The Members of
The Dharamsi Morarji Chemical Company Limited
Report on the Accounts for the fifteen months period ended June 30,2010, in compliancewith section 227(2) of the Companies Act, 1956.
1) We have audited the attached Balance Sheet of The Dharamsi Morarji Chemical CompanyLimited, as at June 30, 2010 and also the Profit and Loss Account and the Cash FlowStatement for the fifteen months period ("the, period") ended on that dateannexed thereto. These financial statements are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on these financial statementsbased on our audit.
2) We conducted our audit in accordance with the auditing standards generally acceptedin India. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.
3) As required by the Companies (Auditor's Report) Order, 2003, as amended by theCompanies (Auditor's Report) (Amendment) Order, 2004, issued by the Central government ofIndia in terms of sub-sectidn (4-A) of section 227 of the Companies act, 1956, we enclosein the Annexure a statement on the matters specified in paragraphs 4 and 5 of the saidOrder.
4) Further to our comments in the Annexure referred to in paragraph 3 above, we reportthat:
(i) We have obtained all the information and explanations, which to the best of ourknowledge 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 theCompany so far as appears from our examination of those books.
(iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of account;
(iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt by this report comply with the accounting standards referred to in sub-section (3C)of section 211 of the Companies Act, 1956.
(v) On the basis of written representations received from the directors as on June 30,2010 and taken on record by the Board of Directors, we report that none of the directorsof the Company are disqualified as on June 30, 2010 from being appointed as a director interms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;
(vi) Attention is invited to Note No.23, regarding preparation of accounts on a 'GoingConcern' basis despite continued losses and erosion of total net worth of the Company, inview of the management's perceptions and reasons detailed therein.
(vii) The Company had recognized net deferred tax asset in earlier years aggregating toRs.2654.15 lacs till 31st March, 2009 considering unabsorbed loss up to 31st March, 2008and unabsorbed depreciation up to 31st March, 2009. For the subsequent financial period,further net deferred tax asset has not been recognized in view of management's perceptionsand reason detailed in Note No. 16(b). We are not in a position to opine on the netdeferred tax asset recognized till date as regards its ultimate realization since thevirtual certainty of the available sufficient future taxable income, as required byAccounting Standard 22 i.e. 'Accounting for taxes on income' issued by the Institute ofChartered Accountants of India, could not be substantiated.
(viii) Had the impact of matter stated at (vii) been considered, accumulated losses asat the year end would have been Rs. 11532.04 Lacs.
(ix) Subject to Clause No.vii above, in our opinion and to the best of our informationand according to the explanations given to us, the said accounts give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fairview 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 June30,2010;
(b) in the case of the Profit and Loss Account, of the Loss for the period ended onthat date; and
(c) in the case of the Cash Flow statement, of the cash flow for the period ended onthat date.
| ||For K. S. Aiyar & Co. |
| ||Chartered Accountants |
| ||FRN: 100186W |
| ||Raghuvir M. Aiyar |
| ||Partner |
| ||Membership No. 38128 |
|Mumbai, 31st August, 2010 || |
ANNEXURE TO THE AUDITORS' REPORT
(Referred to in paragraph 3 of our report of even date on the Accounts for the fifteenmonths period ended June 30, 2010, of The Dharamsi Morarji Chemical Company Limited)
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets. However, in the case of some assetsindividual records with quantitative details and values are to be segregated, updated andreconciled.
(b) A substantial portion of the fixed assets have been physically verified by themanagement during the period and in our opinion, the frequency of verification isreasonable having regard to the size of the Company and the nature of its assets. Momaterial discrepancies were noticed on such verification.
(c) The fixed assets disposed off during the period were not substantial. According tothe information and explanations given to us, we are of the opinion that the disposal ofthe fixed assets has not affected the going concern status of the Company.
(ii) (a) The inventories have been physically verified during the period by themanagement. In our opinion, the frequency of verification is reasonable.
(b) The procedures of physical verification of inventories followed by the managementare reasonable and adequate in relation to the size of the Company and the nature of itsbusiness.
(c) In our opinion and according to the explanations given to us, the Company ismaintaining proper records of inventory. The discrepancies noticed on verification betweenthe physical stocks and the book records have been properly dealt with in the books ofaccount.
(iii) (a) According to the information and explanations given to us, the Company hasnot granted any loans, secured or unsecured to the companies, firms or other partiescovered in the register maintained under Section 301 of the Companies Act, 1956.Accordingly sub clause (b), (c) and (d) are not applicable.
(b) The Company has taken interest free loan amounting to Rs. 1530.43 Lacs from adirector/s of the Company and inter-corporate deposits of Rs.896.80 Lacs from four partieslisted in the register maintained under section 301 of the Companies Act, 1956.
(c) In our opinion and according to the information and explanations given to us, theterms and conditions of the unsecured loans taken were prima facie not prejudicial to theinterest of the Company.
(d) According to the information and explanations given to us the repayment of theprincipal amounts are as stipulated.
(iv) In our opinion and according to the information and explanations given to us,there is an adequate internal control system commensurate with the size of the Company andthe nature of its business with regard to purchase of inventory, fixed assets and withregard to the sate of goods and services. However, there is scope to strengthen theinternal controls at operational level through proper implementation. During the course ofour audit no major weakness has been noticed in the internal controls.
(v) (a) In our opinion and according to the information and explanations given to us,the particulars of contracts of arrangements referred to in Section 301 of Companies Act,1956 have so been entered in register required to be maintained under that section.
(b) In our opinion and according to the information and explanations given to us, thesecontracts or arrangements have been made at prices which are reasonable having regard tothe prevailing market prices at the relevant time.
(vi) In our opinion and according to the information and explanations given to us, theCompany has not complied with certain provisions of Sections 58A and 58AA or any otherrelevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits)Rules, 1975 with regard to the deposits accepted from the public including non-filing ofreturns of fixed deposits etc. As informed to us, no order has been passed by the CompanyLaw Board or National Law Tribunal or Reserve Bank of India or any other Court or anyother Tribunal in contravention of the aforesaid provisions and/or rules by the Company.
(vii) in our opinion, the Company has an internal audit system commensurate with thesize and nature of its business, however, the scope and coverage of the same needs to beincreased.
(viii) We have broadly reviewed the books of account maintained by the Company whichhave been made pursuant to the Rules made by the Central Government for the maintenance ofcost records under Section 209 (1 )(d) of the Companies Act, 1956, in respect of SulphuricAcid, Single Super Phosphate (Fertilizer) and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. We have not however, made adetailed examination of the same.
(ix) (a) According to the records of the Company, the Company is not regular indepositing with appropriate authorities undisputed statutory dues including Customs Dutyand Wealth Tax, Provident Fund, Investor Education Protection Fund, Employees' StateInsurance, Income Tax, Sales Tax, Excise Duty, Service Tax, Cess and other statutory duesapplicable to it. Based on our audit procedures and according to the information andexplanations given to us, the following undisputed statutory dues were outstanding as atJune 30,2010 for a period of more than six months from the date they became payable.
|Nature of Dues ||Period to which the amount relates ||Due Dates ||Amount (Rs.in Lacs) |
|Service Tax/ Interest thereon ||2005-06 ||Various ||0.19 |
| ||2006-07 ||Various ||45.51 |
| ||2007-08 ||Various ||33.31 |
| ||2008-09 ||Various ||3.53 |
| || ||Total ||82.54 |
|Profession Tax ||2006-07 ||Various ||11.18 |
| ||2007-08 ||Various ||10.99 |
| ||2008-09 ||Various ||1.19 |
| ||2009-10 ||Various ||1.40 |
| || ||Total ||24.76 |
|VAT and CST || ||Various ||12.29 |
|PF, FPF, EDLI, Admin. Charges, ESIC etc. || ||Various ||0.30 |
|Tax Deducted at source - WCT ||2008-09 ||Various ||0.01 |
| ||2009-10 ||Various ||0.03 |
| || ||Total ||0.04 |
|Tax Collected at Source on Scrap Sales ||2008-09 ||Various ||0.06 |
|IEPF - Unclaimed Dividend ||Cannot be ascertained ||Cannot be ascertained ||10.63 |
|IEPF - Unclaimed Interest on FD/Debentures ||Cannot be ascertained ||Cannot be ascertained ||5.29 |
|IEPF - Unclaimed Fixed deposits ||Cannot be ascertained ||Cannot be ascertained ||20.46 |
(ix) (b) According to the records of the Company, Income Tax, Sales Tax, Wealth Tax,Customs Duty, Excise Duty, Service Tax and Cess which have not been deposited on accountof dispute are given below:
|Name of the Statute ||Nature of Dues ||Forum where dispute is Pending ||Period to which relates ||Amount (Rs. in lacs) |
| ||Duty/Interest/Penalty ||Asst. Commissioner ||June 1999 to August 1999 ||2.29 |
|Central Excise Act ||Duty/Interest/Penalty ||Asst. Commissioner ||Sept 1999 to Dec 1999 ||1.81 |
| ||Duty/lnterest/Penalty ||Asst. Commissioner ||Jan 2000 to June 2000 ||3.04 |
| ||Duty/Interest/Penalty ||Asst. Commissioner ||Jul 1996 to may 1999 ||4.03 |
| ||Duty/lnterest/Penalty ||Asst.Commissioner ||July 2000 to May 2001 ||2.68 |
| ||Duty/Interest/Penalty ||Asst. Commissioner ||Various ||24.48 |
| ||Duty/lnterest/Penalty ||Asst.Commissioner ||Various ||0.57 |
| ||Duty/lnterest/Penalty ||Asst.Commissioner ||August 2003 to May 2004 ||1.18 |
| ||Duty on captive consumption ||Asst.Commissioner ||Various ||0.80 |
| ||Alleged undervaluation of SA ||CESTAT ||Various ||9.76 |
| || || ||Total ||50.64 |
|Sales Tax Act ||Tax/lnterest/Penalty ||Appellate Tribunal ||1992-93 ||6.91 |
| || || ||1993-94 ||4.20 |
| || || ||Total ||11.11 |
|Entry Tax ||Tax/Interest ||High Court || ||5.21 |
(x) The accumulated losses of the Company are more than fifty percent of the Net Worthof the Company as at the end of the financial period, and it has incurred cash loss duringthe period and in the immediately preceding previous period.
(xi) During the period Company had defaulted in repayment of dues to Banks. However theCompany's offers for One Time Settlement (OTS) made to the Banks have been accepted bythose Banks before the year end. The Company has since complied with the stipulationscontained in those OTS. Therefore, in our opinion and according to the information andexplanations given to us, the Company as at the year end is not considered to be at anydefault in repayment of dues to those Banks.
(xii) Based on our examination of the records and the information and explanationsgiven to us, the Company has not granted loans and advances on the basis of security byway of pledge of shares, debentures and other securities.
(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefitfund/society. Therefore, the provisions of clause 4(xiii) of the Order are not applicableto the Company.
(xiv) In our opinion and according to me information and explanations given to us, theCompany is not dealing in or trading in shares, securities, debentures and otherinvestments. Accordingly the provisions of clause 4 (xiv) of the Order are not applicableto the Company.
(xv) The Company has not given any guarantee for loans taken by others from bank orfinancial institutions.
(xvi) The term loans outstanding in the books of the Company as on June 30, 2010 havebeen taken and. utilized in earlier accounting periods, including working capital termloans, which have been converted from working capital fund based limits.
(xvii) According to the information and explanations given to us and on an overallexamination of the Balance Sheet of the Company, we report that the funds amounting toRs.12542.66 lacs raised on short-term basis have been used for long-term purposes.
(xviii) The Company has not made any preferential allotment of shares to parties andcompanies covered in the register maintained under section 301 of the companies Act, 1956.
(xix) The Company has not issued any debentures during the period.
(xx) The Company has not raised money by public issue during the period.
(xxi) Based upon the audit procedures performed for the purpose of reporting true andfair view of the financial statements and as per the information and explanations given bythe management, we report that no fraud on or by the Company has been noticed or reportedduring the course of our audit.
| ||For K. S. Aiyar & Co. |
| ||Chartered Accountants |
| ||FRN: 100186W |
| ||Raghuvir M. Aiyar |
| ||Partner |
|Mumbai, 31 st August, 2010 ||Membership No. 38128 |