gsl india ltd Auditors report

GSL (INDIA) LIMITED ANNUAL REPORT 2007-2008 AUDITORS REPORT To The Members, We have audited the attached Balance Sheet of M/s. GSL (India) Limited as at 31St March, 2008 together with the Profit and Loss Account and also 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. 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 managements, 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 as amended by the Companies (Auditors Report) (Amendment) Order 2004 (together the Order) issued by the Central Government of India in terms of Section 27(4A) of the Companies Act, 1956 and on the basis of such checks as we considered appropriate and according to the information and explanation given to us, we annex hereto a statement on the: matters specified in paragraphs 4 & 5 of the said order. 2. Further to our comments referred to in paragraph (1) above, 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 the audit. (b) In our opinion, proper books of accounts .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 accounts. (d) In our opinion Balance Sheet , Profit and Loss Account and cash flow statement comply witch the Accounting Standards as specified in sub-section 3 C of Section 211 of the Companies Act, 1956 except such as: * Accounting Standard-11: - For non-conversion of unsettled liability in foreign currency as referred in Note No. 32. * Accounting Standard-15: - On retirement benefit in respect of gratuity and leave encashment as referred in Note No.3. (e) Based on representation made by all the directors of the Company and the information and explanations as made. available; directors 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. 3. In our opinion and to the best of our information and according to the explanation given to us, the said accounts read together with the significant Accounting -Policies and other notes therein, schedule -14 generally, give the information as required by the Companies Act, 1956 in the manner so required and give subject to:- * Note No. 2 (a) :- Regarding non confirmation of estimated amount of contract remaining to be executed of Rs. 5,96,50,991/- * Note No. 2 (e) :- Regarding non-confirmation of guarantees given by Bankers of Rs. 98, 52, 5471- * Note No. 3:- In respect of gratuity and leave encashment liability un- provided for, amount is unascertained. * Note No. 4:- Sundry balances including Financial Institutions and Bankers are subject to confirmation, reconciliation and adjustment required, if any. Amount is unascertained. * Note No. 5:- Pending effects of ARCIL restructuring proposal for the Company for which amount isunascertained. * Note No. 6:- Non-provision of penal interest/liquidated damages on various loans. Amount is not ascertained. * Note No. 7 :-.Non-provision of interest on secured loan from financial institutions -of Rs: 1,09,32,25,302/- (Accumulated Rs. 6,66,96,12,507/-) * Note No. 8 :- Non-provision of interest on other secured/unsecured loan Rs. 7,42,14,497/(Accumulated Rs-74,45,43,051/-) * Note No.9:- Non-provision of interest on over due hire charges Rs.12.51 Lakhs. (Accumulated Rs.162.64 Lakhs) and non provision of hire charges amount unascertainable. * Note No.10:- Non-provision of interest on over due bill Rs. 58,35,577/- (Accumulated Rs.6,07,11,808/-) * Note No. 11 :- Non-provision of interest on overdue lease rental amount unascertainable and because of non provision of lease rentals in earlier years accumulated losses are lower by Rs. 12,93,39,426/- * Note No. 13: - Non provision of Depreciation on Fixed Assets up to Accounting year ended 31St March-2006 Because of that Fixed Assets are over stated and accumulated losses are still understated to the extent of Rs.57,42,43,698/-. * Note No. 15:- Current Liabilities include overdue bills discounting of Rs. 6,50,71,897/-. Hence unsecured loans are under stated to that extent. * Note No. 16: - Regarding remuneration to Directors being paid in excess of Rs 8880/- in previous year and subject to compliance of section 314 of the Companies Act, 1956. * Note No. 18:- Regarding non-provision of loss on account of damages in wind turbine having book value of Rs.876.41 Lakhs. Amount is not ascertained. * Note No. 19:- Non-provision of loss on slow moving inventory Rs.30.54 Lakhs. Amount is not ascertained * Note No. 21:- Non-provision of dividend on cumulative redeemable Preference Shares of Rs. 35 Lakhs (Accumulated dividend of Rs. 344.15 Lakhs). * Note No. 22 :- Non-provision for impairment in value of capital work in progress and preoperative expenses amounting to Rs. 2,39,13,753/- and Rs.9,80,53,916/- respectively as exact amount is not ascertainable at this stage;. * Note No. 23:- Non-provision for doubtful debts and doubtful advances, amount ks. 2, 21,81,036/- & Rs. 2,99,02,980/- respectively. * Note No. 26:- Non-provision of sales tax liability of Rs.51,32,327/-. Due to this loss is under stated to that extent. * Note No. 33:- Regarding foreign exchange gain of Rs. 37,80,618/- treated as income which is not accordance with Schedule VI of the Companies Act. Due to this, loss of the year is under stated to that extent. Note No.34: - Non Provision of Fringe benefit Tax of Rs3,31,222/- Due to this, loss of the year is under stated to that extent. Accumulated loss is lower by Rs.780855)- * We further report that without considering items mentioned for Note No. 3, 4, 5, 6, 9, 11, 18, 19 & 22 above the effect of which could not be determined. Had the observations made by us in paragraph :I above been considered the loss for the year would have been Rs.1,28,69,32,5461- (as against the reported figure of Rs, 5,23,28,987/-) and accumulated loss (including loss of earlier years un-providedfor Rs. 8,11,87,61,527/-) would have been Rs.11,62,60,10,666/- (as against the reported figure of Rs. 2;27,26,46,580/-). Due to increase in loss for the; year after considering the observations as referred in Para - 3 above, earning per share basic and diluted (after extra-ordinary items and effects of Depreciation) reported in Note No. 31 of Schedule - 14 would be Rs. (-) 57.93 as against reported figure of Rs. (-) 2.47. 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 Balance Sheet of the State of affairs of the Company as at 31St March, 2008. (ii) In the case of Profit and Loss Account of the Loss for the year ended on that date. (iii) In the case of Cash Flow statement of the cash flow of the company for the year ended on that date For DINESH S. AGARWAL & ASSOCIATES, CHARTERED ACCOUNTANTS Place: Mumbai DINESH S. AGARWAL Date : 30.06.2008 PARTNER MEMBERSHIP NO. 34693 ANNEXURE TO THE AUDITORS REPORT (Referred To its Paragraph 1 thereof) As required by the Companies (Auditors Report) Order 2003 issued, by the Company Law Board in terms of Section 227 (4A) of the Companies Act, 1956 and on the basis of such checks. as we considered appropriate, we report that: 1 a. The Company has not .maintained; proper records showing full particulars including quantitative details and situation of Fixed Assets- 1 b. We are informed that Fixed Assets has not been physically verified by the management during the year and discrepancies between book record and physical verification, if any, will be determined only after the register is completed /updated and verification is carried out. 1 c. The Company has not disposed off substantial part of Fixed Assets during the year, which could affect the going concern status of the Company. 2 a. The inventory has been physically verified during the year by the Management at reasonable intervals. 2 b. The procedures followed by the Management for physical verification of stock are in our opinion reasonable and adequate in relation to the size of the Company and nature of its business. - 2 c. In our opinion and according to the information and explanation given to us, the Company .has maintained proper records of its inventories and discrepancies were noticed on verification between the physical stock & book stock were not material-have been- properly dealt with in the books of accounts. 3 a. The Company has not granted any loan during the year secured or unsecured to Companies, Firms or other parties covered in the Register maintained u/s. 301 of the Companies Act, 1956. 3 b. The Company has not taken any unsecured loan. during the year. However, the Company had taken an Interest free Unsecured Loan of Rs. 9 Lacs from a Director of the Company in the previous year. Out of this amount Rs.6,11,263/- has remained outstanding at the beginning and at the, end of year. As informed to us, other Terms & Conditions of the said Loan are not prejudicial to the interest of the Company. 4. In our opinion and according to the information and explanation given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase and sale of inventory, fixed assets and with regard to the sale of goods. During the course of our audit we have not observed any continuing failure to correct major weakness in internal controls except in respect of recovery of Debts & Advances to parties for goods supplied which needs to be strengthened. 5 a. In our opinion according to the information and explanation given to us the contract and arrangement that need to be entered to the register maintained U/S 301 of the Companies Act, 1956 have been entered in the said register. 5 b. In our opinion and according to the information and explanation given to us, the Company has not made any transaction in pursuance of contract or arrangement entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the year to Rs. 5 Lakhs or more in respect of any party. 6. In our opinion and according to the information and explanation given to us, the company has not accepted any deposit during the year within meaning of Section 58A and 58AA or any other related provisions of the Companies Act, 1956 and the rules framed there under. 7. The company has internal audit system commensurate with its size and nature of its business. However, same needs to be regularized and strengthen. 8. We have broadly reviewed the books of account maintained by the company pursuant to the order made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the: Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been maintained. We have not, however, made a detailed examination of the record so as to ascertain whether they are accurate or complete and these accounts are subject to audit by Cost Accountants. 9 a. The Company has deposited Employees Staff Insurance dues with some delay. However, the Company is irregular in depositing undisputed Statutory dues including Provident Fund, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess and any other material statutory dues wherever applicable with the appropriate authorities. We are informed that there are arrears of outstanding statutory dues as on 315, March 2008 for more than six months, which are as under: Provident Fund Dues Rs. 13,53,764 (Since Paid Rs.1,58,305) Sales Tax Rs. 76,15,972 T C. Cess. Rs. 5,29,619 GEB Payable Rs. 3,74,69,604 Wealth Tax Rs. 5,59,000 Income Tax Rs. 62,50,000 Fringe Benefit Tax Rs. 5,98,680 Service Tax Rs. 46,447 T.D.S. Rs. 51,596 9 b. According to the information and explanation given to us, the particulars of disputed statutory dues as at 31-03.2008 are listed below: Name of the Nature of Amount in Period to Forum where Statute Dues Rs. Which relate dispute ending Central Excise Central 1990-91 & Asst Commr., of Duty Act 1944 Excise 2152898 1991-92 Excise Ankleshwar Duty - - 1480702 1994-95 Add. Commr., of Excise Surat - - 4130638 1999-2000 CESTAT, Ahmedabad - - 783499 2000-2001 Add. Commr., of Excise, Surat Income Tax Income 38233785 1996-97 ITAT Act 1961 Tax Gujarat Sales 1946089 2001-2002 DC of Sales Tax Sales Tax Tax To Mumbai 2003-2004 Delhi Sales 739003 1996-1997 Asst Commr of Sales Sales Tax Tax To Tax Delhi 2000-2001 10. The Company have accumulated loss at the end of the Financial Year which is more then fifty percent of its net worth. The company has neither incurred cash losses during the financial year ended on that date nor in the immediately preceding financial year. 11. In our opinion and according to the information and explanation given to us and with reference to Schedule 3 & 4, the Company has defaulted in repayment of dues of Rs.2,71,90,01,866/- including interest provided upto 31.03.2000 to Financial institutions, banks and Debenture holders. 12. According to the information and explanation given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13. In our opinion the Company is, not a chit/nidhi/mutual 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 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. 15. In our opinion and with reference to Note 2 (f) of Schedule 14 in absence of specific terms and conditions on which the Company has given guarantee of Rs.530. Lakhs for loan taken by others from Bank. We are unable to comment whether the terms and conditions are prima facie prejudicial to the interest of the Company. 16. The Company has not taken any term loan during the year. 17. According to the information and explanation given to us and on an overall examination of the balance sheet of the Company, we report that fund raised during the year, on short term basis have prima facie, not been used for long term investment. 18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act during the year. 19. The Company has not issued any Debentures during the year and hence creation of security or charge for the same is not applicable. 20. The Company has not raised any money by public issue during the year. 21. According to the information and explanation given to us no fraud on or by the Company has been noticed or reported during the course of our Audit. For DINESH S. AGARWAL & ASSOCIATES, CHARTERED ACCOUNTANTS DINESH S. AGARWAL PARTNER MEMBERSHIP NO. 34693 Place: Mumbai Date : 30.06.2008