hotline glass ltd Auditors report

HOTLINE GLASS LIMITED ANNUAL REPORT 2006 AUDITORS REPORT To, The Members, Hotline Glass Limited, Malanpur, M.P. 1. We have audited the attached balance sheet of Hotline Glass Limited as at 31st December 2006, the Profit and Loss Account and the Cash Flow Statement for the period 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 the auditing standard 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] issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956, we give our comments in the annexure on the matters specified in the order to the extent applicable to the Company. 4. The amount of Rs.92,47,39,633/- shown under extra ordinary items in Schedule - XIV and explained in Note No. B-3, B-6 & B-7 of Schedule - XV of above stated financial statements have been provided for based on managements assessment of its operations. This being a technical matter and in the absence of independent assessment/confirmation, we are unable to form an opinion on the adequacy of the same. The impact for the same on the loss for the current financial period, if any, is unascertained. 5. Subject to the comment at point no. 4 above and 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 accounts as required by law have been kept by the Company so far as appears from our examination of those books. (iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of accounts. (iv) In our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow Statement 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) On the basis of written representation received from the directors as on 31st Dec 2006 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st December 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. (vi) Subject to the observation in para no. 4 above in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give 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 December, 2006; and (b) in the case of Profit and Loss Account, of the loss for the period ended on that date. (c) in the case of Cash Flow statement, of the cash flows for the period ended on that date. For S.S.KOTHARl MEHTA & CO. Chartered Accountants Sd/- YOGESH K. GUPTA Partner Membership No. 93214 Place : New Delhi Date : 16th February 2007 ANNEXURE TO THE AUDITORS REPORT (As referred in paragraph 3 of our report to The Members of HOTLINE GLASS LIMITED on the accounts for the period ended 31st December 2006) (i) a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. b) The fixed assets are physically verified by the management according to a phased programme designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the period and no material discrepancies between the book records and the physical inventory have been noticed. c) The company has not disposed off any substantial part of its fixed assets, which has any effect on its going concern during the period in the case of existing operating unit. However, the company has impaired its Panel Project, which was in installation stage. Accordingly, the company has impaired the Plant & Machinery and written off of related Pre-Operative Expenditure pending allocation. (Refer Note No. B- 3 of Schedule XV) (ii) a) The inventory, except lying with the outside parties, has been physically verified by the management during the period. In our opinion, the frequency of verification is reasonable. b) In our opinion and according to the information and explanation given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. c) On the basis of our examination of the inventory records, in our opinion, the company is maintaining proper records of inventory as far as we could ascertain and no material discrepancies have been noticed between the physical stock and the book records. (iii) a) During the period, as per the information and explanations provided to us, the company has not granted any loan secured or unsecured to companies, firms or other parties covered in the register maintained u/s 301 of the Companies Act 1956, therefore provisions of Clause (iii) (a), (b), (c) & (d) of Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the company. b) During the period, as per the information and explanations provided to us, the company has not taken any loan secured or unsecured from companies, firms or other parties covered in the register maintained u/s 301 of the Companies Act 1956, therefore provisions of Clause (iii) (e), (f) & (g) of Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the company. (iv) In our opinion and according to the information and explanations given to us, there exists an adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchase of inventory and fixed assets and for the 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 system of the company. (v) a) As per information and explanations given to us by the management, we are of the opinion that all the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 and need to be entered in to the register maintained under that section have been so entered. b) As far as we could ascertain on the basis of our selective checking and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees 5 lacs in respect of any party during the period have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time. (vi) The Company has not accepted any deposits during the period under report from the public under Section 58A, 58AA or any other relevant provisions of the Companies Act, 1956. Therefore, the provisions of Clause 4(vi) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the company. (vii) In our opinion, the Company has a reasonable internal audit system commensurate with the size and nature of its business. (viii) 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 for the period under review. (ix) a) The company is not regular in depositing the undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income tax, Sales tax, Wealth Tax, Service Tax, Custom Duty. In case of Excise Duty, the dues have been paid within the extended period with interest as prescribed in the relevant Central Excise Rules. b) According to the information and explanations given to us, the company has not deposited the Electricity Duty amounting to Rs. 27,53,067/- (including Rs. 27,47,445/- pending for more than six months from the date it become payable). In addition to this, the Company has also not deposited the VAT amount to Rs. 71,56,641/- (including Rs. 28,46,955/- pending for more than six months from the date it become payable). c) The details of sales tax / income tax / custom duty / wealth tax / service Tax / excise duty / cess, which have not been deposited on account of dispute are given hereunder: S. No. Name of Statute Nature of Dues A 1. The Central Excise Act, 1944 Excise Duty 3,03,329 2. The Central Excise Act, 1944 Excise Duty $ 7,79,130 3. MP Commercial Tax Act, 1994 Entry Tax* 15,96,252 750,609 4. MP Commercial Tax Act, 1994 Commercial Tax 3,26,739 1,48,553 5. Central Sales Tax Act, 1956 Sales Tax # 54,11,648 S. No. Name of Statute Nature of Dues B 1. The Central Excise Act, 1944 Excise Duty 2002-03 2. The Central Excise Act, 1944 Excise Duty $ 2002-03 & 2004-05 3. MP Commercial Tax Act, 1994 Entry Tax* 2000-01 2001-02 4. MP Commercial Tax Act, 1994 Commercial Tax 1997-98 2000-01 & 2001-02 5. Central Sales Tax Act, 1956 Sales Tax # 2003-04 S. No. Name of Statute Nature of Dues C 1. The Central Excise Act, 1944 Excise Duty Assistant Commissioner 2. The Central Excise Act, 1944 Excise Duty $ CESTAT 3. MP Commercial Tax Act, 1994 Entry Tax* Commercial Tax Appellate Board (MP) Commissioner (Appeals) 4. MP Commercial Tax Act, 1994 Commercial Tax Commercial Tax Appellate Board (MP) Commissioner (Appeals) 5. Central Sales Tax Act, 1956 Sales Tax # Additional Commissioner A = Amount (in Rs.) B = Period C = Forum at Which dispute is pending $ Excluding Rs. 25,000 deposited under protest. * Excluding Rs. 2,21,702 and its. 3,99,064 for 2000-01 and Rs. 83,401/- for 2001-02 deposited under protest. xcluding Rs. 1,27,071 for 1997-98, Rs. 3,264 for 2000-01 and Rs. 13,243 for 2001-02 deposited under protest # Excluding Rs. 50,000 deposited under protest (x) Keeping in the view the provisions considered by the management as also referred in para no. 4 of the main audit report above, the accumulated losses of the company are more than net worth as at 31st December 2006. Further, the company has incurred cash losses during the current period while it has not incurred cash losses in previous financial year ended 31st March 2006. (xi) According to the information and explanations given to us, the company has defaulted in repayment of dues of Financial Institution and banks as per the details given below: Particulars Nature of Dues A B Debentures Principal 30,11,22,262 Nov 2003 Funded Interest 3,88,47,984 Interest 10,92,25,917 Devolved Letter Principal 7,50,34,663 Dec 2005 of Credits Interest & Other Charges 1,31,77,456 Cash Credit Limits Principal 2,48,83,043 Dec 2006 Interest 77,79,057 Mar 2006 Working Capital Principal 7,95,00,000 Dec 2006 Demand Loan Interest 92,97,810 Mar 2006 A = Total amount due as on date (in Rs.) B = Commencement of Default (xii) The company has not granted any loans on the basis of security by way of pledge of shares, debentures and other securities. (xiii) In our opinion, the company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the company. (xiv) 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 (as amended) are not applicable to the company. (xv) According to the information & explanations given to us, the Company has given Corporate Guarantee for loans taken by its related parties from Bank / Financial Institutions. In our opinion, the terms and conditions of such guarantee are not prejudicial to the interest of the Company. (xvi) To the best of our information and knowledge and as per records verified by us, the company has applied its term loans for the purpose for which the loans were obtained. (xvii) According to the information and explanations given to us, the funds raised on short-term basis have not been used for long-term investment (xviii) The company has not made any allotment of shares during the period under report. (xix) During the period the company has not issued any fresh debentures therefore the provisions of clause 4(xix) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the company. (xx) The company has not raised its share capital during the period under report, therefore, the provisions of clause 4 (xx) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the company. (xxi) Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the company has been noticed or reported during the course of our audit for the period ended 31st December 2006. For S.S. KOTHARI MEHTA & CO. Chartered Accountants sd/- Yogesh K. Gupta Partner Membership No.: 93214 Place : New Delhi Date : 16th February 2007