| 1. We have audited the attached Balance Sheet of M/S ZENITH STEEL TUBES
AND INDUSTRIES LIMITED, as at 31st March, 2010 and also Profit & Loss
Account and the Cash flow statement 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 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, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the over all financial statement
presentation. we believe that our audit provides a reasonable basis for
our opinion.
3.As required by the Companies (Auditor's Report) Order, 2003 and read
with the amendments made by the companies (Auditor's Report)
(Amendment) order 2004, issued by the Central Government of India in
terms of sub section (4A) of section 227 of the companies Act, 1956
and on the basis of such checks of books and records of the company as
we considered appropriate and according to the information any
explanation given to us we give in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order to the extent
they applicable to the company.
4.Further to our comments in the Annexure referred to in paragraph (3)
above, we report that:-
(i) We have obtained all the information and explanation, except as
stated in pare (vii) (c) below, which to the best of our knowledge and
belief were necessary for the purposes of our audit,
(ii) In our opinion, proper books of account, as required by the law
have been kept by the company so far as appears from our examination of
those books.
(iii) The Balance Sheet, the Profit & Loss Account and the Cash Flow
statement dealt with by this report are in agreement with the books of
accounts;
(iv) In our opinion, subject to Note No.7 & 8 of schedule-'S' regarding
provision for gratuity and leave encashment being made on estimated
basis instead of on the basis of actuarial valuation as required by
Accounting Standard-15 (Revised 2005) "Accounting for Employee Benefits
in the financial statements of employers" issued by the Institute of
Chartered Accountant of India, and Note No.17 of Schedule 'S' regarding
non ascertainment and non provision of impairment loss in the value of
Fixed assets as required under Accounting Standard 28 " Impairment of
Assets" issued by Institute of Chartered Accountant of India, the
attached Balance Sheet, the profit & Loss Account and the cash Flow
statement is in compliance with the Accounting Standards referred to in
sub-section (3C) of Section 211 of the Companies Act, 1956 to the
extend applicable.
(v) On the basis of written representations received from the
directors' as on 31.03.2010, and taken on record by the Board of
Directors, we report that none of the director is disqualified as on
31.03.2010 from being appointed as a director in terms of Section
274(1)(g) of the Companies Act, 1956.
(vi) Attention invited to a) Note No.6 of Schedule 'S' regarding the One
Time Settlement accepted by the SICOM Ltd. for Rs.23.46,000/- as full and
final payment against the total dues payable of Rs.12,53.44,192/- as per
books of account and the One Time Settlement accepted by SBI. SBI Capital
Mkts Ltd. for Rs.15,43,250/ as full & Final payment against the total dues payable of Rs.2,19,48,123/- & accordingly the balance amount of Rs. 14,34.03.065/ has been written back during the year and shown as
exceptional items in the profit & Loss Account.
b) Note No.6(b) of Schedule'S' regarding the company's proposal for One
Time Settlement (OTS) with IFCI Ltd. which has been agreed for Rs.
3,38,52,000/- vide letter dated 12th December, 2007 subject to
fulfillment of the stipulated conditions. As per the said letter, the
OTS should have been completed by 30th June.2008. Pending the approval
of the Draft Rehabilitation Scheme (DRS) submitted to BIFR thought
IFCI Ltd. and fulfillment of the stipulated conditions, the effect of
the OTS has not been given in the financial statements. The total
outstanding liability to IFCI Ltd. towards principle and interest upto
31st March, 2010 as per books of accounts aggregates to
Rs.303,43,05,373/-.
vii) a) Note No.5 of Schedule S regarding preparation of accounts on
the basis of going concern in spite of loss Rs.48,63,00,170/-incurred
during the year and brought forward losses of Rs. 2,58,21,19,432/-
which has resulted in negative net worth of Rs. 2,98,31,40,363/- as at
31st March, 2010. The Company also has working capital deficiency. The
company is alsoa sick company within the meaning of Section 3(1) (o) of
the Sick Industrial Companies (Special Provisions) Act 1985. These
factors raise doubts about, the Company s ability to continue as a
going concern which is dependent upon infusion of long terms funds for
its future operations. The accompanying financial statements do not
include any adjustments relating to the recoverability and
classification of assets carrying amount or the amount and
classification of liabilities that might result, should the company be
unable to continue as a going concern.
b) No provision has been made for sundry debtors for Rs.3,84.91,736/-
and advances for capital goods for Rs. 2,08,11,349/- which are
outstanding since long/doubtful in nature, (Refer Note No. 3 of
schedule- S)
c) No provision has been made for penal interest and liquidated damages
on over dues on account of certain lease transactions.
In absence of necessary information, the consequential impact thereof
on the accounts is not ascertainable.(Refer Note No.4 of Schedule - S).
d) The balance of sundry debtors, sundry creditors, deposits, secured
loan, unsecured loans, loans and advances and dues to secured creditors
etc. are subject to confirmation and reconciliation, consequential
impact thereof on the accounts is not ascertainable. (Refer Note No.15
of Schedule-S).
e) Provision for gratuity and leave encashment is made on estimated
basis instead of on the basis of actuarial valuation as required by
Accounting Standard 15 (Revised 2005) "Accounting for Retirement
Benefits in the financial statements' of employers" the consequential
impact thereof on the accounts is not ascertainable. (Refer Note No. 7
& 8 of Schedule - ).
f) Note No. 17 of schedule-S regarding non ascertainment and non
provision of impairment loss in the value of Fixed Assets as required
under Accounting Standard-28 "Impairment of Assets" issued by Institute
of Chartered Accountant of India, the consequential impact thereof on
the accounts is not ascertainable.
g) Note No. 20 of Schdule-S regarding non ascertainment of Creditors
falling under Micro, small and Medium Enterprises Development Act, 2006
and consequent non-provision of Interest on amounts due to such
creditors, the resulting impact thereof on the account is not
ascertainable.
viii). We further report that, without considering item mentioned at
para (vii)(a),(c),(d),(e),(f), and (g) above, the effect of which could
not be determined, had the observation made by us in paragraphs (vii)
(b) above been considered, the loss for the year would have been Rs.
54,56,03,225/- (as against the reported figure of Rs. 48,63,00,170/-).
Accumulated loss would have been Rs. 312,77,22,687/- (as against the
reported figure of Rs. 306,84,19,602/-) sundry debtors would have been
Rs. 42,95,567/- (as against the reported figure of Rs. 4,27,87,300/-),
Advance for capital goods would have been Rs. Nil (As against the
reported figure of Rs. 2,08,11,349/-).
ix) In our opinion and to the best of our information and according to
the explanations given to us, because of the effect of the matters
discussed in paragraphs vii & viii above, the financial statements do
not 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 affair, of the Company as at
31st March, 2010 and
b) in cash of the Profit and Loss Account, of the lose for the year
ended on that date.
c) in the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
ANNEXURE TO THE AUDITORS REPORT
Referred to in the Report of even date to the Members ZENITH STEEL
TUBES AND INDUSTRIES LIMITED on the accounts for the year ended March
31, 2010.
1.a) The Company has maintained proper records showing full particulars
including quantitative details and situation of fixed assets.
b) We have been informed that most of fixed assets have been physically
verified by the management during the year. In our opinion the
frequency of the verification is reasonable . No material discrepancies
were noticed on such verification.
c) During the year the company has not disposed off any substantial
part of the fixed assets.
2.a) The inventory has been physically verified during the year by the
management In our opinion, the frequency of verification is reasonable.
b) In our opinion and according to the information and explanations
given to us. the procedure of physical verification of the inventory
followed by the management are reasonable & adequate in relation to the
size of the Company & the nature of its business.
c) In our opinion and according to the information and explanations
given to us, the company is maintaining proper records of the inventory
and no material discrepancies were noticed on physical verification
between the physical stock and book records.
3.a) The Company has not granted Loans to the companies, Firms or other
parties covered in the Register maintained under Section 301 the
Companies Act.
b) The Company had taken, unsecured loan from three parties covered in
the register maintained under section 301 of the Companies Act. 1956.
The maximum amount involved during the year was Rs.73,78.000/- and the
year end balance of loans taken from such parties was Rs. 73,78,000/-.
c) In our opinion and according to information and explanation given to
us, the rate of interest and other terms and conditions on which these
loans have been taken are not prima facie prejudicial to the interest
of the company.
d) We were informed by the company that the terms of repayment have not
been stipulated therefore we are unable to comment whether the company
is regular in repayment of principal and interest thereon.
e) As there is no stipulation in respect of repayment of loan taken
therefore we are unable to comment whether there is any overdue amount
of such loans.
4. In our opinion, and according to information and explanations given
to us, there are adequate internal control procedures commensurate with
size of the Company and the nature of its business with regard to the
purchase of inventory, fixed assets and for sale of goods. During the
course of our audit, we have not observed any continuing failure to
correct major weaknesses in internal control.
5.a)In our opinion, and according to the information and explanation
given to us, the particulars of contracts or arrangements, referred to
in section 301 of the Companies. Act, 1956 have been entered in the
register required to be maintained under that section.
b) In our opinion and according to the information and explanations
given to us , the transaction made in pursuance of contracts or
arrangements entered in the register maintained under Section 301 of
the Companies Act, 1956 have been made at prices which are reasonable
having regard to prevailing market prices at the relevant time.
6. The Company has not accepted any deposits from the public and
consequently the provision of Sections 58A and 58AA or any othe
relevant provision of the companies Act, 1956 and the rules framed
there under are not applicable.
7. In our opinion the Internal audit system is not commensurate With
the size and nature of its business as the scope and area of its
coverage needs to be enhanced.
8. The Central Government has prescribed maintenance of cost records
u/s.209 (l)(d) of the Companies Act, 1956. However the company has not
made and maintained any such record.
9.a) According to the information and explanations given to us, and on
the basis of our examination of the Books of account, the company has
been regular in depositing, with appropriate a authorities undisputed
statutory dues including Provident Fund, Sales Tax, Employees State
Insurance, Income Tax, Wealth tax. Custom Duty, Excise duty, Service
tax, Cess & any other material statutory dues applicable to except for
dues of Tax Deducted at Sources where delay in payment have been
observed and Deferral Sales Tax & Gram Pancnayat Tax which has not been
paid. According to the information and explanations given to us, no
undisputed Statutory dues payable were outstanding as at 31st,March
20l0 for a Period of more than six months from the date they became
payable except for dues in respect Deferral Sales Tax amounting to
Rs.5,32,762/ and due related to Gram Panchayat Tax amounting to
Rs.5,32,890/-.
b) According to the information and explanation given to us, there is
no statutory dues in respect of Sales Tax, Income tax. Custom duty,
Wealth tax, Excise duty, Service tax, and Cess that have not been
deposited With the appropriate authorities on account of any disputes.
10. The accumulated losses of the company are more than fifty percent
of its net worth. The company has incurred cash losses during the
financial year covered by our audit and also in the immediately
preceding financial year. Further the company has been declared as sick
industry company by BIFR vide order dated 29/06/2001.
11. The company has defaulted in repayment of dues to Financial
Institution and Bank. Particulars of defaults by the company in
repayment of dues to bank and financial institution are as follows.
Sr. Name of the Financial Description period of defaul
No. Institution / Bank of Loan
01. Industrial Finance Coprn. Secured Loan Default Continues
of India Ltd. Since 15.10.1997
02. Maharashtra State Finance Secured Loan Default Continues
Corporation Ltd. Since 15.09.1997
04 Industrial Finance Coprn. Lease Rental Default Continues
of India Ltd Since 01.11.1997
05. Bank of Madura Lease Rental Default Continues
Since 30.06.1997
06. Development Credit Bank Lease Rental Default Continues
of India Ltd. Since 29.06.1997
TOTAL - -
Name of the Financial AMOUNT (Rs. In.Lakhs)
Institution / Bank Principle Interest TOTAL
(Inc.Penal Int)
Industrial Finance
Coprn 11,20,00,000/- 140,78,86,911/- 151,98,86,911/-
of India Ltd
Maharashtra
State Finance 21,47,632/- 4,92,71,138/- 5,14,18,770/-
Corporation Ltd
Industrial Finance
Coprn 12,95,45,298/- 138,48,73,164/- 151,44,18,462/-
of India Ltd
Bank of Madura 23,16,275/- - 23,16,275/-
Development Credit
Bank 78,15,250/- 44,32,505/- 1,22,47,755/-
of India Ltd.
TOTAL 25,38,24,455/- 284,64,63,718/- 310,02,88,173/-
* Attention is invited to paragraph 4(vii)(c) of our report of even
date regarding non-provision for penal interest and liquidated damages
on over dues on account of certain lease transactions in absence of
necessary information we are unable to comment about amount of default
of penal interest in respect of the same.
During the year One Time Settlement accepted by SICDM Ltd. for Rs,
23,46.000/- as full & Final payment against the total dues payable ok
Rs. 12,53,44,192/- as per books of accounts.
12. 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 or a
society.
14. In our opinion and according to the information and explanations
given to us, the Company is not dealing in shares, securities,
debentures, and other investments.
15. According to the information and explanations given to us, the
company has not given any guarantees for loans taken by others from
banks or financial institutions.
16. The Company has not taken any term loans 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 as at 31st
March. 2010, we report that short term funds raised during the year
have been used for long term purposes to the extent of Rs.
47,90,92.338/- and the cumulative amount of funds raised on short term
basis amounting to Rs.2,97,25,07,787/- have been used for long term
purposes which mainly includes accumulated losses.
18. The Company has not made any preferential allotment of shares to
parties and companies covered in the register maintained under section
301 of the Act.
19. In our opinion and according to the information and explanations
given to us, the Company has not issued any secured debentures during
the period covered by our report.
20. During the period covered by our audit report, the Company has not
raised any money by public issues.
21. To the best of our knowledge and belief and according to the
information and explanation given to us, no fraud on or by the Company
has been noticed or reported during the course of our audit.
for KHANDELWAL JAIN & CO.
Chartered Accountants
(Firm Reg.No.105049W)
(NARENDRA JAIN)
partner
M.No. 048725
Place: Mumbai
Date : 30th August, 2010
| 