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. () - Director Report

Company director report

THE SVADESHI MILLS COMPANY LIMITED ANNUAL REPORT 2000-2001 DIRECTORS' REPORT To, The Members, 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. BIFR: 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. WINDING UP: 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. INSURANCE: 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. DIRECTORS: 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. SUBSIDIARY: 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 their notice. 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 above:- a. in the preparation of the annual accounts,the applicable accounting standards had been followed along with proper explanation relating to material departures; 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. ACKNOWLEDGEMENT: 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 circumstances. For and on behalf of The Board of Directors, Chairman Mumbai, 9th November, 2001. ANNEXURE-A 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: ( Lakhs) Current Previous Year Year 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.