We have audited the Balance Sheet and the Cash Row statement of Sri
Chakra Cements Limited as at 31st March, 2006 and the Profit and Loss
account for the year 2005-06 annexed thereto. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with accounting standards
generally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assistance 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
1. As required by the Companies (Auditors Report) Order, 2003 issued
by the Central Government of India in terms of Section 227 (4A) of the
Companies Act, 1956, we enclose in the Annexure a statement on the
matters specified in the paragraphs 4 and 5 of the said order.
2. Further to our comments in the Annexure referred to in paragraph 1
above, we state 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
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 such
c. The Balance Sheet and the Profit and Loss Account referred to in
this report are in agreement with the Books of account.
d. In our opinion, the Balance Sheet and Profit and Loss account dealt
with by this report are in compliance with the Accounting Standards
referred to in Section 211 (3C) of the Companies Act, 1956 except AS-6
and AS-10 regarding non-provision of depreciation upto 31-3-2001 and
over statement of fixed assets, AS-15 regarding non provision of
liability in respect of gratuity and leave encashment liability, AS-2
regarding valuation of WIP and AS-20 earnings per share which are not
in accordance with the prescribed accounting standards and generally
accepted accounting principles.
e. Reference is invited to Note No. 16 regarding preparation of
accounts on a going concern basis, inspite of huge accumulated losses,
in view of the reasons given therein.
f On the basis of written representations received from the Directors
and placed on record, none of the Directors is disqualified as on 31st
March, 2006 from being appointed as Directors of this Company under
Section 274(1 )(g) of the Companies Act. 1956.
g. In our opinion and to the best of our information and according to
the explanations given to us. the said Balance Sheet and the Profit and
Loss account subject to note no.9 regarding non-provision of lease
rentals in respect, of 250 acres of land allotted to the Company, not
quantified in the absence of a lease agreement, note no. 10 regarding
non-provision of gratuity liability and liability towards leave
encashment payable to employees, me amount where of is not quantised,
note no.11 regarding non-provision of interest and other charges on
Term Loans amounting to Rs. 250.95 lakhs, note no. 12 a & b regarding
non-provision of interest on term loans and funded interest term loans
given by banks amounting to Rs. 104.94 lakhs and interest on dealers
deposits not quantified, note no. 13 regarding non-provision of
depreciation on Plant A Machinery and Electrical Equipment to an extent
of Rs.76O.76 lakhs, upto 31-3-20O1 and overstatement of fixed assets by
a like amount,non provision of Sales tax liability amounting to Rs.
43.56 lakhs, non provision of fringe benefit tax liability amounting to
Rs2.87laks, non accounting of deferred-tax assets of Rs. 423.9O lakhs
for the current year note no. 14 regarding non-writing off of deferred
revenue expenditure amounting-to Rs. 367.06 lakhs. Non- compliance with
AS-2 Valuation of Inventories, due to absence of relevant details, non
reconciliation of Service Tax, non-review of Capital Work in Progress
items requiring adjustment, non reconciation of chit account, non
confirmation of balances in Sundry Debtors accounts. Sundry Creditors
accounts induding banks and financial institutions, the cumulative
effect of which resulted in under statement of toss by a like amount to
the extent quantified and note no. 17 regarding non-furnishing of
information relating to dues to SSI, and read in conjunction with
other notes thereon give the information required by the % Companies
Act, 1956 in the manner so required and give-a true and fair view, in
confirmity with the accounting principles generally accepted in India.
i) In so far as it relates to the Balance Sheet and the state of
affairs of the Company as at 31st March. 2O06 and
ii) In so far as it relates to the Profit and Loss account of the loss
for the year ended on that date.
ii) In case of cash flow statement of the cash flows for the year ended
on that date.
ANNEXURE TO THE AUDITORS REPORT:
Re : Sri Chakra Cements Limited
Referred to in paragraph 1 of our report of even date .
1. a. The Company has generaly maintained proper records showing full
particulars including Quantitative details and situation of fixed
b. All fixed assets have not been physically verified by the
Management during the period but there is a regular programme of
verification which in, our opinion, is reasonable having regard to the
size of the Company and the nature of its assets. As informed, no
material discrepancies were identified on such verification.
c. There was no substantial disposal of fixed assets during the
2. a. The management has conducted physical verification of inventory
at reasonable intervals during the period.
b. 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 and no
material discrepancies were noticed on physical verification.
3. The Company has neither granted nor taken any loans, secured or
unsecured to / from Companies, firms or other parties covered in the
register maintained under Section 301 of the Companies Act 1956.
4. In our opinion and according to the information and explanations
given to us, there are adequate internal control procedures
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. During the course of our audit, no major weakness has
been noticed in the internal controls in respect of these areas.
5. a. According to the information and explanations provided by the
management, we are of the opinion that the transactions that need to be
entered into the register maintained under Section 301 have been so
b. In our opinion and according to the information and explanation
given 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 the value of Rupees Five Lakhs 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, except sale of goods with two parties which in our
opinion have not been made at prevailing market prices at the relevant
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 order made by the Central Government for the
maintenance of cost records under section 209 (1) (d) of the Companies
Act, 1956 in respect of the products of the Company, and are of the
opinion that primafacie, the prescribed accounts and records have been
made and maintained.
9. a. Undisputed statutory dues including, investor education and
protection fund, income-tax, sales-tax, have not been regularly
deposited with the appropriate authorities. However other Material
Statutory dues viz Provident Fund, Employ- ees State Insurance dues,
Excise Duty, have generally been paid regularly. The extent of arrears
of outstanding statutory dues as at 31.08.2006 for a period of more
than six months from the date they became payable is as under:
Rs. in lakhs
1. Income Tax (TDS) 5.67
2. Sales Tax 413.27
3. Royalty & Cess 693.80
b. According to the records of the Company and on the basis of the
information and explanations given to us, the dues in respect of sales
tax. Income tax, custom duty, wealth tax, excise duty, cess which have
not been deposited on account of any dispute, are as under:
Name of the Nature of Amount
statute dues (Rs. in lakhs)
Tamilnadu Sales 42.89
Sales Tax Act
Commissioner Central 104.84
of Customs & Excise
Period to Forum where
which the dispute is
amt relates pending
1983 II Jr. Civil Judge,
1999 Office of the
to Commissioner of
10. The Company has accumulated losses to the extent of Rs.4222.77
Lakhs at the end of the financial year which is more than fifty percent
of its net worth and has incurred cash losses in the current and
immediately proceeding financial year.
11. Based on our audit procedures and as per the information and
explanations given by the management, we are of the opinion that the
Company has continuously defaulted in repayment of dues to financial
institutions and banks. The total amount under Secured Loans amounting
to Rs. 4O21.44 Lakhs is in default for a period more than 10 years. The
Company has not issued debentures. The Company has been registered with
the BIFR and One Tune Settlement proposals with the Banks and
Institutions have been submitted.
12. According to the information and explanations given to us and
based on the documents and records produced 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, the Company is not a chit fund or a nidhi / mutual
benefit fund / society. Therefore, the provisions of clause 4 (xiii) of
the Companies (Auditors Report) Order, 2003 are not applicable to the
14. In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4 (xiv) of the Companies (Auditors Report) Order,
2003 are not applicable to the Company.
15. According to the information and explanations given to us, the
Company has not given guarantee for loans taken by others from bank or
16. Based on information and explanations given to us by the
management, the Company did not take any term loans during the year.
17. According to the information and explanations given to us and on
an overall examination of the Balance Sheet arid Cash Row statement of
the Company, we report that no funds raised on short term basis nave
been used for long term investment.
18. The Company has not made preferential allotment of shares to
parties and Companies covered in the register maintained under Section
301 of the Companies Act, 1956.
19. The Company did not issue debentures during the year.
20. The Company has not raised money by Public Issue during the year.
21. Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and as per
the information and explanations given by the management, we report
that no fraud on or by the Company has been noticed or reported during
the course of our audit.
For Satyanarayana & Co.
Place : Hyderabad Partner
Date : 31.08.2006