CT COTTON YARN LIMITED
ANNUAL REPORT 2007-2008
The Members of
CT Cotton Yarn Limited
1. We have audited the attached Balance Sheet of CT Cotton Yarn Limited as
at 31st March 2008 and also the Profit & Loss Account for the period ended
31st March 2008 (comprised of fifteen months) annexed thereto, and the cash
flow statement for the period ended on that date. These financial
statements are the sole responsibility of management of the Company. 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 misstatements. 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 statements presentation. We believe that our audit
provides a reasonable basis for our opinion.
2. As required by the Companies (Auditor's Report) Order, 2003 as amended
by the Companies (Auditor's 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 as we considered
appropriate and according to the information and explanations given to us,
We give in the Annexure a statement on the matter specified in paragraph 4
and 5 of said order.
3. Further to our comments referred to in paragraph 2 above, we report and
invite attention as under:
(a) (i) The Company has incurred during the year loss of Rs. 56,388
thousand resulting in accumulated losses of Rs.1,783,719 thousand as at
31st March 2008, which has significantly eroded the net worth of the
Company, which prima facie raises substantial doubts about the management's
ability to continue as a going concern.
(ii) The company has suspended providing of Interest Penal Interest, Penal
charges & liquidated damages payable to bankers/Financial Institutions with
effect from 1st April 2005. No provision for Interest/Penal Interest, Penal
charges & liquidated damages payable to bankers/Financial Institutions has
been made during the period covered under audit for delay & default in
repayment of their loans. (Amount unascertained)
(iii) The bank statements of various accounts including Current Accounts
(regarded as non-operative) are not available with the company for any part
of the year. The resultant impact thereof on the accounts is presently
(iv) In the absence of necessary information, we are. not able to comment
on the difference amount of Rs. 256 thousand in respect of dividend payable
pertaining to earlier years as appearing in the books of accounts of the
company. Further, the unclaimed dividend of Rs. 892 thousand transferred to
UCO Bank (Unclaimed dividend account) has not been transferred to the
general revenue account of the Central Government Account in accordance
with the provisions of section 205A of the Companies Act, 1956.
(v) Claim for interest recoverable and quality claims of Rs. 39,032
thousand lodged against suppliers and taken into income in earlier years.
As per the Management, these claims are under settlement and the
confirmation from supplier has not been received so far, in view of this,
these claims are contingent in nature.
(vi) The company did not take into account the sales tax (both CST & Local)
demand including penalty & interest imposed by the Asst. Commissioner
Commercial Tax, Gwalior vide his order dated 29th January 2007 for the
Assessment Year 2003-2004 for an amount of Rs.15,635 thousands as in the
opinion of the management the same is applicable and the company will
contest the same legally through filing of Appeals. Hence the same is
contingent in nature.
(vii) The Company has defaulted in the repayment of dues pertaining to the
IFCI Ltd. as a result of which all the Fixed Assets of the Company has been
acquired by the IFCI Ltd. vide panchnama dated 13.03.2008 due to the
unascertainment of the liability payable to the IFCI Ltd.
4. We further report that if the observation made by us in paragraph
3(a)(v) & (vi) above is considered, the accumulated losses would have been
Rs.1,838,386 thousands (as against the reported figure of Rs.1,783,719
5. On an overall consideration and in view of remarks made in Para 3 above
and further to our comments in the annexure referred to in paragraph 2
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 accounts as required by law have been
kept by the company so far as appears from our examination of the said
iii) The Balance sheet and Profit & Loss Account dealt with this report are
in agreement with the books of account.
iv) In our opinion, Balance Sheet and Profit & Loss Account comply with
accounting standards as referred to in section 211(3C) of the Companies
v) We had requested directors to give written representations regarding
their eligibility for appointment as Director in terms of clause (g) of
sub-section (1) of section 274 of the Companies Act, 1956 but no such
representation was received by us and therefore we are unable to express
our opinion on the subject.
vi) In our opinion and to the best of our information and according to the
explanations given to us, the accounts read together with the notes and
accounting policies given in Schedule 16 gives the information required by
the Companies Act, 1956 in the manner so required and gives a true and fair
view subject to the point no. 3 of this report.
a) In the case of Balance Sheet of the state of affairs of the Company as
at 31st March, 2008;
b) In the case of Profit & Loss Account of the loss for the year ended on
31st March, 2008.
c) In the case of Cash Flow Statement, of the Cash Flow for the year ended
on that date.
For Deepak Gulati & Associates
Place : New Delhi Deepak Gulati
Date : 02.09.2008 Proprietor
ANNEXURE TO THE AUDITOR'S REPORT
(Annexure referred to in paragraph 2 of our Report of even date)
(1) In respect of its fixed assets:
(a) The company has maintained proper records showing full particulars,
including quantitative details and situation of fixed assets on the basis
of available information.
(b) As explained to us, the fixed assets have been physically verified by
the management during the year in a phased periodical manner, which in our
opinion is reasonable, having regard to the size of the Company and nature
of its assets. No material discrepancies were noticed on such physical
(c) During the year whole of the Companies fixed assets have been taken
over by the principal financer IFCI Ltd. as per panchnama dated 13.03.2008
and hence on 31.03.2008 there were no assets in physical possession of the
(2) In respect of its inventories:
(a) As explained to us, inventories have been physically verified by the
management at regular intervals during the year, however as on 31st March
2008 the closing stock in hand of the company reduced to Nil as the Company
had sold all the stocks lying with the Company.
(b) In our opinion and according to the information and explanations given
to us, the procedures 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 has maintained proper records of inventories. As explained
to us, there were no material discrepancies noticed on physical
verification of inventory as compared to the books and records.
(3) (a) The company has not granted any loans, secured or unsecured, to
companies, firms or other parties covered in the register maintained u/s
301 of the Companies Act, 1956.
(b) The company had taken unsecured loan from one company covered in the
register maintained u/s 301 of the Companies Act, 1956 to finance the daily
operations of the company without interest. The maximum amount involved
during that period was Rs.127,663 thousands.
(c) In our opinion the rate of interest and other terms & conditions of
above loans are not, prima facie, prejudicial to the interest of the
(d) The Company is regular in repaying the principle amounts as stipulated
and has been regular in payment of interest.
(4) According to the information and explanations given to us, there are
adequate internal control procedures commensurate with the size of the
company and the nature of its business, for the purchase of inventory and
fixed assets, sales of goods and services. During the course of our audit,
we have not observed any continuing failure to correct major weaknesses in
(5) (a) According to the information and explanations given to us and on
the basis of such checks as considered appropriate we are of the opinion
that the Company has entered all the transactions required to be entered in
the register maintained u/s 301 of the Companies Act, 1956.
(b) In our opinion and according to the information and explanations given
to us, the transactions made in pursuance of contracts or arrangements
required to be entered in the registered maintained under section 301 of
the Companies Act, 1956 has been made at a price which is reasonable having
regard to the prevailing market prices at that time. However during the
period covered under audit the total value of transactions with any single
party covered under section 297 & 299 of the Companies Act, 1956 didn't
exceed the threshold limit of Rs.5,00,000/-.
(6) The Company has not accepted any deposits from the public and hence
directives issued by the Reserve Bank of India and the provisions of
Section 58A and 58AA or any other relevant provisions of the Companies Act,
1956 and rules framed there under are not applicable for the year under
(7) In our opinion, the Company has an internal audit system commensurate
with its size and nature of its business.
(8) The Central Government has prescribed maintenance of Cost Records under
section 209(1)(d) of the Companies Act, 1956 in respect of certain
manufacturing activities of the Company. We have broadly reviewed the
accounts and records of the Company in this connection and are of the
opinion, that prima facie, the prescribed accounts and records have been
made and maintained. We have not, however, made a detailed examination of
(9) (a) According to the records of the Company, the Company has been
regular in depositing undisputed statutory dues including Income-Tax,
Sales-tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and
other statutory dues as are applicable to the company except Employees'
Provident Fund, Employees' State Insurance & Central Sales Tax dues that
have not been regularly deposited with the appropriate authorities.
According to the information and explanations given to us and according to
the records of the Company, undisputed amounts payable in respect of the
ESI, EPF, CST inclusive of Entry Tax outstanding as at 31st March 2008 for
a period of more than six months from the date of becoming payable were
Rs.3,625 thousand, Rs. 7,027 thousand, 5,141 thousand respectively.
(b) The disputed statutory dues aggregating to IRS. 115,656 thousand, which
have riot been deposited on account of matters pending before, appropriate
authorities are as under:
Name of the Assessment Nature of the Dues Forum where Amount
Statute Year Dispute is (Rs. In
Income 2002-03 Penalty u/s 271(1)(c) ITAT, New Delhi 3408
Tax Act, 1961 2003-04 Assessment CIT(A) 90000
u/s 143 (3)
Central Excise 1995 Excise Duty & Case referred 1698
Act, 1944 Penalty back by Supreme
Court to CESTAT
M.P.Commercial - Sales Tax Asst. Comm 5000
Tax Act, 1994 (Commercial)
M.P.Commercial 1998-99 Sales Tax Asst.Comm 2665
Tax Act, 1994 1999-00 Sales Tax Asst.Comm 3016
2001-02 Sales Tax Asst.Comm 776
2002-03 Sales Tax Add.Comm 7242
Central Excise Custom Duty CESTAT, N.Delhi 1851
(10) According to the information and explanations given to us, the
accumulated losses at the end of the financial year as on 31st March 2008
are Rs.1,783,719 thousands against its Share Capital Rs. 193,900 thousand.
Therefore the accumulated losses exceed the net worth of the Company. The
company has incurred cash losses of RS. 16,400 thousands for the year ended
as on 31st March 2008. It also has incurred cash losses of Rs.34100
thousands for the year ended as on 31st December 2006.
(11) As per the information & explanations given to us, and as per balance
sheet of the Company as on 31st March 2008, the company has defaulted in
repayment of dues to Banks/ FI'S including IDBI, ICICI and IFCI. It also
has defaulted in the repayment of working capital loans including Packing
credit and overdrafts of Canara Bank, Bank of Nova Scotia, PNB and SBI. The
period and amount of default are as follows:
FIS / Banks Nature of Finance Period of Amount
Default (in `000)
IDBI Term Loan 7 Years 405600*
ICICI Term Loan 7 Years 181800*
IFCI Term Loan 7 Years 808700*
Canara Bank Term Loan 7 Years 10200*
Canara Bank Packing Credit 6 Years 134700*
Bank of Nova Scotia Packing Credit 6 Years 68900*
S.B.I. Packing Credit 6 Years 99800*
P.N.B. Packing Credit 6 Years 89100*
Bank of Nova Scotia Over Draft 6 Years 1200
S.B.I. Over Draft 6 Years 2200
P.N.B. Over Draft 6 Years 10300
All the above balances are subject to Banks / FI's confirmation.
* These figures are as per estimation made by the management without
corresponding confirmation for the respective Bankers/FI's. The interest
figures are only up to 31st March 2005.The management decided to dispense
with providing interest on all loans accounts including working capital
loans from 1st April 2005.
(12) In our opinion and according to the information and explanation given
to us, no loans and advances have been granted by the Company on the basis
of security by way 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, clause 4(xiii) of the Companies
(Auditor's Report) (Amendment) Order, 2004 is not applicable to the
(14) This clause is not applicable to the company.
(15) According to the information and explanations given to us, the company
has not given any guarantee for loans taken by others from banks or
(16) According to the information and explanations given to us, the Company
has not obtained any term loan during the period covered under audit.
(17) On the basis of review of utilization of fund, which is based on
overall examination of the Balance Sheet of the Company as at 31st March
2008, related information as made available to us and as represented to us,
we are of the opinion that no short terms funds raised by the company has
been utilized for long term investment purposes.
(18) During the year, the Company has not made any preferential allotment
of shares to parties and companies covered in the Register maintained under
section 301 of the Companies Act, 1956.
(19) No debentures were issued by the company for the financial year ended
31st March, 2008.
(20) During the period covered by our report, the Company has not raised
any money by way of public issue during the year.
(21) In our opinion and according to the information and explanations given
to us, no fraud on or by the Company has been noticed or reported during
the year that causes the financial statements to be materially misstated.
For Deepak Gulati & Associates
Place : New Delhi
Date : 02.09.2008