1. We have audited the attached Balance Sheet of M/s. MAHARASHTRA
POLYBUTENES LIMITED as at 31st December, 2004 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 Companys 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 the 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 (read
w[th Companies (Auditors Report)(Amendment) Order, 2004) issued by the
Centra! Government of India in terms of sub-section (4A) of Section 227
of the Companies Act, 1956 (hereinafter referred to as the Act), we
enclose in the Annexure a statement on the matters specified in
paragraphs 4 and 5 of the said Order, to the extent applicable.
4. Further to our comments in the Annexure referred to in Paragraph
(3) above, we report that;
a) The accounts have been prepared by the management on a going concern
basis, as explained in Note no. 4 in Schedule14. In view of
non-adherence to schedule of payment asprescribed in the sanctioned
rehabilitation scheme, suspension of manufacturing activities and other
uncertainties, we are unable to express an opinion as to whether the
Company can now operate as a going concern.
b) Attention is drawn to note no.2 (d) in Schedule 14 regarding
Companys inability to adhering to the prescribed payment schedule as
per the sanctioned rehabilitation scheme and provision of interest
liability being continued to be made in accordance to the aforesaid
sanctioned scheme in view of proposal submitted to the monitoring
agency for the reschedulement of the outstanding loan and arrears of
interest. In the event of Scheme being declared as failed the amount of
additional interest as would be payable and reversal of waivers earlier
granted as would have to be made connot be determined.
c) Following legal advice, the Company had earlier adjusted the
accumulated losses amounting to Rs. 1529.42 lacs against the
revaluation reserve arising on the revaluation of certain fixed assets
(Refer Note No. 5(b) in Schedule 14). This treatment is not in
accordance with the views of the Institute of Chartered Accountants of
India on treatment of reserve created on revaluation and also not
strictly in accordance with Accounting Standard -10 Accounting for
Fixed Assets issued by them.
d) The Company has provided depreciation on Plant & Machinery on actual
capacity utilisation basis which is not in accordance with the
provisions of Schedule XIV of the Act, read with Accounting Standard -
6 Depreciation Accounting issued by the Institute of Chartered
Accountants of India. This has resulted in short provision of
depreciation by Rs. 705.21 lacs (including Rs. 104.60 lacs for the
year) (Refer Note No.6 in Schedule 14).
e) Subject to what is stated in paragraph 4(f) below, 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;
f) The accounts of certain lenders and creditors are subject to
confirmations, reconciliations and consequent adjustments, if any,
which are presently not ascertainable. (Refer Note No. 7(b) in Schedule
g) We are unable to express an opinion as to the extent of:
realisabilty and usability of non-moving stores and electrical items
amounting to Rs. 9.68 lacs and no provision for loss as may arise in
the matter has been considered necessary by the management, in view of
the fact they would be used on commencement of operations in the near
h) The Balance Sheet and Profit and Loss Account dealt with by this
report are in agreement with the books of account;
i) 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 Act, to the extent applicable
except for (i) Accounting Standard 10 - Accounting for Fixed Assets
and (ii) Accounting Standard 6 - Depreciation Accounting, the details
and effect of which, have been disclosed in the paragraphs 4(c) and
4(d) above, respectively.
j) On the basis of written representations received from the directors,
as on 31st December, 2004 and taken on record by the Board of
Directors, we report that none of the directors is disqualified as on
31st December, 2004 from being appointed as a director in terms of
clause (g) of sub- section (1) of Section 274 of the Act;
k) We further report that, without considering items mentioned at
paragraphs 4 (a), 4(b), 4(f) and 4(g) the effect of which could not be
determined as also without considering item at paragraph 4(c) regarding
adjustment of accumulated losses against revaluation reserve based on a
legal advice, had the observations made by us in paragraphs 4(d) above
been considered, the loss for the year would have been Rs. 344.52 lacs
(as against the reported figure of Rs. 239.92 lacs), accumulated
losses would have been Rs. 2611.12 lacs (as against reported figure
ofRs-.1905.91 lacs) and Net block of Fixed Assets would have been Rs.
2409.52 lacs (as against reported figure of Rs.3060.84 lacs) Subject to
the above, in our opinion and to the best of our information and
according to the explanations given to us, the said accounts read
together with note no. 17(ii) in Schedule 14 regarding pending Centra)
Government approval with respect to the managerial remuneration and
Significant Accounting Policies, Contingent liabilities and other notes
appearing in the said Schedule and other notes appearing elsewhere in
the accounts 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 December, 2004 and
(ii) in the case of Profit and Loss Account, of the loss 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.
For LODHA & COMPANY
Membership No. 44101
Place : Mumbai
Date : April 29, 2005
ANNEXURE REFERRED TO IN PARAGRAPH 3 OF AUDITORS REPORT OF EVEN DATE ON
THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31st DECEMBER, 2004 OF M/s.
MAHARASHTRA POLYBUTENES LIMITED.
On the basis of such checks as we considered appropriate and according
to the information and explanations given to us during the course of
audit, we state that:
The Company is in the process of updating its fixed assets records to
show full particulars including quantitative details and situation of
fixed assets. There is a programme of verification of fixed assets in a
phased manner which as explained could not be complied with due to
closure of the plant. No substantial part of the fixed assets has been
disposed off during the year.
(a) The inventory has been physically verified by the management at
reasonable intervals during the year.
(b) The procedures for physical verification of inventory 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 properly dealt with in the books of account.
3. (a) The company has not granted any loans, secured or unsecured, to
cotnpanies, firms or other parties covered in the register maintained
under Section 301 of the Act.
(b) The company has not taken any loans, secured or unsecured, from
companies, firms or other parties covered in the register maintained
under Section 301 of the Act
4. There is adequate internal control system commensurate with the
size of the Company and the nature of its business for the purchase of
inventory and fixed assets and for the sale of goods and services.
During the course of our audit, no major weakness has been noticed in
these internal control system.
5. The Company has no? entered into any transaction with the parties
covered in Section 301 of the Act.
6. No deposits within the meaning of Sections 58A and 58AA or any
other relevant provision of the Act and ruies framed thereunder have
been accepted by the Company.
7. In our opinion, the Company has an internal audit system
commensurate with the size of the Company and nature of its business,
8. The Company is not required to maintain cost records 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.
9. (a) The Company is regular in depositing undisputed statutory dues
including provident Fund, Investor Education and Protection Fund,
Income Tax, Wealth Tax, Service Tax, Sales Tax, Customs Duty, Excise
Duty, Cess and other material statutory dues applicable to the Company
with the appropriate authorities. Following undisputed amounts payable
in respect of the aforesaid statutory dues were outstanding as at the
last day of the financial year for a period of more than six months
from the date they became payable.
Sl.No. Particulars Amount outstanding for
more than 6 months
Rs. in Lacs
1 Sales Tax 62.24
2 Interest on Sales Tax 48.66
3 Property Tax (NMMC) 88.72
(b) According to the information and explanations given to us, the dues
in respect of Income Tax, Sales Tax, Service tax, Customs Duty, Wealth
Tax, Excise Duty, Cess that have not been deposited with the
appropriate authorities on account of any dispute are given below;
Particulars Forum where the dispute is pending Rs. in
Income Tax Appeal before C)T(A)
A.Y. 97-98 30.13
J.A.Y. 98-99 27.53
Sales Tax The Deputy Commissioner of Sales tax
F.Y. 93-94 (BST) 71.96
F.Y. 96-97 (CST) 8.32
F.Y. 97-98 (BST) 130.01
F.Y. 97-98 (CST) 8.12
The Sales Tax Tribunal
F.Y. 98-99 (BST) 24.50
10. The accumulated losses of the Company at the end of year as on
December 31, 2004 are more than 50% of its net worth, The Company has
incurred cash losses during the current financial year and in the
immediately preceding financial year
11. The Company has made default in repayment of dues to financial
institutions and banks, details whereof are as under.
Rs. In Lacs
Sl. No. Fis/Bank Interest Principal Total
1. IDBI 35.51 145.59 181.10
2. IFCI 18.94 77.65 96.58
3. LIC 10.73 44.00 54.73
4. ICICI 2.10 - 2.10
5. SBT 6.65 27.28 33.93
As explained the Company has approached the monitoring agency for
reschedulement of the outstanding loan and arrears of interest.
12. According to the records of the Company and on the basis of
information and explanations given to us, the Company has not given any
guarantee during the year for loans taken by others from banks or
13. The Company has not borrowed any Term Loan during the Year.
14. According to the information and explanations given to us, in our
opinion, the term loans were applied for the purpose for which they
15. During the year, no frauds on or by the Company has been noticed or
reported by/to us during the course of our audit.
For LODHA & COMPANY
Membership No. 44101
Date: April 29, 2005