1. We have audited the attached Balance Sheet of MODERN INSULATORS
LIMITED as at 31 st March'' 2012'' the Statement of Profit and Loss and
Cash Flow Statement of the Company for the year ended on that date
annexed hereto. 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 auditing standards
generally accepted in India. These 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
statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
3. As required by Companies (Auditor''s Report) Order'' 2003 as amended
by Companies (Auditor''s Report) (Amendment) Order'' 2004'' issued by the
Central Government of India in terms of Section 227 (4A) of the
Companies Act'' 1956'' we give 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 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 purpose 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 with by this report'' comply with the
applicable Accounting Standards referred to in sub-section (3C) of
section 211 of the Companies Act'' 1956.
(v) (a) Balances of Trade Receivables and Trade Payables are subject to
reconciliations/confirmations. (NoteNos. 8&14)
(b) The Company has not received information from vendors regarding
their status under the Micro'' Small and Medium Enterprises Development
Act 2006 and hence disclosure relating to amounts unpaid as at the year
end together with interest paid/payable under this Act have not been
given. (Note No.8)
(c) Provisionfor taxation (including interest etc.)estimated at f
680.16 lacs for current year (upto the year Rs. 4640.13 lacs) has not
been made and Debenture Redemption Reserve amounting to f 5.80 lacs has
not been created'' in view of proposed amalgamation proceedings awaiting
approvals. Meanwhile Income Tax Department has completed assessment for
Assessment Years 2008-09 & 2009-10 and demand of Rs. 1611.16 lacs has
been raised in respect of disallowance of losses pertaining to proposed
amalgamation pending approval from concerned authorities. However'' the
Company filed appeals against the said demand and CIT (Appeals) has
directed the Assessing Officer to make substantive assessment order
(allowing losses pertaining to proposed amalgamation) as well as
protective assessment order (presuming that no amalgamation had taken
place) and further held that in case if the amalgamation scheme is not
sanctioned then the protective assessment order shall prevail over the
substantive order. Order of Assessing Officer giving appeal effect is
awaited. (Note No.29)
(vi) On the basis of written representations received from the
directors as on 31st March'' 2012 and taken on record by the Board of
Directors'' none of the directors is disqualified as on 31 st March''
2012 from being appointed as a director in terms of clause (g) of
sub-section (1) of section 274 of Companies Act'' 1956.
(vii) 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'' notes thereon and subject to our
comments in para (v) above'' 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
(a) In the case of Balance Sheet'' of the state of affairs of the
Company as at 31st March'' 2012.
(b) In the case of Statement of Profit and Loss of the profit of the
Company for the year ended on that date.
(c) In the case of Cash Flow Statement'' of the cash flows for the year
ended on that date.
ANNEXURE FORMING PART OF THE AUDITORS'' REPORT
Referred to in the report of even date of the Auditors to members of
MODERN INSULATORS LIMITED.
(i) (a) The company has maintained proper records showing full
particulars including quantitative details and situation of fixed
assets except furniture & fixtures for which detailed records are not
(b) As per information and explanations given to us'' most of the fixed
assets have been physically verified during the year by management in
accordance with a phased programme of verification at reasonable
intervals. According to the information and explanations given to us''
no material discrepancies were noticed on such verification.
(c) During the year'' the company has not disposed off substantial part
of the fixed assets.
(ii) (a) As explained to us'' the inventories have been physically
verified during the year by the management. In our opinion'' the
frequency of verification is reasonable.
(b) According to the information and explanations given to us'' 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
inventories. As explained to us'' the discrepancies noticed on physical
verification between the physical stocks and the book records were not
(iii) (a) The company had given loans to two subsidiaries. In respect
of the said loans'' the maximum amount outstanding at any time during
the year was Rs. 4500 lacs and the year end balance is Rs. 4200 lacs
(Previous year Rs. 4750 lacs & Rs. 4500 lacs respectively). The said loans
are without interest and principal amounts are repayable on demand.
(b) The company has given interest-free loan/advance ofRs. 2245.15 lacs
to a company covered under section 301 of Companies Act'' 1956 in view
of proposed amalgamation awaiting approvals. Maximum amount outstanding
during the year was Rs. 2245.15 lacs and the year end balance was X
2245.15 lacs (previous period Rs. 1945.61 lacs & Rs. 1945.61 lacs
(c) The Company has not taken any loans'' secured or unsecured from
companies'' firms or other parties covered in the register maintained
under Section 301 of the Act. Accordingly'' the provisions of clauses
4(iii)(f) and 4(iii)(g) of the Order are not applicable.
(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 its
business for purchases of inventory'' fixed assets and for the sale of
goods. During the course of our audit'' we have not observed any major
weakness in internal controls.
(v) (a) Based on audit procedures applied by us and according to the
information and explanations given to us'' the particulars of contracts
or arrangements referred to in section 301 of the Act have been entered
in the register required to be maintained under that section. (b) In
our opinion and according to the information and explanations given to
us'' there are no transactions made in pursuance of such contracts or
arrangements'' referred to in section 301 of Companies Act 1956''
exceeding Rupees Five lacs in respect of each party during the year.
(vi) The Company has not accepted any deposits from the public during
(vii) In our opinion'' the internal audit carried out during the year
commensurates with the size of the company and the nature of its
(viii) We have broadly reviewed the cost records maintained by the
Company pursuant the Companies (Cost Accounting Records) Rules'' 2011
prescribed by the Central Government .under Section 209(1 )(d) of the
Companies Act'' 1956 and are of the opinion that prima facie the
prescribed cost records have been maintained. We have'' however'' not
made a detailed examination of the cost records with a view to
determine whether they are accurate or complete.
(ix) (a) According to the records of the company'' the company is
regular in depositing with appropriate authorities undisputed statutory
dues including provident fund'' investor education and protection fund''
employees'' state insurance'' service tax'' sales tax'' wealth tax'' custom
duty'' excise duty and other statutory dues applicable to it and no
undisputed statutory dues as noted above is outstanding for a period of
more than six months from the date it became payable. The company has
not paid/provided income tax (refer clause 4(v)(c) of Auditors''
(b) According to the information and explanations given to us and the
records of the Company examined by us'' the particulars of dues of
Income tax'' sales tax'' excise duty and cess etc. as at 31 st March''
2012 which have not been deposited on account of dispute'' are as
Name of the
Statute Nature of
Central Sales Tax Act CSTand VAT 314.66
1956 and RV Act 2003
Income Tax Act 1961 Income Tax 1611.16
Central Excise Act Excise Duty & 72.34
1944 Service Tax
Name Period to Forum where
which the the dispute is
Tax Act 2007-08 Rajasthan Tax
2008-09 Deputy Commissioner
2009-10 Assistant Commissioner
Commercial Taxes. Pali
Income Tax Act 1961 2007-08 & Deputy Commissioner
2008-09 (1. Tax)'' Jaipur
years from Service
2003-04 Tribunal. Delhi
Central Excise Act 2009-10 & Commissioner Central
2010-11 Excise (Appeals)''
2009-10 & Additional
Central Excise'' Jaipur /
Central Excise'' Jodhpur
(x) The Company does not have accumulated losses as at the end of the
financial year and it has not incurred any cash losses during the
financial year covered by our audit and the immediately preceding
(xi) Based on our audit and as per information and explanations given
by the management'' there has been no default in repayment of dues to
any financial institution or bank or debenture holders during the year.
(xii) Basedonour examination of books of account and 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) The provisions of any special statutes applicable to chit fund''
nidhi or mutual benefit fund/society are not applicable to the company.
(xiv) The Company is not dealing or trading in shares'' securities''
debentures and other investments and hence requirement of para 4(xiv)
is not applicable.
(xv) As per information and explanations given to us'' the Company has
not given any guarantee for loans taken by otiiers from bank or
(xvi) On the basis of records examined by us'' we have to state that the
company has prima facie'' applied the term loan for the purpose for
which it was obtained .
(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 no funds raised on short-term basis have been used for long-term
(xviii) No allotment of shares has been made by the company during the
(xix) The company has not issued any debenture during the year covered
(xx) During the year the company has not raised any money by way of
(xxi) Based upon the audit procedures performed and information and
explanations given by the management'' no fraud on or by the company has
been noticed or reported during the year.
For S.S. KOTHARI & CO.
(Firm Registration No. 001064C)
Place : Jaipur PARTNER
Date : 30th June'' 2012 (Membership No. 10900)