1. We have audited the attached Balance Sheet of MODERN INSULATORS
LIMITED as at 31st March, 2011, the Profit & Loss Account and cash flow
statement of the Company for the period from 1st October, 2009 to 31st
March, 2011 annexed hereto. 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. These 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 Companies (Auditor''s Report) Order, 2003 as amended
by Companies (Auditor''s Report) (Amendment) Order, 2004, issued by the
Central Government of India in terms of Section 227 (4-A) of the
Companies Act, 1956, we give 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 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 purpose 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 Cash Flow Statement
dealt with by this report are in agreement with the books of account.
(iv) In our opinion, the Balance Sheet, Profit & Loss Account and Cash
Flow Statement dealt with by this report, comply with the applicable
accounting standards referred to in sub-section (3C) of section 211 of
the Companies Act, 1956.
(v) (a) Balances of debtors and creditors are subject to
reconciliations/ confirmations (Note No.4 of Schedule 13).
(b) The Company has not received information from vendors regarding
their status under the Micro, Small and Medium Enterprises Development
Act 2006 and hence disclosure relating to amounts unpaid as at the
period end together with interest paid/payable under this Act have not
been given. (Note No. 11 of Schedule 13).
(c) Provision for taxation (including interest etc.) estimated at Rs.
1239.23 lacs for current period (upto the period Rs. 3491.88 lacs) has
not been made in accounts, in view of proposed amalgamation proceedings
awaiting approvals. Meanwhile Income Tax Department has completed
assessment for Assessment Year 2008-09 and demand of Rs.1413.30 lacs
has been raised in respect of disallowance of losses pertaining to
proposed amalgamation, which is under appeal (Note No. 14 of schedule
(vi) Some of the existing directors of the company are not eligible
from being re-appointed as directors under the proviso to Section
274(l)(g) of the Companies Act, 1956. However, the Company has obtained
an opinion according to which such directors of the Company can
continue to be in office during their tenure and they can also be
re-appointed as directors on the expiry of their tenure. We have been
further informed that the Company had made representation to the
Central Government (Department of Company Affairs) seeking appropriate
exemption from the applicability of the said section.
(vii) In our opinion and to the best of our information and according
to the explanations given to us, the said accounts subject to our
comments in para (v) above and read with other notes thereon, 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 Balance Sheet, of the state of affairs of the
Company as at 31st March, 2011,
(b) In the case of Profit & Loss Account, of the profit of the Company
for the period from 1st October, 2009 to 31st March, 2011.
(c) In the case of Cash Flow Statement, of the cash flows for the
period from 1st October, 2009 to 31st March, 2011.
ANNEXURE FORMING PART OF THE AUDITORS'' REPORT
Referred to in the report of even date of the Auditors to members of
MODERN INSULATORS LIMITED.
(i) (a) The company has maintained proper records showing full
particulars including quantitative details and situation of fixed
assets except furniture & fixtures for which detailed records are not
(b) As per information and explanations given to us, most of the fixed
assets have been physically verified during the period by management in
accordance with a phased programme of verification at reasonable
intervals. According to the information and explanations given to us,
no material discrepancies were noticed on such verification.
(c) During the period, the company has not disposed off substantial
part of the fixed assets.
(ii) (a) As explained to us, the inventory has been physically verified
during the period by the management. In our opinion, the frequency of
verification is reasonable.
(b) 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) On the basis of our examination of the records of inventory, we are
of the opinion that the company is maintaining proper records of
inventory. As explained to us, the discrepancies noticed on physical
verification between the physical stocks and the book records were not
(iii) (a) The company has given loans to two subsidiaries. In respect
of the said loans, the maximum amount outstanding at any time during
the period was Rs.4750 lacs and the period end balance is Rs.4500 lacs
(Previous year Rs.1300 lacs & Rs.1300 lacs respectively). The said
loans are without interest and principal amounts are repayable on
(b) The company has also given interest-free loan/advance of Rs.
1945.61 lacs to a company covered under section 301 of companies Act,
1956 in view of proposed amalgamation awaiting approvals. Maximum
amount outstanding during the period was Rs.1945.61 lacs and the period
end balance was Rs.1945.61 lacs (previous period Rs.280 lacs & Rs.280
(c) 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. Accordingly, the provisions of clause
4(iii) (f) and 4(iii) (g) of the order are 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 the nature of its
business for purchases of inventory, fixed assets and for the sale of
goods. During the course of our audit, we have not observed any major
weakness in internal controls.
(v) a) Based on audit procedures applied by us and according to the
information and explanations given to us, the particulars of contracts
or arrangements referred to in section 301 of the Act have been entered
in the register required to be maintained under that section.
b) In our opinion and according to the information and explanations
given to us, there are no transactions made in pursuance of such
contracts or arrangements exceeding Rupees Five lacs in respect of any
party during the period.
(vi) The Company has not accepted any deposits from the public during
(vii) In our opinion, the internal audit carried out during the period
commensurates with the size of the company and the nature of its
(viii) The Central Government has prescribed the maintenance of cost
records u/s 209(1)(d) of the Companies Act, 1956 in respect of the Yarn
product only. On the basis of the records produced, we are of the
opinion that prima-facie the records and accounts have been maintained
as prescribed by the Central Government u/s 209(1) (d) of the Companies
Act, 1956. However we have not carried out detailed examination of such
records and accounts with a view to ascertain whether they are accurate
or complete. Maintenance of such records has not been prescribed for
(ix) (a) According to the records of the company, the company is
regular in depositing with appropriate authorities undisputed statutory
dues including provident fund, investor education and protection fund,
employees'' state insurance, service tax, sales-tax, custom duty, excise
duty and other statutory dues applicable to it and no undisputed
statutory dues as noted above is outstanding for a period of more than
six months from the date they became payable. The company has not
paid/provided income tax (refer clause 4(v)(c) of Auditors'' Report).
(b) According to the information and explanations given to us and the
records of the Company examined by us, the particulars of dues of
Income tax, sales tax, excise duty and cess as at 31st March-2011 which
have not been deposited on account of dispute, are as follows:
Name of the Nature of Amount Period to Forum where the
Statute dues (Rs. in which the dispute is pending
Sate Tax CST 447.94 2007-08 Deputy
Act 1956and RV and VAT & Commissioner
Act 2003 2008-09 (Appeals), Jodhpur
Income Tax Act Income Tax 1087.37 2007-08 CIT(Appeals)-II,
Act Excise Duty 51.31 2009-10 Commissioner
1944 (Appeals), Jaipur
(x) The Company does not have accumulated losses as at the end of the
financial period and it has not incurred any cash losses during the
financial period covered by our audit and the immediately preceding
(xi) Based on our audit and as per information and explanations given
by the management, there has been no default in repayment of dues to
any financial institution or bank or debenture holders during the
(xii) Based on our examination of books of account and 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 provisions of any special statutes applicable to chit fund,
nidhi or mutual benefit fund/society are not applicable to the company.
(xiv) The Company is not dealing or trading in shares, securities,
debentures and other investments and hence requirement of para 4(xiv)
is not applicable.
(xv) As per information and explanations given to us, the Company has
not given any guarantee for loans taken by others from bank or
(xvi) On the basis of records examined by us, we have to state that the
company has prima facie, applied the term loan for the purpose for
which it was obtained .
(xvii) According to the information and explanations given to us and on
an overall examination of the balance sheet of the company, we report
that no funds raised on short-term basis have been used for long- term
(xviii) No allotment of shares has been made by the company during the
(xix) The company has not issued any debenture during the period
covered by audit.
(xx) During the period the company has not raised any money by way of
(xxi) Based upon the audit procedures performed and information and
explanations given by the management, no fraud on or by the company has
been noticed or reported during the period.
For S.S. KOTHARI & CO.
(Membership No. 10900)
Place : Jaipur
Date : 25th June, 2011