Bellary Steels & Alloys Ltd liquidated Auditor Reports

BELLARY STEELS AND ALLOYS LIMITED ANNUAL REPORT 2008-2009 AUDITORS REPORT To The Members, M/s. Bellary Steels and Alloys Limited., S. 10/11,Anantapur Road, BELLARY-583 101 1. We have audited the attached Balance Sheet of M/s. Bellary Steels & Alloys Limited, as at 31st March 2009; the Profit & Loss Account; and the Cash Flow Statement for the year ended as on that date, annexed thereto. 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. 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, evidences 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 statements presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditors Report) Order, 2003, duly amended by the DCA notification GSR 766(E) dated 25th November 2004, (hereinafter to be referred to as the Order) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order, to the extent applicable. 4. Further to our comments in the Annexure referred to 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 purpose of our audit; ii) In our opinion, proper books of account as required by law have been kept by the company so far as it appears from our examination of those books; iii) The Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report are in agreement with books of account; iv) In our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report comply with Accounting Standards referred to in sub section (3C) of section 211 of the companies Act 1956, except as stated in Notes on accounts No. 20,26 and 27. v) On the basis of written representations received from the directors as on 31st March 2009 and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 31st March 2009, from being appointed as directors in terms of clause (g) of Sub-Section(1) of Section 274 of the Companies Act, 1956. vi) In the year 2002-03, the company has created Deferred Tax Asset in pursuance of AS-22, Accounting for taxes on Income amounting to Rs 85.50 crores. As the virtual certainty does not exist to substantiate that the company would generate sufficient taxable income in future, we are of the view that the continuation of deferred tax asset shall be discontinued by the company. vii) Subject to the above, in our opinion and to the best of our information and according to the explanations given to us, the said accounts read with significant accounting policies and notes to accounts, 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 in India; a. In the case of Balance Sheet, of the state of affairs of the Company as at 31st March 2009; b. In the case of Profit and Loss Account, of the loss for the year ended on that date; and c. In the case of Cash flow Statement, of the Cash Flows for the year ended on that date. For Manohar Chowdhry & Associates Chartered Accountants (CA. ASHOK KUMAR DODDI) Place: Bangalore Partner Date : 31st August, 2009 M. NO.: 217909 THE ANNEXURE REFERRED TO IN PARAGRAPH-3 OF OUR REPORT TO THE MEMBERS OF M/S. BELLARY STEELS AND ALLOYS LIMITED, BELLARY FOR THE PERIOD ENDED 31ST MARCH 2009. WE REPORT THAT: 1. a) The Company has maintained records showing full particulars including quantitative details and situation of Fixed Assets. However, item-wise value in respect of assets other than land and buildings are not available since the assets acquired are added to the block value of the assets. b) Verification of fixed assets is being conducted in a phased manner by the management designed to cover all assets over a period of three years, which in our opinion is reasonable having regard to the size of the Company and the nature of assets. The discrepancies noticed on such verification were not material and have been properly dealt with in the books of account. c) Some of the fixed assets have been disposed of during the year. However, in our opinion and according to the information and explanations given to us, the ability of the Company to continue as a going concern is not affected. 2. a) The inventory of the Company (excluding consignment stocks with third parties) has been physically verified by the management during the year according to a phased manner normally so designed that each material item is physically verified at least once in a year and at more frequent intervals in appropriate cases. We are given to understand that there was no consignment stock lying with the third party at the end of the year. In our opinion the frequency of verification is reasonable. b) The procedures of physical verification of Inventory followed by the management are reasonable and adequate in relation to the size of company and nature of its business. c) The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and book records were not material and accordingly dealt in the books. 3. a) According to the information and explanation given to us, the company has, during the year, not granted any secured or un secured loans to companies, firms or other parties covered in the register maintained under section 301 of the companies Act 1956. Accordingly paragraph 4 (iii) (a), (b),(c),(d) of the order, are not applicable. e) The company has taken interest free unsecured loans from the parties covered in register maintained u/s. 301 of the Companies Act. The details of which are mentioned here below: Name of the Maximum amount due at any Balance due as at the end Directors/ Parties time during the year of the financial year Amount (Rs.) Amount (Rs.) Mr. S. Madhava 29,49,33,086 29,45,85,496 Smt. S. Parvathi 1,07,50,000 1,07,50,000 Bellary Steel 8,89,256 7,83,596 Rolling Mill f) As we have not been provided with the terms and conditions of loan agreement, we are unable to comment on whether the terms and conditions of the said loans are prejudicial to the interest of the company. g) The company has not been regular in payment of principal portion of loan taken from the parties referred above. 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 regard to purchase of inventory, fixed assets and for sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in Internal Controls. 5. According to the information and explanation given to us, we are of the opinion that the transactions that need to be entered in the register maintained u/s. 301 of the Companies Act, 1956 have been entered. 6. The Company has not accepted any deposits from the public during the year. Consequently, the provisions of section 58A, 58AA or any other relevant provisions of the companies Act, 1956 and the companies (Acceptance of Deposits) Rules, 1975 are not applicable to the company. 7. The Company has an Internal Audit system on a quarterly reporting basis. However, considering the size of the company and the nature of its business in our opinion, the same needs to be done on monthly basis. 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 sec. 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. We have not, however made a detailed examination of the same. 9. a) According to the records of the company, undisputed statutory dues including provident fund, employees state insurance, investor education and protection fund, income tax, sales tax, wealth tax, service tax, customs duty, excise duty and other statutory dues have been generally regularly deposited with the appropriate authorities. 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. b) According to the information and explanations given to us, there are dues of Sales Tax, Income Tax, Excise Duty, Cess, which are disputed, and the forums where the disputes are pending is mentioned here below. Name of the Maximum Balance due Directors/ amount due as at the end Parties at any time of the during the year financial year Amount (Rs.) Amount (Rs.) Mr. S. Madhava 29,49,33,086 29,45,85,496 Smt. S. Parvathi 1,07,50,000 1,07,50,000 Bellary Steel 8,89,256 7,83,596 Rolling Mills b) According to the information and explanations given to us, there are dues of Sales Tax, Income Tax, Excise Duty, Cess, which are disputed, and the forums where the disputes are pending is mentioned here below. Name of the Nature of Amount of Period to Forum where Statute dues Tax due which the dispute is pending (Rs.) amount Relates Central Disputed 4,77,292 1991-92 Appeal filed Sales Turnover to before Karnataka Tax 1995-96 Appellate Tribunal KST & Disputed 10,51,83,487 1996-97 Supreme Court Central Turnover From Appeal filed with the Sales Tax 1997-98 to Tribunal and 2000-01 Commissioner. Disputed Entry Tax Turnover 24,464 1994-95 Appellate Tribunal, Bangalore. Entry Tax Disputed 6,50,804 1995-96 Appellate Turnover Tribunal, Bangalore. Entry Tax Disputed 7,42,345 1996-97 Appellate Turnover Tribunal, Bangalore. Income Tax U/s 234A, 2,17,42,739 A.Y.1997-98 Income Tax 234B, 234 C, Appellate Additional Tribunal Tax U/s 154, Bangalore disallowance of Lease Rentals and Interest on Lease Rentals Sales Tax Disputed 10,40,000 1990-91 Special Turnover Appellate Tribunal Chennai Central MODVAT 2,18,14,814 2002-03 CESTAT, Excise disallowed Chennai Central MODVAT 1,43,47,222 1998 CESTAT Excise disallowed Bangalore Central MODVAT 2,74,280 Sep 93 CEGAT, Excise disallowed Bangalore Central MODVAT 14,79,180 April 02 CEGAT,Chennai Excise disallowed Central MODVAT 7,19,511 Sep 02 Commissioner Excise disallowed (Appeals); Mangalore Central MODVAT 2,18,14,814 2002-03 CE, Belgaum Excise disallowed CESTAT Central Stock 6,18,71,454 2000-01 Commissioner of Excise Variation CE, Belgaum Central CENVAT 28,26,587 2001-02 CESTAT,Chennai. Excise Utilization Central Stock 7,46,24,640 2002 CESTAT,Bangalore Excise Variation Central ISP cenvat 10,21,10,684 2008-09 CESTAT Excise credit Bangalore disallowed Central MODVAT 17,37,249 July 02 Commissioner of Central ISP cenvat 10,21,10,684 2008-09 CESTAT, Excise utilized in Bangalore existing disallowed 10. In our Opinion,the accumulated losses of the company at the end of the financial year have eroded the entire net worth of the company. Further, the company has incurred cash loss in the financial year covered by our audit report and the immediately preceding financial year. BANKS Period of default Rs. in WORKING CAPITAL LOANS lacs 1 HDFC 7 years 3 months 5452 2 Dhanlakshmi Bank Ltd 9 years 6983 3 Central Bank of India 9 years 6 months 5938 4 Indian Bank 9 years 7 months 3567 5. LOAN PORTFOLIO TAKEN OVER BY ARCIL a. State Bank of India 7 years 5 months 8642 b. ICICI Bank 8 years 4 months 8247 c. Punjab National Bank 8 years 5834 d. The South Indian Bank Ltd. 8 years 9 months 8821 e. State Bank of Travancore 7 years 5 months 4369 f. State Bank of Mysore 8 years 9 months 3306 g. Dena Bank 9 years 6 months 3217 h. Bank of Maharashtra 7 years 10 months 5750 i. Bharath Overseas Bank 8 years 8 months 4072 TERM LOANS 1 IDBI 9 years 1507 2 IIBI 9 years 20 LOAN PORT FOLIO TAKEN OVER BY ARCIL a. ICICI 9 years 1462 TERM LOANS (ISP) 1 IDBI 8 years 6 months 46659 2 IFCI 8 years 6 months 26991 3 IIBI 8 years 6 months 4987 4 Exim Bank 6 years 6 months 6703 LEASE FINANCE 5 Canara Bank 10 years 3 months 3688 6 KSFC 10 years 3 months 10043 LOAN PORT FOLIO TAKEN OVER BY ARCIL a. ICICI 7 years 6 months 34217 b. State Bank India 5 years 6 months 24997 c. Punjab National Bank 5 years 6 months 9786 d. State Bank of Mysore 6 years 6 months 4684 e. Dena Bank 6 years 6 months 9190 f. Bank of Maharashtra 6 years 6 months 7421 11. In our opinion and according to the information and explanations given to us, the company has defaulted in repayment of dues to financial institutions and banks. The details of defaults are as follows: 12. The Company has not granted loans or advances on the basis of security by way of pledge of Shares, Debentures and other Securities. 15. In our Opinion, the company is not a chit fund or a nidhi or mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the company. 14. In our opinion, the company is not dealing 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. 15. The company has not given any guarantee for loans taken by others. 16. In our opinion, the company has not raised any term loans during the year under audit. 17. According to the information and explanations given to us and on the basis of 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 investment. 18. According to the information and explanation given to us, during the year under our audit the company has not made any preferential allotment of equity shares to the parties listed in the registered maintained u/s. 301 of the Companies Act. 19. According to the information and explanations given to us, during the year under audit the company has not issued any debentures. 20. According to the information and explanations given to us, during the year under audit, the company has not raised any money by way of public issue. 21. According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit. For Manohar Chowdhry & Associates Chartered Accountants (CA. ASHOK KUMAR DODDI) Place: Bangalore Partner Date : 31st August, 2009 M. NO.: 217909