Directors Report of Flawless Diamond (india) Ltd.

Mar 31, 2013

TO THE MEMBERS OF FLAWLESS DIAMOND (INDIA) LIMITED,

The Directors hereby present their 24th Annual Report on the business and operations of the Company and the Financial Accounts for the year ended 31st March, 2013.

Particulars (Rs. in Thousand)

Year ended Year ended 31.03.1013 31.03.2012

Total Income 87167.91 755908.32

Profit / (Loss) Before Depreciation & Taxes (6407.97) (1930.03)

Less: Depreciation 2869.52 3558.12

Profit/(Loss) Before Tax (9277.50) (5488.15)

Less: Provision for Current Tax 0.00 0.00

Less: Provision for Deferred Taxation (2865.18) (8970.87)

Less: Earlier Tax 865.34 0.00

Profit / (Loss) After Tax for the year (7277.66) (3482,72)

Add: Balance in Reserves & Surplus 621401.38 617918.66

Less: Appropriations 0.00 0.00

Closing Balance 614123.721 621401.38

BUSINESS OPERATION

During the year the company has suffered a loss, ofRs. 92.77 lakhs as against the loss ofRs. 54.88 lakhs for the previous year. The loss is due to global slowdown and lower economic growth resulting to non realization of exports proceeds from the overseas parties. The company is very hopefull that it will recover from the slowdown and achieve its past glory in near future.

DIVIDEND

In view of the loss during the year the Board of Directors has decided to not to declare the dividend.

RESEARCH AND DEVELOPMENT

Research and Development is a vital area of the Company''s focus and has been a key factor in maintaining the company''s growth. Leveraging on its strong research and development department, your Company has been constantly developing new and latest designs of jewellery and lifestyle products but due to overall slowdown and sudden break in the business activity of the company, the research work could not be carried out during the year.

CORPORATE GOVERNANCE ,

Your Company is committed to maintain the highest standards of Corporate Governance; Your Directors adhere to me stipulations set out in me Listing Agreement with the Stock Exchange and have implemented all the prescribed requirements. A separate; report on Corporate Governance is enclosed as a part of this Annual Report of the Company. A certificate from Auditors of the Company regarding compliance on Corporate Governance as stipulated under clause 49 of the Listing Agreement is annexed to the report on Corporate Governance^

DIRECTORS''RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors'' Responsibility

Statement, It is hereby confirmed that: (i) In the preparation of the annual accounts, for the Financial Year ended 31st March, 2013, the applicable accounting

standards had been followed;

(ii) The Directors have selected such accounting policies and applied them consistently and made judgements 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 and of the Loss of the Company for the year ended 31st March, 2013; ''

(iii) The Directors had taken proper and sufSfcient care for the maJSteaaace of adequate accounting records in accordance with the provisions of the Companies Act, 1956Rs. for safeguarding the assets of the Company and for preventing and detecting fraud and other

(iv) The Directors have prepared the annual accounts of the Company for die Financial Year ended 31s* March, 2013 on ''going concern'' basis. However, the company''s secured creditor ''ICICI Bank'' has filed winding up petition u/s 439 of the Companies Act, 1956 in die HonourableJJoinbay High:Court, which may affect die ''Going Concern'' Status. The Punjab and Sind Bank has also initiated winding up petition u/s 43^ of ti*e Companies Act, 1956 in the Honourable Bombay High Court.

DIRECTORS

Pursuant to Article 164 of the Article of Association of the Company Shri Rajiv Kamdar and Shri Kamal U. Jain, Directors of the Company, retire by rotation at the forthcoming Annual General Meeting and being eligible, offer them selves for re-appointment.

DEPOSITS

Your Company has not invited or accepted any fixed deposits from the public during the year under review.

AUDITORS

M/s. Suresh Anchaliya &Co., Chartered Accountants, the retiring Auditors of the Company who holds Office in accordance witii the provisions of" the Companies Act, 1956 up to the conclusion of the forthcoming Annual General Meeting and being eligible offer themselves for re-appointment.

The Company has received letter from the Auditors to the effect that their re-appointment, if made, would be within the prescribed limit under Section 224 (IB) of the Companies Act, 1956 and that they are not disqualified for such re-appointment within the meaning of Section 226 of the said Act.

AUDITORS REPORT

The adverse comment or qualification in the Auditors Report are self explanatory and are mainly related to statutory dues and default in the repayment of bank loan

MATERIAL CHANGES

a. The Company''s account with the banks has been declared NPA (Non Performing Assets) by the banks for non realization of export proceeds and non payment of loans and interest. The banks have moved the matter before Debt Recovery Tribunal and initiated recovery proceeding under SARFAESI Act, 2002 for recovery of their dues. The Debt Recovery Tribunal in its order instructed the company to pay the ICICI Bank loan amount with interest at the rate 18% PA. from 30th May, 2012 onwards.. The Directors of the company are trying tiieir best to realize the export proceeds at the earliest and pay off die bank dues.

b. There is no manufacturing activities carried out during the year under review.

c. The secured creditor ''ICICI Bank'' has moved winding up petition u/s 439 of the Companies Act, 1956 before me Honourable Bombay High Court for dissolution of the company and the matter is pending before the Honourable Bombay High Court. However me company has entered into the consent term with the "ICICI Bank" for repayment of loan with interest on or before 31.03.2014.

LISTING

The shares of the company is listed at The Bombay Stock Exchange Ltd (BSE), Mumbai. The company has paid the listing fees to stock exchange.

MANAGEMENT''S DISCUSSION AND ANALYSIS REPORT

A detailed review of the progress of the project and the future outlook of the Company and its business as stipulated under clause 49 of the Listing Agreement with the Stock Exchange is presented in a separate section forming part of the Annual Report.

SHORT TERM LOAN FROM BODIES CORPORATES

The Company has accepted short term loan from the bodies corporatato meet the requirement of repayment of loan to the bankers.

PARTICULARS OF EMPLOYEES

The overall industrial and employee relations remained healthyi There are no Such employees pursuant to Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended by the Companies Amendment Act, 1988.Hence,noparticularsarerequiredtobeapp«ridedtothisrepOftintfiisregard.

DEMATERIALISATION OF SHARES

77.97% Shares of total equity capital is held in dematerialised form with NSDL and 16.77% Shares of total equity capital is held in dematerialised form with CDSL, as on 31.03.2013.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS & OUTGO

The information pursuant to Section 217(i)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, is given as under.

A. Conservation of Energy: As the Company is not covered in the list of industries required to furnish information in form ''A'' in relation to conservation of energy, the same is not given.

B. Technology Absorption, Research and Development (R&D): The Company''s manufacturing unit is not in operation during theyear.

C. Foreign Exchange Earning & Outgo: The total exports for the year 2012-13 amounts to Rs. NIL

Total Foreign Exchange used & earned :Rs. (In Lakhs)

Total Foreign Exchange used : Nil

Total Foreign Exchange earned 945.98

ACKNOWLEDGEMENT

The Directors wish to place on record their appreciation for the consistent assistance and co-operation received from the Central and State Government Authorities, Company''s Bankers, Directors, Vendors, Members and dedicated Employees for the confidence in the Company and its management through the periods of prosperity and adversity.

Registered Office: On behalf of the Board of Directors

136, Panchratna,

Opera House,

Mumbai - 400 004.

Place : Mumbai Kamal U.Jain

Date :30th May, 2013 Chairman

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Mar 31, 2012

TO THE MEMBERS OF FLAWLESS DIAMOND (INDIA) LIMITED.

The Directors hereby present their 23rd Annual Report on the business and operations of the Company and the Financial Accounts for the year ended 31st March, 2012.

Particulars (Rs. in Thousands)

Year ended Year ended 31.03.2012 31.03.2011

Total Income 755908.32 3356671.75

Profit/(Loss) Before Depreciation & Taxes (1930.03) (15269.82)

Less: Depreciation 3558.12 4388.87

Profit/(Loss) Before Tax (5488.15) (19658.69)

Less: Provision for Current Tax 0 0

Less: Provision for Deferred Taxation (8970.87) (328.77)

Less: Earlier Tax 0 205.01

Profit/(Loss) After Tax for the year 3482.72 (19534.93)

Add: Balance in Reserves & Surplus 617918.66 637453.59

Less: Appropriations 0 0

Closing Balance 621401.38 617918.66

BUSINESS OPERATION

During the year the company has suffered a loss of Rs. 54.88 lakh before tax against loss of Rs. 196.58 lakh for previous year. The loss is due to global slowdown and lower economic growth resulting to non realization of exports proceeds from the overseas parties. The company is very hopeful that it will recover from the slowdown and achieve its past glory in near future.

DIVIDEND

In view of Loss during the year, the Board of Directors has decided to not to declare the dividend.

RESEARCH AND DEVELOPMENT

Research and Development is a vital area of the Company's focus and has been a key factor in maintaining the company's growth. Leveraging on its strong research and development department, your Company is constantly developing new and latest designs of jewellery and lifestyle products. Your Company keeps abreast with the latest trends in the market and its users, which will be useful in coming years.

CONTRIBUTION OF EXPORT IN TOTAL REVENUE

The total contribution of exports in the Company is 69.84% of total revenue of the company. During the year, export turnover was Rs. 4033.97 Lakhs.

CORPORATE GOVERNANCE

Your Company is committed to maintain the highest standards of Corporate Governance. Your Directors adhere to the stipulations set out in the Listing Agreement with the Stock Exchange and have implemented all the prescribed requirements. A separate report on Corporate Governance is enclosed as a part of this Annual Report of the Company. A certificate from Auditors of the Company regarding compliance of Corporate Governance as stipulated under clause 49 of the Listing Agreement is annexed to the report on Corporate Governance.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, It is hereby confirmed that:

(i) In the preparation of the annual accounts, for the Financial Year ended 31st March, 2012, the applicable accounting standards had been followed;

(ii) The Directors have selected such accounting policies and applied them consistently and made judgements 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 and of the Loss of the Company for the year ended 31st March, 2012;

(iii) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) The Directors have prepared the annual accounts of the Company for the Financial Year ended 31st March, 2012 on 'going concern' basis. However the company's secured creditor 'ICICI Bank' has filed winding up petition u/s 439 of the Companies Act, 1956 in the Bombay High Court, which may affect the 'going concern' status.

DIRECTORS

Pursuant to Article 164 of the Article of Association of the Company Shri Deepak K. Parekh and Shri Ashok Chheda, Directors of the Company, retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. During the year Shri Gautam Banerjee Director of the Company resigned on 12.12.2011. The Board appreciates his association and contribution to the Company during his tenure as Director of the company.

DEPOSITS

Your Company has not invited or accepted any fixed deposits from the public during the year under review.

AUDITORS

M/s. Suresh Anchaliya & Co., Chartered Accountants, the retiring Auditors of the Company who holds Office in accordance with the provisions of the Companies Act, 1956 up to the conclusion of the forthcoming Annual General Meeting and being eligible offer themselves for re-appointment.

The Company has received letter from the Auditors to the effect that their re-appointment, if made, would be within the prescribed limit under Section 224 (IB) of the Companies Act, 1956 and that they are not disqualified for such re-appointment within the meaning of Section 226 of the said Act.

AUDITORS REPORT

There is no adverse comment or qualification in the Auditors Report.

MATERIAL CHANGES

a. The Company's account with the banks has been declared NPA (Non Performing Assets) by the banks for non realization of export proceeds and non-payment of loans and interest. The banks have moved the matter before Debt Recovery Tribunal and initiated recovery proceeding under SARFAESI Act, 2002 for recovery of their dues. The Directors of the company are trying their best to realize the export proceeds at the earliest and pay off the bank dues.

b. During the year the company has closed its operation at Dehradun Unit. There is no manufacturing activities carried out during the year under review.

c. The secured creditor 'ICICI Bank' has moved winding up petition u/s 439 of the Companies Act, 1956 before the Bombay High Court for dissolution of the company and the matter is pending before the Honorable High Court.

INSURANCE

The Company's assets and goods are fully insured.

MANAGEMENT'S DISCUSSION AND ANALYSIS REPORT

A detailed review of the progress of the project and the future outlook of the Company and its business as stipulated under clause 49 of the Listing Agreement with the Stock Exchange is presented in a separate section forming part of the Annual Report.

PARTICULARS OF EMPLOYEES

The overall industrial and employee relations remained healthy. There are no such employees pursuant to Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended by the Companies Amendment Act, 1988. Hence, no particulars are required to be appended to this report in this regard.

DEMATERIALISATION OF SHARES

77.75% Shares of total equity capital is held in dematerialised form with NSDL and 16.93% Shares of total equity capital is held in dematerialised form with CDSL as on 31.03.2012.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS & OUTGO

The information pursuant to Section 217(i)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, is given as under.

A Conservation of Energy: As the Company is not covered in the list of industries required to furnish information in form 'A' in relation to conservation of energy, the same is not given.

B. Technology Absorption, Research and Development (R&D): The Company's manufacturing unit is closed hence no information is required.

C. Foreign Exchange Earning & Outgo: The total exports for the year 2011-12 amounts to Rs. 4033.96 lakhs

Total Foreign Exchange used & earned : Rs. (In Lakhs)

Total Foreign Exchange used : 778.87

Total Foreign Exchange earned : 460.96

ACKNOWLEDGEMENT

The Directors wish to place on record their appreciation for the consistent assistance and co-operation received from the Central and State Government Authorities, Company's Bankers, Outgoing Director, Vendors, Members and dedicated Employees for the confidence in the Company and its management through the periods of prosperity and adversity.

On behalf of the Board of Directors

KAMAL U. JAIN Chairman

Registered Office:

136, Panchratna, Opera House, Mumbai - 4 00 004.

Place : Mumbai Date : 28/08/2012

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Mar 31, 2010

The Directors hereby present their 21st Annual Report on the business and operations of the Company and the Financial Accounts for the year ended 31st March, 2010. (Rs. in Thousands)

FINANCIAL RESULTS Year ended Year ended

31st March, 2010 31st March, 2009

Profit before Depreciation 188106.85 159925.09

Less: Depreciation 4738.69 5231.72

Profit before Tax 183368.16 154693.37

Less: Provision for Taxation

Current 34052.09 18582.25

Deferred Tax -367.75 288.24

Earlier Year 2704.34 2302.46

Fringe Benefit Tax 000.00 36388.68 268.29

Profit after Taxation 146979.48 133252.13

Add: Balance brought forward from the previous year 490474.11 357221.98

Amount available for appropriation 637453.59 490474.11

Appropriations

Dividend 0.00 0.00

Tax on Dividend 0.00 0.00

Balance carried to Balance Sheet 637453.59 490474.11



DIVIDEND

The Management has decided to retain the profits for the working capital requirements and to strengthen the reserves for expansion.

RESEARCH AND DEVELOPMENT

Research and Development is a vital area of the Companys focus and has been a key factor in maintaining the Companys growth. Leveraging on its strong research and development department, your Company is constantly developing new and latest designs of jewellery and lifestyle products. Your Company keeps abreast with the latest trends in the market and its users.

SUB-DIVISION OF EQUITY SHARES

During the year, the Company has carried out the sub-division of existing 1 (One) Equity Share of face value of Rs. 10/- (Rupees Ten) each, into 10 Equity Shares of face value of Re. l/-(Rupee One) each with effect from 04th December, 2009.

GROWTH IN EXPORT

The contribution of exports in the total revenue of the Company has shown buoyant trend. During the year, export turnover was Rs. 439.33 Crores and has shown 195.03% growth over the last year.

CORPORATE GOVERNANCE

Your Company is committed to maintain the highest standards of Corporate Governance. Your Directors adhere to the stipulations set out in the Listing Agreement with the Stock Exchange and have implemented all the prescribed requirements. A separate report on Corporate Governance is enclosed as a part of this Annual Report of the Company. A certificate from Auditors of the Company regarding compliance of Corporate Governance as stipulated under clause 49 of the Listing Agreement is annexed to the Report on Corporate Governance.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors Responsibility Statement, It is hereby confirmed that:

(i) In the preparation of the annual accounts, for the Financial Year ended 31st March, 2010, the applicable accounting standards had been followed;

(ii) The Directors have selected such accounting policies and applied them consistently and made judgements 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 and of the profit of the Company for the year ended 31st March, 2010;

(iii) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) The Directors have prepared the annual accounts of the Company for the Financial Year ended 31st March, 2010 on going concern basis.

DIRECTORS

Pursuant to Article 164 of the Article of Association of the Company, Shri Deepak K. Parekh, Shri Sujay N. Kantawala and Shri Gopalakrishna Pillai, Directors of the Company, retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment.

During the year, Shri Anil U. Jain Director of the Company resigned on 11.02.2010. The Board appreciated his association and contribution to the Company during his tenure as Director.

DEPOSITS

Your Company has not invited or accepted any Fixed Deposits from the public during the year under review.

AUDITORS

M/s. Suresh Anchaliya & Co., Chartered Accountants, the Auditors of the Company, who holds Office in accordance with the provisions of the Companies Act, 1956 up to the conclusion of the forthcoming Annual General Meeting and being eligible offer themselves for reappointment.

The Company has received letter from the Auditors to the effect that their re-appointment, if made, would be within the prescribed limit under Section 224 (IB) of the Companies Act, 1956 and that they are not disqualified for such re-appointment within the meaning of Section 226 of the said Act.

FLAWLESS DIAMOND DMCC

The Company has setup a wholly owned subsidiary in Dubai Multi Commodity Centre, Dubai, U.A.E by the name of "Flawless Diamond DMCC" and intend to tap the growing demand of diamonds / diamond jewellery in the Middle East through the Diamond hub of Gulf i.e. Dubai. The Company intends to start the operations of the wholly owned subsidiary by the middle of this financial year.

FLAWLESS JEWELLERY

The Company has incorporated a Partnership Firm named "Flawless Jewellery" for diamond cutting and polishing, with its holding of 99% share in the capital of the firm. Flawless Jewellery has setup its plant at Dehradun. The funds required for the firm will be contributed from internal accruals. The firm has begun its operations from March, 2010.

AUDITORS REPORT

There is no adverse comment or qualification in the Auditors Report.

INSURANCE

The Companys assets and goods are fully insured.

MANAGEMENTS DISCUSSION AND ANALYSIS REPORT

A detailed review of the progress of the project and the future outlook of the Company and its business as stipulated under clause 49 of the Listing Agreement with the Stock Exchange is presented in a separate section forming part of the Annual Report.

PARTICULARS OF EMPLOYEES

The overall industrial and employee relations remained healthy. There are no such employees pursuant to Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended by the Companies Amendment Act, 1988. Hence, no particulars are required to be appended to this report in this regard.

DEMATERIALISATION OF SHARES

75.94% Shares of total equity capital is held in dematerialised form with NSDL and 18.36% Shares of total equity capital is held in dematerialised form with CDSL, as on 31.03.2010.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS & OUTGO

The information pursuant to Section 217(i)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, is given as under.

A. Conservation of Energy: As the Company is not covered in the list of industries required to furnish information in form A in relation to conservation of energy, the same is not given.

B. Technology Absorption, Research and Development (R&D): The Companys manufacturing unit is set up with the ultra modern plant and machineries, with the latest and energy savvy technologies. As and when the need arises the Company will upgrade the technology.

The Company continues to do the research and development in the field of designs and market surveys to read the mindset of the consumers. The Company has design bank of large number of latest and upgraded designs, keeping in view the future demands and the benefits of which will arise in the following years.

C. Foreign Exchange Earning & Outgo: The total exports for the year 2009-2010 amounts to Rs. 43933.27 lakhs. The Company is concentrating more on export of high value added Polished Diamonds and Designer Jewellery.

Total Foreign Exchange used & earned : Rs. (In Lakhs)

Total Foreign Exchange used : 16259.43

Total Foreign Exchange earned : 34548.08

ACKNOWLEDGEMENT

The Directors wish to place on record their appreciation for the consistent assistance and co-operation received from the Central and State Government Authorities, Companys Bankers, Vendors, Members and dedicated Employees for the confidence in the Company and its management through the periods of prosperity and adversity.

Registered Office: On behalf of the Board of Directors

120, Prasad Chambers,

Opera House,

Mumbai - 400 004.

Place : Mumbai KAMAL U. JAIN

Date: August, 2010 Chairman