Notes to Accounts of Lakhani India Ltd.

Mar 31, 2011

1 Contingent liabilities not provided for: 31.03.2011 31.03.2010

L/C's issued by Bank 15,405,879 Nil

Bank Guarantee 234,726 Nil

2 Breakup of expenditure incurred on the employees who were in receipt of remuneration aggregating to Rs.24,00,000/- or more per annum, if employed through out the year, or Rs. 2,00,000- per month if employed for 198,540 92,725

3 EMPLOYEE BENEFITS

Gratuity has been charged in the accounts on the basis of last year's provisions as actuarial valuation was not available.

4 Statutory Dues like ESI and PF are not deposited for more than six months.

5 There are no Micro, Small and medium Enterprise to whom the company owes dues, which are outstanding for more than 45 Days at the balance sheet date. The information regarding Micro, Small, and Medium Enterprise has been determined to the extent such parties have been identified on the basis of data available with the company

6 Segment Reporting

The Board of Directors of the Company consider and Maintain "Footwear as the only business segment of the Company.

7 Deferred Tax Liability/Assets

Deferred Tax Liability/Assets has been arrived at after considering the timing difference on account of depreciation allowable under the Companies Act and Income Tax Act.

8 Income tax assessment has been completed up to A.Y 2008-09. Demand of Rs.46.66 Lacs has been created in respect of various years against which company has preferred appeals which are pending. No provision has been made in the account as company is hopeful that demand created will be knocked off in appeals.

9 Sales tax assessment have been completed up to 2007-08. Demand of Rs.106.31 Lacs Is created including demand of Rs.104.65 Lacs pending against "C" Forms. Company is of the view that the above demand will be substantially reduced on receipt of Forms. For the remaining amount company is seeking opinion for the appeal. As a result no provision has been made in the books of account.

10 Previous year's figures have been re-arranged/ regrouped wherever considered necessary, Figures in bracket pertains to previous year.

11 Figures have been rounded off to the nearest Rupee's

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Mar 31, 2010

1 Contingent liabilities not provided for: 31.03.2010 31.03.2009

L/Cs issued by Bank Nil Rs. 164.99 Lacs

Cheques purchased with bank Nil Rs. 938 Lacs

2. Breakup of expenditure incurred on the employees who were in receipt of remuneration aggregating to Rs.24,00,000/- or more per annum, if employed through out the year, or Rs. 2,00,000- per month if employed for a part of year Nil ( Previous Year Nil)

3. EMPLOYEE BENEFITS

(b) The fair value of plan assets is Nil since employee benefit plans are wholly unfunded as on March 31, 2010.

(e) The discount rate is based upon the market yields available on Government bonds at the accounting date with a term that matches that of the liabilities.

(f) The estimates of future salary increase considered in the actuarial valuation takes into account factors like inflation, seniority, promotion and other relevant factors.

(g) The employees are assumed to retire at the age of 58 years.

(h) The mortality rate considered are as per the published rate in the LIC(1994-96) mortality tables.

4. There are no Micro, Small and medium Enterprise to whom the company owes dues, which are outstanding for more than 45 Days at the balance sheet date. The information regarding Micro, Small, and Medium Enterprise has been determined to the extent such parties have been identified on the basis of data available with the company.

5. Secured Loans

(a) Cash Credit / working capital facilities are secured against hypothecation of raw material, semi finished goods, finsihed goods stores spares and book debts both present and future and by way of second charge on fixed assets of the company.

(b) Term loans are secured by way of first charge on buildings, plant and machinery & other fixed assets and by way of second charge on the current assets of the company.

(c) Term loans and working capital facilities are collaterally secured by way of charge on the Companys Land and have been personally guaranteed by its Directors Mr. P.D. Lakhani and Mrs. Suman Lakhani.

(d) Vehicle loans are secured by hypothecation of vehicles in favour of respective lender.

6. Segment Reporting

The Board of Directors of the Company consider and Maintain "Footwear as the only business segment of the Company.

7. Deferred Tax Liability

Deferred tax liability has been arrived at after considering the timing difference on account of depreciation allowable under the Companies Act and Income Tax Act. Deferred tax liability/ created /(written back) has been calculated after considering the timing difference of Rs 25,17,06,300/- (Previous year- Rs. 21,53,38,900/-)

8. Income tax assessment has been completed upto A.Y 2007-08. Demand of Rs.46.66 Lacs has been created in respect of various years against which company has preferred appeals which are pending. No provision has been made in the account as company is hopeful that demand created will be knocked off in appeals.

9. Sales tax assessment have been completed upto 2006-07. Demand of Rs. 185.26 Lacs Is created including demand of Rs. 159.05 Lacs pending against "C" Forms. Company is of the view that the above demand will be substantially reduced on receipt of "C" Forms for the remaining amount company is seeking opinion for the the appeal. As a result no provision has been made in the books of account.

10. A portion of Company plant situated at Plot No. 122, Sector-24, Faridabad was destroyed by fire on 1st May,2009. Plant and Machineries destroyed in fire amounting to Rs.49.90 Lacs towards net block have been reduced from the Fixed Assets. Stocks aggregating to Rs 320.22 lacs were also destroyed in the fire. The Companys insurance claim has been settled in Financial year 2010-11 and consequently the resultant loss has been charged to Profit and Loss Account.

11. In terms of accounting policy on investments, the additions includes interest capatalised during the year.

12. Previous years figures have been re-arranged/ regrouped wherever considered necessary, Figures in bracket pertains to previous year.

13. Figures have been rounded off to the nearest Rupee.

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Mar 31, 2009

1 The Company has initiated the processs of obtaining confirmation from suppliers who have registered themselves under the Micro Small Medium Enterprise Development Act, 2006 ( MSMED Act,2006). Based on the information available with the Company, the balance due to Micro and Small Enterprises as defined under the MSMED Act,2006 is nil. Further no interest during the year has been paid or payable under the terms of the MSMED Act,2006.

2 Secured Loans

(a) Cash Credit / working capital facilities are secured against hypothecation of raw material, semi finished goods, finsihed goods stores spares and book debts both present and future and by way of second charge on fixed assets of the company.

(b) Term loans are secured by way of first charge on buildings, plant and machinery & other fixed assets and by way of second charge on the current assets of the company.

(c) Term loans and working capital facilities are collaterally secured by way of charge on the Companys Land and have been personally guaranteed by its Directors Mr. P.D. Lakhani and Mrs. Suman Lakhani.

(d) Vehicle loans are secured by hypothecation of vehicles in favour of respective lender.

3 In terms of accounting policy number (f) accounting of custom duty in respect of purchase of fixed assets in foreign currency, a sum of Rs.77,72,192 has been reduced from the cost of fixed assets during the year.

4 Company has been advised that in respect of transactions with the related parties for purchase /sale made as per details given in note No.23, prior approval of the Central Government is required U/S 297 of the Companies Act 1956. Company is seeking the legal opinion on the matter and on receipt of legal opinion it will initiate the process of obtaining the necessary approval if so required. Company is of the view that transactions have been made at most competitive prices wherever applicable and in case of specific item of purchases/sales transactions have been made at terms not prejudicial to the interest of the company.

5 Company has initiated the detailed exercise during the year in respect of Sundry debtors outstanding for a period exceding six months particularly in respect of outstandings from 2006 of Rs.276.68 lacs carried forward from the earlier years. On completion of excercise it will initiate the process of recovery from these debtors and if any adjustment entries with regard to provision of doubtful debts will be passed thereafter. Sundry Debtors includes Rs 14,03,573/- representing cheque returns for which debtors are to be identified.Sundry Debtor Includes Rs. 2260.70 Lacs due from companies under the same management.

6 Inventory of raw materials, stores and spares, loose tools, finished goods, semi finished goods is verified by the management at resonable periods during the year. Closing stock is taken at the year end in respect of all plants as a whole and is valued on physical verification basis.Management has adopted the prudent principle of conservatism in determining the quantity, and has valued at price not less than the net realisable value. Management has also determined the slow/ non moving stocks and has valued on the fair basis keeping in view the net realisable value. Stocks with third parties as on the balance sheet date is taken on derivative figure and is subject to confirmation from the third parties.Quantitative data in the schedules is certified by the Management

7 Sundry creditors includes Rs.1,28,55,322/- outstanding for a period exceeding one year In the opinion of Management these accounts are not barred by limitation and subject to reconcilation, these are payable.

8 Loans and advances includes Rs.606.06 lacs due from various suppliers/contractors/ employees which are required to be adjusted in subsequent years on receipt of final bills/settlements etc. Management is making efforts to settle these advances and adjustment entries will be made subsequently. At this stage there is no doubtful advances which is required to be provided for including the amounts outstanding from earlier years because none of the advance is barred by limitation Loans & advances includes Rs.5,12,000/- paid by way of Sales tax on DEPB 2000 (under appeal). No provision against the same has been made as company is of the view that demand will be reduced to nil.

9 Income tax assessments has been completed upto assessment year 2006 - 07. Demand of Rs.59.73 lacs has been created in respect of various years against which company has preferred appeals which are pending. No provisions has been made in the account as company is hopeful that demand created will be knocked off in appeals.

10 Sales tax assessments have been completed upto 2005 - 06. Demand of Rs.1,39,43,320/- is created including demand of Rs.94,58,535/- pending against "C" Forms. Company is of review that demand for 2005 - 06 will be substantially reduced on receipt of "C" forms. For the remaining amount company is seeking opinion for filing the appeal. As a result no provision has been made in the books of account.

Related Party Disclosures

Associates Companies

Lakhani Rubber Udyog P Ltd. Lakhani Footcare P Ltd Laksons Footwear P Ltd Lakhani Detergents & Soaps P Ltd. Lakhani Auto Components P Ltd. Vardaan Developers India P Ltd. Lakhani Apparel Private Ltd. Reliable Logistics Private Limited Lakhani Apparel International P Ltd. Lakhani Investments P Ltd. Lakhani Medtec P Ltd. Lakhani Medicare Private Limited Vardaan Shoe Company Private Ltd. Zest Auto Private Limited

Lakhani Exim (India) P Ltd. Lakhani Fashion (India) P Ltd. Lakhani Infrastrcuture P Ltd. Lakhani Clothing (India) P Ltd. Lakhani Belmaks Developers P Ltd. Lakhani Steels Private Limited Lakhani Sheet Metal P Ltd. Lakhani Platinum Lifestyle P Ltd. Vardaan Detergents P Ltd Vardhan Auto P Ltd. Lakhani Education P Ltd. Alpha Omega retail P. Ltd. Alpha Omega Environmentel S. P Ltd. Freshness Coatings P Ltd.

Euphoria Infrastructure P Ltd. Vertex Hotel P Ltd. Jubliant Real Estate P Ltd. Progress Real Estate P Ltd. Rise Real Estate P Ltd. Boost Real Estate P Ltd. Boost Shoe Company P Ltd. Lakhani Vardaan Auto P. Ltd. Natural Coatings P Limited Vardaan Shoe Company Pvt. Ltd Lakhani Hitech Rubber P. Ltd. Lakhani Developers P Ltd. Victory Motels P. Ltd.

Firms in which Directors are interested

Lakhani Marketing Inc. Lakhani Packaging

Vardaan Exim Co.

Key Management Personnel

Mr. Parmeshwar Dayal Lakhani Mr. Anand Swaroop Sharma Mr. Jai Kumar Seth

Managing Director Whole Time Director Whole Time Director

11 Segment Reporting

The Board of Directors of the Company consider and maintain "Footwear" as the only business segment of the Company.

12 Deferred Tax Liability

Deferred tax liability has been arrived at after considering the timing difference on account of depreciation allowable under the Companies Act and Income Tax Act.

Deferred tax liability/(written back) has been calculated after considering the timing difference of Rs.21,53,38,900/- (Previous year- Rs. 16,28,43,523/-).

13 Previous years figures have been re-arranged/ regrouped wherever considered necessary. Figures in bracket pertains to previous year.

14 Figures have been rounded off to the nearest Rupees.