| 1. We have audited the attached Balance Sheet of M/s. Bellary Steels &
Alloys Limited, as at 31st March 2009; the Profit & Loss Account; and
the Cash Flow Statement for the year ended as on that date, annexed
thereto. These financial statements are the responsibility of the
companys management. Our responsibility is to express an opinion on
these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards
generally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidences supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by the management, as well as evaluating the overall financial
statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
3. As required by the Companies (Auditors Report) Order, 2003, duly
amended by the DCA notification GSR 766(E) dated 25th November 2004,
(hereinafter to be referred to as "the Order") issued by the Central
Government of India in terms of sub-section (4A) of section 227 of the
Companies Act, 1956, we enclose in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order, to the
extent applicable.
4. Further to our comments in the Annexure referred to above, we
report that:
i) We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
audit;
ii) In our opinion, proper books of account as required by law have
been kept by the company so far as it appears from our examination of
those books;
iii) The Balance Sheet, Profit & Loss Account and Cash Flow Statement
dealt with by this report are in agreement with books of account;
iv) In our opinion, the Balance Sheet, Profit & Loss Account and Cash
Flow Statement dealt with by this report comply with Accounting
Standards referred-, to in sub section (3C) of section 211 of the
companies Act 1956, except as stated in Notes on accounts No. 20,26 and
27.
v) On the basis of written representations received from the directors
as on 31 st March 2009 and taken on record by the Board of Directors,
we report that none of the directors are disqualified as on 31st March
2009, from being appointed as directors in terms of clause (g) of Sub-
Section (1) of Section 274 of the Companies Act 1956;
vi) In the year 2002-03, the company has created Deferred Tax Asset in
pursuance of AS-22, "Accounting for taxes on Income" amounting to Rs
85.50 crores. As the virtual certainty does not exist to substantiate
that the company would generate sufficient taxable income in future, we
are of the view that the continuation of deferred tax asset shall be
discontinued by the company.
vii) Subject to the above, in our opinion and to the best of our
information and according to the explanations given to us, the said
accounts read with significant accounting policies and notes to
accounts, give the information required by the Companies Act, 1956, in
the manner so required and give a true and fair view in conformity with
the accounting principles generally accepted in India;
a. In the case of Balance Sheet, of the state of affairs of the
Company as at 31 st March 2009;
b. In the case of Profit and Loss Account, of the loss for the year
ended on that date; and
c. In the case of Cash flow Statement, of the Cash Flows for the year
ended on that date.
THE ANNEXURE REFERRED TO IN PARAGRAPH-3 OF OUR REPORT TO THE MEMBERS OF
M/S. BELLARY STEELS AND ALLOYS LIMITED, BELLARY FOR THE PERIOD ENDED 31
ST MARCH 2009.
WE REPORT THAT;
1. a) The Company has maintained records showing full particulars
including quantitative details and situation ÿ% of Fixed Assets.
However, item-wise value in respect of assets other than land and
buildings are not available since the assets acquired are added to the
block value of the assets.
b) Verification of fixed assets is being conducted in a phased manner
by the management designed to cover all assets over a period of three
years, which in our opinion is reasonable having regard to the size of
the Company and the nature of assets. The discrepancies noticed on such
verification were not material and have been properly dealt with in the
books of account.
c) Some of the fixed assets have been disposed of during the year.
However, in our opinion and according to the information and
explanations given to us, the ability of the Company to continue as a
going concern is not affected.
2. a) The inventory of the Company (excluding consignment stocks with
third parties) has been physically verified by the management during
the year according to a phased manner normally so designed that each
material item is physically verified at least once in a year and at
more frequent intervals in appropriate cases. We are given to
understand that there yvas no consignment stock lying with the third
party at the end of the year. In our opinion the frequency of
verification is reasonable.
b) The procedures of physical verification of Inventory followed by the
management are reasonable and adequate in relation to the size of
company and nature of its business.
c) The company is maintaining proper records of inventory. The
discrepancies noticed on verification between the physical stocks and
book records were not material and accordingly dealt in the books.
3. a) According to the information and explanation given to us, the
company has, during the year, not granted any secured or un secured
loans to companies, firms or other parties covered in the register
maintained under section 301 of the companies Act 1956. Accordingly
paragraph 4 (iii) (a), (b),(c),(d) of the order, are not applicable.
e) The company has taken interest free unsecured loans from the parties
covered in register maintained u/s. 301 of the Companies Act. The
details of which are mentioned here below:
Name of the Maximum Balance due
Directors/ amount due as at the end
Parties at any time of the
during the year financial year
Amount (Rs.) Amount (Rs.)
Mr.S.Madhava 29,49,33,086 29,45,85,496
Smt.S.Parvathi 1,07,50,000 1,07,50,000
Bellary Steel
Rolling Mills 8,89,256 7,83,596
t) As wehave not been provided with the terms and conditions of loan
agreement, we are unable to comment on whether the terms and conditions
of the said loans are prejudicial to the interest of the company.
g) The company has not been regular in payment of principal portion of
loan taken from the parties referred above.
4. Iln our opinion and according to the information and explanations
given to us there are adequate internal control procedures commensurate
with the size of the company and nature of its business with regard to
purchase of inventory, fixed assets and for sale of goods and services.
During the course of our audit, we have not observed any continuing
failure to correct major weaknesses in Internal Controls.
5. According to the information and explanation given to us, we are of
the opinion that the transactions that need to be entered in the
register maintained u/s. 301 of the Companies Act, 1956 have been
entered.
6. The Company has not accepted any deposits from the public during
the year. Consequently, the provisions of section 58A, 58AA or any
other relevant provisions of the companies Act, 1956 and the companies
(Acceptance of Deposits) Rules, 1975 are not applicable to the company.
7. The Company has an Internal Audit system on a quarterly reporting
basis. However, considering the size of the company and the nature of
its business in our opinion, the same needs to be doneon monthly basis.
8. We have broadly reviewed the books of account relating to
materials, labour and other items of cost maintained by the company
pursuant to the Rules made by the Central Government for the
maintenance of cost records under sec. 209 (1) (d) of the Companies
Act, 1956 and we are of the opinion that prima facie the prescribed
accounts and records have been made and maintained. We have not,
however made a detailed examination of the same.
9. a) According to the records of the comapny, undisputed statutory
dues including provident fund, employees state insurance, investor
education and protection fund, income tax, sales tax, wealth tax,
service tax, customs duty, excise duty and other statutory dues have
been generally regularly deposited with the appropriate authorites.
Further, since the Central Government has till date not prescribed the
amount of cess payable under section 441A of the Companies Act, 1956,
we are not in a position to comment upon the regularity or otherwise of
the Company in depositing the same.
b) According to the information and explanations given to us, there are
dues of Sales Tax, Income Tax, Excise Duty, Cess, which are disputed,
and the forums where the disputes are pending is mentioned here below.
Name of the Statute Nature of dues Amount of Tax due (Rs.)
Central Sales Tax Disputed Turnover 4,77,292
KST & Central Sales Tax Disputed Turnover 10,51,83,487
Entry Tax Disputed Turnover 24,464
Entry Tax Disputed Turnover 6,50,804
Entry Tax Disputed Turnover 7,42,345
Income Tax U/s 234A, 234 B,
234 C, Additional
Tax U/s154,
disallowance of
Lease Rentals and
Interest on Lease
Rentals 2,17,42,739
Sales Tax Disputed Turnover 10,40,000
Central Excise MODVAT disallowed 2,18,14,814
Central Excise MODVAT disallowed 1,43,47,222
Central Excise MODVAT disallowed 2,74,280
Central Excise MODVAT disallowed 14,79,180
Central Excise MODVAT disallowed 7,19,511
Central Excise MODVAT disallowed 17,37,249
Central Excise Stock Variation 6,18,71,454
Central Excise CENVAT Utilization 28,26,587
Central Excise Stock Variation 7,46,24,640
Central Excise ISP cenvat credit
disallowed 10,21,10,684
Central Excise ISP cenvat utilized
in existing
disallowed 10,21,10,684
Name of the Statute Period to which Forum where dispute is pending
the amount Relates
Central Sales Tax 1991-92 to 1995-96 Appeal filed before Karnataka
Appellate Tribunal
KST & Central Sales 1996-97 From 1997-98
Tax to 2000-01 Supreme Court. Appeal filed
with the Tribunal and
Commissioner.
Entry Tax 1994-95 Appellate Tribunal, Bangalore.
Entry Tax 1995-96 Appellate Tribunal, Bangalore.
Entry Tax 1996-97 Appellate Tribunal, Bangalore.
Income Tax A.Y.1997-98 Income Tax Appellate Tribunal
Bangalore.
Sales Tax 1990-91 Special Appellate Tribunal
Chennai
Central Excise 2002-03 CESTAT, Chennai
Central Excise 1998 CESTAT,Bangalore
Central Excise Sep 93 CEGAT, Bangalore.
Central Excise April 02 CEGAT, Chennai
Central Excise Sep 02 Commissioner (Appeals),
Central Excise Mangalore.
Central Excise July 02 Commissioner of CE, Belgaum
Central Excise 2000-01 Commissioner of CE, Belgaum
Central Excise 2001-02 CESTAT, Chennai.
Central Excise 2002 CESTAT, Bangalore
Central Excise 2008-09 CESTAT, Bangalore
Central Excise 2008-09 CESTAT, Bangalore
10. In our Opinion, the accumulated losses of the company at the end of
the financial year have eroded the entire net worth of the company.
Further, the company has incurred cash loss in the financial year
covered by our audit report and the immediately preceding financial
year.
11. In our opinion and according to the information and explanations
given to us, the company has defaulted in repayment of dues to
financial institutions and banks. The details of defaults are as
follows:
SI.No BANKS Period of default Rs. in lacs
WORKING CAPITAL LOANS
1 HDFC 7 years 3 months 5452
2 Dhanlakshmi Bank Ltd 9 years 6983
3 Central Bank of India 9 years 6 months 5938
4 Indian Bank 9 years 7 months 3567
5. LOAN PORTFOLIO TAKEN
OVER BY ARCIL
a. State Bank of India 7 years 5 months 8642
b. ICICI Bank 8years 4 months 8247
c. Punjab National Bank 8 years 5834
d. The South Indian Bank Ltd.8 years 9 months 8821
e. State Bank of Travancore 7 years 5 months 4369
f. State Bank of Mysore 8 years 9 months 3306
g. DenaBank 9 years 6 months 3217
h. Bank of Maharashtra 7 years 10 months 5750
i. Bharath Overseas Bank 8 years 8 months 4072
TERM LOANS
1 IDBI 9 years 1507
2 IIBI 9 years 20
LOAN PORT FOLIO TAKEN OVER BY ARCIL
a. ICICI 9 years 1462
TERM LOANS (ISP)
1 IDBI 8 years 6 months 46659
2 IFCI 8 years 6 months 26991
3 IIBI 8 years 6 months 4987
4 Exim Bank 6 years 6 months 6703
LEASE FINANCE
5 CanaraBank 10 years 3 months 3688
6 KSFC 10 years 3 months 10043
LOAN PORT FOLIO TAKEN OVER BY ARCIL
a. ICICI 7 years 6 months 34217
b. State Bank India 5 years 6 months 24997
c. Punjab National Bank 5 years 6 months 9786
d. State Bank of Mysore 6 years 6 months 4684
e. DenaBank 6 years 6 months 9190
f. Bank of Maharashtra 6 years 6 months 7421
12. The Company has not granted loans or advances on the basis of
security by way of pledge of Shares, Debentures and other " Seewities
13.In our Oprntofti the company is notachit fund or a hidhi or mutual
benefitfund/society. therefore, the provisions of clause 4(xiii) of the
Companies (Auditors Report) Order, 2003 are not applicable tothe
company.
14. In our opinion, the company is not dealing or trading in shares,
Securities, Debentures and other Investments. Accordingly, the
provisions of clause 4(xiv) of the Companies (Auditors Report) Order,
2003 are not applicable to the company.
15., The company has not given any guarantee for loans taken by others.
16. In our opinion, the company has not raised any term loans during
the year under audit..
17. According to the information and explanations given to us and on
the basis of overall examination of the balance sheet of the company,
we report that no funds raised on short term basis have been used for
long term investment.
18. According to the information and explanation given to us, during
the year under ouraudit the company has not made any preferential
allotment of equity shares to the parties listed in the registered
maintained u/s. 301 of the Companies Act.
19. According to the information and explanations given to us, during
the year under audit the company has not issued any debentures.
20. According to the information and explanations given to us, during
the year under audit, the company has not raised any money by way of
public issue.
21. According to the information and explanations given to us, no
fraud on or by the company has been noticed or reported during the
course of our audit.
for Manohar Chowdhry & Associates
Chartered Accountants,
(CA. ASHOK KUMAR DODDI)
Place :Bangalore Partner
Date :31st August, 2009 M.NO.217909 |