1. We have audited the attached Balance Sheet of EASTERN SILK
INDUSTRIES LTD. as at 31 st,March, 2011 and also the Profit & 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 our audit.
2. 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
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
3. As required by the Companies (Auditors'' Report) Order, 2003 as
amended by the Companies (Auditor''s Report Amendment) Order 2004 issued
by the Central Government of India in terms of Sub-Section (4A) of
Section 227 of the Companies Act, 1956 and on the basis of such checks
as were considered appropriate and according to the information and
explanations given to us, we enclose in the Annexure a statement on the
matter specified in paragraphs 4 and 5 of the said Order.
4. Furtherto ourcomments in the Annexure referred to in paragraph 3
above, 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 purposes 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
III. the Balance Sheet, Profit & Loss Account and the Cash Flow
Statement dealt with by this report are in agreement with the books of
IV. in our opinion, the Balance Sheet, Profit & Loss Account and the
Cash Flow Statement dealt with by this report comply with the
Accounting Standards referred to in clause (3C) of Section 211 of the
Companies Act, 1956, subject to our comment in Para-VII below.
V. on the basis of written representation received from the Directors
and taken on record by the Board of Directors, we report that none of
the Directors is disqualified as on 31st March, 2011 from being
appointed as a Director in terms of clause (g) of Sub-Section (I) of
Section 274 of the Companies Act, 1956;
VI. In our opinion the valuation of closing stock has been overstated
by the Company by Rs. 92.46 crores as at 31st March 2011. This is due
to the lower realisation of finished goods in the subsequent periods
and a substantial stock being non/slow moving, the lower realisation in
the value of stocks have not been fully captured in the accounts by the
management. Only a sum of Rs.34.70 crores has been accounted for in the
Profit & Loss Account towards lower realisable value of stock. Had the
entire lower realisable value been accounted, the loss for the year
ended 31st March, 2011 would have been Rs 150.40 crores and Reserves &
Surplus would have been lower by Rs.92.46 crores.
VII. Without qualifying our opinion, attention is drawn to the
following notes in Schedule 14 :
a) Note No. 12 - Provision for Bad & Doubtful debts, on which we are
unable to express any opinion on correctness and/or adequacy of the
b) Note No. 9 -As at the Balance Sheet date the losses of the Company
stands at Rs 57.94 crores as against the shareholders'' fund of Rs
331.40 crores (including revaluation reserve of Rs 42.11 crores). As
stated in the said note the management has a future plan for the
revival of the Company and is confident and hopeful of improving
financial health in the near future. Accordingly the financial
statements for the year have been drawn up by the management as per the
going concern assumption.
VIII. in our opinion and to the best of our information and according
to the explanations given to us, the said accounts, read together with
Accounting Policies and the Notes thereon appearing in schedule - 14
give the information required by the Companies Act, 1956 in the manner
so required and give a true and fair view in conformity with the
accounting principles generally accepted in India:-
(a) in the case of the Balance Sheet of the state of affairs of the
Company as at 31st March, 2011.
(b) in the case of the Profit & Loss Account of the Loss for the year
ended on that date; and
(c) in the case of the Cash Flow Statement of the Cash Flows for the
year ended on that date.
ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE
I) a. The Company has maintained proper records showing full
particulars including quantitative details and situation of fixed
b. The management has physically verified certain fixed assets during
the year in accordance with a programme of verification, which in our
opinion provides for physical verification of the fixed assets at
reasonable intervals having regard to the size of the Company and
nature of its assets. According to the information and explanations
given to us no material discrepancies were noticed on such
c. In our opinion and according to explanations given to us, Fixed
Assets disposed off during the year were not substantial and as such
the disposal has not affected the going concern concept of the Company.
ii) a. As explained to us, inventories have been physically verified
by the management at regular intervals during the year.
b. In our opinion and according to the information and explanations
given to us, the procedures 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 explanations
given to us, the Company has maintained proper records of its
inventories and no material discrepancies were noticed on physical
verification as compared to the book records.
iii) As explained to us and according to the information furnished to
us, 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 and as
such clause (iii) of the Order is not applicable.
iv) 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 nature of its business
for the purchase of inventory, fixed assets and also for the sale of
goods. During the course of our audit, we have not observed any major
weakness in internal controls.
v) In respect of transactions entered in the register maintained under
Sec. 301 of the Companies Act, 1956:
a. To the best of our knowledge and belief and according to the
information and explanations given to us, transactions that needed to
be entered into the register pursuant to Section 301 of the Companies
Act, 1956 have been so entered.
b. In our opinion and according to the information and explanations
given to us, the transactions in pursuance of contracts or arrangements
entered in the register maintained under Section 301 of the Companies
Act, 1956 and aggregating during the year to Rs.5 lakhs or more in
respect of any party 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 and as
such clause (vi) of the Order is not applicable.
vii) In our opinion, the Company has an adequate interna! audit system
commensurate with the size and nature of its business and needs to be
viii) We have broadly reviewed the books of account and records
maintained by the Company relating to Textiles'' pursuant to Sec. 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. We
have, however, not made a detailed examination of these records.
ix) According to the information and explanations given to us in
respect of the statutory dues:
a. The Company is generally regular in depositing undisputed statutory
dues including Provident Fund, Investor Education and Protection Fund,
Employees'' State Insurance, Income Tax, Wealth Tax, Sales Tax, Customs
Duty, Excise Duty, Cess and any other statutory dues with the
appropriate authorities during the year. According to the information
and explanations given to us, no undisputed amounts payable in respect
of the aforesaid dues were outstanding as at 31st March, 2011 for a
period of more than six months from the date they became payable except
42.93 Lacs since paid.
b. According to the information and explanations given to us, details
of dues of Customs Duty/ Excise Duty/Sales Tax which have not been
deposited on account of any dispute are as follows:
Name of the Name of the Amount Period Forum where
Statute Dues (Rs. in to which dispute is
lacs) the amount pending
Central Excise Excise Duty 26.72 2002-03 Deputy Commis-
Act and Penalty sioner,
Employees State Employees 6.03 1995-96 & Asst.Director,
Insurance Act State Insur 2002-03 ESIC
Custom Duty Act Custom Duty 109.77 2001-02 Hon''ble High
Customs Duty Act Custom Duty 148.50 2005-06 Commissioner
Customs Duty Act Custom Duty 78.92 2003-04 CESTAT,
Customs Duty Act Custom Duty 28.70 2003-04 Commissioner
Customs Duty Act Custom Duty 44.07 2002-03 Commissioner
Income Tax Act Income Tax 2.31 2004-05 I.T.A.T
x) The Company has no accumulated losses at the end of financial year
but has incurred cash losses during the financial year covered by our
audit .The company has not incurred cash losses in the previous
xi) In our opinion and according to the information & explanations
given to us, the Company has not defaulted in repayment of term loan
installment & Interest to Banks. However in the repayment of term loan
installments amounting to Rs. 150.00 Lacs due in Apr''10, July''10,
Oct''10 & Jan''11 respectively due to State Bank of India were
paidinJuly''10, Sep''10, Jan''11 & Feb''11 respective and repayment of
interest is as follows:
Bank Period (Rs. In Lacs) Amount
State Bank of
India May''10 22.14 02.07.10
June''10 21.61 01.07.10
July''10 21.52 01.11.10
Aug''10 26.29 01.11.10
Sep''10 30.79 22.12.10
Oct''10 27.93 22.12.10
Nov''10 27.95 04.02.11
Dec''10 28.98 04.02.11
Jan''11 28.33 04.02.11
Feb''11 23.77 12.05.11
Mar''11 26.23 12.05. & 30.06.11
Exim Bank 20th
To 27.47 20.06.11
xii) In our opinion and according to the information and explanation
given to us, no loans and advances have been granted by the Company on
the basis of security by way of pledge of shares, debentures and other
xiii)'' The Company is not a Chit Fund or a Nidhi / Mutual Benefit
Fund/Society and as such reporting under clause (xiii) of the Order is
not applicable to the Company.
xiv) Based on our examination of the records and according to the
information and explanations given to us, Company is not dealing or
trading in shares, securities, debentures and other investments. We
also report that the Company has held the shares, securities,
debentures and other investments in its own name.
xv) According to the information and explanations given to us, the
Company has given a corporate guarantee to a bank for an Associate
Company for Rs. 650.00 Lacs for availing loan from bank by the said
Company, the terms of conditions of which are not prima facie
prejudicial to the interest of the Company.
xvi) To the best of our knowledge and belief and according to the
information and explanations given to us, term loans availed by the
company were, prima facie, applied by the company during the year for
the purposes for which the loans were obtained.
xvii) According to the information and explanations given to us and on
an overall examination of the Balance Sheet of the Company, we are of
the opinion that prima facie funds raised on short-term basis have been
not used for long-term investments.
xviii). The Company has not made preferential allotment of shares
during the year to parties and companies covered in the Register
maintained under Section 301 of the Companies Act, 1956.
xix). The Company has not issued any debentures during the year.
xx). The Company has not raised any money by public issue during the
xxi). To the best of our knowledge and belief and according to the
information and explanations given to us, no fraud on or by the company
was noticed or reported during the course of our audit.
For B. K. SHROFF & CO.
Firm Registration No.: 302166E
23A, Netaji Subhas Road, PARTNER
Kolkata, the 2nd August, 2011 Membership No. : 60742