| We have audited the attached Balance Sheet of Malanpur Steel Ltd. as at
31st March 2011 and the Profit and Loss Account and 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.
We conducted our audit in accordance with auditing standards generally
accepted in India. Those standards Ý 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 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.
1. As required by the Companies(Auditor's Report) Order, 2003(the
order) issued by the Central Government under section 227(4A) of the
Companies Act,1956 as amended by the Companies(Auditor's
Report)(Amendment)Order, 2004 and according to the information and
explanations given to us and on the basis of such checks as we
considered appropriate , we report that:
i) a) Proper records showing full particulars including quantitative
details and situation of fixed assets were made available for the
purpose of our verification.
b) The physical verification of Fixed Assets has not been carried out
during the year and hence discrepancies, if any in this respect have
not been ascertained as indicated in Note no.3(c) of Schedule 12.
c) As per records and information and explanations given to us, no
fixed assets were disposed off during the year.
ii) a) The physical verification of inventories has not been conducted
by the management during the year as stated in Note no.3(c) of Schedule
b) In our opinion and having regard to our comment in para (ii)(a)
above, the procedures of physical verification of inventory followed by
the management are not reasonable and adequate to the size of the
Company and nature of its business.
c) The Company is maintaining proper records of inventory. The physical
verification of inventories has not been carried out during the year
and hence discrepancies, if any, in this respect, have not been
ascertained as indicated in Note no.3(c) of Schedule 12.
iii) a) Based on the list of Companies, firms and parties covered in
the register maintained under section 301 Of the Companies Act, 1956
provided to us and according to the information and explanations given
to us, the Company has not granted any loans, secured or unsecured to
companies, firms or other parties covered in the register maintained
under section 301 of the Companies Act, 1956. Accordingly, clauses 4
(iii) (b)to (d) of the order are not applicable. b) Based on the list
of Companies, firms and parties covered in the register maintained
under section 301 of the Companies Act, 1956 provided to us and
according to the information and explanations given to us, the Company
has not taken any loans, secured or unsecured from companies, firms or
other parties covered in the register maintained under section 301 of
the Companies Act, 1956. Accordingly, clauses 4(iii) (f) and (g) of the
order are not applicable.
iv) In our opinion and according to the information and explanations
given to us, internal control systems for purchase of inventory and
fixed assets and for sale of goods are generally commensurate with the
size of the Company and the nature of its business. However, there were
no purchases of inventory and fixed assets and sale of goods, during
the year.
v) In our opinion and according to the information and explanations
given to us, there are no particulars of contracts or arrangements that
need to be entered into a register maintained under section 301 of the
Companies Act, 1956. Accordingly clause 4(v) (b) of the order is not
applicable.
vi) The Company has not accepted any deposits from the public within
the meaning of the directives issued by Reserve Bank of India and the
provision of sections 58A and 58AA or any other relevant provisions of
the Act and the rules framed there under.
vii) In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
viii) In the absence of any production during the year due to closure
of the production operation of the steel unit by the management, cost
records prescribed by the Central Government under section 209(1) (d)
of the Companies Act, 1956 have not been made and maintained .
ix) a) According to the records of the Company and information and
explanations given to us, there is no undisputed statutory dues payable
for a period of more than six months from the date they became payable
as at 31st March 2011.
b) According to the records of the Company, dues in respect of Sales
Tax, Income Tax, Custom Tax, Wealth Tax, Service Tax, Excise Duty and
Cess on account of any dispute are as follows:
Name of the
statute Nature of Forum where Period to which Amount
the Due dispute
is Pending the dispute
relate (Rs in
thousands)
Sales Tax
Act Sales Tax Appellate
Authority 1990-91
to 1996-97 3 85 02
Central
Excise
Act Excise
Duty High Court
Gwalior Not Available 9 56
x) The Company's accumulated losses at the end of the financial year
are more than My percent of its net worth. The Company has not incurred
cash losss in the current and immediately preceding financial year.
xi) According to the examination of the books of accounts, the Company
has defaulted in the repayment of dues to financial institutions, bank
and debenture holders aggregating to Rs.2,44,58,46 thousands which are
due for more than one year and could not be repaid. Interest
aggregating to Rs.4,22,43,32 thousands as given in Note no 13 of
Schedule 12 has also not been provided/ paid.
xii) 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 order is not applicable to the Company.
xiv) The Company is not dealing or trading in shares, securities,
debentures and other investments.
xv) According to the examination of books of accounts and records of
the Company and 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 according to the information and explanations
given to us, the company has not availed any term loans during the
year.
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 no funds raised on short-term basis have been used for long-term
investment.
xviii) The Company has not made any preferential allotment of shares
during the year to parties and companies covered in the register under
section 301 of the Companies Act, 1956.
xix) The Company has created security or charge in respect of
debentures issued.
xx) The Company has not raised any money by way of public issue during
the year.
xxi) During the course of our examination of books of accounts carried
out in accordance with generally accepted practices in India, we have
neither come across any incidence of fraud on or by the Company nor we
have been informed of any such case by the management-.
2. The accounts of the Company have been prepared on the basis that it
is a going concern as stated in Note no. 2 of Schedule 12. However, due
to closure and discontinuation of the manufacturing and other
operations of the company, we are unable to express our opinion on its
ability to continue as a going concern. In the event of the same not
being held to be a going concern, the various assets and liabilities
being consequently required to be adjusted with respect to their
realisable value, the impact thereof has not been ascertained and
therefore cannot be commented upon by vs.
3. Further, attention is invited to the following notes of Schedule
12:
a) Note no. 3(c) regarding no carrying out of physical verification of
fixed assets CWIP and inventory and non-provision for diminution in
value thereof (amount ascertained) and valuation of inventories at the
same value as it was at the end of previous year, and our inability to
comment thereon and the impact whereof on the Profit and Loss account
and State of Affairs not being ascertained.
b) Note no.4 regarding non-provision against demand amounting to Rs.
56,75,96 thousands raised by MPEB .Consequently Loss for the year and
current liabilities and accumulated losses at the year end would have
been higher to that extent.
c) Note no.5 regarding non-provision (amount unascertained) for
diminution in value of "Assets held for disposal".
d) Note no.8 regarding non-provision of certain Sundry Debtors
amounting to Rs 13,75 thousands respectively. Consequently, Loss for
the year and accumulated losses at the end would have been lower to
that extent.
e) Note no. 13 regarding non-provision of interest on Secured loans
amounting to Rs 4,22,43,32 thousands. Consequently, loss for the year,
secured loans and accumulated losses at the yearend ' would have been
higher to that extent.
4. We further report that without considering the items mentioned in
paragraph 2 and 3 (a) and (c) above the effect of which could not be
ascertained ,the impact of notes referred to in paragraph 3(b), (d) and
(e) above given effect to in these accounts, the loss for the year
would have been Rs.2,50,44,82 thousands (as against the reported figure
of profit for Rs.2,28,87,89 thousands), accumulated loss at the year
end would have been Rs.9,16,75,38 thousands (as against the reported
figure of Rs.4,37,42 67 thousands), Secured Loans would have been
Rs.5,52,42,58 thousands (as against the reported figure of
Rs.1,29,99,58 thousands), current liabilities and provision would have
been Rs.71,01,80 thousands (as against the reported figure of Rs.
14,25,84 thousands) and current assets could have been Rs. 10,25,33
thousands(as against the reported figure of Rs. 10,39,08 thousands).
5. Subject to above, 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) Proper books of accounts as required by law have been kept by the
company.
c) The Balance Sheet and Profit and Loss account referred to in this
report are in. agreement with books of accounts.
d) In our opinion the Balance Sheet, Profit and Loss account and Cash
Flow Statement subject to our comments in para 2 and 3 above comply
with the Accounting Standards referred to in section 211 (3C) of the
Companies Act,1956, to the extent applicable.
e) As per Note no.2(a) of Schedule 12, the Company is a sick company
and it has unpaid redeemable debentures as on 31st March 2011,
therefore the directors of the company are disqualified from being
appointed as directors in terms of section 274(1)(g) of the Companies
Act, 1956.However, as per the written representation received from the
directors and taken on record by the Board of Directors and as per the
legal advise, as indicated in Note no. 16 of Schedule 12, the
disqualification is applicable to the directorships of the Directors of
the company in companies other than this company.
f) In our opinion and to the best of our information and according to
the explanations given to us, the account subject to our remarks given
above in para 2 and 3 together with their overall impact (to the extent
ascertainable) as given above under para.4 and read together with other
notes of Schedule 12 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 Balance Sheet of the state of affairs of the company
as at 31st March 2011
ii) In case of Profit and Loss account, of the loss of the company for
the year ended on that date; and
iii) In case of Cash Flow Statement, of the cash flows for the year
ended on that date.
For ASITMEHTA & COMPANY
Chartered Accountants
Firm Registration No.000689N
Asit Mehta
Place: New Delhi Partner
Date : the 22nd day of September, 2011 Membership No.17541
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