| We have audited the accompanying financial statements of Modern Syntex
(India) Limited ("the Company") which comprise the Balance Sheet as at
March 31,2014, and the Statement of Profit and Loss and Cash Flow
Statement for the year then ended, and a summary of significant
accounting policies and other explanatory information. Management's
Responsibility for the Financial Statements Management is responsible
for the preparation of these financial statements that give a true and
fair view of the financial position, financial performance and cash
flow of the Company in accordance with the Accounting Standards
referred to in sub-section (3C) of section 211 of the Companies Act,
1956 ("the Act") read with the General Circular 15/2013 dated 13th
September, 2013 of the Ministry of Corporate Affairs in respect of
section 133 of the Companies Act, 2013. This responsibility includes
the design, implementation and maintenance of internal control relevant
to the preparation and presentation of the financial statements that
give a true and fair view and are free from material mis-statement,
whether due to fraud or error. Auditor's Responsibility.
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatement. An audit involves performing procedures to
obtain audit evidence about the amounts and disclosures in die
financial statements. The procedures selected depend on die auditor's
judgment, including the assessment of the risks of material
mis-statement of me financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal
control relevant to me Company's preparation and fair presentation of
die financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for die purpose of expressing
an opinion on effectiveness of me company's internal control. An audit
also includes evaluating the appropriateness of accounting policies
used and die reasonableness of die accounting estimates made by
management, as well as evaluating die overall presentation of die
financial statements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our audit
opinion. Opinion We report the observations / comments as under:
1 The accounts of the company have been prepared on going concern basis
though the accumulated losses of the company have exceeded its net
-worth. (Note30.I).
2 The premium on redemption of debentures is not provided (Sub para
ivof Note 1.3) and devolved non-fund based borrowings are accounted for
as and -when paid I discharged (Note 1.18), amounts whereof are not
ascertained.
3 Balance confirmations from debtors, creditors, advances, secured and
unsecured lenders, etc, are generally not asked / received and
accordingly not reconciled / confirmed. In absence of the same, these
balances and their classification are reflected as per the records
produced to us (Note 30.4).
4 Penal interest, compound interest and liquidated damages on loans
from Financial Institutions, Banks and others, wherever applicable,
have not been provided for in current as well as in previous period(s),
amount not ascertained (Note30.6).
5 Calls in arrears accounts are subject to confirmation and
reconciliation (Note 2.2 and 3.2).
6 Interest on foreign currency loan availed in DM currency calculated
at fixed rate of 2.74% p.a. rather than a floating interest rate based
on 6-months-DM-Libor plus a margin of0.80% p.a., impact of which is not
ascertained.[Note5.5 (c)].
7 a) The company has locked out its POY division since 15th November,
2012. The company has not acertained liability if any, for locked out
period from 15th November, 2012 onwards due to matter pending with
Hon'ble Gujarat High Court (Note 23.1). b) The company had not
provided salary and wages of POY division for the period 1st October,
2012 to 14th November, 2012 amounting to Rs.65.55 Lacs as the matter is
pending with Hon'ble Gujarat High Court. In case the liabilty is
accounted for as on the Balance Sheet date, the "Current Liabilities "
would have been higher by Rs. 65.55 Lacs and "Accumulated Losses" would
have been higher by Rs. 65.55 Lacs. (Note 23.1)
8 Amount of Rs. 1,042.41 Lacs paid towards restructuring / settelement to
various preference share holders till 31st March 2014 has been
reflected under the head "Other current assets"pending sanction
ofrehibilition scheme by BIFR. In case, the payments made have been
adjusted from the same, than the "Preference Share Capital" and
"Current Assets" would have been lower by Rs.1,042.41Lacs (Note 2.1).
9 Amount of Rs. 8,331,38 Lacs paid towards restructuring /settlement to
varous lenders till 31st March, 2014 had been reflected under the head
"Other current assets" rather than reducing the same from Loans shown
as current maturities of long term debt under "Other current
liabilities". In case, the payments made have been adjusted from the
same, than the "Other current liabilities" and "Current Assets" would
have been lower by Rs. 8,331.38 Lacs.(Note 18.1).
10 SUUTIhas restored the total liabilities due to default inpayment of
OTSamount and have intimated the outstanding dues of Rs. 1,63.803.63 Lacs
including unsecured debts, dues ofUTIMF, overdue & penal interest etc.
as per their records as on 31st March, 2013. No further communication
regarding outstanding has been received. The company has disputed the
entire dues of VTI MF and in the process of renegotiating the OTS
proposal with them, pending which, unpaid liability of Rs. 1,360 Lacs is
kept in books of accounts as per earlier settlement terms. In case, the
liability is accounted for as restored by SUUTland UTIMF, "Current
Liabilities" would have been higher by Rs. 1,62,443.83 Lacs and
"Accumulated Losses" would have been higher by that amount. (Note 9.3).
11 Exchange Fluctuation on foreign currency loan availed in DM currency
to acquire Plant and Machinery has not been provided since 01.04.2001
due to conversion of currency from DM to Euro as there is no currency
conversion clause in the agreement. In case, the liability is
accounted for based on the exchange rate of Euro as on the Balance
Sheet date, the "Current Liabilities" would have been higher by Rs.
13,813.93 Lacs,"Loss before tax for the year" would have been higher by
Rs. 4,429.78 Lacs and "Accumulated Losses" would have been higher by Rs.
13,813.93 Lacs [Note 5,5 (b)].
12 Provision for interest amounting to Rs. 910.74Lacs (including Rs.86.91
Lacs for the year) has not been made on public fixed deposits and on
retail non convertible debentures as company expects waiver /reliefs.
In case, the liability is accounted, the "Current Liabilities" would
have been higher by Rs. 910.74 Lacs, Loss before tax for the year" would
have been higher by Rs. 86.91 Lacs and "Accumulated Losses" would have
been higher by Rs. 910.74 Lacs (Note9.4).
13 The company has not provided for interest on dealers deposit of Rs.
19.00 Lacs (including Rs. 9.50 Lacs for the year), and commission &
brokerage on sales of Rs. 24.70 Lacs (including Rs. Nil for the year)
related to POY division due to pending settlements with customers /
dealers. In case the liabilty is accounted as on the Balance Sheet
date, the "Current Liabilities" & "Accumulated Losses" would have been
higher by Rs. 43.70 Lacs and "Loss before tax for the year" would have
been higher by Rs. 9.50 Lacs. (24.1&. 25.3).
We further report drat, widiout considering items mentioned at para 1
to 7(a) above, me effect of which could not be determined, had die
observations made by us in para 7(b) to 13 above been considered,
accumulated losses would have been Rs. 2,31,700.66 Lacs (as against die
reported figure ofRs. 54,422,91 Lacs), Current Liabilities would have
beenRs. 2,07,662.83 Lacs (as against die reported figure ofRs. 38,716.46
Lacs), Preference Share Capital would have been Rs. 457.59 Lacs (as
against die reported figure ofRs. 1,500 Lacs) and Current assets would
have been Rs. 5,505,94 Lacs (as against the reported figure ofRs. 14,879.73
Lacs). In our opinion and to die best of our information and according
to the explanations given to us, die financial statements subject to
our observations as above and read together wim Notes to Accounts give
die information required by die Act in the manner so required and give
a true and fair view in conformity wim die accounting principles
generally accepted in India:
(a) in the case of me Balance Sheet, of the state of affairs of die
Company as at March 31,2014;
(b) in the case of die Statement of Profit and Loss, of die loss for
die year ended on that date; and
(c) in the case of me Cash Flow Statement, of me cash flows for die
year ended on diat date.
Report on Other Legal and Regulatory Requirements
1. As required by die Companies {Auditor's Report) Order, 2003, as
amended by die Companies (Auditor's Report) (Amendment) Order 2004
(togemer the 'Order'), issued by die Central Government of India in
terms of Section 227 (4A) of die Companies Act, 1956, we enclose in die
Annexure a statement on the matters specified in paragraphs 4 and 5 of
die said Order to die extent applicable to die company,
2. As required by section 227(3) of die Companies Act, 1956 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 purpose of our
audit;
b. In our opinion, proper books of account as required by law have
been kept by die Company so far as appears from our examination of
those books;
c. The Balance Sheet, Statement of Profit and Loss, and Cash Flow
Statement dealt witii by this Report are in agreement widi the books of
account;
d. In our opinion, the Balance Sheet, Statement of Profit and Loss,
and Cash Flow Statement comply wim me Accounting Standards referred to
in subsection (3C) of section 231 of the Companies Act, 1956 read with
the General Circular 15/2013 dated 13th September, 2013 of die Ministry
of Corporate Affairs in respect of section 133 of die Companies Act,
2013.
e. On the basis of written representations received from die directors
as on March 31,2014, and taken on record by the Board of Directors,
none of the directors is disqualified as on March 31,2014, from being
appointed as a director in terms of clause (g) of sub-section (1) of
section 274 of die Companies Act, 1956.
f. Since the Central Government has not issued any notification as to
the rate at which die cess is to be paid under section 441A of die
Companies Act, 1956 nor has it issued any Rules under die said section,
prescribing die manner in which such cess is to be paid, no cess is due
and payable by die Company.
Annexure to the Independent Auditors' Report for the year ended March'
2014 (Referred to in Paragraph lunder the heading of "report on other
legal and regulatory requirements" of our report of even date)
i. Fixed Assets
a) The Company has generally maintained proper records showing full
particulars including quantitative details and situtation of its fixed
assets except that the records for some of the assets are under
updation.
b) As per the information and explanation given to us, the company
carries out the physical verification of its fixed assets over a period
of three years in a phased manner, which in our opinion is reasonable
having regard to the size of the company and the nature of its assets.
No material discrepancies were noticed on such verifications.
c) The company has not sold any substantial portion of fixed assets
during the year.
ii. Inventories
a) The inventory has been physically verified by the management during
the year. In our opinion, the frequency of verification is reasonable.
b) The procedures of physical verification of inventory followed by the
Company is reasonableand adequate in relation to the size of the
Company and the nature of its business.
c) The Company is maintaining proper records of inventory. The
discrepancies noticed on physical verification were not material in
relation to the operations of the Company and the same have been
properly dealt with in the books of account.
iii. Loans given / taken
As informed to us, 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. Accordingly, clauses 4 (iii) (a) to (g) of the Companies
(Auditor's Report) Order are not applicable to the company.
iv. Internal Control
According to the information and explanations given to us and in our
opinion, there are adequate internal control systems commensurate with
the size of the company and the nature of its business, with regard to
purchase of inventory, fixed assets and with regard to sales of goods
and services. During the course of our audit, we have not observed any
continuing failure to correct major weakness in internal control
system.
v. Contracts and arrangement under Section 301
a) According to the information and explanation given to us, we are of
the opinion that the particulars of contracts or arrangements referred
to in Section 301 of the Companies Act, 1956 have been entered in the
register required to be maintained under that section.
b) In our opinion and according to the information and explanation
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 have been made at prices which are reasonable
having regard to prevailing market prices at the relevant time.
vi. Public Deposit
The Company has accepted fixed deposits under Section 58A of the
Companies Act, 1956 in past. In our opinion and according to the
explanations given to us, the company has complied with the provisions
of sections 58A, 58AA or any other relevant provisions of the Act and
the rules framed thereunder with regard to deposits accepted from
public except for default in payments of the same and non maintenance
of liquid assets against the deposits. As given in Note 30.8, the
Company Law Board (CLB) has passed an order on 23.1.2002 that "The
repayment of fixed deposits shall be made by the Company in accordance
with the revival scheme as and when approved by BIFR under provisions
of SICA". However payment on compassionate ground are continued to be
made as per the decision of the committee formed by Hon'ble Company Law
Board for this purpose. As informed to us, no other orders are passed
by National Company Law Tribunal or Reserve Bank of India or any Court
or any other Tribunal in this regard.
vii. Internal Audit System
The Company has an internal audit system, which in our view
commensurate with the size and nature of its business.
viii. Cost Records
We have broadly reviewed the books of accounts produced relating to the
cost records maintained by the Company pursuant to the rule made by the
Central Government 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 carried out
detailed examination of such accounts and records with a view to
ascertain whether these are accurate and complete.
ix. Statutory Dues
a) The Company has been regular in depositing its undisputed statutory
dues including Provident Fund, Investor Education and Protection Fund,
Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service
Tax, Customs Duty, Excise Duty, Cess and other statutory dues as
applicable with the appropriate authorities during the year except
delay in deposition in few cases and pending deposition of undisputed
dues for a period of more than six months as at 31.03.2014 are as
under:-
Nature rs in lacs
Professional Tax 0.67
Royalty to Gram Panchyat 9.89
b) The details of dues of Income tax / Sales tax / Wealth tax / Service
tax / Custom duty / Excise duty / cess not deposited on account of
dispute alongwith the amounts involved and the forum where dispute is
pending is given as under:
Nature of dues Amount Forum at which jxroliiig
Rs. in lacs
Excise Duty 326.31 CESTAT, Ahmedabad
249.04 Gujarat High Court, Ahmedabad
99.41 Commissioner Appeal, Baroda
5.13 Assistant Commisssioner, Baroda
(CentralExcise)
88.30 CEGAT, Jaipur
Provident Fund 1.84 PF Tribunal, Delhi_
1.51 PF Department, Jaipur
Sales Tax 313,28 Jt.Conm(Convnercial) Tax Appeal,
Baroda
3.55 Commissioner Appeal, Jaipur
Textile Committee Cess 147.88 Textile Committee Tribunal
Municipal Tax 1.56 Rajasthan High Court
Custom Duty 129.44 Commisisoner of Custom, Mumbai
Land & Building Tax 12.43 Municipal Corporation, Alwar
x. The accumulated losses of the company at the end of the finacial
year are more than the net worth of the company. It has incurred cash
losses during the current year as well as in immediately preceding
financial year.
xi. The Company has defaulted in repayment of dues to Financial
Iinstitutions, Banks and Debenture holders / Public Fixed Depositors
amount of Rs. 8,488.48 Lacs, 116,577.22 Lacs andRs. 1,979.29 Lacs
respectively as on the Balance Sheet date from the year 1999-2000
onwards as per books of accounts of the Company.
xii. The Company has not granted any loans and advances on the basis
of any security by way of pledge of shares, debentures and other
securities.
xiii. As explained, the company is not a chit fund or a nidhi / mutual
benefit fund / society. Accordingly, the provisions of clause xiii of
Para 4 of the Companies (Auditor's Report) Order are not applicable to
the Company. xiv. As explained and verified, the Company is not
dealing or trading in shares, securities, debentures and other
investments.
xv. As explained and verified, the Company has not given any guarantee
for loans taken by others from Banks or Financial Institutions.
xvi. The Company has not obtained any term loans during the year under
review.
xvii. On an overall examnitaion of the balance sheet of the company, we
are of the opinion that no fund raised on short term basis have been
utilised for long term uses.
xviii. The Company has not made any preferential allotment of shares
during the year to parties and companies covered in the Register
maintained under Section 301 of Companies Act, 1956.
xix. According to the information and explanations given to us, the
Company has not created security or charges against some of the
debentures outstanding at the Balance Sheet date. As explained, the
company is in the process of settlement of such dues.
xx. According to the information and explanations given to us, the
Company has not raised any money from the public during the year
through public issue.
xxi. 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 T.R. CHADHA & CO.
Chartered Accountants
Firm Regn. No: 00671IN
Arvind Modi
Place: Mumbai Partner
Date : 27th June, 2014 M. No. 112929 |