Triumph International Finance India Ltd Auditors Report.

TRIUMPH INTERNATIONAL FINANCE INDIA LIMITED ANNUAL REPORT 2005-2006 AUDITORS REPORT To The Members of TRIUMPH INTERNATIONAL FINANCE INDIA LIMITED, Mumbai 1. We have audited the attached Balance Sheet of TRIUMPH INTERNATIONAL FINANCE INDIA LIMITED, as at 31st March, 2006 and also the Profit and Loss for the year ended on that date annexed thereto and the Cash Flow Statement for the year ended on that date. 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 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(s). 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. 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. 4. 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 our audit; (ii) 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 those books; (iii) The Balance Sheet, 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, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; (v) On the basis of written representations received from the two directors, as on 31st March, 2006, and taken on record by the Board of Directors, we report that they are not disqualified as on 31st March 2006 from being appointed as a Director in terms of clause (g) of subsection (1) of section 274 of the Companies Act, 1956. However, as regards the third Director, Mr. Dharmesh Doshi, in absence of the written representation from him, we are unable to comment whether or not he is disqualified under 274(1)(g) as on 31st March, 2006; (vi) We draw your attention to Note 1(b), 2 and 3 in Schedule P to the Balance Sheet regarding preparation of accounts on Going Concern Basis and that the Securities and Exchange Board of India has canceled the registration of the Company as a stock-broker and that National Stock Exchange has declared the Company to be a defaulter and that the Companys ability to continue as a going concern is dependent on vacation of order of cancellation of registration by Securities Appellate Tribunal and recovery of debts. In view of the cancellation of registration and declaration of the Company to be a defaulter, our comments in pain (vii) below, about recovery of the major debtor being doubtful and sizable accumulated losses, in our opinion the ability of the Company to continue as a gong concern seem to be doubtful and preparation of the accounts on Going Concern Assumption do not seem to be correct. However, in view of over inability to quantify the impact of some of qualifications, we are unable to quantify the impact of the above on the loss for the year and assets and liabilities and the reserves stated in the Balance Sheet, (vii) We draw your attention to Note 6 in Schedule P to the Balance Sheet about amount of Rs. 202 crores and delivery of shares (worth Rs. 105.43 crores at the market value as on 15.6.2006) receivable from Classic Credit Limited (CCL). CCL has not commenced the payment as per the time schedule and the Company and CCL have agreed to postpone the installments by one more year. The Company has not been able to produce any positive evidence to us to show that CCL will be able to repay the amount and give the delivery of the shares. According to the information and explanation given to us and in absence of any evidence being made available to us, m our opinion on the recoverability of this amount and the receipt of delivery of those shares from CCL seem doubtful On the basis that the amount is not recoverable and the delivery of shares is not receivable and the provision for the same rs required to be made in the accounts, the loss for the year and the debit balance of Profit & Loss Account shown in the Balance Sheet would have been higher by Rs.304.43 crores and the asset, stated in the balance sheet would have been lower to that extent. (viii) We draw your attention to the fact that total Debtors other than Classic Credit Limited are Rs.7.19 crores. In absence of other details about them, we are unable to express an opinion about the recoverability of the amount and the consequential effect thereof on the loss for the year and on the asset, liabilities and the reserves, stated in the Balance Sheet. (ix) We draw your attention to Note 13 in Schedule Y to the Balance Sheet about Rs.34.32 lacs paid by M. Jiggar & Co., To the TRO and Note No. 29 about Rs. 12.77 lacs paid by Triumph Forex Services Ltd. to The Madhavpura Mercantile Co. Op Bank Ltd. In absence of any information from 7R0 accepting or The Madhavpura Mercantile CO. Op. Bank Ltd. confirming the payment, we are unable to express an opinion about the receipt of the same by the Income lax Department and Madhavpura Mercantile Co. Op. Bank Ltd. and consequential effect thereof on the loss for the year and on the asset, liabilities and reserve stated in the Balance Sheet. (x) We draw your attention to Note 14 in Schedule P to the Balance Sheet about Rs.3.56 crores paid to Panther Investrade Limited. In view of the fact that DRT matters are pending against Panther Investrade Limited and since other information about them is not made available to us, we are unable to express an opinion about the recoverability of this amount and consequential effect thereof on the loss for the year and on the asset, liabilities and reserve stated in the Balance Sheet. (xi) We draw your attention to Note 17 in Schedule P to the Balance Sheet about Rs. 4 crores advance given to an Ex-director Based on the available evidence we are unable to express an opinion about the recoverability of this amount and the consequential effect thereof on the loss for the year and on the asset, liabilities and the reserves, stated in the Balance Sheet. (xii) We draw your attention to Note 27 in Schedule P to the Balance Sheet regarding Managerial Remuneration. (xiii) Except for the matters referred to in para (viii) to (xii) above in respect of which the amount involved is significant and in respect of which we are unable to express an opinion about recoverability of amount, delivery of shares, in our opinion and to the best of our information and according to the explanations given to us the said accounts, read with the Notes to Accounts appearing in the Schedule P give the information required by the Companies Act, 1956, in the manner so required. (xiv) In view of our inability to comment upon recoverability of amount from other Debtors/advances/other amount stated in para (viii) to (xi) above Managerial Remuneration in para (xii) above, and in view of our opinion about doubtful recovery of amounts from CCL stated in para (vii) above and our comment about the ability of the Company to continue as a going concern being doubtful stated in para (vi) above and the fact that the accounts are prepared on Going concern assumption in our opinion the said accounts, read with the Notes to Accounts appearing in the Schedule P do not give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006, (b) in case of the Profit and Loss Account, of the loss for the year ended on that date, and (c) in case of the Cash Flow Statement, of the Cash flows for the year ended on that date. FOR PRAVIN P. SHAH & COMPANY CHARTERED ACCOUNTANTS (PARAG P. DOSHI) PARTNER Membership Number: 41727 Place: Mumbai Date : 30th June, 2006 ANNEXURE, GIVING DETAILS AS REQUIRED BY THE COMPANYS (AUDITORS REPORT) ORDER, 2003 (CARO) ISSUED BY THE CENTRAL GOVERNMENT OF INDIA IN TERMS OF SECTION 227(4A) OF THE COMPANIES ACT, 1956 AND REFERRED TO IN PARA (3) OF OUR REPORT OF THE EVEN DATE ON THE ACCOUNTS OF TRIUMPH INTERNATIONAL FINANCE INDIA LIMITED FOR THE YEAR ENDED 31ST MARCH 2006. Annexure to the Auditors Report The Annexure Referred To In Paragraph 3 Of Our Report To The Members Of TRIUMPH INTERNATIONAL FINANCE INDIA LIMITED on the financial (the Company) For The Year Ended March 31, 2006. (i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of Fixed Assets. (b) According to the information and explanations given to us, all the Fixed Assets have been physically verified by the management at the year end, which in our opinion is reasonable having regard to the size of the Company and the nature of the Fixed Assets. We have been informed by the management that no material discrepancies were noticed on such physical verification. (c) During the year, the Company has not disposed off any substantial part of fixed assets. (ii) (a) The inventories of securities in physical form have been physically verified at the end of the year by the management. In our opinion, the frequency of verification is reasonable. (b) In our opinion, and according to the information and explanation given to us, 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) In our opinion, and according to the information and explanations given to us, the Company is maintaining proper records of inventory. In our opinion, and according to the information and explanation given to us material discrepancies noticed on physical verification of Inventory, as compared with the books records, were not material. (iii) (a) There was 1 party covered in the register maintained under section 301 of the Companies Act, 1956 to which the Company has granted interest free unsecured loan in the past. During the year no further loan was given to any party covered under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.6500/- and the year end balance of loans was Rs.6,500. (b) In our opinion, the other terms and conditions on which loans have been granted to Company listed in the register maintained under section 301 of the Companies Act, 1956 is not, prima facie, prejudicial to the interest of the Company. (c) According to the information given to us, in case of loans given, there was no stipulation about repayment of the principal amounts. (d) According to the information given to us, in respect of the above loans, there were no overdue amounts exceeding rupees one lakh. (e) The Company has not taken loans, secured or unsecured, from parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, sub clause (f) and (g) of clause (iii) of paragraph 4 of the Order are not applicable to the Company for the current year. (iv) 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 equipment and other assets and for the sale of goods and services. During the year there was no purchase of inventory, fixed assets or sale of goods and services and therefore we have neither come across nor we have been informed of any weakness in internal controls. (v) (a) According to the information and explanations given to us, in our opinion the transactions 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, no transactions of purchase of goods and materials, and sale of goods, material and services made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the year to Rs. 5,00,000 (Rupees Five Lakhs only) or more in respect of each party, have been entered into. (vi) During the year the company has not accepted any deposits from the public as defined in the directives issued by the Reserve Bank of India read with the provisions of sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under. Hence in our opinion, the clause (vi) of the Order is not applicable to the Company. (vii) The Company did not have an internal audit system during the year under audit. (viii) According to the information and explanations given to us, the Company did not have any manufacturing activity during the period under audit, and hence, the maintenance of Cost records under section 209(1)(d) of the Companies Act, 1956 does not arise. (ix) (a) According to the information and explanation given to us, during the year the company was regular in depositing undisputed statutory dues including provident fund, investor education protection fund, employees state insurance, income tax, sales tax, wealth tax, custom duty, excise duty, cess and other material statutory dues applicable to it, with the appropriate authorities. According to the information and explanations given to us, as on 31.3.2006 Service tax payable Rs. 11.20 lakhs was in arrears, for a period of more than six months from the date it became payable. According to the information and explanations given to us, as on 31.3.2006 no undisputed amounts payable in respect of income tax, wealth tax, sales tax, customs duty, excise duty and cess were in arrears, for a period of more than six months from the date they became payable. (b) According to the information and explanation given to us, there are no dues of sales tax, custom duty, wealth tax, excise duty and cess, as on 31.3.2006, which have not been deposited on account of any dispute. According to the information and explanation given to us, particulars of dues of income tax as on 31.03.06, which have not been deposited on account of any dispute, are as under: Name of the Nature of Dues Amount Period to Forum Statute (Rs. in which the before lakhs) amount which the relates dispute is pending. I.T. Act, 1961 Income Tax demand 112.67 A.Y.1997-98 Income Tax Appellanet Tribunal (ITAT) I.T. Act, 1961 Income Tax demand 364.44 A.Y.1998-99 ITAT I.T. Act, 1961 Income Tax demand 7117.27 A.Y.1999-00 ITAT I.T. Act, 1961 Income Tax demand 259.98 A.Y.2000-01 ITAT I.T. Act, 1961 Income Tax demand 68084.56 Block Period Bombay High Court I.T. Act, 1961 Income Tax demand 938.29 A.Y.2001-02 CIT(A) I.T. Act, 1961 Penalty 420.00 A.Y.2000-01 ITAT I.T. Act, 1961 Income Tax Demand 140.91 A.Y.2000-01 CIT(A) I.T. Act, 1961 Income Tax Demand 0.36 A.Y.2003-04 CIT(A) I.T. Act, 1961 Penalty 428.99 A.Y.2003-04 CIT(A) (x) In our opinion, the accumulated losses of the company as at 31.3.06 were 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. (xi) The Company has not borrowed from any Financial Institution or by issue of Debentures. In our opinion and according to the information and explanation given to us, the Company has defaulted in repayment of dues to banks. The details of the same are as under. Name of the Bank Principal/Interest Amount Period of default (Rs. In lakhs) 1. The Madhavpura 1) Principal. - Since 04.04.2001 Mercantile Co-op. 2) Interest 1521.05 Bank Limited 2. Global Trust 1) Principal 2949.43 Since 21.03.2001 Bank Limited 2) Interest 3983.80 3) Bank Guarantee 315.00 Since 29.01.2004 4) Interest on Bank Gurantee 130.19 Note: All the above loans were overdraft facilities and were not having any fixed repayment schedules. Therefore, in case of the principle amount, the Period of default is calculated from the date the banks have demanded the payment. Period of default with respect to interest is not mentioned since provision for the same has been made on various dates. The payments made are adjusted towards Principle repayment. (xii) Based on our examination of the records and the information and explanation given to us, the Company has not granted loans and/or advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) According to the information given to us the provisions of special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company. Therefore, the provisions of clause 4(xiii) of the CARO are not applicable to the company. (xiv) In our opinion and as per the information and explanation given to us, the Company has maintained proper records of transactions and contracts in respect dealing or trading in shares, securities, debentures and other investments and timely entries have generally been made therein. All the shares, securities, debentures and other Investments have been held by the Company in its own name, except to the extent of exemption granted under section 49 of the Companies Act, 1956 (xv) In our opinion and according to information and explanations given to us, the terms and conditions on which the company has given guarantees for loans taken by others frown banks and financial institutions are not prejudicial to the interest of the company. (xvi) The company has not taken or utilised any term loan during the year. (xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that the funds raised on short-term basis have not been used for long term investment. (xviii) According to the information and explanation given to us, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act. (xix) The company has not issued any debentures and hence, the question of creating security or charge thereof does not arise. (xx) The company has not raised any money by public issues during the year covered by our report. (xxi) According to the information and explanations given to us, certain clients and banks have lodged complaints against the Company with charges relating to cheating by the Company. The details of such complaints are as under Complaint by Stage of Complaint Charges Raised European Crime Branch, Mumbai has Non receipt of sale Investments filed the charge sheet proceeds of Rs.83.22 Limited before the Addl. Chief crores Metropolitan Magistrate, 19th Esplanade Court, Mumbai Economic Offence The matter is still under The Company and its wing of CBI Mumbai investigation of EOW, CBI. Directors along with investigating No charge sheet is filled other 30 parties were preferential yet. alleged for commission of allotment of various offences relating shares by Padmini to cheating and forgery Polymers Limited under Indian Penal Code and P.C. Act 1988. The Madhavpura CBI has filed the charge Utilisation of loan Mercantile Co. Op. sheet before the High of Rs.20 crores against Bank Limited Court, Gujarat sanction of Rs.5 crores According to the information and explanation given to us, no other fraud on or by the Company has been noticed or reported during the year under audit. For PRAVIN P. SHAH & COMPANY CHARTERED ACCOUNTANTS (PARAG P. DOSHI) PARTNER Membership Number: 41727 Place: Mumbai Date : 30th June 2006.