| 1. We have audited the attached Balance Sheet of BCL FORGINGS LIMITED
as of 31st March, 2011, the Profit and Loss Account and the Cash Flow
Statement of the Company for the year ended on that date, annexed
thereto. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
2. We have 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, evidence supporting the amounts and
disclosures in tile 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 statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
3. Attention of the members is drawn to Note C1 of Schedule is of the
audited accounts regarding the reasons for preparing the accounts by
applying the principal of going concern assumption,
4. In our opinion, after taking into consideration the effect of
unprovided liability/losses/expenses referred to in Para 6(g) here
below, tile Company liars become a "Sick Industrial Company" within the
meaning of Section 3(l)(o) of the Sick Industrial Companies(Special
Provisions) Act, 1985.
5. As required by the Companies (Auditor's Report) Order, 2003 issued
by the Company Law Board in terms of Section 227(4A) of the Companies
Act, 1956 and on the basis of such checks as considered necessary and
as per the information and explanations given to us, we enclose in the
Annexure a statement on the matters specified in paragraphs 4 and 5 of
the said Order.
6. Further, to our comments in the Annexure referred to in 'paragraph 5
above, 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 purposes of our
audit;
b) In our opinion, proper books of account, as required by law, have
been kept by die Company, so far as it appears from our 'examination of
those books except that the Company has not provided for the estimated
gratuity liability of'Rs.2,13,31,769/ and estimated leave salary of Rs.
l,019,5U/-as of 31st March 2007 as also the incremental liability of
leave salary thereafter as the amount where of is not ascertainable
in view of the actuarial valuation of the liability of leave salary as
of 31st March 2011 leaving not been done. (Refer Note No 18 C 3(a)
&(b)];
c) The Balance Sheet, the Profit and Loss Account and the Cash Flow
Statement dealt with by this report are, in agreement with the books of
account;
d) In our opinion, the Balance Sheet, the Profit and Loss Account and
the Cash Flow- Statement dealt with by this report comply with the
Accounting Standards referred to in Section 211 (3C) of the Companies
Act, 1956, except for non provision of retirement benefits in respect
of gratuity and leave salary as also non-disclosure of information in
respect thereof as required by Accounting Standard 15 (AS -15)
"Employee Benefits" [Refer Note No. 18.0.2(a) & (b)] and computing
Earnings Per Share without considering un-provided
liabilities/losses/expenses though required by Accounting Standard 20
"Earnings Per Share" (AS -20) (Refer Note No. 18. C.23);
e) We have not received any representation from the Directors of the
Company confirmation that they are not disqualified from being
appointed as directors of the Company under clause (g) of sub-section
(1) of section 274 of the Companies Act, 1956. In view of the same, we
are liable to express our opinion in respect thereof.
f) Attention of 'the Members of the Company is drawn to Note N0.I8.C
7regarding non-payment of the Cumulative Dividend of Rs. 14,297,918 in
respect of 6% Cumulative Convertible Preference Shares upto tile date
of their conversion into equity shares, as the management is of the
view that the same is not payable as not declared.
g) Attention of the Members is drawn to the following Notes as referred
to in Part C of Schedule 18:
(i) Note No. 2(g) regarding contingent liability for saving of custom
duty of Rs. 1,07,65,944/- which can devolve on the Company in the
event of non fulfillment of export obligation as we are unable to
express our opinion on account in absence of export orders.
(ii) Note No. 3(a) and '3(b) regarding non-provision of 'the estimated
gratuity of Rs.2,13,31,769 as of 31st March 2011 and estimated leave
salary of Rs. 10,19,514/- as of 31st March 2007 as also the incremental
liability of leave salary there after, as the amount Where of 'is not
ascertainable in the video of the actuarial valuation of the liability
of' leave salary as on 31st March 2011 having not been done;
(iii) Note No. 10 regarding pending ascertainment by the management of
the Company whether there is any need to provide for obsolescence/
impairment in respect of unmoved inventory of stores, spare parts and
dye blocks.
(iv) Note No. 11 regarding non-provision of debts considered 'doubtful
for recovery aggregating to Rs.2,36,49,749/- in 'view of the Company's
efforts to recover them by taking appropriate legal steps and/or
personal follow up actions;
(v) Note No. 12. regarding the opinion expressed by the management of
the Company as regards the recoverability of the amount of 'Rs.
63,.266,282/- due from Messer. Invest well in respect of 'which we are
unable to express our opinion in absence of confirmation from the said
party and other documentary evidences;
(vi) Note No. 13 regarding non-provision of fees payable by the Company
To Prathamesh Investments & Trading Private Limited in connection with
the services rendered by it in relation to the preferential issue of
shares and warrants by the Company in earlier period(s) in view of the
Managements decision to charge the fees as and when determined to the
Share Premium Account in accordance with the provisions of Section 79
of 'the Companies Act, 1956.
(vii) Note No. 14 regarding tire following transactions with Business
Combine Limited (BCL) which are subject to reconciliation &
confirmation.
(a) Interest of' Rs.1,86,57,778/- for the -previous financial year
covered by our report ' charged to BCL in respect of the outstanding
balances recoverable from it;
(b) Labour charges of Rs. 62,94,400/- credited by the Company to BCL
towards products manufactured by them; and
(c) Debit notes issued by the Company for rejection(s) as well as
reimbursement of expenses for and up to years ended 31st March, 2011.
Consequently, the above transactions on account of subject to being
disputed are subject to adjustment, finalisation/settlement in the year
in which the same are concluded.
Further, we are unable to express our opinion regarding the opinion
expressed by the management of the Company as regards the
recoverability of dues of Rs. 7,04,68,215/- from BCL.
(viii) Note No. 15 regarding advances of Rs.1,07,87,214 paid to
suppliers which are subject to reconciliation and necessary adjustment
entries upon reconciliation.
(ix), Note No. 16 regarding reconciliation /confirmation of balances of
Sundry Debtors, Loans and Advances and Sundry Creditors.
(x) Note No. 17 regarding Hon disclosure of vendors status under "the
Micro, Small and Medium Enterprises Act, 2006 as also the
non-provision oj: interest payable, if 'any, c) the said vendors in
accordance with the provisions of the said Act;
(xi) Note No.18 regarding non-provision of disputed income tax demand
of earlier years ' Rs.64,96,611/-; .
(xii) Note No. 19 regarding audit committee constituted under section
292A of the Companies Act,1956.
(xiii) The consequential effects on loss for the year and on the
provision as well as on the balance in the Profit and Loss Account as
stated in the accounts to the extent of Rs.2,88,47,894/-on account
of Para Nos.,(ii) and (xi).
(xiv) The consequential effects on loss for the year and on the
assets and liabilities as well as on the balance in the Profit and
Loss Account and the Slier Premium Account as stated in the accounts
on account of Para Nos (i), (ii) to (x), the effects whereof are not
possible to be determined.
h) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts, subject to Para Nos (i)
to (xii) of(g) and their consequential effects as stated in Para Nos
(xtii) & (xiv)of (g), read along with Significant Accounting Policies
and Other Notes thereon, give the information required by the Companies
Act, 1956 in the manner so required arid give a true and fair view in
conformity with the accounting principles generally accepted in India:
(i) In the case of the Balance Sheet, of the State of Affairs of the
Company as at 31®< March, 2011;
(ii) In the case of the Profit and Loss Account, of the Loss for the
year ended on that date; and
(iii) In the case of the Cash Flow Statement, of the Cash Flows for the
year ended on that date.
Annexure to Auditors' Report
Referred to iii Paragraph 1 of our report of even date
1. In respect of its fixed assets:
a. The Company has 'maintained proper records showing full
particulars, including quantitative details and situation of the fixed
assets except for furniture, fixtures and equipments.
b. The management had decided to carry out physical verification of
certain fixed assets during the year in accordance with the phased
programme of verification, so as to verify all the material fixed
assets over a period of three years. However,, during the year, no
physical verification was carried out by the Management and hence, we
are not able to comment on the discrepancies, if any.
c. The Company has not disposed off substantial fixed assets during
the year and therefore, the question of going concern assumption
getting affected does not arise.
2. In respect of its inventories:
- a. As explained to us, the inventories have been physically verified
by the management at the year end. In our opinion, the frequency of
such verification is reasonable.
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, except that
the instructions for physical verification of inventory were issued
orally and not documented as well as the documentation of physical
verification carried put is not properly maintained.
c. - The Company has maintained proper records of inventories. As
explained to us, the discrepancies noticed on physical verification of
inventories were not- material as compared to the book records and have
been properly dealt with in , the books of account.
- 3. The Company has not granted/taken any loans, secured or unsecured
to/from companies, firms or other parties covered in the register
maintained under Section 301 of the: Companies Act, 1956. Therefore,
the requirements of Clause 4(iii) of the Order are - not applicable.
4. In our opinion and according to 'the information and explanations
given to us, there is an , adequate internal. control system commensurate
with the size of the Company and the nature of its business for the
purchase of inventories and fixed assets and for the sale . of goods
and services. During the course of our audit, we have not observed any
major weaknesses in the internal control system and Hence, the;
question of continuing failure on the part of the Company to correct
the major weaknesses in the internal control system does not arise.
5. During the year, there were. no particulars of contracts or
arrangements referred to in Section 301 of the Companies Act, 1956
that, were needed to be entered into the register required to be
maintained under that section. Therefore, the requirements of Clause
4(v) of the Order are not applicable.
6. During the year, the Company has not accepted any deposits from the
public and consequently, the directives issued, by the Reserve Bank of
India and the provisions of Section 58A, 58AA or any other relevant
provisions of the Companies Act, 1956 and the rules framed there under
are not applicable.
7. The Company does not have an internal audit system.
8. The Central Government has not prescribed the maintenance of "cost
records" under section 209(l)(d) of the Companies Act, 1956 in respect
of the products dealt with by the Company. ' * '
9. In respect of statutory dues: - .
a. The Company is generally regular in depositing the undisputed
statutory dues including Provident Fund, Employees' State Insurance,
Income-tax, Sales-tax, . Wealth-tax, Service tax, Custom Duty, Excise
Duty, Cess and other applicable statutory dues with the appropriate,
authorities except for. non payment of tax deducted at source ofRs.
7,54,844/-as on 3P'March, 2009.
b. According to the information and explanations given to us, except
for the above - Unpaid undisputed statutory dues,-there are no other
undisputed amounts payable in respect of the aforesaid dues were in
arrears as at 31st March, 2011 for a period of more than six months
from the date they became payable.
c According to the information and explanations given to us and
according to the records of the Company, the outstanding dues of
Income-tax of Rs, 9,39,397/- and Rs. 55,57,214/-, for the assessment
years 2006-2007 and 2008-2009 respectively have not been deposited on
account of disputes which are. pending before Commissioner of Income
Tax (Appeals). Except for the same, there are no other disputed dues of
Sales-tax, Wealth-tax, Custom Duty, Excise Duty and Cess.
10. The Company's accumulated losses are more than 50 % of its net
worth. The Company has incurred cash losses during the financial year
covered by our report as well as in the immediately preceding financial
year.
11. In our opinion and according to the information and explanations
given to us, the Company was generally regular in repayment of dues to
its bank. The Company has not borrowed from any financial institutions
and has not issued any debentures.
12. The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
Therefore, the requirements of Clause 4(xii) of the Order are not
applicable. '-
13. In our opinion, the Company is not a chit fund or a nidhi / mutual
benefit fund / society. Therefore, the requirements of Clause 4(xiii)
of the Order are not applicable.
14. During the year, the Company has not dealt in or traded in shares,
securities, debentures and other investments. Therefore, the
requirements of Clause 4(xiv) of the Order are not applicable. -
15. According to the information and explanations given to us, the
Company has not given any guarantee for loans taken by others from
banks or financial institutions. Therefore, the requirements of Clause
4(xv) of the Order are not applicable.
16. In our opinion and according to the information and explanations
given to us and on the basis of examination of the books of account, no
new term loans have been obtained during the year. '" '
17. According to the information and explanations given to us and on
an overall examination of the Balance Sheet of the Company, we report
that no funds have been raised on short term basis and hence, the
question of using the same for long term investment does not arise.
18. The Company has not made any preferential allotment of shares to
parties and companies covered jn the register maintained under section
301 of the Companies Act, 1956. Therefore, the requirements of Clause
4(xviii) of the Order are not applicable,
19. The Company has not issued debentures and hence, the creation of
security or charge in respect thereof as contemplated in Clause 4(xix)
of the Order does notaries.
20. The Company has not raised any money by way of public issue during
the financial year covered by our report and hence, the question of
disclosure by the Management on the end use of money raised there from
and the verification of the same by us does not arise,
21. Based upon the audit procedures performed by us and as per the
information and . explanations given by the Management, no fraud on
or, by the Company has been noticed or reported during the course of
our audit.
For M.A. Parikh & Co.
Chartered Accountants
Registration No. 107556W
Partner
Name: AjitC Shah
Membership No. 13097
Place: Mumbai
Date : 24th Nov. 2011
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