| We have audited the accompanying financial statements of OSWAL SPINNING
AND WEAVING MILLS LIMITED ("the Company"), which comprise the Balance
Sheet as at March 31, 2014, the Statement of Profit and Loss and the
Cash Flow Statement for the period then ended, and a summary of
significant accounting policies and other explanatory information.
Management's Responsibility for Financial Statements
Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position and
financial performance of the Company in accordance with the Accounting
Standards referred to in sub-section (3C) of section 211 of the
Companies Act, 1956 ("the Act"). This responsibility includes the
design, implementation and maintenance of internal control relevant to
the preparation and presentation of the financial statements that give
a true and fair view and are free from material misstatement, whether
due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor's judgment, including the assessment of
the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Company's preparation and
fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances. An audit also
includes evaluating the appropriateness of accounting policies used and
the reasonableness of the accounting estimates made by management, as
well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified audit opinion.
Opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the effects of matters described
in the Basis for Qualified Opinion paragraph, the financial statements
give the information required by the Act 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 the Balance Sheet, of the state of affairs of the
Company as at March 31, 2014;
b) In the case of the Statement of Profit and Loss, of the profit for
the period ended on that date.
c) In the case of the Cash Flow Statement, of the cash flows for the
period ended on that date.
Emphasis of Matter
Without qualifying our opinion, we draw attention to the following:
a) We draw attention to Note-16 to the financial statements which
describes the doubtful nature of the Trade Receivables to the extent of
Rs. 92,91,903.00 receivable for more than 3 years against which no
provision for doubtful debts has been made by the company. However, The
company is taking requisite steps to recover the amount.
b) We draw attention to Note-29 to the financial statements which
describes that during the year the Company has changed rate of charging
depreciation on cotton spinning unit from the rate prescribed for
Continuous Process Plant to General Plant and Machinery as per rates
specified in Schedule XIV of the Companies Act, 1956. Consequently the
difference of Depreciation relating to earlier years amounting to
Rs.1,26,16,898.42/- has been provided during the year as an Exceptional
Item. Had the depreciation been provided as per previous rate then the
depreciation for the period on cotton spinning unit would have been
Rs.2,25,66,538/- instead of Rs. 98,20,049/-. The Company's records
indicate that had the depreciation been provided as previous rate :-
i. The Profit would have been Rs.35,92,603.40/- as against the reported
figure of Rs. 37,22,194.40/-.
ii. Balance of Surplus would have been Rs 5,95,15,484.20- as against
the reported figure of Rs. 5,96,45,075.20/-.
iii. Fixed Assets (excluding Capital Work-in-progress) would have been
Rs.17,27,61,591.70/- as against the reported figure of
Rs.17,28,91,182.70/-
c) We draw attention to Note-30(iii) to the financial statements which
describes that Kotak Mahindra Bank Ltd. has issued a notice under
section 13(2) of the SARFAESI Act, 2002 demanding Rs. 63.43 crores
(calculated upto 04/04/2014) from the Company in respect of various
commitments, defaults, penalties and interest thereon, which the
Company has contested illegal and without any basis before the Hon.
High Court of Punjab and Haryana, for which petition has been admitted
on 29/05/2014 and further proceedings under section 13(4) of SARFAESI
Act, 2002 has been stayed.
d) We draw attention to Note-30(iv) to the financial statements which
describes that State Bank of Patiala (SBOP) has filed an application
before the Debts Recovery Tribunal (DRT) Chandigarh for recovery of an
amount of Rs. 4.09 cr. (being NPV of Rs. 2.88 cr. of CRPS of Rs. 5.38
cr. and interest thereon). These CRPS have already been issued by the
Company to the Bank. Further the Company had agreed to pay the NPV of
CRPS because SBOP had informed the Company that they had waived the
amount of Rs. 5.29 cr. being interest payable by the Company to SBOP.
However, later on it has transpired that instead of waiving this amount
of Rs. 5.29 cr., SBOP has transferred the same to Kotak Mahindra Bank
Limited (KMBL) vide assignment agreement dated 16.11.2007 thereby
misleading the Company that they have waived the interest and thus
violating the terms and conditions of the agreement that they had with
the Company. On this ground the application of the bank is being
contested by the Company in the DRT.
e) We draw attention to Note-30(v) to the financial statements which
describes that IFCI has filed an application before the Debts Recovery
Tribunal (DRT) Chandigarh for recovery of an amount of Rs. 2347.02 lacs
(Rs. 1269.82 lacs being amount of FITL and balance amount being
interest thereon). IFCI has also filed a company petition with the
Punjab and Haryana High Court under section 433, 434 & 439 for Recovery
of the above mentioned amount/winding up of the Company. The Company is
contesting the application in the DRT and Company petition in Punjab
and Haryana High Court on the ground that by way of assignment of debt
IFCI has assigned/transferred the entire dues including FITL of Rs.
1269.82 lacs payable by the Company to IFCI on 16.11.2007 in favour of
Kotak
Mahindra Bank Limited vide Assignment Agreement dated 16.11.2007 and
after that nothing is due and payable by the Company to IFCI.
Report on Other Legal and Regulatory
Requirements
1. As required by the Companies (Auditor's Report) Order, 2003 ("the
Order") issued by the Central Government of India in terms of
sub-section (4A) of section 227 of the Act, we give in the Annexure a
statement on the matters specified in paragraphs 4 and 5 of the Order.
2. As required by section 227(3) of the Act, we report that:
a) 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 except as specifically mentioned in Point 11 of the Annexure;
b) in our opinion proper books of account as required by law have been
kept by the Company so far as appears from our examination of those
books;
c) the Balance Sheet, Statement of Profit and Loss and Cash Flow
Statement dealt with by this Report are in agreement with the books of
account;
d) In our opinion, the Balance Sheet, Statement of Profit and Loss and
the Cash Flow Statement comply with the Accounting Standards referred
to in subsection (3C) of section 211 of the Companies Act, 1956;
e) On the basis of written representation received from the Directors
as on 31st March 2014, and taken on record by the Board of Directors,
we report that none of the directors are disqualified as on 31st March
2014 from being appointed as a director in terms of clause (g) of sub-
section (1) of section 274 of the Companies Act, 1956.
ANNEXURE TO THE AUDITOR'S REPORT
The Annexure referred to in paragraph 1 under the heading 'Report on
Other Legal and Regulatory Requirements' of the Our Report of even date
to the members of OSWAL SPINNING AND WEAVING MILLS LIMITED on the
accounts of the company for the period ended 31st March, 2014.
On the basis of such checks as we considered appropriate and according
to the information and explanation given to us during the course of our
audit, we report that:
1. (a) The company has maintained proper records showing full particu
-lars including quantitative details and situation of its fixed assets.
(b) All the assets have not been physically verified by the management
during the period but there is a regular programme of verification,
which, in our opinion, is reasonable, having regard to the size of the
company and the nature of its business. No material discrepancies were
noticed on such verification.
(c) In our opinion and according to the information and explanations
given to us, the company has not disposed off substantial part of fixed
assets and therefore does not affect the going concern assumption.
2. (a) As explained to us, inventories have been physically verified
during the period by the management at reasonable intervals.
(b) In our opinion and according to the information and explanations
given to us, the procedures of physical verification of inventories
followed by the management are reasonable and adequate in relation to
the size of the company and the nature of its business.
(c) In our opinion and on the basis of our examination of the records,
the Company is generally maintaining proper records of its inventories.
No material discrepancy was noticed on physical verification of stocks
by the management as compared to book records.
3. (a) The company has taken loan from four companies and 17 other
parties covered in the register maintained under section 301 of
the Companies Act 1956. The maximum amount involved during the
period was Rs.5,27,10,698/62 and the period end balance of loans was
Rs.4,91,10,698/62
(b) The rate of interest and other term and conditions of such loans
are, in our opinion, prima facie not prejudicial to the interests of
the Company.
(c) According to information and explanations given to us, the parties
from whom loans and advances in the nature of loans have been taken,
the interest and principal amounts are being repaid as stipulated.
(d) The company has not granted loan to companies covered in the
register maintained under section 301 of the Companies Act, 1956. So
Para No. e, f, g are not applicable.
4. In our opinion and according to the information and explanations
given to us, there is generally an adequate internal control procedure
commensurate with the size of the company and the nature of its
business, for the purchase of inventories & fixed assets and payment
for expenses & for sale of goods. During the course of our audit, no
major instance of continuing failure to correct any weaknesses in the
internal controls has been noticed.
5. a) Based on the audit procedures applied by
us and according to the information and explanations provided by the
management, the particulars of contracts or arrangements referred to in
section 301 of the Act have been entered in the register required to be
maintained under that section.
b) As per information & explanations given to us and in our opinion,
the transactions entered into by the company with parties covered u/s
301 of the Act exceeding five lakh rupees in a financial period have
been made at prices which are prima facie reasonable.
6. The Company has not accepted any deposits from the public covered
under section 58A and 58AA of the Companies Act, 1956.
7. As per information & explanations given by the management, the
Company has an internal audit system commensurate with its size and the
nature of its business.
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 section 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, however, not made a detailed
examination of the cost records with a view to determine whether they
are accurate or complete.
9. (a) According to the records of the company, undisputed statutory
dues including Provident Fund, Investor Education and Protection
Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealth Tax,
Service Tax, Custom Duty, Excise Duty, cess to the extent applicable
and any other statutory dues have generally been regularly deposited
with the appropriate authorities. According to the information and
explanations given to us there were no outstanding statutory dues as
on 31st of March, 2013 for a period of more than six months from the
date they became payable.
(b) According to the information and explanations given to us, there is
no amounts payable in respect of income tax, wealth tax, service tax,
sales tax, customs duty and excise duty which have not been deposited
on account of any disputes except Sale Tax penalty amounting to
Rs.135000/- demanded in year 2000-2001 which is disputed in Sale Tax
Appellate Authority.
10. The accumulated losses of the company are not more than its net
worth. The company has not incurred cash losses during the financial
period covered by our audit and immediately preceding financial period.
11. We are unable to express an opinion on term loan from Kotak
Mahindra Bank Limited as information regarding repayment terms have not
been provided to us by the company. In case of all other term loans,
the company has not defaulted in repayment of dues to banks.
12. According to the information and explanations given to us, the
Company has not granted loans and advances on the basis of security by
way of pledge of shares, debentures and other securities.
13. The Company is not a chit fund or a nidhi /mutual benefit
fund/society. Therefore, the provision of this clause of the Companies
(Auditor's Report) Order, 2003 (as amended) is not applicable to the
Company.
14. According to information and explanations given to us, the Company
is not trading in Shares, Mutual funds & other Investments.
15. According to the information and explanations given to us, the
Company has not given any guarantees for loan taken by others from a
bank or financial institution.
16. Based on our audit procedures and on the information given by the
management, we report that the company has not raised any term loans
during the period.
17. Based on the information and explanations given to us and on an
overall examination of the Balance Sheet of the Company as at 31 st
March, 2014, we report that no funds raised on short- term basis have
been used for long-term investment by the Company.
18. Based on the audit procedures performed and the information and
explanations given to us by the management, we report that the Company
has not made preferential allotment of shares during the period to
parties covered in the register maintained under section 301 of the
Act.
19. The Company has no outstanding debentures during the period under
audit.
20. The Company has not raised any money by public issue during the
period.
21. Based on the audit procedures performed and the information and
explanations given to us, we report that no fraud on or by the Company
has been noticed or reported during the period, nor have we been
informed of such case by the management.
FOR DASS KHANNA & CO.
CHARTERED ACCOUNTANTS
(Firm Regn No. 000402N)
PLACE : LUDHIANA (RAKESH SONI)
DATED : 30.05.2014 PARTNER
M.NO. 83142
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