INDEPENDENT AUDITORS
To the Members of Modern Terry Towels Limited
Report on the Financial Statements
We have audited the accompanying financial statements of Modern Terry Towels Limited
("the Company"), which comprise the Balance Sheet as at March 31, 2013 and
the Statement of Profit and Loss and Cash Flow Statement for the year then ended and a
summary of significant accounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation of these financial statements that give a
true and fair view of the financial position, financial performance and cash flows of the
Company in accordance with the Accounting Standards referred to in sub-section (3C) of
section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes
the design, implementation and maintenance of internal control relevant to the preparation
and fair presentation of the financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our
audit. We conducted our audit in accordance with the Standards on Auditing issued by the
Institute of Chartered Accountants of India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditors
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Companys preparation and fair presentation of
the financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of the accounting estimates made by management, as
well as evaluating the overall presentation of the financial statements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our qualified audit opinion.
Basis for Qualified Opinion
(a) Dividend for the year in respect of cumulative redeemable preference shares
amounting to Rs 184.50 lacs excluding Dividend Distribution Tax Payable
thereon (Previous year Rs 184.50 lacs ) has not been provided due to
accumulated losses. The total amount of Dividend not provided till 31st March 2013 amounts
to Rs 3136.50 lacs. (Previous year Rs 2952.00 lacs) (Note No. 1.3).
Had the Company provided for the Dividend on cumulative redeemable preference shares,
Other Current Liabilities would have been higher and balance in Statement of Profit and
Loss would have been lower by Rs 3136.50 lacs (Previous year Rs 2952.00 lacs). Profit for
the year would have been lower by Rs 184.50 lacs (Previous year Rs 184.50
lacs). A similar qualification had been given in the previous years Auditors Report.
(b) Provision for interest on certain Secured and Unsecured Borrowings amounting to Rs
32.88 lacs (Previous year Rs 72.77 lacs) (Note No. 18.1) has not been
made in accounts due to company expects waiver/relief under rehabilitation scheme
submitted to BIFR, having its impact on increasing the Loss for the Year. The total amount
of Interest not provided till 31st March 2013 amounts to Rs 567.59 lacs.
(Previous year Rs 534.71 lacs) (Note No. 4.7 & 18.1). Had the Company
provided for the Interest, Other Current Liabilities would have been higher and balance in
Statement of Profit and Loss would have been lower by Rs 32.88 lacs
(Previous year Rs 72.77 lacs) and Interest Expenses would have been higher
and Loss for the Year a would have been lower by Rs 32.88 lacs (Previous Year Rs 72.77
lacs). A similar qualification had been given in the previous years Auditors Report.
(c) The accounts of the Company have been prepared on a going concern basis though the
Board for Industrial and Financial Reconstruction (BIFR) has declared the company as a
sick company. (Note No. 24).The Financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts and
classification of liability that may be necessary if the Company is unable to continue as
a going concern. A similar qualification had been given in the previous years Auditors
Report.
We further report that, without considering items mentioned at para (c) above, the
effect of which could not be determined, had the observations made by us in para (a) and
(b) above been considered, the loss for the year would have been Rs 298.55 lacs (as
against the reported figure of Rs 265.67 Lacs), Other Current Liabilities
would have been Rs. 5988.80 lacs (as against the reported figure of Rs 2284.71 lacs), and
Debit balance of Reserves & Surplus would have been 7 12032,54 lacs (as
against the reported figure of Rs 8328.45 lacs).
Opinion
In our opinion and to the best of our information and according to the explanations
given to us, except for the effects of the matter described in the Basis for Qualified
Opinion paragraph, the financial statements give the information required by the Act in
the manner so required and give a true and fair view in conformity with the accounting
principles generally accepted in India:
(a) In the case of the Balance Sheet, of the state of affairs of the Company as at
March 31, 2013;
(b) In the case of the Statement of Profit and Loss, of the loss for the year ended on
that date; and
(c) In the case of the Cash Flow Statement, of the cash flows for the year ended on
that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order, 2003 ("the Order")
issued by the Central Government of India in terms of sub-section (4A) of section 227 of
the Act, we give in the Annexure a statement on the matters specified in paragraphs 4
• and 5 of the Order.
2. As required by section 227(3) of the Act, we report that:
(a) We have obtained all the information and explanations which to the best of our
knowledge and belief were necessary for the purpose of our audit;
(b) In our opinion proper books of account as required by law have been kept by the
Company so far as appears from our examination of those books and proper returns adequate
for the purposes of our audit have been received from branches not visited by us;
(c) The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with
by this Report are in agreement with the books of account and with the returns received
from branches not visited by us;
(d) Except for the effects of the matter described in the Basis for Qualified Opinion
paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow
Statement comply with the accounting standards referred to in sub-section (3C) of section
211 of the Act;
(e) On the basis of written representations received from the directors as on
March 31, 2013, and taken on record by the Board of Directors, none of the directors is
disqualified as on March 31, 2013, from being appointed as a director in terms of clause
(g) of sub-section (1) of section 274 of the Act.
(f) Since the Central Government has not issued any notification as to the rate at
which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it
issued any Rules under the said section, prescribing the manner in which such cess is to
be paid, no cess is due and payable by the Company.
|
For J. T. SHAH & COMPANY |
|
Chartered Accountants |
|
(Firm Registration No. 109616W) |
|
(J. T. SHAH) |
| Place : Ahmedabad |
Partner |
| Date : 28th June, 2013 |
(Membership No. 3983) |
ANNEXURE TO THE AUDITORS REPORT
Referred para 1 of our Report on Other Legal and Regulatory Requirements for the year
ended 31st March, 2013 to the members of Modern Terry Towels Limited.
1. In respect of Fixed Assets:
a. The Company has maintained proper records showing full particulars including
quantitative details and situation of Fixed Assets other than Furniture and Fixtures for
which detailed records are not maintained.
b. As per the information and explanations given to us, the fixed assets were
physically verified by the management at reasonable intervals during the period in
accordance with a programme of physical verification and no material discrepancies were
noticed on such verification as compared to the available records.
c. During the year, the Company has not disposed off any major/substantial part of the
fixed assets.
2. In respect of its Inventories:
a. The inventory has been physically verified during the period by the management. In
our opinion, the frequency of verification is reasonable.
b. The procedures of physical verification of inventories followed by the management
are reasonable and adequate in relation to the size of the Company and the nature of its
business.
c. On the basis of our examination of the records of inventory, we are of opinion that
the Company is maintaining proper records of inventory. The discrepancies noticed on
verification between the physical stocks and books records were not material.
3. In respect of loans, secured or unsecured, granted or taken by the company to/from
companies, firms or other parties covered in the register maintained under section 301 of
the Companies Act, 1956.
a. The Company has not granted any loans, secured or unsecured, to the companies, firms
or other parties covered in the register, maintained under section 301 of the Companies
Act, 1956, and therefore the paragraphs 4(iii)(a), (b), (c) and (d) of The Companies
(Auditors Report) Order, 2003 are not applicable.
b. The Company has taken loan from Companies and parties covered in the register
maintained under section 301 of the Companies Act, 1956. There is one such party covered
in the register maintained under section 301 of the Companies Act, 1956 from whom the
company has taken loan. The maximum amount involved during the year was Rs 2245.15 Lacs
and the year end balance of loans taken from such party was Rs 2245.15 Lacs.
c. In our opinion and according to the information and explanation given to us, in case
of loans taken during the year, the rates of interest, wherever applicable and other terms
and conditions are prime facie not prejudicial to the interest of the Company.
d. . There are no stipulated terms of repayment of loans taken thereon by the company
from the companies/firms/parties listed in the register maintained under section 301 of
the Companies Act, 1956. Hence we are pot able to give comment on para 4(iii) (g) of the
Companies (Auditors Report) Order, 2003.
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 the
nature of its business with regard to purchases of inventory and fixed assets and for the
sale of goods and services. During the course of our audit, no major weakness has been
noticed in the internal controls.
5. In respect of contracts/arrangements covered under Section 301 of the Companies Act,
1956:
a. Based on the audit procedures applied by us and according to the information and
explanations provided by management, we are of the opinion that the contracts or
arrangements that need to be entered into the register maintained under section 301 have
been so entered.
b. In our opinion and according to the information and explanations given to us, the
transactions made in pursuance of contracts or arrangements entered in the registers
maintained under section 301 in respect of any of the parties during the period have been
made at prices which are reasonable having regard to prevailing market prices at the
relevant time.
6. The Company has not accepted any fresh deposits during the period as per the
information and explanations given to us, in respect of deposits accepted in earlier
years, the compliance with the provisions of Section 58A, 58AA or any other relevant
provisions of the Companies Act, 1956 and rules framed there under are subject to the
order passed by the Company Law Board on 17.04.2002 whereby the Company is required
to-make repayment of deposits and payment of interest thereon in accordance with the
revival scheme approved by the Board for Industrial and Financial Reconstruction (BIFR)
under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985.
7. In our opinion, the Company has an internal audit system commensurate with the size
and nature of its business.
8. We have broadly reviewed the books of account relating to materials, labour and
other items of cost maintained by the Company pursuant to the Rules made by the Central
Government for the maintenance of cost records under Section 209 (1) (d) of the Companies
Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records
have been made and maintained.
9. In respect of Statutory Dues:
a. According to the records of the Company, the Company is regular in depositing with
appropriate authorities undisputed statutory dues including provident fund, employees
state insurance, income-tax, sales-tax, wealth-tax, Service Tax, custom duty, excise duty,
cess and other statutory dues applicable to it except there were some delay in cases of
P.F. and TDS.
b. According to the information and explanations given to us, no undisputed amounts
payable in respect of income tax, wealth tax, service tax, sales tax, customs duty and
excise duty were outstanding, as at 31st March, 2013 for a period of more than six months
from the date they became payable.
10. The accumulated losses of the Company as at 31st March, 2013 are more than fifty
percent of its net worth. The Company has incurred cash losses during the financial period
under review. However there was no cash loss during the immediately preceding financial
year.
11. The Company has defaulted in repayment of installments of dues to Financial
Institutions since 1997, amount overdue Rs 569.44 Lacs.
12. Based on our examination of documents and records and information and explanations
given to us, the Company has not granted any loans and 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. The Company is not dealing or trading in shares, securities, debentures or other
investments and hence, the requirements of para 4(xiv) are not applicable to the Company
15. The Company has given corporate guarantee to the Bank in respect of loans taken by
group companies amounting to Rs 13352.83 lacs which is still subsisting. In view of the
default in repayment and negative net worth of Borrowing Company, in our opinion the terms
and conditions on which Company has given guarantee are prima facie prejudicial to the
interest of the Company.
16. The Company has not taken any fresh term loan during the period under review.
17. According to the information and explanations given to us and on an overall
examination of the balance sheet of the Company, we report that no funds raised on short
term basis have been used for long term investments.
18. During the year, the Company has not made any preferential allotment of shares to
parties covered in the register maintained under section 301 of the Companies Act, 1956.
19. As per the information given to us, the company has created security in respect of
debentures issued in earlier years.
20. During the period, the Company has not raised any money by way of Public issues.
21. Based upon the audit procedures performed and information and explanations given by
the management, we report that no fraud on or by the Company has been noticed or reported
during the course of our audit
|
For J. T. SHAH & COMPANY |
|
Chartered Accountants |
|
(Firm Registration No. 109616W) |
|
(J. T. SHAH) |
| Place : Ahmedabad |
Partner |
| Date : 28th June, 2013 |
(Membership No. 3983) |
+91-9892691696
