| 1. We have audited the attached Balance Sheet of ORG Informatics
Limited ("the Company") as at March 31, 2011, the Profit and Loss
Account and also the Cash Flow Statement for the year ended on that
date annexed thereto. 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. 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
our opinion.
3. As required by the Companies (Auditors' Report) Order, 2003 (as
amended) issued by the Central Government of India in terms of
sub-section (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 Order.
4. The financial statements have been prepared on going concern basis,
despite significant losses suffered during the year, substantial
contingent liabilities not provided for (Refer Note Nos. 1(a), (b),
(c), (d)), legal cases filed by some of the suppliers against the
Company and its officials under section 138 of the Negotiable
Instruments Act, 1881 (Refer Note No. 2(a)), restriction imposed on a
major customer by court, on vendor's request, from making any payment
to the Company (Refer Note No 2(c)), causing severe cash crunch, which
had in turn resulted in defaults in payment of statutory liabilities /
non compliance of statutory requirements/ loss of key management
personnel / staff and considerable scaling down of operations. The
Company's ability to continue as a going concern is dependent upon
satisfactory resolution of the above matters besides steps being taken
by management to provide / arrange for significant additional funds.
5. Attention is invited to the following:
i. We are unable to opine on the adequacy of provision of TRs 161,700
for permanent fall in the value of investments amounting to TRs 695,202
in absence of convincing evidence;
i. We are unable to opine on the reliability of non moving stock of
Stores and Spares of TRs 50,286 not provided by the management for
reasons stated in Note No. 7.
iii. We are unable to opine on recoverability / reliability of old
outstanding of Sundry Debtors aggregating to TRs 2,337,024 (including
TRs 4,968 due from Subsidiary) which may not be recoverable and which
are not appropriately evidenced with correspondence statement of
accounts, unconfirmed, unreconciled and against which no material
recoveries have been made till date of completion of audit. No
provision has been made for such receivables as the management
considers them as good for recovery.
iv. We are unable to opine on the bank balance for which Bank Balance
confirmations are not available to the tune of TRs 9,565.
v. We are unable to opine on recoverability / reliability of old
outstanding in respect of (a) advances of TRs. 20,319 given to other
company (b) TRs 28,080 advance given to Vendors and (c) TRs 6,593
receivable in respect of Tender Deposit given which are not
appropriately evidenced with correspondence statement of accounts,
unconfirmed, unreconciled and against which no material recoveries have
been made till date of completion of audit. No provision has been made
for such receivables as the management considers them as good for
recovery.
vi. In the absence of detailed workings, convincing evidence and legal
consultants' opinion on the availability of TRs 28,455 in respect of
CENVAT credit for set off in the future, we are unable to comment on
the appropriateness of carry forward of the CENVAT recoverable.
vii. In respect of guarantee of TRs 25,000 invoked by MPSEDC during the
year, the management has claimed that the amount is good of recovery
since the matter was subjudice and now the company is being Judgment
creditor, the management's claim remains to be substantiated by the
Order passed by the Court of appropriate jurisdiction. The Company has
made the claim of said amount with the MPSEDC for wrongful invocation
of the guarantee. We are unable to opine on the recoverability or
otherwise of the amount shown under Loans and Advances.
viii. We are unable to opine on collectability of dues in respect of
revenue booked in respect of MTNL contract from BEL to the tune of TRs.
132,069 which are dependent on achievement of certain milestones.
ix. In respect of Managerial Remuneration paid during the year to
Managing and Whole time Director of TRs. 7,696, (Previous year TRs.
6,015), Shareholders' approval was taken in Annual General Meeting held
on 29-12-2009 and 30.9.2010. However, No approval from Central
Government is obtained for reason stated in Note No 20.
x. No Provision has been made for :
a. Impairment loss of Fixed Assets for reasons stated in Note No. 10.
b. Loans and advances of TRs. 625,403 due from Subsidiary Companies
and Associate Company for the reasons stated in Note No. 9 (b).
c. Invocation of bank guarantees given in respect of various projects
undertaken by the Company to the extent of TRs 251,708 and
consequential penalties subsequent to the close of the year.
d. Interest and commission of TRs 64,145, payable, in terms of
agreements, to the vendors (shown as contingent liability).
e. Bank and Other Charges of TRs 19,470 paid to one of the vendor
(shown as contingent liability).
f. Implementation, service / warranty charges aggregating to TRs
30,582 (shown as contingent liability).
g. Liquidated Damages / penalty payable to customers for delays in
performance / non compliance of some of the contractual Terms and
conditions aggregating to TRs 448,736 (shown as contingent liability).
h. Interest and Penal charges on bank loans aggregating to TRs.
102,840 for the reasons stated in Note No. 6 (shown as Contingent
liability)
i. Penalty and other charges which may be imposed by (a) the various
Statuary/Regulatory Authorities on account of non compliance of the
provisions of the various statutes including non payment of statutory
dues and filing of periodic returns.
(b) the Court, with respect to the cases filed by the parties against
Company's officials (including some past officials) under sections 138
and 143 of the Negotiable Instruments Act, 1881, on account of dishonor
of post dated cheques issued to them.
Due to uncertainty involved, the impact of the above on the profit for
the year is presently unascertainable.
6. Further to our comments in the Annexure referred to in paragraph 3
and subject to our comments in paragraphs 4 and 5 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 purposes of our
audit;
(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
those books;
(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 and loss account and
cash flow statement dealt with by this report comply with the
accounting standards referred to in sub-section (3C) of Section 211 of
the Companies Act, 1956, except to the extent referred to hereunder:
a. The Company has not determined the provision required for slow
moving / non moving inventory for the purpose of arriving at the Value
to be scaled down in terms of Accounting Standard 2 - Inventories;
b. The Company has not appropriately determined and provided for fall
in value of long term investments in subsidiary / associate companies,
in terms of Accounting Standard - 13 - Investments; and
c. The Company has not adequately determined impairment in assets
during the year, in terms of Accounting Standard - 28 - Impairment of
Assets.
(v) On the basis of written representations received from directors as
on March 31, 2011 and taken on record by the Board of Directors, we
report that none of the directors is disqualified as on March 31, 2011
from being appointed as a director in terms of clause (g) of
sub-section (1) of Section 274 of the Companies Act, 1956;
(vi) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read together with
accounting policies and notes thereon give the information required by
the Companies Act, 1956, in the manner so required;
7. Subject to our remarks mentioned in paras 4 and 5 above, the impact
on the financial results for the year is unascertainable and our
comments contained in annexure referred to in Paragraph 3 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 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;
(a) in the case of the balance sheet, of the state of affairs of the
Company as at March 31, 2011;
(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.
ANNEXURE TO AUDITORS' REPORT
(Referred to in paragraph 3 of our report of even date)
Re: ORG Informatics Limited
1. In respect of its fixed assets:
a) The Company has generally maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets.
b) Fixed assets held by the Company was not subjected to physical
verification. In the absence of verification and reconciliation we are
unable to state whether there are any discrepancies.
c) Though the Company has disposed off considerable portion of its
fixed assets, from areas wherein it had stopped operation due to
closure of office, as cost saving measure during the year, its ability
to continue as a going concern, we are informed by the management, is
not affected by such disposals.
2. In respect of its inventories:
a) As explained to us, during the year none of the inventories
comprising of Projects in progress, stores and spares, trade goods etc.
have been subjected to physical verification at any time during the
year by the management.
b) In the absence of physical verification indicated herein above,
there is no question of adequacy or otherwise of the procedures.
c) In our opinion and according to the information and explanations
given to us, the Company is maintaining proper records of its
inventories. However during the year since the inventories owned by the
Company had not been physically verified by the management, we are
unable to state whether or not there are any discrepancies.
3. In respect of loans, secured or unsecured, granted by the Company
to companies, firms or other parties covered in the register maintained
under section 301 of the Companies Act, 1956, according to the
information and explanations given to us:
a) The Company had granted interest bearing loan to a subsidiary by
converting the share application money into loan vide agreement dated
30th Oct. 2008 and interest free loans to other subsidiaries besides
amounts advanced to one company covered in the register maintained
under Section 301 of the Companies Act, 1956. As at the year-end, the
outstanding balance of such loan granted to this company is TRs. 11,295
and the maximum amount involved during the year was TRs. 12,436.
b) In our opinion and according to the information and explanations
given to us, the terms and conditions of the interest free loans
referred to above, keeping in view significant interest claimed by
suppliers for credits provided, bankers and other parties, appear prima
facie prejudicial to the interest of the Company.
c) The loans granted are repayable on demand. As informed, the Company
has not demanded repayment of the loans during the year and thus there
is no default on the part of the parties to whom the amount is lent.
d) The Company has, in the earlier years, taken interest bearing (and
interest free) loan from a Party covered in the register maintained
under Section 301 of the Companies Act,1956 and the outstanding balance
of such loan aggregated to TRs 33,567 (including accrued interest) and
the maximum amount involved during the year was TRs 33,656.
e) The rate of interest and other terms and conditions of such loan is,
in our opinion, prima facie not prejudicial to the interest of the
Company.
f) The loan is repayable on demand and the same has not been demanded.
4. In our opinion and according to the information and explanations
given to us and our evaluation of the prevailing internal control
structure and its operation disclosed weakness in internal control
systems. The said control structure in operation can not be stated to
be commensurate with the size of the Company and the nature of its
business with regard to the purchase of traded goods / inventory, fixed
assets and with regard to the sale of goods and rendering of services.
5. In respect of contracts or arrangements entered in the register
maintained in pursuance of section 301 of the
Companies Act 1956, to the best of our knowledge and belief and
according to the information and explanations given to us:
a) The particulars of contracts or arrangements referred to Section 301
have been entered in the register required to be maintained under the
said section.
b) According to the information and explanations given to us, where
each of such transactions, other than interest bearing and interest
free loans granted (Referred to in Para 3(b), (c) and (d) above), is in
excess of Rs. 5 Lakhs in respect of any party, the transactions have
been made at prices which are prima facie, reasonable having regard to
the prevailing market prices at the relevant time, except that in
respect of sale of services, no comparison of prices could be made
since similar services are not being rendered to any other party by the
Company.
6. In our opinion and according to the information and explanations
given to us, the Company has not accepted any deposits from public
within the meaning of Section 58A and 58AA or any other relevant
provisions of the Companies Act, 1956 and the Companies (Acceptance of
Deposits) Rules, 1975 with regard to the deposits accepted from the
public.
7. There is no Internal Audit System in the Company during the year
under review and hence we are unable to comment on this aspect.
8. As informed to us, the Central Government has not prescribed
maintenance of cost records under clause (d) of sub-section (1) of
Section 209 of the Companies Act, 1956.
9. According to the information and explanations given to us and as
revealed by the books of accounts maintained by the Company, except for
the following statutory dues, the Company has been generally regular in
depositing undisputed statutory dues, including Provident Fund,
Employees State Insurance, Income tax, Sales Tax, Service Tax and other
statutory dues with the appropriate authorities during the year:
Particulars Balance at Period
31.3.11 from
Amount (TRs.) which due
Contribution to PF 2,403 July '10
Staff Professional Tax 209 Oct '10
Contribution to ESI 145 July '10
Maharashtra CST 254 Aug '10
Delhi CST 107 Oct '10
Karnataka VAT 45 Mar '10
UP Sales Tax 19 Dec' 08
Service Tax 16,650 Apr' 08
Education Cess Payable 902 Apr'08
Secondary Higher Education Cess 409 Apr' 08
During the year, the management has confirmed that there were no dues
payable in respect of Investor Education and Protection Fund, Wealth
Tax, Custom Duty, Excise Duty, Cess and other material statutory dues.
In the case of Cess, the central government has till date not
prescribed the amount of Cess payable under section 441A of the
Companies Act, 1956.
The details of disputed demands which have not been deposited during
the year as under:
Nature of Nature of Amount Period to Forum where
Statue the dues (TRs.) which the dispute is
amount pending
relates
Income Tax Penalty 9,555 2002-03 ITAT
Act, 1961 9,866 2003-04 CIT(Appeal)
1,874 2004-05 CIT(Appeal)
Income Tax 1,0942 2004-05 CIT(Appeal)
21,083 2005-06 CIT(Appeal)
15,396 2006-07 CIT(Appeal)
15,996 2007-08 CIT(Appeal)
Sales Sales Tax 37,057 2008-09 Appellate
Tax Act Tribunal
Note: In respect of Income Tax demands, the Company has deposited TRs
20,000 on ad-hoc basis.
10. In our opinion and according to information and explanations given
to us, the accumulated losses of the Company at the end of the
financial year are more than fifty percent of its net worth and the
Company has not incurred cash losses in current financial year but the
Company had incurred cash losses in the immediately preceding financial
year.
11. In our opinion and according to the information and explanations
given to us, the Company has defaulted in repayment of dues to the
banks. The period and the amount of defaults excluding interest and
penal charges are as under:
Description Period of Amount TRs.
of Loan default involved
BOI - Cash Credit Account is NPA 29,222
Since March 2008
BOI - BG Invoked October 2008 7,800
PNB - Cash Credit Account is NPA 113,372
Since June 2010
PNB - BG Invoked Account is NPA 58,000
Since June 2010
CB - Cash Credit Account is NPA 91,386
Since Feb 2010
CB - WCTL Account is NPA 8,549
Since Feb 2010
CB - BG Invoked Account is NPA 5,243
Since Feb 2010
SCB - Cash Credit Account is NPA 81,862
Since March 2010
Barclay - WCL January 2009 95,863
BOB - CC / WCTL/ Account is NPA 141,053
BG Invoked Since Feb 2010
12. According to the information and explanations given to us and
based on the documents and records produced before us, the Company has
not granted loans and advances on the basis of security by way of
pledge of shares, debentures and other securities.
13. In our opinion, the Company is not a chit fund or a nidhi mutual
benefit fund / society.
14. According to the information and explanations given to us, the
Company is not dealing in shares, securities and other investments.
15. In our opinion and according to the information and explanations
given to us, the Company has, other than guarantees given to a bank on
behalf of subsidiary Company, not given any guarantees for loans taken
by others from banks and financial institutions. The terms and
conditions whereof are not prejudicial to the interest of the Company
except for the guarantees which are invoked by the banks.
16. To the best of our knowledge and belief and according to the
information and explanations given to us, no term loans, except vehicle
loans which are repayable in installments, and their application is as
agreed were availed by the Company during the financial year, hence
there is no question of any misapplication.
17. According to the information and explanations given to us, funds
raised by the Company on short term basis have, prima facie, not been
used during the year for long term investment.
18. According to the information and explanation given to us and as
evidenced by the books and records, the Company has not issued any
bonds / debentures during the year and hence there is no question of
creating any security during the year.
19. The Company has not, according to the information and explanation
given to us, raised any funds from public during the year hence the
question of verification of end use does not arise.
20. According to the information and explanations given to us, the
Company has not made during the year, any preferential allotment of
shares to parties and companies covered in the Register maintained
under Section 301 of the Companies Act, 1956.
21. During the course of our examination of the books and records of
the Company, carried out in accordance with the generally accepted
auditing practices in India, and according to the information and
explanations given to us, we have neither come across any instance of
fraud on or by the Company, noticed or reported during the year, nor
have we been informed of such case by the management.
For Sorab S. Engineer & Co.
Firm Registration No. 110417W
Chartered Accountants
CA. Chokshi Shreyas B.
Partner
Membership No. 100892
Vadodara
October 5, 2011
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