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2. We conducted our audit in accordance with the 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 our opinion.
3. As required by the Companies (Auditors' Report) Order, 2003, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we annex here to a statement on the matters specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to in paragraph (3) 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 purposes of our audit;
(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 those books and proper returns adequate for the purpose of our audit have been received from branches of the Company, not visited by us;
(c) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; .
(d) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report, comply with applicable Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;
(e) on the basis of written representations received from the directors, as on September 30,2012, and taken on record by the Board of Directors, we report that none of the directors of the Company is disqualified as on September 30,2012 from being appointed as a director, in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;
(f) in our opinion and to the best of our information and according to the explanations given to us, they said accounts give the information required by the Companies Act, 1956, in the manner so required subject to
(i) Non provision of interest on secured loan to the extent of Rs. 12,04,36,726/- since the account is NPA from 31st December 2011 (to that extent loss is lower);
(ii) Non-provision of interest on unsecured loan to the extent of Rs 16,80,667/- and interest on LC credit on Material purchase of Rs 8,33,974/- and interest on credit on Material of Rs 8,92,987/- (to that extent loss is lower) read together with the notes and accounting policies there on give a true and fair view generally accepted in India;
(iii) in the case of the Balance Sheet, of the state of affairs of the Company as at September 30,2012;
(iv) in the case of the Profit and Loss Account, of the LOSS for the period ended April 2011 to September 2012 for 18 months ;
(v) in the case of the Cash Flow Statement for the period ended on that date.
ANNEXURE TO AUDITORS' REPORT TO THE MEMBERS
(Referred to the paragraph 3 of our report of even date)
1. (a) The company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.
(b) As explained to us, the fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such physical verification.
(c) There was no disposal of substantial part of its fixed assets during the year.
2. (a) Physical verification of inventory has been conducted by the management at reasonable intervals.
(b) The procedure for Physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business.
(c) The Company has maintained proper records of inventory and' no major discrepancies were noticed on physical verification.
3. In our opinion and according to the information and explanations given to us,
(a) the Company has granted interest free loans to three companies, all the above companies are covered in register maintained u/s 301 of the Act. The maximum amount involved during the year aggregate to Rs 1,93,20,831 and the year ended balance to Rs 15,99,92,040. There are no stipulation as to the dates for the repayment of the loan.
(b) In our opinion the rate of interest and terms and condition to the loan taken from companies are prima facie prejudicial to the interest of the company.
(c) The company has taken a interest free loan from a director covered u/s 301 of the Companies Act 1956, the maximum amount of Rs 62,00,000/- and outstanding at the year ended is nil. There is no stipulation as to the dates for the repayment of the loan. In our opinion the loan is not prima facie of prejudicial to the interest of the company.
4. In our opinion and according to the information and explanations given to us, there are adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, we have not come across any major weakness in the internal control system nor we have been informed of any such instance.
5. In respect of transactions covered under Section 301 of the Companies Act, 1956:
(a) In our opinion and according to the information and explanations given to us, the transactions that need to be entered into the register maintained under section 301 have been so entered.
(b) In our opinion and according to the information and explanations given to us, the transactions with parties exceeding the value of Rupees five lakhs each entered into during the financial year, are at prices which are reasonable having regard to the prevailing market prices at the relevant time.
6. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.
7. We have broadly reviewed the books of accounts and records maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209(1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed records have been made and maintained. We have not, however, made a detailed examination of the same.
8. According to the records of the Company, it has generally been regular in depositing undisputed statutory dues including Provident Fund and Employees' State Insurance, Income-tax, Sales tax, Custom Duty, Excise Duty, Service-tax, Cess and other statutory dues during the year with the appropriate authorities, and there are no arrears of outstanding statutory dues as on that date, for a period of more than six months except Rs 11,43,335 on account of service tax which is pending with Central Excise Tribunal, from the date they became payable.
9. (a) The Company has accumulated losses at the end of the financial year Rs. 57,05,25,099 and it has incurred cash losses in the current year of Rs 56,02,35,375 and there is no cash loses in the immediately preceding financial year.
(b) At the Financial year ended 30.09.2012(18 months period), the Company has become a Potentially Sick Industrial Company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985. The Company is in the process of making reference to the Board for Industrial and Financial Reconstruction (BIFR) in accordance with the provisions of Section 23(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.
10. 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 defaulted in repayment of dues to bank and the Bank has declared the company as Non Performing Assets since 31st December 2011.
11. According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of securities by way of pledge of shares, debentures and other securities.
12. The nature of Company's activities during the year is such that clauses (xiii) and (xiv) of paragraph 4 of Companies (Auditors' Report) Order, 2003 are not applicable to the Company for the year.
13. The Company has given guarantee for loans taken by one of its Associate Company Bhoruka Fabcons Private Limited from banks or financial institutions.
14. Based on our audit procedures and information and explanation given by the management, during the financial year the Company has not obtained any term loan.
15. On the basis of information and explanations given to us and on an overall examination of the Balance Sheet and the Cash Flow Statement of the Company, funds raised on short-term basis have, prima facie, not been used during the year for long-term investment.
16. (a) The Company has not made any preferential allotment of shares during the year to parties & companies covered in the register maintained U/s 301 of the Act except bonus share are issued out of share premium account.
(b) There are no debentures outstanding at the year end.
17. The Company has not raised any money by public issues during the year.
18. Based upon the audit procedures performed 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.
19. 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 material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.
For R.S. Agarwala & Co.,
Place: Mysore Partner.
Date: 29th November, 2012 Membership No. 22958
Firm Reg NO-00049S