shree vindhya paper mills ltd Auditors report

SHREE VINDHYA PAPER MILLS LIMITED ANNUAL REPORT 2004-2005 AUDITORS REPORT To, THE MEMBERS OF SHREE VINDHYA PAPER MILLS LIMITED We have audited the attached Balance Sheet of SHREE VINDHYA PAPER MILLS LIMITED, as at 31st March, 2005 and also the Profit & Loss Account and Cash Flow Statement of the Company 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 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 amount 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. 1. As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956, on the basis of such checks as we considered appropriate and according to the information and explanations given to us during the normal course of audit, we annexure thereto a statement on the matters specified by paragraph 4 and 5 of the said Order. 2. Further to our comments in the Annexure referred to in Paragraph (1) above, we report that: (a) 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; (b) In our opinion, proper books of account as required by law have been kept by the Company, so far as it appears from our examination of such books; (c) The Balance Sheet and the Profit and loss Account, dealt with by the report are in agreement with the books of account; (d) In our opinion, the Profit and Loss Account and the Balance Sheet dealt with by this report complies with the Mandatory Accounting Standards referred in to subsection (3C) of the Companies Act, 1956, except for Non Provision of Leave Encashment Liability which is not in accordance with Accounting Standard 15 and the Company has not identified the assets that may be impaired nor has estimated the recoverable amount of the assets as required by Accounting Standard-28 Impairment of Assets (As-28) issued by the Institute of Chartered Accountants of India. Therefore, we are unable to verify whether any impairment loss needs to be provided in the books of accounts and the impact of the same is unascertainable. (e) On the basis of written representation received from the Directors, none of the Directors is disqualified as on 31st March, 2005, from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. (f) We further report that: 1) No provision has been made for of doubtful debts amounting to Rs.46,848,532 and old stock amounting Rs.7,068,614. 2) Balances in respect of balances with Banks amounting to Rs.3,732,172, Sundry Debtors amounting to Rs.53,245,339, Sundry Creditors amounting to Rs.47,078,980, Loans and Advances amounting to Rs.266,636,207 and Deposits amounting to Rs.33,689,073 are subject to confirmations and reconciliation. In the absence of the Confirmation we are unable to comment about the recoverability of the above amounts. 3) No provision has been made by the company for losses incurred by the subsidiary company. 4) The accumulated losses of the company are in excess of paidup share capital and reserve of the company. However, in the opinion of the management inspite of the matter discussed of above the accounts are prepared on going concern basis in view of expected relief and concession from the banks and financial institution in terms of revised restructuring proposal as per CDR scheme. (g) In our opinion and to the best of our information and according to the explanation given to us, the said accounts subject to Point No (d) and (f) above and, the consequent cumulative impact there of on the losses, assets and liabilities, which is not ascertainable and 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: (i) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2005. (ii) In the case of the Profit and Loss Account, of the loss for the year ended on that date. and (iii) In the case of Cash Flow Statement of the cash flows for the year ended on that date. For KHANDELWAL JAIN & CO. Chartered Accountants, (HIRANYA ASHAR) PARTNER Membership No.111092 Place : Mumbai Date : 26th October, 2005 ANNEXURE TO THE AUDITORS REPORT (REFERRED TO IN PARAGRAPH (1) OF OUR REPORT OF EVEN DATE) 1. (a) The company has maintained records showing full particulars including quantitative details and situation of fixed assets. However same has not been updated. (b) According to information and explanation given to us fixed assets has not been physically verified during the year by the management. (c) During the year, the company has not disposed off a major part of the fixed assets. 2. (a) The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable. (b) The procedure 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. (c) The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book stock has not been properly dealt with in the books of account. 3. (a) The company has granted loan to two companies covered in the register maintained under section 301 of the Companies Act,1956. The maximum amount involved during the year was Rs.473.59 lacs and year-end balance of loans granted to such parties were Rs.466.21. (b) In our opinion, the rate of interest and other terms and conditions of such loans are prima facie, not prejudicial, to the interest of the company. (c) The parties have repaid the principal amount as stipulated and have also been regular in the payment of interest of the company. (d) There are overdue amount in excess of Rs.1 Lac in respect of loans granted to companies, firm or other parties listed in the register maintained under section 301 of Companies Act, 1956. (e) The company has not taken loan from parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, clause 3(f) and (g) of Companies (Auditors Report) Order, 2003 is not applicable. 4. In our opinion and according to the information and explanations given to us, the internal control procedures are 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 system of the company. 5. (a) According to the information and explanations given to us, we are of the opinion that the particulars of all contracts or arrangements 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 that made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year. 6. In our opinion and according to the information and explanations given to us, the company has defaulted in repayment of public fixed deposits and has not complied with the provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. 7. The company does not have internal audit system. 8. 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. 9. (a) According to the records of the company undisputed statutory dues including provident fund, investor education protection fund, employees state insurance, income tax, sales tax, wealth tax, custom duty, excise duty, cess, service tax and other material statutory dues applicable to it have not been regularly deposited during the year with the appropriate authorities. Further, since the Central Government has till date not prescribed the amount of cess payable under section 441A of the Companies Act, 1956 we are not in a position to comment upon the regularity or otherwise of the company in depositing the same. (b) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, wealth tax, sales tax, customs duty, excise duty and cess were in arrears, as at 31st March, 2005 for a period of more than six months from the date they became payable except for Rs.4,638,758/- (excluding interest) in case of Central Excise, Rs.999,724/- in case of Sales Tax, 288,695/- in case of Professional Tax, Rs.21,000/- in case of Non-Agricultural Tax, Rs.789,132/- in case of TDS which were outstanding as on 31st March, 2005 for the period of more than six months. (c) According to the information and explanation given to us, there are no dues of sales tax, income tax, customs duty, wealth tax, excise duty and cess which have not been deposited on account of any dispute. 10. In our opinion, the accumulated losses of the company are more than fifty percent of its net worth. The company has incurred cash losses during the financial year covered by our audit and the immediately preceding financial year. 11. In our opinion and according to the information and explanations given to us, and after considering the financial restructuring package approved under corporate debt restructuring (CDR) system, the company has defaulted in repayment of dues to a financial institution and bank. However, as per revised CDR package dated 22/08/2005 there are no defaults in respect of repayment of financial institution and bank. 12. According to the information & explanations given to us, the Company has not granted loans and advances on the basis of security byway of pledge of shares, debentures and other securities. 13. In our opinion, the company is not a chit fund or a nidhi mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the company. 14. In our opinion, the company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the company. 15. In our opinion, the terms and conditions on which the company has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interest of the company. 16. During the year, no term loans were raised by the Company. 17. According to the information and explanations given to us, and on an overall examination of the balance sheet of the company, we report that no funds raised on short-term basis have been used for long-term investment. 18. Company has not made any preferential allotment of shares during the year. 19. According to the information and explanations given to us, the Company has not issued any debentures during the year. 20. According to the information and explanations given to us, the Company has not raised money by public issue during the year. 21. According to the information and explanations given to us, no fraud on or by the company had been noticed or reported during the course of our audit. For KHANDELWAL JAIN & CO. Chartered Accountants, (HIRANYA ASHAR) PARTNER Membership No.111092 Place: Mumbai Date : 26th October, 2005