We have audited the attached Balance Sheet of DEORA POLYTEX LIMITED as
at 31st March, 2006 and also the annexed Profit and Loss Account of the
company for the year ended on that date. 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.
1. 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 statement
presentation We believe that our audit provides a reasonable basis for
2. As required by the Companies (Auditors Report) Order, 2003 issued
by the Central Government of India in terms of Section 227 (4A) of the
Companies Act, 1956, we annex hereto a statement on the matters
specified in Paragraphs 4 and 5 of the said order.
3. Further to our comments in the Annexure referred to in Paragraph I
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
b) 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
books of the Company
c) The Balance Sheet and the Profit and Loss Account dealt with by the
report are in agreement with the books of accounts of the company.
d) The Balance Sheet and the Profit and Loss Account dealt with by this
report are in compliance with the Accounting Standards referred to in
Section 211(3C) of the Companies Act 1956, in so far as they are
applicable to the company, except Accounting Standard 15(AS - 15) with
respect to non-provision of Gratuity, Accounting Standard 13(AS13)
with respect to diminution in the value of Investments, the impact of
which cannot be quantified in the absence of adequate information
e) On the basis of written representations received from the directors
of the company, and taken on record by the Board of Directors, none of
the directors are disqualified under Section 274(l)(g) of the Companies
f) Based on available information, it is not possible to quantify the
disputed amount of statutory dues, since the company has been unable to
furnish the necessary information.
g) In our opinion and to the best of our information and according to
the explanations given to us, subject to
i) Non provision of gratuity, leave encashment and retirement benefits
as mentioned in clause V of the Significant Accounting Policies, the
impact of which cannot be ascertained as explained in sub-para d of
Paragraph 3 above
ii) Note No. 3 regarding confirmation from various parties
iii) Note No. 6 regarding no provision for the diminution in the value
of investments (whether quoted or unquoted), as the same cannot be
quantified in the absence of adequate information
iv) Non provision of interest/penal interest and other charges for
non-fulfilment of various conditions of the rescheduling arrangement
with the financial institutions, the impact of which cannot be
quantified based on available information
v) Non Provision for doubtful debts estimated at Rs. 6,40,50,245/
vi) Non Provision of depreciation for the financial year 1999-2000
amounting to Rs. 45,00,000/-
vii) Non Provision of accrued fixed deposit interest, the amount of
which cannot be ascertained in the absence of adequate information, the
said accounts give the information required by the Companies Act, 1956
in the manner so required and present a true and fair view
i. In the case of the Balance Sheet, of the state of the affairs of
the Company as at 31st March, 2006 and
ii. In the case of the Profit and Loss Account, of the Loss for the
year ended on that date
iii.In the case of Cash Flow Statement, of the cash flow for the year
ended on that date.
ANNEXURE REFERRED TO IN PARAGRAPH 2 OF OUR REPORT OF EVER DATE ON THE
ACCOUHT8 FOR THE YEAR ENDED 31ST MARCH. 2OO6 OF DEORA POLYTEX LIMITED
On the basis of such checks as we considered appropriate and in terms
of the information and explanations given to us, we state that :
1. According to the information and explanation given to us, the
Company has not updated the fixed assets register with respect to
additions made from the year ending 31st March, 2003.
2. The fixed assets have not been verified by the Management
3. The Company has not disposed of any of its fixed assets during the
year under review and none of its fixed assets have been revalued.
4. With respect to its inventory,
(a) As explained to us, the Management has physically verified the
stocks at the close of the year. In our opinion, the frequency of
physical verification needs to be increased to make it reasonable.
(b) The procedures of physical verification, which are followed by the
Management are reasonable and adequate in relation to the size of the
company and the fact that the business was suspended.
(c) The discrepancies noticed on physical verification of stocks as
compared to the book records were not material and have been properly
dealt with in the books of accounts.
5. With respect to loans, it is stated as under :-
(a) The company has not taken loans from/given loans to persons, firms
or other parties covered by Section 301 of the Companies Act, 1956.
(b) There is no stipulation regarding the repayment of the Principal
amount in respect of the said loan.
6. In our opinion and according to the explanations given to us, the
internal controls in respect of purchases of stores, raw materials,
including components, plant & machinery, equipments and other assets
and for the sale of goods needs to be strengthened to make it
commensurate with the size of the company and the nature of its
business. During the course of our audit, we have not observed any
continuing failure to correct major weaknesses in internal controls.
7. According to the information and explanations given to us,
(a) The register under Section 301 is not maintained.
(b) The transactions made in pursuance of contracts or arrangements
covered by Section 301 of the Companies Act, 1956 and exceeding the
value of rupees five lakhs in respect of any party during the year have
been made at prices which are reasonable having regard to prevailing
market prices at the relevant time
8. During the year under review, the company has not accepted deposits
from the public
9. The Company does not have an internal audit system and no comments
are therefore applicable.
10.Maintenance of Cost Records is not applicable to the company for the
year under review, since it has not carried on any operations..
1l.With respect to statutory dues, it is stated that :
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of Income-tax, Wealth tax, Sales
tax, Customs duty, Excise duty-and cess were in arrears as at 31st
March, 2006 for a period exceeding six months from the date they became
payable, except the following :
Applicable Nature of dues Due Date Date of Payment
Income Tax Tax As per statute Not paid till date
Act,1961 deducted For the year of report
at Source ending 31st
Applicable Amount Rs
Income Tax 7.919/-
(c) According to the information and explanations given to us, there
are no dues of sale tax, income tax, customs duty, wealth tax, excise
duty and cess which have not been deposited on account of any dispute.
12.The accumulated losses of the Company exceeds 50% of net worth of
the company. The Company has been declared as a Sick Company as defined
under Section 3(l)(O) of the Sick Industrial Companies (Special
Provisions) Act, 1985, (referred to as SICA) by the Board for
Industrial and Financial Reconstruction vide Case No. 499/2002 (Against
the reference being made u/s 15(1} of SICA in Form A dated
16.10.2002). The Company has incurred cash losses of Rs. 1.06 lakhs and
Rs. 20.71 lakhs for the financial years ending 31* March, 2006 and 31st
March, 2005 respectively.
13.The Company has defaulted in the repayment of dues to a financial
institution or bank. All the Secured Loans taken by the Company has
been declared as Non Performing Assets by the respective financial
institution and Banks as on 31st March, 2006 aggregating to Rs.
14.The Company has not given any guarantee for loans taken by others
from bank or financial institutions.
15.The Company has not taken any term loan during the year under
16.On an overall examination of the Balance Sheet of the Company, it is
stated that no funds raised on short term basis have been used for long
term investment and vice versa.
17. The Company did not have any outstanding debentures during the year
18.The Company has not raised any money through public issue during the
19.The Company has not made any preferential allotment of equity shares
during the year under review.
20.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