Oswal Spinning and Weaving Mills Limited is a public company incorporated in India under the provisions of the Companies Act, 1956. The Company is engaged in the business of manufacturing & trading of Cotton Yarn and Trading of Blankets.

2. LONG-TERM BORROWINGS

Kotak Mahindra Bank Ltd. has issued a notice under section 13(2) of the SARFAESI Act, 2002 demanding Rs. 63.43 crores (calculated upto 04/04/2014) in respect of various commitments, defaults, penalties and interest thereon, which the Company has contested illegal and without any basis before the Hon. High Court of Punjab and Haryana, for which petition has been admitted on 29/05/2014 and further proceedings under section 13(4) of SARFAESI Act, 2002 has been stayed. **

3. During the year the Company has changed rate of charging depreciation on cotton spinning unit from the rate prescribed for Continuous Process Plant to General Plant and Machinery as per rates specified in Schedule XIV of the Companies Act, 1956. Consequently the difference of Depreciation relating to earlier years amounting to Rs.1,26,16,898.42/- has been provided during the year as an Exceptional Item. Had the depreciation been provided as per previous rate then the depreciation for the period on cotton spinning unit would have been Rs.2,25,66,538/- instead of Rs. 98,20,049/-. The Company's records indicate that had the depreciation been provided as previous rate :-

i. The Profit would have been Rs.35,92,603.40/- as against the reported figure of Rs. 37,22,194.40/-.

ii. Balance of Surplus would have been Rs 5,95,15,484.20- as against the reported figure of Rs. 5,96,45,075.20

iii. Fixed Assets (excluding Capital Work-in-progress) would have been Rs.17,27,61,591.70/- as against the reported figure of Rs.17,28,91,182.70/-

4. CONTINGENT LIABILITIES NOT PROVIDED FOR

i) For Foreign Bills Discounted against Letters of Credit Rs. 110771230/- (Previous Year Rs. 1106603638)

ii) Bank Guarantee outstanding - Rs. 8.00 lacs.

iii) Kotak Mahindra Bank Ltd. has issued a notice under section 13(2) of the SARFAESI Act, 2002 demanding Rs. 63.43 crores (calculated upto 04/04/2014) from the Company in respect of various commitments, defaults, penalties and interest thereon, which the Company has contested as illegal and without any basis before the Hon. High Court of Punjab and Haryana, for which petition has been admitted on 29/05/2014 and further proceedings under section 13(4) of SARFAESI Act, 2002 has been stayed.

iv) State Bank of Patiala (SBOP) has filed an application before the Debts Recovery Tribunal (DRT) Chandigarh for recovery of an amount of Rs. 4.09 cr. (being NPV of Rs. 2.88 cr. of CRPS of Rs. 5.38 cr. and interest thereon). These CRPS have already been issued by the Company to the Bank. Further the Company had agreed to pay the NPV of CRPS because SBOP had informed the Company that they had waived the amount of Rs. 5.29 cr. being interest payable by the Company to SBOP. However, later on it has transpired that instead of waiving this amount of Rs. 5.29 cr., SBOP has transferred the same to Kotak Mahindra Bank Limited (KMBL) vide assignment agreement dated 16.11.2007 thereby misleading the Company that they have waived the interest and thus violating the terms and conditions of the agreement that they had with the Company. On this ground the application of the bank is being contested by the Company in the DRT.

v) IFCI has filed an application before the Debts Recovery Tribunal (DRT) Chandigarh for recovery of an amount of Rs. 2347.02 lacs (Rs. 1269.82 lacs being amount of FITL and balance amount being interest thereon). IFCI has also filed a company petition with the Punjab and Haryana High Court under section 433, 434 & 439 for Recovery of the above mentioned amount/winding up of the Company. The

Company is contesting the application in the DRT and Company petition in Punjab and Haryana High Court on the ground that by way of assignment of debt IFCI has assigned/transferred the entire dues including FITL of Rs. 1269.82 lacs payable by the Company to IFCI on 16.11.2007 in favour of Kotak Mahindra Bank Limited vide Assignment Agreement dated 16.11.2007 and after that nothing is due and payable by the Company to IFCI.

5. In the opinion of the Board of Directors, the current assets, loans and advances have a value on realization in the ordinary course of business at least equal to the amount at which they are stated except as expressly stated otherwise.

6. Confirmation of balances, whether in debit or credit from parties have not been obtained. As such their effect on Profit & Loss Statement cannot be reflected.

7. Based on a revaluation report, land at Jugiana was revalued as on 1st April, 1987, which resulted an increase in gross block of Rs.1,17,69,380/-. During the year the Revaluation Reserve has been reversed for Rs. 2272420/- towards sale of land

8. Trade Receivables includes amount of Rs. 92.92 lacs (Previous year Rs. 98.12 lacs), which are outstanding for more than 3 years for which no provision has been made for doubtful receivables as company is taking effective steps for recovering the amount.

9. PREVIOUS YEAR FIGURES

During the year ended 31 March 2014 the Revised Schedule VI notified under the Companies Act, 1956, is applicable to the company. The company has reclassified previous year figures to confirm to this year's classification.

10. Detail of transactions entered into with the related parties during the year as required by Accounting Standard (AS)-18 on "Related Party Disclosure" issued by the Institute of Chartered Accountants of India are as under:

A) List of Related parties with whom transactions entered into:

Associate:

- Oswal Worsted spinners Ltd.

Enterprises over which Key Management personnel are able to exercise Significant influence :

- Vallabh Trading and Mercantile Pvt. Ltd.

- Oswal Impex Pvt. Ltd.

- Smt. Satyawati Oswal Trust

C) Key Management Personnel

(i) Sh. Raj Paul Oswal (ii) Sh. Ashok Oswal (iii) Sh. Sambhav Oswal

11 Staff Retirement Benefits (Defined Benefit Plan)

a) The Company has compiled with Accounting Standard (AS-15 Revised) required to be so compiled by the Companies (Accounting Standards) Rules, 2006 w.e.f. 01.07.2009.

b) The summarised position of post-employment benefits and long term employee benefits recognised in the Balance Sheet and Statement of Profit and Loss as required in accordance with Accounting Standard (AS) 15 are as under :

12. Segment Reporting

A Primary Business Segment

The Company operates in only one business segment viz. "Cotton Spinning", which is reportable segment in accordance with the requirements of Accounting Standard (AS)-17 on "Segment Reporting", issued by The Institute of Chartered Accountants of India.

13. In accordance with the Accounting Standard (AS)-28 on "Impairment of Assets", the Company has assessed as on the balance sheet date, whether there are any indications (listed in paragraphs 8 to 10 of the Standard) with regard to the impairment of any of the assets. Based on such assessment it has been ascertained that no potential loss is present and therefore, formal estimate of recoverable amount has not been made. Accordingly, no impairment loss has been provided in the books of account