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Kitply Industries Ltd.

BSE: 502595 Sector: Others
NSE: KITPLYIND ISIN Code: INE147B01019
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Kitply Industries Ltd. (KITPLYIND) - Auditors Report

Company auditors report

INDEPENDENCE AUDITORS

TO THE MEMBERS OF KITPLY INDUSTRIES LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of KITPLY INDUSTRIES LIMITED whichcomprise the Balance Sheet as at March 31 2014 and the Statement of Profit and Loss andCash Flow Statement for the year then ended and a summary of significant accountingpolicies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give atrue and fair view of the financial position financial performance and cash flows of theCompany in accordance with the Accounting Standards referred to in sub-section (3C) ofsection 211 of the Companies Act 1956 ("the Act"). This responsibility includesthe design implementation and maintenance of internal control relevant to the preparationand presentation of the financial statements that give a true and fair view and are freefrom material misstatement whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chattered Accountants of India Those Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements 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 judgement including the assessment of the risks of material misstatementof the financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal control relevant to the Company’spreparation and fair presentation of the financial statements in order to design auditprocedures that are appropriate in the circumstances but not for the purpose of expressingan opinion on the effectiveness of the Company’s internal control.

An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of the accounting estimates made by management as well as evaluatingthe overall presentation of the financial statements. We believe that the audit evidencewe have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Option

In our opinion and to the best of our information and according to the explanationsgiven to us the financial statements give the information required by theAct in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India:

a) in the case of Balance Sheet of the state of affairs of the Company as at March 312014;

b) in the case of the Profit and Loss of the loss for the year ended on that date; and

c) in the case of the Cash Flow Statement of the cash flows for the year ended on thatdate.

Emphasis of Matter

We draw attention to the following Notes to the Financial Statements which describesthe following matters related to the Company:

a) Note 40 which describes that the Company’s net worth has been fullyeroded. Also considering below-mentioned point (b) and (c) under emphasis of matterparagraph along with this point there is a clear indication that there is existence of amaterial uncertainty that may cast significant doubt about the Company’s ability tocontinue as a going concern which is dependent on establishing profitable operations inline with the Company’s business plans as well as satisfactory settlement ofdisputes and litigation in favour of the Company. Further the Company has made areference to the Hon’ble Board for Industrial & Financial Reconstruction (BIFR)pursuing to the provisions of Sick Industrial Companies (Special Provisions) Act 1985 andit has also been registered u/s 15(1) of Sick Industrial Companies (Special Provisions)Act 1985. As described in the above note the Company is hopeful for working out arehabilitation scheme in view of which the accompanying financial statements have beenprepared under the going concern assumption and consequently no adjustments if anyhave been made in the financial statements.

b) Note 39(c) which descripes that no provision has been made for interestamounting to Rs. 425.27 lacs (including Rs. 84.36 lacs for the year) and liquidateddamages of Rs.170.89 lacs claimed by certain lenders. In view of pending disposal of thesuits filed by the above-mentioned lenders as well the Company in this matter noliability thereof is considered payable.

c) Note 38 which descripes that no provision is made for demand from a lenderamounting to Rs. 3210.37 lacs towards principal and interest on withdrawal of One TimeSettlement entered in earlier years due to alleged non fulfillment of agreed conditionsby the Company.

However the above amount in the opinion of the management is not payable as theCompany has fully complied with payment term as per CDR (Corporate Debt Restructuring)terms and the Company has also been legally advised that the above demand is not tenable.

d) Note 42 which descripes that no provision has been made for interestamounting Rs. 60 lacs on loan of Rs. 400 lacs from an unsecured creditor since the same isdisputed by the Company and the matter is subjudice. Moreover according to BIFR’s(Board for Industrial and Financial Reconstruction) summary record of proceedings of thehearing held on 21.09.2012 and 11.02.2013 against Miscellaneous Application No. 341/2012Case No. 23/2012 made by the Company the company is restrained from making any payment tounsecured creditors without prior approval of the Board till next date of hearing. Atpresent a stay order has been granted on the sickness of the company by Hon’bleAAIFR.

e) Note 4 (A) (b) to (g) of the financial statements which describes that theCompany has failed to pay agreed installments towards redemption of various Debentureswhich were due in 2013-14 due to the sickness of the Company.

Our opinion is not qualified in respect of the above matters.

Report on Other Legal and Regulatory Requiremens

1. As required by the Companies (Auditor’s Report) Order 2003 ("theOrder") issued by the Central Government of India in terms of sub-section (4A) ofSection 227 of the Act we give in the Annexure a statement on the matters specified inparagraphs 4 and 5 of the said Order.

2. As required by section 227(3) of the Act we report that:

(a) We have obtained all the information and explanations which to the best of ourknowledge 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 theCompany so far as appears from our examination of those books;

(c) The Balance Sheet Statement of Profit and Loss and Cash Flow Statement dealt withby this report are in agreement with the books of account;

(d) In our opinion the Balance Sheet Statement of Profit and Loss and Cash FlowStatement comply with the Accounting Standards referred to in sub-section (3C) of Section211 of the Companies Act 1956.

(e) On the basis of the written representations received from the directors as onMarch 31 2014 and taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2014 from being appointed as a director in terms of clause(g) of subsection (1) of Section 274 of the Companies Act 1956.

For Krishanu Bhattacharyya & Associates
Chartered Accountants
FRN: 324327E
CA Krishanu Bhattacharyya
Place : Kolkata Partner
Date: November 30 2014 M. No. 059934

ANNEXURE TO THE AUDITORS’ REPORT

ANNEXURE REFERRED TO PARAGRAPH 1 OF THE REPORT DATED

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) Fixed assets were physically verified by the management in the previous year inaccordance with a planned programme of verifying them once in three years which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. No material discrepancies were noticed on such verification.

(c) The Company has not disposed of any substantial part of its fixed assets so as toaffect its going concern status.

(ii) (a) The management has conducted physical verification of inventory at reasonableintervals during the year.

(b) The procedures of physical verfication of inventory followed by the Management arereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

(c) The Company is maintaining proper records of inventory and no materialdiscrepancies were noticed on such physical verification.

(iii) (a) According to the information and explanations given to us the Company hasnot granted any loans secured or unsecured to Companies firms or other parties coveredin the register maintained under section 301 of the Companies Act 1956

(b) The Company has taken loans inform of debentures from two parties covered in theregister maintained under section 301 of the Act. The maximum outstanding amount of suchloans during the year and the year-end balance due to such parties was Rs. 1103.20 lacs(including Rs. 880 lacs not bearing interest).

(c) In our opinion and according to the information and explanations given to us therate of interest and other terms and conditions for such loans are not prima facieprejudicial to the interest of the Company.

(d) As per stipulations the above loans have not become due for repayment and thusthere has been no default on the part of the company. Further interest on the aboveloans wherever applicable was not due for payment during the year.

(iv) In our opinion and according to the information and explanations given to usthere are adequate internal control systems commensurate with the size of the Company andthe nature of its business for the purchase of fixed assets inventory and for the saleof goods. During the course of our audit we have neither come across nor have we beeninfirmed of any major weakness or continuing failure to correct of major weaknesses in theaforesaid internal control systems of the company.

(v) (a) According to the information and explanations provided by the management weare of the opinion that the particulars of contracts or arrangements referred to insection 301 of the Act that need to be entered into the register maintained under theabove section have been so entered.

(b) In our opinion and according to the information and explanations given to us thetransactions made in pursuance of such contracts or arrangements and exceeding the valueof Rupees five lacs have been entered into during the financial year at prices which arereasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to usdirectives issued by Reserve Bank Of India and the provisions of sections 58A 58AAor any other relevant provisions of the Act and the rules framed there under to theextent applicable have not been complied with in respect of loan of Rs. 400 lacs takenfrom a party. We are informed by the management that no order has been passed by theCompany Law Board National Company Law Tribunal or Reserve Bank Of India or any Court orany other Tribunal.

(vii) In our opinion the Company has an internal audit system commensurate with thesize and nature of its business.

(viii) We have broadly reviewed the books of accounts maintained by the Companypursuant to the rules made by the Central Government for the maintenance of cost recordsunder section 209(1)(d) of the Act in respect of its products and are of the opinion thatprima facia the prescribed accounts and records have been made and maintained.

(ix) (a) According to the information and explanations given to us the Company is notregular in depositing undisputed statutory dues including Provident Fund InvestorEducation and Protection Fund Employees’ State Insurance Income tax Sales taxWealthtax service tax Customs duty Excise duty Cess and other material statutory duesas applicable with the appropriate autorities. Moreover there have been serious delays ina large number of cases and also certain amounts are not yet paid as indicated in (b)below.

(b) According to the information and explanations given to us undisputed dues inrespect of Provident Fund Investor Education and Protection Fund Employees’ StateInsurance Income tax Wealth tax Service tax Sales tax Customs duty Excise duty Cessand other material statutory dues which were outstanding at 31st March 2014 for a periodof more than six months from the date they became payable are as follows :

Name of the Statute Nature of the Dues Amount (Rs. in lacs) Period to which the amount relates Due Date
Central Sales Tax/Maharashtra Sales Tax Act Sales Tax Liability 35.54 2002-03 to 2004-05 & 2009-10 to 2011-12
Entry Tax Act Chhattisgarh Entry Tax Liability 0.83 2010-11 & 2011-12 Subsequent month after accrual
Uttar Pradesh Sales Tax Act Purchase Tax Liability 2.63 2002-03
Income Tax Act 1961 Tax Deducted at Source (TDS) & Interest thereon 102.57 2008-09 to 2013-14
Fringe Benefit Tax & Interest thereon 49.54 2007-08 to 2013-14 (only interest part) Quarterly after accrual
Employees Provident Fund Act Provident Fund Dues 76.39 2009-10 to 2013-14 Subsequent month after accrual
Employees State Insurance Act ESI 4.53 2010-11 to 2013-14
Sales Tax on Employment Professional Tax 3.58 2004-05 to 2013-14 Subsequent month after accrual
Central Excise and Customs Act 1944 Excise Duty & Interest thereon 1499.56 1995-96 to 1999-2000 & 2002-03 to 2013-14
Value Added Tax Value Added Tax Payable 173.61 2005-06 to 2013-14

(c) According to the records of the Company the dues outstanding in respect of SalesTax Income Tax Customs Duty Wealth Tax Service Tax Excise Duty & Cess on accountof any dispute are as follows : -

Name of the Statute Nature of the Dues Amount (Rs. in lacs) Period to which the amount relates Forum where dispute is pending
Central Excise and Customs Act 1944 Differential Excise Duty 559.17 1980-81 to 1984-85 & 1994-95 to 1996-97 CESTAT Kolkata
Denial of benefit of Exemption 330.02 2007-08 to 2010-11 CESTAT Kolkata
Service Tax on GTA 35.21 2004-05 to 2005-06 CESTAT Kolkata
Cenvat Credit reversal on Non-Excisable Product 18.25 2000-01 CESTAT Delhi
Differential Excise Duty 5.07 2005-06 This case was pending under CESTAT Meerut until imediately preceding previous year but as explained by the Management such case was decided in previous year
U.P. Sales Tax / U.P. VAT Act / Central Sales Tax Act 1956 Purchase Tax/Form C & F Pending / Various Other matters 107.75 Various Years Asst. Comm/Dy. Comm./Joint Comm./ Member Tribunal Bench/High Court

(x) The Company’s accumulated losses at the end of the financial year are morethan fifty percent of its net worth and it has incurred cash losses in the current andimmediately preceeding financial year.

(xi) Dues of Rs. 41.64 lacs (including interest on debentures aggregating to Rs. 31.10lacs recalled by the lenders have been disputed by the Company as stated in Note 38 tothe accompanying financial statements and hence we are unable to comment whether there isa default in respect of the above recalled dues. Read with the above based on our auditprocedures and as per the information and explanations given by the management theCompany has not defaulted in repayment of dues to financial institutions banks ordebenture holders except Rs. 3780.88 lacs (including interest Rs. 1758.48 lacs)towards certain debentures which have become due for repayment on 31st March 2014.

(xii) According to the information and explanations given to us and based on thedocuments and records produced to us the Company has not granted loans and advances onthe basis of security by way of pledge of shares debentures and other securities.

(xiii) In our opinion the Company is not a chit fund or a Nidhi/ Mutual BenefitFund/society and therefore the provisions of sub clause (a) (b) (c) and (d) of clause(xiii) of paragrapg 4 of the Order are not applicable to the Company.

(xiv) In our opinion the Company is not dealing or trading in shares securitiesdebentures and other investments. Accordingly the provisions of clause 4 (xiv) of theCompanies (Auditor’s Report) Order 2003 are not applicable to the Company.

(xv) According to the information and explanations provided to us the Company has notgranted any Guarantee for loans taken by others from banks or financial institutions.

(xvi) Based on the information and explanations given to us by the management the termloans raised during the immediately preceeding previous years by the Company have beenwere applied for the purpose for which these loans were obtained where such end use hasbeen stipulated by the lenders. However during the previous year no term loans wereraised by the Company

(xvii) According to the information and explantions given to us and on an overallexamination of the balance sheet of the Company we report that no funds raised onshort-term basis have been used for long-term investment.

(xviii) According to the information and explantions given to us the Company has notmade any preferential allotment of shares to parties covered in the Register maintainedunder section 301 of the Companies Act 1956. Accondingly the provision of clause (xviii)of paragraph 4 of the Order is not applicable to the Company.

(xix) According to the information and explanations given to us the Company hadcreated security in respect of debentures issued in earlier years and outstanding duringthe year.

(xx) The Company has not raised any money through a public issue during the year.Therefore the provision of clause (xx) of paragraph 4 of the Order is not applicable tothe Company.

(xxi) Based upon the audit procedures performed for the purpose of reporting the trueand fair view of the financial statements and as per the information and explanationsgiven by the management we report that no fraud on or by the the Company has been noticedor reported during the year.

For Krishanu Bhattacharyya & Associates
Chartered Accountants
FRN: 324327E
CA Krishanu Bhattacharyya
Place : Kolkata Partner
Date: November 30 2014 M. No. 059934