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J K Pharmachem Ltd.

BSE: 500218 Sector: Health care
NSE: JKPHARMA ISIN Code: INE335C01018
BSE 05:30 | 01 Jan J K Pharmachem Ltd
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J K Pharmachem Ltd. (JKPHARMA) - Auditors Report

Company auditors report

J.K. PHARMACHEM LIMITED ANNUAL REPORT 2004-2005 AUDITORS' REPORT To The Members, J.K. PHARMACHEM LIMITED We have audited the attached Balance Sheet of M/s. J.K. PHARMACHEM LIMITED, Cuddalore, Tamil Nadu, (herein after called the COMPANY) as at September 30, 2005 and the Profit and Loss Account of the Company for the year ended on that date and cash flow statement of the Company annexed thereto. 1. RESPONSIBILITY: These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these statements based on our audit. 2. SCOPE: 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 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. Attention is invited to the following: 3.1 Interest on debentures for the year amounting to Rs.443.09 lakhs (previous year Rs.292.86 lakhs) and interest on inter corporate loans amounting to Rs.36.02 lakhs (previous year NIL) has not been provided in the accounts and total interest not provided for in the books upto 30.09.2005 is Rs.1193.45 lakhs (upto previous year Rs.764.34 lakhs. [note no.2] 3.2 No depreciation on Buildings and Plant and Machinery has been provided in the books amounting to Rs.969 lakhs (previous years Rs.NIL). 3.3 The accounts have been prepared on the basis of going concern concept which is subject to grant of concessions by the financial institutions, availability of remunerative prices and availability of manpower and support from the suppliers. 3.4 The company has not provided for the provision for the impairment of assets as required by the Accounting Standard 28-impairment of assets prescribed by the Institute of Chartered Accountants of India. 3.5 We are not able to comment on the recoverability or otherwise of the amount of Rs.35.16 lakhs kept under advances recoverable in cash or in kind as explained in note no 12, being the amount paid to the erstwhile whole time director over and above the amount approved by the department of company affairs even though the company has made representation to the concerned authorities. 3.6 We further report that without considering the item no 3.3 and 3.4 above, had the observations made by us in paragraph 3.1 and 3.2 above has been considered, loss for the year, would have been Rs.2539.32 lakhs (as against the reported figure of Rs.1091.21 lakhs) and the Balance in the profit and loss account would have been Rs.16406.37 lakhs (as against the reported figure of Rs.14243.92 lakhs) 4. ASSERTIONS: 4.1 We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; 4.2 The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account; 5. OPINION: 5.1 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 those books. 5.2 Subject to non compliance of the Accounting Standard 28 -impairment of assets prescribed by the Institute of Chartered Accountants of India as explained in 3.4 Supra, the Balance Sheet and Profit and Loss Account dealt with by this report have been prepared in compliance with the Accounting Standards issued by the Institute of Chartered Accountants of India referred to in Section 211(3C) of the Act, to the extent applicable. 5.3 The company has defaulted to redeem the debentures on due date and the default has exceeded one year as on 30.09.2005. Hence all the directors of the company except Mr Kailash Bhansali and Mr. T.S. Surendranath (Financial Institution Nominees), in our opinion, are being disqualified from being appointed as directors in terms of Section 274(1)(g) of the Companies Act, 1956. 5.4 In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with significant accounting policies and other notes appearing in schedule 13, and subject to para 3 above, 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 the Balance Sheet, of the state of affairs of the Company as at September 30, 2005; (ii) In the case of Profit and Loss Account, of the LOSS for the year ended on that date. (iii) In the case of the cash flow statement, of the cash flows of the company for the year ended on that date. 6. As required by the Companies [Auditors' Report] Order 2003 issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956 and on the basis of such checks as we considered appropriate and information and explanation given to us, we further report that: FIXED ASSETS: 6.1 The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets. 6.2 We were informed that the physical verification of the fixed assets was carried out by the management during the year and no material discrepancies were noticed. 6.3 During the year, the Company has disposed off some of the assets, which in our opinion, does not affect the going concern assumption. INVENTORIES: 6.4 The inventories lying with the Company were physically verified during the year by the management at reasonable intervals, including stocks lying with third parties. 6.5 In our opinion, the procedure of physical verification of inventory followed by the management is reasonable and adequate in relation to the size of the Company and nature of its business. 6.6 The Company is maintaining proper records of inventory. As informed to us, no material discrepancies have been noticed during the verification. LOANS TAKEN AND GIVEN: 6.7 The Company has not accepted any deposits from the public. 6.8 The company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act 1956. 6.9 Except for the amount of Rs.35.16 lakhs recoverable from the director of the company [remuneration paid in excess of the amount approved by the department of company affairs], the company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956 6.10 In our opinion and according to the information and explanations given to us, the company has defaulted in repayment of dues to the financial institutions of Rs.3632.41 lakhs towards principal and Rs.3669.75 lakhs towards interest. 6.11 In our opinion and according to the information and explanations given to us, the company has utilized the term loans (taken in earlier years) for the purposes for which the same were obtained. 6.12 The company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. SECURITY FOR DEBENTURES: 6.13 The company has not issued any debentures during the year and hence the question of commenting on the creation of security does not arise. FURNISHING OF GUARANTEE: 6.14 In our opinion and according to the information and explanations given to us, the company has given corporate guarantee of Rs.330 lakhs for loans taken by others from financial institutions, the terms and conditions of which are not prejudicial to the interest of the company. However the same has been discharged at the end of the year. FURTHER ISSUE OF SHARES: 6.15 The company has not raised any money by way of public issue during the year. 6.16 The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956. INTERNAL CONTROL AND INTERNAL AUDIT: 6.17 There are adequate internal control procedures 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 the sale/supply of services. During the course of our audit, no major weakness has been noticed in the internal controls. 6.18 The Internal audit of the Company is being entrusted to an independent firm of chartered accountants and the scope and coverage of the same is in our opinion is commensurate with the size and nature of the business STATUTORY DUES: 6.19 The Company is generally regular in depositing with appropriate authorities the undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income tax, Wealth tax, Service tax, Sales tax, Custom Duty, Excise Duty, Cess and other statutory dues applicable to it with the appropriate authorities and according to the information and explanations given to us, there are no undisputed dues of statutory dues which are outstanding as at September 30, 2005 for a period of more than six months from the date they became payable. 6.20 According to the information and explanations given to us, there are no dues of Income Tax/Sales Tax/Service Tax/Wealth tax/Excise Duty/Cess which have not been deposited on account of any dispute, except the following and which are pending before the concerned authorities, Sl. Name of the Nature of Period Amount Forum where No. Statute Dues Rs.in lakhs Dispute is Pending 1 Central Sales Sales tax 1996-97 279.18 STAT Tax Act 2 -DO- Penalty 1996-97 493.76 STAT 3 -DO- Sales tax 1997-98 474.13 Appeals Commissioner 4 -DO- Penalty 1997-98 725.15 Appeals Commissioner 5 Tamilnadu Tax Energy and 2002-04 48.69 Hon'ble High on Consumption Consumption Court of Madras or sale of tax Electricity Act 2003 6 Electricity Electricity 2002-04 19.00 Hon'ble High Act, 1991 Tax Court of Madras 7 Central Excise Excise duty 1995-1996 6.19 CESTAT Act, 1944 to 1999-2000 8 -DO- Excise duty 1999-2000 16.02 CESTAT 9 -DO- Penalty 1994-1995 5.00 NIL COST AND OTHER RECORDS: 6.21 We have broadly reviewed the books of accounts maintained by the company pursuant to the order made by the Central Government for the maintenance of the cost records under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed records have been made and maintained. We have not however made a detailed examination of the said records. 6.22 In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. The investments shown in the accounts are held in the name of the Company. OTHERS: 6.23 The accumulated losses at the end of the year is more than 50% of the net worth of the Company. However, the Company has incurred cash losses both during the current financial year as well as in the immediately preceding financial year, after considering the quantum of qualifications in the auditors report. 6.24 In our opinion, considering the nature of the activities carried out by the company during the year, the provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the company. 6.25 Based on the information and explanations given to us, and on an overall examination of the balance sheet of the Company, in our opinion, there are no funds raised on short term basis which have been used for long term investment. 6.26 On the basis of the books and records of the company verified by us in the normal course of audit and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported by/to us during the course of our audit. NON-REPORTING OF CERTAIN CLAUSES: 6.27 In our opinion the reporting on the Clauses 4(iii)(b) to (iii)(d), 4(iii)(f), 4(iii)(g), 4(v) of the CARO 2003 is not applicable and hence not reported upon. For LODHA & CO. Chartered Accountants G. SUBRAMANIA SARMA Partner Place : New Delhi Dated : 30th November 2005