2. Balances of sundry debtors, sundry creditors, loans and advances, loans from financial institutions and banks, stocks lying with the third parties and other balances are subject to confirmation/reconciliation and consequential adjustments.

3. Contingent liabilities not provided for:

i) Show Cause notices/summons received from excise authorities for under valuation of excisable goods manufactured and cleared - amount not ascertainable.

ii) Sales tax matters for the year 1991-92, 1992-93 and 1993-94 where the company has preferred appeals before higher authorities, on legal grounds, where there will be no liability. Further sales tax matters for the year 1999-2000 and 2000-2001 are also in appeal involving the liability of Rs. 8.28 lacs (Rs. 1.70 lacs).

iii) In the matters for the Assessment Year 1999- 2000, 2004-2005 and 2005-2006, where the company has preferred appeals before higher authorities, on legal grounds, having liability of Rs. 201.49 lacs in respect of penalty and Rs. 1.95 lacs in respect of income tax, without considering further interest or penalty thereon.

5. No provision has been made for accrued gratuity and bonus. The same will be provided as and when paid.

6. The company has, on the basis of technical opinion and continuous operation in three shifts throughout the year of the texturising plant and machinery, treated the same as "continuous process plant" for the. purpose of computation of depreciation, which however is not consistent with the recommendation of Institute of Chartered Accountants of India, as a result, up to date depreciation charge is lower by Rs 13.44 lacs (Rs. 44.30 lacs) after taking into account Rs. 12.76 lacs (Rs. 10.98 lacs) excess charge for the year under review. Had this practice not been followed, the block of plant & machinery of Jalgaon unit would have fully depreciated.

7. The remuneration paid by the Company to its whole time directors was not approved by the Remuneration Committee as per conditions of Schedule XIII of the Companies Act 1956. Secondly the Company has also made default in repayment of its debts and debentures.

8. The income tax assessment of the company has been completed up to Assessment Year 2005-2006 and no provision for income tax has been made for the financial year ended 31st March 2008 as according to the company, there is no assessable income for the year.

9. No provision has been made in respect of interest accrued and due on the unpaid instalments which have already become due pertaining to Special Capital Incentives and Sales Tax Incentives received in the form of unsecured loans in the absence of proper information available with the company.

10. Figures for the previous year have been regrouped, rearranged and recasted whenever necessary to make them comparable with the figures of the current year and in the financial statements; any discrepancies in any total and the sum of the amounts listed are due to rounding off.

11. Loans & advances and sundry debtors include the following debit balances due from the company under the same management and other parties in which the directors of the company and / or their relatives are interested as director/partner/proprietor:

12. The manufacturing operations at the Jalgaon unit of the company have been suspended due to heavy losses resulting in erosion of working capital fund. Since company net worth as at 31.03.2000 was fully eroded, it filed a reference with BIFR. The BIFR declared the company as sick and appointed Central Bank of India as an Operating Agency to examine the viability of the company.

The OA appointed The Bombay Textile Research Association (BTRA) for preparation of Techno Economic Viability Study and revival scheme (TEVS). BTRA has submitted TEVS report to OA. The company has also submitted its rehabilitation proposal to OA on the basis of guidelines submitted by BTRA that was not acceptable to the OA and consortium members on the ground that it was not in line with the RBI guidelines. In the hearing before BIFR on 7th April 2003, since BTRA report, submitted to OA, was not acceptable to secured creditors, the BIFR ordered the Change of Management (COM). The OAwas also changed to IDBI in place of CBI. In the absence of any concrete proposal, the BIFR directed to send the matter to concerned High Court to wind up the company.

The Honourable High Court, Mumbai issued notification to official liquidator for appointing him as provisional liquidator and the hearing before the liquidator is in process. The company, in view of OTS with secured creditors, is in the process of filing an appeal before the Honourable High Court, Mumbai to give permission for sale of its fixed assets to clear the dues payable under OTS.

Secondly in respect of liabilities provided in the accounts further to add that pursuance to the heavy losses, the company suspended its yarn manufacturing Works / functioning in its units / factories a long back and in lieu of no improvement in the textile market but reactant slack down, it has closed down yarn manufacturing units / factories long back and approached to BIFR in the year 2000- 2001 and subsequently BIFR declared the company sick industrial undertaking.

Therefore it is pertinent to say that the liabilities of the company towards all financial institution / banks, of its principles amounts, interest and compound interest along with rate inconceivable / untenable and can not be taken as the admitted liabilities but under scanner / scrutinisation / arbitrated / prima- facie and subject for the verdict of an appropriate Court of Law as per provision i.e. the liabilities stand as disputed / integrated.

In spite of the above facts the accounts of the company, including Jalgaon unit, the operations of which were suspended and Kim unit also, the plant & machinery of which were sold, have been prepared on the concept that company will continue as a going concern.

13. Due to non availability of the information with company regarding status of the suppliers registered as the Micro, Small and Medium enterprises under the Micro, Small and Medium Enterprises Development Act 1951, the quantum of the amount due to such suppliers and interest thereon, if any could not be determined.

14. No provision has been made in respect of interest, in view of OTS, on outstanding secured loans for the financial year 2007-2008 and overdue and compound interest and liquidated damages on late payment/defaults in payment of interest as well as repayment of instalments of loans and non- convertible debentures, as the same could not be determined / ascertained properly.

15. IDBI has filed a recovery suit before the Debt Recovery Tribunal at Mumbai for Rs. 183.94 lacs and further interest till the date of actual payment and the DRT issued temporary injunction against the company that until further order, it should not dispose off, transfer, mortgage etc. of its properties involved in the loan transaction. Subsequently, Bank of Baroda has also become co-applicant with IDBI in the recovery suit before DRT. However the IDBI settled its dues OTS, but Bank of Baroda is yet to arrive at OTS.

16. Provision for interest, till financial year 2006-2007, on term loans from banks and financial institutions has been made @ 18% p.a. and on working capital loans from banks @ 15% p.a. in the absence of proper information with the company and rounded off to Rs. 1000/- as was done in the earlier years. The company has recognised the relief granted by IDBI and SICOM on making full payment as per OTS amounting to Rs.69622565/- representing relief towards interest Rs.61823260/- and towards principle amount Rs. 7799305/-.

The accounting effect of the relief under OTS with outstanding secured creditors.will given only after payment of amount of OTS to respective secured creditors and on getting the no dues certificates from them.

17. Due to heavy losses continuously incurred in the past, the company is not in the position to have the fair value, determined, of its assets as compared to the carrying amount of such assets as required by AS-28 for impairment of assets.

18. In view of the losses, Debenture Redemption Reserve has not been created during the year.

19. The office of Company Secretary has been vacant since 1997-98, in the circumstances; the authentication by Company Secretary does not appear in the Accounts.

20 Related Party Disclosure:

a) The control of the company exists with Shri Radheshyam Poddar -Chairman & Managing Director of the company and Shri Pradeep Poddar & Shri Sunil Poddar who both are also key management personnel.

b) The names of the enterprises of related parties where transactions have taken place are P. Fabrics, Adhunik Yarns limited and Adhunik Fintrade Ltd.

c) The names and relation of the relatives of related parties where transactions have taken place is Shri Sandeep Poddar, son of Chairman & Managing Director and brother of both the Joint Managing Directors.

d) The other controlled enterprises of related parties are Sarika Texoverseas (I) Limited, Travel Vistas and R. Omprakash.

21. In respect of Taxes On Income:

As the company has incurred substantial losses in past several years and total net worth of the company has eroded by 31.03.2000, though the company has huge carried forward losses and depreciation as per the returns of income filed with the Income Tax Department but as a prudent policy and due to uncertainty in availing the future taxable income, no deferred tax assets has been recognized as on 31.03.2008.