Notes to Accounts of Alsa Marine & Harvests Ltd.

Dec 31, 2009

1. The company has prepared accounts on a going concern basis despite total erosion of net worth,

2. a) Loans from banks are secured by first/second charge on certain Current Assets, Investments and Fixed Assets as the case may be. They are further secured by Personal Guarantees of the three Promoters, Mr.Altaf Pasha, Mr. Salim Pasha and Mr.Eusufal Elias Saithh.

b) Long term loans from ICICI Bank Ltd are secured by First charge on certain Fixed Assets of the Company and they rank paripassu with State Bank of India (assigned to Kotak Mahindra Bank) for the disbursements made towards term loan.

c) Payments received by ICICI Bank upon disposal of assets are reduced from the total liability of Secured Bank creditors in the absence of information from ICICI Bank as to the amount shared with Indian Bank and State Bank of India (assigned to Kotak Mahindra Bank)

d) Loans from others are secured by Hypothecation of assets against which the respective Hire Purchase Contracts are entered.

3. Contingent Liabilities not provided for:

a) In respect of total sales tax demand for Rs. 1,18,36,470/- including penal interest (Previous year Rs.1,18,36,470) for Assessment years from 1990-91 to 1999-2000 towards sale of RLP/Advance licence and other issues. The company has filed appeals against the order/s of Appellate Tribunal to the High court.

b) In respect for demand for Customs duty of Rs. 4.36.79,737 (Previous year Rs. 4,36,79,737) u/s II a of the Customs Duty Act. The company's appeal with CESTAT has been disposed in favour of the company. However an appeal against the order of CESTAT has been filed by Vizag Customs in Supreme Court.

c) In respect of demand for Rs.2,47.872/- (Previous year Rs.2,47.872) by the Regional Commissioner of Provident Fund, Chennai towards penal charges/damages. The company's appeal is pending before the Tribunal for disposal.

d) In respect of demand for Rs.350509/-(Previous year Rs.NIL) by the Regional Commissioner of Provident Fund, Kolkatta towards Interest and damages. The company's appeal is pending before the Tribunal for disposal

e) In respect of demand for Customs duty of Rs. 25,16,02 5/- (Previous year Rs.25.16,025) u/s 28 of the Customs Act., against which the company's appeal against the order of the Commissioner of Central Excise (Appeals) is pending with CESTAT.

f) In respect of demand for Customs Duty of Rs. 5,10,071 and interest thereon Rs. 15,17,935 and Excise duty of Rs, 52,935 and interest there on Rs. 2,91,034 being amount of duty short paid on debonding of Kolkatta unit in 2000. The company has appealed to the commissioner of Central Excise, Kolkatta against the Show Cause Notice cum Demand

g) In respect of penalty imposed by the Directorate of Enforcement (FEMA) tor Rs. 1,00,000 towards non realization of export proceeds. The company filed writ petition before High Court of Madras.

h) In respect of Interest imposed by Asst. Commissioner of Customs (Bonds) for Customs duty on Imports under 100% EOU scheme wherein the interest has not been quantified. The duty of Rs.3,00,38.617/- has been absorbed in the accounts for the current year.

4. a) The Company received an advance of USD 10 million from Alsa Europe Belgium (wholly owned subsidiary) in the year 1996 against specific cont.

b) A Claim was preferred by the company against Alsa Europe for USD 14 million during the period ended 30,9.98 for non-fulfillment of obligations under the contract by Alsa Europe.

c) 50% of the claim amounting to Rs. 25,14,05,000/- (at the prevailing exchange rate) was adjusted against the above said advance in the year 1998. The court in Belgium has dismissed the appeal of the company to enforce the claim.

d) The company had given an indemnity for the Advances received from M/s. Alsa Europe towards supply of materials. The indemnity was assigned by M/s Alsa Europe in favour of M/s. Kredict Bank, Belgium from whom M/s.Alsa Europe had availed credit facilities under a facility Agreement.

e) In the proceeding initiated against Alsa Europe and the Company, M/s.KBC Bank (formerly Krediet Bank) had got a decision in their favour from The Commercial Court, Antwerp. As against the judgment, appeals were preferred before the Court of Appeal, Belgium by the company. The superior court in Belgium, which heard the matter confirmed the finding of the Commercial Court, Antwerp, KBC Bank has since moved High Court of Madras for enforcing the decree against the company. The plea of KBC Bank for attachment before judgement has been dismissed by the High Court of Madras. The matter is pending trial before the High Court of Madras.

f) The total decree amount exclusive of interest is Rs.53.41 Crores (Previous year Rs.55.35 Crores) at the current rate of exchange and the contingent liability on account of the above not acknowledged as debt is Rs.48.45 Crores (Previous year Rs.50.40 Crores) net of amount due to Alsa Europe.

The interest amount as per the decree works out to Rs.41.74 Crores (Previous year 43.16 Crores) and the liability has not been acknowledged as debt by the company.

5. The company accounted for the outstanding balance, repayable towards export advance from M/s.Alsa Europe, on the basis of the exchange rate that prevailed on the date of receipt of such advance. On the date of Balance Sheet, in addition to such export advance, an amount of Rs. 1,59,18.235/- [This amount is included in the amount due to KBC Bank indicated in Para 7(1). (Previous year Rs. 1,64.01.673/-)] is due to M/s. Alsa Europe on account of exchange rate fluctuations.

The company has not recognised the additional liability in its accounts as the Company is of the view that this being part of the decree amount mentioned in para 7(f), need not be considered separately, as the company is contesting the same in the High Court of Madras.

6. i) The company's investment in equity shares of its wholly owned subsidiary, M/s. Alsa Europe amounts to Rs.3,79,13,097 (Previous year Rs.3,79,13.097). Since this company is declared bankrupt, the book value is taken as Nil.

ii) The company has invested Rs. 1.00,00,000 in the shares of Alsa Global Finance & Securities Ltd. The book value of such shares is taken as Rs. 10,00,000/- (Previous year Rs. 10,00,000) at the nominal rate of Re 1 per share.

iii) The company has invested in equity shares of Seal Fisheries Limited Rs.56,71,315. The book value of such shares is taken as is taken as Rs.5,64,310 (Previous year Rs.5,64,310) at the nominal rate of Re 1 per share.

iv) The total diminution in the value of the above said investments amount to Rs.5,20,20,102 (Previous year Rs.5,20,20,102) and the diminution during the current years is Rs.Nil (Previous year Rs.NIL) has been provided for.

11. a) Overdue Interests on Hire purchase facilities and interests on Bill discounting facilities have not been provided for as the same are not ascertainable.

b) Interest liability on overdue outstanding has not been provided in respect of Banks and institutions due to the fact that the advances have become a 'Non Performing Asset' account with the them and the company has made representation for restructuring the liabilities. The company has requested for waiver of interest and other concessions. Pending the approval of the rehabilitation proposal where waiver of interest is sought, the interest to be provided for is not currently quantifiable.

c) Interest has also not been provided on Inter-corporate deposits, Loans from Directors and other overdue creditors.

7. In accordance with Section 209(3) of the Companies Act, 1956 the Company has accounted on accrual basis. In view of reasonable uncertainty regarding the quantum the following items of expenditure has been accounted on cash basis:

a) Gratuity

b) Liability for leave encashment entitlement.

The company has not ascertained the liability towards Gratuity and leave encashment entitlement on the basis of Actuarial valuation.

8. The balances of Debtors, Creditors. Loans. Advances and Deposits are subject to confirmation.

9. a) The Company could not pay its dues towards plant lease rentals to its Lessors at Kochi Chennai and Bhubaneswar, Due to this, the Lessors did not allow access to the assets of the Company lying in these plants. An assessment of the state of these assets could not be made in the absence of access. At all these plants the Company also had employees dues unsettled and it is possible that sum items of assets might have been forcibly taken by the employees. In the absence of concrete information, the Company has carried forward such assets in its books and also the liabilities.

b) The company has not worked out the impairment of fixed assets as apart from the note 15 (a), the Banks and Institutions who are the secured charge holders of the assets of the company have already sold the Nellore, Kolkatta, Vishakapatnam and Chennai Plants.

10. The Company on account of losses could have "Deferred tax assets". However as a prudent measure the same has not been considered in the accounts.

11. Figures have been given in thousands of rupees,

12 Previous year's figures have been regrouped/reclassified wherever necessary.

13. MFR Status :

The BIFR, had issued an order dated 27th August 2003 giving a Show Cause Notice for Winding up and also fixed the hearing on 17th November, 2003 to discuss the same. The Company, after filing an appeal against this order with the AIFR. challenged the order in the High Court of Madras and has obtained an 'Interim stay' of this order of the BIFR. The interim stay had been made 'absolute' by the High Court of Madras subsequently. The Madras High Court disposed off the writ petition on 12th September 2006, giving an option to approach ALFR in respect of the show cause notice issued by BIFR in 2003, as the body was very much functional. The Company had since filed a petition before the AIFR and the same has been deposed off by AIFR in Dec 2009.

BIFR has in the meanwhile abated our case on 07.05.2007 pursuant to ICICI having represented that they have taken over the Fixed assets of the Company by invoking SARFEASI Act,2002. ICICI Bank disposed off the assets at Kolkatta, Nellorc, Vishakapatnam, Bandikavanoor and Kadappakkam. IFCI had under an OTS Scheme taken possession of the Company's land at Satyavedu.

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Dec 31, 2007

1. The company has prepared accounts on a going concern basis despite total erosion of net worth,

2. a) Loans from banks are secured by first/second charge on certain Current Assets, Investments and Fixed Assets as the case may be. They are further secured by Personal Guarantees of the three Promoters, Mr.Altaf Pasha, Mr. Salim Pasha and Mr.Eusufal Elias Saithh.

b) Long term loans from ICICI Bank Ltd are secured by First charge on certain Fixed Assets of the Company and they rank paripassu with State Bank of India (assigned to Kotak Mahindra Bank) for the disbursements made towards term loan. Medium Term Loan is secured by Deposit of the title deeds of certain property. they are furthere secured by pledge of shares held by promoters and personel Guarantees of the Promoters.

c) Payments received by ICICI Bank upon disposal of assets are reduced from the total liability of Secured Bank creditors in the absence of information from ICICI Bank as to the amount shared with Indian Bank and State Bank of India (assigned to Kotak Mahindra Bank)

d) Loans from others are secured by Hypothecation of assets against which the respective Hire Purchase Contracts are entered.

3. The company received a notice from ICICI Bank, on 19th October, 2006. Under Section 13(2) of the securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) calling upon the company to remit the outstanding of Rs. 91,54,24,471 withing 60days. Subsequent to this ICICI Bank Ltd, has sold the Vizag Plant for a price of Rs. 1.30 Crores (excluding payment of Rs. 20 laksh labour and other statutory dues). The sale value has been appropriated by ICICI Bank towards there secured loans and also used part amount to pay the other 2 secured creditor Banks. (Please refer Not 2 above). ICICI bank had also taken possession of properties located at Nellor and Bank kavanoor and Kadappakkam.

4. Contingent Liabilities not provided for:

a) In respect of total sales tax demand for Rs. 1,18,36,470/- including penal interest (Previous year Rs.1,18,36,470) for Assessment years from 1990-91 to 1999-2000 towards sale of REP/Advance licence and other issues. The company has filed appeals against the order/s of Appellate Tribunal to the High court.

b) In respect for demand for Customs duty of Rs. 4.36.79,737 (Previous year Rs. 4,36,79,737) u/s II a of the Customs Duty Act. The company's appeal with CESTAT has been disposed in favour of the company. However an appeal against the order of CESTAT has been filed by Vizag Customs in Supreme Court.

c) In respect of demand for Rs.2,47.872/- (Previous year Rs.2,47.872) by the Regional Commissioner of Provident Fund, Chennai towards penal charges/damages. The company's appeal is pending before the Tribunal for disposal.

d) In respect of demand for Rs.350509/-(Previous year Rs.NIL) by the Regional Commissioner of Provident Fund, Kolkatta towards Interest and damages. The company's appeal is pending before the Tribunal for disposal

e) In respect of demand for Customs duty of Rs. 25,16,025/- (Previous year Rs.25.16,025) u/s 28 of the Customs Act., against which the company's appeal against the order of the Commissioner of Central Excise (Appeals) is pending with CESTAT.

f) In respect of demand for Customs Duty of Rs. 5,10,071 and interest thereon Rs. 15,17,935 and Excise duty of Rs, 52,935 and interest there on Rs. 2,91,034 being amount of duty short paid on debonding of Kolkatta unit in 2000. The company has appealed to the commissioner of Central Excise, Kolkatta against the Show Cause Notice cum Demand

g) In respect of penalty imposed by the Directorate of Enforcement (FEMA) tor Rs. 1,00,000 towards non realization of export proceeds. The company filed writ petition before High Court of Madras.

5. a) The Company received an advance of USD 10 million from Alsa Europe Belgium (wholly owned subsidiary) in the year 1996 against specific contract.

b) A Claim was preferred by the company against Alsa Europe for USD 14 million during the period ended 30.9.98 for non-fulfillment of obligations under the contract by Alsa Europe.

c) 50% of the claim amounting to Rs. 25,14,05,000/- (at the prevailing exchange rate) was adjusted against the above said advance in the year 1998. The court in Belgium has dismissed the appeal of the company to enforce the claim.

d) The company had given an indemnity for the Advances received from M/s. Alsa Europe towards supply of materials. The indemnity was assigned by M/s Alsa Europe in favour of M/s. Kredict Bank, Belgium from whom M/s.Alsa Europe had availed credit facilities under a facility Agreement.

e) In the proceeding initiated against Alsa Europe and the Company, M/s.KBC Bank (formerly Krediet Bank) had got a decision in their favour from The Commercial Court, Antwerp. As against the judgment, appeals were preferred before the Court of Appeal, Belgium by the company. The superior court in Belgium, which heard the matter confirmed the finding of the Commercial Court, Antwerp, KBC Bank has since moved High Court of Madras for enforcing the decree against the company. The plea of KBC Bank for attachment before judgement has been dismissed by the High Court of Madras. The matter is pending trial before the High Court of Madras.

f) The total decree amount exclusive of interest is Rs.45.42 Crores (Previous year Rs.51.32 Crores) at the current rate of exchange and the contingent liability on account of the above not acknowledged as debt is Rs.40.46 Crores (Previous year Rs.46.36 Crores) net of amount due to Alsa Europe.

The interest amount as per the decree works out to Rs.35.90 Crores (Previous year 40.22 Crores) and the liability has not been acknowledged as debt by the company.

6. The company accounted for the outstanding balance, repayable towards export advance from M/s.Alsa Europe, on the basis of the exchange rate that prevailed on the date of receipt of such advance. On the date of Balance Sheet, in addition to such export advance, an amount of Rs. 1,59,18.235/- [This amount is included in the amount due to KBC Bank indicated in Para 8(1). (Previous year Rs. 13259413/-)] is due to M/s. Alsa Europe on account of exchange rate fluctuations.

The company has not recognised the additional liability in its accounts as the Company is of the view that this being part of the decree amount mentioned in para 8(f), need not be considered separately, as the company is contesting the same in the High Court of Madras.

7. i) The company's investment in equity shares of its wholly owned subsidiary, M/s. Alsa Europe amounts to Rs.3,79,13,097 (Previous year Rs.3,79,13.097). Since this company is declared bankrupt, the book value is taken as Nil.

ii) The company has invested Rs. 1.00,00,000 in the shares of Alsa Global Finance & Securities Ltd. The book value of such shares is taken as Rs. 10,00,000/- (Previous year Rs. 10,00,000) at the nominal rate of Re 1 per share.

iii) The company has invested in equity shares of Seal Fisheries Limited Rs.56,71,315. The book value of such shares is taken as is taken as Rs.5,64,310 (Previous year Rs.5,64,310) at the nominal rate of Re 1 per share.

iv) The total diminution in the value of the above said investments amount to Rs.5,20,20,102 (Previous year Rs.5,20,20,102) and the diminution during the current years is Rs.Nil (Previous year Rs.NIL) has been provided for.

8. a) Overdue Interests on Hire purchase facilities and interests on Bill discounting facilities have not been provided for as the same are not ascertainable.

b) Interest liability on overdue outstanding has not been provided in respect of Banks and institutions due to the fact that the advances have become a 'Non Performing Asset' account with the them and the company has made representation for restructuring the liabilities. The company has requested for waiver of interest and other concessions. Pending the approval of the rehabilitation proposal where waiver of interest is sought, the interest to be provided for is not currently quantifiable.

c) Interest has also not been provided on Inter-corporate deposits, Loans from Directors and other overdue creditors.

9. In accordance with Section 209(3) of the Companies Act, 1956 the Company has accounted on accrual basis. In view of reasonable uncertainty regarding the quantum the following items of expenditure has been accounted on cash basis:

a) Gratuity

b) Liability for leave encashment entitlement.

The company has not ascertained the liability towards Gratuity and leave encashment entitlement on the basis of Actuarial valuation.

10. The balances of Debtors, Creditors. Loans. Advances and Deposits are subject to confirmation.

11. a) The Company could not pay its dues towards plant lease rentals to its Lessors at Kochi Chennai and Bhubaneswar, Due to this, the Lessors did not allow access to the assets of the Company lying in these plants. An assessment of the state of these assets could not be made in the absence of access. At all these plants the Company also had employees dues unsettled and it is possible that sum items of assets might have been forcibly taken by the employees. In the absence of concrete information, the Company has carried forward such assets in its books and also the liabilities.

b) The company has not worked out the impairment of fixed assets as apart from the note 16 (a), the Banks and Institutions who are the secured charge holders of the assets of the company as pressurising for disposal of the assets of the company in as is where is conditions for recovery of their outstanding dues and have already sold the Nellore, Kolkatta, Vishakapatnam and Chennai Plants.

12. The Company on account of losses could have "Deferred tax assets". However as a prudent measure the same has not been considered in the accounts.

13. Figures have been given in thousands of rupees,

14. Previous year's figures have been regrouped/reclassified wherever necessary.

15. BIFR Status :

The BIFR, had issued an order dated 27th August 2003 giving a Show Cause Notice for Winding up and also fixed the hearing on 17th November, 2003 to discuss the same. The Company, after filing an appeal against this order with the AIFR. challenged the order in the High Court of Madras and has obtained an 'Interim stay' of this order of the BIFR. The interim stay had been made 'absolute' by the High Court of Madras subsequently. The Madras High Court disposed off the writ petition on 12th September 2006, giving an option to approach ALFR in respect of the show cause notice issued by BIFR in 2003, as the body was very much functional. The Company had since filed a petition before the AIFR and the same has been deposed off by AIFR in Dec 2009.

BIFR has in the meanwhile abated our case on 07.05.2007 pursuant to ICICI having represented that they have taken over the Fixed assets of the Company at Utukur Village Nellore, Bandikavanur near chennai, Kadapakkam near chennai, Bheemunipatnam Vishakapatnam and machilipatnam in the year 2007 by invoking SARFEASI Act, 2002.