Directors Report of Punjab Fibres Ltd.

Mar 31, 2009

The Directors are pleased to present their 29th Annual Report with the audited Statement of Accounts for the year ended 31st March, 2009 and the Auditors' Report thereon.

OPERATIONS

During the past couple of years, the Indian Textile Industry is passing through tough competition both in domestic as well as the international markets. Resultantly, the huge losses suffered by the industry has forced a large number of spinning units to virtually wind up their operations. The industry has, however, recently started showing signs of revival and is becoming the first sector in the country to rebound. The Company looks forward to have improved market conditions during the times ahead. Meanwhile, pending the settlement under the aegis of BIFR/AAIFR, the Company's manufacturing operations remained suspended during the year under review.

FINANCIAL RESULTS

Current Year Previous Year Rs. Rs.

Profit/(Loss) before Financial

Expenses and Depreciation (27,14,833) 1,01,85,651

Less : Financial Expenses 3,195 11,752

Profit/(Loss) after Financial Expenses (27,18,028) 1,01,73,899

Less : Depreciation 59,53,032 1,05,94,561

Profit/(Loss) after Depreciation (86,71,060) (4,20,662)

DIVIDEND

As there are no surplus for appropriation, your Directors are unable to recommend dividend for the year under review.

WORKING CAPITAL

Your Company continues to avail Working Capital Limits of Rs.775.00 lakhs for its Unit-I at Vill. Rail Majra (Pb.) and Rs.925.00 lakhs for its Unit-II at Surajpur (U.P.) from Kotak Mahindra Bank Ltd. (earlier State Bank of Patiala) in consortium with Punjab National Bank. Meanwhile, the State Bank of Patiala had unilaterally and arbitrarily proceeded to declare the name of the company and its directors as the 'willful defaulters'. Upon company's various representations to de-categorize the name of the company from the list of willful defaulters, a firm of Chartered Accountants appointed by the bankers carried out a detailed examination of the books of account and other records and reportedly concluded that in the light of the facts and circumstances, the company can not be categorized as willful defaulter. Despite various subsequent representations, the bankers have yet to take effective steps to de-categorize the name of the company from the said list.

DIRECTORS

Shri Shiv Shankar Morya, Director of the Company retires by rotation and being eligible, offers himself for re-appointment.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

i) in the preparation of the annual accounts the applicable accounting standards have been followed along with proper explanations relating to material departures;

ii) appropriate accounting policies have been selected and have applied them consistently and made judgments 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 2008-2009 and the profit or loss of the Company for that period;

iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv) the annual accounts have been prepared on a going concern basis.

DEMATERIALISATION OF SHARES

The equity shares of your Company have been included in the list in which trading is compulsory in dematerialized form for all the shareholders of the Company. The Company's request for dematerialization of shares has been deferred by the National Securities Depository Limited.

COMMENTS ON AUDITORS' REPORT

Appropriate disclosures have been made in Schedule 17 under the heading 'Notes to the Accounts' vide Note Nos. 2 (v), 2(vi), (ix) (a) to (e), (x),(xi), (xii) (a), (xv) (a) to (d), 3(iv) (a) to (c), (v), (vi) (a) and (b), 4, 5, 6, 7(ii), 8(ii), 8(iv), 9 and 16 as regards the qualifications made by the statutory auditors in their report dated August 22, 2009 on the Balance Sheet and Profit & Loss of the company for the year under review. The company had been declared a sick industrial company during the year 2006-07 under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985. Keeping in view the same, certain reliefs and concessions are anticipated from the concerned lenders/Govt. departments. Thus, certain provisions relating to interest on term loans, working capital loans, promoters' loans, interest free loans from Punjab Govt. and disputed demands of Central Excise, Customs, Sales Tax, Employees' State Insurance Corporation, Provident Fund Organization etc. have not been made in the Profit & Loss Account. However, the same have been duly clarified/quantified in the Balance Sheet under Schedule 17 of 'Notes to the Accounts'. Further, the continued cash crunch has restricted the company to pay the undisputed demands quantified under para 9 of the Annexure to the Auditors' Report. However, the rehabilitation/revival scheme envisaging payment of such arrear of dues, subject, however, to certain reliefs and concessions, is under consideration of the secured lenders under the aegis of BIFR/AAIFR and the company expects their requisite approval shortly.

STATUTORY AUDITORS

M/s. S.C. Dewan & Company, Chartered Accountants, S.C.O. 90, Ist Floor, Swastik Vihar, Panchkula - 134109 retire and are eligible for re-appointment as Statutory Auditors of the Company.

ACKNOWLEDGMENT

Your Directors wish to place on record their deep gratitude to the consumers of the Company's products for their patronage, the all India Financial Institutions for their consistent guidance and co-operation and to the Bankers, the Suppliers and the Trading Community for their support and assistance as rendered to the Company from time to time.

PERSONNEL

The relations between employees and the management have been exemplary. The Directors record their warm appreciation for the dedication, hard work and efficiency of all the employees. There are no employees who are in receipt of salary exceeding the limits prescribed under Section 217(2A) of the Companies Act, 1956.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information as required to be disclosed under 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 given in the Annexure to this report.

On behalf of the Board

Sd/-

(PADAM KUMAR JAIN)

Chairman & Managing Director

New Delhi

August 22, 2009

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Mar 31, 2008

The Directors are pleased to present their 28th Annual Report with the audited Statement of Accounts for the year ended 31st March, 2008 and the Auditors' Report thereon.

OPERATIONS

During the past couple of years, the Indian Textile Industry is passing through tough competition both in domestic as well as the international markets. Resultantly, the huge losses suffered by the industry has forced a large number of spinning units to virtually wind up their operations. However, the dismantling of quota regime has triggered opening up of newer opportunities for the Indian yarn manufacturing business. The industry is now on the look out to acquire sick units even in the U.S., Europe, Middle East, Africa and in the other neighbouring countries. According to current trends, a strong performance of the developing Asian suppliers of clothing to the key markets is therefore, expected to further continue. Thus, the company foresees a bright business opportunity in the years ahead. Meanwhile, pending the settlement, and with a view to maintain minimum level of operations in order to avoid deeper crisis, the Company continues to engage a part of its installed capacity on Job- Work arrangement during the period under review.

FINANCIAL RESULTS

Current Year Previous Year Rs. Rs.

Profit/(Loss) before Financial

Expenses and Depreciation 1,01,85,651 32,44,361

Less : Financial Expenses 11,752 43,675

Profit/(Loss) after Financial Expenses 1,01,73,899 32,00,686

Less : Depreciation 1,05,94,561 1,51,95,475

Profit/(Loss) after Depreciation (4,20,662) (1,19,94,789)

DIVIDEND

As there are no surplus for appropriation, your Directors are unable to recommend dividend for the year under review.

WORKING CAPITAL

Your Company continues to avail Working Capital Limits of Rs.775.00 lakhs for its Unit-I at Vill. Rail Majra (Pb.) and Rs.925.00 lakhs for its Unit-II at Surajpur (U.P.) from State Bank of Patiala in consortium with Punjab National Bank. Meanwhile, the State Bank of Patiala had unilaterally and arbitrarily proceeded to declare the name of the company and its directors as the 'willful defaulters'. Upon company's various representations to de-categorize the name of the company from the list of willful defaulters, a firm of Chartered Accountants appointed by the bankers carried out a detailed examination of the books of account and other records and reportedly concluded that in the light of the facts and circumstances, the company can not be categorized as willful defaulter. Despite various subsequent representations, the bankers have yet to take effective steps to de-categorize the name of the company from the said list.

DIRECTORS

Your Directors place on record their sincere appreciation of the services rendered by Shri Sita Ram Agarwal who ceased to be Director of the Company on 5th December, 2007. Shri Shiv Shankar Morya joined the Board on 5th December, 2007 and retires at this Annual General Meeting. The Company has received a notice in writing from a member signifying his intention to propose his appointment as a Director. Shri Vir Vikram Singh, Director of the Company retires by rotation and being eligible, offers himself for re-appointment.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

i) in the preparation of the annual accounts the applicable accounting standards have been followed along with proper explanations relating to material departures;

ii) appropriate accounting policies have been selected and have applied them consistently and made judgments 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 2007-2008 and the profit or loss of the Company for that period;

iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv) the annual accounts have been prepared on a going concern basis.

DEMATERIALISATION OF SHARES

The equity shares of your Company have been included in the list in which trading is compulsory in dematerialized form for all the shareholders of the Company. The Company's request for dematerialization of shares has been deferred by the National Securities Depository Limited.

COMMENTS ON AUDITORS' REPORT

Appropriate disclosures have been made in Schedule 17 under the heading 'Notes to the Accounts' vide Note Nos. 2 (v), 2(vi), (ix) (a) to (e), (x),(xi), (xii) (a), (xv) (a) to (d), 3(iv) (a) to (c), (v), (vi) (a) and (b), 4, 5, 6, 7(ii), 8(ii), 8(iv), 10 and 18 as regards the qualifications made by the statutory auditors in their report dated August 27, 2008 on the Balance Sheet and Profit & Loss of the company for the year under review. The company had been declared a sick industrial company during the year 2006-07 under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985. Keeping in view the same, certain reliefs and concessions are anticipated from the concerned lenders/Govt. departments. Thus, certain provisions relating to interest on term loans, working capital loans, promoters' loans, interest free loans from Punjab Govt. and disputed demands of Central Excise, Customs, Sales Tax, Employees' State Insurance Corporation, Provident Fund Organization etc. have not been made in the Profit & Loss Account. However, the same have been duly clarified/quantified in the Balance Sheet under Schedule 17 of 'Notes to the Accounts'. Further, the continued cash crunch has restricted the company to pay the undisputed demands quantified under para 9 of the Annexure to the Auditors' Report. However, the rehabilitation/revival scheme envisaging payment of such arrear of dues, subject, however, to certain reliefs and concessions, is under consideration of the secured lenders under the aegis of BIFR/AAIFR and the company expects their requisite approval shortly.

STATUTORY AUDITORS

M/s. S.C. Dewan & Company, Chartered Accountants, S.C.O. 90, Ist Floor, Swastik Vihar, Panchkula - 134109 retire and are eligible for re-appointment as Statutory Auditors of the Company.

ACKNOWLEDGMENT

Your Directors wish to place on record their deep gratitude to the consumers of the Company's products for their patronage, the all India Financial Institutions for their consistent guidance and co-operation and to the Bankers, the Suppliers and the Trading Community for their support and assistance as rendered to the Company from time to time.

PERSONNEL

The relations between employees and the management have been exemplary. The Directors record their warm appreciation for the dedication, hard work and efficiency of all the employees. There are no employees who are in receipt of salary exceeding the limits prescribed under Section 217(2A) of the Companies Act, 1956.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information as required to be disclosed under 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 given in the Annexure to this report.

On behalf of the Board

(PADAM KUMAR JAIN)

Chairman & Managing Director

New Delhi

August 27, 2008