DIRECTOR'S REPORT To The Members, 1. Your Directors have pleasure in submitting their 24th (Twenty Fourth) Annual Report of the Company together with the Audited Statements of Accounts for the financial year ended March 31, 2015. 2. DIVIDEND In view of losses suffered by the Company, no dividend has been considered for the year. 3. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND Since there was no unpaid/unclaimed Dividend declared and paid last year, the provisions of Section 125 of the Companies Act, 2013 do not apply. 4. CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements prepared in accordance with the Companies Act, 2013 and Accounting Standards-21 is attached with the Annual Report. 5. MANAGEMENT DISCUSSION AND ANALYSIS (i) Industry Structure and Development Non-Banking Finance Companies (NBFC) sector in India is represented by a mix of a few large companies with nationwide presence and a few small and medium sized companies with regional focus, primarily engaged in hire purchase financing, investments, corporate loans, IPO funding, venture capital and other non-fund based activities. The Reserve Bank of India (RBI) regulates and supervises these NBFCs. (ii) Opportunities and Threats The NBFCs are facing stiff competition from Banks and Financial Institutions, due to the ability of Banks & FII's to raise low cost funds which enables them to provide funds at more favorable rates. More stringent capital adequacy norms have been stipulated by RBI for NBFCs also resulted into their inability to give cheaper finance. (iii) Segment-wise or Product-wise Performance The Company has been primarily engaged in the business of hire purchase, leasing, bill discounting and non-fund based activities. Since the risk and returns in these businesses are similar, therefore, they are grouped as a single segment. This is in accordance with the guiding principle provided in the Accounting Standard on Segment Reporting (AS- 17) issued by The Institute of Chartered Accountants of India. (iv) Future Outlook The Company is presently engaged in recovery of delinquent loan assets and settlement of old legal cases filed by/ against the Company. Application made to RBI in the year 1997 for registration as NBFC was rejected by RBI in 2004. Company has filed a scheme of settlement with creditors and reorganization of share capital with the Hon'ble High Court of Delhi. Pending sanction of scheme by Hon'ble High Court of Delhi and recovery of loan assets, the possibilities of venturing into newer business areas shall be examined subsequently. (v) Risks and Concerns High interest regime in the economy may act as a dampener for the financing business. There is also stiff competition due to entry of large players in the market. (vi) Internal Control Systems and their adequacy The Internal Control Systems are in place to serve the existing operations of the Company. (vii) Financial Performance The loss for the year amounts to Rs. 282.51 Lacs. (viii) Human Resource and Industrial Relations The Company is having five employees as on the date of this report. Your Directors relation at all levels with employees were cordial. 6. CAUTIONARY STATEMENT Statements in this Management Discussion and Analysis section describing the Company's objectives, projections, estimates and expectations may be 'forward looking statements' within the meaning of applicable laws and regulations. Actual results may differ substantially or materially from those expressed or implied. Important developments that could affect the Company's operations are significant changes in political and economic environment in India, tax laws, RBI regulations, exchange rate fluctuation and related costs. 7. DIRECTORS AND KEY MANAGERIAL PERSONNEL Mr. Surender Kumar was re-appointed as a Whole-Time Director in the Annual General Meeting held on 31st December, 2014 (subject to the approval of Central Government) w.e.f 1st December, 2014. Further, Mr. Surender Kumar has not been paid any remuneration/monetary benefits from the date of his appointment till the date of this report; as the Company could not obtain the Central Government approval for the payment of the said remuneration. Accordingly, the Board recommends the passing of the Special Resolution as set out in the item no. 4 of the Notice for the re-appointment of Mr. Surender Kumar as a Whole-Time Director. Following are the directors on the Board: 1. Mr. Om Prakash Gupta Independent Non-Executive Director 2. Mr. Surender Kumar Whole-Time Director 3. Mr. Sehdev Shori Independent Non-Executive Director The policy for Appointment and Remuneration of Director's, Key Managerial Personnel and Other Employees is attached as Annexure-A and forms an integral part of this report. The Company has devised the criteria for performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of the non-executive directors. An evaluation was done by the Board for its own performance and that of its Committees and individual Directors. 8. CORPORATE GOVERNANCE Your Company reaffirms its commitment to the good corporate governance practices and has adopted the Code of Conduct which has set out the systems, processes and policy conforming to established standards. Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, the Corporate Governance Report and Auditors' Certificate regarding compliance of conditions of Corporate Governance are enclosed as Annexure - B and forms an integral part of this Report. 9. DECLARATION OF INDEPENDENT DIRECTORS The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules. 10. DIRECTORS RESPONSIBILITY STATEMENT In accordance with the provisions of Section 134(5) of the Companies Act, 2013 the Board hereby submits its responsibility Statement:— (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.- Internal financial control means the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business including adherence to Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information. (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. 11. AUDITORS i) STATUTORY AUDITORS M/s. V. Sahai Tripathi & Co., Chartered Accountants, Delhi (Firm Registration No. 000262N), Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received letter from M/s. V. Sahai Tripathi & Co., Chartered Accountants to the effect that their appointment, if made, would be within the prescribed limits as specified under Section 139 of the Companies Act, 2013 and that they are not disqualified for such appointment within the meaning of Section 141 of the Companies Act, 2013 read with Companies (Audit and Auditors) Rules, 2014. Board recommend to appoint M/s. V. Sahai Tripathi & Co., Chartered Accountants, as Statutory Auditors for a period of two years i.e. upto the conclusion of the Annual General Meeting to be held in the year 2017, subject to the ratification by members in every Annual General Meeting. Auditors' Qualifications/ Observations and Management Comments Thereon Going Concern Basis -Para i and note 30. In accordance with section 217 (2AA) of the Companies Act, 1956, the financial statements are required to be made on going concern basis. In light of the fresh scheme of restructuring pending before the Hon'ble Delhi High Court, the Company has plans for future business and income generation. Accordingly it is not only prudent but also imperative to draw the financial statement based on such Going Concern basis. The Scheme seeks to restructure relying on debt equity swaps and profits earned by engaging in service oriented, fee based business leading to progressive reduction in the debt of the Company. The Scheme of Arrangement would not only enable the Company to wipe out its debts but will also enable it to reduce carry forward losses to be a profitable entity. Further in accordance with amended Section 217 (2AA) of the Companies Act, 1956, the financial statements are required to be made on going concern basis. Provision of interest on certain liabilities covered under Para II and under notes 4.1.g, 4.4(g) &4.6 is in accordance with the Scheme of restructuring filed by the Company before the Hon'ble Delhi High Court, which provides for waiver and cancellation of interest and the same is pending before the Hon'ble Court. Para iii and Note 2.2 on non-creation of debenture redemption reserve is self-explanatory and cannot be created due to insufficient profits Depletion in the value of Assets charged to Banks/Institution and Debentures in Para iv and covered under notes 4.1 .e, 4.2.b& 4.3.1 relates to ascertainment of Security against Debentures and Bank Loan, which could not be ascertained since the Company is in litigation with various Lease and Hire Purchase customers and the matters are sub-judice, hence confirmations and acknowledgements are not feasible Regarding Para v, regarding liability on account of fixed deposit received, the company has prepared a fixed deposit register and verifying the claims of depositors on regular basis and also in process of reconciling difference with books of accounts. Further once the Scheme is sanctioned and all deposits will be verified & reconciled before repayments as per directions of the Court In view of litigation with creditors mentioned in the para vi, it's not possible to obtain the balance Confirmations. Maintenance of minimum liquid assets covered under Para viii and note 4.4(h). Due to the liquidity crisis and default in payment to fixed depositors, the liquid assets held by the Company had to be used for payment to depositors in terms of directions from RBI to pay all the matured depositors. Thereafter, the Company has made application to the RBI as well as the Hon'ble Company Law Board for exemption from maintaining minimum liquid assets Para (viii) In view of restrictions imposed by the Hon'ble High Court of Delhi on the operations of bank accounts, assistance of Rs 20.47 lacs has been taken to meet the essential expenses/obligations from Global IT Options. Company being sick and as the scheme of arrangement pending before the Court does not provide payment of any Interest to creditors, the subsidiary company has given this amount without interest and element of interest and payment of interest will be decided once the scheme is approved and liquidity position improves. Para viii(i).The Company is contesting claims lodged against it not acknowledged as debts including claims on account of securitization transaction and underwriting obligations. Rest of the contingent liabilities are being addressed through the Scheme In case of Payment to Punjab & Sind Bank & IndusInd Bank as mentioned in para viii(ii) & para viii(iii) , it is submitted that the scheme of restructuring, pending before the Hon'ble Delhi High Court and repayment issue to these banks is being addressed in the scheme of arrangement with creditors . Further, the Hon'ble Court has stayed the suits filed in DRT by PSB & IndusInd Bank As mentioned in the para viii (iv), the Company has filed an application with Hon'ble High Court of Delhi for the release of amount to be deposited in the Punjab & Haryana High Court and the same is pending Para viii(v) There are certain disputes with the tenant and the claim of tenant is contested in the pending arbitration. As mentioned in the para viii (iv), the Company has filed necessary application for the rectification application for the deletion of said demand, however the same is pending Para viii (vii) Company has preferred an appeal/objections before Hon'ble High Court of Delhi in the MS Shoes East Limited matter against the arbitration order and the same pending adjudication Para viii (viii) Company is contesting the claim of NBCC, which is pending arbitration under the Indian Arbitration Act Emphasis of Matter: Group Companies have infused money in Company from time to time for its revival and as these amount are not to be paid back, group companies had requested to convert their outstanding amount into Share Capital. In view of pending scheme before the Hon'ble High Court of Delhi and these amount remained in share application money only and as shares can only be issued once the scheme is sanctioned by the court. Keeping these facts In view, amounts appearing in share application money have been credited back to the respective group company's account and upon sanction of scheme, shares will be issued. All the other notes are self-explanatory. ii) SECRETARIAL AUDITORS The Board of Directors of the Company has appointed M/s Latika Chawla and Associates, Practicing Company Secretaries to conduct secretarial audit of the Company for the financial year 2014-15. The Secretarial Audit Report for the financial year ended March 31, 2015 is enclosed as Annexure - C and forms an integral part of this Report. Management Comments on the observations of Secretarial Auditor i) The Company is identifying the right person as candidature to be appointed as a Woman Director and will be done soon. ii) The Company has taken adequate steps to appoint a Full time Company Secretary commensurate to the requirement. However, the Company has duly outsourced all its Secretarial work to the reputed Secretarial Audit Firms. iii) Due to non-availability of manpower and resources some filing of forms as mentioned in the report remained pending. However efforts are being made to file the relevant forms at the earliest with the Registrar of Companies. iv) Other observations are on the basis of the facts and hence self explanatory. iii) INTERNAL AUDITORS M/s SVTG & Co., Chartered Accountants, performs the duties of Internal Auditors of the Company and their report/s are reviewed by Audit Committee from time to time. 12. DISCLOSURES i) Meetings of the Board Six meetings of the Board of Directors were held during the year. For further details, please refer Report on Corporate Governance annexed as Annexure - B to this report. ii) Extracts of Annual Return In terms of provisions of Section 92 of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, the extracts of Annual Return in Form MGT-9 is enclosed as Annexure - D and forms an integral part of this Report. iii) Particulars of Loans given, Investments made, Guarantees given and Securities provided During the year under review, no loan, investment, guarantees and securities has been provided. iv) Contracts and Arrangements with Related Parties No contract/ arrangements/ transactions were entered by the Company during the financial year 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 the materiality of related party transactions. The particulars of contracts and arrangement with related parties under section 188(1) in Form AOC-2 is enclosed as Annexure-E. The Policy on materiality of related party transactions and dealing with related party transactions as provided by the Board may be accesses on the Company's website www. <http://www/>dfslonline.com under Investor Information. Your Directors draw attention of the members to Note 32 to the financial statement which sets out related party disclosures. 13. PARTICULARS OF EMPLOYEES None of the employees of your Company is in receipt of remuneration requiring disclosure pursuant to the provisions of Section 197(12) of the Companies Act, 2013, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014; hence no such particulars are annexed. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexure - F and forms an integral part of this Report. 14. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 134(3)(m) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 are as follows:- i) Conservation of Energy Your Company being engaged in financing business and does not have any activity relating to conservation of energy. ii) Research & Development (R&D) Specific R&D Activities: There is no Research and Development activity in the Company. Benefits derived as a result of above R&D: N.A. Future Plan of Action: NIL Expenditure on R & D: NIL iii) Technology Absorption, Adaptation and Innovation: Efforts in brief made towards Technology absorption etc.: NIL Benefits derived as a result of above: N.A. Technology imported, years of Import, Has technology been fully absorbed? If not fully absorbed, areas where this has not taken place, reasons therefor and future plans of action: N.A. iv) Foreign exchange earnings and outgo During the period under review, there was no foreign exchange outflow from your Company and it had no foreign exchange earnings. 15. INTERNAL FINANCIAL CONTROLS 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 was observed. 16. STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OF THE COMPANY During the year, your Directors have constituted a Risk Management Committee which has been entrusted with the responsibility to assist the Board in (a) overseeing and approving the Company's enterprise wide risk management framework; and (b) Overseeing that all the risks that the organisation faces such as strategic, financial, credit, market, liquidity, legal, regulatory and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks. The Risk Management Policy was reviewed and approved by the Committee. 17. CORPORATE SOCIAL RESPONSIBILITY The Company has not developed and implemented any Corporate Social Responsibility Initiatives as the said provisions are not applicable 18. PUBLIC DEPOSITS During the year under review, the Company has not invited any fixed Deposits. As on 31st March,2015, there were 50928 fixed deposits aggregating to Rs 5631.36Cr remained unpaid as the scheme of repayment to fixed depositors is pending approval before the Hon'ble High Court of Delhi and out of these deposits, Rs 3.51 Cr ( 3639 depositors) have not submitted fixed deposit receipts and can be considered as unclaimed. 19. SUBSIDIARIES M/s Global IT Solutions Limited is the Subsidiary of your Company. The Financial Statements and other documents of the subsidiary company is being attached with the Financial Statements of the Company. 20. SHARES a. Buy Back of Securities The Company has not bought back any of its securities during the year under review. b. Sweat Equity The Company has not issued any Sweat Equity Shares during the year under review. c. Bonus Shares No Bonus Shares were issued during the year under review. d. Employees Stock Option Plan The Company has not provided any Stock Option Scheme to the employees. 21. OBLIGATION OF COMPANY UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 Company has Zero tolerance towards any action on the part of any executive which may fall under the ambit of Sexual Harassment at Workplace. Company has adopted a policy for prevention of Sexual Harassment of Women at workplace and has set up Committee for implementation of said policy. During the year Company has not received any complaint of harassment. 22. ACKNOWLEDGEMENTS Your Directors place on record their sincere thanks to bankers, business associates, consultants, and various Government Authorities for their continued support extended to your Companies activities during the year under review. Your Directors also acknowledges gratefully the shareholders for their support and confidence reposed on your Company. By Order of the Board For DCM Financial Services Limited Om Prakash Gupta Chairman Date: November 5, 2015 Place: New Delhi |