THE SVADESHI MILLS COMPANY LIMITED
ANNUAL REPORT 2000-2001
The Directors hereby submit their Report with the Audited Accounts of the
Company for the year ended 31st March, 2001.
OPERATIONS AND FINANCE:
2. Gross income during the year decreased to Rs.27.26 crores as compared to
that of Rs.57.02 crores during the previous year. The operations of the
Company came to complete halt in November, 2000. The BIFR issued show
cause Notice for change in Management as the operations were not viable and
the Company has no resources to continue the loss generating activities.
The promoters after investing a huge amount of funds could conclude that it
will not be possible on their part to revive the Company. The Company was
operating at a loss of approximately Rs. 2 Crores per month which required
a cash infusion of the like amount. There had not been any source of funds
from any corner and the Company's operation came to a complete halt.
The total cumulative losses at the end of 31.03.2001 reached to a level of
Rs. 99.12 Crores as against the Share Capital of Rs. 7.80 crores only. The
operating agency IDBI, the Company's Bankers Bank of Baroda and the BIFR
came to the conclusion that the operations of the Company can not be made
viable in the present circumstances. The BIFR therefore recommended to the
Honourable High Court, Mumbai for the winding up of the Company.
In view of the closure of operations and non availability of the funds for
meeting the liabilities, the working environment became non-conducive and
the management could not access the records and information. As such the
Accounts for the year ended 31.03.2001 have been prepared based on the
records available with the management. The same has been recorded by the
Auditors in their report.
3. The BIFR at the hearing on 5.2.2001 came to the conclusion that the
Company was not likely to make it's net worth exceed its accumulated losses
within a reasonable time while meeting its financial obligations and that
the Company as a result thereof was not like!y to became viable in future.
Hence it was just, equitable and in the public interest that it should be
wound up. This opinion was forwarded to the Honourable High Court, Mumbai.
RMMS, the recognised Union had filed an appeal against the order of the
BIFR. The appellate authority AAIFR rejected the appeal of RMMS. However at
the instance of the representative Union and with the initiative of the
Government authorities a Committee has been set up to explore ways and
means to generate liquidity out of assets of the Company and to meet
liabilities of the workers and creditors with the approval of the
Honourable High Court.
4. Consequent to the recommendations of the BIFR, Bank of Baroda filed an
application before the Honourable High Court Mumbai for orders for winding
up of the Company. The hearing is continuing.
The Honourable High Court, Mumbai has appointed Court Receiver, who has
taken possession of some of the assets of the Company. IDBI also filed an
application before the Debt Recovery Tribunal (DRT). The matter has been
heard by the Tribunal and it has been adjuourned for further hearing.
One of the creditors who was holding a Decree against the Company since
1997 also moved the High Court, Mumbai for recovery of their dues.
5. The Company's fixed assets are insured by the first charge holders i.e.
IDBI and request has been made to Bank of Baroda for the insurance of the
current assets including inventories.
6. In accordance with the provisions of the Companies Act, 1956 and the
Articles of Association of the Company, Mr. K.C.Mehra retires by rotation
at the ensuing Annual General Meeting and is eligible for re-appointment.
The Board commends his appointment.
The BIFR has withdrawn the nomination of Mr.R.S. Rathore as their Nominee
and he ceased to be a Director of the Company with effect from 30th August,
2001. The Board places on record its sincere appreciation of the valuable
services rendered by him.
7. COROMANDEL GARMENTS LTD. (CGL):
The operations of the subsidiary Company remain suspended since 13.5.1999.
In the mean time, as part of the Revival Scheme submitted to BIFR, 532
employees were sent way on Early Retirement Scheme (ERS).
BIFR had convened the meeting on 16.4.2001 for discussing the Draft Revival
Scheme (DRS) circulated to all concerned. At this meeting the management of
subsidiary Company informed BIFR that the parent company M/s. The Svadeshi
Mills Company Limited, which was also declared as a sick company (Case
No.50/98) was referred to Mumbai High Court by BIFR for initiating the
winding up proceedings and this has stalled the promoter support to see
through the smooth implementation of Revival Scheme. Consequently BIFR had
directed the Operating Agency (OA) to advertise in the news papers calling
for change of management of subsidiary Company. Accordingly the Operating
Agency (M!s. Bank of Baroda) advertised in the news papers on 30.5.2001 and
invited offers for change of management. Unfortunately there was no
response to the advertisement released by the operating agency. In the mean
while, the employees of Coromandel Garments Limited came together and
formed an Employees Industrial Co-operative Society and submitted a Revival
Proposal to BIFR through the Operating Agency.
A Notice dated 24.10.2001 from BIFR directing the management of subsidiary
Company to show cause as to why winding up notice should not be issued in
view of the considerable delay on the part of the subsidiary Company in
finalising Rehabilitation Proposal.
The subsidiary Company has since submitted a reply to BIFR in response to
AUDITORS AND AUDIT REPORT:
8. You are required to appoint Auditors for the current year and authorise
the Board to fix their remuneration. The retiring Auditors, Messrs
A.F.Ferguson & Co., Chartered Accountants offer themselves for re-
appointment as the Auditors of the Company. Having regard to the provisions
of Section 224A of the Companies Act, 1956, the appointment is required to
be passed by a Special Resolution.
The Auditors in their report to the Members have made observations and
qualifications to be read with the Notes to the Accounts. The Auditors have
also stated that all the records and documents are not accessible and that
the financial statements have been prepared by the Company based on the
records available with the Company. Accordingly, the Auditors have not
been able to carry out their normal Audit Procedures and checks and
accordingly their reports are based on the Examination of the records
produced to them and available with the management. In the present
circumstances as explained above, the Board had no other option but to
complete the accounts with the available information. The observations of
the Auditors in their report read with the Notes to the Accounts are self
explanatory and it is not possible to take any further corrective steps and
comment in view of the non-availability of the human resources.
DIRECTOR'S RESPONSIBILITY STATEMENT:
9. Pursuant to the provisions contained in sub-section (2AA) of Section 217
of the Companies Act, 1956, the Board reports to the members of the Company
that, to the best of their knowledge and belief and subject to paragraph 8
a. in the preparation of the annual accounts,the applicable accounting
standards had been followed along with proper explanation relating to
b. the Directors had selected such accounting policies and applied them
consistently and made judgements 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 profit or loss of the
Company for that period;
c. the Directors had taken proper and sufficient care for the maintenance
of adequate accounting records in accordance with the provisions of the Act
for safeguarding the assets of the Company and for preventing and detecting
fraud and other irregularities;
d. the Directors had prepared the annual accounts on a going concern basis.
PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956
10. The Company has no employee drawing a remuneration of Rs.12,00,000/-
p.a. and/or Rs.1,00,000/- p.m., if employed for a part of the year. Hence
Section 217(2A) of the Companies Act, 1956 with the Companies (Particulars
of Employees) Rules, 1975 does not apply. Particulars of Energy, Technology
and Foreign Exchange pursuant to Section 217(1)(e) of the Companies Act,
1956 read with the Companies (Disclosure of Particulars in the Report of
Board of Directors) Rules, 1988 is set out in the Annexure A hereto and
forms part of this report.
COST ACCOUNTING RECORDS
(COTTON TEXTILES) RULES, 1977:
11. Being in Textile business the above Rules are applicable to the
Company. The necessary books of accounts and cost records prescribed under
Section 2C9(1)(d) of the Companies Act, 1956 have generally been maintained
but could not be made available to the Cost Auditors.
12. The Directors thank the Company's Bankers, Bank of Baroda and the
Industrial Development Bank of India (IDBI) for the help and co-operation.
The Directors also acknowledge and appreciate the continued trust and
confidence reposed by the Shareholders on the Company. The Directors wish
to thank all the employees for their support under extremely difficult
For and on behalf of
The Board of Directors,
Mumbai, 9th November, 2001.
Statement containing particulars pursuant to the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988.
A. Conservation of Energy:
(i) Measures undertaken during the year were continuation of proposals
initiated during the earlier year.
(ii) Additional investments and proposals include implementation and
installation of equipments already purchased subject to availability of
funds for completion of these project.
(iii) The impact of the measure will be to reduce consumption of power and
reduction in the cost of manufacture.
B. Technology Absorption and Research & Development
(a) Research and Development
Specific areas in which R & D carried out by the Company.
2. Benefits derived as a result of the above R & D.
3. Future plans of actions.
4. Expenditure on R & D - Rs. Lakhs - Nil
(b) Technology Absorption, Adoption and Innovation.
(C) Foreign Exchange Earnings and Outgo:
Foreign Exchange Earnings Nil 9.58
Foreign Exchange Outgo Nil 159.95
Due to the difficult situation prevailed during the whole year and the
total closure of operations from November, 2000, no steps would be taken on
the above matters as the same was not feasible.