1. We have audited the accompanying financial statements of Soma
Textiles & Industries Limited (the company), which comprise the Balance
Sheet as at March 31, 2014, 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
2. Management is responsible for the 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 Standards referred to in sub-section (3C) of section 211
of the Companies Act, 1956 read with the General Circular 15/2013 dated
13th September, 2013 of the Ministry of Corporate Affairs in respect of
section 133 of the Companies Act, 2013. This responsibility includes
the design, implementation and maintenance of internal control 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. Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. 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.
4. An audit involves performing procedures to obtain audit evidence
about the amounts and 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
in order to design audit procedures that are appropriate in the
circumstances but not for the purpose of expressing an opinion on the
effectiveness of the entity''s internal control. 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.
5. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
6. Emphasis of Matter
(a) We draw attention to Note 12.2 to the Financial Statements,
relating to Account Receivables of Soma Textiles FZC, an associated
enterprise of the company, whereby the debtors have requested the
company for 2 years cooling period. The amount of such debtors is AED
6,28,38,125/-. We are unable to comment on the said receivables of Soma
Textiles FZC, which are deemed to be good by the Independent Auditor of
Soma Textiles FZC– ''Business Management World Auditors & Business
Consultants''. The company has shown a loan amount of Rs. 9444.17 Lakhs
(Previous Year Rs. 8558.24 Lakhs) given to Soma Textile FZC (UAE) out of
GDR proceeds, classified as a long term loan. This loan had been
advanced by the Company as a Quasi- Equity (Note 12) in addition to the
Capital of Soma Textiles 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 31.03.2014 the accumulated loss reflects at AED 585,540 as against
Total Capital of AED 9,00,000 (including Statutory Reserves). Our
opinion is not qualified in this matter.
(b) We draw attention to Note 4 ''Other Long Term Liabilities''
[Non-Current Liabilities] whereby Trade Payables by the company against
purchase of goods, to the tune of Rs. 20,43,58,109/-, have been restated
as Long Term [Non-Current Liabilities] from its ordinary classification
as Short Term [Current Liabilities]. The company has obtained and
presented letter of confirmations from its creditors stating that their
payment is re-scheduled, becoming due as at April 2015, and that the
same is acceptable to these creditors. We have relied upon these
confirmation letters as received by the company from its vendors. Our
opinion is not qualified in this matter.
(c) We draw attention to Note 35 to the Financial Statements, whereby
the company has sold its Cotton Spinning Unit at Baramti, Pune to M/s
GTN Engineering (India) Ltd. at a Lump-sum consideration of Rs. 29.8
Crores under a Business Transfer Agreement signed on 01st April
2013,and the company has handed over the possession of the said unit to
M/s GTN Engineering (India) Ltd. on 09th June, 2013. Our opinion is not
qualified in this matter.
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
(i) In the case of the Balance Sheet, of the state of affairs of the
Company as at March31, 2014;
(ii) In the case of the Statement of Profit and Loss, of the Loss for
the year ended on that date and;
(iii) In the case of the Cash Flow Statement, of the cash flows for the
year ended on that date;
8. Attention to the following is invited:
As per the provisions of section 23of SICA Act,1985, the Accumulated
Losses of the Company as at 31st March, 2014 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, 2014.
Consequent upon, the Company has become a Potentially Sick Company
under the said provision.
9. Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditors'' Report) Order, 2003 as amended
by the Companies (Auditors'' Report) (Amendment) Order, 2004 (together
the ''Order'') issued by the Central Government of India in terms of
sub-section (4A) of section 227 of the Companies Act, 1956 of India and
on the basis of such checks of the books and records of the Company as
we considered appropriate and according to the information and
explanations given to us, we enclose in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order.
10. As required by section 227(3) of the Act, 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
those books and proper reports adequate for the purposes of our audit
have been received from the branch not audited by us. The financial
records of Baramati unit of the company for the period upto 9-6-2013
have been audited by M/S Shankarlal Jain & Associates, Chartered
Accountants, Mumbai, (Firm Registration No. 109901W) a copy of whose
report has been forwarded to us. We have relied on that report and have
appropriately dealt with the same in our report.
(iii) The Balance Sheet, Statement of Profit & Loss and Cash Flow
Statement dealt with by this Report are in agreement with the books of
accounts along with the audited report of the branch.
(iv) In our opinion, the Balance Sheet, the Statement of Profit and
Loss and the Cash flow statement comply with the Accounting Standards
notified under the Companies Act, 1956 read with the General Circular
15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs
in respect of section 133 of the Companies Act, 2013.
(v) On the basis of written representations received from the directors
as on March 31, 2014, and taken on record by the Board of Directors,
none of the directors is disqualified as on March 31, 2014, from being
appointed as a director in terms of clause (g) of sub-section (1) of
section 274 of the Companies Act, 1956.
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.
(c) The fixed assets disposed off during the year, including the Sale
of Cotton Spinning Unit of Baramati, in our opinion, although
consituted a division of the company, such disposal has, in our
opinion, not affected the going concern status of the Company.
(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
(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
2014 was Rs. 9444.17 lakhs.
(b) There are no terms and conditions set out by the Company as on date
for the loans given to Soma Textile FZC and therefore, we are unable to
comment on terms and conditions of the said loan.
(c) As there is no stipulation made for repayment of loan by Associate,
we are unable to report on regularity of receipt of principal amount.
(d) As there is no stipulation of repayment of loan by Associate, we
are unable to report on overdue amount.
(e) According to the information and explanations given to us the
Company has taken unsecured loans from companies, firm or other parties
covered in the register maintained under section 301 of the Companies
Act, 1956 and the same are as under.
(Rs. In lacs)
Opening Balance 500
No. of Parties involved : 1
Maximum Amount Involved during the year : 50
Amount Outstanding as on 31.03.2014 : 562
(f) Interest free unsecured loan has been taken from promoters to
fulfill stipulation of Financial Institutions so there is no rate of
interest specified. Terms and conditions of loans taken are prima facie
not prejudicial to the interest of the company;
(g) No stipulation has been specified for the repayment of these loan.
(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) In respect of contracts or arrangements entered in Register
maintained in pursuance Section 301 of Companies Act,1956, to the best
of our knowledge and belief and according to the information and
explanation given to us :
(a) The particulars of contracts or arrangements reffered to in section
301 that need to be entered in the Register maintained under the said
Section have been so entered.
(b) where each of such transaction is in excess of Rs. Five Lakhs in
respect of any party, the transaction have been made at prices which
are prima facie reasonable having regard to the prevailing market
prices at the relevant time.
(vi) According to the information and explanations given to us, the
Company has not accepted any deposits from the public thus, the
Provisions of the section 58A and 58AA and other relevant provisions of
the Companies Act,1956 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
(vii) In our opinion and according to information and explanations
given to us, the Company has an adequate internal audit system
commensurate with its size and nature of its business.
(viii) 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 records under clause (d) of sub-
section (1)of section 209 of the Act 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.
(ix) According to information and explanation given to us in respect of
(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
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 31.03.2014 on account of dispute are
Name of Statute Nature of Dues Amount Period to
(Rs. in Lacs) which it
Central Excise Act, Recovery of CENVAT 1.59 2004-05
Central Excise Act, Recovery of additional 24.85 2002-03
1944 TTA duty of Yarn
Central Excise Act, Refund claim for 0.98 2005-06
1944 amount short received
against refund claim of
yarn duty after adjusting
the old recovery
Central Excise Act, Demand for old duty 0.50 2008-09
Central Excise Act, Recovery of transitional 5.81 2012-13
The Income Tax Demand of Income Tax 9.77 A.Y.
The Income Tax Demand of Income Tax 14.55 A.Y.
Gujarat Sales Tax Additional Sales Tax 6.17 1997-98,
Name of Statute Forum where dispute is pending
Central Excise Act, 1944 The Dy. Commissioner of C. Excise, Div-I,
Central Excise Act, 1944 The Dy. Commissioner of C. Excise, Div-III,
Central Excise Act, 1944 Commissioner of Central Excise, (Appeals),
Central Excise Act, 1944 CESAT, West Zone, Ahmedabad
Central Excise Act, 1944 CESAT, West Zone, Ahmedabad (Appeal)
The Income Tax Act-1961 Asst. Commissioner of Income Tax,
The Income Tax Act-1961 Commissioner of Income Tax (Appeal),
Gujarat Sales Tax Act-1969 Gujarat Value Added Tax Tribunal
(x) 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.
(xi) Company is under Corporate Debt Restructuring (CDR) package under
scheme of RBI which was duly approved and implemented. In our opinion
and according to the information & explanations given to us, the
company has not defaulted in repayment of dues to financial institution
(xii) The company has not granted loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
Accordingly the provisions of clause 4(xii) of the order are not
applicable to the Company.
(xiii) The company is not a chit fund / nidhi company / mutual benefit
fund or society which would be governed by any special statute.
Accordingly this clause along with sub clauses does not apply.
(xiv) The company is not dealing or trading in shares, securities,
debentures and other investments. Accordingly this clause does not
(xv) In our opinion and according to the information and explanations
given to us and management representation received, the Company has not
given any guarantee for loans taken by others from bank or financial
(xvi) In our opinion and according to the explanations given to us and
management representation received the term loans were applied only for
the purpose for which they were obtained.
(xvii) In our opinion, and according to the information & explanations
given to us and management representation received, funds raised on
short-term basis have, prima facie, not been used during the year for
long-term investment .
(xviii) According to the information & explanations given to us, during
the period under our audit report, the Company has not allotted any
shares on preferential basis to the parties and companies covered in
the register maintained under section 301 of the Act.
(xix) According to the information and explanations given to us, during
the period covered by our audit report, the Company has not issued
(xx) According to the information and explanations given to us, the
Company has not raised any money by way of public issue during the
(xxi) To the best of our knowledge and according to the information and
explanations given to us, no fraud by the Company and no material fraud
on the Company has been noticed or reported during the year.
For PIPARA & COMPANY
Firm Regn. No. : 107929W
Place: Ahmedabad (Partner)
Date:30th May, 2014 Membership No.034289