Report On Financial Statement
1. We have audited the accompanying financial statements of Soma
Textiles & Industries Limited, which comprise the Balance Sheet as at
March 31, 2013, the Statement of Profit and Loss and Cash Flow
Statement for the year ended, and a summary of Significant Accounting
Policies and other explanatory information.
Management''s Responsibility For The Financial Statement
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. 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. 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. 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 31st March, 2013; (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. 7 Without qualifying our opinion, we draw
attention to Note No. 13, 13.1 and 13.2 regarding loan amount of
Rs. 8,558.24 Lacs (Previous Year Rs. 8,021.18 Lacs) given to Soma Textile
FZC (UAE) out of GDR proceeds, being classified as a long term loan
which had been advanced by the Company as a quasi- equity. When the
loan was given, the said Company was a wholly owned subsidiary,
however, with effect from 31st March, 2010, the Company''s holding has
diluted from 100% to 40% (of the paid up Capital of Soma Textile FZC –
UAE). Hence the said Company has become an associate of Soma Textiles &
Industries Ltd. The loan amount is classified as Long Term under Loans
& Advances (Note 13 of Financial Statements).
In the financial statements of Soma Textile FZC the accumulated loss
reflects at AED 623,647 as against Total Capital of AED 900,000
(including Statutory Reserves); The said advance has been considered
good by the management placing reliance on the Statutory Auditor''s
Report of Soma Textile FZC (UAE) dated 16th April, 2013. The Audit was
conducted by an independent Auditor viz Business Management World
Auditors & Business Consultants, Dubai, U.A.E. for the financial year
ended 31st March, 2013.
8. The Company has signed Business Transfer Agreement on 01.04.2013 to
dispose off the Baramati Unit, situated at D-49, M.I.D.C., Baramati on
a slump sale basis as a going concern for a lumpsum consideration of Rs.
29.80 crores. The sale of the unit is governed by the terms &
conditions laid down in Business Transfer Agreement, transaction will
be given effect in books of accounts in the Financial Year 2013-14.
Report On Other Legal And Regulatory Requirements
9. 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 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, Statement of Profit & Loss
along with the Cash Flow Statement comply with the Accounting Standards
referred to in sub-section (3C) of section 211 of the Companies Act,
(v) On the basis of written representations received from the directors
as on 31st March, 2013 and taken on record by the Board of Directors,
none of the directors is disqualified as on 31st March, 2013 from being
appointed as a director in terms of clause (g) of sub-section (1) of
section 274 of the Companies Act, 1956.
Annexure referred to in paragraph 3 of our report of even date to the
members of SOMA TEXTILES & INDUSTRIES LIMITED on the accounts for the
year ended on 31st March, 2013.
(i) (a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
(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 Company has not disposed off a substantial part of its fixed
assets during the year and the Going Concern status of the Company is
(ii) (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, the procedures of physical verification of
inventory followed by the 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. 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, 2013 was Rs. 8,558.24 lacs.
(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)
No. of Parties Involved Two Parties
Opening Balance 500
Loan Taken 244
Balance Outstanding at
the end of year 744
(f) Interest free unsecured loan has been taken from promoters to
fulfill stipulation of Financial Institution 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) There is an adequate internal control system commensurate with the
size of the Company and the nature of its business, for the purchase of
inventory and fixed assets and for the sale of goods and service. (v)
(a) According to the information and explanations given to us, we are
of the opinion that the transactions that need to be entered into the
register maintained under Section 301 of the Companies Act, 1956 have
been so entered. (b) In our opinion and as explained to us, the
transactions made in pursuance of contracts or arrangements entered in
the register maintained under Section 301 of the Companies Act, 1956
and exceeding value of Rupees Five Lacs in respect of any party during
the year 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 during the year.
Therefore the provisions of Sections 58A, 58AA or any other relevant
provisions of the Act and the rules framed thereunder 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 internal audit system
commensurate with its size and nature of its business. (viii) In our
opinion, prima facie the Company has maintained proper cost records as
prescribed by the Central Government under clause (d) of sub-section
(1) of Section 209 of the Companies Act,1956. We have, however, not
made a detailed examination of cost records with a view to determine
whether they are accurate or complete.
(ix) (a) According to the information and explanations given to us and
on the basis of our examination of books of account, we are of the
opinion that the Company is generally regular in depositing undisputed
statutory dues including Provident Fund, Investor Education and
Protection Fund, Employees'' State Insurance, Income-tax, Sales-tax,
Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other
statutory dues with the appropriate authorities. At the end of the
year, there were no undisputed dues payable for a period of more than
six months from the date they became payable. (b) As on 31st March
2013, according to records of the Company, some statutory dues were
disputed and not deposited as given below:
Name of Statute Nature of Dues Amount Period to Forum where
in Lacs) which it
Act, Recovery of CENVAT 1.59 2004-05 The Dy.
Act, Recovery of
additional 24.85 2002-03 The Dy.
1944 TTA duty of Yarn Ahmedabad.
Act, Refund claim for 0.98 2005-06 Commissioner of
1944 amount short
claim of yarn
the old recovery
Act, Demand for old duty 0.50 2008-09 CESAT, West
Act, Recovery of
transitional 5.81 2012-13 CESAT, West
The Income Tax Demand of Income 9.77 A.Y. Asst.
Act-1961 Tax 2006-07 Cir.-8,
The Income Tax Demand for Penalty 7.43 A.Y. Asst.
Act-1961 U/s. 271(1)(C) 2008-09 Ahmedabad
The Income Tax Demand of Income
Tax 14.55 A.Y. Commissioner of
Act-1961 2007-08 Ahmedabad
Tax Additional Sales
Tax 6.17 1997-98, Gujarat Value
Added Tax Tribunal
(x) The Company has accumulated losses at the end of the Financial
Year. However such losses do not exceed 50% of
its net worth.
(xi) Company is under Corporate Debt Restructuring (CDR) package under
scheme of RBI which was duly approved and implemented. Company has
defaulted in repayment of Loans and interest as stated in Note No 4.3
which is mentioned under head Long term borrowing.
(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) The Company has not given any guarantee for loans taken by others
from bank or financial institutions. Accordingly this clause does not
(xvi) In our opinion and according to the explanations given to us the
term loans were applied only for the purpose for which they were
(xvii) In our opinion and according to explanations given to us, the
funds raised on short-term basis have not been used for long-term
(xviii) 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 during the year and accordingly this clause does
(xix) The Company has not issued debentures during the year.
Accordingly this clause does not apply.
(xx) The Company has not raised any money from public issue during the
financial year. Accordingly this clause does not apply.
(xxi) In our opinion and according to explanations given to us, no
fraud on or by the Company has been noticed or reported during the
For Pipara & Co.
(Firm Registration No. 107929W)
Place: Ahmedabad Partner
Date:24th May, 2013 Membership No. 034289