SARIKA PAINTS LIMITED
ANNUAL REPORT 2004-2005
Sarika Paints Ltd.
We have audited the attached Balance Sheet of M/s Sarika Paints Limited as
on 31st March, 2005 and the Profit and Loss Account of the Company 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 statement based on our audit.
We Conducted our audit in accordance with the auditing standards generally
accepted inn 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 disclosure, 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.
a. 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.
b. In our opinion, proper books of account, as required by law have been
kept by the Company so far as it appears from our examination of such
c. The Company's Balance Sheet and Profit & Loss Account dealt with by this
report are in agreement with the books of accounts.
d. In our opinion Balance Sheet and Profit & Loss Account dealt with by
this report comply with the accounting standard referred to in sub section
(3c) of section 211 of the Companies Act, 1956,
e. On the basis of our review of the confirmations received from the
Directors of the Company and taken on record by the Board of Directors, the
Directors of the company do not prima facie have any disqualification as
referred to in section 274 (1) (g) of the Companies Act, 1956.
f. In our opinion and to the best of our information and according to do
explanations given to us, the accounts read together with the notes in
Schedule R forming, part of accounts, and subject to :
I. The Company has reduced it's debtors balance by Rs.1014119.93 from the
closing debtors balance as on 31.3.2004 on account of difference in the
balances of the CSA when compared with the books of the Head office. There
fore, the loss in the profit and Loss account on account of reduction in
debtors is overstated to this extent.
II. Loans & Advance of Rs. 17668933/-, includes an amount of Rs. 13330861/-
advanced to a company and others which has not been recovered for a long
dine and the company has not made any provision in the books of accounts
for the same. As a result the loss for the year is understated to the
extent of Rs. 13330861/-.
III. The Company has not made any provision for interest receivable on the
loans and advance made to a company in which the old promoters of the
Company were interested and the interest receivable on the same is
accounted for on cash basis.
IV. No provision has been made by the Company in respect of bank balances
for which the confirmations have not been received from the banks amounting
to Rs.455681/- and the losses to this extent is understated by the company.
Gives 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 Balance Sheet, of the State of affairs of the Company as
at 31st March, 2005.
(ii) In the case of Profit and Loss Account, of the Profit for the year
ended on that date.
As required by the Companies (Auditor's Report) Order 2003 issued by the
Central Government of India in terms of Section 227 (4A) of the Companies
Act, 1956. We give hereunder a statement on the matters specified in
paragraph 4 and 5 of the said order.
a) The company has maintained proper records showing full particulars
including quantitative details and situation of the Fixed Assets on the
basis of available information.
b) We are informed that during the year the management has undertaken
physical verification of the Fixed Assets at reasonable intervals and no
material discrepancies were noticed during such verification.
c) The Company has not disposed off substantial part of fixed assets during
the year and the going concern status of the company is not affected.
a) As informed to us physical verification of inventory has been conducted
at reasonable intervals by the management during the year.
b) The procedures of physical verification of inventory followed by the
management its reasonable and adequate in relation to the size of the
company and the nature of its business.
c) As explained to us the company is maintaining proper records of
inventory and no material discrepancies were noticed on physical
verification by the management.
a) As informed to us the Company had made an advance of Rs. 129.16 lacs to
one of the Concerns in which the erstwhile promoters of the company had
substantial interest. The Company has also received interest free unsecured
loan from Directors of the Company and their associate concerns amounting
to Rs.99.07 lakhs.
b) As informed to us the advance given to the associate concern above was
in the ordinary course of business. The Company is not charging any
interest on the above advance. The terms and conditions of advance given
by the company, secured or unsecured, are prima facie prejudicial to the
interests of the company.
c) As informed to us the advances were made in the ordinary course of
business and the company is not able to recover the advance made. The
principal and interest on such advance is not being received by the company
the loans taken by the company are from the Directors and their associate
concerns which have been given to the company interest free.
d) As informed to us the company is taking steps to recover the amount
advanced. However no progress has been made in the recovery of the amount
as they are long overdue.
a) It has been informed to us and as observed by us there is an internal
control procedure commensurate with the size of the company and the nature
of its business, for the purchase of inventory and fixed assets and for the
sale of goods. It has been informed to us that the company takes reasonable
care to remove the weakness if any immediately upon observing the weakness
and they do not continue.
a) As informed to us the transactions that need to be entered into a
register in pursuance of Section 301 of the Act have been so entered in the
b) It has been informed to us that each of these transactions have been
made at price which are reasonable having regard to the prevailing market
prices at the relevant time.
a) It has been informed to us that the Company has not accepted any deposit
from the public, and the directives issued by the Reserve Bank of India and
the provisions of Section 58A and 58AA of the Act and the rules framed
there under, and its compliances are not applicable to the company in view
of the above.
a) We have been informed that the company has an adequate internal audit
system conducted by it's own staff which commensurate with its size and
nature of its business.
a) We have been informed that the maintenance of cost records has not been
prescribed by the Central Government under clause (d) of sub section (1) of
section 209 of the Act, for the company.
a) We have been informed that the company is regular in depositing
undisputed statutory dues including Provident Fund, Income-tax, Wealth Tax,
Custom Duty, Excise Duty, cess and any. other statutory dues with the
appropriate authorities. However We observe that the company is not paying
the sales tax dues regularly or in time. Similarly we observe that for the
year ended 31-3-2005 the company has not deposited the amount of Provident
fund, EDLI, Family pension fund etc., with the appropriate authorities
since July 2004. A demand of Rs.15000/- by the Income tax Department for
the Asst. year 1998-99 which has not been contested by the company in
appeal has not been paid. As has been informed to us the, ESI is not
applicable to the Company and no contribution to the investor education and
protection fund has been made by the company.
b) We have been informed that there are undisputed dues of sales tax and
Income Tax demand of Rs.15000/-, which has not been deposited by the
company in view of liquidity crunch being faced by the company. (Refer to
note 2. in notes to accounts forming part of this report.
a) We have been informed and as observed by us, its accumulated losses at
the end of the financial year are more than fifty per cent of its net worth
and it is sick industrial company as defined in clause (o) of sub section
(1) of section 3 of SICA Act 1985. The Company has approached GBIFR
(Gujarat Board for industrial and Financial Reconstruction) and has been
registered as a sick unit.
a) We have been informed that the company has not defaulted in repayment of
dues to a financial institution or bank or debenture holders?. The Banker's
of the Company M/s Bank of Baroda have granted an adhoc facility of
Rs.25.00 lacs to the Company to be repaid in three months. However the same
was overdue and outstanding at the end of the year.
a) We have been informed that the company has not granted any loans or
advance, on the basis of security by way of pledge of shares, debentures
and other securities.
We have been informed that the provisions of any special statue applicable
to chit fund nidhi /mutual benefit fund/ societies are not applicable to
xiv) The company is not dealing or trading in shares, securities,
debentures and other investments and it has not undertaken any transaction
during the year.
xv) The company has not given any guarantee for loans taken by others from
bank car financial institutions.
xvi) It has been informed to us that no term loans were taken by the
company during the year hence, the application for the purpose for which
they were taken does not arise.
xvii) According to the information and explanation given to us and on an
overall examination of the balance sheet of the Company we are of the
opinion that the company has not utilized any funds from chart term sources
towards repayment of long term borrowing's and or acquisition of fixed
xviii) 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 Act.
xix) During the year the company has not issued any debentures hence no
security is required to be created.
xx) During the year the Company has not raised any money from public issue
xxi) In our opinion and according to the explanations given to us no fraud
on or by the company has been noticed or reported during the year.
For S K Jha & Co.
Satyendra K. Jha
Place : Ahmedabad
Dated : 17.06.2005