TO THE SHAREHOLDERS
We have audited the attached Balance Sheet of POLAR INDUSTRIES LTD., as at 31stMarch, 2011 and also the Profit and Loss Account and the Cash Flow Statement for the yearended on that date annexed thereto. These financial statements are the responsibility ofthe Company's management. Our responsibility is to express an opinion on these financialstatements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted inIndia. 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.
As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued by theCentral Government of India in terms of sub-section (4A) of Section 227 of the CompaniesAct, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4and 5 of the said Order.
Further to our comments in the Annexure referred to above, we report that:
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, subject to notes givenin paragraph (vi) below, have been kept by the Company so far as appears from ourexamination of those books. The reports on the account of branches audited by otherauditor have been forwarded to us and have been appropriately dealt by us in preparing ourreport.
iii. The Balance Sheet, Profit and Loss Account and Cash Flow statement dealt with bythis report are in agreement with the books of account and with the returns from the saledepots.
iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt with by this report comply with the Accounting Standards referred to in sub-section(3C) of section 211 of the Companies Act, 1956 subject to notes given in paragraph (VI)below.
v. On the basis of written representations received from the directors as on 31s'March 2011 and taken on record by the Board of Director, we report that two of thedirectors are disqualified as on 31s' March 2011 from being appointed asdirectors in terms of clause (g) of Sub-section (1) of Section 274 of the Companies Act,1956.
vi. (a) Regarding corporate guarantees given in excess of limit approved by theshareholders and considered the same as
contingent liability by the management and not provided for as referred in (Note No. 3in Schedule 20).
(b) (i) Regarding debt acquired by ARCIL which is subject to compliance of terms &condition and recalling of loan and demanding of others payments as referred in Note NoB-4 in Schedule 20. Pending negotiation with the ARCIL we are unable to comment aboutimpact on the liquidity position of the company due to recalling of loan / demanding ofothers payments and consequent impact on the ability of the company to continue business.
(ii) Regarding sale of residential property and provisional adjustment thereof inaccounts and possession of another property by ARCIL as referred in Note No B-4(e) inSchedule 20 We are unable to comment about impact on the profit for the year due tonon - availability of required information.
(c) Regarding valuation of finished goods stock for Rs. 86, 40,825 pertaining todiscontinued business segment and non provision of interest, demurrages etc on the goodslying in custom bonded warehouse for which amount was not ascertained as referred in NoteNo.7 in Schedule 20. We are unable to comment about the extent of realization on suchstock and impact thereof including non-provision referred above on profit for the year andconsequently impact on debit balance in the Profit and Loss Account at year end.
(d) Regarding preparation of accounts on going concern basis as referred in Note No.B-8in Schedule 20. The company has sold a substantial part of its fixed assets in earlieryear. According to the information and explanations given to us, the company has so farnot made any plan to replace the substantial part of the fixed asset that have been sold.The company has also negative net worth, substantial negative working capital, inabilityto pay its debts repayments / creditors etc indicating that going concern assumption mayno longer be appropriate. Therefore, in our opinion, there exists substantial doubt thatthe company will be able to continue as a going concern for the foreseeable future.Consequently, adjustment may be required to the recorded amount of assets andclassification of liabilities. The financial statement (and notes thereto) do not disclosethis fact.
(e) Regarding pending recovery of advances / dues aggregating Rs 2,14,74,831 fromvarious parties and ex- employees as referred in Note No B-9 in Schedule 20. We are unableto comment about the extent of realization of such advances / dues due to uncertaintyinvolved.
(f) Regarding refusal of insurance claim for Rs. 6, 76,27,254 by the insurance companybut considered good by the company as referred in Note No B-15 in Schedule 20. Weare unable to comment about the realizability of the claim pending decision of theNational Consumer Forum.
(g) Regarding remuneration paid in earlier year to an Ex-Executive Director for whichCompany intends to file application with Central Government for waiver of excessremuneration paid as referred in Note No .B- 22(b) in Schedule 20.
(h) Regarding non-provision and non-ascertainment of penalties on various outstandingstatutory dues as referred in Note No B-25 in Schedule 20. We are unable to commentabout the impact on the profit for the year and debit balance in Profit and Loss Accountat year end due to non ascertainment of amount.
(i) Regarding mortgage of one of the property having original book value of Rs.2,47,26,244 in favour of Co-operative Bank as a collateral security for obtaining loan bya body corporate as referred in Note No. B-16 of Schedule 20 for which share holdersapproval not obtained by the Company. Due to non availability of the latest auditedbalance sheet of the body corporate, we are not in a position to comment whether abovesecurity given is prejudicial to the interest of the company.
vii. In our opinion and to the best of our information and according to theexplanations given to us and considering our observations in vi above, the said accountsread together with notes thereon, do not give the information required by the CompaniesAct. 1956 in the manner so required and not give a true and fair view in conformity withthe accounting principles generally accepted in India :
a) In the case of the Balance Sheet, of the state of affairs of the Company as at 31s'March, 2011.
b) In the case of the Profit and Loss Account, of the profit of the Company for theyear ended on that date and
c) In the case of Cash Flow Statement, of the cash flows of the Company for the yearended on that date.
| ||ForSINGHI&CO. |
| ||Chartered Accountants |
| ||Firm Reg. No. 302049E |
| ||B.K.Sipani |
|Place: Kolkata ||Partner |
|Date: 10,h August 2011 ||Membership No. 88926 |
Annexure referred to in paragraph 3 of our report of even date
Re: Polar Industries Limited
(i) a. The Company has maintained proper records showing full particulars, includingquantitative details and situation of its fixed assets.
b. According to the information and explanation given to us, fixed assets ofsignificant value have been physically verified by the management during the previous yearin accordance with a phased programme of verification adopted by the company. In ouropinion, the frequency of verification is reasonable having regard to the size of thecompany and the nature of its fixed assets. The discrepancies noticed on such verificationwere not material and have been properly dealt with in the books of account.
c. In our opinion and according to information and explanations given to us, theCompany has disposed off substantial part of it's fixed assets during the previous year.The company has so far not made any plan to replace the fixed assets that have been sold.Therefore there are substantial doubt about the company's ability to continue as a goingconcern in the foreseeable future.
(ii) a. As explained to us, inventories (except stock lying with third parties) werephysically verified by the management during the year at reasonable intervals.
b. In our opinion and according to the information and explanations given to us, theprocedures of physical verification of inventory followed by the management are reasonableand adequate in relation to the size of the Company and the nature of its business.
c. In our opinion and according to the information and explanation given to us, theCompany is maintaining proper records of inventory and no material discrepancies werenoticed on physical verification.
(iii) a. According to the information and explanations given to us, the Company has nottaken any loan during the year from any party covered in the register maintained underSection 301 of the Companies Act,1956. However, the Company has taken unsecured interestfree credit on current account aggregating Rs. 17,08,307 and debit aggregating Rs. 45,600on current account during the year from two bodies corporate listed in the registermaintained under section 301 of the Companies Act, 1956. Maximum balance during the yearwas Rs. 56,09,560 (Net) as payable and year end balance was Rs. 55,76,394 (Net) aspayable. However, there is no stipulation as to interest on these transactions.
b. According to the information and explanations given to us, the company has notgranted any loan during the year to any parties covered in the register maintained undersection 301 of the Companies Act, 1956.
(iv) In our opinion and according to the information and explanations given to us,there is adequate internal control system commensurate with the size of the Company andthe nature of its business, for the purchase of inventory and fixed assets and for thesale of goods and services. During the course of our audit, no major weakness has beennoticed in internal control system.
(v) a. In our opinion and according to the information and explanations provided by themanagement, we are of the opinion that the particulars of contract or arrangements thatneed to be entered into the register maintained under section 301 of the Companies Act,1956 have been so entered.
b. In our opinion and according to the information and explanations given to us, notransactions were made exceeding the value of five lakhs rupees from any party during theyear.
(vi) In our opinion and according to the information and explanations given to us, theCompany has complied with, the directives issued by the Reserve Bank of India andprovisions of Section 58A and 58AA of the Companies Act, 1956 and rules framed there underwith regard to the deposits accepted from the public except not filing of Return ofDeposits. The order passed by Company Law Board in earlier year has been complied with.
(vii) In our opinion, the Company has no internal audit system during the year.
(viii) As information provided to us that no major manufacturing activities werecarried out during the year, hence the Company has not maintained cost records section209(1)(d) of the Companies Act, 1956.
(ix) a. According to the records of the Company, the Company was not regular indepositing undisputed statutory dues including provident fund, investor education andprotection fund, employees' state insurance, income-tax, sales-tax, services tax, wealthtax, custom duty, excise duty, cess and other statutory dues applicable to it with theappropriate authorities. The undisputed outstanding statutory dues as at the year end fora period of more than six months from the date they became payable were Fringe Benefit TaxRs 44,93,612, Sales Tax/ VAT Rs. 4,30,45,370, TDS Rs. 42,60,897, TCS Rs. 49,430, PF Rs60,56,536, Professional Tax Rs 9045, ESIC Rs 421 and Service Tax Rs 2172 . The Company hasapplied for remission of Custom Duty Rs 1,58,10,965 on stock lost on fire in earlier year.Pending remission of duty by custom department, the Company has not deposited the same.The Company has not provided and ascertained interest /penalties on outstanding statutorydues except partial interest Rs. 13,07,162 on outstanding Sale Tax / VAT, hence same havenot been included in above.
b. According to the records of the Company, there are no dues outstanding of sales tax,income tax, service tax, custom tax, wealth tax, excise duty and cess on account of anydispute, other than the following (to the extent quantified by the assessing authorities):
|Nature of Dues ||Amount (Rs.)* ||Forum where disputes are pending |
|Central and States Sales Tax ||1,05,07,748 ||Sales Tax Appellate Authorities |
| ||148,56,050 ||Rajasthan High Court |
| ||7,32,86,106 ||Commissioner Appeal UP |
| ||76,95,597 ||Sales Tax Tribunal |
|Central Excise Duty ||3,11,449 ||Central Excise Tribunal |
| ||3,44,60,124 ||Allahabad High Court |
| ||8,52,792 ||Commissioner of Excise |
| ||64,72,404 ||In the process of filling appeal with |
| || ||CESTAT |
*Net of payments made.
(x) The Company has accumulated losses at the end of the financial year which are notless than fifty percentage of its net worth. However, it has not incurred cash loss in thecurrent and immediately preceeding financial year.
(xi) As per formation & explanation provided to us, the Company ha made provisionaladjustment of reserve price of property as indicated in Note No. B-4(e) of Schedule 20 againstSecured Loans due to ARCIL as on 31.03.11. Pending final adjustment defaults in repaymentof dues, if any cannot be ascertained. Further the company has defaulted in repayment ofDebenture Rs.15,16,100 due since December 2009 onwards.
(xii) According to the information and explanations given to us and based on thedocuments and records produced to us, the Company has not granted any loan and advance onthe 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 BenefitFund/Society, therefore, the provisions of clause 4 (xiii) of the Companies (Auditor'sReport) Order, 2003 (as amended), are not applicable to the Company.
(xiv) The Company does not deal or trade in shares, securities, debentures and othersecurities except that it has investments of long-term nature in shares and these are heldin the name of the Company.
(xv) According to the information and explanations given to us, the Company has givencorporate guarantees aggregating Rs.137,61,99,219 (to the extent of outstanding dues) atyear end in favour of financial institution/ bank & others for loans taken by otherbodies corporate/firms. In our opinion, terms and conditions of such corporate guaranteesis prejudicial to the interest of the Company in view of the weak financial position ofthe said Companies/firms.
(xvi) To the best of our knowledge and belief and according to the information andexplanations given to us, Company has not obtained any term loan during the year.
(xvii) According to the information and explanation given to us, Company has not raisedany fund during the year on short term basis
(xviii) According to the information and explanation given to us, the Company has notmade any preferential allotment of shares to parties or Companies covered in registermaintained under Section 301 of Companies Act, 1956.
(xix) The Company has yet to create securities in respect of debentures outstanding atthe year end
(xx) The Company has not raised any money through a public issue during the year.
(xxi) Based on our examination of the books and records of the Company, carried out inaccordance with the generally accepted auditing practice in India and according to theinformation and explanations given to us, no fraud on or by the Company, noticed orreported during the year.
| ||For SINGHl & CO. |
| ||Chartered Accountants |
| ||Firm Reg. No. 302049E |
| ||B.K.Sipani |
|Place: Kolkata ||Partner |
|Date: 10th August, 2011 ||Membership No. 88926 |