alcobex metals ltd Auditors report

ALCOBEX METALS LIMITED ANNUAL REPORT 2009-2010 AUDITORS REPORT TO THE MEMBERS ALCOBEX METALS LIMITED 1. We have audited the attached Balance Sheet of ALCOBEX METALS LIMITED as at 31st March, 2010, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards 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 the 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. 3. As required by the Companies (Auditors Report). Order, 2003 as amended by the Companies (Auditors Report) (Amendment) Order 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of The Companies Act, 1956, and on the basis of such checks as we considered appropriate and according to the information and explanations given to us, we enclose in the Annexure a statement on the matters specified in paragraphs 4 & 5 of the said order. 4. Attention is invited to the following notes in Schedule 26. 4.1 Note No. 2.1 regarding failure to comply with the order of the BIFR. 4.2 Note no. 2.2 regarding accumulated losses of the Company having exceeded the net worth of the Company. This along with other matters as set forth in the financial statements raise doubt that the Company will be able to continue as a going concern which is dependent on various factors stated therein. 4.3 Note no. 3 regarding prior approval not obtained from Central Government in respect of transactions covered under Section 295/297 of the Companies Act, 1956. 4.4 Note no. 4 regarding land not being depicted separately. 4.5 Note no 5.1 regarding classification of loans and satisfaction/charge to be created in favour of banks/financial Institutions in terms of reworked out package of loans shown under the head secured Loans approved by them. 4.6 Note no 5.2 regarding interest being provided as per rates agreed in the One Time Settlement (OTS) of dues entered into with Banks/FIs which has subsequently been, liability towards interest at prevalent cap rate (amount unascertained)/penal interest which have occurred for reason stated therein 4.7 Note no. 7 regarding semi finished goods aggregating to Rs. 6.61 lacs being accounted for on the basis of a certificate from management for reasons stated therein. 4.8. Note no 9.1 regarding balances of various accounts under the head Sundry Debtors, Banks, loans and advances, liabilities and loans (secured and unsecured) are subject to confirmation/reconciliation. 4.9 Note no.10(b) regarding interest recoverable from various banks aggregating to Rs. 62.57 lacs on the basis of reworked out package approved by the banks in earlier years for which no provision has been made for reason stated therein. 4.10 Note no 20 regarding segment information as required by the Accounting Standard (AS) 17 Segment Reporting has not been disclosed. The consequential effect of the adjustments, if carried out of the amounts to the extent ascertainable would have increased the loss for the year and reduced the Current Assets by Rs. 62.57 lacs. As regards our comments in other points in para 4 above, the effect is not quantifiable at this stage. 5. Further to our comments in the Annexure referred to in para 3 above and subject to our comments in paragraph 4 above, we report that: i) We have obtained all the information and explanations which to the best of our knowledge 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 the company so far as appears from the examination of such books. iii) The Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report, are in agreement with the books of account; iv) In our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow Statement comply with the Accounting Standards referred to in sub section (3C) of Section 211 of the Companies Act, 1956 except as mentioned in Note 20 as regards Segment Reporting contained in Schedule 26; v) On the basis of the written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 3181 March, 2010 from v) being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read in conjunction with Schedules 1 to 26 give the information required by the Companies Act, 1956, in the manner so required and subject to our comments in para 3 & 4 above give a true and fair view in conformity with the accounting principle generally accepted in India: i) In the case of the Balance Sheet of the state of affairs of the Company as at 31st March, 2010. ii) In the case of the Profit & Loss Account of the loss for the year ended on that date. iii) In the case of the Cash Flow Statement of the Cash Flows for the year ended on that date. For RAY & RAY Chartered Accountants (A.K. SHARMA) Partner Membership No. 80085 Firms Registration No: 301072E Place: New Delhi Date : 8th September, 2010. ANNEXURE REFERRED TO IN PARAGRAPH 3 IN OUR REPORT OF EVEN DATE TO THE SHAREHOLDERS OF ALCOBEX METALS LIMITED. 1.1 The Company has generally maintained proper records showing full particulars regarding valuation of different type of assets including quantitative details and situation of fixed assets. 1.2 The fixed assets are physically verified by the management according to a phased programme designed to cover all items over a period of two years, which in our opinion, is reasonable having regard to the size of the company and the nature of its business. However, all the assets could not be physically verified during the year. As such we are unable to comment on the clause (1) (b) of paragraph 4 of the order. 1.3 During the year no substantial part of fixed assets has been disposed off by the Company. Therefore, the provisions of clause (i) (c) of paragraph 4 of the aforesaid Order, in our opinion are not applicable to the Company. 2.1 As explained to us, the inventories namely Raw Material & Finished Goods in companys custody have been physically verified by the management during the year. As regards semi finished goods at the year end aggregating to Rs 6.61 lacs reference is drawn to Note 7 in schedule 25. In case of semi finished goods lying with third parties aggregating to Rs. 1.56 lacs, certificates confirming stocks in quantitative terms has been received at the year end. Stores & Spares have not been physically verified at the year end. 2.2 The procedures of physical verification of inventories followed by the management, as observed by us to the extent possible, are reasonable and adequate in relation to the size of the company and nature of its business. 2.3 On the basis of our examination of inventory records of the company, we are of the opinion that, the company is maintaining proper records of its inventory except for semi finished goods which is accounted for on the basis of technical estimates (Note 7 Schedule 26). The discrepancies, which were noticed on physical verification of inventory as compared to book records were not material and have been properly dealt with in the books of account. 3.1 a) 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. b) In view of our comments in paragraph 3 (a) above, clauses (iii) (b) to (d) of paragraph 4 of the aforesaid Order are not applicable to the Company. c) The Company has taken unsecured loans from two companies covered in the register maintained under Section 301 of the Companies Act, 1956 in earlier years. The maximum amount involved during the year and the year end balance of loan taken was Rs. 223.69 lacs. d) In our opinion, the rate of interest and other terms and conditions on which loans have been taken from companies/parties listed in the register maintained under Section 301 of the Companies Act, 1956 are prima facie not prejudicial to the interest of the Company. e) The Company has generally been regular in the payment of interest wherever applicable. In absence of any stipulation as regards repayment of loan, we are unable to make any specific comment on the repayment of principal amount of loans taken. 4. In our opinion and according to the information and explanations given to us and having regard to management representations that for some items purchased for which comparable alternative quotations are not available/ obtained because of nature/quality of such items & delivery schedule, the internal control system needs to be strengthened as regards confirmation/ reconciliation of balances, dispatch of goods & realisability of debts in order to be commensurate with the nature of its business with regard to purchase of inventory, fixed assets and with regards to sale of goods & services. However, in our opinion, subject to above, there is no other continuing failure to correct major weakness in internal control system in these areas. 5.1 On the basis of the audit procedures performed by us, and according to the information, explanation and representations given to us, we are of opinion that, the contract or arrangement in which directors were interested as contemplated under Section 297 and sub section (6) of Section 299 of the Companies Act, 1956 and which were required to be entered in the register maintained under Section 301 of the said Act, have generally been so entered. 5.2 In our opinion and according to information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 have been made at price which are reasonable having regards to prevailing market prices at that time or at prices determined by the management in absence of market quotation for similar items as the management has stated that the goods/services are made/supplied to order according to the specifications. 6. The Company has not accepted any deposits from the public and consequently the provisions of Section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and rules framed there under are not applicable. Further, during the course of our audit, we have neither come across nor have we been informed of any order passed under the aforesaid sections by national Company law Board or National Company Law Tribunal or any court or any other Tribunal. 7. On the basis of the concurrent/internal audit reports broadly reviewed by us, we are of the opinion that, the coverage of concurrent/internal audit functions carried out by a firm of Chartered Accountants appointed by the management in consultation with Financial Institution/Banks is commensurate with the size of the Company and nature of its business. 8. The Central Government has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of section 209 of the Companies Act, 1956 in respect of the activities carried out by the Company. 9.1 According to records of the Company, undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues applicable to it, has not been regularly deposited with appropriate authorities and there has been delays in large number of cases. Further, since the Central Government has till date not prescribed the amount of cess payable under section 441A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the Company in depositing the same. 9.2 According to information and explanations given to us, there are no undisputed amount payable in respect of Income tax, wealth tax, sales tax, custom duty and excise duty & other statutory dues which were outstanding at the year end for period of more than six months from the date they become payable. 9.3 According to the information and explanations given to us, there are no dues outstanding of income tax, sales tax, custom duty, wealth tax, service tax and cess on account of any dispute other than excise duty and sales tax as indicated below: Name of the Nature of Forum where dispute is Amount statute dues pending Rs. in lacs 1. The Central Excise duty Show Cause Notice Suppt. 33.32 Excise Act, 1944 Central Excise Range-1 Jodhpur 2. Central Sales tax Commercial tax Offered, 9.48 Sales Tax Special Range-1, Jodhpur Act, 1956 10. The Companys accumulated losses at the end of the financial year are more than fifty percent of its net worth. The Company has incurred cash loss during the year and also in the immediately preceding financial year. 11. The Company has defaulted in the repayment of dues to Financial Institutions /Banks. The defaulted amount of principal amounted to Rs.4503.08 lacs. In addition to above, the estimated interest amounting to Rs.3613.48 lacs is also in default from various dates. In absence of details and pending approval of Financial Institutions/Banks on the application of the Company for deferment, the period of default could not be disclosed. 12. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, clause 4(xii) of the Order is not applicable to the Company. 13. The Company is not a chit fund or a nidhi/mutual benefit fund/society and accordingly, clause 4 (xiii) of the Order is not applicable to the Company. 14. The company has not dealt or traded in shares, securities, debentures and other investments and accordingly, clause 4 (xiv) of the Order is not applicable to the Company. 15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. Accordingly, clause 4 (xv) of the Order is not applicable to the Company. 16. During the year, the Company did not take any fresh term loan. Accordingly, clause 4(xvi) of the Order is not applicable to the Company for the current year. 17. According to the information and explanations given to us and on an overall examination of the Financial Statements and after placing reliance on the reasonable assumptions made by the Company for classification of short term and long term usages of funds, we are of the opinion that prima facie short term funds have not been utilized for long term purposes. 18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956 during the year. Accordingly, clause 4(xviii) of the Order is not applicable to the Company for the current year. However, reference is invited to Note 12 in Schedule 26. 19. The Company has not issued any fresh debentures during the year. Accordingly, clause 4 (xix) of the Order is not applicable to the Company. 20. The Company has not raised any money by public issues during the year. Accordingly, clause 4(xx) of the Order in is not applicable to the Company for the current year. 21. During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, and according to the information, explanations and representations given to us, no fraud on or by the company has been noticed or reported during the year by the Company. For RAY & RAY Chartered Accountants (A.K. SHARMA) Partner Membership No. 80085 Firms Registration No: 301072E Place: New Delhi Date : 8th September, 2010.