1. We have audited the attached Balance Sheet of M/s. PASUPATI
SPINNING & WEAVING MILLS LIMITED as at 31st March, 2010 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 management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
3. 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 subsection (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
4. 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 Company, so far as appears from our examination of the
iii. The Balance Sheet, Profit and 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 Accounting
Standards referred to in subsection (3C) of Section 211 of the
Companies Act, 1956, subject to our observations in paragraph (vi)
v As per information and explanations given to us, we report that as on
31.3.2010 none of the directors of the company are disqualified from
being appointed as a director of the company under Section 274((1)(g)
of the Companies Act, 1956. As the company has not redeemed its
debentures on due dates and as the default continues for more than a
year, all directors of the company are not qualified for being
appointed as directors of any other public company in terms of
provision of Section 274(1 )(g) of the Companies Act, 1956 as amended
by the Companies Amendment Act, 2000.
vi. Reference is drawn to:
(a) Note No. 4 on Schedule 21 relating to accounts of the company for
the year-ended 31.03.2010 having been prepared on the basis that the
company is a going concern.
(b) Note No. 5 on Schedule 21 relating to assignment of outstanding
dues of IDBI/SASF in favour of JMFARC. As the terms and conditions of
dues of JMFARC are yet to be finalized by BIFR, the accounts have been
prepared as per terms and conditions agreed to with IDBI/SASF. The
effect thereof on the loss for the year cannot be determined.
(c) Note No. 6(g) on Schedule 21 relating to non-provision of interest
on 14% and 15% redeemable partly convertible debentures amounting to
Rs. 20339120 (including Rs. 18338237 for earlier years) resulting in
the loss for the year before tax and secured loans to be lower by the
(d) Note No. 9 on Schedule 21 relating to non provision of Debenture
Redemption Reserve amounting to Rs. 1674150 which has no effect on the
loss for the year before tax.
(e) Note No. 23(iii) on Schedule 21 relating to payment of remuneration
of Rs. 3090 to Shri S.K. Chhajer, Whole time director, for the period
from 29.03.2010 to 31.03.2010 for which approval of Central Government
is awaited resulting in the loss before tax for the year to be
overstated and Cash & Bank Balance to be understated by the said
(f) We further report that had the observations made by us in paragraph
vi(c) and vi(e) above been considered, the loss for the year before tax
would have been Rs. 62396971 (as against the reported figure of Rs.
42060941), secured loans would have been Rs. 719147328 (as against the
reported figure of Rs. 698808208) and cash & bank balance would have
been Rs. 29093118 (as against the reported figure of Rs. 29090028).
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 other notes appearing in Schedule 21 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 the Balance Sheet, of the state of affairs of the
Company as at 31st March, 2010; and
ii) in the case of the Profit and Loss Account, of the loss for the
year ended on that date; and
iii) in the case of cash flow statement, of the cash flow for the year
ended on that date.
ANNEXURE 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 explained to us, all the fixed assets have been physically
verified by the management according to a regular program which in our
opinion is reasonable having regard to the size of the company and the
nature of its assets. No material discrepancies with respect to book
records were noticed on such verification.
(c) In our opinion and according to explanations given to us, fixed
assets disposed off during the year were not substantial and as such
the disposal has not affected the going concern concept of the company.
(ii) (a) As explained to us, physical verification of inventory (except
material in transit and lying with third parties) has been conducted by
the management at reasonable intervals. In our opinion, the frequency
of verification is reasonable.
(b) In our opinion, the procedures of physical verification of
inventories 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 records of inventory, we are
of the opinion that the company is maintaining proper records of
inventory. Discrepancies noticed on verification of inventory as
compared to book records were not material and these have been properly
dealt with in the books of accounts.
(iii) The company has neither granted nor taken any loans, secured or
unsecured, to/from companies, firms or other parties covered in the
register maintained under section 301 of the Companies Act, 1956 and
hence paragraph (iii)(a) to (iii)(g) of the aforesaid order are not
applicable to the company.
(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 with regard to purchase of inventory and fixed assets and for
the sale of goods and services. No major weakness in the internal
control system was observed during the course of audit.
(v) According to the information and explanations given to us, during
the year there were no transactions that need to be entered into the
register maintained under section 301 of the Companies Act, 1956.
Accordingly, paragraphs v (a) and (b) of the aforesaid order are not
(vi) In our opinion and according to the information and explanations
given to us, the company has not accepted any deposits from public as
pep provisions of sections 58A, 58AA or any other relevant provisions
of the Companies Act, 1956 and the Companies (Acceptance of Deposit)
Rules 1975. No order has been passed by the Company Law Board or
National Company law Tribunal or Reserve Bank of India or any court or
any other Tribunal.
(vii) In our opinion, the company has an internal audit system
commensurate with the size and the nature of its business.
(viii) We have broadly reviewed the books of account maintained by the
company pursuant to the order made by the Central Government 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. However, we have
not made a detailed examination of such accounts and records.
(ix) (a) According to the records of the company, the company is not
regular in depositing with the appropriate authorities undisputed
statutory dues including Provident Fund, Investor Education and
Protection Fund, Employees State Insurance, Income Tax, Wealth Tax,
Service Tax, Custom Duty, Excise Duty, Cess and other statutory dues
applicable to it. According to information and explanations given to us
the undisputed amounts outstanding as at 31st March, 2010 for a period
of more than six months from the date they became payable are as under:
Name of the Statue Nature of dues Amount Period to which
Rs. amount relates
Sales Tax Haryana Sales Tax 110525 April 2009
to September 2009
Sales Tax Chennai Sales Tax 120461 March 2008
Sales Tax Haryana Demand 567396 2006-07
Sales Tax Mumbai Sales Tax 198277 August 2009
Central Excise Act Excise Duty 27555087 April 84 to
(b) According to the records of the company, dues in respect of Sales
Tax/Income Taxi Customs Duty /Wealth Tax/Service Tax/Excise Duty /Cess
which have not been deposited on account of any dispute are as under:
Name of Nature of dues Amount Forum where pending
the Statue Rs.
Haryana Value VAT 4407602 Joint Excise & Taxation
Added Tax Act Commissioner
(x) As at 31.03.2010 the accumulated losses of the company are more
than fifty percent of its net worth. The company has incurred cash
losses during the financial year covered by our audit. Cash loss was
not incurred in the immediately preceding financial year.
(xi) The company has defaulted in payment of dues to financial
institutions, banks and debenture holders. Details as per company s
books of accounts are as under:
Name of Institu
tion / Bank Nature of Dues Due Dates Remarks
Debentures- 14% 2407547 21.12.1999
432054 Since 30.09.1998
6769226 Since 01.04.2000 Not provided in
Books of Accoun
ts (Refer No
te No. 6(g)
in Schedule 21)
Debentures- 15% 2894911 09.12.2000
1138090 Since 30.09.1998
13569894 Since 01.04.2000 Not provided in
Books of Accou
nts (Refer No
te No. 6(g)
in Schedule 21)
Debentures- 19% 1666666 03.01.2000
48405390 Since 03.01.2000
Note : Does not include amount for which one time settlement (OTS) has
been negotiated with the lenders and repayment of dues has been
rescheduled and payments are being made as per reschedulement. (Refer
Note No. 5(d) and 6 (d) on Schedule 21).
The limits with banks were overdrawn for most of the year and were
within limits for the remaining part of the year. The overdrawn limits
as on 31.03.2010 are as under:
Limit Name of the
Bank Limit Balance as Excess Remarks
n Lacs) (Rs. in
Lacs) (Rs. in
Loan Nainital Bank
Limited 27.40 27.55 0.15 Borrowings
State Bank of
Travancore 82.20 83.05 0.85 in excess
Canara Bank 98.00 98.04 0.04 of limit
Bank of Baroda 136.00 137.39 1.39
Credit Canara Bank 277.00 282.01 5.01
Cash Credit ING Vysya Bank
Ltd. 6.05 6.07 0.02
Canara Bank 225.00 226.10 1.10
State Bank of
Travancore 375.80 378.25 2.45
Limited 75.60 75.61 0.01
Limit Name of the
Bank Amount Due Remarks
ounted/ State Bank of
Patiala 3305946 15.03.2010 Payment pending
on due date
Purchased Bank of Baroda 952826 19.03.2010
(xii) Based on our examination of documents and records maintained by
the company, we are of the opinion that since the company has not
granted any loan and advance on the basis of security by way of pledge
of shares, debenture and other securities, it is not required to
maintain records in respect thereof.
(xiii) In our opinion the company is neither a chit fund nor nidhi /
mutual benefit fund / society and hence paragraph 4 (xiii) of the
aforesaid order is not applicable.
(xiv) In our opinion the company is not dealing in or trading in
shares, securities, debentures and other investments and accordingly
the provisions of paragraph 4(xiv) of the aforesaid order is not
(xv) Based on our examination of the records we are of the opinion that
the company has not given any guarantee for loans taken by others from
banks or financial institutions.
(xvi) In our opinion, term loans received during the year have been
applied for the purpose for which they were 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 during the year net long term investments of Rs. 1643370 has been
made from funds raised on short term basis.
(xviii) During the year the company has not made any preferential
allotment of shares to parties and companies covered in the register
maintained under section 301 of Companies Act, 1956.
(xix) During the year the company had not issued any debentures. The
company has created security or charge in respect of debentures issued
in earlier years.
(xx) During the year under review no money was raised by public issue.
(xxi) During the course of our examination of the books and records of
the company, carried out in accordance with auditing standards
generally accepted in India, we have not come across any instance of
fraud by the company or on the company, noticed or reported during the
year. We have also not been informed of any such case by the
For B.K. SHROFF & CO.,
Firm Registration No. 302166E
3/7-B, Asaf Ali Road,
New Delhi-110 002. O.P. SHORFF
Dated : SEPTEMBER 04, 2010 Partner
Membership No. 06329