1. Accounting Standards
The Company follows all applicable accounting standards as required under Section 133 of the companies Act 2013 read with Rule 7 of the Company (Accounts) Rules, 2014.
2. Determination of Revenues under ‘Percentage of Completion Method’ necessarily involves making estimates by management for percentage of completion, projected cost to completion, revenues expected from projects, and foreseeable losses. These estimates being of technical nature have been relied upon by the auditors as per management representations.
3. In the opinion of Directors, the current assets, loans and advances including advances for purchase of land have value on realization in the ordinary course of business at least equal to the value at which they are stated in the forgoing Balance Sheet except as otherwise stated.
4. Some of the Debit and credit balances of Trade Receivables, (excluding unbilled receivable) trade and other payable, security deposit, short term advances and bank accounts are subject to confirmation and consequent adjustment if any arising from subsequent reconciliation. The Management however is of the view that there will be no material adjustment in this regard.
5. Penal Interest on loan from banks and financial institutions if any payable for defaults in accounts declared NPA or otherwise has not been provided. Liability for unascertained value of penal interest has not been quantified nor provided on account of the uncertain and discretionary nature of such charges pending negotiations for settlement of dues.
6. As per board resolution dated 17.02.2015, it was resolved that loans availed from banks and financial institutions which have been declared NPA and on which the lenders are not providing interest, no interest on such accounts be provided w.e.f. 01.04.2014. The management shall take a decision in respect of this liability after negotiation and final settlement with the lenders, which is under progress.
In consequence of the above resolution:
a) Interest of Rs.22,75,35,705/- (previous year Rs.17,59,92,811/-) being the interest directly related with the projects has not been included in the construction cost of respective projects. Similarly, interest of Rs.18,21,49,868/- ( previous year Rs. 6,33,62,804/-) not directly relating to any project was required to be expensed, but in view of resolution dated 17.02.2015, this interest also pertaining to accounts declared as NPA, has not been charged to Profit and Loss Account during the year.
Total liability towards interest on loans from banks and financial institutions not provided in these financial statements during the year is Rs.40,96,85,573/- (previous year Rs. 32,39,14,890/-). Out of this interest as per the system of revenue recognition followed by the company, namely Percentage of Completion method (POC), interest of Rs.22,75,35,703/-(previous year Rs.23,85,94,630/-) directly related with ongoing real estate projects was to be expensed as direct project cost, which would have resulted in the increase in the percentage of completion. Thus proportionate recognition of sales would have gone up by Rs.18,99,09,679/- (previous year Rs. 26,14,60,650/-).
b) The other component of interest not directly related with the project, of Rs.18,21,49,868/- (previous year Rs. 8,53,20,260/ -) has also not been provided during the year on loans declared NPA, by the lenders.
Net effect of non provision of interest on loans from banks and financial institution declared NPA is that : -
i) Sales as per the system of revenue recognition POC method, regularly followed, are understated by Rs. 18,99,09,679/ - (previous year Rs. 26,14,60,650/-).
ii) Net Loss from operations is understated by Rs. 21,97,75,894/- (Previous year Rs.6,24,54,240)
7. Following advances to group companies ,
outstanding as at 31/03/2016 are considered doubtful of recovery by the auditors:
i) Noesis Industries Limited Rs. 2759.43 lacs
ii) Falcon Techosystems Limited Rs. 56.51 Lacs
While interest @ 9% p.a is being provided on advance to Noesis Industries Limited, no interest is being provided on advance to Falcon Technosystems Ltd.
The auditor‘s have further opined that the above advances are in contravention of the provisions of Companies Act 2013 and are prejudicial to the interest of the company.
These advances are given for meeting their working capital requirements of the above said companies
8. Trade receivables include Rs.244.41 crores (previous year Rs.231.46 crores) representing unbilled receivables included as debts considered good under Note No.16 of financial statements. These debts represent amounts receivable on the basis of sale accounted for under the Percentage of Completion (POC) method, regularly followed by the company. The recovery of these debts is subject to completion and delivery of projects, to the customers.
9. BANK LOANS
(a) Following credit facilities are availed by the Company, from Banks and Financial Institutions:-
(i) Term Loan from Consortium of Canara Bank and UCO Bank secured against first pari passu charge on moveable and immoveable assets situated at MVL IBC-IT Park Sector 35, Gurgaon.
- Further secured against personal guarantee of Managing Director and Corporate Guarantee provided by associate company.
(ii) Term Loan from Dena Bank secured against first charge on entire assets of MVL Indihome Group Housing Project situated at Bhiwadi.
- Further secured against personal guarantee of Managing Director.
(iii) Corporate Loan from IFCI Ltd secured against pledge of equity shares owned by associate company, personal guarantee of Managing Director and Corporate Guarantee of associate company. Further secured against mortgage of flats at Bhiwadi Coral Project.
(iv) Sicom Ltd secured against first charge on property belonging to associate company including hypothecation of receivables thereupon.
- Further secured against personal guarantee of Managing Director
(v) IFCI Factors Ltd secured against flats situated at Bhiwadi Coral Project and pledge of shares owned by associate company.
- Further secured against personal guarantee of the Managing Director.
(b) Present Status of Bank Loans
i) Canara Bank has declared the loan account as NPA and has filed application under Section 19(4) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 before the Debts Recovery Tribunal-II, Delhi vide application dated 11.5.2015 for recovery of Rs.93.91 crores along with interest upto the date of payment. Canara Bank has also issued notice dated 9.5.2015 under Section 13(2) of Securitization and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) claiming dues of the value of Rs.93.64 crores along with further interest up to the date of payment. The issue of notice under SARFAESI Act, 2002 has been challenged by the company vide letter dated 9.7.2015. The Company’s proposal for One Time settlement is under consideration of Bank.
ii) UCO Bank has declared the loan account as NPA and has filed application under Section 19(4) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 before the Debts Recovery Tribunal-II, Delhi vide application dated 10.7.2014 for recovery of Rs. 43.62 crores along with interest upto the date of payment. UCO Bank has also issued notice dated 5.3.2014 under Section 13 (2) of Securitization and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) claiming dues of the value of Rs. 40.00 crores along with further interest up to the date of payment. The issue of notice under SARFAESI Act, 2002 has been challenged by the company vide letter dated 06.05.2014. The Company’s proposal for One Time settlement is under consideration of Bank.
iii) Dena Bank has declared the loan account as NPA and company’s One Time Settlement proposals is under consideration of the bank. The Company’s proposal for One Time settlement is under consideration of Bank.
iv) IFCI Ltd has declared the Loan Account as NPA and has filed application under section 19(4) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 before the Debts Recovery Tribunal-I Delhi vide application dated 19.12.2012 for recovery of Rs. 49.24 crores along with interest upto the date of payment. IFCI Ltd has also issued notice dated 8.12.2014 under section 13(4) of SARFAESI Act, 2002 claiming their dues. The Company’s proposal for One Time settlement is under consideration of Bank.
v) Sicom Limited has declared the Loan Account as NPA on 15.4.2015 and has also proceeded under section 13(4) of SARFAESI Act, 2002 claiming their dues of Rs. 47.10 crores against mortgaged property. The Company’s proposal for One Time settlement is under consideration of Bank.
10. Interest of Rs.531.29 lacs (previous year Rs.472.82 lacs) has been provided on actual payment basis to some of the allottees of MVL IBC Project which are under Assured Return Scheme. Since some of the allottees are likely to take additional space, interest on balance deposits has not been provided during the year. Consequently, the interest of Rs. 478.28 lacs (previous year Rs. 447.55 lacs) is short provided in these accounts on accrual system of accounting.
11. During the year 2014-15, the Security Exchange Board of India (SEBI) had passed an order dated 19.12.2014 declaring violation of Collective Investment Scheme, in respect of collections received under the Assured Return Plan launched for IBC, Gurgaon project, in terms of section 11AA of SEBI Act. The company has challenged the said order, requiring the company to refund the total collection. Company‘s appeal before Securities Appellate Tribunal (SAT) is pending for adjudication, however restraint on sale against other projects was lifted by SAT order dated 17th March 2015 and an interim stay has been granted till next hearing on refund of collections to IBC allottees vide its order of April, 2016.
12. Disclosure of Related Party Transactions in accordance with Accounting Standard (AS) - 18 “Related Party Disclosures”.
a) Subsidiaries (Group - A)
MVL Developers Ltd.
Udyan Hoticultures Pvt. Ltd.
Creative Pools Developers Pvt. Ltd.
b) Associates (Group - B)
Nll
c) Key Managerial Personnel (Group - C)
Mr. Prem Adip Rishi - Managing Director
Mr. Rakesh Gupta - Director & Chief Financial Officer
Mr. Sushil Aggarwal - Vice President (Company Affairs& Legal)
(tiill May, 2015)
Mr. Dhiraj Suri - Vice President Operations
d) Relatives of Key Managerial Personnel Relative (Group - D)
Mr. Arjun Rishi
Mr. Prem Adip Rishi (HUF)
Mrs. Anuradha Rishi
e) Companies/Parties in which key management Person or their relatives have substantial interest/significant influence (Group - E)
Media Holding Pvt. Ltd.
Media Magnetic Cassettes Ltd.
MVL Credits Holdings & Leasing Ltd.
Falcon Technosystems Ltd Noesis Industries Ltd.
Risbro Technical Equipment Pvt. Ltd.
Cardinal Infratech Ltd.
Balaji Tirupati Property Developers Pvt. Ltd.
MVL Solar Power Ltd Shri Tirupati Balaji Electronics Pvt.Ltd Parisar Property Developers Pvt. Ltd Note : - List of related parties has been identified by the management and relied upon by the auditors
13. Disclosure of Guarantees & Securities given during the year in terms of section 186 (4) of the Companies Act, 2013.
Guarantee & security provided to Karvy Financial Services Ltd, Mumbai against Rs. 15.00 crores loan availed by MVL Credits Holdings & Leasing Ltd and its subsidiaries. Security provided is 8 Residential Flats situated at project MVL Coral, Bhiwadi. Loans have been availed by these companies for meeting their working capital requirements.
14. Information pursuant to regulation 34(3) and 53(f) of the listing agreement.
b) There are no loans & advances in the nature of loans to Associate.
c) Loans and advances in the nature of loans to firms/ companies in which directors are interested:
d) Investment of Noesis Industries Ltd in the shares of parent company represents the shares received as per scheme of Demerger of said company as approved by the the Hon’ble High Court of Delhi w.e.f 15.2.2007. There is no other investment by the loanee in the shares of parent company.
15. As per the best estimate of the Management, no provision is required to be made in terms of Accounting Standard (AS)-29, in respect of any present obligation as a result of past event that could lead to a probable outflow of resource which would be required to settle the obligation.
16. In respect of advances for projects (Land/ rights) included under the head “Long Term Loans and Advances” under note no. 13 of the financial statements, advances of Rs. 6817.72 lacs (Previous year Rs. 11780.53 lacs)are included as outstanding as at 31.03.2016. Out of these advances :
a) For advance of Rs. 2,803.10 lacs, the company has filed legal suit for specific performance. This matter is now under arbitration and the management expects final order shortly.
b) Possession of property in respect of advance of Rs. 762 lacs from the builder is expected to be delivered on completion of construction as per the terms of agreement.
In respect of the balance advances of Rs. 3252.62 lacs as at 31/03/2016, which are outstanding, confirmations and valid supporting agreements for some of the advances, have not been provided to the auditors, however the management expects to recover and/ or adjust the above said advances against deliveries.
17. During the year a sum of Rs. 38,86,02,392/- has been included under the head inventories (WIP) towards the cost of commercial space of 23987.82 sq feet acquired at Gurugram on the basis of 99% payment already made, supported with Builder buyer agreement dated 06-09-2013 and on possession of the space taken during the year.
18. Previous year figures have been regrouped and rearranged, wherever necessary to facilitate comparison with current year figures.
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