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Auditor Report of Futura Polyesters Ltd.

Mar 31, 2010

1. We have audited the attached Balance Sheet of Future Polyesters Limited, as at March 31,2010 and also the Profit and Loss Account and the Cash flow Statement for the year ended on that date annexed there to. 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 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.

3. As required 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 explanations given to us during the course of audit, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order, to the extent applicable.

4. Further to our comments in the Annexure referred to 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 such books;

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statements dealt with by this report are in agreement with the books of account;

d) In our opinion, the Balance Sheet, Profit and. Loss Account and Cash Flow Statement dealt with by this report comply with the requirements of the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 to the extent applicable;

e) On the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors are disqualified as on March 31,2010 from being appointed as a director in terms of Clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

f) In our opinion and to the best of our information and according to the explanations given to us, the said Balance Sheet and Profit and Loss Account read with the Notes there on, 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 for the year ended on that date; and

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

ANNEXURE TO THE AUDITORS REPORT OF EVEN DATE

(i) (a) The Company was maintaining proper records showing full particulars, including quantitative details and situation of its fixed assets in Computer system. Consequent to failure in the computer system, the record of its fixed assets have not been updated;

(b) As per the information and explanation furnished by the management the physical verification of major Fixed assets was conducted during the year, which in our opinion is reasonable having regard to the size of the Company and nature of its assets. As the records have hot been updated comparison of the physically verified assets with that of book records have not been completed;

(c) In our opinion the company has not disposed off, substantial part of Fixed assets during the year;

(ii) (a) The stock of inventories have been physically verified by the management at the close of the year. In our opinion, the frequency of verification is reasonable;

(b) In our opinion and according to the information and explanations given to us, the procedures for 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) On the basis of our examination of records of Inventory, in our opinion the Company has maintained proper records of inventory and no material discrepancies were noticed on physical verification as compared with the book records in relation to the operations of the Company;

(iii) (a) In our opinion the Company has not granted any loans, secured or unsecured to Companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956. Accordingly,the provision of clause 4(iii)(b),4(iii)(c) _ and 4(iii)(d) are not applicable to the company;

(e) During the year, the Company has taken loans amounting to Rs. 717 Lacs from three parties listed in the register maintained under section 301 of the Companies Act, 1956. The balance of the loans at the year end taken from such parties is amounting to Rs. 2,852 Lacs.

(f) The Loans taken from the two parties listed under section 301 are interest free and there are no terms and conditions for their repayment. In respect of Loan taken from a party the rate of interest and terms and conditions on which loan has been taken is not prima facie prejudicial to the interest of the Company.

(g) The Company is regular in repaying the principal amounts as stipulated and has been regular in the payment of interest other than the two parties listed in the register maintained under section 301;

(iv) In our opinion, and according to the information and explanations given to us, there are adequate internal control systems 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 services. Further, on the basis of our examination and according to the information and explanations given to us, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control system;

(v) Based on the audit procedures applied by us and according to the information and explanations given to us, contracts or arrangements particulars of which need to be entered into the Register maintained under Section 301 of the Companies Act, 1956 have been so entered;

(vi) In our opinion and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India and the provisions of Section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed under, where applicable, with regard to deposits accepted from the public. As per the information and explanations given to us no order under the aforesaid sections has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal on the Company;

(vii) The Company has an adequate internal audit system, which was conducted by an independent firm of Chartered Accountants which in our opinion is commensurate with the size and nature of its business;

(viii) We have broadly reviewed the books of accounts maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government, the maintenance of cost records has been prescribed under Section 209(1) (d) of the Companies Act, 1956. We are of the opinion that prima facie the prescribed accounts and records have been maintained and are being made up. We have not however made a detailed examination of the records with a view to determining whether they are accurate or complete;

(ix) (a) According to the information and explanations given to us and according to the books and records as produced and examined by us, in our opinion the undisputed statutory dues in respect of Provident Fund, Employees State Insurance, Income-tax, Sales-tax, Wealth-tax, Service-tax, Custom Duty, Excise Duty, Cess and any others statutory dues as applicable have been generally regularly deposited with the appropriate authorities. According to the information and explanations given to us no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2010 for a period of more than six months from the date of becoming payable;

(b) The disputed statutory dues aggregating to Rs.1679.15 Lacs, that have not been deposited on account of matters pending before appropriate authorities. Details regarding the name of the statute, nature of the dues, disputed amount and the forum where the disputes are pending have been enclosed in the Annexure-I;

(x) The Company does not have any accumulated losses. The Company has not incurred cash losses during the financial year covered by our report and in the immediately preceding financial year;

(xi) Based on our Audit procedures and according to the information and explanations given to us, we are of the opinion that the Company has not defaulted in the repayment of dues to financial Institutions and banks. These do not cover the case where the company has paid additional charges in respect of the delay thereof;

(xii) Based on our examination and according to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities;

(xiii) The Company is not a chit/nidhi/mutual benefit fund/ society;

(xiv) The Company is not a dealer or trader in shares, securities, debentures and other investment. We also report that the company has held the investments in its own name;

(xv) On the basis of the information and explanations given to us, the Company has given guarantee for obtaining credit facilities taken by Innovassynth Technologies (India) Ltd. from a bank; In our opinion and according to the information and explanations given by the Company the terms and conditions are not prejudicial to the interest of the company;

(xvi) The Company has raised term loan during the year on the basis of information and explanations given to us the loan has been applied for the purpose for which it was obtained;

(xvii) According to the information and explanations given to us and an overall examination of the Balance Sheet of the company and the fund flow based on the Audited Accounts we report that no funds raised on short-term basis have been used for long-term investment;

(xviii) During the year, 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;

(xix) During the year the company has not issued any debentures;

(xx) During the year the company has not raised any monies by way of public issues;

(xxi) Based upon the audit procedures performed .and information and explanations given by the management, we report that no fraud on or by the company has been noticed or reported during the course of our audit.

Disputed amounts under various statutes



ANNEXURE -1 (Rupees in Lacs)

Sr. Name of the Nature Forum where Amount No. Statue of Dues dispute is pending

1 Central Excise Act Excise Duty Central Excise Commissioner Appeals 53.20

2 Central Excise Act Excise Duty CESTAT 116.10

3 Central Excise Act Excise Duty High Court 265.96

4 Central Excise Act Excise Duty Supreme Court 121.00

5 Central Excise Act Service Tax CESTAT 603.18

6 Central Excise Act Service Tax Supreme Court 6.37

7 Income Tax Act Income Tax Supreme Court 324.09

8 Income Tax Act Income Tax High Court 189.25

Total 1679.15

For N. M. Raiji & Co.,

Chartered Accountants

CA Y. N. THAKKAR

Partner Place: Mumbai Membership No. 33329

Date: 18th May, 2010 Firm Regn. No.l08296W

 
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