SONU SYNTHETICS LIMITED
ANNUAL REPORT 2005-2006
We have audited the attached Balance Sheet of SONU SYNTHETICS LIMITED as at
31st March, 2006 and also the annexed Profit and Loss Account of the
company for the year ended on that date. 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.
1. 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 statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
2. 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 annex hereto a statement on the matters specified
in Paragraphs 4 and 5 of the said order.
3. Further to our comments in the Annexure referred to in Paragraph 1 above
we report that:
a) We have obtained all the information and explanations, which, to the
best of our knowledge and belief were necessary for the purposes of our
b) 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 books of
c) The Balance Sheet and the Profit and Loss Account dealt with by the
report are in agreement with the books of accounts of the company.
d) The Balance Sheet and the Profit and Loss Account dealt with by this
report are in compliance with the Accounting Standards referred to in
Section 211 (3C) of the Companies Act, 1956, in so far as they are
applicable to the Company, subject to Note No. 13 (Schedule U - Notes to
Accounts) with respect to non-provision of Retirement Benefits in
accordance with Accounting Standard 15 (AS - 15), the impact of which
cannot be quantified in the absence of adequate information.
e) On the basis of written representations received from the directors of
the company, and taken on record by the Board of Directors, none of the
directors are disqualified under Section 274(1)(g) of the Companies Act,
f) In view of Note No. 2 (ii) (Schedule U) dealing with the suit filed by
the Banks, which is under the consideration of the Debt Recovery Tribunal
(DRT) and take-over of the immovable financial assets of the company by
Asset Recovery corporation of India Ltd. (ARCIL), and considering the
absence of prospects of expeditious rehabilitation, based on available
information, we are unable to comment on the fundamental assumption of
g) Based on available information, it is not possible to quantify the
disputed amount of statutory dues, since the company has been unable to
furnish the necessary information with verifiable evidence.
h) In our opinion and to the best of our information and according to the
explanations given to us, subject to:
i) Note No. 3 regarding confirmation from various parties;
ii) Note No. 6 regarding non provision of liabilities / dues of the
financial institutions and banks;
iii) Note No. 7 regarding provision of interest due to the financial
institutions and banks, the correctness of which cannot be ascertained in
the absence of confirmation.
iv) Note No. 9 regarding the non-transfer of unpaid dividend to the Central
Government pursuant to Section 205C of the Companies Act, 1956 and, the
consequent penalties /fees payable arising therefrom.
v) Note No. 10, which is self-explanatory.
vi) Note No. 13, regarding the non-provision of retirement benefits, the
impact of which cannot be quantified.
vii) Note No. 14. regarding correctness of amounts deducted towards the
Provident Fund and their deposit with the prescribed authorities.
viii) Suit filed against the Company by one of the shareholders of the
Company, the impact of which cannot be quantified based on available
ix) Subject to sub-paragraph f) and g) of Paragraph 3 of this report, the
said accounts read together with the notes thereon give the information as
required by the Companies Act, 1956 in the manner so required, but we are
unable to specifically opine whether they present a true and fair view, (on
account of the Assumption of Going-Concern, being questionable as various
issues and matters being sub-judice with quasi judicial / judicial and
statutory authorities and pending determination):
i. In the case of the Balance Sheet, of the state of the affairs of the
Company as at 31st March, 2006; and
ii. In the case of the Profit and Loss Account, of the Loss for the year -
ended on that date;
iii. In the case of Cash Flow Statement, of the cash flow for the year
ended on that date.
For and on behalf of
NEETA AND CO.
NEETA H. BAKSHI
2nd September, 2006
ANNEXURE REFERRED TO IN PARAGRAPH 2 OF OUR REPORT OF EVEN DATE ON THE
ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2006 OF SONU SYNTHETICS LIMITED
On the basis of such checks as we considered appropriate and in terms of
the information and explanations given to us, we state that:
1. According to the information and explanation given to us, the Company
has not updated the fixed assets register with respect to additions made
from the year ending 31st March, 2003.
2. The fixed assets have net been verified by the Management.
3. The Company has not disposed of any of its fixed assets during the year
under review and none of its fixed assets have been revalued.
However, attention is invited to Note No. 2 (ii) (Schedule U) dealing with
the suit filed by the Banks, which is under the consideration of the Debt
Recovery Tribunal (DRT) and the takeover of the immovable financial assets
of the company by Asset Recovery corporation of India Ltd. (ARCIL).
Based on available information and circumstances existing, we are unable to
comment on the fundamental assumption of Going Concern.
4. With respect to its inventory:
(a) As explained to us, the Management has physically verified the stocks
at the close of the year. In our opinion, the frequency of physical
verification needs to be increased to make it reasonable.
(b) The procedures of physical verification, which are followed by the
Management are reasonable and adequate in relation to the size of the
company and the fact that the business was suspended.
(c) The discrepancies noticed on physical verification of stocks as
compared to the book records were not material and have been properly
dealt with in the books of accounts.
5. With respect to loans, it is stated as under:-
(a) the company has not taken loans from / given loans to persons, firms or
other parties covered by Section 301 of the Companies Act, 1956, during the
year under review.
(b) According to information and explanation given to us, the Company has
not taken any new loan secured or unsecured during the year under review.
However, the loans taken from eleven parties in the past amounting to Rs.
13,12,447/- continues to be outstanding.
(c) There is no stipulation regarding the repayment of the Principal amount
in respect of the said loan.
6. In our opinion and according to the explanations given to us, the
internal controls in respect of purchases of stores, rain materials,
including components, plant & machinery, equipments and other assets and
for the sale of goods needs to be strengthened to make in commensurate with
the size of the company and the nature of its business. During the course
of our audit, we have not observed any continuing failure to correct major
weaknesses in internal controls.
7. According to the information and explanations given to us,
(a) The register under Section 301 is not maintained.
(b) The company has not entered into any contracts or arrangement covered
by Section 301 of the Companies Act, 1956 during the year under review and
there are no / transactions that are required to be entered into the
8. During the year under review the company has not accepted deposits from
9. The Company does not have an internal audit system and no comments are
10. Maintenance of Cost Records is not applicable to the company for the
year under review, since it has not carried on any operations.
11. With respect to statutory dues, it is stated that:
(a) As per the records of the company and the information made available by
the company, the company has not deposited statutory dues including
Provident Fund and Employees State Insurance with appropriate authorities.
Based on available information, we are not in a position to confirm the
correctness of the quantification of the undisputed statutory dues.
As per information given to us by the Management, the following is the list
of undisputed statutory Dues:
Name of the Nature of dues Amount Due Remarks
Employees For the Year ending Unpaid, Due
Provident Employees March, 2005 - date as per
Fund and Provident fund Rs.285996/- statute
Miscellaneous And Admn.
Income Tax Tax deducted For the year ending Unpaid, Due
Act, 1961 at source March, 2003 - Date as per
March 2004 - Unpaid, Due
Rs.100780/- Date as per
March, 2005 -
Professional Profession For the Year ending -Do- Unpaid
March, 2003 -
March, 2004 -
The Company has disputed the income Tax of Rs. 14.84 Lakhs, which is
pending before the Income Tax Appellate Tribunal pertaining to Block
Assessment (1988 - 98).
12. The accumulated losses of the Company exceeds 50% of net worth of the
Company. The Company has made a reference to the Board for Industrial and
Financial Reconstruction in accordance with the provision of Sick
Industrial Companies (Special Provisions) Act, 1985.
13. The Company has defaulted in the repayment of dues to a financial
institution or bank. All the Secured loans taken by the Company has been
declared as Non Performing Assets by the respective financial institution
and Banks as on 31st March, 2006. As per the Books of accounts of the
company, the total outstanding to the banks and financial institutions
aggregate to Rs. 38,19,97,502/-.
14. The Company has not given any guarantee for loans taken by others from
bank or financial institutions.
15. The Company has not taken any term loan during the year under review.
16. On an overall examination of the Balance Sheet of the Company, it is
stated that no funds raised on short-term basis have been used for long-
term investment and vice versa.
17. The Company did not have any outstanding debentures during the year.
18. The Company has not raised any money through public issue during the
19. The Company has not made any preferential allotment of equity shares
during the year under review.
20. 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 and on behalf of
NEETA AND CO.
NEETA H. BAKSHI
2nd September, 2006