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Assam Petrochemicals Ltd.

BSE: 506267 Sector: Industrials
NSE: N.A. ISIN Code: INE277D01010
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Assam Petrochemicals Ltd. (ASSAMPETROCHEM) - Auditors Report

Company auditors report

TO THE MEMBERS OF ASSAM PETROCHEMICALS LIMITED

Report on the Financial Statements

We have audited the accompanying standalone financial statements of ASSAMPETROCHEMICALS LIMITED ("The Company") which comprise the Balance Sheet as atMarch 312016 and the Statement of Profit and Loss and the Cash Flow Statement for theyear then ended on that date and a summary of the significant accounting policies andother explanatory information.

Management’s Responsibility for the Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act’) with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theAccounting Principles Generally Accepted in India including the Accounting Standardsspecified under section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules2014 ("the Rules"). This responsibility also includes the maintenance ofadequate accounting records in accordance with the provision of the Act for safeguardingof the assets of the Company and for preventing and detecting the frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

We have conducted the audit for the year ending on 31.03.2016 as per our appointmentvide Letter No./CA.V/COY/ASSAM APETRO (1)/69 dated 03.07.2015 by the C&AG of India.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. ose Standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on theauditor’s judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the Company’spreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances.

An audit also includes evaluating the appropriateness of the accounting policies usedand the reasonableness of the accounting estimates made by the Company’s Directorsas well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.

Basis for Qualified Opinion:

1. A mortization of ROC fees Expenses: Expenses related to ROC fees for enhancement ofauthorized share capital total amounting to Rs. 16650510/- had been amortized as perdecision of the management from Financial Year 2012-13 @ Rs. 3330102/- per year hasbeen charged under Depreciation and Amortization expenses and balance amount Rs.3330102/- shown as Unamortized Expenses under Other Non-Current Assets. On the basis ofAccounting Standard (AS)-10 on Fixed Assets Para 9.2 underThe Companies AccountingStandards Rules 2006 the whole expenses related to ROC fees for enhancement ofauthorised share capital of Rs. 16650510/- should have been charged to CapitalWork in Progress as the amount is specifically incurred with a view for expansion of newproject. As such the company had overstated its loss for FY 2014-15 & 2015-16 by Rs.33 30102/- respectively and understated profit for FY 2012-13 & 2013-14 by Rs. 3330102/- respectively. This matter was also qualified by the previous auditor on thefinancial statements for the year ended 31st March’2015.

2. P rovision for Pay revision of arrear salaries for employees for the year 2009-10& 2010-11 : As mentioned in CAG comments on the accounts for the year 2012-13 and asper qualified opinion of previous auditor Rs. 62754977/- being the arrear payableagainst pay revision of salaries of employees for the years 2009-10 & 2010-11 shouldhave been provided for and shown under "Current Liabilities" instead ofdisclosing it under "Contingent Liabilities" as the same was approved by theBoard of Directors of the Company and Government of Assam. But no provision has been madeby the Company charging to Statement of Profit and Loss Rs. 627 54977/- (Previous yearended 31st March’2015 Rs. 6270 54977/-) as "Prior period Items" and shownunder "Short term provisions". This has resulted in understatement of loss byRs. 62754977/- and understatement of short term provisions by Rs. 62754977/-previous year ended 31st March’ 2015 Rs. 62754977/- Rs. 62754977/-respectively). This matter was also qualified by the previous auditor on the financialstatements for the year ended 31st March’2015.

3. Provision for deficit in PF Trust: As per the Employees’ Provident Funds &Miscellaneous Provisions Act 1952 PF Trust is liable to be audited and if there is anydeficit in PF Trust Account it is the responsibility of the Company to compensate for thedeficit every year. According to the Audit report for the FY 2014-15 balance ofaccumulated deficit as on 31st March’ 2015 is Rs. 18535484/- out of which deficitfor FY 2014-15 Rs. 1784203/-. But no such provision has been made by the Company yet. Asa result the "Profit and Loss Account" & "Short term provisions"had been misstated for the current as well as previous years. Loss for the year have beenunderstated by Rs. 1784203/- & Rs. 16751281/- respectively for current year andprevious years. Similarly "Short term provisions" have been understated.

4. Other Tax Provision:

a) Fringe Benefit Tax:The Company had overstated its other tax provision as on31.03.2015 by Rs. 4492729/- & long term loans & advances as on 31.03.2015by Rs. 4492729/-.

b) L iabilities for Companies Income

Company had overstated its other tax provision as’ on 31.03.2015 by Rs.35508493/- & long term loans & advances as on 31.03.2015 by Rs. 35508493/-.

c) Treatment of MAT Credit:The Company had MAT Credit Balance in FY 2012-13 of Rs.4919700/-which the company fails to recognized in the books of account nor claimed inthe income tax return for the said financial year which it had written back to thebalance of Profit & Loss Account in the current year. This has resulted inunderstatement of Loss for the current year by Rs. 4919700/- & overstatementof loss for FY 2014’15 by Rs. 4919700/-.

d) Treatment of Income Tax Expense:The Company had made excess Provision for Income Taxfor FY 2014-15 by Rs. 36 74395/- which it had written back to the balance of Profit& Loss Account in the current year. This has resulted in understatement of Loss forthe current year by Rs. 3674395/-& over statement of loss for FY 2014-15 by Rs.3674395/-

5. Capital Work in Progress:

a) Administrative Building (Project): Construction of Administrative Building for thenew Project is under process. The Company had debited to Administrative Building Account(FY 2014-15 to Repairs & Maintenance) Rs. 1259195/- & credited to Prior PeriodItems by same amount during the FY 2015-16. This has resulted in overstatement of Loss forthe FY 2014-15 by Rs. 1259195/-.

b) Administrative & Other Expenses (Project) :The Company had debited the relatedexpenses to Capital Work-in Progress during the FY 2015-16 Rs. 15040679/- (DepreciationRs. 2215175/-

+ Salary & Other Allowances Rs.11695195/- + Project Travelling Expenses Rs.1066203/- + Other Expenses Rs. 63386/-) & whereasThe Company had debited therelated expenses to Profit & Loss Account during the FY 2014-15 Rs. 7676204/-(Salary & Other Allowances Rs. 7149318/- + Project Travelling Expenses Rs.526886/-). This has resulted in overstatement of Loss for the FY : The 2014-15 by Rs.7676204/- & understatement the Administrative & Other expenses of Capital Workin Progress for FY 2014-15 by Rs. 7676204/-. From the above we are of the view that thecompany has changed its Accounting Policies & Practice.

6. VAT TDS :The Company had overstated the Other Short Terms Loans of Loans &Advances as well as duties & taxes of Current Liabilities for FY 2015-16 by Rs.132627/-by not claiming the VAT TDS.

7. Quantity Discount & Turnover Discount:The Company had following the policy ofdebiting quantity & turnover discount to Turnover Account. During the year the Companyhad charged quantity & turnover discounts to the Turnover Account resulting inunderstatement of Sales by Rs. 19603592/- (Previous year Rs. 14901010/-).

8. Other Income: During the year recoveries were made from staff for the followingamenities used by them :

a) U se of School Bus : Rs. 84120/-(Previous Year Rs. 83360/-)

b) Use of Electricity Charges Rs. 243998/- (Previous Year Rs. 242678/-)

c) Use of Water Rs. 20523/-(Previous Year Rs. 7718/-)

These recoveries should be adjusted to the corresponding expenses account. AccordinglyOther Income have been overstatement by Rs. 3 48641/-(Previous Year Rs. 333756/-) aswell as corresponding expenses also overstatement by Rs. 348641/- (Previous YearRs. 333756/-).

Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis for QualifiedOpinion paragraph above the aforesaid standalone financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India:

a) in the case of the Balance Sheet of the state of affairs of the Company as at March312016;

b) in the case of the Statement of Profit and Loss of the loss for the year ended onthat date.

c) in the case of the Statement of Cash Flow of the cash flow for the year ended onthat date.

Emphasis of Matter

1. We draw attention to Note 5(b) (ii) and Note 24.1 to the financial statementsrelated to Equity capital money received from Government of Assam amounting Rs. 1702 lakhsshown under other long term liabilities for which legal formalities relating to issue ofshare capital will be taken by the Board in due course as mentioned in above notes.

Our opinion is not qualified in respect of this matter.

2. We draw attention to Note 25.10 to the financial statements :

The Consolidated Financial Statements under section 129(3) of the CompaniesAct’2013 of the company and its subsidiary M/s Pragjyotish Fertilizer and ChemicalsLimited has not been prepared due to absence of Audited Financial Statements of thesubsidiary company. Our opinion is not qualified in respect of this matter.

3. We draw attention to Note 25.11 to the financial statements related to basis forcalculation of depreciation: In absence of proper fixed assets register rate ofdepreciation under straight line method and written down value method on remaining usefullife of respective assets is calculated on the basis of audited financial statements ofprevious years and other financial records. Our opinion is not qualified in respect ofthis matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order2016 issued by theCentral Government of India in exercise of powers conferred by sub-section 11 of section143 of the Act we enclose in Annexure "A" a statement on the matters specifiedin paragraphs 3 & 4 of the Order.

2. As required by sub-section 3 of section 143 of the Act we report that:

a) We have sought and obtained all the information and explanations which to the bestof 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 theCompany so far as it appears from our examination of those books.

c) The Balance Sheet Statement of Profit and Loss and the Cash Flow Statement dealtwith by this Report are in agreement with the books of account.

d) In our opinion the aforesaid standalone financial statements comply with theaccounting standards specified under section 133 of the Act read with Rule 7 of theRules.

e) On the basis of the written representations received from the Directors as on 31stMarch 2016 and taken on record by the Board of Directors none of the Directors aredisqualified as on 31st March 2016 from being appointed as a Director in terms of subsection 2 of section 164 of the Act.

f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in Annexure "B" and.

g) W ith respect to the other matters to be the Auditor’s Report in accordancewith Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to thebest of our information and according to the explanations given to us :

i) The Company has disclosed the impact of pending litigations on its financialposition in its financial statements - Refer Note No. 24.2 to the financial statements:

ii) Provision has been made in the financial statements as required under theapplicable law or accounting standards for material foreseeable in losses if any onlong-term contracts-Refer Note No. 8 to the financial statements;

iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

For SPRK & CO.
(Formerly R.K. Jallan & Associates)
Chartered Accountants
FRN 321080E
Sd/-
(K . K. Agarwala)
Date:22nd June’2016 Managing Partner
Place: Guwahati Membership No. 062315

ANNEXURE "A" TO THE INDEPENDENT AUDITOR’S REPORT -31ST MARCH 2016

Referred to in our report of even date

1. (a) The company has not maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) According to the information given to us physical verification of fixed assets hasnot been done by the management during the year and as such material discrepancies withfinancial records if any could not be noticed and have not been dealt with in the booksof account.

(c) According to the information and explanations given to us the title deeds of theimmoveable properties as disclosed in note 9 to the financial statements are held in thename of the company.

2. The inventories of Stores except goods-in-transit has been physically verified atreasonable intervals during the year by the management. In our opinion the frequency ofverification is reasonable. The discrepancies noticed on verification between the physicalstocks and the book records were not material.

3. The company had granted loan to two body corporate listed in the register maintainedunder section 189 of the Act.

(a) The Company has granted loan to its subsidiary M/s Pragjyotish Fertilizers &Chemicals Limited which is Rs. 4184185/- and advance for Share Application Money to theSubsidiary Company is Rs.480000/- as on 31st March 2016. The Company has made provisionfor the full amount i.e. Rs. 4184185/- and Rs. 480000/- respectively considering themdoubtful. The Company had also granted loans to Assam Tea Corporation Limited as perdetails given in Note No.25.9.

A s per above details the repayment of of loan II was received on 22.10.2009 againstthe due date of 10.04.2009 and the interest due Rs. 524488/- has not been received sofar. In case of loan I out of principal Rs. 3500000/- Rs. 1000000/- only wasreceived on 17.03.2011 against due date of 07.08.2007 and the interest due Rs. 3878404/-has not been received so far.

(b) The balance amount of principal for the loan given to Assam Tea Corporation Ltd. ofRs. 2500000/- is still overdue and total interest accrued and due Rs. 4402892/- hasnot been received so far. ough the Company is pursuing through Govt. of Assam for therecovery of the balance amount of principal and the amount of interest overdue howeverthe steps are not reasonable in view of long overdue.

4. The company had not granted any loans or provided any guarantees or security to theparties covered under section 185 of the Act. The Company has complied with the provisionsof Section 185 & 186 of the Act in respect of investments made or loans or guaranteeor security provided to the parties covered under section 185 & 186.

5. In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits in contravention of Directives issued by ReserveBank of India and the provisions of section 73 to 76 or any other relevant provisions ofthe Act and the rules framed there under where applicable . No order has been passed bythe Company Law Board or National Company Law Tribunal or Reserve Bank of India or anycourt or any other tribunal.

6. We have broadly reviewed the records maintained by the company pursuant to the rulesprescribed the Central Government for maintenance of cost records under sub-section (1) ofSection 148 of the Act and we are of the opinion that prima facie the prescribed accountsand records have been made and maintained. However we have not made a detailedexamination of the records.

7. (a) According to the information and explanations given to us and records of thecompany examined by us in our opinion the Company is generally regular in depositing theundisputed statutory dues including provident fund investor education protection fundemployees’ state insurance income tax sales tax wealth tax service tax customduty excise duty Cess and other material statutory dues applicable to it withappropriate authorities.

According to the information and explanations given to us no undisputed amountspayable in respect of income tax wealth tax service Tax sales tax custom duty exciseduty and cess were in arrears as at 31-March-2016 for a period of more than six monthsfrom the date they became payable.

(b) According to the information and explanations given to us there are no dues ofsales tax value added tax income tax service tax custom duty wealth tax excise dutyand cess which have not been deposited with the appropriate authorities on account of anydispute other than those mentioned below to this report.

Central Excise Act Nature of Dues Amount(Rs.) Period to which the amount relates Forum where dispute is pending
Central Excise Act’1944 Excise Duty & Penalty 50454714/- February' 2009 to January' 2011 CES- TAT Kolkata
Central Excise Act’1944 Excise Duty & Penalty 20956450/- February' 2011 to February’ 2012 CES- TAT Kolkata
Central Excise Act’1944 Excise Duty & Penalty 4049747/- March’ 2012 to January’ 2013 CES- TAT Kolkata
Central Excise Act’1944 Excise Duty & Penalty 15578715/- February’ 2013 to October’ 2013 CES- TAT Kolkata

8. As the company doesn’t have any loans or borrowings from any financialinstitutions or banks or Government nor has it issued any debentures as at balance sheetdate the provisions of clause 3 (viii) of the Order are not applicable to the company.

1. The company has not raised money by way of initial public offer or further publicoffer (including debt instrument) and term loans during the year. Accordingly theprovisions of Clause 3 (ix) of the Order are not applicable to the Company.

2. Based upon the audit procedures performed and according to the information andexplanations given to us no fraud by the company or any fraud on the company by itsofficers or employees has been noticed or reported during the course of our audit thatcauses the financial statements to be materially misstated.

3. The Managerial remuneration has been paid or provided in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theAct.

4. In our Opinion and according to the information and explanations given to us thecompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is notapplicable.

5. According to the information and explanations given to us and based on ourexaminations of the records of the Company transactions with related parties are incompliance with sections 177 and 188 of the Act where applicable. The details of suchrelated party transactions have been disclosed in note no. 25.4.b of the financialstatements as required under AS-18 Related Party Disclosures specified under section 133of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.

6. A ccording to the information and explanations us and based on our examinations ofthe records the Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under review.

7. According to the information and explanations given to us and based on ourexaminations of the records the Companyhasnotenteredintononcashtransactionswith directorsor persons connected with him. Accordingly paragraph 3(xv) of the Order is notapplicable.

8. The company is not required to be registered under section 45-IA of the Reserve Bankof India Act 1934. Accordingly the provisions of clause 3(xvi) of the Order is notapplicable to the Company.

For SPRK & CO.
(Formerly R.K. Jallan & Associates)
Chartered Accountants
FRN 321080E
Sd/-
(K . K. Agarwala)
Date: 22nd June’2016 Managing Partner
Place: Guwahati Membership No. 062315

ANNEXURE "B" TO THE INDEPENDENT AUDITOR’S REPORT – 31STMARCH’2016 OF EVEN DATE ON THE STANDALOINE FINANCIAL STATEMENTS OF ASSAMPETROCHEMICALS LIMTED

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the the internal financial controls over financial reporting of AssamPetrochemicals Limited as of 31st March 2016 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internalfinancial controls based on the internal controls over financial reporting criteriaestablished by the Company considering the essential components of internal controlsstated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by ICAI. These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and eficient conduct of its business including adherence tocompany’s policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable standalone financial information as required under the CompaniesAct2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the

Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the"Guidance Note") and the Standards on Auditing issued by ICAI and deemed to beprescribed under section 143(10) of the Companies Act2013 to the extent applicable to anaudit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India. oseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor’s judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company’s internal financial controlssystem over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

Acompany’sinternalfinancialcontroloverfinancialreporting is a process designed toprovide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company’s internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Basis for Qualified Opinion

According to the information and explanations given to us and based on our audit thefollowing material weaknesses have been identified as at March 31 2016:

a) The Company did not have an appropriate internal financial control system asexplicated in the following material instances :

i) Weakness in Debtors/ Trade Receivables management like lack of practice of timelyreconciliation of account statements long credit balance outstanding unsystematicrealisation and credit period allowed to the parties and non adherence to the creditpolicy of the company non release/ adjustment of CST Security Deposit collected fromcustomers beyond reasonable period.

ii) Lack of proper management of Creditors/Trade Payables like lagging of liabilityrecognition for more than reasonable period even after receipt of materials due toineficient internal accounting cycle non-payment/adjustment of security deduction of thecreditors beyond reasonable period.

iii) Ineffective Internal Audit commensurate with the size and nature of business.

iv) Lapses have been observed in proper deduction of Income Tax TDS/ VAT TDS in certainexpenditure/payments to creditors.

A ‘material weakness’ is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the company’s annual or interim financialstatements will not be prevented or detected on a timely basis.

Qualified Opinion

In our opinion except for the effects/possible effects of the material weaknessesdescribed above on the achievement of the objectives of the control criteria the Companyhas maintained in all material respects adequate internal financial controls overfinancial reporting and such internal financial controls over financial reporting wereoperating effectively as of March 312016 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India.

We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the March 312016financial statements of the Company and these material weaknesses do not affect ouropinion on the financial statements of the Company.

For SPRK & CO.
(Formerly R.K. Jallan & Associates)
Chartered Accountants
FRN 321080E
Sd/-
(K . K. Agarwala)
Date:22nd June’2016 Managing Partner
Place: Guwahati Membership No. 062315