AUDITOR
TO THE MEMBERS OF THE INTEGRATED FINANCE COMPANY LIMITED, CHENNAI
We have audited the attached Balance Sheet of M/s. Integrated Finance Company
limited, as at 31st March 2011 and also 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.
We conducted our audit in accordance with the 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 Companies (Auditors Report) Order, 2003, as amended by the
Companies (Auditors Report) (Amendment) Order, 2004 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.
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, Profit and Loss Account and cash flow statement dealt with by
this report are in agreement with the books of account
(iv) On the basis of written representations received from the directors, as on 31st
March, 2011 and taken on record by the Board of Directors, we report that none of the
director is disqualified as on 31st March, 2011 from being appointed as a
director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act,
1956;
(v) In our opinion, the Balance Sheet, Profit and 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, except as for non accrual of interest on
fixed deposits and non-convertible bonds after 19th May 2005.
(vi) a) The net worth of the company is completely eroded and restrictions are placed
by RBI on accepting further deposits which seriously hampers the ability of the company to
carry on its designated business activities as NBFC. In the meanwhile the Company has
filed a restructuring proposal for meeting the liability towards deposits and Bonds under
section 391 of the Companies Act 1956 on 21.06.2005 which was approved by the Honble High
Court, Madras on 19.08.2006 vide order of Single Judge Bench, which on an appeal the
division bench of Madras High Court decided the proposal for restructuring against the
company, in respect of which the company appealed to supreme court through a Special Leave
Petition (SLP) and the same has been admitted by the Honorable Supreme Court pending the
outcome of the same (despite huge accumulated losses incurred by the company) the
financial statements have been prepared as that on a going concern basis. In the event,
the out come of the on going proceedings are going to be against the company the same will
impair the very going concern assumption of the company, and would place serious
limitations on the companys eventual ability to meet its obligation to secured /
unsecured lenders/depositors. In view of the above we are unable to express our view
whether the company is a going concern or not.
b) 1) Interest to banks has been provided at the contracted rates on the sanctioned
limits, which is different from the actual out standings to the respective banks. The
claims of the banks towards all penal levies and other claims have not been provided
amount not quantified.
2) The Company has not provided interest on fixed deposits and non-convertible secured
bonds after 19th May 2005 (effective date under scheme U/s 391 of Companies Act
1956) for the year amounting to Rs. 373.61 Lakhs cumulative Rs.4917.73 lakhs, consequently
the loss for the year is understated by Rs.373.61 Lakhs and hence the carried forward
profit and loss account is also understated byRs.4917.73 lakhs.
3) During the year, the government of Puducherry had acquired the property of company
under compulsory acquisition of land for a compensation of Rs.2.18 Crores, for which the
company had filed the writ petition before the High Court of Madras seeking the quashing
of the acquisition. Pending the outcome the Company had not taken cognizance of the
transaction in the books of accounts, and consequently in the financial statements also.
Had the company accounted for the transaction, profit for the year could be higher by
Rs.1.96 Crores and the Profit and Loss account debit balance would be lower by the same
amount.
4) The company seized to be a deposit accepting NBFC and further also discontinued its
primary objective as NBFC (other than collecting dues from its debtors or payment of dues
to lenders/depositors) many of the provisions pertaining to NBFC have not been
compliedwith in relation to filing of periodical returns and other compliances required
under the RBI Act, consequently having regard to our audit qualification mentioned above,
our report cannot be taken as any assurance for future performance of the company in
meeting any of its obligation towards secured / unsecured lenders or depositors.
5) As referred to in 14(a), an amount of Rs.67.50 Lakhs being the balance in the
current account of a bank has been adjusted by the bank as a preference dividend due by
the company (notwithstanding that no dividend is declared by the company), which we are
not able to express an opinion on recoverability of said amount from the bank.
(vii) Subject to above and based on the matters mentioned Note No. 10 (D) regarding the
security for secured loans, 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 having specific regard to VI (a)
and VI (b)(g) above, on the ability of the company to be treated as going concern, give a
true and fair view in conformity with the accounting principles generally accepted in
India:
a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st
March, 2011;
b) in the case of the Profit and Loss Account, of the Profit for the year ended on that
date; and
c) in the case of the Cash Flow Statement of the cash flows for the year ended on that
date.
|
For BRAHMAYYA & Co. |
|
Chartered Accountants |
|
(Firm Regn. No.000511S) |
|
N. SRI KRISHNA |
| Place : Chennai |
Partner |
| Date : 01.10.2011 |
Membership No.26575 |
ANNEXURE REFERRED IN OUR REPORT OF EVEN DATE
1. The Company has maintained proper records showing full particulars including
quantitative details and situation of fixed assets. Fixed Assets including the assets
under lease, have not been physically verified by the management during the year. The
Company has a programme of verification for the fixed Assets other than the assets under
lease which, in our opinion, is reasonable having regard to the size of the company and
the nature of its assets, however the Company has not verified the fixed assets as per the
said programme. The Company does not have any programme of verification in respect of
assets on lease. During the year, there was no substantial disposal of fixed assets
affecting the status of the company as a going concern.
2. In our opinion and according to the information and explanations given to us, the
Company has neither granted nor taken any loans secured or unsecured to / from companies,
firms and other parties entered in the Register maintained under Section 301 of the
Companies Act, 1956 during the year.
3. 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 fixed assets. During the course of our
audit, no major weakness has been noticed in the internal controls.
4. Based on the audit procedures applied by us and according to the information and
explanations provided by the Management, we are of the opinion that the transactions that
need to be entered into the Register maintained under Section 301 have been so entered.
5. In our opinion and according to the information and explanations given to us, the
company has complied with the directives issued by the Reserve Bank of India and the
provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the rules framed
there under with regard to deposits accepted from the public, except that the Company has
not submitted the required returns/statements to Reserve Bank of India with in the
stipulated time. The Reserve Bank of India passed an order, prohibiting the company from
accepting any deposits from public from 18th January 2005. The Company has
filed a restructuring proposal for meeting the liability towards deposits under section
391 of the Companies Act 1956 on 21.06.2005 which was approved by the Honble High Court,
Madras on 19.08.2006 vide order of Single Judge Bench, which on an appeal the division
bench of Madras High Court decided the proposal for restructuring against the company, in
respect of which the company appealed to supreme court through a Special Leave Petition
(SLP) and the same has been admitted by the Honble Supreme Court , pending the outcome of
the same the interest amounting to Rs. 422.61 lakhs on deposits has not been provided
after 19.05.2005.
6. Company does not have an internal audit adequate and commensurate to the size and
nature of the business of Company.
7. According to the records of the Company, the Company is in general irregular in
depositing with appropriate authorities undisputed statutory dues including provident
fund, employees state insurance, income-tax, sales-tax, wealth-tax, service tax, custom
duty, excise duty, cess. There are no undisputed amounts payable in respect of statutory
dues which are outstanding as at 31st March, 2011 for a period of more than six
months from the date they become payable. The company has not deposited the amounts
stipulated under Section 205 C (2) to the credit of "Investor Education and
Protection Fund" amounting to Rs.13.90 Lakhs.
8. Based on our audit procedures and on the information and explanations given by the
Management, there are no dues outstanding in respect of excise duty, customs duty, wealth
tax, service tax and cess on account of any dispute. Disputed income tax and sales tax
which have not been deposited on account of disputes and the forum where the dispute is
pending are as under:
| Name of the statute |
Assessment year |
Tax Amount |
Amount deposited |
Forum where dispute is pending with |
|
|
(In lakhs) |
|
| 1. Income Tax Act, 1961 |
1997-1998 |
39.37 |
39.37 |
The High Court of Judicature at Madras |
|
1999-2000 |
182.35 |
0 |
The High Court of Judicature at Madras |
|
2000-2001 |
664.64 |
40.82 |
The High Court of Judicature at Madras |
|
2001-2002 |
250.31 |
0 |
The High Court of Judicature at Madras |
|
2002-2003 |
227.37 |
7.40 |
The High Court of Judicature at Madras |
|
2003-2004 |
133.03 |
0 |
The High Court of Judicature at Madras |
|
2004-2005 |
411.97 |
0 |
The Income tax Appellate Tribunal |
|
2005-2006 |
319.26 |
0 |
The Income tax Appellate Tribunal |
| 2. Tamilnadu General Sales Tax Act, 1959 |
1992-1993 |
1.23 |
0.20 |
The Appellate Assistant Commissioner (CT) III Chennai |
|
1995-1996 |
4.38 |
0 |
The Sale Tax Appellate Tribunal, Chennai |
|
1996-1997 |
11.88 |
0 |
The Appellate Assistant Commissioner (CT) III Chennai |
|
2004-2005 |
1.30 |
1.30 |
The Appellate Assistant Commissioner (CT) III Chennai |
| 3. Kerala General Sales Tax Act, 1963 |
1993-1994 |
5.02 |
0 |
The Sale Tax Appellate Tribunal, Additional Bench, Ernakulam |
|
1994-1995 |
0.80 |
0 |
The Sale Tax Appellate Tribunal, Additional Bench, Ernakulam |
|
1995-1996 |
15.26 |
5.09 |
The Sale Tax Appellate Tribunal, Additional Bench, Ernakulam |
| 4. Bombay Sales Tax Act, 1959 |
1992-1993 |
8.97 |
3.11 |
Remanded back to Assistant commissioner Mumbai |
| 5. Delhi Sales Tax Act, 1975 |
1989-1990 |
1.50 |
0.15 |
Deputy commissioner of sales tax, Appeal -1, New Delhi |
9. The Companys accumulated losses at the end of financial year are more than
its net worth. The company has incurred cash losses during the financial year as well as
incurred cash loss during the immediately preceding previous year.
10. The company has defaulted in payment of interest and installments to banks
towards working capital borrowings of Rs.10816 Lakhs. The Company has filed a
restructuring proposal for meeting the liability towards Bonds under section 391 of the
Companies Act 1956 on 21.06.2005 which was approved by the Honble High Court, Madras on
19.08.2006 vide order of Single Judge Bench, which on an appeal the division bench of
Madras High Court decided the proposal for restructuring against the company, in respect
of which the company appealed to supreme court through a Special Leave Petition (SLP) and
the same has been admitted by the Honble Supreme Court , pending the outcome of the same
the interest amounting to Rs. 4495.12 lakhs on bond has not been provided after
19.05.2005, the company has not repaid the matured bonds on due dates, amounting to
Rs.7027.74 Lakhs .
11. According to information and explanations given to us and records of the company
examined by us the Company has granted loans and advances on the basis of security by way
of pledge of shares. The company has since obtained adequate documents, such as the valid
transferred deeds in respect of such shares taken as security.
12. The Company has given guarantee for loans taken by the associate company from
banks, the terms and conditions of which are prima facie not prejudicial to the interest
of the company. The company also given the guarantee to loans taken by others, the terms
and conditions of which are not prejudicial to the interest of the company.
13. According to information and explanations given to us and records of the company
examined by us the company has not availed any term loan during the year.
14. According to the cash flow statement and other records examined by us and the
information and explanations given to us on an overall basis, funds raised on short term
basis, prima facie, have not been used during the year for long term investment and vice
versa.
15. According to information and explanations given to us and records of the company
examined by us, securities have been created in respect of bonds issued, except for
certain modification of charges in respect "Bond A".
16. 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.
17. The provisions of Clauses of Paragraph 4 of the Companies (Auditors Report) Order,
2003, as amended by the Companies (Auditors Report) (Amendment) Order, 2004 listed below
are not applicable to the Company for the year:
a) Clause (ii) regarding Physical verification and maintenance proper records, of
inventory;
b) Clause (viii) regarding maintenance of cost records under Section 209(1)(d) of the
Companies Act, 1956;
c) Clause (xiii) regarding special statute applicable to Chit Funds and Nidhis/Mutual
Benefit Fund and Societies;
d) Clause (xiv) regarding dealing or trading in shares, securities etc.;
e) Clause (xviii) regarding preferential allotment of shares to specified parties and;
f) Clause (xx) regarding money raised by public issue and its end use
|
For BRAHMAYYA & Co. |
|
Chartered Accountants |
|
(Firm Regn. No.000511S) |
|
N. SRI KRISHNA |
| Place : Chennai |
Partner |
| Date : 01.10.2011 |
Membership No.26575 |
+91-9892691696
