We have audited the attached Balance Sheet of INDU NISSAN OXO CHEMICAL
INDUSTRIES LIMITED, as at 31st March, 2011 and also the Profit and Loss
Account 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.
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 overall financial statement
presentation. We believe that our audit provides a reasonable basis for
1. As required by Companies (Auditors'' Report) Order,
2003 issued by Central Govt, of India, in terms of Sub- section (4A) of
Section 227 of the Companies Act, 1956, we enclose in the annexure a
statement on the matters specified in paragraphs 4 & 5 of the said
2. Further to our comments in the Annexure referred to in paragraph 1
above, we report that:
a) We have obtained all the information and explanations, except
confirmations from lenders and creditors, more particularly the secured
lenders / creditors, which to the best of our knowledge and belief were
necessary for the purpose of our audit;
b) in our opinion, proper books of account as required by law, have
beert kept by the Company so far as appears from our examination of
c) the Balance Sheet, Profit and Loss Account, and Cash Flow statement
dealt with by this report are in agreement with the books of account of
d) in our opinion, the Balance Sheet, Profit and Loss account, and the
and Cash Flow Statement dealt with by this report, except compliance
with AS-15 on Employee Benefits (refer clause (j) of this report),
comply with the Accounting Standards referred to in sub-section (3C) of
section 211 of the Companies Act, 1956.
e) the Company has defaulted in redemption of Debentures, which fell
due on the 1CP of July, 1998 aggregating to f 552.02 lacs and the
amount of interest including penal interest calculated at simple
interests accrued as of 31st March, 2011 is Rs1334.01 lacs, thereby, the
directors of the Company are disqualified from being appointed as
director under clause (g) of sub section 1 of section 274 of the
Companies Act, 1956;
f) Attention is invited to Note No. 7 of Notes to Accounts regarding
confirmation of account of various parties, the balances have been
taken as per books of account. We in the absence of confirmations are
unable to ascertain the nature of adjustments that may be required in
respect of various accounts and the resultant effects thereof on the
g) Attention is invited to Note no. 3 (c) of Notes to Accounts. The
Custom department had imposed penalty of f 1000 Lacs on the Company,
which was disputed by the Company. On appeal before CESTAT, the said
penalty is reduced to Rs700 Lacs vide order dated March 31, 2011. The
Company has informed us that, it is proceeding in appeal against this
order in appeal, and hence no provision for this liability is made in
the accounts, contending this being contingent liability. We are unable
to express our opinion on this item.
h) Attention is invited to Note no. 3 (e) of Notes to Accounts. Amount
receivable from RSEB (Rajasthan State Electricity Board) in respect of
Assets given on Lease is shown at Rs412.19 Lacs against security deposit
received from RSEB of f 653.09 Lacs.
We have been informed that Company has filed a suit against RSEB before
Rajasthan High Court for the recovery of f 964.92 lacs inclusive of
interest @ 20% after making adjustment of DPA (Deferred Payment
Agreement) decision of which remains pending. We are unable to express
our opinion on this item.
i) Attention is invited to Note no. 3 (a) of Notes to Accounts. In
respect of Inter Corporate Deposits received from Himalaya Machinery
Limited, the Company had, based on legal opinion, written back interest
amounting to f 23.43 lacs during the financial year ended 31st March
2002 due to which debit balance in profit and loss a/c is lower by
Rs23.43 lacs. Further the Company has not provided any interest for the
period 1.10.2000 to 31.03.2011 the interest of which works out to f
120.94 Lacs calculated at simple interests @ 27%. Including current
year''s interest of Rs. 11.61 Lacs.
j) Provision for Gratuity payable to employees has been made only upto
31st March, 2006 based on management estimates. Provision for gratuity
and retirement benefits for the current year has not been made. In the
absence of any actuarial valuation we are unable to quantify the impact
of the same on the Profit and Loss Account. This practice of the
Company is not in conformity with the AS- 15.
k) Attention is invited to Note no. 3 (b) of Notes to Accounts. Based
on management''s perception, the Company has written back Interest
accrued on Working Capital Loans amounting to f 493 Lacs during the
year under consideration. We are informed that, the management is in
negotiation with the bankers as regards repayment of the working
capital loans at a reduced principal amount and no interest. However,
no finality has been reached as to non payment of interest. In our
opinion, profit for the current year is overstated by Rs 493 Lacs. This
apart, no provision is made for interest payable for the current year
that the Company used to provide every year amounting to Rs 52.98 Lacs;
I) in absence of confirmations from creditors, especially secured
creditors, we are unable to opine on the outstanding balances shown in
accounts including interest provided and payable thereon;
m) the closing stock of f12.88 Lacs and cash in hand of f 31.33 Lacs
are accepted as certified by the management;
n) write off of non existing fixed assets and current assets during the
year under consideration are accepted as certified by the management;
o) the combined effect of the above qualifications over financial
results is not determinable in view of absence of relevant components
3. Subject to above, in our opinion and to the best of our information,
and according to the explanations given to us, said Accounts read with
notes thereon, give the information required by the Companies Act,
1956, in the manner so required and give a true and fair view:
i) in the case of Balance Sheet, of the state of affairs of the Company
as at 31st March, 2011. and
ii) in the case of Profit & Loss Account of the Profit for the year
ended on that date. and iii) in the case of the Cash Flow Statement,
of the cash flows for the year ended on that date.
ANNEXURE TO THE AUDITOR''S REPORT FOR THE YEAR ENDED 31st MARCH, 2011 OF
INDU NISSAN OXO CHEMICAL INDUSTRIES LIMITED.
(i.) (a) The Company has maintained records showing particulars
including quantitative details and the general location of its Fixed
Assets other than those given on lease only up to the year 1999.
(b) As plant of the Company is not in operation, the Company has not
carried out physical verification of the assets at periodic intervals.
In respect of assets given on lease, no confirmation from the lessee
has been produced before us, stating that the assets leased under the
agreements are existing, but owing to dispute with the lessee, the same
cannot be confirmed. The Company has written off some non existing
assets during the year based on perception of the management.
(c) No substantial part of fixed assets have been disposed off during
the year, which can affect the going concern
(ii) (a) We have been informed by the management that, Stock of goods
have been physically verified by the management at reasonable intervals
during the year; though no records of physical verification or
valuation on the date of balance sheet were produced before us. The
stock of stores, packing material, and semi finished goods is valued
based on Chartered Engineers'' Certificate dated 13/10/2010.
(b) In view of this, we are unable to comment on the procedure of
physical verification of stocks followed by the management.
(c) In view of this, we are unable to comment on the maintenance of
proper stock records by the management.
(iii) (a) The Company has not granted any loans, secured or unsecured
to companies, firms or other parties covered in the register maintained
under section 301 of the Act.
(b) Since no loans are granted, the sub-clause dealing with rate of
interest and other terms and conditions of loans given by the Company
are not applicable.
(c) Since no loans are granted, the sub-clause dealing with receipt of
the principal amount and interest on regular basis is not applicable.
(d) Since no loans are granted, the sub-clause dealing with overdue
amount more than rupees one lakh is not applicable.
(e) The Company has taken interest free unsecured loans from Two
parties covered in the register maintained under section 301 of the
Act. The amount involved in the transactions at the year end was Rs.
80.28 Lac and on maximum basis Rs. 86.56 Lac.
(f) Other terms and conditions of unsecured loans taken by the Company,
are prima facie not prejudicial to the interest of the Company.
(g) We are informed that, these are demand loans, and there is no
stipulation put in view of the financial conditions of the Company.
(iv) 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 business
with regard to the purchases of inventory and fixed assets and sale of
(v) (a) Based on the audit procedures applied by us and according to
the information and explanation provided by the management, we are of
the opinion that the transaction that need to be entered into the
register maintained under Section 301 have been properly entered in the
(b) In our opinion, and according to the information and explanation
provided by the management, no transactions were entered as specified
under section 301 of the Companies Act 1956, and accordingly no entries
were required to be made in the register maintained under section 301
of The companies Act, 1956 and exceeding during the year by Rs.
500,000/- or more.
(vi) The Company has not accepted any deposits from public within the
meaning of the provisions of section 58A and section 58AA or any other
provisions of the Companies Act, 1956 and the rules made there under.
We have been informed by the management that there has been no order
passed by the Company law Board or National Company Law Tribunal or
Reserve Bank of India or any Court or any other Tribunal on the Company
with respect to compliance of the provisions of section 58A or 58AA or
any other provisions of the Companies Act 1956.
(vii)The Company does not have any formal Internal Audit System
commensurating with its size and nature of business.
(viii)We have been informed by the management that, the Central
Government has not prescribed the method of maintenance of cost records
u/s. 209 (1) (d) of the Companies Act, 1956 to the industry to which
the Company pertains.
(ix) (a) The Company has defaulted in payment of undisputed statutory
dues as given below. The extent of arrears of Statutory Dues
outstanding (after adjusting pre- paid taxes) for than six months as on
the year end is as follows:
Nature of Amount (Rs)
Statutory Dues (in lacs)
Investor Protection Fund 16.61
Income Tax 216.51
Fringe Benefit Tax 0.27
Sales Tax 105.05
Profession Tax 1.53
Bajwa Gram Panchayat 6.82
Tax Deducted at Source 3.81
The Company has requested the Income-tax Department to adjust refunds
of subsequent years against outstanding dues of earlier years for
which, we are informed, no communiqué is received from the Income-tax
No provision is made for rates and taxes payable to Bajwa Gram
Panchayat for the year under consideration. The amount payable is not
quantified by the Company.
In the case of Income tax deducted at source, the Company has deducted
tax on payment basis whereas provisions of chapter VXII-B of the
Income-tax Act 1961 require deduction of tax on payment or credit in
the books of account whichever is earlier. Details of payments wherein
tax should have been deducted on credit basis is not available. Hence
we are unable to state the exact amount of the defaulted tax deducted
at source liability. The above mentioned amount is tax deducted at
source on payments made but not deposited with the Central government.
(b) The following are details of disputed Income tax, sales tax that
has not been paid to the concerned authorities.
Name of Forum Period to Unpaid
the where which Amount
Statutory dispute is the amount (Rs in
Dues pending relates Lacs)
1 Central Excise Comm. 1993-96 35.74
2 Sales Tax Sales Tax 1991-92 7.34
3 Income tax ITAT- 1996-97
4 Income tax ITAT- 1999-00 0.63
5 Income tax ITAT- 2000-01 0.55
6 Custom Duty CESTAT- 1995-96 700.00
(x) (a) The Company as at the end of period under audit has accumulated
losses exceeding fifty percent of its net worth.
(b) The Company has not incurred any cash losses during the financial
year covered by. our audit or in the immediately preceding financial
year. For arriving at profit for this purpose, write back of
liabilities has been considered as part of cash profits.
(xi) (a) The Company has defaulted in redemption of debentures, which
fell due on the 10,h July 1998 aggregating to Rs 552.07 lacs and the
amount of interest accrued as of date is Rs 1334.56 lacs calculated 6n
simple rests inclusive of penal interest as agreed upon in terms and
conditions of issue of the debenture.
(b) In respect of term loans from financial institution, the Company
has defaulted in repayment of their dues. Following table brings out
the amount of default and the period from which default is made.
Sr Loans from Principal Interest Total Default commencing on