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. () - Auditors Report

Company auditors report

NATIONAL FLASK INDUSTRIES LIMITED ANNUAL REPORT 2009-2010 AUDITORS' REPORT To The Members of NATIONAL FLASK INDUSTRIES LIMITED We have audited the attached Balance Sheet of NATIONAL FLASK INDUSTRIES LIMITED as at 31st March, 2010 and also the Profit and Loss Account for the year ended on that date annexed thereto. These financial statements are the responsibility of the unit's management. Our responsibility is to express an opinion on these financial statements based on our audit. 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 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 (hereinafter referred to as the Act), we enclose in the Annexure a statement on the matters specified in paragraphs 4 & 5 of the said Order, to the extent applicable. Further to our comments in the Annexure referred to above, we report that: i) 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; ii) in our opinion, proper books of account as required by law have been kept by the Unit so far as appears from our examination of those books. iii) the Balance Sheet and Profit & Loss account dealt with by this report are in agreement with the books of accounts. iv) in our opinion, the Balance Sheet & the Profit and Loss account dealt with by this report comply with the accounting standards referred to in subsection (3C) of Section 211 of the Act EXCEPT AS 2 on valuation of Inventories, AS 9 on Revenue Recognition and AS 15 for Retirement Benefits in the Financial Statements of Employers. v) On the basis of written representation received from the director's as on 31st March, 2010 and taken on record by the Board of Directors of the Company, none of the directors is disqualified as at 31st March, 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the notes thereon subject to Note No. IC, IIIb, VI, IX a & b of Schedule 'S' forming part of the financial statements and give the information required by the Act, vii) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2010; b) in the case of the Profit & Loss Account, of the loss for the year ended on that date; c) In the case of the cash flow statement, of the cash flows for the year on that date. For KIRAN MATANI & ASSOCIATES Chartered Accountants Proprietor. Place: Sarigam. Date : 16th August 2010 Annexure referred to in Paragraph 1 of the Auditors Report of even date of NATIONAL FLASK INDUSTRIES LIMITED, for the year ended 31st March 2010. (i) Fixed Assets: (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets; (b) The fixed assets have been physically verified by the management at reasonable intervals. No material discrepancies were noticed on such verification. (c) The Company has disposed off certain part of the fixed assets during the year, In our opinion the same has not affected the going concern. (ii) Inventory: (a) The inventory has been physically verified by the management. In my opinion, the frequency of such verification is reasonable. (b) The procedure of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. (c) The company is maintaining proper records of inventory. The discrepancies noticed on verification between physical stocks and the book records were not material and have been properly dealt with in the books of account. (iii) Loans granted to related persons: The company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register specified under section 301 of the companies Act, 1956. Accordingly clause iii(b) to iii(d) of paragraph 4 of the order are not applicable to the company. The company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register specified under section 301 of the Companies Act, 1956. Accordingly clause iii(f) to iii(g) of paragraph 4 of the order are not applicable to the company. (iv) Internal Control: There is an adequate internal control procedure commensurate with the size of the company and the nature of its business, for the purchase of inventory, fixed assets and for the sale of goods and services. In my opinion and according to the information and explanation given to me I have neither come across nor have I been informed of any instance of major weakness in the aforesaid internal control system. (v) Related Party Transactions: (a) In my opinion and according to the information and explanations given to me the particulars of contracts or arrangements that need to be entered into a register in pursuance of section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under that section. (b) In my opinion and according to the information and explanation given to me the transactions made in pursuance of such contracts or arrangements have been made at prices, which are reasonable having regard to prevailing market price at the relevant time. (vi) Deposits from Public: The company has not accepted any deposits from the public. (vii) Internal Audit: The company has an internal audit system. However the same needs to be strengthened to make it commensurate with its size and nature of its business. (viii) Cost Records: The company is not required to maintain cost records prescribed by the Central Government under clause (d) of sub-section (1) of section 209 of the Companies Act. (ix) Statutory Dues: (a) The company is generally regular in depositing undisputed statutory dues. As at 31st March 2010, except in specific issues addressed as under. The amount outstanding as at the last day of the financial year concerned for a period of more than six months from the date they become payable to Provident Fund is Rs.1,82,589/-.for Sales Tax is Rs.7,89,296/-.Notified Area Tax is Rs.8,57,398/-and Gram Panchayat Tax is Rs.72,500/-. (b) According to the records of the company following dues have not been paid on account of some dispute. i) Cases in dispute with Central Excise Department - Naroli are as under:- Date Amount Description 27/02/99 Rs.345000/- Lost of Cenvet Documents (Input) 17/05/02 Rs.4560249/- SCN against Fire on 04/06/01 (Comm Surat - II) 23/05/02 Rs.9555393/- SCN against Fire on 04/06/01 (D/c. Vapi - II) Total Rs.14460642/- plus 100% penalty of Rs.14460642/- and Interest as applicable ii) Cases in dispute with Central Excise Department - Sarigam are as under Date Amount Description 27/02/99 NIL Polypropelene shortage 28/05/98 Rs.29160/- SCN to NFIL sarigam - Small & BigStool mentioned as exempted 04/04/00 Rs.150818/- Patla Case 03/05/99 Rs.1655085/- SC to NFIL Sarigam from Suptd. Range II Sarigam 10/05/00 Rs.1317203/- SCN to NFIL Sarigam from Add. Comm. Surat-II Total Rs.3152266/- plus penalty of Rs.3199915/- and interest as applicable. iii) Export obligation for Imported Capital Goods against EPCG License No.0111183 Dated 12-04-1999 Rs. 2186600/- and License No. 0114131 Dated 05-10-1999 Rs.2764727/- approached Jt. DGFT for extension of time. iv) Export obligation for Imported Raw Materials against advance License No.0310162131/2/03/00 dated 08-10-02 for Rs.615650/-and License No. 310162132/2/03/00 dated 08-10-02 for Rs.361494/- . The payment of the duty will be made as per rehabilitation scheme approved by the honourable BIFR. (x) Net Worth: The accumulated loss of the company has eroded the net worth of the company completely during year ended on 31/03/2004. The company has become the Sick Industrial Company within the meaning of clause (O) of section 3(1) of the sick industrial companies (Special Provisions) Act,1985 and has been registered with the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of the said Act. The company has incurred a cash loss of Rs.1627.59 lacs in the previous year and in the current year the cash loss is Rs.1791.37 lacs. (xi) Repayment of dues: (a)The company has defaulted in repayment of dues to the financial institutions/ banks/ debenture holders. The period and the amount of default is as under: The Saraswat Co-operative Bank Ltd. Rs. 56,67,73,945/- The Shamrao Vithal Co-op. Bank Ltd. Rs. 23,99,63,923/- The North Kanara GSB Co-op. Bank Ltd. Rs. 16,92,55,687/- The Cosmos Co-op. Bank Ltd. Rs. 24,06,61,166/- Development Credit Bank Ltd. Rs. 4,46,28,913/- Total Rs. 1,26,12,83,634/- The above alleged dues are outstanding as on 31-03-2010, includes interest and principal amount from the year 2000-01 onwards. The captioned alleged amount is based on generally accepted accounting principles and is arrived at without adjudicating / considering the views / objections raised against the dues payable. Hence the said alleged amount is not actual payable amount at present. The actual payable alleged amount could not be payable at all or could differ significantly from the alleged amount of Rs.1,26,12,83,634/- when the objections against the repayment of bank dues will be taken into consideration. The alleged amount whether payable or otherwise will be recognized / identified in the period in which the actual liability will be known. (xii) Loans granted: 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) Chit Fund: The Company is not chit fund/ nidhi/ mutual benefit fund/ society. (xiv) Investment company: The company is not dealing or trading in shares, securities, debentures and other investments. (xv) Guarantee issued: The Company has not given any guarantee for loans taken by others from bank or financial institutions. (xvi) Utilisation of term loans: The company has not availed of any term loans during the year. (xvii) Utilisation of short-term loans (xviii) Preferential Allotment: 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. (xix) Debentures: No debentures have been issued by the company. (xx) End use of Public Issue: The company has not raised money by public issues during the year. (xxi) Frauds: To the best of my knowledge and belief, and according to the information and explanation given to me no frauds on or by the company were noticed or reported during the year. For KIRAN MATANI & ASSOCIATES Chartered Accountants Kiran Matani Proprietor M.NO : 16879 SARIGAM : 16th August 2010