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Pasupati Spinning & Weaving Mills Ltd.

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Pasupati Spinning & Weaving Mills Ltd. Accounting Policy

REPORT ON CORPORATE GOVERNANCE

INTRODUCTION

The Securities and Exchange Board of India has introduced a Code of Corporate Governance (Code) by way of amendment to the listing agreements with the Stock Exchanges. The Company has complied with the mandatory requirements of the Code.

1 Company's Philosophy on Corporate Governance :

Corporate Governance implies governance with highest standards of professionalism, integrity, accountability, fairness, trans­parency, social responsiveness and business ethics for efficient and ethical conduct of business. Your Company's endeavor has been to inculcate good corporate governance practices in its organizational and business systems and processes with a clear goal to not merely adhere to the letter of law to comply with the statutory obligations, but also to center around following the spirit underlying the same.

The Corporate governance practices followed by the Company include the corporate structure, its culture, policies and practices, personal belief, timely and accurate disclosure of information, commitment to enhancing the shareholder while protecting the interests of all the stakeholders.

Your Company is committed to and firmly believes in practicing good corporate governance practices as they are critical for meeting its obligations towards shareholders and stakeholders. The Company's governance framework is based on the following principles which adhere to sound corporate governance practices of transparency and accountability:

• Constitution of Board of Directors with an appropriate blend of Executive and Non Executive Directors committed to dis­charge their responsibilities and duties.

• Strict Compliance with all governance codes, Listing Agreements, other applicable laws and regulations.

• Timely and balanced disclosure of all material information relating to the Company to all stakeholders.

• Adoption of 'Code of Conduct' for Directors and Senior Management, and 'Code of Ethics' and 'Policy on Prohibition of Insider Trading' and effective implementation thereof.

• Regular update of Pasupati website www.pasupatitextiles.com  to keep stakeholders informed.

2 Board of Directors :

a) Presently, the Board comprises of 8 Directors out of which three are executive directors and five are non-executive direc­tors. Out of five Non Executive Directors there are four Independent Directors on the board. The Company is headed by CMD.

3 Audit Committee

a) Composition:-

Pursuant to the provisions of Section 177 of the Companies Act, 2013 and the provisions of Clause 49 of the listing Agreement, Audit Committee has been constituted by the Board of Directors. The strength of the Audit Committee as on 01.04.2014 was three members i.e. Mr. G. D. Gupta, Chairman, Mr. Praveen Paliwal and Mr. Ashwani Rathore as Members. Mr Anil Gupta was co opted as member of the committee w.e.f.1-7-2014 .Presently all the members of the Committee including its Chairman are independent Directors.

The Company Secretary acted as the Secretary of the Committee.

b) Terms of Reference

The broad terms of reference of Audit Committee are as follows:

a. Oversight of the Company's financial reporting process and the disclosure of financial information to ensure that the finan­cial statement is correct, sufficient and credible;

b. Recommending to the Board, the appointment, re-appointment or removal of the statutory auditor and cost auditor.

c. Reviewing with management the periodical financial statements before submission to the Board for approval, with particular reference to (i) changes in accounting policies and practices, (ii) major accounting entries involving estimates based on exercise of judgment by management, (iii) qualifications in draft audit report (if any), (iv) significant adjustments made in financial statements arising out of the audit, (v) the going concern assumption, (vi) compliance with accounting standards, (vii) compliance with listing and other legal requirements concerning financial statements, (viii) Disclosures of any related party transactions i.e. transactions of the Company of material nature, with promoters or the management, their subsidiaries or relatives etc that may have potential conflict with the interest of the company at large;

d. Reviewing with the management performance of statutory and internal auditors, the adequacy of internal control systems and recommending improvements to the management;

e. Reviewing the adequacy of internal audit functions.

f. Discussion with internal auditors any significant findings and follow-up thereon;

g. Reviewing the findings of any internal investigations by the internal auditors into the matters where there is suspected irreg­ularity or a failure of internal control systems of a material nature and reporting the matter to the Board.

h. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern.

i. Approval of appointment of CFO after assessing the qualifications, experience & background, etc. of the candidate.

The terms of reference stipulated by the Board to the Audit Committee are as per Clause 49 of the Listing Agreement and Section 177 of the Companies Act, 2013. The Audit Committee had reviewed the Annual Financial Statements, before their submission to the Board, as prescribed in Section 177 of the Companies Act 2013. In the past, the meetings of the Audit Committee were attended by the Members of the Committee, Chief Financial Officer of the Company and the Auditors. The minutes of the Com­mittee were placed before the Board of Directors for information.

c) Number of Committee Meetings and Attendance:-

4 Nomination and Remuneration Committee

a) Composition:

The strength of the Nomination and Remuneration Committee as on 01.04.2014 was three members i.e. Mr. G. D. Gupta, as Chairman, Mr. Praveen Paliwal and Mr. Ashwani Rathore as members of the committee . Mr Anil Gupta was co opted as member of the committee w.e.f.1-7-2014. The Company Secretary is the Secretary of the Committee.

b) Terms of Reference:

The role, terms of reference, authority and powers of the Remuneration Committee are in conformity with the listing agree­ment and as prescribed under the Companies Act, 2013. The remuneration committee of the Company reviews, approves and recommends to the Board the matters connected with fixation and periodic revision of remuneration of Chairman & Managing Director, whole time Directors and Executive Directors.

c) Number of Committee Meetings and Attendance:-Appointment & Remuneration Policy:

Policy For Appointment And Removal Of Director, KMP And Senior Management

1. Appointment Criteria and Qualifications

a) The Committee shall identify and ascertain the integrity, qualification, expertise and experience of the person for appoint­ment as Director, KMP or at Senior Management level and recommend to the Board his / her appointment.

b) A person should possess adequate qualification, expertise and experience for the position he / she is considered for ap­pointment. The Committee has discretion to decide whether qualification, expertise and experience possessed by a person is sufficient / satisfactory for the concerned position.

c) The Company shall not appoint or continue the employment of any person as Whole-time Director who has attained the age of seventy years. Provided that the term of the person holding this position may be extended beyond the age of seventy years with the approval of shareholders by passing a special resolution based on the explanatory statement annexed to the notice for such motion indicating the justification for extension of appointment beyond seventy years.

2. Term/Tenure

a) Managing Director/Whole-time Director:

The Company shall appoint or re-appoint any person as its Executive Chairman, Managing Director or Executive Director for a term not exceeding five years at a time. No re-appointment shall be made earlier than one year before the expiry of term.

b) Independent Director

An Independent Director shall hold office for a term up to five consecutive years on the Board of the Company and will be eli­gible for re-appointment on passing of a special resolution by the Company and disclosure of such appointment in the Board's report. No Independent Director shall hold office for more than two consecutive terms of upto maximum of 5 years each, but such Independent Director shall be eligible for appointment after expiry of three years of ceasing to become an Independent Director. Provided that an Independent Director shall not, during the said period of three years, be appointed in or be associated with the Company in any other capacity, either directly or indirectly. At the time of appointment of Independent Director it should be ensured that number of Boards on which such Independent Director serves is restricted to seven listed companies as an Independent Director and three listed companies as an Independent Director in case such person is serving as a Whole-time Director of a listed company or such other number as may be prescribed under the Act.

3. Evaluation

The Committee shall carry out evaluation of performance of every Director, KMP and Senior Management Personnel at regular interval (yearly).

4. Removal

Due to reasons for any disqualification mentioned in the Act or under any other applicable Act, rules and regulations there under, the Committee may recommend, to the Board with reasons recorded in writing, removal of a Director, KMP or Senior Manage­ment Personnel subject to the provisions and compliance of the said Act, rules and regulations.

5. Retirement

The Director, KMP and Senior Management Personnel shall retire as per the applicable provisions of the Act and the prevailing policy of the Company. The Board will have the discretion to retain the Director, KMP, Senior Management Personnel in the same position/ remuneration or otherwise even after attaining the retirement age, for the benefit of the Company.

Policy for Remuneration to Directors/KMP/Senior Management Personnel.

1. Remuneration to Managing/Whole-time / Executive / Managing Director, KMP and Senior Management Personnel:

The Remuneration/ Compensation/ Commission etc. to be paid to Director / Managing Director etc. shall be governed as per provisions of the Companies Act, 2013 and rules made there under or any other enactment for the time being in force.

2. Remuneration to Non- Executive / Independent Director:

The Non-Executive Independent Director may receive remuneration / compensation / commission as per the provisions of Com­panies Act, 2013. The amount of sitting fees shall be subject to ceiling/ limits as provided under Companies Act, 2013 and rules made there under or any other enactment for the time being in force.

Details of remuneration/sitting fees paid to directors during the year 2014-15:

­5 Stakeholders Relationship Committee - (Earlier known as Share/ Debenture Transfer-cum-Shareholders'/ Inves­tors' Grievance Committee:

The Committee is vested with the requisite power and authority to specifically look into the redressal of the shareholders'/Deben­ture holders/ Investors' Grievance.

a) Composition

Presently the Share/Debenture Transfer-cum-Shareholders'/Investors' Grievance Committee consisted of three members - Mr. Ashwani Rathore as Chairman, Mr. Ramesh Kumar Jain and Mr. Vidit Jain as members.

b) Name & Designation of Compliance Officer

Ms. Rekha Sharma, Company Secretary of the Company acts as the Compliance Officer of the Company.

c) Investors Complaints received and resolved during the year

During the financial Year 2014-15, no Complaint was received and no complaint was pending as on 31.03.2015.

d) Meetings:-

During the year ending 31.03.2015, 36 ( Thirty Six) Meetings of Share/ Debenture Transfer-cum Shareholders'/ Investors' Griev­ance Committee were held. The Details of attendance of Members are as under:

The objectives and scope of the Risk Management Committee broadly comprise of

i. To consider the Company's risk management strategies;

ii. To consider, review and approve risk management policies and guidelines;

iii. To decide on risk levels, risk appetite and related resource allocation;

iv. To approve major decisions affecting the Group's risk profile or exposure and give such directions as it considers appropri­ate;

v. To approve major risk management activities such as hedging transactions;

vi. To review the Group's approach to risk management and approve changes or improvements to key elements of its process­es and procedures; and

vii. Provide an update report to the Board in this regard no less frequent than annually.

7 Code of Conduct:

The Board of Directors of the Company have adopted Code of Business Conduct & Ethics. This Code is based on three funda­mental principles, viz. good corporate governance, good corporate citizenship and exemplary conduct and is applicable to all the Directors and senior management personnel. In terms of the requirements of Clause 49 of the Listing Agreement, the Code of Business Conduct & Ethics, as approved by the Board of Directors, has been displayed at the website of the company, www. pasupatitextiles.com  . All the members of the Board and senior management personnel have affirmed compliance with the Code for the year ended 31st March, 2015 and a declaration to that effect signed by the Chairman & Managing Director is attached and forms part of this report.

8 Code of Conduct for Prevention of Insider Trading:

The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires pre-clearance for dealing in the Company's shares and prohibits the purchase or sale of Company shares by the Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed. The Board is responsible for implementation of the Code. All Board Directors and the designated employees have confirmed compliance with the Code.

9 Performance Evaluation:

In compliance with the provisions of the Companies Act, 2013 ('the Act') and Clause 49 of the Listing Agreement, the Board during the year adopted a formal mechanism for evaluation of its performances as well as that of its committees and individual Directors, including the Chairman of the Board. A structured questionnaire was prepared after taking into consideration inputs received from the Directors, covering various aspects of the Board's functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance. A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as level of engagement and contribution, independence of judgement, safeguarding the interest of the Company and its minority shareholders, etc. The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the Chairman and the Non-Independent Directors was carried out by the Independent Directors. The Directors expressed their satisfaction with the evaluation process.

10 Induction & Familiarization Programs for Independent Directors:

On appointment of the Independent Directors a letter of Appointment setting out in detail, the terms of appointment, duties and responsibilities is issued. Each newly appointed Independent Director is taken through a familiarization programme. The program aims to familiarize the Directors with the Company, their role and responsibilities, business model of the Company etc.

11 Independent Directors' Meeting:

In compliance with Section 149(8) of the Act read along with Schedule IV of the Act and Clause 49 (II)(B)(6) of the listing agree­ment with the stock exchange, the Independent Directors met on14-02-2015, inter alia, to discuss:

(a) Evaluation of the performance of non- Independent Directors and the Board as a whole;

(b) Evaluation of the performance of the Chairperson of the company, taking into account the views of executive directors and non-executive directors;

(c) Evaluation of the quality, quantity and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties. All the Independent Directors were present at the meeting.

12 Vigil Mechanism / Whistle Blower Policy

Pursuant to Section 177(9) of the Companies Act, 2013 and clause 49 of the Listing Agreement, the Company has formulated a Whistle Blower Policy to establish a vigil mechanism for directors and employees of the Company. This Policy covers malprac­tices and events which have taken place, suspected to have taken place, misuse or abuse of authority, fraud or suspected fraud, violation of company rules, manipulations, negligence causing danger to public health and safety, misappropriation of monies and other matters or activity on account of which the interest of the Company is affected and formally reported by whistle blowers. This Policy is intended to encourage and enable employees to raise serious concerns within the Company prior to seeking resolution outside the company. The purpose and objective of this Policy is to provide a framework to promote responsible and secure whistle blowing. It protects the employees wishing to raise a concern about serious irregularities within the Company. The Company en­courages its directors and employees who have genuine concern about suspected misconduct to come forward and express these concerns without fear of punishment or unfair treatment. A vigil (Whistle Blower) mechanism provides a channel to the employees and directors to report to the management concerns about unethical behaviour, actual or suspected fraud or violation of the Code of Conduct or policy. The mechanism provides for adequate safeguards against victimization of employees and directors to avail of the mechanism and also provide for direct access to the Chairperson of the Audit Committee or MD/ED / Company Secretary . The Whistle Blower Policy of the Company has been uploaded and can be viewed on the Company's website.

13 Related Party Transactions

Company has entered Related Party Transactions during the financial year 2014-15. All Related Party Transactions entered into during the year are on an arm's length basis and are in the ordinary course of business. There are no materially significant Relat­ed Party Transactions made by the Company with promoters, directors, Key Managerial Personnel or other designated persons which may have potential conflict with the interests of the Company at large. On the recommendation of the Audit Committee, the Board of Directors has adopted a policy on Related Party Transactions, which is also uploaded on the website of the Company www.pasupatitextiles.com  under the head 'Investor Relations'. The Policy envisages the procedure governing related party trans­actions required to be followed to ensure compliance with the applicable laws and regulations as well as to ensure that the Related Party Transactions are managed and disclosed in accordance with the strict legal and accounting requirements. A statement of all related party transactions is presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms & conditions of the transactions. The statement is supported by a certificate from the CMD and CFO. The particulars of related party transactions are given in form AOC-2 and is annexed as Annexure-E to Directors report.

14 Compliance By the Company:

The Company has complied with the requirements of the Stock Exchanges, SEBI and other Statutory Authorities on all matters related to capital market during the last three years.

15 Shareholders Information :

a (i) Means of Communication & Website :

The Quarterly & Annual Results were generally published in the newspaper i.e. Financial Express (English edition) and in the Hari Bhumi (Hindi edition). The Quarterly results are also displayed on the website of the Company, i.e., www.pasupatitextiles.com  

ii) In line with the existing provisions of the Listing Agreement, the Company has created a separate e-mail address viz. rekha-sharma@pasupatitextiles.com  to receive complaints and grievances of the investors.

b) Share Transfer System & Registrar & Share Transfer Agent:-

Annual General Meeting

Date & Time 29-9-2015 AT 10 A.M

Venue :Registered Office of the Company at Village Kapriwas (Dharuhera) Distt. Rewari, Haryana

Book Closure

Date: 22nd September , 2015 to 29th September, 2015 (Both Days are Inclusive)

All requests for dematerialization, rematerialization, transfer, transmission, issue of duplicate share certificates, sub-divisions, , etc. are being handled by the Registrar & Share Transfer Agent and registered within 15 days of receipt of documents, if found in order.

All requests for transfer of shares in the physical form are processed and the duly transferred share certificates are returned to the transferee within the time prescribed by the law in this regard, subject to the share transfer documents being valid and complete in all respects.

Address & Contact No. of Registrar & Share Transfer Agent are as follows:

M/s. Skyline Financial Services Pvt. Ltd D-153,

1st Floor, Okhala Industrial Area Phase -1, New Delhi 110020.

Tel.: 011-26812682, 83, 011-64732681-88 I Fax: +91 11 26812682

Web:www.skylinerta.com

c) Procedure for dematerialization/ Rematerlisation of shares and Liquidity

Shareholders seeking demat/remat of their shares must approach the Depository Participants (DP) with whom they maintain a demat account. The DP will generate an electronic request and will send the physical share certificates to the Registrar and Share transfer Agent ("the Registrar') of the Company. Upon receipt of the request and share certificate, the Registrar will verify the same. Upon verification, the Registrar will request the National Securities Depository Ltd. (NSDL)/Central Depository Services Ltd. (CDSL) to confirm the demat request. The demat account of the concerned shareholder will be credited with an equivalent number of shares. In case of a rejection of the request, it will be communicated to the shareholder. In the case of remat, upon receipt of a request from the shareholder, the DP generates a request and verification of the same is done by the Registrar. The Registrar then requests the NSDL and CDSL to confirm the request. The approval of the company is sought and an equivalent number of shares are issued in the physical form to the shareholder.

The share certificates are dispatched within one month from the date of issue of shares.

As on 31st March, 2015, 96.02% of the Company's equity shares were held in dematerialized form and balance are held in physical form. Trading in Company's shares is permitted only in demat form w.e.f. 06.09.2000 as per notification issued by the Securities & Exchange Board of India.

e) Postal Ballot:

For the year ended March 31, 2015 there have been no ordinary or special resolutions passed by the Company's Shareholders through postal ballot.

Additional Shareholders Informations:-

a) Financial Year

The financial year of the Company starts from 1st April of the calendar year and ends on 31st March of next calendar year.

b) Registered office and address for correspondence:-Registered Office:

Village Kapriwas (Dharuhera), Distt. Rewari (Haryana)

Company Secretary & Compliance Officer:-

Name:- Ms. Rekha Sharma.

Address:- Pasupati Spinning & Weaving Mills Limited. 1501, Nirmal Tower Barakhamba Road,

New Delhi -110001. Mail Id:- rekhasharma@pasupatitextiles.com

d) Plant Location:

Polyester Viscose Yarn & Cotton Yarn Unit : Village Kapriwas (Dharuhera) Distt. Rewari, Haryana

Sewing Thread Unit : Village Kheri (Kala-amb) Distt. Sirmour, H.P.

e) Listing at Stock Exchanges:

The details regarding payment of listing fee to Stock Exchange are given below:

S. No. Name of Stock Exchanges Listing Fee Paid up to Stock Code No

1. Delhi Stock Exchange Association Ltd. 2004-05 A-2

2. The Stock Exchange, Mumbai 2014-15 A-1

16 Disclosures

(i) There were no transactions of material nature with the directors or the management or their subsidiaries or relatives etc. during the year that had potential conflict with the interests of the Company at large. The details of related party transactions have been reported in the Notes to Accounts.

(ii) The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013 and in con­formity, in all material respects, with the generally accepted accounting principles are consistent, reasonable and on prudent basis so as to reflect true and fair view of the state of affairs and results/operations of the Company.

(iii) The Company has formulated Whistle Blower Policy to establish a Vigil Mechanism for directors and employees of the Company and the details are provided in corporate governance report.

(iv) The Company has well-defined Risk Management Policies for each of the businesses, duly approved by the Board, which are periodically reviewed to ensure that the executive management controls risk by means of a properly defined framework.

(v) The Company has not raised any funds from the capital market (public/rights/preferential issues etc.) during the financial year under review.

17 Segment-Wise Performance:

Company is only manufacturing textile and textile articles and therefore, segment reporting is not applicable to the Company.

18 Financial Performance :

The financial performance of the company has been given separately in the Directors' Report.

19 CEO/CFO Certificate

The requisite certificate has been obtained from the CEO/ CFO of the Company.

For and on behalf of the Board of Directors

Ramesh Kumar Jain

Chairman & Managing Director

Place : New Delhi

Dated : 14-8-2015