We have audited the attached Balance sheet of SURYA PHARMACEUTICAL
LIMITED as at 31st March, 2012 and also the Profit and Loss Account and
the cash flow statement for the year ended on that date annexed
thereto. These financial statements are the responsibility of the
Company''s management. Our responsibility is to express an opinion on
these financial statements based on ouraudit.
1. We conducted our audit in accordance with auditing standards
generally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit also
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
2. As required by the Companies (Auditors'' Report) Order, 2003 issued
by the Company Law Board in terms of Section 227 (4A) of the
CompaniesAct, 1956 we enclose in theAnnexureAstatement on the matters
specified in paragraph 4 & 5 of said order:
3. As stated in note 28.10 of the financial statement, the managerial
remuneration to directors exceeded the limits specified in the relevant
provisions of the Companies Act,1956, by Rs. 270.62 lacs. As informed
to us, the company taken necessary steps to seek approval from central
Government and expects such approval. Pending such approval the impact
thereof on the financial statement has not been determined.
4. Further to our comments in the annexure referred to in paragraph
(2) above, we report that:-
a) We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of
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 the
c) The Balance sheet and Profit and LossAccount dealt with by this
report are in agreement with the books of accounts;
d) In our opinion, the Balance Sheet and the Profit and Loss account
comply with the accounting standards referred to in sub section (3C) of
section 211 of the CompaniesAct, 1956, subject to Notes on Accounts
forming part of Balance Sheet.
e) As per information and explanations given to us, none of the
directors of the company is disqualified from being appointed as a
director in terms of clause (g) of subsection (1) of section 274 of the
f) Subject to our comments in paragraph (3) above and para 3(b) of
annexure A, the effect of which has not been ascertained, in our
opinion and to the best of our information and according to the
explanations given to us, the said accounts give the information
required by the CompaniesAct, 1956, in the mannerso required and give a
true and fair view.
(i) In the case of the Balance Sheet of the State of affairs of the
company as at 31st March, 2012 and
(ii) In the case of the Profit and Loss account, of Loss of the company
for the year ended on that date.
(iii) In case of cash flow statement, of the cash flows for the year
ended on that date.
ANNEXURE ''A'' REFERRED TO IN PARAGRAPH 1 OF OUR REPORT OF THE AUDITORS
TO THE MEMBERS OF SURYA PHARMACEUTICAL LIMITED ON THEACCOUNTS
FORTHEYEAR ENDING 31st MARCH, 2012
1 (a) The company has maintained proper records showing full
particulars including quantitative details and situation of fixed
(b) The company has a regular program of physical verification of its
fixed assets by which all fixed assets are verified every year. In our
opinion, the periodicity of physical verification is reasonable to the
size of the company and nature of its assets. No material
discrepancies were noted on such verification.
(c) The fixed assets disposed off during the year were not substantial,
and therefore, do not affect the going concern assumption.
2 (a) Physical verification of stock of finished goods, stores, spares
and raw materials was conducted by the management during the year and
in our opinion, the frequency of such verification was reasonable.
(b) Procedures for 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) The company is maintaining proper records of inventory. The
discrepancies noticed on verification between the physical stocks and
book records were not material. The expired stock of Rs. 15.72 crore
detected during physical verification has been written off by the
3 In respect of unsecured loans granted by the company to companies
covered in the register under section 301 of the CompaniesAct, 1956 and
according to information and explanation given to us-
(a) The company has granted unsecured loans to six Companies/ Firms/
Trusts and other Parties Listed in the register maintained under
Section 301 of the CompaniesAct, 1956 and the amount outstanding as on
31.03.2012 was Rs. 84.92 crore (Rs. 5.10 crore). The maximum balance
outstanding during the year was Rs.109.56 crore.
( b) According to the information and explanation given to us , we are
of the opinion that the rate of interest and terms and conditions of
loan given by the company to companies/firms/ trusts in which directors
of the company, are interested are prima facie prejudicial to the
interest of the company on account of following.
(c) The company has granted the interest free loans, where the company
is paying interest to banks and institutions
(d) The company has agreement for recovery with a stipulation of four
(e) The company has taken unsecured loans from companies/firms or other
parties listed in the register maintained under section 301 of the
(f) The loans are interest free and not prejudicial to the interest of
(g) The company has agreementfor repayment with a stipulation of three
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 with regard to the purchase of stores, raw materials including
the Plant & Machinery, Vehicles, Equipment and other assets and for the
sale of these goods. In our opinion and according to the information
and explanations given to us, there is no continuing failure to correct
the major weaknesses in internal control system. We have not observed
any major weakness in the internal control system during the course of
5 In respect of contracts or arrangements entered in the register
maintained in pursuance of section 301 of the CompaniesAct, 1956, to
the best of our knowledge and belief and according to information and
explanation given to us:
a) The particulars of contracts or arrangements referred to in section
301 that were needed to be entered in the register maintained under
said section have been so entered.
b) Where each of such transaction is in excess of Rs. 5 lakhs in
respect of any party, the transaction have been made at price prima
facie reasonable having regard to the prevailing market prices at
6. In our opinion, and according to the information and explanations
given to us, the company has accepted deposits from public during the
year and has complied with the provisions of Section 58A of the Act and
the Companies (Acceptance of Deposits) Rules, 1975 with regard to the
deposits accepted from the public.
7 The company has an internal audit system, which in our opinion is,
commensurate with the size of the company and nature of its business.
8 We have broadly reviewed the books of account maintained by the
company pursuant to the rules prescribed by the Central Government for
maintenance of cost records under section 209(1)(d) of the companies
Act, 1956 and are of the opinion that prima facie, the prescribed
accounts and records have been made and maintained. However, we have
not made a detailed examination of the records.
9 (a) The company has generally been regular in depositing undisputed
dues, including Provident Fund ,Investor Education and Protection Fund,
Employees'' State Insurance ,Income Tax, Sale Tax, Wealth Tax Service
Tax ,Custom Duty ,Excise Duty, cess and other material statutory dues
applicable to it with the appropriate authorities.
(b) No undisputed amounts payable in respect of Provident Fund,
Investor Education and Protection Fund, Employees'' State Insurance,
Income Tax, Sale Tax, Custom Duty, Excise Duty, cess were in arrears as
at March 31.03.2012 fora Period of more than six months from the date
they became payable.
(c) Detail of dues of Sales Tax, Service Tax and Income Tax which have
not been deposited as at March 31.03.2012 on account of disputes are
given below :-
Name of Statute Nature of Dues Amount Period to which Forum
In the amount
1944. 2 16 1998 CESTAT
Excise Demand 17.96 1999 CESTAT
Act, 1944 3.69 2002
Service Tax Demand 2.89 2007 Department
Custom Act Demand 313.27 2008 Department
Net of pre-deposit amount
10. The Company does not have accumulated Losses. The Company has
incurred cash losses of Rs. 358.60 crore during the financial year
covered by our audit previous year Nil.
11. The Company has defaulted in repayment of dues amounting to Rs.
22.20 crore principal and Rs. 39.78 crore interest to banks and
financial institutions. The company has approached the Corporate Debt
Restructuring cell for restructuring of loans and working capital
limits, where its application has been accepted and is in process of
12. In our opinion and according to the information and explanations
given to us, the Company has not granted loans & advances on the basis
of security byway of pledge of shares, debentures & other securities.
13. In our opinion and according to the information and explanations
given to us the provisions of chit fund are not applicable to the
14. In our opinion and according to the information and explanations
given to us, the Company is not dealing in shares securities and
debentures. Therefore the provision of clause 4(xiv) of CARO are not
applicable to the Company.
15. In our opinion and according to the information and explanations
given to us, having regard to the fact that the subsidiary is wholly
owned the term and conditions of the guarantee given by the Company for
loan taken by the subsidiary from a bank are not prima facie
prejudicial to the interest of the Company
16. In our opinion and according to the information and explanations
given to us, the term loan have been applied for the purpose forwhich
they were raised.
17. In our opinion and according to the information and explanations
given to us and on an overall examination of the Balance Sheet of the
Company, we report that funds raised on short term basis have not been
used during the year for long term investment.
18. According to the information and explanations given to us during
the period covered by our audit, the Company has converted 10,00,000
convertible warrants out of 47,00,000 convertible share warrants issued
earlier into 1,00,00,000 equity shares to the parties and companies
covered in the register maintained under Section 301 of the
19. According to the information and explanations given to us, during
the year covered by our report, the Company has not issued any secured
20. During the course of our examination of the books and records of
the Company carried out in accordance with the generally accepted
auditing practices in India, and according to the information and
explanation given to us, we have neither come across any instance of
fraud on or by the Company noticed or reported during the year.
FOR AAD & ASSOCIATES
PLACE: CHANDIGARH M.NO. 083898
DATE: July 7, 2012