quest softech (india) limited

QUEST SOFTECH (INDIA) LIMITED

The Company was incorporated as Quest Softech (India) Private Limited on 27th March, 2000 under

the Companies Act, 1956 and was converted into a public limited company on 18th March 2008 vide

Certificate of Incorporation issued by the Registrar of Companies, Mumbai, Maharashtra.

Regd. Office: 27, Maker Bhavan II, 18, New Marine Lines, Mumbai – 400 020. INDIA.

Tel No.: 022 – 6615 7700 / 03; Fax No.: 022 – 6615 7704; Website: www.questsoftech.co.in

Contact Person: Mr. Siluvairajan, Compliance Officer; e-mail: [email protected]

INFORMATION MEMORANDUM FOR LISTING OF 1,00,00,000 EQUITY SHARES OF RS. 10/-

EACH FULLY PAID UP, PURSUANT TO THE SCHEME OF ARRANGEMENT BETWEEN THE

COMPANY AND CONTINENTAL CONTROLS LIMITED AND THEIR RESPECTIVE

SHAREHOLDERS AND CREDITORS.

GENERAL RISKS

Investment in equity and equity related securities involve a degree of risk and investors should not

invest any funds in the equity shares of Quest Softech (India) Limited unless they can afford to take

the risk of losing their investment. Investors are advised to read the risk factors carefully before taking

an investment decision in the shares of the Company. For taking an investment decision, investors

must rely on their own examination of the Company including the risks involved. The securities have

not been recommended or approved by Securities and Exchange Board of India (SEBI) nor does

SEBI guarantee the accuracy or adequacy of this document. Specific attention of investors is invited

to the statement of risk factors on page 5-6 of this Information Memorandum.

ABSOLUTE RESPONSIBILITY OF QUEST SOFTECH (INDIA) LIMITED

Quest Softech (India) Limited having made all reasonable inquiries, accepts responsibility for, and

confirms that this Information Memorandum contains all information with regard to the Company

which is material, that the information contained in this Information Memorandum is true and correct in

all material aspects and is not misleading in any material respect, that the opinions and intentions

expressed herein are honestly held and that there are no other facts, the omission of which makes

this document as a whole or any of such information or the expression of any such opinions or

intentions misleading in any material respect.

LISTING

The Equity Shares of Quest Softech (India) Limited are proposed to be listed on the Bombay Stock

Exchange Limited (BSE). The Company has submitted this Information Memorandum with BSE and

the same has been made available on the Company’s website viz. www.questsoftech.co.in. The

Information Memorandum would also be made available on the website of BSE viz.

www.bseindia.com.

REGISTRAR AND SHARE TRANSFER AGENT:

Purva Sharegistry (India) Pvt. Ltd.

33, Printing House, 28-D, Police Court Lane, Behind Old Handloom House, Fort, Mumbai 400 001.

Tel: 91-22-2262 6407 / 6634 8073;

Contact Person: Ms. Rajesh Shah;

e-mail: [email protected]

INFORMATION MEMORANDUM QUEST SOFTECH (INDIA) LIMITED

TABLE OF CONTENTS

Sr.

No.

Particulars Page No.

I. DEFINITIONS, ABBREVIATIONS AND INDUSTRY RELATED TERMS 1

II. RISK FACTORS 5

III. SUMMARY 7

IV. GENERAL INFORMATION 10

V. CAPITAL STRUCTURE 12

VI. SCHEME OF ARRANGEMENT 26

VII. TAXATION 29

VIII. BUSINESS 37

IX. HISTORY OF THE COMPANY 45

X. PROMOTERS 47

XI. MANAGEMENT 48

XII. MANAGEMENTS’ DISCUSSION AND ANALYSIS 53

XIII. FINANCIAL INFORMATION 54

XIV. GROUP COMPANIES 65

XV. OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS 70

XVI. GOVERNMENT APPROVALS 71

XVII. REGULATIONS AND POLICIES 72

XVIII. REGULATORY AND STATUTORY DISCLOSURES 74

XIX. MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION 77

XX. MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION 97

XXI. DECLARATION 98


1

I. DEFINITIONS, ABBREVIATIONS AND INDUSTRY RELATED TERMS

Act The Companies Act, 1956 as amended from time to time

AGM Annual General Meeting

Articles / AOA Articles of Association of Quest Softech (India) Limited

Appointed Date / Demerger

Appointed Date

Opening of business on 1st April 2008

Bankers to the Company Bankers of Quest Softech (India) Limited

Board Board of Directors of Quest Softech (India) Limited

BPO Business Process Outsourcing

BSE Bombay Stock Exchange Limited

CDSL Central Depository Services (India) Limited

Company / QSIL / Quest Softech

/ Resulting Company

Quest Softech (India) Limited

Continental Controls Limited /

CCL / Demerged Company

Continental Controls Limited having its registered office at 2

Siddharth Industrial Estate, Gala No 1, Sativali Road, Shailesh

Udyog Nagar, Opp Nicholas Garage, Waliv, Vasai E,Thane

401208

Demerger Transfer by way of demerger of the Demerged Undertaking of the

Demerged Company to the Resulting Company, and the

consequent issue of equity shares of the Resulting Company to

the shareholders of the Demerged Company as set out in the

Scheme

Depositories Act The Depositories Act, 1996 as amended from time to time

Depository A Depository registered with SEBI under the SEBI (Depositories &

Participants) Regulations, 1996 as amended from time to time

Directors Directors on the Board of Quest Softech (India) Limited

DP Depository Participant

EPS Earnings Per Share

{EPS = Profit After Tax / No. of Equity Shares}

Equity Shares Fully paid-up equity shares of Rs.10/- each of Quest Softech

(India) Limited

Equity Shareholders Equity Shareholders of Quest Softech (India) Limited

Effective date 26th September 2008, being the date of coming into effect of the

Scheme

FEMA Foreign Exchange Management Act, 1999 read with rules and

regulations there under and amendments thereto

FI Financial Institution

FII(s) Foreign Institutional Investor(s) registered with SEBI under

applicable laws


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FY Financial Year (the 12 month period starting on 1st April in a year

and ending on 31st March of subsequent year)

Information Memorandum This Information Memorandum

IT Information Technology

IT Act Income Tax Act, 1961 as amended

ITES Information Technology Enabled Services

KPO Knowledge Process Outsourcing

MOA Memorandum of Association of Quest Softech (India) Limited

NA Not Applicable

NSDL National Securities Depository Limited

NSE The National Stock Exchange of India Limited

P/E Ratio Price/Earnings Ratio

PAT Profit After Tax

RBI Reserve Bank of India

Record Date 3rd July 2009, being the date fixed by the Board of Directors of

Quest Softech (India) Limited and Continental Controls Limited

pursuant to Part – I Clause A of the Scheme

Registrar and Share Transfer

Agent / Registrars / Sharepro

‘Purva Sharegistry India Private Limited’ having its Registered

Office at 33, Printing House, 28-D, Police Court Lane, B/H Old

Handloom House, Fort, Mumbai – 400001

Resulting Company See “Company” above

ROC Registrar of Companies, Maharashtra, Mumbai

Scheme / Scheme of

Arrangement

Scheme of Arrangement under Section 391 to 394 and other

applicable provisions of the Companies Act, 1956 between Quest

Softech (India) Limited and Continental Controls Limited and their

respective Shareholders and Creditors for the Demerger of the

Software Services Division Undertaking of Continental Controls

Limited into Quest Softech (India) Limited (with Appointed Date

being 1st April 2008) and Reduction of the Issued, Subscribed and

Paid up share capital of Continental Controls Limited, as

sanctioned by the Hon’ble High Court of Judicature at Bombay

vide its Order dated 5th September 2008, which was filed with the

Registrar of Companies, Maharashtra on 26th September 2008,

which is the Effective Date of the Scheme.

SEBI Securities and Exchange Board of India

SEBI Act Securities and Exchange Board of India Act, 1992

SEBI (ICDR) RGULATIONS Securities and Exchange Board of India (Issue of Capital and

Disclosure Requirements) Regulations, 2009, as amended,

including instructions and clarifications issued by SEBI from time

to time


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Security(ies) Equity Share(s)

Share Certificate(s) Equity Share Certificate(s)

Software Services Division

Undertaking

Means and includes the Software Services Division Undertaking

of Continental Controls Limited transferred and vested in Quest

Softech (India) Limited as a going concern in terms of the Scheme

and more particularly defined in Part – I Clause A of the Scheme.

Stock Exchange Bombay Stock Exchange Limited

CURRENCY OF PRESENTATION

In the Information Memorandum, all references to “Rupees” or “Rs.” or “`” are to Indian Rupees, the

official currency of the Republic of India and the word ‘Lakh’ or ’Lac’ means ‘one hundred thousand’

and the word ‘million’ means ‘ten lakhs’ and the word ‘crore’ means ‘ten million’.

CERTAIN CONVENTIONS; USE OF MARKET DATA

Unless stated otherwise, the financial data in this Information Memorandum is derived from the

company’s audited financial statements. The fiscal year commences on April 1 and ends on March 31

of each year, and unless otherwise stated, references to a particular fiscal year are to the twelve-

month period ended March 31 of that year. In this Information Memorandum, any discrepancies in any

table between the total and the sums of the amounts listed are due to rounding. All references to

“India” contained in this Information Memorandum are to the Republic of India. All references to one

gender also refers to another gender. For additional definitions, please see the section titled

“Definitions, Abbreviations and Industry Related Terms” of this Information Memorandum.

Unless stated otherwise, industry data used throughout this Information Memorandum has been

obtained from the published data and industry publications. Industry publications generally state that

the information contained in those publications has been obtained from sources believed to be reliable

but that their accuracy and completeness are not guaranteed and their reliability cannot be assured.

Although we believe that industry data used in this Information Memorandum is reliable, it has not

been independently verified .

FORWARD- LOOKING STATEMENTS

This Information Memorandum may contain words or phrases such as “will”, “aim”, “will likely result”,

“believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, contemplate”, “seek to”,

“future”, “objective”, “goal”, “project”, “should”, “will pursue” and similar expressions or variations of

such expressions, that are “forward looking statements”. Similarly, statements that describe the

Company’s objectives, plans or goals also are forward-looking statements. Actual results may differ

materially from those suggested by the forward looking statements due to risks or uncertainties

associated with the Company’s expectations with respect to, but not limited to:

General economic and business conditions in India and other countries;

Regulatory changes and the Company’s ability to respond to them;

The Company’s ability to successfully implement its strategy, growth and expansion plans;

Technological changes;

The Company’s exposure to market risks, general economic and political conditions in India

which have an impact on its business activities or investments;


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The monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence in interest

rates, foreign exchange rates, equity prices or other rates or prices, the performance of the

financial markets in India and globally;

Changes in domestic and foreign laws, regulations and taxes and changes in competition in the

industry.

For further discussion of factors that could cause the actual results to differ, please see the section

titled “Risk Factors” of this Information Memorandum. By their nature, certain market risk disclosures

are only estimates and could be materially different from what actually occurs in the future. As a

result, actual future gains or losses could materially differ from those that have been estimated.

The Company does not have any obligation to, and does not intend to, update or otherwise revise any

statements reflecting circumstances arising after the date hereof or to reflect the occurrence of

underlying events, even if the underlying assumptions do not materialize.


5

II. RISK FACTORS

An investment in equity shares involves a high degree of risk. You should carefully consider all of the

information in this Information Memorandum, including the risks of uncertainties described below. If

any of the following risks actually occur, our business, financial condition and results of the operations

could suffer, the trading price of our Equity Shares could decline, and you may lose all or part of your

investment. The business operations of the Issuer could also be affected by additional factors other

than those mentioned below and that are not presently known to the Company or the Management of

the Company or that are currently considered to be immaterial to the business and operations of the

Company.

1. Technological breakthroughs may render existing infrastructure redundant

The BPO industry is a rapidly evolving sector witnessing new technological breakthroughs

which may render the existing technology/infrastructure redundant. The future success of the

Company would depend on its ability to anticipate these changes and develop new product

and service offered.

2. Risks relating to intellectual property infringement

The Company relies on a combination of trade secrets, confidentiality procedures and

contractual provisions to protect its intellectual property. There are currently no pending or

threatened intellectual property claims against the Company. However if it becomes liable to

third parties for infringing their intellectual property rights then the Company could be required

to pay substantial damages and be forced to develop non – infringing technology or obtain a

license.

3. Disruptions in telecommunications and basic infrastructure could harm the service

delivery model, which could result in client dissatisfaction and a reduction in the

revenues of the Company

The services the Company provides are often critical to the clients business and any failure to

provide those services on a timely manner could result in a claim for substantial damages

against the Company. Any temporary or permanent loss of equipments or systems or any

disruptions to basic infrastructure such as power and telecommunication would impede the

Company’s ability to provide services to the clients, could expose the Company to a liability

claims and could have a material adverse effect on the reputation, results of operation,

financial conditions and cash flows

4. Low availability of skilled manpower may impact the business of the company

The IT/BPO Industry is human-resource intensive and is dependent on individual skill sets,

which may or may not be readily available or replaceable. Low availability of skilled

manpower and high rate of employee turnover in the industry will lead to additional cost of

investing in employee’s retention and training.

5. Stiff Competition

The Company faces competition from large established players in the industry. The industry

structure is skewed with major part of the business being captured by few large players who

can command a premium for the services rendered. This is opposed to the increasing

competition and massive price cutting faced by the smaller players. This has rendered small

businesses unviable and is responsible for a major shakeout in the industry.


6

6. Exchange Rate Fluctuation

The Company reports its financial results in Rupees, but a significant portion of income in

future would be denominated in US Dollar. The appreciation of the Rupee against the US

Dollar would have a material adverse effect on the results of operations.

7. Political Risk

Political Risk is an inherent risk faced by all the businesses operating on a global scale. Bills

passed by various states in the USA opposing the outsourcing of government contracts to

firms of developing countries. This is a matter of concern for companies operating in the ITES

segment as their profitability may be impacted.

8. Sensitivity to the economy and extraneous factors

The Company’s performance is highly correlated to the performance of the economy and the

financial markets. The health of the economy and the financial markets in turn depends on the

domestic economic growth, state of the global economy and business and consumer

confidence, among other factors. Any event disturbing the dynamic balance of these diverse

factors may directly or indirectly affect the performance of the Company.


7

III. SUMMARY

INDUSTRY SUMMARY

INDIAN ITeS AND BPO INDUSTRY

The Indian ITeS-BPO industry has been consistently growing over the past few years, in spite of rising

competition from countries such as Philippines, China, Brazil, Mexico and Ireland. Its contribution to

the service sector and to the country’s GDP has also been increasing over these years. The revenue

of the sector (IT-BPO) has manifolded during the last decade from merely US$8.3 bn in 2000 to

around US$71 bn in 2009 at a CAGR growth of 27%1.

The ITeS/BPO notably is the fastest-growing segment within the IT-BPO sector, and during the last

decade it grew at a CAGR of 42.8%; the IT services and software revenue grew at a CAGR of 26.8%.

In the last 10 years, the domestic IT services and software products and engineering services market

grew by 21% annually and reached US$10.5 bn in 2009.

Going ahead, the challenge for the industry players lies in maintaining the level of competency and

offering high level customer satisfaction at an affordable price.

INDIAN ITeS-BPO INDUSTRY AND ECONOMIC GROWTH

The Indian ITeS-BPO industry has revolutionized global sourcing and has emerged as one of the

sunrise sectors for the country.

The Indian ITeS-BPO sector revenue notably recorded a CAGR growth of 42.8% during 2000-2009

and outpaced the growth of the IT services sector during this period, which grew by an average of

25.4%. In 2009, the ITeS-BPO export is estimated to have contributed over 86.8% to the total IT-BPO

revenue, though this contribution was lower than that made in 2002 at 93.8%. The decrease in

exports could be attributed to the growth of the domestic BPO over the last couple of years; during

2005-2009, the domestic BPO grew at a CAGR of 34.1%, ably supported by the BFSI and telecom

vertical.

INDIA CONTINUES TO DOMINATE GLOBAL OFFSHORE BPO MARKET

The global outsourcing market has been expanding at a rapid pace in the past few years as

outsourcing has become an integral function of every organization in the past 10 years or so.

Companies have been benefiting through global sourcing partnerships in terms of cost savings,

enhanced business efficiency, ability to explore new markets, reduction in time-to-market and

products and services among others.

India continues to dominate the global business process offshoring market by offering value added

services to its global clients. Global organisations are increasingly outsourcing their business needs

owing to rapidly changing business scenario, intense competition from peers, and rising globalisation,

to improve their performance. As mentioned earlier, India’s comparative advantage are its huge talent

pool, higher working population, improved infrastructure facilities, and innovative business processes,

which offer significant cost benefits to international clients. India’s share in global business process

offshoring increased steadily from 32% in 2004 to 35% in 2008, according to data from UNCTAD-


8

Everest Research Institute. In India, several cities are emerging as favourable destinations for US-

based and Europe-based companies to establish their delivery centres in cities such as Bengaluru,

Gurgaon, Hyderabad, Pune, Mumbai and Chennai.

ROAD AHEAD

The Indian ITeS-BPO industry is expected to continue its growth march in future as well in spite of the

expected rise in challenges. The industry is likely to gain further specialization in the KPO, EPO and

LPO arena. The BPO sector was the driving force behind the Indian ITeS-BPO industry during its

advent days like presently the KPO sector is the driving force for the industry because of the high

analytical services it offers global clients. The EPO and LPO segments are touted as the growth

drivers of the next wave of outsourcing.

However, given the current global recession, the ITeS-BPO industry is registering lower growth rate

as compared with the previous years. For instance, during 2004 to 2008, the sector registered an

average growth of around 39%, while in 2009, the growth declined sharply to 18.2%. Consequently,

the BPO export revenue also recorded a much lower growth of 17.5% during 2009 as compared with

an average annual growth rate of 37% between 2004 to 2008. It is important to mention that the

sector’s share in overall services exports has gone up remarkably over the past few years from 5.5%

in 2001 to 12.8% in 2009. The Indian ITeS-BPO exports alone provided direct employment to around

0.8 mn people, not including the indirect employment. The sector has massively developed the overall

economic and social landscape of the country.

However, the economic slowdown has opened up opportunities for the Indian ITeS-BPO companies,

as it is expected that the global companies would adopt outsourcing as an initiative to reduce cost.

The Indian companies have to be proactive to grab the opportunities and should venture into newer

markets, verticals and service line. Besides, the Indian ITeS-BPO companies should further explore

domestic market, which offers immense opportunities.

BUSINESS SUMMARY

HISTORY

Quest Softech (India) Limited was incorporated as Quest Softech (India) Private Limited on 27th

March 2000 under the Companies Act, 1956 and was converted into a public limited company on 18th

March 2008, and engaged in the business of IT/BPO Consultancy services related to the preparation

and maintenance of accounting information and reports.

QSIL TODAY

Our unique business process outsourcing methodology and approach work to optimize operations

across the full range of finance and accounting functions. We serve as a single window outsourcing

solution for all Finance, Accounting and Tax Related services. Our unique approach ensures a highly

professional, friendly, value for money service.

QSIL is able to offer a complete range of services for businesses and individuals. From individual tax

planning services to complex corporate consulting engagements, we are ready and able to be full


9

service accounting firm. Our skilled professionals offer both knowledge of technical financial topics

and experience in process operations.

Our services and concern for client satisfaction are reasonably priced, helping clients manage costs

while obtaining the services they need.

VISION

“To be a leading provider of financial services and knowledge based services to a global clientele by

offering value through innovative use of technology and harnessing the highest potential of its

people”.

CAPABILITIES

Multi Medium – Phone, Web, E-Mail, Print, Fax and Face-to-Face

Multi Process – Data Collection, Processing, Analytics, Presentation

Multi Industry – IT & Telecom, Healthcare & Pharma, FMCG/Consumer Goods, BFSI, Retail &

Manufacturing, Media, Others.

SERVICES

Accounting and Financial Services

Our Professionals handles Bookkeeping Services, Write-Up Services, Accounts Payable

Services, Financial Reporting Services and Account Reconciliation Services. Our Accounting

personnel can act as the back-office operation staff on behalf for clients however situated in our

office. We have an experienced team of CA's and Accounting personnel to efficiently manage

the Accounting processes.

o General Accounting and bookkeeping processes

o Fixed Asset and capital accounting processes

o Cost and Inventory Accounting processes

Tax Preparation Services

We provide all kinds of taxation related services including tax preparation and tax consulting.

We are updated with the latest technology, software and workflow processes to enhance on-

the-job efficiency for tax processing.

Financial Analysis Services

Our Financial Analysis services can be utilized to create a complete picture of the financial

performance and streamlining operations. This will help in formulating strategic decisions

regarding your business organization's financial matters.

Financial Budgeting & MIS Services

Our expertise in budgeting & MIS planning can protect from possible financial crises and help to

run the business smoothly. By utilizing a unique methodology, we assess the business risks

associated with the budget and forecast processes. We then analyze key performance

indicators through the data collection process and management review.


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IV. GENERAL INFORMATION



March 2008 vide Certificates of Incorporation issued by the Registrar of Companies, Maharashtra,

Mumbai and the name was subsequently changed to Quest Softech (India) Limited.

Address of the Registered Office of the Company

27, Maker Bhavan No. 2, 2nd Floor, 18, New Marine Lines, Mumbai - 400 020.

Tel : +91 22 66157700–03 E-mail : [email protected]

Registration Number:

U72200MH2000PLC125359

Address of Registrar of Companies where the Company is registered:

100, Everest, Marine Drive, Mumbai- 400002.

Tel : 022-22812639 E-mail : [email protected]

Board of Directors as on the date of filing of the Information Memorandum

Sr. No. Name Designation

1 Mr. Dhiren B. Kothary Executive Director

2 Mr. Suresh S. Vishwasrao Non-Executive Director

3 Mr. Paresh Zaveri Independent Director

For further details of the Board of Directors of the Company, please see the Section titled

“Management”

Compliance Officer

Mr. Siluvairajan

27, Maker Bhavan No. 2, 2nd Floor, 18, New Marine Lines, Mumbai - 400 020.

Tel : +91 22 66157700–03 E-mail : [email protected]

Banker to the Company

HDFC Bank Limited

22-25, Ashoka Shopping Centre,

L T Road, Crawford Market

Mumbai – 400001

Auditors

M/s Ashok Gokani & Co., Chartered Accountants

J/4, ‘B’ Building, Mangal Kunj,

Opp. Indraprasth Shopping Center,

S. V. Road, Borivali (W),

Mumbai – 400 092

Phone: (022) 2899 3618


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Registrar and Share Transfer Agent

Purva Sharegistry (India) Pvt. Ltd.

Unit no. 9, Shiv Shakti Ind. Estate,

J.R. Boricha Marg, Lower Parel (E),

Mumbai 400 011

Contact Person: Mr. Rajesh Shah

Tel : (022) 2301 6761

Fax : (022) 2301 2517

E-mail: [email protected]

Disposal of Investor’s Grievances

Complaints, if any, received in respect of the Shares will be attended to by the Registrar and Share

Transfer Agent in coordination with the Company expeditiously and to the satisfaction of the

shareholders.

Stock Market Data for Equity Shares of the Company

The Equity Shares of the Company are presently not listed on any stock exchanges. The Company is

seeking approval for listing of its shares on BSE only.


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V. CAPITAL STRUCTURE OF THE COMPANY

SHARE CAPITAL

Pre-Scheme of Arrangement:

Number Rupee

Authorised Capital

60,00,000 Equity Shares of Rs.10/- each 6,00,00,000

Total 6,00,00,000

Issued, Subscribed and Paid-up

55,78,744 Equity Shares of Rs.10/- each 5,57,87,440

Total 5,57,87,440

Post-Scheme of Arrangement:

Number Rupee

Authorised Capital

1,00,00,000 Equity Shares of Rs.10/- each 10,00,00,000

Total 10,00,00,000

Issued, Subscribed and Paid-up

1,00,00,000 Equity Shares of Rs.10/- each 10,00,00,000

Total 10,00,00,000

Notes to Capital Structure

1. Share Capital History of the Company

Authorised Share Capital

Sr.

No.

Particulars of Increase Date of Shareholder’s

Meeting

Type of Meeting

1 Rs. 2,50,000 On Incorporation

2 Rs. 2,50,000 to Rs. 6,00,00,000 March 01, 2008 EGM

3 Rs. 6,00,00,000 to Rs. 10,00,00,000 July 06, 2009 EGM

Issued, Subscribed & Paid up Share Capital

Sr.

No. Date of Allotment

Number

of Shares

Face

Value (Rs.)Basis of Allotment

Consider-

ation

1 On Incorporation 200 10.00 Subscribed to MOA Cash

2 September 30, 2000 7,300 10.00 Further Allotment Cash

3 December 3, 2002 2,500 10.00 Further Allotment Cash

4 January 2, 2008 40,000 10.00 Further Allotment Cash

5 March 29, 2008 55,28,744 10.00 Further Allotment Cash

6 July 06, 2009 44,21,256 10.00 Further Allotment Otherwise

than in Cash#

# 44,21,256 equity shares of Rs. 10 have been issued to the shareholders of Continental

Controls Limited (CCL) in terms of Scheme of Arrangement, approved by the Hon’ble High

Court of Judicature at Bombay vide their order dated 5th September 2008.


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The said order was filed with the Registrar of Companies, Maharashtra on 26th September 2008

for both the Companies. Accordingly, the Demerger is effective from 26th September 2008.

Pursuant to Clause 7 of the Scheme, the Board of Directors of the Company on 6th July 2009

issued and allotted 44,21,256 Equity Shares of Rs. 10/- each to the shareholders of the

Demerged Company whose names appeared in the Register of Members of the Demerged

Company on the Record Date viz 3rd July 2009 in the Demerger Share Entitlement Ratio of 1

(One) new equity share of Rs. 10/- each credited as fully paid up of the Company for every 2

(Two) equity shares of Rs.10/- each held by such member in the Demerged Company.

On allotment of 44,21,256 Equity Shares by the Company, the issued, subscribed and paid up

share capital of the Company increased from Rs.5,57,87,440/- consisting of 55,78,744 equity

shares of Rs. 10/- each fully paid-up to Rs. 10,00,00,000/- consisting of 1,00,00,000 equity

shares of Rs.10/- each fully paid-up.


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2. Pre - Scheme of Arrangement Shareholding Pattern of the Company (As on 3rd July

2009, being the Record Date)

2(a).

Category

code

Category of

shareholder

Number

of

sharehold

ers

Total

number of

shares

Number of

shares held

in

dematerializ

ed form

Total shareholding as a

percentage of total

number of shares

As a

percentage

of (A+B)1

As a

percentag

e of

(A+B+C)

(A) Shareholding of

Promoter and

Promoter Group2

(1) Indian

(a) Individuals/ Hindu

Undivided Family

003 43,51,944 Nil 78.01% 78.01%

(b) Central

Government/ State

Government(s)

--- --- --- --- ---

(c) Bodies Corporate --- --- --- --- ---

(d) Financial

Institutions/ Banks

--- --- --- --- ---

(e) Any Other

(specify)

--- --- --- --- ---

Sub-Total (A)(1) 003 43,51,944 Nil 78.01% 78.01%

(2) Foreign

(a) Individuals (Non-

Resident

Individuals/ Foreign

Individuals)

--- --- --- --- ---

(b) Bodies Corporate --- --- --- --- ---

(c) Institutions --- --- --- --- ---

(d) Any Other (specify) --- --- --- --- ---

Sub-Total (A)(2) --- --- --- --- ---

Total

Shareholding of

Promoter and

Promoter Group

(A)= (A)(1)+(A)(2)

003 43,51,944 Nil 78.01% 78.01%

(B) Public

shareholding3

(1) Institutions

1 For determining public shareholding for the purpose of Clause 40A. 2 For definitions of “Promoter” and “Promoter Group", refer to Clause 40A. 3 For definitions of “Public Shareholding”, refer to Clause 40A.


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(a) Mutual Funds/ UTI --- --- --- --- ---

(b) Financial

Institutions/ Banks

--- --- --- --- ---

(c) Central

Government/ State

Government(s)

--- --- --- --- ---

(d) Venture Capital

Funds

--- --- --- --- ---

(e) Insurance

Companies

--- --- --- --- ---

(f) Foreign Institutional

Investors

--- --- --- --- ---

(g) Foreign Venture

Capital Investors

--- --- --- --- ---

(h) Any Other (specify) --- --- --- --- ---

Sub-Total (B)(1)

(2) Non-institutions

(a) Bodies Corporate --- --- --- --- ---

(b) Individuals -

i. Individual

shareholders

holding nominal

share capital up

to Rs. 1 lakh.

ii. Individual

shareholders

holding nominal

share capital in

excess of Rs. 1

lakh.

---

003

---

12,26,400

---

Nil

---

21.98%

---

21.98%

(c) Any Other (specify)

(a) Directors &

Employees

004 400 Nil 0.01% 0.01%

Sub-Total (B)(2) 004 400 Nil 0.01% 0.01%

Total Public

Shareholding (B)=

(B)(1)+(B)(2)

007 12,26,800 Nil

21.99% 21.99%

TOTAL (A)+(B) 010 55,78,744 Nil 100.00% 100.00%

(C) Shares held by

Custodians and

against which

Depository

Receipts have

been issued

--- --- ---

--- ---

GRAND TOTAL

(A)+(B)+(C)

010 55,78,744 Nil 100.00% 100.00%


16

2b. Statement showing Shareholding of persons belonging to the category “Promoter

and Promoter Group”

Sr.

No. Name of the shareholder

Number of

shares

Shares as a percentage of total number of

shares {i.e., Grand Total (A)+(B)+(C)

indicated in Statement at para (I)(a) above}

1. Mr. Dhiren B. Kothary 15,48,000 27.75%

2. Mrs. Nita Dhiren Kothary 19,01,500 34.08%

3. Mr. Sesha Srinivas Malladi 9,02,444 16.18%

TOTAL 43,51,944 78.01%

2c. Statement showing Shareholding of persons belonging to the category “Public” and

holding more than 1% of the total number of shares

Sr.

No.

Name of the shareholder Number of

shares

Shares as a percentage of total number of


indicated in Statement at para (I)(a) above}

1. Mr. Amit Sheth 9,50,000 17.03%

2. Mr. Bhavesh Koradia 1,38,200 2.48%

3. Mrs. Sonal Koradia 1,38,200 2.48%

TOTAL 12,26,400 21.99%

2d. Statement showing details of locked-in shares

Sr.

No.


locked-in

shares

Locked-in shares as a percentage of total

number of shares {i.e., Grand Total

(A)+(B)+(C) indicated in Statement at para

(I)(a) above}

1. --- --- ---

TOTAL --- ---

2e. Statement showing details of Depository Receipts (DRs)

Sr.

No.

Type of

outstanding

DR (ADRs,

GDRs, SDRs,

etc.)

Number of

outstanding

DRs

Number of

shares

underlying

outstanding DRs

Shares underlying outstanding DRs

as a percentage of total number of


indicated in Statement at para (I)(a)

above}

1. --- --- --- ---

TOTAL --- --- ---


17

3. Post - Scheme of Arrangement Shareholding Pattern of the Company (As on 6th July

2009)

3(a).

Category

code

Category of

shareholder

Number of

shareholde

rs

Total number

of shares

Number of

shares held

in

demateriali

zed form


percentage of total

number of shares

As a

percentage

of (A+B)4

As a

percentage

of (A+B+C)

(A) Shareholding of

Promoter and

Promoter Group5

(1) Indian


Undivided Family

003 44,09,752 57,768 44.10% 44.10%

(b) Central Government/

State Government(s)

--- --- --- --- ---


(d) Financial

Institutions/ Banks

--- --- --- --- ---

(e) Any Other

(specify)

--- --- --- --- ---

Sub-Total (A)(1) 003 44,09,752 57,768 44.10% 44.10%

(2) Foreign


Resident Individuals/

Foreign Individuals)

--- --- --- --- ---


(c) Institutions --- --- --- --- ---


Sub-Total (A)(2) --- --- --- --- ---

Total Shareholding

of Promoter and

Promoter Group

(A)= (A)(1)+(A)(2)

003 44,09,752 57,768 44.10% 44.10%

(B) Public

shareholding6

(1) Institutions


(b) Financial

Institutions/ Banks

001 13,926 13,926 0.14% 0.14%

(c) Central Government/ --- --- --- --- ---



18

State Government(s)

(d) Venture Capital

Funds

--- --- --- --- ---

(e) Insurance

Companies

--- --- --- --- ---


Investors

--- --- --- --- ---

(g) Foreign Venture

Capital Investors

--- --- --- --- ---


Sub-Total (B)(1) 001 13,926 13,926 0.14% 0.14%


(a) Bodies Corporate 126 6,16,837 1,88,012 6.17% 6.17%

(b) Individuals -

i. Individual

shareholders

holding nominal

share capital up to

Rs. 1 lakh.

ii. Individual

shareholders

holding nominal

share capital in

excess of Rs. 1

lakh.

5598

29

22,29,130

27,20,856

18,16,563

10,95,118

22.29%

27.21%

22.29%

27.21%


(a) Directors &

Employees

1 100 - 0.00% 0.00%

(b) N.R.I. (Repat &

Non – Repat)

023 9,399 6,149 0.09% 0.09%

Sub-Total (B)(2) 5777 55,76,322 31,05,842 55.76% 55.76%

Total Public

Shareholding (B)=

(B)(1)+(B)(2)

5778 55,90,248 31,19,768 55.90% 55.90%

TOTAL (A)+(B) 5781 1,00,00,000 31,77,536 100.00% 100.00%

(C) Shares held by

Custodians and

against which

Depository

Receipts have

been issued

--- --- ---

--- ---

GRAND TOTAL

(A)+(B)+(C)

5781 1,00,00,000 31,72,536 100.00% 100.00%


19



Sr. No. Name of the shareholder Number of

shares

Shares as a percentage of total number

of shares {i.e., Grand Total (A)+(B)+(C)


above}




TOTAL 44,09,752 44.10%



Sr. No. Name of the shareholder Number of shares Shares as a percentage of total

number of shares {i.e., Grand

Total (A)+(B)+(C) indicated in

Statement at para (I)(a) above}

1. Mr. Amit Sheth 9,50,000 9.50% 2. Narayani Finance Limited 3,97,125 3.97%

3. Mr. Navin G Thakkar 3,60,119 3.60%


5. Mrs. Sarojben N Thakkar 2,40,253 2.40%

6. Mrs. Sameer N Thakkar 1,59,085 1.59%

7. Mr. Bhavesh Koradia 1,38,200 1.38% TOTAL 25,53,946 25.53%


Sr.

No.


locked-in shares

Locked-in shares as a

percentage of total number of

shares {i.e., Grand Total

(A)+(B)+(C) indicated in


1. --- --- ---

TOTAL --- ---


Sr.

No.

Type of

outstanding DR

(ADRs, GDRs,

SDRs, etc.)

Number of

outstanding

DRs

Number of

shares

underlying

outstanding DRs





above}

1. --- --- --- ---

TOTAL --- --- ---


20

4. Shareholding Pattern of the Company as on date of Information Memorandum

4(a).

Category

code

Category of

shareholder

Number of

shareholde

rs

Total number

of shares

Number of

shares

held in

dematerial

ized form


percentage of total

number of shares

As a

percentage

of (A+B)7

As a

percentage

of (A+B+C)

(A) Shareholding of

Promoter and

Promoter Group8

(1) Indian


Undivided Family

003 43,51,944 --- 43.52% 43.52%

(b) Central Government/

State Government(s)

--- --- --- --- ---


(d) Financial

Institutions/ Banks

--- --- --- --- ---

(e) Any Other

(specify)

--- --- --- --- ---

Sub-Total (A)(1) 003 43,51,944 --- 43.52% 43.52%

(2) Foreign


Resident Individuals/

Foreign Individuals)

--- --- --- --- ---


(c) Institutions --- --- --- --- ---


Sub-Total (A)(2) --- --- --- --- ---

Total Shareholding

of Promoter and

Promoter Group

(A)= (A)(1)+(A)(2)

003 43,51,944 --- 43.52% 43.52%

(B) Public

shareholding9

(1) Institutions


(b) Financial

Institutions/ Banks

001 13,926 13,926 0.14% 0.14%

(c) Central Government/

State Government(s)

--- --- --- --- ---



21

(d) Venture Capital

Funds

--- --- --- --- ---

(e) Insurance

Companies

--- --- --- --- ---


Investors

--- --- --- --- ---

(g) Foreign Venture

Capital Investors

--- --- --- --- ---


Sub-Total (B)(1) 001 13,926 13,926 0.14% 0.14%


(a) Bodies Corporate 123 2,17,262 1,88,012 2.17% 2.17%

(b) Individuals -

i. Individual

shareholders

holding nominal

share capital up to

Rs. 1 lakh.

ii. Individual

shareholders

holding nominal

share capital in

excess of Rs. 1

lakh.

5594

31

2,217,620

3,189,749

18,16,563

11,52,886

22.17%

31.90%

22.17%

31.90%


(a) Directors &

Employees

1 100 --- 0.00% 0.00%

(b) N.R.I. (Repat &

Non – Repat)

023 9,399 6,149 0.09% 0.09%

Sub-Total (B)(2) 5772 56,34,130 31,63,610 56.34% 56.34%

Total Public

Shareholding (B)=

(B)(1)+(B)(2)

5773 56,48,056 31,77,536 56.48% 56.48%

TOTAL (A)+(B) 5776 1,00,00,000 31,77,536 100.00% 100.00%

(C) Shares held by

Custodians and

against which

Depository

Receipts have

been issued

--- --- ---

--- ---

GRAND TOTAL

(A)+(B)+(C)

5776 1,00,00,000 31,77,536 100.00% 100.00%


22



Sr. No. Name of the shareholder Number of

shares

Shares as a percentage of total number

of shares {i.e., Grand Total (A)+(B)+(C)


above}




TOTAL 43,51,944 43.52%



Sr. No. Name of the shareholder Number of shares Shares as a percentage of total

number of shares {i.e., Grand

Total (A)+(B)+(C) indicated in


1. Mr. Amit Sheth 9,50,000 9.50%

2. Mr. Nimesh Shah 3,99,488 3.99%

3. Mrs. Nikita Shah 3,97,125 3.97%

4. Mr. Navin Thakkar 3,60,119 3.60%


6. Sonal Kalpesh Koradia 1,70,964 1.71%


TOTAL 25,54,096 25.54%


Sr.

No.


locked-in shares

Locked-in shares as a

percentage of total number of

shares {i.e., Grand Total

(A)+(B)+(C) indicated in


1. --- --- ---

TOTAL --- ---


Sr.

No.

Type of

outstanding DR

(ADRs, GDRs,

SDRs, etc.)

Number of

outstanding

DRs

Number of

shares

underlying

outstanding DRs





above}

1. --- --- --- ---

TOTAL --- --- ---


23


24

8. Details of the shareholding of the Promoters and Promoter Group

(A) Pre - Scheme of Arrangement, as on 3rd July 2009, (being the Record Date)

Sr. No. Name of the Shareholder No.of Shares % of Holding




TOTAL 43,51,944 78.01%

(B) Post- Scheme of Arrangement, as on 6th July 2009.

Sr. No. Name of the Shareholder No. of shares % of Holding




TOTAL 44,09,752 44.10%

(C) As on the date of this Information Memorandum

Sr. No. Name of the Shareholder No. of shares % of Holding



TOTAL 43,51,944 43.51%

9. The list of top 10 shareholders of the Company and the number of Equity Shares held by

them

A. Top 10 shareholders as on the date of the Information Memorandum

Names No of shares held % of paid-up Capital



3. Mr. Amit Sheth 9,50,000 9.50%

4. Mr. Nimesh Shah 3,99,488 3.99%

5. Mrs. Nikita Shah 3,97,125 3.97%

6. Mr. Navin Thakkar 3,60,069 3.60%



9. Enpee Enterprises Pvt Ltd 85,000 0.85%

10. Mr. Sunil Jagdish Sachade 75,000 0.75%


25

B. Top 10 shareholders on the Record Date, being 3rd July, 2009

Name of the Shareholder No of shares held % of paid-up

Capital



3. Mr. Amit Sheth 9,50,000 17.03%




7. Mr. Suresh S. Vishwasrao 100 0.00%

8. Mr. Vilas Darji 100 0.00%

9. Mr. M. Chandrashekhar 100 0.00%

10. Mr. J A Kotian 100 0.00%

C. Top 10 shareholders two years prior to the date of this Information Memorandum

Name of the Shareholder No of shares held % of paid-up

Capital



3. Mr. Amit Sheth 9,50,000 17.03%




7. Mr. Suresh S. Vishwasrao 100 0.00%

8. Mr. Vilas Darji 100 0.00%

9. Mr. M. Chandrashekhar 100 0.00%

10. Mr. J A Kotian 100 0.00%

10. The face value of the Equity Shares is Rs.10/- per share and there shall be only one

denomination for the Equity Shares of the Company, subject to applicable regulations and the

Company shall comply with such disclosure and accounting norms specified by SEBI, from time

to time.

11. The number of shareholders is 5,776 as on the date of this Information Memorandum.

12. None of the Equity Shares of the Company were under lock-in prior to the Scheme.


26

VI. SCHEME OF ARRANGEMENT

Background and Rationale of the Scheme of Arrangement

CCL was incorporated on March 02, 1995 with the Registrar of Companies, Maharashtra, Mumbai.

CCL was engaged in the business of Electrical Controls and Software Services each of which were

being carried out as two separate business divisions. Both the divisions of CCL were being run

independently with different characteristics, distinct fixed assets, non-overlapping revenue streams

and separately identifiable customers. The nature of risks and competition involved in the business of

Electrical Division Undertaking is different from that of the business Software Services Division.

The software services business of the Company was started in the year 2000 and in the year 2003,

Continental Softech Limited, a Group Company engaged in the business of Software Services was

amalgamated with CCL to strengthen the Software Services business. However, due to increased

competition this Division was passing through a tough phase and the management was unable to

spare sufficient time and effort to put the Software Services Division Undertaking on the path of

efficiency and growth. Thus, infrastructure created for the Software Services Division was not being

utilized to its fullest potential and proving to be a drag on the overall working of the Company.

QSIL was incorporated on 27th day of March 2000 with the Registrar of Companies, Maharashtra,

Mumbai. QSIL is engaged in the business of providing software and BPO Services to both domestic

and international clients. However, its growth is constrained due to lack of infrastructure and

resources commensurate with the business development potential the management has. The

infrastructure and resources transferred from CCL by the demerger would enable QSIL to expand its

business substantially, the fruits whereof can be enjoyed by the shareholders of the Company.

The restructuring has resulted in segregation of the Software Services Division Undertaking from

CCL, leading to operational efficiencies and synergies and enable exploitation of growth opportunities

of both the CCL and the QSIL. Since the shares of both companies are proposed to be listed, the

entire investment of all the shareholders will continue to remain tradeable on the Stock Exchanges,

thereby not jeopardizing their interests in any manner.

The Salient Features of the Scheme are:-

i. The Scheme envisages the demerger of the Software Services Division Undertaking of the

Applicant Company to the QSIL pursuant to Sections 391 to 394 and other relevant provisions

of the Act in the manner provided for in the Scheme, and the consequent issue of equity shares

by the QSIL to the shareholders of the Applicant Company in the Share Entitlement Ratio (as

defined hereinafter).

ii. The Scheme provides that the "Appointed Date" shall be April 1, 2008.

iii. The "Effective Date" for the Scheme means the last of the dates on which the conditions and

matters referred to in Clause 12 of the Scheme occur or have been fulfilled or waived.

iv. "Software Services Division Undertaking " as described in Clause A of Part I of the Scheme

means the software services business carried on by the Applicant Company, which shall

include the following:

a. All the properties and assets, investments, stocks, debtors, receivables, loans, advances,

all rights, powers, interests, authorities, privileges and liberties, whether or not recorded in

the books of account and/or appearing in the balance sheet of the Applicant Company

pertaining, or relating, to the Software Services Business.


27

b. All liabilities, including all the financial commitments / obligation present and future,

contingent or otherwise, whether or not recorded in the books of account and/or

appearing in the balance sheet of the Applicant Company pertaining, or relating to the

Software Services Business.

c. Such of the general or multi-purpose borrowings of the Software Services Business as

identified by the Board of Directors of the Applicant Company.

d. All books of account, registers, records, files, papers and all other documents of whatever

nature relating to the above assets, properties and liabilities.

e. Without prejudice to the generality of sub-clauses (a) and (b) hereinabove, the Software

Services Division Undertaking shall include all the assets and properties of the Applicant

Company pertaining or relating to its Software Services Business, whether real corporeal

and incorporeal, in possession or reversion, present and contingent, all other assets

(whether tangible or intangible) and liabilities of whatsoever nature, and wheresoever

situate, investments, stocks, other rights, powers, authorities, allotments, approvals,

consents, exemptions, letters of intent, licences, permits, registrations, contracts,

engagements, arrangements, agreements with clients, rights, titles, interests, benefits,

and advantages of any nature whatsoever and wheresoever situate of, belonging to, or in

the ownership, power or possession and in the control of, or vested in, or granted in

favour of, or enjoyed by, the Software Services Business of the Applicant Company,

including all intellectual properties and rights of any nature whatsoever and licences,

assignments, grants in respect thereof, privileges, liberties, easements, contracts,

advantages, benefits, goodwill, , approvals, authorisations, right to use and avail of

telephones, facsimile and other communication facilities, connections, equipments and

installations, utilities, electricity and electronic connections and all other services, of every

kind, nature and descriptions whatsoever, benefits of all agreements, contracts,

arrangements, deposits, advances, recoverables and receivables whether from

government, semi-government, local authorities or any other customers, etc., and all

other rights, interests, claims and powers of every kind, nature and description of, and

arising to, Software Services Business of the Applicant Company and cash and bank

balances, all earnest moneys or deposits including security deposits, if any, paid by the

Software Services Business of the Applicant Company.

f. All permanent employees of the Software Services of the Applicant Company

substantially engaged in the Software Services Business and those permanent

employees that are determined by the Board of Directors of the Applicant Company to be

substantially engaged in, or in relation to, the Software Services Division Undertaking.

v. "Electrical Division Undertaking" means all the businesses, activities and operations of the

Applicant Company other than Software Services Division Undertaking.

vi. The Scheme of Arrangement provides that though it shall become effective from the Effective

Date, the provisions of the Scheme of Arrangement shall be applicable and come into operation

from the Appointed Date.

vii. The Scheme also provides for:

a. the manner of vesting and transfer of the assets of the Applicant Company relating to the

Software Services Division Undertaking in the QSIL;

b. the transfer of contracts, deeds, bonds, agreements, schemes, arrangements and other

instruments of whatsoever nature relating to the Software Services Division Undertaking

from the Applicant Company to the QSIL;


28

c. the transfer of all consents, permissions, licenses, certificates, clearances, authorities,

powers of attorney given by, issued to or executed in favour of the Software Services

Division Undertaking from the Applicant Company to the QSIL;

d. the transfer of all debts, liabilities, duties, and obligations of the Software Services

Division Undertaking from the Applicant Company to the QSIL;

e. the transfer of all suits, actions and proceedings by or against the Applicant Company

relating to the Software Services Division Undertaking to the QSIL;

f. the manner in which the Applicant Company shall be deemed to have been carrying on

all business and activities relating to the Software Services Division Undertaking for and

on account of, and in trust for, the QSIL;

g. the transfer of employees engaged in the Software Services Division Undertaking of the

Applicant Company to the QSIL on terms and conditions not less favourable than those

on which they are engaged in the Applicant Company;

h. provisions for the Software Services Division Undertaking to continue in the Applicant

Company;

i. the issuance of 1 (One) share of face value of Rs. 10/- by the QSIL to the shareholders of

the CCL whose names are recorded in the Register of Members of the Applicant

Company on the Record Date for every 2 (Two) share of face value of Rs. 10/- credited

as fully paid-up held by such shareholder and matters related thereto;

j. the reduction of paid-up capital of the Applicant Company by half, consequent to the

transfer of Software Services Undertaking to QSIL and the allotment of shares by QSIL in

lieu thereof and the matters related thereto.

k. The treatment of fractional entitlements in view of (i) and (j) above.

l. that the QSIL shall apply for the listing of the shares issued by the QSIL pursuant to the

Scheme to the Bombay Stock Exchange Limited (BSE), on which the equity shares of the

Applicant Company are listed;

m. that the shares allotted and issued pursuant to this Scheme of Arrangement shall remain

frozen in the depositories system till listing/trading permission is given by the Bombay

Stock Exchange;

n. the accounting treatment for the arrangement in the books of the Applicant Company and

the QSIL respectively.

viii. The Scheme is conditional upon and subject to:

a. the Scheme being agreed to by the respective requisite majorities of the Shareholders

and creditors (where applicable) of the Applicant Company and the QSIL as required

under the Act and the requisite orders of the High Court being obtained;

b. such other sanctions and approvals including but not limited to in-principle approvals,

sanctions of any Governmental Authority or any stock exchanges as may be required by

law in respect of the Scheme being obtained; and

c. the certified copies of the orders of the High Court referred to in the Scheme being filed

with the Registrar of Companies, Mumbai.

The Shareholders of the Transferor Company have accorded their approval for the Scheme of

Arrangement at the Court Convened meeting on 24th May, 2008. Subsequently, Scheme of

Arrangement has been approved by the Honourable High Court of Judicature at Bombay on

September 5, 2008. The Copy of order of High court along with the Scheme of Demerger is available

at the registered office of the Company.


29

VII. Taxation

The information provided below sets out the possible tax benefits available to the shareholders of

an Indian company in a summary manner only and is not a complete analysis or listing of all potential

tax consequences of the subscription, ownership and disposal of the Equity Shares, under the

current tax laws presently in force in India. Several of these benefits are dependent on our

shareholders fulfilling the conditions prescribed under the relevant tax laws. Hence the ability of any

shareholder to derive the tax benefits is dependent upon fulfilling such conditions, which based on

business imperatives it faces in the future, it may not choose to fulfill. The following overview is not

exhaustive or comprehensive and is not intended to be a substitute for professional advice. You are

advised to consult your own tax consultant and advisors with respect to the tax implications of an

investment in the Equity Shares, particularly in view of certain recently enacted legislation which may

not have a direct legal precedent or may have a different interpretation on the benefits which you can

avail.

STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO OUR SHAREHOLDERS UNDER

THE INCOME TAX ACT, 1961 (“IT ACT”) AND OTHER DIRECT TAX LAWS PRESENTLY IN

FORCE IN INDIA TAX BENEFITS AVAILABLE TO OUR SHAREHOLDERS

• This statement sets out below the possible tax benefits available to our shareholders under

the current tax laws presently in force in India. Several of these benefits are dependent on

such shareholders fulfilling the conditions prescribed under the relevant tax laws. Hence, the

ability of our shareholders to derive the tax benefits is dependent upon fulfilling such

conditions, which based on the business imperatives, the shareholders may or may not

choose to fulfil;

• This statement sets out below the provisions of law in a summary manner only and is not

a complete analysis or listing of all potential tax consequences of the subscription,

ownership and disposal of Equity Shares. This statement is only intended to provide

general information to the investors and is neither designed nor intended to be a substitute

for a professional tax advice. In view of the individual nature of tax consequences and the

changing tax laws, each investor is advised to consult his or her or their own tax consultant

with respect to the specific tax implications arising out of their participation in the issue;

• In respect of non-residents, the tax rates and the consequent taxation, mentioned in this

section shall be further subject to any benefits available under the Double Taxation

Avoidance Agreement, if any, between India and the country in which the non-resident has

fiscal domicile; and

• The stated benefits will be available only to the sole/first-named holder in case the Equity

Shares are held by joint shareholders.

I. Benefits under the IT Act

A. Resident Shareholders

1. Under Section 10(32) of the IT Act, any income of minor children clubbed in the total income of the

parent under Section 64(1 A) of the IT Act, will be exempt from tax to the extent of Rs. 1,500

per minor child whose income is so included.


30

2. As per Section 10(34), read with Section 115-O(6) of the IT A, any income by way of dividends

referred to in Section 115-O (i.e. dividends declared, distributed or paid on or after 1 April

2003 by the domestic companies) received on the Equity Shares is exempt from tax. However it

is pertinent to note that Section 14A of the IT Act restricts claims for deduction of expenses

incurred in relation to exempt income. Thus, any expense incurred to earn the dividend income is

not an allowable expenditure.

3. As per Section 2(29A), read with Section 2(42A), Equity Shares held in a company are treated as

long term capital asset if the same are held by the assessee for more than twelve months

period immediately preceding the date of its transfer. Accordingly, the benefits enumerated

below in respect of long term capital assets would be available if the Equity Shares are held for

more than twelve months.

4. As per Section 10(38) of the IT A, long term capital gains arising from the transfer of a long term

capital asset being an Equity Share, where such transaction is chargeable to securities

transaction tax, will be exempt in the hands of the shareholder.

5. As per Section 54EC of the IT A and subject to the conditions and to the extent specified therein,

long-term capital gains (in cases not covered under Section 10(38) of the ITA) arising on the

transfer of a long-term capital asset will be exempt from capital gains tax to the extent such

capital gains are invested in a “long term specified asset” within a period of 6 months after the

date of such transfer. It may be noted that investment made on or after April 1, 2007 in the

long term specified asset by an assessee during any financial year cannot exceed Rs. 50 Lacs.

However, if the assessee transfers or converts the long term specified asset into money within a

period of three years from the date of its acquisition, the amount of capital gains exempted

earlier would become chargeable to tax as long-term capital gains in the year in which the long

term specified asset is transferred or converted into money.

A “long term specified asset” means any bond, redeemable after three years and issued on or

after the 1st day of April 2007 by the:

• National Highways Authority of India constituted under Section 3 of the National

Highways

Authority of India Act, 1988; or

• Rural Electrification Corporation Limited, a company formed and registered under the

Companies

Act, 1956.

6. As per Section 54F of the ITA, long term capital gains (in cases not covered under Section

10(38)) arising on the transfer of the Equity Shares held by an individual or Hindu Undivided

Family (HUF) will be exempt from capital gains tax if the net consideration is utilised, within a

period of one year before, or two years after the date of transfer, in the purchase of a residential

house, or for construction of a residential house within three years. Such benefit will not be

available:

if the individual or Hindu Undivided Family -

• owns more than one residential house, other than the new residential house, on the date


31

of transfer of the Equity Shares; or

• purchases another residential house within a period of one year after the date of

transfer of the Equity Shares; or

• constructs another residential house within a period of three years after the date of

transfer of the Equity Shares; and

the income from such residential house, other than the one residential house owned on the date

of transfer of the original asset, is chargeable under the head “Income from house property”.

If only a part of the net consideration is so invested, so much of the capital gain as bears to the

whole of the capital gain, the same proportion as the cost of the new residential house bears to the

net consideration, will be exempt.

If the new residential house is transferred within a period of three years from the date of

purchase or construction, the amount of capital gains on which tax was not charged earlier, will

be deemed to be income chargeable under the head “Capital Gains” of the year in which the

residential house is transferred.

7. As per Section 74 Short-term capital loss suffered during the year is allowed to be set-off against

short-term as well as long-term capital gains of the said year. Balance loss, if any, could be

carried forward for eight years for claiming set-off against subsequent years' short term as well as

long-term capital gains. Long-term capital loss suffered during the year is allowed to be set-off

against long-term capital gains. Balance loss, if any, could be carried forward for eight years for

claiming set-off against subsequent years' long-term capital gains.

8. As per Section 111A of the IT A, short term capital gains arising from the sale of Equity Shares

transacted through a recognised stock exchange in India, where such transaction is chargeable to

securities transaction tax, will be taxable at the rate of 15% (plus applicable surcharge and

education cess).

9. As per Section 112 of the IT A, taxable long-term capital gains, if any, on sale of listed securities

will be charged to tax at the rate of 20% (plus applicable surcharge and education cess) after

considering indexation benefits or at 10% (plus applicable surcharge and education cess) without

indexation benefits, whichever is less. Under Section 48 of the IT A, the long term capital gains

arising out of sale of capital assets excluding bonds and debentures (except Capital Indexed

Bonds issued by the Government) will be computed after indexing the cost of acquisition/

improvement.

B.1 Non-Resident Shareholders - Other Than Foreign Institutional Investors

1. Under Section 10(32) of the IT Act, any income of minor children clubbed with the total income

of the parent under Section 64(1A) of the IT Act, will be exempt from tax to the extent of Rs.

1,500 per minor child whose income is so included.

2. As per Section 10(34) read with Section 115-O(6) of the ITA, any income by way of dividends

referred to in Section 115-O (i.e. dividends declared, distributed or paid on or after 1 April 2003

by the domestic companies) received on the Equity Shares is exempt from tax.


32

3. As per Section 2(29A) read with Section 2(42A), Equity Shares held in a company are treated

as long term capital asset if the same are held by the assessee for more than twelve months

period immediately preceding the date of its transfer. Accordingly, the benefits enumerated

below in respect of long term capital assets would be available if the Equity Shares are held

for more than twelve months.

4. As per Section 10(38) of the ITA, long term capital gains arising from the transfer of long term

capital asset being an Equity Share, where such transaction is chargeable to securities

transaction tax, will be exempt in the hands of the shareholder.

5. As per first proviso to Section 48 of the ITA, in case of a non-resident shareholder, the capital

gain/loss arising from transfer of Equity Share, acquired in convertible foreign exchange, is to

be computed by converting the cost of acquisition, sales consideration and expenditure

incurred wholly and exclusively incurred in connection with such transfer, into the same foreign

currency which was initially utilized in the purchase of Equity Shares. Cost Indexation benefit

will not be available in such a case. As per Section 112 of the ITA, taxable long-term capital

gains, if any, on sale of Equity Shares is chargeable to tax at the rate of 20% (plus applicable

surcharge and education cess).

6. As per Section 54EC of the ITA and subject to the conditions and to the extent specified

therein, long-term capital gains (in cases not covered under Section 10(38) of the ITA) arising

on the transfer of a long-term capital asset will be exempt from capital gains tax to the extent

such capital gains are invested in a “long term specified asset” within a period of 6 months

after the date of such transfer. It may be noted that investment made on or after April 1, 2007

in the long term specified asset by an assessee during any financial year cannot exceed Rs.

50 Lacs.





A “long term specified asset” for making investment under this Section on or after 1st April 2007

means any bond, redeemable after three years and issued on or after the 1st April 2007 by:


Highways Authority of India Act, 1988; or


Companies Act.

7. As per Section 54F of the IT A, long term capital gains (in cases not covered under Section

10(38)) arising on the transfer of the Equity Shares held by an individual or Hindu Undivided

Family (HUF) will be exempt from capital gains tax if the net consideration is utilised, within a

period of one year before, or two years after the date of transfer, in the purchase of a residential

house, or for construction of a residential house within three years. Such benefit will not be

available:

if the individual or Hindu Undivided Family -


33

• owns more than one residential house, other than the new residential house, on the date

of transfer of the Equity Shares; or

• purchases another residential house within a period of one year after the date of

transfer of the Equity Shares; or

• constructs another residential house within a period of three years after the date of

transfer of the Equity Shares; and

the income from such residential house, other than the one residential house owned on the date

of transfer of the original asset, is chargeable under the head “Income from house property”.

If only a part of the net consideration is so invested, so much of the capital gain as bears to the

whole of the capital gain, the same proportion as the cost of the new residential house bears to the

net consideration, will be exempt.

If the new residential house is transferred within a period of three years from the date of

purchase or construction, the amount of capital gains on which tax was not charged earlier, will

be deemed to be income chargeable under the head “Capital Gains” of the year in which the

residential house is transferred.




long-term capital gains. Long- term capital loss suffered during the year is allowed to be set-off



9. As per Section 111A of the IT A, short term capital gains arising from the sale of Equity Shares



education cess).

10. As per Section 115E of the IT A, in the case of a shareholder being a Non-Resident Indian, and

subscribing to the Equity Shares in convertible foreign exchange, in accordance with and subject

to the prescribed conditions, long term capital gains arising on transfer of the Equity Shares (in

cases not covered under Section 10(38) of the ITA) will be subject to tax at the rate of 10% (plus

applicable surcharge and education cess), without any indexation benefit.

11. As per Section 115F of the ITA and subject to the conditions specified therein, in the case of a

shareholder being a Non-Resident Indian, gains arising on transfer of a long term capital asset

being Equity Shares will not be chargeable to tax if the entire net consideration received on such

transfer is invested within the prescribed period of six months in any specified asset or savings

certificates referred to in Section 10(4B) of the ITA. If part of such net consideration is invested

within the prescribed period of six months in any specified asset or savings certificates referred to

in Section 10(4B) of the ITA then such gains would not be chargeable to tax on a proportionate

basis. Further, if the specified asset or savings certificate in which the investment has been made

is transferred within a period of three years from the date of investment, the amount of capital

gains tax exempted earlier would become chargeable to tax as long term capital gains in the year

in which such specified asset or savings certificates are transferred.


34

12. As per Section 115G of the ITA, Non-Resident Indians are not obliged to file a return of income

under Section 139(1) of the ITA, if their only source of income is income from specified

investments or long term capital gains earned on transfer of such investments or both, provided

tax has been deducted at source from such income as per the provisions of Chapter XVII-B of the

ITA.

13. As per Section 115H of the ITA, where Non-Resident Indian becomes assessable as a resident in

India, he may furnish a declaration in writing to the Assessing Officer, along with his return of

income for that year under Section 139 of the ITA to the effect that the provisions of Chapter XII-A

shall continue to apply to him in relation to such investment income derived from the specified

assets for that year and subsequent assessment years until such assets are converted into

money.

14. As per Section 115I of the ITA, a Non-Resident Indian may elect not to be governed by the

provisions of Chapter XII-A for any assessment year by furnishing a declaration along with his

return of income for that assessment year under Section 139 of the ITA, that the provisions of

Chapter XII-A shall not apply to him for that assessment year and accordingly his total income for

that assessment year will be computed in accordance with the other provisions of the ITA.

For the purpose of aforesaid clauses “Non-Resident Indian” means an Individual, being a citizen

of India or a person of Indian origin who is not a “resident”. A person shall be deemed to be of

Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India.

Provisions of the ITA vis-à-vis provisions of the Tax Treaty

15. In respect of non-residents, the tax rates and consequent taxation mentioned above will be further

subject to any benefits available under the Tax Treaty, if any, between India and the country

in which the non resident is resident. As per the provisions of Section 90(2) of the ITA, the

provisions of the ITA would prevail over the provisions of the Tax Treaty to the extent they are

more beneficial to the non-resident.

B.2 Non-Resident Shareholders - Foreign Institutional Investors

1. We are required to pay a “dividend distribution tax” currently at the rate of 16.995% (including

applicable surcharge and education cess) on the total amount distributed or declared or paid

as dividend. Under Section 10(34) of the IT Act, income by way of dividend referred to in

Section 115-O received on our Equity Shares is exempt from income tax in the hands of

shareholders. However it is pertinent to note that Section 14A of the IT Act restricts claim for

deduction of expenses incurred in relation to exempt income.

2. As per Section 10(34) read with Section 115-O(6) of the ITA, any income by way of dividends

referred to in Section 115-O (i.e. dividends declared, distributed or paid on or after 1 April 2003 by

the domestic companies) received on the Equity Shares is exempt from tax.

3. As per Section 2(29A) read with Section 2(42A), Equity Shares held in a company are treated as

long term capital asset if the same are held by the assessee for more than twelve months period

immediately preceding the date of its transfer. Accordingly, the benefits enumerated below in

respect of long term capital assets would be available if the Equity Shares are held for more than

twelve months.


35

4. As per Section 10(38) of the IT A, long term capital gains arising from the transfer of long term

capital asset being Equity Shares, where such transaction is chargeable to securities transaction

tax, will be exempt to tax in the hands of the FIIs.

5. As per Section 54EC of the ITA and subject to the conditions and to the extent specified therein,

long-term capital gains (in cases not covered under Section 10(38) of the ITA) arising on the

transfer of a long-term capital asset will be exempt from capital gains tax to the extent such

capital gains are invested in a “long term specified asset” within a period of 6 months after the

date of such transfer. It may be noted that investment made on or after April 1, 2007 in the long

term specified asset by an assessee during any financial year cannot exceed Rs. 50 Lacs.





A “long term specified asset” for making investment under this Section on or after 1st April 2007

means any bond, redeemable after three years and issued on or after the 1st April 2007 by:


Highways Authority of India Act, 1988; or


Companies Act, 1956.




long-term capital gains. Long-term capital loss suffered during the year is allowed to be set-off



7. As per Section 111A of the ITA, short term capital gains arising from the sale of Equity Shares



education cess).

8. As per Section 115AD of the ITA, FIIs will be taxed on the capital gains that are not exempt under

the provision of Section 10(38) of the ITA, at the following rates:

Nature of income Tax Rate (%)

Long term capital gains 10

Short term capital gains (other than referred to in Section 111A) 30

The above tax rates have to be increased by the applicable surcharge and education cess.

In case of long term capital gains, (in cases not covered under Section 10(38) of the ITA), the tax

is levied on the capital gains computed without considering the cost indexation and without

considering foreign exchange fluctuation.


36

9. As per Section 196D, no tax is to be deducted from any income, by way of capital gains arising

from the transfer of Equity Shares payable to Foreign Institutional Investor.

Provisions of the ITA vis-à-vis provisions of the Tax Treaty

10. The tax rates and consequent taxation mentioned above will be further subject to any benefits

available under the Tax Treaty, if any, between India and the country in which the FII is resident.

As per the provisions of Section 90(2) of the IT A, the provisions of the ITA would prevail over the

provisions of the Tax Treaty to the extent they are more beneficial to the FII.

II. Benefits Available Under the Wealth-Tax Act, 1957

Asset as defined under Section 2(ea) of the Wealth tax Act, 1957 does not include shares in

companies and hence, Equity Shares are not liable to wealth tax in the hands of shareholders.

III. Benefits under the Gift Tax Act, 1958

Gift tax is not leviable in respect of any gifts made on or after October 1, 1998. Therefore, any gift of

Equity Shares will not attract gift tax.

IV. Benefits available to Mutual Funds

As per Section 10(23D) of the ITA, any income of Mutual Funds registered under the Securities and

Exchange Board of India Act, 1992 or Regulations made there under, Mutual Funds set up by public

sector banks or public financial institutions and Mutual Funds authorized by the Reserve Bank of India

will be exempt from income tax, subject to such conditions as the Central Government may, by

notification in the Official Gazette, specify in this behalf.

V. Tax Deduction at Source

No income-tax is deductible at source from income by way of capital gains under the present

provisions of the IT Act, in case of residents. However, as per the provisions of section 195 of the IT

Act, any income by way of capital gains, payable to non residents (except long-term capital gains

exempt under section 10(38) of the IT Act), may fall within the ambit of with-holding tax provisions,

subject to the provisions of the relevant tax treaty. Accordingly income tax may have to be deducted

at source in the case of a non- resident at the rate under the domestic tax laws or under the tax treaty,

whichever is beneficial to the assessee unless a lower withholding tax certificate is obtained from the

tax authorities.


37

VIII. BUSINESS

INDUSTRY OVERVIEW

INDIAN ITES AND BPO INDUSTRY

The Indian ITeS-BPO industry has been consistently growing over the past few years, in spite of rising

competition from countries such as Philippines, China, Brazil, Mexico and Ireland. Its contribution to

the service sector and to the country’s GDP has also been increasing over these years. The industry

has come a long way from just offering traditional outsourced data entry work to providing high-end

knowledge services to global clients. Yet there is a vast untapped universe in the Indian ITeS-BPO

industry, which represents tremendous growth opportunities for the industry players.

The impressive growth of the Indian IT and BPO industry has contributed significantly towards the

socioeconomic development by generating employment opportunities, foreign exchange reserves et

al. Besides, the sector has facilitated other industries such as real estate, transportation, catering

services, and has thus generated many employment opportunities in the country. The revenue of the

sector (IT-BPO) has manifolded during the last decade from merely US$8.3 bn in 2000 to around

US$71 bn in 2009 at a CAGR growth of 27%1.

The ITeS/BPO notably is the fastest-growing segment within the IT-BPO sector, and during the last

decade it grew at a CAGR of 42.8%; the IT services and software revenue grew at a CAGR of 26.8%.

The small and medium-sized enterprises have recently had ample avenues to explore in terms of IT

services and business process solutions. Due to the boom in the banking, telecom, retail, logistics

sector and several initiatives taken by the Central government and other state governments, the IT

spending in the domestic market has increased impressively. In the last 10 years, the domestic IT

services and software products and engineering services market grew by 21% annually and reached

US$10.5 bn in 2009.

Nonetheless, the global economic slowdown has put a brake on the growth run of the sector’s

performance during 2009 as the clients in the western countries are either delaying or cutting their IT

spending, or re-negotiating the prices.

Going ahead, the challenge for the industry players lies in maintaining the level of competency and

offering high level customer satisfaction at an affordable price. The current economic slowdown has

changed the business scenario across the globe. The changes in macroeconomic fundamentals,

protectionism measures are also few important risks looming large on the sector. Players need to

adopt an innovative approach to tackle the situation by finding out alternative markets, adopting

different business models, improving the quality of services, diversi20ing service line, and most

importantly, focusing on other emerging verticals.

INDIAN ITES-BPO INDUSTRY AND ECONOMIC GROWTH


sunrise sectors for the country. The success of the outsourcing of IT services was followed by global

sourcing of business processes which in turn has increasingly become an absolute value addition for

the global companies, and India with its large skilled manpower and favourable government policy

initiatives has grabbed the opportunities by both hands.


38

Apart from aiding the socioeconomic development of the country, the ITeS-BPO sector has also

driven the rapid growth of other sectors such as organized retail, automobile, aviation, real estate,

banking and financial sector. The Indian ITeS-BPO sector revenue notably recorded a CAGR growth

of 42.8% during 2000-2009 and outpaced the growth of the IT services sector during this period,

which grew by an average of 25.4%. In 2009, the ITeS-BPO export is estimated to have contributed

over 86.8% to the total IT-BPO revenue, though this contribution was lower than that made in 2002 at

93.8%. The decrease in exports could be attributed to the growth of the domestic BPO over the last

couple of years; during 2005-2009, the domestic BPO grew at a CAGR of 34.1%, ably supported by

the BFSI and telecom vertical.

Highlights of ITeS-BPO performance in 2009

The Indian ITeS-BPO market grew by over 18% and its revenues totaled US$ 14.8 bn. The

growth of the sector was largely affected by the global economic slowdown.

The BPO exports market was around US$ 12.8 bn, having recorded a growth rate of 17.5%

much lower than 30% growth in the previous year.

The domestic ITeS-BPO market grew by over 23.0% to US$ 1.94 bn as compared with the

previous year’s growth of 43.7%.

The ITeS-BPO export segment added 90,000 employees during the year, which took the total

head count to 790,000

Customer Interaction Services (CIS) continues to be mainstay of the BPO services offered by

India as it contributed over 44% to the total revenues generated by exports.

ITeS-BPO revenues contributed 1% to India’s GDP and 4% of exports

Tech & BPO generated 45% of the total urban employment in India, BPO has created over a

third of those jobs.

INDIA CONTINUES TO DOMINATE GLOBAL OFFSHORE BPO MARKET

The global outsourcing market has been expanding at a rapid pace in the past few years as

outsourcing has become an integral function of every organization in the past 10 years or so.

Companies have been benefiting through global sourcing partnerships in terms of cost savings,

enhanced business efficiency, ability to explore new markets, reduction in time-to-market and


39

products and services among others. Leading global organisations have realized the importance of

outsourcing and offshoring and are increasingly outsourcing their non-core activities to low-cost

countries such as India, China, Ireland, and Philippines among others. India has taken centre stage in

the global outsourcing arena and Indian vendors are progressively adopting more new business

models with a blend of onshore, offshore and near-shore operations that gratify their clients and help

them to increase their top line and bottom line;

Share Of Market For Business Process Offshoring 2004-2008

India continues to dominate the global business process offshoring market by offering value added

services to its global clients. Global organisations are increasingly outsourcing their business needs

owing to rapidly changing business scenario, intense competition from peers, and rising globalisation,

to improve their performance. Offshoring of business services are done in different ways, such as

moving the production from parent company by establishing a foreign captive affiliate, which is also

known as captive offshoring. Besides, it also involves outsourcing of business activities to a third party

service provider – either domestic or foreign owned. As mentioned earlier, India’s comparative

advantage are its huge talent pool, higher working population, improved infrastructure facilities, and

innovative business processes, which offer significant cost benefits to international clients. India’s

share in global business process offshoring increased steadily from 32% in 2004 to 35% in 2008. In

recent times, however, the Philippines has been emerging as a business process offshore destination;

in 2008, it had a 15% share in the global business offshoring up from 9% in 2004. In India, several

cities are emerging as favourable destinations for US-based and Europe-based companies to

establish their delivery centres in cities such as Bengaluru, Gurgaon, Hyderabad, Pune, Mumbai and

Chennai.

ROAD AHEAD

The Indian ITeS-BPO industry is expected to continue its growth march in future as well in spite of the

expected rise in challenges. The industry is likely to gain further specialization in the KPO, EPO and

LPO arena. The BPO sector was the driving force behind the Indian ITeS-BPO industry during its

advent days like presently the KPO sector is the driving force for the industry because of the high

analytical services it offers global clients. The EPO and LPO segments are touted as the growth

drivers of the next wave of outsourcing.


40

However, given the current global recession, the ITeS-BPO industry is registering lower growth rate

as compared with the previous years. The financial crisis in the US and the Europe has affected the

overall IT spending of majority companies. It is important to highlight that exports constitute over 86%

of overall industry revenue and therefore, any crisis in the international market in general, and the US

in particular, will have a large impact on the sector. The slowdown has dried up volumes of the BPO

companies, which in turn has affected the profitability; therefore, the companies are taking innovative

initiatives to improve their bottom-line and also to open up delivery centres in non-metros, that is, tier

II, III and even smaller cities/towns, which help them to survive at the current juncture. These cities

are offering good infrastructure facilities and skilled manpower at a much lower price. However, the

governments should also step into the system by creating robust eco-system through public-private

partnership by investing in developing employable human resource, and adequate infrastructure

facilities to cater to the domestic market as well as the international market. In addition, companies

are also looking for mergers and acquisitions in high-end analytical space to offer superior knowledge-

based solutions to their global clients.

The current contraction in overall growth is the one of the most severe crises ever since the one

witnessed during World War II. The subprime-triggered crisis in the US during end of 2007 gradually

spread across other parts of the world; as fallout of this crisis, credit availability dropped sharply in

advanced economies and their GDP growth contracted incessantly during the last quarter of 2008. It

is clearly evident that recession has taken a toll on overall growth of the sector. For instance, during

2004 to 2008, the sector registered an average growth of around 39%, while in 2009, the growth

declined sharply to 18.2%. Consequently, the BPO export revenue also recorded a much lower

growth of 17.5% during 2009 as compared with an average annual growth rate of 37% between 2004

to 2008.


sunrise sectors for the country. The success of the IT services outsourcing was followed by global

sourcing of business processes, which has become an absolute value addition for the global

companies. India with its large skilled manpower and favorable government policy initiatives has

grabbed these opportunities with both hands. It is important to mention that the sector’s share in

overall services exports has gone up remarkably over the past few years from 5.5% in 2001 to 12.8%

in 2009. The Indian ITeS-BPO exports alone provided direct employment to around 0.8 mn people,

not including the indirect employment. The sector has massively developed the overall economic and

social landscape of the country.

However, the economic slowdown has opened up opportunities for the Indian ITeS-BPO companies,

as it is expected that the global companies would adopt outsourcing as an initiative to reduce cost.

The Indian companies have to be proactive to grab the opportunities and should venture into newer

markets, verticals and service line. Besides, the Indian ITeS-BPO companies should further explore

domestic market, which offers immense opportunities.


41

BUSINESS OVERVIEW



March 2008. The main business is of IT/BPO services related to the preparation and maintenance of

accounting information and reports.

We seek to elevate our clients’ finance and accounting functions from transactional requirements into

tools that can be used to effectively manage the business. Our unique business process outsourcing

methodology and approach work to optimize operations across the full range of finance and

accounting functions. We serve as a single window outsourcing solution for all Finance, Accounting

and Tax Related services.

We have a unique combination of a highly qualified and enthusiastic team in India with a complete

understanding of all aspects of the Internal Revenue Code, Taxation Laws and rules and regulations.

Our unique approach ensures a highly professional, friendly, value for money service. We present our

services as an invaluable and highly cost effective alternative to staffing and funding in-house

equivalents. We offer our client-partners valuable benefits from improved financial operations

including increased efficiency, flexibility, and transparency, while minimizing risks and costs.

From individual tax planning services to complex corporate consulting engagements, we act as a full

service accounting firm. Our skilled professionals offer both knowledge of technical financial topics

and experience in process operations. This elevates our capabilities above typical business process

outsourcing, and allows for the outsourcing of complex, high-end financial and accounting processes.

Our services and concern for client satisfaction are competitively priced, helping clients manage costs

while obtaining the services they need.

We provide references on request, from existing clients to determine our quality, competence and

promptness in providing services. We guarantee complete confidentiality and privacy of information

and we sign a service level agreement with clients.

VISION

“To be a leading provider of financial services and knowledge based services to a global clientele by

offering value through innovative use of technology and harnessing the highest potential of its

people”.

MISSION

We will ensure the highest standards of social responsibility in everything we do.

We will provide solutions that meet and exceed our customer's business challenges and deliver

only the highest quality of service.

We will marshal talented, committed people and create an environment in which they can

achieve and grow.

We will generate dependable and growing revenues, earnings, and returns to our shareholders.


42

QUALITY POLICY

QSIL is committed to provide quality and specialised solutions consistently, using state of the art

technology, at affordable cost, in a secure environment, assuring value to our customers through a

competent, well trained and motivated team pursuing the finest industry practices.

CORE VALUES

Humility, Humanity and Integrity are the values that drive QSIL. All our staff is committed to live these

values. Our services and solutions, apart from adding value to the customer, will complement these

values that the organization stands for.

CAPABILITIES

Multi Medium – Phone, Web, E-Mail, Print, Fax and Face-to-Face

Multi Process – Data Collection, Processing, Analytics, Presentation

Multi Industry – IT & Telecom, Healthcare & Pharma, FMCG/Consumer Goods, BFSI, Retail &

Manufacturing, Media, Others.

SERVICES

Accounting and Financial Services

Our Professionals handle Bookkeeping Services, Write-Up Services, Accounts Payable

Services, Financial Reporting Services and Account Reconciliation Services. Our Accounting

personnel can act as back-office operation staff on behalf of clients however situated in our

office. We have an experienced team of CA's and Accounting personnel to efficiently manage

the Accounting processes.

General Accounting and bookkeeping processes

o Updating Chart of Accounts

o Maintaining ledger accounts

o Generating Trial Balance and closing accounts

o Bank and Account reconciliation

o Preparation of Financial Statements- Income & Expenditure statement, Balance Sheet

and Cash-Flows statement.

Fixed Asset and capital accounting processes

o Compute depreciation tables and schedules and record depreciation

o Account for write-offs and valuation adjustments

o Maintain work in progress accounts

o Reconcile fixed asset accounts and ledger entries

Cost and Inventory Accounting processes

o Maintain inventory records

o Develop and update costs

o Perform variance analysis


43

Our Write-up services are an important factor for good financial reporting as it is the base for all

analyses and financial reporting in an organization. Based on data inputs like sales and

purchase invoices, checks and receipts and payroll details, our skilled team prepares the ledger

accounts and financial statements with total compliance to statutory regulations applicable..

Our Accounts Payable Service provide the advantages of cutting edge technology and skilled

staff without having to invest in these or buying and maintaining expensive software. Our

Services include utility bill management, travel and expenses processing, tax reporting, supplier

management, special project reports, and customer service.

Our Financial Reporting Services can help you gain a perspective of where does organization

stands. We provide Income Statement, Income statement by month, Balance Sheet, Statement

of Cash Flow, Bank Reconciliation Report, Payroll Register, Journal Entry and Check Register,

Detail General Ledger Report, Business Analysis Report, Financial Analysis Report and

Operations Analysis Report.

Account Reconciliation Services entails a detailed check of an organization's financial records,

bank statements, client and vendor bills and all supporting documents to detect discrepancies,

address them and reconcile the final balance. It accounts for checks outstanding, deposits in

transit and reveals errors in the records.

Tax Preparation Services

We provide all kinds of taxation related services including tax preparation and tax consulting.

Our Professional tax preparation provides CAs and Tax service providers of almost any size

with a great new way of handling their tax compliance workload and meeting filing timing

deadlines.

We examine client's data and balance sheets and classify each item in appropriate place or

form. We also classify analyses and interpret profit and loss items, and interpret the taxability

and treatment to various accounts during tax return processing and preparation services. We

are updated with the latest technology, software and workflow processes to enhance on-the-job

efficiency for tax processing.

Financial Analysis Services

Our Financial Analysis services can be utilized to create a complete picture of the financial

performance and streamlining operations. We will provide financial recommendations on the

basis of in depth analysis of business trends. This will help in formulating strategic decisions

regarding the business organization's financial matters.

We possess state of the art infrastructure, technological capability, and a competent group of

professionals to meet its esteemed your Financial requirements efficiently, timely, and cost

effectively. Our services are affordable when compared to most of the similar service providers

in the industry. This is made possible by leveraging infrastructural and professional self-

sufficiency.


44

Financial Budgeting and Analytics Services

Budgeting is the most effective way to keep the business - and its finances - on track. Budget

planning is an important aspect of business. Improper budgeting can put a company into

financial crises. Our expertise in budgeting can protect from possible financial crises and help to

run the business smoothly. By utilizing a unique methodology, we assess the business risks

associated with the budget and forecast processes. We then analyze key performance

indicators through the data collection process and management review.

Benefits of our Budgeting services:

o Helps to focus on business priorities

o Helps to prepare for contingencies or unforeseen expenses

o Helps in taking secure financial strategies and decisions

o Creates additional resources to invest in core business activities

o Develop better financial planning

o Gives a clear focus on decision-making

THE OUTSOURCING ADVANTAGE

Cost savings upto 50%;

Cost structure becomes variable;

Investment in assets is lowered;

Accurate, fast, efficient and timely results;

Benefits of outsourcer's standardized processes and advanced technology;

Helps companies streamline and improve business processes;

Inside resources are freed for other purposes;

Increases management's valuable time and thus an improvement in productivity;

Helps companies focus on their core capabilities & businesses;

Off-site backup of data;

Get organized globally along business lines.


45

IX. HISTORY OF THE COMPANY

Brief History and changes in Memorandum of Association

The Company was incorporated as Quest Softech (India) Private Limited on 27th March 2000 under

the Companies Act, 1956 with an authorized share capital of Rs. 25,00,000 divided into 2,50,000

Equity Shares of Rs. 10/- each and an issued, subscribed and paid up capital of Rs. 2,000 divided into

200 Equity shares of Rs. 10/- each. The Registered Office of the Company has been situated in the

state of Maharashtra. At the time of incorporation, the main objects of the Company were to carry out

activities relating to software & hardware consultancy & consulting services business.

The issued, subscribed and paid up share capital of the Company was increased from Rs. 2,000

divided into 200 Equity Shares of Rs. 10/- each to Rs. 75,000 divided into 7,500 Equity Shares of Rs.

10/- each on 30th September 2000.Further on 3rd December 2002, the issued, subscribed and paid

up share capital of the Company was increased from Rs. 75,000 divided into 7,500 Equity Shares of

Rs. 10/- each to Rs. 1,00,000 divided into 10,000 Equity Shares of Rs. 10/- each.

Further on 2nd January 2008, the issued, subscribed and paid up share capital of the Company was

increased from Rs. 1, 00,000 divided into 10,000 Equity Shares of Rs. 10/- each to Rs. 5,00,000

divided into 50,000 Equity Shares of Rs. 10/- each.

The authorised share capital of the Company was increased from Rs. 25,00,000 to Rs. 6,00,00,000,

divided into 60,00,000 Equity Shares of Rs. 10/- each, by resolution passed by the members on 1st

March 2008. The Company was converted into a public company on 18th March 2008 vide

Certificates of Incorporation issued by the Registrar of Companies, Maharashtra, Mumbai. The

issued, subscribed and paid up share capital of the Company was increased from Rs. 5,00,000

divided into 50,000 Equity Shares of Rs. 10/- each to Rs. 5,57,87,440 divided into 55,78,744 Equity

Shares of Rs. 10/- each on 29th March 2008.

The Hon’ble High Court of Judicature at Bombay vide Order dated 5th September 2008 approved the

Scheme of Arrangement for Demerger of the Software Services Division Undertaking of Continental

Controls Limited into the Company. Pursuant to the Scheme becoming effective on 26th September

2008 (the Appointed Date of the Scheme being 1st April 2008), the business of Continental Controls

Limited stands transferred to, and is being carried out by the Company. As per the requirements

under the Scheme, the authorised share capital of the Company was increased from Rs. 6,00,00,000

to Rs. 10,00,00,000, divided into 1,00,00,000 Equity Shares of Rs. 10/- each, by a resolution passed

by the members on 6th July 2009. On 6th July 2009, the Board of Directors of the Company issued

and allotted 44,21,256 Equity Shares of Rs. 10/- each to the shareholders of Demerged Company

whose names appeared in the Register of Members of the Demerged Company on the Record Date

viz.3rd July 2009 in the Demerger Share Entitlement Ratio of 1 Equity Share of Rs. 10/- each credited

as fully paid up of the Company for every 2 equity shares of Rs.10/- each held by such member in the

Demerged Company.

After allotment of 44,21,256 equity shares by the Company, the issued, subscribed and paid up share

capital of the Company was increased to Rs. 10,00,00,000 divided into 1,00,00,000 Equity Shares of

Rs. 10/- each fully paid-up.


46

Main Objects of the Company

To carry on the activities in India or abroad, either on own or in collaboration with or technical know-

how from any organisation or person in India or abroad of providing software and hardware

consultancy and consulting services related to the preparation and maintenance of accounting,

statistical, scientific or mathematical information and reports, data processing, programming,

collecting, storing, processing and transmitting information and data of every kind and description,

systems analysis, and machine services for solving or aiding commercial, industrial scientific and

research problems and for all other related business., to develope, manage, run, establish, execute or

undertake to do all and anything required in connection with manufacture, sell, assembly, integration

and operating by computers, software and hardware programming, data processing, computer

hardware and software projects, systems integration services, project management, development and

execution, provide manpower in information technology and applications, develope software computer

programmes and applications, data base management, to develop, design, manufacture, process,

fabricate, assemble, install, alter, modify, repair, buy, sell, re-sale, import, export or otherwise deal in

any other manner computer software and hardware operating system and products which posses an

internal intelligence for recognition and correlating and type of data or information to be processed

recognition and memory systems, systems, transmission equipment processing equipments

networking internet system, display devices, word processing devices printing devices, software and'

hardware integrated circuits, micro circuits, peripherals, floppy, discs and other devices and

accessories.

Subsidiaries of the Company and their businesses

The Company does not have any Subsidiary Company.

Shareholders’ Agreement

There is no separate Shareholders’ Agreement executed between any shareholder and the Company.

Strategic / Financial Partners and Other Material Contracts

Other than the contracts mentioned in the section “Documents for Inspection”, the Company does not

have any material contracts other than in the ordinary course of business, nor does it have any

strategic / financial partners.


47

X. PROMOTERS

Mr. Dhiren B. Kothary

The Company is Promoted by Mr. Dhiren B. Kothary. He is a Chartered

Accountant by profession and has more than 20 years of experience in

financial and corporate advisory services. He has experience in executing

Investment Banking transactions ranging from Project Finance to Initial

Public Offering. He is on the Board of Glodyne Technoserve Limited.

PAN No: AAHPK0621J

Driving License No: MH03 / 95 / 57783

Passport No: H5625968


48

XI. MANAGEMENT

The overall management of the Company is vested in the Board of Directors, comprised of qualified

and experienced persons.

Board of Directors as on the date of the Information Memorandum is as follows:

Sr. No. Name, Age, Designation, Father’s Name, Address,

Occupation, Shareholding in the Company

Other Directorships in

public companies in India

1 Mr. Dhiren B. Kothary

Age : 47 years

Designation: Director

Father’s Name: Mr. Bhogilal V. Kothary

Address: 62-A, Harmony, Ram Nagar, off Sai Baba

Nagar, Borivali (West), Mumbai – 400 092

Occupation: Business

Shareholding in the Company: 24.50%

1. Quest Fincap Ltd

2. Glodyne Technoserve

Ltd

2 Mr. Suresh S. Vishwasrao

Age: 64 years

Designation: Non-Executive Director

Father’s Name: Mr. Shankar B. Vishwasrao

Address: B/9, “Dream” SBI Staff Housing Ltd., Babhai,

Borivali (West), Mumbai – 400 092


Shareholding in the Company: 0.001%

1. Bombay Rayon Fashions

Ltd.

3 Mr. Paresh Zaveri

Age: 42 years

Designation: Independent Director

Father’s Name: Mr. Chandulal Zaveri

Address: 3, Siglap Road, #06-23, Mandarin Gardens,

Singapore – 448907. Singapore.


Shareholding in the Company: NIL

1. Aurionpro Solutions Ltd.

Brief Biographies of the Directors

1. Mr. Dhiren Kothary

A Chartered Accountant by profession, he has more than 20 years of experience in financial

and corporate advisory services. He is on the Board of Glodyne Technoserve Limited.

2. Mr. Suresh S. Vishwasrao

He is an ex-banker having more than 35 years of experience in banking and finance with a long

stint with State Bank of India. He is well networked with various Government agencies and

financial institutions. During his tenure in the Bank, Mr. Vishwasrao had held various positions

both at the operational areas as well as at the corporate centre. He was on deputation for over


49

5 years at the Bank’s New York office. He heads the corporate finance department at Quest

and facilitates debt syndication for our clients.

3. Mr. Paresh Zaveri

Mr. Paresh Zaveri is an Engineer and Management Graduate, with over 15 years of experience

in the area of corporate finance, supply chain and general management.

Borrowing Powers

Subject to the provisions of the Act and the Articles, and without prejudice to the other powers

conferred by the Articles, the Directors shall have the power from time to time at their discretion to

borrow any sum or sums of money for the purpose of the Company, provided that the total amount

borrowed at any time together with the moneys already borrowed by the Company (apart from

temporary loans obtained from the Company’s Bankers in the ordinary course of business) shall not

without the consent of the Company in General Meeting exceed the aggregate of the paid-up capital

of the Company and its free reserves, that is to say, reserves not set apart for any specific purpose.

Subject to the provisions of the Act and the Articles, the Directors may raise and secure the payment

of such sum or sums in such manner and upon such terms and conditions, in all respects as they

think fit and particular by the issue of bonds, perpetual or redeemable, debentures or debenture-stock

or any mortgage or charge or other security on the undertaking of the whole or any part of the

property of the Company (both present and future) including its uncalled capital for the time being.

Compensation of Managing Director / Whole Time Directors

None of the directors of the Company received any compensation from the Company.

Corporate Governance (Clause 49 of the Listing Agreement)

Compliance Report on Corporate Governance as on_11th October, 2010

Particulars Clause of

Listing

Agreement

Compliance

Status

Yes/No

Remarks

I Board of Directors 49 I Yes

(A) Composition of Board 49(IA) Yes

(B) Non-executive Directors’

compensation & disclosures

49 (IB) Yes

(C) Other provisions as to Board and

Committees

49 (IC) Yes

D) Code of Conduct (49 (ID) Yes

II. Audit Committee 49 (II)

(A)Qualified & Independent Audit

Committee

49 (IIA) Yes

(B)Meeting of Audit Committee Yes

(C)Powers of Audit Committee 49

(IIC)

49 (IIB) Yes

(D)Role of Audit Committee 49 II(D) Yes


50

(E)Review of Information by Audit

Committee

49 (IIE) Yes

III. Subsidiary Companies 49 (III) No

V. Disclosures 49 (IV)

(A)Basis of related party transactions 49 (IV A) Yes

(B)Board Disclosures 49 (IV B) Yes

(C)Proceeds from public issues,

rights issues, preferential issues etc.

49 (IV C) Yes

(D)Remuneration of Directors 49 (IV D) Yes Will be Complied with in the

Annual Report 2010-11

(E)Management 49 (IV E) Yes Will be Complied with in the


(F)Shareholders 49 (IV F) Yes Will be Complied with in the


V.CEO/CFO Certification 49 (V) Yes Will be Complied with in the


VI. Report on Corporate Governance 49 (VI) Yes Will be Complied with in the


VII. Compliance 49 (VII) Yes Will be Complied with in the


Independent Directors

The Company has appointed Mr. Paresh Zaveri as Independent Director of the Company on 1st April

2009. He is also chairman of Audit Committee.

Audit Committee

The company has formed audit committee as per clause 49 of the listing Agreement and section 292A

of the companies Act 1956 with Chairman and members as follows:

1. Mr. Paresh Zaveri, Chairman 2. Mr. Dhiren B. Kothary 3. Mr. Suresh S. Vishwasrao

The Audit Committee shall comply with the following: 1. The Audit Committee shall have meetings periodically as it may deem fit with at least four

meetings in a year and not more than four months shall elapse between two meetings, viz., one meeting before finalization of annual accounts . `

2. The Quorum shall be either two members or one third of the members of the audit committee which is grater, but there should be a minimum of two independent members present.

3. The Audit Committee shall invite such of the executives (and particularly the head of the finance function), to be present at the meetings of the Committee whenever required by it.

4. The finance Director, head of internal audit and the auditors of the Company shall attend participates at the meeting without right to vote.

The Audit Committee has the following powers:

It shall act in accordance with terms of reference to be specified in writing by the board To investigate any activity within its terms of reference. To seek information from any employee. To obtain outside legal or other professional advice.


51

To secure attendance of outsiders with relevant expertise, if it considers necessary.”

The Role of the Audit Committee includes the following:

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

Recommending to the Board, the appointment, the re-appointment and if required, the

replacement or removal of the statutory auditor and the fixation of audit fee and also approval for payment for any other services.

Reviewing, with management the annual financial statements before submissions to the

Board, focusing primarily on :

- Matters required to be included in the Director’s Responsibility Statement to be included in the Board’s report in terms of clause (2AA) of Section 217 of the Companies Act,1956

- Change, if any, in accounting policies and practices and reasons for the same.

- Major accounting entries involving estimates based on exercise of judgment by

management.

- Significant adjustment made in the financial statement arising out of Audit finding

- Compliance with listing and other legal requirement relating to financial statements - Qualifications in draft audit report.

- Disclosure of any related party transaction.

Reviewing with the management, performance of statutory and internal auditors, and the

adequacy of internal control systems. It shall have authority to investigate in to any matter in relation to the items specified in this

section or referred to it by the board and for this purpose, shall have full access to information contained in the records of the company and external professional advice if necessary

Reviewing with the management, the quarterly financial statements before submission to the

board for approval.

Reviewing the adequacy of internal audit function, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit.

Discussions with internal auditors any significant findings and follow up thereon.

Reviewing the finding of any internal investigations by the internal auditors into matter where

there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.

Discussions with Statutory auditors before the audit commences, about the nature and scope

of audit as well as to have post-audit discussion to ascertain any area of concern.

To look into reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders, (in case of non-payment of declared dividends) and creditors.

To Review the functioning of the whistle Blower Mechanism, in case the same is existing


52

Approval of appointment of CFO ( the Whole Time Finance Director or any other person heading the fiancé function or discharging that function) after assessing the qualification, experience & background, etc of the candidate

Carrying out the function as is mentioned in the terms of reference of the audit Committee

It shall have discussion with the auditors periodically about internal control systems, the

scope of audit including the observations of the auditors and review the quarterly, half-yearly, and annual financial statements before submissions to the Board.

It shall ensure compliance of internal control systems.”

The audit Committee mandatorily reviews the following information:

Management Discussion and Analysis of financial conditions and results of operations; Statement of significant related party transactions (as defined by the audit Committee),

submitted by the management; Management letters / letters of internal control weaknesses issued by the statutory Auditors; Internal Audit Reports related to internal control weakness; and The appointment, removal and terms of remuneration of the Chief Internal auditor.”

Shareholders / Investors Grievance Committee

The company has formed Shareholders / Investors Grievance Committee as per clause 49 of the

listing Agreement and section of the companies Act 1956. With Chairmen and members us follows

1. Mr. Suresh Vishwasrao, Chairman 2. Mr. Dhiren B Kothary

It will look into matter of the redressing of shareholders and investors complaints like,

a. non receipt of shares, b. transfer/transmission/transposition of shares, c. non receipt of balance sheet, d. non receipt of declared dividends e. and other demat related queries

Change in the Board of Directors of the Company since Incorporation

Name of the Director Date of Appointment/

Resignation

Reason / Remarks

Mr. Navin S Jagesha 30.09.2010 Resigned

Mrs. Nita D. Kothary 02.01.2008 Resigned

Mr. Suresh S. Vishwasrao 02.01.2008 Appointment

Mr. Paresh Zhaveri 01.04.2010 Appointment

Mr. Sesha Srinivas Malladi 01.04.2010 Resigned

Interest of Directors

Other than their respective shareholdings in the Company and reimbursement of expenses incurred

as stated above, the directors of the Company have no other interest in the Company.


53

XII. MANAGEMENT DISCUSSION AND ANALYSIS

The management of Quest Softech (India) Limited presents the analysis of the performance of the

company for the year 2009-10 and its outlook for the future. This outlook is based on an assessment

of the current business environment. It may vary due to future economy and other developments both

in India and Abroad.

Industry Structure

The BPO Industry has and will be witnessing growth due to its intrinsic strength. In the Competitive

global environment, India continues to be one of the major players in the BPO industry and for skills

relating to software & its training.

Financial Performance

During the year under review, your Company recorded Income from Operations aggregating to Rs 141.87 Lac as against Rs.114.11 Lac in the previous year, registering a growth of 24.33%. The Loss before tax has been Rs. 121.26 Lac as against Rs. 169.35 Lac in previous year, thereby recording a decrease in loss by 28.40%.

Future Outlook

The Indian ITeS-BPO industry is expected to continue its growth in future as well in spite of the

expected rise in challenges. The economic slowdown has opened up opportunities for the Indian

ITeS-BPO industry, as it is expected that the global companies would adopt outsourcing as an

initiative to reduce cost. With the rise in the demand for the outsourcing, the growth rate for the BPO

Industry is expected to be on the upward trend.

Opportunities and Threats

Rising demand for the BPO development in the overseas market will provide more impetus and

opportunities for the growth of this industry.

Internal Control Systems and Adequacy

The Company has adequate internal control procedure commensurate with the size and nature of its

business. These business control procedures ensure efficient use and protection of resources and

compliance with policies, guidelines, authorizations and approval procedures. The Board has also

constituted an Audit Committee which meets periodically to review the financial performance and the

accuracy of the financial records.

Human Resources/ Industrial Relations

The Company believes that the successes of an organization largely depends on the quality of its

work force and hence have always recognized people and its key work force. Employee relations

have remained cordial and peaceful throughout the year.

Cautionary Statement

Statements in the Management Discussion and Analysis, describing the Company’s objectives,

projections and estimates are forward looking statements and progressive within the meaning of

applicable security laws and regulations. Actual results may vary from those expressed or implied,

depending upon the economic conditions, government policies and other incidental/ related factors.


54

XIII. FINANCIAL INFORMATION Financial Information presented in this Information Memorandum has been extracted from the Audited Annual Report of our Company for the Financial Years 2007-08, 2008-09 and 2009-10.

BALANCE SHEET

PARTICULARS Schedule

As at 31.03.2010 Rs. in Lacs



SOURCES OF FUNDS

Shareholders Funds:

Share Capital 1 1,000.00 1,000.00 557.87

Reserves & Surplus - - 0.29

Loan Funds 2 373.25 403.41 29.45

Deferred Tax Liability 3 2.61 8.11 1.56

TOTAL 1,375.86 1,411.52 588.88

APPLICATION OF FUNDS

Fixed Asset 4

Gross Block 280.02 280.02 10.18

Less: Depreciation 253.93 209.69 2.29

Net Block 26.08 70.33 7.89

Investments 5 57.77 537.77 530.00

Current Assets, Loans And Advances

Inventories 158.90 72.15 66.86

Sundry Debtors 6 30.27 150.79 36.28

Cash & Bank Balances 7 0.89 22.05 23.88 Loans & Advances 8 851.95 510.67 140.34 1042.02 755.66 267.36

LESS: Current Liabilities & Provisions 9 208.31 301.69 220.40

Net Current Assets 83.37 453.97 46.96

Miscellaneous Expenditure 10 - 6.91 4.32

Profit & Loss Account (Debit Balance) 458.30 342.54 -

TOTAL 1,375.86 1,411.52 588.88

Notes to Accounts 12


55

PROFIT & LOSS ACCOUNT

Sche

dule For the Year

ended 31.03.2010

For the Year ended

31.03.2009

For the Year ended

31.03.2008

Rs. in Lacs Rs. in Lacs Rs. in Lacs

I. INCOME Income from Operations 141.87 114.11 34.52 Other Income 0.80 0.01 4.28 Increase/Decrease in

Stock 86.76 5.29 66.86 TOTAL 229.42 105.66 105.66

II. EXPENDITURE Operating Expenses 11 297.03 119.32 99.43 Financial Charges 9.40 125.18 4.30 Depreciation &

Amortization 44.25 44.25 1.65 TOTAL 350.68 288.75 105.38

III Profit before Tax (121.26) (169.34) 0.28

IV. Less: Provision for Income Tax - - -

Deferred Tax (5.50) 6.55 0.70 Fringe Benefit - - -

V. Profit after Taxes (115.76) (175.89) (0.42)

VI. Add: Balance b/f from previous year (342.54) 0.29 0.71

Debit Balance b/f on Demerger of

Continental Controls Limited - Software Services Division - (166.93) -

VII. Balance c/f to Balance

Sheet (458.30) (342.54) 0.29


56

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS AS ON

31.03.2010 31.03.2009 31.03.2008


SCHEDULE "1"

SHARE CAPITAL:

AUTHORISED CAPITAL

Equity Shares of Rs. 10/- each 1,000.00 600.00 600.00

ISSUED, SUBSCRIBED & PAID UP CAPITAL

Equity Shares of Rs. 10/- each Fully Paid 1,000.00 557.87 557.87

Share capital pending allotment in terms of the scheme of Arrangement approved by Bombay High Court. - 442.13 -

1,000.00 1,000.00 557.87

SCHEDULE "2"

UNSECURED LOAN

Inter corporate Deposit 373.25 403.41 29.75

373.25 403.41 29.45

SCHEDULE "3"

DEFFERED TAX LIABILITY

Deferred tax 8.11 1.56 0.86

Add: During the year (5.49) 6.55 0.75

2.61 8.11 1.56

SCHEDULE "5"

INVESTMENTS

In Shares (Other than Listed Companies) 57.77 537.77 530.00

57.77 537.77 530.00

SCHEDULE "6"

SUNDRY DEBTORS

More than Six Months 11.76 26.64 -

Others 18.51 124.14 36.28

30.27 150.78 36.28


57

SCHEDULE ANNEXED TO AND FORMING PART OF THE ACCOUNTS AS ON 31ST MARCH, 2010 Schedule 4: Fixed Assets

(Rs. in Lacs)

GROSS BLOCK DEPRECIATION NET BLOCK

Particulars

As on 01st April 2009

Additions

during the year

As on 31st

March 2010


Additions during the year

Total As on 31st March 2010

As on 31st

March 2010

As on 1st

April 2009

Tangible Assets

Computers 268.91 268.91 203.04 43.59 246.63 22.27 65.86

Electrical Installation 1.10 1.10 0.74 0.05 0.80 0.30 0.36

Furniture & Fixture 8.60 8.60 5.31 0.54 5.86 2.74 3.28

Intercom Service 1.41 1.41 0.58 0.07 0.65 0.77 0.83

Total 280.02 280.02 209.69 44.25 253.93 26.08 7.89

Previous Year 10.18 280.02 2.30 44.25 209.68 70.34 7.89


(Rs. in Lacs)


Particulars


Additio

ns during

the year

As on 31st

March 2009

As on

01st April 2008



As on 31st

March 2009

As on 1st

April 2008

Tangible Assets

Computers 10.18 - 10.18 2.29 - 3.94 6.24 7.89

Computer System - 258.73 258.73 - 157.16 199.10 59.63 - Electrical Installation - 1.10 1.10 - 0.69 0.74 0.36 -

Furniture & Fixture - 8.60 8.60 - 4.77 5.31 3.28 -

Intercom Service - 1.41 1.41 - 0.51 0.58 0.83 -

Total 10.18 269.84 280.02 2.29 163.13 209.69 70.33 7.89

Previous Year 10.18 - 10.18 0.64 - 2.29 7.89 9.54


58


(Rs. in Lacs)


Particulars


Additio

ns during

the year

As on 31st

March 2008

As on

01st April 2007



As on 31st

March 2008

As on 1st

April 2007

Tangible Assets

Computers 10.18 - 10.18 0.64 1.65 2.29 7.89 9.54

Total 10.18 10.18 0.64 1.65 2.29 7.89 9.54

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS AS ON

31.03.2010 31.03.2009 31.03.2008


SCHEDULE "7"

CASH AND BANK BALANCES

Cash in Hand 0.04 0.03 0.15

Balance in Current Account 0.86 22.02 23.73

HDFC Bank Ltd 0.90 23.88 23.88

0.90 22.05 23.88

SCHEDULE "8"

LOANS AND ADVANCES:

Advance Received in Cash or Kind 843.73 506.31 136.68

Deposit 7.71 3.22 2.62 1.14 1.14 1.14

851.94 510.67 140.34

SCHEDULE "9"

CURRENT LIABILITIES & PROVISIONS:

Sundry Creditors 207.49 288.22 205.03

Provisions 0.83 0.83 0.83

Deposits - 12.65 14.55

301.70 301.69 220.41

SCHEDULE "10"

Miscellaneous Expenditure

Preliminary Expenses - 3.56 4.32


59

Amalgamation Expenses - 3.35 -

- 6.91 4.32

SCHEDULE "11"

Operating Expenses Loss on Sale of Shares 56.00 - -

Software Procured 223.64 112.23 97.07

Staff Cost 5.02 4.86 1.68

Administrative, Selling & Other Expenses 12.37 2.24 0.68

297.03 119.33 99.43


60

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

SCHEDULE 12

A. Significant Accounting Policies

1. Basis of Accounting

The financial statements have been prepared on accrual basis following the historical cost convention

in accordance with the Accounting Standards referred to in section 211 (3C) and other requirements of

the Companies Act, 1956

2. Use of Estimates

The preparation of financial statement requires estimates and assumptions to be made that affect the

reported amount of assets and liabilities on the date of the financial statements and the reported

amount of revenues and expenses during the reporting period. Difference between the results and

estimates are recognized in the period in which the results are known / materialized.

3. Revenue Recognition

(i) Revenue from sale of products is recognized when the risk and reward of ownership of the

product is passed on to the customers, which is generally on dispatch of goods. Sales are

stated inclusive of Sale/Trade tax

(ii) Revenue in respect of other income is recognized when no significant uncertainty as to its

determination or realization exists.

4. Fixed Assets

Fixed Assets are stated at cost, which comprises of purchase consideration and other directly attributable

cost of bringing the assets to its working condition for the intended use.

5. Depreciation

Depreciation on fixed assets is provided on straight-line method over useful life of assets at the rates and

in the manner as prescribed in Schedule XIV to the Companies Act, 1956. Subsequent upgrades of

hardware are entirely charged off to revenue in the year of purchase.


61

6. Inventories

Cost of inventories comprises all costs of purchase, conversion and other costs incurred in bringing the

inventories to their present location and condition. Inventories are valued at Cost or Net Realizable Value,

whichever is less.

7. Accounting for Taxes on Income and Deferred Tax

Deferred tax resulting from timing differences between accounting and tax profits is accounted for under

the liability method, at the current rate of tax, to the extent that the timing differences are expected to

crystallize. Deferred tax assets are recognized and carried forward only if there is a virtual/ reasonable

certainty that they will be realized and are reviewed for the appropriateness of their respective carrying

values at each balance sheet date. Where there is Unabsorbed Depreciation or carry forward loss under tax

laws, Deferred Tax Asset are recognized only if there is virtual certainty of realization of Assets.

8. Foreign Exchange Transactions

Transactions in foreign currency are generally recorded at the exchange rate prevailing on the date of

transaction. Monitory items denominated in foreign currency and outstanding at the Balance Sheet

date are translated at the exchange rate ruling at that date. Exchange differences on foreign exchange

transactions are recognized in the profit and loss account.

9. Impairment of Assets

The Company assesses at each balance sheet date whether there is any indication that any asset may be

impaired. If any such indication exists, the carrying value of such assets is reduced to its recoverable

amount and the amount of such impairment loss is charged to profit and loss account. If at the balance

sheet date there is an indication that a previously assessed impairment loss no longer exists, then such loss

is reversed and the asset is restated to that effect.

10. Provisions and Contingencies

The Company recognizes a provision when there is a present obligation as a result of a past event that

probably requires outflow of resources, which can be reliably estimated. Disclosures for a contingent

liability is made, without a provision in books, when there is an obligation that may, but probably will not,

require outflow of resources.


62

11. Investments

Investments are classified into long-term investments and current investments based on the management’s

intention at the time of purchase. Long-term investments are carried at cost and provision is made to

recognize any decline, other than temporary, in the value of such investments, determined separately for

each investment. Current investments are carried at the lower of the cost and fair value and provision is

made to recognize any decline in the carrying value. The comparison of cost and fair value is done

separately in respect of each category of investments.

12. Accounting of Employee Benefits

The Company has for its employees in India, benefits such as Gratuity and Provident Fund. Provision for

gratuity is made on the basis of actuarial valuation and charged to Profit and Loss account. The

Company’s contribution to the provident fund along with the employee share of provident fund deducted

from the salary is paid into Employee Provident Fund of Government of India. The Company’s

contribution to EPF is charged to revenue.

A. Notes to Accounts

1. The Previous year’s figures have been regrouped and rearranged wherever found necessary.

2. The balances of sundry debtors and creditors are subject to confirmation and reconciliation.

3. In the opinion of the Board of Directors, the Current assets, loans & advances are approximately

of the value stated, if realized in the ordinary course of business and Provisions for all known and

determined Liabilities are adequate and not in excess of the amount reasonably stated

4. The software services division undertaking of Continental Controls Limited was demerged in to

the Company alongwith its assets and liability as per the Scheme of Amalgamation approved by

the Bombay High Court on 5th September 2008. Thus in terms of the Scheme of Arrangement, the

Company has allotted 4,421,256 equity shares of Rs. 10/- each to the share holders of Continetal

Controls Limited during the year.

5. Auditors Remuneration

Particulars 2009-10 2008-09 2007-08

For Statutory Audit (Rs.) 7,500 7,500 7,500

For Tax Audit (Rs.) 2,500 2,500 --

Total 10,000 10,000 7,500

6. Transactions in Foreign Currency

The Company has not entered in any foreign currency transactions during the year


63

7. Deferred Tax :

The Company has recognized deferred tax arising on account of timing differences, being the

difference between the taxable incomes and accounting income, that originates in one period and

is capable of reversal in one or more subsequent period(s) in compliance with Accounting

Standard (AS 22) – Accounting for Taxes on Income issued by Institute of Chartered Accountants

of India.

8. Disclosure under Micro, Small and Medium Enterprises Development Act 2006 (MSMED)

As per information available with the company, none of the Suppliers have been identified under

the meaning of the Micro, Small and Medium Enterprises Development Act 2006 (MSMED)

which came in to Force from 2nd October, 2006

9. Quantitative Detail

The company is primarily engaged software Services. Hence, it is not possible to give the

quantitative details of sales and other information as required under paragraphs 3, 4C and 4D of

part II of Schedule VI of Companies Act, 1956

10. Related Party Transactions (in respect of related parties as of the date of this report):

A. Name of the related parties:

Key Managerial Personnel:

1. Dhiren B. Kothary – Director

Enterprises controlled by Key Management personnel and Individual having significant

influence:

1. Quest Profin Advisor Private Limited

2. Quest Fincap Limited

3. Quest (East India) Advisory Private Limited

4. Quest Finlease Private Limited

B. Transactions with related parties :

1. Refund of Advance Received : Rupees 86,55,150/-

2. Repayment of Unsecured Loans : Rupees 10,00,000/-

11. Segment Reporting

A. The company operates only in one segment IT & ITES.

2009-10 2008-09 2007-08

Opening Deferred Tax Liability (Rs) 8,11,157 1,56,184 86,000

Addition During the year (Rs) (5,49,832) 6,54,973 70,000

Closing Deferred Tax Liability (Rs) 2,61,326 8,11,157 1.56,000


64

B. During the year, the company has catered mainly to the needs of the Indian market and

thus there are no reportable geographical segments.

12. Earnings per share has been computed as under :

(Amount in Rupees)

For the year For the year For the year

2009-10 2008-09 20007-08

Net Profit after Tax available for the Equity Shareholder (1,15,76,407) (1,75,89,473) (42,292)

Weighted average number of Equity Shares (in nos.) 88,37,149 55,78,1.744

55,78,744

Nominal/Face Value of Equity Share 10 10 10

Basic and Diluted Earnings Per Share (1.31) (3.15) 0 .0075


65

XIV. GROUP COMPANIES

QUEST PROFIN ADVISOR PRIVATE LIMITED

Date of Incorporation: 08th

April 2004

Registration Number: U67190MH2004PTC145608

Registration with: Registrar of Companies, Mumbai, Maharashtra

Nature of Activities: Financial & Advisory Services

Main Objects of the Company:

1. To carry on the business of consultancy in project finance including syndication of term loan

and working capital from banks and financial institutions advising clients on issues of capital /

debt rising, structuring or raising funds by way of venture capital.

2. To carry on the business as financial advisers and to advise and assist in all financial costing,

accounting, internal control and other similar matters to advise and assist in the preparation of

all revenue and capital budgets, deployment of funds, short, long term planning of utilization of

resources for rehabilitation, renewal, expansion and diversification, procuring bank and

institutional finance including foreign finance cash credit facilities, overdraft facilities,

subscription of debentures and term loans to assess the needs for short and long term credit

facilities and raising of resources, to advise and assist in formulation of internal control,

procedure for the maintenance and presentation of all assets and prevention of fraud, wastage,

financial and cost accounting procedure and other connected matters to advise and assist in

formulating short, long term financial policies and control of their execution; and generally to

advise and assist in all financial, fiscal capital and revenue matters.

Shareholding:

Name No. of Shares % of the Holding

Dhiren B Kothary 95,000 47.82%

White Rose Trading Private Limited 40,000 20.13%

Nita D Kothary 20,000 10.07%

Themis Investment Pte. Ltd. 12,435 6.26%

Amit Sheth 10,548 5.31%

Kalpesh Koradia 4,500 2.26%

Sonal Koradia 4,500 2.26%

Bhavesh Koradia 4,500 2.26%

Ishita Koradia 3,681 1.85%

Jagdish Tanna 3,516 1.71%

TOTAL 1,98,680 100.00%


66

Brief Financial Information:

(Rs in lacs)

Year 2009-10 2008-09 2007-08

Paid-Equity Capital 15.50 15.50 11.00

Reserves 741.85 663.67 569.47

Sales 324.50 319.06 239.96

Profit after Tax 75.48 74.53 52.74

EPS (Rs.) 48.70 48.08 48.85

Book Value per Share (Rs) 488.67 438.17 527.70

Board of Directors:

Mr. Dhiren Kothary

Mr. Suresh S. Vishwasrao

Mr. Uday Sankar Roy

QUEST FINCAP LIMITED

Date of Incorporation: 10th October 1994

Registration Number: U65990MH1994PLC081898


Nature of Activities: Member of Saurashtra & Kutch Stock Exchange

(SEBI registration No: INB181105934)


1. To do the business as investment company by way of acting and operating as the share

brokers agents, dealers in India or abroad.

2. To carry on the activities of finance, leasing, hire purchase, factors securitization, financial and

negotiable instruments in any field of capital market, money and finance market, investment

market and others in any industrial, commercial, governmental enterprises and consumer fields.

Shareholding:


Quest Softech (India) Limited 40,000 40.00%

Rashmi B. Kothary 16,500 16.50%

Quest Profin Advisor Pvt Ltd 15,000 15.00%

Bhogilal V. Kothary 11,800 11.80%

Bhogilal V. Kothary HUF 5,000 5.00%

Vipul N. Chauhan 4,100 4.10%

Ashish B. Kothary 3,500 3.50%

Deepa Kothary 3,500 3.50%

Dhiren B. Kothary HUF 400 0.40%

Kalpesh R. Karodia 100 0.10%

Nikita N. Shah 100 0.10%


67

TOTAL 1,00,000 100.00%


(Rs in lacs)

Year 2009-10 2008-09 2007-08

Paid-Equity Capital 10.00 10.00 10.00

Reserves 4.85 6.00 5.48

Sales 0.28 0.75 1.51

Profit after Tax 0.01 0.51 0.67

EPS (Rs.) 0.02 0.51 0.67

Book Value per Share (Rs) 14.85 16.00 15.48

Board of Directors:

Mr. Dhiren Kothary

Mr. Kalpesh Koradia

Mrs. Nita Kothary

QUEST (EAST INDIA) ADVISORY PRIVATE LIMITED

Date of Incorporation: 06th Jan 2010



Nature of Activities: Advisory Services


To carry on the business of financial consultancy and to advise and assist in all financial costing,

accounting, internal control and other similar matters to advise and assist in the preparation of all

revenue and capital budgets, deployment of funds, short, long term planning of utilization of resources

for rehabilitation, renewal, expansion and diversification, procuring bank and institutional finance

including foreign finance cash credit facilities, overdraft facilities, subscription of debentures and term

loans to assess the needs for short and long term credit facilities and raising of resources, to advise

and assist in formulation of internal control, procedure for the maintenance and presentation of all

assets and prevention of fraud, wastage, financial and cost accounting procedure and other

connected matters to advise and assist in formulating short, long term financial policies and control of

their execution; and generally to advise and assist in all financial, fiscal capital and revenue matters.

Shareholding:


Quest Profin Advisor Private Ltd 99,999 99.99%

Dhiren B. Kothary 1 0.01%

TOTAL 1,00,000 100.00%


68


The Company was incorporated on 6th January 2010 and has not completed full year of operations.

Board of Directors:

Mr. Dhiren Kothary

Mr. Suresh Vishwasrao

Mr. Uday Sankar Roy

QUEST FINLEASE PRIVATE LIMITED

Date of Incorporation: 25th June 2010



Nature of Activities: NBFC (Financing & Investments)


1. To carry on in India or elsewhere the business of financing and advancing short term or long

term loans, advances or providing margin trade financing or credits to individuals, companies or

association of individuals or any other person by whatever name called for any purpose and

either on security such as shares, debentures, bonds, government securities, stock certificates,

land, building or part thereof, machinery, plants, vehicles, life insurance policies, stock in trade,

bullion, other precious metals, commodities or any other security or on guarantee or to finance

or give loan, advances or credit in any other form.

2. To carry on business of an investment Company, and to invest the capital and other moneys of

the Company in the purchase or upon the security of shares, stocks, units, debentures,

debenture-stock, bonds, mortgages, obligations and securities of any kind issued or guaranteed

by any company, corporation or undertaking of whatever nature, whether incorporated or

otherwise and wheresoever’s constituted or carrying on investment business, and shares,

stocks, debentures, debenture-stock, bonds, notes, mortgages, obligations and other securities

issued or guaranteed by any government, sovereign ruler, commissioners, trust, municipal,

local or other authority or body of whatever nature in India or abroad.

Shareholding:


Quest Profin Advisor Pvt Ltd 19,99,999 99.99%

Dhiren B. Kothary 1 0.01%

TOTAL 20,00,000 100.00%


The Company was incorporated on 25th June 2010 and has not completed full year of operations.

Board of Directors:


69

Mr. Dhiren Kothary

Mr. Suresh Vishwasrao

NIYAMAK CONSULTANCY PRIVATE LIMITED

Date of Incorporation: 20th March 2010



Nature of Activities: Consultancy Services


To carry on the business as providing services of accountancy and consultancy for book keeping to

various type of clients & other related activities marketing consultants, advertising market research

and survey, consultancy in marketing of financial products, getting foreign collaboration and technical

collaboration investment consultants, stock broking, management consultants, health care

consultancy, financial consultants, project consultants, loan consultants, loan processing, insurance

consultant, insurance broker, sub broker, outsourcing, call centre, mutual fund, agents, managers and

provide advise service, consultancy on matters relating to administration, management, investments,

finance, import, export, organisational structure, commercial, legal, economic, labour, Industrial,

technical, material, accounts, internal checks, internal audit & internal control system, direct or Indirect

taxes, secretarial, corporate and other laws, man power planning, selection and training of personnel,

career counselling, communication, computer hardware and software, metrimonial consultants,

educational consultants, medical consultants.

Shareholding:


Dhiren B Kothary 5,000 50.00%

Nita D Kothary 5,000 50.00%

TOTAL 10,000 100.00%


The Company was incorporated on 20th March 2010 and has not completed full year of operations.

Board of Directors:

Mr. Dhiren Kothary

Mrs. Nita Kothary


70

XV. OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS

The Scheme provides that upon the coming into effect of the Scheme, all legal or other proceedings

relating to the operations of the Software Services Division Undertaking on and from the Appointed

Date shall be continued and enforced by or against QSIL only.

The Scheme further provides that, all other legal proceedings shall be continued and enforced by or

against CCL and if any such proceedings are taken against QSIL, QSIL will defend on notice or as per

advice of CCL at the costs of CCL and CCL will indemnify and keep indemnified QSIL from and

against all liabilities, obligations, actions, claims and demands in respect thereof.

Save as stated herein, there are no outstanding or pending material litigation, suits, criminal or civil

prosecution, proceedings initiated for any offence (irrespective of whether specified in paragraph (I) of

Part I of Schedule XIII of the Companies Act, 1956) or litigation for tax liabilities against the Company,

its promoters, directors, subsidiaries, group companies and there are no material defaults, non

payments or overdue or statutory dues, institutional or bank dues or dues towards holders of

debentures, bonds and fixed deposits.


71

XVI. GOVERNMENT APPROVALS

Pursuant to the Scheme, all the permissions, approvals, licenses etc. granted by the Government and

Government agencies in connection with or relating to the Software Services Division Undertaking

have been transferred to and vested in and/or deemed to be transferred to and vested in the

Company.


72

XVII. REGULATIONS AND POLICIES

The following description is a summary of the relevant regulations and policies as prescribed by the

Government. The information detailed in this chapter has been obtained from the various legislations

that are available in the public domain. The regulations set out below are not exhaustive, and are only

intended to provide general information to the investors and are neither designed nor intended to be a

substitute for professional legal advice. In this section, unless the context requires otherwise, any

reference to the Company refers to the Company and its Subsidiaries.

Information Technology Act, 2000

The Information Technology Act, 2000 (“the IT Act”) was enacted with the purpose of providing legal

recognition to electronic transactions and facilitating electronic filing of documents. The IT Act further

provides for civil and criminal liability including fines and imprisonment for various cyber crimes,

including unauthorized access to computer systems, unauthorized modification to the contents of

computer systems, damaging computer systems, the unauthorized disclosure of confidential

information and computer fraud.

The Act regulates Information Technology i.e. it governs information storage, processing and

communication. The Act provides legal recognition of electronic records and electronic signatures,

their use, retention, attribution and security. Penalties are provided for cyber crimes, which include

tampering with computer source document and electronic publishing of obscene information, in

addition to provision of compensation in certain cases. The Act also provides punishment for offences

committed outside India if the Act involves a computer system or computer network outside India.

Labour laws

India has various labour laws to protect the rights and interest of the ‘employees’ and ‘workman’. The

definition of the ‘employees’ and ‘workman’ have been defined in various legislations, and such

people are entitled to various statutory benefits including provident fund, bonus, pensions, maternity

benefits, insurance etc.

a. The Minimum Wages Act, 1948 provide for the fixation of a minimum wage payable by the

employer to the employee.

b. The Employees Provident Fund and Miscellaneous Provisions Act, 1952 provides for the

institution of compulsory Provident fund, pension fund and deposit linked insurance funds for

the benefit of eligible employees. A liability is placed on the employer and employee to make

certain contributions to the funds.

c. The Payment of Gratuity Act, 1961 provides for payment of gratuity to (a) the legal heirs of

employees on the demise of the employees; and (b) to the employees employed in factories,

shops and establishments who have put in a continuous service of 5 years, in the event of their

superannuation, retirement, resignation or disablement. Gratuity is calculated at the rate of 15

days wages for every completed year of service with the employer, subject to the maximum

gratuity of Rs. 3,50,000.

d. The Maternity Benefits Act, 1961 provides inter alia for paid leave of upto 12 weeks, to pregnant

women.

e. Labour Welfare Fund: Contributions need to be paid by an employer as required under the

provisions of the applicable labour welfare fund, if the relevant state government has enacted

such legislation.


73

Profession Tax: Some states require the payment of profession tax by a company and by the

employees of the company. The contribution of the employees is deducted by the company from the

wages of the employees and remitted to the relevant statutory authority. The rates of profession tax

are specified in the relevant legislation governing the payment of profession tax.

Termination of Services: Any termination of employment of a person (other than workman) would be

governed by the terms of the relevant employment contract, and would be subject to applicable Shops

and Commercial Establishments Act, if there are provisions thereunder for the same. As regards a

‘workman’, the Industrial Disputes Act provides for the procedure of removal and termination of

services.

Other Provisions: The applicable Shops and Commercial Establishments Act inter alia regulate the

conditions of work and employment in shops and commercial establishments and generally prescribe

obligations in respect of inter alia registration, opening and closing hours, daily and weekly working

hours, holidays, leave, health and safety measures and wages for overtime work.

Intellectual Property

Intellectual property rights in India are protected by the following Acts and the rules and regulations

framed there under:

Patents Act of 1970;

Copyright Act of 1957;

Trade Mark Act of 1999; and

Design Act of 2000.

The above enactments provide for protection of intellectual property by imposing civil and criminal

liability for infringement. There are no special legislations, which protect “trade secrets” or “confidential

information”, the same are protected under common law.

In addition to the above domestic legislations India is a party to several international intellectual

property related instruments including the Patent Co-operation Treaty, 1970, the Paris Convention for

the Protection of Industrial Property, 1883, the International Convention for the Protection of Literary

and Artistic Works signed at Berne in 1886 (the Universal Copyright Convention of 1952), the Rome

Convention for the Protection of Performers, Producers of Phonograms and Broadcasting

Organizations 1961 and as a member of the World Trade Organisation is a signatory to the

Agreement on Trade Related aspects of Intellectual Property Rights, 1995 (the TRIPS Agreement).

Foreign Investment

100% foreign investment is permissible under the automatic route in the information technology

structure, provided that the foreign investor satisfies and complies with the requirements as specified

in the Foreign Exchange Management Act, 1999 and the relevant Rules and Regulations framed

there under and the various notifications and press notes issued by the Department of Industrial

Policy and Promotion, Ministry of Commerce and Industry. Pursuant to any foreign investment, a

company would be required to make filings with the Reserve Bank of India and the authorized dealer

informing them of the foreign investment and the allotment of shares of the company.


74

XVIII. REGULATORY AND STATUTORY DISCLOSURES

Authority for Listing

The Company entered into the Scheme of Arrangement 391 to 394 and other applicable provisions of

the Companies Act, 1956 with Continental Controls Limited and their respective Shareholders and

Creditors (“Scheme”) for the demerger of the Software Services Division Undertaking of Continental

Controls Limited into the Company on a going concern basis. The Appointed Date for the demerger

as per the Scheme was 1st April 2008. The Scheme was sanctioned by the Hon’ble High Court of

Judicature at Bombay vide its Order dated 5th September 2008, which was filed with the Registrar of

Companies, Maharashtra on 26th September 2008, which is the Effective Date of the Scheme.

Accordingly, with effect from 1st April, 2008 (being the Appointed Date), the Software Services

Division Undertaking of Continental Controls Limited stands transferred to and vested in the Company

as a going concern.

Clause 7.2 of Part II of the Scheme, as sanctioned by the Hon’ble High Court of Judicature at Bombay

provides that the equity Shares of the Resulting Company, viz. Quest Softech (India) Limited shall be

listed and / or admitted to trading on the Bombay Stock Exchange Limited. Further, Clause 7.7 of Part

II of the Scheme provides that the shares so allotted and issued pursuant to the Scheme of

Arrangement shall remain frozen in the depositories till the listing / trading permission is given by the

BSE.

There being no initial public offering or rights issue, the eligibility criteria in terms of Regulation 3 of

Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations,

2009 does not become applicable. However, SEBI has vide its letter SEBI/CFD/SCRR/01/2009/03/09

dated September 3, 2009, issued Guidelines for considering application for seeking relaxation from

strict enforcement of clause (b) to sub-rule (2) of rule 19 thereof. The Company has submitted its

Information Memorandum, containing information about itself, making disclosure in line with the

disclosure requirement for public issues, as applicable to BSE for making the said Information

Memorandum available to public through their websites viz. www.bseindia.com.

The Company has also made the said Information Memorandum available on its website viz.

www.questsoftech.co.in.

The Company will publish an advertisement in the newspapers containing the details in line with the

details required as per Clause 5 of Part A of Annexure of SEBI Circular No. SEBI/CFD/SCRR/01/

2009/03/09 dated September 3, 2009. The advertisement will draw a specific reference to the

availability of aforesaid Information Memorandum on the Company’s website www.questsoftech.co.in

Prohibition by SEBI

The Company, its directors, its promoters, other companies promoted by the promoters and

companies with which the Company’s directors are associated as directors have not been prohibited

from accessing the capital markets under any order or direction passed by SEBI.

General disclaimer from the Company

The Company accepts no responsibility for statements made otherwise than in the Information

Memorandum or in the advertisements to be published in terms of Clause 5 of Part A of Annexure of

SEBI Circular No. SEBI/CFD/SCRR/01/2009/03/09 dated September 3, 2009 or any other material


75

issued by or at the instance of the Company and anyone placing reliance on any other source of

information would be doing so at his or her own risk. All information shall be made available by the

Company to the public and investors at large and no selective or additional information would be

available for a section of the investors in any manner.

Disclaimer Clause of BSE

A copy of this Information Memorandum has been submitted to BSE. BSE has vide its letter

DCS/AMAL/SKS/24(f)/2988/2007-08 dated 27th March 2008 approved the Scheme of Arrangement

under clause 24 (f) of the Listing Agreement and by virtue of that approval, BSE’s name in this

Information Memorandum as the Stock Exchange on which the Company’s securities are proposed to

be listed is appearing. BSE does not in any manner warrant, certify or endorse the correctness or

completeness of any of the contents of this Information Memorandum; or warrant that this Company’s

securities will be listed or will continue to be listed on the BSE; or take any responsibility for the

financial or other soundness of this Company; and that it should not for any reason be deemed or

construed to mean that this Information Memorandum has been cleared or approved by BSE. Every

person who acquires any securities of this Company may do so pursuant to independent inquiry,

investigation and analysis and shall not have any claim against the BSE whatsoever by reason of any

loss which may be suffered by such person consequent to or in connection with such

subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for any

other reason whatsoever.

Filing

Copies of this Information Memorandum have been filed with the BSE.

Listing

Applications have been made to the BSE for permission to deal in and for an official quotation of the

Equity Shares of the Company. The Company has nominated the BSE as the Designated Stock

Exchange for the aforesaid listing of its Equity Shares. The Company has taken steps for the

completion of necessary formalities for listing and commencement of trading at the Stock Exchanges

mentioned above.

Stock Market Data for Equity Share Capital

Equity shares of the Company have not been previously listed on any Stock Exchanges. The

Company is seeking for approval of listing of its shares through this Information Memorandum.

Demat Credit

The Company has executed agreements with CDSL and NSDL for admitting its Securities in demat

form. The ISIN of the Company’s Equity Shares is INE989J01017. The allotment of Equity shares was

made on 6th July 2009 and the demat accounts of the members were credited on 16th and 17th

September 2009. In terms of Clause 7.7 of Part II of the Scheme, the shares so allotted and issued

pursuant to the Scheme of Arrangement shall remain frozen in the depositories till the listing / trading

permission is given by the BSE.

Dispatch of share certificates

Equity Shares that were allotted in physical certificate form were dispatched to the members on 17th

August 2009.


76

Expert Opinions

Save as stated elsewhere in this Information Memorandum, the Company has not obtained any

expert opinions.

Previous rights and public issues

The Company has not made any public issue since incorporation.

Commission and brokerage on previous issues

Since the Company has not issued shares to the public in the past, no sum has been paid or has

become payable as commission or brokerage for subscribing to or procuring or agreeing to procure

subscription for any of the Equity Share since its inception.

Capital Issues by Group Companies

No capital issues have been made in the last three years.

Revaluation of assets

The Company has not revalued its assets during the last five years.

Companies under the same Management

There are no companies under the same management within the meaning of Section 370(1B) of the

Companies Act, other than the ones disclosed elsewhere in the Information Memorandum.


77

XIX. MAIN PROVISONS OF THE ARTICLES OF ASSOCIATION

SHARE CAPITAL, INCREASE AND REDUCTION IN CAPITAL

4) The Authorised Share Capital of the Company shall be as per paragraph V of the Memorandum

of Association of the Company with rights to alter the same in whatever way as deemed fit by

the Company. The Company may increase the Authorised Capital which may consist of Equity

and/or Preference Shares as the Company in General Meeting may determine in accordance

with the law for the time being in force relating to Companies with power to increase or reduce

such capital from time to time in accordance with the Regulations of the Company and the

legislative provisions for the time being in force in this behalf and with power to divide the shares

in the Capital for the time being into Equity Share Capital or Preference Share Capital and to

attach thereto respectively and preferential, qualified or special rights, privileges or conditions

and to vary, modify and abrogate the same in such manner as may be determined by or in

accordance with these presents.

5) The Company in General Meeting may, from time to time, increase the capital by the creation of

new shares. Such increase to be of such aggregate amount and to be divided into shares of

such respective amounts as the resolution shall prescribe. Subject to the provisions of the Act,

any shares of the original or increased capital shall be issued upon such terms and conditions,

and with such rights and privileges annexed thereto, as the General Meeting resolving upon the

creation thereof shall direct, and if direction be given, the directors shall determine accordingly

and in particular, such shares may be issued with a preferential or qualified right to dividends,

and in the distribution of assets of the company, and with a right of voting at General Meetings

of the Company in conformity with provisions of the Act. Whenever the capital of the Company

has been increased under the provisions of this Article, the Directors shall comply with the

relevant provisions of the Act.

6) Except so far as otherwise provided by the conditions of issue or by these Articles, any capital

raised by the creation of new shares shall be considered as part of the existing capital, and shall

be subject to the provisions herein contained, with reference to the payment of calls and

instalments, forfeiture, lien, surrender, transfer and transmission, voting and otherwise.

7) The Company may (subject to the applicable provisions of the Act) from time to time by Special

Resolution, reduce its capital and any Capital Redemption Reserve Account or Securities /

Share Premium Account in any manner for the time being authorised by law; and in particular,

capital may be paid off on the basis that it may be called up again or otherwise. This Article is

not to derogate the company from any power which it would have, if it was omitted.

8) Subject to the applicable provisions of the Act, the company in General Meeting may from time

to time, sub-divide or consolidate its shares, or any of them and the resolution whereby any

share is sub-divided, may determine that, as between the holders of the shares resulting from

such sub-division, one or more of such shares shall have same preference or special advantage

as regards dividend, capital or otherwise over or as compared with the other or others. Subject

as aforesaid, the Company in General Meeting may also cancel shares which have not been

taken or agreed to be taken by any person and diminish the amount of its share capital by the

amount of the shares so cancelled.

MODIFICATION OF RIGHTS

9) Whenever the capital, by reason of the issue of Preference Shares or otherwise, is divided into

different classes of shares, all or any of the rights and privileges attached to each class may,

subject to the applicable provisions of the Act, be modified, commuted, affected or abrogated, or

dealt with by agreement between the Company and any person purporting to contract on behalf


78

of that class, provided such agreement is ratified in writing by holders of at least three-fourths in

nominal value of the issued shares of the class or is confirmed by a special Resolution passed

at separate General Meeting of the holders of shares of that class.

POWER TO ISSUE SWEAT EQUITY SHARES

10) Notwithstanding anything contained in Section 79 or other applicable provisions of the Act,

a Company may make issue of sweat equity shares or of a class of shares/other securities

already issued if the applicable provisions of the Companies Act, 1956 or any other statutory

modification(s) for the time being in force in this regard be fulfilled.

FURTHER ISSUE OF SHARES

11) Where at any time after the expiry of two years from the formation of the company or at any time

after the expiry of one year from the allotment of shares in the Company made for the first time

after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the

Company by allotment of further shares, whether out of unissued Share Capital or out of

increased Share Capital, then such further Shares shall be offered to the persons who, at the

date of the offer, are holders of the equity shares of the Company, in proportion, as nearly as

circumstances admit to the capital paid-up on these shares at that date. Such offer shall be

made by a notice specifying the number of shares offered and limiting a time not being less than

fifteen days from the date of the offer within which the offer, if not accepted, will be deemed to

have been declined. The amount to be paid-up on application and allotment on the shares so

offered shall be equal in all respect for all the share-holders. After the expiry of the time

specified in the notice aforesaid or on receipt of earlier intimation from the person to whom such

notice is given that he declines to accept the shares offered, the Board may dispose of them in

such manner as they think most beneficial to the Company.

12) Notwithstanding anything contained in the immediately preceding clause, the Company may:

(i) by a Special Resolution; or

(ii) where no such Special Resolution is passed, if the votes cast (whether on a show of

hands or on a poll, as the case may be) in favour of the proposal contained in the

resolution moved in that General Meeting (including the casting vote, if any, of the

Chairman) by Members who, being entitled so to do, vote in person, or where proxies are

allowed, by proxy, exceed the votes, if any, cast against the proposal by Members so

entitled and voting and the Central Government is satisfied, on an application made by the

Board in this behalf, that the proposal is most beneficial to the Company, offer further

shares to any person and such person need not be at the date of such offer, a holder of

equity shares.

(iii) Notwithstanding anything contained in the above para, but subject, however to the

applicable provisions of the Act, the Company may increase its subscribed capital on

exercise of an option attached to the debentures issued or loans raised by the company to

convert such debentures or loans into shares, or to subscribe for shares in the Company.

POWER OF COMPANY TO PURCHASE ITS OWN SECURITIES

33) The Company shall have power, subject to and in accordance with Section 77A, 77AA, 77B and

other applicable provisions of the Act, to purchase any of its own shares or other securities, (i.e.

buy-back) whether or not redeemable, from out of the sources as permissible under the Law. As

regard to the financing for subscribing or investing in its own shares or securities by the

Company, the statutory provisions for the time being applicable to the Company shall be

observed.


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UNDERWRITING AND BROKERAGE

POWER TO PAY CERTAIN COMMISSION AND PROHIBITION OF PAYMENT OF ALL OTHER

COMMISSIONS DISCOUNTS ETC.

34) (A) The Company may pay a commission to any person in consideration of :-

(i) his subscribing or agreeing to subscribe whether absolutely or conditionally, for any shares

in or debentures of the Company, subject to the restrictions specified in sub-section (4A)

of Section 76 of the Act, or

(ii) his procuring or agreeing to procure subscriptions, whether absolute or conditional for any

shares in or debentures of the Company, if the following conditions are fulfilled, namely:

(a) the commissions paid or agreed to be paid does not exceed in the case of

shares, five percent of the price at which the shares are issued and in the case of

debentures, two and half percent of the price at which the debentures are issued.

(b) The amount or rate percent of the commission paid or agreed to be paid on

shares or debentures offered to the public for subscription, is disclosed in the

Prospectus, and in the case of shares or debentures not offered to the public for

subscription, is disclosed in the Statement in lieu of Prospectus and filed before

the payment of the Commission with the Registrar, and where a circular or notice,

not being a Prospectus inviting subscription for the shares or debentures is

issued is also disclosed in that circular or notice.

(c) The number of shares or debentures which such persons have agreed for a

commission to subscribe, absolutely or conditionally is disclosed in the manner

aforesaid and

(d) A copy of the contract for the payment of commission is delivered to the Registrar

at the time of delivery of the prospectus or the statement in lieu of prospectus for

registration.

(B) Save as aforesaid and save as provided in Section 75 of the Act, the Company shall not

allot any of its shares or debentures or apply any of its moneys, either directly or indirectly,

in payment of any commission, discount or allowance, to any person in consideration of :-

(i) his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares

in, or debentures of the Company or

(ii) his procuring or agreeing to procure subscriptions, whether absolute or conditional for any

shares in or debentures of the Company whether the shares, debentures or money be so

allotted or applied by, being added to the purchase money of any property acquired by the

Company or to the contract price of any work to be executed for the Company or the

money be paid out of the nominal purchase money or contract price, or otherwise.

(C ) Nothing in this Article shall affect the power of the Company to pay such brokerage as it

has hereto before been lawful for the Company to pay

(D) A vendor to, promoter of, or other person who receives payment in shares, debentures

or money from the Company shall have and shall be deemed always to have had power

to apply any part of the shares, debentures or money so received for payment of any

commission, the payment of which, if made directly by the Company would have been

legal under Section 76 of the Act,

(E) The commission may be paid or satisfied (subject to the provisions of the Act and these

Articles) in cash, or in shares, debentures or debenture-stock of the Company.

INTEREST OUT OF CAPITAL

35) Where any shares are issued for the purpose of raising money to defray the expenses of the

construction of any work or building, or the provision of any plant, which cannot be made


80

profitable for a lengthy period, the Company may pay interest on so much of that share capital

as is for the time being paid-up, for the period, at the rate and subject to the conditions and

restrictions provided by the Act, and may charge the same to capital as part of the cost of

construction of the work or building, or the provision of plant.

CALLS

DIRECTORS MAY MAKE CALLS

36) The Board may, from time to time, subject to the terms on which any shares may have been

issued and subject to the conditions of allotment, by a resolution passed at a meeting of the

Board (and not by a circular resolution) make such calls as it thinks fit upon the Members in

respect of all moneys unpaid on the shares held by them respectively, and each Member shall

pay the amount of every call so made on him to the person or persons and at the times and

places appointed by the Board. A call may be made payable by instalments.

NOTICE OF CALL

37) Thirty days' notice in writing of any call shall be given by the Company specifying the time and

place of payment, and the person or persons by whom such call shall be paid.

38) A call shall be deemed to have been made at the time when the resolution authorising such call

was passed at a meeting of the Board.

39) A call may be revoked or postponed at the discretion of the Board.

LIABILITY OF JOINT HOLDERS OF SHARES

40) The joint-holders of a share shall be jointly and severally liable to pay all calls in respect thereof.

DIRECTORS MAY EXTEND TIME

41) The Board may, from time to time at its discretion, extend the time fixed for the payment of any

call, and may extend such time as to all or any of the Members for any reason which the Board

may consider satisfactory but no Member shall be entitled to such extension save as a matter of

grace and favour.

WHEN INTEREST ON CALL OR INSTALMENT PAYABLE

42) If any Member fails to pay any call due from him on the day appointed for payment thereof, or

any such extension thereof as aforesaid, he shall be liable to pay interest on the same from the

day appointed for the payment thereof to the time of actual payment at such rate as shall from

time to time be fixed by the Board, but nothing in this Article shall render it obligatory for the

Board to demand or recover any interest from any such Member.

43) Any sum, which by the terms of issue of shares becomes payable on allotment or at any fixed

date, whether on account of the nominal value of the share or by way of premium, shall for the

purposes of these Articles be deemed to be a call duly made and payable on the date on which

by the terms of issue the same becomes payable, and in case of non-payment, all the relevant

provisions of these Articles as to payment of interest and expenses, forfeiture or otherwise shall

apply as if such sum had become payable by virtue of a call duly made and notified.

PROOF ON TRIAL OF SUITS FOR MONEY DUE ON SHARES

44) On the trial or hearing of any action or suit brought by the Company against any Member or his

representatives for the recovery of any money/claim to be due to the Company in respect of his

shares, it shall be sufficient to prove that the name of the Member in respect of whose shares

the money is sought to be recovered is alleged to have become due on the shares in respect of


81

which such money is sought to be recovered; that the resolution making the call is duly recorded

in the Minute Book; and that notice of such call was duly given to the Member or his

representatives issued in pursuance of these Articles; and that it shall not be necessary to prove

the appointment of the Directors who made such call, nor that a quorum of Directors was

present at the Board at which any call was made was duly convened or constituted nor any

other matters whatsoever, but the proof of the matters aforesaid shall be conclusive evidence of

the debt.

PARTIAL PAYMENT NOT TO PRECLUDE FORFEITURE

45) Neither the receipt by the Company of a portion of any money which shall from time to time be

due from any Member to the Company in respect of his shares, either by way of principal or

interest, nor any indulgence granted by the Company in respect of payment of any such money,

shall preclude the Company from thereafter proceeding to enforce a forfeiture of such shares as

hereinafter provided.

PAYMENT IN ANTICIPATION OF CALLS MAY CARRY INTEREST

46) The Board may, if it thinks fit, agree to and receive from any member willing to advance the

same, all or any part of the amounts of his respective shares beyond the sums actually called -

up and upon the moneys so paid in advance, or upon so much thereof from time to time, and at

any time thereafter, as exceeds the amount of the calls then made upon and due in respect of

the shares on account of which such advances are made, the Board may pay or allow interest,

at such rate as the Member paying the sum in advance and the Board agree upon. The Board

may agree to repay at any time any amount so advanced or may at any time repay the same

upon giving to the member one month’s notice in writing. Provided that moneys paid in advance

calls shall not confer a right to dividend or to participate in profits.

47) No member paying any such sum in advance shall be entitled to voting rights in respect of the

moneys so paid by him until the same would but for such payment become payable.

LIEN

COMPANY’S LIEN ON SHARES/DEBENTURES

48) The Company shall have a first and paramount lien upon all the shares (other than fully paid-up

shares) registered in the name of each Member (whether solely or jointly with others) and upon

the proceeds of sale thereof for all moneys (whether presently payable or not) called or payable

at a fixed time in respect of such shares and no equitable interest in any shares shall be created

except any contrary provisions in these Articles. Any such lien shall extend to all dividends from

time to time declared in respect of such shares. Unless otherwise agreed, the registration of a

shares shall operate as a waiver of the Company's lien, if any, on such shares.

AS TO ENFORCING LIEN BY SALE

49) For the purpose of enforcing such lien, the Board may sell the shares subject thereto in such

manner as they shall think fit, and for that purpose may cause to be issued a duplicate

certificate in respect of such shares and may authorise one of their number to execute a transfer

thereof on behalf of and in the name of such Member. No sale shall be made until such period

as aforesaid shall have been served on such Member or his representatives and default shall

have been made by him or them in payment, fulfilment, or discharge of such debts, liabilities or

engagements for fourteen days after such notice.


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APPLICATION OF PROCEEDS OF SALE

50) The net proceeds of any such sale shall be received by the Company and applied in or towards

payment, of such part of the amount in respect of which the lien exists as is presently payable

and the residue, if any, shall (subject to a like lien for sums not presently payable as existed

upon the shares before the sale) be paid to the persons entitled to the shares at the date of the

sale.

FORFEITURE OF SHARES

IF CALL OR INSTALMENT NOT PAID NOTICE MUST BE GIVEN

51) If any Member fails to pay any call or instalment of a call on or before the day appointed for the

payment of the same or any such extention thereof as aforesaid, the Board may at any time

thereafter, during such time as the call or instalment remains unpaid, give notice to him requiring

him to pay the same together with any interest that may have accrued and all expenses that

may have been incurred by the Company by reason of such non-payment.

FORM OF NOTICE

52) The notice shall name a day (not being less than fourteen days from the date of the notice) and

a place or places on and at which such call or instalment and such interest thereon at such rate

as the Directors shall determine from the day on which such call or instalment ought to have

been paid and express as aforesaid are to be paid. The notice shall also state that, in the event

of the non-payment on or before the time and at the place appointed, the shares in respect of

which the call was made or instalment is payable, will be liable to be forfeited.

IN DEFAULT OF PAYMENT SHARES OR DEBENTURES TO BE FORFEITED

53) If the requirements of any such notice as aforesaid shall not be complied with, every or any

share in respect of which such notice has been given, at any time thereafter, but before

payment of all calls or instalments, interest and expenses due in respect thereof, be forfeited by

a resolution of the Board to that effect. Such forfeiture shall include all dividends declared or any

other moneys paid before the forfeiture.

ENTRY OF FORFEITURE IN REGISTER OF MEMBERS/DEBENTURES HOLDERS

54) When any share shall have been so forfeited, notice of the forfeiture shall be given to the

Member in whose name it stood immediately prior to the forfeiture, and an entry of the forfeiture,

with the date thereof, shall forthwith be made in the Register of Members, but no forfeiture shall

be in any manner invalidated by any omission or neglect to give such notice or to make any

such entry as aforesaid.

FORFEITED SHARE/DEBENTURES TO BE PROPERTY OF COMPANY AND MAY BE SOLD

55) Any share so forfeited shall be deemed to be the property of the Company and may be sold,

reallotted or otherwise disposed off, either to the original holder thereof or to any other person,

upon such terms and in such manner as the Board think fit.

SHAREHOLDERS STILL LIABLE TO PAY MONEY OWING AT TIME OF FORFEITURE AND

INTEREST

56) Any Member whose shares have been forfeited shall notwithstanding the forfeiture, be liable to

pay and shall forthwith pay to the Company on demand all calls, instalments, interest and

expenses owing upon or in respect of such shares at the time of the forfeiture until payment, at

such as the Board may determine and the Board may enforce the payment thereof, if it thinks fit.


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EFFECT OF FORFEITURE

57) The forfeiture of a share shall involve extinction at the time of the forfeiture, of all interest in and

all claims and demands against the Company, in respect of the share and all other rights

incidental to the share, except only such of those rights as by these Articles are expressly

saved.

CERTIFICATE OF FORFEITURE

58) A declaration in writing that the declarant is a Director or Secretary of the Company and that a

share in the Company has been duly forfeited in accordance with these Articles on a date stated

in the declaration, shall be conclusive evidence of the facts therein stated as against all persons

claiming to be entitled to the share.

VALIDITY OF SALES

59) Upon any sale after forfeiture or for enforcing a lien in purported exercise of the powers herein

before given, the Board may appoint some person to execute an instrument of transfer of the

shares sold and cause the purchaser's name to be entered in the Register of Members in

respect of the shares sold, and the purchaser shall not be bound to see to the regularity of the

proceedings, or to the application of the purchase money, and after his name has been entered

in the Register of Members in respect of such shares, the validity of the sale shall not be

impeached by any person and the remedy of any person aggrieved by the sale be in damages

only and against the Company exclusively.

CANCELLATION OF SHARE CERTIFICATE IN RESPECT OF FORFEITED SHARES

60) Upon any sale, re-allotment or other disposal under the provisions of the preceding Articles, the

certificate or certificates originally issued in respect of the relative shares shall (unless the same

shall on demand by the Company have been previously surrendered to it by the defaulting

Member) stand cancelled and become null and void and of no effect, and the Directors shall be

entitled to issue a duplicate certificate or certificates in respect of the said shares to the persons

or persons entitled thereto.

61) The Board may at any time before any share so forfeited shall have been so sold, re-allotted or

otherwise disposed off, annul the forfeiture thereof upon such conditions, as it thinks fit.

TRANSFER AND TRANSMISSION OF SHARES

REGISTER OF TRANSFERS

62) The Company shall keep a "Register of Transfers" and therein shall be fairly and distinctly

entered particulars of every transfer or transmission of any share.

INSTRUMENT OF TRANSFER

63) The instrument of transfer shall be in writing and all the provisions of section 108 of the Act and

of any statutory modification thereof for the time being shall be duly complied with in respect of

all transfers of shares and registration thereof.

64) The instrument of transfer duly stamped and executed by the transferor and the transferee shall

be delivered to the Company in accordance with the provisions of the Act. The instrument of

transfer shall be accompanied by such evidence as the Board may require to prove the title of

transferor and his right to transfer the shares, and every registered instrument of transfer shall

remain in the custody of the Company until destroyed by order of the Board. The transferor shall

be deemed to be the holder of such shares until the name of the transferee shall have been


84

entered in the Register of Members in respect thereof. Before the registration of a transfer, the

certificate or certificates of the shares must be delivered to the Company.

DIRECTORS MAY REFUSE TO REGISTER TRANSFER

65) Subject to the applicable statutory provisions of the Act, the Board of Directors may refuse

whether in pursuance of any power of the Company under the Articles or otherwise to register

the transfer of, or the transmission by operation of law or the right to any shares or interest of a

member in, or any security of the Company, the Company shall within one month from the date

on which the instrument of transfer, or the intimation of such transmission, as the case may be,

was delivered to the Company, send notice of the refusal to the transferee and the transferor or

to the person giving intimation of such transmission, as the case may be, giving reasons for

such refusal.

Provided that registration of a transfer shall not be refused on the ground that the transferor

being either alone or jointly with any person or persons is indebted to the Company on any

account whatsoever, except the outstanding allotment/call money/any interest on the same.

66) Where, in the case of partly paid shares, an application for registration is made by the

transferor, the Company shall give notice of the application to the transferee in accordance with

the provisions of the Act.

TRANSMISSION OF SHARES

70) Subject to the provisions of these presents, any person becoming entitled to shares in

consequence of death, lunacy, bankruptcy, or insolvency of any Member, or by any lawful

means other than by a transfer in accordance with these Articles may, with the consent of the

Board (which it shall not be under any obligation to give) upon producing such evidence that he

sustains the character in respect of which he proposes to act under the Article, or such title, as

the Board thinks sufficient, either be registered himself as the holders of the shares or elect to

have some person nominated by him as approved by the Board registered as such holder;

provided, nevertheless, that if such person shall elect to have his nominee registered, he shall

testify the election by executing in favour of his nominee as instrument of transfer in accordance

with the provisions herein contained, and until he does so, he shall not be freed from any liability

in respect of the shares.

71) The Board shall have the same right to refuse to register a person entitled by transmission to

any shares or his nominees as if he were the transferee named in the case of a transfer of

shares presented for registration.

PERSONS ENTITLED MAY RECEIVE DIVIDEND WITHOUT BEING REGISTERED AS MEMBER

74) A person entitled to a share by transmission shall, subject to the right of the Directors to retain

such dividend or money as herein provided, be entitled to receive, and may give a discharge for

any dividend or money as herein provided, be entitled to receive, and may give a discharge for

any dividend or other moneys payable in respect of such share.

75) No fee shall be charged for the registration of a transfer or transmission of any share.

THE COMPANY NOT LIABLE FOR DISREGARD OF A NOTICE PROHIBITING REGISTRATION OF

TRANSFER

76) The Company shall incur no liability or responsibility whatsoever in consequence of its

registering or giving effect to any transfer of shares made or purporting to be made by any

apparent legal owner thereof (as shown or appearing in the Register of Members) to the

prejudice of persons having or claiming any equitable right, title of interest to or in the said


85

shares, notwithstanding the Company may have had notice of such equitable right, title or

interest or notice prohibiting registration of such transfer and may have entered such notice, or

referred thereto, in any book of the Company; and the Company shall not be bound or required

to regard or attend or give effect to any notice which may be given to it of any equitable right,

title or interest, or be under any liability whatsoever for refusing or neglecting so to do, though it

may have been entered or referred to in some books of the Company, but the Company shall

nevertheless be at liberty to regard and attend to any such notice and give effect thereof, if the

Board shall so think fit.

POWER TO ISSUE SHARE WARRANTS

77) Subject to the provisions of Section 114 and 115 of the Act and subject to any directions which

may be given by the Company in General Meeting, the Board may issue share-warrants in such

manner and on such terms and conditions as the Board may deem fit. In case of such issue

Regulations 40 to 43 of table "A" in Schedule 1 to the Act, shall apply.

COPIES OF MEMORANDUM AND ARTICLES TO BE SENT TO MEMBERS

78) Copies of the Memorandum and Articles of Association of the Company and other document

referred to in Section 39 of the Act shall be sent by the Company to every member at his

request within seven days of the request on payment of such sum as may be prescribed by the

Act for each copy.

BORROWING POWERS

79) Subject to the provisions of Section 58A, 292, 293 and other applicable provisions of the Act,

the Board may, from time to time at its discretion, by a resolution passed at a meeting of the

Board, accept deposits from Members, either in advance of calls or otherwise and generally

raise or borrow or secure the payment of any sum or sums of money for the purpose of the

Company.

80) Subject to the provisions of these presents, the payment or repayment of moneys borrowed as

aforesaid may be secured in such manner and upon such terms and conditions in all respects

as the Board may think fit, by resolution passed at the meeting of the Board (but not by

circulation) and in particular, by the issue of bonds, debentures, debenture stock or other

security of the Company either unsecured or secured by a mortgage or charge over all or any

part of the property of the Company (both present or future) including its uncalled capital for the

time being, and debentures, debenture-stock, bonds and other securities may be made

assignable, free from any equities between the Company and the person to whom the same

may be issued.

81) Any debentures, debenture-stock, loan stock or other securities may be issued at a discount,

premium or otherwise and may be issued on condition that they shall be convertible into shares

of any denomination, and with any privileges and conditions as to redemption, surrender,

drawing, allotment of shares and attending (but not voting) at General Meeting, appointment of

Director and otherwise. Debenture with the right to conversion into or allotment of shares shall

be issued only with the consent of the Company in General Meeting accorded by a Special

Resolution.

82) The Board shall cause a proper Register to be kept in accordance with the provisions of the Act,

of all mortgages, debentures and charges specifically affecting the property of the Company;

and shall cause the statutory requirements of the Act in that behalf to be duly complied with, so

far as they are required to be complied with by the Board.


86

83) The Company shall, if at any time it issues debentures, keep a Register and Index of

Debenture-holder in accordance with Section 152 of the Act. The Company shall have the

power to keep in any state or country outside India a branch Register of debenture-holders

resident in that state or country.

84) Debenture, debenture stock and other securities of the Company shall be transferable,

transmitted and consolidated in the same manner and to the same extent and be subject to the

same restrictions and limitations as in the case of shares in the Company and the provision

contained in these Articles of Association relating to transfer and transmission, split and

consolidation of shares, shall apply mutates mutandis, to the transfer and transmission, split and

consolidation of debentures and debenture-stock.

MEETINGS OF THE MEMBERS

87) The Company shall in each year hold a General Meeting as its Annual General Meeting in

addition to any other meeting in that year. All General Meetings other than Annual General

Meeting shall be called Extra-Ordinary General Meetings. An Annual General Meeting shall be

held within six months after the expiry of each Financial Year. Provided that not more than

fifteen months shall elapse between the date of one Annual General Meeting and that of the

next. Nothing contained in the foregoing provisions shall be taken as affecting the right

conferred upon the Registrar under the provisions of the Act extend the time within which any

Annual General Meeting may be held. Every Annual General Meeting shall be called for a time

during business hours, on a day that is not a public holiday, and shall be held at such place as is

permissible by the Act and as the Board may determine. The notice calling the meeting shall

specify it as the Annual General Meeting. Every member of the Company shall be entitled to

attend either in person or by proxy and the Auditor of the Company shall have the right to attend

and to be heard at any General Meeting which he attends on any part of the business which

concerns him as Auditor. At every Annual General Meeting of the Company there shall be laid

on the table the Directors' Report and Audited Statement of Accounts, Auditors' Report (if not

already incorporated in the Audited statement of Accounts) and the Register of Directors'

Shareholdings which register shall remain open and accessible during the continuance of the

Meeting.

POWERS OF DIRECTOR’S TO CALL EXTRA ORDINARY GENERAL MEETING AND CALLING

OF EXTRA ORDINARY GENERAL MEETING ON REQUISITION

88) The Board may, whenever it thinks fit, call an Extra-Ordinary General Meeting and it shall do so

upon a requisition in writing by Member or Members holding in the aggregate not less than the

prescribed proportion of the paid-up Capital as at that carries the right of voting in regard to the

matter in respect of which the requisition has been made.

89) Any valid requisition so made by Member or Members must state the object or objects of the

Meeting proposed to deposit at the office PROVIDED that such requisition may consist of

several documents in like form, each signed by one or more requisitionists.

90) Upon receipt of any such requisition, the Board shall forthwith call an Extra-Ordinary General

Meeting, and if they do not proceed within 21 days from the date of the requisition being

deposited at the Office, to cause meeting to be so called on a day not latter than forty-five days

from the date of deposit of the requisition the requisitionist, or such of their number as represent

either a majority in value of the paid-up share capital held by all of them or not less than one-

tenth of such of the paid-up share capital of the Company as is referred to in Section 169 (4) of

the Act, whichever is less, may themselves call the meeting, but in either case any meeting so


87

called shall be held within three months from the date of the deposit of the requisition as

aforesaid.

91) Any Meeting called under the foregoing Articles by the requisitionist shall be called in the same

manner, as nearly as possible, as that in which meetings are to be called by the Board.

QUORUM FOR MEETING

96) Five Members present in person shall be quorum for a General Meeting.

97) A body corporate being a Member shall be deemed to be personally present if it is represented

in accordance with Section 187 of the Act.

IF QUORUM NOT PRESENT MEETING TO BE DISSOLVED OR ADJOURNED

98) If, at the expiration of half an hour from the time appointed for holding a meeting of the

Company, a quorum shall not be present, the meeting, if convened by or upon the requisition of

members, shall stand dissolved, but in any other case the meeting shall stand adjourned to the

same day in the next week or if that day is a public holiday, until the next succeeding day which

is not a public holiday at the same time and place or to such other day and at such other time

and place in the city or town in which the office of the Company is for the time being situate, as

the Board may determine, and if at such adjourned meeting a quorum is not present at the

expiration of half an hour from the time appointed for holding the meeting, the Members present

shall be a quorum and may transact the business for which the meeting was called.

CHAIRMAN OF GENERAL MEETING

99) The Chairman (if any) of the Board shall be entitled to take the chair at every General Meeting,

whether Annual or Extra- Ordinary. If there be no such Chairman of the Board or if at any

meeting he shall not be present within fifteen minutes of the time appointed for holding such

meeting or if he shall be unable or unwilling to take the chair, then the Members present shall

elect another Director as Chairman, and if no Director be present or if all the Directors present

decline to take the chair, then the members present shall select one of them to be Chairman.

DEMAND FOR POLL

102) Before or on the declaration of the result of the voting on any resolution on a show of hands, a

poll may be ordered to be taken by the Chairman of the meeting of his own motion, and shall be

ordered to be taken by him on a demand made in that behalf by any member or members

present in person or by proxy and holding shares in the Company to the extent prescribed.

103) The demand for a poll may be withdrawn at any time by the person or persons who made the

demand. Unless a poll is demanded, a declaration by the chairman that a resolution has on a

show of hands, been carried or carried unanimously or by a particular majority, or lost and on

entry to that effect in the Minute Book of the Company shall be conclusive evidence recorded in

favour of or against that resolution.

CASTING VOTE

104) In the case of an equality of votes, the Chairman shall both on a show of hands and at a poll (if

any), have a casting vote in addition to the vote or votes to which he may be entitled as a

Member.

TIME OF TAKING POLL

105) If a poll is demanded as aforesaid, the same shall, subject to any provisions of these presents,

be taken at such time (not later than forty-eight hours from the time when the demand was


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made) and place in the city or town in which the Office of the Company is for the time being

situate, and either by open voting or by ballot, as the Chairman shall direct, and either at once or

after an interval or adjournment, or otherwise, and the result of the poll shall be deemed to be

the resolution of the meeting at which the poll was demanded. The demand for a poll may be

withdrawn at any time by the person or persons who made the demand.

SCRUTINEERS AT POLL

106) Where a poll is to be taken, the Chairman of the meeting shall appoint two scrutineers to

scrutinise the votes given on the poll and to report thereto, to him. One of the scrutineers so

appointed shall always be a Member (not being an officer or employee of the Company) present

at the meeting, provided such a Member is available and willing to be appointed. The Chairman

shall have power at any time before the result of the poll is declared to remove a scrutineer from

office and fill vacancies from such removal or from any other cause.

107) Any poll duly demanded on the election of a Chairman of a meeting or any question of

adjournment shall be taken at the meeting forthwith.

108) The demand for a poll except on the question of the election of the Chairman and of an

adjournment shall not prevent the continuance of a meeting for the transaction of any business

other than the question on which the poll has been demanded.

VOTES OF MEMBERS

RESTRICTIONS ON EXERCISE OF VOTING RIGHTS OF MEMBERS WHO HAVE NOT PAID

CALLS

109) No Member shall be entitled to vote either personally or by proxy at any General Meeting or

Meetings of a class of shareholders either upon a show of hands or upon a poll in respect of any

shares registered in his name on which any calls or other sums presently payable by him have

not been paid or in regard to which the Company has, and has exercised, any right of lien.

110) Subject to the provisions of these Articles and without prejudice to any special privileges or

restrictions as to voting for the time being attached to any class of shares for the time being

forming part of the Capital of the Company, every Member, who is not otherwise disqualified,

shall be entitled to be present, and to speak and vote at such meeting, and on a show of hands,

every Member present in person shall have one vote and upon a poll, voting right of every

Member present in person or by proxy shall be in proportion to his share of the paid-up equity

share capital of the Company. Provided, however, a preference Shareholder of the Company,

save as provided in clause (b) of sub-section (2) of Section 87 or other applicable provisions of

the Act, shall have a right to vote only on resolutions placed before the meeting which directly

affect the rights attached to his preference shares.

111) On a poll taken at a meeting of the Company, a Member entitled to more than one vote, or his

proxy or other person entitled to vote for him, as the case may be, need not, if he votes, use all

his votes or cast in the same way all the votes he uses.

112) A member of unsound mind or in respect of whom an order has been made by any Court having

jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee or

other legal guardian; and any such committee or guardian may, on poll vote by proxy. If any

member be a minor, the vote in respect of his share or shares shall be by his guardian, or any

one of his guardians, if more than one, to be selected in case of dispute, by the Chairman of the

meeting.

113) If there be joint registered holders of any shares, any one of such persons may vote at any

meeting or may appoint another person (whether a member or not) as his proxy in respect of

such shares, as if he were solely entitled thereto, but the proxy so appointed shall not have any


89

right to speak at the meeting and, if more than one of such joint-holders be present at any

meeting, that one of the said persons so present whose name stands higher on the Register of

Members shall alone be entitled to speak and to vote in respect of such shares, but the other or

others of the joint-holders shall be entitled to be present at the meeting. Several executors or

administrators of a deceased Member, in whose name shares stand shall for the purpose of

these Articles be, deemed joint-holders thereof.

PROXIES

114) Subject to the provisions of these Articles, votes may be given either personally or by proxy. Any

member of the Company entitled to attend and vote at a meeting of the Company shall be

entitled to appoint any other person (whether a member or not) as his proxy to attend and vote

instead of himself. A member (and in the case of joint holders all holders) shall not appoint more

than one person as proxy. A proxy so appointed shall not have any right to speak at the

meeting.

REPRESENTATION OF BODY CORPORATE

115) A body corporate being a member may vote either by a proxy or by a representative duly

authorised in accordance with the provisions of the Act and such representative shall be entitled

to exercise the same rights and powers (including the right to vote by proxy) on behalf of the

body corporate which he represents as that body could exercise if it were an individual Member.

116) Any person entitled to any share upon transmission or nomination may vote at any General

Meeting in respect thereof in the same manner as if he were the registered holder of such

shares, provided that at least forty-eight hours before the time of holding the meeting or

adjourned meeting, as the case may be, at which he proposes to vote, he shall satisfy the

Directors of his right to transfer such shares and give such indemnity (if any) as the Directors

may require or the Directors shall have previously admitted his right to vote at such meeting in

respect thereof.

117) Every proxy (whether a Member or not) shall be appointed in writing under the hand of the

appointor or his attorney, or if such appointor is a Corporation, under the common seal of such

Corporation, or be signed by an officer or any attorney duly authorised by it, and any committee

or guardian may appoint such proxy. The proxy so appointed shall not have any right to speak

at the meeting.

118) An instrument of proxy may appoint a proxy either for the purpose of a particular meeting

specified in the instrument and any adjournment thereof, or of every meeting to be held before a

date specified in the instrument and every adjournment of any such meeting.

119) A Member present by proxy shall be entitled to vote only on a poll.

120) The instrument appointing a proxy and the power of attorney or other authority (if any), under

which it is signed or a notarised certified copy of that power of authority, shall be deposited at

the office not later than forty-eight hours before the time for holding the meeting at which the

person named in the instrument proposes to vote, and in default the instrument of proxy shall

not be treated as valid.

121) Every instrument of proxy whether for a specified meeting or otherwise shall, as nearly as

circumstances will admit, be in any of the forms set out in the Act.

122) A vote given in accordance with the terms of an instrument of proxy shall be valid

notwithstanding the previous death or insanity of the principal, or revocation of the proxy or of

any power of attorney under which such proxy was signed, or the transfer of the share in

respect of which the vote is given, provided that no intimation in writing of the death or insanity,

revocation or transfer shall have been received at the office before the meeting.


90

123) No objection shall be made to the validity of any vote, except at any meeting or poll at which

such vote shall be tendered, and every vote whether given personally or by proxy, not

disallowed at such meeting or poll shall be deemed valid for all purposes of such meeting or poll

whatsoever.

SITTING FEES AND OTHER EXPENDITURE PAYABLE TO DIRECTORS

144) The fees payable to the Directors for attending a meeting of the Board or a Committee thereof

shall be such sum, as shall be prescribed by law or by the Central Government from time to

time. The Company may allow and pay to any Director such reasonable expenditure as may

have been incurred by him or such sum as may be considered fair and reasonable for attending

such meetings.

QUALIFICATION SHARES

147) A Director shall not be required to hold any shares in the Company to qualify for the office of a

Director of the Company.

MANAGING DIRECTOR(S) AND WHOLE-TIME DIRECTOR(S)

169) Subject to the applicable provisions of the Act and of these Articles, the Board shall have power

to appoint from time to time any of its numbers as Managing Director or Managing Directors of

the Company for a fixed term not exceeding five years at a time and upon such terms and

conditions as the Board thinks fit, and subject to the provisions of these presents, the Board

may by a resolution vest in such Managing Director or Managing Directors such of the powers

hereby vested in the Board generally as it thinks fit and such powers may be made exercisable

for such period or periods upon such conditions and subject to such restrictions as it may

determine. The remuneration of a Managing Director or Managing Directors may be by way of

monthly payment, participation in profits or by any other mode not expressly prohibited by the

Act. Subject to the provisions of the Act, a Managing Director shall not, while he continues to

hold that office, be subject to retirement by rotation and he shall not be reckoned as a Director

for any purpose of determining the rotation of retirement of Directors or in fixing the number of

Directors to retire, but (subject to the provisions of any contract between him and the Company)

he shall be subject to the same provisions as to resignation and removal as the other Directors

and he shall, ipso facto and immediately cease to be a Managing Director if he ceases to hold

the office of Director from any cause.

170) Subject to the applicable provisions of the Act and of these Articles, the Board shall have power

to appoint from time to time any of its number as whole-time Director or whole-time Directors of

the Company for a fixed term not exceeding five years at a time and upon such terms and

conditions as the Board thinks fit, and subject to the provisions of these presents the Board may

by resolution, vest in such Whole-time Director or Whole-time Directors such of the powers

hereby vested in the Board generally as it thinks fit, and such powers may be made exercisable

for such period or periods, and upon such conditions and subject to such restrictions as it may

determine. The remuneration of Whole-time Director or Whole-time Directors may be by way of

monthly payment, fee for each meeting or participation in profits, or by any or all of these

modes, or any other mode not prohibited by the Act.

171) The Managing Director or Managing Directors or Whole-time Director or Whole-time Directors

shall not exercise the powers to:

(i) make calls on shareholders in respect of money unpaid on the shares in the Company.

(ii) issue debentures;


91

and except to the extent mentioned in the resolution passed at the Board Meeting under Section

292 of the Act.

(iii) borrow moneys, otherwise than on debentures;

(iv) invest the funds of the Company; and

(v) make loans.

172) Subject to the provisions of the Act, the Company shall not appoint or employ, or continue the

appointment or employment of, a person as its Managing Director or Whole-time Director who -

(i) is an undischarged insolvent or has at any time been adjudged an insolvent;

(ii) suspends, or has at any time suspended payment to its creditors or makes, or has at any

time made a composition with them; or

(iii) is, or has at any time been, convicted by a Court of any offence involving moral turpitude.

173) A Managing Director or Whole-time Director shall ipso facto and immediately cease to be a

Managing Director or Whole-time Director if he ceases to hold the office of a Director.

POWERS OF DIRECTORS

CERTAIN POWERS TO BE EXERCISED BY THE BOARD ONLY AT MEETING

189) (a) Without derogating from the powers vested in the Board of Directors under these Articles,

the Board shall exercise the following powers on behalf of the Company and they shall do so

only by means of resolutions passed at meetings of the Board.

(i) The power to make calls on shareholders in respect of money unpaid on their shares

(ii) The power to issue debenture

(iii) The power to borrow moneys otherwise than on debentures

(iv) The power to invest the funds of the Company and

(v) The power to make loans

Provided that the Board may be resolution passed at the meeting, delegate to any committee of

Directors, the Managing Director, the Manager or any other principal officer of the Company or

in the case of a branch office of the Company, a principal officer of the branch office, the powers

specified in sub-clauses (iii), (iv) and (v) to the extent specified in clauses (b), (c) and (d)

respectively on such condition s the Board may prescribe.

(b) Every resolution delegating the power referred to in sub-clause (iii) of clause (a) shall specify

the total amount outstanding at any one time upto which moneys may be borrowed by the

delegate.

(c ) Every resolution delegating the power referred to in sub-clause (iv) of clause (a) shall

specify the total amount upto which the funds of the Company may be invested and the nature

of the investments which may be made by the delegate.

(d) Every resolution delegating the power referred to in sub-clause (v) of the clause (a) shall

specify the total amount upto which loans may be made by the delegates, the purpose for which

the loans may be made and the maximum amount upto which loans may be made for each

such purpose in individual cases.

(e) Nothing in this Article shall be deemed to affect the right of the Company in general Meeting

to impose restrictions and conditions on the exercise by the Board of any of the powers referred

to in sub-clauses (i), (ii), (iii), (iv) and (v) of clause (a) above.

RESTRICTIONS ON POWERS OF BOARD

190) The Board shall not, except with the consent of the Company in General Meeting:-

(i) sell, lease or otherwise dispose off the whole, or substantially the whole, of the

undertaking of the Company, or where the Company owns more than one undertaking of

the whole, or substantially the whole of any such undertaking;


92

(ii) remit, or give time for the repayment of, any debt due by a Director;

(iii) invest otherwise than in trust securities, the amount of compensation received by the

Company in respect of the compulsory acquisition of any such undertaking as is referred

to in clause (a), or of any premises or properties used for any such undertaking and

without which it cannot be carried on or can be carried on only with difficulty or only after a

considerable time;

(iv) borrow moneys, where the moneys to be borrowed together with the moneys already

borrowed by the Company (apart from temporary loans obtained from the Company's

bankers in the ordinary course of business) will exceed the aggregate of the paid-up

capital of the Company and its free reserves, that is to say, reserves not set apart for any

specific purpose. Provided further that the powers specified in Section 292 of the Act shall,

subject to these Articles, be exercised only at meetings of the Board, unless the same be

delegated to the extent therein stated; or

(v) contribute to charitable and other funds not directly relating to the business of the

Company or the welfare of its employees, any amounts the aggregate of which will, in any

financial year exceed fifty thousand rupees or five percent of its average net profits as

determined in accordance with the provisions of the Act during the three financial years

immediately preceding, whichever is greater.

GENERAL POWERS OF THE COMPANY VESTED IN DIRECTORS

191) The Board may exercise all such powers of the Company and do all such acts and things as are

not, by the Act, or any other Act or by the Memorandum or by the Articles of the Company

required to be exercised by the Company in General Meeting; subject nevertheless to these

Articles, the provisions of the Act, or any other Act or to any regulations being not inconsistent

therewith, as may be prescribed by the Company in General Meeting but no regulation made by

the Company in General Meeting shall invalidate any prior act of the Board which would have

been valid if that regulation had not been made.

192) Without prejudice to the general powers conferred by the preceding Articles and so as not in any

way limit or restrict those powers, and without prejudice to the other powers conferred by these

Articles, but subject to the restrictions contained in the last preceding Article, it is hereby

declared that the Directors shall have the following powers, that is to say, power :-

TO MORTGAGE, CHARGE PROPERTY

(i) At their discretion and subject to the provisions of the Act to pay for any property, rights or

privileges acquired by or services rendered to the Company, either wholly or partially in

cash or in shares, bonds, debentures, loan, stocks, mortgages, or other securities of the

Company, and any such shares may be issued either as fully paid up or with such amount

credited as paid up thereon, as may be agreed upon and any such bonds, debentures,

loan stocks , mortgages or other securities may be either specifically charged upon all or

any part of the property of the Company and its uncalled capital or not so charged.

(ii) To secure the fulfilment of any contracts or engagements entered into by the Company by

mortgage or charge of all or any of the property of the Company and its uncalled capital for

the time being or in such manner as they may think fit.

DIVIDENDS

DIVISION OF PROFITS

198) The profits of the Company, subject to any special rights relating thereto created or authorised

to be created by these Articles, and subject to the provisions of the Act and of these Articles,


93

shall be divisible among the members in proportion to the amount of capital paid-up or credited

as paid-up on the shares held by them respectively.

199) The Company in General Meeting may declare dividends to be paid to Members according to

their respective rights, but no dividends shall exceed the amount recommended by the Board,

but the Company in General Meeting may declare a smaller dividend.

DIVIDENDS ONLY TO BE PAID OUT OF PROFITS

200) No dividend shall be declared or paid otherwise than out of profits of the Financial year arrived

at after providing for the depreciation in accordance with the provisions of the Act or out of the

profits of the Company for any previous financial year or years arrived at after providing for

depreciation in accordance with these provisions and remaining undistributed or out of both.

Provided that:

(i) If the Company has not provided for depreciation for any previous financial year or years it

shall, before declaring or paying a dividend for any financial year, provide for such

depreciation out of the profits of the financial year, or out of the profits of any other

previous year or years.

(ii) If the Company has incurred any loss in any previous financial year or years, the amount

of the loss or an amount which is equal to the amount provided for depreciation for that

year or those years, whichever is less, shall be set off against the profits of the Company

for the year for which the dividend is proposed to be declared or paid or against the profits

of the Company for any previous financial year or yeas arrived at in both cases after

providing for depreciation in accordance with the provisions of sub-section (2) of Section

205 of the Act or against both.

(iii) Notwithstanding anything contained herein, no dividend shall be declared or paid by the

Company for any financial year out of profits of the Company for that year arrived at after

providing for depreciation in accordance with the provisions of Section 205 of the Act,

except after the transfer to the reserves of the Company of such percentage of its profits

for that year, not exceeding ten percent , as may be prescribed. Provided that nothing in

this sub-clause shall be deemed to prohibit the voluntary transfer by the Company of a

higher percentage of its profits to the reserves in accordance with the prescribed rules in

this behalf.

(iv) Where, owing to inadequacy or absence of profits in any year, the Company proposes to

declare dividend out of the accumulated profits earned by the Company in previous years

and transferred by it to the reserves, such declaration of dividend shall not be made

except in accordance with prescribed rules in this behalf, and, where any such declaration

is not in accordance with the prescribed rules, such declaration shall not be made except

with the previous approval of the appropriate authority.

INTERIM DIVIDENDS

201) Subject to the provisions of the Act, the Board may, from time to time, pay to the Members such

interim dividend as in their judgement the position of the Company justifies.

CAPITAL PAID UP IN ADVANCE WILL NOT CARRY DIVIDEND

202) Where capital is paid in advance of calls, such capital may carry interest but shall not in respect

thereof confer a right to dividend or participate in profits.


94

DIVIDENDS IN PROPORTION TO AMOUNT PAID UP

203) All dividends shall be apportioned and paid proportionately to the amounts paid or credited as

paid on the shares during any portion or portions of the period in respect of which the dividend is

paid; but if any share is issued on terms providing that it shall rank for dividend as from a

particular date, such share shall rank for dividend accordingly.

204) Subject to the provisions of the Act, the Board may retain the dividends payable upon shares in

respect of which any person is under any provisions of these presents is entitled to transfer, until

such person shall become a Member in respect of such shares or shall duly transfer the same.

DIVIDEND TO JOINT HOLDERS

205) Any one of several persons who are registered as the joint holders of any share may give

effectual receipt for all dividends or bonus and payments on account of dividends or bonus or

other moneys in respect of such shares.

DEBT MAY BE DEDUCTED FROM DIVIDEND

206) No Member shall be entitled to receive payment of any interest or dividend in respect of his

share or shares, while any money may be due owing from him to the Company in respect of

such share or otherwise, howsoever, either alone or jointly with any other person or persons and

the Board may deduct from the interest or dividend payable to any Member all sums of moneys

so due from him to the Company.

207) A transfer of shares shall not pass the right to any dividend declared thereon before the

registration of the transfer.

208) Where any instrument of transfer of shares has been delivered to the Company for registration

and the transfer of such shares has not been registered by the Company, it shall:

(i) transfer the dividend in relation to such shares to the Special Account referred to in

Section 205A of the Act unless the Company is authorised by the registered holder of such

shares in writing to pay such dividend to the transferee specified in such instrument of

transfer and

(ii) keep in abeyance in relation to such shares any offer of rights shares under clause (a) of

sub-section (1) of Section 81 and any issue of fully paid-up bonus shares in pursuance of

sub-section (3) of Section 205 of the Act.

DIVIDEND HOW REMITTED

209) Unless otherwise directed, any dividend may be paid by cheque or warrant or by a payslip or

receipt having the force of the cheque or warrant sent through the post to the registered address

of the Member or person entitled or in case of joint-holders to that one of them first named in the

Register of members in respect of joint-holding. Every such cheque or warrant shall be made

payable to the order of the person to whom it is sent. The Company shall not be liable or

responsible for any cheque or warrant or payslip or receipt lost in transmission, or for any

dividend lost to the Member or person entitled thereto by the forged endorsement of any cheque

or warrant or the forged signature of any payslip or receipt or the fraudulent recovery of the

dividend by any other means.

UNPAID DIVIDEND WILL NOT CARRY INTEREST

210) Subject to the provisions of the Act, no unpaid dividend shall bear interest as against the

Company.

211) Where a dividend has been declared by the Company but has not been paid or claimed within

such time as may be prescribed from the date of declaration to any shareholder entitled to the


95

payment of the dividend, the Company shall deal with the same in the manner as directed by

the Act.

212) In the above para, the expression "dividend which remains unpaid" shall mean any dividend the

warrant in respect whereof has not been encashed or which has otherwise not been paid or

claimed.

213) Any General Meeting declaring a dividend may, on the recommendation of the Directors make a

call on the Members of such amount as the meeting fixes, but so that the call on each Member

shall not exceed the dividend payable to him and so that the call be made payable at the same

time as the dividend, and the dividend may, if so arranged between the Company and the

member, to set off against the calls.

CAPITALISATION OF PROFITS AND RESERVES

214) The Company in general meeting may resolve that any moneys, investments or other assets

forming part of the undivided profits of the Company standing to the credit of the Reserve Fund,

or any Capital Redemption Reserve Account, or in the hands of the Company and available for

dividend (or representing premium received on the issue of shares and standing to the credit of

the Share Premium Account) or other reserves or funds permissible for this purpose be

capitalised and distributed amongst such of the shareholders as would be entitled to receive the

same if distributed by way of dividend and in the same proportions on the footing that they

become entitled thereto as capital and that all or any part of such capitalised fund be applied on

behalf of such shareholders in paying up in full either at par or at such premium as the

Resolution may provide, any unissued shares or debentures or debenture-stock of the Company

which shall be distributed accordingly or in or towards payment of the uncalled liability on any

issued shares or debentures or debenture-stock and that such distribution or payment shall be

accepted by such shareholders in full satisfaction of their interest in the said capitalised sum.

Provided that a Share Premium Account and a Capital Redemption Reserve Account may, for

the purpose of this Article, only be applied in the paying of any unissued shares to be issued to

Members of the Company as fully paid bonus shares.

215) A General Meeting may resolve that any surplus moneys arising from the realising of any capital

assets of the Company, or any investments representing the same, or any other undistributed

profits of the Company not subject to charge for income-tax be distributed amongst the

members on the footing that they receive the same as capital.

216) For the purpose of giving effect to any relevant resolution under the above Articles the Board

may settle any difficulty which may arise in regard to the distribution as it thinks expedient, and

in particular may issue fractional certificates, and may fix the value for distribution of any specific

assets, and may determine that such cash payments shall be made to any Member upon the

footing of the value so fixed or that fraction of less value than Rs. 10/- may be disregarded in

order to adjust the rights of all parties, and may vest any such cash or specific assets in trustees

upon such trusts for the person entitled to the dividend or capitalised fund as may seem

expedient to the Board. Where required, a proper contract shall be delivered to the Registrar for

registration in accordance with the provisions of the Act, and the Board may appoint any person

to sign such contract on behalf of the persons entitled to the dividend or capitalised fund, and

such appointment shall be effective.

WINDING UP

234) The liquidator on any winding-up (whether voluntary, under supervision or compulsory) may,

with the sanction of a Special Resolution, but subject to the rights attached to any preference

share capital, divide among the contributories in specie any part of the assets of the Company


96

and may, with the like sanction, vest any part of the assets of the Company in trustees upon

such trusts for the benefit of the contributories, as the liquidator, with like sanction shall think fit.

INDEMNITY AND RESPONSIBILITY

235) (a) Subject to the provisions of Section 201 of the Act, every Director, Managing Director,

Wholetime Director, Manager, Secretary and other officer or employee of the Company shall

be indemnified by the Company against and it shall be the duty of the Directors, out of the

Funds of the Company to pay all costs, losses and expenses (including travelling expenses)

which such Director, Manager, Secretary and Officer or employee may incur or become liable

to by reason of any contract entered into or act or deed done by him as such Director,

Manager, Secretary, Officer of Servant or in any way in the discharge of his duties including

expenses and the amount for which such indemnity is provided, shall immediately attach as a

lien on the property of the Company and have priority between the members over all other

claims.

(b) Every officer or agent for the time being of the Company shall be indemnified out of the

assets of the Company against all liability incurred by him in defending any proceedings,

whether civil or criminal, in which judgement is given in his favour or in which he is acquitted

or discharged or in connection with any application under section 633 or other applicable

provisions of the Act in which relief is granted to him by the Court or other Appropriate

Authority.

INSPECTION OF REGISTERS ETC.

236) Where under any provisions of the Act any person, whether a Member of the Company or not, is

entitled to inspect any register, return, certificate, deed, instrument or document required to be

kept or maintained by the Company, the person so entitled to inspection shall be permitted to

inspect the same during business hours, for such periods not being less in the aggregate than

two hours in each day as the Directors may determine.

SECRECY CLAUSE

237)

(i) Every Director, Manager, Auditor, Treasurer, Trustee, Member of a Committee, Officer,

Servant, Agent, Accountant or other person employed in the business of the Company

shall, if so required by the Directors, before entering upon his duties, sign a declaration

pledging himself to observe strict secrecy respecting all transactions and affairs of the

Company with the customer and the state of the accounts with individuals and in matters

relating thereto, and shall be such declaration pledge himself not to reveal any of the

matters which may come to his knowledge in the discharge of his duties except when

required so to do by the Directors or by law or by the persons to whom such matters relate

and except so far as may be necessary in order to comply with any of the provisions as

these presents contained.

(ii) No Member shall be entitled to visit or inspect any works of the Company without the

permission of the Directors or to require discovery of or any information respecting any

details of the Company's trading, or any matter which is or may be in the nature of a trade

secret, mystery of trade, secret process or any other matter which may relate to the

conduct of the business of the Company and which in the opinion of the Directors, it would

be inexpedient in the interest of the Company to disclose.


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XX. MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION

1. Memorandum and Articles of Association of the Company

2. Certificate of Incorporation dated 27th March 2000

3. Fresh Certificate of Incorporation Consequent upon Change of Name on Conversion to Public Limited Company dated 18th March 2008

4. Scheme of Arrangement under Section 391 to 394 and other applicable provisions of the Companies Act, 1956 between Quest Softech (India) Limited, Continental Controls Limited and their respective Shareholders and Creditors for the Demerger of the Software Services Division Undertaking of Continental Controls Limited into Quest Softech (India) Limited

5. Order dated 05th September 2008 of the Hon’ble High Court of Judicature at Bombay approving the Scheme of Arrangement.

6. Copies of Audited Annual Report for Financial Years 2007-08, 2008-09 and 2009-10.

7. Copy of Tripartite Agreement entered into with NSDL & CDSL.

8. Memorandum Of Understanding Signed with Purva Sharegistry (India) Pvt. Ltd. (Registrar & Transfer Agent)

9. No-Objection letter of BSE (letter no. DCS/AMAL/SKS/24(f)/2988/2007-08 dated 27th March 2008)


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XXI. DECLARATION

All the relevant provisions of the Companies Act, 1956, and the Guidelines issued by the Government

of India or the Regulations issued by the Securities and Exchange Board of India, established under

Section 3 of the Securities and Exchange Board of India Act, 1992, as the case may be, have been

complied with and no statement made in this Information Memorandum is contrary to the provisions of

the Companies Act, 1956, the Securities and Exchange Board of India Act, 1992 or rules or

Regulations made there under or guidelines issued, as the case may be. We further certify that all the

disclosures made in this Information Memorandum are true and correct.

SIGNED ON BEHALF OF

THE BOARD OF DIRECTORS OF THE COMPANY

Sd/-

Director

Place: Mumbai

Date: 11/10/2010