SHAMKEN COTSYN LIMITED
ANNUAL REPORT 2006-2007
The Members of
M/s SHAMKEN COTSYN LIMITED,
We have audited the attached Balance Sheet of M/s. SHAMKEN COTSYN LTD., NEW
DELHI, (hereinafter referred to as the 'Company') as at 31st March 2007 and
also the Profit and Loss Account of the company 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.
We have 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 statements presentation. We believe that our audit
provides reasonable basis for our opinion.
As required by the Companies (Auditor's Report) Order, 2003 as amended by
the companies (Auditors' Report) amendment order 2004, issued by the
Central Government of India in terms of sub-section (4A) of section 227 of
the Companies Act, 1956, and on the basis of such checks of the books and
records of the company as we considered appropriate and according to the
information and explanation given to us, We enclose in the Annexure a
statement on the matters specified in paragraphs 4 & 5 of the said Order.
1) Attention is specifically Invited to the following clauses of the above
Clause I- Concerning records of fixed assets register and physical
verification occasioned with their inaccessibility and consequent
constraint on forming opinion. Relevant impact on account as well as
operating result could not be ascertainable in quantum.
Clause II- Concerning inventory physically taken inaccessibility of
corroborative evidence and therefore, consequent constraint on forming
opinion. Relevant impact on account as well as operating result could not
be dwelt in quantum.
ii) The company has not provided for interest payable on working capital
loans and Term loans amounting to Rs. 1913.80 Lakhs as calculated by the
management during the year under review. In case this interest had been
provided in the books amounting to Rs. 1913.80 Lakhs it would have
increased the loss of the company in addition to the Depicted loss of
Rs.354.59 Lakhs would stand increased to Rs.2268.39 Similarly the depicted
accumulated losses as on 31.03.2007 amounting to Rs.4634.00 lakhs would
stand increased to Rs.10895.39 Lakhs.
III) Further persisting capitalization of expenditure on projects
discontinued, in earlier period(s) has resulted in overstatement of the
Gross Fixed Assets of the company by Rs.4813.86 lakhs and an understatement
of accumulated losses by Rs.4813.86 lakhs. And accordingly the accumulated
losses of the company as on 31.3.2007 would stand further enhanced from
Rs.10895.39 lakhs amounting to Rs.15709.25 lakhs.
IV) The losses of the company exceed its net-worth and therefore the
company is classified as a sick industrial company as per provisions of the
Sick Industrial Companies (Special Provisions) Act, 1985. Despite this, the
company has prepared its accounts as a going concern.
Further to our comments in the Annexure referred to above, and subject to
the 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 purpose of our audit.
b) 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.
c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt
with by this report are in agreement with the Books of Account.
d) In our opinion, the Balance Sheet and Profit & Loss Account dealt with
by this report comply with the accounting standards referred to in sub-
section (3C) of section 211 of the Companies Act, 1956.
e) On the basis of written representations received from the directors, as
on 31st March, 2007, and taken on record by the Board of Directors, we
report that directors are disqualified as on 31st March, 2007 from being
appointed as a director in terms of clause (g) of sub-section (1) of
section 274 of the Companies Act, 1956.
f) Subject to the effect of the qualifications given in the preceding
paragraphs, in our opinion and to the best of our information and according
to the explanations given to us, the said accounts give the information
required by the Companies Act, 1956, in the manner so required and give a
true and fair view in conformity with accounting principles generally
accepted in India:
(i) In the case of the Balance Sheet, of the State of Affairs of the
Company as at 31st March, 2007 and;
(ii) I n the case of the Profit & Loss Account, of LOSS for the year ended
on that date,
(iii) In the case of Cash Row Statement of the cash flows for the year
ended on that date.
For and on behalf of
For Rakesh Chauhan & Associates
Race: New Delhi
Date: 30th October, 2007.
ANNEXURE TO THE AUDITORS' REPORT
(Referred to In Paragraph (3) of the Auditors' Report of even date to the
members of M/s SHAMKEN COTSYN LIMITED on the financial statements for the
year ended 31st March 2007)
i (a) The company has represented, to maintain proper records showing full
particulars including quantitative details and situation of fixed assets.
In our opinion the company has not yet maintained proper records showing
full particulars including quantitative details and situation of the fixed
assets for the year. However, the same register of fixed assets has not
been produced before us for verification. In the absence of its
accessibility we are constrained to comment on their compatibility with
physical existence or otherwise.
i (b) Fixed assets represented to have been physically verified by the
management during the period in phased periodical manner however in the
absence of accessibility of relevant documentation relating to fixed assets
verification we are constrained to comment on the matter.
i. (c) The Company has represented, to have made no sale/disposal of a
substantial part of fixed assets during the period. Under review, as such
reliance is placed in the absence of any such substantial sale / disposal
of fixed assets, the status of the company as going concern was not
ii (a) As per management, the stocks of the finished goods, stores and
spare parts, represented, to have been physically verified by the
management at reasonable intervals during the period. However in the
absence of accessibility of relevant documentation relating to inventory
verification we are constrained to comment on the matter. Further our
opinion is restrained on procedures followed for physical verification and
maintenance of inventory records of the company.
iii (a) The company has granted secured/unsecured loans to the company's,
firms or other parties covered in the register maintained under section 301
of the Companies Act, 1956. the maximum amount involved during the year was
Rs.4.33 lakhs and year end balance of such loan was Rs.4.33 lakhs.
iii (b) The rate of interest, wherever applicable and other terms and
conditions are not prima facie prejudicial to interest of the company in
view of reliance placed on the assurances of the management.
iii (c & d) Reliance is placed on company's claim that there is no over due
amount in respect of loans taken / granted by the company.
iii. (e) The company has taken interest free loan from one company covered
in the register maintained under section 301 of the Companies Act, 1958.
The maximum amount involved during the year was Rs. 11.75 lakhs and the
year-end balance of loan taken from such company was Rs. 11.75 lakhs. The
amount is interest free and against promoter's contribution. Hence the
clauses 3 (f) and 3 (g) are not applicable.
iv. Having regard to the explanation that certain items purchased are of
special nature for which suitable alternative sources do not exist for
obtaining comparative quotations, there are adequate internal control
procedures 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. Further, on the basis of our examination of the books and records of
the company, and according to the information and explanations given to us,
we have neither come across nor have been informed of any continuing
failure to correct major weaknesses in the aforesaid internal control
system. However in generality, the system faded, somehow, leading to
erosion of net worth, financial exigencies and ongoing litigation pending
adjudication in respect of recovery of debts.
v. Based on the representations made by the company and relied upon, we are
of the opinion that the transactions that need to be entered into the
register maintained u/s 301 of the Companies Act, 1956 have been so
entered. According to representations made, the transactions materialized
in pursuance of contracts or arrangements entered in the registers
maintained under section 301 and exceeding the value of Rs.5 lacs in
respect of any party during the period have been made at prices which are
reasonable having regard to the prevailing market prices at the relevant
vi. During the year under review, the Company has not accepted fresh public
deposits within the meaning of Section 58A of the Companies Act, 1956.
However, deposits, received in preceding periods, still continue to be
outstanding in breach. However, management has not complied with the orders
of the Company Law Board in some cases.
vii. In our opinion, the Company needs to have a review of it's internal
audit system commensurate with the size and the nature of its business.
viii. The Company is required to maintain cost records as prescribed under
Section 209(1)(d) of the Companies Act, 1956. The company has represented
to have maintained proper cost records as required. However, in the absence
of it's accessibility we are constrained to comment on the matter.
ix. a) According to the records of the company, the company is generally
regular in depositing the undisputed statutory dues including
provident fund, investor education and protection fund, employees' state
insurance, income-tax, sales-tax, wealth tax, service tax, customs duty,
excise duty, cess and other material statutory dues as applicable with the
appropriate authorities though there has been a slight delay in a few
b) The company represented that there was disputed demand of Rs.391.05 lacs
payable on account of Income tax for the assessment Year 2002-03 and 2003-
04 against which appeal has been partly allowed by making addition of
Rs.18.52 lacs pending remand and demand notice.
x. The accumulated losses of the company have exceeded fifty percent of its
Net worth as at 31st March 2007, The company has earned a cash profit of
Rs. 62.38 Lacs in the current reporting year and incurred a cash loss of
Rs. 170.39 Lacs in the immediately preceding reporting period.
xi. The Company has defaulted in repayment of loans (either secured or
unsecured) including term loans from Financial Institutions or Bank or
Debenture holder. The banks/financial institutions have levied restraints
and put moratorium in the operations of bank accounts of the company.
However, one time settlement (OTS) under negotiation is being efforted to
xii. The Company has not granted any loans and advances on the basis of
security byway of pledge of shares, debentures and other securities, in
lieu of reliance placed on corroboration of the management.
xiii. The Company is not a Chit Fund, Nidhi or mutual benefit Society.
Hence the requirements of clause (xiii) of paragraph 4 of the Order are not
applicable to the Company.
xiv. The company is not a dealer or trader in shares, securities,
debentures and other investments as pronounced by the management
xv. The Company has not, during the year under review, given any guarantee
for loans taken by others from Bank or Financial Institutions in lieu of
reliance placed on corroboration of the management.
xvi. No fresh term loans have been reported to have been raised and
received by the company during the period under review. Therefore our
opinion could not be composed in respect of funds raised.
xvii. The company remained encountered with constraints on account of
operations of Bank Accounts, lied under moratorium. Therefore, no opinion
could be composed in respect of funds raised being used for short-term
/long term inter-se.
xviii. The company has not made preferential allotment of shares to
companies, firms or other parties listed in the register maintained under
section 301 of the Companies Act, 1956 in lieu of reliance placed on
assurance of the management
xix. The Company has not issued any debentures. Hence the requirements of
clause (xix) of paragraph 4 of the Order are not applicable to the Company.
xx. The company has not raised any money by public issues during the
xxi. No fraud committed by the company, related to the year under audit,
was represented. However, some pertaining to earlier period(s), instituted
during the period, under review, are pending adjudication, relating to debt
The other matters, referred to in the order have not been reported upon, as
they are not applicable to the Company.
For and on behalf of
Rakesh Chauhan & Associates
(M. No.: 90531)
Place: New Delhi
Date : 30th October, 2007.