1. We have audited the attached Balance Sheet of REGENCY CERAMICS
LIMITED, HYDERABAD (A.P) as at 31st March, 2012, the statement of
Profit and Loss and also 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 our opinion.
3. As required by the Companies (Auditors'' Report) Order, 2003, issued
by the Central Government of India in terms of Section 227 (4A) of the
Companies Act, 1956. 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 in para 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 purposes 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, the 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, the statement of Profit and Loss
and Cash Flow Statement dealt with by this report comply with the
Accounting Standards referred to in Section 211 (3C) of the Companies
v) On the basis of written representations received from the Directors
as on 31st March, 2012 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 a Director in terms of clause (g) of
sub-section (1) of Section 274 of the Companies Act, 1956.
vi) a) Manufacturing operations of the Company were stopped due to
riots, strike and
malicious damage at factory with effect from 27th January, 2012. The
condition of the fixed assets and the realisable value could not be
estimated. The machinery and building were insured / covered under
replacement policies. These assets are disclosed at book value after
providing depreciation on account of efflux of time.
b) During the year the Company has not provided for its liability
towards gratuity and leave encashment in accordance to AS-15
Employee Benifits”. Since the Company could not compute the
liability in the absence of complete records, we are unable to comment
upon the impact of non-provision of additional loss of the Company for
the year and on the current liabilities as at 31.03.2012.
c) There are no confirmatory letters in respect of debtors, creditors
and the loans and advances.
d) The loss of materials at the factory, Yanam based on the panchanama
of Customs and Central Excise were estimated at Rs. 1742.03 lakhs. The
same is transferred to Claims receivable account pending acceptance
by insurance company.
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
notes thereon subject to para vi 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 India :
a) In the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March, 2012;
b) In the case of the statement of Profit and Loss, of the Loss of the
Company for the year ended on that date, and
c) In the case of the Cash Flow Statement, of the cash flows 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
articulars, including quantitative details and situation of fixed
b) /4s explained to us, the management could not verify physically the
fixed assets situated at Yanam, due to riots, strike and malicious
c) During the year the Company has not disposed off any fixed assets
and hence, it has not affected the going concern status of the Company.
ii) Physical verification of inventory has been conducted in the
presence of officials of Customs and Central Excise. The loss of
materials in the riots, strike and malicious damage was estimated and
claimed with Insurance Company.
iii) a) The Company has not granted any loans, secured or unsecured to
Companies, firms or other parties covered in the register maintained
under Section 301 of the Companies Act, 1956.
b) In view of our comment in paragraph 3(a) above III (b),(c) & (d) of
the aforesaid order are not applicable to the Company.
e) During the year, the Company has taken unsecured loans from a party
covered in the register maintained under section 301 of the Companies
Act, 1956 and the maximum amount involved during the year was Rs.1.55
f) In our opinion the rate of interest and other terms and conditions
on which loans have been taken from the other parties listed in the
register maintained under section 301 of the Companies Act, 1956 are
not prima facie prejudicial to the interest of the Company.
g) The Company is regular in payment of the principal amount and
interest thereon as stipulated.
iv) In our opinion and according to the information and explanations
given to us, there are adequate internal control systems commensurate
with the size of the Company and the nature of its business with regard
to purchase of inventory, fixed assets and with regard to sale of
goods. Further, on the basis of our examination of the books and
records and according to the information and explanations given to us,
we have neither come across nor have been informed of any continuing
failure to correct major weaknesses in the internal control system.
v) a) According to the information and explanations given to us, we are
of the opinion that 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; and
b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of such contracts or
arrangements have been made at prices which are reasonable having
regard to the prevailing market prices at the relevant time.
vi) The Company has not accepted any deposits from the public. Hence,
the provisions of Sections 58A, 58AA and other relevant provisions of
the Companies Act, 1956 and the Companies (Acceptance of Deposits)
Rules, 1975 are not applicable.
vii) In our opinion, the Company has an internal audit system
commensurate with its size and nature of its business.
viii) Maintenance of cost records has been prescribed by the Central
Government under clause(d) of sub-section (1) of section 209(1)(d) of
the Act. We were informed that the cost records got damaged in the
riots, strike and malicious damage. In the absence of records we are
unable to comment on cost records.
ix) a) According to the records of the Company, the Company is regular
in depositing with appropriate authorities undisputed statutory dues
including Investor Education and Protection Fund, Wealth Tax, Customs
Duty and other material statutory dues applicable to the Company.
b) According to the information and explanations given to us, the
Company is not regular in depositing with appropriate authorities,
undisputed dues in respect of Sales Tax of Rs. 21.25 lakhs, CST of Rs.
29.10 lakhs, VAT Rs. 5.66 lakhs, PGST Rs. 1.67 lakhs, Service Tax Rs.
27.91 lakhs, Provident Fund of Rs. 5.83 lakhs and ESI Rs. 0.29 lakhs
outstanding as at 31st March, 2012 for a period of more than six months
from the date it became payable.
c) According to the records of the Company and the information and
explanations given to us, the dues of Service Tax / Income-Tax / Taxes
which have not been deposited on account of any dispute are as follows.
Nature of Amount Period to which Forum where
dues (Rs. in
lakhs) the amount
relates dispute is pending
Service Tax 35.04 2006-2007 CESTAT, Bangalore
Income Tax 101.17 2003-2004 Income Tax Appellate
Municipal Tax 32.35 1998-2007 Yanam Municipality
x) The Company has accumulated losses at the end of the financial year.
It has incurred cash losses in the financial year under report and
immediately preceding financial year.
xi) In our opinion and according to the information and explanations
given to us, the Company has not defaulted in repayment of dues to
xii) The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
xiii) The company is neither a chit fund nor a nidhi mutual benefit
fund/society. Therefore, the provisions of clause 4(xiii) of the above
referred Order are not applicable to the company.
xiv) The company is not dealing in or trading in shares, securities,
debentures and other investments. Accordingly, the provisions of clause
4(xiv) of the above referred Order are not applicable to the company.
xv) The company has not given any guarantee for loans taken by others
from banks or financial institutions.
xvi) The Term Loans were applied for the purpose for which the loans
xvii) According to the information and explanations given to us and on
all overall examination of the balance sheet of the company funds
raised on short-term basis have not been used for long-term investment.
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 the Act. Accordingly the provisions of
clause 4(xviii) of the order are not applicable to the Company.
xix) Since no Debentures were issued during the year, clause No.XIX of
the said Order is not applicable.
xx) During the year the company has not raised money by public issues.
xxi) According to the information and explanations given to us, no
fraud on or by the company has been noticed or reported during the
for Brahmayya & Co.,
Firm Registration No. 000513S
Place : Hyderabad K S Rao
Date : 09-11-2012 Partner
Membership No. : 15850