Notes to Accounts of Dewan Tyres Ltd.

Mar 31, 2014

1 Contingent Liabilities:

(i) Bills, Cheques and Drafts discounted with Banks Rs. NIL (previous year Rs. NIL).

(ii) Bank Guarantees given/Letter of Credit established by Bankson behalf of the Company Rs. 174.54 Lacs (Previous Year Rs. 174.54 Lacs).

(iii) Corporate Guarantees extended by the Company Rs. 7,653.00 Lacs (Previous Year Rs. 7,653.00 Lacs) in respect of financial facilities sanctioned by the various Financial Institutions/Banks to the Group Companies.

(iv) In Asstt. Year 2000-2001 a demand raised by Joint Commissioner Appeals II Commercial Tax, Meerut of Rs. 591,788. The Company is contesting this demand before High Court Allahabad, U.P..

(v) There is a demand of Rs. 1,85,096oftradetaxforJabalpur(M.P.)

(vi) The Commissioner of Central Excise and Customs had passed an adjudidcation order against the show cause notice, with a demand of Rs. 1,575.68 Lacs on the Company comprising of Rs. 787.84 Lacs by way of excise duty and Rs. 787.84 Lacs by way of penalty, against which the Company had filed an appeal before the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT), New Delhi.

The CEGAT, New Delhi has directed the Company to deposit a sum of Rs. One Crore as pre- condition for admission of the appeal against which, Company went to Hon''ble Delhi High Court, New Delhi which reduced the pre-condition deposit from Rupees One Crore to Rupees Seventy Lacs. The Company is yet to make a deposit of Rupees Seventy Lacs as per the directions of the Hon''ble Supreme Court of India, New Delhi which upheld the decision of the Hon''ble High Court on the Company''s writ petition for waiver of pre-condition deposits.

The Company is of the opinion that the demand raised against the Company may not be sustained and hence, no provision has been made for the the same in the accounts.

(vii) The Special Director of Enforcement, Enforcement Directorate, Government of India, New Delhi has passed an Order of Personal Penalty of Rs. 4,79,00,000 on Dewan Tyres Limited under Foreign Exchange Regulation Act, 1973; against which the Company is trying to get it waived by depositing the necessary required documents.

(viii) Industrial Development Bank of India (IDBI) has filed a Case against the Company u/s Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 before the Debt Recovery Tribunal, Lucknow (DRT) in 2003 for recovery of their dues amounting to Rs. 115,175,173/- Since the company is registered with Board for Industrial and Financial Reconstruction (BIFR), the Company filed Application u/s 34 of Recovery of Debts due to the Banks and Financial Institutions Act, 1993 read with Section 22 and Section 16 of Sick Industrial Companies (Special Provisions) Act, 1985 for stay of the proceedings of the said case.

(ix) Bank of Baroda has also filed a case under Section 19 ofthe Recovery of Debts due to Banks and Financial Institutions Act, 1993 against the Company before the Debts Recovery Tribunal (DRT), Lucknow in 2002 for recovery of their dues amounting to Rs.80,619,295/- Since the company is registered with Board for Industrial and Financial Reconstruction (BIFR), the Company filed Application u/s 34 of Recovery of Debts due to the Banks and Financial Institutions Act, 1993 read with Section 22 and Section 16 of Sick Industrial Companies (Special Provisions) Act, 1985 for stay ofthe proceedings ofthe said case.

(x) N.R.C. Limited has filed winding up petition against the Company before the High Court, Allahabad for recovery of their dues amounting to Rs. 11,52,091/-. The Company is contesting the case by the protection of BIFR.

(xi) Kerala Co-operative Limited has filed winding up petition against the Company before the High Court, Allahabad for recovery of their dues amounting to Rs. 16,52,341/-. The Company is contesting the case by the protection of BIFR.

(xii) SIDBI has filed winding up petition against the Company before the High Court, Allahabad for recovery of their dues amounting to Rs. 1,85,30,112.93/-. The amount was availed by Dewan Rubber Industries Limited and Dewan Tyres Limited stood as Guarantor. The Company is contesting the case by the protection

2. (a) The Company has charged Depreciation on its Fixed Assets on Straight Line Method, except that it has charged the Depreciation in respect of Plant and Machinery at the rate of average life expectancy of 20 years on Main Machinery and 10 years on Moulds etc. bassed on technical evaluation.

(b) Depreciation on increase in the value of Plant and Machinery pursuant to revaluation of these assets over their Written Down Value as per books as on 30.6.1991 has been computed on the average life of 20 years on Main Machinery and 10 years for Moulds etc.

3. (a) Confirmation of Balance of parties appearing under the head Secured Loans Unsecured Loans, Current Liabilities, Sundry Debtors and Loans and ''Advances ; including the Companies under the same management; have not been obtained and shown to Auditors.

(b) Confirmation of Balances of Secured Loans on 31.3.2014 - I.D.B.I., PIC U.P, Bank of Baroda and Dena Bank - have not been obtained and shown to Auditors. All these Accounts are N.P.AAccounts

(c) The Company has not provided the interest on term loans related to PICUP and Dena Bank/ASREC (India) Ltd. as the One Time Settlement (OTS) has been sanctioned by these institutions/Banks for Rs. 3,36,00,000/- and Rs. 1,29,50,000/- respectively. The amount of Rs. 20,75,11,097/- (over & above the OTS amount) towards unpaid Interest and Principal amount, shall be reversed in the year of complete liquidation of these amounts, keeping in view the conditions of full payment stipulated in the OTS sanctions as made by these Financial Institutions.

(d) Confirmation of Balance with Banks on 31.3.2014 have not been obtained and shown to Auditors.

4. The Company has made a provision for doubtful debts out of the debts exceeding six months amounting to Rs. 12,657,976.00 during the yearended 31st March 2003, in view of non-realisation of the dues against exports made by the Company. The Company has also applied to Reserve Bank of India for the permission for writing off the unrealised export bills, and the matter is still under correspondence.

5. The Company had been engaged in manufacturing of automobile Tyres and Tubes. Since there is only one business Segment in which, Company is operating, therefore, segment reporting as required under Accounting Standard 17 issued by the institute of Chartered Accountants of India is not applicable. During the year there has been no production.

6. The Company has not accepted deposits from public; except that the Company has taken unsecured loans from Directors and their Relatives in order to fulfill the stipulation imposed, by the Financial Institutions which are exempt and are not being treated as as part <5t deposits as per Rule 2(b) (xi) of the Companies (Acceptance of Deposits) Rules, 1975.

7. Pursuant to the clarification issued by Accounting Standard Board of the Institute of Chartered Accountants of India on Accounting Standard 9 "Revenue Recognition", the Net Sales under the Statement of Profit and Loss has been disclosed exclusive of Excise Duty which has been hitherto was included in the Sales. However this has no impact on the Loss for the year.

8. In accordance with the Accounting Standard 22 -Accounting for Taxes on Income - issued by the Institute of Chartered Accountants of India, the Deferred Tax for timing difference beween the book and tax profits for the year is accounted for using tax rates and laws that have been enacted or substantively enacted as on the Balance Sheet date.

Deferred Tax assets arising from temporary timing differences are recognised to the extent of reasonable certainty that assets can be realised in future.

The Company has recognised the accumulated deferred tax assets (Net) amounting to Rs. 130.25 Lacs as at 31st March 2014 arising from temporary timing difference but has not accounted for in view of the absence of the reasonable certainty that the deferred tax assets can be realised in future. Hence, no deferred tax assets has been created on Balance Sheet and accordingly no deferred tax charges is recognised to Statement of Profit and Loss for year in respect thereof.

9. None of the suppliers of the Company have informed that it is a small scale industrial unit. Hence, it was not possible for the Company to ascertain amount due to small scale industrial unit as on 31st March 2014.

10. The Company has not transferred the amount lying in credit in Investor Education and Protection Fund amounting to Rs. 326,635 to the Central Govemment as the necessary details of the persons to whom it was payable are being sorted out.

11. In the opinion of the Management, the Current Assets and Loans and Advances are approximately of the value stated, if realised in the ordinary course of business, unless otherwise stated. The provisions for all known liabilities are adequate and not in excess of the amount reasonably necessary.

12. Previous Year''s figures have been reworked, regrouped, rearranged and reclassified wherever necessary.

13 NOTES:

1. The Terms Loans from Financial Institutions are Secured by a first mortgage of all immovable properties of the Company, both present and future and a first charge by way of hypothcation of all movable machineries, sparies etc. present and future, but excluding book debts and inventories subject to prior charges of banks for working capital finance and further secured by way of personal guarantee of Late ShriV. S. Dewan, Director and Shri J. C. Dewan, Director, the mortgage and the charge created/ to be created in favour of the above financial institution shall rank pari-passu inter se

2. Borrowing from Banks are secured by hypothecation of Stock of Raw Materials, Work - in - Process, Finished Goods, Spares, Stores, Packing Materials and Book Debts and second charge on the Fixed Assets of the Company and guaranted by the Promotor Directors.

3. The Company has not provided the interest on term loans related to PICUP and Dena Bank/ASREC (India) Ltd. as the One Time Settlement (OTS) has been sanctioned by these institutions/Banks for Rs. 3,36,00,000/- and Rs. 1,29,50,000/- respectively. The amount of Rs. 20,75,11,097/- (over & above the OTS amount) towards unpaid Interest and Principal amount, shall be reversed in the year of complete liquidation of these amounts, keeping in view the conditions of full payment stipulated in the OTS sanctions as made by these Financial Institutions.