Satguru Agro Industries Ltd Auditors Report.

SATGURU AGRO INDUSTRIES LTD AUDITORS REPORT FOR THE YEAR ENDED 30TH SEPTEMBER, 2003 We have audited the attached Balance Sheet of Brown Paper Technologies Limited as at 3e September, 2003 and also the Profit & Loss Account 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 have 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 from material misstatement. An audit includes examining, on a test check 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 and we report that: 1. As required by the Manufacturing and Other Companies (Auditors Report) Order 1988, issued by the Company Law Board in terms of Section 227(4A) of the Companies Act 1956, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order. 2. Further to our comments in the Annexure referred to in paragraph (1) above we report as under:- a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; b) 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 the books; c) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of accounts. d) We further report that i) Non-provision of extra shift depreciation in earlier years and consequential overstatement of net fixed assets and understatement of cumulative loss by Rs. 198.19 lacs (Refer Note 4). ii) Understatement of unsecured loans and cumulative loss by Rs. 280.29 lacs due to accounting of deferred sales tax liability on the basis of actuarial valuation (Refer Note 5). iii) Accounting of retirement benefits and leave encashment on cash basis and not on accrual basis as stipulated in AS-15. The impact of the same on the profit for the year is not ascertained. e) In our opinion, subject to para (d) above, the Balance Sheet and Profit & Loss Account comply with the Accounting Standards referred to in Section 211 (3C) of the Companies Act 1956 to the extent applicable. f) On the basis of the written representations received from the directors, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 30th September, 2003 from being appointed as a director under. clause, (g) of sub-section (1) of Section 274 of the Companies Act, 1956. g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts subject to remarks in paragraph. (d) above, and read together with the other notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view: (i) In the case of the Balance Sheet, of the state of affairs of the Company as at 30th September,2003 and (ii) In the case of Profit & Loss Account, of the Loss of the Company for the year ended on that date. ANNEXURE TO THE AUDITORS REPORT 1. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. Major items of fixed assets such as buildings, plant and machinery, equipment, have been physically verified by the management during the year and the frequency of verification, in our opinion, is reasonable having regards to, the size of the Company and the nature of its business. 2. None of the fixed assets have been revalued during the year. 3. The stocks of raw materials, stores, spare ,parts and finished goods except goods in transit have been physically verified by the management during the year and in our opinion, the frequency of verification is reasonable. 4. In our opinion, the procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. 5. The discrepancies noticed on verification between the physical stocks and the book records were not material and same have been properly dealt with in the Books of Accounts. 6. In our opinion, the valuation of stocks is fair and proper in accordance with the normally accepted accounting principles and is on the same basis as in the preceding year. 7. In our opinion, the terms and conditions on which loans have been taken from companies, firms or other parties listed in the registers maintained under section 301 of the Companies Act, 1956 and/or from the companies under the same management within the meaning of Sub-Section (1B) of Section 370 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company. No stipulation of interest is made on these amount. 8. The Company has not granted any loans, secured or unsecured, to the companies, firms or other parties listed in the register maintained under section 301 of Companies Act, 1956 and/or to the companies under the same management. 9. The Company has given loans or advances in the nature of loans to its employees. Repayments of the principal amounts are generally as stipulated. No interest has been charged on such loans. 10. In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of a special nature and comparable quotations are not available, there are adequate internal control procedures commensurate with the size of the Company and nature of its business with regard to purchases of stores, raw materials, including components, plant and machinery, equipment and other assets, and for the sale of goods. 11. In our opinion and having regard to our comment in paragraph 10 above, and according to the information and explanations given to us, the transactions of purchase of goods and materials and sale of goods, materials and services aggregating during the year to Rs. 50,000/- or more in respect of each party in pursuance of contracts or arrangements entered into with the parties listed in the register maintained u/s 301 of the Companies Act, 1956, have been made at prices which are reasonable having regard to the prevailing market prices for such goods, materials and services, where such market prices are available with the Company or the prices at which transactions for similar goods or services have been made with the other parties. 12. The Company does not have a formal Procedure for determination of unserviceable or damaged stores, raw materials or finished goods. As certified by the management, there were no unserviceable or damaged stores and raw materials or finished goods at the end of the year and no provision for loss is necessary. 13. The Company has not accepted deposits from the Public within the meaning of section 58A of the Companies Act, 1956. 14. In our opinion, reasonable records have been maintained by the Company for sale and disposal of realisable scrap. The process does not generate any by-product. 15. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. 16. We have broadly reviewed the books of accounts maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records u/s 209 (1) (d) of the Companies Act, 1956, and are of the opinion that prima facie the prescribed records have been maintained. We have, however, not made a detailed examination of the said records with a view to determine whether they are accurate or complete. 17. The company has deposited Provident Fund with the appropriate authorities upto May02, The arrears of the Provident Fund as on 30.9.2003 were Rs.55.53 lacs. According to the information given by the Company the provisions of the Employees State Insurance Act, 1948 are not applicable to the Company. 18. According to the information and explanations given to us, except Rs.30.80 lacs payable for sales tax, Rs.7.96 lacs towards tax deducted at source, Rs.27.54 lacs payable for income tax, Rs.5.38 lacs for professional tax and Rs.2 lacs for property tax, no undisputed amounts payable in respect of Wealth tax, Customs duty, Excise duty were outstanding as at 30th September, 2003 for a period of more than six months from the date they became payable. 19. According to the Information and explanations given to us, no personal expenses of employees or directors have been charged to revenue account other than those payable under contractual obligations or in accordance with generally accepted business practice. 20. The Company is Sick Industrial Company within the meaning of Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act. 1985. We have been informed that the company is taking necessary steps as per the provisions of Sick Industrial Companies (Special Provisions) Act, 1985.