Directors Report of Polar Industries Ltd.

Mar 31, 2010

Directors of the company have pleasure in submitting the 27th Annual Report of the Company together with Audited Accounts for the period ended 31st March 2010. A brief sum- mary of financial results and other operational aspects are being detailed herein as under;

FINANCIAL RESULTS

(Rs. In Lacs)

Year Ended Year Ended 31/3/2010 31/3/2009

(12 months) (12 months)

Total Income 5116.08 11667.18

Profit/(Loss) before

Depreciation, Interest & Tax 1727.90 (1511.76)

Less: Depreciation 42.93 (70.82) Interest 92.53 (162.77)

Principal Amount of Loan

& Interest Written Back - 299.23

Profit/(Loss) before Tax 1592.44 (1446.12)

Less: Provision for

Taxation

- Current Tax

- Fringe Benefit Tax - (17.70)

Profit/(Loss) after Tax 1592.44 (1463.82)

Transfer from Debenture

Redemption Reserve - (55.32)

Profit/(Loss) brought forward

from previous period (16305.02) (14896.51)

Loss carried forward to

Balance Sheet (14712.57) (16305.02)

RESTRUCTURING OF SECURED DEBTS

One Time Settlement (OTS) of all the secured debts of the Company was sanctioned at Rs. 32 Crores under Corporate Debt Restructuring (CDR) mechanism followed by individual sanction from the lenders.

In the meanwhile, Asset Reconstruction Company (India) Ltd. (ARCIL) has acquired the debts of all the secured lenders except IIBI and have restructed the total secured debts of Rs. 95.22 Crores as on 31.3.2008.

As per ARCILs sanction, the Company allotted 30,74,300 equity shares at per for Rs. 3.07 Crores to ARCIL and the balance debt of Rs. 59 Crores would be repaid over a period of 5 years between 2010-2013.

The Company in spite of all efforts could not infuse working capital into the system on time. The Company unable to bring in required working capital pruned down its structure to almost half by closing down various divisions other than the core business of fans, with only one Fan unit remaining.

The Company has received letters under Section 13(2) & 13(4) of the SARFAESI Act, 2002 from ARCIL. The Company has already proposed One Time Settlement of dues with ARCIL and the same is under discussion with them.

DIRECTORATE

In accordance with the provisions of Article 98(1) of the Articles of Association of the Company, Mr. Sunil Agarwal will retire by rotation in the ensuing Annual General Meeting of the Company and, being eligible, offers himself for re appointment. The Board has recommended his re appointment.

Mr. P. S Ravendernath, who represented Asset Reconstruction Company (India) Limited, has resigned as nominee director from the Board of the Company consequent to withdrawal of his nomination by ARCIL.

The Board places on record its gratitude for services rendered by Mr. P S Ravendranath during his tenure as the member of the Board.

In order to broad base the Board of Directors and to comply with the requirement of Clause 49 of the Listing Agreement, Mr. Uday Chand Kungilwar, was appointed as an Additional Director in the category of non-executive independent director of the Company w.e.f. 28th May, 2010 & holds office upto the ensuing Annual General Meeting of the Company. The Company has received notice from a member pursuant to Section 257(1) of the Companies Act, 1956 signifying his intention to propose the candidature of Mr. Uday Chand Kungilwar for the office of Director. The Board recommends for the appointment of Mr. Uday Chand Kungilwar as a candidate for the office of Director liable to retire by rotation. The brief resume details relating to directors who are to be appointed/ re-appointed are furnished in the Corporate Governance Report which forms part of separate section of Annual Report.

AUDITORS

M/s. Singhi & Co., Chartered Accountants, (Regn. No. FRN 302049E) Statutory Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting, and, being eligible, offer themselves for re-appointment as Statutory Auditor of the Company. A certificate, required under Section 224(1 B) of the Companies Act, 1956 to the effect that, the re-appointment, if made, shall be within the limits specified in the said section, has been obtained from them.

M/s. S. Jaykishan, Chartered Accountants, Branch Auditors of Sumach and Marketing Divisions retire at the conclusion of the ensuing Annual General Meeting, and being eligible, offer themselves for re-appointment as Branch Auditors of Sumach & Marketing Division. A certificate, required under Section 224(1 B) of the Companies Act, 1956 to the effect that, the re-appointment, if made, shall be within the limits specified in the said section, has been obtained from them.

Since not less than 25% of the subscribed Share Capital of the Company is held collectively by Public Financial Institutions, the re-appointment of Statutory Auditors is being proposed as a Special Resolution in accordance with section 224A of the Companies Act, 1956.

AUDITORS OBSERVATIONS

In respect of Auditors Observation regarding disqualification of two directors namely, Shri Anil Agarwal and Sri Sunil Agarwal it may be noted that Company has failed to redeem its debentures on due date and such failure continues for more than 1 year. Therefore, two above-mentioned directors are disqualified in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

In respect of Auditors Observation regarding debt acquired by ARCIL & non-provision of Interest it may be noted that the Company has placed its proposal for One Time Settlement (OTS) of the dues to ARCIL and the same is under discussion. Pending settlement no accounting adjustment has been carried out in the books of accounts.

In respect of Auditors Observation regarding sale of residential property by ARCIL it may be noted that pending receipt of information from ARCIL with respect to the sale consideration of Companys residential property situated at A-8 Maharani Bagh, New Delhi-110065, the Company has considered a minimum reserve price of Rs. 27.50 crores for the purpose of provisional adjustment in the books of accounts.

In respect of Auditors Observation regarding valuation of finished goods stock for Rs. 86,40,825 pertaining to the discontinued business segment and non provision of inter- est, demurrages etc. on the goods lying in the custom bonded warehouse it may be noted that the Company is taking necessary steps to liquidated the same at best resalable value.

In respect of Auditors Observaton regarding the account has been prepared on going concern basis, it may be noted that the management feels that due to likely impact on the restructuring, induction of working capital and future profitability on the net worth, the Company will be able to revive itself.

In respect of Auditors Observation regarding payment of remuneration to Director - Finance & Corporate Affairs which is subject to approval of Central Government, it may be noted that application for approval of the remuneration has been made to the Central Government and the approval for the same is being awaited.

In respect of Auditors Observation regarding non-provision and non-ascertainment of interest/pehalities on various outstanding statutory dues it may be noted that the Company will provide the said liabilities if the same arises in future in the books of accounts.

In respect of Auditors Observation regarding not charging interest on advances, it may be noted that Company did not consider charging interest on the amount outstanding due to weak financial position of the other companies covered under Section 301 of the Companies Act, 1956.

In respect of Auditors Observation regarding failure is filing of Return of Deposits it may be noted that the same is under process & the Company will file the return of Deposit very soon as per the statutory requirement.

In resect of Auditors Observation regarding Company not regular in depositing undisputed statutory dues, it may be noted that the Company despite of its best efforts, due to cash crunch, was not regular in payment of statutory dues. ^ The Company is taking steps to pay undisputed outstanding statutory dues which are due for more than six months, out of the fresh funds to be infused.

In respect of Auditors Observation regarding default of Company regarding repayment of Rs. 6,79,75,501 to Industrial Investment Bank of India (IIBI), it may be noted that Company is still awaiting the One Time Settlement (OTS) sanction from IIBI. As soon as the Company receives sanction the Company will take necessary steps to repay the amount due to IIBI.

In respect of Auditors Observation regarding terms and conditions of corporate guarantees are prejudicial to the interest of the Company, it may be noted that corporate guarantee were given for two corporate. In view of the revival and restructuring plan of one corporate and, indemnity given by the promoters in case of other corporate, the management thinks that there would not be any liability on the company.

In respect of Auditors Observation regarding creation of securities in respect of debentures outstanding at the year end it may be noted that the same will be created in due course of time.

The other notes to the accounts referred to in the Auditors Report are self-explantory.

COST AUDIT

M/s K.L. Jaisingh & Co., Cost Accountants, are appointed as Cost Auditor of the Company to conduct Cost Audit of the Accounts maintained by the Company for the financial year ending 31st March, 2011.

SHARE CAPITAL

During the year ended March 31, 2010, the paid-up equity share capital of the Company increased from Rs. 18, 37, 77,680/- comprising of 1, 81, 27,768 equity shares of Rs. 10/ - each & 25,000 14% Redeemable Cumulative Preference Shares of Rs. 100 each to Rs. 21,45,20,680/- comprising of 2,12,02,068 equity shares of Rs. 10/- each consequent to allotment of 30,74,300 equity shares to Asset Reconstruction Company (India) Ltd. which has been allotted as a part settlement towards restructuring the total secured debts of the Company by Asset Reconstruction Company (India) Ltd.

The Final Listing approval for allotment of 30,74,300 equity shares to Asset Reconstruction Company (India) Ltd. from Bombay Stock Exchange Limited and National Stock Exchange of India Limited is still awaited & Company is expecting to receive the same at the earliest.

PREFERENTIAL ALLOTMENT OF WARRANTS

As approved by the shareholders your Company has made preferential allotment of 39,00,000 Zero Coupon Convertible Warrants (ZCCWs) to M/s Polar Overseas Ltd. & M/s Arunima

Investment Pvt. Ltd.-the Associate of Promoters of the Company on 3rd July, 2009 & the same is convertible into equal no. of Equity Shares within a period of 18 months from the date of allotment of warrants.

SHIFTING OF REGISTERED OFFICE

The Registered Office of your Company has been shifted from 113, Park Street, 8th Floor, Kolkata - 700 016 to 51, Ezra Street, 2nd Floor, Kolkata - 700 001 w.e.f. May 29, 2010.

DEPOSITS

The Companys Public Deposit scheme closed long back. There was no failure to make repayments of Fixed Deposits on maturity and the interest due thereon in terms of the conditions of the Companys erstwhile Schemes.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed report on Management Discussion and Analysis is provided as a separate chapter in the Annual Report

DIVIDEND

In view of the huge losses incurred by the Company in the previous years, your Directors express regret for not declaring any dividend for the year under review.

CORPORATE GOVERNANCE

The Code of Corporate Governance has already been implemented as per the listing agreements and a separate note on Corporate Governance has been given. The certificate of the Auditors, M/s. Singhi & Co. confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchange in India is annexed along with this report.

The CMD have certified to the Board w.r.t financial reporting, in the manner required under Clause 49 of the Listing Agreement concerning the annual financial statement.

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

The particulars required under Section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Director) Rules, 1988 are set out in Annexure-I forming part of this Report.

PARTICULARS OF EMPLOYEES

Information in accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, regarding employees is given as Annexure I to the Directors Report.

DIRECTORS RESPONSIBILITY STATEMENT.

Pursuant to Sub-section (2AA) of section 217 of the Companies Act, 1956, the Board of Directors of the Company hereby state and confirm that:

i) in the preparation of annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

ii) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of financial year and the loss of the Company for that period;

iii) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with 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 on a going concern basis.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to thank all investors, business partners, clients, banks, regulatory foreign authorities and Stock Exchange for their continuous support.

For and on behalf of the Board

Registered Office:

51, Ezra Street,

2nd floor, ANIL AGARWAL

Kolkata - 700 001 Chairman & Managing Director