Notes to Accounts of Best & Crompton Engineering Ltd.

Mar 31, 2013

1. Contingent Liabilities

Particulars 31.03.2013 31.03.2012 Rs. ''000 Rs. ''000

a) Claims against the company not acknowledged as debts 23,205 31,443

b) Guarantees given to Banks on behalf of subsidiaries & others 3,268,050 4,183,550

c) Counter guarantees to bankers against guarantees issued by them to customers (secured by a charge on current assets) 82,760 68,240

d) Disputed Tax demands under appeal

(i) Income Tax/penalty 338,923 328,000

(ii) Sales Tax 21,733 17,251

(iii) Excise Duty 86 86

Total 3,734,757 4,628,570

2. Arrears of cumulative preference dividend and tax thereon - Rs.71,881 thousands (as of 31.03.2012-Rs. 65,542 thousands).

3. The Company has not been informed by any supplier of their being a Micro and Small Enterprise and as defined under the Micro Small and Medium Enterprises Development Act 2006 and hence no disclosure has been made in respect of dues to such units if any outstanding for more than 45 days.

4. The Company has an outstanding export obligation of Rs.1,563 Lakhs on account of imported machinery to be fulfilled within 8 years after commencement of production of machinery division.

5. Note on Investments

The Company has invested in certain strategic verticals through subsidiaries which are under direct control of the Company. The present status of these subsidiaries is as under:- a) B&C Machinery Limited - Rs. 71.77 Crores

The substantial investment in this subsidiary has been made under the direct supervision of the promoter, who envisages bright opportunities for the subsidiary. As the unit is under construction and nearing completion, there is no impairment in the value of investment.

b) Best & Crompton Apparels Limited - Rs.18 Crores

The modern state of art apparel manufacturing unit was commissioned with the expectation that the products mainly sports apparel would become the preferred choice of the sporting community.

The promoter''s holding the entire equity through the company and overseas company owned by the promoter.

Unfortunately the products could not withstand competition from international brand apparels. Due to inadequate demand volume, lack of working capital and relatively weak marketing setup the unit could not even recover the prime cost leading to the closure of the unit precipitating agitation by workers and action by the lending institution. The promoter is examining the probability of reviving the unit; alternatively relocating the factory overseas after making arrangement for one time settlement with the lending institution. According to the management impairment in the carrying value of plant & machinery because of non-usage would not be significant. The aggregate market value of land and factory building and fair value of plant and machinery is more than the carrying values shown in the Balance sheet; however an updated technical evaluation of the unit and the guideline value of the land would be undertaken to quantify diminution in the value, if any, during the following year.

The periodical cash funding for the unit over the years is being critically reviewed in the context of their end use and necessary adjustment would be made in the accounts of the following year.

c) Crombest Precast Buildings Limited - Rs.29.08 Crores.

The modern prefabricating building factory unit has been functioning but slow down its activities due to unecnomical operation resulting in the eventual closure. The starting of the work in the opinion of the management could be reviewed with the present boost in the reality business. The promoter is making the critical assessment of the economic overview of the industrial segment: however the present value of extensive land and building together with the Plant & Machinery would not impair the carrying value of the investment.

The lending Institution of two subsidiaries have, due to non repayment of dues, referred the matter to Debts recovery Tribunal, Chennai and also taken action under ''SARFAESI'' Act to ensure recovery from these Companies. There is at present, no invocation of guarantees against the Company. However, the subsidiaries are all negotiating with the lending banks for one time settlement / installment payments and progress has been made in this direction.

The promoter group has been infusing significant funds whenever the company has been in dire need and is committed to keep the operating unit going and to honour the commitments to the lending institution and negotiations are in progress for one time settlement with them. The Promoter group is endeavouring to restart the closed units.

In view of what has been stated in the preceding paragraphs the company''s accounts are presented on principles applicable to a "Going Concern".

6. Best & Crompton Green Tech Limited an Associate Company has been fully disinvested with effect from 21st January 2013.

7. Loans and Advances include Rs. 21.38 Cr. given in earlier years towards project advances of Rs. 21.38 Cr. This advance would be adjusted upon commencement of the project. In the opinion of the Management, these advances though unsecured are good and no provision is necessary.

8. The Company owes as on the date of the Balance sheet Rs. 57.45 Cr. to IL&FS which due to nonpayment on time has resulted on the Institution moving the Court for creditors winding up since the close of the financial year, for which a stay has been obtained. The promoter group had submitted to the court a schedule of repayment in this regard.

9. Loans and advances include an amount of Rs. 2,787 lakhs received from PT Multikarsa Investama, Jakarta towards advance for exports (USD 5,771,646 as of March 2013) against contracts for development and manufacture of products for exports from our factories. The exports of these products will be beyond one year from the date of receipt of advance payment and the Company is in compliance to Notification No. FEMA,23/RB-2000, dated 3rd May 2000. As these items are long lead delivery items which are subject to various approvals and clearances from the exporter before final execution of the contract.

10. Trade recoverable and loans and advances exceeding six months are classified as doubtful have all been fully provided for even though continuing efforts are being made for their recoveries.

11. The Company''s financial statements have not been authenticated by the Group Chief Executive Officer of the Company, as he is presently out of country. The Company has not appointed a Chief Financial Officer; the relevant duties are being discharged by the Whole Time Director.

12. As in the Balance sheet, the figures in the Profit and Loss Account have been expressed in terms of Rupees in thousands.

13. Previous year figures have been regrouped, rearranged or reclassified to conform to schedule VI (as annexed) of the Companies Act 1956.

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Mar 31, 2010

1. Contingent Liabilities

(Rs in thousands)

Particulars 31.03.2010 31.03.2009

a) Claims against the company not acknowledged as debts 74,257 21,418

b) Guarantees given to Banks on on behalf of subsidiaries 3,860,550 2,204,170

c) Counter guarantees to bankers against guarantees issued by them to customers (secured by charge on Current Assets) 71,042 54,462

d) Tax demands under appeal

(i) Income/Penalty tax 127,393 --

(ii) Wealth tax 29,658 --

(iii) Sales tax 15,847 16,488

(iv) Excise duty 86 86

Total 4,178,833 2,296,624

With regard to tax demands under appeal no provision is presently considered necessary based on Counsels opinion.and the Management is of the view that there would not be any significant cash flow on diposal of the appeals.

2. Events occurring after the Balance Sheet date :

Pursuant to the decision of the Board of Directors of the Company to exit from the business engaged by the wholly owned subsidiary, Best & Crompton Engineering Projects Limited Companys entire equity holdings in the said subsidiary was sold with effect from 1.4.2010 and to have the charge of Companys major fixed assets released by bank and substitution of significant guarantees given by the Company both of which when accomplished within the given time frame would facilitate Companys further borrowings and augment the other more profitable activities of the Company. Following the above disinvestment Best & Crompton Engineering Projects Limited has ceased to be the subsidiary of the Company.

The above sale completed subsequent to the balance sheet i.e. on 17th July 2010 resulted in loss on sale of Companys Investments in the aforesaid subsidiary amounting to Rs. 24.29 Crores which has been accounted in the financial accounts of the Company in July 2010.

3. The Company has not been informed by any supplier of their being a Micro and Small Enterprise and as defined under the Micro Small and Medium Enterprises Development Act 2006 and hence no disclosure has been made in respect of dues to such units if any outstanding for more than 45 days.

4. Of the total loans and advances outstanding as at 31st March 2010 a sum of Rs. 280 Lacs has been outstanding since 2008 and according to Management the amount is good and recoverable an accordingly no provision need be considered in the accounts.

5. Related party disclosure

I. Related parties where control exists:

a) Holding Company

B & C Holdings Limited

b) Subsidiaries

Three C Systems Limited*

Beacon Carbons & Electricals (India) Ltd.*

Beacon Tileman Limited*

Beacon Pumps (India) Limited*

Best & Crompton Apparels Limited

Best & Crompton Green Tech Limited

Bestai Precast Buildings Limited

B&C Machinery Limited

B&C Tech Services Limited

B&C Foundry Ltd

Best & Crompton Engineering Projects Limited # Under liquidation

II. Other Related parties with whom transactions have taken place during the year:

a) Enterprise in which Key Management Personnel have significant influence

b) Key Management Personnel

K. Prakash - Whole Time Director

6. The Company has an export obligation of Rs.1,563 Lakhs on account of imported machinery to be fulfilled within 8 years after commencement of production.

7. Retirement Benefits:-

(a) Contribution to providend fund, family pension fund and superannuation fund are recognised in profit and loss account on accrual basis.

(b) Gratuity and Leave encashment-As per Actuarial Valuation as on 31st March 2010. As per Accounting Standard No.15 "Employee Benefits".

8. As in the Balance sheet, the figures in the Profit and Loss Account have been expressed in terms of Rupees in thousands.

9. Previous year figures have been regrouped, rearranged or reclassified where necessary.