1. We have audited the attached Balance Sheet of Khatau Makanji
Spinning and Weaving Company Limited, as at 31st March, 2012, and
also the Statement of Profit and Loss of the Company 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,
issued by the Central Government of India in terms of sub-section (4A)
of section 227 of the Companies Act 1956, as amended by the Companies
(Auditor''s Report) (Amendment) Order, 2004, we enclose in the
Annexure a statement on the matters specified in paragraphs 4 and 5 of
the said Order.
4. Further to our comments in the Annexure referred to above, we
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 Account as required by law have been
kept by the Company, so far as appears from our examination of those
c) The Balance Sheet, the Statement of Profit and Loss and Cash Flow
Statement dealt with by the report are in agreement with the Books of
d) In our opinion the Balance Sheet, Statement of Profit and Loss and
Cash Flow Statement, comply with the Accounting Standards referred to
in sub-section (3c) of Section 211 of the Companies Act 1956.
e) On the basis of written representations received from the Directors
as on 31s1 March, 2012, and taken on record by the Board of Directors,
we report that none of the Directors are disqualified as on 31st March,
2012 from being appointed as a director in terms of clause (g) of
sub-section (1) of Section 274 of the Companies Act, 1956.
f) Attention is invited to the following:-
i) An amount ofRs 20,000,000 which was received from the party
appointed as per the Company''s sanctioned scheme under BIFR for
settlement of creditors, has been refunded back to the same party
during the year. This amount was lying unutilized. The Company refunded
this amount to the party, on the party''s request as they were
temporarily short of funds. We are
unable to ascertain and confirm the same. The party balance outstanding
at the end of the - accounting year amounting to Rs 6,260,283 is
subject to reconciliation and confirmation. Hence we are unable to
ascertain the exact liability which may arise on this account.
ii) The Company''s preference shares amounting to Rs 29,92,500 have
not been redeemed by 22.2.2012 as per the company''s sanctioned scheme
under BIFR, vide its order dated 22.2.2007.
5. Subject to what has been mentioned in Paragraph (f) above, and our
comments in Annexure referred to in Paragraph 3, in our opinion and to
the best of our information and according to the explanations given to
us, the Accounts read together with notes thereon 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 the 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 Profit for
the year ended on that date.
(iii) In case of the Cash Flow Statement of the cash flows of the
Company for the year ended on that date.
Re: The Khatau Makanji Spinning and Weaving Company Limited
Referred to in paragraph 3 of our report of even date.
i. a) The Company is maintaining proper records showing full
particulars including quantitative details
and situation of its fixed assets except Furniture and Fixtures and
b) These fixed assets have been physically verified by the management
and no material discrepancies were noticed. .
c) The Company has not disposed off substantial parts of its fixed
assets during the year.
ii. a) The inventory has been physically verified during the year by
the management. In our opinion, the
freouencv of verification is reasonable.
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) On the basis of our examination of the records of inventory, we are
of the opinion that the company is maintaining proper records of
inventory. The discrepancies noticed on verification between the
physical stocks and the book records were not material.
iii. (a) to (d) The Company has granted an interest free advance to a
company covered in the Register
maintained under Section 301 of the Companies Act, 1956. There are no
terms of repayment, in respect of the said loan, the maximum balance
outstanding at any time during the year is Rs. 50,000 and the year end
balance is Rs. 50,000.
(e) to (g) The Company has taken interest free loans from a director
and from 3 companies covered in Register maintained under Section 301
of the Companies Act, 1956. Maximum balance outstanding during the year
was Rs. 422,331. The year end balance of loans taken from parties was
Rs. 422,331 There are no terms for repayment. .
iv. We are informed by the Management that internal control systems
commensurate with the size and nature of its business will be
introduced by the Company as and when the proposed comprehensive
Rehabilitation Scheme at Mahad is implemented.
v. a) According to the information and explanations given to us, we
are of the opinion that the particulars
of all contracts or arrangements that need to be entered into the
register maintained under section 301 of the Companies Act, 1956 have
been so entered, b) In our opinion and according to the information and
explanations given to us, the transactions made in pursuance of
contracts or arrangements entered in the register maintained under
section 301 of the Companies Act, 1956 have been made at prices which
are reasonable having regard to prevailing market prices at the
vi. The Company has not accepted any deposits from the public to which
the provisions of Section 58A, 58AA or any other relevant provisions of
the Companies Act, 1956 and the rules framed there under would apply.
vii. The Company has no Internal Audit System.
viii. As there is no production of processed goods during the year
under audit there is no question of maintenance of Cost Records
U/s.209(1)(d) of Companies Act, 1956.
ix. a) The company is regular in depositing undisputed statutory dues
with the appropriate authorities,
except for the following statutory due, as at the last day of the
financial year which was outstanding for a period of more than six
months from the date it has become payable. ,
Particulars Amount in Rupees
Gram Panchayat Tax 353,006
b) There are no disputed statutory liabilities not paid by the Company.
x. Accumulated losses of the Company are more than fifty percent of
its net worth. The Company has not made cash loss during the year or in
the immediately preceding financial year.
xi. There are no dues to Financial Institutions and Banks.
xii. The Company has not granted any loans and Advances on the basis of
Security by way of pledge of shares, debentures or any other security.
xiii. In our opinion, the company is not a chit fund or nidhi / mutual
benefit fund / society. Therefore, the provisions of clause 4 (xiii) of
the Companies (Auditor''s Report) Order, 2003 are not applicable to
the company. ''
xiv. In our opinion, the company is not dealing in or trading in
shares, securities, debentures and any other investments. Accordingly,
the provisions of clause 4 (xiv) of the aforesaid Order are not
applicable to the company.
xv. In our opinion and according to the information and explanation
given by the management, the company has not given any guarantees for
loans taken by others from banks or financial institutions.
xvi. The Company has not taken any term loan during the year.
Therefore, the provisions of clause 4 (xvi) of the Order are not
xvii. There were no short term funds raised during the year.
Therefore, the provisions of clause 4 (xvii) of the Order are not
xviii. According to the information and explanation given to us and
the records examined by us, 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,
xix. The Company has not issued any debentures during the year.
xx. No public issue was made by the company during the year.
xxi. Based upon the audit procedures performed and 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 year.
For SORAB S. ENGINEER & CO.
Firm Registration No. 110417W M.P.ANTIA
Place: Mumbai PARTNER
Date : 25th June 2012 MEMBERSHIP