Polar Industries Ltd

To

The Members,

Directors of the Company have pleasure in submitting the 28^th Annual Reportof the Company together with Audited Accounts for the period ended 31st March 2011. Abrief summary of financial results and other operational aspects are being detailed hereinas under:

FINANCIAL RESULTS

RESTRUCTURING OF SECURED DEBTS

One Time Settlement (OTS) of all the secured debts of the Company was sanctioned at Rs.32 Crores under Corporate Debt Restructuring (CDR) mechanism followed by individualsanction from the lenders.

In the meanwhile, Asset Reconstruction Company (India) Ltd. (ARCIL) has acquired thedebts of all the secured lenders except IIBI and have restructured the total secured debtsof Rs.95.22 Crores as on 31.03.2008.

As per ARCIL's sanction, the Company allotted 30,74,300 equity shares at par forRs.3.07 Crores to ARCIL and the balance debt of Rs. 59 Crores would be repaid over aperiod of 5 years between 2008-2013.

The Company in spite of all efforts could not infuse working capital into the system ontime. The Company unable to bring in required working capital pruned down its structure toalmost half by closing down various divisions other than the core business of fans, withonly one Fan unit remaining.

The Company has received letters under Section 13(2) & 13(4) of the SARFAESI Act,2002 from ARCIL. The Company has already proposed One Time Settlement of dues with ARCILand the same is under discussion with them.

IIBI vide its letter dated 25^th August, 2010 sanctioned the settlementamount of Rs. 178.57 lacs with a condition for the Company to pay the amount within astipulated time period. M/s Omkam Developers Limited, Strategic investors of PMAL, a groupCompany and the owner of the property mortgaged to IIBI by the Company paid the settlementamount on behalf of the Company.

DIRECTORATE

In accordance with the provisions of Article 98(1) of the Articles of Association ofthe Company, Mr. Anil Agarwal will retire by rotation in the ensuing Annual GeneralMeeting of the Company and, being eligible, offers himself for re appointment. The Boardhas recommended his re appointment.

In order to Broad Base the Board of Directors and to comply with the requirement ofClause 49 of the Listing Agreement, Mr. Shashank Prashad, who had resignated on 10^lh December,2010 from the Directorship of the Company was again appointed as an Additional Director inthe category of non-executive independent director of the Company w.e.f. 22^ndJanuary, 2011 & holds office upto the ensuing Annual General Meeting of the Company.The Company has received notice from a member pursuant to Section 257(1) of the CompaniesAct, 1956 signifying her intention to propose the candidature of Mr. Shashank Prashad forthe office of Director. The Board recommends for the appointment of Mr. Shashank Prashadas a candidate for the office of Director liable to retire by rotation. The brief resumedetails relating to directors who are to be appointed/ re-appointed are furnished in theCorporate Governance Report which forms part of separate section of Annual Report.

AUDITORS

M/s. Singhi & Co., Chartered Accountants, (Regn. No. FRN 302049E) StatutoryAuditors of the Company retire at the conclusion of the ensuing Annual General Meeting,and, being eligible, offer themselves for re-appointment as Statutory Auditor of theCompany. A certificate, required under Section 224(1 B) of the Companies Act, 1956 to theeffect that, the re-appointment, if made, shall be within the limits specified in the saidsection, has been obtained from them.

MANAGEMENT'S EXPLANATION TO AUDITOR'S OBSERVATIONS

The company has been legally advised that as the company replaced the debt representedby the debentures by a Memorandum of Understanding entered into with the so-calledDebenture Holder (references to Debenture Holder below are, therefore, only for ease ofreference), the said MoU amounted to replacement of the debt acknowledged by thedebentures by a new contractual debt, the terms of which were incorporated in the MoU.Such new terms were neither incorporated on the debenture certificate, nor done with theconcurrence of the debenture trustee. Hence, the debentures have effectively been replacedby a new contractual debt, which is not a "security" as defined in sec. 2(45AA)of the Companies Act, and hence, not a "debenture" as defined in sec. 2 (12) ofthe Companies Act.

In any case, it has been noted that, as per the 'Notes to Accounts' forming part of theBalance Sheet as at 30th June, 2010 of the Debenture Holder, the Debenture Holder hasreceived an amount from ARCIL. It is noted that ARCIL had enforced security interest interms of sec. 13 of the SARFAESI Act and caused a sale of a property belonging to thecompany. ARCIL has apparently shared a part of the sale proceeds of the said property withthe Debenture Holder. Such payment, made by ARCIL, is payment made on behalf of thecompany and in any case has been accepted by the Debenture Holder as reducing theDebenture Holder's investment in the debentures. A total amount of approx Rs 102 Lacs hasbeen repaid to the Debenture holder by ARCIL.

As per the Repayment Schedule mentioned in the MOU entered with the Debenture holder, atotal amount of Rs 102 lacs was due for repayment till 26th July, 2010. Upon ARCIL makingpayment of approx Rs 102 lacs to the Debenture holder, the dues of the company uptill 26thJuly, 2010 have been paid off, on first-due-first-paid basis. For applicability of 274 (1)(g) (B), there must be a default of 1 year from the due date. As debts upto 26th July,2010 have been paid off, no default of more than 1 year exists as on 31st March, 2011 andhence section 274 (1) (g) (B) is not attracted.

In respect of Auditor's Observations regarding debt acquired by ARCIL, withoutprejudice to the contentions of the company as to legality of ARCIL's actions, ARCIL hasenforced security interest on one of the company's property, effect of which has beengiven in this account. The right of ARCIL, if any, to recall the loan or demand any otherpayment is equivalent to rights of an unsecured creditor, which is no different from therights of the original lenders from whom these loans were acquired by ARCIL. Theloans/debts were reportedly acquired by ARCIL in year 2008, and the company has beencarrying on business since then. In the opinion of the Board, there is no significantchange in circumstances that impairs or affects the ability of the company to carry on itsbusiness..

In respect of Auditor's Observation regarding sale of residential property by ARCIL itmay be noted that pending receipt of information from ARCIL with respect to the saleconsideration of Company's residential property situated at A-8 Maharani Bagh, New Delhi -110065, the Company has considered a minimum reserve price of Rs. 27.50 crores for thepurpose of provisional accounting adjustment in the books of accounts.

In respect of Auditor's observations regarding valuation of finished goods stock forRs. 86,40,825 pertaining to the discontinued business segment and non provision ofinterest, demurrages etc. on the goods lying in the custom bonded warehouse it may benoted that the Company is taking necessary steps to liquidate the same at best resalablevalue.

In respect of Auditor's observations regarding the account has been prepared on goingconcern basis, it may be noted that the management feels that due to likely impact on therestructuring, induction of working capital and future profitability on the net worth, theCompany will be able to revive itself.

In respect of Auditor's observations regarding non-provision and non-ascertainment ofinterest/penalties on various outstanding statutory dues it may be noted that the Companywill provide the said liabilities if the same arises in future in the books of accounts.

In respect of the Auditor's observation that in accordance with the explanations givento them and considering their observations in vi, the Company's accounts read togetherwith notes thereon, do not give the information required by the Companies Act, 1956, inthe manner so required and not give a true and fair view in conformity with the accountingprinciples generally accepted in India, it may be noted that mentioned above is the pointwise explanation to all the Auditor's observation raised in pt. no. (vi) of the Auditor'sReport which goes on to explain that the Company's accounts read together with notesthereon, do give the information required by the Companies Act, 1956, in the manner sorequired and do give a true and fair view in conformity with the accounting principlesgenerally accepted in India.

In respect of Auditor's Observation regarding non filing of Return of Deposits it maybe noted that the Company has discontinued accepting deposit from the public since longand all the remaining amount to be transferred to the Investor Education & ProtectionFund account has been transferred in the last year itself and therefore nothing as on dateis due to be transferred to the Investors Education and Protection Fund.

In respect of Auditor's Observation regarding the Company having no internal auditsystem during the year, it may be noted, that there were no such major activities in thecompany in the year concerned which might call for conducting internal audit in a majorscale, the company do have internal audit, commensurate with the size and activity of thecompany.

In respect of Auditor's Observation regarding Company not regular in depositingundisputed statutory dues, it may be noted that the Company despite of its best efforts,due to cash crunch, was not regular in payment of statutory dues. The Company is takingsteps to pay undisputed outstanding statutory dues which are due for more than six months,out of the fresh funds to be infused.

The other notes to the accounts referred to in the Auditor's Report areself-explanatory.

The other notes to the accounts referred to in the Auditor's Report areself-explanatory.

COST AUDIT

M/s K.L. Jaisingh & Co., Cost Accountants, Jaisingh House J-7, Sector -XI, Noida-201 301 are appointed as Cost Auditor of the Company to conduct Cost Audit of the Accountsmaintained by the Company for the financial year ending 31^s' March, 2012.

Due date of filing of Cost Audit Report is 30^th September, 2011. The auditof the Cost Audit Records as maintained by the Company is being conducted. The Cost AuditReport will be filed within the stipulated time frame.

SHARE CAPITAL

The Final Listing approval for allotment of 30,74,300 equity shares to AssetReconstruction Company (India) Ltd. (ARCIL) as a part settlement towards restructuring thetotal secured debts of the Company byARCILfrom Bombay Stock Exchange Limited and NationalStock Exchange of India Limited is awaited.

PREFERENTIAL ALLOTMENT OF WARRANTS

As approved by the shareholders your Company has made preferential allotment of39,00,000 Zero Coupon Convertible Warrants (ZCCWs) to M/s Polar Overseas Ltd. & M/sArunima Investment Pvt. Ltd. the Associate of Promoters of the Company on 3^rdJuly, 2009 & the same is convertible into equal no. of Equity Shares within a periodof 18 months from the date of allotment of warrants (on or before January 2, 2011). Thewarrant holders having failed to exercise the option to acquire the equity shares withinthe said period, the warrants stands lapsed and the amount of Rs 1.12 crore received bythe Company as advance stands forfeited.

SHIFTING OF REGISTERED OFFICE

The Registered Office of your Company has been shifted from 51, Ezra Street, 2^ndFloor, Kolkata - 700 001 to 18, Rabindra Sarani, Poddar Court Building, Kolkata - 700 001w.e.f. March 22^nd, 2011.

DEPOSITS

The Company's Public Deposit scheme closed long back. There was no failure to makerepayments of Fixed Deposits on maturity and the interest due thereon in terms of theconditions of the Company's erstwhile schemes.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed report on Management Discussion and Analysis is provided as a separatechapter in the Annual Report.

DIVIDEND

In view of the huge losses incurred by the Company in the previous years, yourDirectors express regret for not declaring any dividend for the year under review.

CORPORATE GOVERNANCE

The Code of Corporate Governance has already been implemented as per the ListingAgreements and a separate note on Corporate Governance has been given. The certificate ofthe Auditors, M/s. Singhi & Co. confirming compliance of conditions of CorporateGovernance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchangein India is annexed along with this report.

The CMD has certified to the Board w.r.t financial reporting, in the manner requiredunder the Clause 49 of the Listing Agreement concerning the annual financial statement.

CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars required under Section 217(1) (e) of the Companies Act, 1956 read withthe Companies (Disclosure of Particulars in the Report of the Board of Director) Rules,1988 are set out in Annexure-1 forming part of this Report.

PARTICULARS OF EMPLOYEES

Information in accordance with the provisions of Section 217(2A) of the Companies Act,1956, read with the Companies (Particulars of Employees) Rules, 2011, as amended,regarding employees is given as Annexure II to the Directors' Report.

DIRECTOR'S RESPONSIBILITY STATEMENT

Pursuant to Sub-section (2AA) of section 217 of the Companies Act, 1956, the Board ofDirectors of the Company hereby state and confirm that:

i) in the preparation of annual accounts, the applicable Accounting Standards have beenfollowed along with proper explanation relating to material departures;

ii) the directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of financial year and theprofit and loss of the Company for that period;

iii) the directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.

iv) the directors have prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to thank all investors, business partners,clients, banks, regulatory foreign authorities and Stock Exchange for their continuoussupport.

TO THE DIRECTORS' REPORT

Information required under the Companies (Disclosure of Particulars in the Report ofthe Board of Directors) Rules, 1988, for the period ended March 31, 2011.

Conservation of Energy

The Company's operations involve low energy consumption. Wherever possible, energyconservation measures have already been implemented and there are no major areas wherefurther energy conservation measures can be taken. However, efforts to conserve andoptimize the use of energy through improved operational methods and other means willcontinue.

FORM-B

Form of disclosure of particulars with respect to Absorption of Technology Research& Development (R&D).

1. Specific areas in which R&D carried out by the Company:

The R&D efforts of the Company are directed towards quality control,improvements/up-gradation of existing production methods and development of new products.

2. Benefits derived as result of the above R&D:

Improvement in product quality, reduction in consumption of raw materials with costeffectiveness, development of new models.

3 Future Plan of Action

To continue with the above line of action

4 Expenditure on Research and Development

1. Efforts in brief, made towards technology absorption adaptation and innovation.

There is constant endeavor to achieve consistent end product performance with less& less material consumption

2. Benefits derived as a result of the above efforts eg. product improvement, costreduction, product development, import substitution etc

Company has been able to produce products at a reduced cost.

3. In case of imported technology (imported during the last five years reckoned fromthe beginning of the financial year) following information may be furnished.

a) Technology imported

b) Year of Import

c) Has technology been fully absorbed?

d) If not fully absorbed, areas where this has not taken place, reasons therefore andfuture plans & action.

Not applicable as the Company has indigenous technology.

Statement pursuant to Section 217(2A) of the Companies Act, 1956 read with theCompanies (Particulars of Employees) Rules, 2011

None of the personnel are in receipt of remuneration aggregating not less than Rs.5,00,000 per month.