Winsome Diamonds & Jewellery Ltd.
|BSE: 507892||Sector: Consumer|
|NSE: WINSOMEDJ||ISIN Code: INE664A01015|
|BSE 00:00 | 04 Mar||Winsome Diamonds & Jewellery Ltd|
|NSE 05:30 | 01 Jan||Winsome Diamonds & Jewellery Ltd|
|BSE: 507892||Sector: Consumer|
|NSE: WINSOMEDJ||ISIN Code: INE664A01015|
|BSE 00:00 | 04 Mar||Winsome Diamonds & Jewellery Ltd|
|NSE 05:30 | 01 Jan||Winsome Diamonds & Jewellery Ltd|
The Directors present the 31st Annual Report together with the AuditedAccounts for the year ended 31st March 2017.
The total income of the Company during the current year was ' 63.94 lacs as against Rs.325.58 Crore in the previous year. The Company continued to incur loss mainly due tohigher depreciation as a result of new Company law provisions and legal expenses incurred.
During the preceding four years the Company witnessed unprecedented turn of events. Thefailure of overseas customers from the UAE in making payments for Company's exportsresulted in the Company defaulting in meeting its obligations. This had resulted in theCompany defaulting in meeting its obligations. The bankers appointed independent auditfirms for forensic and investigative audit for which the Company offered explanations. TheCompany sent notices to the defaulting overseas customers in October 2013. As no positiveactions were received from the defaulting overseas customers the Company had initiatedlegal proceedings before the Sharjah Federal Court the step preceding to filing ofcommercial cases before the Sharjah Court in May 2014. The Reports of the AccountingExperts/Banking Experts appointed by the Sharjah Federal Court of First Instance First
Plenary Commercial Department and the Sharjah Federal Court of First Instance SecondPlenary Commercial Department in various suits filed by the Company against 13 UAEcompanies that had defaulted in payment of dues amounting to USD 1.2 billion. Thesereports had been made available on the Company's website i.e. www.winsomeiewellerv.com andthe summary of these reports have been made available on the website of the Bombay StockExchange i.e. www.bseindia.com.
The banks had lodged complaints with the Central Bureau of Investigation (CBI) andEnforcement Directorate (ED) to carry out investigations against the Company and itsmanagement. The management and the directors have fully cooperated with the agenciesduring their investigations and have submitted all the information available with them.
ONE TIME SETTLEMENT
The Company has entered into a Tripartite One Time Settlement (OTS) with the defaultingUAE based customers viz. M/s Al Alam Jewellery FZE Al Mufied Jewellery FZE Italian GoldFZE and State Bank of Mauritius on 23rd December 2016.
The Board of Directors do not recommend any dividend for the period under considerationdue to loss incurred by the Company.
The Paid up Equity Capital of the Company as at March 31 2017 Was ' 106.47 crorescomprising of 106607894 shares of ' 10 each. The Company has not issued any sharesduring the year.
The Cash and Cash Equivalent as at March 31 2017 stood at 15.79 crores. The Company'sworking capital facilities have been withheld by the consortium due to non-payment of duesof the banks as its overseas customers failed to make payment towards exports made by theCompany during the year 2012-13.
The Company has received E-Auction Sale Notice for sale of the property situated atKolkata Goa Bangalore Jodhpur Surat and Mumbai from Debt Recovery Tribunal Ahmedabad.
The banks have lodged complaints with the Central Bureau of Investigation (CBI) andEnforcement Directorate (ED) to carry out investigations against the Company and itsmanagement. The Company is also under investigation by Serious Fraud Investigation Office(SFIO). The management and the directors have fully cooperated with the agencies duringtheir investigations and have submitted all the information available with them.
The company initiated legal proceedings against its 13 defaulting overseas customersbefore the Sharjah Federal Court of first instant in Sharjah UAE to recover itsoutstandings. The judgment of the Sharjah Federal Court of First Instance in Sharjah UAEhave been in favour of the company. The Court has directed the defaulting overseascustomers to repay the outstanding amount alongwith interest @ 5% per annum.
The overseas customers have gone in further Appeal against the orders of SharjahFederal Court of First Instance. The following are the status of the appeals pendingbefore the Appellate Court/ Supreme Court.
The Company has not accepted any deposit within the meaning of Section 73 of theCompanies Act 2013 and the Companies (Acceptance of Deposits) Rules 2014 madethereunder.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
The Company has not given any loans or guarantees covered under the provision ofsection 186 of the Companies Act 2013. The details of investments made by the Company isgiven 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. Allthe locations have stopped its activities as at March 31 2015. The Company however hasin house internal controls of administrative and statutory outgoings commensurate with itssize and volume.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Company has formed a CSR committee. In light of continuing losses in the precedingtwo years and with no activities the Company has not made any contribution towards thesame. The Company is committed to give its due contribution as soon as the situationimproves.
CONSERVATION OF ENERGY
The particulars regarding conservation of energy are not applicable to the Company asthe Company has stopped all its manufacturing activities.
In the absence of any production activity there is no need for any technologyabsorption.
FOREIGN EXCHANGE EARNINGS AND OUTGO
During the year under review there was no foreign exchange earnings or outflow.
There are no activities in any of the units of the Company. However in Goa Unit of theCompany which was in operation till December 2014 the relations with the workmen werecordial.
Mr. Kalpesh Sanghani (DIN: 07743036) was appointed as an Additional Director of theCompany with effect from 24th April 2017 under Section 161 of the CompaniesAct 2013 and holds office upto the date of ensuing Annual General Meeting. Mr. HarimohanNamdev resigned w.e.f. 1st February 2017.
Declaration by Independent Director
The Company has received necessary declarations from each independent Director undersection 149(7) of the Companies Act 2013 that he/she meets the criteria of independencelaid down in Section 149(6) of the Companies Act 2013 and Clause 49 of the ListingAgreement.
The Companies Act 2013 and SEBI (LODR) Regulations mandates that formal annualevaluation needs to be made by the Board of its own performance and that of its committeesand individual Directors. Schedule IV of the Companies Act 2013 states that performancevaluation of independent Directors shall be done by the entire Board excluding theDirector being evaluated. A separate meeting of the Independent Directors (Annual IDmeeting) was convened which reviewed the performance of the Board (as a whole) and thenon-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. Major Event ( Role andPerformance of nominee Director):
- The Board has sought resignation of Mr. S. P Tanwar Nominee Director vide letterdated 2nd March 2016 for consistently working against the interest of thecompany and non fulfilling the fiduciary duty as a Director of the Company. Further theCompany has also sent a letter to the Bank for replacement of Nominee Director dated 28thMarch 2016. The Company has not received any feedback or comments from the NomineeDirector or Banks.
- The Board of Directors at its meeting held on 29th May2017 had decided tosent the letter reminding Consortium of Banks to send the reply to the Company.
Policy on Directors appointment and remuneration
The current policy is to have an appropriate mix of executive and independent Directorsto maintain the independence of the Board and separate its functions of governance andmanagement. The Board periodically evaluates the need for change in its composition andsize.
The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration.
The policy of the Company on Director's appointment and remuneration includingcriteria for determining qualification positive attributes independence of a Directorand other matters provided under section 178(3) of the Companies Act 2013 adopted by theBoard 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 thenomination and remuneration policy of the Company.
A calendar of meetings is prepared and circulated in advance to the Directors.
During the year Six Board Meetings (including adjourned meetings) and Five AuditCommittee Meetings (including adjourned meetings) and Four stakeholders' relationshipcommittee Meeting were convened and held. The details of the same are given in theCorporate Governance Report. The intervening gap between the meetings was within theperiod 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 standardshave been followed;
the Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial 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 ofadequate accounting records in accordance with the provisions of the Companies Act 1956for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; and
the Directors have prepared the Annual Accounts on a going concern basis;
The directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively.
The directors had devised proper system to ensure compliance with the provisionsof 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 financialyear were on an arm's length basis and were in the ordinary course of business. There wereno related party transactions requiring disclosures in the Directors' Report in FormAOC-1.
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 membersof 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 withthe Code.
VIGIL MECHANISM/ WHISTLE BLOWER POLICY
The Company has vigil mechanism/whistle blower policy in place to deal with instancesof fraud or mismanagement if any.
A whistle blower may report any violation or any instances of fraud or mismanagement tothe Chairman of the Audit Committee. The policy ensures that strict confidentiality ismaintained whilst dealing with concerns also that no discrimination will be meted out toany 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 viewto regulate trading in securities by the Directors and designated employees of theCompany. The Code required pre-clearance for dealing the Company's shares and prohibitsthe purchase or sale of Company's shares by the Directors and designated employees whilein possession of unpublished sensitive information in relation to the Company and duringthe period when the Trading Window is closed. The Board is responsible for theimplementation of the Code.
All Board Directors and designated employees have complied with the Code.
The qualifications in the Auditors Report (In Italics) are followed by appropriateBoard's reply and explanations (in bold) as under:
1. Basis for Qualified Opinion
A. The Company has made long term investments in Forever Precious Diamonds andJewellery Ltd. (Forever) amounting to Rs. 1411710802 thereby resulting in it holding a49 % stake in the equity of that company. The said investments continue to be valued atcost. As stated in Note No. 8 in the view of the management provision for diminution invalue of investments as per the requirements of Ind-AS 28 - Investments in Associates andJoint Ventures is not considered necessary and hence not made. We have been provided withthe financial statements of Forever for the year ended 31stMarch 2016. We haveobserved that there are no significant business operations in Forever. Further theauditors of Forever have qualified the financial statements and termed the company as anon-going concern. In view of the above the Company should have provided the diminution invalue of investments amounting to Rs. 1411710801. Accordingly the loss for the yearhave been understated and investments overstated by Rs. 1411710801.
B. The company has also made long term investment in Peakok Jewellery Limited amountingRs.5012750/- at the average rate of Rs.286.44/- per share. As per the balance sheet as at31st March 2016 the book value of the shares of the company is Rs.110.78/- pershare. In the view of the management provision for diminution in value of investments asper the requirements of Ind-AS 28 - Investments in Associates and Joint Ventures is notconsidered necessary and hence not made. In view of the above the Company should haveprovided the diminution in value of investments amounting to Rs.3075100/-. Accordinglythe loss for the year have been understated and investments overstated by Rs.3075100/-.
A. Forever Precious Jewellery and Diamonds Limited has also initiated legal actionagainst its defaulting overseas customers and is hopeful of recovering its dues andtherefore no diminution in the value of investments is considered. As informed by themanagement of Forever Precious Jewellery and Diamonds Limited the Sharjah Federal Courthas directed six out of thirteen overseas defaulters to pay to the company itsoutstanding dues with interest. The company is hopeful of getting a favourable decision inthe case of remaining overseas defaulters.
B. The management is of the opinion that Peakok Jewellery Limited is a going concernand there is no permanent diminution in the value of investments.
2. Basis for Disclaimer of opinion
A. In respect of Trade Receivables amounting to Rs. 56080930760/- (Valued atexchange rate as on 31/03/2017 under IndAS) the auditors have not received anyconfirmations from the overseas parties. The company has filed legal suit against itsdefaulting overseas customers for nonpayment of its export bills at Sharjah Federal CourtSharjah. The court has appointed an expert to look into the affairs of the companies basedin Dubai/ Sharjah. The Court has confirmed the debts payable to the Company and orderedthe overseas customer to pay along with interest @5% p.a. However the copies of theorders are not provided for verification. The overseas customers had filed an appealagainst the judgment of the Sharjah Federal Court and the Sharjah Federal Appellate Courthas passed order in favour of the Company and now the matter is pending for 1 case withthe Sharjah Federal Appellate Court and 2 case with Sharjah Supreme court and theirjudgments are awaited. . During the year under review state bank of Mauritius has enteredin the One Time Settlement agreement with the company and overseas Customers of thecompany for settlement of its loan. Accordingly the Overseas customers agreed to pay US$1050833/- against the total outstanding bill of USD 8241831.11/-. The balance amountreceivable (Rs. 488352906/-) from overseas customers has been considered as impairedcharged to profit and loss in FY 2016-2017. As per Ind-As - 109 (Financial Instruments)provides practical expedient to use a provision matrix to estimate Expected Credit Lossfor trade receivables.
In view of these court orders pending legal proceedings we are unable to comment ontime frame of the realisability of the debts through provision matrix where allsignificant trade receivables past due by more than a year and any provision to be madefor unrealisability in the remaining carrying amounts of these balances and theconsequential impact on the financial statements. (Refer Note 9 11 and Note 34 to thefinancial statements)
B. As per Ind-AS -16(Property Plant and Equipment) the depreciable amount of atangible fixed asset should be allocated on a systematic basis over its useful life. Thedepreciation method should reflect the pattern in which the asset's future economicbenefits are expected to be consumed by the entity. Further standard requires thedepreciation method applied to an asset residual value and useful life shall be reviewedat least at each financial year-end. Based on technical evaluation the managementbelieves that written down method of depreciation method and the useful lives asprescribed under Part C of Schedule II of the Companies Act 2013 are best representativefuture economic benefits associated with tangible fixed assets. In absence of thetechnical report we are unable to comment on reasonability of useful and method ofdepreciation and the consequential impact on the financial statements. (Refer note 6& 7)
C. As mentioned in Note No 1 regarding preparation of accounts on a Going Concern basisand the reasons stated therein and Note No.34 of the financial statements detailing thedevelopments that have happened in the last 4 years the Company's operating results havebeen materially affected due to various factors including non availability of finance inview of the consortium of bankers recalling the financial facilities granted. These eventscast significant doubts on the ability of the Company to continue as a going concern sincethe business has stopped. The appropriateness of the going concern assumption is dependenton the Company's ability to raise adequate finance from alternate means and/ or recoveriesfrom overseas debtors to meet its short term and long term obligations as well as toestablish consistent business operations.
In absence of any convincing audit evidences non recovery of trade receivables on duedate non-payment of liabilities including statutory dues financial difficulties faced bythe company due to recalling of bank finance facilities and in view of multipleuncertainties as stated above we are unable to determine the possible effects on thefinancial statements. We are also unable to conclude on the ability of the company tocarry on as a going concern.
A. The Company had initiated legal proceedings against its 13 defaulting overseascustomers before the Sharjah Federal Court and had received orders which confirmed thedebts payable by the overseas customers. The Overseas Customers were ordered to pay to thecompany all the outstanding dues along with interest @ 5% per annum.
The Overseas Customers filed appeal against the order of Sharjah Federal Court. Of the13 overseas customer's cases the company has received favourable judgment in 12 cases andone case is pending in appeal before the Federal Appellate. There are 2 cases pendingbefore the Supreme Court UAE Viz. AlSubhi Jewllery FZE and Al Minhaj Jewellery FZE .
B. As there are no business activities and the Company has no technical person toevaluate the company continue to follow written down metod of depreciation and the usefullives as prescribed under Part C of Schedule II of Companies Act 2013
C. The management assumes that the Company will have adequate cash flows from theproceeds of export receivables to defray its entire debt obligation in a phased manner. Inview of the aforesaid para A the Company is hopeful of resuming its normal operationsonce the cash flow improves. Hence the accounts of the Company are prepared on a goingconcern basis.
3. Emphasis of Matter
A. The Company has not carried out any valuation of the stocks which are lying withthem/in the joint custody with the banks. To that extent the increase or decrease in thevalue of inventories as at year end as required to be done as per the requirements ofInd-AS -2 (Inventories) has not been done. The impact on the profit/loss of the companydue the said non valuation has not been determined. Refer note no. 10.
B. There is difference of Rs. 34688692/- in the outstanding balance of advancesobtained from the bankers. In absence of details made available by the bankers thecompany is not in a position to reconcile the difference. Which may lead to understatementof liability and its consequential effect in the book result if any.
C. Due to the defaults of the Company to the banks the Company's accounts have beenclassified as NPAs by the banks. Most of the banks have not charged interest on theCompany's borrowings/loans while some banks have been charging interest at higher rates.The board of directors of the Company in its meeting held on 30th May 2015 haddecided not to provide Interest. Now the directors in its meeting dated 29thMay 2017 have decided to provide for Interest to comply with Ind-AS. The Company hasprovided Interest @ 12.5 % of the outstanding amount being the average rate of rupeeexport finance as worked out by the Directors. Moreover The Debt recovery tribunal haspassed order dated 09.12.2016 determining the total amount payable Rs.46870404315/-along with the simple interest @ 14% p.a. from the date of filing of original applicationwith DRT till the date of realization of dues. However the company has not passed anyeffect relating to the above mention order as the detailed calculation of Bank wiseliability is not available and in that concern liability of the company cannot bedetermined.
A. A Inventory of diamonds and pearls lying at Surat and Mumbai has been placed in thelockers in PNB and is in the joint custody with PNB since 18.06.2013. The stock at ChennaiSEZ and Cochin SEZ are also in the joint custody with PNB since November 2013 at company'spremises. Inventory at Bangalore and Goa are also in the joint custody with PNB at theirlocal branches at Bangalore and Goa.
The majority of the inventory is in the joint custody with Bank and therefore the samehas not been valued by the Management.
B. The details of differences debited by the Banka are not available and the banks arenot providing any details under the circumstances as a result of which the Company is notin the possession to reconcile the difference.
C. The Board of Directors of the Company in its meeting held on 30th May2015 had decided not to provide interest. Now the Directors in its meeting dated 29thMay 2017 have decided to provide for interest to comply with ind AS. The Company hasprovided compounding interest @ 12.5% of the outstanding amount being the average rate ofrupee export finance . As the detailed break up of liabilities determined by DRT is notavailable and therefore the Company has provided interest as decided by the Board ofDirectors.
SECRETARIAL AUDITOR AND HIS REPORT
The Board has appointed kamlesh M. Shah & Co Practising Company Secretaries toconduct the Secretarial Audit of FY 201617. The Secretarial Audit Report for the yearended 31st March
2017 ia attached herewith as Annexure
The management would like to state that Cossortium Banks are not inviting the Companyto attend the meeting. Mr. S.P Tanwar Nominee Director was attending the meeting ofconsortium Banks however he never gives any information pertaining to proceeding of themeeting.
In the AGM held on 30th September 2016 M/s Manan Vakil & Co.Chartered Accountants Ahmedabad were appointed as Statutory auditors of the Company foras period of five years. Ratification of the appointment of statutory auditors is beingsought from the members of the Company at the ensuing AGM.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT-9 is annexedherewith as "ANNEXURE .... ".
Though the Company's operations has come to a grinding halt post devolvement of Letterof Credits issued in favour of bullion banks the probability of any operational risks hascome to a naught Since March 2014 the operations have come to a halt and company does nothave any underlying transactions requiring hedging. Apart from above the company does nothave elaborate risk management policy in relation to other commercial and operationalrisks. Further pursuant to SEBI (Listing Obligation and Disclosure Requirement)Regulations 2015 the requirement to constitute Risk Management Committee is nowapplicable to top 100 Listed companies and therefore the said committee has been dissolvedby the Board on 10th May 2016.
PARTICULARS OF REMUNERATION
The Information required under section 197 of the Companies Act 2013 and the rulesmade there-under in respect of the employees of the Company is as under:
(a) the ratio of the remuneration of each director to the median remuneration of theemployees of the Company for the financial year
(b) the percentage increase in remuneration of each Director Chief Executive OfficerChief Financial Officer Company Secretary or Manager if any in the financial year;
(c) the percentage increase in the median remuneration of employees in the financialyear
(d) the number of permanent employees on the rolls of Company:
(e) the explanation on the relationship between average increase in remuneration andCompany performance;
There are no increase in remuneration during the last 4 years.
(f) comparison of the remuneration of the Key Managerial Personnel against theperformance of the company;
(g) variations in the market capitalisation of the Company price earnings ratio as atthe closing date of the current financial year and previous financial year and percentageincrease over decrease in the market quotations of the shares of the Company in comparisonto the rate at which the Company came out with the last public offer in case of listedcompanies and in case of unlisted companies the variations in the net worth of theCompany as at the close of the current financial year and previous financial year;
(h) average percentile increase already made in the salaries of employees other thanthe managerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration.
(i) the key parameters for any variable component of remuneration availed by thedirectors;
(j) the ratio of the remuneration of the highest paid director to that of the employeeswho are not directors but receive remuneration in excess of the highest paid directorduring the year;
None of the employees receive remuneration in excess of the limits as prescribed in theinformation required pursuant to Section 197 read with sub rule (2) of rule 5 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect ofemployees of the Company.
PECUNIARY RELATIONSHIP OR TRANSACTIONS OF NONEXECUTIVE DIRECTORS
During the year the Non-Executive Directors of the Company had no pecuniaryrelationship or transactions with the Company except the payment of sitting fees.
CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS REPORTS
Report on Corporate Governance Management Discussion and Analysis and Auditor's Reporton compliance with the Corporate Governance requirements have been included in this AnnualReport in separate sections.
Your Company and Board wish to thank the members of the Company and staff for theircontinued patience and co-operation.