We have audited the attached Balance Sheet of Hindustan Fluorocarbons
Ltd., Hyderabad, as at March 31, 2012 the Statement of profit and Loss
and the Cash Flow Statement for the year ended on that date, which are
revised statements of the original Balance Sheet and Statement of
Profit and Loss covered by the audit report of Hindustan Fluorocarbons
Ltd., dated 25.05.2012. We have considered the earlier audit report
dated 25.05.2012 on the original accounts and also revised report dated
13.07.2012 and have examined the changes made therein which are as
The reversal of excess provision of Gratuity amounting to Rs.65.89
lakhs has now been treated as Other non operating Income instead of
Exceptional Item, however due to change, there is no impact on profit
for the year from continuing operations.
Revised Audit Report:
In the light of C & AG''s observations under Section 619(4) of the
Companies Act, 1956, on the accounts of the company, the above Audit
Report Dated 13.07.2012 is revised by modifying sub Paras 1(d) &
1(f)(V). This report is in substitution of our earlier report dated
These financial statements are the responsibility of the Company''s
management. Our responsibility is to express an opinion on the
Financial Statements based on our audit.
We conducted our audit in accordance with Audit 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 the management, as well as evaluating the overall Financial
Statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
I. As required by the Companies (Auditor''s Report) Order, 2003, issued
by the Central Government of India in terms of subsection (4A) of
section 227 of the Companies Act, 1956, we enclose in the Annexure here
to a statement of the matters specified in paragraphs 4 & 5 of the said
II. 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 purpose of our
(b) 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
(c) The Balance Sheet, Statement of Profit and Loss and the Cash Flow
Statements dealt with by this report are in agreement with the books of
(d) In our opinion, the Balance Sheet, Statement of Profit and Loss and
the Cash Flow Statement dealt with this report comply with the
Accounting Standards referred to in subsection (3C) of Section 211 of
the Companies Act. 1956, except AS – 6, AS- 15 & AS – 29.
(e) As per the Notification No. GSR. 829 (e) dated 21.10.2003 issued by
the Central Government clause(G) of sub-section(1) of Section 274 of
the Companies Act, 1956, is not applicable to the Government Company
and hence we offer no comment as to whether any of the Directors are
disqualified from being appointed as the Directors in terms of the said
(f) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read together with the
Significant Accounting Policies and Notes thereon, subject to following
(I) The Company had incurred Rs.284.14 lakhs and Rs. 17.83 lakhs as
refurbishment expenditure on Plant & Machinery during the Financial
Year 2008-09 & 2009-10 respectively. As per the guidelines laid down in
scheme of BIFR, Modified Draft Rehabilitation Scheme (MDRS), it has
been stipulated that this sum shall be written off in 5 equal annual
installments. Accordingly, during the current financial year, a sum of
the Rs.61.49 lakhs has been written off on pro – rata basis. This
accounting treatment is a deviation from Accounting Standard ( AS-6)
issued by The Institute of Chartered Accountants of India (ICAI) and
incorporated as a mandatory accounting standard in Section 211(3C) of
the Companies Act 1956;
(II) An amount of Rs.223.57 lakhs was incurred towards VRS payments for
31 employees in accordance with BIFR''s Modified Draft Rehabilitation
Scheme (MDRS) in Jan 2009. As per scheme, this amount is to be
amortized and charged to P & L Account over a period of 3 years on
pro-rata basis. Accordingly, the balance of Rs.37.27 Lakhs has been
amortized/written off during the year to Statement of profit & loss.
This is in accordance with BIFR''s Modified Draft Rehabilitation Scheme
(MDRS). However, the aforesaid accounting treatment is a deviation from
the Accounting Standard (AS-15) issued by The Institute of Chartered
Accountants of India (ICAI) and incorporated as a mandatory accounting
standard in Section 211(3C) of the Companies Act;
(III) The arrears payable on account of pay fixation in the revised
scale with effect from 01-01-1997 vide wage revision settlement as per
DPE guidelines, have had not been provided for in the books of the
company. The arrears payable at the close of the year was Rs.1160
lakhs (Pr. year Rs.1552 Lakhs). As per BIFR-MDRS, the company has
implemented the wage revision for officers and non officers'' with
effect from December 2010 and the arrears payable for the period before
that date has not been charged to profit and loss account on account of
categorically stipulation made under the scheme that arrears are to be
released subject to availability of funds. The company has accordingly
not provided for. This liability has been disclosed under contingent
liability in the financial statements;
(IV) Trade Receivables, Trade payables, sundry balances of debit and
credit of parties are subject to confirmation and review by the
management, 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:-
i) in the case of Balance Sheet of the state of affairs of the
company as at 31st March,2012.
ii) in the case of the Statement of Profit and Loss, of the result for
the year ended on that date and
iii) in the case of Cash Flow statement of the cash flows for the year
ended on that date.
Annexure to Auditors Report
(Referred to in Paragraph 1 of our report of even date)
1(a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
1(b) All the fixed assets have been physically verified by management
during the year and there is regular program of verification which, in
our opinion, is reasonable having regard to the size of the Company and
the nature of its assets. As informed no major material discrepancies
were noticed on such verification.
1(c) During the year, the Company has not disposed off substantial part
of its fixed assets.
2(a) As explained to us, the stocks of finished products,
stock-in-process and raw materials have been physically verified by the
management during the year. Stock of stores and spare parts are
reported to be physically verified in accordance with the procedure
followed by the management. In our opinion, the frequency of such
physical verification of stocks is reasonable.
2(b) In our opinion, the procedure of physical verification of stocks
followed by the management is reasonable and adequate in relation to
the size of the Company and the nature of its business.
2(c) The Company is maintaining proper records of inventory and no
material discrepancies have been noticed on physical verification of
stocks compared to the books/records.
3(a) The company has not granted any loans secured or unsecured to/from
Companies, Firms or other parties covered in the registers maintained
u/s 301 of the Companies Act, 1956.
3(b) The company has taken secured loan from its holding company,
Hindustan Organics Company Limited, covered in the register maintained
under section 301 of the Companies Act 1956 and the maximum amount
involved during the year was Rs.4021.06 lakhs (Pr. Year Rs.4019.15
lakhs ) and the year - end balance is Rs. 3929.33 lakhs (Pr. Year Rs.
4019.15 lakhs )
3(c) In our opinion, the rate of interest and other terms and
conditions on which loans have been taken on the holding company, are
not prima facie prejudicial to the interest of the company.
3(d) The Company is irregular in repaying the principal amount as
stipulated and also irregular in payment of interest. The overdue of
principal and interest at the close of the year is Rs. 1514.62 lakhs
(Pr. Year Rs. 916.62 lakhs)
4. In our opinion and 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 with regard to the purchase of inventory, fixed assets and
with regard to the sale of goods. Further, on the basis of our
examination of the books and records of the company and according to
the information and explanations given to us, we have neither come
across nor have been informed of any continuing failure to correct
major weaknesses in the aforesaid internal control procedures;
5(a) According to the information and explanations given to us, we are
of the opinion that the transactions that need to be entered in the
register maintained u/s 301 of the Companies Act, 1956 have been so
5(b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts and
arrangements entered in the register maintained under section 301 of
the Companies Act 1956 in respect of transactions during the year, have
been made at prices which are reasonable having regard to the
prevailing market price at the relevant time.
6. The Company has not accepted any deposits from the public within
the meaning of section 58A, 58AA of the companies Act 1956 or any other
relevant provisions of the act and the rules made there under.
7. The internal audit of the company has been entrusted to an
independent firm of Chartered Accountants to carry out the functions as
Internal Auditors. In our opinion the company has internal audit system
commensurate with the size and nature of business.
8. We have broadly reviewed the books of accounts maintained by the
Company pursuant to the rules made by the Central Government for the
maintenance of cost records u/s 209 (1) (d) of the Companies Act. 1956
and we 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 records with a view to determine whether
they are accurate or complete.
9(a) The company is generally regular in depositing with appropriate
authorities undisputed statutory dues including Provident fund,
Employee''s state Insurance, Income-tax, CST/VAT, Wealth-tax, Service-
tax, Customs duty, Excise duty, cess and other material statutory dues
applicable to it. The arrears of CST/VAT, Provident fund etc.
outstanding at the close of previous year have been deposited during
9(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of income – tax, wealth tax,
service tax, sales tax, customs duty, excise duty and cess were in
arrears, as at 31st March 2012 for a period of more than six months
from the date they became payable;
10. The accumulated losses of the company as at the end of the year are
more than fifty percent of its net worth. Further, the company has not
incurred cash losses during the financial year covered by our audit and
in the opinion of the previous auditor; the company has incurred cash
losses in the immediately preceding financial year. The company is
under the Scheme of BIFR and hence considered as a Sick Company as per
Sick Industries Companies (Special Provisions) Act 1985.
11. The Company has not defaulted in repayment of dues to financial
institutions during the current financial year. There are no over dues
as on 31st March, 2012.
12. The Company has not granted any loans and advances on the basis of
shares, debentures and other securities of a similar nature and hence
maintenance of documents and records relating to such items are not
13. In our opinion the Company is not a chit fund or a nidhi/mutual
benefit fund/society. Therefore, clause-4 (iii) of the Companies
(Auditor''s Report) Order, 2003, is not applicable to the Company.
14. The Company has not dealt in or traded in shares, securities,
debentures and other investments.
15. The Company has not given any guarantee for loans taken by others
from banks and financial institutions.
16. In our opinion, the term loans have been applied for the purpose
of which they were raised.
17. In our opinion and as per the explanations given to us, no funds
raised on short term basis have not been used for long term purposes
18. The Company has not made any preferential allotment of the shares
during the year.
19. The Company has not issued any debentures during the year.
20. The Company has not raised any money by public issues during the
21. Based upon the audit procedures performed 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 S. Daga & Co.,
M. No. 011617