1. We have audited the attached Balance Sheet of Gwalior Chemical
Industries Limited (The Company) as at 31st March, 2007 and the
related Profit & Loss Account and cash flow statement for the year
ended on that date annexed thereto. These financial statements are the
responsibility of the management of the Company. Our responsibility is
to express an opinion on these financial statements based on our audit.
2. We have 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 the management, as well as evaluating the overall presentation of
the financial statements. We believe that our audit provides a
reasonable basis for our opinion.
3. As required by the Companies (Auditors Report) Order, 2003
(CARD) issued by the Central Government of India in terms of Section
227 (4A) of the Companies Act, 1956 of India (the Act), we enclose in
the Annexure 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 above, we
a) We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
b) In our opinion, proper books of account as required by law have been
kept by the Company so far as it appears from our examination of such
c) The Balance Sheet, Profit & 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 & Loss Account and Cash
Flow Statement dealt with this Report, subject to change in Accounting
Policy (Refer note no. 6 - Schedule 24- A Significant Accounting
Policies) comply with the applicable accounting standards referred to
in Section 211 (3C) of the Act;
e) On the basis of written representations received from the directors
and taken on records by the Board of Directors, we report that none of
the DDirectors of the Company is disqualified as on 31st March 2007
from being appointed as a directors in terms of clause (g) of
sub-section (1) to Section 274 of the Act;
f) In our opinion, and to the best of our information and according to
the explanations given to us, the said financial statement read
together with the notes thereon, give in the prescribed manner, in 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 Balance Sheet, of the state of affairs of the
Company as at 31st March, 2007;
ii. in the case of Profit & Loss Account, of the profit of the Company
for the year ended on that date; and.
iii. in the case of Cash Flow Statement, of the cash flows for the
year ended on that date.
ANNEXURE TO THE AUDITORS REPORT
(Referred to in our report of even date)
I. (a) The Company has maintained unit wise proper record showing full
particulars including quantitative details and situation of its fixed
assets. However in respect of furniture and fixtures, office equipment
and data processing equipment record in terms of values are only kept.
(b) Some of the fixed assets were physically verified during the year
by the management in accordance with a program of verification, which
in our opinion provides for physical verification of all the fixed
assets at reasonable intervals. According to information and
explanation given to us, no material discrepancies were noticed on such
(c) The assets disposed off during the year are not substantial and
therefore do not affect the going concern assumption, company has not
disposed off substantial part of fixed assets, during the year under
review, to affect its going concern.
II. (a) The inventories have been physically verified by management
during the year at reasonable intervals, except materials lying with
third parties, where confirmations are obtained.
(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 nature of its business.
(c) The Company has maintained proper records of inventory. The
discrepancies noticed on physical verification of inventories as
compared to book records were not material and have been properly dealt
in books of account.
III (a) The Company has not granted any loans, secured or unsecured to
companies, firms or other parties covered in the register maintained
under section 301 of the Act; and hence clause (b) ,(c) and (d) are not
(b) The company has taken unsecured loan from one party amounting to
Rs. 14.71 Lacs, covered in the register maintained under section 301 of
the Act. The amount outstanding as on 31st March 2007 was Rs. 14.71
(c) The rate of interest and other terms and conditions of loan taken
by the company, are prima facie not prejudicial to the interest of the
(d) The payment of the principal amount and interest are also regular
in respect of loans taken from other parties, company is generally
regular in repaying the principal and payment of interest as
(e) In respect of such loans given by the company, there are no overdue
amounts more than Rs.1, OO.OOO/-.
IV. In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the company and the nature of its business, with
regard to for the purchase of inventories and fixed assets and with
regards to the sale of goods and services. In our opinion and according
to the information and explanation given to us, there is no continuing
failure to correct major weakness in the internal controls.
V (a) In respect of transactions entered in the register maintained in
pursuance of section 301 of the Companies Act 1956, to the best of our
knowledge and belief and according to the information and explanations
given to us, particulars of contracts or arrangements that needed to be
entered into the register have been so entered,
(b) The transactions in pursuance of such contracts or arrangements
have been made at prices which are prima facie reasonable having regard
to the prevailing market prices at the relevant time; VI. The
Directives issued by the Reserve Bank of India and the provisions of
sections 58A and 58AA or any other relevant provisions of the Companies
Act, 1956 and the rules framed there under have been complied with in
respect of deposits accepted from the public. We have been informed
that no order has been passed by the Company Law Board or National
Company Law Tribunal or Reserve Bank of India or any Court or any other
Tribunal in this regard.
VII. In our opinion, the company has an internal audit system
commensurate with the size of the Company and nature of its business.
VIII. According to the explanations given to us and to the best of our
knowledge the Company has not been prescribed by the Central Government
under section 209-(1)-(d) of the Companies Act, 1956 to maintain cost
records about its one of the unit.
I. (a) According to the information and explanations given to us on the
basis of examination of the books of account, Company has been
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 material statutory dues with
appropriate authorities. According to the information and explanation
given to us, the Company did not have any undisputed amounts payable in
this respect at 31st March 2007 for a period of more than six months
from the date they became payable, (b) According to the information and
explanation given to us, dues of Sales Tax, Entry Tax, Excise Duty and
Cess have not been deposited by the Company with the appropriate
authorities on account of disputes as follows.
Name of the Nature of Dues Amount
Statute (Rs. In lacs)
The Central Duties and Penalty
Excise Act 1944 on classification/ 42.58
State and Central Tax, Interest and 16.23
Sales Tax Acts Penalty for
of forms and other
State Entry Tax, Interest and 2.97
Tax Act Penalty for non
forms and other
Year to which Forum where
relates dispute is pending
Commissioner of Central
2001-2005 Excise, Appeals - Indore
1996-99 High Court
2001-02 Deputy Commissioner
2002-03 (Appeals), Commercial Tax
1999-01 Assist. Commissioner of
2000-01 Commercial Tax - Ujjain
2003-04 Addl Commissioner of
Commercial Tax - Indore
1995-96 Appellant Tribunal - Bhopal
X. The Company does not have any accumulated losses and has not
incurred cash losses during the current year and in the immediately
preceding financial year.
XI. According to the records of the Company examined by us and the
information and explanation given to us, the Company has not defaulted
in repayment of dues to any financial institution or bank as at the
balance sheet date.
XII. According to the information and explanations given to us, the
Company has not granted any loans or advances on the basis of security
by way of pledge of shares, debentures and other securities.
XIII. The Company is not a chit/nidhi/mutual benefit fund/society and
Clause XIII of the Order is not applicable.
XIV The Company is not dealing or trading in shares, securities,
debentures and other investments.
XV. According to the information and explanations given to us, the
Company has not given any guarantee for loans taken by others from bank
or financial institutions.
XVI. In our opinion and according to the information and explanations
given to us and on an overall examination, the term loans have been
applied for the purpose for which they were raised.
XVII. On the basis of our examination of the Cash Flow statement and
other records, the funds raised on short-term basis have not been used
for long-term investment, as they have been financed out of internal
accruals. The Company has raised long-term funds during the year and
has utilized for the purpose for which it has been raised.
XVIII. During the period under review the Company has not made any
preferential allotment of shares to parties and Companies covered in
the register maintained in pursuance of section 301 of the Companies
XIX. The Company has not issued any secured debentures during the
period under review.
XX. We have verified the end use of money raised by public issues of
equity shares as disclosed in the Note B - 5 Schedule 24.
XXI. 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
explanations given to us, we have neither come across any instance of
fraud on or by the Company, noticed or reported during the year nor
have we been informed of such case by the management.
For SARDA & PAREEK
M. No.: 16617
Date : 23rd May 2007