DIRECTORS' REPORT TO THE SHAREHOLDERS TO, THE MEMBERS, Your Directors have pleasure in presenting their 32nd Annual Report on the business and operations of the Company and the accounts for the Financial Year ended March 31, 2015, 2. State of Company's affair During the year ending 31s1 March, 2005 the Scheme of Compromise and Arrangement under Section 391 of the Companies Act, 1956 to effect the restructure of Company's debts particularly Debentures and subordinated debts of the Company was framed and presented before the Honorable High Court of Karnataka. Accordingly, the meeting of the Shareholders, Debenture Holders and Subordinated Debt holders were held on 20lh April, 2005. The scheme as proposed had provided for payment of principal in a phased manner over 60 months from effective date and payment of interest accrued till 30'" June, 2002 within 72 months from the effective date. The Scheme as proposed do not provide for accrual of interest after 30'" June, 2002. (For the above purpose the effective date means the date on which the Order of High Court of Karnataka sanctioning the Scheme of Arrangement is filed with the Registrar of Companies in Karnataka.) On 10,h July, 2009, Honorable High Court of Karnataka has directed the Company to submit the details of payments made to Non-Convertible Debenture holders and subordinated debt holders from 1st April, 2005. Accordingly the details were furnished to Honorable Court. It was submitted before the Honorable Court that the Company has settled substantial portion of Non-Convertible Debentures and Subordinated Debts and it was therefore felt that the scheme requires to be changed having regard to the settlements already made and quantum of non-convertible debentures and subordinated debts remaining to be settled. Therefore the Company had proposed to withdraw the scheme of arrangement from the Honorable High Court of Karnataka, with an option to present a new scheme of arrangement. The Honorable High Court of Karnataka has permitted the Company to withdraw the petition, with liberty to file a fresh petition, vide its order dated 28lh October, 2009. Accordingly, the Company is exploring the possibility of proposing a fresh petition to be filed before the Honorable High Court of Karnataka. At present the Company is concentrating only on recovery of its dues and settling the debts. 3. Dividend The Company has not declared any Dividend on equity shares, due to insufficient profit. 4. Reserves During the year the Company has not transferred any amount to General Reserve Account. 5. Share Capital The paid up Equity Share Capital as on 31st March, 2015 was Rs. 838 Lakhs and preference share captial of Rs. 295 Lakhs. During the year under review, the Company has not issued any shares. The Company has not issued shares with differential voting rights. It has neither issued employee stock options nor sweat equity shares and does not have any scheme to fund its employees to purchase the shares of the Company. 6. Directors and Key Managerial Personnel Mr. Raghavendra Nayak, Director retire by rotation at the forthcoming Annual General Meeting and being eligible, offer himself for reappointment. Mrs. Vinoda Chandappa Sherigar has been appointed as an Women/Independent Director with effect from 29.6.2015 for term of 5 years. Further, Mr. Chandappa R. Sherigar has resigned as Director of the Company w.e.f. 29.6.2015. During the year under report. Mr. T. Sanjay Pai was appointed as Chief Financial Officer (CFO) of the Company in terms of Section 203 of the Companies Act, 2013. Details of remuneration paid to the Directors and Key Managerial Personnel are given in the Annexure I forming part of the Boards' Report. 7. Particulars of Employees During the year under review, the Company had no employees whose remuneration exceeded the limit prescribed pursuant to the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. 8. Meetings A calendar of Meetings is prepared and circulated in advance to the Directors. During the year four Board Meetings and four Audit Committee Meetings were convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. 9. Board Evaluation Pursuant to the provisions of the Act and Clause 49 of the Listing Agreement, the Board has carried out an annual evaluation of its own performance, performance of the Directors as well as the evaluation of the working of its Committees. The Nomination and Remuneration Committee has defined the evaluation criteria, procedure and time schedule for the Performance Evaluation process for the Board, its Committees and Directors. The Board's functioning was evaluated on various aspects, including inler-alia degree of fulfillment of key responsibilities. Board structure and composition, establishment and delineation of responsibilities to various Committees, effectiveness of Board processes, information and functioning. Directors were evaluated on aspects such as attendance and contribution at Board/Committee Meetings and guidance/support to the management outside Board/Committee Meetings. In addition, the Chairman was also evaluated on key aspects of his role, including setting the strategic agenda of the Board, encouraging active engagement by all Board members and motivating and providing guidance to the Managing Director. Areas on which the Committees of the Board were assessed included degree of fulfillment of key responsibilities, adequacy of Committee composition and effectiveness of meetings. The performance evaluation of the Independent Directors was carried out by the entire Board, excluding the Director being evaluated. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors who also reviewed the performance of the Board as a whole. The Nomination and Remuneration Committee also reviewed the performance of the Board, its Committees and of the Directors. 10. Corporate governance Corporate governance represents a set of systems and practices to ensure that the affairs of the company are managed in a way that ensures accountability, transparency and fairness in all transactions. Your company is fully committed to pursue goals and objectives which are in the best interests of stake holders. The company aims at achieving highest standards of corporate governance. The company has Board Committees for different matters and subjects. These committees also make their contribution to better corporate governance. Also, there is a system of internal audit in the company which is conducted by an independent firm of chartered accountants. The company also reviews the corporate governance practices with references to the practices obtaining in the corporate sector and the regulatory developments. The company has complied with not only statutory requirements but also, voluntarily adhered to a set of strong corporate governance practices. 11. Declaration by an Independent Director(s) and re-appointment, if any A declaration by an Independent Director(s) that he/they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 shall be enclosed as Annexure III. An independent director shall hold office for a term up to five consecutive years on the Board of a Company, but shall be eligible for reappointment for next five years on passing of a special resolution by the Company and disclosure of such appointment in the Board's report. 12. Remuneration Policy and Managerial Remuneration: None of the Directors of the Company, who may be a Managing or Whole-time Director of the Company's, have received any remuneration, including commission from the Company during the year. None of the Directors of the Company have received any remuneration or commission from any Holding Company or Subsidiary Company, Service contracts, notice period, severance fees, fixed component and performance linked incentives etc. 13. Details of Subsidiary/Joint Ventures/Associate Companies The Company does not have any Subsidiary/Joint Ventures/Associate Companies. 14. Auditors a) The Auditors, Mis Pai Nayak & Associates Chartered Accountants, Udupi retire at the ensuing Annual General Meeting and, being eligible, offer themselves for reappointment to hold office till the conclusion of the 34lh AGM to be held in the Calendar year 2017 subject to ratification in the ensuing Annual General Meeting. b) In respect of comments made by the auditors vide basis for the "Qualified opinion", "Emphasis of matter, and para 2, 3 (e), (f), (g) (1), (g) (3), of the report on other legal and regulatory requirement" of report on the financial statement and Para No. 1 (b), 5, 7 (c), 8 & 9 of annexure to the aforesaid report, the clarifications vide note no. 2.01, 5.01, 5.02, 23.01 (J), 23.02, 23.05, 23.06, 23.13, 23.15 are self explanatory. 15. Secretarial Audit Report In terms of Section 204 of the Act and Rules made there under, Sri S. Ramachandra Bhat, Practicing Company Secretary (Membership No. 04441, C P No. 5421) from Bangalore has been appointed as Secretarial Auditor of the Company. The report of the Secretarial Auditor is enclosed as Annexure IV to this report. As per Section 134 (3f) of the Companies Act, 2013, Company is required to make comments on the adverse remarks/ comments on the Secretarial Auditors Report. 1. As per the Secretarial Auditor's Report placed before the Board, the Secretarial auditor have opined that the Company has not published the unaudited financial results in news papers as per the provisions of Clause 41 of the Listing Agreements: Your Directors reiterate that due to poor financial conditions, the company is not able to publish the results in news papers. However once the financial conditions of the company revived, company will arrange to publish the same. 2. As per the Secretarial Auditor's Report placed before the Board, the Secretarial auditor have opined that the Company has not appointed Key Managerial Person (Company Secretary). Your Directors reiterate that company was not engaged in any business consequently there were no income. Due to poor financial conditions, the company was forced to reduce the number of branches and also number of employees. This is the main reason for not appointing a whole time company secretary. However as and when the company engages itself in a proper business, it would certainly comply with this requirement. 3. As per the Secretarial Auditor's Report placed before the Board, the Secretarial auditor have opined that the Company has not filed the relevant statutory forms notifying appointment of Key Managerial Person (Chief Financial Officer) Your directors reiterate that the Company will arrange to file immediately the relevant forms for appointment of Chief Financial Officer. 4. As per the Secretarial Auditor's Report placed before the Board, the Secretarial auditor have opined that the Company has not appointed Woman Director within the time limit prescribed in the Companies Act, 2013 and Clause 49 of the Listing Agreement. Your Directors reiterate that, the company did identify a woman director and requested her to join the Board before 31s' March, 2015 as per provisions of the Act. However, she expressed her difficulty to join prior to 31s1 March owing to some personal reason. She was however inducted to the Board at its meeting held on 29'" June, 2015. 16. Internal Audit & Controls The Company has established and maintained adequate internal controls over the financial reporting. Internal controls have been designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements in accordance with accounting principles generally accepted in India. The Company has internal control system commensurate with the size and nature of the business. The Company engages M/s N. P. Pai & Co., Chartered Accountants, Udupi, (Firm Registration No.115271W/Membership No. 039351) as its Internal Auditor. During the year, the Company continued to implement their suggestions and recommendations to improve the control environment. Their scope of work includes review of processes for safeguarding the assets of the Company, review of operational efficiency, effectiveness of systems and processes, and assessing the internal control strengths in all areas. Internal Auditors findings are discussed and acted upon and suitable corrective actions taken as per the directions of Audit Committee on an ongoing basis to improve efficiency in operations. 17. Vigil Mechanism The Company has adopted a formal mechanism to the Directors and employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Company's Code of Conduct or ethics policy. 18. Risk Management Policy The Company has adopted a Risk Management Policy in accordance with the provisions of the Act and Clause 49 of the Listing Agreement. It establishes various levels of accountability and overview within the Company, while vesting identified managers with responsibility for each significant risk. The Internal Audit Department facilitates the execution of Risk Management Practices in the Company, in the areas of risk identification, assessment, monitoring, mitigation and reporting. Through this programme, each Function and Unit addresses opportunities and risks through a comprehensive approach aligned to the Company's objectives. The Company has laid down procedures to inform the Audit Committee as well as the Board of Directors about risk assessment and management procedures and status. Sustainability is embedded in the Corporate Enterprise Risk Management Programme, which gives an opportunity to increase the effectiveness of risk management practices and for improving business efficiency. The Company's social and environmental policies correlate strongly with the risk management strategy and ultimately the financial performance. This risk management process, which is facilitated by internal audit, covers risk identification, assessment, analysis and mitigation. Incorporating sustainability in the process also helps to align potential exposures with the risk appetite and highlights risks associated with chosen strategies. The current risk slate and the comprehensive risk policy have been further redefined during the year. The major risks forming part of the Enterprise Risk Management process are linked to the audit universe and are covered as part of the annual risk based audit plan. 19. Extract of Annual Return As required pursuant to Section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in MGT 9 as a part of this Annual Report as ANNEXURE-I. 20. Material changes and commitments, if any, affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report and changes in nature of business, if any: There are no such material changes to be reported in this regard and there are no change in nature of business. 21. Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future: Your Directors wish to state that there have been no significant or material orders that were passed by the Regulators or Courts or Tribunals which may impact the going concern status and operations of the Company in future. 22. Particulars of loans, guarantees or investments under Section 186 Details of Loans: Not applicable to NBF Companies since same are given in the ordinary course of business. Further, no loans are given to any party. Details of Guarantee/Security Provided: Not applicable to NBF Companies. However no such guarantee or security provided. Investments made are of the nature quoted /unquoted equity shares. Particulars of such investments are provided in the financial statements vide note Nos. 8.01. 23. Conservation of energy, technology absorption and foreign exchange earnings and outgo The company did not have any activity in relation to conservation of energy or technology absorption. The company had no foreign exchange earnings or outgoings during the year under report. 24. Details in respect of adequacy of internal financial controls with reference to the Financial Statements The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation were observed. 25. Deposits The details relating to deposits, covered under Chapter V of the Act - a) accepted during the year; Nil b) remained unpaid at the end of the year; Rs. 13.53 Lakhs, c) whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved: i) at the beginning of the year; Rs. 13.53 Lakhs ii) maximum during the year; - iii) at the end of the year; Rs. 13.53 Lakhs The details of deposits which are not in compliance with the requirements of Chapter V of the Act. 26. Particulars of contracts or arrangements with related parties All related party transactions that were entered into were on an arm's length basis, in the ordinary course of business and were in compliance with the applicable provisions of Companies Act, 2013 ("the Act"). There were no materially significant Related Party Transactions made by the Company during the year that would have required shareholders approval under the provisions of the Act. Details of the transactions with related parties are provided in the Note No. 23.04 of accompanying financial statements. Form AOC-2 pursuant to Clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 is annexed herewith marked as Annexure-ll. 27. Corporate Governance Certificate The Compliance certificate from the auditors or practicing company secretaries regarding compliance of conditions of corporate governance as stipulated in Clause 49 of the Listing agreement shall be annexed with the report. 28. Management Discussion and Analysis The Management Discussion and Analysis forms part of this Annual Report, the details of which are given in The Corporate Governance Report. 29. Statutory Disclosures In terms of the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the annexure to the Directors' Report. However, as per the provisions of Section 219 (b) (iv) of the said Act read with Clause 32 of the Listing Agreement, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company at the registered office of the Company. 30. Obligation of Company under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at the Workplace, in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder. The Company has not received any complaint of sexual harassment during the financial year 2014-15. 31. Corporate Social Responsibility (CSR): Not applicable 32. Human Resources Your Company treats its "human resources" as one of its most important assets. Your Company continuously invest in attraction, retention and development of talent on an ongoing basis. A number of programs that provide focused people attention are currently underway. Your Company thrust is on the promotion of talent internally through job rotation and job enlargement. 33. Directors' Responsibility Statement The Directors' Responsibility Statement referred to in Clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, shall state that- a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; b) the directors had selected 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 and of the profit and loss of the company for that period; c) the directors had taken proper and sufficient care 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; d) the directors had prepared the annual accounts on a going concern basis; and e) the directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively. f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 34. Transfer of Amounts to Investor Education and Protection Fund As all the matured deposits, debentures and debts were already claimed, the question of transfer of such amounts to Investor Education and Protection Fund does not arise. 35. Listing with Stock Exchanges The Company confirms that it has paid the Annual Listing Fees for the year 2015-2016 to Bombay Stock Exchange, Mumbai where the Company's Shares are listed. 36. Acknowledgements An acknowledgement to all with whose help, co-operation and hard work the Company is able to achieve the results. For and on behalf of the Board of Directors (T. Narayan M. Pai) (DIN : 00101633) Managing Director Place : Manipal Date : 29.6.2015 |