enkay texofood industries ltd Auditors report

ENKAY TEXOFOOD INDUSTRIES LIMITED ANNUAL REPORT 2001-2002 AUDITORS REPORT To The Members of ENKAY TEXOFOOD INDUSTRIES LTD We have audited the attached Balance Sheet of ENKAY TEXOFOOD as at 31st MARCH 2002 and also the Profit INDUSTRIES LIMITED and Loss Account 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 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. As required by the Manufacturing and Other Companies (Auditors Report) Order, 1988 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. 1 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 purposes of our audit; ii. 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. iii. The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account. iv. In our opinion, the Balance Sheet and Profit 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; V. No Provision has been made for the debts amounting to Rs. 838387852 which have become long overdue and are doubtful of recovery,(Note 6 in Schedule 17). vi. No statement of accounts and/or confirmation of balances of Sundry Debtors, Sundry Creditors, Loan and Advances, Loan from Financial institutions, Banks and other parties have been produced before us and consequential impact, if any, could not be ascertained, (Note 3 and 8 in Schedule 17). vii. Provision has not been made for interest on working capital loans and term loans from banks and financial institutions since the same is also not been applied by the banks and financial institutions. Estimated interest on working capital loans and term loans of the banks and financial institutions, interest for the year under review is Rs. 58 Crores and thus the Loss for the year is lower to that extent.(Note 8 in Schedule 17). viii. No provision for Provident Fund, Family Pension Fund and Tax Deducted at Source has been made, amount of which is presently not ascertainable, due to non-compilation of information and records of the Company during the year. (Note 9 in Schedule 17). 2.The Company has filed a reference with Board for Industrial and Financial Reconstruction (BIFR) and has been registered as Case No. 188/2001 vide letter dt. 23rd May, 2001. However pending finalisation and relevant direction from BIFR, we are unable to express any opinion presently in this regard. 3. On the basis of representations received, directors of the Company do not prima facie, have any disqualification as referred to in clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. 4. Subject to the foregoing, we are of the opinion that, to the best of our information and according to the explanations given to us, the said account read together with Significant Accounting Policies and other Notes in Schedule 17 and elsewhere in the accounts, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view: (i) in the case of the Balance Sheet, of the state of affair of the Company as at 31st March, 2002 and (ii) in the case of the Profit and Loss Account, of the Loss of the Company for the year ended on that date. For M.D. Gala Chartered Accountants M.D. Gala MUMBAI, 31st August, 2002 Proprietor Annexure referred to in paragraph 1 of our report of even date on the Accounts for the year ended 31st March, 2002 1. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. Physical verification of most of the fixed assets have been conducted by the management at reasonable intervals and no material discrepancies were noticed on such verification. 2. None of the fixed assets have been revalued during the year 3. As explained to us, the stocks of Finished Goods, Stores, Spare parts and Raw Materials have been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable. 4. In our opinion and according to the information an explanations given to us, the procedures of physical verification of the stocks followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. 5. The discrepancies noticed on verification between the physical stocks and the book records were not material and the same have been properly dealt with in the books of accounts. 6. On the basis of our examination of stock records, we are of the opinion that the valuation of stocks is fair and proper in accordance with the normally accepted accounting principles and is on the same basis as in the preceding year. 7. The Company has not taken loans from companies, firms and other parties listed in the register maintained under Section 301 of the Companies Act, 1956 and/or from the companies under the same management as defined under sub-section(1-B) of Section 370 of the Companies Act, 1956 except loans and advances taken in ordinary course. In our opinion, the rate of interest and other terms & conditions stipulated, if any, of such loans and advances are not prime facie prejudicial to the interest of the Company. 8. The Company has not granted loans to companies, firms or other parties fisted in the register maintained under Section 301 of the Companies Act, 1956 and/or to the companies under the same management as defined under sub- section (I-B) of Section 370 of the Companies Act, 1956 except advances given in the ordinary course of business. In our opinion, the rate of interest and other terms & conditions stipulated, if any, of such loans and advances are not prime facie prejudicial to the interest of the Company. 9. The panics arid employees to whom loans or advances in the nature of loans have been given by the Company are, where stipulations have been made, generally repaying the principal amounts arid interest, where applicable, as stipulated. 10. 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 purchase of stores, raw materials including components, plant and machinery, equipment and other assets and with regard to sale of goods 11. In our opinion and according to the information and explanations given to us, the transactions of purchase of goods and materials and sale of goods, materials and services made in pursuance of contract or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to Rs. 50000 or more in respect of each party have been made at prices which are reasonable having regard to prevailing market prices for such goods, materials or services at the prices at which transactions for similar goods, materials or services have been made with other parties. 12. As explained to us, the Company has a regular procedure for the determination of unserviceable or damaged stores, raw materials & finished goods and adequate provision has been made in the accounts for the loss arising on the item so determined. 13. In our opinion and according to the information and explanations given to us, the Company has not complied with the provisions of Section 58A of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to deposits accepted from the public to the extent referred to in Note 15 in Schedule 17 regarding Intimation about the defaults to be made to the Company Law Board. 14. As explained to us, having regard to the nature and size of operations of the Company, reasonable records have been maintained by the Company for the sale and disposal of realisable scrap The Companys operations do not generate any by-products. 15. In our opinion, the Company has an adequate internal audit system commensurate with the size and the nature of its business. 16 Maintenance of cost records has not been prescribed by the Central Government under Section 209(1) (d) of the Companies Act, 1956 for any product of tile Company. 17. The Provident Fund and other dues amounting to Rs. 367426/- have not been paid to the appropriate authorities and remained unpaid till date. 18. According to the information and explanations given to us undisputed amounts payable in repect of income tax, Sales tax, Professional tax, wealth tax and custom duty amounting to Rs 7722338/- were outstanding as at 31st March) 2002 for a period of more than six months from the date became payable. 19. According to the information and explanations given to us., no personal expenses of employees or directors have been charged to revenue account other than those payable under contractual obligations or in accordance with generally accepted business practice. 20. The Company has become a Sick Industrial Company within the meaning of Clause(0) of Section 3(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 and as given in Note 5 of Schedule 17 the necessary application to Board for Industrial and Financial Reconstruction (BIFR) to register itself as a sick industrial unit has been made. For M.D. GALA Chartered Accountants MUMBAI, 31st August, 2002 M.D. GALA Proprietor