n. PROVISIONS:
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the Statement of Profit and Loss net of any reimbursement.
o. EARNINGS PER SHARE:
Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
p. CASH AND CASH EQUIVALENT:
Cash and cash equivalents in the Balance Sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of charges in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company's cash management.
q. CASH DIVIDEND:
The Company recognises a liability to make cash or non-cash distributions to equity holders of the Company when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the Companies Act, 2013, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
r. CONTINGENT LIABILITIES:
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or nonoccurrence of one or more uncertain future events beyond the control of the company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The company does not recognize a contingent liability but discloses its existence in the financial statements.
2.2 SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS:
The preparation of the Company's financial statements requires management to make judgements, estimates customer will be entitled. The Company determined that the expected value method is the appropriate method to use in estimating the variable consideration for revenue from contract with customer. The selected method that better predicts the amount of variable consideration was primarily driven by the number of volume thresholds contained in the contract with the customer. Before adjusting any amount of variable consideration in the transaction price, the Company considers whether the amount of variable consideration is constrained. The Company determined that the estimates of variable consideration are not constrained based on its historical experience, business forecast and the current economic conditions.
Judgements
In the process of applying the Company's material accounting policies, management has made the following judgement, which have the most significant effect on the amounts recognised in the financial statements.
Determining the lease term of contracts with renewal and termination options - Company as lessee.
The Company determines the lease term as the noncancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customisation to the leased asset).
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
Defined benefit plans (gratuity benefits)
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuation. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.
The mortality rate is based on publicly available mortality tables for India. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for India.
Further details about gratuity obligations are given in Note 33.
Useful Life of Property, Plant & Equipment and Intangible assets
Property, Plant and Equipment and Intangible Assets are depreciated / amortised over their estimated useful life, after taking into account estimated residual value. Management reviews the estimated useful life and residual values of the assets annually in order to determine the amount of depreciation / amortisation to be recorded during any reporting period. The useful life and residual values are based on the Company's historical experience with similar assets and take into account anticipated technological changes. The depreciation / amortisation for future periods is revised if there are significant changes from previous estimates.
2.3 The Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended March 31, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
(a) The Company holds investment in equity shares of Shree Ram Electrocast Limited as subsidiary company. Due to heavy losses and non operation of Shree Ram Electrocast Limited the amount of Investment of Rs. 78.68 Crore has been written off during the financial year 2015-2016. State Bank of India has conducted auction under Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 & Movable & Immovable Property, Plant & Equipment and Inventory charged with the bank were sold during the year ended on March 31, 2020. In view of the said facts advances to the said subsidiary of Rs 1.78 Crore (March 31, 2023 Rs. 1.78 Crore), shown in Note no. 8, has been treated as Doubtful advance to the Subsidiary Company.
(b) The company holds an investment in equity shares of ET Elec-Trans Limited as subsidiary company and Bhaskarpara Coal Company Limited as a joint venture. These Companies have incurred heavy losses and / or are non-operating and therefore the fate of said Companies is uncertain. Provision for impairment of Rs. 2.13 Crore (March 31, 2023 Rs. 2.13 Crore) in the value of investment in joint ventures namely Bhaskarpara Coal Company Limited and in the value of investment in subsidiary namely ET Elec-Trans Limited Rs. 0.72 Crore (March 31, 2023 Rs. 0.72 Crore) has been provided as on April 1, 2016.
33.2 Risks associated with defined benefit plan
Gratuity is a defined benefit plan and company is exposed to the Following Risks:
Interest rate risk: A fall in the discount rate which is linked to the G.Sec. Rate will increase the present value of the liability requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending on the duration of assets.
Salary Risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level will increase the plan's liability.
Investment Risk: The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments.
Asset Liability Matching Risk: The plan faces the ALM risk as to the matching cash flow. Since the plan is invested in lines of Rule 101 of Income Tax Rules, 1962, this generally reduces ALM risk.
Mortality Risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.
Concentration Risk: Plan is having a concentration risk as all the assets are invested with the insurance company and a default will wipe out all the assets. Although probability of this is very less as insurance companies have to follow regulatory guidelines.
The details related to gratuity is on the basis of the certificate issued by the acturial valuer.
36. Default in repayment of loans, its settlement terms and Accounting Treatment
The information / details as provided in the Financial Statements are for the disclosure purpose only as per the applicable Ind Accounting Standards (Ind AS) without prejudice to the rights of the Company and without any acknowledgement of the debts / liabilities of the Company under the applicable laws.
(i) Central Bank of India
(a) The company has defaulted in repayment of the loan taken from Central Bank of India in March 2012 of Rs. 436.13 Crore (Principal of Rs. 428.94 Crore and Interest of Rs. 7.19 Crore). The company on June 29, 2022 has accepted the compromise / One Time Settlement (OTS) letter of Central Bank of India dated June 28, 2022 for their outstanding loan / credit facility. As per the settlement terms and agreement the company need to pay Rs 22.50 Crore as upfront towards the repayment of loan and Rs 202.50 Crore in thirty instalment from July 2022 to December 2024 along with the interest @ 1 year MCLR on the outstanding settlement amount. The Company is regular in payment of instalment as per the settlement terms.
(b) The amount of repayment of debt to Central Bank of India, up to the balance sheet date is Rs. 192.74 Crore (March 31, 2023 is Rs. 84.33) which has been adjusted against the total outstanding loan liability.
(c) If all the terms and conditions of the settlements are fully complied, there would be a reduction in debt by Rs. 211.13 Crore.
(ii) Rare Asset Reconstruction Limited (being assignee of debts of Indian Overseas Bank)
(a) The company has defaulted in repayment of loan of Rs 189.96 Crore (after adjustment of repayment of Rs 10.05 Crore paid during the year ended as at March 31, 2020) (Principal of Rs. 189.95 Crore and Interest of Rs. 0.01 Crore) in August 2011. Indian Overseas Bank has assigned its debts to Rare Asset Reconstruction Limited on September 28, 2017. The company is in the process of entering into a settlement agreement with Rare Asset Reconstruction Limited. As on March 31, 2024, the Company have paid Rs. 6.00 Crore as upfront payment towards commitment to settlement.
(b) The company was informed vide letter dated October 12, 2017 of Indian Overseas Bank, that the bank has assigned debts to Rare Asset Reconstruction Limited. However considering pending settlement, the outstanding loan amount is treated as current maturities of long term borrowings.
(iii) Rare Asset Reconstruction Limited (being assignee of Debts of Dena Bank)
(a) The company has defaulted in repayment of loan of Rs 51.44 Crore (Principal of Rs 51.44 Crore) in September 2011. The bank has assigned this loan to Rare Asset Reconstruction Limited. The company has entered into a settlement agreement with Rare Asset Reconstruction Limited for the repayment of loan on June 28, 2018. As per the settlement agreement the company has agreed to repay the loan by March 15, 2022. However, the company has again defaulted in repayment of loan of the instalment falling due from September 2021 till March 15, 2022 and interest. The company has submitted a revised repayment proposal to Rare Asset Reconstruction Limited which is pending for consideration.
(b) The repayment of debt to Rare Asset Reconstruction Limited, up to the balance sheet date of Rs. 23.00 Crore (March 31, 2023 is Rs. 19.00 Crore) has been adjusted against the total outstanding loan liability.
(c) If all the terms and conditions of the settlement are fully complied and subject to sanction of the revised repayment proposal, there will be reduction of debt by Rs. 23.44 Crore.
(iv) Corporation Bank (merged with Union Bank of India) and Union Bank of India
Union Bank of India (Corporation Bank merged with Union Bank of India)
(a) The company has defaulted in repayment of loan of Rs 116.73 Crore in April 2012. The company has entered into a settlement agreement for the repayment of loan on November 13, 2018. As per the settlement agreement the company has agreed to repay the loan by September 2021.
Union Bank of India
(b) The company has defaulted in repayment of Principal amount of Loan of Rs 49.40 Crore in May 2012. The company has entered into a settlement agreement with the bank for the repayment of loan in March 2017. As per the settlement agreement, the company has agreed to repay the loan by March 2023.
(c) With regard to the both the loan as stated in (a) and (b) the company has again defaulted in repayment of Installment due and interest of Rs 39.84 Crore. Thereafter the company has submitted revised repayment proposal to Union Bank of India. Based on the proposal of the Company, Union Bank of India on August 18, 2023 has approved condonation of delay in payment of OTS amount towards the outstanding due up to March 31, 2023 (both principal and Interest), where in company has agreed to pay Rs 45.00 Crore payable in seven instalments (from June 30, 2023 to December 31, 2023) and Interest is payable @ 1 year MCLR 2% on reducing balance from April 01, 2023. The company has paid all the instalments and interest due thereupon as per the OTS agreement and has received no due certificate from the bank.
(v) Edelweiss Asset Reconstruction Company Limited (being debt assignee of Bank of India, Bank of Baroda, State Bank of India,
Canara Bank and State Bank of Travancore)
(a) The company has defaulted in repayment of the loan from Bank of India in December 2012 of Rs. 628.04 Crore (Principal of Rs. 628.04 Crore), Bank of Baroda in September 2012 of Rs. 31.23 Crore (Principal of Rs. 31.23 Crore), Canara Bank in September 2012 of Rs. 232.97 Crore (Principal of Rs. 190.18 Crore and Interest of Rs. 42.79 Crore), State Bank of India in December 2011 of Rs. 323.27 Crore (Principal of Rs. 323.27 Crore) and State Bank of Travancore in September 2011 of Rs. 91.98 Crore (Principal of Rs. 85.04 Crore and Interest of Rs. 6.94 Crore). All these loans were assigned to Edelweiss Asset Reconstruction Company Limited. The company entered into a settlement agreement with Edelweiss Asset Reconstruction Company Limited on March 10, 2015. As per the settlement agreement the company has agreed to repay the loan by March 2023. However, the company has again defaulted in repayment of the instalment of the loan falling due from December 2020 till March 2023 and interest thereupon. Based on the proposal of the company, Edelweiss Asset Reconstruction Company Limited has approved the restructuring of the outstanding due, wherein the company is required to pay total amount of Rs 391 Crore, through 28 installments (from August 08, 2023 to March 31, 2026) along with Interest @ 11% p.a. and Default Interest @ 7% p.a.
(b) The Management is of the opinion that Fixed Deposit of Rs. 12.45 Crore appropriated by Bank of Baroda will be adjusted against the outstanding liability payable to Edelweiss Asset Reconstruction Company Limited, at the time of last installment.
The Company has filed a Special Civil Application ("SCA") before the Hon'ble Gujarat High Court to return back Rs. 12.45 crore to the company's bank account which was adjusted against the outstanding loan. The said petition is admitted and is pending for further hearing.
(c) The amount of repayment of debt to Edelweiss Asset Reconstruction Company Limited, up to the balance sheet date of Rs. 528.34 Crore (March 31, 2023 is Rs. 484.34 Crore) has been adjusted against the total outstanding loan liability.
(d) If all the terms and conditions of settlement are fully complied upto March 2026, there will be reduction in debt by Rs. 403.55 Crore.
(vi) Invent Assets Securitization and Reconstruction Private Limited (being assignee of debts of Oriental Bank of Commerce, Punjab National Bank and Allahabad Bank)
(a) The company has defaulted in repayment of the loan from Oriental Bank of Commerce in June 2012 of Rs. 55.19 Crore (Principal of Rs. 42.64 Crore and Interest of Rs. 12.55 Crore), Punjab National Bank in October 2011 of Rs. 184.69 Crore (Principal amount of Rs. 184.69 Crore) and Allahabad Bank in July 2012 of Rs. 283. 62 Crore (Principal of Rs. 278.22 Crore and interest of Rs. 5.40 Crore). All these loans were assigned to Invent Assets Securitization and Reconstruction Private Limited in August 2015, July 2016 and July 2016 for Oriental Bank of Commerce, Allahabad Bank and Punjab National Bank respectively. As per the original settlement agreement the company has agreed to repay the loan by June 2020 for Oriental Bank of Commerce and March 2021 for Allahabad Bank &Punjab National Bank.
37. Details of cases of recovery / other proceedings by the Lenders
(a) Cases before Debts Recovery Tribunal (DRT):
(i) Central Bank of India has filed Original Application against the Company & its guarantors (Mr. Mukesh Bhandari, Mr. Shailesh Bhandari and Mr. Avinash Bhandari) before the Debts Recovery Tribunal-1, Ahmedabad ("DRT") under section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993. The Hon'ble DRT vide judgement dated October 9, 2018 allowed the original application filed by the Bank and issued recovery certificate against the Company and guarantors to the tune of Rs. 577.89 Crores and future interest on the amount due @10% p.a. with monthly rests from the date of filing of Original Application till the recovery of amount. The Hon'ble Recovery Officer of the DRT has initiated recovery proceedings and passed order / issued warrant for attachment of hypothecated / mortgaged properties and for valuation of the said attached properties. Further action / hearing is pending before the Hon'ble Recovery Officer. As per the terms of settlement with Central Bank of India dated June 28, 2022, the amount of Rs. 10.75 Crores lying in 'No Lien" account has been adjusted against the upfront amount and the Bank has agreed to withdraw all the legal cases on payment of entire settlement amount.
In view of petitions under Section 95 of the Insolvency and Bankruptcy Code, 2016 filed by Central Bank of India against the personal guarantors before Hon'ble National Company Law Tribunal ("NCLT"), the proceedings against personal guarantors before the Hon'ble DRT are stayed. The Hon'ble NCLT has passed an order for appointment of Resolution Professional and filing of report by the Resolution Professional. In view of settlement with Central Bank of India, the Hon'ble NCLT has disposed of the petitions against Mr. Shailesh Bhandari, Mr. Avinash Bhandari and Mr. Mukesh Bhandari as withdrawn / infructuous.
(ii) Rare Asset Reconstruction Limited (being assignee of debts of Indian Overseas Bank) ("Rare ARC") had filed Original Application against the Company & its guarantors Mr. Mukesh Bhandari, Mr. Shailesh Bhandari and Mr. Avinash Bhandari before the Debts Recovery Tribunal-1, Ahmedabad ("DRT") under section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993. The Hon'ble DRT vide judgment dated September 20, 2018 allowed the original application filed by the Bank / Financial Institution and issued recovery certificate against the Company and Guarantors to the tune of Rs. 315.64 Crore and future interest on the amount due @12.75% p.a. with monthly rests from the date of filing of Original Application till the recovery of amount. The Hon'ble Recovery Officer of the DRT has initiated recovery proceedings and passed order / issued warrant for attachment of hypothecated / mortgaged properties. The Hon'ble Recovery Officer has passed order for release of Rs. 10 Crores from the account of company with Standard Chartered Bank to Rare ARC, sale of shares of the guarantors and payment of Rs. 0.05 Crores by Mr. Avinash Bhandari for non-disclosure of assets to be adjusted towards the dues. Further in view of petition under Section 95 of the Insolvency and Bankruptcy Code, 2016 filed by Central Bank of India against the personal guarantors, there was moratorium against personal guarantors. Further action / hearing is pending before Hon'ble Recovery Officer.
(iii) In view of settlement / consent terms filed with DRT and after completion of pleadings and hearing, the Original Application filed by Corporation Bank has been disposed on August 25, 2018 and the recovery proceedings by the Recovery Officer of the Hon'ble DRT was being adjourned. Thereafter, the Demand Notice dated June 22, 2021 and August 26, 2021 is issued by Recovery Officer. Based on the revised settlement terms and payment of One Time Settlement amount, the Recovery Officer by order dated February 29, 2024 closed the recovery certificate as satisfied under Bank One Time Settlement.
(iv) In view of settlement / consent terms filed with DRT and after completion of pleadings and hearing, the Original Application filed by Union Bank of India has been disposed on April 27, 2018 and the recovery proceedings by the Recovery Officer of the Hon'ble DRT was being adjourned. Thereafter, the Demand Notice dated June 22, 2021 and August 26, 2021 is issued by Recovery Officer. Based on the revised settlement terms and payment of One Time Settlement amount, the Recovery Officer by order dated March 7, 2024 closed the recovery certificate as satisfied under Bank One Time Settlement.
(v) In view of settlement / consent terms filed with DRT, the Original Application filed by Rare Asset Reconstruction Limited (being assignee of debts of Dena Bank) has been disposed on October 15, 2018 and the recovery proceedings by the Recovery Officer of the Hon'ble DRT were being adjourned. Thereafter, the Demand Notice dated August 3, 2021 is issued by Recovery Officer and further action / hearing is pending before Hon'ble Recovery Officer.
(vi) In view of settlement / consent terms filed with DRT or otherwise after completion of pleadings and hearing, the Original Application filed by Invent Assets Securitization and Reconstruction Private Limited (being assignee of debts of Allahabad Bank) has been disposed on March 21, 2018 and the recovery proceedings by the Recovery Officer of the Hon'ble DRT is being adjourned.
(b) Willful Defaulter
(i) Central Bank of India has declared the Company as a wilful defaulter on May 29, 2014 for outstanding default amount of Rs. 436.13 Crores and reported the name of Company and its directors to the Reserve Bank of India and Credit Information Bureau (India) Limited (CIBIL) as wilful defaulter.
(ii) Dena Bank has declared the Company as a wilful defaulter on March 31, 2016 for outstanding amount of Rs. 51.44 Crores and reported the name of the Company and its directors to the Reserve Bank of India and Credit Information Bureau (India) Limited (CIBIL) as Wilful Defaulter. Rare Asset Reconstruction Limited (being assignee of debts of Dena Bank) has agreed to withdraw the name of the Company and its directors from the defaulter's list on receipt of entire settlement amount.
(c) Central Bureau of Investigation (CBI)
(i) The Central Bureau of Investigation (CBI) has conducted certain proceedings, on the basis of the complaint filed by Central Bank of India with regard to the utilization of the loan disbursed by Central Bank of India. Central Bureau of Investigation has filed a charge sheet and a CBI Special Case Number 27 of 2015 was registered against the Company and its directors i.e. Mr. Mukesh Bhandari, Mr. Shailesh Bhandari, Mr. Avinash Bhandari and few officers of Central Bank of India before the Hon'ble CBI Court, Ahmedabad on October 6, 2015 and the matter was pending before the Hon'ble CBI Court for further proceedings. The Directorate of Enforcement, Ahmedabad has filed an application before the Hon'ble CBI Court, Ahmedabad for transfer of CBI Case to the designated court of PMLA. The Hon'ble CBI Court, Ahmedabad by order dated January 24, 2022 allowed the application and by further order dated March 29, 2022 disposed of the case for transfer to PMLA Court. The Principal District Court (PMLA Court) has registered the transferred case as ACB - Special Case No. 15 / 2022 and the case is now pending for opening of case by prosecution.
(ii) Bank of India has filed a complaint under section 154(1) of the Criminal Procedure Code (Cr.P.C) pertaining to fraud perpetrated by the Company, its directors, unknown public servants and other unknown persons with intent to defraud Bank of India to the tune of Rs. 81.97 Crores. The Central Bureau of Investigation, Banking Securities Fraud Branch, Mumbai has registered a FIR on December 31, 2021. Central Bureau of Investigation (CBI) carried out the search on January 4, 2022 and seized various documents and now the matter is under investigation. The Company has filed a petition for quashing of FIR before Hon'ble Gujarat High Court in April 2024 and the Hon'ble Gujarat High Court by order dated April 26, 2024 issued notice and notice as to interim relief. The said petition is pending for further hearing.
(d) Petition under Insolvency and Bankruptcy Code (IBC)
(i) Union Bank of India, a financial creditor has filed a petition under section 7 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal (NCLT), Ahmedabad for initiating Corporate Insolvency Resolution Process (CIRP) against the Company for an default amount of Rs. 305.38 Crores in respect of outstanding dues. In view of revised settlement terms with Union Bank of India and repayment of entire loan, the petition was disposed of by Hon'ble NCLT, Ahmedabad as withdrawn on January 18, 2024.
(ii) Edelweiss Asset Reconstruction Company Limited ("EARC"), a financial creditor has filed a petition under section 7 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal (NCLT), Ahmedabad for initiating Corporate Insolvency Resolution Process (CIRP) against the Company for an default amount of Rs. 1900.56 Crores in respect of outstanding dues of Bank of India, the original lender only. In view of the restructure of the loan in November 2023, the Hon'ble NCLT, Ahmedabad has dismissed the petition alongwith Interlocutory Applications as settled out of Court by order dated November 22, 2023.
(e) Fraud Classification
(i) The Company had filed a Special Civil Application ("SCA") against Central Bank of India and Reserve Bank of India for wrongfully declaring the account of the Company as fraud account on November 6, 2013 in breach of principles of natural justice. The said petition was dismissed by the Hon'ble Gujarat High Court. The Company has filed a Letters Patent Appeal (LPA) against the said order. The Hon'ble Gujarat High Court has issued Notice and notice as to interim relief. The Hon'ble Gujarat High Court by interim order dated June 21, 2023 stayed the fraud classification and order passed by Hon'ble single judge. In view of interim order passed by Hon'ble Gujarat High Court and request of the Company, Central Bank of India has removed fraud flagging in the account. The said appeal is pending for further hearing before the Hon'ble Gujarat High Court.
(ii) The Company had filed a Special Civil Application ("SCA") against Bank of India in July 2023 for wrongfully declaring the account of the Company as fraud account on February 13, 2019 without any intimation and in breach of principles of natural justice. The Hon'ble Gujarat High Court by order dated November 30, 2023 quashed and set aside the action of classifying the account as fraud account and the matter was remitted to the bank leaving a liberty to take fresh steps in the accordance with the principles laid down by Hon'ble Apex Court. Bank of India has given a show cause notice and copy of Forensic Audit Report to the Company to make representation / submission. The Company is in process to make appropriate representation / submission.
(iii) The Company had filed a Special Civil Application ("SCA") against Canara Bank (erstwhile Syndicate Bank) in December 2023 for wrongfully declaring the account of the Company as fraud account on May 4, 2018 without any intimation, in breach of principles of natural justice and despite that the Company has repaid the settled loan amount and have received No Due Certificate from the bank on May 27, 2019. The Hon'ble Gujarat High Court has issued notice on December 11, 2023 and now petition is pending for further hearing.
(iv) The Company had filed a Special Civil Application ("SCA") against ICICI Bank and Reserve Bank of India in April 2024 for wrongfully declaring the account of the Company as fraud account without any intimation, in breach of principles of natural justice and despite that the Company has repaid the settled loan amount and have received No Due Certificate from the bank on July 4, 2016. The Hon'ble Gujarat High Court has issued notice on April 18, 2024 and now petition is pending for further hearing.
(f) Case under section 138 of the Negotiable Instruments Act, 1881:
Indian Overseas Bank had filed two criminal complaints against the Company and its directors / officers under section 138 of Negotiable Instruments Act, 1881 for dishonor of cheques of Rs. 103.00 Crore issued by the Company and the Company is contesting both the said cases and both the matters are pending for further proceedings before the respective Hon'ble Metropolitan Magistrates, Ahmedabad.
(g) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI")
Edelweiss Asset Reconstruction Company Limited has issued statutory demand notice dated July 13, 2022 under section 13(2) of Securitisation and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 ("SARFAESI") read with Security Interest (Enforcement) Rules, 2002 to the Company and personal guarantors to discharge the liabilities within sixty days from the date of notice. The Company was yet to reply / comply, to the said notice and there was no further communication from Edelweiss Asset Reconstruction Company Limited. In view of the restructuring of the loan in November 2023, the demand notice has become infructuous.
38. (a) During the financial year ended on March 31, 2019, Goods and Service Tax Department of Maharashtra has re-determined Value Added Tax liability (including interest and penalty) of Rs. 6.28 Crore for the financial year 2009-10 and Rs. 23.93 Crore for the financial year 2010-11 after adjustment of Rs. 4.00 Crore paid by the company under protest. The company has paid Rs 1.07 Crore during the year ended as at March 31, 2020 and have filed an appeal before the Deputy Commissioner of State Tax, Mumbai. On account of the said order presently the liability of the company is of Rs. 29.15 Crore (March 31, 2023: Rs. 29.15 Crore). The provision for impugned disputed tax liability has not been made for as the company is hopeful of matter being decided in its favor by appellate authority.
(b) The Indian Overseas Bank had classified the loan account of the Company as non-performing assets during August 2011, which was subsequently assigned to Rare Assets Reconstruction Limited ("Rare ARC"), but with whom the settlement terms have not been entered into. Further, the Hon'ble Debt Recovery Tribunal (DRT), Ahmedabad has passed judgment against Company for recovery along with future interest on the amount due @12.75% p.a. with monthly rests. As per the details available with the company, the amount of unprovided interest, on approximate basis, on the said loan is as under:-
39. Additional Disclosure
(a) The cost of material consumed includes freight, loading and unloading expenses, inspection fees, commission on purchase, taxes & duties (to the extent of credit not available), rate difference and interest cost on purchase of raw material and ancillary expenses thereof (including reversal of any claim).
(b) Few accounts of "Trade Receivables", "Trade payables", "Advances from Customer", "Advances Recoverable In Cash or Kind", "Advance to Suppliers and Other Parties" including very old balances and some of the Journal entries passed therein, are subject to confirmation / reconciliation / supporting documents and includes very old non-moving items therefore are subject to necessary adjustments for accounting or re-grouping / classification.
(c) Account of Receivables / Payables in respect of Goods and Service Tax, Service Tax, CENVAT, and Vat are subject to reconciliation, submission of its return for its claim and / or its Audit / Assessment / Settlement / Payment, if any.
(d) The classification / grouping of items of the accounts are made by the management, based on the available data with the company.
(e) The amount of inventory has been taken by the management based on information available with the company and without conducting physical verification of the slow-moving inventory. The slow-moving inventories have been valued by the management on estimated net realizable values.
(f) In the Capital Work in Progress of Rs 44.10 Crore (March 31, 2023 Rs. 26.08 Crore) the management believes that the uncompleted projects of Rs. 1.42 Crore (March 31, 2023: Rs. 1.37 Crore;) requires some further investment to bring them into commercial use and the company desires to complete the project, therefore these are not treated as impaired assets and treated as temporarily suspended.
(g) On account of technicalities involved, the claim of MEIS will be accounted for as and when the claim will be admissible with the respective authority.
(h) During the year ended as at March 31, 2022 the business activity of Transmission Line Tower division (TLT) was temporarily suspended in order to evaluate its further business viability. However, till March 31, 2024 the operation of the TLT division has not commenced. The management is of the opinion that the carrying value of the Inventory, Property, Plant and Equipment and Trade receivables represent net realizable value and therefore no provision for impairment / write off is required to be made.
(i) In absence of confirmation from the lenders, during the year the company has adjusted the repayment of the loan towards the principal loan outstanding. Further in case of Central Bank of India, there is non-stipulation about the date of payment of interest and therefore the same has been shown as Interest accrued but not due.
(j) Audit Log: The Company has used an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, where audit trail (edit log) facility was enabled, no instance of the audit trail feature being tampered with.
40. DIRECTOR'S REMUNERAITON
Mr. Suraj Bhandari was re-appointed as a Whole-time Director for a period of three years w.e.f. November 13, 2022 to November 12, 2025 at a remuneration of Rs. 1,50,000 / - per month as approved by the shareholders of the Company at 36th Annual General Meeting held on August 31, 2022. Mr. Shailesh Bhandari was re-appointed as a Managing Director for a period of three years w.e.f. February 1, 2023 to January 31, 2026 at a remuneration of Rs. 2,00,000 / - per month as approved by the shareholders of the Company through Postal Ballot on March 28, 2023. This remuneration to both the Directors are subject to approval from banks and financial institutions as the company has defaulted in repayment of loans.
Further, Mr. Shailesh Bhandari, Managing Director was re-designated as Executive Vice Chairman and Mr. Suraj Bhandari was elevated and re-designated as a Managing Director with effect from February 9, 2024 with same terms & conditions of remuneration and the shareholders of the Company has also approved the same through Postal Ballot on March 19, 2024.
41. OTHER LEGAL CASES:
(a) Some of the creditors have filed cases of recovery against the company before the various Civil Courts / Commercial Courts for Rs 3.76 Crore (Previous Year Rs 1.30 Crore). The said amounts are excluding interest.
(b) Some of the suppliers have filed complaints against the Company and its directors / officers under Section 138 of Negotiable Instruments Act, 1881 for dishonor of cheques of Rs. 66.17 Crores issued by the Company and the Company and its directors / officers are contesting the said cases and the same are pending before respective courts.
(c) In view of the registration of the FIR by the Central Bureau of Investigation related to loan of Central Bank of India for scheduled offences, the Ahmedabad Zonal Office of the Directorate of Enforcement ("ED") has recorded a case under the provisions of the Prevention of Money Laundering Act, 2002 and during the course of investigation, the ED has passed an order dated March 28, 2018 under sub-section (1) of section 5 of the Prevention of Money Laundering Act, 2002 for provisional attachment of certain properties to the extent of Rs. 179.80 Crores comprising Land having total area of 4,90,621 square meter at Chhadavada and Samakhiyali of Steel Plant, Building and Plant & Machinery for a period of 180 days. Thereafter, a complaint under sub-section (5) of section 5 of the Prevention of Money Laundering Act, 2012 was filed by ED before the Adjudicating Authority, New Delhi and the Adjudicating Authority, New Delhi vide order dated September 5, 2018 confirmed the attachment of abovesaid properties. The Company has filed an appeal before the Hon'ble Appellate Tribunal, PMLA, New Delhi and the Hon'ble Appellate Tribunal, PMLA, New Delhi vide order dated December 10, 2018 passed an order for maintaining status quo and no coercive action by ED. The ED has filed its reply and the matter is adjourned for filing of rejoinder. The ED has filed an application for vacation of interim order. Edelweiss Asset Reconstruction Company Limited, a secured financial creditor has filed impleadment application in July 2023 to participate in the proceedings. Thereafter, the matter was adjourned from time to time for further hearing.
(d) The Assistant Director, Directorate of Enforcement, Ahmedabad has filed a PMLA - Special Case No. 20 / 2018 on December 1, 2018 before Principal District Judge, Ahmedabad against the company, Mr. Mukesh Bhandari, Mr. Shailesh Bhandari and Mr. Avinash Bhandari under section 3 and 4 of the Prevention of Money Laundering Act, 2002. During the year 2023, the charge has been framed by the Hon'ble Court and now it is pending at the stage of evidence of prosecution.
(e) The Company has filed recovery case against Victory Rich Trading Limited ("VRTL") & its director for non-payment of amount in the High Court of Hong Kong and the High Court of Hong Kong has passed judgment for payment of recovery amount. Thereafter, VRTL has challenged the said order and the same is pending before the High Court of Hong Kong. Further the Company has filed a winding up petition against VRTL before the High Court of Hong Kong and the High Court of Hong Kong has passed the order for winding up of VRTL.
(f) Mr. Siddharth Bhandari, one of the Promoter group and erstwhile Whole-time Director and Dr. Rakesh Bhandari, one of the Promoter group of the Company ("Petitioners") has filed two separate petitions (CP No. 93 / 2018 and CP No. 94 / 2018) before the Hon'ble National Company Law Tribunal, Ahmedabad ("NCLT") under section 149, 150, 152, 159 and 176 of the Companies Act, 2013 inter alia, for declaring the appointment of four independent directors as null and void from their respective dates of appointment being violative of provisions of section 149 and 150 and other related provisions of the Companies Act, 2013 and the Companies (Appointment and Qualification of Directors) Rules, 2014. The interim order dated May 4, 2021 passed by the Hon'ble NCLT, Ahmedabad for joint signature of Mr. Siddharth Bhandari in bank accounts, policy decisions affecting smooth running of company as a going concern etc. was challenged by Mr. Shailesh Bhandari & Company before Hon'ble NCLAT and thereafter, before Hon'ble Supreme Court of India. After granting stay on joint signature in bank accounts by the Hon'ble NCLAT and Hon'ble Supreme Court of India, the appeals were finally disposed of. Therefore, there was joint signature of Mr. Siddharth Bhandari in bank accounts during the interregnum period. The CP No. 93 / 2018 and CP No. 94 / 2018 was finally heard by the Hon'ble NCLT, Ahmedabad and the said petitions were disposed of on January 11, 2023 as not maintainable and vacated all interim orders. The Petitioners have challenged the order dated January 11, 2023 before the Hon'ble NCLAT and the appeals are pending before the Hon'ble NCLAT for hearing.
(g) Mr. Siddharth Bhandari - erstwhile Whole-time Director & Promoter group, Dr. Rakesh Bhandari, Promoter group and Mr. Mukesh Bhandari - erstwhile Chairman & Promoter and currently Non-Executive Director of the Company has filed a petition (CP No. 89 / 2019) before the Hon'ble National Company Law Tribunal, Ahmedabad ("NCLT") under section 222 of the Companies Act, 2013 against the Company and three shareholders for suspension of their voting rights and non-participation in voting at the 33rd Annual General Meeting of the Company and for maintaining the existing status of Petitioner No. 1 Mr. Siddharth Bhandari. The Hon'ble NCLT vide order dated September 27, 2019 allowed the Company to go ahead with the 33rd Annual General Meeting and e-voting process, however, the agenda Item No. 2 of the AGM shall be subject to final outcome of the petition. Thereafter, the Hon'ble NCLT, Ahmedabad by order dated January 11, 2024 dismissed CP No. 89 / 2019 as infructuous.
(h) Mr. Siddharth Bhandari, Mr. Mukesh Bhandari and Dr. Rakesh Bhandari ("Petitioners") has filed a petition (CP No. 5 / 2022) before the Hon'ble National Company Law Tribunal, Ahmedabad ("NCLT") under section 241-242 of the Companies Act, 2013 against the Company, Mr. Shailesh Bhandari & Others. The Hon'ble NCLT has issued notice to respondents and directed to file reply on interim relief and maintainability. The Company has filed its reply on interim relief and maintainability. The petition is pending for further hearing.
During the pendency of this petition, the Petitioners have filed an Interlocutory Application No. 55 / 2022 in CP No. 5 / 2022 to restrain the Company from holding Board Meeting dated August 2, 2022 and stay some of the agenda items. The Hon'ble NCLT, Ahmedabad by order dated August 24, 2022 not granted any stay and rejected the application as misconceived and not maintainable. The Petitioners have challenged the order dated August 24, 2022 before the Hon'ble NCLAT and the Hon'ble NCLAT by order dated November 29, 2022 dismissed the appeal. The Petitioners have challenged the order dated November 29, 2022 before the Hon'ble Supreme Court of India and the civil appeal is pending for hearing before the Hon'ble Supreme Court of India.
The Petitioners have also filed an Interlocutory Application No. 5 / 2024 in CP No. 5 / 2022 for various reliefs including joint signature in bank accounts. The Hon'ble NCLT, Ahmedabad by order dated March 19, 2024 dismissed the application.
(i) Ministry of Corporate Affairs, Office of the Regional Director, North-Western Region, Ahmedabad has in October, 2018 initiated inspection of books of accounts and other records under section 206(5) of the Companies Act, 2013. Thereafter, the Regional Director has issued letter for violations / irregularities of the Companies Act, 1956 / 2013 and the Company has replied to the same. Based on the same, the Registrar of Companies, Gujarat has issued letter for violations of Section 128(1), 129(1), 129(5), 133 read with Schedule III of the provisions of the Companies Act, 2013 and initiated prosecution against Mr. Mukesh Bhandari, Mr. Shailesh Bhandari, Mr. Avinash Bhandari, Mr. Siddharth Bhandari, Managing Directors / Whole-time Director & Late Mr. Pawan Gaur, Chief Financial Officer of the Company. Mr. Shailesh Bhandari, Mr. Avinash Bhandari & Late Mr. Pawan Gaur have challenged the said prosecution before the Hon'ble Gujarat High Court under section 463 of the Companies Act, 2013 and the said petition is pending for hearing before the Hon'ble Gujarat High Court.
Further the office of Regional Director vide letter / order dated December 24, 2019 informed the Company about investigation into the affairs of the Company under section 210(1)(c) of the Companies Act, 2013. Thereafter, the Company was directed to furnish documents / information and the Company has challenged the said investigation before the Hon'ble Gujarat High Court. As the petition was rejected by the Hon'ble Gujarat High Court, the Company has challenged the same before division bench by filing Letters Patent Appeal and the division bench of the Hon'ble Gujarat High Court has passed order for continuation of investigation and that if the report recommends closure of the proceedings, no further orders may be necessary, however, if the report recommends some coercive measures to be taken, then the Central Government or the competent authority may not take any such decision without leave of the Court. The Letters Patent Appeal is pending awaiting the appropriate report of investigation under Section 210 of the Companies Act, 2013.
(j) Mr. Babu Devraj Badhiya has filed a Writ Petition in the nature of Public Interest Litigation (PIL) on February 4, 2019 before the Hon'ble Gujarat High Court with prayer for direction for compliance of various approvals / permissions issued by various authorities for the Samakhiyali Plant, Kutch, Gujarat. The Hon'ble Gujarat High Court has passed order for not to carry out any further construction / development and the matter is pending before the Hon'ble Gujarat High Court.
Note: The financial implication of all this case is not ascertainable at this point of time.
42. OTHER STATUTORY INFORMATION
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the company for holding any Benami property.
(ii) The Company does not have any transactions with the Companies which are struck off.
(iii) The Company does not have any charges or satisfaction which are yet to be registered with ROC beyond the statutory period.
(iv) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.
(v) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries
(vi) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries,
(vii) The Company does not have any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).
ii) Valuation technique used to determine fair value
Financial instruments are initially recognized and subsequently re-measured at fair value as described below :
- The fair value of investment in quoted Mutual Funds is measured at quoted price or NAV.
iii) Valuation process
The Company obtains valuation results from external / internal valuers for level 2 measurements. Inputs to level 2 measurements are verified by the Company's treasury department.
iv) Fair value of financial assets and liabilities measured at amortized cost
The management assessed that cash and cash equivalents, Bank Balance other than cash and cash equivalents, trade receivables, trade payables, investments in unquoted equity of joint venture / subsidiary company and government securities, other financial assets, short term borrowings, non current borrowings and other current financial liabilities approximate their carrying amounts.
45 Financial Instrument Risk, Management, Objectives & Policies
45.1 Financial risk management
The management of the Company has implemented a risk management system that is monitored by the Board of Directors. The general conditions for compliance with the requirements for proper and future-oriented risk management within the Company are set out in the risk management principles. These principles aim at encouraging all members of staff to responsibly deal with risks as well as supporting a sustained process to improve risk awareness. The guidelines on risk management specify risk management processes, compulsory limitations, and the application of financial instruments. The risk management system aims at identifying, analyzing, managing, controlling and communicating risks promptly throughout the Company. Risk management reporting is a continuous process and part of regular company reporting.
The Company is exposed to credit, liquidity and market risks (interest rate risk, foreign currency risk and other price risk) during the course of ordinary activities. The aim of risk management is to limit the risks arising from operating activities and associated financing requirements.
45.2 Credit risk
The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks. The balances with banks and security deposits are subject to low credit risk since the counterparty has strong capacity to meet the obligations and where the risk of default is negligible or nil.
Trade receivables, Loans and Advances to Suppliers & Others
Credit risk arises from the possibility that customer / borrowers will not be able to settle their obligations as and when agreed. To manage this, the Company periodically assesses the financial reliability of customers and the brorrowers, taking into account the financial condition, current economic trends, analysis of historical bad debts, ageing of accounts receivable and forward looking information.
The provision on trade receivables for expected credit loss is recognized on the basis of life-time expected credit losses (simplified approach). Trade receivables are evaluated separately for balances towards progress billings and retention money due from customers. An expected loss rate is calculated at each year-end, based on combination of rate of default and rate of delay. The Company considers the rate of default and delay upon initial recognition of asset, based on the past experience and forwardlooking information, wherever available. The provision on loans for expected credit loss is recognized on the basis of 12-month expected credit losses and assessed for significant increase in the credit risk.
Concentrations of Credit Risk form part of Credit Risk
During the year ended March 31, 2024, the company has made sale of Rs 901.96 Crore (or 21.12% of Revenue from operation) to two Customer which exceeds 10% of its Revenue from Operation and during the year ended March 31, 2023, the company did not have sales to a single customer exceeding 10% of the Revenue from operation. Accounts receivable from such customer approximated Rs Nil as at March 31, 2024 and Rs Nil as at March 31, 2023. A loss of this customer could adversely affect the operating results or cash flows of the Company.
i) Interest Rate Risk:
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the market rates. Since the borrowing of the company are classified as non performing assets or are transferred to assets reconstruction company or the settlement agreement have been executed and few lenders are charging interest at fix rate of interest, therefore the exposure to risk of changes in market interest rates is minimal. However the Company is liable for the payment of interest to Union Bank of India and Central Bank of India @ 1 Year MCLR on the Outstanding amount & it's sensitivity analysis is as under:-
51 Events occurred after the Balance Sheet Date
The Company evaluates events and transactions that occur subsequent to the Balance Sheet date but prior to the approval of the financial statements to determine the necessity for recognition and / or reporting of any of these events and transactions in the financial statements. As of May 20, 2024, there were no subsequent events to be recognized or reported that are not already disclosed elsewhere in the financial statements.
52 Previous year amount has been regrouped / re-casted / re-arranged / re-classified / re-determined, wherever necessary, to make the figure of the current year comparable with the previous year.
As per our report of even date For and on behalf of the Board of Directors of
For Hitesh Prakash Shah & Co. Electrotherm (India) Limited
Chartered Accountants Firm Registration No: 127614W
Hitesh Shah Shailesh Bhandari Suraj Bhandari
Partner Executive Vice Chairman Managing Director
Membership No. 124095 DIN:- 00058866 DIN:- 07296523
UDIN: 24124095BKAYTE4681
Fageshkumar R. Soni
Company Secretary
Place : Ahmedabad Place : Ahmedabad
Dated: May 20, 2024 Dated: May 20, 2024
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