Mukunda Industrial Finance Ltd Auditor Reports

MUKUNDA INDUSTRIAL FINANCE LIMITED ANNUAL REPORT 2010-2011 AUDITORS REPORT To The Members of Mukunda Industrial Finance Limited We have audited the attached Balance Sheet of MUKUNDA INDUSTRIAL FINANCE LIMITED as at 31st March 2011 and also 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. 1. 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 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 statements presentation. We believe that our audit provides a reasonable basis for our opinion. 2. As required by the Companies (Auditors Report) Order, 2003 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 hereto a statement on the matters specified in paragraphs 4 and 5 of the said order to the extent applicable. 3. Further to our comments in the Annexure referred to paragraph 2 above and schedule 16 to Balance Sheet, 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 it appears from our examination of those 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 account; (d) 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. (e) On the basis of written representations received from the Chairman and Managing Director, as on 31st March 2011, we report that none of the directors 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; (f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts subject to Point no. 1 (d) of Annexure to Auditors Report and note no. 2,10,11 and 15 in Notes on Accounts in Schedule No. 16 part B, 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 the Balance Sheet, of the state of affairs of the Company as at 31st March 2011; ii. in the case of the Profit and Loss Account, of the loss for the year ended on that date; and iii. in the case of the Cash Flow Statement, of the Cash Flows for the year ended on that date. For Venkat And Vasan Chartered Accountants Firm No. 004598 S Place: Bangalore K S Subramanian Dated: 5th December, 2011 Partner M.No. 019923 ANNEXURE TO AUDITORS REPORT OF MUKUNDA INDUSTRIAL FINANCE LIMITED (Referred to in Paragraph 2 of our report of even date) 1. In respect of its fixed assets: a. The Company has maintained relevant records and papers, which indicate the necessary particulars of quantitative details and situation of fixed assets on the basis of available information. b. The company has a programme of physical verification of fixed assets, which has been explained to us as a continuous process. As per the said programme, certain assets were physically verified during the year. In our opinion, the frequency of verification is reasonable having regard to the size of the company and nature of its assets. According to the information and explanation given to us, no material discrepancies were noticed on such verification except as stated in clause (d) below. c. As per information and explanations given to us and as shown by the books and records and further certified by the management to the effect, the Company has not disposed of substantial part of fixed assets during the year. d. The Management has capitalized under Fixed Assets Accumulated Lease Equalisation Net of Lease Adjustment Account Rs. 47.01 lacs. In our opinion the same should be written off. 2. In respect of its inventories: a. The company does not own any stock on hire and repossessed assets. b. In view of the (a) above the procedures of physical verification of underlying assets covered by stock on hire and repossessed assets do not apply to the Company. c. The company has maintained proper records of underlying assets covered by stock on hire and repossessed assets. 3.a. The company has not granted loans/deposits to companies covered in the register maintained u/s 301 of the companies Act, 1956 during the year. b. The company has not taken any loan from companies, firms or other parties covered in the register maintained u/s 301 of the Companies Act, 1956. Therefore, the provisions of sub clauses (e), (f) and (g) of clause 4(iii) of the order is not applicable to the company. c. In our opinion and according to the information and explanations given to us, the rate of interest, wherever applicable and other terms and conditions are not prima facie prejudicial to the interests of the Company. d. According to information and explanations given to us, there are overdue amounts in respect of loans/ deposits given by the Company, as specified in Notes on Accounts under point 2(d). 4. 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 and sale of plant and machinery, equipment and other assets. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control systems. 5. In respect of transactions covered under Section 301 of the Companies Act, 1956: (a) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements, that need to be entered into in the register maintained under Section 301 of the Companies Act, 1956 have been entered. (b) In our opinion and according to the information and explanations given to us, transactions made in pursuance of such contracts or arrangements have been made on such terms and conditions and at prices, which are reasonable, having regard to the prevailing market conditions at relevant time. 6. 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 with relation to the repayment of the deposits and interest payable thereon. Company has failed to intimate the Tribunal regarding default in repayment of deposits and interest from small depositors u/s 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. No order has been passed by the Company Law Board in terms of Section 58AA of the Companies Act, 1956. In our opinion and according to the information and explanation given to us, the Company has not complied with the directives issued by the Reserve Bank of India, vide letter no. DNBS (BG)No.2774/ 01.02.166/2009-10 datedMarch 08,2010.viz., placing the letter before Board of Directors and furnish specific compliance in respect of repayment of matured deposits, intimation of change in Net Owned Funds, CRAR, AFC classification, Fair Practices Code, intimating the depositors two months before maturity of deposits and framing call and demand loan policy. 7. No Internal Audit andEDP Audit are carried out during the financial year. 8. The provisions relating to maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956, do not apply to the Company. 9. In respect of statutory dues: a) The Company has to remit the following statutory dues Particulars Amount (Rs.) 1. Provident Fund: 17,68,874 2. ESI: 84,563 3. Professional Tax: 18,060 4. TBS payable: 57,520 6. KVAT: 5,11,722 b. Out of the above, a sum of Rs. 16,78,401/ - is due for more than six months as on 31.03.2011. c. There is a disputed sales tax liability of Rs. 4,60,119 (tax, surcharge and penalty) pending appeal before the Appellate Assistant Commissioner (CT), III Chennai. A bank guarantee has been furnished for Rs. 4,60,119/- to Tamilnadu Sales Tax Authorities towards the same. 10. Subject to non-writing offofRs. 47.01 lacs in respect of Accumulated Lease Equalisation Net of Lease Adjustment Account as referredto inpointno. 1(d) above and Note no. 2 in Notes on Accounts in Schedule 16 regarding non provision ofRs. 440.63 lacs in respect of unsecured and doubtful advances and deposits and Net Investment on lease Rs. 280.37 lacs and interest on deposits amounting to Rs. 16.36 lacs, the Company has brought forward accumulated losses as on 31st March 2011 amounting to Rs. 601.64 lacs which is more than 50% of its Net Worth (Rs. 177.31 lacs) and the company has incurred cash loss of Rs. 32.86 lacs in the current financial year and cash loss of Rs. 105.53 lacs in the immediately preceding financial year. 11. Secured loans from bank is secured by assignment of hire purchase and lease agreements, lien on fixed deposits and personal guarantee of some of the present and past directors of the company. There is no operation in the accounts since 18th September 2008 and the bank has filed a suit before the Debt Recovery Tribunal and obtained decree against the company since company has defaulted in repayment of term loan dues to banks. As per information and explanation given to us, the company has received a letter dated 16.08.2011 from Karur Vysya Bank Limited for one time settlement of their dues out of court. The Company has paid Rs. 75 Lakhs to ING Vysya Bank Ltd subsequent to the balance sheet date, towards the one time settlement against Term loan. 12. According to the information and explanations given to us, the Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities. 13. The Company is not a chit fund or a 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. The Company has not traded in shares during the year. 15. According to the information and explanations given to us, the Company has not given any guarantees for loans taken by others from banks or financial institutions. 16. According to the information and explanations given to us and as shown by the books of account, the Company has availed term loans from the banks and have been applied for the purposes for which they have been raised. 17. According to the information and explanations given to us and based on an overall examination of the Balance Sheet as at 31st March 2011 of the Company, we are of the opinion that both short-term and long-term funds have been used to finance business assets (short and long term) and working capital requirements. 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 Companies Act, 1956. 19. According to the information and explanations given to us and as shown by the books of account, the Company has not issued any debentures during the year. 20. The Company has not raised any money by way of public issue during the year. 21. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit. For Venkat And Vasan Chartered Accountants Firm No. 004598 S Place: Bangalore K S Subramanian Dated: 5th December, 2011 Partner M.No. 019923