Multi Arc India Ltd Auditor Reports

MULTI-ARC INDIA LIMITED ANNUAL REPORT 2008-2009 AUDITORS REPORT 1. I have audited the attached Balance Sheet of Multi Arc-India Limited as at March 31, 2009, the related Profit and Loss Account for the year ended on that date annexed thereto, and the Cash-flow Statement for the year ended on that date. These financial statements are the responsibility of the Companys management. My responsibility is to express an opinion on these financial statements based on my audit. 2. I have conducted my audit in accordance with the auditing standards generally accepted in India. Those standards require that I 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 the 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. I believe that my audit provides a reasonable basis for my opinion. 3. 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 sub-section (4A) of section 227 of the Companies Act, 1956, I enclose in the Annexure a statement on the matters specified in paragraph 4 and 5 of the said order. Further to my comments in the Annexure referred to above, I report that: i) I have obtained all information and explanations, which to the best of my knowledge and belief were necessary for the purposes of the audit. ii) In my opinion, proper books of accounts as required by law have been kept by the Company so far as appears from my 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) In my 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 v) On the basis of information and explanations provided and the written representations received from the Directors as on March 31, 2009 and taken on record by the Board of Directors, I report that none of the directors is disqualified as on March 31, 2009 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of 4 the Companies Act, 1956 vi) Attention is invited to the following in Schedule L a) Note 2 (ii) regarding non provision of retirement benefits of employees, pursuant to application of the Accounting Standard 15 (Revised 2005) - Employee Benefits, in the financial statements. b) Note (iv) regarding the notices received by the company under the Securitization and Reconstruction of Financial Assets Enforcement Of Security Act 2002, SARFAESI ACT whereby in view of the secured assets under the control of the Banks the going concern concept needs to be reviewed. Since no data is made available, the overall impact/effect of the above,,on the financial statements for the year March 31, 2009 could not be determined. vii) Subject to the above and the observations in the annexure attached herewith, in my opinion and to the best of my information and according to the explanations given to me, the said accounts, read together with the significant accounting policies and 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: a. In the case of the Balance Sheet, of the state of affairs of the company as at March 31, 2009. b. In the case of the Profit and Loss Account, of the loss for the year ended on that date; and c. In the case of the Cash-flow Statement, of the cash-flow for the year ended on that date. Place: Mumbai J.C. Bhatt Date : 30th July 2009 Chartered Accountant Annexure referred to in paragraph 3 of the audit report of even date to the members of Multi Arc-India Limited on the accounts for the year ended March 31, 2009. 1. Fixed Assets: a. The company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets on the basis of available information. b. As explained, all the fixed assets have not been physically verified by the management during the year, but a major portion of the fixed assets have been physically verified by the management, as per their verification programme. In my opinion, the frequency of verification of those fixed assets by the management is reasonable having regard to the size of the Company and nature of its assets. To the best of my knowledge, no material discrepancies were noticed on such verification. c. In my opinion and according to the information and explanations provided, no substantial part of the fixed assets has been disposed off during the current financial year but, pursuant to the notices received by the company under the SARFAESI ACT the going concern concept needs a review. (Refer Note (iv) forming part of Schedule L). 2. Inventory: a. As per the explanations and information provided, the management has not conducted physical verification of all the inventory during the year, but a major portion of the inventory has been verified as per the managements verification programme. In my opinion, having regard, to the nature of the Companys business the frequency of verification is reasonable. b. In my, opinion and according to the information and explanations provided 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. In my opinion and on the basis of information and explanations provided, the Company has maintained proper records of inventory and the discrepancies noted on physical verification between the physical stocks and book records were not material. 3. Loans and Advances: As per the information and explanations provided, there are transactions with one Company-UCT Coatings Pvt. Ltd. covered in the Register maintained under section 301 of the Companies Act, 1956. The Company has advanced Rs. 312.40 lacs towards investment in Equity to UCT Coatings Pvt. Ltd, taken Rs. 628.95 lacs from the same company towards project advance and the company also maintains current account transactions with the same company closing balance Dr- Rs 21,23,965/-. The terms and conditions of these advances are such that either the end utilization of the amount involved is fixed for specific purposes or are long term in nature or are current account transactions; hence no repayment or interest stipulations have been adhered to. The terms and conditions of the transactions prima facie does not appear to be prejudicial to the interest of the company. 4. Internal Control System: In my opinion and according to the information and explanations given to me, having regard to the explanation that for the purchase of gold, being an integral and high value inventory item and also considering the high quality aspect maintained by the Company for its services rendered, the Company has certain fixed sources/vendors for the purchase of gold, for re- moulding of used gold bars and for recovery of gold, and the market being customer driven the sale prices of articles vary from customer to customer and from process to process. There are certain cases wherein lapses in the internal control system have been observed which are not capable of precise quantification. Subject to the above, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of services. Further, on the basis of my examination and according to the information and explanations given, during the course of the audit, subject to the foregoing I have not observed any continuing failure to correct major weakness in internal control system. 5. Related Party Transactions: On the basis of information and explanations made available to me, the transactions that were required to be entered in the Register maintained under section 301 of the Companies Act, 1956 have been so entered and are made at the prevailing market prices at the relevant time. 6. Public Deposits: The company has not accepted any deposits from the public within the meaning of the provisions of section 58A and 58AA or any other relevant provisions of the Act and the Rules framed thereunder. 7. Internal Audit System: Based on the information and explanations provided, no internal audit has been conducted during the current financial year and in my opinion, there has not been an adequate internal audit system commensurate with its size and nature of its business. 8. Maintenance of Cost Records: To the best of my knowledge and as explained, the Central Government has not prescribed maintenance of cost records under section 209(1) (d) of the Companies Act, 1956. 9. Statutory Dues: a. According to the information and explanation given by the management and according to the books and records produced and examined by me, in my opinion the Company lias not been regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Income-Tax, Service Tax, Cess, Value Added Tax, Electricity Bills and other material statutory dues including salary of existing employees and final settlement dues of left employees. He undisputed statutory dues outstanding at the year end for a period of more than six months from the date they became payable are as given in the Table below: Name of the Statute & A B C Nature of the Dues The Employees Provident Fund Scheme & Pension Scheme 1995, Provident Fund 39,88,703 April 2007 to Not paid March 2009 till date The Income Tax Act 1961, Tax Deducted at Source- 6,31,900 April 2008 to -do- Salary March 2009 Tax Deducted at Source- 72,418 April 2008 to -do- Professional Fees March 2009 Tax Deducted at Source- 11,59,010 April 2008 to -do- Contractors March 2009 Tax Deducted at Source- 4,64,805 April 2008 to -do- Interest other than Interest March 2009 on Securities Tax Deducted at Source- 7,48,506 April 2008 to -do- Rent March 2009 Fringe Benefit Tax 17,78,850 April 2007 to -do- March 2009 Service Tax, under the Finance Act, 1994, Service Tax 15,416,056 April 2007 to -do- March 2009 Value Added Tax, Gujarat State 3,724,320 April 2007 to -do- & Tamilnadu March 2009 Water/Notified Area Tax 1,69,117 April 2008 to -do- March 2009 Payment under Gratuity 5,269,910 April 2007 to -do- Act, 1872 and payment to March 2009 ex-employees Salary of existing employees 6,549,166 June 2008 to -do- March 2009 Total 3,997,761 A = Amount (Rs.) B = Period to which the amount related C = Date of Payment b. The Company has disputed the Income Tax Arrears of Dura Coaters Pvt Ltd. amounting to Rs. 65,75,302/- (including interest) Dura Coaters Pvt. Ltd. was amalgamated with the Company on and from November 1, 1988 and the matter is pending before the Income Tax Appellate Tribunal for decision. 10. Accumulated Losses: In my opinion, according to the information and explanations given and on an overall examination of the Balance Sheet, the Companys accumulated losses at the end of the financial year are more than 50% of its net worth as at March 31, 2009 and the Company has incurred cash losses during the financial year ended on that date but not in the immediately preceding financial year. 11. Repayment of Loans from Banks and Financial Institutions: According to the information and explanations given by the management, there have been delays in the repayment of dues to financial institutions and banks. The Company has defaulted in repayment of secured loan from Technology Information Forcast & Ass.Council, the amount outstanding as on 31st March 2009 being Rs. 73.55 Lacs (including interest) outstanding, for a period of more than 1.5 years. Also, the company has been unable to repay the credit facilities availed and utilized, from Canara Bank and Union Bank of India amounting to Rs. 3.05 Crores and Rs. 49.88 Lacs respectively (excluding interest and penalty). 12. As per the information and explanations given by the management, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13. According to the information and explanations given by the management, the terms and conditions of the guarantee given by the Company for loans taken by others from banks and financial institutions, are not prima facie prejudicial to the interests of the Company(Refer note 2 (i) (c) forming part of the notes to accounts) 14. In my opinion, and according to the information and explanations given to me, the terms and conditions of the various term loans raised by the Company have been re-structured and as explained, the term loans raised have been applied for the purpose for which they were raised. 15. In my opinion, according to the information and explanations given by the management, and on an overall examination of the Balance Sheet of the Company, prima-facie, there are no funds raised on short term basis that have been utilized for long term investments. 16. As per the books and records verified and according to the information, explanations and management representation provided to me, 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, during the year. 17. As per the books and records verified and according to the information and explanations given to me there are nc debentures outstanding as on March 31, 2009. 18. During the year covered under audit, the Company has not raised any money by way of public issue(s) of shares. 19. Reference is invited to Note (xiv) forming part of Notes on accounts, wherein during the current financial year, one cast of dishonored cheque, issued by the Company, have been reported to the management for which the Company has received a legal notice. 20. As per information and explanations given to me & taking into consideration, the nature of business of the Company clauses (xiii), (xiv) of the paragraph 4 of the Order are not applicable and therefore not commented upon. Place: Mumbai J.C. Bhatt Date : 30th July 2009 Chartered Accountant