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Soma Textiles and Industries
BSE: 521034|NSE: SOMATEX|ISIN: INE314C01013|SECTOR: Textiles - Composite Mills
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« Mar 13
Auditor's Report (Soma Textiles and Industries) Year End : Mar '14
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.
 
 Auditor''s Responsibility
 
 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.
 
 7.  Opinion
 
 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
 India:
 
 (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
 audit;
 
 (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
 operations.
 
 (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
 account.
 
 (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
 Company.
 
 (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
 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 31.03.2014 on account of dispute are
 given below:
 
 Name of Statute       Nature of Dues           Amount       Period to
                                                (Rs. in Lacs)  which it 
                                                             relates
 
 Central Excise Act,   Recovery of CENVAT          1.59      2004-05
 1944
 
 Central Excise Act,   Recovery of additional     24.85      2002-03
 1944                  TTA duty of Yarn
                       captively consumed 
 
 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
 1944
 
 Central Excise Act,   Recovery of transitional    5.81      2012-13
 1944                  Cenvat
 
 The Income Tax        Demand of Income Tax        9.77      A.Y.
 Act-1961                                                    2006-07
 
 The Income Tax        Demand of Income Tax       14.55      A.Y.
 Act-1961                                                    2007-08
 
 Gujarat Sales Tax     Additional Sales Tax        6.17      1997-98,
 Act-1969                                                    1998-99
                                                           & 2000-01
 
 
 Name of Statute            Forum where dispute is pending
 
 Central Excise Act, 1944   The Dy. Commissioner of C. Excise, Div-I,
                            Ahmedabad.
 
 Central Excise Act, 1944   The Dy. Commissioner of C. Excise, Div-III,
                            Ahmedabad.
 
 Central Excise Act, 1944   Commissioner of Central Excise, (Appeals), 
                            Ahmedabad
 
 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,
                            Cir.-8, Ahmedabad
 
 The Income Tax Act-1961    Commissioner of Income Tax (Appeal),
                            Ahmedabad
 
 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
 and banks.
 
 (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
 apply.
 
 (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
 institutions.
 
 (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
 debentures.
 
 (xx) According to the information and explanations given to us, the
 Company has not raised any money by way of public issue during the
 year.
 
 (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
                                               Chartered Accountants 
                                            Firm Regn. No. : 107929W
 
                                                         GYAN PIPARA
 Place: Ahmedabad                                          (Partner)
 Date:30th May, 2014                            Membership No.034289
Source : Dion Global Solutions Limited
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