TO THE MEMBERS OF SAKTHI SUGARS LIMITED,
We have audited the attached Balance Sheet of Sakthi Sugars Limited as at 31stDecember 2009, the Profit and Loss Account and also 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.
I. As required by the Companies (Auditor's Report) Order 2003 issued by the CentralGovernment of India in terms of sub-section (4A) of section 227 of the Companies Act,1956, we furnish below a statement on the matters specified in paragraphs 4 and 5 of thesaid Order.
i. In respect of its fixed assets:
a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets on the basis of available information.
b. As explained to us, the fixed assets have been physically verified by the managementduring the year at reasonable intervals and no material discrepancies were noticed on suchphysical verification.
c. The Company has not disposed off substantial part of its fixed assets during theyear and the going concern status of the Company is not affected.
ii. In respect of its inventories:
a. As explained to us, inventory has been physically verified by the management atregular intervals during the year.
b. In our opinion and according to the information and explanations given to us, theprocedures of physical verification of inventories followed by the management arereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.
c. The Company has maintained proper records of inventory. As explained to us, therewere no material discrepancies noticed on physical verification of inventory as comparedto the book records.
iii. The company has not granted any loans secured or unsecured to companies, firms orother parties covered in the register maintained under section 301 of the Act.Accordingly, clauses 4(iii)(a) to (g) of the Order are not applicable to the company.
The company has taken an interest free unsecured loan of Rs.4 Crores from a companycovered in the register maintained under section 301 of the Act. The terms and conditionsof the loan are primafacie not prejudicial to the interest of the company.
iv. In our opinion and according to the information and explanations given to us, thereis an adequate internal control system commensurate with the size of the Company and thenature of its business for the purchase of inventory, fixed assets and also for the saleof goods and services. During the course of our audit, we have not observed any majorweaknesses in the internal control system.
v. In respect of transactions covered under Section 301 of the CompaniesAct, 1956:
a. In our opinion and according to the information and explanations given to us, theparticulars of contracts or arrangements referred to in section 301 of the Act have beenentered in the register maintained under that section.
b. In our opinion and according to the information and explanations furnished to us,the transactions made in pursuance of such contracts or arrangements have been made atprices which are reasonable having regard to the prevailing market prices at the relevanttime.
vi. In our opinion and according to the information and explanations given to us, inrespect of the deposits accepted by the company from the public, the directives issued bythe Reserve Bank of India and the provisions of sections 58A and 58AA of the CompaniesAct,1956 and other relevant provisions of the Act and the rules framed there under, whereverapplicable, have been complied with. No order has been passed by the Company Law Board orNational Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.
vii. In our opinion, the internal audit system of the Company is commensurate with itssize and nature of its business.
viii. The Central Government has prescribed maintenance of cost records under Section209(1)(d) of the CompaniesAct, 1956 in respect of certain manufacturing activities of theCompany. We have broadly reviewed the accounts and records of the Company in thisconnection and are of the opinion, that prima facie, the prescribed accounts and recordshave been made and maintained.
ix. In respect of statutory dues:
a. According to the records of the Company, undisputed statutory dues such as ProvidentFund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, SalesTax, Wealth Tax, Service Tax, Customs Duty, Excise Duty and Cess have been generallyregularly deposited with the appropriate authorities. There are no arrears of suchstatutory dues outstanding for a period of more than six months as at 31st December2009.
b. The disputed statutory dues that have not been deposited on account of matterspending before appropriate authorities are as under:
|Particulars ||Period to which the matter pertains ||Forum where dispute is pending ||Rs. Crores |
|Income Tax ||2005-06, 2006-07 ||Appellate Tribunal ||1.28 |
| ||2002-03 ||Commissioner ||4.88 |
| ||1993-94, ||Sales Tax Appellate Tribunal ||1.28 |
| ||2000-01,2001-02 ||High Court of Madras ||0.35 |
|Sales Tax ||1989-90 to 1992-93 ||High Court of Madras ||8.03 |
| ||2000-01 ||Addl. Commissioner ||0.28 |
|Excise Duty ||Excise Duty: || || |
| ||2007-08, 2008-09 ||Commissioner/Dy. Commissioner ||0.50 |
| ||2006-07, 2008-09 ||CESTAT/Commissioner ||19.72 |
| ||2002-2004 ||Commissioner ||0.94 |
| ||1992-2005 ||High Court of Orissa, Cuttack ||0.12 |
| ||Service Tax: || || |
| ||2005-06 ||Commissioner ||0.04 |
| ||2007-08 ||CESTAT/Commissioner ||1.43 |
| ||2005-06,2006-07,2007-08 ||Commissioner ||0.15 |
| ||2007-08 ||CESTAT/Commissioner ||0.95 |
| ||2008-09 ||Commissioner ||0.80 |
| ||2008-09 ||Asst. Commissioner/Dy. Commissioner ||0.34 |
|Water Charges ||1964-65 to 1999-2000 and 1991-2008 ||High Court of Madras ||5.80 |
| ||2004-05, 2005-06 ||High Court of Orissa, Cuttack ||0.06 |
|State Adminstrative fee ||April 2004 to June 2007 ||Supreme Court ||4.47 |
x. In our opinion, the company does not have any accumulated losses at the end of thefinancial year and has not incurred cash losses during the financial year covered by ouraudit or in the immediately preceding financial year.
xi. According to the records of the company examined by us and the information andexplanations given to us, the Company has not defaulted in repayment of dues to banks,financial institutions and debenture holders.
xii. In our opinion and according to the information and explanations given to us, noloans and advances have been granted by the Company on the basis of security by way ofpledge of shares, debentures and other securities.
xiii. The Company is not a chit fund or anidhi/mutual benefit fund/society. Therefore,clause 4(xiii) of the Companies (Auditor's Report) Order 2003 is not applicable to theCompany.
xiv. The company is not dealing or trading in shares, securities, debentures and otherinvestments.
xv. The company has given guarantee for loan from banks taken by a foreign subsidiaryand the amount of loan outstanding is Rs.268.27 Crores. The loan of Rs.268.27 Crores isunder restructuring process and on completion of such restructuring, the terms andconditions of the guarantee given may not be prejudicial to the interest of the company.The company has also given guarantee for bank loans taken by Indian subsidiaries, theoutstanding of which amounts to Rs.174.72 Crores and the terms and conditions of theguarantee/s given for these loans are not prejudicial to the interest of the company.
xvi. In our opinion, the term loans have been applied for the purpose for which theywere raised.
xvii. According to the information and explanations given to us and on an overallexamination of the Balance Sheet of the Company, we are of the opinion that during theyear the Company has not used funds raised on short-term basis for long-term investments.
xviii. During the year, the Company has not made any preferential allotment of sharesto companies covered in the Register maintained under Section 301 of the Companies Act,1956.
xix. In our opinion and according to the information and explanations given to us, thecompany has issued debentures and security or charge has been created in respect ofdebentures issued.
xx. The Company has not raised any money by way of public issue during the year.
xxi. In our opinion and according to the information and explanations given to us, nofraud on or by the Company has been noticed or reported during the year, that causes thefinancial statements to be materially misstated.
II. In our opinion, non-provision of interest to banks and institutions under CDRwhich has been converted into Funded Loan/ reversal of interest which has been convertedinto Funded Loan amounting to Rs.88.25 Crores is not in conformity with the AcceptedAccounting Principles and consequently the profit during the year is overstated byRs.88.25 Crores.
III. Further to our comments under Para I and 11 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, 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 with by this report comply with the mandatory Accounting Standards, referred to insub-section (3C) of Section 211 of the CompaniesAct, 1956;
v. On the basis of written representations received from the directors and taken onrecord by the Board of Directors, we report that none of the directors of the Company isdisqualified, as on 31st December 2009, from being appointed as a director in terms ofclause (g) of sub-section (1) of section 274 of the CompaniesAct 1956;
vi. In our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts read together with the Significant Accounting Policies andother notes thereon give the information required by the Companies Act, 1956, in themanner so required, and present a true and fair view, in conformity with the accountingprinciples generally accepted in India:
a. In so far as it relates to Balance Sheet, of the state of affairs of the Company asat 31st December 2009;
b. In so far as it relates to the Profit and Loss Account, of the Profit of the Companyfor the year ended on that date; and
c. In so far as it relates to the Cash Flow Statement, of the cash flows of the Companyfor the year ended on that date.
| ||For P.N. RAGHAVENDRA RAO & Co. |
| ||Chartered Accountants |
|Coimbatore ||P.R.VITTEL |
|29 th March 2010 ||Partner |
| ||M.No.018111 |