DIRECTORS' REPORT

DEAR SHAREHOLDERS,

Your Directors hereby present the 81st Annual Report and the audited accounts of the Company for the year ended 31st March, 2015.

STATE OF THE COMPANY'S AFFAIRS

During the year under review, both the segments of your Company i.e .sugar and alcohol passed through a very difficult and painful period.

The Sugar Industry in U.P. suffered heavy loss during the year due to combination of extraneous factors such as high sugarcane price, unremunerative sugar price, higher production of sugar on all India basis in the last 5 years i.e 244 Lac tones in 2010-11, 263 Lac tones in 2011-12, 251 Lac tones in 2012-13 and 244 lac tones in 2013-14. The production for sugar season 2014-15 is also expected to be around 280 Lac tones. With this excess production in 2014-15 season and carry-forward stock of 95 Lac tones as on 1st October, 2014, the sugar price fell by about Rs.700-800 per quintal resulting in heavy losses of Rs.65 Crores in Shamli  Sugar Mill Unit.  In the existing scenario sugar units are not covering the cost of production.

REFERENCE TO BIFR

Last year the accumulated losses of the Company have exceeded its entire net worth. Therefore the Company has become sick industrial Company under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 and the fact was reported to the BIFR as required under the provisions of section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 and relevant Form"A" was duly filed with The Registrar of BIFR, who had asked the Company to file revised form "A" along with balance sheet in which assets and liabilities of unit Unn Sugar Complex are not depicted. The relevant adjustment entries regarding sale of unit Unn Sugar Complex are recorded in the books appearing in the accounts for the year ended 31.03.2015. The revised Form "A" shall be/has been submitted after the approval of the accounts of the company for the year ended 31st March, 2015 by the Board of Directors of the Company.

FINANCE

The Bankers have a view that in the absence of reasonable cane price formula which has made sugar production unviable in U.P. was mainly due to industry's inability to pay their debts. During the year 2014-15 the SBI have approved renewal cum reduction proposal to reduce the working capital limit from Rs.104 Crores to Rs.70 Crores which was to be converted into WCTL. Due to security related issues, the conversion of CC limit of Rs.70 Crores into WCTL could not be completed by 31.03.2015, therefore the amount of Rs.64.66 Crores standing in the company's account is shown under the Cash Credit limit. The PNB has only reviewed the limit of Rs.41 Crores for the year 2014-15, out of which only Rs.20 Crores was disbursed to us and declined to disburse the balance Rs.21 Crores. The District Coop.Bank Ghaziabad and Bulandshahr from whom we have taken Rs.50 Crores during last season 2013-14 only DCB, Ghaziabad have extended their Cash Credit Limit of Rs.30 Crores for the year 2014-15 against their outstanding balance amount of Rs.20.34 Crores pertaining to balance of last season. In this way the Company can get cash credit limit of only Rs.105.24 Crores as against the total requirement of Rs.160 Crores. The bankers fear about the increase in Non Performing Assets (NPA) after the Supreme Court order in October, 2014 up-holding the High Court decisions that farmer's have the first right over the realization from sugar cane and not the bankers. After the Supreme Court verdict the bankers are virtually forced not to recon sugar as security and are asking promoters and directors of the sugar mills to give their personal guarantee.

The State Bank of India and Punjab National Bank Chairpersons have also written to the U.P. Govt. to finalise the cane pricing formula keeping in view the interest of entire stake holders i.e. Farmers, Sugar Mills and Bankers.

SALE OF UNIT UNN SUGAR COMPLEX

The Company has sold its unit Unn Sugar Complex by execution of slum sale deed on 07.09.2014 to M/s.Superior Foodgrains Pvt. Ltd., Chandigarh for a consideration of Rs. 75.50 Crores. The sale of the unit Unn Sugar Complex was approved by the Board of Directors of the Company in their meeting held on 04.01.2014 and by the shareholders' approval by postal Ballot was taken on 27th February, 2014.

The exceptional item above represents net of capital profit of Rs.16.51 Crores after adjusting loss of Rs.1.67 Crores on transfer of stores.

TRANSFER TO RESERVES

Loss for the year Rs. 30,94,08, 269/- has been transferred to General Reserves.

DIVIDEND

In view of the present financial crisis of the company, your directors regret their inability to recommend any dividend for the year ended 31st March, 2015.

FIXED DEPOSITS

The total amount of fixed deposits as on 31.03.2014 was Rs.1740.99 Lacs and the same has been repaid by the Company to the Depositors during the financial year 2014-15.

Material changes and Commitments affecting financial position between end of the financial year and date of the report.

There have been no material changes and commitments affecting financial position between end of the Financial year and date of report.

CANE DEVELOPMENT

Due to vigorous efforts made by the Management and action plan made for sugarcane development, area under cultivation of high sugar varieties of cane has increased in unit Upper Doab Sugar Mills. Further due to increased area under improved variety, ensuring cane crop free from insects, pests, diseases and optimum uses of Phosphatic and pottasic fertilizers in the season 2014-15, Pol% cane has increased by 0.29% comparing with season 2013-14. This has resulted in higher % of average sugar recovery in current season as compared to previous season 2013-14. We are further making efforts to increase area under high sugar varieties from 19% to 45% as well as replacement of rejected and low pol varieties from 41% to 26% in the next season 2015-16. With this varietal balance, cane cut to crush would be improved and supply of dried cane in the coming season will be reduced. By these efforts the Pol% cane would be increased to 11.90% in the coming season 2015-16.

DISTILLERY UNIT

The production in the unit Shamli Distillery & Chemical Works in the financial year 2014-15 was 6428526 BL as compared to 70,66,191 BL during F.Y.2013-14. The fall in the production is mainly due to closure of distillery unit for 4 months from July, 2014 to October, 2014 by agitating cane growers who were demanding cane price payment of the season 2013-14.

There was a profit of Rs.303.87 Lacs in the F.Y. 2014-15 as against the profit of Rs. 451.22 Lacs in the FY 2013-14 in the distillery unit. Further analysis of operating performance for sugar and distillery segments is covered under "Management Discretion and Analysis", which form part of this report.

DIRECTORS:

In the last Annual General Meeting held on 22.09.2014 shareholders appointed Sh. Onke Aggarwal, Sh. R.C.Sharma and Sh. Hemant Pat Singhania as Independent Directors of the Company for a period of five consecutive years from 22.09.2014 to 21.09.2019 in terms of section 149 and 152 of the Companies Act, 2013 and Companies (Appointment and qualification of Directors) rules 2014 and clause 49 of the Listing Agreement.

The term of appointment of Sh. Onke Aggarwal as Chairman of the Board of Directors of the Company was expiring on 10.03.2015. The Board of Directors of the Company re-appointed Sh.Onke Aggarwal as Chairman of the Board of Directors of the Company for a further period of one year w.e.f.11.03.2015.

In accordance with the provisions of Companies Act, 2013(the Act) and the Company's Article of Association, Sh. R.L. Srivastava and Sh. Rahul Lal retire by rotation under section 152 of the Act, and being eligible offer themselves for re-appointment at the ensuing Annual General Meeting.

The Board of Directors of the Company had appointed Sh. Ajit Hoon as an Additional Director w.e.f. 01.11.2014 u/s 161 of the Companies Act, 2013. Sh. Ajit Hoon holds office only upto the date of 81st Annual General Meeting of the Company. The Company has received a notice in writing alongwith a deposit of Rs. 1 Lac from a member, u/s 160 of the Companies Act, 2013, signifying the intention to propose the candidature of Sh. Ajit Hoon as a Director of the Company, subject to retirement by rotation.

The required information pursuant to clause 49 of the Listing Agreement providing their experiences, qualifications, name of the company in which the above directors' board directorship and membership of the committee of the board are detailed in the notice convening the annual general meeting against the relevant items of the agenda which forms part of this annual report.

Necessary Resolutions for appointment/re-appointment of aforesaid directors have been included in the notice convening the ensuing Annual General Meeting.

None of the directors of the company is disqualified from being appointed as director as specified in terms of section 164 (1) and (2) of the Companies Act, 2013.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION AND OTHER DETAILS

The guidelines for selection of director are set out below:

The Board's Nomination and Remuneration Committee oversees the Company's nomination process for directors. The Committee identifies and review individual qualified candidate to serve as a director on the board. The Committee may act on its own identifying the potential candidate. The Committee review and discuss details pertaining to the candidate and conduct evaluation of candidates in accordance with the process that it seems fit and appropriate, discuss with the promoters, and send its recommendation for nomination to the board based on the following guidelines.

ATTRIBUTES

1. For Independent Directors the Committee seeks candidate who is not a nominee or related to promoter of the company. Such candidates shall posses integrity, leadership, skill, managerial qualities, foresight abilities and competency required to direct and oversee the Company's management in the best interest of stake holders i.e. shareholders, consumers, employees and the community it serves.

2. The candidate must be willing to regularly attend the meeting of the board and develop a strong understanding of the Company, its business and its need. He must contribute his/ her time and knowledge in the Company and be prepared to exercise his/her duties with skill and care. Candidates should have understanding of governance concept and legal duties of a director.

3. The Candidate should preferably have sufficient experience on the board of a listed company.

4. For appointment of Executive Directors the Committee also seeks opinion of promoters.

KEY MANAGERIAL PERSONNEL

The board of directors have appointed following Key Managerial Personnel as provided under section 203 of the Companies  Act, 2013.

1. Sh. Rajat Lal, Managing Director

2. Sh. P.K.Goyal, Chief Financial Officer.

3. Sh. Akhilesh Kr.Singh, Company Secretary.

Sh. P.K.Goyal, who was earlier discharging the responsibilities of Company Secretary and Chief Financial Officer has been appointed as Chief Financial Officer w.e.f. 01.11.2014 and Sh. Akhilesh Kumar Singh has been appointed as Company Secretary w.e.f. 01.11.2014

INDEPENDENT DIRECTORS' DECLARATIONS

The declaration, from independent directors under section 149 (6) of Companies Act 2013 and clause 49 of the listing agreement with the stock exchanges, have been received.

INDEPENDENT DIRECTORS MEETING

A separate meeting of the independent directors (Annual Independent Directors Meeting) was convened which reviewed the performance of Board as a whole and the non independent directors on the basis of Nomination and Remuneration Committee Report. The collective feed back of each independent director was discussed with the board covering performance of the board as a whole and performance of non independent directors.

PERFORMANCE EVALUATION OF CHAIRMAN, DIRECTORS, BOARD AND COMMITTEES

Pursuant to the provisions of Section 178 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the performance evaluation of Non Independent Directors, Board and Committees was undertaken by the Nomination and Remuneration Committee for the year under review. The report of non independent directors as done by the Nomination and Remuneration Committee is reviewed by Independent Directors.

The Performance Evaluation of Chairman and Independent Directors is done by the board and the report of nomination and  remuneration committee for non independent director as reviewed by the independent director is placed before the board of directors. The criteria for Performance and evaluation is mentioned in the Corporate Governance.

The Evaluation frame work for assessing the performance of Directors, Board and Committee is done on the following parameters:

A. Board Evaluation

1. Attendance and active participation.

2. Knowledge of working of industry, experience in related issues.

3. Leadership and initiative.

4. Independent judgments on the board discussions utilizing his knowledge and experience especially on issues related strategy, operational performance and risk management.

5. Commitment to role and fiduciary responsibility as a board member.

6. Understanding the nature in directors role, demonstrate awareness and concern about norms related to corporate governance, disclosure and legal compliance.

7. Contribute new ideas/advise to management on business issues based on the management

B. Committee Performance

1. The Committee is delivering on the defined objectives.

2. The Committee has the right composition to deliver its objective.

REMUNERATION POLICY

The Board has, on the recommendation of the Nomination & Remuneration Committee, framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report.

MEETINGS

A calendar of Meetings is prepared and circulated in advance to the Directors.

During the financial year 2014-15 six Board Meetings were held on 27.05.2014, 26.07.2014, 02.08.2014, 22.09.2014, 01.11.2014 and 06.02.2015. The details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirements of sub-section 134(5) of the Act  with respect to Directors' Responsibility Statement, the Directors confirm that:

i) in the preparation of the Annual Accounts for the year ended March 31, 2015, the applicable Accounting Standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;

ii) they 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 as at March 31, 2014 and of the loss of the Company for the financial year ended on that date;

iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv) they have prepared the Annual Accounts of the Company on a 'going concern' basis.

v) they have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

RELATED PARTIES TRANSACTIONS

There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel and other designated persons which may have a potential conflict with the interest of the Company at large. All related party transactions are placed before the Audit Committee and also Board for approval. The form for disclosure of particulars of Contract / arrangements entered into by the Company with related parties referred to sub section (1) of Section 188 of the Companies Act 2013 in form AOC-2 is given below:

PARTICULARS OF LOAN, GUARANTEE AND  INVESTMENTS

The Company has not made any loans or investment or given any guarantee during the year under review.

SUBSIDIARY COMPANIES

The Company does not have any subsidiary, joint venture or associate Company.

CODE OF CONDUCT

Code of Conduct for the Directors as well as for the members of the Senior Management of the company was adopted in the Board Meeting held on 4th April, 2005 which was subsequently amended from time to time. The Code is intended to serve as a basis for ethical decision-making in conduct of professional work. The Code of Conduct states that each individual in the organization must know and respect existing laws, accept and provide appropriate professional views and be upright in his conduct and observe corporate discipline. The said Code of Conduct has been circulated to all the Directors and Members of Senior Management and the compliance of the same has been affirmed by them in respect of the Financial Year 2014-15 and a declaration to that effect signed by the Managing Director is detailed below and forms part of this report. A copy of Code of Conduct has also been put up on the Company's Website - www. sirshadilal.com A declaration regarding compliance of Code of Conduct is given by the Managing Director under the head Code of Conduct that Board Members and Senior Management team have complied with the same, under Corporate Governance.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has a vigil mechanism named Whistle Blower Policy/ Vigil Mechanism to deal with instance of fraud and mismanagement, if any.

A Vigilance Committee has been constituted which looks into the complains raised. The Committee reports to the audit committee and the Board.

The details are given in Corporate Governance.

PREVENTION OF INSIDER TRADING

The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires pre-clearance for dealing in the Company's shares and prohibits the purchase or sale of Company shares by the Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed. The Board is responsible for implementation of the Code.

All Directors and the designated employees have confirmed compliance with the Code.

AUDITORS

In terms of section 139 of the Companies Act, 2013 and rules made thereunder, M/s.Basant Ram & Sons, Chartered Accountants, (firm registration No.000569N) were appointed as Auditors of the Company from the closure of 80th Annual General Meeting of the Company held on 22nd September, 2014 for a period of three years upto 83rd Annual General Meeting of the company to be held in the year 2017. The appointment ofAuditors is subject to ratification on every Annual General Meeting of the Company. M/s. Basant Ram & Sons, Chartered Accountants, New Delhi are eligible for ratification of their appointment in this Annual General Meetings. They have furnished certificate to the effect that ratification of their appointment will be within the limits specified under section 159 of the Act.

COMMENTS ON AUDITOR'S OBSERVATIONS

(i) Reply to Paragraph No 1 of "Emphasis of Matters" in Auditor's Report

The Auditors have referred to note No.3.8 regarding potential sickness ofthe company and reference to the BIFR under section 15(1) of the Sick Industrial Companies (Special Provision) Act, 1985. The note itself is self explanatory. The revised Form A shall be submitted to the Registrar, BIFR shortly.

(ii) Reply to Paragraph No. 2 of "Emphasis of Matters" inAuditor's Report regarding Deferred Tax Assets.

The Company has recognized the deferred Tax Assets in accounts to comply the requirement of "Accounting Standard-22". As the Company has been incurring continuous losses for the last five years, and in the absence of future projections of Profitability, the recovery of deferred Tax Assets at Rs.68.81 Crores is uncertain. The Board has decided that in future the Company will not make provision for Deferred Tax Assets, until the Company accumulated deferred Tax Assets of Rs.68.81 Crores is recovered.

(iii) Reply under the head opinion of the Auditors Report

The Company have taken legal opinion from its lawyers regarding recovery of Rs. 150.38 Lacs from M/s. Sainov Spirits Pvt Ltd. against the sale of unit Pilkhani Distillery & Chemical Works as a going concern. As per opinion of the Solicitor there is no legal basis to construe Company's entitlement to the said amount of Rs. 150.38 Lacs as irrevocable and if the company treat it doubtful of recovery at any stage and make any treatment in the books of accounts, it may affect adversely the legal proceedings of recovery of debt. Therefore in view of the above opinion, the Company has not made any provision for bad and doubtful debts in the books of accounts.

(iv) Reply to Point No. IX in annexure to Independent Auditors Report referred to paragraph no. 1 under the heading of report on other legal and regulatory requirements

(a) As regards the unpaid balance of SBI Rs.646576381/- to the SBI the bank has approved renewal cum reduction proposal of Company on 17.04.2014 to reduce the working capital from Rs.104 Crore to Rs.70 Crores which was subsequently to be converted into WCTL of Rs. 70 Crores. Due to security related issues the conversion of CC limit to WCTL could not be completed up to 31.03.2015 and the amount of Rs. 643576381/- could not be converted into WCTL u to 31.03.2015.

(b) As per Hon'ble High Court Allahabad decision dated 5th September, 2014 the cane price for the season 2013-14 was to be paid upto 31.10.2014. The court for this purpose directed the District Magistrate of the concerned districts to ensure the payments of cane price arrears. After the Supreme Court upholding High Court Decision that farmers have the first right over the realization from sugar sale and not the bankers, the district administration sold the stock of sugar pledged to the District Cooperative Bank, Ghaziabad for payment of cane arrear. Therefore the amount of Rs. 20,33,85,431/- could not be paid to the bank on due date.

COST AUDITORS

The Shareholders of the Company approved appointment of Sh.Rishi Mohan Bansal, Cost Auditor for conducting the Cost Audit for Sugar and Industrial Alcohol business for the F.Y. 2014-15.

The Cost Audit Report for the last audited accounts for the Financial Year ended 31.03.2014 was filed by the Cost Auditor with respect to Sugar and Industrial Alcohol business on 07.08.2014 which is within the due date. There is no adverse or negative remark in the Cost Audit Reports.

SECRETARIAL AUDIT REPORT

The Board of Directors of the Company appointed M/s. Sunil Kumar Jain and Associates, Company Secretaries, to conduct the secretarial audit for the financial year ended 31st March, 2015.

The Secretarial Audit Report for the financial year ended 31st March, 2015 is annexed as "Annexure - 1" to the Directors' Report.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of Annual Return in form MGT-9 is annexed with "Annexure-2"

DISCLOSURE OF RATIO OF REMUNERATION OF  DIRECTORS AND KEY MANAGERIAL PERSONNEL

As required under Section 197(12) read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the details of the ratio of the remuneration of each director to the median employee's remuneration and such other details as prescribed therein are given in "Annexure - 3", which is attached hereto and forms part of the Directors' Report.

PARTICULARS OF EMPLOYEES

The information required pursuant to section 197 (12) read with rule 5 of the companies (Appointment and remuneration of managerial personnel) rules, 2014 in respect of the employees of the company are given in "Annexure - 3" and forms part of this report.

DETAIL OF SHARES WITH DIFFERENTIAL VOTING

RIGHT, SWEAR EQUITY SHARE AND ESOP SCHEME

The Company has not issued shares with differential voting right and sweat equity shares. There is no scheme of ESOP Scheme during the financial year. Contd.....

SIGNIFICANT AND MATERIAL ORDERS

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operation in future.

RISK MANAGEMENT

Pursuant to section 134 (3) (n) of the Companies Act, 2013 & Clause 49 of the listing agreement, the company has constituted a business risk management committee. The details of the committee and its terms of reference and risk associated and their mitigation are set out in the corporate governance report forming part of the Boards report.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has an internal control system, commensurate with the size, scale and complexity of its operations to maintain its objectivity and independence, the Internal Audit Department reports to the Audit Committee of the Board. The details of the Internal Control System and their adequacy are given in the Corporate Governance.

CORPORATE SOCIAL RESPONSIBILITY

Due to the continuous losses to the Company in the last five years the provisions of Corporate Social Responsibility Policy under section 135 of the Companies Act, 2013 is not applicable to our Company.

CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO

The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo as required to be disclosed under Section 134(3)(m) of the Companies Act 2013, read with Companies (Accounts), Rules, 2014 are provided in "Annexure -4" and forms part of this Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The performance of both the business segments i.e. sugar and alcohol segments of the Company for the year ended 31st March, 2015 and current year prospects as required under Clause 49 of the Listing Agreement has been detailed in the "Management Discussion and Analysis Report" in the section on Corporate Governance.

CORPORATE GOVERNANCE

The company complies with all the mandatory requirements as stipulated under Clause 49 of the Listing Agreement with Stock Exchanges. The separate section on "Corporate Governance"  including a certificate from the Practicing Company Secretary confirming compliance of the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with Stock Exchanges is given in "Annexure-5" and forms part of this Report.

LISTING ARRANGEMENT

The shares of the Company are listed with the Bombay Stock Exchange Limited and Delhi Stock Exchange Limited. The annual listing fee for the year 2015-16 has been paid to Bombay Stock Exchange Limited.

The Delhi Stock Exchange has advised the companies not to make payment of listing fee for the Financial Year 2015-16.

DISCLOSURE AS PER SEXUAL HARASSMENT OF WOMEN AT WORK AT WORK PLACE (PREVENTION,  PROHIBITION AND REDRESSAL) ACT, 2013:

he Company confirms that there is no complaint / case has been filed / pending with the Company during the financial year 2014-15.

INDUSTRIAL RELATIONS

The Industrial relations remained cordial at both the plants of the Company during the year.

APPRECIATION:

Your Directors wish to place on record their sincere thanks and appreciation for the devoted services rendered by the employees of the Company at all levels. We also place on record our appreciation to the Financial Institutions, State Bank of India, Punjab National Bank, Zila Sahkari Bank Ltd., other business associates and Government Authorities for their valuable co-operation and support from time to time. We would also like to express our thanks to our Shareholders for their continued confidence in the company.

For and on behalf of the Board of Directors of

Sir Shadi Lal Enterprises Ltd

Onke Aggarwal

Chairman

(DIN-00141124)

Place : New Delhi

Dated : 25.07.2015