1. We have audited the attached Balance Sheet of M/s. PASUPATI
SPINNING & WEAVING MILLS LIMITED as at 31st March, 2012 and also the
Profit and Loss Account 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 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 (Auditors'' Report) Order, 2003 as
amended by the Companies (Auditors'' Report) (Amendment) order, 2004,
issued by the Central Government 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 and 5 of the said
4. Further to our comments in the annexure referred to 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 the
iii. The Balance Sheet, Profit and Loss Account and cash flow statement
dealt with by this report are in agreement with the books of account.
iv. In our opinion the Balance Sheet, Profit & Loss Account and cash
flow statement dealt with by this report comply with the Accounting
Standards referred to in sub-section (3C) of Section 211 of the
Companies Act, 1956, subject to our observations in paragraph (vi)
v. As per information and explanations given to us, we report that as
on 31.3.2012 none of the directors of the company are disqualified from
being appointed as a director of the company under Section 274((1)(g)
of the Companies Act, 1956. As the company had not redeemed its
debentures on due dates and as the default continued for more than a
year, directors of the company were not qualified for being appointed
as directors of any other public company in terms of provision of
Section 274(1)(g) of the Companies Act, 1956 as amended by the
Companies Amendment Act, 2000. Board for Industrial and Financial
Reconstruction has sanctioned rehabilitation scheme for the company
vide its order dated 17.2.2012. The said scheme has approved payments
of the settled amount to debenture holders in instalments. The payment
as approved by BIFR is being made and there is no default in such
payment. Besides, one of the directors has been appointed after the
scheme has been sanctioned. He has certified that he is not
disqualified from being appointed as a director in any other company.
vi. Reference is drawn to :
(a) Note No. 32 of accompanying notes to the financial statements
relating to accounts of the company for the year-ended 31.03.2012
having been prepared on the basis that the company is a going concern.
(b) Note No 4(v)(b) of accompanying notes to the financial statements
relating to non- provision of interest amounting to Rs. 59109302
(including Rs. 26614936 for earlier years) on loan of Rs.10 Crores of
JMFARC which is proposed to be converted into Equity / Optionally
Cumulative Convertible Debentures as per the rehabilitation scheme
sanctioned by BIFR resulting in the profit for the year to be higher
and other current liabilities to be lower by the said amount.
(c) Note No. 4(v)(c) of accompanying notes to the financial statements
relating to waiver of loan of Rs. 6.45 Crores of JMFARC not being
written back pending full implementation of rehabilitation scheme
sanctioned by BIFR, resulting in the profit for the year to be lower
and long term borrowings to be higher by the said amount.
(d) Note No. 4(vii)(g) of accompanying notes to the financial
statements relating to non- provision of interest on 14% and 15%
redeemable partly convertible debentures amounting to Rs.
23939987(including Rs. 21944988 for earlier years) resulting in the
profit for the year to be higher and other current liabilities to be
lower by the said amount.
(e) Note No. 3 of accompanying notes to the financial statements
relating to non provision of Debenture Redemption Reserve amounting to
Rs. 18761301 which has no effect on the profit for the year.
(f) Note No. 30(b) of accompanying notes to financial statements
relating to payment of remuneration of Rs.1187496(including Rs. 579606
for previous year) to a director for which approval of Central
Government is to be obtained resulting in the profit for the year and
cash & cash equivalents to be understated by the said amount.
(g) Note No. 11 of the accompanying notes to the financial statements
relating to non provision of additional compensation on acquisition of
part of factory land amounting to Rs. 24276787, demanded by the
company, resulting in the profit for the year and other current assets
to be lower by the said amount.
(h) We further report that had the observations made by us in paragraph
vi(b), vi(c), vi(d), vi(f) and vi(g) above been considered, the profit
for the year would have been Rs. 18987624 (as against the reported
figure of Rs. 12072180), long term borrowings would have been Rs.
47910478 (as against the reported figure of Rs. 112410478), cash & cash
equivalents would have been Rs.30687858 (as against the reported figure
of Rs. 29499912), other current liabilities would have been Rs.
429178322 (against the reported figure of Rs. 346129033) and other
current assets would have been Rs. 34731633 (against the reported
figure of Rs. 10454846).
Subject to the above, 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 accompanying notes 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 and
ii) in the case of the Profit and Loss Account, of the profit for the
year ended on that date and
iii) in the case of cash flow statement, of the cash flow for the year
ended on that date.
ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE
(i) (a) The company has maintained proper records showing full
particulars including quantitative details and situation of fixed
(b) As explained to us, all the fixed assets have been physically
verified by the management according to a regular program which in our
opinion is reasonable having regard to the size of the company and the
nature of its assets. No material discrepancies with respect to book
records were noticed on such verification.
(c) In our opinion and according to explanations given to us, fixed
assets disposed off during the year were not substantial and as such
the disposal has not affected the going concern concept of the company.
(ii) (a) As explained to us, physical verification of inventory (except
material in transit and lying with third parties) has been conducted by
the management at reasonable intervals. In our opinion, the frequency
of verification is reasonable.
(b) In our opinion, the procedures of physical verification of
inventories followed by the management are reasonable and adequate in
relation to the size of the company and 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. Discrepancies noticed on verification of inventory as
compared to book records were not material and these have been properly
dealt with in the books of accounts.
(iii) The company has neither granted nor taken any loans, secured or
unsecured, to / from companies, firms or other parties covered in the
register maintained under Section 301 of the Companies Act, 1956 and
hence paragraph (iii)(a) to (iii)(g) of the aforesaid order are not
applicable to 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 its
business with regard to purchase of inventory and fixed assets and for
the sale of goods and services. No major weakness in the internal
control system was observed during the course of audit.
(v) According to the information and explanations given to us, during
the year there were no transactions that need to be entered into the
register maintained under Section 301 of the Companies Act, 1956.
Accordingly, paragraphs v (a) and (b) of the aforesaid order are not
(vi) In our opinion and according to the information and explanations
given to us, the company has not accepted any deposits from public as
per provisions of Sections 58A, 58AA or any other relevant provisions
of the Companies Act, 1956 and the Companies (Acceptance of Deposit)
Rules, 1975. No order has been passed by the Company Law Board or
National Company law Tribunal or Reserve Bank of India or any court or
any other Tribunal.
(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 books of account maintained by the
company pursuant to the order made by the Central Government for the
maintenance of cost records under Section 209 (1) (d) of the Companies
Act, 1956 and we are of the opinion that prima facie the prescribed
accounts and records have been made and maintained. However, we have
not made a detailed examination of such accounts and records.
(ix) (a) According to the records of the company, the company is not
regular in depositing with the appropriate authorities undisputed
statutory dues including Provident Fund, Investor Education and
Protection Fund, Employees State Insurance, Income Tax, Wealth Tax,
Service Tax, Custom Duty, Excise Duty, Cess and other statutory dues
applicable to it. According to information and explanations given to
us the undisputed amounts outstanding as at 31st March, 2012 for a
period of more than six months from the date they became payable are as
Name of the Statue Nature of dues Amount Period to which
Rs. amount relates
Sales Tax Haryana Demand 339148 2006-07
Central Excise Act Excise Duty 27555087 April'' 84 to Oct.'' 93
Service Tax Act Service Tax 380586 2009-10
(b) According to the records of the company, dues in respect of Sales
Tax/Income Tax / Customs Duty/Wealth Tax/Service Tax/Excise Duty/Cess
which have not been deposited on account of any dispute are as under :
Name of Nature of dues Amount Forum where pending
the Statue Rs.
Haryana Value VAT 4407602 Joint Excise & Taxation
Added Tax Act Commissioner
Uttar Pradesh VAT 106000 Joint
VAT Act, 2007 Commissioner (Appeals)
Income Tax Income Tax 16364611 Assessing Authority
(x) A s at 31.03.2012 the accumulated losses of the company are more
than fifty percent of its net worth. The company has not incurred cash
losses during the financial year covered by our audit or in the
immediately preceding financial year.
(xi) The company has defaulted in payment of dues to financial
institutions, banks and debenture holders. Details as per company''s
books of accounts are as under :
The limits with banks were overdrawn for most of the year and were
within limits for the remaining part of the year. The overdrawn limits
as on 31.03.2012 are as under :
Nature of Limit Name of the Bank Limit Balance as
Lacs) (Rs. in Lacs)
Demand Loan Nainital Bank Limited 27.40 27.75
State Bank of Travancore 82.20 82.60
Canara Bank 98.00 99.40
Bank of Baroda 136.00 137.88
Packing Credit State Bank of Patiala 315.50 317.83
ING Vysya Bank Ltd. 114.50 115.61
Bank of Baroda 350.00 368.25
Cash Credit State Bank of Patiala 105.50 105.94
Canara Bank 225.00 230.05
State Bank of Travancore 375.80 378.28
Nature of Limit Excess Remarks
(Rs. in Lacs)
Demand Loan 0.35 Borrowings
0.40 in excess
1.40 of limit
Packing Credit 2.33
Cash Credit 0.44
Nature of Limit Name of the Bank Amount Due Remarks
Bill Discounted/ Bank of Baroda 290377 11.03.2012 Payment
Purchased 421413 11.03.2012
Does not include amount for which one time settlement (OTS) has been
negotiated with the lenders and repayment of dues has been rescheduled
or the dues have been settled / rescheduled by BIFR vide its order
dated 17.02.2012 and payments are being made accordingly.
(xii) Based on our examination of documents and records maintained by
the company, we are of the opinion that since the company has not
granted any loan and advance on the basis of security by way of pledge
of shares, debenture and other securities, it is not required to
maintain records in respect thereof.
(xiii) In our opinion the company is neither a chit fund nor nidhi /
mutual benefit fund / society and hence paragraph 4 (xiii) of the
aforesaid order is not applicable.
(xiv) In our opinion the company is not dealing in or trading in
shares, securities, debentures and other investments and accordingly
the provisions of paragraph 4 (xiv) of the aforesaid order is not
(xv) Based on our examination of the records we are of the opinion that
the company has not given any guarantee for loans taken by others from
banks or financial institutions.
(xvi) In our opinion, term loans received during the year have been
applied for the purpose for which they were 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 funds raised on short term basis have not been used for long term
(xviii) 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 Companies Act, 1956.
(xix) During the year the company had not issued any debentures. The
company has created security or charge in respect of debentures issued
in earlier years.
(xx) During the year under review no money was raised by public issue.
(xxi) During the course of our examination of the books and records of
the company, carried out in accordance with auditing standards
generally accepted in India, we have not come across any instance of
fraud by the company or on the company, noticed or reported during the
year. We have also not been informed of any such case by the
for B.K. SHROFF & CO.,
Firm Registration No. 302166E
3/7-B, Asaf Ali Road,
New Delhi-110 002. O.P. SHORFF
Dated : 30th May, 2012 Partner
Membership No. 06329