We have audited the attached Balance Sheet of KANORIA CHEMICALS &
INDUSTRIES LIMITED as at 31st March 2007, the Profit & Loss Account for
the year ended on that date and also the Cash Flow Statement for the
year ended on that date 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 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
As required by the Companies (Auditors Report) Order, 2003 as amended
by the Companies (Auditors 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, we enclose in the Annexure, a statement
on the matters specified in paragraphs 4 and 5 of the said Order.
Further to our comments in the Annexure referred to above, we report
1. We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary for the purposes of our
2. 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
3. The Balance Sheet and Profit and Loss Account dealt with by this
report are in agreement with the books of account;
4. In our opinion, the Balance Sheet and Profit and Loss Account dealt
with by this report comply with the accounting standards referred to in
sub-section (3C) of section 211 of the Companies Act, 1956;
5. On the basis of the written representations received from the
Directors as on 31 st March, 2007 and taken on record by the Board of
Directors, we report that none of the Directors is disqualified as on
31st March, 2007 from being appointed as a Director in terms of clause
(g) of sub-section (1) of section 274 of the Companies Act, 1956;
6. In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read with significant
accounting policies and notes on account in Schedule R 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, 2007;
b) ln the case of the Profit and Loss Account of the PROFIT for the
year ended on that date; and
c) 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 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) As per the information and explanations given to us, physical
verification of fixed assets has been carried out in terms of the
phased program of verification of its fixed assets adopted by the
Company and no material discrepancies were noticed on such
verification. In our opinion, the frequency of verification is
reasonable having regard to size of the Company and nature of its
(c) There was no substantial disposal of fixed assets during the year.
ii. (a) The inventories have been physically verified at reasonable
intervals during the year by the management/Internal Auditors except
materials lying with third parties, where confirmations are obtained.
(b) In our opinion, the procedure of physical verification of
inventories followed by the management is reasonable and adequate in
relation to the size of the Company and the nature of its business.
(c) The Company has maintained proper records of inventories. The
discrepancies between the physical stocks and book stocks, which are
not significant, have been properly dealt with in the books of account.
iii. (a) As per the information furnished, the Company has not granted
any loans secured or unsecured to Companies, firms or other parties
covered in the Register maintained U/S 301 of the Companies Act, 1956.
Hence Clauses 3(b), (c) and (d) of the order are also not applicable to
(b) As per the information furnished, the Company has not taken any
loans secured or unsecured from Companies, firms or other parties
covered in the Register maintained U/S 301 of the Companies Act, 1956.
Hence Clauses 3(f) and (g) of the order are also not applicable to the
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 and fixed assets and for the sale of
goods and services. Further, on the basis of our examination of the
books of accounts and according to the information and explanations
given to us, we have not come across nor have we been informed of any
instances of major weaknesses in the aforesaid internal control system.
v. (a) In our opinion and according to the information and explanation
given to us, the transactions that need to be entered into register
maintained under section 301 of the Companies Act, 1956 have been so
(b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contract or
arrangements entered in the register maintained under section 301 of
the Companies Act, 1956 have been made at prices which are reasonable
having regard to the prevailing market price at the relevant time.
vi. The Company has not accepted any deposit during the year from the
public within the meaning of the provisions of Section 58A and 58AA of
the Companies Act, 1956 and rules made thereunder. According to
information and explanations given to us no order has been passed by
Company Law Board or National Company Law Tribunal or Reserve Bank of
India or any Tribunal on the Company.
vii. In our opinion, the Company has internal audit system
commensurate with the size and nature of its business.
viii. We have broadly reviewed the Books of Account maintained by the
Company in respect of its product as 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 maintained. However, we have
not carried out a detailed examination of accounts and records.
ix. (a) According to the information and explanations given to us and
on the basis of our examination of the books of account, the 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, Customs Duty, Excise Duty, Cess and any other statutory dues
during the year with the appropriate authorities. According to the
information and explanations given to us, no undisputed arrears of
statutory dues were outstanding as at 31 st March, 2007 for a period of
more than six months from the date they became payable.
(b) According to the record of the Company, the dues of Sales tax and
Excise Duty, which have not been deposited on account of dispute and
the forum where the disputes are pending are as
Nature of the Statute Nature of Dues Amount(Rs. in million)
Sates Tax Act Sales Tax demand 0.25
Sales Tax demand 0.09
Sales Tax demand 0.07
Central Excise Act Excise Duty demand 3.98
Excise Duty demand 0.88
Excise Duty demand 0.24
Excise Duty demand I.33
Customs Act Customs Duty 0.12
Period From where dispute is pending
1989-90 & 1990-91 High Court
1998-99 Trade Tax Tribunal /
2002-03 Deputy Commissioner of
1996-97 to 2004-05 CESTAT
1995-96 to 2000-O1 & Commissioner Appeal
2002-03 t0 2003-04
1999-2000 to 2003-04 Allahabad High Court
1996-07 to 1997-98 & Asstt Commissioner
2004-05 to 2006-07
1999-2000 Asstt Commissioner
x. The Company has no accumulated losses as at 31st March 2007 and has
not incurred cash losses in the current financial year ended on that
date and in the immediately preceding financial year.
xi. The Company has not defaulted in repayment of dues to financial
institutions, banks or debenture holders.
xii. According to the information and explanations given 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.
xiii. The Company is not a chit fund / nidhi / mutual benefitfund /
xiv. According to the information and explanations given to us, the
company is not dealing or trading in shares, securities, debentures and
xv. The Company has given the corporate guarantee amounting to Rs.11.63
million to Gujarat Industrial Development Corporation for securing loan
by Bharuch Eco- Aqua Infrastructure Ltd. The terms and conditions of
which, prima facie, are not prejudicial to the interest of the company.
xvi. According to the information and explanations given to us the
Company has applied term loans for the purpose for which they were
obtained during the year.
xvii. On the basis of our examination of the Cash Flow Statement,
records and information and explanations given to us, the fund raised
on Short Term basis, during the year, have not been used for Long Term
investments. Long Term investments during the year have been financed
through Long Term Borrowings and internal accrual of the Company.
xviii. The Company has not made any preferential allotment of shares
during the year to parties and companies covered in the Register
maintained under section 301 of the Act.
xix. The securities have been duly created by the Company in respect
of outstanding debentures.
xx. The Company has not raised any money by public issues during the
xxi. According to the information and explanations given to us, no
fraud on or by the Company has been noticed or reported during the
For SINGHI & CO.
Camp: New Delhi Rajiv Singhi
1 -B, Old
Post Office Street,
Dated: the 1 day of May 2007 Membership No. 53518