DIRECTORS' REPORT Dear Members Your Directors hereby present their Thirty First Annual Report of the Company together with the Audited Accounts for the financial year ended 31st March, 2015 REVIEW OF OPERATIONS AND STATE OF COMPANY'S AFFAIRS: During the year under review, your Company could not make any sales and as such the Turnover was Rs.NIL compared to previous year of Rs.3 Lakhs and incurred a Net Loss of Rs.1341.06 Lakhs compared to previous year Net loss of Rs.1110.49 Lakhs. PERFORMANCE & FINANCE: Your company declared lock-out of its plant at Yanam with effect from 31.01.2012 after the devastating incident occurred on 27.01.2012. Since then, there is no production in the plant. DIVIDEND : Your Directors express their inability to recommend any dividend for the year under review due to insufficient disposable income. INSURANCE SETTLEMENTS: Your company submitted its claim for loss/damage to the properties of the company and provided all the supporting information as called for by the surveyors. Your company is awaiting the decision of the insurance company. LABOUR SETTLEMENTS: Your company paid full and final settlement amounts to those who have resigned from the company and waiting for the balance workmen to come forward for final settlement. Action initiated by your company against the workers involved in the Violence is pending for disposal at the Labour Tribunal. LENDERS' DUES SETTLEMENTS: Your company paid part of One Time Settlement (OTS) amount to the lenders and requested for extension of time for balance payment. However, the lenders issued a Demand Notice under section 13(2) of SARFAESI Act. State Bank of India on behalf of its bank, Corporation Bank and State Bank of Travancore issued a Possession Notice (Symbolic) under Rule 8(1) of Security Interest (Enforcement) Rules, 2002 and taken possession of the properties in exercise of powers conferred on them under section 13(4) of the SARFAESI Act on 04.03.2015. State Bank of Bikaner & Jaipur assigned and transferred the facilities sanctioned by them together with all underlying securities interests thereto to Phoenix ARC Private Limited (Trustee of Phoenix Trust - FY15-5). The lenders filed an application under section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 in the Debts Recovery Tribunal, Hyderabad for recovery of their dues. REFERENCE TO BIFR: A reference made by your company to Board for Industrial and Financial Reconstruction (BIFR) as per the provisions under section 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985 has been registered as case no. 19/2014. FUTURE OUTLOOK: Consequent to the completion of the general elections and assumption of the new governments at the center and as well as in Andhra Pradesh and Telangana states, the economic activity which had slowed down during the past few years has started picking-up. The construction activity and infrastructure activities in the country are expected to push the demand for ceramic tiles and all tile producing Companies would be able to take full advantage of the economic momentum in the coming years. Your company is in the process of resolving all pending issues including settlement of insurance claim, release of the claim amount, settlement with workmen, settlement with lenders, settlement with statutory authorities, suppliers and other creditors. Your company is also pursuing with Central and State government for extending support by way of reliefs, concessions, grants, etc. for recommencing plant operations. INSURANCE All properties and insurable interests of the Company including building, plant and machinery and inventory were being fully insured at the reinstatement values every year. However, after the incident of 27.01.2012, the Insurance companies denied insurance coverage for the good assets as the assessment could not be completed. CORPORATE GOVERNANCE As per Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on corporate governance practices followed by the Company, together with a certificate from Company's Auditors confirming compliance forms an integral part of this report. EXTRACTS OF ANNUAL RETURN The Extracts of Annual Return is prepared in Form MGT-9 as per the provisions of the Companies Act, 2013 and Rule 12 of Companies (Management and Administration) Rules, 2014 and the same is enclosed as Annexure - 1 to this Report. DIRECTORS: In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Company's Articles of Association, Mr. N. Satyendra Prasad, Director retires by rotation at the forthcoming Annual General Meeting and being eligible offers himself for re-appointment. Further, the tenure of Mr. N. Satyendra Prasad as a Executive Director will expire on 31.07.2015 and the Board of Directors at its meeting held on 29.05.2015 re-appointed him as Executive Director of the Company for further period of 5 years with effect from 31.07.2015 on terms and conditions as mentioned in the notice of the meeting . The Board of Directors at its meeting held on 14th November 2014 has appointed Smt G. Vijaya Vani as an Additional Director of the Company. As per Section 161(1) of the Companies Act, 2013, the above said Additional Director holds office only up to the date of this Annual General Meeting of the Company. A notice has been received from a member proposing her as a candidate for the office of Director of the Company with effect from 14th November, 2014 to hold office for five consective years for a term up to 14th November, 2019 as Independent Director as mention in the resolution. NUMBER OF MEETINGS OF THE BOARD The details of the number of meetings of the Board held during the financial year 2014-15 forms part of the Corporate Governance Report. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY THE COMPANY The details of Loans, Guarantees, Investments given during the Financial Year ended on 31st March, 2015 in terms of the provisions of Section 186 of the Companies Act, 2013 read with Companies (Meetings of Board and its Powers) Rules, 2014: NIL REMUNERATION AND NOMINATION POLICY The Board of Directors has framed a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. This policy also lays down criteria for selection and appointment of Board Members. The details of this policy are explained in Corporate Governance Report. STATEMENT OF PARTICULARS OF APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL There are no employees in the Company withdrawing remuneration in excess of Rs. 5 lakhs and the median remuneration of managerial personnel has not been disclosed as no remuneration is being paid to the Key Managerial Personnel of the Company. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES The particulars of contracts or arrangements with related parties referred to in subsection (1) of Section 188 of the Act, are prepared in Form No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 : NIL DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, with respect to the Directors' Responsibility Statement, the Board of Directors of the Company hereby confirms: 1) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; 2) that the Directors had 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 the financial year and of the profit and loss of the company for that period; 3) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; 4) That the Directors have prepared the accounts for the financial year ended 31st March, 2015 on a "Going Concern" basis. 5) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. STATUTORY AUDITORS M/s Brahmayya & Co., Chartered Accountants, Hyderabad were appointed as Statutory Auditors of the Company to hold office until conclusion of Thirty First Annual General Meeting. The Board pursuant to the recommendation of Audit Committee of the company now recommends the re-appointment of M/s Brahmayya & Co., Chartered Accountants, Hyderabad as statutory auditors to hold office from the conclusion of this Annual General Meeting until the conclusion of next Annual general Meeting and authorized the Board of Directors to fix their remuneration. The Company has received a letter from them to the effect that their appointment, if made, would be within the prescribed limits under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for appointment. AUDITORS REPORT M/s.Brahmayya & Co., Chartered Accountants (ICAI Regn. No.000513S) have issued Auditors Report for the Financial Year ended 31st March, 2015 being annexed to this Annual Report. The Auditors' comments in the Report are self-explanatory. Auditor's Remarks: i. Referring to Para on basis for qualified opinion of the Auditors' Report, the Directors would like to refer Notes forming part of Accounts which is self explanatory. The reference to note numbers are as under : COST AUDITORS: The Board of Directors, on the recommendation of Audit committee has appointed M/s. Badri Prasad & Associates, Practicing Cost Accountants, Hyderabad as Cost Auditor to audit the cost accounts of the Company for the financial year 2015-16. The Cost Audit Report for the financial year 2014-15 was not applicable to the company. CUSTOMS, EXCISE, INCOME TAX & OTHER MATTERS: 1. Your Company preferred appeals before the Hon'ble CESTAT, Bangalore against the demand from Customs & Central Excise Department (Service Tax Cell) for service tax on installation, erection and commissioning of plant & machinery imported during the year 2005-06 and on GTA services during the year 2008-09, though paid by the service provider. 2. The income Tax Appellate Tribunal, Hyderabad disposed of the appeal preferred by the Company partly in its favour on the demand from Dy Commissioner of Income Tax, Hyderabad in respect of Assessment year 2004-05 for disallowance of additional depreciation, for which the company is eligible under the Act. 3. Yanam Muncipality has demanded Property Tax of Rs.32.35 lakhs for the years from 1998-99 to 2006-07 and your company disputed the same as the grounds are not just proper and reasonable. SECRETARIAL AUDIT Pursuant to the provisions of Section 204 of the Companies Act, 2013, and rules made there under, the Company has appointed Mr. K.V.Chalama Reddy, Practicing Company Secretary as Secretarial Auditor to undertake the Secretarial Audit of the company for the Financial year ended on 31st March, 2015. Secretarial Audit Report issued by Practicing Company Secretary in Form MR-3 is enclosed as Annexure - 2 to this Annual Report and certificate is enclosed as Annexure - 3. With respect to observations made in the report, the explanations are as follows: Regarding the observation Nos, 01, 03, 04 and 05 of the report, the Company could not comply with the same due to current financial position of the Company. Regarding the Observation No.02, Non -compliance noticed was rectified later. DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS The Company has appointed Internal Auditors to observe the Internal Controls, whether the work flows of organization is being done through the approved policies of the Company. Internal Auditors will present to the Audit Committee the Internal Audit Report and Management Comments on the Internal Audit observations. VIGIL MECHANISM The Board of Directors of the Company has adopted Whistle Blower Policy. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees of the Company are covered under the Whistle Blower Policy. A mechanism has been established for employees to report concerns about unethical behavior, actual or suspected fraud, or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism, and allows direct access to the Chairman of the audit committee in exceptional cases. RISK MANAGEMENT POLICY The Company has a Risk Management Policy for dealing with different kinds of risks which it faces in day to day operations of the Company. Risk Management Policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Company has adequate internal control systems and procedures to combat the risk. The Risk management procedure will be reviewed by the Audit Committee and Board of Directors on a periodical basis at the time of review of Quarterly Financial Results of the Company. OBLIGATION OF COMPANY UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The Company has in place an Anti Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Woman at workplace (Prevention, Prohibition and Redressal) Act, 2013. Internal Complaints Committee has been set up to redress complaints received regarding Sexual Harassment. All employees (permanent, contractual, temporary and trained) are covered under the policy. The following is a summary of sexual harassment complaints received and disposed off during each calender year: A) No. of Complaints received - NIL B) No. of Complaints disposed off - NIL DECLARATION BY INDEPENDENT DIRECTORS The independent directors have submitted the declaration of independence, as required pursuant to section 149 (7) of the Companies Act ,2013 stating that they meet the criteria of independence as provided in sub-section 6 of Section 149 of the Companies Act 2013. CORPORATE SOCIAL RESPONSIBILITY (CSR) Corporate Social Responsibility is commitment of the Company to improve the quality of life of the workforce and their families and also the community and society at large. The Company believes in undertaking business in such a way that it leads to overall development of the stakeholders and society. Pursuant to section 134 of the Companies Act, 2013 and the relevant rules, the Board has constituted the CSR Committee under the Chairmanship of Dr. G N Naidu with the other members as required. The report on CSR activities as required under Companies(Corporate Social Responsibility) Rules, 2014 is set out as Annexure -4 forming part of this report. MATERIAL CHANGES AND COMMITMENTS There are no Material Changes and Commitments impacting the going concern status and Company's operations in future. DEPOSITS The Company has not invited/accepted any deposits from the public in terms of Section 73 of the Companies Act, 2013 during the Financial Year 2014-15. INDUSTRIAL RELATIONS: Your Company has always been known to maintain cordial industrial relations with its employees. Your Company believed in developing Human Resources at all levels by imparting continuous training, motivation to attain higher productivity, finer quality, cost control, safety and environment protection. CONSERVATION OF ENERGY: Your Company committed to energy conservation and had taken up the fuel saving technology for the manufacture of ceramic tiles and was constantly upgrading the same to reduce the consumption of gas and power. Regular maintenance and repairs of all the equipment and machinery were carried out to ensure optimum efficiency and to minimize wastage. Necessary steps were initiated for implementing the energy conservation across the plant. TECHNOLOGY ABSORPTION: Your Company was continuously endeavoring to upgrade its technology from time to time in all aspects through R&D primarily aiming at reduction of cost of production and improving the quality of the product. Your company developed several value added products and high definition designs with laser printing. ACKNOWLEDGEMENTS: The company places on record continued support and cooperation extended by the Banks and other secured lenders, Central and state government departments, GAIL, Dealers, customers, suppliers and shareholders. The Company also places on record the deep sense of appreciation for the dedicated efforts and contribution being made by employees at all levels during the year. For and on behalf of the Board Dr G N Naidu N Satyendra Prasad Chairman and Managing Director Executive Director Date : 29.05.2015 Place : Hyderabad |