We have audited the attached BALANCE SHEET OF KERALA CHEMICALS &
PROTEINS LIMITED, as at 31st March 2007, 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 manage- ment. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with audit- ing 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 misstate- ment. 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 sig- nificant estimates
made by management, as well as evaluating the overall financial
statement presenta- tion. We believe that our audit provides a reason-
able basis for our opinion.
1. As required by the Companies (Auditors Report) Order, 2003 issued
by the Government of India in terms of Section 227 (4A) of the
Companies Act, 1956, we give in the Annexure, a statement on the
matters specified in para- graphs 4 and 5 of the said Order.
2. Further to our comments in the Annexure referred to above, we
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 com- pany, so far as appears from our examination of
iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
dealt with by the report are in agreement with the books of accounts;
iv) In our opinion, the Balance Sheet and Profit & Loss Account and
Cash Flow Statement dealt with by this report comply with the
Accounting Standards referred to in sub-sec- tion (3C) of Section 211
of the Companies Act, 1956;
v) On the basis of written representations received from directors as
on 31st March 2007 other than from three foreign directors, who, as
certified to us by the management of the company are not directors of
any other Indian Company 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;
vi) Attention is invited to Note No. B6 attached to accounts regarding
investments in and advances to subsidiary company, for which no
provision is made, for the reasons stated therein.
vii) Further to the above, in our opinion and to the best of our
information and according to the explanations given to us, subject to
Note No. B9 regarding duty draw back claims aggregating to Rs. 64.62
lakhs included under Other Assets considered realisable and not
provided for, for the reason stated therein; the readability of which
is not acertainable at this stage, as also Note No.B12(b)(i) b)
regarding non-provision of disputed sales tax demands aggregating to
Rs. 10.54 lakhs disclosed as contingent liability and not provided for,
in respct of which the final liability if any, is not ascertainable at
this stage and read together with the Accounting policies and other
notes attached thereto, give the in- formation 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 ac- cepted
i) in the case of the Balance Sheet, of the state of. affairs of the
Company as at 31st March, 2007;
b) in the case of the Profit and Loss Account, of the profit 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.
For VARMA& VARMA Chartered Accountants
Kochi-16 M. No. 22703
ANNEXURE REFERRED TO IN PARAGRAPH I OF OUR AUDIT REPORT OF EVEN DATE
1. a) The company is maintaining proper records showing full
particulars including quanti- tative details and situation of fixed
b) We are informed that major items of the fixed assets have been
physically verified by the management at the end of the year, which, in
our opinion is reasonable having regard to the size of the company and
the na- ture of its assets and that no material discrep- ancies have
been noticed on such verification.
c) The Company has not disposed off a sub- stantial part of fixed
assets during the year.
2. a) We are informed that the physical verification of inventory has
been conducted by the management at the end of the year, which in our
opinion, is reasonable having regard to the size of the company and the
nature of its business.
b) In our opinion and according to the expla- nations given to us, the
procedures for physical verification of inventory followed by the
management are generally reasonable and adequate in relation to the
size of the company and the nature of its business, but offers scope
c) The Company is maintaining proper records of inventory and no
material discrepancies were no- ticed on physical verification, by the
3. a) The Company has not granted any loans secured or unsecured to
companies, firms or other parties covered in the register main- tained
under section 301 of the Companies Act, 1956.
b) The Company has taken an unsecured for- eign currency loan from a
body corporate listed in the register maintained under Sec- tion 301 of
the Companies Act, 1956, the rupee equivalent of the loan taken and
out- standing translated at the exchange rate as at the end of the year
is Rs. 2,588,400/-. Except the above, the Company has not taken any
loans, secured or unsecured from companies, firms or other parties
requiring to be entered in the register in terms of Section 301 of the
Companies Act, 1956.
c) In our opinion, the rate of interest and other terms and conditions
of loan taken by the Company from a party listed in the register
maintained u/s 301 of the Act, as above, are not prima-facie
prejudicial to the interest of the Company.
d) The payment of principal amount of the loan and the interest are
4. In our opinion and according to the informa- tion and explanations
given to us, there is adequate internal control system commensu- rate
with the size of the Company and nature of its business for the
purchase of inventory and fixed assets and for sale of goods. During
the course of our audit no major weak- ness has been noticed in the
5 a) According to the information and explana- tions given to us, we
are of the opinion that the particulars of contracts or arrangements
that need to be entered in the register main- tained u/s 301 of the
Companies Act, 1956 have been so entered.
b) In our opinion and according to the informa- tion and explanations
given to us, the trans- actions made in pursuance of such contract or
arrangements with parties referred to in (a) above, have been made at
prices which are reasonable having regard to the prevail- ing market
prices at the relevant time.
6. The Company has not accepted any deposits from the public during the
year and hence the directives issued by the Reserve Bank of India and
the provisions of sections 58A, 58AA or any other relevant provisions
of the Companies Act, 1956 and the rules framed thereunder are not
7. In our opinion, the company has an internal audit system, the scope
and coverage of which is commensurate with its size of the Company and
nature of its business.
8. To the best of our knowledge and according to the information and
explanations given to us, the Central Government has not prescribed the
maintenance of cost records under Section 209 (1) (d) of the Companies
Act, 1956 for the products of the Company;
9. a) As per the information and explanations furnished to us and
according to our exami- nation of the records of the Company, except
for certain minor delays in remittance of induspited Income Tax
deducted at source, Employees State Insurance and Provident, the
Company has been generally regular in depositing undisputed statutory
dues with the appropriate authorities during the year. There are no
arrears of undis- puted statutory dues outstanding as at the last day
of the financial year, for a period of more than six months from the
date on which they became payable.
b) According to the information and explana- tions given to us and the
records of the Company examined by us, disputed amounts of taxes have
not been deposited with the authorities as at 31st March 2007 as per
de- tails given below:
Name of the Nature of the Amount
statute dues (Rs.)
Income Tax Income Tax and 31,02,609
Act 1961 Interest thereon
Income Tax Interest 6,86,785
The Central Sales Tax 5,63,639
Sales Tax Act
Period to which the Forum where the
amount relates dispute is pending
Financial year Income Tax Appellate
Financial year Commissioner of
1998-99 Income Tax (Appeals)
Financial year Sales Tax Appellate
10. The accumulated losses of the company as at the end of the
financial year are less than fifty per cent of its net worth and the
company has not incurred cash losses in the financial year and in the
immedi- ately preceding financial year.
11. According to the information and explanations given to us and the
records of the Company examined by us, the Company has not de- faulted
in repayment of dues to the financial institutions and banks.
12. The Company has not given any loans or advances in the nature of
loans on the basis of security by way of pledge of shares, debentures
and other securities.
13. The Company is not a chit fund/nidhi/mutual benefit fund/society
and hence the provisions thereof are not applicable.
14. The Company is not dealing or trading in shares, securities,
debentures or other investments and accordingly the relative reporting
requirements of the order are not applicable to the Company.
15. According to the information and explanations given to us and the
records of the Company examined by us, the company has not given any
guarantee for loans taken by others from banks or financial
16. According to the information and explanations given to us and the
records of the Company examined by us, the term loans availed by the
company has been applied for the purpose for which the loans were
17. According to the information and explanations given to us and the
records of the Company ex- amined by us, the funds raised on short-term
basis have not been used for long-term investment.
18. The Company has not made any preferential allotment of shares to
parties and companies requiring to be entered in the Register pursu-
ant to Section 301 of the Act.
19. The Company has not issued any debentures during the year.
20. The Company has not raised any money by public issues during the
21. According to the information and explanations given to us and the
records of the company exam- ined by us, no fraud either on or by the
company, has been noticed or reported during the year.
For VARMA & VARMA
Kochi-16 M. No. 22703