| ANNUAL REPORT 2005-2006
AUDITORS' REPORT
To
The Members of
M/s. GSAL (India) Limited
1. We have audited the attached Balance Sheet of M/s. GSAL (India) Limited
as at 31st March 2006, the Profit and Loss Account and also the Cash Flow
Statement for the period 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 the 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 the
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides the reasonable basis for
our opinion.
3. As required by the Companies (Auditors' Report) Order, 2003 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. Further to our comments in the Annexure reffered to above, we report
that :
(i) We have obtained all the in formation and explanations, which to the
best of our knowledge and belief were necessary for the purpose 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, the Profit and Loss Account and the Cash Flow
Statement dealt with by this report are in agreement with the books of
account;
(iv) In our opinion, the Balance Sheet, the profit and Loss account and the
Cash Flow Statement dealt with by this report comply with the mandatory
accounting Standards referred to in sub - section (3C) of section 211 of
the Companies Act, 1956 subject to the following and other observations in
the notes on accounts;
i) Please refer to the Item No. 1 (d) in the notes on accounts in Schedule
O in respect of Depreciation. The company has not been providing
depreciation on fixed Assets consistently from year to year. Due to such
non-provision, loss for the current financial year has been understated by
Rs. 93,530 thousands and the accumulated losses of the company are lower by
Rs. 11,97,322 thousands. Consequently the value of the net block of the
fixed assets has been overstated by an amount of Rs. 11,97,322 thousands.
ii) Please refer item No. 1(f) in the notes on account in respect of
interest.
iii) Please refer item Nos.4 in the notes on accounts in Schedule O, in
respect of provision for retirement benefits. The policy of the company is
in deviation from the accounting standard-15 in respect of retirement
benefits. In the absence of adequate information, we are unable to quantify
the liability on such account.
iv) Please refer item No. 1(g) in Schedule O in respect of the order of the
BIFR. The accounts have been prepared on the assumption of going concern
basis in view of the order by the Hon'ble AAIFR remanding back the matter
to Hon'ble BIFR for their consideration and approval.
(v) On the basis of written representations received from the Directors, as
on 31st March, 2006 and taken on record by the Board of Directors, we
report that none of the Directors is disqualified as on 31st March, 2006
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 the
significant Accounting Policies and other notes and subject to our above
comments 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
accounting principles generally accepted in India;
a) In the case of Balance Sheet, of the state of affairs of the Company as
at 31st March, 2006;
b) In the case of Profit and Loss Account, of the Loss of the company for
the period ended on that date; and
c) In so far as it relates to the Cash Flow Statement of the Cash Flow of
the Company for the period ended on that date.
For N. LAKSHMINARAYANA ASSOCIATES,
CHARTERED ACCOUNTANTS
Place : Hyderabad
Date : 26-05-2006 N. LAKSHMINARAYANA
Partner
ANNEXURE TO THE AUDITOR'S REPORT
(Of even date referred to in Para 3 of our Report)
Re: M/s. GSAL (India) Limited
(i) (a) We have been informed that the Company has maintained a record
showing particulars containing quantitative details and situation of fixed
assets, which needs to be updated and hence we were not in a position to
verify the same;
(b) All the Fixed Assets have not been physically verified by the
management during the year, but we have been informed that there is regular
programme of verification, which in our opinion, is reasonable having
regard to the size of the company and nature of its business and we have
been informed that no discrepancies were noticed on such verification;
(c) In our opinion, the Company has not disposed off any substantial part
of Fixed Assets during the year;
(ii) (a) As explained to us inventories have been Physically verified by
the Management during the year. 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 the nature of its business;
(c) The Company is maintaining 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.
(iii) (a) The company has not granted or taken loans, secured or unsecured,
from the persons covered in the Register maintained u/s 301 of the
Companies Act, 1956;
(b) In view of the above, in our opinion, the sub-clauses (b) to (g) are
not applicable to the company for the year.
(iv) In our opinion and according to the information and explanations given
to us there are adequate internal control systems commensurate with the
size of the Company and the nature of its business for the purchase of
inventory, fixed assets and also for the sale of goods. During the course
of our audit we have not observed any continuing failure to correct major
weaknesses in the internal control system.
(v) (a) In our opinion, and according to the information and explanations
given to us, the contracts or arrangements that need to be entered into a
register in pursuance of section 301 of the Act have been so entered;
(b) Based on information provided to us, each of these contracts or
arrangements have been made at prices which are reasonable having regard to
the prevailing prices at the relevant period;
(vi) In our opinion and according to the information provided to us, the
Company has not accepted any deposits from the public during the year.
(vii) In our opinion, the company has an Internal Audit system commensurate
with its size and nature of its business.
(viii) As per the explanations given to us, the clause 4(viii), with
respect to maintenance of cost records, is not applicable to the company.
(ix) a) According to the records of the Company, the company is regular in
depositing the undisputed statutory dues including Provident Fund,
Employees State Insurance, Income Tax, Customs Duty, Excise Duty except
Sales Tax arrears of Rs. 1,88,19,854/- which in the opinion of the company
is not payable pending revival package with the Hon'ble BIFR. We have been
informed that the provisions of Investor Education and Protection Fund,
Wealth Tax, Service Tax and Cess are not applicable to the company.
b) According to the information and explanations given to us, the company
has not deposited the following amounts on account of disputes.
Name of the Nature of Amount Period to which Forum where
statute dues (Rs.) the amount dispute is
relates pending
Central CENVAT 23,87,839 2003-04 Commissioner
Excise Act Credit of Central
Excise(Appeals)
Visakhapatnam
APGST Act Sales Tax 10,99,007 1995-96 High Court of
Andhra
Pradesh
Provident Damages 13,89,944 Earlier Years Employees PF
Fund and Appellate
Misc. Tribunal, New
Provisions Delhi
Act
(x) The accumulated losses of the Company at the end of the financial year
are not less than fifty percent of its net worth and the company has
incurred cash losses during the financial year covered by our audit and in
the financial year immediately preceding such financial year.
(xi) Based on the information and explanations given to us, financial
institutions have approved a debt restructure and the company is in the
process of complying with the conditions stipulated by them.
(xii) In our opinion and according to the information and explanations
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
securities.
(xiii) In our opinion the Company is not a chit fund or a Nidhi / Mutual
Benefit Fund / Society. Therefore, clause 4 (xiii) of the Companies
(Auditor's Report) Order 2003 is not applicable to the Company.
(xiv) In our opinion and based on the information provided to us, the
Company has not dealt or traded in shares, securities, debentures or other
investments during the year.
(xv) As per the information and explanations given to us, the Company has
not given guarantees for loans taken by others from banks or financial
institutions.
(xvi) In our opinion and based on the explanations given to us, the Company
has not taken any fresh term loans during the year and hence clause 4(xvi)
is not applicable to the company.
(xvii) According to the information and explanation given to us and on an
overall examination of the Balance Sheet of the Company, we are of the
opinion that no funds raised on short-term basis have been used for
long-term investments.
(xviii) The Company has received share application money from on
preferential basis but not made any allotment of shares to the parties and
companies covered in the register maintained u/s. 301 of the Companies Act,
1956 during the year the price at which the share application money has
been received is not prejudicial to the interests of the company.
(xix) The Company has not issued debentures and hence clause (xix) of the
Companies (Auditor's Report) Order 2003 is not applicable.
(xx) The Company has not raised any money by Public issue and hence Clause
(xx) of the Companies (Auditor's Report) Order 2003 is not applicable to
the Company.
(xxi) In our opinion and according to the information and explanations
given to us, no fraud on or by the Company has been noticed or reported
during the course of our audit.
For N. LAKSHMINARAYANA ASSOCIATES,
CHARTERED ACCOUNTANTS
Place : Hyderabad
Date : 26-05-2006 N. LAKSHMINARAYANA
Partner |