arun processors ltd Auditors report

ARUN PROCESSORS LIMITED ANNUAL REPORT 2003-2004 AUDITORS REPORT TO THE MEMBERS OF ARUN PROCESSORS LTD. We have audited the attached Balance Sheet of M/s. ARUN PROCESSORS LIMITED, as at 31st March 2004 and also the Profit and Loss Account for the year ended on that date annexed thereto and cashflow statement for the period ended on that date. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with audit 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 1. As required by the 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 matter specified in paragraphs 4 & 5 of the said order. 2. Further to our comments in the Annexure referred to in paragraph (1) above: a. We have obtained all the information and explanations which to the best of our knowledge and belief where necessary for the purpose of our audit. b. In our opinion, proper books of accounts as required by law have been kept by the company so far as it appears from our examination of the books. c. The Balance sheet and Profit and Loss Account dealt with by this report are in agreement with the books of accounts. d. In our opinion the profit and loss account and Balance sheet 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 confirmations received from the directors as on 31-03-2004 and taken on record by the Board of Directors, we report that none of the Directors are disqualified as on 31.03.2004, from being appointed as a director in terms of clause (g) of sub-section(i) 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 profit & loss account and the balance sheet read together with the notes thereon gives the information required by the companies Act, 1956 in the manners required and give a true and fair view in conformity with the accounting principles generally accepted in India subject to: i) The Company has entered into One Time Settlement (OTS) with Banks and Financial Institutions. According to the OTS, out of the total amounts due to various Institutions, a certain portion has been waived and the balance is to be paid in instalments as scheduler. This OTS is subject to the approval of BIFR and consent Decree obtained from DRT and also on payment of the instalments as stipulated (the company is yet to obtain the above approvals and has also not paid the instalments as per schedule). On the failure to adhere to the conditions prescribed in the OTS, the same is liable to be cancelled and the entire outstanding has to be repaid with the contracted rate of interest. Pending these, the company has already written back a sum of Rs.13,47,61,262/- representing the interest portion in the profit and loss account and adjusted Rs.6,46,77,275/- representing the principal portion against the opening balance of profit and loss account, being the reduction in liability due to banks and financial institutions and has also not provided interest amounting to Rs.7,64,56,225/- in the books of accounts based on the above settlement. ii) The Classification of Creditors pending for a long period and relating to projects at the time of inception, as "PROJECT AND LONG TERM CREDITORS" and inclusion of the same under the head "UNSECURED LOAN" to the extent of Rs.2,06,03,143/-. iii) The non provision of interest on unsecured loans amounting to Rs.16,87,000/-. Consequent to this, the net profit for the period has been overstated to the extent of Rs.21,29,04,487/- , the total loss has been understated to the extent of Rs.27,75,21,762/-/- secured loans has been understated to the extent of Rs.19,93,78,537/-, the unsecured loans has been overstated to the extent of Rs.1,89,16,243/- (Rs.2,06,03,243-Rs.16,87,000), and the current liabilities has been understated to the extent of Rs.2,06,03,243/- and give a true and fair view: i. In the case of the Profit and Loss Account of the profit for the period ended 31st March 2004; and ii. In the case of the Balance Sheet of the state of affairs of the Company as at 31st March 2004. iii. In the case of cash flow statement, of the cash flows for the year ended on that date. As required by the companies (Auditors Report) order, 2003, made by the Central Government under section 227(4A) of the Companies Act, 1956, we state that: 1) a. The Company has maintained proper records showing full particulars including quantitative details and situation of Fixed Assets. b. The fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such verifications. c. Fixed assets of a substantial part, affecting the going concern, have not been disposed off during the year. 2) a. The Management has carried out physical verification of inventory at reasonable intervals. b. The procedure of verification of inventory followed by the Management is reasonable and adequate in relation to the size of the Companies and the nature of its business. c. The company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification. 3) The Company has not granted secured or unsecured loans to companies covered in the Companies act, 1956. The Company has not taken any loans, secured or unsecured, from Companies, firms or other parties covered in the Register maintained under section 301 of the Companies Act, 1956. 4) There is an adequate internal control procedure commensurate with the size of the company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. 5) a. Transactions that need to be entered into a register in pursuance of Section 301 of the Companies Act, 1956, have been so entered. b. Transaction exceeding the value of Rs.5,00,000/- in respect of any such party, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time. 6) The Company has not accepted any deposits from the public. 7) The Company has an interval audit system commensurate with its size and nature of its business. 8) As explained to us, the company is maintaining reasonable records for the sale and disposal of wastes and scraps. There is no by-products in the process. 9. We have been informed that the Central Government has not prescribed maintenance of cost records under section 209(1)(d) of the Companies Act, 1956. 10) a. According to the information and explanations given to us, no disputed amount payable in respect Income Tax, Wealth Tax, Sales Tax. Customs Duty and cess were in arrears as at March 31, 2004 for a period of more than six months from the date they became payable except the following statutory obligations, the details of which are given below: Particulars Period to which Amount Reason for non- Amount the payment due to be payment of Paid pertains paid amount The company has obtained an order from the Honourable High Court of 1.3.2002 to Rs.6.40 Madras, vide order Rs.1.60 31.8.2002 Lakhs dated 25.09.2003 in Lakhs W.P.No.: 46331/20002 & W.P.M.P. Number 67441/2002 with the conditions that the company has, to Provident pay Lakhs Rs.53.358/- Fund once in two months commencing from 31.10.2003 1.9.2002 to Rs.15.77 The company has Rs.6.86 31.10.2003 Lakhs obtained stay order Lakhs from Honourable High Court of Madras, dated 21.6. 2004 in WAMP No.: 3192/3193/2004 1.9.2002 to Rs.4.46 The Company is yet Nil 31.10.2003 Lakhs to discharge the liability Excise Fin. Year Rs.478 The company has Nil Duty 1998-1999 Lakhs obtained stay from Honourable High Court of Madras, vide order dated 28.6.2004 in WPMP No.: 47008/2003. b. According to the information and explanations given to us, details of dues of sales tax, Income-tax, excise duty and service tax which have not been deposited on account of any dispute are given below: Particulars Financial year to which Forum where Amount the matter pertains dispute is pending Commissioner of Income 1997-1998 Tax, (Appeals)-I Rs.11 Lakhs Coimbatore Income Tax 1997-1998 Assistant Commissioner, Rs.15.65 Circle II, Erode. Lakhs 11) The Company has defaulted in repayment of dues to financial institution or banks. Amount due Amount Particulars to be paid paid before before 31-3-04 31-3-04 Due to Bankers under OTS: State Bank of India Rs.46 Lakhs Rs.2 Lakhs S. Bank of Travancore Rs.17 Lakhs Rs.1 Lakh State Bank of Mysore Rs.18 Lakhs Rs.1.1 Lakh Due to Financial Institutions under OTS ICICI Rs.346 Lakhs Rs.137 Lakhs 12) The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities and hence maintenance of adequate documents and records for such cases does not arise 13) The company at the end of the year has accumulated losses exceeding 50% of its net worth. The company lies not incurred cash losses during the year covered by our audit and the immediately preceding financial year. 14) The Company has not given any guarantee for loans taken by others from banks or financial institutions. 15) In our opinion the Company is not a chit fund or a nidhi mutual benefit fund / society. Therefore. provisions of clause 4(xiii) of the Companies Act (Auditors Report) Order, 2003 are not applicable to the company. 16) In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the company. 17) As per the information and explanations given to us. Term loans borrowed by the company were applied for the purpose for which the loans were obtained. 18) According to the information and explanations given to its, funds raised on short term basis have not been used for long term investments and vice versa. 19) On the basis of the information and explanations furnished by the company no fraud on or by the Company has been noticed or reported during the year. 20) According the information and explanations given to us no preferential allotment of shares has been made by the company to companies, firms or parties listed in the register maintained under section 301 of the Companies Act, 1956. 21) During the period covered by our audit report, the Company has not raised any money by public issue. To be readwith our report of even date FOR M/S N.C. RAJAGOPAL & CO., CHARTERED ACCOUNTANTS Place: Singampettai. N.C. SAMPATH Date : 30-07-2004 PARTNER