The company has only one class of equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts in proportion of their shareholding.

[b] Increase in Authorised share capital :

The company increased its Authorised Share Capital from Rs. 2,800 Lacs to Rs. 18,500 Lacs [525 lakhs Equity Shares of Rs. 10/- each and Rs. 132.5 Lacs Optionally Convertible Cumulative Redeemable Preference Shares of Rs. 100 each] by special resolutions passed by Postal Ballot on March 13, 2012 for increase to Rs. 15,600 Lacs and on July 06, 2012 for increase to Rs. 18,500 Lacs. This increase in authorised share capital to facilitate allotment of shares as specified in Note '3' is subject to payment of stamp duty, registration charges and filing of relevant forms with the Registrar of Companies.

[a] (a) Pursuant to the scheme of CDR, the company, subject to in-principle approval from the stock exchanges and filing of relevant forms with the Registrar of Companies, passed special resolution through postal ballot for issue of 1,32,19,790 0.001% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) of Rs. 100/- each at par and to convert unsecured loans of Promoters into Equity Share capital by issue of 3,13,63,000 Equity shares of Rs. 10/- each at a premium of Rs. 36/- per share. However the company has not made any allotment in respect thereof during the year.

[b] General Terms & Conditions :

[i] The OCCRPS shall be issued at par and the equity shares shall be issued at a premium of Rs. 36/- per share.

[ii] The option to convert the OCCRPS into fully paid equity shares may be exercised by the respective allotees at the end of 18 months from the date of issue of the OCCRPS in accordance with the then applicable SEBI guidelines.

[iii] If option to convert the said OCCRPS into equity shares is not exercised by the allotees at the end of the 18th month, then the OCCRPS will be redeemed on December 31, 2020 at a redemption premium calculated @ 8% p.a. on simple interest basis and accumulated dividend.

NOTE '1A' : NATURE OF SECURITY AND TERMS OF REPAYMENT OF LONG TERM BORROWINGS Security Details

a] The term loans of Rs. 14,260.83 Lacs from banks are secured as under :

i. First pari passu charge over all movable and immovable fixed assets of the company situated at Village Manakpur, P.O. Lodhimajra, Tehsil Nalagarh, District Solan [H.P.] - 174 101, Village Makhnu Majra, P.O. Bhud, Tehsil Baddi, District Solan [H.P.] - 173 205 and Plot No. 3 & 4, Survey No. 168, Dabhel Industrial Co-operative Society Ltd., Village Dabhel 396 210, Nani Daman, Daman.

ii. Second pari passu charge over current assets of the company along with other term lenders.

iii. Personal Guarantee of Mr. Purnandu Jain, Chairman and Managing Director of the Company

b] Working Capital Term Loans amounting to Rs. 40,713.86 Lacs from banks are secured as under :

i. First pari passu charge on fixed assets of the company with others lenders.

ii. Second pari passu charge on current assets of the company.

iii. Personal Guarantee of Mr. Purnandu Jain, Chairman and Managing director of the company.

Out of the above, term loans and working capital term loans amounting to Rs. 11,571.01 Lacs are further secured by way of additional security in the form of second charge on the office premises at 20th Floor, Lotus Business Park, Off. Andheri Link Road, Andheri [West], Mumbai - 400 053.

c] Term loan amounting to Rs. 1,146.84 Lacs is secured as under:

i. First pari passu charge on fixed assets of company at its factory at Village Makhnu Majra, P.O. Bhud, Tehsil - Baddi, District Solan [H.P.]

ii. Second pari passu charge on other fixed assets of the company.

iii. Personal Guarantee of Mr. Purnandu Jain, Chairman and Managing Director of the Company.

d] Term loans amounting to Rs. 945.62 Lacs are secured as under;

i. First pari passu charge over all movable and immovable fixed assets of the company situated at Village Manakpur, P.O. Lodhimajra, Tehsil - Nalagarh, District Solan [H.P.].

ii. Personal Guarantee of Mr. Purnandu Jain, Chairman and Managing Director of the Company

e] Term Loan amounting to Rs. 420.18 Lacs is secured as under :

i. Pledge of Promoters Shares

ii. First charge by way of equitable mortgage over land measuring 17 bigha 17 biswas situated at Village Makhnumajara, Pargana : Dharampur, Tehsil, Baddi Dist. Solan [H.P.]

iii. Personal Guarantee of Mr. Purnandu Jain, Chairman and Managing Director of the company

f] Term Loan from non-banking finance company amounting to Rs. 162.85 Lacs is secured as under :

i. First charge by way of Hypothecation over Equipment acquired out of loan.

ii. Subservient charge on current assets of the company.

iii. Personal Guarantee of Mr. Purnandu Jain, Chairman and Managing Director of the company.

g] Term Loan amounting to Rs. 2,398.85 Lacs from a bank is secured as under:

i. First charge over office premises at 20th floor, Lotus Business Park, Off. Andheri Link Road, Andheri [West], Mumbai - 400 053.

ii. Personal Guarantee of Mr. Purnandu Jain, Chairman and Managing Director of the company.

e] Term Loan from NBFC amounting to Rs. 162.85 Lacs [out of which Rs. 33.82 Lacs is overdue] is to be repaid in 15 monthly installments of Rs. 9.51 Lacs each.

f] Term Loan amounting to Rs. 420.18 Lacs is to be repaid in installments of Rs. 86.85 Lacs due on June 30 , 2012, Rs. 133.33 Lacs due on September 30, 2012 and last installment of Rs. 200 Lacs due on December 31, 2012.

f] Office Loan amounting to Rs. 2,398.85 Lacs is to be repaid with rate of interest @ PLR -0.50%. of the lending bank.

g] Term Loans amounting to Rs. 1,103.28 Lacs are to be repaid with rate of interest of 11.50% p.a and amounting to Rs. 1,146.84 Lacs are to be paid @ PLR - 1.00%

h] Term Loans amounting to Rs. 945.62Lacs are to be repaid with rate of interest of Rs. 11.00% p.a. from April 2011 to March 2013 and 12.00% p.a. thereafter.

i] Term loan amounting to Rs. 162.85 Lacs are to be repaid with rate of interest of 15.25% p.a.] Term loan amounting to Rs. 420.18 Lacs is to be repaid with rate of interest of 13.50% p.a.

Vehicle Loan

Vehicle Loans amounting to Rs. 46.02 Lacs are secured by hypothecation of respective vehicles financed and are payable over a period of next 10 months. Period and amount of continuing defaults :

The company defaulted in making payment of dues related to banks, non-banking finance companies, financial institutions, inter-corporate deposits, demand promissory notes [DPN], Public Fixed Deposit and Foreign currency convertible bonds. The amount of default in case of banks, financial institutions and non-banking financial companies is equivalent to Rs. 6,478.89 Lacs [Interest : Rs. 3,166,94 and principal : Rs. 3,311.95 Lacs], inter-corporate deposits Rs.3,735.07 Lacs, DPN Rs. 150.63 Lacs, Public Fixed Deposit is Rs. 388.24 Lacs [Interest : Rs. 92.55 Lacs and Principal Rs.295.69 Lacs] and Foreign currency convertible bonds Rs. 5,911.85 Lacs. Further there was also default of Bills Discounting from Banks and NBFCs amounting to Rs. 2,991,18 Lacs.

The defaults in case of banks, financial institutions and non-banking financial companies started from July 2010, inter-corporate deposits from October 2010, DPN from February 2011, Public Fixed Depsits from October 2011, FCCBs from May 2011 and Bills Discounting from Banks and NBFC's from October 2011. There is a continuing default in all the above cases as on the balance sheet date.

NOTE NO. '2A' : NATURE OF SECURITY AND TERMS OF REPAYMENT FOR SHORT TERM BORROWINGS

A] Short term loans :

Security Details

a] Short term loan of Rs. 182.10 Lacs from banks is secured as under :

i. First pari passu charge over all movable and immovable fixed assets of the company situated at its factories at Village Manakpur, P.O. Lodhimajra, Tehsil - Nalagarh, District Solan [H.P.], Village Makhnu Majra, P.O. Bhud, Tehsil - Baddi, District Solan [H.P.]and Plot No. 3 & 4, Survey No. 168, Dabhel Industrial Co-operative Society Ltd., Village Dabhel, Nani Daman, Daman.

ii. Second charge over current assets of the company along with other term lenders.

iii. Personal Guarantee of Mr. Purnandu Jain, Chairman and Managing Director of the Company

b] Receivable Funding amounting to Rs.505.94 Lacs is secured by way of second charge over:

i. Pledge of Promoters Shares

ii. Equitable mortgage over land measuring 17 bigha 17 biswas situated at Village Makhnumajara, Pargana : Dharampur, Tehsil, Baddi Dist. Solan [H.P.]

iii. Personal Guarantee of Mr. Purnandu Jain, Chairman and Managing Director of the company

c] Short Term Loans amounting to Rs. 66.15 Lacs are secured against lien on Fixed Deposit Receipts Repayment Details

a] Short Term Loan amounting to Rs. 182.10 Lacs is payable on demand.

b] Receivable Funding amounting to Rs. 505.94 Lacs are overdue.

c] Loans Against FDR amounting to Rs. 66.15 Lacs are to be repaid in F.Y. 2012-13 Rate of Interest

a] Term Loan amounting to Rs. 182.10 Lacs is to be repaid at the rate of 11% p.a.

b] Receivable Funding amounting to Rs. 505.94 Crores is to be repaid at the rate of interest of 14.25% p.a.

c] Term Loans amounting to Rs. 66.15 Lacs are to be repaid at the rate of 11.5% p.a.

B] Working Capital Borrowings:

Cash Credit amounting to Rs. 7,228.77 Lacs and WCDL of Rs. 2,542.25 Lacs is secured as under;

i. Pari passu first hypothecation charge on current assets [both present and future] of the company with consortium of banks and

ii. Pari passu second charge on fixed assets [both present and future] with consortium of banks.

iii. Personal Guarantee of Mr. Purnandu Jain, Chairman and Managing director of the company Working Capital Borrowings are payable on demand

NOTE 3 : CONTINGENT LIABILITIES                          Rs.in Lacs

                                               As at           As at

Particulars                           March 31, 2012  March 31, 2011

Bank Guarantee                                246.99          173.63

Corporate Guarantee                           605.01               -

                           Total            1,288.99          631.63

In the opinion of management, there shall be no material adverse effect on the financial statements of the company on the basis of disputes, lawsuits, claims, inquiries, proceedings etc. which may arise from time to time in the ordinary course of its business.

NOTE 4 :

The Company does not possess information as to which of its suppliers are ancillary industrial/small scale industrial undertaking holding permanent registration certificate issued by the Directorate of Industries of a state or union Territory. Consequently the liabilities if any, of interest which would be payable under the "interest on delayed payments to small scale and Ancillary industrial undertaking Act, 1993 cannot be ascertained. However, the company has not received any claim in respect of such interest and as such, no provision has been made in the books of accounts.

NOTE 5:

Disclosures as required by Accounting Standard -18, on "'Related Party Disclosure" issued by the Institute of Chartered Account of India are given below:

a] Key Management Personnel and their relatives :

i] Shri. Purnandu Jain, Chairman & Managing Director

ii] Shri. Girraj Vijayvargiya, Whole-time Executive Director

iii] Smt. Anupama Jain

iv] Shri. Vaibhav Jain

v] Ms. Aakanksha Jain

b] Enterprises/Key Managerial Personnel having significant influence/controlling power :

i] Aakanksha Securities Pvt. Limited

ii] Aril Pharma Limited

iii] Purnandu Jain [HUF]

NOTE 6 : EXCEPTIONAL ITEMS

During the year, in the absence of any realisable value, the stock of raw material, packing material and finished goods to the extent of Rs. 13,636.70 Lacs was written off on account of changes in pharmacopeal specification, expiry, discontinuance of products, etc.

NOTE 7 : CORPORATE DEBT RESTRUCTUTRING

During the year, the Debt of the Company was restructured under Corporate Debt Restructuring [CDR] Mechanism. CDR Empowered Group at its meeting held on June 30, 2011 and August 30, 2011 had approved the Restructuring package of the Company with the cut off date as January 01, 2011 and communicated its sanction vide their letter No. BY CDR[SKK]/No 4035/2011-12 dated September 19, 2011 further modified vide their letter No. BY CDR[SKK]/No 5878/2011-12 dated October 19, 2011. The Restructured package includes interalia reduction in the existing rate of interest, re-schedulement for repayment of loans, conversion of excess drawing power in C.C. and O.D. Accounts including devolved letter of credit and standby letter of credit into working capital Term Loan [WCTL], conversion of part of term loans and working capital term loans into Optionally Convertible Cumulative Redeemable Preference Shares [OCCRPS], waiver of penal interest, conversion of unsecured loans of promoters into equity and additional infusion of funds by the promoters, etc. The said CDR package also stipulates conditions to ask for roll over of FCCB's and to renegotiate terms of repayment and interest with Non- CDR lenders.

The banks are still in the process of readjusting the books on the basis of the CDR approval. The Company has passed the necessary entries in the books based on the CDR approval and accounted for the same as on the reporting date. Any difference in the interest/other charges charged by the banks and actual worked out on the basis of CDR approval accounted for by the company shall be adjusted on final determination.

As per the CDR Package the company has carved out excess drawing power in C.C. and O.D. Accounts including devolved letter of credit and standby letter of credit into working capital Term Loan [WCTL] and thereafter a certain portion of WCTL is carved out into OCCRPS. This has resulted in reclassification of Short Term Borrowings into Long Term Borrowings to the extent of Rs. 3,67,222.48 Lacs.

Out of the OCCRPS amounting to Rs. 11,306.51 Lacs, carved out of the Term loans and Working Capital Term Loans, Rs. 3,168.30 Lacs relates to Term Loans and Rs. 8,138.21 Lacs relates to WCTL.

NOTE 8 : ZERO COUPON FOREIGN CURRENCY CONVERTIBLE BONDS

i] The company had issued 16,000 FCCB's of US $ 1000 each aggregating to US $ 16 million on May 25,2006. Out of the above FCCBs' to the extent of US $ 8 million were converted upto March 31, 2010 and the balance FCCB's of US$ 8 million were pending for conversion upto 13th April '2011. However, none of the FCCB's were converted into equity and the entire balance of US $ 8 Million has become due along with premium of US $ 3.62 million on May 27, 2011.

ii] US$ 20 million FCCB's [20,000 Bonds of US$ 1000 each issued on December 24, 2007] outstanding as at March 31, 2012 are due for conversion on or before November 08, 2012 and if these FCCB's are not converted, the entire balance along with premium of US $ 5.64 million will become due on December 27, 2012.

iii] During the year, provision for Premium on redemption of FCCB's to the tune of Rs. 1,175.40 Lacs has been computed on pro rata basis.

NOTE 9 : TECHNICAL KNOW-HOW AND PRODUCT DEVELOPMENT EXPENDITURE

The company incurred substantial expenditure on generation of real time stability data of its product, product development of NDDS, marketing rights of NDDS for 10 years, product license/quota approvals from Drug Controller General of India/Narcotic Department and etc., the benefit of which shall be derived by it on long term basis. Considering it, the company decided to amortise the expenditure over a period of 10 years beginning from current financial year.

NOTE 10 : SEGMENT REPORTING

As per the requirements of AS-17 issued as per Companies (Accounting Standards) Rules, 2006, no disclosure is required as the Company is operating in single business/geographical segment of " Pharmaceutical Formulations".

NOTE 11:

The net-worth of the company as on the Balance Sheet date turned negative on account of its accumulated losses of Rs. 24,368.23 Lacs exceeding its share capital and other reserves of Rs. 22,466.23 Lacs. The Company is in the process of making application to the Hon'ble Board for Industrial & Financial Reconstruction (BIFR) pursuant to the provisions of Sick Industrial Companies (Special Provisions) Act, 1985.

NOTE 12 :

A winding up order dated July 13, 2012 was passed against the company by Single Bench of Honorable High Court of Bombay. However, on company's appeal, the said order was stayed by the larger bench of Hon'ble High Court of Bombay vide its order dated August 6, 2012. The company expects quashing of the aforesaid winding up order by the Honorable Bombay High Court. Also, the company is in process of filing a scheme of compromise and arrangement with its creditors.

NOTE 13:

The company is making continued efforts for improving efficiency, restructuring its debts, exploring multiple financing opportunities and optimisation of cost. In the opinion of management, the company shall continue to carry on its operations in future and its accounts shall be maintained on the assumption of going concern.

NOTE 14:

In view of recurring losses in the company, the Chairman & Managing Director of the company, Shri Purnandu Jain decided not to accept any remuneration and sitting fees for the year.

NOTE 15:

During the year ended March 31, 2012 the Company has prepared the Financial Statements as per the format prescribed by the revised Schedule VI of The Companies Act, 1956 issued by Ministry of Corporate Affairs. Accordingly, the Company has made significant changes in the format of Financial Statements and disclosures.

NOTE 16 :

In the opinion of the Board of Directors, the current assets and loans and advances have value on realisation at least equal to the amount at which they are stated in the Balance-sheet and provision for all known and determined liabilities is adequate and not in excess of amount reasonably required.