ADHUNIK SYNTHETICS LIMITED
ANNUAL REPORT 2007-2008
AUDITORS' REPORT
To
The Members of
ADHUNIK SYNTHETICS LIMITED
1. We have audited the attached Balance Sheet of ADHUNIK SYNTHETICS LIMITED
as at 31st March 2008, the Profit & Loss Account and also 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. Those 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 includes examining, on test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles and
significant estimates made by the 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 (Auditor's Report) Order, 2003 (hereinafter
referred to as 'the CARO 2003') issued by the Central Government of India
in terms of section 227(4A) of the Companies Act, 1956, (hereinafter
referred to as `the Act') we enclose in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said order.
4. Further to our comments in the Annexure referred to above, we report
that:
(i) We have obtained all the information and explanations, except referred
to elsewhere in the report, which 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, Profit & Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account.
(iv) In our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow
Statement dealt with by this report comply with the mandatory Accounting
Standards referred to in sub-section (3-C) of section 211 of the Companies
Act, 1956 except:
(a) AS-1 as referred to in Note No. 12 of schedule 20 that the financial
statements have been prepared on the concept that the company will continue
as a going concern, though:
aa) Manufacturing operations at Jalgaon unit of the company continued to
stand suspended.
ab) Plant and Machinery of Kim unit has already been sold in an earlier
year.
ac) Murbad and Umbergaon units of the company were not operating at full
capacity.
ad) The company is not in a position to honour its commitment towards
various secured, even under 'One Time Settlement' (hereinafter referred as
to 'the OTS') and unsecured creditors.
ae) The company has continuously incurred losses and thereby the
accumulated loss has exceeded the net worth of the company and a
substantial loss is carried forward as on 31st March 2008.
af) On forwarding the matter by the BIFR, The Honourable High Court,
Mumbai, issued notification to official liquidator for appointing him as
provisional liquidator, the initial proceedings before official liquidator
were commenced; and
ag) Further impairment of the. assets as reported in the following
paragraphs and also in annexure to report, cannot be ruled out on
realization / recovery, which may contribute to accumulated loss.
Hence it cannot be said whether the company will continue to be so.
Accordingly, financial statements for the year under consideration do not
include any adjustments relating to recorded amounts and classification of
assets; or to amounts and classification of liabilities that may be
necessary if the company is unable to continue as a going concern.
(b) AS-2 as referred to in Point No. 5 of schedule 19 of Significant
Accounting Policies for valuation of inventories, the method of valuation
is not as per Accounting Standard. Secondly, even in respect of fabric
division of the company, in view of various qualities, as explained to us,
of fabrics produced, valuation of grey and finished fabrics is based on the
past experience and judgment of the management as regards to attribution of
cost elements which is not fully verifiable for want of cost records.
Thirdly, the comparative inventory holding levels, in view of continuous
steep decline in the turnover in past few years, as compared to variier
years with turnover, in our opinion, are Wgher therefore there is a
possibility of loss on sale / realization of slow moving /old items also.
The impact of the above remarks, presently not ascertainable and,
therefore, cannot be commented upon.
(c) AS-15 as referred to in Note No. 5 of schedule 20, the company has
neither formulated any policy for amployees' benefits nor made provision
for employees' benefits, therefore for want of actuarial valuation, the
amount of the same and consequential impact thereof on the profit floss is
sat ascertainable.
(d) AS-13 as referred to in Note no. 15 of schedule 20, ms.provision has
been made for diminution in the tie of investments in the equity shares of
(a) JWhunik Yarns Ltd, a sick industrial undertaking thin the meaning of
Section 3 (1)(O) of the SICA, 1985 and BlFR formed, prima facie, an opinion
that the company be wound up and forwarded the matter to concerned High
Court, Rs 81.87 lacs and (b) Adhunik Fintrade Ltd., a company having
cstantial carried forward losses, Rs. 5.94 lacs; and
(e) AS-28, as referred to in Note no. 20 of schedule 20, the company has
not measured and recognized Ieloss of impairment of its assets, which, in
view of continuous suspension of manufacturing operations at its yarn
manufacturing units and partly utilization of capacity of fabric
manufacturing units and also long outstanding amount as referred to in note
no. 14 of schedule 20, in our opinion, cannot be ruled out and therefore
should have been recognized. Attention of the members is further invited to
refer para no. (iii) of annexure to the Auditors' Report.
v) Attention of the members is invited to:
(a) Note no. 2 of schedule 20, no independent confirmation of balances of
Sundry Debtors, Sundry Creditors, Loans and Advances, Loans from Financial
Institutions & Banks and other balances have been produced to us and
therefore consequential impact, if any, could not be ascertained.
(b) Note no.6 of schedule 20, lower charge of depreciation, as a result, up
to date depreciation charge is lower by Rs 13.44 lacs after taking into
account Rs 12.76 lacs excess charge for the year under review.
(c) Note no. 9 of schedule 20, no provision has been made for interest
accrued and due on the unpaid instalments which have already become due
pertaining to Special Capital Incentives and Sales Tax Incentives received
in the form of unsecured loans, the amount could not be ascertained in
absence of proper information available with the company; and
(d) Note no. 16 of schedule 20, no provision has been made for interest on
unpaid secured loans in view of the OTS with the said secured creditors,
however till the final payments to such creditors and getting the no dues
certificates from them the company should have provided the interest, The
amount of interest, liquidated damages, overdue and compound interest, if
any, on late payments/ defaults in payment of interest as well as repayment
of instalments of loans & debentures, could not be determined 1 ascertained
properly.
vi) We, further report that, overall impact of the above referred remarks,
without considering items mentioned at iv) a), b), c), d), e) and v) a),
c), and d) at ove and para no (i), (ii) and (xv) of Annexure to the
Auditors' Report, the effect of which could not be determined, the loss for
the year would have been lower by Rs.12.75 lacs and the debit balance in
Profit & Loss Account would have been higher by Rs.13.44 lacs.
vii) All the directors of the company, are disqualified as on 31st March
2008, to be appointed as a director of any other public company, as the
company has failed to redeern its debentures on due dates, as referred to
in Section 274 (1) (g) of the Act on the said date.
viii) As informed to us, the company has not complied with the conditions
of the Corporate Governance as stipulated under Clause 49 of the Listing
Agreement.
ix) Minutes Books of Meetings of the Board of Directors and Shareholders
and other Statutory Registers required to be maintained under the Act by
the company, were not produced to us for our verification.
x) Note No. 7 of Schedule 20, the company has paid managerial remuneration
amounting to Rs. 2.48 lacs without satisfying the conditions of Schedule
XIII of the Act.
xi) Note No. 13 of Schedule 20 for non-availability of the relevant
information with the company, the information of creditors registered as
Micro, Small and Medium Enterprises under the Micro, Small and Medium
Enterprises Development Act, 2006 could not be complied.
xii) For want of proper evidence of expenses amounting to Rs. 530691.00
included under the head Advertisement & Publicity, incurred through credit
cards, the classification and reasonableness of the same could not be
ascertained and hence the impact, if any, on the financial statement
presentation (including disclosure of expenditure in foreign currency)
cannot be commented upon.
xiii) Expenses amounting to Rs. 256540/-, included under head of
electricity expenses, are in nature of personal expenses; and
xiv) In our opinion and to the best of our knowledge and according to the
information and explanations given to us, the said accounts, subject to the
forgoing and read together with the accounting policies and other notes
thereon, give the information required by the Companies Act 1956, in the
manner so required and give a true and fair view.
(i) In the case of Balance Sheet, of the state of affairs of the Company as
at 31st March 2008.
(ii) In the case of Profit & Loss Account, of the profit for the year ended
on that date; and
(iii) In case of Cash Flow Statement, of the cash flows for the year ended
on that date.
For and on behalf of
R.S. AGRAWAL & ASSOCIATES
Chartered Accountants
R.S. Agrawal
Partner
Membership No.: 33216
Place: Mumbai
Date : 11th August 2008
ANNEXURE REFERRED IN PARAGRAPH, (3) OF AUDITOR'S REPORT OF EVEN DATE ON THE
ACCOUNTS FOR THE YEAR ENDED 31st MARCH, 2008 OF ADHUNIK SYNTHETICS LIMITED
ON THE BASIS OF SUCH CHECKS AS WE CONSIDER APPROPRIATE AND IN TERMS OF THE
INFORMATION AND EXPLANATION GIVEN TO US, WE STATE THAT:
(i) a) The fixed assets register was not produced to us for our
verification, however a statement was produced to us containing the broad
particulars of the fixed assets on the basis of that it can not be said
that the Company has maintained proper records showing full particulars,
including quantitative details and situation of fixed assets.
b) As informed to us, the management has, at reasonable intervals during
the year, physically verified the fixed assets except the fixed assets of
Units located at Jalgaon and Kim where manufacturing operations were shut
down and found no discrepancies. Hence, discrepancies, if any, in the fixed
assets situated on above locations, could not be ascertained. Further no
fixed assets of the company were insured for any risk; and
c) During the year the company has not disposed off a substantial part of
its fixed assets.
(ii) a) As informed to us, the inventory has been physically verified at
the close of the year by the management except the stocks and other items
of stores and spares lying at the units located at Jalgaon and Kim, where
manufacturing operations were shut down and goods lying with third parties.
In our opinion, the verification of inventory only at the close of the year
in respect of all the items cannot be said to be reasonable and also no
confirmation /certificates have been produced to us for physical
verification of the inventories, for the inventories lying with third
parties.
b) The procedures of physical verification of inventories, as explained,
followed by the management are, in our opinion, needs to be strengthened in
relation to the size of the company and the nature of its business as no
records evidencing the physical verification were produced to us except
confirming the same as done; and
c) The company, for inventory, has maintained no specific records that can
be said proper. As informed to us no material discrepancies have been
noticed on physical verification of stock except the stocks and other items
of stores and spares lying at the units located at Jalgaon and Kim, where
manufacturing ,operations were shut down and goods lying with third parties
as inventories at these locations were not physically verified, as compared
to book records / statements and the same has been properly dealt with in
the books of account. Hence discrepancies, if any, in the stocks lying at
above locations and with the third parties, could not be ascertained.
Further inventories of the company were not insured for any risk.
(iii) a) As informed to us, the company has granted unsecured loans to 3
parties covered in the register maintained under section 301 of the Act.
The maximum amount involved during the year was Rs. 370.30 lacs (including
trade advances given in earlier years), the year end balance of such loans
included in sundry debtors Rs. 330.37 lacs and in loans and advances Rs.
4.25 lacs.
b) The aforesaid advances in the nature of loans are interest-free and
therefore, in our opinion, are prejudicial to the interest of the company.
c) The payment of principal amount of the aforesaid loans, however it is
informed that there was/is no stipulation, still, in our opinion, are not
regular as the same are outstanding since long.
d) As stated above, that there was no stipulation yet, in our opinion, the
whole amount is, prudently, overdue as one of these company is a sick
industrial undertaking declared by 1BIFR for which BIFR also formed, prima-
facie, an opinion for wound up and other one is also a company having
substantial carried forward losses. No Specific recovery steps, as informed
to us, were taken by the company.
e) During the year the company has, as informed to us, taken unsecured
loans from the one party covered in the register maintained under section
301 of the Act. The maximum amount involved during the year was Rs. 30.28
lacs and year end balance of such loan was Rs. 30.28 lacs.
f) The terms and conditions of the aforesaid loan taken are prima facie not
prejudicial to the interest of the company as such loan were taken free of
interest; and
g) Since the aforesaid loan, as informed to us, is repayable on demand, the
payment of principal amount of the aforesaid loans was treated regular.
(iv) In our opinion and according to the information and explanations given
to us, internal control system, followed by the management, need to be
strengthened 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 and services. During the course of audit, no major weakness
has been reported and noticed in these internal control systems.
(v) a) The company has not produced the register required to be maintained
under section 301 of the Act, for our verification, hence it can not be
said whether particulars of contract or arrangements, referred to in said
section, that need to be entered into such register have been so entered;
and
b) In our opinion and according to the information and explanations given
to us, the transactions, exceeding the value of Rs. 5 lacs in respect of
any party during the year made in pursuance of such contracts or
arrangements, have been made at prices which are reasonable having regard
to the prevailing market prices at the relevant time wherever such market
prices are available.
(vi) As informed to us, the company has accepted deposit from the public
(from a firm in which relatives of the directors are partners), contrary to
the directives issued by the Reserve Bank of India and provisions of
section 58A of the Act and Rules framed there under. As informed to us, no
order has been passed by the Company Law Board or National Company Law
Tribunal or Reserve Bank of India or any Court or any other Tribunal.
(vii) We are informed that the company has no internal audit system.
(viii) We are informed that the accounts and records pursuant to the Rules
made by the Central Government for the maintenance of cost records under
section 209(1)(d) of the Act, have not been maintained by the company.
(ix) a) The company is not regular in depositing with the appropriate
authorities undisputed statutory dues including Provident Fund, Employees'
State Insurance, Investors Education and Protection Fund, Income tax,
Sales-tax, Service tax and other material Statutory Dues applicable to it.
There were no arrears as at 31st March 2008 for a period of more than six
months from the date they became payable except:
aa) Rs. 84752/-, Rs. 1385/-, Rs. 221954/-, Rs. 103386/-, Rs. 109679/-,
Rs.559832/-, Rs. 50856/-; Rs. 12249/-and Rs. 11992/- towards provident
fund, E.S.I.C., sales tax, interest on sales tax, professional tax, income
tax (TDS), Fringe Benefit Tax (FBT), property tax and Maharashtra Labour
Welfare Fund respectively,
ab) the company has also not credited 'Investors Education and Protection
Fund' by unclaimed dividend declared for the period ended 30th June 1995
and unclaimed FCD application money which on allotment became due for
refund, if any, as informed to us that necessary information are not with
the company, and
b) According to the information & explanations given to us, the statutory
dues that have not been deposited with the appropriate authorities on
account of dispute and the forum where the disputes are pending are given
below:
Name of the Statute Amount A B
(in
Rupees)
Bombay Sales Tax Act 33044 1999-2000 In appeal with Deputy
Commissioner of Sales Tax
Central Sales tax Act 137221 1999-2000 In appeal with Deputy
Commissioner of Sales Tax
Bombay Sales Tax Act 657564 2000-2001 In appeal with Deputy
Commissioner of Sales Tax
Income Tax Act 10000* AY 1999-2000 The Income Tax Appellate
Tribunal
20000* AY 2004-2005 The Income Tax Appellate
Tribunal
20118705** AY 2004-2005 The Income Tax Appellate
Tribunal
194891*** A5 200x-2Gu6 The Commissioner of Income
Tax (Appeals)
A = Period to which the amount relates
B = Forum where dispute is pending
* Penalty u/s 271(1)(b)
** Penalty u/s 271-(1)(c)
*** On regular assessment
(x) The Company has not incurred cash losses in the year under review
(considering the relief under OTS settlements with secured creditors) but
incurred cash losses in the immediately preceding financial year and its
accumulated losses at the end of the year under review is more than fifty
per cent of its net worth.
(xi) The Company has defaulted in repayment of dues to the financial
institutions, banks and debenture-holders which, as per the information and
explanation given and representation made to us, are given below:
Lender A B C
Nature of credit facilities
and Financial Institutions/
banks
(a) Long Term Funds:
Bank of Baroda 5250000 February 1998 to August
1999
13671696 July 1998 to March 2007
Debenture-holders 26250000 August 1997 to August 1999
99595383 April 1997 to March 2007
(b) Cash Credit Limit (#):
Central Bank of India 64783542 167475603 April 1998 to March 2008
Bank of Baroda 51680240 125921382 October 1998 to March 2008
State Bank of India 19683098 41047126 April 1999 to March 2008
(c) Incentives in form of
unsecured loans:
Capital Incentive-MIDC 1320605 December 1995 to June 2003
Sales Tax Interest Free
Loan-Sicon 15386035 November 2000 to March
2008
Total 184353520 447711190
A = (Amount Rupees) - Interest
B = (Amount Rupees) - Principal
C = Period in which sums became due
(#) In the absence of 'Recall' letters from bankers the due dates are taken
when the accounts became NPA as informed by the management.
(xii) According to the 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.
(xiii) The company is not a chit fund or a nidhi mutual benefit fund/
society. Therefore, the provisions of clause 4(xiii) of the CARO 2003 are
not applicable to the company.
xiv) According to the information and explanations given to us, the Company
is not dealing or trading (except for investments purposes) in shares,
securities, debentures and other investments. Accordingly, the provisions
of clause 4(xiv) of the CARO 2003 are not applicable to the company. The
Company in its own name holds all the investments.
(xv) According to the information and explanations given to us and we
report that on prima-facie examination of information provided, the company
has not given any guarantee for loans taken by a third party from financial
institution (s) or bank(s).
(xvi) The company has not obtained any term loans during the year and hence
reporting requirements of para (xvi) of the CARO 2003 are not applicable.
(xvii) According to the information and explanations given to us and on an
prima-facie examination of the balance sheet of the company, we report that
due to payment of OTS to secured creditors towards term loans by the
company in the year under review and also heavy losses incurred in earlier
years, the funds raised on short term basis have been used for long
purposes to the extent of Rs. 4271.35 lacs at the end of the year including
Rs. 85.28 lacs during the year.
(xviii) The Company has not made preferential allotment of shares to
parties and companies covered in the register maintained under section 301
of the Act.
(xix) According to the information and explanations given to us, the
Company has created security in respect of debentures issued in an earlier
year. No debentures have been issued during the year.
(xx) The Company has not raised any money through a public,issue during the
year.
(xxi) According to the information and explanation given to us,
representation made to us and to the best of our knowledge and belief, no
fraud on or by the Company, has been noticed or reported by the company
during the course of our audit.
For and on behalf of
R.S. AGRAWAL & ASSOCIATES
Chartered Accountants
R.S. Agrawal
Partner
Membership No.: 33216
Place: Mumbai
Date : 11th August 2008
|