1 We have audited the attached Balance Sheet of Reliance Communications
Limited (''the Company'') as at 31 March 2011 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 the 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 (Auditor''s Report) Order, 2003 (''the
Order'') issued by the Central Government of India in terms of
sub-section (4A) of Section 227 of the Companies Act, 1956 (''the Act''),
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 the paragraph
3 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
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 books;
(c) the Balance Sheet, profit and Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account;
(d) in our opinion, the Balance Sheet, profit and 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;
(e) on the basis of written representations received from the directors
of the Company as at 31 March 2011 and taken on record by the Board of
Directors, we report that none of the directors is disQualified as at 31
March 2011 from being appointed as a director of the Company under
clause (g) of sub-section (1) of Section 274 of the Companies Act,
1956; and
(f) in our opinion, and to the best of our information and according to
the explanations given to us, the said accounts 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 31 March 2011;
(ii) in the case of the profit and Loss Account, of the loss of the
Company for the year ended on that date; and
(iii) in the case of the Cash Flow Statement, of the cash flows of the
Company for the year ended on that date.
Annexure to Auditors'' Report - 31st March, 2011
With reference to the Annexure referred to in the Auditors'' Report to
the Members of Reliance Communications Limited (''the Company'') on the
financial statements for the year ended 31 March 2011, we report the
following:
1. (a) The Company is in the process of updating its fixed asset
register including, to give effect to the assets transferred on
demerger of the optical fibre undertaking and the passive infrastructure
to a subsidiary company.
(b) We are informed that the Company physically verifies its assets over
a three year period, except for base trans-receiver stations. We are
informed that these assets are under continuous operational
surveillance at National Network Operating Centre and are therefore not
separately physically verified. In our opinion, this periodicity of
physical verification is reasonable having regard to the size of the
Company and the nature of its assets. In accordance with this policy,
the Company has physically verified certain fixed assets during the year.
(c) Fixed assets disposed off during the year were not substantial and,
therefore, do not affect the going concern assumption.
2. (a) The inventory has been physically verified by management during
the current year. In our opinion, the frequency of such verification is
reasonable.
(b) The procedures for the physical verification of inventories followed
by management are reasonable and adequate in relation to the size of
the Company and the nature of its business.
(c) The Company is maintaining proper records of inventory.
Discrepancies identifed on physical verification of inventories as
compared to book records were not material.
3. The Company has neither granted nor taken any loans, secured or
unsecured, to or from companies, firms or other parties covered in the
register maintained under section 301 of the Companies Act, 1956.
Accordingly, paragraph 4(iii) of the Order is not applicable.
4. In our opinion, and according to the information and explanations
given to us, and having regard to the explanation that purchases of
certain items of inventories and fixed assets are for the Company''s
specialised requirements for which suitable alternative sources are not
available to obtain comparable quotations, there is an adequate
internal control system commensurate with the size of the Company and
nature of its business with regard to the purchase of inventories and
fixed assets and with regard to the sale of services. In our opinion,
activities of the Company do not involve sale of goods. In our opinion,
and according to the information and explanations given to us, there is
no continuing failure to correct major weaknesses in the internal
control system.
5. In our opinion, and according to the information and explanations
given to us, there are no contracts and arrangements the particulars of
which need to be entered into the register maintained under section 301
of the Companies Act, 1956.
6. The Company has not accepted any deposits from the public.
7. In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
8. We have broadly reviewed the books of account maintained by the
Company pursuant to the rules prescribed by the Central Government for
maintenance of cost records under section 209(1) (d) of the Companies
Act, 1956 in respect of telecommunication activities and 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 the records.
9. (a) According to the information and explanations given to us and
on the basis of our examination of the records of the Company, amounts
deducted/accrued in the books of account in respect of undisputed
statutory dues including Provident Fund, Wealth Tax, Income Tax,
Service Tax, Customs Duty, Sales Tax, Entry Tax, Employees'' State
Insurance and other material statutory dues have been regularly
deposited during the year by the Company with the appropriate
authorities. As explained to us, the Company did not have any dues on
account of Excise Duty and Investor Education and Protection Fund.
There were no dues on account of cess under Section 441A of the
Companies Act, 1956 since the date from which the aforesaid section
comes into force has not yet been notified by the Central Government.
According to the information and explanations given to us, no
undisputed amounts payable in respect of Provident Fund, Wealth Tax,
Income Tax, Service Tax, Customs Duty, Sales Tax, Entry Tax, Employees''
State Insurance and other material statutory dues were in arrears as at
31 March 2011 for a period of more than six months from the date they
became payable.
(b) According to the information and explanations given to us, there
are no dues of Income Tax, Wealth Tax, Service Tax, Customs Duty,
Employees'' State Insurance which have not been deposited on account of
any dispute. The dues of Excise Duty, Sales Tax and Entry Tax as
disclosed below have not been deposited by the Company on account of
disputes.
Name of the Statute Nature of Amount Period to
which the Forum where
dispute is pending
the Dues (Rs
crores) amount
relates
The Central Excise
and Salt Act, 1944 Excise duty 2.08 2002-04 Tribunal
Entry Tax Act,
Uttar Pradesh Entry Tax 0.13 2003-04 Trade Tax
Tribunal, Lucknow
Trade Tax Act,
Uttar Pradesh Sales Tax 0.93 2004-05 Trade tax
Tribunal,(Appeals)
10.53 2005-06 Joint Commissioner
(Appeals)
0.24 2003-04 Trade Tax Tribunal
Lucknow
Entry Tax Act,
Madhya Pradesh Entry Tax 0.29 2002-03 Deputy
Commissioner of
Appeals
(Commercial Taxes)
0.20 2003-04 Deputy
Commissioner of
Appeals
(Commercial Taxes)
0.16 2005-06 Deputy
Commissioner of
Appeals
(Commercial Taxes)
0.15 2006-07 Deputy
Commissioner of
Appeals
(Commercial Taxes)
0.65 2007-08 Deputy
Commissioner of
Appeals
(Commercial Taxes)
Punjab VAT Act VAT 0.01 2007-08 Deputy
Commissioner
(Appeals)
Entry Tax Act,
Chhattisgarh Entry Tax 0.03 2003-04 Deputy
Commissioner
(Appeals)
(Commercial Taxes)
Uttarakhand VAT Act VAT 0.01 2005-06 Deputy
Commissioner of
Commercial
Taxes
West Bengal VAT Act VAT 1.49 2005-06 First appellate
authority
1.80 2006-07 First appellate
authority
2.40 2007-08 Deputy
Commissioner of
Sales Tax
Entry Tax Act,
Rajasthan Entry tax 0.03 2005-06 Deputy
Commissioner of
Appeals
(Commercial Taxes)
10.78 2007-08 Deputy
Commissioner of
Appeals
(Commercial Taxes)
10.59 2008-09 Deputy
Commissioner of
Appeals
(Commercial Taxes)
Delhi VAT Act VAT 36.48 2007-08 Commissioner
(Appeals)
Maharashtra
Sales Tax Sales Tax 4.79 2004-05 Deputy
Commissioner of
Sales tax
West Bengal,CST CST 0.21 2007-08 Deputy
Commissioner of
Sales Tax
Punjab VAT Act VAT 0.05 First appellate
authority
10. The Company does not have any accumulated losses at the end of the
financial year and has not incurred cash losses in the current financial
year and in the immediately preceding financial year.
11. In our opinion and according to the information and explanations
given to us, the Company has not defaulted in repayment of dues to its
bankers or debenture holders or to any financial institutions.
12. According to the 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.
13. In our opinion and according to the information and explanations
given to us, the Company is not a chit fund/ nidhi/ mutual benefit fund/
society.
14. According to the information and explanations given to us, the
Company is not dealing or trading in shares, securities, debentures and
other investments.
15. In our opinion and according to the information and explanations
given to us, the terms and conditions on which the Company has given
guarantees for loans taken by wholly owned subsidiaries and other
companies with whom the Company has business dealings, from banks or
financial institutions are not prejudicial to the interest of the
Company.
16. In our opinion and according to the information and explanations
given to us and examination of the records of the Company by us, the
term loans taken by the Company have been applied for the purpose for
which they were raised except portion of term loans availed as at the
end of the year is kept in bank, to be applied for the purpose for
which it was obtained.
17. According to the information and explanations given to us and on
an overall examination of the balance sheet of the Company, we are of
the opinion that the funds raised on short term basis have not been
used for long term investment.
18. The Company has not made any preferential allotment of shares to
companies/firms/parties covered in the register maintained under Section
301 of the Companies Act, 1956.
19. According to the information and explanations given to us, the
Company has created security in respect of debentures issued.
20. The Company has not raised any money by public issues during the
year.
21. According to the information and explanations given to us, no
significant fraud on or by the Company, that causes a material
misstatement to the financial statements, has been noticed or reported
during the year.
For Chaturvedi & Shah For B S R & Co.
Chartered Accountants Chartered Accountants
Firm Reg. No: 101720W Firm Reg. No: 101248W
C. D. Lala Bhavesh Dhupelia
Partner Partner
Membership No: 35671 Membership No: 042070
Mumbai
30 May 2011
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