| 1. We have audited the attached Balance Sheet of CT Cotton Yarn
Limited as at 31st March 2008 and also the Profit & Loss Account for
the period ended 31st March 2008 (comprised of fifteen months) annexed
thereto, and the cash flow statement for the period ended on that date.
These financial statements are the sole responsibility of management of
the Company. Our responsibility is to express an opinion on these
financial statements based on our audit.
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 misstatements. 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 overall financial statements
presentation. We believe that our audit provides a reasonable basis for
our opinion.
2. As required by the Companies (Auditors Report) Order, 2003 as
amended by the Companies (Auditors 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 as we considered appropriate and according to the information
and explanations given to us, We give in the Annexure a statement on
the matter specified in paragraph 4 and 5 of said order.
3. Further to our comments referred to in paragraph 2 above, we report
and invite attention as under:
(a) (I) The Company has incurred during the year loss of Rs. 56,388
thousand resulting in accumulated losses of Rs. 1,783,719 thousand as
at 31st March 2008, which has significantly eroded the net worth of the
Company, which prima facie raises substantial doubts about the
managements ability to continue as a going concern.
(ii) The company has suspended providing of Interest/Penal Interest,
Penal charges & liquidated damages payable to bankers/Financial
Institutions with effect from 1st April 2005. No provision for
Interest/Penal Interest, Penal charges & liquidated damages payable to
bankers/Financial Institutions has been made during the period covered
under audit for delay & default in repayment of their loans. (Amount
unascertained)
(iii) The bank statements of various accounts including Current
Accounts (regarded as non-operative) are not available with the company
for any part of the year. The resultant impact thereof on the accounts
is presently unascertained.
(iv) In the absence of necessary information, we are not able to
comment on the difference amount of Rs. 256 thousand in respect of
dividend payable pertaining to earlier years as appearing in the books
of accounts of the company. Further, the unclaimed dividend of Rs. 892
thousand transferred to UCO Bank (Unclaimed dividend account) has not
been transferred to the general revenue account of the Central
Government Account in accordance with the provisions of section 205A of
the Companies Act, 1956.
(v) Claim for interest recoverable and quality claims of Rs. 39,032
thousand lodged against suppliers and taken into income in earlier
years. As per the Management, these claims are under settlement and the
confirmation from supplier has not been received so far, in view of
this, these claims are contingent in nature.
(vi) The company did not take into account the sales tax (both CST &
Local) demand including penalty & interest imposed by the Asst.
Commissioner Commercial Tax, Gwalior vide his order dated 29th January
2007 for the Assessment Year 2003-2004 for an amount of Rs. 15,635
thousands as in the opinion of the management the same is appealable
and the company will contest the same legally through filing of
Appeals. Hence the same is contingent in nature.
(vii) The Company has defaulted in the repayment of dues pertaining to
the IFCI Ltd as a result of which all the Fixed Assets of the Company
has been acquired by the IFCI Ltd vide panchnama dated 13.03.2008 due
to the unascertainment of the liability payable to the IFCI Ltd.
4. We further report that if the observation made by us in paragraph 3
(a) (v) & (vi) above is considered, the accumulated losses would have
been Rs. 1,838,386 thousands (as against the reported figure of Rs
1,783,719 thousands).
5. On an overall consideration and in view of remarks made in Para 3
above and further to our comments in the annexure referred to in
paragraph 2 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 accounts as required by law have
been kept by the company so far as appears from our examination of the
said books.
iii) The Balance sheet and Profit & Loss Account dealt with this report
are in agreement with the books of account.
iv) In our opinion, Balance Sheet and Profit & Loss Account comply with
accounting standards as referred to in section 211(3C)of the Companies
Act, 1956.
v) We had requested directors to give written representations regarding
their eligibility for appointment as Director in terms of clause (g) of
sub-section (1) of section 274 of the Companies Act, 1956 but no such
representation was received by us and therefore we are unable to
express our opinion on the subject.
vi) In our opinion and to the best of our information and according to
the explanations given to us, the accounts read together with the notes
and accounting policies given in Schedule 16 gives the information
required by the Companies Act, 1956 in the manner so required and gives
a true and fair view subject to the point no. 3 of this report.
a) In the case of Balance Sheet of the state of affairs of the Company
as at 31st March, 2008;
b) In the case of Profit & Loss Account of the loss for the year ended
on 31st March, 2008.
c) In the case of Cash Flow Statement, of the Cash Flow for the year
ended on that date.
ANNEXURE TO THE AUDITORS REPORT
(Annexure referred to in paragraph 2 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 fixed assets on the
basis of available information.
(b) As explained to us, the fixed assets have been physically verified
by the management during the year in a phased periodical manner, which
in our opinion is reasonable, having regard to the size of the Company
and nature of its assets. No material discrepancies were noticed on
such physical verification.
(c) During the year whole of the Companies fixed assets have been taken
over by the principal financer IFCI Ltd as per panchnama dated
13.03.2008 and hence on 31.03.2008 there were no assets in physical
possession of the Company.
(2) In respect of its inventories:
(a) As explained to us, inventories have been physically verified by
the management at regular intervals during the year, however as on 31st
March 2008 the closing stock in hand of the company reduced to Nil as
the Company had sold all the stocks lying with the Company.
(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) The Company has maintained proper records of inventories. As
explained to us, there were no material discrepancies noticed on
physical verification of inventory as compared to the books and
records.
(3) (a) The company has not granted any loans, secured or unsecured, to
companies, firms or other parties covered in the register maintained
u/s 301 of the Companies Act,1956.
(b) The company had taken unsecured loan from one company covered in
the register maintained u/s 301 of the Companies Act, 1956 to finance
the daily operations of the company without interest. The maximum
amount involved during that period was Rs. 127,663 thousands.
(c) In our opinion the rate of interest and other terms & conditions of
above loans are not, prima facie, prejudicial to the interest of the
Company.
(d) The Company is regular in repaying the principle amounts as
stipulated and has been regular in payment of interest.
(4) According to the information and explanations given to us, there
are adequate internal control procedures commensurate with the size of
the company and the nature of its business, for the purchase of
inventory and fixed assets, sales 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) (a) According to the information and explanations given to us and
on the basis of such checks as considered appropriate we are of the
opinion that the Company has entered all the transactions required to
be entered in the register maintained u/s 301 of the Companies Act,
1956.
(b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts or
arrangements required to be entered in the registered maintained under
section 301 of the Companies Act, 1956 has been made at a price which
is reasonable having regard to the prevailing market prices at that
time. However during the period covered under audit the total value of
transactions with any single party covered under section 297 & 299 of
the Companies Act, 1956 didnt exceed the threshold limit of Rs.
5,00,000/-.
(6) The Company has not accepted any deposits from the public and hence
directives issued by the Reserve Bank of India and the provisions of
Section 58A and 58AA or any other relevant provisions of the Companies
Act, 1956 and rules framed there under are not applicable for the year
under audit.
(7) In our opinion, the Company has an internal audit system
commensurate with its size and nature of its business.
(8) The Central Government has prescribed maintenance of Cost Records
under section 209 (1) (d) of the Companies Act, 1956 in respect of
certain manufacturing activities of the Company. We have broadly
reviewed the accounts and records of the Company in this connection and
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 Company, the Company has been
regular in depositing undisputed statutory dues including Income-Tax,
Sales-tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and
other statutory dues as are applicable to the company except Employees
Provident Fund, Employees State Insurance & Central Sales Tax dues
that have not been regularly deposited with the appropriate
authorities. According to the information and explanations given to us
and according to the records of the Company, undisputed amounts payable
in respect of the ESI, EPF, CST inclusive of Entry Tax outstanding as
at 31" March 2008 for a period of more than six months from the date of
becoming payable were Rs. 3,625 thousand, Rs. 7,027 thousand, 5,141
thousand respectively.
(b) The disputed statutory dues aggregating to Rs. 115,656 thousand,
which have not been deposited on account of matters pending before,
appropriate authorities are as under:
S.
No. Name of the Statute Assessment Nature of the Dues
Year
1. Income Tax Act, 1961 2002-03 Penalty u/s271 (1) (c)
2003-04 Assessment u/s 143 (3)
2. Central Excise Act, 1944 1995 Excise Duty &
Penalty
3. M.P. Commercial Tax Act- - Sales Tax
1994
4. M.P. Commercial Tax Act 1998-99 Sales Tax
1994
1999-00 Sales Tax
2001-02 Sales Tax
2002-03 Sales Tax
5. Central Excise Act, 1944 - Custom Duty
Forum where Amount
Dispute is pending (Rs. In thousand)
ITAT, New Delhi 3408
CIT (A) 90000
Case referred back 1698
by Supreme Court to
CESTAT
Asst. Comm (Commercial) 5000
Asst.Comm 2665
Asst. Comm 3016
Asst.Comm 776
Add.Comm 7242
CESTAT, N.Delhi 1851
(10) According to the information and explanations given to us, the
accumulated losses at the end of the financial year as on 31st March
2008 are Rs.1,783,719 thousands against its Share Capital Rs. 193,900
thousand. Therefore the accumulated losses exceed the net worth of the
Company. The company has incurred cash losses of Rs. 16,400 thousands
for the year ended as on 31st March 2008. It also has incurred cash
losses of Rs. 34100 thousands for the year ended as on 31st December
2006.
All the above balances are subject to Banks / Fls confirmation.
These figures are as per estimation made by the management without
corresponding confirmation for the respective Bankers/FIs.The interest
figures are only up to 31st March 2005.The management decided to
dispense with providing interest on all loans accounts including
working capital loans from 1st April 2005.
(12) In our opinion and according to the information and explanation
given to us, no loans and advances have been granted by the Company on
the basis of security by way of pledge of shares, debentures and other
securities.
(13) In our opinion, the Company is not a chit fund or a nidhi/ mutual
benefit fund /society. Therefore, clause 4(xiii) of the Companies
(Auditors Report) (Amendment) Order, 2004 is not applicable to the
Company.
(14) This clause is not applicable to the company.
(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.
(16) According to the information and explanations given to us, the
Company has not obtained any term loan during the period covered under
audit.
(17) On the basis of review of utilization of fund, which is based on
overall examination of the Balance Sheet of the Company as at 31" March
2008, related information as made available to us and as represented to
us, we are of the opinion that no short terms funds raised by the
company has been utilized for long term investment purposes.
(18) During the year, the Company has not made any preferential
allotment of shares to parties and companies covered in the Register
maintained under section 301 of the Companies Act, 1956.
(19) No debentures were issued by the company for the financial year
ended 31st March, 2008.
(20) During the period covered by our report, the Company has not
raised any money by way of public issue during the year.
(21) In our opinion and according to the information and explanations
given to us, no fraud on or by the Company has been noticed or reported
during the year that causes the financial statements to be materially
misstated.
For Deepak Gulati & Associates
Chartered Accountants
Sd/-
Deepak Gulati
Proprietor
M.No. 086403
Place: New Delhi
Date : 02.09.2008 | 