We have audited the accompanying financial statements of SOMA TEXTILES
& INDUSTRIES LIMITED, which comprise the Balance Sheet as at March 31,
2015, 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.
2. 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 with respect to the
preparation and presentation of these financial statements that gives 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) Rules, 2014.
This responsibility also includes maintenance of adequate accounting
records in accordance with the provisions of the Act for safeguarding
of 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.
3. Auditor''s Responsibility
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
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 financial control relevant
to the Company''s preparation of the financial statements that give a
true and fair view in order to design audit procedures that are
appropriate in the circumstances. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness
of the accounting estimates made by the Company''s Directors, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion on the financial
In our opinion and to the best of our information and according to the
explanations given to us, the aforesaid 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:
(a) In the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2015;
(b) In the case of the Statement of Profit and Loss, of the Loss for
the year ended on that date and;
(c) In the case of the Cash Flow Statement, of the cash flows of the
Company for the year ended on that date.
5. Emphasis of Matter
(a) We draw attention to Note 12.2 to the Financial Statement, relating
to Account Receivables of Soma Textiles FZC, an associate enterprise of
the company, whereby the debtors have requested the company for 2 years
cooling period i.e. till March 2016. The amount of such debtors is AED
6,26,31,823. We are unable to comment on said receivables of Soma
Textiles FZC, which are deemed to be good by Independent Auditor of
Soma Textiles FZC-''Business Management World Auditors & Business
Consultants''. The company has shown a loan amount of Rs.9852.39 lakhs
(Previous year Rs.9444.17 lakhs) given to Soma Textile FZC (UAE) out of
GDR proceeds, classifies as long term loan. This loan had been advanced
by the company as a Quasi- Equity (Note 12) in addition to the capital
of Soma Textile FZC when the said loan was given, the said company was
a wholly owned subsidiary, however, with effect from 31st March 2010,
the company''s holding in this company has diluted from 100% to 40%. In
the financial statements of Soma Textile FZC ended as at 31.03.2015 the
accumulated loss reflects at AED 5,64,690 as against Total Capital of
AED 9,00,000 (including Statutory Reserves). Our opinion is not
qualified in this matter.
(b) Attention to the following is invited:
As per the provisions of Section 23 of SICA Act, 1985 the Accumulated
Losses of the company as at 31st March, 2015 have resulted in erosion
of more than 50% of its peak net worth during the four financial years
immediately preceding the financial year ended on 31st March, 2015.
Consequent upon, the company has become a Potentially Sick Company
under the said provision.
6. Report on Other Legal and Regulatory Requirements
(i) As required by the Companies (Auditor''s Report) Order, 2015 (the
Order) issued by the Central Government of India in terms of
sub-section (11) of section143 of the Act, we give in the Annexure a
statement on the matters specified in paragraph 3 & 4 of the said Order
to the extent applicable.
(ii) 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
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
(c) The Balance Sheet, Statement of Profit and Loss and Cash Flow
Statement dealt with by this Report are in agreement with the books of
(d) In our opinion, the aforesaid financial statements comply with the
Accounting Standards specified under Section 133 of the Act, read with
Rule 7 of the Companies (Accounts) Rules, 2014;
(e) On the basis of the written representations received from the
directors as on 31st March, 2015 taken on record by the Board of
Directors, none of the directors is disqualified as on 31st March, 2015
from being appointed as a director in terms of Section 164 (2) of the
(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)
Rules, 2014, in our opinion and to the best of our information and
according to the explanations given to us:
I. The company has disclosed the impact of pending litigation on its
financial position in its financial statements- (Refer Note 31 to the
II. The Company did not have any long-term contracts including
derivative contracts for which there were any material foreseeable
III. There has been no delay in transferring amounts, required to be
transferred, to the Investor Education and Protection Fund by the
ANNEXURE TO INDEPENDENT AUDITOR''S REPORT
(Reffered to in paragraph 1 under ''Report on Other Legal and Regulatory
Requirements'' section of our report of even date)
(i) In respect of its fixed assets :
(a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of fixed assets.
(b) The Company has a phased programme of physical verification of
fixed assets which, in our opinion, is reasonable having regard to the
size of the company and nature of its assets. In accordance with this
programme, the management has verified fixed assets during the year and
no material discrepancies have been noticed on such verification.
(ii) In respect of its inventory:
(a) The management conducts regular physical verification of inventory
at reasonable intervals commensurate and adequate to the size of its
operations. In our openion the frequency of physical verification is
reasonable having regard to the size and nature of business of company.
(b) In our opinion and according to the information and explanation
given to us, the procedure of physical verification of inventories
followed by the management are reasonable and adequate in relation to
the size of the company and the nature of its business.
(c) In our opinion and according to the information and explanation
given to us, the Company has maintained proper records of its
inventories. Some immaterial discrepancies were noticed on physical
verification which have been properly dealt with in the books of
(iii) (a) The company has granted interest free loan (quasi-equity) to
its Associate, Soma Textile FZC. Total amount
outstanding on 31st March 2015 was Rs. 9852.39 lakhs.
(b) There are no terms and conditions set out by the Company as on date
for the loans given to Soma Textile FZC therefore, we are unable to
report on regularity of receipt of principal amount.
(c) As there is no stipulation of repayment of loan by Associate, we
are unable to report on overdue amount and reasonability of the steps
taken by the company for the recovery of the principal.
(iv) In our opinion, and according to the information and explanations
given to us, there is an adequate internal control procedures
commensurate with the size of the Company and the nature of its
business with regard to purchases of inventory and fixed assets and the
sale of goods and services. During the course of our audit, we have not
observed any major weakness in such internal control system.
(v) According to the information and explanations given to us,the
Company has not accepted any deposits from the public thus, directives
issued by Reserve Bank of India the Provisions of the section 73 to 76
and other relevant provisions of the Companies Act, 2013 and the rules
framed there under or any order passed by Company Law Board or National
Company Law Tribunal or Reserve Bank of India or any Court or any other
Tribunal do not apply to Company.
(vi) We have broadly reviewed the books of accounts maintained by the
company pursuant to the rules made by the Central Government of India,
regarding the maintenance of cost record under sub-section (1) of
section 148 of the Companies Act, 2013 and are of opinion that, prima
facie, the prescribed accounts & records have been maintained. We
have, however, not made a detailed examination of the cost records with
a view to determine whether they are accurate or complete.
(vii) According to information and explanation given to us in respect
of statutory dues:
(a) According to the information and explanations given to us, and on
the basis of our examination of the books of accounts, the Company has
generally been regular in depositing the undisputed statutory dues
including Income- Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty,
Custom Duty, Cess and other material Statutory dues during the period
with the appropriate authorities. At the end of the year, there were no
undisputed amount payable for a period of more than six months from the
date they became payable.
(b) Details of dues of Income Tax, Sales Tax, Wealth Tax, Service Tax,
Custom Duty, Excise Duty and Cess which have not been deposited as on
31.03.2015 on account of dispute are given below:
Name of Nature of Amount Period to Forum
Statute Dues (Rs. in which it where
Central Recovery 1.59 2004-05 The Dy.
Excise Act, of CENVAT Commissi
1944 oner of C.
Central Recovery 24.85 2002-03 The Dy.
Excise Act, of additional Commissi
1944 TTA duty oner of C.
of Yarn Excise,
Central Refund claim for 0.98 2005-06 Commissioner
Excise Act, amount of Central
1944 short Excise,
Central Demand for 0.50 2008-09 CESAT, West
Excise Act, old duty Zone,
Central Recovery 5.81 2012-13 CESAT,
Excise Act, of West
1944 transit Zone,
ional Cenvat Ahmedabad
The Income Demand of 9.77 A.Y.Asst. Commissioner
Tax Income Tax of Income
Act-1961 2006-07 Tax,Cir.-8,
The Income Demand of 14.55 A.Y Commissioner
Tax Income Tax of Income
Act-1961 2007-08 Tax(Appeal),
Gujarat Additional 6.17 1997-98, Gujarat
Sales Tax Sales Tax 1998-99 Value
Act-1969 & 2000-01 Added
(c) There has been no delay in transferring amount, required to be
transferred, to the Investor Education and Protection Fund By Company.
(viii) The accumulated loss of the Company at the end of the financial
year exceeds fifty percent of its net worth and also the company has
incurred cash losses in the current financial year.
(ix) In our opinion and according to the information & explanations
given to us, the company has defaulted in repayment of dues to
financial institution and banks. (Please Refer Note 3.3 to Financial
(x) In our opinion and according to the information and explanations
given to us, the Company has not given any guarantee for loans taken by
others from bank or financial institutions.
(xi) In our opinion and according to the explanations given to us the
term loans were applied only for the purpose for which they were
(xii) To the best of our knowledge and according to the information and
explanations given to us, we report that no fraud on or by the company
has been noticed or reported during the year under audit and even up to
the date of our audit.
For PIPARA & COMPANY
Firm Regn. No. : 107929W
Place : Ahmedabad (Partner)
Date : 30th May, 2015 Membership No.034289