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Modern Denim Ltd.

BSE: 500451 Sector: Industrials
NSE: MODERNDENM ISIN Code: N.A.
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Modern Denim Ltd. (MODERNDENM) - Auditors Report

Company auditors report

MODERN DENIM LIMITED ANNUAL REPORT 2011-2012 AUDITORS' REPORT To The Members of MODERN DENIM LIMITED 1. We have audited the attached Balance Sheet of MODERN DENIM LIMITED as at 31st March 2012, the Statement of Profit and Loss and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's 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. These 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 also 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 Company Law Board in terms of section 227 (4 A) of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraphs 4 & 5 of the said order. 4. Further to our comments in the annexure referred to in paragraph 3 above, we report that: (i) We have obtained all the information and explanations, which are 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 appears from our examination of those books; (iii) The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account; (iv) In our opinion the Balance Sheet, Statement of Profit and Loss 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 except as stated at para (vi) below. (v) On the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2012 from being appointed as directors in terms of clause (g) of sub-section (1) of section 274 of the Companies Act 1956; (vi) We further report that: (a) Dividend for the year amounting to Rs. 110.75 lacs on cumulative redeemable preference shares has not been provided. The total amount of Dividend not provided till 31st March 2012 amounts to Rs. 1772.00 lacs. (Note No. 1.3) (b) Provision for interest on certain Secured and Unsecured Borrowings amounting to Rs. 231.67 lacs has not been made in accounts. The total amount of Interest not provided till 31st March 2012 amounts to Rs. 1680.09 lacs. (Note No. 4.2, 4.3 & 4.10) (c) Compound interest, Penal and liquidated damages in respect of all borrowings have not been provided, amount of which is unascertainable, pending confirmations / reconciliation. (Note No. 4.12) (d) Balances of Trade payables, Trade receivables, Advances and Loans etc. are subject to confirmation and reconciliation if any. (Note No. 7.2 & 12.2) (e) Amount paid towards restructuring/settlement to various secured lenders Rs. 2234.66 lacs has been shown under the head Loans & advances. Non- current Long Term Borrowings and Long-term Loans & advances are overstated to that extent. (Note No. 10) (f) The accounts of the Company have been prepared on a going concern basis though the Board for Industrial and Financial Reconstruction (BIFR) has declared the company as a sick company. (Note No. 27) (g) Provisions for impairment loss if any, has not been made, amount of which is unascertainable. (Note No. 31) (h) Pursuant to restructuring of some of the borrowings, the Company has taken credit of Rs. NIL to Statement of Profit and Loss as exceptional items during the year; pending fulfillment of future obligations. Total Credit taken by the Company upto 31st March 2012 which are subject to fulfillment of future obligations amounts to Rs. 12391.51 lacs. We further report that, without considering items mentioned at para (vi)(c), (vi)(d),(vi)(f) and (vi)(g) of para 4 above, the effect of which could not be determined, had the observations made by us in para (vi)(a), (vi)(b), (vi)(e) and (vi)(h) above been considered, the loss for the year would have been Rs.102.32 lacs (as against the reported figure of profit of T129.35 Lacs), Long term borrowings would have been Rs.4477.63 lacs (as against the reported figure of Rs. 6712.29 lacs), Other current liabilities would have been Rs. 22061.95 lacs (as against the reported figure of Rs. 6218.35 lacs), Long term loans & advances would have been Rs. 185.08 lacs (as against the reported figure of Rs. 2419.74 lacs) and Debit balance of Reserves & Surplus would have been Rs. 31396.15 lacs (as against the reported figure of Rs. 15552.55 lacs). (vi) Subject to the above, in our opinion and to the best of our information and according to the explanations given to us, the said accounts, 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 in conformity with the accounting principles generally accepted in India: (i) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2012; (ii) In the case of the Statement of Profit and Loss, of the Profit of the Company for the year ended on that date; and (iii) In the case of the Cash Flow Statement, of the Cash Flows for the year ended on that date. FOR J.T. SHAH & COMPANY CHARTERED ACCOUNTANTS (Firm Registration No. 109616W) (J. T. SHAH) Place: Ahmedabad PARTNER Date : 30th June, 2012 (Membership No. 3983) ANNEXURE TO THE AUDITORS' REPORT Referred to in paragraph 3 of our Report of even date to the Members of MODERN DENIM LIMITED. 1. In respect of Fixed Assets: a. The Company has maintained proper records showing full particulars including quantitative details and situation of Fixed Assets other than Furniture and Fixtures for which detailed records are not maintained. b. Asper the information and explanations given to us, the fixed assets were physically verified by the management at reasonable intervals during the year in accordance with a programme of physical verification and no material discrepancies were noticed on such verification as compared to the available records. c. During the year, the Company has not disposed off any major/substantial part of the fixed assets. 2. Inrespect of its lnventories: a. The inventory has been physically verified during the period by the management. In our opinion, the frequency of verification is reasonable. b. 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. On the basis of our examination of the records of inventory, we are of opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and books records were not material. 3. In respect of loans, secured or unsecured, granted or taken by the company to/ from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. a. The Company has not granted any loans, secured or unsecured, to the companies, firms or other parties covered in the register, maintained under section 301 ofthe Companies Act, 1956, and therefore the clauses (iii)(a), (iii)(b), (iii)(c) and (iii)(d) of The Companies (Auditor's Report) Order, 2003 are not applicable. b. The Company has not taken any loans, secured or unsecured, from the companies, firms or other parties covered in the register, maintained under section 301 ofthe Companies Act, 1956, and there fore the clauses (iii)(e), (iii)(f) and (iii)(g) of The Companies (Auditor's Report) Order, 2003 are not applicable. 4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size ofthe 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, no major weakness has been noticed in the internal controls. 5. In respect of transactions covered under Section 301 ofthe Companies Act, 1956: a. Based on .the audit procedures applied by us and according to the information and explanations provided by management, we are of the opinion that the contracts or arrangements that need to be entered into the register maintained under section 301 have been so entered. b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the registers maintained under section 301 in respect of any of the parties during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time. 6. The Company has not accepted any fresh deposits during the year. As per the information and explanations given to us, in respect of deposits accepted in earlier years, the compliance with the provisions of Section 58 A, 58 AA or any other relevant provisions of Companies Act, 1956 and rules framed there under are subject to the order passed by the Company Law Board on 21/12/2001 whereby the Company is required to make repayment of deposits and payment of interest thereon in accordance with the revival scheme to be approved by the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985. 7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. 8. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained, 9. In respect of statutory dues: a. According to the records of the Company, the Company is regular in depositing with appropriate authorities undisputed statutory dues including provident funds, employee's state insurance, income tax, sales tax, wealth tax, custom duty, excise duty, cess and other statutory dues applicable to it. b. According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, wealth tax, service tax, customs duty, sales tax and excise duty were outstanding as at 31st March, 2012 for a period of more than six months from the date they became payable. c. According to the records ofthe Company, the dues of excise duty and income tax, which have not been deposited on account of disputes and the forum where the dispute is pending, are as under: Name of the Nature of Amount Forum where dispute Statute the Dues (Rs. In is pending lacs) The Central Excise duty 0.34 The Central Excise and Excise Act, 1944 Penalty 24.42 Service Tax Appellate Tribunal (Ahmedabad) The Central Excise duty 0.91 The Central Excise and Excise Act, 1944 Penalty 15.82 Service Tax Appellate Tribunal (Ahmedabad) Income Tax Penalty 128.09 The Commissioner of Income Tax, Jaipur Total 169.58 10. The accumulated losses of the Company as at 31st March, 2012 are more than fifty percent of its net worth. The Company has earned cash profit during the financial year under review and during the immediate preceding financial year. 11. The Company has defaulted in repayment of installments of dues to Financial Institutions, Banks and Debenture holders amounting to ?4749.30 lacs since 1997. 12. Based on our examination of documents and records and information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13. The provisions of any special statute applicable to Chit Fund, Nidhi or Mutual benefit Fund/Societies are not applicable to the Company. 14. The Company is not dealing or trading in shares, securities, debentures or other investments and hence, the requirements of para 4 (xiv) are not applicable to the Company. 15. As per the information provided to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions. 16. The Company has not taken any fresh term loan during the year under review. 17. The Company has not raised any short term funds during the year under review. 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 ofthe Companies Act, 1956. 19. As per the information given to us, the Company has created security in respect of debentures issued in earlier years except for the cases where debentures trust deeds are yet to be executed. 20. During the year, the Company has not raised any money by way of public issues. 21. Based upon the audit procedures performed, information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit. FOR J.T. SHAH & COMPANY CHARTERED ACCOUNTANTS (Firm Registration No. 109616W) (J. T. SHAH) Place: Ahmedabad PARTNER Date : 30th June, 2012 (Membership No. 3983)