ELECTREX (INDIA) LIMITED
ANNUAL REPORT 2005-2006
The Members of
ELECTREX (INDIA) LIMITED.
1. We have audited the attached Balance Sheet of M/s. Electrex (India)
Limited as at March 31, 2006 and also the Profit & Loss account and 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. 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.
3. As required by the Companies (Auditor's Report) (Amendment) Order, 2004
issued by the Central Government in terms of Section 227(2A) of the
Companies Act, 1956, we give 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 in paragraph 3
above, we report that:
4.1 We have obtained all information and explanations, which to the best of
our knowledge and belief were necessary for the purposes of our audit.
4.2 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.
4.3 The Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt
with by this report are In agreement with the above books of account.
4.4 In our opinion, the Balance Sheet, Profit and Loss Account and Cash
Flow Statement comply with the Accounting Standards referred to in sub-
section(3C) of Section 211 of the Companies Act, 1956 to the extent
applicable to the Company except Accounting Standard-23 an 'Impairment of
4.5 The directors are disqualified from being appointed as director in
terms of Section 274(1)(g) of the Companies Act, 1956 as there is default
in repayment of principal and interest fixed deposits and debentures (Refer
Note 17 of Schedule S).
4.6 Reference is invited to Note No. 5, 6, 7 and 8 of Schedule S relating
to various legal cases filed against the Company and its promoters and the
erosion of the total networth of the Company. We are not inn position to
company on the outcome of these cases and the resultant impact of the same
on the accounts of the Company. The accounts of the Company have been
prepared on going concern basis inspite of the same.
4.7 Attention is invited to the following paras of Schedule S of notes
forming part of the Accounts:
4.7.1 Note No. 9 with regard to non-reconciliation/non-availability of
confirmation of various debit and credit balances outstanding as on
31.06.2006 and the resultant impact thereof (amount not ascertainable).
4.7.2 Note No. 9 and 10 with regard to not making provision towards old
outstanding balances of debtors and advances (amount not ascertained).
4.7.3 Note No. 12 with regard to non-provision of depreciation on moulds
and jigs and plant and machinery an account of higher obsolescence of the
same pending determination (amount not ascertained).
4.7.4 Note No. 27 with regard to not carrying out any exorcise to calculate
the amount of impairment loss of assets and to make provision towards the
same (amount not ascertained).
4.7.5 Note No. 11 with regard to non-provision of interest/lease
rental/discounting charges/hire charges on amounts borrowed from Financial
Institutions/Banks/NBFCs/others amounting to Rs.8193.40 Lac for the year
(Rs.32535.11 Lac up to 21.3.2006) on estimated basis.
4.7.6 We further report that, without considering items mentioned at para
4.4, 4.5 and para 4.7.1 to pare 4.7.4 above, the effect of which could not
be determined, had the observations made by us in para 4.7.5 above been
considered, the loss for the year would have been Rs.9042.65 Lac (as
against we reported figure of Rs.649.26 Lac), accumulated losses would have
been Rs.61251.66 Lac (as against the reported figure of Rs.28716.55 Lac)
and loan funds (including acceptances and lease rentals) would have been
Rs.59,147.11 Lac (as against the reported figure of Rs.26612 Lac).
4.3 In our opinion and to the best of out information and according to the
explanations given to us, the said accounts, subject to our comments In
paragraph 4.4, 4.5, 4.5 and 4.7 above read together with the Significant
Accounting Policies and notes thereon as per Schedule S, 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 Balance Sheet of the state of affairs of the Company, as
at 31st March, 2006;
ii) In the case of the Profit and Loss Account of the loss for the year
ended on that date: and
iii) In the case of Cash Flow Statement, on the cash flows for the year
ended on that date.
For T.R. Chadha & Co.
Place: Mumbai (Vikas Kumar)
Date : 28.08.2003 Partner
Annexure to the Auditor's Report referred to in paragraph  of our report
of even date on the Accounts of ELECTREX (INDIA) LTD for the year ended
March 31, 2006
1. Fixed Assets:
a) The Company has maintained records showing particulars including the
quantitative details and situation of fixed assets (excluding for office
equipments, furniture and fixtures). The same does not contain the details
with regard to the purchase of assets upto September 1989 along with the
date of purchase and the name of the supplier as the records in this regard
are stated to ho destroyed in fire in past years. These fixed assets were
however valued by tile valuers appointed by the bank.
b) As per the information and explanations given to us, the Company has
physically verified its assets during the year, which in our opinion is
reasonable having regard to the size of the Company and the nature of its
assets. The reconciliation of the same with book records is in process and
the discrepancies the same, if any will be adjusted after reconciliation.
c) During the year, the Company has disposed off vehicles. However, the
same did not affect the going concern nature of the company.
a) The management has carried out the physical verification of inventories
b) Taking into consideration the nature of business, we are of the opinion
that the procedure of physical verification is reasonable and adequate in
relation to the size of the Company and the nature of its business.
However, the frequency at physical verification of inventories needs to be
c) Though the Company is maintaining proper records of inventory, the same
needs to be improved with regard to timely recording of the entries. The
discrepancies noticed on verification between the physical stocks and
records were not material in relation to the operation of the Company and
the same have been properly dealt with in the books of account.
3. Secured or Unsecured Loans Granted or Taken:
a) An amount of Rs.493.76 Lac is receivable as on 31.03.2006 from one
company covered in the register maintained under section 301 of the
Companies Act, 1956, which was advanced to this company in earlier years.
b) In respect of the loans/advances granted, no interest has been charged
from them and the details with regard to the terms and conditions of such
advance are not available. Accordingly, we are nil to a position to comment
as to whether the same is prejudicial to the interest of the Company or
not. The Company has informed that this amount mainly represents investment
as part of a joint venture.
c) In respect of the loans granted, the Company has not stipulated any
repayment schedule. Accordingly, we are not in a position to comment as to
whether the same is overdue or not.
d) An amount of Rs.68.40 Lacs payable as on 31.03.2006 towards loan taken
from four directors in earlier years.
e) In respect of loans taken, those are interest free and accordingly are
prima facie not prejudicial to the interest of the Company.
f) In respect to the loans taken, these are payable on demand and
therefore, the question of overdue amounts does not arise.
4. Internal Control System:
According to the information and explanations given to us, there is
adequate internal control system commensurate with the size of the Company
and the nature of its business, with regard to purchase of inventory, fixed
assets and with regard to sales of goods. However the same needs to be
improved to make it more effective. During the course of our audit, we have
not observed any continuing failure to correct major weakness in internal
5. Transactions under Section 301 According to the information and
explanation given to us, there are no transactions that need to be entered
into the register maintained under section 301 of the Companies Act, 1956.
Accordingly, clause 5(a) and 5(b) of Para 4 of the Companies (Auditor's
Report) Order are not applicable to the Company.
6. Public Deposits:
The Company has not accepted any fixed deposits during the year under
audit. According to in formation and explanations given to us and based on
the test checks carried out by us, the Company has complied with the
provisions of Section 58A, 58AA or any other relevant provisions of the Act
and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the
deposits accepted in earlier years excepting the clause relating to
maintenance of liquid assets, the repayment of principal amount and payment
of interest in time, delay in filing of deposit return and non filing of
statement in lieu of advertisement. The total amount due for payment which
has not been repaid as per terms and is outstanding as on 31.03.2006
aggregates to Rs.1278.82 Lac with regard to principal and Rs.429.48 Lac for
interest (excluding 1.10.2001 to 31.03.2006, which is not provided - Refer
Note no M of Schedule S).
7. Internal Audit System:
In our opinion, the Company's internal audit system is generally
commensurate with the size and nature of its business. However, the scope
and coverage of she same needs to be employed.
8. Cost Records:
As explained to us by the management, the Central Government has not
prescribed the maintenance of cost records under Section 209(1)(d) of the
Companies Act, 1956.
9. Statutory Dues:
a) The undisputed statutory dues including provident fund, employees' state
insurance, sales tax, tax deducted at source, fringe benefit tax, cess and
other material statutory dues applicable to the Company have not been
regularly deposited with the appropriate authorities and there were regular
delays/non deposit/non deduction of the same.
b) According to the information and explanations given to us, no undisputed
amounts is payable in respect of sales tax, income tax, wealth tax, Service
tax, custom duty, excise duty and cess were in arrears, as at 31.03.2006
for a period of more than six months from the date they became payable
excepting Sales Tax, Tax deducted at source, professional tax and employees
state insurance amounting to Rs.868.92 Lac, Rs.200.47 Lac, Rs.1.51 Lac and
Rs.0.90 Lac respectively.
c) There are no disputed contingent sales tax/ Income tax/ custom duty/
wealth tax/ excise duty/ cess outstanding as on 31.03.2006 except the
Name of the statute Nature of dues Amount Forum where
Rs. in Lacs pending
Income Tax Act, 1961 Income Tax (AY 137.57 Remanded back to
97-98) Assessing Officer
Income Tax Act, 1961 Income Tax (AY 112.52 Income Tax Appellate
Provident Fund Penalty and 28.91 EPF Appellate
10. The accumulated losses of the Company are more than 50% of the net
worth of the Company as on 31.03.2006 and it has insured a cash loss in
this financial year and in the immediately preceding financial year.
11. The Company has defaulted in repayment of dues to financial
institutions, banks and debenture holders. The amount overdue towards
principal to financial institutions, banks and debenture holders as on
31.03.2006 amounts to Rs.2820 Lac, Rs.5410.33 Lac and Rs.3873.35 Lac
respectively From February 1998 onwards. In addition to above, the interest
on the above amounting to Rs.2365.59 Lac, Rs.94.15 Lac and Rs.3511.06 Lac
respectively are in default towards financial institutions, banks and
debenture holders respectively, which are provided in the accounts. No
interest is provided in this accounts towards the same from 1.10.2001
onwards (Refer note 11 of Schedule S).
12. The Company has not granted loans and advances on the basis of security
by way of pledge of shares, debentures and other securities.
13. As explained, (he Company is not a chit fund or a nidhi/mutual benefit
fund/society, Accordingly, the provisions of clause 13 of Para 4 of the
Companies (Auditor's Report) Order are not applicable to the Company.
14. As explained and verified, the Company is not dealing or trading in
shares, securities, debentures and other investments. The shares held by
the Company arc in its own name.
15. As per information provided to us, the Company had given guarantee of
Rs.926.56 Lac in earlier years for bans taken by others from bank or
financial institutions. The terms and conditions of the same have not been
made available to us and accordingly we cannot comment whether the same is
prejudicial to the interest of the Company or not.
16. The Company has not availed any Hum lean during the year.
17. According to the information and explanation given to us and on an
overall examination of the balance sheet of the Company, we report that no
funds raised on short-term basis during the year have been used for long-
18. 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. Accordingly, the compliance of clause 18 of Para 4 of the
Companies (Auditors Report) Order is net applicable to the Company.
19. As explained to us, the security or charge has been created for all the
debentures being reflected as secured loans. However, we were not being
provided the complete supporting of the same and accordingly we cannot
comment on the same. Further, the Company has not created debenture
Redemption Reserve towards the amount due for redemption in view of the
20. The Company has not raised any money by public during the year.
21. According to the Information and explanation given to us, no fraud on
or by the Company has been noticed or reported during the year.
For T.R. Chadha & Co.
Place: Mumbai (Vikas Kumar)
Date : 28.08.2006 Partner