cellulose products of india ltd Auditors report

CELLULOSE PRODUCTS OF INDIA LIMITED ANNUAL REPORT 2006-2007 AUDITORS REPORT TO THE SHAREHOLDERS OF CELLULOSE PRODUCTS OF INDIA LIMITED 1. We have audited the attached Balance Sheet of Cellulose Products of India Limited as at 31st March, 2007, the Profit and Loss Account and 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 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, 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 (together the Order) 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 paragraphs 4 & 5 of the said Order. 4. The Company is not a going concern in the Note No. 5 of Schedule XIV. However, the presentation of accounts has been made on the principles applicable to a going concern and the accounts do not include any adjustment relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities. 5. Subject to what we have stated above and our comments in the Annexure referred to above, we report that; (a) We have obtained all the information and explanations which to the best of our knowledge and belief wore necessary for the purposes of our audit; (b) In our opinion, Subject to Note No. 2 of Schedule XIV, proper books of account as required by law, have been kept by the Company so far as appears from our examination of the books; (c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; (d) In our opinion, subject to Note No. 2 of Schedule XIV, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in reasonable Section (3C) of Section 211 of the Companies Act, 1956; (e) No provision Has been made in the accounts in respect of: (i) Interest on term loans/working capital loans from Financial Institutions and Banks and on Debentures for the years 1998-99 to 2006-2007 amounting to Rs. 3561.57 lacs including Rs. 661.18 lacs for the year for the reason mentioned for in Note No. 2 of Schedule XIV; (ii) Doubtful debts and loans and advances of Rs. 19.42 lacs and Rs. 6.45 lacs respectively. (Vide Note No. 3 of Schedule XIV); (iii) Interest free loan of Rs. 35.42 lacs (including Rs. 10.00 lacs given during the year) given to United Esters and Nitrochem Ltd considered doubtful of recovery (Vide Note No. 7 of Schedule (iv) Interest on sales tax Rs. 2.23 lacs for the year (Vide Note No. 17 of Schedule XIV). We further report that had the observations made by us in paragraph (i)to(iv) above been considered, the loss for the year would have been Rs.720.39 lacs (as against the reported figure of Rs. 46.98 lacs), the loss carried to Balance Sheet would have teen Rs. 4821.74 lacs (as against the reported figure of Rs.1196.65 lacs), Sundry Debtors would have been Rs. Nil (as against the reported figure of Rs. 19.42 lacs), Loans & Advances would have been Rs. 87.98 lacs (as against the reported figure of Rs. 129.85 lacs), Current Liabilities would have been Rs. 179.99 lacs (as against the reported figure of Rs. 177.76 lacs). (f) Attention is invited to the following notes in Schedule XIV. (i) Note No. 4 : regarding disclosure of certain information pertaining to Small Scale Industrial Undertakings not made by the Company in he Balance Sheet for the reasons mentioned in the note; (ii) Note No. 8 : regarding remuneration of Rs. 4.48 lacs paid to Managing Director for the period 16-2-04 to 31-3-07 subject to the approval of Central Government; (iii) Note No. 14; confirmation from parties for amount due to them/from them not called for; (iv) Note No.15 : statements and confirmations of Bank Balances of Rs.30.34 lacs not obtained; (v) Note No. 16 : unclaimed Debenture Installment/Interest aggregating Rs.6.40 lacs relating to the period 1982 to 1992 not transferred to the Investment Education and Protection funds of Central Government under section 205C of the Companies Act, 1956. (g) The Company had failed to redeem its debentures on due date. The Company also failed to pay interest on debentures on due dates and the failure exceeds one year as at 31st March, 2007 therefore, all the directors are disqualified from being appointed as director in terms of clause (g) of sub-section (1) of Section 274 of the Act. Subject of foregoing, in our opinion and to the best of our information and according to the explanations given to us, the accounts read with other notes thereon give the information required by the Companies Act, 1956, in the manner so required, and give a true and fair view in in conformity with the accounting principles generally accepted in India. (i) In the case of the Balance Sheet, of the state of the affairs of the Company as at 31st March, 2007; (ii) In the case of Profit & Loss Account, of the less for the affairs of the Company as at 31st March, 2007; (iii) In the case of the Cash Flow Statement, of the Cash Flows for the year ended on that date. For, C.C. CHOKSHI & CO. Chartered Accountants Place: Ahmedabad H.P. Shah Date : 12th June, 2007 Partner ANNEXURE TO THE AUDITORS REPORT (Referred to in paragraph 3 of our report of even date) 1. The nature of Companys activities during the year have been such that clauses (ii), (viii), (xiii) and (xiv) of paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable to the Company. 2. (a) The company has maintained proper records showing full particulars including quantitative details and situations of fixed assets. (b) According to the information and explanations given to us the fixed assets have been physically verified by the management during the year and no material discrepancies have been noticed by the management on such verification. (c) During the year, the Company has disposed off a substantial part of fixed assets which has adversely affected the going concern status of the company. (Refer to Note No. 5 of Schedule XIV). 3. In respect of loans, secured or unsecured, granted or taken by the Company to or from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956, according to the information and explanations given to us : (a) The Company has granted interest free loan to United Esters & Nitrochem Limited, a Company covered in the Register maintained under Section 301 of the Companies Act, 1956. The maximum amount of loan outstanding during the year and the year and balance was Rs. 35.42 lacs. (b) In our opinion and according to the information and explanations given to us, the other terms and conditions on which the interest free loan of Rs. 35.42 lacs given (including Rs. 10.00 lacs given during the year) to United Esters & Nitrochem Limited, a company listed in the register maintained under section 301 of the Companies Act, 1956, are, prima facie, prejudicial to the interest of the Company. During the year no amount has been received from the said company. Attention is invited to Note No. 7 Schedule XIV. (c) As regards, the loan granted as stated in (a) above, terms of repayment have not been stipulated and hence question of any over due amount does not arise. (d) The Company has not taken loan from parties covered in the Register maintained under Section 301 of the Companies Act, 1956. 4. In our opinion and according to the information and explanations given o us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase fixed assets. During the course of audit, we have not observed any continuing failure to correct major weaknesses in internal controls. 5. (a) In our opinion and according to the information and explanations given to us, transactions that need to be entered into register maintained in pursuance of Section 301 of the Companies Act, 1956 have boon so entered. (b) In our opinion and according to the information and explanations given to us, there are no transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 aggregating during the year to rupees five lacs or more in respect of any party during the year. 6. The Company has not accepted deposits from the public during the year within the meaning of Section 58A and 58AA or any other relevant Provisions of the Companies Act, 1956 and the Rules framed there under. 7. In our opinion, the Company has an adequate internal audit system commensurate with the size and the nature of its business. 8. According to the information and explanations given to us in respect of statutory and other dues: (a) The Company has been generally regular in depositing with appropriate authorities undisputed statutory dues including income tax, sales tax, and other statutory dues with the appropriate authorities during the year. (b) According to the information and explanations given to us, no undisputed amount payable in respect of income-tax, sales tax, and other statutory dues except Rs. 6.40 lacs towards investor education and protection fund and Rs. 39.23 lacs towards sales-tax which are outstanding as at 31st March, 2007 for a period of more than six months from the date they became payable. (c) Details of disputed dues of excise duty and sales tax which have not been deposited as on 31st March, 2007 are given below : (i) Excise Duty of Rs. 37.17 lacs for the year 1984-85 on Sodium Alginate pending before CESTAT. (ii) Sales-tax of Rs. 65.87 lacs for the year 1990-91 and 1991-92 pending before High Court of Gujarat. 9. In our opinion, the accumulated losses of the Company are more than fifty percent of its net worth. The Company has not incurred cash losses during the financial year covered by our audit. However the company had incurred cash losses in the immediately preceding financial year. 10. In our opinion and according to the information and explanation given to us, the company has defaulted in the repayment of dues and interest to (i) banks of Rs. 336.95 lacs (ii) financial institutions of Rs. 87.05 lacs and (iii) debenture holders of Rs. 71.10 lacs. As per the order dated 20- 11-1998 of the High Court of Gujarat, the Company was permitted to take steps for sale of its fixed assets through the sale committee constituted and make repayment towards the overdue amount as mentioned above under the direction of the High Court. As per the order dated 31-07-2006 of High Court of Gujarat, the sale committee was dispersed as the disbursement of sale proceeds is completed. 11. According to the information and explanations given to us, the Company has not given any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 12. 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. 13. The company has not received any term loan during the year. 14. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that funds raised on short term basis have, prima facie, not been used during the year for long term investment, 15. 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. 16. No debentures have been issued by the Company during the year and hence the question of creating securities in respect there of does not arise. 17. During the year the Company has not raised money by public issue. 18. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the financial year. For, C.C. CHOKSHI & CO. Chartered Accountants Place: Ahmedabad H.P. Shah Date : 12th June, 2007 Partner Membership No.: 33331