Shamken Spinners Ltd Auditor Reports

SHAMKEM SPINNERS LIMITED ANNUAL REPORT 2010-2011 AUDITORS REPORT To, The Members of SHAMKEM SPINNERS LTD. 1. We have audited the attached Balance Sheet of M/s. SHAMKEN SPINNERS LTD., NEW DELHI, as at 31st March, 2011 and also the Profit and Loss Account of the company for the year ended on that date, annexed there to. 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 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides reasonable basis for our opinion. 3. As required by the Companies (Auditors Report) Order, 2003 as amended by the companies (Auditors Report) amendment order 2004, issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information and explanation given to us. We enclosed in the Annexure a statement on the matters specified in paragraphs 4 & 5 of the said Order. 4. Further to our comments in the Annexure-(i) & (ii) referred to above, and we report that: a) We have obtained all 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 account, as required by law, have been kept by the company, so far as appear from our examination of those books. c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this reports are in agreement with the Books of Account. d) In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report comply with the accounting standards referred to in sub- section (3C) of section 211 of the Companies Act, 1956. e) On the basis of written representations received from the directors, as on 31st March, 2011, and taken on record by the Board of Directors, we report that all directors were disqualified as on 31st March, 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. f) Subject to the effect of the qualifications given in the preceding paragraphs, 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 accounting principals generally accepted in India: (i) In the case of the Balance Sheet, of the State of Affairs of the Company as at 31st March, 2011 and; (ii) In the case of the Profit & Loss Account, of 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 and on behalf of For J.P. CHATURVEDI & COMPANY, Chartered Accountants Sd/- (J.P. CHATURVEDI) M. No. 031373 Prop. Place: New Delhi. Date : 23.08.2011 ANNEXURE - (I) TO THE AUDITORS REPORT (Referred to in Paragraph (4) of the Auditors Report of even date to the members of M/s. SHAMKEN SPINNERS LIMITED on the financial statements for the year ended 31st March, 2011) 1.(a) The company has represented to maintain proper records showing full particulars, including quantitative details and situation of fixed assets. However, full particulars of the assets as required, are not maintained in the fixed assets register. Therefore, we are constrained to comment on their compatibility with physical existence or other wise. (b) Fixed assets represented to have been physically verified by the management during the period in phased periodical manner however in the absence of accessibility of relevant documentation relating to fixed assets verifications we are constrained to comment on the matter. (c) The Company has represented, to have made no sale/disposal of a substantial part of fixed assets during the period. Under review, as such reliance is placed in the absence of any such substantial sale / disposal of fixed assets, the status of the company as going concern was impaired. 2. In view of absence of manufacturing & trading activities the stock of finished goods do not exist except the some store & spare and packing material which as per management representation have been physically verified by the management. 3.(a) The company has granted interest free secured / unsecured loans to the companies firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. The year-end balances of loan given to such companies were Rs. 10.45 Lacs. (b) Subject to the Interest part other terms and conditions are not prima facie prejudicial to interest of the company in view of reliance placed on the assurance of the management. (c) Reliance is placed on companys claim that there is no over due amount in respect of loans taken / granted by the company from the parties covered u/s 301. (d) The company has taken interest free loan from the lenders covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 467.76 Lacs and the year- end balance of loan taken from such company was Rs. 467.76 Lacs. So the clauses 3 (f) and 3 (g) are not applicable. 4. The operation of the company were suspended, no commercial activities were carried out during the year under review. Hence we are not commenting on internal control procedures maintained to purchase of inventory and fixed assets and for the sale of goods. 5.(a) In view of absence of manufacturing & trading activities we are not commenting on internal control procedures adopted by the company for purchase / sale which are of special nature for which suitable alternative source do not exists (b) Based on the representations made by the company and relied upon, we are of the opinion that the transactions that need to be entered into the register maintained u/s 301 of the Companies Act, 1956 have been so entered. In absence of any commercial operation no transactions of any kind of sales & purchases are made. 6. During the year under review, the Company has not accepted fresh public deposits within the meaning of Section 58A of the Companies Act, 1956. However, deposits received in preceding periods, still continue to be outstanding for which management application to the Company Law Board for further extension of time against of its earlier order for repayment of deposits, is in progress. 7. Internal audit systems have been suspended in absence of any manufacturing or commercial activities. 8. The Company is required to maintain cost records as prescribed under Section 209 (1) (d) of the Companies Act, 1956. The company has represented to have maintained proper cost records as required. However in the absence of any manufacturing activities, we have not gone through detailed examination of records, with a view to determine whether they are accurate or complete. 9. (a) According to the records of the company, the company is generally regular in depositing the undisputed statutory dues including Investor education and protection fund, employees state insurance, income-tax, sales- tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues as applicable with the appropriate authorities. (b) The company has informed that Income Tax Demand of Rs.895.04 Lacs and Wealth Tax Demand of Rs.4.92 Lacs related to A.Y. 2003-04 and excise duty demand of Rs.67.14 Lacs , and since the matter is pending in C.I.T.(Appeals), the same caused to be in nature of contingent liability. 10. The accumulated losses of the company have exceeded fifty percent of its Net worth as at 31st March, 2011. The company has incurred a cash loss of Rs. 54.67 Lacs in the current reporting year and incurred cash loss Rs. 66.02 Lacs in the immediately preceding reporting period. 11. The Company has defaulted in repayment of loans (either secured or unsecured) including term loans from Financial Institutions or Bank or Debenture Holder. The bank / financial institutions have levied restraints and put moratorium in the operations of bank accounts of the company. However, one time settlement (OTS) under negotiation is being effort to be attained. 12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities, in lieu of reliance placed on corroboration of the management. 13. The Company is not a Chit Fund, Nidhi or Mutual Benefit Society. Hence, the requirements of clause (xiii) of paragraph 4 of the Order are not applicable to the Company. 14. The Company is not a dealer or trader in shares, securities, debentures and other investments as pronounced by the management. 15. The Company has not, during the year under review, given any guarantee for loans taken by others from Bank or Financial Institutions in lieu of reliance placed on corroboration of the management. 16. No fresh term loans have been raised and received by the company during the period under review. The company remained encountered with constraints on account of operations of Bank Accounts, lied under moratorium. 17. The Company has not issued any debentures. Hence, the requirements of clause (xix) of paragraph 4 of the Order are not applicable to the Company. 18. The Company has not raised any money by public issues during the reporting period. 19. No fraud committed by the company, related to the year under audit, was represented. The other matters, referred to in the order have not reported upon, as they are not applicable to the Company. For and on behalf of For J.P. CHATURVEDI & COMPANY, Chartered Accountants Sd/- (J.P. CHATURVEDI) M. No. 031373 Prop. Place: New Delhi. Date : 23.08.2011 ANNEXURE-(II) TO THE AUDITORS REPORT (Referred to in Paragraph (3) of the Auditors Report of even date to the members of M/s. SHAMKEN SPINNERS LIMITED on the financial statements for the year ended 31st March, 2011) Attention is specifically invited to the following clauses. A.(i) The company has not provided the interest on the term loans and working capital loans and so on during the previous year(s). (ii) Further persisting capitalization of expenditure on project discontinued in earlier period(s) has related in over statement of Gross Fixed Assets of the company by Rs.10640.13 Lacs and under statement of accumulated losses by Rs.10640.13 Lacs. (iii) The company has also not provided the interest on over due fixed deposits. (iv) Considering the above factors the accumulated losses of the company should have been as under: S. PARTICULARS Current Year Accumulated NO. Losses Losses Rs. In Lacs Rs. In Lacs 1. Accumulated Loss upto last year 13443.74 2. Losses as per profit & loss account 1190.27 1190.27 3. Interest not provided for current year 3186.00 3186.00 4. Accumulated interest B/F 21925.89 5. Capitalization of Expenditure 10640.13 TOTAL 4376.27 50386.03 B. The losses of the company exceed its net-worth and therefore the company is classified as a sick industrial company as per provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. Despite this, the company has prepared its accounts as a going concern. C. The company have closed down its plant and suspended all its commercial operation since last two years due to lack of working capital funds and adverse market conditions which has resulted in impairment losses which company has not quantified in value terms and such as the same have not been charged to profit & loss account. D. Events occurred after balance sheet date The Arcil has taken the possession of the entire assets of the company on 18th August,2011 in exercise of its right under the provision of The Securitisation And Reconstruction of Financial Assets And Enforcement of Security Interest Act 2002. However the company is in process to defend the above action in the Court of Law. The other matters, referred to in the order have not been reported upon, as they are not applicable to the Company. For and on behalf of For J.P. CHATURVEDI & COMPANY, Chartered Accountants Sd/- (J.P. CHATURVEDI) M. No. 031373 Prop. Place: New Delhi. Date : 23.08.2011