Rathi Ispat Ltd Auditor Reports

RATHI ISPAT LIMITED ANNUAL REPORT 2006-2007 AUDITORS REPORT To The member of RATHI ISPAT LIMITED We have audited the attached Balance Sheet RATHI ISPAT LTD as at 31st March 2007 & its Profit & Loss Account and the Cash Flow Statement for the year ended on that date-attached 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 auditing standards generally accepted in India. These 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 statement. 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. As required by the Companies (AuditorsReport) Order 2003 issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956, we enclose herewith in the annexure statement of the matter specified therein. Further to our comments in the Annexure referred to above, we report that: i. We 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 accounts, as required by law have been kept by the Company so far as appears from our examination of books of accounts. iii. Balance Sheet and Profit & Loss Account dealt with by this Report are in agreement with the books of accounts. iv. In our opinion Profit & Loss Account and Balance Sheet comply with the mandatory Accounting Standards referred to in sub section (3C) of section 211 of the Companies Act, 1956 to the extent applicable. v. On the basis of written representations received from the Directors as on 31st March 2007 and taken on record by the Board of Directors, we report that none of the directors of the Company is disqualified from being appointed as a director of the company in terms of clause (g) of subsection (I) 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 Balance Sheet and Profit & Loss Account read together with the Notes thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view subject to: a) Note No.2 (a) of schedule 16 relating to doubtful debts. b) Note No.2 (b), 2(c) & 2(d) of schedule 16 relating to Sales Tax Demands. c) Note No.2 (e) & 2(f) of schedule 16 relating to Central Excise Duty Demand. d) Note No.2 (g) of schedule 16 relating to penal interest imposed by Bank. e) Note no. 2(h) of schedule 16 relating to debit note issued to various party for supplying of inferior quality scrap. f) Note no. 2(i) of schedule 16 relating to written back of provision of electricity expenses payable pertaining to earlier years. g) Note no. 3(a) & (b) of schedule 16 relating to debit notes issued to various suppliers. h) Note no.4 of Schedule-16 relating to Research & Development Expenses. In our opinion the total amount of Research and Development Expenses should be debited to Profit & Loss account, hence the amount of Loss during the year is being understated to the extent of amount not written off, of the Research & Development Expenses. i. In so far it relates to the Balance Sheet, of the State of affairs of the Company as at March 31st,2007 and ii. In so far it relates to the Profit & Loss Account, of the loss for the year ended on that date. iii. In the case of cash flow statement, of the cash flows for the year ended on that date. FOR S N R S & ASSOCIATS Chartered Accountants Place : Delhi (SHAILENDRA NATH) Date : The 12th day of May, 2007 Partner Membership No: 94243 ANNEXURE TO THE AUDITORS REPORT OF RATHI ISPAT LIMITED FOR THE YEAR ENDED ON 31st MARCH 2007 1. a) The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets. b) The fixed assets have been physically verified by the Management at reasonable intervals. According to the information & explanations given to us, No material discrepancies between book records and the physical inventories have been noticed on such verification. c) The assets disposed off during the year are not significant and there for do not affect the going concern assumption. 2. a) The inventory (excluding stocks lying with the third parties)have been physically verified by the management at reasonable intervals. There is a process of obtaining confirmation in respect of inventory lying with the third parties. b) In our opinion and according to the information and explanations given to us, 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. 3. On the basis of our examination of the records of inventory, we are of the opinion that the company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and books records were not material and have been properly dealt with in the books of account. The Raw Material disposed off during the year is significant; however same does not affect the going concern assumption. 4. a) During the period, the company has not granted any loans to parties listed in the register maintained under section 301 of the Companies Act, 1956. b) During the period the company has not taken any loans from parties listed in register maintained under section 301 of the Companies Act, 1956. 5. In our opinion and according to the information and explanations given to us there is an adequate internal control procedure commensurate with the size of the company and the nature of its business for purchase of inventory and fixed assets and on the sale of goods. During the course of our audit no major weakness has been noticed in the internal controls. We have not observed any failure on the part of the Company to correct weakness in internal control. 6. a) Based on 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 Companies Act, 1956 have been so entered. b) In our opinion and according to information and explanations given to us, the transaction made in pursuance of contracts or arrangements entered in registers maintained under section 301 and exceeding the value of five lakh rupees in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time. 7. The Company has not accepted any deposits from the public during the period under review. 8. In our opinion the Company has an internal audit system commensurate with the size and nature of its business. 9. On the basis of records produced we are of the opinion that prima facie cost records and accounts prescribed by the Central Government under section 209(1)(d) of the companies Act, 1956 in respect of products of the company covered under the rules under said section, have been maintained. However, we are neither required to carry out nor have carried out any detailed examination of such accounts & records to determine whether they are accurate or complete. 10. a) According to the information and explanations given to us and the records of the company examined by us ,in our opinion company is generally regular in depositing undisputed statutory dues including provident fund, investor education fund and protection fund , employees state insurance, income tax, sales, tax, Wealth tax, Service tax, custom duty, excise duty, cess and other statutory dues as applicable with appropriate authorities. b) According to the information and explanations given to us and the records of the company examined by us ,the particulars of the Sales Tax and Excise Duty as at 31st March 2007 which have not been deposited on account of dispute are as follows: Name of Nature of Dues Amount Rs. Period to Forum Where the Statutory which Amount Dispute is dues Relates pending Sales Tax Demand on 15,98,739/- Assesment Additional Assessment Year 1994-95 Commissioner (Appeal) Sales Tax Delhi. Sales Tax Demand on 18,21,980/- Assesment Year Additional Assessment 1997-98 Commissioner (Appeal) Sales Tax Delhi. Sales Tax Demand on 99,13,666/- Assesment Year Additional Assessment 1990-91 Commissioner IV, Sales Tax, New Delhi Excise Duty Modvat 13,39,402/- Financial Year Allahabad High Disallowance & 2002-03 Court. Penality thereof Excise Duty Modvat 16,96,05,226/- Financial Year Order passed by Disallowance 1994-95 and Assessing & Penality 1995-96 officers, thereof however company is in the process of filling of appeal in the CEGAT. 11. The Company has accumulated losses at the end of the financial year & 100% of Net Worth has been eroded and company has become a Sick Industrial Company in terms of the provision as mentioned in the sick Industrial Company (Special provision) Act, 1985. The Company has also incurred cash losses during the period. 12. Based on the audit procedure and on the information and explanation given by the management we are of the opinion that the Companys account of working capital facilities with various banks have become irregular and some of the Banks has categorised Companys working capital accounts as Non Performing Assets. 13. Based on our examination and according to the information and explanations given to us the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and others securities. 14. Based on our examination of the records, and evaluations of the related internal controls, we are of the opinion that proper records have been maintained of the transactions and contracts relating to shares, securities and other investments dealt in by the company and timely entries have been made in the records. We also report that the company has held the shares, securities and other investments in its own name. 15. The company has not given any guarantee for loans taken by others from Banks or Financial Institution. 16. Based on our examination of the records and according to the information and explanations given to us, we are of the opinion that Term Loan / Corporate Loan availed during the period under review were applied for the purpose for which these loans were obtained. 17. No fund raised on short-term basis has been used for long term investment or vice versa. However, there has been deployment of fund out of reserve of the Company, which is technically regarded as long term source of fund for meeting need based working capital requirement. 18. The Company has not made any preferential allotment of shares to the parties and companies covered in the register maintained under section 301 of the companies Act, 1956 during the period. 19. The Company did not have any outstanding debentures during the period. 20. The Company has not raised any money by Public Issue during the period. 21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanation given to us, we have neither come across any instances of material fraud on or by the company, noticed or reported during the year, nor have we been informed of such case by the management. 22. Other clauses of the order are not applicable to the company. FOR S N R S & ASSOCIATS Chartered Accountants Place : Delhi (SHAILENDRA NATH) Date : The 12th day of May, 2007 Partner Membership No:94243