KDL Biotech Ltd Auditor Reports

KDL BIOTECH LIMITED ANNUAL REPORT 2011-2012 AUDITORS REPORT TO THE MEMBERS OF KDL BIOTECH LIMITED 1. We have audited the attached Balance Sheet of KDL BIOTECH LIMITED as at 31st March, 2012 and also the Statement of Profit and Loss and the Cash Flow Statement of the Company 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 from material misstatements. 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 the 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 issued by the Central Government of India under sub-section (4A) of Section 227 of the Companies Act, 1956 and on the basis of such checks as we considered appropriate and according to the information and explanations given to us we enclose in the annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4.(i) As mentioned in Note No. 32 of the financial statements, the Company has prepared the accounts on the basis of going concern inspite of loss of Rs. 17,21,23,537 incurred during the current year and accumulated losses amounting to Rs. 1,83,99,27,558 as at 31st March 2012, resulting into erosion of its entire net worth. The Company also has working capital deficiency. The Company is a sick company within the meaning of Section 3(1)(O) of the Sick industrial Companies (Special Provisions) Act, 1985 and its reference to the Board for Industrial and Financial Reconstruction (BIFR) has been registered by BIFR. These factors raise doubts about the Companys ability to continue as a going concern which is dependent upon infusion of long terms funds for its future operations. The accompanying financial statements do not include any adjustments, relating to the recoverability and classification of assets carrying amounts or the amount and classification of liabilities that might result, should the Company be unable to continue as a going concern. (ii) As mentioned in Note No. 33 of the financial statements, outstanding balances of certain debtors, creditors, secured loans including interest payable thereon and loans and advances are subject to confirmation. (iii) As mentioned in Note No. 28 of the financial statements, the Company has created a charge by way of mortgage on 12th August, 2010 on the land acquired in the financial year200809, in favour of Unimark Remedies Limited, to secure further borrowing of funds from the said company, for which permission / approval of lender banks is yet to be obtained. (iv) The Company has not provided for the liquidated damages, penal interest and additional interest on defaults in payment of installments and interest on credit facilities from banks, the amount of which is unascertained. 5. Further to our comments in the Annexure referred to in paragraph 3 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 purposes of our audit; b) 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; c) the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement, dealt with by this report are in agreement with the books of account; d) in our opinion and to the best of our information, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement, dealt with by this report comply with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956. e) based on written representations received from all the Directors of the Company as on 31st March, 2012 and taken on record by the Board of Directors, we report that none of the Director of the Company is disqualified as at 31st March, 2012 from being appointed as a director under clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. f) in our opinion and to the best of our information and according to the explanations given to us the said accounts subject to our comments in paragraph 4 above, consequential cumulative effect thereof is not ascertainable and read together with the 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 conformity with the accounting principles generally accepted in India; i) in the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2012. ii) in the case of Statement of Profit and Loss, of the loss of the Company for the year ended on that date, and iii) in the case of Cash Flow Statement, of the cash flows for the year ended on that date. For KHANDELWAL JAIN & CO. Firm Registration No. 105049W Chartered Accountants (S.S. SHAH) Place: Mumbai Partner Date : August 28, 2012 Membership No. 33632 ANNEXURE TO THE AUDITORS REPORT (Referred to in the report of even date to the Members of KDL Biotech Limited on the accounts for the year ended March 31st, 2012) 1.(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. (b) As explained to us, all tangible fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such physical verification. (c) According to the information and explanations given to us, as also on the basis of books and records examined by us, the Company has not disposed off any substantial part of its fixed assets during the year so as to affect its going concern status. Also, refer Note No. 31 and 32 of notes forming part of financial statements. 2.(a) As explained to us, the management has conducted physical verification of the inventory at reasonable intervals, except stocks lying with third parties and in bonded warehouse, which are verified with reference to the certificates obtained and/or subsequent clearance of goods. (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of the inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) In our opinion and according to the information and explanations given to us the Company is maintaining proper records of the inventory and no material discrepancies were noticed on physical verification of inventory as compared to the book records. 3.(a) According to the information and explanations given to us, the Company has not granted loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the sub-clauses (a), (b), (c) and (d) of paragraph 4 (iii) of the Order are not applicable. (b) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured, from companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the sub-clauses (e), (f) and (g) of paragraph 4 (iii) of the Order are not applicable. 4. In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, with regard to the purchase of inventory, fixed assets and for sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weakness in the internal controls. 5. On the basis of the audit procedures performed by us, and according to the information, explanations and representations given to us, we have not come across any particulars of contracts or arrangements which were required to be entered in the register maintained under Section 301 of the Companies Act, 1956. 6. According to the information and explanations given to us, during the year the Company has not accepted any deposits from the public to which the directives issued by the Reserve Bank of India and the provision of Sections 58A, Section 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under apply. 7. In our opinion, the Company has an internal audit system commensurate with the size of the Company and nature of its business. 8. We have broadly reviewed the books of accounts 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 we are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not carried out any detailed examination of such accounts and records. 9.(a) According to the information and explanations given to us, and on the basis of our examination of the books of account, the Company has been generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income-tax, Sales Tax, Wealth tax, Service Tax, Custom Duty, Excise duty, Cess and other material statutory dues applicable to it. According to the information and explanations given to us, no undisputed statutory dues payable in respect of Income-tax, Wealth tax, Service Tax, Custom Duty, Excise duty and Cess were outstanding as at 31st March, 2012 for a year or more than six months from the date they became payable. (b) According to the information and explanation given to us, dues in respect of Sales tax, Income tax, Customs duty, Wealth tax, Excise duty and cess that have not been deposited on account of disputes and the forum where the dispute is pending are as under: Name of Nature of Amount Period to Forum where the Statute the dues (Rs.) which the dispute is amount pending relates Central Excise Dispute in Respect of 5772375 2007-08 High Court, Act, 1944 Settlement Commission Mumbai Order Cancellation Customs Dispute in payment of *214625716 2002-03 Regional Bench Act, 1962 Custom duty on Import Less: to Customs Excise Deposited 2006-07 and Service 115000000 Tax Appellate Tribunal Bombay Sales Demand on account of 1541288 2003-04 Joint Tax Act, 1959 non-submission of Commissioner Form BC of Sales Tax *Against this, the company has paid Rs. 11,50,00,000 under protest and made provision for the same as doubtful advances. 10. The accumulated losses being debit balance in Profit and Loss Account at the end of the financial year are more than 50% of its net worth. The Company has incurred cash losses of Rs. 807.94 lacs during the financial year ended 31.03.2012 and had incurred cash losses of Rs. 4,196.49 lacs in the immediately preceding financial period. 11. Based on our audit procedures and the information and explanations given to us, the Company has defaulted in repayment of principal and interest dues to banks. The Company has not paid installments of Working Capital Term Loan of State Bank of India (SBI) fallen due on monthly basis with effect from 1st October, 2007aggregating to Rs. 8,84,00,000 up to 31st March, 2012. The company has also defaulted in repayment of dues of banks viz. SBI, Canara Bank and Saraswat Co-operative Bank Ltd aggregating to Rs.30,02,90,543 on various dates and outstanding as on 31st March, 2012. The first default occurred in October 2005. Further, the interest on these Bank loans is overdue to the tune of Rs. 21,36,85,597 upto 31st March, 2012. This amount of secured loans and overdue interest is subject to confirmation from the respective banks. 12. In our opinion and according to the explanations given to us and based on the information available, no loans and advances have been granted by the Company 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 fund or a nidhi / mutual benefit fund/society. Therefore, the provisions of clause (xiii) of paragraph 4 of the Order are not applicable to the Company. 14. In our opinion and according to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, Clause (xiv) of paragraph 4 of the Order is not applicable to the Company. 15. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantee for loans taken by others from banks or financial institutions are not, prima facie, prejudicial to the interest of the Company. 16. In our opinion and relying on the information given to us, the Term Loans have been applied for the purposes for which they were obtained. 17. In our opinion and 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 amounting to Rs. 10,631.94 lacs have been used for long-term purposes including for accumulated losses. 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. 19. As the Company has not issued any debentures during the year covered by our report, clause (xix) of paragraph 4 of the order is not applicable to the Company. 20. During the year covered by our audit report, the Company has not raised any money by way of public issue. 21. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year. For KHANDELWAL JAIN & CO. Firm Registration No. 105049W Chartered Accountants (S.S. SHAH) Place: Mumbai Partner Date : August 28, 2012 Membership No. 33632