We have audited the attached Balance Sheet of PANCHMAHAL STEEL LIMITED
as at 31st March, 2006, the Profit and Loss Account for the year ended
on that date annexed thereto and Cash Flow Statement for the year ended
on that date. 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 statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
1. Though the Company is a sick industrial undertaking within the
meaning of Section 3(1)(o) of the Sick Industrial Companies (Special
Provisions) Act; 1985, the accounts have been prepared on going concern
basis (Refer Note 12).
2. As required by the Companies (Auditors Report) Order, 2003 as
amended by Companies (Auditors Report) (Amendment) Order, 2004
(together the `Order) issued by the Central Government of India, in
terms of Section 227(4A) of the Companies Act, 1956, and on the basis
of such checks of the books and records of the Company as we considered
appropriate and according to the information and explanation given to
us, we set out in the annexure hereto a statement on the matters
specified in paragraphs 4 and 5 of the said Order.
3. Further to our comments in the Annexure referred to in paragraph (3)
above, we report that:
a. We have obtained all the information and explanations, which, to the
best of our knowledge and belief, were necessary for the purposes of
b. 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
c. The Balance Sheet, the Profit and Loss Account and the Cash Flow
Statement dealt with by this report are in agreement with the books of
d. In our opinion, the Balance Sheet and Profit and Loss Account
comply with the Accounting Standards referred to in sub-section (3C) of
Section 211 of the Companies Act, 1956, to the extent applicable;
e. According to the information and explanations given to us, prima
facie no person appointed as a Director in the Company during the year
under audit was disqualified from being appointed as a Director at the
date of his appointment under clause (g) of sub-section (1) of Section
274 of the Companies Act, 1956;
f. Subject to matters stated in paragraphs 1 and 2, in our opinion and
to the best of our information and according to the explanations given
to us, the accounts, read with the 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:
i) in the case of Balance Sheet, of the state of affairs of the Company
as at 31st March employment 2006;
ii) in the case of the 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 K. V. THAKKAR AND CO.
K. V. Thakkar
1st September 2006 Membership No.9312
ANNEXURE TO THE AUDITORS REPORT OF EVEN DATE TO THE MEMBERS OF
PANCHMAHAL STEEL LIMITED FOR THE YEAR ENDED 31 ST MARCH, 2006.
1. (a) The Company has maintained proper records to show full
particulars including quantitative details and situation of its fixed
(b) The fixed assets of the company (other than items with third
parties) have been physically verified by the management during the
year and no material discrepancies have been noticed. In our opinion,
the frequency of verification is reasonable.
(c) In our opinion, and according to the information and explanations
given to us, a substantial part of fixed assets has not been disposed
off by the Company during the year.
2. (a) The inventory of the Company (excluding items in transit and
with third parties) has been physically verified by the management
during the year. In respect of inventory lying with third parties, they
have substantially confirmed these. In our opinion, the frequency of
verification is reasonable.
(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) On the basis of our examination of the inventory records, in our
opinion, the Company has maintained proper records of inventory. The
discrepancies noticed on physical verification of inventory as compared
to book records were not material.
3. The Company has neither granted nor taken any loans, secured or
unsecured, to/from companies firms or other parties covered in register
maintain under Section 301 of the Act. Accordingly the paragraphs
4(iii)(b), 4(iii)(c), 4(iii)(d) of the Order are not applicable.
4. 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 with regard to purchases of inventory, fixed assets and for
sale of goods and services. During the course of our audit, we have not
observed any continuing failure to correct major weaknesses in internal
5. According to the information and explanations given to us:
(a) We are of the opinion that transactions that need to be entered
into a register in pursuance of Section 301 of the Companies Act, 1956
have been so entered;
(b) In our opinion, the transactions aggregating during the year to Rs.
Five Lacs or more in respect of each party in pursuance of contracts or
arrangements which are required to be entered in Register maintain
under Section 301 of the Companies Act, 1956, have been made at prices
which are reasonable having regard to the prevailing market prices at
the relevant time.
6. In our opinion and according to the information and explanation
given to us, the Company has complied with the provisions of Section
58A, 58AA or any other relevant provisions of the Companies Act, 1956
and the Companies (Acceptance of Deposits) Rules, 1975.
7. In our opinion, the Companys present internal audit system (a firm
of Chartered Accountants has been appointed for the purpose) as
conducted in phased manner is commensurate with its size and nature of
8. We have broadly reviewed the books of account relating to materials,
labour and other items of cost maintained by the Company pursuant to
the rules made by the Central Government of India for the maintenance
of cost records under Section 209(1)(d) of the Companies Act, 1956 and
we are of the opinion that prima facie, the prescribed accounts and
records have been made and maintained.
9. According to the information and explanations given to us:
(a) The Company has generaIly, been regular in depositing the
undisputed statutory dues including Provident Fund, Investor Education
and Protection Fund, Employees State Insurance, Income Tax, Wealth Tax,
Service Tax, Customs duty, Cess and other material statutory dues as
applicable to it and there were no arrears outstanding as at the
year-end, for a period of more than six months from the date they
(b) The particulars of dues on account of Sales Tax, Income Tax, Custom
Duty, Cess and Excise Duty as at 31st March, 2006, which have not been
deposited on account of a dispute, are as follows-
Name of the Nature of Amount which the Forum where
Statute dues (Rs. in lacs) amount dispute is pending
Customs Act Custom Duty 3.46 plus 1992-93 CEGAT Intrest 10. The Company
has accumulated losses as at 31st March 2006, and it has not incurred
any cash losses during the financial year ended on that date or in the
immediately preceding financial year.
11. According to the records examined by us and the information and
explanations given to us, and after considering the Financial
Restructuring Package approved by the Asset Reconstruction Company
(India) Ltd., we have to state that the company has not made payments
in due date but within grace period as below:
Sr. Name of the Lender Amount due Date of Amount of
N. as at 31.03.2006 Payment Payment
1 Life Insurance Corporation of
India Ltd. 24.64 Lac 03.04.06 24.64 Lac
2 Asset Reconstruction Company
(India) Ltd. 304.00 Lac 13.06.06 100.00 Lac
23.06.06 204.00 Lac
During the period under review ARCIL & LIC has restructured its debts
but approval is in negotiation with GIIC. The restructuring scheme,
upon being effective finally by the authority, is subject to compliance
of all the statutory and legal requirements.
12. According to the records of the Company examined by us and the
information and explanations given to us, the Company has not defaulted
in repayment of its dues to any financial institution, bank or
debenture holders during the year.
13. The Company has not granted any loans or advances on the basis of
security by way of pledge of share, debentures and other securities.
14. The provisions of any special statute applicable to chit fund
/mutual benefit fund/societies are not applicable to the Company.
15. In our opinion, the Company is not a dealer or trader in shares,
securities, debentures and other investments.
16. In our opinion and according to the information and explanations
given to us, the Company has not given any guarantee for the loans
taken by others from banks or financial institutions during the year.
17. In our opinion and according to the information and explanations
given to us and on an overall basis, the term loans have been applied
for the purposes for which they were obtained.
18. According to the information and explanation given to us, and on
overall examination of the Financial Statements of the company and
after placing reliance on the reasonable assumption made by the company
for classification of long term and short term usage of funds and after
considering the Financial Restructuring package approved by the Asset
Reconstruction Company (India) Ltd. wherein outstanding sums including
interest have been converted into long term funds have not been
utilized during the year for long term purpose.
19. On the basis of an overall examination of the Balance Sheet of the
Company, in our opinion and according to the information and
explanation given to us, there are no funds raised on short-term basis,
which have been used for long-term investment and vice versa.
20. The Company has not made any preferential allotment of shares
during the year.
21. The Company has not issued any Debentures during the year.
22. The Company has not raised any money by public issue during the
23. According to the information and explanations given to us, no fraud
on. or by the Company has been noticed or reported during the year.
For K. V. THAKKAR AND CO.
Vadodara. K. V. Thakkar (Proprietor)
1st September, 2006. Membership No. 9312