shree bhawani paper mills ltd Directors report

We are presenting our 37th Annual Report together with the audited accounts of the Company for the year ended 31st March, 2016.

Performance

The working of the Company during the year under review has been highlighted below:

	Year Ended 31.03.2016	Year Ended 31.03.2015
Production (Tonnes)	25	7499
	Rs in Lacs	Rs in Lacs
Sales	19	2828
Other Income	80	81
	99	2909
Gross Profit/(Loss)	-1877	-2583
Less: Interest	2133	2056
Depreciation for the year	893	912
Profit Before Exceptional Items and Tax	-4903	-5551
Exceptional Items	247	-
Profit for the year before tax	-5150	-5551
Less: Income Tax Adjustment of Earlier Years	12	-
Profit / (Loss) after taxation	-5138	-5551
Profit/(Loss) brought forward from last year	-20014	-14463
Loss carried to Balance Sheet	-25152	-20014

Operations & Reason for losses

The Central Pollution Control Board (CPCB) vide its Letter No.D-23012/1/PCI-III/5944-5948 has stopped the production on all the three paper machines of the Company in October, 2014. Conditional clearance of the same was received in March, 2015. Due to which, the financial position has further deteriorated. The Company is exploring various avenues to infuse the funds for revival of the Company.

Revival Plan

The Paper Mill of the Company is closed since October 2014 due to order by CPCB order to make modification in the Pollution Control Plant. This requires investment of nearly Rs. 2 Crores.

In the meanwhile, Government of Uttar Pradesh has issued Government Order (GO) no 1701/77-1-2015-10(BIFR)/ 09TC dated 7th December, 2015 which offers various benefits to eligible units, we are eligible and benefits available to us are as follows:

• Refund of 85% of paid VAT, CST (in case of GST, 85% of State Government share) including aforesaid taxes paid on raw material for 10 years.

• Total Electricity and other State Dues net of interest, surcharges be allowed to be repaid in 10 equal yearly installments after 2 years moratorium.

• To allow the sale of surplus land with land use conversion.

Our Company is in a position to avail the benefits provided we arrange funds for the Scheme and get Reliefs/ Settlement with our Lenders. The Company is in advance stage of finalizing and submitting a Rehabilitation Scheme to Bank of Baroda, the Operating Agency appointed by BIFR. In the meanwhile, BOB and JM Financial ARC Private Limited have sent a notice under Sub section (2) of Section 13 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Looking into the urgency of the situation and in view of the cyclical nature of Paper Industry, the management is of the view, that the restructuring of the Company is only possible with fresh infusion of funds and also by sale of surplus land and machinery of the Company. The new paper machine and DIP has been sparingly used and has a long residual life. Therefore, the production should be restarted based on the new machines.

The pollution load of waste paper plant is much lower and can easily meet NGT standard. In this light, the profitability of Agro pulping and old paper machine should be reviewed to decide future course of action. The new paper machine can also be restarted with minimum gestation period. Proposal will be made to the lenders based on sustainable debt and relief will be sought accordingly. Part of dues of Secured Creditors can be paid over a short period of time by sale of surplus assets and land if the scheme is approved by PICUP and permission given by lenders.

Compliance of Sick Industrial Companies (Special Provisions) Act, 1985

The Company has filed a Reference Application under Section 15 (1) of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) with Hon’ble BIFR which was registered as Case No. 29/2013. In the hearing held on 26th September, 2013, the Hon’ble BIFR declared the Company as ‘Sick’ u/s 3 (1) (o) of SICA and appointed Bank of Baroda as the Operating Agency (OA) u/s 17 (3) of the Act, to prepare a Rehabilitation Scheme for the Company. The Company has submitted the Draft Rehabilitation Scheme (DRS) to Bank of Baroda (OA) and other stakeholders with a copy to Hon’ble BIFR. Indian Bank has sold its loan to the ARC, M/s JM Financial Asset Reconstruction Company Pvt. Ltd whose name has been substituted in place of Indian Bank.

The revival of the Company is dependent on approval of Draft Rehabilitation Scheme at the earliest.

Share Capital

The paid up Equity Share Capital as on 31st March, 2016 was Rs.34,82,72,240/-. During the year under review, the Company has not issued shares with differential voting rights nor granted stock options or sweat equity.

Directors and Key Managerial Personnel

The present tenure of office of Shri Girish Tandon as Managing Director and Shri Alankar Tandon as Executive Director expired on 31st March, 2016. The Board of Directors of the Company, having regard to the present situation of the Company and closure of manufacturing facility, decided to recommend the re-appointment of Shri Girish Tandon as Managing Director of the Company, for a further period of three years subject to requisite approvals. After the improvement in situation, the other appointment may be considered.

Your Directors expressed their deep appreciation for valuable contributions of Shri Alankar Tandon to the Company as Executive Director of the Company but he shall continue to remain the Non Executive Director on Board. Shri Alankar Tandon, Director, is retiring by rotation, being eligible and offers himself for re-election, has given his consent for the same.

During the Year, the Non Executive Directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fee and reimbursement of expenses incurred by them for the purpose of attending meetings of the Company.

Pursuant to Provisions of Section 203 of the Companies Act, 2013, key managerial personnel of the Company are Shri Girish Tandon, Managing Director, Shri R M Pandey, Chief Financial Officer, and Smt Babita Jain, Company Secretary. There has been no change in key managerial personnel during the year.

The Brief resume and other details relating to the Directors, who are to be appointed/ re-appointed as stipulated under Regulation 36(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, are furnished in the Annual Report.

Further, all independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149 (6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. None of the Director is disqualified under Section 164 (2) of the Companies Act, 2013 and Clause 49 of the Listing Agreement with the Stock Exchange.

Corporate Governance Code

Your Company has complied with all the mandatory requirements of Corporate Governance. The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Bombay Stock Exchange and SEBI Listing Regulations forms an integral part of the Directors’ Report.

The Statutory Auditors of the Company have examined the Company’s compliance to the Code of Corporate Governance and have certified the same, as required under SEBI guidelines. The certificate is reproduced with Corporate Governance Report to the Members.

Management’s Discussion and Analysis Report

Management’s Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Bombay Stock Exchange and SEBI Listing Regulations, is presented in a separate section forming part of the Annual Report.

Auditors and Auditor’s Report

Statutory Auditors

M/s. P. L. Gupta & Co., Chartered Accountants, Statutory Auditors of the Company, retire from their Office at the conclusion of ensuing Annual General Meeting. They are, however, eligible for re-appointment and have furnished certificate to the effect that their appointment, if made, will be in accordance with the limits specified in Sub- Section (I-B) of Section 139 of the Companies Act, 2013. Your Directors recommend their re-appointment up to the conclusion of next annual general meeting.

Auditor’s Qualification/ Remarks

With regard to qualifications/ remarks in Auditor’s Report, Management response there on as under:

a) The balances of some of the trade receivables, trade payables, lender and loans and advances are subject to confirmation/ reconciliation and subsequent adjustments, if any. Due to closure of the Plant, necessary verification has been delayed, however, the Management is of the opinion that there are no material adjustments in this regard.

b) The Company became a sick industrial company within the meaning of Section 3 (1) (O) of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) due to erosion of its entire net worth and the Company was declared a sick Industrial Company by Hon’ble BIFR on 26th September, 2013. The Company has submitted the Draft Rehabilitation Scheme (DRS) to operating agency, Bank of Baroda. The Company has provided interest on Term Loan and other loans of Indian Bank and Bank of Baroda @ 10.50% with effect from 1st January, 2013 in accordance with Guidelines and Checklist for preparation of Draft Rehabilitation Scheme as provided by Hon’ble BIFR.

c) The Company has not recognized additional net Deferred Tax Asset during the year. There has been delay in approval of Draft Rehabilitation of scheme/ settlement with lenders. The Company is confident of getting support from lenders for settlement /revival of the Company and generate profit in near future.

d) The Company could not get the Actuarial Valuation of Gratuity during the year under review and provided the gratuity liability on estimated basis for the year.

Cost Auditor

Pursuant to Section 148 of the Companies Act, 2013, read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company in respect of its paper activity is required to be audited. Your Directors had, on the recommendation of the Audit Committee, appointed Shri Rakesh Mishra, Cost Accountant, as Cost Auditor for auditing the cost accounts of the Company for the Financial Year 2016-17 at a remuneration of Rs.10,000/-(Rupees ten thousand only). As required under the Companies Act, 2013, the remuneration payable to the Cost Auditor is required to be placed before the Members in the general meeting for ratification. Accordingly, a Resolution seeking member’s ratification for the remuneration payable to Shri Rakesh Misra , Cost Auditor is included in the Notice convening the Annual General Meeting.

The Company has received a letter from him to the effect that his re-appointment would be within the limits prescribed under Section 141(3)(g) of the Companies Act, 2013 and that he is not disqualified for such re-appointment within the meaning of Section 141 of the Companies Act, 2013.

Secretarial Auditor

The Board of Directors of the Company have appointed M/s. Adesh Tandon & Associates, Company Secretaries, as the Secretarial Auditor of the Company for the financial year 2016-17, in terms of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

The Report of the Secretarial Auditor for the year 2015-16 is annexed herewith as Annexure A and forms an integral part of this Report. The comments mentioned in Secretarial Audit Report are self explanatory.

Internal auditor

The Board of Directors of the Company have appointed M/s. S. Kakkar & Company, Chartered Accountants, as the Internal Auditor of the Company for the financial year 2016-17. The Internal Auditors have consistently expressed their satisfaction about adequacy of internal control systems and procedures followed by the Company for conducting its business efficiency. All issues raised by Internal Auditors are being suitably dealt with and rectified under the close monitoring of the Audit Committee.

Extract of Annual Return

Pursuant to Section 92 (3) of the Companies Act, 2013 and Rule 12(1) of the Company (Management & Administration) Rules, 2014, extract of Annual Return of the Company is annexed herewith as Annexure B in Form MGT-9 to this Report.

Particulars of Employees/Managerial Remuneration

None of the Employee of the Company was in receipt of total remuneration of Rs.60,00,000/- during the financial year under review or Rs.5,00,000/- per month.

Information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith as Annexure C and form an integral part of this Report.

Deposits

The Company has not accepted any deposit under Section 73 or Section 76 of the Companies Act, 2013 read with the Companies (Acceptance of Deposit) Rules, 2014 during the year under review.

Particulars of conservation of energy, technology absorption and foreign exchange earnings and outgo

Particulars with respect to conservation of energy, technology absorption and foreign earnings and outgo pursuant to Section 134 (3) (m) read with the Companies (Accounts) Rules, 2014 for the year ended 31st March, 2016 are provided in Annexure D to this Report.

Directors’ Responsibility Statement

Pursuant to the requirement under Section 134(3) (c) of the Companies Act, 2013 with respect to Directors’ Responsibility Statement, it is hereby confirmed:

I) that in the preparation of the annual accounts for the year ending 31st March, 2016 the applicable accounting standards had been followed along with proper explanation relating to material departures, if any;

II) that 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 ended 31st March, 2016 and of the loss of the Company for that period;

III) that proper and sufficient care has been taken 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;

IV) that the annual financial statements for the year ending 31st March, 2016 have been prepared on a ‘going concern’ basis;

V) that proper internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

VI) that systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Material Changes and Commitments affecting the Financial position of the Company which have occurred between the end of financial year to which the financial year relates and the date of the Report

The Company has received Notice under Section13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Company is in process of settlement with the lenders.

Disclosures Audit Committee

The Audit Committee comprises of five Directors namely Shri Badri Vishal Tandon, non-executive non independent Director and four Independent Directors, namely Shri C.M. Krishna, Brig. (Retd.) Shri Rajeev Lochan Singh SC, Shri Saran Vinod and Shri Atul Seth. All the recommendations made by the Audit Committee were accepted by the Board.

Particulars of Loans, Guarantees or Investments

The Company has not given any loans or guarantees covered under the provisions of Section 186 of the Companies Act, 2013. The details of the investments made by Company are given in the notes to the financial statements.

Risk Management

The Board of Directors has constituted a Risk Management Committee to monitor and review the risk management plan and apprised the Board about Risk Management framework, methodology for categorization of risk and mitigation plan and such other function as directed by Board from time to time. The main objective of this policy is to ensure sustainable business growth with stability and to promote a proactive approach in reporting, evaluating and resolving risks associated with the business. In order to achieve the key objective, the policy establishes a structured and disciplined approach to Risk Management, in order to guide decisions on risk related issues. In today’s challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the Company are imperative. The common risks inter alia are Regulations, competition, Business risk, Technology obsolescence, Investments, retention of talent and expansion of facilities. Business risk, inter-alia, further includes financial risk, political risk, fidelity risk, legal risk. As a matter of policy, these risks are assessed and steps as appropriate are taken to mitigate the same.

Vigil Mechanism

Pursuant to provisions of Section 177 of the Companies Act, 2013, the Company has adopted Vigil Mechanism of the Company, which also incorporates a whistle blower policy. Adequate safeguards are provided against victimization to those who avail the mechanism and access to the Chairman of the Audit Committee in exceptional cases. This policy is available on the Company’s website at www.shbhawani.com

Unclaimed Dividend

Pursuant to the provisions of Section 205A (5) and 205C of the Companies Act, 1956, the Company has transferred the unpaid or unclaimed dividends for the financial year up to 2006-07 from time to time on due dates, to the Investor Education and Protection Fund (the IEPF) established by the Central Government. The Company has not declared any dividend thereafter till the year under review.

Contracts and Arrangements with related parties

During the year, the Company had not entered into any contract/ arrangement/ transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. The policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company’s website at www.shbhawani.com Your Directors draw attention of the members to Note 31 to the financial statement which sets out related party disclosures.

Meetings of the Board

Five meetings of the Board of Directors were held during the year. For further details, please refer Report on Corporate Governance of this Annual Report.

Subsidiary and Associate Companies

The Company does not have any Subsidiary/ Associate Company.

Appointment Policy

The Board has, on the recommendation of the Nomination & Remuneration Committee, framed a policy for selection and appointment of Directors, Key managerial Personnel, Senior Management and their remuneration. The appointment Policy is stated in the Corporate Governance Report and is available on website of the Company www.shbhawani.com

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"), the Board has carried out an annual performance evaluation of its own performance and the performance of the individual Directors as well as the evaluation of the working of its Committees. The manner in which the evaluation was carried out has been explained in the Corporate Governance Report. The details of programme for familiarization of Independent Directors of the Company is available on website of the Company www.shbhawani.com

Listing with Stock Exchange

The Equity Shares of the Company are listed on Bombay Stock Exchange Limited.

Disclosure 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 Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. Till date, the Company has not received any complaint there under.

Acknowledgement

Your Directors would like to express their thanks to the Banks for their co-operation and assistance from time to time. The Directors would also like to record their appreciation to the members of staff and workers, who in spite of constraints have been working hard for the Company and are maintaining cordial relations.

FOR AND ON BEHALF OF THE BOARD
GIRISH TANDON	ALANKAR TANDON
MANAGING DIRECTOR	DIRECTOR
PLACE: ALLAHABAD
DATED: 13TH AUGUST, 2016