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Pal Credit & Capital Ltd.

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Pal Credit & Capital Ltd. Accounting Policy

CORPORATE GOVERNANCE REPORT

Compliance Report for the year 2014-15

The following are the relevant disclosures about the Board, its various Committees, financial and stock performance and such other disclosures as required under the Clause 49 of the Listing Agreement. What is stated in this report also forms part of information required to be given in Directors report under section 134 of Companies Act, 2013.

1) Company's Philosophy on Code of Governance

Your Company believes that adherence to sound Corporate Governance Practices, which include ethical conduct of business, transparency in its working, disclosures to stakeholders and compliance with all regulatory requirements is vital to achieve the long term corporate objectives.

2) Composition of Board of Directors

Composition of Board of Directors of the Company is in accordance with the provision of Companies Act, 2013. In all there are five Directors of them two are Independent elected by the members of the company in accordance with the provision of section 149 of the Companies Act, 2013. Their appointment is for a five years. One of the remaining three directors is a Woman Director, as per requirement of section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement. All directors are Non-Executive.

DIRECTORS PROFILE

> Shri J. H. Shah

Shri J. H. Shah was appointed as an Additional Director of the Company on 31st January, 2002 under Section 260 of the Companies Act, 1956 read with Article 161 of the Articles of Association of the Company. He was subsequently appointed as Director on the Board at the Annual General Meeting held on 11th September, 2002. He is Non-Executive Chairman of the Board. He is of 77 years age. He is B. Com., LLB, PGDFM, and ACMA and has more than 55 years of experience in Finance, Accounts, Taxation and Management. He is Director of Snowwall Packaging Pvt. Ltd. Your Company has no transaction with Snowwall Packaging Pvt. Ltd. He does not hold any share in the Company. He is not related to any other Director or employee of the Company. He is liable to retire by rotation.

> Shri M. D. Adhikari (upto 26/03/2015)

Shri M. D. Adhikari was appointed as an Additional Director of the Company on 29th September, 2004 under Section 260 of the Companies Act, 1956 read with Article 161 of the Articles of Association of the Company. He was subsequently appointed as Director on the Board at the Annual General Meeting held on 29th September, 2005. He expired on 26/03/2015. He was 66 years of age. He was B. Com., ICWA and had 47 years of experience in Accounts, Auditing, Costing, Logistics and General Management. He was Director of Premier Auto Ltd. Your Company had no transaction with Premier Auto Ltd. He was a member of Investor's & Shareholder's Grievance Redressal Committee till the date he expired. He was not holding any share in the Company. He was not related to any other Director or employee of the Company.

> Shri K. D. Mankikar

Shri K. D. Mankikar was appointed as an Additional Director of the Company on 31st October, 2009 under Section 260 of the Companies Act, 1956 read with Article 161 of the Articles of Association of the Company. He was subsequently appointed as Director on the Board at the Annual General Meeting held on 30th August, 2010. He is appointed as an Independent Director under sec 149 (4) of Companies Act, 2013 at the Annual General Meeting of the Company held on 19th September, 2014 for a period of five year. As per provisions Section 149(13) of Companies Act, 2013 being Independent Director he is excluded from retirement by rotation.

He is of 69 years of age. He has Post Graduate Diploma in Management from IIM, Kolkata, B.A. (Eco.) and has more than 44 years of experience in Management, Systems, Accounting & Control and Corporate Affairs. He is appointed as Chairman of Nomination and Remuneration Committee by the Board of Directors with effect from 28th March, 2014. He was chairman of Audit Committee of the Board upto 28th March, 2014 and from that date he is member of Audit Committee and Stakeholders Relationship

Committee of the Board of Directors. He is Director of Microscan Computers Private Limited. Your Company has no transaction with Microscan Computers Private Limited. He does not hold any share in the Company. He is not related to any other Director or employee of the Company.

> Shri Jayesh Dadia

Shri Jayesh Dadia was appointed as an Additional Director of the Company on 16th December, 2013 under Section 260 of the Companies Act, 1956 read with Article 161 of the Articles of Association of the Company. He was subsequently appointed as Director on the Board at the Annual General Meeting held on 19th September, 2014. He is liable to retire by rotation. Shri Jayesh Dadia is 59 years of age. He is B.Com and Practicing Fellow Chartered Accountant and has more than 30 years of experience in Accounting, Taxation and Audit. He is Chairman of Stakeholders Relationship Committee of the Board of Directors and a member of Audit and Nomination and Remuneration Committees of the Board of Directors. He is a Director of Walkwater Consultants Pvt. Ltd., Tooltech Global Engineering Pvt Ltd. and PPFAS Trustee Company Pvt. Ltd. Your Company has no transaction with any of the above companies. He and his wife jointly hold 1000 Equity Shares of Rs. 1/- each in the company. He is not related to any other Director or employee of the Company.

> Shri Jatin D. Jhaveri

Shri Jatin D. Jhaveri was appointed as an Independent Director of the Company on 28th March, 2014 as per clause 49 of Listing Agreement in the casual vacancy caused by the demise of Shri P. S. More. He is appointed as an Independent Director under sec. 149 (4) of Companies Act, 2013 at the Annual General Meeting of the Company held on 19th September, 2014, for a period of five years. As per provision of Section 49 (13) of Companies Act, 2013 being an Independent Director he is excluded from retirement by rotation. He is 48 years of age. He is B. Com and Practicing Fellow Chartered Accountant and has more than 24 years of experience in Accounting, Taxation and Audit. From 28th March, 2014, he is appointed as Chairman of Audit Committee of the Board of Directors and a member of Nomination and Remuneration Committee. He is a Director of Cheten Dalal Investigation and Management Services Pvt Ltd. Your Company has no transaction with Cheten Dalal Investigation and Management Services Pvt Ltd. He is not related to any other Director or employee of the Company. He does not hold any share in the Company.

> Shrimati Urmila U Nagarkar

Shrimati Urmila Nagarkar was appointed as a Director of the Company on 30th March, 2015 in the causal vacancy caused by the demise of Shri M. D. Adhikari. She being a women her appointment as Director of the Company also satisfy the requiremet of provisions of section 149 (1) of Companies Act and clause 49 (II) of listing agreement. She is liable to retire by rotation. She is 53 years of age.

She is B.A. and has more than 24 years of experience in Accounting and Taxation. She is the member of Stakeholders Relationship Committee. She is not Director of any other company. She is not related to any other Director or employee of the Company. She holds 10 shares in the Company.

3) No. of Meetings of Board of Directors held and dates:

Nine Meetings of Board of Directors were held during the year on 9th May, 2014, 29th May, 2014, 13th August, 2014, 19th September, 2014, 8th November, 2014, 13th November, 2014, 21st January, 2015, 13th February, 2015 and 30th March, 2015. The gap between any two meetings of the Board was not more than 4 months.

Information placed before the Board of Directors

The information as required under Annexure IA to clause 49 of the listing agreement is made available to the Board. The agenda papers for consideration at the Board meetings are circulated prior to the meetings. Adequate information is circulated at the Board meetings to enable the Board to take informed decision.

It is the Company's policy that in addition to matters that statutorily require Board approval, all other major decisions and all material transactions which are not in ordinary course of business e.g. involving mobilization of resources, new investments, capital expenditure, sale of fixed assets/investments, closure of branches, settlement of dues with banks/financial institutions, appointment(s)/resignation(s) of Director(s), Company Secretary, Compliance Officer, Authority to officers of the Company for various purposes, major change in accounting policies etc., change in rating of the Company are placed before the Board for consideration and approval by the Board.

The following information is placed before the Board of Directors:-

a. Report of Chief Manager & CEO to the Board of Directors on Statutory Compliances, Dues to Premier Ltd. and Income Tax Matters for every quarter.

b. Quarterly, Half Yearly and Annual Results after expiry of Quarter, Half Year and Year;

c. All major decisions and all material transactions which are

d. Compliance Report under RBI (NBFC) Guidelines in respect of Fixed Deposits and Fair Practice Code;

e. Appointment, resignation / removal of senior officers of the Company.

4) Composition of Stakeholders Relationship Committee Meeting of Board of Directors:

Company's Stakeholders Relationship Committee Meeting consisted of Shri Jayesh Dadia as Chairman, Shri M. D. Adhikari and Shri K D Mankikar as members.

After demise of Shri M D Adhikari Stakeholders Relationship Committee Meeting was reconstituted. The reconstituted Committee consists of Shri Jayesh Dadia as Chairman & Shri K. D. Mankikar and Shrimati Urmila U Nagarkar as members of the Committee.

Shri J. H. Shah is a permanent invitee at the committee meetings. Ms Kavita A. Javheri, Company Secretary functions as a Compliance Officer.

No. of Meetings of Stakeholders Relationship Committee Meeting of Board of Directors held and dates:

Four Meetings of Stakeholders Relationship Committee Meeting were held during the year on 9th May, 2014, 13th August, 2014, 13th November, 2014 and 13th February, 2015.

Information placed before the Stakeholders Relationship Committee Meeting of Board of Directors:

The Committee oversees the performance of Registrar & Share Transfer Agents M/s Link Intime India Private Limited, approves the transfer and transmission of shares; issue of duplicate share certificates in lieu of lost / stolen / mutilated / torn share certificates; and issue of consolidated / split share certificates in lieu of split / consolidated share certificates. The committee verifies the status of Complaints received and solved / unsolved complaints.

Total numbers of complaints received and replied to the satisfaction of shareholders during the year are as under:

5. Composition of Audit Committee of Board of Directors:

The Audit Committee consisted of Shri Jatin D Jhaveri, an Independent Director as Chairman and Shri K. D. Mankikar, an Independent Director and Shri Jayesh Dadia, a Non- Independent Director as members of the Committee.

Shri J. H. Shah is a permanent invitee at the committee meetings. Ms Kavita A. Javheri, Company Secretary functions as a Compliance Officer.

No. of Meetings of Audit Committee of Board of Directors held and dates:

Six Meetings of Audit Committee were held during the year on 9th May 2014, 29th May, 2014, 13th August, 2014 and 8th November, 2014, 13th February, 2015 and 30th March, 2015.

Information placed before the Audit Committee of Board of Directors:-

The Committee oversees the financial reporting process by selecting and establishing sound accounting policies, disclosure of financial information, reviewing the performance and the Quarterly, Half Yearly and Annual results after expiry of Quarter, Half Year and Year respectively and recommend the same to the Board of Directors for their approval, who approves publication of same and submission of same to Stock Exchanges and

other statutory bodies; considers and reviews related party transactions, compliance with the legal requirements, status of pending tax matters/appeals, Draft Auditors' Report (including in particular the qualification/s, if any therein) and also note Quarterly Limited Review Report by the Auditors and submission of same to Stock exchange; reviewing the quarterly Internal Auditor Report, and carry out assessment of the performance of statutory and internal auditors, with the management, review the adequacy of controls internal audit function and discuss significant findings with the Auditors, the other issues related with revival of the Business of the Company including proposed Rights Issue of the Company and other matters specified in Clause 49 of Listing Agreement and Section 177 of the Companies Act, 2013.

Terms of Refernece of Audit Committee:

The recommendation for appointment, remuneration and terms of appointment of auditors of the Company; Review and monitor the auditor's independence and performance, and effectiveness of audit process; Examination of the financial statement and the auditor's report thereon; Approval or any subsequent modification of transactions of the company with related parties; Scrutiny of inter corporate loans and investments; Valuation of undertakings or assets of the company, wherever it is necessary; Evaluation of internal financial controls and risk management systems; Monitoring the end use of funds raised through public offers and related matters.

6) Nomination and Remuneration Committee of Board of Directors :

Nomination and Remuneration Committee comprised of Shri K D Mankikar as Chairman and Shri Jatin D Jhaveri and Shri Jayesh Dadia as members of the Committee.

Shri J. H. Shah is a permanent invitee at the meetings. Ms Kavita A. Javheri, Company Secretary functions as a Compliance Officer.

No. of Meetings of Nomination and Remuneration Committee of Board of Directors held and dates:

There were two meetings held in the year on 8th November, 2014 and 30th March, 2015 to approve the Nomination & Remuneration Policy, prepare and approve the evaluation framework for directors, recommended the appointment of Shrimati Urmila U Nagarkar as a director and Shrimati Rajeshree Parekh as a CFO of the Company.

The broad terms of reference of Nomination & Remuneration Committee are as under:

Recommend to the Board, the set-up and composition of the Board and its Committees, including the "formulation of the criteria for determining qualifications, positive attributes and independence of a Director". The Committee will consider periodically reviewing the composition of the Board with the objective of achieving an optimum balance of size, skills, independence, knowledge, age, gender and experience; Recommend to the Board, the appointment or reappointment of Directors; Recommend to the Board, appointment of Key Managerial Personnel ("KMP" as defined by the Act) Support the Board and Independent Directors in evaluation of the performance of the Board, its Committees and individual Directors. This shall include "formulation of criteria for evaluation of Independent Directors and the Board"; Recommend to the Board, the Remuneration Policy for Directors, Key Managerial Personnel. Oversee familiarisation programmes for Directors; Performing such other duties and responsibilities as may be consistent with the provisions of the Committee. Based on the recommendations of Nomination & Remuneration Committee, the Board has adopted the Policy relating to remuneration of the Directors, KMP and other employees.

7) Remuneration Policy:

No remuneration is paid to any of the Directors except sitting fees of Rs. 2000/- for attending meeting of Board of Directors/Committee meetings held on any one day.

Detail policy in this regard is given in Directors Report. Please refer to point no. 20 and annexure no 2(iv) of Directors Report.

9) Disclosures

a. Basis of related party transactions :

A statement in summary form of transactions with related parties in the ordinary course of business, details of material individual transactions with related parties that are not in the normal course of business and that are not on arm's length basis, is required to be placed before the Audit Committee

b. Compliance with Accounting Standards :

The financial statements for the year 2014-15 have been prepared in accordance with the applicable accounting standards issued by The Institute of Chartered Accountants of India, and there were no deviations.

10) Proceeds of Public issues, right issues, preferential issues etc. :

Subject to the approval of the Members of the company, Board passed a Resolution at the Meeting of the Board held on 28th October, 2013 for issue of Rights Shares. There after, Special Resolution is passed by the Members of the Company at the Extra Ordinary General Meeting held on 16th December, 2013 to issue the Rights Shares of 4,32,00,512 Equity Shares of Re.1/- in the share capital of the company to all the existing shareholders of the company on the basis of two equity share of Re.1 each for every one equity share of Re. 1 each i. e. in the ratio of 2:1 at par.

11) Remuneration of Directors:

No remuneration is paid to any Director except sitting fees for attending meetings of Board of Directors / Committee of Directors as under:

None of the Directors have any other pecuniary relationship or transaction with the Company except Consultancy Fees of Shri Jayesh Dadia. Shri Jayesh Dadia jointly with his wife holding 1,000 equity shares in the Company and Shrimati Urmila U Nagarkar is holding 10 shares in the company. No other Director of the company is holding any shares in the Company.

12) Disclosure of Material Transactions :

None of the transactions are potentially conflicting with the interest of the Company.

13) Communication with Shareholders:

The Company has provided the details of the Director seeking re-appointment in the AGM included in the notice.

No presentations have been made to Institutional Investors or to any analysts.

14) Details of non compliances or penalties or strictures imposed on the Company:

The Company has received the notice from BSE imposing the penalty of Rupees 7865/-for delay in filing of Annual Report by 7 (seven) days to BSE. A representation has been made by the Company to BSE Limited to waive this penalty. Decision of BSE Limited is awaited. Company has negative net worth, and is not complying with RBI

Guidelines with regard to adequacy of Net Owned Funds. Therefore, a Show Cause Notice has been served upon the company by RBI and the same is replied. Details are given in Directors Report. The Company has complied with the provisions of various other statutes as applicable to the Company. No penalties or strictures other than mentioned above are imposed on the Company by any statutory authorities, on any matter related to capital markets during last three years.

15) Code of Conduct:

The Company has laid down a Code of Conduct for the Members of the Board as well as for the employees of the Company, including senior management. The members of the Board and senior employees have affirmed compliance with the Code of Conduct. The code of conduct is uploaded on company's website www.palcc.co.in

16) Website:

The Company's information can be availed at website www.palcc.co.in

17) CEO / CFO Certification:

For every quarter of the year Shri M. Sudalaikannu, Chief Manager and CEO of the Company who is Manager under Companies Act has issued CEO certificate in accordance with SEBI guidelines to the Board of Directors. In absence of Chief Finance Officer (CFO) Shri J. H. Shah Chairman -Director issued CFO certificate to the Board of Directors for first three quarters of the year, Shrimati Rajeshree Parekh after her appointment as CFO of the Company by the Board of Director has issued CFO certificate for the fourth quarter of the year.

19) Shareholders Information

a. 53rd Annual General Meeting for the

Financial year 1st April, 2014 to 31st March, 2015

Date and Time: On Monday, 28th September, 2015 at 3.30 p.m.

Venue: M.C.Ghia Hall, (of Indian Textile

Accessories & Machinery Manufacturers' Association), Bhogilal Hargovindas Building, 4th floor, 18/20, Kaikhushru Dubash Marg, Mumbai- 400 001.

Date of Book Closure: From Saturday, 19th September, 2015 to Monday, 28th September, 2015.

b. Financial Calendar of Results Tentative Dates

For Quarter ending

June 30, 2015 on 14th August, 2015

September 30, 2015 on or before 14th November, 2015

December 31, 2015 on or before 14th February, 2016

March 31, 2016 on or before 30th May, 2016

c. Registrar and Share Transfer Agents :

Link Intime India Private Limited C-13, Pannalal Silk Mills Compound, L.B.S.Marg, Bhandup (West), Mumbai - 400 078 Tel: 022- 25946970 - 78, Fax: 022- 2594 6969 E-mail: rnt.helpdesk@linkintime.co.in Counter timing: 10.00 am to 4.00 pm (Monday to Saturday)

d. Contact Details :

PAL Credit & Capital Limited Amarsons Bhavan, 3rd Floor, Shri Vile Parle K.V.O. Seva Samaj, 68, Misquitta Street, Vile Parle (East), Mumbai 400 057 Tel/Fax No: 022-261 26875 Web site: www.palcc.co.in Email:investors@palcc.co.in CIN No. L51010MH1962PLC012287

e. Listing and Dematerialization :

The Company's shares are listed on Bombay Stock Exchange (BSE).

The Company has executed Agreement with M/s Link Intime India Private Limited and with National Securities Depository Ltd. (NSDL) and Central Depository Services (India) Ltd. (CDSL) to establish Electronic Connectivity and the same has not been discontinued.

The Company has paid the listing fee to Bombay Stock Exchange Ltd. up to the year 2015-16. Annual Custody fee for the year 2015-16 will be paid by the Company to National Securities Depository Ltd. (NSDL) and Central Depository Services (India) Ltd. (CDSL) on receipt of the invoices. The Company's shares are traded in dematerialized format compulsorily by all investors under Code No. ISIN INE983B01025.

Up to 31st March, 2015, 19251820 shares representing 89.13% of total capital of the Company have been dematerialized.

The requests to dematerialize the shares are processed by Registrar and Share Transfer Agents of the Company Link Intime India Private Limited within stipulated period of 21 days if the documents forwarded by the investors through the Depository Participants are valid in all respect and the same are noted by the Stakeholders Relationship Committee.

f. Share Transfer System :

Share Transfers are registered and returned within a period of 15 days from the date of receipt, if the documents forwarded by the investors are in order in all respect. Members who still hold share certificates in physical form are advised to dematerialize their shareholding to avail the benefits of dematerialization, which include easy liquidity (since trading is permitted in dematerialized form only) electronic transfer, savings in stamp duty and elimination of any possibility of loss of documents and bad deliveries.

As per SEBI Circular No. MRD/DOP/Cir-05/2009 dated 20th May, 2009 for transfer of shares in physical form, a copy of PAN number is compulsorily required to be furnished.

Our Registrar and Transfer Agents Link Intime India Private Limited have created a Client Co-ordination Department, who are single-point contacts for the clients to take care of their requirements like to handle IPO/ Rights Issue queries, separate for shareholders of RTA clients and separate for Depositors of Fixed Deposit clients. In this connection, they have a separate cell to take care of telephone calls (022­25946970), emails (rnt.helpdesk@linkintime.co.in >.), letters etc. received from shareholders. This has been done with the interests of shareholders in mind and the same has been working well.

20) Status of Compliance of Non- Mandatory Requirements:

a. The Board:

The Company does not defray / reimburse expenses pertaining to Chairman's Office. However, actual expenses incurred on traveling etc., by the Chairman for the work of the Company are being paid.

b. Shareholder Rights:

The company's quarterly, half yearly and annual financial results are published in Free Press Journal (English) and in Navshakti (Marathi) newspapers. The financial results are not sent to the shareholders but the same are available at company's website www.palcc.co.in

c. Unqualified Audit Report :

There is no qualification in the Auditors' Report on the Accounts for the year ended 31st March, 2015.

For and on behalf of the Board of Directors

J. H. SHAH

CHAIRMAN

Date: 14th August, 2015

Place: Mumbai