mahendra petrochemicals ltd Auditors report

MAHENDRA PETROCHEMICALS LIMITED ANNUAL REPORT 2003-2004 AUDITORS REPORT TO THE MEMBERS OF MAHENDRA PETROCHEMICALS LIMITED We have audited the attached Balance Sheet of M/s MAHENDRA PETROCHEMICALS LIMITED as at 30th September, 2004 and also the Profit & loss Account for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management Out responsibility is to express in our opinion on these financial statements based on our audit. 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 misstatements. An audit includes examining on test basis, evidence supporting the amounts and disclosure 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 statements presentation. We believe that Our audit provides a reasonable basis for our opinion. We report as follows:- 1. As required by the manufacturing and other companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of section 227(4A) of the Companies Act, 1956, We enclose in the Annexure a statement on the matters specified in the paragraphs 1 and 5 of the said order. 2. Further to our comments in the Annexure referred to in paragraph above: a) 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. b) In our opinion proper books of accounts as required by law have been kept by the company so far as appears from our examination of those books. c) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account. d) In our opinion. the Balance sheet and Profit and Loss Account dealt with by this report comply with the accounting standards referred to in sub- section (3C) of Section 211 of the Companies Act, 1956; e) On the basis of written representations received from the Directors, as on 30th September, 2004 and taken on record by the Board of Directors. we report that none of the Directors is disqualified as on 30th September, 2004 from being appointed as Director in terms of clause (G) of subsection (1) of section 274 of the Companies Act, 1956. f) In our opinion, and to the best of our information and according to the explanations given to us, the said accounts read together with the Companys Accounting Policies arid the Notes thereto, give the information required by the companies Act. 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted m India: i. In the case of the Balance Sheet, of the state of affairs of the company as on September 30. 2004 and ii. In the case of the Profit and loss Account, of the PROFIT for the year ended on that date For and on behalf of M/s R. Choudhary & Associates (Chartered Accountants) Date: 03.03.2005 (R.D. Choudhary) Place: Ahmedabad. Partner M. No.: 43979 ANNEXURE TO THE AUDITORS REPORT Referred to in paragraph 1 of our Report of even date 1. (a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. b) All the assets have not been physically verified by the management during the year but there is regular program of verification, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As explained the reconciliation of physical inventory of all assets with book records is almost over and the Company is in process of reconciliation of physical inventory with book records in respect of all the assets. c) During the year, Company has not disposed of any substantial/major part of all fixed assets. 2. (a) As explained to us. the inventory has been physically verified during the year by the management in our opinion, the frequency of verification is reasonable. (b) In our opinion and according to the information arid explanations given to us. the procedures of physical verification of inventory followed by the management are reasonable and 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 explanations given to us arid on the basis of our examination of the records of inventory. the company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to the book records were not material and have peen property dealt with in the book of accounts. 3. (a) According to information and explanations given to us, the company has not granted any loans, secured or unsecured to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 (b) According to information and explanations given to us in our opinion the company has not granted loans and hence the rate of interest and other terms and conditions thereof are not prima facie, prejudicial to the interest of the company. (c) According to information and explanations given to us, the company has not granted any loans secured or unsecured to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. (d) There is no overdue amount of loan granted to the company listed in the register maintained under section 301 of the Companies Act, 1956. (e) According to information and explanations given to us, the company has not taken any loans, secured or unsecured to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act. 1956. (1) According to information and explanations given to us, in our opinion, the company has not taken loans and hence the rate of interest and other terms and conditions thereof are not prima facie, prejudicial to the interest of the company. (g) According to information and explanations given to us, the company has not taken any loans secured or unsecured to companies, firms or other parties listed n the register maintained under section 301 of the Companies Act. 1956 4. In our opinion and according to the information and explanations given to us there are adequate internal control procedures commensurate with the size of the Company and nature of its business with respect to the purchase of inventory and fixed assets and with regard to the sale of goods & services. During the course of our audit no major weakness has been noticed in tire internal controls. 5. In respect of transactions entered in the register maintained in pursuance of section 301 of Companies Act, 1956.; (a) Based on audit procedures applied by us to the best of our knowledge and belief and according to the information and explanations given to us, we are of the opinion that the transactions that needed to be entered into the register maintained under section 301 have been so entered. (b) According to the information and explanations given to us and excluding certain transaction of purchase of goods and material of special nature for which alternate quotations are not available, in our opinion the transactions have been made at prices which are prima facie reasonable heaving regard to the prevailing market prices at the relevant time. 6. In our opinion and according to the information and explanations given to us. the Company has not accepted deposits from the public and therefore. the provisions of Section 58A and 58AA or any other relevant provisions of Companies Act. 1956. and Rules there under are not applicable to the Company. 7. In our opinion the Company has internal audit system commensurate with the size and nature of its business. 8. We have broadly reviewed the books of account maintained by the Company. The Company is required to maintain cost records as prescribed by the Central Government u/s 209(1) (d) of the Companies Act. 1956. as it carried manufacturing activity and are of the opinion that prima facie, the prescribed accounts and records have been maintained. We have not however, made a detailed examination of the records with a view to determining whether they are accurate or complete. 9. a) According to the records of the Company and information and explanations given to us. the Company has been generally regular in depositing undisputed statutory dues including Provident Fund. Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth-Tax, Service Tax, Customs Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities during the year. b) As per the information arid explanations to us, the following are the particulars of disputed dues on account of income tax, sales tax. Wealth Tax. Service Tax, custom duty and excise duty and cess matters which have not been deposited: SN Particulars Where dispute is pending Amount Rs. 1. Excise Duty Dy. Comm. C.Ex, Div.IV. Ahmedabad-II 1102057 2. Excise Duty High Court of Gujarat Ahmedabad 1057479 3. Excise Duty Dy. Comm. C.Ex. Div.IV. Abad II and CEGAT Mumbai 8656276 4. Excise Duty Dy. Comm. C.Ex. Div.IV. Ahmedabad II 94410 5. Excise Duty Adl. Comm. C. Ex. Ahmedabad II 139856 6 Excise Duty Dy. Comm. C.Ex. Div.IV. Ahmedabad II 305702 7. Service Tax Dy. Comm. Of Service Tax. Ahmedabad 328973 8. Custon Duty Custom and Central Excise Settlement Comm. Mumbai 7124409 9. Penalty on Ass. Comm of Sales Tax Sale Tax Ahmedabad 287853 10. The company does have accumulated losses, which are more than 100% of its networth as at the end of the year. The company has been classified as Sick Industry u/s. 3 (1) of the Sick Industries (Special) Provision Act 1985 wide order dated 28.02.2003 of B.I.F R. The Company has not incurred cash losses during current and the immediately preceding financial year. 11. Based on our audit procedures and on the basis of information and explanations given by management, we are of the opinion that the Company has defaulted in the repayment of dues to financial institutions, banks and debentures and other securities. The company is under final negotiations with the Institutions for restructuring of its loans as the company has become sick. Name of Financial Institution/Bank Amount in default (in lacs) IFCI 3630.35 GSFC 392.58 Canbank Mutual Fund 363.07 UTI 206.96 Others 388.08 12. According to the information and explanations given to us the Company has not granted any loans advances on the basis of security by way of pledge of shares, debentures and other securities. 13. The provisions of any special statute, applicable to Chit Fund, Nidhi or Mutual Benefit Fund/Societies are not applicable to the Company. 14. (a) Based on our audit procedures and to the best of our knowledge and belief-and according to the information and explanations given to us. we are of the opinion that the company is maintaining proper record of the transactions and contracts of dealing in shares, securities, debentures and other investments and that timely entries have been made in these records. (b) Based on our audit procedures and to the best of the best of our knowledge and belief and according to the information and explanations given to us. the shares, securities. debentures and other investments have been held by the Company in its own name. 15. According to the information and explanations given to us the Company has not given any guarantee for loans taken by others from banks and financial institutions. 16. To the best of our knowledge and belief and according to the information and explanations given to us, term loans availed by the Company were. prime facie, applied by the company during tile year for the purposes for which the loans were obtained. 17. To the best of our knowledge and belief and according to the information and explanations given to us. short term loans availed by the Company were, prime facie, not applied in long term investments during the year. 18. The Company has not made any preferential allotment to parties and companies covered under register maintained under section 301 of the Companies Act, 1956. during the year and the question of whether the price at which the shares have been issued is prejudicial to the interest of the Company does not arise. 19. According to the information and explanations to us and the records examined by us, securities and charge has not been created in respect of the debentures issue. 20. The Company has not raised money by any public issues during the year. 21. To the best of our knowledge and belief and according to the information and explanation given to us, no fraud on or by the Company was noticed or reported the year. M/s R. Choudhary & Associates (Chartered Accountants) Date : 03.03.2005 (R.D. Choudhary) Place: Ahmedabad. Partner M. No.: 43979