1) We have audited the attached Balance Sheet of The Dharamsi Morarji
Chemical Company Limited, as at March 31, 2012 and also the Statement
of Profit & Loss 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 an
opinion on these financial statements based on our audit.
2) We conducted our audit in accordance with the 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 overall financial statement
presentation. We believe that our audit provides a reasonable basis for
3) As required by the Companies (Auditor''s Report) Order, 2003, as
amended by the Companies (Auditor''s Report) (Amendment) Order, 2004,
issued by the Central Government of India in terms of sub-section (4-A)
of section 227 of the Companies Act, 1956, we enclose in the Annexure a
statement on the matters specified in paragraphs 4 and 5 of the said
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 explanations, which to the
best of our knowledge and belief were necessary for the purposes of our
(ii) 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
(iii) The Balance Sheet, Statement of Profit and Loss and Cash Flow
Statement dealt with by this report are in agreement with the books of
(iv) In our opinion, the Balance Sheet, Statement of Profit and Loss
and Cash Flow Statement dealt by this report comply with the accounting
standards referred to in sub-section (3C) of section 211 of the
Companies Act, 1956.
(v) On the basis of written representations received from the directors
as on March 31, 2012 and taken on record by the Board of Directors, we
report that none of the directors of the Company are disqualified as on
March 31, 2012 from being appointed as a director in terms of clause
(g) of sub-section (1) of section 274 of the Companies Act, 1956;
(vi) Attention is invited to Note No. X(11), regarding preparation of
accounts on a ''Going Concern'' basis despite continued losses and
erosion of total net worth of the Company, in view of the management''s
perceptions and reasons detailed therein.
(vii) Attention is invited to Note No. X(16), regarding Trade
Receivables that could not be classified as outstanding for a period of
more than six months from the due date instead of invoice date as
required by the revised Schedule VI to the Companies Act, 1956. We were
explained that the necessary modification in the existing computer
program will be carried out in due course. This revised classification
does not have any material impact on the financial statements except
for the Presentation and Disclosure of the same.
(viii) The Company had recognized net deferred tax asset in earlier
years aggregating to Rs. 2654.15 lacs till 31st March, 2009 considering
unabsorbed loss up to 31st March, 2008 and unabsorbed depreciation up
to 31st March, 2009. For the subsequent financial periods, further net
deferred tax asset has not been recognized in view of management''s
perceptions and reason detailed in Note No. V(c). We are not in a
position to opine on the net deferred tax asset recognized till date as
regards its ultimate realization since the virtual certainty of the
available sufficient future taxable income, as required by Accounting
Standard 22 i.e. ''Accounting for taxes on income'' notified pursuant to
Companies (Accounting Standards) Rules, 2006, could not be
Had the Company not recognized the said net deferred tax asset
aggregating to Rs. 2654.15 Lacs, the Accumulated Losses as at the end
of the year would have been higher by Rs. 2654.15 Lacs.
(ix) Had the impact of matter stated at (viii) been considered,
accumulated losses as at 31st March, 2012 of Rs. 9755.75 Lacs would
have been Rs. 12409.90 Lacs.
(x) Subject to Clause No. (viii) and (ix)above, in our opinion and to
the best of our information and according to the explanations given to
us, the said accounts give the information required by the Companies
Act, 1956, 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, 2012;
b. in the case of the Statement of Profit and Loss of the Loss for the
year ended on that date; and
c. in the case of the Cash Flow Statement of the cash flow for the
year ended on that date.
ANNEXURE TO THE AUDITORS'' REPORT
(Referred to in paragraph 3 of our report of even date on the Accounts
for the year ended March 31, 2012, of The Dharamsi Morarji Chemical
(i) (a) The Company has maintained proper records showing full
particulars including quantitative details and situation of fixed
assets. However, in the case of some assets, individual records with
quantitative details and values are to be segregated, updated and
(b) A substantial portion of the fixed assets has been physically
verified by the management during the year and in our opinion, the
frequency of verification is reasonable having regard to the size of
the Company and the nature of its assets. No material discrepancies
were noticed on such verification.
(c) The fixed assets disposed off during the year were not substantial.
According to the information and explanations given to us, we are of
the opinion that the disposal of the fixed assets has not affected the
going concern status of the Company.
(ii) (a) The inventories have been physically verified during the year
by the management. In our opinion, the frequency of verification is
(b) 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 according to the explanations given to us, the
Company is maintaining proper records of inventory. The discrepancies
noticed on verification between the physical stocks and the book
records have been properly dealt with in the books of account.
(iii) (a) According to the information and explanations given to us,
the Company has not granted any loans, secured or unsecured to the
companies, firms or other parties covered in the register maintained
under Section 301 of the Companies Act, 1956. Accordingly sub clause
(b), (c) and (d) are not applicable.
(b) The Company has taken interest free loan amounting to Rs. 1715.43
Lacs from a director/s of the Company and inter-corporate deposits of
Rs. 716.80 Lacs from four parties listed in the register maintained
under section 301 of the Companies Act, 1956.
(c) In our opinion and according to the information and explanations
given to us, the terms and conditions of the unsecured loans taken were
prima facie not prejudicial to the interest of the Company.
(d) According to the information and explanations given to us the
repayment terms of the principal amounts are not decided.
(iv) 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 with regard
to purchase of inventory, fixed assets and with regard to the sate of
goods and services. However, there is scope to strengthen the internal
controls at operational level through proper implementation. During me
course of our audit no major weakness has been noticed in the internal
(v) (a) In our opinion and according to the information and
explanations given to us, the particulars of contracts or arrangements
referred to in Section 301 of Companies Act, 1956 have so been entered
in register required to be maintained under that section.
(b) In our opinion and according to the information and explanations
given to us, these contracts or arrangements have been made at prices
which are reasonable having regard to the prevailing market prices at
the relevant time.
(vi) In our opinion and according to the information and explanations
given to us, the Company has not complied with certain provisions of
Sections 58A and 58AA or any other relevant provisions of the Companies
Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with
regard to the deposits accepted from the public including non-filing of
returns of fixed deposits etc. As informed to us, no order has been
passed by the Company Law Board or National Law Tribunal or Reserve
Bank of India or any other Court or any other Tribunal in contravention
of the aforesaid provisions and/or rules by the Company.
(vii) In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business, however, the
scope and coverage of the same needs to be increased.
(viii) We have broadly reviewed the books of account maintained by the
Company which have been made pursuant to the Rules made by me Central
Government for the maintenance of cost records under Section 209 (1)(d)
of the Companies Act, 1956, 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.
(ix) (a) According to the records of the Company, the Company is not
regular in depositing with appropriate authorities undisputed statutory
dues including Customs Duty and Wealth Tax, Provident Fund, Investor
Education Protection Fund, Employees'' State Insurance, Income Tax,
Sales Tax, Excise Duty, Service Tax, Cess and other statutory dues
applicable to it. Based on our audit procedures and according to the
information and explanations given to us, the following undisputed
statutory dues were outstanding as at March 31, 2012 tor a period of
more than six months from the date they became payable.
Nature of Dues Period to which Due Dates Amount (Rs.
Amount relates In Lacs)
Interest thereon 2005-06 Various 0.19
2006-07 Various 45.51
2007-08 Various 33.31
2008-09 Various 3.53
Professional Tax 2006-07 Various 11.18
2007-08 Various 9.75
2008-09 Various 0.20
2009-10 Various 0.05
2010-11 Various 0.50
2011-12 Various 1.25
VAT and CST Various 3.36
PF, FPF, EDLI,
ESIC etc Various 12.75
at source on:
Salary 2011-12 Various 2.55
Contractors 2011-12 Various 2.54
Prof. Fees 2011-12 Various 1.39
TDS on WCT 2011-12 Various 0.15
TCS 2010-11 Various 0.06
2011-12 Various 0.02
IEPF- Cannot be Cannot be 10.63
Unclaimed Ascertained Ascertained
FD/Debentures Cannot be Cannot be 5.29
IEPF-Unclaimed Cannot be Cannot be 17.31
Fixed Deposits Ascertained Ascertained
Sales Tax Loans 161.10
(ix) (b) According to the records of the Company, Income Tax, Sales
Tax, Wealth Tax, Customs Duty, Excise Duty, Service Tax and Cess which
have not been deposited on account of dispute are given below:
Name of the Nature of Dues Forum where Period to Amount
Statute dispute is whch relate (Rs.
Central Duty/Interest/ Asst. June 1999 to 2.29
Excise Act Penalty Commissioner August 1999
Duty/Interest/ Asst. Sept 1999 to 1.81
Penalty Commissioner Dec 1999
Duty/Interest/ Asst. Jan 2000 to 3.04
Penalty Commissioner June 2000
Duty/Interest/ Asst. July 1996 to 4.03
Penalty Commissioner May 1999
Duty/Interest/ Asst. July 2000 to 2.68
Penalty Commissioner May 2001
Duty/Interest/ Asst. Various 24.48
Duty/Interest/ Asst. Various 0.57
Duty/Interest/ Asst. August 2003 1.18
Penalty Commissioner to May 2004
Duty/Interest/ Asst. Various 0.80
Alleged CESTAT Various 9.76
Sales Tax Tax/Interest/ Appellate 1992-93 6.91
Act Penalty Tribunal
Tax/Interest/ Appellate 1993-94 4.20
Entry Tax Tax/Interest High Court 4.47
(x) The accumulated losses of the Company are more than fifty percent
of the Net Worth of the Company as at the end of the year and it has
not incurred any cash loss during the current financial year and in the
immediately preceding financial year.
(xi) Company has defaulted in repayment of Sales Tax Loans of Rs.
161.10 Lacs. Pending receipt of revised schedule the same has been
considered as ''Other Payables'' in ''Current Liabilities'' (Also referred
to in ix(a) above).
(xii) Based on our examination of the records and 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.
(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual
benefit fund/society. Therefore, the provisions of clause 4(xiii) of
the Order are not applicable to the Company.
(xiv) In our opinion and according to the information and explanations
given to us, the Company is not dealing in or trading in shares,
securities, debentures and other investments. Accordingly the
provisions of clause 4 (xiv) of the Order are not applicable to the
(xv) The Company has not given any guarantee for loans taken by others
from bank or financial institutions.
(xvi) The term loan taken from a Bank has been utilized for the purpose
for which it is taken.
(xvii) According to the information and explanations given to us and on
an overall examination of the Balance Sheet of the Company, we report
that the funds amounting to Rs. 2396.16 Lacs raised on short-term basis
have been used for long-term purposes.
(xviii) 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.
(xix) The Company has not issued any debentures during the year.
(xx) The Company has not raised money by public issue during the year.
(xxi) Based upon the audit procedures performed for the purpose of
reporting true and fair view of the financial statements and as per the
information and explanations given by the management, we report that no
fraud on or by the Company has been noticed or reported during the
course of our audit.
For K. S. Aiyar & Co.
RAGHUVIR M. AIYAR
Membership No. 38128
Mumbai, 30th May, 2012