We have audited the accompanying Financial Statements of M/s PASARI
SPINNING MILLS LIMITED, (the Company), which comprise the Balance
Sheet as at March 31, 2015, and the Statement of Profit and Loss and
Cash Flow Statement for the year then ended, and a Summary of
Significant Accounting Policies and other explanatory information.
Management''s Responsibility for the Financial Statements:
The Company''s Board of Directors is responsible for the matters stated
in Section 134(5) of the Companies Act 2013 (The Act) with respect to
preparation of these financial statements that give a true and fair
view of the financial position, financial performance and cash flows of
the Company in accordance with the Accounting principles generally
accepted in India, including the Accounting Standards specified under
Section 133 of the Act, read with Rule 7 of the Companies (Accounts)
This responsibility also includes maintenance of adequate accounting
records in accordance with the provisions of the Act for safeguarding
the assets of the Company and for preventing and detecting frauds and
other irregularities; selection and application of appropriate
accounting policies; making judgments and estimates that are reasonable
and prudent; and design, implementation and maintenance of adequate
internal financial controls, that were operating effectively for
ensuring the accuracy and completeness of the accounting records,
relevant to the preparation and presentation of the financial
statements that give a true and fair view and are free from material
misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these financial
statements based on our audit. We have taken into account the
provisions of the Act, the accounting and auditing standards and
matters which are required to be included in the audit report under the
provisions of the Act and the Rules made there under.
We conducted our audit in accordance with the Standards on Auditing
specified under Section 143(10) of the Act. Those Standards require
that we comply with ethical requirements and plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and the disclosures in the financial statements. The
procedures selected depend on the auditor''s judgment, including the
assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
Company''s preparation and fair presentation of the financial statements
that give a true and fair view in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of
expressing an opinion, whether the company has in place an adequate
internal financial controls system over financial reporting and the
operating effectiveness of such controls. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of the accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence that we have obtained is sufficient
and appropriate to provide a basis for our audit opinion on the
Emphasis on the Matters:
We draw attention to the following matters in the Notes to the
a) Notes-2 of Notes to Account: The Company has discontinued its
production operations from the end of June 2011. The Company has no
intention to continue the production operations henceforth and has
decided to lease out the Factory premises. The Company has not made any
sales during the current year.
b) Note-3: Notes to Account: During the year, the company involved in
buying and selling of shares of other companies through share market
which is not the main objects of the business of the Company for which
it was incorporated.
c) Notes-8 of Notes to Account: Non disclosure under provisions of the
Micro, Small and Medium Enterprises Development Act 2006 in the absence
of details received from suppliers.
d) Notes-10 of Notes to Account: No provision of Employee benefits has
been made which need to be made as per AS-15 issued by the Institute of
Chartered Accountants of India, non quantifiable.
e) Notes-11 of Notes to Account: No provision is made for depletion in
Market value of Investments in shares, securities and mutual funds.
f) Non confirmation of balances in respect of Sundry Debtors, Creditors
and Loans & Advances.
In our opinion and to the best of our information and according to the
explanations given to us, the Financial Statements give the information
required by the Act in the manner so required and give a true and fair
view in conformity with the Accounting Principles generally accepted in
India, of the state of affairs of the Company as at 31 March 2015 and
its Profit & Loss a/c and its cash flows for the year ended on that
Report on other Legal and Regulatory Requirements:
1. As required by the Companies (Auditor''s Report) Order, 2015 (the
Order) as amended, issued by the Central Government of India in terms
of sub-section (11) of section 143 of the Companies Act 2013, We give
in the Annexure a statement on the matters specified in paragraphs 3
and 4 of the Order to the extent applicable.
2. As required by section 143(3) of the Act, We report that:
(a) We have sought and obtained all the information and explanations
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 been
kept by the Company so far as appears from our examination of those
(c) The Balance Sheet, Statement of Profit and Loss and the 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 and Loss and
the Cash Flow Statement comply with the Accounting Standards referred
to in subsection (3C) of section 133 of the Act, read with Rule 7 of
the Companies (Accounts) Rules, 2014.
(e) On the basis of written representations received from the Directors
as on March 31, 2015, and taken on record by the Board of Directors,
none of the Directors are disqualified as on March 31, 2015, from being
appointed as a Director in terms of section 164(2) of the Companies
(f) With respect to the other matters to be included in the Auditor''s
Report in accordance with Rule 11 of the Companies (Audit and Auditors)
Rule, 2014, in our opinion and to the best of our information and
according to the explanation given to us:
(a) The company does not have any pending litigations to disclose in
the financial statements.
(b) There are no material foreseeable losses assessed during the year
and hence no provision is required to be made at the reporting date by
the Company, as required under the applicable Law or accounting
standards, for material foreseeable losses, if any, on long term
contracts including derivative contracts.
With respect to the above two points, we draw attention to the
following matters in the Notes to the financial statements:
i. Notes-4 of Notes to Accounts: Wherein, the Company has raised a
demand on Cotton Corporation of India for Rs. 180 Lacs with respect to
Price variation for purchase of Cotton from the Cotton Corporation of
India. The same has been denied by the Cotton Corporation of India and
the dispute is under Arbitration for settlement. This dispute pertains
to the earlier years.
ii. Notes-5 of Notes to Accounts: The Loans and Advances of
Rs.50,38,879/- paid to cotton suppliers which is in dispute and
pertaining to earlier years.
iii. Notes-9 of Notes to Accounts: No provision is made towards sales
tax arrears including penalty aggregating to Rs.1,80,18,068 of the
iv. Notes-12 of Notes to Accounts: No provision is made towards Back
billing demand raised by CESCOM aggregating to Rs.28,43,845/- of the
(c) The company does not have any amounts to be transferred to Investor
Education and Protection Fund.
The Annexure referred to in our report to the members of M/s. PASARI
SPINNING MILLS LIMITED (''the Company'') for the year ended 31st March,
2015, we report that:
1. (a) The Company has not maintained proper records
to show full particulars including quantitative details and situation
of all Fixed Assets. (b) The Fixed Assets of the Company have not been
physically verified by the Management during the year at reasonable
2. The company does not have any trading inventory, hence no physical
verification has been carried out. However, the Company has the
opening Stores and Spares for which no physical verification report is
made available with respect to quantitative details.
3. In respect of the loans, secured or unsecured, granted by the
company to companies, firm or other parties, covered under Register
maintained under section 189 of the companies Act, 2013:
We draw your attention to Notes-6 of Notes to Accounts, wherein, during
the year, the Company has given an amount of Rs. 30,34,000/- to M/s.
Pasari Exports Limited. The transactions have been covered under
related parties and M/s. Pasari Exports Limited holds more than 50% of
the shareholding of M/s. Pasari Spinning Mills.
4. In our opinion and according to the information and explanations
given to us, there are adequate Internal Control System commensurate
with the size of the Company and the nature of its business with regard
to purchases of inventory, Fixed Assets and for the Sale of goods and
Services. However, since the Company has discontinued its commercial
operation in 2010- 11, the company has not effected any purchases of
inventory, Fixed Assets and for the Sale of goods and Services During
the course of our audit, we have not observed any continuing failure to
correct major weakness in internal controls.
5. The company has not accepted any deposit from the public as per the
provisions of sections 73 to 76 or any other relevant provisions of the
Companies Act and the rules framed there under.
6. The Maintenance of Cost records as prescribed by the Central
Government under section 148 (1) of the Companies Act, 2013 in respect
of the activities of the Company does not apply to the Company, as per
the directions of the Central Government. However the company has
stopped its operation from June 2010 and all the workers are given one
7. (a) The Company is not regular in depositing the
undisputed Statutory Dues with Appropriate Authorities and there are
certain disputed and outstanding amounts payable in respect of ESI
Fund, Investor Education and Protection Fund, Income-tax, Service Tax ,
Sales Tax, Cess or any other applicable taxes, Duties or Levies
applicable to the Company and its business which have remained
outstanding as at 31st March 2015, for a period of more than six months
from the date they became payable. The following are the details of
Name of the Nature of Amount Year
Statute the dues due
ESIC ESIC 7,03,115 2010-11
Income tax act TDS 36,654 Various years
Karnataka Tax on
calling and Employ - Professional 64,000 08-09 to
ment Act Tax 11-12
Karnataka Sales Cess on 84,760 06-07 to
tax Act sales 07-08
Name of the Nature of Amount For the
statute the Dues (Rs.) Year
Central Sales CST 4,45,496 1999-00
Tax Act 5,80,226 2000-01
Karnataka Entry KVAT 46,593 1999-00
Tax Act 98,290 2000-01
Penalty CST and
KVAT 5,000 1999-00
iNTEREST CST and
KVAT 3,11,968 1999-00
8. The Company is in existence for more than 5 years and has
accumulated losses as at the year end; and has also incurred a cash
losses during the financial year.
9. In our opinion and according to the information and explanation
given to us, the Company has defaulted in repayment of principal dues
in respect of Term Loan borrowed from Syndicate Bank as on 31.03.2015.
There are no debenture holders with the Company.
10. The Company has not given any guarantee for loans taken by others
from the Banks or Financial Institutions.
11. In our opinion and according to the information and explanation
given to us, the Company has borrowed Term Loans from Syndicate Bank in
2012 for the purpose of settlement to labour.
12. According to the information and explanations given to us, no
fraud on or by the Company has been noticed or reported during the
course of our audit.
For MURALI & VENKAT
CH. RANGA RAO
Membership Number: 222091
Firm''s Registration Number: 002162S
Date: 19th August, 2015