murablack india ltd Auditors report

MURABLACK INDIA LIMITED ANNUAL REPORT 2005-2006 AUDITORS REPORT To The Members of MURABLACK INDIA LIMITED 1. We have audited the attached balance sheet of MURABLACK INDIA LIMITED as at 30th June, 2006, the profit and loss account and also 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. 2. 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. 3. 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, a statement on the matters specified in paragraphs 4 and 5 of the said order. 4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that: a) The accumulated losses of the Company have far exceeded its entire net worth. The accounts have, however, been prepared by the management on a going concern basis as explained in Note no. 7 of Schedule 14. However, in view of plant being under closure since April, 2000 and uncertainty of its opening, we are unable to comment as to whether the Company will continue as a going concern in the foreseeable future. The Company has to make resultant adjustments (presently not ascertainable) on the assets, liabilities and the net worth of the Company as at the year end and losses for the year, should it be unable to continue as a going concern; b) We are unable to express our opinion as to the extent of deterioration in the value of the Buildings, Plant & Machinery, Storage Tanks, Electrical Installations, Factory Equipment, Furniture and Fittings and Vehicles in the absence of independent assessment. Diminution as may be ascertained in this regard would have to be appropriately provided by the Company, the amount where of is presently not determinable. Besides, the insurance policy in respect of the above assets, which expired in November 2002 has not been renewed; c) 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; d) 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; e) The Balance Sheet, Profit and Loss account and Cash Flow Statement dealt with by this report are in agreement with the books of account; f) 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, subject to what is stated in paragraph (a) and (b) above; g) On the basis of explanations and information given to us and written representations received from the directors of the Company and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 30th June, 2006 from being appointed as a director of the Company in terms of clause (g) of Sub-Section (1) of Section 274 of the Companies Act, 1956; h) 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 paragraphs (a) and (b) above and read together with Significant Accounting Policies, Contingent Liabilities and other notes of Schedule 14 particularly Note No. 3 (a) and (b) pertaining to the decision dated 5th July, 2005 passed by CEGAT dismissing the appeal filed by the Company and upholding the order passed by the Commissioner of Central Excise and Customs (Appeals) - Mumbai III, regarding adjudication of Customs Duty and Central Excise Duty liability with respect to withdrawal from 100% Export Oriented Unit Scheme and clearances in the Domestic Tariff Area and those appearing elsewhere in the accounts 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 30th June, 2006; (ii) In the case of the Profit and Loss Account, of the Loss of the Company 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 P.SUBRAMANIAM & ASSOCIATES Chartered Accountants Place : Mumbai Date : 04.12.06 P.Subramaniam Proprietor (M. No. 43163) Annexure referred to in paragraph 3 of the Auditors Report of even date to the members of MURABLACK INDIA LIMITED on the accounts for the year ended 30th June, 2006. 1. (a) The Company is in the process of updating its fixed assets records to show full particulars including quantitative details, situation of fixed assets and condition thereof. (b) As explained to us, in view of closure of the plant and inadequate manpower, no physical verification was carried out by the management during the year. In our opinion, fixed assets should be physically verified at regular intervals having regard to the size of the Company and nature of its business. (c) Based on the information and explanations provided to us, substantial part of fixed assets have not been disposed off by the Company during the year under review. Therefore, this does not affect the going concern status of the Company. 2. (a) According to the information and explanations given to us, in view of closure of the plant and inadequate manpower, the inventory consisting of stores and spare parts and finished Goods have not been physically verified by the management during the year under review. (b) According to the. information and explanations given to us, since the inventory have not been physically verified by the management during the year under review, we are unable to comment on the procedure of physical verification of inventories followed by the management. (c) According to the information and explanations given to us, in view of closure of the plant and inadequate manpower, the Company is not maintaining proper records of inventory. Hence, we are unable to comment on the discrepancies, if any, between the physical stocks and the books records. 3. (a) During the year under review, the Company has taken loans aggregating to Rs.306,038/- from Companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.21,865,814/-and the year-end balance of loans taken from such Companies was Rs.21,865,814/-. The Company has not taken any loans from firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. (b) In our opinion, the terms and conditions on which loans have been taken from Companies listed in the register maintained under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company. (c) The Company is not regular in repaying the principal amounts of the loans. (d) In the absence of any stipulations with respect to loans taken from Companies listed in the register maintained under section 301 of the Companies Act, 1956. we are unable to comment on the overdue amounts of such loans. (e) The Company has not granted any loans to Companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. 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 purchases of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls. 5. (a) 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 of the Companies Act, 1956 have been so entered. (b) In our opinion and according to the information and explanations given to us, there are no transactions made in pursuance of contracts or arrangements entered in the Register maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to a value exceeding Rupees Five Lacs in respect of each party. 6. The Company has not accepted any deposits from the public during the year under review, therefore the directive issued by Reserve Bank of India and the provisions of Section 58A & Section 58AA of the Companies Act, 1956 and the rules framed thereunder are not applicable to the Company. 7. The Company did not have an internal audit system during the year under review. 8. During the year under review, the Company has not maintained cost records though required to be maintained pursuant to the Order issued by the Central Government for maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 for the products manufactured by the Company in view of closure of plant operations. 9. (a) According to the review of the records of the Company, undisputed statutory dues including Provident Fund, Investor Education, Wealth-tax, Protection Fund and Cess etc except Income-tax and Sales-tax, have been generally deposited on regular basis with the appropriate authorities. We are informed that the provisions of Employees State Insurance Act, 1948 are not applicable to the Company. (b) According to the information and explanations given to us. no undisputed amounts payable in respect of Wealth-tax-and Cess were in arrears, as at 30th June, 2006 for a period of more than six months from the date they become payable. The undisputed amounts (excluding interest) payable in respect of Income Tax and Sales Tax which are outstanding as at 30th June, 2006 for a period of more than six months from the date they become payable, were Rs. 300,063 and Rs.38,729,698 respectively. (c) According to the records of the Company, there are no dues of Wealth- tax and Cess, which have not been deposited on account of any dispute, however disputed dues in respect of Income-tax Rs.94,540,344/- pending with Income Tax Appellate Tribunal & Excise duty Rs. 6,040,4057- pending with CEGAT. 10. The Companys accumulated losses at the end of the year are more than fifty percent of its net worth and the Company has also incurred cash losses in the current financial year and in the immediately preceding financial year. The Company was declared as a sick industrial company by the Board of Industrial and Financial Reconstruction (BIFR) within the meaning of clause (o) of sub-section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. BIFR has vide its letter no 383/99/BI dated 19th June 2003 recommended winding up the Company and as explained, the management is awaiting for necessary directions from the Honorable Bombay High Court. 11. On the basis of records made available and according to information and explanations given to us, the Company has defaulted in repayment of dues to a financial institution and a bank during the year and there are overdue amounts of Rs. 977.531.698/- as on 30th June, 2006. This is to be read with note No.4 and 11 of Schedule 14 regarding confirmation of balances. 12. Based on our examination of documents and records, we are of the opinion that the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13. In our opinion, considering the nature of activities carried on by the Company during the year, the provisions of any special statute applicable to chit fund/nidhi/ mutual benefit fund / societies are not applicable to it. 14. Based on our examination of documents and records, we are of the opinion that the Company has not dealt or traded in shares, securities, debentures or other investments during the year. 15. Based on the information and explanations given by the management, the Company has not given any guarantee for loans taken by others from banks or financial institutions. 16. In our opinion and according to information and explanations given to us, the Company has not taken/accepted any fresh term loans during the year. 17. According to the information and explanations given to us and on an overall examination of the financial statements of the Company, we report that no funds raised on short term basis have been used for long term investment and no long term funds have been used to finance short term assets. 18. Based on our examination of documents and records, during the financial year, 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. During the year covered by our audit report, the Company has not issued any debentures. 20. The Company has not raised any money by public issue during the year. 21. During the course of our examination of the books and records of the Company, carried out in accordance with the auditing standards generally accepted in India, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year nor we have been informed of such case by the management. For P.SUBRAMANIAM & ASSOCIATES Chartered Accountants P.Subramaniam Proprietor (M. No. 43163) Place : Mumbai Date : 04.12.06