Notes to Accounts of Modern Dairies Ltd.

Mar 31, 2025

(a) The Company has only one class of equity shares having a par value of '' 10 each. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(b) There is a movement in equity share capital during the current year and no movement during the previous year.

(d) The Company has not issued any share pursuant to a contract without payment being received in cash in the current year and preceding five years. The Company has not issued any bonus shares nor has there been any buy-back of shares in the current year and preceding five years.

29 Contingent Liabilities & Commitments Contingent Liabilities:	As at 31 March 2025 Amount in '' Lacs	As at 31 March 2024 Amount in '' Lacs
a) Claim against the Company not acknowledged as debts b) Other money for which Company is contingent liable	5,31,30.58	5,31,30.58

Commitments:

a) Estimated amounts of contractors remaining to be executed - -

On capital accounts and not provided for

b) Letter of credited against import of material - -

30 The One-Time Settlement (OTS) scheme with Punjab National Bank, which was under implementation in the previous year, has been successfully completed during the current year. All dues have been fully settled. No Due Certificate has already been received from the Bank.

31 Regarding Milk Cess liability to Govt. of Haryana under Haryana Murrah Buffalo and other Milch Animal Breed Act, 2001 Act. The company has filed a Special Leave Petition before the Hon''ble Supreme Court against the decision dated 28th May, 20lO of Punjab & Haryana High Court regarding levy of Milk Cess under the above act. The SLP was admitted in the Hon''ble Supreme Court and it had granted interim stay in September, 2012. The matter is pending before the Hon''ble Supreme Court. Ending September quarter i.e. 30.09.2023, Company received demand notice amounting to Rs. 512.76 Crore and further received the recovery notice for above amount from the office of Tehsildar, District Karnal. The company filed a writ petition in Hon''ble Punjab & Haryana High Court against this demand recovery notice and stay of recovery proceedings. The Hon''ble High court stayed the recovery proceedings and instructed the company to deposit Rs. 4 Crores by 31.03.2024. The company has complied and deposited the due amount as per the said order. The company had received the last demand notice as on 31st December, 2023 from the Govt. of Haryana for Rs. 544.31 Crores for Milk Cess along with compounded Interest. The company as an abundant caution has provided for the Milk Cess Provision in the accounts for the current year Rs. 59.06 Lacs, making total amount of Rs. 21.30 Crore as on 31st March 2025, out of which Rs. 5.91 Crore and Rs. 4.00 Crore, total amounting to Rs. 9.91 Crore has been already deposited as per Hon''ble Supreme Court''s & Hon''ble Punjab & Haryana High Court''s orders. The respective milk cess matters are pending before Hon''ble Supreme Court & Hon''ble Punjab & Haryana High Court.

35 OPERATING SEGMENT

The Company is engaged in the business of Milk Products Manufacturing which in context of Indian Accounting Standards - 108 “Operating Segment” issued by the Institute of Chartered Accountants of India is considered as the only Business Segment. Accordingly, the disclosure requirements of Ind AS 108 are not applicable.

36 In the opinion of the Board of Directors, Current Assets, Loan and Advances have value on realization in the ordinary course of business at least equal to the amounts at which they are stated and provision for all known liabilities have been made in accounts.

37 As per the Indian Accounting Standard - 24 issued by the Institute of Chartered Accountants of India “Related Party Disclosure “. In view of this the company has given the following disclosures for the year.

The company has identified the related parties having transactions during the year, as per detail given below.

38 The company has paid Managerial Remuneration amounting to Rs.66,08,470/- to directors without prior approval from the lenders. The Company''s lenders have been paid by OTS Debt Settlement. The entire settlement amount has been paid to the respective Lenders. They have issued their No Dues Certificates to the Company. Board has recommended to the share holder for the ratification of remuneration already paid.

39 Subsequent to the One-Time Settlement (OTS) with various banks, the company undertook a comprehensive review and reconciliation of its bank accounts. During this exercise, a discrepancy amounting to ?140 lakhs was identified, primarily arising from old cheques issued and received in prior years. Due to the age of these transactions and the lack of traceable supporting documentation, the balances were deemed irrecoverable. Accordingly, the company has decided to write off the said amount by debiting it to Miscellaneous Expenditure in the Profit and Loss Account.

41 Figures for the previous year have been regrouped/rearranged wherever considered necessary.

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Mar 31, 2024

(a) The Company has only one class of equity shares having a par value of '' 10 each. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(b) There is no movement in equity share capital during the current year and previous year.

Rate of Interest and Terms for repayment

Unsecured Loan obtained from Related Party carries nil to 9.85% rate of interest (March 31, 2023 - Nil) and shall be repaid after 3 years Unsecured Loan obtained from Others carries 9% rate of interest (March 31, 2023 - 9%) and shall be repaid after 3 years

Cash credit/export credit from banks, reclassified as other financial liabilities, are secured by way of hypothecation of current assets of the company comprising of raw material, stock in process, finished goods, stores and spares, goods-in-transit, receivables and any other security acceptable on pari-passu basis. It is also secured by equitable mortgage of fixed assets including land and building of the Company on pari-passu basis with other banks and is also guaranteed by the promoter of the Company. The Company’s various credit facilities declared as NPA for which one time settlement is under implementation and as such the amounts of such credit facilities have been reclassified into current liabilities.

30 The Company has settled all the dues of the lenders namely PNB by the way of OTS. The OTS scheme is under implementation and interest due there on has been accounted for. The scheme shall be accounted for at the time of closure of OTS.

Since, the account with various banks have turned NPA in the previous years, the company has not provided interest on the credit facilities subsequent to the accounts having been declared NPA. In case the OTS/ restructuring scheme fails, the Company will have to provide for Interest from the date of accounts becoming non performing asset. Such interest amounts for the year ended 31^st March, 24, Rs. 26.11 crores. This will effect the stated current liabilities & profits for the current year 31^st March, 24, to that extent.

31 Regarding Milk Cess liability to Govt. of Haryana under Haryana Murrah Buffalo and other Milch Animal Breed Act, 2001. The company has filed a Special Leave Petition before the Hon’ble Supreme Court against the decision dated 28^th May, 2010 of Punjab & Haryana High Court regarding levy of Milk Cess under the above act. The SLP was admitted in the Hon’ble Supreme Court and it had granted interim stay in September, 2012. The matter is pending before the Hon’ble Supreme Court. The Govt. of Haryana demand notice is for Rs. 544.31 Crores for Milk Cess along with compounded Interest as on 31^st December, 2023. The company as an abundant caution has provided for the Milk Cess in the accounts as on 31^st March 24, total Milk Cess provision amount is Rs. 20.71 Crore (including Rs. 59.06 Lacs for FY 23-24), out of which Rs. 9.91 Crore has been already deposited (Rs 5.91 Crore was deposited as per Hon’ble Supreme Court’s order and Rs. 4.00 Crore was deposited as per Hon’ble Punjab & Haryana High Court order on 20.12.23).

32 Due to uncertainty mentioned in note no. 30 & 31 above, deferred tax asset has not been recognized due to absence of virtual certainty supported by convincing evidence to the effect that sufficient future taxable income would be available against which deferred tax assets can be realized.

36 OPERATING SEGMENT

The Company is engaged in the business of Milk Products Manufacturing which in context of Indian Accounting Standards - 108 “Operating Segment” issued by the Institute of Chartered Accountants of India is considered as the only Business Segment. Accordingly, the disclosure requirements of Ind AS 108 are not applicable.

37 In the opinion of the Board of Directors, Current Assets, Loan and Advances have value on realization in the ordinary course of business at least equal to the amounts at which they are stated and provision for all known liabilities have been made in accounts.

38 As per the Indian Accounting Standard - 24 issued by the Institute of Chartered Accountants of India “Related Party Disclosure “. In view of this the company has given the following disclosures for the year.

The company has identified the related parties having transactions during the year, as per detail given below.

A) Related Party and their relationship Key management personnel (KMP)

Mr. Krishan Kumar Goyal (Chairman and Managing Director - CMD)

Mr. A.K. Aggarwal (Executive Director)

Mr. Mukesh Sehgal (Chief Financial Officer)

Ms. Shruti Joshi (Company Secretary)

Entities in which directors of the Company are able to exercise control or have significant influence

Mala Builders Private Limited

39 Management’s disclosure in respect to inadmissible Managerial Remuneration

The company has paid Managerial Remuneration amounting to Rs.84,35,595/-, to directors without prior approval from the lenders. The directors undertake that in case the approval is not received, the remuneration so as received by the Directors shall be refunded. The financial Results are affected to that extent.

41 Figures for the previous year have been regrouped/rearranged wherever considered necessary.

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Mar 31, 2023

2.13) Provisions for Contingent liabilities and Contingent Assets

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past event and it is probable that there will be outflow of resources. Contingent liabilities are disclosed by way notes.

2.14) Earning Per Share

Basic earnings per share is computed by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by taking into the account the aggregate of the weighted average number of equity shares outstanding during the period and weighted average number of equity shares which would be issued on conversion of all the dilutive potential equity shares into equity shares

2.15) Cash Flow Statement

Cash and cash equivalents for the purpose of Statement of Cash Flows include bank balances, cheques and drafts on hand, demand deposits with banks where the original maturity is three months or less and other short term highly liquid investments that are readily convertible into cash. Bank overdrafts are included as a component of cash and cash equivalents for the purpose of Statement of Cash flows. The cash flow statement has been in accordance with the Ind AS-7 on “Cash Flow Statements” issued by the Companies (Accounting Standard) Rules, 2013.

2.16) Accounting policies not specifically referred to above are consistent with Indian Accounting Standards.

39 In the opinion of the Board of Directors, Current Assets, Loan and Advances have value on realization in the ordinary course of business at least equal to the amounts at which they are stated and provision for all known liabilities have been made in accounts.

40 The Company’s various credit facilities have been declared as NPA for which One-Time Settlement / Restructuring scheme is under implementation and as such the amounts of such credit facilities have been reclassified into current liabilities. Since all the credit facilities have been recalled by the lenders, all these consolidated credit facilities have been considered as recalled loans for the purpose of identifying defaults.

41 As per the Indian Accounting Standard - 24 issued by the Institute of Chartered Accountants of India “Related Party Disclosure “. In view of this the company has given the following disclosures for the year.

The company has identified the related parties having transactions during the year, as per detail given below.

A) Related Party and their relationship Key management personnel (KMP)

Mr. Krishan Kumar Goyal (Chairman and Managing Director - CMD)

Mr. A.K. Aggarwal (Executive Director)

Mr. Mukesh Sehgal (Chief Financial Officer)

Ms. Shruti Joshi (Company Secretary)

Entities in which directors of the Company are able to exercise control or have significant influence

Mala Builders Private Limited Krishan Kumar Goyal (HUF)

Amarjit Goyal (HUF)

Relatives of KMP

Mrs. Alka Goyal, Wife of CMD.

Mr. Aditya Goyal, Son of CMD.

Mrs. Aesha Goyal, Son’s Wife of CMD Mrs. Sonam Jhunjhunwala, Daughter of CMD

5 Figures for the previous year have been regrouped/rearranged wherever considered necessary.

For APT & CO LLP For Modern Dairies Limited

Chartered Accountants

CA Amrit Pal Singh Krishan Kumar Goyal A K Aggarwal

Partner (Chairman & Managing Director) (Director)

(DIN:00482035) (DIN:00486430)

Place: Chandigarh Mukesh Sehgal Shruti Joshi

Date: 12^th May, 2023 (Chief Financial Officer) (Company Secretary)

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Mar 31, 2015

NOTE: 1.

The Company has incurred a net loss of M 22,25.46 lacs for the year ended 31st March, 2015 and as of that date, the Company's total liabilities exceeded its total assets by M 33,68.65 lacs. In the opinion of the management, the unjust levy of milk cess and other related operating factors has eroded the net worth of the Company. The uncertainty of the outcome of litigation in connection with milk cess and other related operating factors has cast doubts about the Company's ability to continue as going concern. In the opinion of the management, as the litigation currently stands sub-judice with the Hon'ble Supreme Court of India, the management is hopeful that such milk cess imposed by the Government of Haryana shall be waived off along with interest and other dues there on. The Company is in the process of formulating its revised business plans and negotiating with stakeholder so as to ensure continuity of operations of the Company and is hopeful of turning around and expects that the net worth of the Company shall become positive in near future.

NOTE: 2.

SEGMENT INFORMATION Primary segment

The Company is primarily engaged in the business of manufacturing/processing of milk and milk products like Casein, Lactose, Skimmed milk powder, Cheese, Butter, Pure Ghee, Premix etc., management considers the risk and rewards associated with these products to be similar in nature. Accordingly, the entire operations of the company are governed by the same set of risk and rewards and thus, it operates in a single primary segment.

Secondary segment

The Company's business is organized into two key geographic segments. Revenues are attributable to individual geographic segments based upon the location of customers.

Other information

The accounting policies consistently used in the preparation of financials statements are also applied to revenues and expenditure of individual segments.

Segment information disclosures as required under Accounting Standard-17 " Segment Reporting" issued by Companies (Accounting Standard) Rules, 2006 as prescribed by Institute of Chartered Accountant of India.

NOTE: 3.

LEASES

The Company has leased facilities under cancellable operating leases arrangements with a lease term ranging from one to three years, which are subject to renewal at mutual consent thereafter. The cancellable arrangements can be terminated by either party after giving due notice. The lease rent expenses recognized during the year amounts to M 22.16 lacs (Previous year M 16.41 lacs).

NOTE: 4.

The Company through its internal control processes identified an instance of one of the employees colluding with a vendor for supply of raw milk and found him issuing incorrect lab test results, thereby rating the milk to be of superior quality as opposed to its actual quality. The management has fled a first information report against the said employee and the vendor involved in this matter, stating an estimated loss incurred of M 0.79 lacs, however, as the case is sub-judice and under investigation, management is in the process of quantifying its impact on the financial statements and believes that such amount is not expected to be material to the financial statements. Pending resolution of the matter, the management has terminated the services of such employee, discontinued business with such vendor and has initiated necessary steps, including pursuing the legal cases against the employee and the vendor for ensuring appropriate recoveries.

NOTE: 5.

Pursuant to the reference fled by the Company with Board for Industrial and Financial Reconstruction (BIFR) under section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 the BIFR vide its order dated 8th February, 2012 declared the Company as sick and appointed Punjab National Bank being the Lead Bank as Operating Agency (OA) to formulate rehabilitation plan for the Company. As per the meeting held on 15th April, 2013 Company has submitted Debt Restructuring Scheme (DRS) on 25th February, 2013. During the year, the matter came up for hearing on 28th May, 2014, and the Hon'ble BIFR Board observed that in the light of the Milk Cess matter being pending before the Supreme Court, the DRS of the Company could not be formulated, the Hon'ble Bench directed the Company and the Haryana Livestock Development Board to keep the BIFR Board updated. Thereafter the matter is yet to come up for hearing.

NOTE: 6.

In the opinion of the board of directors, current assets, loans and advances have a value on realization in the ordinary course of business at least equal to the amounts at which they are stated and provision for all knows liabilities have been made in accounts.

NOTE: 7.

Previous year figures have been regrouped /recasted, wherever considered necessary to make them comparable with those of the current year.

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Mar 31, 2014

NOTE : I As at As at March 31,2014 March 31, 2013 CONTINGENT LIABILITIES AND PROVISIONS Amount in Lac Amount in Lac

a) Contingent liabilities:

Claims against the Company not 3,73.82 3,45.14 acknowledged as debts

i) Excise duty 2,61.25 2,61.25

ii) Service tax - 1.39

iii) Custom duty 10.60 -

iv) Entry tax 95.51 76.04

v) Income tax 6.46 6.46

Note:

i) Excise duty: During 2005-06, the Company had availed CENVAT credit of Rs.77.21 lacs on certain steel and other similar items (i.e. ''supporting goods'') as inputs used in fabrication of storage tanks other structures. As per the Excise Authorities, this credit of Rs.77.21 lacs pertains to inputs used in fabrication of milk storage tanks and other supporting structures of storage tanks and has therefore denied all the aforesaid credit on the ground that the inputs and goods mentioned above neither qualify as capital goods nor inputs as per CENVAT Credit Rules, 2004 for manufacture of the final products viz. Casein and Lactose. However, the Company has deposited demand of Rs.77.21 lacs together with interest thereon of Rs.5.19 lacs under protest. The case is pending in CESTAT and is awaited for regular hearing.

Further during the year 2007-08 to 2009-10 the Company also availed CENVAT credit of T78.30 lacs on certain steel items & other items as input used in fabrication of storage tanks. The excise authority (Panchkula) issued show cause notice for denial of the said CENVAT credit. The Company filed an appeal before Commissioner and commissioner confirmed a demand of CEVAT Credit amounting to Rs.78.30 lacs along with a penalty of amount equal to the Cenvat Credit, interest of Rs.4.57 lacs and Rs.17.68 lacs of CENVAT Credit wrongly taken and reversed. The Company had filed appeal before CESTAT and hearing on stay application was fixed on 14th October, 2012 which was adjourned to 11th December, 2012 and thereafter on the request of department representative the same was adjourned to 12th February, 2013. On this date, CESTAT ordered to deposit Rs.15 lacs as predeposit within 12 weeks which was deposited by Company on 15th May, 2013.

Based upon the legal advise obtained by the Company, the management believes that the Company has reasonably good chances of winning the case and hence currently no provision has been recorded.

ii) Custom duty: During 2011-12, the Company had exported 17.070 MT of Cheese Curd to a customer in Saudi Arabia and out of total 17.070 MT Cheese Curd of 14.218 MT was rejected by customer due to some functionality issues in stretching. The Company re-imported the goods. The Additional Commissioner of Customs (Imports) vide its order dated 7th May, 2012 confiscated the goods and imposed a penalty of Rs.3.6 lacs and redemption fine of Rs.7 lacs stating that re-imported goods had violated the prescribed condition under the FSA Act and hence were liable for confiscation. The Company deposited penalty of Rs.3.6 lacs and redemption fine of Rs.7 lacs on and got the goods released. The Company filed an appeal before Commissioner of Customs (Appeals), Mumbai against the order of Additional Commissioner of Customs (Imports) imposing penalty and fine stating that re-import was not against the provisions of FSA Act. The Commissioner of Customs (Appeals), Mumbai upheld the order of Additional Commissioner of Customs (Imports) and rejected the claim of Company vide order dated 27th June, 2013. The Company aggreived by the order of Commissioner of Customs (Appeals), Mumbai has preferred an appeal before CESTAT, Mumbai on 10th October, 2013. The case is pending in CESTAT and is awaited for regular hearing.

iii) Entry tax: Local Area Development Tax (''LADT'') was imposed in the state of Haryana with effect from 1st April, 2000. In 2007-08, the LADT was quashed and declared ultra-virus by the Hon''ble High Court of Punjab and Haryana in its order dated 1st April,2008. The State Government replaced the LADT with Entry Tax and it was also declared ultra-virus by the Hon''ble High Court of Punjab and Haryana. The State Government filed an appeal in the Hon''ble Supreme Court. The Hon''ble Supreme Court passed an order dated 30th October, 2009, directing all assesses to file all the returns and staying recovery of tax till final order. The final order is still awaited.

iv) Income tax: During the year ended 31st March, 2012, the Income Tax Department carried out assessment for assessment years 2006-07 and 2008-09 and issued a notice of demand u/s 156 of the Income Tax Act, 1961 for Rs.6.06 lacs and Rs.0.40 lacs respectively. The Company has filed an appeal with ITAT, New Delhi against the order of Commissioner (Appeals).

i) The provisions of ''The Haryana Murrah Buffalo and Other Milch Animal Breed (Preservation and Development of Animal Husbandry and Dairy Development Sector) Act, 2001, requires every milk processing company to pay milk cess not exceeding fifteen paisa per liter on registered capacity of a milk plant under Milk and Milk Product Order, 1992. Accordingly Haryana State Government, vide its notification no. 6388-AH-4-2001/16142 dated 9th September, 2001, imposed a milk-cess of ten paisa per liter on the registered capacity of plants.

In 2001, the Company filed a writ petition before the Hon''ble High Court of Punjab and Haryana challenging the imposition of such cess as against the Constitution of India. The Hon''ble High Court of Punjab and Haryana issued a stay order dated 9th July, 2004 on such imposition and directed the Company to continue to pay 1/3rd of the total milk-cess amount to the State Government on registered capacity till the final outcome of the case and Company provided the same in the books of account. In 2004, a similar cess was levied in the state of Punjab by the Government of Punjab under the Punjab Dairy Development Board Ordinance, 2000, and was upheld unconstitutional by the Hon''ble Supreme Court. Based upon this order of the Hon''ble Supreme Court, the stay order imposed by Hon''ble High Court of Punjab and Haryana and as per the legal advice obtained by the Company at that point of time, the Company discontinued the provision of milk-cess in the books of account.

On 28th May, 2010 the Hon''ble High Court of Punjab and Haryana dismissed the Company''s writ petition and upheld the levy of cess by State Government on milk plants. On 18th August, 2010 the Company filed a review application with the Hon''ble High Court. But such application was dismissed by Hon''ble High Court of Punjab and Haryana. On 18th October, 2010 the Company filed a special leave petition before the Hon''ble Supreme Court challenging the impugned judgment. The matter was listed before the Hon''ble Supreme Court on 5th August, 2011. The Hon''ble Supreme Court has issued a notice to the Govt. of Haryana on Special Leave Petition filed by the Company as well as on the application for interim stay. On 20th April, 2012, the Government of Haryana filed its reply and Hon''ble Supreme Court has ordered the case to be put before the Hon''ble Bench.

The Company had also received a notice dated 1st April, 2011 from Semen Bank Officer, Haryana Livestock Development Board, Karnal demanding the payment of Rs.21,25.75 lacs as arrears of Cess and Rs.1,28.72 lacs towards interest on the full unpaid amount for the period 1st January, 2011 to 31st March, 2011.

The Hon''ble Supreme Court in its order dated 7th September, 2012 granted an interim stay on impugned judgment passed by The Hon''ble High Court, subject to petitioners depositing 50% of the cess levied and demanded by the State Government for expedited the hearing in this case. Based on the order of The Hon''ble Supreme Court, the Company has deposited 50% of milk cess liability amounting to Rs.5,91 lacs till 7th September, 2012 and after that, there is no hearing held in the Supreme Court till date. ii) In the opinion of the management, the unjust levy of milk cess has eroded the net worth of the Company, and in view of the erosion of the net worth, the Company has become a sick industrial company in terms of section 3(1)(o) of Sick Industrial Companies (Special Provisions) Act, 1985 in the hearing held on 8th February, 2012. The Company has worked out a business and debt restructuring plan and submitted the draft of the same with the BIFR, which is based on the following major assumptions:

- During last year, the Government of India lifted ban on export of casein, a product manufactured by the Company, and since then the Company is continuously exporting casein to various countries across the world and the casein sales contribute good margins.

- In the opinion of the management, as the litigation currently stands sub-judice with the Hon''ble Supreme Court of India, the milk cess imposed by the Government of Haryana on the plant shall be waived off along with interest there on.

- The Company has currently made draft submissions to the BIFR for waiver of milk cess and interest thereon so that the viability of the future operations of the Company could be maintained and the Company could turn around its operations profitable.

In view of the above developments, coupled with the generation of cash profits from its operations, the management of the Company believes that even though there is significant uncertainty in connection with the outstanding litigation and the Company''s net worth being fully eroded, the Company is hopeful of turning around and expects that the net worth of the Company shall become positive in near future.

c) Other matters incidental to milk cess related litigation:

The management of the Company has obtained an opinion from an independent firm of attorneys in connection with the outstanding litigation relating to the milk cess matter as referred to in Note XXIX(b) above. In the opinion of the management, and upon consideration of the opinion from an independent firm of attorneys, the Company stands a good case to argue of obtaining a waiver on the interest on milk cess liability from the Hon''ble Supreme Court. The Company also has the discretion to make a submission with the BIFR for waiving the interest on milk cess. Accordingly, the Company has written back the provision for interest on milk cess aggregating Rs.11,44.36 lacs accrued in prior years and disclosed the same as an exceptional item in the statement of profit and loss.

d) Particulars of unhedged foreign currency exposure as at the reporting date:

Unhedged foreign currency exposure as at year end

RELATED PARTY DISCLOSURES

a) Disclosure of related parties and relationship between the parties

Nature of relationship Name of related party

Entities in which Directors Modern Steels Limited, Chandigarh Finance of the Company are able to Private Limited, Mala Builders Private exercise control or have Limited, Modern Dairyfarms Limited, Times significant influence Finvest & Commerce Limited, Shree Ganesh Investments & Industries Limited, Smile Finvest Private Limited, Bharat Forgings Private Limited, Kamal Leasing Limited, Punjab Financial Corporation, Haryana Financial Corporation, North India Technical Consultancy Organization Limited Indian Acrylics Limited, Alps Industries

Key Management Personnel Mr. Krishan Kumar Goyal, (KMP) Mr. A.K. Aggarwal, Dr. P.K. Jain

Relatives of KMP Mr. Amarjit Goyal, Father, Mrs. Rattan Mala Goyal, Mother, Mrs. Alka Goyal, Wife, Mr. Aditya Goyal, Son, Mrs. Sonam Jhunjhunwala, Daughter

SEGMENT INFORMATION Primary Segment

The Company is primarily engaged in the business of manufacturing/processing of milk and milk products like Casein, Lactose, Skimmed milk powder, Cheese, Butter, Pure Ghee, Premix etc., management considers the risk and rewards associated with these products to be similar in nature. Accordingly, the entire operations of the company are governed by the same set of risk and rewards and thus, it operates in a single primary segment.

Secondary Segment

The Company''s business is organized into two key geographic segments. Revenues are attributable to individual geographic segments based upon the location of customers.

Other information

The accounting policies consistently used in the preparation of financials statements are also applied to revenues and expenditure of individual segments.

NOTE : II EARNING PER SHARE

The calculation of Earning Per Share (EPS) as disclosed in the statement of profit and loss has been made in accordance with Accounting Standard (AS)-20 on "Earning Per Share" issued by Companies (Accounting Standards) Rules, 2006.

Pursuant to the approval for debt restructuring obtained from the Corporate Debt Restructuring Empowered Group (CDREG) and the respective banks within the consortium, Working capital term loan (WCTL) and Funded interest term loan(FITL) are converted into Optionally Convertible Debentures (OCD) at a coupon rate of 0.001% w.e.f 1st April, 2013. During the year ended 31st March, 2014, Company has earned profits and these potential equity shares (0.001% OCD) are dilutive, hence these are considered for computation of earnings per share on face value. Although the actual conversion of OCD''s into Equity Shares shall be subject to the SEBI Guidelines and provisions of the Memorandum & Articles of Association of the Company. During the last year Company had incurred losses, these potential equity shares (0.001% OCD) were anti dilutive, hence these were not considered for computation of loss per share.

NOTE : III LEASES

The Company has leased facilities under cancellable operating leases arrangements with a lease term ranging from one to three years, which are subject to renewal at mutual consent thereafter. The cancellable arrangements can be terminated by either party after giving due notice. The lease rent expenses recognized during the year amounts to Rs.16.41 lacs (Previous year Rs.6.73 lacs).

NOTE : IV

Pursuant to the reference filed by the Company with BIFR under section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 the BIFR vide its order dated 8th February, 2012 declared the Company as sick and appointed Punjab National Bank being the Lead Bank as Operating Agency (OA) to formulate rehabilitation plan for the Company. As per the meeting held on 15th April, 2013, Company submitted Debt Restructuring Scheme (DRS) on 25th February 2013. In the meeting held on 10th September 2013, the OA informed that the DRS submitted by the Company was not fully tied up and the Company has been asked to re-submit the fully tied up DRS. The next hearing is scheduled for 28th May, 2014.

NOTE : V

In the opinion of the board of directors, current assets, loans and advances have a value on realization in the ordinary course of business at least equal to the amounts at which they are stated and provision for all knows liabilities have been made in accounts.

NOTE : VI

Previous year figures have been regrouped /recasted, wherever considered necessary to make them comparable with those of the current year.

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Mar 31, 2013

NOTE:I

BACKGROUND AND NATURE OF OPERATIONS

Modern Dairies Limited (''the Company'') was incorporated in 1992 and is primarily engaged in business of manufacturing/processing of milk and milk products like Milk Powders, Cheese, Butter, Pure Ghee and other milk based products like Casein, Whey Protein Concentrate and Lactose, etc.

NOTE : II

As at As at

CONTINGENT LIABILITIES AND PROVISIONS March 31,2013 March 31, 2012 Amount in Rs. Lac Amount in Rs. Lac

Particulars

i) Contingent liabilities:

a) Claims against the Company not acknowledged as debts; 3,45.14 3,21.60

(i) Excise duty 2,61.25 2,56.06

(ii) Service tax 1.39 1.39

(iii) Entry tax 76.04 57.69

(iv) Income tax 6.46 6.46

(i) Excise duty: During 2005-06, the Company had availed CENVAT credit of Rs. 77.21 lacs on certain steel and other similar items (i.e. ''supporting goods'') as inputs used in fabrication of storage tanks other structures. As per the Excise Authorities, this credit of Rs. 77.21 lacs pertains to inputs used in fabrication of milk storage tanks and other supporting structures of storage tanks and has therefore denied all the aforesaid credit on the ground that the inputs and goods mentioned above neither qualify as capital goods nor inputs as per CENVAT Credit Rules, 2004 for manufacture of the final products viz. Casein and Lactose. However, the Company has deposited demand of Rs. 77.21 lacs together with interest thereon of Rs. 5.19 lacs under protest. The case is pending in CESTAT and is awaited for regular hearing. Further during the year 2007-08 to 2009-10 the Company also availed CENVAT credit of Rs. 78.30 lacs on certain steel items & other items as input used in fabrication of storage tanks. The excise authority (Panchkula) issued show cause notice for denial of the said CENVAT credit. The Company filed an appeal before Commissioner and commissioner confirmed a demand of CENVAT Credit amounting to Rs. 78.30 lacs along with a penalty of amount equal to the Cenvat Credit, interest of Rs. 4.57 lacs and Rs. 17.68 lacs of CENVAT Credit wrongly taken and reversed. The Company had filed appeal before CESTAT and hearing on stay application was fixed on 14''" October, 2012 which was adjourned to 11* December, 2012 and thereafter on the request of department representative the same was adjourned to 12" February, 2013. On this date, CESTAT ordered to deposit Rs. 15 lacs as predeposit within 12 weeks which was deposited by Company on 15mMay,2013.

Based upon the legal advise obtained by the Company, the management believes that the Company has reasonably good chances of winning the case and hence currently no provision has been recorded.

(ii) Service tax: A show cause notice was received from The Assistant Commissioner Central Excise Division (Ambala) for denial of exemption under notification no.18/2009 dated 7th July, 2009. The case is pertaining to the period from 1*'' April, 2010 to 30"'' September, 2010. The service tax involved in this case is Rs. 1.39 lacs. The Assistant Commissioner Customs & Central Excise Division (Ambala) had passed an Order vide Original No. 7/ST/AC/Amb/2012 dated 27''" July, 2011. The Company has filed Appeal before Commissioner (Appeals), Gurgaon. The case is awaiting for personal hearing. Based upon the legal advise obtained by the Company, the management believes that the Company has reasonably good chances of winning the case and hence currently no provision has been recorded.

(iii) Entry tax: Local Area Development Tax (''LADT'') was imposed in the state of Haryana with effect from 1" April, 2000. In 2007-08, the LADT was quashed and declared ultra-virus by the Hon''ble High Court of Punjab and Haryana in its order dated 1 "April, 2008. The State Government replaced the LADT with Entry Tax and it was also declared ultra-virus by the Hon''ble High Court of Punjab and Haryana. The State Government filed an appeal in the Hon''ble Supreme Court. The Hon''ble Supreme Court passed an order dated SO1" October, 2009, directing all assesses to file all the returns and staying recovery of tax till final order. The final order is still awaited.

(iv) Income tax: During the year ended 31" March, 2012, the Income Tax Department carried out assessment for assessment years 2006- 07 and 2008-09 and issued a notice of demand u/s156 of the Income Tax Act, 1961 for Rs. 6.06 lacs and Rs. 0.40 lacs respectively. The Company has filed an appeal with ITAT, New Delhi against the order of Commissioner (Appeals).

The provisions of ''The Haryana Murrah Buffalo and Other Milch Animal Breed (Preservation and Development of Animal Husbandry and Dairy Development Sector) Act, 2001 (''Act'')'', requires every milk processing company to pay milk cess not exceeding fifteen paisa per liter on registered capacity of a milk plant under Milk and Milk Product Order, 1992. Accordingly Haryana State Government, vide its notification no. 6388-AH-4-2001/16142 dated 9''" September. 2001 imposed a milk-cess often paisa per liter on the registered capacity of plants.

In 2001. the Company filed a writ petition before the Hon''ble High Court of Punjab and Haryana challenging the imposition of such cess as against the Constitution of India. The Hon''ble High Court of Punjab and Haryana issued a stay order dated 9''" July, 2004 on such imposition and directed the Company to continue to pay 1/3rd of the total milk-cess amount to the State Government on registered capacity till the final outcome of the case. Till 2004-05, the Company had provided milk-cess amounting to Rs. 3,53.75 lacs in the books of account. In 2004. a similar cess was levied in the state of Punjab by the Government of Punjab under the Punjab Dairy Development Board Ordinance, 2000, and was upheld unconstitutional by the Hon''ble Supreme Court. Based upon this order of the Hon''ble Supreme Court, the stay order from the Hon''ble High Court of Punjab and Haryana and as per the legal advice obtained by the Company at that point of time, the Company discontinued the provision of milk-cess in the books of account as it was believed that the chances of cess being levied on the Company for the period after the year 2004-2005 of Rs. 4,21.88 lacs would be remote and hence no provision against this was considered necessary.

On 28''" May, 2010 the Hon''ble High Court of Punjab and Haryana dismissed the Company''s writ petition and upheld the levy of cess by State Government on milk plants. On 18''" August, 2010 the Company filed a review application with the Hon''ble High Court. Subsequently, the Company''s review application with Hon''ble High Court of Punjab and Haryana has been dismissed. On IS* October, 2010 the Company also filed a special leave petition before the Hon''ble Supreme Court challenging the impugned judgment. The matter was listed before the Hon''ble Supreme Court on 5''" August, 2011. The Hon''ble Supreme Court has issued a notice to the Govt, of Haryana on Special Leave Petition filed by the Company as well as on the application for interim stay. On 20,h April, 2012, the Government of Haryana filed its reply and The Hon''ble Supreme Court has ordered the case to be put before the Hon''ble Bench.

The Company had also received a notice dated 1 "April ,2011 from Semen Bank Officer, Haryana Livestock Development Board, Karnal demanding the payment of Rs. 21,25.75 lacs as arrears of Cess and Rs. 1,28.72 lacs towards interest on the full unpaid amount for the period 1" January, 2011 to 31 "March, 2011.

Further, The Hon''ble Supreme Court in its order dated 7''" September, 2012 granted an interim stay on impugned judgment passed by The Hon''ble High Court, subject to petitioners depositing 50% of the cess levied and demanded by the State Government for expedited the hearing in this case.

Based on the order of The Hon''ble Supreme Court, the Company has deposited 50% of milk cess liability amounting to Rs. 5,91 lacs till 7,h September, 2012 (date of the order) and after that there is no hearing held in the Supreme Court till date.

c) Other matters incidental to milk cess related litigation

Based upon a legal opinion obtained by the Company from an independent law firm in connection with the method in which the Company had been computing and recognizing the liability on account of interest on milk cess in terms with the provisions of The Haryana Murrah Buffalo and Other Milch Animal Breed (Preservation and Development of Animal Husbandry and Dairy Development Sector) Act, 2001. the Company has, during the year ended 31" March, 2013, written back the interest of Rs. 13,06.96 lacs being provided in excess in prior years.

d) In the opinion of the management, the unjust levy of milk cess has completely eroded the net worth of the Company. In view of the complete erosion of the net worth, the Company has become a sick industrial company in terms of section 3(1)(o) of Sick Industrial Companies (Special Provisions) Act, 1985 in the hearing held on 8''" February, 2012. The Company has worked out a business and debt restructuring plan which is based on the following major assumptions:

i) During the year, Government of India lifted ban on export of casein, since then the Company is continuously exporting casein to various countries across the world and the casein sales contributes good margin.

ii) In opinion of the management, the milk cess imposed by the Government of Haryana on the plant shall be waived off along with interest and other dues there on.

In view of the above, the management of the Company is hopeful of turning around and expects that the net worth of the

Company shall become positive in near future.

NOTE : III SEGMENT INFORMATION

Primary Segment

The Company is primarily engaged in the business of manufacturing/processing of milk and milk products like Casein, Lactose, Skimmed milk powder, Cheese, Butter, Pure Ghee, Premix etc., management considers the risk and rewards associated with these products to be similar in nature. Accordingly, the entire operations of the company are governed by the same set of risk and rewards and thus, it operates in a single primary segment.

Secondary Segment

The Company''s business is organized into two key geographic segments. Revenues are attributable to individual geographic segments based upon the location of customers.

Other information

The accounting policies consistently used in the preparation of financials statements are also applied to revenues and expenditure of individual segments.

Segment information disclosures as required under Accounting Standard-17 " Segment Reporting" issued by Companies (Accounting Standard) Rules, 2006 as prescribed by Institute of Chartered Accountant of India.

NOTE : IV

LEASES

The Company has leased facilities under cancellable operating leases arrangements with a lease term ranging from one to three years, which are subject to renewal at mutual consent thereafter. The cancellable arrangements can be terminated by either party after giving due notice. The lease rent expenses recognized during the year amounts to f 6.73 lacs (Previous year Rs. 5.64 lacs).

NOTE :V

Pursuant to the reference filed by the Company with BIFR under section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 the BIFR vide its order dated 8''" February, 2012 declared the Company as sick and appointed Punjab National Bank being the Lead Bank as authorised agency to formulate rehabilitation plan for the Company. As per the meeting held on 15* April, 2013 Company has submitted Debt Restructuring Scheme (DRS) on 25''" February, 2013.

NOTE : VI

In the opinion of the board of directors, current assets, loans and advances have a value on realization in the ordinary course of business at least equal to the amounts at which they are stated and provision for all known liabilities have been made in accounts.

NOTE : VII

As per the transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961, the Company is required to use certain specific methods in computing arm''s length prices of transactions with associated enterprises and maintain adequate documentation in this respect. Since law requires existence of such information and documentation to be contemporaneous in nature, the Company is in the process of appointing independent consultants for conducting a Transfer Pricing Study (the ''Study'') to confirm that the transactions with associate enterprises undertaken during the financial year are on an "arms length basis". Management is of the opinion that the Company''s transactions are at arm''s length and that the results of the proposed study will not have any impact on the financial statements and that they do not expect any transfer pricing adjustments.

NOTE : VIII SUBSEQUENT EVENTS

In pursuance to the CDR rework package sanctioned to the Company vide Letter No. BY.CDR (SKK)No./5874/2011-12 dated 19" October, 2011 by CDREG, the Allotment Committee of the Company in its meeting held on 3rd April, 2013 allotted 496530325 Optionally Convertible Debentures (OCDs) of Rs. 1 each for an aggregate amount of Rs. 49,65,30,325 at par, carrying a coupon rate of 0.001% to the lenders upon conversion of outstanding amount of Working Capital Term Loan (WCTL) and Funded Interest Term Loan (FITL).

NOTE:IX

Previous year figures have been regrouped /recasted, wherever considered necessary to make them comparable with those of the current year.

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Mar 31, 2012

BACKGROUND AND NATURE OF OPERATIONS

Modern Dairies Limited ('the Company') was incorporated in 1992 and is primarily engaged in business of manufacturing/processing of milk and milk products like Milk Powders, Cheese, Butter, Pure Ghee and other milk based products like Casein, Whey Protein Concentrate and Lactose, etc.

a) Details of shares issued pursuant to contract without payment being received in cash, allotted as fully paid up by way of bonus issues and brought back during the last 5 years to be given for each class of shares

During the last five years the Company has not issued any equity shares pursuant to a contract without payment being received in cash, other than issuance of bonus shares. The Company issued 8753100 bonus equity shares in the year 2007-2008 in the ratio of 1:1. There has been no buy-back of shares in the current year and preceding five years. On 23rd July, 2008, 1163661 equity shares were issued to the Promoters and Promoters Group on conversion of warrants (on 29th November, 2007 the Company had allotted 3000000 convertible share warrants to Promoters and Promoters Group companies on preferential basis at a price ofRs. 81 per share).

a) Details of security for term loans from banks

Term loans from banks are secured by way of equitable mortgage of fixed assets both present and future including land & building ofthe Company on first pari-passu basis and are also guaranteed by the promoter ofthe Company.

b) Details of security for corporate loans

Corporate loans are secured by way of mort age and charge of immovable and movable assets both present and future and it is also secured by way of charge/assignment on all bank accounts.

c) Terms of repayment

Pursuant to the rework proposal approved under the corporate debt restructuring (CDR) scheme by CDR Empowered Group and sanctioned by respective banks under the consortium, following interest rates and schedules of repayment have been agreed with the Company:

i) Working capital term loans(WCTL):

At the end of two years, outstanding of WCTL shall be converted into Optionally Convertible Debentures (OCD) at a coupon rate of 0.001%. Holders of OCD shall have the right to convert the said OCD into fully paid equity shares of the Company during 18 months from the date of issuance of such OCD as per the then applicable SEBI guidelines. In the event of OCD not being ' converted into equity, the same will be redeemable at the end of restructuring package i.e. in financial year 2019 in one bullet payment.

ii) Funded interest term loans(FITL):

At the end of two years, outstanding of FITL shall be converted into Optionally Convertible Debentures (OCD) at a coupon rate of 0.001%. Holders of OCD shall have the right to convert the said OCD into fully paid equity shares of the Company during 18 months from the date of issuance of such OCD as per the then applicable SEBI guidelines. In the event of OCD not being converted into equity, the same will be redeemable at the end of restructuring package i.e. in financial year 2019 in one bullet payment.

iii) From others (unsecured):

Loans taken from others have interest rate ranging from 10% to 14.5%. All these loans along with interest are due for repayment in the financial year 2013-14.

Cash credit/export credit from banks is secured by way of hypothecation of current assets ofthe company comprising of Raw Material, Stock in process, finished goods , stores & spares, goods-in-transit, receivables and any other security acceptable on pari passu basis. It is also secured by equitable mortgage of fixed assets including land & building ofthe Company on pari-passu basis with other banks and is also guaranteed by the promoter ofthe Company.

NOTE : iv

CONTINGENT LIABILITIES AND PROVISIONS

As at As at March 31, 2012 March 31, 2011

Amount in Rs. Lac Amount in Rs. Lac

a) Claims against the Company not acknowledged as debts; 3,21.60 1,97.67

(i) Excise duty 2,56.06 1,55.51

(ii) Service tax 1.39 -

(iii) Entry tax 57.69 42.16

(iv) Income tax 6.46 -



(i) Excise duty: During 2005-06, the Company had availed CENVAT credit ofRs. 77.21 lacs on certain steel and other similar items (i.e. 'supporting goods') as inputs used in fabrication of storage tanks other structures. As per the Excise Authorities, this credit of Rs. 77.21 lacs pertains to inputs used in fabrication of milk storage tanks and other supporting structures of storage tanks and has therefore denied all the aforesaid credit on the ground that the inputs and goods mentioned above neither qualify as capital goods nor inputs as per CENVAT Credit Rules, 2004 for manufacture ofthe final products viz. Casein and Lactose. However, the Company has deposited demand of Rs. 77.21 lacs together with interest thereon of 15.19 lacs under protest. The case is pending in CESTAT and is awaited for regular hearing.

Further during the year 2007-08 to 2009-10 the Company also availed CENVAT credit of Rs. 78.30 lacs on certain steel items & other items as input used in fabrication of storage tanks. The excise authority (Panchkula) issued show cause notice for denial of the said CENVAT credit. The Company filed an appeal before the Commissioner and the commissioner confirmed a demand of CENVAT Credit amounting to Rs.78.30 lacs along with a penalty of amount equal to the CENVAT Credit, interest of Rs. 4.57 lacs and Rs.17.68 lacs of CENVAT Credit wrongly taken and reversed. The Company had filed appeal before CESTAT and the case is awaited for regular hearing.

Based upon the legal advice obtained by the Company, the management believes that the Company has good chances of winning the case and hence no provision against thereof is considered necessary at this point in time

(ii) Service tax: A show cause notice was received from The Assistant Commissioner Central Excise (Ambala) for denial of exemption under notification no. 18/2009 dated 7th July, 2009. The case is pertaining to the period from 1st April, 2010 to 30th September, 2010. The service tax involved in this case is Rs. 1.39 lacs. The company had filed reply to the Show Cause Notice. The personal hearing in the matter was attended on 30st' April, 2012.

The Company will defend the matter, however chances of winning the case is more hence, no provision has been considered necessary in the books of accounts.

(iii) Entry tax: Local Area Development Tax ('LADT') was imposed in the state of Haryana with effect from 1S! April 2000. In 2007-08, the LADT was quashed and declared ultra-vires by the Hon'ble High Court of Punjab and Haryana in its order dated 1 st April 2008. The State Government replaced the LADT with Entry Tax and it was also declared ultra-virus by the Hon'ble High Court of Punjab and Haryana. The State Government filed an appeal in the Hon'ble Supreme Court. The Hon'ble Supreme Court passed an order dated 30th October 2009, directing all assesses to file all the returns and staying recovery of tax till final order. The final order is still awaited.

(iv) Income tax: During the year ended 31st March, 2012, the Income Tax Department carried out assessment for assessment years 2006-07 and 2008-09 and issued a notice of demand u/st56 ofthe Income Tax Act, 1961 for Rs. 6.06 lacs and Rs. 0.40 lacs respectively. The Company has filed application for rectification of the order u/s 154 of the Income Tax Act, 1961 with Assistant Commissioner of Income Tax as in its opinion, the amount considered as inadmissible by the Income Tax Department should be adjusted against the carry forward losses for the respective years, and hence, the Company is not liable to make payment towards such demands. Accordingly, no provision has been recognised in the financial statements for these years.

The provisions of The Haryana Murrah Buffalo and Other Milch Animal Breed (Preservation and Development of Animal Husbandry and Dairy Development Sector) Act, 2001 ('Act')', requires every milk processing company to pay milk cess not exceeding fifteen paisa per litre on registered capacity of a milk plant under Milk and Milk Product order, 1992.Accordingly Haryana State Government, vide its notification no. 6388-AH-4-2001/16142 dated 9th September, 2001, imposed a milk-cess often paisa per litre on the registered capacity of plants.

In 2001, the Company filed a writ petition before the Hon'ble High Court of Punjab and Haryana challenging the imposition of such cess as against the Constitution of India. The Hon'ble High Court of Punjab and Haryana issued a stay order dated 9thJuly, 2004 on such imposition and directed the Company to continue to pay 1/3'" ofthe total milk-cess amount to the State Government on registered capacity till the final outcome ofthe case. Till 2004-05, the Company had provided milk-cess amounting toRs. 3,53.75 lacs in the books of account. In 2004, a similar cess was levied in the state of Punjab by the Government of Punjab under the Punjab Dairy Development Board Ordinance, 2000, and was upheld unconstitutional by the Hon'ble Supreme Court. Based upon this order ofthe Hon'ble Supreme Court, the stay order from the Hon'ble High Court of Punjab and Haryana and as per the legal advice obtained by the Company at that point of time, the Company discontinued the provision of milk-cess in the books of account as it believed that the chances of cess being levied on the Company for the period after the year 2004-2005 of Rs. 4,21.88 lacs would be remote and hence no provision against this was considered necessary.

On 28th May, 2010 the Hon'ble High Court of Punjab and Haryana dismissed the Company's writ petition and upheld the levy ofcessby state Government on milk plants. On 18th'August, 2010theCompanyfileda review application with the Hon'ble High Court. Subsequently the Company's review application with Hon'ble High Court of Punjab and Haryana has been dismissed. On 18'th October, 2010 the Company also filed a special leave petition before the Hon'ble Supreme Court challenging the impugned judgment. The matter was listed before the Hon'ble Supreme Court on Rs.August, 2011. The Hon'ble Supreme Court has issued a notice to the Govt, of Haryana on Special Leave Petition filed by the Company as well as on the application for interim stay. On 20th April, 2012 the Government of Haryana filed its reply and The Hon'ble Supreme Court has ordered the case to be put before the Hon'ble Bench. As the Hon'ble Supreme Court is closed from 14th May, 2012 till 1st July, 2012 the case shall come up for hearing before the Hon'ble Bench after the Supreme Court re-opens.

The Company had also received a notice dated 1st April, 2011 from Semen Bank Officer, Haryana Livestock Development Board, Karnal demanding the payment ofRs. 21,25.75 lacs as arrears of Cess andRs. 1,28.72 lacs towards interest on the full unpaid amount for the period from 1st January, 2011 to 31st March, 2011. In view of the above developments and as advised by legal attorneys, the Company, as at 31st March, 2012 has accrued for Milk Cess liability amounting to Rs.32,15.27 lacs (previous year Rs. 25,18.63 lacs) as demanded by Haryana Livestock Development Board.

During the year ended 31st March, 2012 the Company has recorded a provision for milk cess liability ofRs. 84.38 lacs and interest thereon Rs. 6,12.25 lacs as disclosed under note XXVIII.

NOTE :v SEGMENT INFORMATION Primary Segment

The Company is primarily engaged in the business of manufacturing/processing of milk and milk products like Casein, Lactose, Skimmed milk powder, Cheese, Butter, Pure Ghee, Premix etc., management considers the risk and rewards associated with these products to be similar in nature. Accordingly, the entire operations of the company are governed by the same set of risk and rewards and thus, it operates in a single primary segment.

Secondary Segment

The Company's business is organized into two key geographic segments. Revenues are attributable to individual geographic segments based upon the location of customers.

Other information

The accounting policies consistently used in the preparation of financial statements are also applied to revenues and expenditure of individual segments.

Segment information disclosures as required under Accounting Standard" Segment Reporting" issued by The Institute of Chartered Accountant of India.

NOTE : vi LOSS PER SHARE

The calculation of Earnings Per Share (EPS) as disclosed in the statement of profit and loss has been made in accordance with Accounting Standard (AS)-20 on "Earning Per Share" issued by Companies (Accounting Standards) Rules, 2006.

Pursuant to the approval for debt restructuring obtained from the Corporate Debt Restructuring Empowered Group (CDREG) and the respective banks within the consortium, Working Capital Term Loan (WCTL) and Funded Interest Term Loan (FITL) are convertible into Optionally Convertible Debentures (OCD) at a coupon rate of 0.001 % from the year 2013-14. Since the Company has incurred losses during the current year, these potential equity share (0.001% OCD) are anti dilutive, hence these are not considered for the computation of loss per share.

NOTE : vii LEASES

The Company has leased facilities under cancellable operating leases arrangements with a lease term ranging from one to three years, which are subject to renewal at mutual consent thereafter. The cancellable arrangements can be terminated by either party after giving due notice. The lease rent expenses recognized during the year amounts to Rs. 5.65 lacs (Previous year Rs 6.52 lacs).

NOTE : viii

During the year, the Company has incurred net losses after tax of Rs1,820.11 lacs (previous yearRs. 4,107.16 lacs). Due to losses in the current year, indicators of impairment as per Accounting Standard - 28 Impairment of Assets, are present as at 31 March 2012. Accordingly, the Company has reviewed the fixed assets for impairment and determined that the value in use of its fixed assets exceeds its carrying value as at 31 st March, 2012. Concluded that the value in use of the assets is more than the recorded value of the assets and writing-down the carrying value of the fixed assets is not required as at the date of the balance sheet.

Subsequent to the year ended 31st March, 2012, Government vide Notification no 112 (RE-2010)/2009-2014 dated 1stMay, 2012 has lifted the ban on export of casein. Management believes that this event along with the approval obtained during the year for restructuring of debt from appropriate authorities further strengthen the going concern status of the company.

NOTE : ix

Pursuant to the reference filed by the Company with BIFR under section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 the BIFR vide its order dated 81st Feburary, 2012 declared the Company as sick and appointed Punjab National Bank being the Lead Bank as authorized agency to formulate rehabilitation plan for the Company.

NOTE : x

In the opinion of the board of directors, current assets, loans and advances have a value on realization in the ordinary course of business at least equal to the amounts at which they are stated and provision for all known liabilities have been made in accounts.

NOTE : xi PREVIOUS YEAR FIGURES

Till the year 31st March, 2011, the Company was preparing and presenting its financial statements in accordance with the erstwhile Schedule VI to the Companies Act, 1956. During the year ended 31st March, 2012, the revised Schedule VI notified under the Companies Act, 1956 has become applicable to the Company. Accordingly, the Company has prepared and presented its financial statements for the year ended 31st March, 2012 in accordance with the provisions of revised Schedule VI and has reclassified previous year figures to confirm to current year's classification in terms with the said notification's

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Mar 31, 2010

1. Nature of Operations

Modern Dairies Limited ["the Company"] was incorporated in 1992 and is primarily engaged in the business of manufacturing/processing of milk and milk products like casein, lactose, skimmed milk powder, cheese, butter, pure ghee, etc.

2. Contingent Liabilities exist in respect of:

Amount inRs.000s

Particulars As at As at 31st March, 2010 31st March, 2009

a) Milk Cess 4,21,88 3,37,50

b) Excise Duty 77,21 77,21

c) Claims not acknowledged as debts 33,73 38,15

d) Sales tax 14,62 Nil

e) Service tax 19,39 Nil

f) Entry tax 28,97 Nil

g) Bank guarantee Nil 4,55

(a) Milk Cess

The provisions of The Haryana Murrah Buffalo and Other Milch Animal Breed (Presentation and Development of Animal Husbandry and Dairy Development Sector) Act, 2001 (Act), requires every milk processing company to pay milk cess not exceeding fifteen paisa per litre on registered capacity of a milk plant under Milk and Milk Product Order, 1992. Accordingly Haryana State Government, vide its notification no.6388-AH-4-2001/16142 dated 9th September, 2001, imposed a milk-cess often paisa per litre on the registered capacity of plants.

In 2001, the Company filed a writ petition before the Honble High Court of Punjab and Haryana challenging the imposition of such cess as against the Constitution of India. The Honble High Court of Punjab and Haryana issued a stay order dated 9* July, 2004 on such imposition and directed the Company to continue to pay 1/3rd of the total milk-cess amount to the State Government on registered capacity till the final outcome of the case.

Until 2004-05, the Company had provided milk-cess amounting toRs.35,375 thousand in the books of account (refer Note 4 below). In 2004, a similar cess was levied in the state of Punjab by the Government of Punjab under the Punjab Dairy Development Board Ordinance, 2000, and was upheld unconstitutional by the Honble Supreme Court. Based upon this order of the Honble Supreme Court, the stay order from the Honble High Court of Punjab and Haryana and as per the legal advice obtained by the Company, the Company discontinued the provision of milk-cess in the books of account as it believed that the chances of cess being levied on the Company for the period after the year 2004-2005 of X 42,188 thousand would be remote and hence no provision against this was considered necessary.

The Company received the final order of the Honble High Court of Punjab and Haryana at Chandigarh dated 28,h May, 2010 in W.P.(C) No.19828 of 2001 whereby the Honble Division Bench of the High Court has dismissed the petition filed by the Company and upheld the levy of cess by State Government on milk plants.

Subsequently the Company has filed a review application dated 18* August, 2010 with the Honble High Court of Punjab and Haryana at Chandigarh, for reviewing/recalling the order passed and for issuance of an appropriate order or direction in favourof the Company, keeping in view the facts and circumstances of the case.

In addition the Company has obtained a legal opinion of an independent expert on the dismissal of its writ petition and has also filed a Special Leave Petition dated 18"October, 2010, before the Honble Supreme Court challenging the impugned judgment and final order passed by the High Court of Punjab and Haryana.

Based on the opinion of an independent expert and keeping in view the facts and circumstances of the above

case the Company believes that no financial liabilities are likely to devolve and consequently no further provision has been made in the financial statements.

(b) Excise Duty

In the year 2005-06, the Company had availed CENVAT credit ofRs.77,21 thousand (previous yearRs.77,21 thousand) on certain steel and other similar items (i.e. supporting goods) as inputs used in fabrication of storage tanks other structures. As per the Excise Authorities, this credit ofRs.77,21 thousand pertains to inputs used in fabrication of milk storage tanks and other supporting structures of storage tanks and has therefore denied all the aforesaid credit on the ground that the inputs and goods mentioned above neither qualify as capital goods nor inputs as per CENVAT Credit Rules, 2004 for manufacture of the final products viz. Casein and Lactose.

Based upon the legal advise obtained by the Company, the management believes that the Company has good chances of winning the case and hence no provision against thereof is considered necessary at this point in time. However, the Company has deposited demand ofRs.77,21 thousand together with interest thereon ofRs.5,19 thousand under protest.

(c) Claims not acknowledge as debts

An overseas vendor claimedRs.33,73 thousand (previous yearRs.38,15 thousand) for services provided to the Company in respect of capital projects. The Company has alleged that the services provided by the vendor are not as per the agreement and due to which the Company has not been able to achieve the required production efficiency. Based upon the discussion with the vendors, the Company is confident no liability would devolve against the Company and hence no provision against thereof is considered necessary at this point in time.

(d) Sales Tax

In sales-tax assessment for the financial year 2005-06, the sales-tax department has raised demand ofRs.7,24 thousand and interest of? 7,38 thousand thereon. The Company has filed an appeal before the Sales-Tax Tribunal Chandigarh (Haryana) (Tribunal) against this demand. The decision of the Tribunal is awaited. However, the Company has deposited an amount ofRs.6,00 thousand under protest in the current year.

(e) Service Tax

A penalty equal to the amount of service tax was imposed by the Central Excise and Customs Department (Department) for default in timely deposit of service tax levied on import services. The Company has filed an appeal before the Commissioner (Appeals). The Company has deposited 25% of the penalty amounting toRs.4,85 thousand in the current year.

(f) Entry Tax

Local Area Development Tax (LADT) was imposed in the state of Haryana with effect from April 1, 2000. In 2007-08, the LADT was quashed and declared ultra-virus by the Honorable High Court of Punjab and Haryana in its order dated April 1, 2008. The State Government replaced the LADT with Entry Tax and it was also declared ultra-virus by the Honorable High Court of Punjab and Haryana. The state government filed an appeal in the Honorable Supreme Court. The Honorable Supreme Court passed an order dated October 30, 2009, directing all assesses to file all the returns and staying recovery of tax till final order. The final order is awaited.

3. Secured Loans

(a) Long-term loans ofRs.65,21,58 thousand (previous yearRs.55,50,33 thousand) include term loans of X 46,34,09 thousand (previous yearRs.44,30,71 thousand) and a corporate loan ofRs.18,87,49 thousand (previous yearRs.11,19,61 thousand). Term loans are secured byway of equitable mortgage of fixed assets, present and future including land and building of the Company on first pari-passu basis and also guaranteed by managing director of the Company. Corporate loan is sanctioned by the consortium of banks as a part of Corporate Debt Restructuring scheme (Scheme). As per the Scheme, it is secured by way of mortgage and charge of immovable and movable assets both present and future. It is also secured by way of charge/assignment on all bank accounts. Further, it is to be secured by way of pledge of entire promoters shareholding after obtaining approval from International Finance Corporation.

(b) Cash credit/export credit loans ofRs.32,83,23 thousand (previous yearRs.46,51,33 thousand) from banks is secured by way of hypothecation of current assets of the Company comprising of raw material, stock in process, finished goods, stores & spares, goods in transit, receivables and any other security acceptable on pari-passu basis. It is also secured by equitable mortgage of fixed assets including land and building of the Company on pari-passu basis with other banks. It is also guaranteed by Managing Director of the Company.

4. Leases

The Company has taken various residential and offices under operating lease agreements. In all the cases, the agreements are further renewable at the option of the Company. There is no escalation clause in the respective lease agreements. For all cases, there are no restrictions imposed by lease arrangements and the rent is not determined based on any contingency. These are generally not non-cancelable and are renewable by mutual consent on mutually agreed terms. The total lease payments in respect of such leases recognised in the profit and loss account for the year areRs.6,44 thousand (previous yearRs.8,72 thousand).

5. Paid-up equity share capital comprises 8753100 (previous year 8753100) equity shares allotted as fully paid up bonus shares by capitalization out of accumulated Profit and Loss Account

6. Conversion of equity share warrants

On November 29, 2007, the Company had allotted 3000000 convertible equity share warrants to Promoters and Promoters Group Companies on preferential basis at a price ofRs.81 per share (Face value ofRs.10 each). These warrants were convertible into equivalent number of equity shares within a period of eighteen months from the date of issue i.e. upto May 29,2009 subject to receipt of full consideration. The Company had receivedRs.8.10 per equity share warrant as application money.

During the previous year, Allotment Committee of the Company in its meeting held on July 23, 2008, allotted 1163661 equity shares upon conversion of equity share warrants to promoters and promoter group companies amounting toRs.9,42,57 thousand.

In the current year till the due date of last day of conversion, the Promoters and Promoters Group Company have not applied for conversion of remaining equity share warrants and accordingly the Company has forfeited 1836339 equity share warrants and share warrant application money ofRs.1,48,74 thousand. This equity share warrant application money has been transferred to Capital Reserve Account.

7. Loans and Advances includesRs.19,70 thousand (previous yearRs.94,92 thousand) due from Modem DairyFarms Limited, a company under same management. Maximum amount outstanding during the yearRs.7,63,98 thousand (previousyear? 6,97,56thousand).

8. Related party disclosures A. Relationship

Enterprises owned or significantly influenced by key management personnel or their relatives

Modern Steels Ltd.

Chandigarh Finance Pvt. Ltd

Mala Builders Pvt. Ltd.

Modern DairyFarms Ltd

Times Finvest & Commerce Limited (Formerly

known as Bhanu Investment & Commerce Ltd.)

Shree Ganesh Investments & Industries Ltd.

Smile Finvest Private Limited

(Formerly known as Smile Estates (P) Ltd)

Nabha Finance Pvt. Ltd.

Bharat Forgings Pvt. Ltd.

PHi Business Solutions Ltd.

Modern Automotives Ltd.

Indo Pacific Finlease Limited

Kamal Leasing Limited

Krishan Kumar Goyal (HUF)

Amarjit Goyal (HUF)

Key Management Personnel (KMP)

Mr. Krishan Kumar Goyal

Mr. A.K. Aggarwal

Mr. H. S. Oberoi (till the date of cessation)

Relatives of KMP (Mr. Krishan Kumar Goyal)

Mr. Amarjit Goyal, Father

Mrs. Rattan Mala Goyal, Mother

Mrs. Alka Goyal, Wife

Mr. Aditya Goyal, Son

Ms. Sonam Goyal, Daughter

The Company follows Accounting Standard-22, Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India. The Company has significant time differences between accounting and tax records on account of losses and unabsorbed depreciation, which suggest accounting for deferred tax asset. Since there is no convincing evidence which demonstrates virtual certainty of realization of such "deferred tax asset", the company has prudently decided not to recognise any deferred tax asset. There is no case for accounting of any deferred tax liability either.

9. During the year, the Company has incurred net losses after tax of? 1,77,52 thousand (previous year? 26,00,01 thousand). Due to losses in the current year, indicators of impairment as per Accounting Standard - 28, Impairment of Assets, are present as at March 31, 2010. Accordingly, the Company has reviewed the fixed assets for impairment and determined that the value in use of its fixed assets exceeds its carrying value as at March 31,2010. Concluded that the value in use of the assets is more than the recorded value of the assets and writing-down the carrying value of the fixed assets is not required as at the date of the Balance Sheet.

10. In accordance with paragraph 10 of Accounting Standard-9, Revenue Recognition notified under the Companies (Accounting Standard) Rules, 2006, excise duty amounting toRs.83,41 thousand (previous yearRs.57,22 thousand) on sales has been reduced from sales in profit and loss account and excise duty on increase/decrease in stock amounting toRs.63 thousand (previous year? 35,07 thousand) has been adjusted in Schedule 19 of the financial statements.

11. Segment information

Primary segment

The Company is primarily engaged in the business of manufacturing/processing of milk and milk products like casein, lactose, skimmed milk powder, cheese, butter, pure ghee etc. Management considers the risk and rewards associated with these products to be similar in nature. Accordingly, the entire operations of the Company are governed by the same set of risk and rewards and thus, it operates in a single primary segment.

Secondary segment

The Companys business is organized into two key geographic segments. Revenues are attributable to individual geographic segments based upon the location of the customers

Other information

The accounting policies consistently used in the preparation of the financial statements are also applied to revenues and expenditure of individual segments

Segment information disclosures as required under accounting standard on "Segment Reporting" issued by The Institute of Chartered Accountants of India.

(a) Secondary segment information - Geographical

(b) The Company has common fixed assets for producing goods for domestic market and overseas market. Hence, separate figures for fixed assets / additions to fixed assets cannot be provided.

12. Employee benefits

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service subject to maximum limit ofRs.3,50 thousand (previous yearRs.3,50 thousand).

The following table summarizes the components of net benefit expenses recognized in the Profit & Loss Account and the funded status and amount recognized in the Balance Sheet for respective plans.

13 Prior period adjustments

Prior period adjustment includes reversal of excess depreciation (net) erroneously charged during the earlier years to the extent ofRs.1,24,97 thousand (previous year Nil)

14 During the previous year, the Corporate Debt Restructuring [CDR] empowered group vide its letter dated March 24, 2009, which was further revised vide letters dated March 30, 2009 and June 25, 2009, had approved the loan restructuring scheme for the Company. One of the important conditions of the Master Restructuring Agreement is that entire shareholding in the Company held by the Promoters shall be pledged with the CDR lenders on pari- passu basis. This pledging is subject to approval from International Finance Corporation (IFC) by virtue of its subscription agreement with promoters. The IFC has disapproved this pledging. The Company has taken up matter with CDR lenders and subsequently approached the IFC again for permission to pledge such shares.

15 Previous year figures have been regrouped/recasted wherever considered necessary to make them comparable with those of the current year.