To the Members of Samtel Color Limited
We have audited the accompanying financial statements of Samtel Color Limited ('theCompany1) which comprise the Balance Sheet as at 31st March 2014the Statement of Profit and Loss and the Cash Flow Statement for the year then ended andNotes to Financial Statements comprising of a summary of significant accounting policiesand other explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation of these financial statements that givesa true and fair view of : the financial position financial performa nce and cash flows ofthe Company in accordance with the Accounting Standards referred to in sub-section (3C) ofsection 211 of the Companies Act 1956 ('the Act') read with the General Circular 15/2013dated 13th September 2013 of the Ministry of Corporate Affairs in respect ofsection 133 of the Companies Act 2013This responsibility includes the designimplementation and maintenance of internal controls relevant to the preparation andpresentation of the financial statements that gives a true and fair view and are free frommaterial misstatements whether due to fraud or error.
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 Chartered 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 the auditor'sjudgment including the assessment of the risks of the material misstatement of thefinancial statements whether due to error or fraud. In making those risk assessments theauditor considers internal control relevant to the Company's preparation and fairpresentation of the financial statements in order to design audit procedures that areappropriate in the circumstances but not for the purpose of expressing an opinion oneffectiveness of the entity's internal controls. An audit also includes evaluating theappropriateness of accounting policies used and reasonableness of the accounting estimatesmade by management as well as evaluating the overall presentation of the financialstatements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion.
Basis for Qualified Opinion
(A) The financial statements have been prepared by the Company on the going concernbasis as fully elaborated in Note 38 of the financial statements even though theproceedings are going on before the Board of Industrial and Financial Reconstruction underthe Sick Industrial Companies(Special Provisions) Act 1985..
(B) We had reported in our audit report for the year ended 31st March 2012as under:-
(i) The entire net worth of the Company has eroded completely; (li) the Company hasinitiated the bidding process for the disposal of production lines 1 and 4(non -coreassets) out of 4 production lines at plant situated at Gautam Budh NagarfUttar Pradesh)after obtaining approval of CDR lenders and consequently impaired those production linesby Rs. 3866.91 Lacs and related stores & spares by Rs. 512.28 Lacs; (Hi) themanufacturing operations at other production lines at plants situated at Ghaziabad (UttarPradesh) & Parwanoo (Himachal Pradesh) could not be resumed in the financial year dueto non-participation of labour in production process reasoning to their over-dues; (iv)the Company has defaulted in repayment of loans as per CDR scheme and borrowings of otherlenders as elaborated in note no. 38 of the financial statements; (v) there is diminutionin the value of long term investments; (vi) reconciliation and confirmations of balancesof certain major creditors and acceptances are pending; (vii) non- redemption of 9691630% redeemable preference shares of RslOO each amounting to Rs. 969.16 lacs already due forredemption; and (viii) non payment of preference dividend for the period from 31stMarch 2008 to 31st March 2012 aggregating to Rs. 773.61 Lacs on 2110116 8%Non Convertible Cumulative Redeemable Preference Shares.
(C) We further reported in our audit report for the year ended on 31stMarch 2013 as under
(i) In view of the continued failure of the Company to disburse the legitimate dues ofthe workmen Hon'ble High Court of Himachal Pradesh (Shimla) has settled the dispute bypassing an order for the closure of Deflection Yoke unit at Parwanoo (H.P) and therebypay off the corresponding outstanding dues by selling the industrial undertaking/Companyassets etc. (ii) the operations have been suspended in all locations by the mid ofNovember 12 & have not been resumed till date and consequently management hasimpaired the production lines 3&5 located at Gautam Buddh Nagar (UP) & DeflectionYoke unit located at Parwanoo (HP) by Rs.27977.06 lacs and related stores & spares byRs. 410.35 lacs etc.; (Hi) the impairment of assets of production line 2 located atGautamBuddh Nagar (U.P.) and gun division at Meerut has not been considered by themanagement on the rationale of its revival plan of running the operations by restructuringthem even though in our opinion considering the liquidity crunch the probability ofrunning these lines seems remote; (iv) the balances outstanding as on 31s1March 2013 of receivables & inventory are subject to confirmation & physicalverification respectively due to temporary suspension of operations & non access toinventories (v) raw materia! & finished goods inventory amounting to Rs. 311.90 lacsand Rs. 55 lacs respectively have been seized by the excise authorities due to non-paymentof excise dues; (vi) there is nonsubmission of various statutory returns acknowledged bythe respective authorities non provision/deposition of various overdue statutoryliabilities like PF/Service Tax/TDS/Excise/Vat & CST/WCT/TCS/ESI/Gratulty/Bonus/Preference dividend & related over dues (interest and penalty) non deduction of IDSon provisional expenses; and as explained by management exact amount of which could not beascertained in present scenario; (viii)there is increase in diminution of investments incurrent year of Rs.841.48 lac; (ix) Assets lying with the Provident Fund trust have beentransferred to Regional Provident Fund Commissioner and those related to Gratuity Trusthave been settled by adjustment of employees dues. However as per the management relatedliability has been accounted for completely and there will be no demand over and above thesame; (x) Company has accounted for its gratuity and leave encashment liability on actualbasis rather than on actuarial valuation method which has been prescribed in AccountingStandard AS-15 "Employee Benefits".
(D) We further report that during the year ended 31st March 2014 the factsand situation mentioned above continues.
Further the Company has not complied with the provisions of clause 35 of listingagreement (submission of shareholding pattern) and requirements of SEBI circular no. D& CC/ FITTC/CIR-16/2002 dated 31.12.2002 regarding Reconciliation of Share CapitalAudit Report for the quarter ended 31st December 2013. Default stillcontinues.
These factors raise substantial doubts as to the Company's ability to continue as goingconcern and therefore the Company may not be able to realise its assets and discharge itsliabilities in the normal course of business. The financial statements do not include anyadjustment relating to the recoverability and classification of recorded assets amounts.
Based on the above facts we are of the opinion that going concern assumption has beenaffected and the financials should have been stated at net realisable value.
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 regarding erosion of net-worth coupled with other events and inabilityin realisation of assets and discharge of liabilities based on going concern assumptionsand clauses (1) (2) (3) (7)(8) (9)(10) (il) & (17) of annexure to Auditor'sReport referred in clause 1 of paragraph of 'Report on other Legal and Regulatoryrequirements' below; being nonprovision of physical verification due to restricted accessof fixed assets & Inventories irregular in payment or principal and interest tocertain parties internal audit system maintenance of cost records non payment ofoutstanding statutory dues cash loss in the current financial year default in payment ofdues to financial institutions and banks and utilization of short - term funds for longterm purposes the financial statements give the information required by the Act in themanner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:
a) in the case of the Balance Sheet of the state of affairs of the Company as at 31stMarch 2014;
b) In the case of the Statement of Profit and Loss of the loss for the year ended onthat date; and
c) In the case of the Cash Flow Statement of the cash flows for the year ended on thatdate.
Report on Other Legal and Regulatory Requirements
1) As required by the Companies (Auditor's Report) Order 2003 ('the Order') issued bythe Central Government of India in terms of section 227 of the Act we give in theAnnexure a statement on the matters specified in paragraphs 4 and 5 of the 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 purpose 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) Except for the effects of the matter described in the Basis for Qualified Opinionparagraph 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 read with the General circular 15/2013 dated 13thSeptember 2013 of the Ministry of Corporate Affairs in respect of section 133 of theCompanies Act 1956
e) On the basis of written representations received from the directors as on 31stMarch 2014 and taken on record by the Board of Directors none of the directors aredisqualified as on 31st March 2014 from being appointed as a director in termsof clause (g) of sub-section (1) of section 274 of the Companies Act 1956;
For S. S. Kothari Mehta & Co.
(K. K. mlshan)
Membership Number: 085033
Place: New Delhi
Date: 30th May 2014