PATODIA TEXTILE INDUSTRIES LIMITED
We have audited the attached Balance Sheet of PATODIA TEXTILE INDUSTRIES
LIMITED for the 16 months period ended 31st July, 1998 and the Profit &
Loss Account of the Company for the period ended on that date and report
1. As required by the Manufacturing and Other Companies (Auditor's Report)
Order. 1988 issued by the Company Law Board in terms of Section 227 (4A) of
the Companies Act, 1956, we give in the annexure our report on the matters
specified in paragraph 4 & 5 of the said order.
2. Further to our comments in the Annexure in our opinion, proper books of
accounts as required by law have been kept by the Company, so far as it
appears from our examination of the books.
3. The Balance Sheet and Profit & Loss Account dealt with by this report
are in agreement with the books of accounts.
4. In our opinion and according to the information and explanations given
to us, the accounts read with notes thereon and documents annexed hereto
give the information required and give a true and fair view subject to our
observations from point no. 5 to 10.
a. In the case of the Balance Sheet of the State of Affairs of the Company
as at 31st July, 1998.
b. In the case of Profit & Loss Account, of the Loss of the Company for the
period ended on that date.
5. During the period the Company has provided for Bad & Doubtful Debts to
the extent of Rs.8,05,96,565, for the agents/ parties who are untraceable
or become bankrupt in the market. The Company is taking all necessary
steps for the recovery of some debts.
6. The Company has not transferred unclaimed dividend to the revenue
department of Central Government as required U/s 205 A of the Companies Act
7. During the period the Company has written off the amount of Quantity
Discount receivable from the suppliers of the raw material viz. Partially
Oriented yarn (POY) to the extent of Rs.2,40,25,138 from April,1997 till
30th September 1997, since the suppliers have denied to reimburse the
quantity discount We were informed that the management has confirmed with
the suppliers that the quantity discount will be irrecoverable. The loss of
the period would have been less by Rs. 2,40,25,138, if the quantity
discount would have been recovered from the suppliers of raw material.
8. The Company has defaulted in payment of interest and installment due to
financial institution against the term loan availed from them. The Company
has also defaulted in payment of some of installments due to Non - Banking
Finance Companies from whom the Company has availed the Hire Purchase,
9. As required by the Manufacturing and the other Companies (Auditor's)
order, 1988, issued by the Company law Board and on the basis of such
examination as are considered appropriate and the information and
explanation given to us, we state that:
(i) The Company has not revalued its Fixed Assets.
(ii) The Company is maintaining proper records to show full particulars
including quantitative details and situation of the Fixed Assets. A
physical verification of major Fixed assets has been conducted by the
management during the period. In our opinion, the program of verification
carried out is reasonable having regard to the size of the Company and
nature of their assets and on the basis of the explanation given to us, no
serious discrepancies have been noticed on verification.
(iii) As informed to us, the closing stock have been physically verified
and valued by the management at the end of the period.
(iv) In our opinion, the procedures of physical verification of the
aforesaid stock followed by the management are reasonable and adequate in
relation to the size of the Company and nature of its businesses
(v) We are informed that no discrepancies are noticed on such verification,
between the physical stocks and the books records.
(vi) In our opinion valuation of those stocks are fair and proper and is in
accordance with normally accepted accounting principles.
(vii) The deposits and loans, obtained by the Company from Companies, firms
or other parties listed in the register maintained under section 301 and
from the companies under the same management are at the rates of interest
and on terms and conditions which are prima facie not prejudicial to the
interest of the company.
(viii) The rate of interest and the terms and conditions of loans granted
to the Companies, firms or other parties listed in the Register maintained
under Section 301 and / or to the Companies under the same management as
defined under Section (1B) of the Section 370 of the Act are in our
opinion, prima facie not prejudicial to the interest of the Company.
(ix) The Company has adequate internal control procedures to commensurate
with the size of the Company and the nature of its business and in our
opinion the Company has adequate internal audit system commensurate with
the size of the company and nature of its business.
(x) The Company has not accepted any deposits from the Public.
(xi) In relation to the service activities of the company, there exists a
reasonable internal control system to commensurate with the size of the
company and nature of its business.
(xii) The Central Government has not prescribed the maintenance of cost
records under Section 209 (1) (d) of the Companies Act, 1956 for the
products of the Company.
(xiii) In respect of the company's trading activity we are informed that
there are no damaged stocks.
(xiv) There are no undisputed amount payable in respect of Income Tax,
Sales Tax, Wealth Tax, Custom Duty and Excise Duty outstanding for a period
of more six months from the date they become payable, except to the extent
indicated in point eight to the notes on accounts.
(xv) According to the information and explanations given to us no personal
expenses have been charged to the Revenue Account and also we have not come
across such expenses being charged to the Revenue Account.
(xvi) The Company has become a Sick Company since its net worth, within the
meaning of Section 3 (1)(ga) of the Sick Industrial Company (Special
Provision) Act, 1993, has been completely eroded and become negative.
(xvii) In respect of loans and advances in the nature of loans given by the
company to employees and others, the parties are repaying the principal
amount as stipulated.
(xviii) In respect of investments made by the company in shares,
securities, etc. proper records have been maintained. All the shares,
securities and other investment are held in the name of company except to
the extent of exemption granted under section 49 of the Companies Act,1956.
(xix) The Company is regular in depositing Provident Fund and Employee's
State Insurance dues with the appropriate authorities. except to the extent
indicated in point seven to the notes on accounts.
(xx) As explained to us the company has no by products. In our opinion
reasonable records has been maintained by the company for the sale of
(xxi) As explained to us the company has determined the stock of
unserviceable or damaged stores, raw materials and finished goods and
adequate provision has been made in the accounts, if any loss arising on
the items so determined.
For PRAFUL M. JOSHI
Place : Mumbai PRAFUL M. JOSHI
Date : 31st August, 1998 Proprietor