We have audited the attached Balance Sheet of MODERN THREADS (INDIA)
LIMITED as at 31st March, 2012, Statement of Profit & Loss and the Cash
Flow Statement of the Company 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. 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 management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
1. As required by the Companies (Auditor''s Report) Order, 2003 issued
by the Ministry Of Finance, Department Of Company Affairs in terms of
Section 227(4A) of the Companies Act, 1956, we enclose in the annexure
a statement on the matters specified in paragraph 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, 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 such
c) The Balance Sheet, Statement of Profit & Loss and Cash Flow
Statement dealt with by this report are in agreement with the books of
d) In our opinion, the Balance Sheet, Statement of Profit & Loss and
Cash Flow Statement dealt with by this report comply with accounting
standards referred in Section 211(3C) of the Companies Act, 1956,
except otherwise appearing in Notes on Financial Statements.
e) On the basis of written representations received from the directors
and taken on record by the Board of Directors, we report that none of
the directors is disqualified as on 31st March 2012 from being
appointed as directors in terms of clause (g) of sub-section (1) of
section 274 of the Companies Act 1956.
f) In our opinion and to the best of our information and according to
explanation given to us, said accounts read together with Significant
Accounting Policies and Notes thereon and subject to:
i) Dividend on cumulative redeemable preference shares amounting to Rs.
140.37 lacs for the year (f 2246 lacs upto the period) have not been
provided in view of accumulated losses. (Note No. 1.7)
ii) Provision of interest on certain unsecured loans/deposits amounting
to Rs. 104.54 lacs has not been made as company expects waiver/reliefs.
The total amount of interest not provided till 31st March 2012 amounts
to Rs.652.76 lacs. (Note No.4.2 & 4.4)
iii) Effect of change in foreign exchange rates prevailing at the year
end on trade payables (under litigation) amounting to Rs. 127.82 lacs
for the year (cumulative Rs. 333.14 lacs) have not been recognized as
an expense. (Note No.6.3)
iv) Balances of trade payables and receivables are subject to
confirmation and reconciliation, if any. (Note No. 6.2 & 14.2)
v) Impairment loss and impact of depletion in inventories of Threads
Division if any, not ascertained due to seizure of entire plant and
office block by Ajmer Vidyut Vitran Nigam Ltd. (Note No. 8.4 & 11).
vi) The accounts of the company have been prepared on going concern
basis though the Board for Industrial and Financial Reconstruction
(BIFR) has declared the Company as a SICK Company.
We further report that without considering items mentioned at para 2
(f) (iv), (v) & (vi), the effect of which could not be determined, had
the observations made by us in para 2 (f) (i), (ii) & (Hi) above been
considered, the Profit for the year would have been Rs. 639.22lacs (as
against the reported figures of'' Rs. 871.58 lacs), Reserves and Surplus
would have been Rs. (28539.96) lacs (as against the reported figures of
Rs. (25308.06) lacs), Trade Payables would have been Rs. 1893.39 lacs
(as against reported figures Rs. 1560.25 lacs) and Other Current
Liabilities would have been Rs. 6364.86 lacs (as against reported
figures of Rs. 3466.10 lacs).
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 and
(ii) In the case of Statement of Profit & Loss, of the Profit for the
year ended on that date.
(iii) In the case of Cash Flow Statement, of the cash flows for the
year ended on that date.
ANNEXURE TO THE AUDITOR''S REPORT
Refened to in paragraph 1 of Report of even date to the Members of
THREADS (INDIA) LIMITED:
(i) The Company has maintained proper records showing full particulars
including quantitative details and situations of its fixed assets other
than furniture and fixtures for which detailed records are not
maintained. According to the information and explanations given to
us, the fixed assets were physically verified by the management except
of Threads Division being under attachment by AWNL, at reasonable
intervals during the year in accordance with a program of physical
verification and no material discrepancies were noticed on such
verification as compared to the available records. No substantial part
of Fixed Assets have been disposed off during the year except certain
discarded plant and machinery, furniture and vehicle and its not
affecting going concern of the company.
(ii) As explained to us, physical verification except of Threads
Division of the Company being under attachment of AVVNL, has been
conducted by the management at reasonable intervals in respect of
inventories except stocks in transit and lying with third parties which
have generally been confirmed. In our opinion and according to the
information and explanations given to us, the procedures of physical
verification of the stocks followed by the management are reasonable
and adequate in relation to the size of the company and the nature of
its business. According to the records produced to us for our
verification, there were no material discrepancies noticed on physical
verification of stocks as compared to book records and the same have
been properly dealt within the books of accounts.
(iii) The company has neither granted nor taken any loans, secured or
unsecured to/ from companies, firms or other parties listed in the
register maintained under Section 301 of the Companies Act 1956, during
the year, hence clauses (iii) (a) to (iii) (g) of the Companies
(Auditors Report) order, 2003 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 nature of its business
with regard to purchase of Inventory and Fixed Assets and for sale of
goods and services. During the course our audit, we have not observed
any continuing failure to correct the major weakness in internal
(v) In respect of transactions covered under section 301 of Companies
(a) In our opinion and according to the information and explanations
given to us the particulars of contracts or agreements, that needs to
be entered in to the register maintained U/s 301 of the Companies Act,
1956, have been so entered.
(b) 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
have been made at prices which are reasonable having regard to
prevailing market prices at the relevant time.
(vi) As per information and explanations given to us, the company has
not accepted fresh deposits during the year. In respect of deposits
accepted in earlier years, the compliance with the provisions of
Section 58A and 58AA of the Companies Act, 1956 and the rules framed
there under are subject to order of Company Law Board Dated 17.04.2002
,that the repayment of fixed deposits shall be made by the Company in
accordance with the revival scheme as and when approved by the BIFR
under the Provisions of ''SICA''. However the Company is making payment
on compassionate grounds as per decisions of committee formed by the
Company Law Board.
(vii) In our opinion the company has an internal audit system,
commensurate with the size and nature of its business.
(viii) We have broadly reviewed the cost records maintained by the
Company pursuant to Section 209 (1 )(d) of the Companies Act, 1956 and
are of the opinion that prima-facie prescribed records have been
maintained. We have not however, made a detailed examination of such
(ix) In respect of statutory dues:
a) The company is generally regular in depositing undisputed statutory
dues including Provident fund, Investor Education & Protection Fund,
ESI, Income Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and any
other statutory dues with the appropriate authority except the
following pertaining to Threads Division, which are outstanding for
more than 6 months:
i) Central Sales Tax Rs 13.05 Lacs
ii) Rajasthan Sales Tax Rs 79.44 Lacs
iii) Textiles Committee Cess Rs 15.20 Lacs
iv) Excise Duty Rs 12.17 Lacs
b) The disputed statutory dues, which have not been deposited on
account of matters pending before appropriate authorities are as
( Rs. in lacs)
Name of statute Nature of Amount net Forum where
dues of advance dispute is
Central Sales Tax Act Sales tax 0.78 DC (A), Ajmer
Sales tax 151.93 DC (A), Jaipur
Sales tax 2.23 CTO, Jaipur
State Sales Tax Act Sales tax 79.52 DC(A), Ajmer
Sales tax 3.12 CTO, Jaipur
Sales tax 0.67 Comm. Mirzapur
Sales tax 6.82 H C, Allahabad
Sales tax 0.07 DC(A), Mumbai
Central Excise Act Excise duty 59.09 Commissioner
Excise duty 16.05 CESTAT, Delhi
Textile Committee Cess TC Cess 19.08 Textile
Raj. Land & Building Land & 4.11 High Court,
tax Act Building Tax Jaipur
The Raj. Land Revenue Land Tax 1.83 DJ, Bhilwara
Land Tax 14.50 High Court,
Employee State ESI 28.09 High Court,
Insurance Act Jodhpur
ESI 7.07 Labour Tribunal,
Provident Fund Act PF 4.67 Commissioner,
The Rajasthan Mandi Tax 396.25 The Rajasthan
Product Markets Act Court Jaipur
The Rajasthan Tax Entry Tax 11.25 The Rajasthan
on Entry High
For goods in to Court, Jaipur
Local area Act
(x) The accumulated losses of the company at the end of financial year
are more than its net worth and it has not incurred cash losses during
the financial year.
(xi) The Company is now regular in repayment of its settled dues.
(xii) As informed and explained to us the company has not granted any
loan and advances on the basis of security by way of pledge of shares,
Debentures and other securities during the year.
(xiii) The company is not a Chit fund or a Nidhi/Mutual Benefit
Fund/Society. Accordingly the provisions of clause 4 (xiii) are not
applicable to the company.
(xiv) As informed to us the Company is not dealing/trading in
securities, shares, debentures and other investments. Hence the
provisions of clause 4 (xiv) are not applicable.
(xv) As informed and explained to us, the Company has not given any
guarantee for loans taken by others from Bank or financial
(xvi) The Company has not raised fresh Term Loans during the year.
(xvii) As informed and explained to us no fund raised on short term
basis have been used for long term investments.
(xviii) As informed and explained to us, the company has not made
Preferential allotment to the parties and companies covered in the
Register maintained under section 301 of the Companies Act, 1956.
(xix) As informed and explained to us the Company has created
securities and charges in favour of assignee in respect of secured
debentures assigned by financial institutions.
(xx) The company has not raised any money by way of public issue during
(xxi) As informed and explained to us no fraud on or by the company has
been noticed or reported during the year.
For S.S.SURANA & CO.
Firm Registration No. 001079C
R N Goyal
Membership No. 70331
Date : 28th June, 2012