1. We have audited the attached Balance Sheet of SADHANA NITRO CHEM
LIMITED as at 31st March, 2008 and also the annexed Profit & Loss
Account and the Cash Flow Statement of the Company for the year ended
on the 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 the 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 issued
by the Central 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 paragraphs 4 and 5 of the said order.
4. Further to our comments in the Annexure referred to in paragraph 3
a. We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
b. In our opinion proper Books of Account as required by Law have been
kept by the Company so far as it appears from our examination of such
c. The Balance Sheet, Profit & Loss Account referred to in this report
are in agreement with the Books of Account.
d. In our opinion Balance Sheet and Profit & Loss Account and the Cash
Flow Statement dealt with by this report comply with the Accounting
Standards referred to sub-sections 3(C) of Section 211 of the Companies
e. Based on the representations made by the Directors and taken on
record by the Board of Directors of the Company and the information and
explanations given to us, none of the Directors is, as at 31st March,
2008, prima-facie disqualified from being appointed as a director in
terms of clause (g) of sub-section (1) of Section 274 of the Companies
f. Without qualifying attention is invited to note B(1) of Schedule
(I) regarding diminution in value of investment in one of its
g. In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read along with notes
on Accounts and the Accounting Policies give the information required
by the Companies Act, 1956, in the manner so required and read in
conjunction with all other notes thereon give a true and fair view.
i) in the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March, 2008 ii) in the case of the Profit & Loss
Account, of the Loss for the year ended on that date. and iii) in the
case of the Cash Flow Statement, of the cash flows of the Company for
the year ended on that date.
ANNEXURE TO THE AUDITORS REPORT
Referred to in Paragraph 3 of our report of even date.
1. In respect of its fixed assets:
a. The company has maintained records showing particulars including
quantitative details and situation of fixed assets on the basis of
b. As explained to us, the fixed assets have been physically verified
by the management during the year in a phased periodical manner, which
in our opinion is reasonable, having regard to the size of the company
and nature of its assets. No material discrepancies were noticed on
such physical verification.
c. In our opinion, the company has not disposed of substantial part of
fixed assets during the year and the going concern status of the
company is not affected.
2. In respect of its inventories :
a. As explained to us, inventories have been physically verified by
the management at regular intervals during the year.
b. In our opinion and according to the information and explanation
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. The company has maintained proper records of inventories. As
explained to us, there were no material discrepancies noticed on
physical verification of inventory as compared to the book records.
3. In respect of loans, secured or unsecured, granted or taken by the
company to/ from companies, firms or other parties covered in the
register maintained under section 301 of the Companies Act, 1956, we
report that :-
a. The Company has given unsecured loan to one subsidiary. In respect
of the said loan, the maximum amount outstanding at any time during the
year and the year end balance is Rs. 5,18,65,072/-. ,
b. In our opinion and according to information and explanations given
to us, the rate of interest and other terms and conditions are not
prima facie prejudicial to the interest of the Company.
c. The said loan given to the subsidiary is repayable on demand and
there is no amount overdue.
d. The company has taken loan from one company having an outstanding
year end balance of Rs. 3,71,18,232/-.
e. In our opinion and according to the information and explanations
given to us, the rate of interest, wherever applicable and other terms
and conditions on which the loans are given are not prima-facie
prejudicial to the interest of the company.
f. The company is regular in repaying the principal amount as
stipulated and has been regular in the payment of interest.
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 for the purchase of inventory, fixed assets and for the sale
of goods & services. During the course of our audit, we have not
observed any major weaknesses in internal controls.
5. In respect of transactions covered under section 301 of the Company
a. In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts or
arrangements, that needed to be entered into in the register maintained
under section 301 of the Companies Act, 1956 have been so entered.
b. In our opinion and according to the information and explanations
given to us. the transactions made in pursuance of contracts or
arrangements entered in the register maintained under Section 301 of
the Companies Act, 1956 exceeding value of Rs. 5,00,000/- in respect of
any party during the year have been made at prices which are reasonable
having regard to prevailing market prices at the relevant time.
6. In our opinion and according to the information and explanations
given to us, the company has complied with the provisions of section
58A and 58AA of the Companies Act, and the rules framed thereunder, and
also the directives of Reserve Bank of India with regard to acceptance
of deposits from the public. Since the company has not defaulted in
repayments of deposits, compliance of section 58AA or obtaining any
order from the national company law tribunal does not arise.
7. On the basis of the internal audit reports broadly reviewed by us,
we are of the opinion that, the internal audit functions carried out by
a firm of chartered accountants appointed by the management is
commensurate with the size of the company and the nature of its
8. The Central Government has prescribed maintenance of cost records
under section 209(1) (d) of the Companies Act, 1956 in respect of one
of the products, manufactured by the company. We have broadly reviewed
the accounts and records of the company and are of the opinion that
prima-facie, the prescribed accounts and records have been made and
maintained. We have not, however, made a detailed examination of the
9. In respect of statutory, dues:
a. According to the records of the company, undisputed statutory dues
including provident fund, Investor Education and Protection fund,
employees state insurance income-tax, Sales Tax, Wealth tax, Customs
duty, Excise duty, cess, Service tax and other statutory dues have
generally been regularly deposited with the appropriate authorities.
There are no other undisputed amounts payable in respect of the
aforesaid dues as at 31st March, 2008 for a period of more than six
months from the date of becoming payable.
b. The disputed statutory dues aggregating to Rs.3,32,72,490 that have
not been deposited on account of matters pending adjudication before
appropriate autnorities are as under:
Sr. Name of Statute Nature of Amount (Rs.)
1. Income tax Apt, 1961 Income Tax 1,43,56,968
2. Income tax Act, 1961 Income Tax 1,27,03,216
3. Income tax Act, 1961 Income Tax 62,12,306
Period to Forum where
which amount relates
dispute is pending.
1998-1999 Hble Bombay
1999-2000 Hble Bombay
2001-2002 Commissioner of
Income Tax (A), Mumbai
10. The company has no accumulated losses and has not incurred any
cash losses during the financial year covered by our audit or in the
immediately preceeding financial year.
11. Based on our audit procedures and according to the information and
explanation given to us, we are of the opinion that the company has not
defaulted in repayment of dues to financial institutions and banks.
12. In our opinion and according to the information and explanation
given to us, no loans and advances have been granted by the company on
the basis of security by way of pledge of shares, debentures and other
13. In our opinion, the company is not a chit fund or nidhi/mutual
benefit fund/ society. Therefore, clause 4(xiii) of the Companies
(Auditors Report) Order 2003 is not applicable to the company.
14. The company has maintained proper records of transactions and
contracts in respect of trading in securities, debentures and other
investments and timely entries have been made therein. All shares,
debentures and other investments have been held by the company in its
15. The company has given corporate guarantee against borrowings of
one of its subsidiaries. According to information explanations given to
us, and the representations made by the management, the terms and
conditions of guarantee are not prima facie prejudicial to the interest
of the company.
16. In our opinion and according to the information and explanation
given to us, the term loans have been applied for the purpose for which
they were raised.
17. Based on the information and explanations given to us and on an
overall examination of the balance sheet of the Company as on March 31,
2008, in our opinion, there are no funds raised on a short term basis
which have been used for long term investment.
18. 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 the Companies Act, 1956.
19. In our opinion and according to the information and explanation
given to us, the company has not issued any secured debentures during
the period covered by our report.
20. The company has not raised any money by way of public issue during
21. In our opinion and according to the information and explanation
given to us, no material fraud on or by the company has been noticed or
reported during the course of our audit.
For V. Sankar Aiyar & Co.
Place : Mumbai Partner
Dated : 30th July, 2008 Membership No. 124082