Notes to Accounts of Volant Textile Mills Ltd.

Mar 31, 2013

BACKGROUND & NATURE OF OPERATIONS:

Volant Textile Mills Ltd (''The Company'') is engaged in the business of Textiles. The principal activity of the company is manufacture of Gery Fabrics & Trading of textiles and textiles products.

1) The accumulated losses of the Company exceed its net worth. However these accounts have been prepared on a going concern basis as the management believes that the company will be able to meet all its liabilities on the financial support from its Promoters/ Directors who have agreed to provide all the necessary financial support time to time.

Accordingly these financial statements do not include any adjustments relating to the recoverability and classification of the carrying amount of Assets or the amount and classification of Liabilities that might have to be done should the company be unable to continue as Going Concern.

2) Contingent Liabilities not provided for:

i. Aggregate Central Excise duty of Rs 151.52 lacs and Rs 4.88 lacs demanded by the respective authorities are disputed amounts and not acknowledged as debts. In the opinion of the management these demands are not payable, as the company has preferred an appeal against them. The same shall be charged to revenue in the year the demands are determined and paid. The company has made a deposit of Rs. 15.00 lacs and Rs. 1.00 lac with the Central Excise for pursuing the appeal.

ii. Company has filed appeal against the decision of High Court before the Provident Fund Tribunal, Delhi. Tribunal Authority directed to pay Rs. 2 Lacs on the condition for submission of appeal. Accordingly Company paid and appeal is admitted.

iii.In respect of pending assessments with the Government bodies and authorities, amounts payable towards additional demands, interest and penalty, if any, shall be charged to revenue account in the year in which such demands materialize and is paid, the amount being unascertainable.

iv. The Company has an Export Obligation on duty free imports the details of which are as follows:

a) Rs. 82,79,368/- equivalent to USD 1,73,028 to be completed by 13.10.2012.

b) Rs. 1,95,04,095/- equivalent to USD 4,81,582 to be completed by 02.06.2016.

c) Rs. 1,64,47,903/- equivalent to USD 3,80,739 to be completed by 04.09.2016.

The Company has already completed the required exports against the licences mentioned above and are in the process of getting the licences closed. The Company has already received from DGFT the permission for closure of licence mentioned in point (a & c) and has applied to the customs for release of the guaranty provided to them. Permission from DGFT is awaited for the licences mentioned in point (b).

3) Assets aggregating to Rs.60.14 Lacs were acquired on lease for five years. The lease period has expired on 31.12.2002. Moreover, the company has to pay Rs.82.87 Lacs to the lessor as on 31.3.2004. The lessor has also filed a case against the company for non-payment of lease rent in time. Any additional interest and/or penalty for delay in making lease rents shall be charged to revenue in the year of payment, the amount being unascertained, no provision for the same is made. The company has not yet been able to settle with the lessor as part of the restructuring exercise.

4) The balances of secured and unsecured loans, sundry debtors, sundry creditors, current liabilities, loans, and advances are subject to confirmation and reconciliation. Adjustments, which may arise on receipts of confirmation and completion of reconciliation, are not ascertainable at this stage.

5) The Company used to adjust the foreign currency exchange rate differences on amounts borrowed for acquisition of fixed assets, to the carrying cost of fixed assets in compliance with Revised Schedule VI to the Companies Act, 1956 as per legal advice, which was at variance to the treatment prescribed as per Accounting Standard 11.

6) Segment information:

a) Primary Segment.

In accordance with Accounting Standard 17 "Segmental Reporting" issued by the Council of the Institute of Chartered Accountants of India, the Company has determined its business segment as manufacturing of grey fabrics. There are no other primary reportable segments.

7) The Company has accumulated losses which have exceeded the networth of the company. The company has been declared sick by BIFR vide its letter dt. 1.3.2006 having case No. 322/02 on directive of AAIFR. Bank of Baroda has been appointed as the Operating Agency, and have already submitted a revised rehabilitation scheme to the Hon''ble BIFR. The accounts are prepared on a going concern basis.

8) Taxation:

No provision of Income Tax has been made as the Company is registered with BIFR and is not required to pay MAT under Section 115-JB of the Income Tax Act as the said section is not applicable to a Company registered with BIFR and having negative net worth on the opening day of the financial year. Moreover, the auditor has relied upon the opinion produced by the Management of the Company, in the matter.

9) Employee Benefit:- i. The liability for compensated absence carried forward on the balance sheet date is provided

by the management. The Company has made a provision for leave pay to Rs. 2.46 lac (previous year of Rs. 2.41 lacs).

ii. During the year company makes annual contribution to a Gratuity Fund administered and managed by the Life Insurance Corporation of India. The company accounts its liability for gratuity benefit based on valuation done by LIC as at balance sheet date. The company paid annual contribution to Gratuity fund of Rs. 0.99 lacs in current year (previous year gratuity provided of Rs. 0.15 lacs). Total amount deposited with LIC is Rs. 2.84 lacs (previous year of Rs. 1.85 lacs).

10) Loans and Advances include Rs.54.04 lacs (previous year 41.83 lacs) recoverable from various government authorities towards refund of electricity duty, CST and VAT. The management is pursuing the matter and is hopeful of recovering the same

11) The accounts have not been authenticated by a whole-time company secretary as the Company does not presently have a whole-time company secretary as required by Section 383 A(1) of the Act.

12) The Company has incorporated a subsidiary company named M/s Force Protective Solutions Pvt. Ltd. during the year and hence disclosure in respect of Loans and Advances pursuant to Clause 32 of the Listing Agreement is applicable to the Company.

The financial statements of the subsidiary company alongwith directors'' report, auditor''s report, summary of significant accounting policies and other explanatory information are attached.

13) The amount transferred to investor and education fund Rs. Nil (Previous year Rs. Nil).

14) The Company does not possess information as to which of its suppliers is Small Scale Industrial Undertakings holding permanent registration certificate issued by the relevant authorities. Consequently, the liability, if any, of interest which would be payable on delayed payments under Small Scale and Ancillary Industrial Undertakings Act, 1993, of India cannot be ascertained. However, the Company has not received any claim in respect of such interest. In view of the above, outstanding dues to Small Scale Industrial Undertaking cannot be ascertained.

15) Figure for previous year have been regrouped/rearranged wherever necessary.

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Mar 31, 2012

Note 1. CONTINGENT LIABILITY

The Company has mortgaged its immovable property situated at its Solapur Plant to secure the due repayments to Union Bank of India of all amounts advanced or various facilities granted by the Bank to Lahoti Knitfab Limited to the extent of Rs 36 cr. The Company has given this Guarantee for entering into a marketing tie-up whereby the company will get exclusive marketing rights for sale of the product in India.

BACKGROUND & NATURE OF OPERATIONS:

Volant Textile Mills Ltd (The Company') is engaged in the business of Textiles. The principal activity of the company is manufacture of Gery Fabrics & Trading of Acrylic fibers & other textiles. B) ADDITIONAL DISCLOSURES TO FINANCIAL STATEMENTS

1) The accumulated losses of the Company exceed its net worth. However these accounts have been prepared on a going concern basis as the management believes that the company will be able to meet all its liabilities on the financial support from its Promoters/ Directors who have agreed to provide all the necessary financial support time to time.

Accordingly these financial statements do not include any adjustments relating to the recoverability and classification of the carrying amount of Assets or the amount and classification of Liabilities that might have to be done should the company be unable to continue as Going Concern.

2) Contingent Liabilities not provided for:

i. Aggregate Central Excise duty of Rs 151.52 lacs and Rs 4.88 lacs demanded by the respective authorities are disputed amounts and not acknowledged as debts. In the opinion of the management these demands are not payable, as the company has preferred an appeal against them. The same shall be charged to revenue in the year the demands are determined and paid. The company has made a deposit of Rs. 15.00 lacs and Rs. 1.00 lac with the Central Excise for pursuing the appeal.

ii. The Income Tax Department has approached the Appellate Tribunal against the order of CIT(A). The amount disputed is depreciation of Rs. 45.61 Lacs which was attributed to increase in value of assets on account of foreign exchange fluctuation. The Appellate Tribunal has ruled in favour of the Company in the hearing held on 2nd August, 2012.

iii.The High Court has ruled in favour of the Company in the case against the Asst. PF Commissioner, and the case is dismissed. The Company has asked for refund of its deposit amount and subsequently the PF Authorities are conducting an enquiry u/s 7A for assessment during the exemption period, after which the amount will be refunded to the Company.

iv. In respect of pending assessments with the Government bodies and authorities, amounts payable towards additional demands, interest and penalty, if any, shall be charged to revenue account in the year in which such demands materialize and is paid, the amount being unascertainable.

v. The Company has an Export Obligation on duty free imports the details of which are as follows:

a) Rs. 82,79,368/- equivalent to USD 1,73,028 to be completed by 13.10.2012.

b) Rs. 1,95,04,095/- equivalent to USD 4,81,582 to be completed by 02.06.2016.

c) Rs. 1,64,47,903/- equivalent to USD 3,80,739 to be completed by 04.09.2016.

The Company has already completed the required exports against the licences mentioned above and are in the process of getting the licences closed. The Company has already received from DGFT the permission for closure of licence mentioned in point (a & c) and has applied to the customs for release of the guaranty provided to them. Permission from DGFT is awaited for the licences mentioned in point (b).

3) Assets aggregating to Rs.60.14 Lacs were acquired on lease for five years. The lease period has expired on 31.12.2002. Moreover, the company has to pay Rs.82.87 Lacs to the lessor as on 31.3.2004. The lessor has also filed a case against the company for non-payment of lease rent in time. Any additional interest and/or penalty for delay in making lease rents shall be charged to revenue in the year of payment, the amount being unascertained, no provision for the same is made. The company has not yet been able to settle with the lessor as part of the restructuring exercise.

4) The balances of secured and unsecured loans, sundry debtors, sundry creditors, current liabilities, loans, and advances are subject to confirmation and reconciliation. Adjustments, which may arise on receipts of confirmation and completion of reconciliation, are not ascertainable at this stage.

5) The Company used to adjust the foreign currency exchange rate differences on amounts borrowed for acquisition of fixed assets, to the carrying cost of fixed assets in compliance with Revised Schedule VI to the Companies Act, 1956 as per legal advice, which was at variance to the treatment prescribed as per Accounting Standard 11. During the Current year, the Foreign Exchange rate difference has been taken in the Profit & Loss Account.

6) Segment information:

a) Primary Segment.

In accordance with Accounting Standard 17 "Segmental Reporting" issued by the Council of the Institute of Chartered Accountants of India, the Company has determined its business segment as manufacturing of grey fabrics. There are no other primary reportable segments.

7) The Company has accumulated losses which have exceeded the networth of the company. The company has been declared sick by BIFR vide its letter dt. 1.3.2006 having case No. 322/02 on directive of AAIFR. Bank of Baroda has been appointed as the Operating Agency, and they are preparing and submitting a revised rehabilitation scheme and to the Hon'ble BIFR. The accounts are prepared on a going concern basis.

8) Taxation:

No provision of Income Tax has been made as the Company is registered with BIFR and is not required to pay MAT under Section 115-JB of the Income Tax Act as the said section is not applicable to a Company registered with BIFR and having negative net worth on the opening day of the financial year. Moreover, the auditor has relied upon the opinion produced by the Management of the Company, in the matter.

9) Employee Benefit:-

i. The liability for compensated absence carried forward on the balance sheet date is provided by the management. The Company has made a provision for leave pay to Rs. 2.41 lac (previous year of Rs. 0.021 lacs).

ii. During the year company makes annual contribution to a Gratuity Fund administered and managed by the Life Insurance Corporation of India. The company accounts its liability for gratuity benefit based on valuation done by LIC as at balance sheet date. The company paid annual contribution to Gratuity fund of Rs. 0.15 lacs in current year (previous year gratuity provided of Rs. 1.71 lacs).

10) Loans and Advances include Rs.41.83 lacs (previous year 29.05 lacs) recoverable from various government authorities towards refund of electricity duty, CST and VAT. The management is pursuing the matter and is hopeful of recovering the same

11)The accounts have not been authenticated by a whole-time company secretary as the Company does not presently have a whole-time company secretary as required by Section 383 A(1) of the Act.

12) The Company has incorporated a subsidiary company named M/s Force Protective Solutions Pvt. Ltd. during the year and hence disclosure in respect of Loans and Advances pursuant to Clause 32 of the Listing Agreement is applicable to the Company.

13) The amount transferred to investor and education fund Rs. Nil (Previous year Rs. Nil).

14) The Company does not possess information as to which of its suppliers is Small Scale Industrial Undertakings holding permanent registration certificate issued by the relevant authorities. Consequently, the liability, if any, of interest which would be payable on delayed payments under Small Scale and Ancillary Industrial Undertakings Act, 1993, of India cannot be ascertained. However, the Company has not received any claim in respect of such interest. In view of the above, outstanding dues to Small Scale Industrial Undertaking cannot be ascertained.

15) Figure for previous year have been regrouped/rearranged wherever necessary.

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Mar 31, 2010

1) Contingent Liabilities not provided for:

i. Aggregate Central Excise duty of Rs 151.52 lacs and Rs 4.88 lacs and provident fund of Rs 9.98 lacs demanded by the respective authorities are disputed amounts and not acknowledged as debts. In the opinion of the management these demands are not payable, as the company has preferred an appeal against them. The same shall be charged to revenue in the year the demands are determined and paid. The company has made a deposit of Rs. 15.00 lacs and Rs. 1.00 lac with the Central Excise and Rs. 2.00 lacs with the Employees Provident Fund Organisation for pursuing the appeal.

ii. In respect of pending assessments with the Government bodies and authorities, amounts payable towards additional demands, interest and penalty, if any, shall be charged to revenue account in the year in which such demands materialize and is paid, the amount being unascertainable.

iii.The Company has an Export Obligation on duty free imports the details of which are as follows:

a) Rs. 82,79,368/- equivalent to USD 1,73,028 to be completed by 13.10.2012.

b) Rs. 1,95,04,095/- equivalent to USD 4,81,582 to be completed by 02.06.2016.

c) Rs. 1,64,47,903/- equivalent to USD 3,80,739 to be completed by 04.09.2016.

The Company has already completed the required exports against the licences mentioned in point (a) and (b) above and are in the process of getting the licences closed. The Company would meet the required export obligation for closure of licence mentioned in point (c) above in the next financial year itself.

2) Assets aggregating to Rs.60.14 Lacs were acquired on lease for five years. The lease period has expired on 31.12.2002. Moreover, the company has to pay Rs.82.87 Lacs to the lessor as on 31.3.2004. The lessor has also filed a case against the company for non-payment of lease rent in time. Any additional interest and/or penalty for delay in making lease rents shall be charged to revenue in the year of payment, the amount being unascertained, no provision for the same is made. The company has not yet been able to settle with the lessor as part of the restructuring exercise.

3) The balances of secured and unsecured loans, sundry debtors, sundry creditors, current liabilities, loans, and advances are subject to confirmation and reconciliation. Adjustments, which may arise on receipts of confirmation and completion of reconciliation, are not ascertainable at this stage.

4) Additional information pursuant to the provisions of paragraphs 3 and 4C of Part II of Schedule VI of the Companies Act, 1956.

5) The Company used to adjust the foreign currency exchange rate differences on amounts borrowed for acquisition of fixed assets, to the carrying cost of fixed assets in compliance with Schedule VI to the Companies Act, 1956 as per legal advice, which was at variance to the treatment prescribed as per Accounting Standard 11.

The Ministry of Corporate Affaires, G.O.I, vide Notification No. G.S.R. 225 (E) dated 31st March 2009, notified the Companies (Accounting Standards) Amendment Rules, 2009 (the said Rules) wherein option is given for adding or deducting the exchange rate variation from the cost of depreciable capital assets in respect of long term foreign currency loans upto 31.03.2011. The Company has, therefore, opted for adjusting the foreign currency exchange rate difference to the carrying cost of fixed assets as per the said Rules and the exchange gain of Rs. 18.02 lacs has been reduced from the Fixed Assets / Capital Work in Progress (Exchange loss of Rs. 18.80 Lacs included in Fixed Assets in the previous year), due to which the depreciation for the current financial year is lower by Rs. 0.95 lacs.

6) Segment information:

a) Primary Segment.

In accordance with Accounting Standard 17 "Segmental Reporting" issued by the Council of the Institute of Chartered Accountants of India, the Company has determined its business segment as manufacturing of grey fabrics. There are no other primary reportable segments.

7) Related Party Disclosure:

Related Party Disclosures as required by Accounting Standard 18, "Related Party Disclosures, issued by the Institute of Chartered Accountants of India are given below:

a) There is no listed Company under the same management within the meaning of Section 370 (18) of the Companies Act, 1956.

b) There are 1 active business operations which fall in the definition of enterprises under common control and enterprises where Key management personnel together with relative exercise significant influence.

c) Key Management personnel Managing director and other director of the company.

d) Relatives of Kev manaaement Dersonnel.

8. The Company is incurring losses and hence the accumulated losses have exceeded the networth of the company. The company has been declared sick by BIFR vide its letter dt. 1.3.2006 having case No. 322/02 on directive of AAIFR. Bank of Baroda has been appointed as the Operating Agency, and they had prepared and submitted a report for rehabilitation and restructuring including expansion, to BIFR. BIFR vide its letter dated 13.04.2010 has asked the Company to submit the revised DRS based on the audited Balance Sheet as at 31st March, 2010 and resubmit the rehabilitation scheme. The accounts are prepared on a going concern basis.

9) Taxation:

No provision of Income Tax has been made as the Company is registered with BJFR and is not required to pay MAT under Section 115-JB of the Income Tax Act as the said section is not applicable to a Company registered with BIFR and having negative net worth on the opening day of the financial year. Moreover, the auditor has relied upon the opinion produced by the Management of the Company, in the matter.

10) The Company has made a provision for leave pay tofts. 2.43 lacs (previous year of Rs. 2.58 lacs) and gratuity amounting to Rs, 1.73 lacs (previous year of Rs. 2.23 lacs), as against provision made during the last year for leave pay and gratuity at Rs. 4.81 lacs The amount is provided for all employees who have completed one year of service.

11) Advances recoverable in cash or in kind include Rs.22.88 lacs (previous year 22.88 lacs) recoverable from various government authorities towards refund of electricity duty, CST and VAT as against Rs. 22.88 Lacs of advances receivable in the last year towards the same The management is pursuing the matter and is hopeful of recovering the same.

12) The accounts have not been authenticated by a whole-time company secretary as the Company does not presently have a whole-time company secretary as required by Section 383 A(1) of the Act.

13) The Company does not have any subsidiary and/or associates and hence disclosure in respect of Loans and Advances pursuant to Clause 32 of the Listing Agreement is not applicable to the Company.

14) The amount transferred to investor and education fund Rs. Nil (Previous year Rs. Nil).

15) The Company does not possess information as to which of its suppliers is Small Scale Industrial Undertakings holding permanent registration certificate issued by the relevant authorities. Consequently, the liability, if any, of interest which would be payable on delayed payments under Small Scale and Ancillary Industrial Undertakings Act, 1993, of India cannot be ascertained. However, the Company has not received any claim in respect of such interest. In view of the above, outstanding dues to Small Scale Industrial Undertaking cannot be ascertained.

16) Figure for previous year have been regrouped/rearranged wherever necessary.

17) Additional information pursuant to Part IV of Schedule VI of the Companies Act, 1956.