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Auditor Report of Fertilisers and Chemicals Travancore Ltd.

Mar 31, 2015

We have audited the accompanying standalone financial statements of The Fertilizers And Chemicals Travancore Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2015, and the Statement of Profit and Loss the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Stand alone Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Company's Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting principles generally accepted in India including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities, selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters, which are required to be included in the audit report under the provisions of the Act and the Rules made there under. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10} of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 st March 2015, and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to Note No. 33 to the financial statements which indicates that the Company has accumulated losses amounting to Rs. 150440.82 Lacs and its net worth has been fully eroded, the Company has incurred a net loss during the current and previous years and the Company's current liabilities exceeded the current assets as at 31st March 2015. In order to continue operation for the next 12 months the Company is dependent upon the approval of the financial Restructuring Proposal, which has been recommended by Board for Reconstruction of Public Sector Enterprises on 20.12.2013 and is awaiting the final approval of Government of India. This condition indicates the existence of material uncertainty which may cast significant doubt as to the Company's ability to continue as a going concern. However, the financial statements of the Company have been prepared on a going concern basis of the reason stated in the said note.

Our Opinion is not modified in respect of this matter.

Other Matter

We did not audit the financial information of 5 branches included in the standalone financial statements of the Company whose financial information reflect total assets of Rs. 11,262.49 lacs as at 31st March, 2015 and total revenues of Rs. 1,32,152.94 lacs for the lyear ended on that date, as considered in the standalone financial statements. The financial information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.

Our Opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

(i) As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Gavernment in terms of Sub Section 143 of the Company's Act 2013, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

(ii) We are enclosing our report in terms of section 143 (5) of the Act, on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, in the Annexure on the directions and sub-directions issued by the Comptroller and Auditor General of India.

(iii) As required by section 143(3) of the Companies Act, we report that:

a) We have sought and 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 reports on the accounts of the branch offices of the Company audited under section 143(8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report.

d) The Balance Sheet, the Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

e) In our opinion, the aforesaid standalone financial statement comply with the Accounting Standards notified under Section 133 of the Act read with Rule 7 of the Company's (Accounts) Rules, 2014.

f) The going concern matter described in sub-paragraph under the Emphasis of Matters paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

g) On the basis of the written representations received from the Directoros as on 31st March, 2015 taken on record by the Board of Directors, none of the Directors is disqualified as on 31st March, 2015 from being appointed as a Director in terms of Section 164(2) of the Act.

h) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i) The Company has disclosed the impact of pending litigations on its financial position in its financial statements - refer Note 29 to the financial statements

ii) The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts.

iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT

Referred to in Paragraph (1) under the heading of "Report on Other Legal and Regulatory Requirements"of our report of even date

1. In respect of its fixed assets:

a) The Company is generally maintaing proper records showing full particulars including the quantitative details and situation of fixed assets. However in respect of certain regional offices the records are not showing full particulars ofthefixed assets.

b) The Company has a regular programme of physical verification of its fixed assets by which fixed assets were verified in a phased manner over a period of three years. During the year fixed assets were verified and no material discrepancies were noticed on such verification. In our opinion, this periodicity of verification is reasonable having regard to the size of the Company and the nature ofthe business.

2. In respect of its inventory:

a) As explained to us, the inventories have generally been physically verified (except those lying with third parties and in transit) during the year by the management at reasonable intervals.

b) In our opinion and according to the information and explanation given to us , and taking into consideration the nature of business, we are ofthe opinion that the procedures of physical verification of the inventories followed by the Management need to be strengthened 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 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. The Company has neither granted nor taken any loans, secured or unsecured to companies, firms orother parties covered in the register maintained under Section 189 of the Companies Act, 2013.

4 In our opinion and according to the information and explanations given to us, the internal control system may be strengthened in certain areas at the certain regions to 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 service. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control system.

5. According to the information and explanation given to us, the Company has not accepted any deposits from the public during the year.

6. We have broadly reviewed the books of account maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under section 148(1) of the Companies Act, 2013 and are ofthe opinion that prima facie the prescribed records have been made and maintained. However, we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

7.

a) According to the information and explanations given to us no material undisputed amounts payable in respect of Provident Fund, Employees State Insurance Fund, Income Tax, Wealth Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Cess and any other statutory dues were in arrears as at 31 st March, 2015 for a period of more than six months from the date they became payable.

b) According to the information and explanation given to us, the following disputed dues of sales tax, income tax, customs duty, service tax excised duty, cess, value added tax, etc. which have not been deposited as on 31st March, 2015, are given below.

Name of the Nature of the dues Amount . Period to which Statute income (Rupees in Lacs) dispute relates

Income Tax Act, 1961 Tax demand due to 10.49 1997-98 disallowances

Income Additional tax and interest 1994-95 Tax Act, 1961 demanded on payments to 78.21 to foreign technicians 1997-98

Finance Act, Tax, penalty and 2003-04 1994 interest demand on 235.98 to 2008-09 service tax

Finance Act, Tax, penalty and interest 2006-07 1994 demanded, disputed by 86.11 to 2011-12 the Company

Central Duty .penalty and with 2010-11 Excise Act, interest demand disputed 6273.02 to 2011-12 1944 by company. Cenvat utilised for fertiliser clearances

Central Excise Duty with interest and Act, 1944 penalty on shortages written 79.94 2003-04 off

Central Excise Duty with interest Act, 1944 and penalty on 5.53 2006-11 Cenvat avaiiment

Madhya Pradesh Entry tax demand 3.67 1980-84 Entry Tax

Sales Tax Act, Sales tax demand 63.00 1985-92 Orissa

Sales Tax and Central Sales Sales tax demand 30.84 2000-01 Tax Act, Punjab

Name of the Forum where Statute income dispute is pending

Income Tax Act, 1961 High Court of Kerala

Income Tax Act, 1961 High Court of Kerala

Finance Act, Customs, Excise and Service 1994 Tax Appellate Tribunal, Bangalore

Finance Act, Commissioner of 1994 central excise, kochi

Central Customs, Excise and Service Tax Excise Act, Appellate Tribunal, Bangalore 1944

Central Excise Commissioner of Act, 1944 central excise, kochi

Central Excise Commissioner Act, 1944 of central excise, kochi

Madhya Board of Revenue (Commercial Tax Pradesh Tribunal), Gwalior, Madhya Pradesh Entry Tax

Sales Tax Act, High Court of Orissa Orissa

Sales Tax and Central Sales High Court of Tax Act, Punjab Punjab and Haryana

c. According to the information and explanations given to us, the amounts which were required to be transferred to the investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules there under has been transferred to such fund within time.

8. The accumulated losses of the company as at 31st march, 2015 are more than One Hundred percentage of its net worth and it has incurred cash losses during the year and in the immediately preceding financial year and provisions of the Sick Industrial Companies ( Special Provisions Act), 1985 is applicable,

9. In our opinion and according to the information and explanations given to us and based on the documents and records produced before us, the Company has not defaulted in repayment of dues to Financial Institutions / Banks.

10. In our opinion and according to the information and explanations given to us, the company has given guarantee for the Loan taken by FACT- RCF Building Products Limited from Banks, to the extent of Rs. 3546.50 Lacs. According to the information and explanation given to us, we are of the opinion that the terms and conditions thereof are not prima facie prejudicial to the interest of the company.

11. In our opinion and according to the information and explanations given to us, the term loans have been appliedbytheCompanyduringtheyearforthepurpose for which they were obtained.

12. To the best of our knowledge and according to the information and explanations given to us, no material fraud on or by the company has been noticed or reported during the year

For K. VARGHESE & Co. Chartered Accountants (Firm Registration No. 004525S) Sd /- K. Varghese KOCHI Partner 29th May 2015 (Membership No. 020674)






Mar 31, 2013

Report on the Financial Statements

1) We have audited the accompanying Financial Statements of THE FERTILISERS AND CHEMICALS TRAVANCORE LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2013 and the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information, which we have signed under reference to this report.

Management''s Responsibility for the Financial Statements

2) The Company''s Management is responsible for the preparation of the financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956 ("the Act") and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

3) Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4) An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risks assessments, the auditors consider internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing and opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.

5) We believe that the audit evidence we have obtained is insufficient and appropriate to provide a basis for our audit opinion.

Opinion

6) In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of the report of other auditors on the financial information of the Branch, on the aforesaid financial statements give the information required by the Act 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 March 31, 2013;

b) in the case of the Statement of Profit and Loss, of the loss of the Company for the year ended on that date; and

c) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date,

except qualified opinion in respect of the matters covered in points (i) to (iii) given below :

i. Valuation of closing stock of by product gypsum of 41 lakhs metric tonne, at the rate of rupees 331 per metric tonne based on the assessment of net realizable value by the Management, instead of net realizable value based on the most reliable evidence of approved selling price for bulk sales of rupees 200 per metric tonne exclusive of excise duty, in variation to Accounting Standard 2 issued by the Institute of Chartered Accountants of India resulting in an over valuation of inventory of gypsum by rupees 5364 lakhs and under statement of loss to the same extent.[Refer Note number 15.1].

ii. Classification of fixed asset originally held for sale of rupees 3245 lakhs as current asset instead of non current asset, though the Company has issued sale order in January 2011, which was subsequently cancelled by the Company, and the matter is under litigation in the Hon''able High Court of Kerala [Refer Note number 19.1]

iii. Claim lodged by a contractor of rupees 1,78,490 lakhs towards short fall charge and damages against the Company upon termination of the contract and the dispute is under arbitration. The said claim is shown as a contingent liability and being so, we are unable to comment on the same, considering the significant uncertainty in the final outcome of the case [Refer note number 29.a (vii)].

We further report that:

Had the quantifiable qualifications in paragraph 6 (i) and (ii) above been effected, the loss before tax for the year would have been higher by rupees 5364 lakhs, current assets would have been lower by rupees 8,609 lakhs, non current assets would have been higher by rupees 3245 lakhs and reserves and surplus, negative balance would have been higher by rupees 5364 lakhs.

We are unable to determine the financial impact of the above qualifications in point (iii) in the absence of appropriate details.

Report on Other Legal and Regulatory Requirements

7) As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government in terms of Section 227 (4A) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

8) As required by Section 227 (3) of the Act, 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 and proper returns adequate for the purpose of our audit have been received from the area/ regional offices not audited by us. The area/ regional Auditors'' report have been given to us and have been appropriately dealt with in preparing our report.

c) The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from the area/regional offices not visited by us.

d) In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in Section 211 (3C) of the Act.

e) Being a government company, the provisions of clause (g) of sub section (1) of section 274 of the Companies Act, 1956 is not applicable.

i. In respect of the Company''s fixed assets:

(a) The Company has maintained generally proper records showing most of the particulars including quantitative details and location of fixed assets and in the case of certain Regional Offices, quantitative details and location of fixed assets are not properly recorded.

(b) The fixed assets have not been satisfactorily physically verified by the Management during the year. The physical verification procedure needs to be strengthened. As explained to us, no material discrepancies were noticed on such physical verification.

(c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

ii. In respect of Company''s inventories:

(a) As explained to us, the inventories have generally been physically verified by the management at reasonable intervals.

(b) In our opinion, the procedures of physical verification of inventories followed by the Management need to be strengthened in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of inventories and no material discrepancies were noticed on physical verification.

iii. As informed to us, the Company has neither granted nor taken any loans, secured or unsecured, to/ from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956, and hence reporting requirements under clauses (iii) (a) to (g) of this clause do not apply.

iv. In our opinion and according to the information and explanations given to us, the internal control system may be strengthened to commensurate with the size of the Company and nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. According to the information and explanations given to us, there is no continuing failure to correct major weaknesses in internal control.

v. a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements that need to be entered in the register maintained under Section 301 of the Companies Act, 1956, have been entered in the register under that section.

b) In our opinion and according to the information and explanations given to us, during the year there are no transactions in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956, aggregating to rupees five lakhs or more in respect of any party.

vi. In our opinion and according to the information and explanations given to us, the Company has complied with directives issued by Reserve Bank of India, the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975, with regard to the deposit accepted from the public.

vii. In our opinion, the internal audit functions were carried out by the Company at Head office and by firms of Chartered Accountants at area/regional offices have been generally commensurate with the size of the Company and nature of its business.

viii. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government u/s 209 (1) (d) of the Companies Act, 1956 and are of the opinion that, prima facie the prescribed cost records have been maintained by the Company. We have, however, not made a detailed examination of the records with a view to determining whether these records are accurate or complete.

ix a) According to the information and explanations given to us and according to the books and records of the Company produced to us and examined by us, in our opinion, the Company has been generally regular in depositing undisputed statutory dues including provident fund, employees state insurance, income tax, service tax, sales tax, customs duty, excise duty and other material statutory dues applicable to it with the appropriate authorities during the year and there were no outstanding as at March 31, 2013 for a period of more than six months from the date they became payable

x. The accumulated losses of the Company as at March 31, 2013 after giving effect to the qualifications in the Auditors'' Report are more than hundred percent of its net worth and it has incurred cash losses during the year and in the immediately preceding financial year and provisions of the Sick Industrial Companies (Special Provisions Act), 1985 is applicable.

xi. Based on our examination of the records of the Company and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to banks as at Balance Sheet date. Further in our opinion and according to the information and explanations given to us, the Company did not have any amount outstanding to financial institution or debenture holders.

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. In our opinion, the Company is not a chit fund or a nidhi mutual benefit fund/society. Therefore, the provisions of clause 4 (xiii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

xiv. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4 (xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

xv. According to the information and explanations given to us, the Company has given guarantee for loan taken by FACT RCF Building Products Limited from State Bank of India, to the extent of Rs.1,750 lakhs [Refer Note number 29(1)(b)].

xvi. According to the information and explanations given to us, we are of the opinion that the term loans availed by the Company were, prima facie, applied during the year for the purpose for which the loans were obtained except temporary deployment in working capital.

xvii. According to the information and explanations given to us and overall examination of the Balance Sheet of the Company, we are of the opinion that the funds raised by the Company on short term basis has not been used for long term investments.

xviii.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 during the year.

xix. The Company has not issued any debentures.

xx. The Company has not raised any money by public issue during the year.

xxi. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and as per the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the Management.

For Babu A. Kallivayalil & Co.,

Chartered Accountants,

Firm Registration No.05374S

Sd/-

New Delhi, Mathew Sebastian

October 28,2013. Partner,

Membership No.018859


Mar 31, 2012

1. We have audited the attached Balance sheet of THE FERTILISERS AND CHEMICALS TRAVANCORE LIMITED as at March 31, 2012 and also the Statement of Profit and Loss and the Cash Flow Statement 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.

2. We conducted our audit in accordance with the 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. 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 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 explanations given to us, we annex hereto 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:

(a) 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;

(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 and proper returns adequate for the purposes of our Audit have been received from the area/ regional offices not audited by us. The area/ regional Auditor's Reports have been given to us and have been appropriately dealt with in preparing our report.

(c) the Balance sheet, Statement of Profit and Loss and Cash Flow statement dealt with by this report are in agreement with the books of account and with the audited returns from the area/regional offices;

5. Being a Government Company, the provisions of clause (g) of sub-section (1) of Section 274 of the Companies Act,1956 is not applicable.

6. In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956 to the extent applicable except for the points (a) to (c) given below:

(a) Valuation of closing stock of by-product gypsum of 45 lakhs metric tonne, at the rate of Rs.331 per metric tonne based on average selling price of future five years expected sales, instead of net realizable value based on approved selling price for bulk sales of Rs. 200 per metric tonne in variation to Accounting Standard 2 issued by the Institute of Chartered Accountants of India resulting in an over valuation of stock by Rs. 5895 lakhs and inflated profit to the same extent [Refer Note number 17.1].

(b) (i) Recognition of interest income of rupees 718 lakhs during the year and non- provision towards doubtful debts on the accumulated interest receivable on mobilization advance to a contractor, considering the significant uncertainty in realization, as at year end of rupees 4,286 lakhs; in variation of the Accounting Standard 9 issued by the Institute of Chartered Accountants of India [Refer Note numbers 23.1 and 20.3]

(ii) the contractor has also lodged a claim of rupees 1,78,101 lakhs towards shortfall charges and damages against the Company upon termination of the contract and the dispute is under arbitration. The said claim is shown only as a contingent liability and no provision has been made for the possible liability, if any, upon arbitration award and being so, we are unable to comment on the issue, which can have a significant impact, if the award is not in favour of the Company. [Refer Note number 30(i)g]

(c) Non-disclosure as exceptional item of additional compensation on ammonium sulphate of rupees 6591 lakhs received during the year, as is not similar to the subsidy in the ordinary nature besides it pertains to earlier years, instead of disclosure as income of the year; as required under revised schedule VI to the Companies Act, 1956 and Accounting Standard 5 issued by the Institute of Chartered Accountants of India.[Refer Note number 22.3].

We further report that:- Had the quantifiable qualifications in paragraph 6 (a) to (c) above been effected, the profit before extra ordinary items and tax for the year of rupees 1980 lakhs would have been a loss of rupees 14,792 lakhs and the current assets would have been lower by rupees 10,181 lakhs.

7. Subject to the above, in our opinion and to the best of our information and according to the explanations given to us, the said financial statements read together with the notes thereon 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 March 31, 2012;

(ii) In the case of the Statement of Profit and Loss, of the profit of the Company for the year ended on that date and

(iii) In the case of Cash Flow Statement, of the cash flows for the year ended on that date.

Annexure referred to in paragraph 3 of the Auditors' Report to the Members of THE FERTILISERS AND CHEMICALS TRAVANCORE LIMITED, on the financial statements for the year ended March 31, 2012

i a) The Company has maintained generally proper records showing full particulars including quantitative details and location of fixed assets and in the case of certain Regional Offices, quantitative details and location of fixed assets are not properly recorded.

b) The fixed assets have been physically verified by the Management during the year, which in our opinion is reasonable having regard to the size of the Company and nature of its assets. As explained to us, no material discrepancies were noticed on such physical verification.

c) In our opinion and according to the information and explanations given to us, fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern status.

ii a) The inventories have been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable.

b) In our opinion, the procedures 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 inventories. The discrepancies noticed on verification between the physical stock and the book records were not material and have been properly dealt with in the books of account.

iii As informed to us, the Company has neither granted nor taken any loans, secured or unsecured, to/from Companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956, and hence reporting requirements under clauses (iii) (a) to (g) of this clause do not apply.

iv In our opinion and according to the information and explanations given to us, the internal control system needs to be strengthened to commensurate with the size of the Company and nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. According to the information and explanations given to us, there is no continuing failure to correct major weaknesses in internal control.

v a) In our opinion and according to the Information and explanations given to us, the particulars of contracts or arrangements that need to be entered in the register maintained under Section 301 of the Companies Act, 1956, have been entered in the register under that section.

b) In our opinion and according to the information and explanations given to us there are no transactions in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 aggregating during the year to rupees five lakhs or more in respect of any party.

vi In our opinion and according to the information and explanations given to us, the Company has complied with directives issued by Reserve Bank of India, the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975, with regard to the deposits accepted from the public.

vii On the basis of the test checks conducted by us and according to the explanations given to us, the Company has an internal audit generally commensurate with the size of the Company and nature of its business.

viii We have broadly reviewed the books and records maintained by the Company pursuant to the order of the Central Government u/s 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima- facie the prescribed accounts and records have been made and maintained by the Company. We have however not made a detailed examination of the records with a view to determining whether these records are accurate or complete.

ix a) According to the information and explanations given to us and according to the books and records of the Company produced to us and examined by us, in our opinion, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income- Tax, Service Tax, Sales Tax, Customs Duty, Excise Duty, and other material statutory dues applicable to it with the appropriate authorities during the year and there were no outstanding as at March 31, 2012 for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us and the records of the company examined by us, the particulars of dues towards sales tax, income tax, customs duty, excise duty, service tax, entry tax and cess as at March, 31, 2012, which have not been deposited on account of disputes are furnished below:

Name of the Nature of the Dues Amount Period to which Forum where dispute Statute (Rupees) dispute relates is pending

Income Tax Act ,1961 Tax demand due to 10 lakhs 1997-98 High Court of Kerala disallowances

Income Tax Act, 1961 Additional tax and interest 78 lakhs 1994-95 to 1997-98 High Court of Kerala demanded on payments to foreign technicians

Finance Act, 1994 Tax, Penalty and 11 lakhs 2003-04 to 2005-06 Customs, Excise and interest demand Service Tax Appellate on service tax Tribunal, Bangalore

Finance Act, 1994 Tax, Penalty & Interest 65 lakhs 2006-07 to 2010-11 Commissioner of demanded on Service tax Central Excise, Koch disputed by the Company

Customs Act, 1962 Differential duty 40 lakhs 1991-92 to 1992-93 Customs, Excise and Service Tax Appellate Tribunal, Chennai

Central Excise Act, 1944 Duty with interest and 68 lakhs 2003-04 Adjudicating Authority penalty on shortages written off

Central Excise Act, 1944 Duty with interest and 5 lakhs 2006-10 Adjudicating Authority penalty on Cenvat availment

Madhya Pradesh Entry Tax demand 4 lakhs 1980-84 Board of Revenue Entry Tax (Commercial Tax Tribunal), Gwalior, Madhya Pradesh

Sales Tax Act, Orissa Sales Tax demand 63 lakhs 1985-92 High Court of Orissa

Sales Tax and Sales Tax demand 406 lakhs 2000 -01 High Court of Central Sales Tax Act, Punjab and Hariyana Punjab

x. The accumulated losses of the Company as at March 31, 2012 after giving effect to the qualifications in the Auditors' Report are more than fifty percent of its net worth and it has incurred cash losses during the year and in the immediately preceding financial year.

xi. Based on our examination of the records of the company and according to the information and explanations given to us, the company has not defaulted in repayment of dues to banks as at Balance sheet date.

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. In our opinion, the Company is not a chit fund or a nidhi mutual benefit fund/society. Therefore, provisions of clause 4 (xiii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

xiv. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4 (xiv) of the Companies (Auditor's Report) Order 2003 are not applicable to the Company.

xv. According to the information and explanations given to us, the Company has given guarantee for loan taken by FACT-RCF Building Products Limited from State Bank of India, to the extent of Rs. 1,750 lakhs (Refer Note number 12.2).

xvi. According to the information and explanations given to us, we are of the opinion that the term loans availed by the company were, prima-facie, applied during the year for the purpose for which the loans were obtained except temporary deployment in working capital.

xvii. According to the information and explanations given to us and overall examination of the Balance Sheet of the Company, we are of the opinion that the funds raised by the company on short-term basis has not been used for long term investments.

xviii.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 during the year.

xix. The Company has not issued any debentures.

xx. The Company has not raised any money by Public Issue during the year.

xxi. During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and as per the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the Management.

For Babu A. Kallivayalil & Co., Chartered Accountants,

Firm Registration No.05374S

Sd/- New Delhi N.K. Alexander July 24,2012 Partner, Membership No.007448




Mar 31, 2010

1 We have audited the attached Balance Sheet of the THE FERTILISERS AND CHEMICALS TRAVANCORE LIMITED as at March 31,2010 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the 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. As required by the companies (Auditors Report) Order, 2003, issued by the Central Government of India in terms of Section 227( 4A) 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 explanations given to us, we annex here to a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure reffered to in paragraph 3 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 purposes 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 and proper returns adequate for the purposes of our audit have been received from the area/regional offices not audited by us. The area / regional Auditorss Reports have been given to us and have been appropriately dealt with in preparing our report;

(c) the Balance Sheet and Profit and Loss Account and Cash

Flow Statement dealt with by this report are in agreement with the books of account and with the audited returns from the area/regional offices.ln our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in compliance with the accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956 except for the points iandivbelow:

i Recognition of interest receivable of rupees 497 lakhs (Previous year rupees 414 lakhs) on mobilization advance to a contractor in variation of the Accounting Standard 9 considering the significant uncertainly in realisation, who has also lodged a claim of rupees 177325 lakhs (Previous year rupees 172988 lakhs) against the Company towards shortfall charge and damages upon termination of the contract, not provided though shown as contingent liability and the dispute is under arbitration. [Refer points 2(h) and 15 of Notes on Accounts of Schedule 25]

ii Reliance on the value of stock of gypsum of rupees 20308 lakhs (Previousyear-rupees 19950 lakhs) accounted for the first time during 2008 - 09, based on five years expected sales, since trend of sales till date is not matching the projection on anyear to year basis. [Refer point 16 (c) of Notes on Accounts of Schedule 25]

iii Non-provision of diminution in value of long term investments ( Refer Schedule No.7) in Fertilizer Companies Government of India Special Bonds, as required under Accounting Standard 13 issued by the Institute of Chartered Accountants of India, as the Company considers it as temporary. [ Refer point 8 of Notes of Accounts of Schedule 25].

iv Non-provision of liability for additional terminal benefits to the employees presently in service, not quantified, consequent to the wage revision with retrospective effect as approved by the Government of India in August 2010, required under Accounting Standard 15 issued by the Institute of Chartered Accountants of India. [ Refer point 1 (a) of Notes on Accounts of Schedule 25]

(d) We further report that:-

Had the quantifiable qualification in paragraph 4 (c) (I) above been effected, the loss before tax for theyear would have been higher by rupees 497 lakhs and the current assets would have been lower by rupees 1981 lakhs, taking into account such income accumulation of earlier years; other being not quantified.

(e) Being a Government Company, the provisions of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 is not applicable.

Subject to the above, in our opinion and to the best of our~~ information and according to the explanations given to us, the said financial statements read together with the notes thereon 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 March 31,2010;

(ii) in the case of the Profit and Loss Account, of the loss of the Company for the year ended on that date and

(iii) in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

Annexure referred to in paragraph 3 of the Auditors Report to the Members of THE FERTILISERS AND CHEMICALS TRAVANCORE LIMITED, on the financial statements for the year ended March 31,2010

I. a) The Company has maintained proper records showing full particulars including quantitative detail and location of fixed assets except in the case of certain Regional Offices where location of fixed assets are not properly recorded as reported by Branch Auditors.

b) The fixed assets have been stated to be physically verified by the Management during the year, which in our opinion is reasonable having regard to the size of the Company & nature of its assets. As explained to us, no material discrepancies were noticed on such physical verification. c)ln our opinion and according to the information and explanations given to us, fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern status.

ii. a)The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

b) In our opinion, the procedures 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 generally proper records of inventory. The discrepancies noticed on verification between the physical stock and the book records were not material and have been properly dealt with in the books of account.

iii. As informed to us, the company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act 1956, and hence reporting requirements under clauses (iii) (a) to (g) of this clause do not apply.

iv. In our opinion and according to the information and explanations given to us, the Company has an internal audit control generally commensurate with the size and nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. According to the information and explanations given to us, there is no continuing failure to correct major weaknesses in internal control.

v. a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements that need to be entered , in the register maintained under Section 301 of the Companies Act, 1956, have been entered in the register under that section.

b) In our opinion and according to the information and explanations given to us, there are no transactions in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 aggregating during the year to rupees Five Lakhs or more in respect of any party.

vi. In our opinion and according to the information and explanations given to us, the Company has complied with directives issued by RBI, the provisions of Section 58 A and 58 AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits )Rules 1975, with regard to the deposit accepted from the public.

vii. On the basis of the test checks conducted by us and according to the explanations given to us, the Company has an internal audit system, generally commensurate with size and nature of its business.

viii. We have broadly reviewed the books and records maintained by the Company pursuant to the order of the Central Government u/s 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained by the Company.

We have however not made a detailed examination of the~ records with a view to determining whether these records are accurate or complete. ix. a) According to the information and explanations given to us and according to the books and records of the Company produced to us and examined by us, in our opinion, the Company has been generally regular in depositing undisputed statutory dues including provident fund, employees state insurance, income tax, service tax, sales tax, customs duty and excise duty and other material statutory dues applicable to it with the appropriate authorities during the year and there were no outstanding as at March 31, 2010 for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues towards sales tax, income tax, customs duty, excise duty, service tax, entry tax and cess as at March 31,2010 which have not been deposited on account of disputes are furnished below:

Name of the Nature of the dues Amount (Rupees) Statute (Rupees)

Income Tax Act Disallowance contested 10.49 lakhs by the company

Income Tax Act Disallowance contested 1.32 lakhs by the company

Income Tax Act Disallowance contested 32.55 lakhs by the company

Income Tax Act Additional Tax and interest 78.21 lakhs demanded on payments to foreign technicians contested by the company

Finance Act 1994 Tax, penalty and interest 9.77 lakhs demanded, disputed by the Company

Finance Act 1994 Tax, penalty and interest 46.38 lakhs demanded, disputed by the Company

Customs Act Differential duty 39.36 lakhs disputed by the Company

Central Duty with interest and Excise penalty on shortages 60.85 lakhs Act written off

Madhya Pradesh Entry tax demanded 3.67 lakhs Entry Tax disputed by the Company

Sales Tax Sales Tax demanded, 63 lakns Act Orissa disputed by the Company

Sales Tax & Central Sales Tax demanded, 355.07 lakhs Sales Tax Act Punjab disputed by the Company



Name of the Period to which Forum where the dispute Statue the dispute relates is pending

Income Tax Act 1997-98 High Court of Kerala

Income Tax Act 2005-06 Commissioner of Income Tax, Kochi

Income Tax Act 2005-06 Income Tax Appellate Tribunal, Kochi

Income Tax Act 1994-95 to High Court of Kerala 1997-98

Finance Act 1994 2003 - 04 to CESTAT, Bangalore 2005 - 06

Finance Act 1994 2005 - 06 Commissioner of Central Excise, to Kochi

Customs Act 2008 - 09 to 1992- 93 CESTAT, Chennai

Central Excise Act 2003-04 Adjudicating Authority

Madhya Pradesh Entry Tax 1980 - 84 Board of Revenue (Commercial Tax Tribunal),Gwalior,Madhya Pradesh

Sales Tax Act Orissa 1985-92 High Court of Orissa

Sales Tax & Central Sales Tax Act Punjab 2000 - 01 High Court of Punjab and Haryana

x. The accumulated losses of the Company as at March 31,2010 are more than fifty percent of its net worth and it has incurred cash losses during the year, though not in the immediately preceding financial year.

xi. Based on our examination of the records of the Company and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to banks as at Balance Sheet date.

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. In our opinion, the Company is not a chit fund or a nidhi mutual benefit fund / society. Therefore, the provision of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

xiv. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4 (xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

xv. According to the information and explanations given to us, the Company has given guarantee for loan taken by FACT-RCF Building Products Limited from State Bank of India, to the extent of Rs. 17.50 crore. (Refer point number.2 (iii) of Notes on Accounts of Schedule 25).

xvi. According to the information and explanations given to us, we are of the opinion that the term loans availed by the funds raised by the Company were prima-facie applied forthe purpose for which the loans were obtained except temporary deployment in working capital.

xvii. According to the information and explanations given to us and overall examination of the Balance Sheet of the Company, we are of the opinion that the funds raised by the Company on short-term has not been used for long term investments.

xviii. 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 during the year.

xix. The Company has not issued any debentures.

xx. The Company has not raised any money by public issue during the year.

xxi. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India and as per the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the Management.

For Babu A.Kallivayalil & Co., Chartered Accountants

Firm Registration Number: 05374S

Sd/-

CA. E. V. Thomas

Partner Membership No. 03679

Kochi August 17,2010



 
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