoka Mercantile Limited, pending finalization of Debt Assignment Agreement under this OTS deal and/or successful implementation of the OTS with Punjab National Bank.

(ii) Loan liability of Rs.832.04 lakhs to Bank of Baroda has been discharged by the company under OTS (one time settlement), in arrangement with Ashoka Mercantile Limited and Asset Reconstruction the waived-off amount under OTS as agreeable, but to the extent such sum does not exceed the sum as worked out by applying the ratio of waiver agreed by the company for settlement under OTS with Punjab National Bank (PNB). Pending the successful implementation of OTS with PNB as stated in para 13(b) above, the amount of Rs.232.04 lakhs being the subject matter of OTS arrangement with Ashoka Mercantile Limited and liable to be dealt with later has been kept aside and shown in Balance Sheet under the head "Short term borrowings".

No provision of interest has been made on loan repaid by Ashoka Mercantile Limited, pending finalization of Debt Assignment Agreement under this OTS deal and/or successful implementation of the OTS with Punjab National Bank.

(iii) Pending finalisation of terms of loan agreements with Ashoka Mercantile Limited (AML) who has given unsecured loans of Rs.1131.80 lakhs for payment of OTS dues of banks, no provision of Interest on loan taken of f410 lakhs has been made for the year ended 31st March, 2011 to 31st March, 2014, on loan taken of Rs.540 lakhs, for the years ended 31st March, 2012 to 31st March, 2014 and on loan taken of Rs.100 lakhs for the year ended 31st March, 2013 and on loan taken (net)of f81.80 lakhs for the year ended 31st March,2014.

(e) (i) The Abu Dhabi Commercial Bank Limited has settled its Dues of Rs.351.05 lakhs under One Time Settlement (OTS) as conveyed vide its letter dated 23rd September,2008. Since the Company did not have funds to pay the settled dues, it had approached M/s Ashoka Mercantile Limited (AML) for making payment of settled dues to the Banks. Further, it has also been agreed with AML that it shall not be entitled to settlement of its claim better than what is agreed by the Company with PNB.

(ii) Since successful implementation of settlement of dues of PNB is still pending, the amount paid towards OTS by AML of Rs.157.13 lakhs (net of f40 lakhs paid to AML upto 31st March,2011) is shown as secured loan in Note 5 i.e. as on 31st March, 2014 and the balance amount of f153.92 lakhs (Rs.351.05 lakhs - Rs.197.13 lakhs) outstanding in the books of accounts has also been shown as unsecured loan, to be written back or credited to AML at the time of OTS with PNB as stated in (i) above.

(iii) As the OTS with PNB as stated above is yet to be implemented as on date, no interest has been provided on the balances mentioned in the 13 (e) (ii) above during the current year as well as in the brvious years, amount unascertained.

14. Debts Recovery Tribunal (DRT) has, vide its order dt. 19th May,2011, confirmed/approved sale of a piece of agricultural land admeasuring 40827sq. mtr., owned by the Company to M/s GDC Buildcon Pvt. Ltd., Mumbai for a consideration of Rs.425.00 lakhs (Estimated cost Rs.1.27lakhs)to be deposited with DRT. Consequent upon finalization of OTS with Bank of Baroda, the balance amount of the purchase consideration was directly paid to Bank of Baroda against OTS and accordingly an affidavit to this effect was filed with DRT on 03.03.2013. The sale of the said land stands concluded

As per our Report of even date attached

For P. R. Mehra & co.

(Chartered Accountants)

(Regn. No. 000051N)

Sd/- (Ramesh Chand Goyal)

Partner

 (Membership No. 012628)

(Manish.K.Modi) Managing Director

(M.K. Modi)  Chairman

(A.K. Goel)  Company Secretary

Place: New Delhi

Date: 19th  May 2014.