protchem industries india ltd Auditors report

PROTCHEM INDUSTRIES (INDIA) LIMITED ANNUAL REPORT 2005-2006 AUDITORS REPORT To The Members of M/s. PROTCHEM INDUSTRIES (INDIA) LIMITED We have audited the attached Balance Sheet of M/S. PROTCHEM INDUSTRIES (INDIA) LIMITED, having registered office at Abhishegapakkam, Pondicherry 605 007, as at 31st March, 2006 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 the 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 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 purpose of 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 and Profit and Loss Account and cash flow statement dealt with by this report are in agreement with the books of account. iv) In our opinion, the Balance Sheet and Profit and Loss Account and cash flow statement dealt with this report comply with the accounting standards referred to in snob-section (3C) of section 211 of the Companies Act, 1956 except standard number 11 relating to foreign exchange. transactions. v) On the basis of written representations received from the directors, as on 31st March, 2006, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2006 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. vi) 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 give a true and fair view in conformity with the accounting principles generally accepted in India subject to: i) Non provision of interest on term loan amounting to Rs 1,38,81,833/- and working capital amounting to Rs 33,02,511 during the year resulting in understatement of net boss ii) Non provisioning of fringe benefit tax amounting to Rs 1,30,300/- in the books of account resulting in understatement of liability. a) in the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2006, and 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 cash flow statement, of the cash flow for the year ended on that date For Rao Narayan Associates Chartered Accountants (N. RAJESWARA RAO) Partner M. No.19486 Place : Chennai Date : 10.08.2006 ANNEXURE TO AUDIT REPORT OF PROTCHEM INDUSTRIES (INDIA) LIMITED i) (a) The company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets. (b) The fixed assets have been physically verified by the management at reasonable intervals having regard to the size of the company and nature of its assets. No material discrepancies have been noticed between physical inventory and book records / documents maintained. (c) Substantial part of fixed assets has not been disposed off during the year. ii) (a) The management has conducted physical verification of inventory at reasonable intervals. (b) The procedures followed by the management for physical verification of inventory are reasonable and adequate in relation to the size of the company and the nature of its business. (c) The company is maintaining proper records of inventory no material discrepancies were noticed on physical verification. iii) (a) The company has neither granted nor taken any loans, secured or unsecured to / from companies, firms or other parties covered in the register maintained under section 301 of the Act. b, c and d are not applicable. iv) There is an adequate internal control procedure commensurate with the size of the company and the nature of its business, for the purchase of inventory, fixed assets, for the sale of goods and services, in our opinion and according to the information and explanations furnished to us. Further on the basis of our examination vie have neither come across nor have been informed of any instance of major weakness in the internal control systems. v) (a) No transactions need to be entered into a register in pursuance of section 301 of the Act. (b) not applicable vi) The company has not accepted any deposits from the public and hence this clause is not applicable. vii) The company had not appointed any internal auditor during the year and hence no internal audit was conducted by any external person. viii) No cost records have been prescribed by the Central Government under clause (d) of sub-section (1) of section 209 of the Act. ix) (a) The company is not regular in depositing, undisputed statutory dues regarding Provident Fund, Employees State Insurance and Sales tax. The arrears of outstanding statutory dues relating to: Provident fund is Rs 23,06,759/- (1711595/-) Employees state insurance is Rs. 5,89,161/- (424025/-) Sales tax is Rs. 22,972/- (317661) as at the last day of the financial year concerned. (b) A sum of Rs.1.50 lakhs is disputed with regard to sales tax and the matter is under appeal with Deputy Commissioner of commercial taxes, Pondicherry. x) The accumulated losses at the end of the financial year are not less than fifty percent of its net worth. The company has incurred cash losses in the present financial year and also in the previous financial year. The company affairs have been referred to BIFR, as is required and the acknowledgement of the fact is received by the company. xi) The company has defaulted in repayment of dues to the financial institutions and banks. The details are furnished as under: Institution Amount Details Period Rs IDBI 392,76,559 (392,76,559) Principal IDBI 130,51,632 (130,51,632) I F L IFCI 108,48,000 (108,48,000) Principal 01/04/03 to 01/01/06 IFCI 171,12,000 (171,12,000) I F L 01/04/03 to 01/01/06 ICICI 219,36,055 (219,36,055) Principal 15/11/00 to 15/03/06 ICICI 23,67,473 (23,67,473) I F L 15/11/00 to 15/03/06 Exim Bank 3,69,04,328 (3,69,04,328) Principal upto March, 06 Canara Bank 78,14,971/- (45,12,460) Interest 01/04/03 to 31/03/06 Interest 904,54,364 (765,62,531) Interest upto 31/03/06 to all financial institution xii) The company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. xiii) The provisions applicable to chit funds are not applicable to the company. xiv) The company is not dealing or trading in shares, securities, debentures and other investments. xv) The company has not given any guarantee for loans taken by other from bank or financial institutions. xvi) During the year no terms loans were applied for or received. xvii) No funds have been raised on short-term basis or long term investment during the year. xviii) The company has not made any preferential allotment of shares during the year. ix) The company has not issued any debentures during the year. xx) The company has not raised any money by public issues during the year. xxi) No fraud on or by the company has been noticed or reported during the year. For Rao Narayan Associates Chartered Accountants (N. Rajeswara Rao) Partner M.No. 19486