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Auditor Report of Hindustan Organic Chemicals Ltd.

Mar 31, 2015

We have audited the accompanying standalone financial statements of Hindustan Organic Chemicals Limited ('the Company'), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of the significant accounting policies and other explanatory information, in which are incorporated the Returns for the year ended on that date audited by the branch auditors of the Company's Unit at Kochi.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies 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 judgments 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 in to 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 thereunder.

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 control 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 qualified audit opinion on the standalone financial statements.

Basis for Qualified Opinion

A) No provisions have been made in the standalone financial statements for the following amounts (refer respective notes in the notes to the financial statements);

i) Penal interest of Rs. 1268.87 lakhs (Previous year ended 31st March 2014: Rs. 1062.51 lakhs) on overdue loan from Government of India (note no. 5A(vi)),

ii) Loss on account of misappropriation of Company's fund amounting to Rs. 64.81 lakhs (Previous year ended 31st March 2014: Rs. 64.81 lakhs), pending final report from CBI and outcome of the civil suit (note no. 37),

iii) Liability of wage revision for the period 1.1.1997 to 31.12.2000 Rs.1887.79 lakhs (Previous year ended 31st March 2014: Rs. 1887.79 lakhs) at Rasayani unit (note no. 33A),

iv) Liability of wage revision for the period 1.1.2007 to 31.3.2008 Rs.161.55 lakhs (Previous year ended 31st March 2014: Rs. 161.55 lakhs) to Officers and Rs. 148.26 lakhs (Previous year ended 31st March 2014: Rs. 148.26 lakhs) to Staff at Rasayani unit (note no. 33B and 33C).

The above four matters were also qualified in our report on the financial statements for the year ended 31st March, 2014.

Had the effects of the items mentioned in the paragraphs A) i) to A) iv) above been considered, the loss for the year would have been higher by Rs. 3531.28 lakhs (Previous year ended 31st March 2014: Rs. 3324.92 lakhs).

B) The balances of trade receivables, trade payables, loans and advances and other current assets and other debit / credit balances are pending for confirmations and reconciliation (note no. 42). The effect of the same on the loss for the year is not ascertainable.

This matter was also qualified in our report on the financial statements for the year ended 31st March, 2014.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for Qualified Opinion paragraph above, 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 31st March, 2015, and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

Attention is drawn to note 47 to the standalone financial statements which states that the company has made an application for reference to Board for Industrial and Financial Reconstruction (BIFR). The net worth of the Company is fully eroded. The Company has incurred a cash loss in the current and in previous years. The Company's current liabilities exceeds its current assets as at the balance sheet date. These conditions indicate the existence of a material uncertainty that may cast significant doubt on 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 for the reasons stated in the said note. Our opinion is not modified in respect of this matter.

Other Matter

We did not audit the financial statements/information of Kochi Unit included in the standalone financial statements of the Company whose financial statements / financial information reflect total assets of Rs. 78675.65 lakhs as at 31st March, 2015 and total revenues of Rs. 13880.84 lakhs for the year ended on that date, as considered in the standalone financial statements. The financial statements/ information of this unit has been audited by the branch auditors whose report has been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of this unit, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2015 issued by the Central Government of India in terms of sub section (11) of section 143 of the Act, we give in Annexure I, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

2. As required by the directions and sub-directions issued by the Office of the Comptroller and Auditor General of India under Section 143(5) of the Act, we give in Annexure II, a statement on the matters referred to in those directions.

3. As required by Section 143(3) of the 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 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 it appears from our examination of those books.

c) The report on the accounts of the branch office 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 the Cash Flow Statement dealt with by this report are in agreement with the books of account.

e) In our opinion, the aforesaid standalone financial statements comply

with the Accounting Standards referred to in section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

f) The matters described in the Basis for Qualified Opinion paragraph above, and the going concern matter described in the Emphasis of Matter paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

g) The conditions specified in section 164(2) of the Act in respect of qualifications of directors is not applicable to the Company being a government company.

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 43 to the financial statements).

ii. The Kochi Unit of the Company has entered into long term supply contract with Gas Authority of India (GAIL) for supply of Liquefied Natural Gas in 2011 for a period of 15 years ending in 2026. Material foreseeable losses on this contract is not quantifiable in the current scenario. Other than this, the Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year.

Annexure I to the Independent Auditor's Report

To the Members of Hindustan Organic Chemicals Limited

As referred to in Paragraph 1 under 'Report on Other Legal and Regulatory Requirements' in our Auditors' report of even date and as required by the Companies (Auditor's Report) Order, 2015, issued by the Central Government in terms of sub section (11) of section 143 of the Companies Act, 2013 ('the Act') and on the basis of such checks as we considered appropriate and according to the information and explanations given to us, we further report that: -

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets.

(b) The fixed assets have been physically verified by the management at reasonable intervals except at Kochi unit where the frequency of verification needs to be improved. As explained to us, no material discrepancies were noticed on such verification.

2. (a) The inventory has been physically verified by the management at reasonable intervals during the year.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business, except for inventory in storage tanks at Kochi unit which does not have a system of taking dip measurements. Instead, reliance is placed on the electronic reading reported by the Distribution Control System.

(c) The Company has maintained proper records of inventory. As explained to us, the discrepancies between the physical inventory and the book records noticed on physical verification were not material.

3. As explained to us, the Company has granted secured loan to its subsidiary - Hindustan Flurocarbons Ltd. and unsecured advance in the nature of loan to its joint venture subsidiary company - HOC-Chematur Ltd. covered in the register maintained under section 189 of the Act.

The advance to HOC - Chematur Ltd. of Rs. 1067.46 lakhs is interest free and there is no stipulation as to the repayment of the principal. The advance has been fully provided for as it is doubtful of recovery.

The loan to Hindustan Flourocarbon Ltd. is interest free to the extent of Rs.2744.06 lakhs and has varying interest rates of 10.25% to 14.5% on amount of Rs. 453.01 lakhs. Both the principal amount and interest on this loan has not been received by the Company as per stipulation.

In both the above cases, besides writing follow-up letters, the Company has not taken any other steps for recovery of the dues.

4. 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, fixed assets and for the sale of goods and services. During the course of our audit, we have neither been informed nor have we observed any continuing failure to correct major weaknesses in internal control system.

5. The Company has not accepted any deposits from the public within the meaning of the provisions of Sections 73 to 76 or any other relevant provisions of the Act and Rules framed thereunder.

6. We have broadly reviewed the books of accounts maintained by the Company in pursuance to the rules made by the Central Government for the maintenance of cost records under sub section (1) of section 148 of the Act, for certain products of the Company and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

7. a) According to the information and explanations given to us by the management and on the basis of examination of the books of accounts carried out by us, the Company has been regular in depositing undisputed statutory dues including Employees' State Insurance, Sales-tax, Wealth-Tax, Service Tax, Custom Duty, Excise Duty, Value Added Tax, Cess and other statutory dues, as applicable, with the appropriate authorities. The Company has not been regular in depositing Provident Fund dues and tax deducted at source with the appropriate authorities during the year. There were no undisputed arrears of statutory dues outstanding as at 31st March, 2015 for a period of more than six months from the date they became payable except for as stated below:

Rasayani Unit :

Sr. Name of Statute Nature of Dues Outstanding No. Amount (Rs. in lakhs)

1 The Employees' Provident Funds Employees 1467.67

And Miscellaneous Provisions Provident Fund

Act, 1952 contribution

2 The Employees' Provident Funds Employees Pension 26.18

And Miscellaneous Provisions Fund contribution

Act, 1952

3 MVAT Act, 2002 w.e.f 2005 Works Contract Tax 0.48

4 Income Tax Act, 1961 Tax deducted at 67.94

source

5 Gram Panchayat Gram Panchayat 42.49

Tax

Total 1604.76

Kochi Unit:

Sr. Name of Statute Nature of Dues Outstanding No. Amount (Rs. in lakhs)

1 The Employees' Provident Funds Employees 221.67

And Miscellaneous Provisions Provident Fund

Act, 1952 contribution

2 Income Tax Act, 1961 TDS - Salary 16.76

b) According to the information and explanations given to us by management and the records of the Company examined by us, there were no disputed dues in respect of Income-tax, Sales-tax, Wealth-tax, Service Tax, Custom Duty, Excise Duty, Value Added Tax and Cess which have not been deposited as at 31st March, 2015 other than those shown below :

Rasayani Unit:

Sr. Name of Statute Nature of Dues Period to No. which the dispute relates

1 Central Excise Act, Molten Sulphur Feb-97 to 1944 Classification Jun-98



2 Central Excise Act, Molten Sulphur Sept-94 to 1944 Classification Jan-97

3 Central Excise Act, Molten Sulphur 1999-00 1944 Classification

4 Central Excise Act, Shortage of 1944 Inputs

5 Central Excise Act, Shortage of 1998-01 1944 Inputs

6 Central Excise Act, Shortage of Jul-01 to 1944 Inputs Sept-02

7 Central Excise Act, ARO Case Jul-03 to 1944 (Aniline Valuation) May-06



8 Central Excise Clearance of Sept-96 to Act, 1944 SSA to fertilizer Mar-00

manufacturing

units

9 Central Excise Reversal of 2006-07 Act, 1944 Cenvat Credit availed on inputs lost in flood

10 Central Excise N2O4 Jan-06 to Act, 1944 Exemptiom Feb-08



11 Central Excise Duty on Nov-98 to Act, 1944 Clearance of Dec-98 Molten Sulphur

12 Central Excise Duty on Jan-99 Act, 1944 Clearance of

Molten Sulphur

13 Finance Act, 1994 Wrong credit May-07 to availed on Jul-10 Angels, bars and HR coils and plates

14 Finance Act, 1994 Cleaning, Oct-09 to

gardening and Nov-11

Rent-a-cab

services

15 Finance Act, 1994 Service Tax on Feb-07 to canteen services Mar-11

16 Finance Act, 1994 Capital Goods 27/11/2013 Bill of Entry to wrong address 18/12/2014

17 Finance Act, 1994 Flood Case Jan 07

18 Finance Act, 1994 Reversal Penalty Oct 13 to and Interest Mar 15 payment

19 Income Tax Act, Penalty u/s A.Y 1999- 1961 271(1)(c) 00

20 Income Tax Act, Penalty u/s A.Y 1999- 1961 271(1)(c) 00

21 Income Tax Act, Penalty u/s A.Y 2003- 1961 271(1)(c) 04

22 Income Tax Act, Penalty u/s A.Y 2004- 1961 271(1)(c) 05

Sr. Name of Statute Amount of Forum where No. Dispute dispute is pending (Rs. in lakhs)

1 Central Excise Act, 15.53 Customs, Excise and 1944 Service Tax Appellate Tribunal

2 Central Excise Act, 22.76 Customs, Excise and 1944 Service Tax Appellate Tribunal

7.62 Commissionerate 3 Central Excise Act, 1944 13.64 Commissionerate 4 Central Excise Act, 1944 18.66 High Court 5 Central Excise Act, 1944 5.85 High Court 6 Central Excise Act, 1944 19.29 Customs, Excise and 7 Central Excise Act, Service Tax Appellate 1944 Tribunal

112.78 High Court 8 Central Excise Act, 1944 18.66 Commissionerate 9 Central Excise Act, 1944

104.63 Customs, Excise and 10 Central Excise Service Tax Appellate Act, 1944 Tribunal

5.05 Deputy 11 Central Excise Commissioner Act, 1944 Central Excise

12 Central Excise 2.59 Deputy Act, 1944 Commissioner

Central Excise

13 Finance Act, 1994 1.44 Assistant Commissioner Central Excise

14 Finance Act, 1994 8.88 Deputy

Commissioner

Central Excise

15 Finance Act, 1994 66.96 Commissioner of Central Excise,

Custom and Service Tax

16 Finance Act, 1994 17.58 Commissioner of Central Excise Appeals, Mumbai - II

17 Finance Act, 1994 9.34 Appeal to be filed in

CESTAT

18 Finance Act, 1994 10.95 Assistant Commissioner of Central Excise and Superintendent Service tax of central Excise

Total 462.21

19 Income Tax Act, 91.07 Bombay High Court 1961

20 Income Tax Act, 57.55 Bombay High Court 1961

21 Income Tax Act, 607.25 Bombay High Court 1961

22 Income Tax Act, 63.23 Bombay High Court 1961

Total 819.10

Kochi Unit:

Sr. Name of Statute Nature of Dues Period to No. which the dispute relates

1 ESI Corporation ESI contribution 1.04.92 to of employees 31.10.92



2 Finance Act 1994 Availing of 04/03 to

CEVAT credit on 12/06

service tax on

transportation of

final products to

Rasayani Depot

3 Finance Act 1994 Insurance 07/11 to

renewal/Tyre 05/12

retrading charge

4 Finance Act 1994 Bus, Car 11/11 to

transportation to 06/12

employees



5 Finance Act 1994 Insurance 04/11 to

renewal/Tyre 03/13

retrading charge



6 Finance Act 1994 Outdoor Catering/ 04/06 to

Insurance 01/13

renewal & Tyre

retrading charge

7 Employees Employees 1995 to 1997 Provident Fund Family Pension

Scheme- Damage for default payment

8 Central Sales Tax Trade Discount 2005-06 Act, 1956 given through

credit notes

disallowed- CST

9 Central Sales Tax Turnover 2005-06 Act, 1956 assessed @

12.50% against

4%- CST

10 KVAT Act, 2003 Turnover 2005-06

assessed at

higher rate and

miscellaneous

income assessed to tax - KVAT

11 Central Sales Tax Turnover 2005-06 Act, 1956 assessed @

12.50% against

10%- CST

12 Central Sales Tax Levy of interest- 2005-06 Act, 1956 CST



13 KVAT Act, 2003 Levy of interest- 2005-06 KVAT



14 Central Sales Tax Trade Discount 2006-07 Act, 1956 given through

credit notes

disallowed- CST

15 Central Sales Tax Levy of interest- 2006-07 Act, 1956 CST



16 Central Sales Tax Trade Discount 2007-08 Act, 1956 given through

credit notes

disallowed- CST

17 KVAT Act, 2003 Disallowance of 2008-09 input tax credit



18 KVAT Act, 2003 Disallowance of 2009-10 input tax credit



19 KVAT Act, 2003 Input Tax Refund 2011-12 due from October, 11 to March, 12



20 Central Sales Tax Input Tax due 2012-13 Act, 1956 from April, 12 to March, 13

Sr. Name of Statute Amount of Forum where No. Dispute dispute is (Rs. in lakhs) pending

1 ESI Corporation 2.17 Employees Insurance Court (Industrial)

Total 2.17

2 Finance Act 1994 39.57 CESTAT,

Bangalore

3 Finance Act 1994 3.17 CESTAT,

Bangalore

4 Finance Act 1994 1.10 Commissioner

of Central

Excise Appeals,

Ernakulam

5 Finance Act 1994 10.96 Commissioner

of Central

Excise Appeals,

Ernakulam

6 Finance Act 1994 77.06 Department filed

appeal to CESTAT, Bangalore

Total 131.86

7 Employees 18.05 Appeal filed Provident Fund before High Court, Kerala

Total 18.05



8 Central Sales Tax 53.71 D.C (Appeals), Act, 1956 Dept. of

Commercial

Taxes,Ernakulam

9 Central Sales Tax 0.33 D.C (Appeals), Act, 1956 Dept. of

Commercial

Taxes, Ernakulam

10 KVAT Act, 2003 2.06 D.C (Appeals),

Dept. of

Commercial

Taxes, Ernakulam

11 Central Sales Tax 0.07 D.C (Appeals), Act, 1956 Dept. of

Commercial

Taxes, Ernakulam

12 Central Sales Tax 155.23 Tribunal Dept. Act, 1956 of Commercial

Taxes, Ernakulam

13 KVAT Act, 2003 152.63 Tribunal Dept. of Commercial

Taxes, Ernakulam

14 Central Sales Tax 79.68 D.C (Appeals), Act, 1956 Dept. of

Commercial

Taxes, Ernakulam

15 Central Sales Tax 11.87 D.C (Appeals), Act, 1956 Dept. of

Commercial Taxes, Ernakulam

16 Central Sales Tax 6.70 D.C (Appeals), Act, 1956 Dept. of

Commercial

Taxes, Ernakulam

17 KVAT Act, 2003 1.28 D.C (Appeals), Dept. of

Commercial Taxes, Ernakulam

18 KVAT Act, 2003 0.90 D.C (Appeals), Dept. of

Commercial Taxes, Ernakulam

19 KVAT Act, 2003 104.66 D.C (Appeals), Dept. of Commercial

Taxes, Ernakulam

20 Central Sales Tax 73.36 D.C (Appeals), Act, 1956 Dept. of Commercial Taxes, Ernakulam

Total 642.48

(c) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company in accordance with the relevant provisions of the Act and the rules made thereunder

8. The accumulated losses of the Company at the year-ended exceed its paid-up capital and reserves and its net worth is fully eroded. The Company has incurred cash losses during the year and also in the immediately preceding financial year.

9. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to banks and financial institutions and debenture holders (bond holders) during the year.

10. According to the information and explanations given to us, the Company has given guarantee of Rs. 1103 lakhs for loan taken by subsidiary - Hindustan Flurocarbons Ltd., from bank. Based on the explanations given to us, in our opinion, the terms and conditions of this guarantee are not prejudicial to the interest of the Company.

11. In our opinion, the term loans have been generally applied for the purposes for which they were obtained by the Company. However, we have noticed deviations in the amounts applied for individual purposes.

12. According to the information and explanations given to us, no material fraud on or by the Company has been noticed during the course of our audit or reported during the year.

For Ford, Rhodes, Parks & Co. Chartered Accountants Firm's Registration No. 102860W

Sd/- Shrikant Prabhu Place : Mumbai Partner Date : 28th May, 2015 Membership No. 35296




Mar 31, 2014

We have audited the accompanying financial statements of Hindustan Organic Chemicals Limited ("the Company"), which comprises the Balance Sheet as at 31st March, 2014 and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statement Management is responsible for the preparation of these 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 notified under the Companies Act,1956 ("the Act") read with the General Circular 15/2013 dated 13th September,2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013 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

Our responsibility is to express opinion on theses financial statements based on our audit. We conducted our audit in accordance with 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.

An audit involves performing procedure 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 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, 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 qualified audit opinion.

Basis for Qualified Opinion

A) No provisions has been made in the financial statements for the following amounts (refer respective notes in the notes to the financial statements);

i) Penal interest of Rs. 1062.51 lacs on overdue loan from Government of India (note no. 5A(iv)),

ii) Loss on account of misappropriation of Company''s fund amounting to Rs. 64.81 lacs, pending final report from CBI and outcome of the civil suit (note no. 37),

iii) Liability of wage revision for the period 1.1.1997 to 31.12.2000 Rs. 1887.79 lacs at Rasayani unit (note no. 33A),

iv) Liability of wage revision for the period 1.1.2007 to 31.3.2008 Rs. 161.55 lacs to Officers and Rs. 148.26 lacs to Staff at Rasayani unit (note no. 33B and 33C),

v) Claims of JNPT short provided amounting to Rs. 1351.08 lacs in respect of;

a) Lease rentals and escalation on leased land (note no.34F(ii)),

b) Water charges

B) Capital work in progress includes an amount of '' 2978.91 lacs incurred on JNPT tank terminal project. The construction has been suspended for more than six years and the lease has been called off by the lessor - JNPT after the expiry of the lease period in June 2010. The status of the project is stagnant, incomplete and of no utility since long. No provision is made for the impairment in the value of this asset, if any, pending ascertainment of the recoverable amount (note no. 34F(i)),

C) The Balances of trade receivables, trade payables, loans and advances and other current assets and other debit / credit balances are pending for confirmations and reconciliation (note no. 42),

D) We further report that, had the effects of the items mentioned in the paragraphs (A) above been considered, the loss for the year would have been higher by Rs. 4676 lacs, resulting into a loss of Rs. 22361.28 lacs and the accumulated loss as at the year-end would have been higher by the same amount i.e Rs. 4676 lacs. Further, the long-term liabilities /provisions as at the year-end would have been higher by Rs. 4676 lacs.

E) We also further report that the effect of the items mentioned in paragraphs (B) and (C) above on the loss for the year and on the balance sheet is not ascertainable.

F) Wage arrears in respect of Rasayani unit of the Company which had not been provided in earlier years amounting to 40.73 lacs in case of employees for the period 1.1.1997 to 31.12.2000, Rs. 3.19 lacs for the period 1.1.2007 to 31.3.2008 in case of Officers and Rs. 0.67 lacs for the period 1.1.2007 to 31.3.2008 in case of Staff has been paid / provided during the year and charged as current year wage expense in the Statement of profit and loss. In our opinion, the same should have reflected as a prior period expense item as the Company should have made provision for the same in earlier years (note no. 33)

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph, the 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:

i) in the case of the Balance sheet, of the state of affairs of the Company as at 31st March, 2014;

ii) in the case of the Statement of Profit and Loss, 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.

Emphasis of Matter

Attention is drawn to note 47 to the financial statements which states that the financial statements have been prepared on going concern basis, although the net worth of the Company is fully eroded, for reasons stated in the said note.

Report on Other Legal and Regulatory Requirements

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

2. As required by section 227(3) of the Companies Act, 1956, 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 except for the matters described in the Basis for Qualified Opinion paragraph;

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;

bb) the report on the accounts of the branch offices audited under section 228 by a person other than the company''s auditor has been forwarded to us as required by clause (c) of sub-section (3) of section 228 of the Act and have been dealt with in preparing our report in the manner considered necessary by us;

c) 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;

d) except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards notified under the Act read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013;

e) the conditions specified in section 274(1)(g) of the Companies Act, 1956 in respect of qualifications of directors is not applicable to the Company being a government company.

ANNEXURE TO THE AUDITORS'' REPORT

(REFERRED TO IN PARAGRAPH 1 ABOVE)

As required by the Companies (Auditor''s Report) Order, 2003 issued by the Central Government in terms of Section 227 (4A) of the Companies Act, 1956 ("the Act"), as amended to date, and on the basis of such checks as we considered appropriate and according to the information and explanations given to us during the course of the audit, we further report that: -

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets.

(b) As explained and inform to us, the management has conducted physical verification of major items of fixed assets during the year and we are informed that no material discrepancies were noticed on such verification.

(c) During the year, the Company has not disposed off a substantial part of fixed assets so as to affect the going concern status of the Company.

2. (a) The inventory has been physically verified by the management at reasonable intervals during the year.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business, except for inventory in storage tanks at Kochi unit which does not have system of taking dip measurements. Instead, Reliance is placed on the electronic reading reported by the Distribution Control System.

(c) The Company has maintained proper records of inventory. As explained to us, the discrepancies between the physical inventory and the book records noticed on physical verification were not material and have been properly dealt with in the books of accounts.

3. (a) Based on information, 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 and as such clauses (iii)(b),(c) and (d) are not applicable..

(b) Based on information, the Company has not taken any loans, secured or unsecured, from companies, firms or other parties listed in the registered maintained under Section 301 of the Companies Act, 1956 and as such clauses (iii)(f) and (g) are not applicable.

4. 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, fixed assets and for the sale of goods and services. During the course of our audit, we have neither been informed nor have we observed any continuing failure to correct major weaknesses in internal control system.

5. According to the information and explanations given to us there were no transactions that need to be entered into registered maintained under Section 301 of the Companies Act, 1956. Sub Clause (b) of clause (v) is hence not applicable.

6. In our opinion and according to the information and explanations given to us, Company has not accepted any deposits from the public. Hence the provisions of section 58A, 58AA of the Companies Act, 1956 with regard to acceptance of deposits from the public and the rules framed there under, to the extent applicable, except Rule 3A of the Companies (Acceptance of Deposits) Rules, 1975 regarding investment in liquid asset, are not applicable. We have been informed by the management that no orders have been received by the company, from Company law Board, National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal under section 58A and 58AA.

7. The Company has an internal audit system, which, in our opinion, is commensurate with its size and nature of its business.

8. We have broadly reviewed the books of accounts maintained by the Company in pursuance to the rules made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 for certain products of the Company and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however made a detailed examination of records with a view to determine whether they are accurate or complete.

9. a) According to the information and explanations given to us and on the basis of the examination of the books of account carried out by us, the Company has been generally regular in depositing undisputed statutory dues including Investor Education and Protection Fund, Employees'' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities. The Company has not been regular in depositing Provident Fund dues with the appropriate authorities during the year. There were no undisputed arrears of statutory dues outstanding as at 31st March, 2014, for a period of more than six months from the date they became payable except for as stated below :

Rasayani Unit :

Sr. Name of Statute Nature of Dues Outstanding No. Amount (Rs. in lacs)

1 The Employees'' Provident Funds Employees 451.57 And Miscellaneous Provisions Provident Fund Act, 1952 contribution

2 The Employees'' Provident Funds Employees Pension 4.86 And Miscellaneous Provisions Fund contribution Act, 1952

3 Gram Panchayat Gram Panchayat 5.05 Tax

Total 461.48

b) According to the information and explanations given to us by management and the records of the Company examined by us, there were no disputed dues in respect of Income Tax, Sales- tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty and Cess which have not been deposited as on 31st March, 2014, except as stated below:

A. Rasayani Unit :

Sr. Name of Statute Nature of Dues Period to which the No. dispute relates

1 Central Excise Act, 1944 Molten Sulphur Feb-97 to Jun-98 Classification

2 Central Excise Act,1944 Molten Sulphur Sept-94 to Jan-97 Classification

3 Central Excise Act, 1944 Molten Sulphur 1999-00 Classification

4 Central Excise Act, 1944 Shortage of Inputs

5 Central Excise Act, 1944 Shortage of Inputs 1998-01

6 Central Excise Act, 1944 Shortage of Inputs Jul-01 to Sept-02

7 Central Excise Act, 1944 ARO Case Jul-03 to May-06 (Aniline Valuation) 8 Central Excise Act, 1944 Clearance of SSA to Sept-96 to Mar-00 fertilizer manufacturing units

9 Central Excise Act, 1944 Reversal of Cenvat 2006-07 Credit availed on inputs lost in flood

10 Central Excise Act, 1944 N2O4 Exemptiom Jan-06 to Feb-08

11 Central Excise Act, 1944 Duty on Clearance Nov-98 to Dec-98 of Molten Sulphur

12 Central Excise Act, 1944 Duty on Clearance Jan-99 of Molten Sulphur

13 Finance Act, 1994 Wrong credit availed May-07 to Jul-10 on Angels, bars and HR coils and plates

14 Finance Act, 1994 Cleaning, gardening Oct-09 to Nov-11 and Rent-a-cab services

15 Finance Act, 1994 Service Tax on Feb-07 to Mar-11 canteen services

16 Income Tax Act, 1961 Penalty u/s 271(1)(c) A.Y 1999-00

17 Income Tax Act, 1961 Penalty u/s 271(1)(c) A.Y 1999-00

18 Income Tax Act, 1961 Penalty u/s 271(1)(c) A.Y 2003-04

19 Income Tax Act, 1961 Penalty u/s 271(1)(c) A.Y 2004-05





Sr. Name of Statute Amount of Dispute Forum where No. (Rs. in lacs) dispute is pending

1 Central Excise Act, 1944 15.53 Customs, Excise and Service Tax Appellate Tribunal

2 Central Excise Act,1944 22.76 Customs, Excise and Service Tax Appellate Tribunal

3 Central Excise Act, 1944 7.62 Commissionerate 4 Central Excise Act, 1944 13.64 Commissionerate

5 Central Excise Act, 1944 18.66 High Court

6 Central Excise Act, 1944 5.85 High Court

7 Central Excise Act, 1944 19.29 Customs, Excise and Service Tax Appellate Tribunal 8 Central Excise Act, 1944 112.78 Commissionerate 9 Central Excise Act, 1944 18.66 Commissionerate 10 Central Excise Act, 1944 104.63 Customs, Excise and Service Tax Appellate Tribunal

11 Central Excise Act, 1944 5.05 Deputy Commissioner Central Excise

12 Central Excise Act, 1944 2.59 Deputy Commissioner Central Excise

13 Finance Act, 1994 1.44 Assistant Commissioner Central Excise

14 Finance Act, 1994 8.88 Deputy Commissioner Central Excise

15 Finance Act, 1994 66.96 Commissioner of Central Excise, Custom and Service Tax Total 405.68

16 Income Tax Act, 1961 91.07 Commissioner of Income Tax Appeals, Mumbai 17 Income Tax Act, 1961 57.55 Income Tax Appellate Tribunal, Mumbai

18 Income Tax Act, 1961 607.25 Commissioner of Income Tax Appeals, Mumbai

19 Income Tax Act, 1961 63.23 Commissioner of Income Tax Appeals, Mumbai

Total 819.10

B. Kochi Unit :

Sr. Name of Statute Nature of Dues Period to which the No. dispute relates

1 ESI Corporation ESI contribution of 1.04.92 to 31.10.92 employees

2 Finance Act 1994 Availing of CEVAT credit 04/03 to 12/06 on service tax on transportation of final products to Rasayani Depot

3 Finance Act 1994 Insurance renewal/ 07/11 to 05/12 Tyre retrading charge

4 Finance Act 1994 Bus, Car transportation 11/11 to 06/12 to employees

5 Finance Act 1994 Insurance renewal/ 04/11 to 03/13 Tyre retrading charge

6 Employees Provident Employees Family Pension 1995 to 1997 Fund Scheme-Damage for default payment

7 Income Tax Act, 1961 Short Payment of TDS A.Y2008-09 & 2009-10 8 Central Sales Trade Discount given 2005-06 Tax Act, 1956 through credit notes disallowed - CST

9 Central Sales Turnover assessed 2005-06 Tax Act, 1956 @ 12.50% against 4%-CST

10 KVAT Act, 2003 Turnover assessed at 2005-06 higher rate and miscellaneous income assessed to tax - KVAT

11 Central Sales Turnover assessed @12.50% 2005-06 Tax Act, 1956 against 10% - CST

12 Central Sales Tax Levy of interest-CST 2005-06 Act, 1956

13 KVAT Act, 2003 Levy of interest-CST 2005-06

14 Central Sales Trade Discount given 2006-07 Tax Act, 1956 through credit notes disallowed - CST 15 Central Sales Levy of interest-CST 2006-07 Tax Act, 1956

16 Central Sales Trade Discount given 2007-08 Tax Act, 1956 through credit notes disallowed- CST

17 KVAT Act, 2003 Disallowance of input 2008-09 tax credit

18 KVAT Act, 2003 Disallowance of input 2009-10 tax credit

19 KVAT Act, 2003 Tax assessed at 2011-12 higher rate

20 Central Sales Non-submission of C-form 2011-12 Tax Act, 1956 and C- form rejected

21 Central Sales Non-submission of C-form 2012-13 Tax Act, 1956



Sr. Name of Statute Amount of Dispute Forum where No. (Rs. in lacs) dispute is pending

1 ESI Corporation 2.17 Employees Insurance Court (Industrial)

Total 2.17

2 Finance Act 1994 37.68 CESTAT, Bangalore

3 Finance Act 1994 8.19 CESTAT, Bangalore

4 Finance Act 1994 0.57 Commissioner of Central Excise Appeals, Ernakulam

5 Finance Act 1994 10.96 Commissioner of Central Excise Appeals, Ernakulam

Total 57.40

6 Employees Provident 18.05 Appeal fi led before Fund High Court, Kerala

Total 18.05 7 Income Tax Act, 1961 3.55 Commissioner of Income Tax Appeals, Ernakulam

Total 3.55 8 Central Sales 53.71 D.C (Appeals), Dept. of Tax Act, 1956 Commercial Taxes, Ernakulam

9 Central Sales 0.33 D.C (Appeals), Dept. of Tax Act, 1956 Commercial Taxes, Ernakulam

10 KVAT Act, 2003 2.06 D.C (Appeals), Dept. of Commercial Taxes, Ernakulam

11 Central Sales 0.07 D.C (Appeals), Dept. of Tax Act, 1956 Commercial Taxes, Ernakulam

12 Central Sales Tax 155.23 Tribunal Dept. of Act, 1956 Commercial Taxes, Ernakulam

13 KVAT Act, 2003 152.63 Tribunal Dept. of Commercial Taxes, Ernakulam 14 Central Sales 79.68 D.C (Appeals), Dept. of Tax Act, 1956 Commercial Taxes, Ernakulam 15 Central Sales 11.87 D.C (Appeals), Dept. of Tax Act, 1956 Commercial Taxes, Ernakulam

16 Central Sales 6.70 D.C (Appeals), Dept. of Tax Act, 1956 Commercial Taxes, Ernakulam

17 KVAT Act, 2003 1.28 D.C (Appeals), Dept. of Commercial Taxes, Ernakulam

18 KVAT Act, 2003 0.90 D.C (Appeals), Dept. of Commercial Taxes, Ernakulam

19 KVAT Act, 2003 75.76 D.C (Appeals), Dept. of Commercial Taxes, Ernakulam

20 Central Sales 28.90 D.C (Appeals), Dept. of Tax Act, 1956 Commercial Taxes, Ernakulam

21 Central Sales 302.99 D.C (Appeals), Dept. of Tax Act, 1956 Commercial Taxes, Ernakulam

Total 872.11

10. The accumulated losses of the Company at the year-ended exceed its paid-up capital and reserves and its net worth is fully eroded. The Company has incurred cash losses during the year and also in the immediately preceding financial year.

11. Based on our audit procedures and the information and explanations given to us, we are of the opinion that the Company has not defaulted in repayment of its dues to the bond holders during the current year.

12. According to the information and explanations given to us, adequate documents and records are maintained for loans granted to subsidiary company and others on the basis of security given to them.

13. Clause (xiii) of the Order is not applicable as the Company is not a chit fund company or nidhi / mutual benefit fund / society.

14. The Company is not dealing in or trading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has given guarantee of Rs. 1103 lacs for loan taken by subsidiary - Hindustan Flurocarbons Ltd., from State Bank of Hyderabad. Based on the explanations given to us, in our opinion, the terms and conditions of this guarantee are not prejudicial to the interest of the Company.

16. In our opinion and according to the information and explanations given to us, the term loans raised by the Company during the year were applied for the purposes for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long- term investment.

18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year.

19. The Company has raised Rs. 10,000 lacs through issue of bonds during the year, which is guaranteed by the Government of India by way of registered bond trust deed.

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

21. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations furnished by the management, we report that no fraud has been noticed or reported by the Company during the year.

For Ford, Rhodes, Parks & Co. Chartered Accountants Firm''s Registration No. 102860W

Sd/- Shrikant Prabhu Place : Mumbai Partner Date : 29th May, 2014 Membership No. 35296


Mar 31, 2013

Report on Financial Statements

We have audited the accompanying fi nancial statements of Hindustan Organic Chemicals Limited ("the Company"), which comprises the Balance Sheet as at 31st March, 2013 and the Statement of Profi t and Loss and Cash Flow Statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statement

Management is responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows of the Company in accordance with the Accounting Standards referred to in sub section (3C) section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the fi nancial 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 opinion on theses fi nancial statements based on our audit. We conducted our audit in accordance with 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 fi nancial statements are free from material misstatement.

An audit involves performing procedure to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our qualifi ed audit opinion.

Basis for Qualifi ed Opinion

A) No provisions has been made in the fi nancial statements for the following amounts (refer respective notes in the notes to the fi nancial statements);

i) Penal interest of Rs. 830.30 lacs on overdue loan from Government of India (note no. 5A(ii)),

ii) Loss on account of misappropriation of Company''s fund amounting to Rs. 64.81 lacs, pending fi nal report from CBI and outcome of the civil suit (note no. 37),

iii) Liability of wage revision for the period 1.1.1997 to 31.12.2000 Rs. 1928.51 lacs at Rasayani unit (note no. 33A),

iv) Liability of wage revision for the period 1.1.2007 to 31.3.2008 Rs. 164.74 lacs to Offi cers and Rs. 148.93 lacs to Staff at Rasayani unit (note no. 33B and 33C),

v) Claims of JNPT short provided amounting toRs. 1137.83 lacs in respect of;

a) Lease rentals and escalation on leased land (note no. 34E),

b) Water charges and

c) Way leave charges

B) Capital work in progress includes an amount of Rs. 2978.91 lacs incurred on JNPT tank terminal project. The construction has been suspended for more than fi ve years and the lease has been called off by the lessor - JNPT after the expiry of the lease period in June 2010. The status of the project is stagnant, incomplete and of no utility since long. No provision is made for the impairment in the value of this asset, if any, pending ascertainment of the recoverable amount (note no. 34E),

C) The Balances of trade receivables, trade payables, loans and advances and other current assets and other debit / credit balances are pending for confi rmations and reconciliation (note no. 42),

D) We further report that, had the effects of the items mentioned in the paragraphs (A) above been considered, the loss for the year would have been higher by Rs. 4275.12 lacs, resulting into a loss of Rs. 18074.03 lacs and the accumulated loss as at the year-end would have been higher by the same amount i.e Rs. 4275.12 lacs. Further, the long-term liabilities / provisions as at the year-end would have been higher by Rs. 4275.12 lacs.

E) We also further report that the effect of the items mentioned in paragraphs (B) and (C) above on the loss for the year and on the balance sheet is not ascertainable.

F) Wage arrears in respect of Rasayani unit of the Company which had not been provided in earlier years amounting toRs. 379.57 lacs in case of employees for the period 1.1.1997 to 31.12.2000, Rs. 114.22 lacs for the period 1.1.2007 to 31.3.2008 in case of Offi cers and Rs. 97.38 lacs for the period 1.1.2007 to 31.3.2008 in case of Staff has been paid / provided during the year and charged as current year wage expense in the Statement of profi t and loss. In our opinion, the same should have refl ected as a prior period expense item as the Company should have made provision for the same in earlier years.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matters described in the Basis for Qualifi ed Opinion paragraph, the fi nancial 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:

i) in the case of the Balance sheet, of the state of affairs of the Company as at 31st March, 2013;

ii) in the case of the Statement of Profi t and Loss, of the loss for the year ended on that date; and

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

Emphasis of Matter

Attention is drawn to note 48 to the fi nancial statements which states that the fi nancial statements have been prepared on going concern basis, although the net worth of the Company is fully eroded, for reasons stated in the said note.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specifi ed in paragraph 4 and 5 of the order.

2. As required by section 227(3) of the Companies Act, 1956, 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 except for the matters described in the Basis for Qualifi ed Opinion paragraph;

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, the Statement of Profi t and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account;

d) except for the possible effects of the matters described in the Basis for Qualifi ed Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profi t and Loss and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e) the conditions specifi ed in section 274(1)(g) of the Companies Act, 1956 in respect of qualifi cations of directors is not applicable to the Company being a government company.

f) Since the Central Government has not issued any notifi cation as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

ANNEXURE TO THE AUDITORS'' REPORT

As required by the Companies (Auditor''s Report) Order, 2003 issued by the Central Government in terms of Section 227 (4A) of the Companies Act, 1956 (the Act), as amended to date, and on the basis of such checks as we considered appropriate and according to the information and explanations given to us during the course of the audit, we further report that: -

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of its fi xed assets.

(b) As explained and inform to us, the management has conducted physical verifi cation of major items of fi xed assets during the year and we are informed that no material discrepancies were noticed on such verifi cation.

(c) During the year, the Company has not disposed off a substantial part of fi xed assets so as to affect the going concern status of the Company.

2. (a) The inventory has been physically verifi ed by the management at reasonable intervals during the year.

(b) In our opinion, the procedures of physical verifi cation of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business, except for inventory in storage tanks at Kochi unit which does not have system of taking dip measurements. Instead, reliance is placed on the electronic reading reported by the Distribution Control System.

(c) The Company has maintained proper records of inventory. As explained to us, the discrepancies between the physical inventory and the book records noticed on physical verifi cation were not material and have been properly dealt with in the books of accounts.

3. (a) Based on information, the company has not granted any loans, secured or unsecured, to companies, fi rms, or other parties listed in the register maintained under Section 301 of the Companies Act, 1956 and as such clauses (iii)(b),(c) and (d) are not applicable..

(b) Based on information, the Company has not taken any loans, secured or unsecured, from companies, fi rms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956 and as such clauses (iii)(f) and (g) are not applicable..

4. 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, fi xed assets and for the sale of goods and services. During the course of our audit, we have neither been informed nor have we observed any continuing failure to correct major weaknesses in internal control system.

5. According to the information and explanations given to us there were no transactions that need to be entered into register maintained under Section 301 of the Companies Act, 1956, Sub Clause (b) of clause (v) is hence not applicable.

6. In our opinion and according to the information and explanations given to us, Company has not accepted any deposits from the public. Hence the provisions of section 58A, 58AA of the Companies Act, 1956 with regard to acceptance of deposits from the public and the rules framed there under, to the extent applicable, except Rule 3A of the Companies (Acceptance of Deposits) Rules, 1975 regarding investment in liquid asset, are not applicable. We have been informed by the management that no orders have been received by the company, from Company law Board, National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal under section 58A and 58AA.

7. The Company has an internal audit system, which, in our opinion, is commensurate with its size and nature of its business.

8. We have broadly reviewed the books of accounts maintained by the Company in pursuance to the rules made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 for certain products of the Company and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however made a detailed examination of records with a view to determine whether they are accurate or complete.

9. a) According to the information and explanations given to us and on the basis of the examination of the books of account carried out by us, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities. There were no undisputed arrears of statutory dues outstanding as at 31st March, 2013, for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us by management and the records of the Company examined by us, there were no disputed dues in respect of Income Tax, Sales- tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty and Cess which have not been deposited as on 31st March, 2013, except as stated below:

A. Rasayani Unit :

Sr. Name of Statute Nature of Dues Period to which the / No. dispute relates

1 Custom Act, 1962 Custom Duty on Import of PNT 1995-96

Total

2 Central Excise Act, 1944 Molten Sulphur Classification Feb-97 to Jun-98

3 Central Excise Act, 1944 Molten Sulphur Classification Sept-94 to Jan-97

4 Central Excise Act, 1944 Molten Sulphur Classification 1999-00

5 Central Excise Act, 1944 Shortage of Inputs

6 Central Excise Act, 1944 Shortage of Inputs 1998-01

7 Central Excise Act, 1944 Shortage of Inputs Jul-01 to Sept-02

8 Central Excise Act, 1944 ARO Case (Aniline Valuation) Jul-03 to May-06

9 Central Excise Act, 1944 Clearance of SSA to fertilizer Sept-96 to Mar-00 manufacturing units

10 Central Excise Act, 1944 Reversal of Cenvat Credit availed 2006-07 on inputs lost in flood

11 Central Excise Act, 1944 N2O4 Exemption Jan-06 to Feb-08

12 Central Excise Act, 1944 Duty on Clearance of Molten Nov-98 to Dec-98 Sulphur

13 Central Excise Act, 1944 Duty on Clearance of Molten Jan-99 Sulphur

14 Finance Act, 1994 Wrong credit availed on Angels, May-07 to Jul-10 bars and HR coils and plates

15 Finance Act, 1994 Cleaning, gardening and Rent-a- Oct-09 to Nov-11 cab services

16 Finance Act, 1994 Service Tax on canteen services Feb-07 to Mar-11

Total

17 Income Tax Act, 1961 Penalty u/s 271(1)(c) A.Y 1999-00

18 Income Tax Act, 1961 Penalty u/s 271(1)(c) A.Y 1999-00

19 Income Tax Act, 1961 Penalty u/s 271(1)(c) A.Y 2003-04

20 Income Tax Act, 1961 Penalty u/s 271(1)(c) A.Y 2004-05

Total

21 Central Sales Tax Act, 1956 CST F.Y 2004-05

Total

B. Kochi Unit :

Sr. Name of Statute Nature of Dues Period to which the No. dispute relates

1 ESI Corporation ESI contribution of employees 1.04.92 to 31.10.92

2 Central Excise Act, 1944 Disallowance of CENVAT Credit availed 2004-05 on the ground that duty is paid by debiting DEPB license

3 Finance Act 1994 Non payment of Service Tax on 4/06 to 3/08 commercial coaching/ training (1.92 6.01)

4 Finance Act 1994 Non payment of Service Tax on 04/08 to 03/09 commercial coaching/ training and renting of immovable property to Sterling Gas

Name of Statute Amount of Dispute Forum where dispute is (Rs. in lacs) pending

Custom Act,1962 10.80 Customs, Excise and Service Tax Appellate Tribunal

10.80

Centarl Excise Act,1944 15.53 Customs, Excise and Service

Central Excise Act,1944 Tax Appellate Tribunal

Centarl Excise Act,1944 22.76 Customs, Excise and Service Tax Appellate Tribunal

Centarl Excise Act,1944 7.62 Commissionerate

Centarl Excise Act,1944 13.64 Commissionerate

Central Excise Act,1944 18.66 High Court

Central Excise Act,1944 5.85 High Court

Central Excise Act,1944 19.29 Customs, Excise and Service Tax Appellate Tribunal

Central Excise Act,1944 112.78 Commissionerate

Central Excise Act.1944 18.66 Commissionerate

Central Excise Act,1944 104.63 Customs, Excise and Service Tax Appellate Tribunal

Central Excise Act,1944 5.05 Deputy Commissioner Central Excise

Central Excise Act,1944 2.59 Deputy Commissioner Central Excise

Finance Act,1944 1.44 Assistant Commissioner Central Excise

Finance Act,1944 8.88 Deputy Commissioner Central Excise

Finance Act,1944 66.96 Commissioner of Central Excise, Custom and Service Tax

424.34

Income Tax Act,1961 91.07 Commissioner of Income Tax Appeals, Mumbai

Income Tax Act,1961 57.55 Income Tax Appellate Tribunal, Mumbai

Income Tax Act,1961 607.25 Commissioner of Income Tax Appeals, Mumbai

Income Tax Act,1961 63.23 Commissioner of Income Tax Appeals, Mumbai

819.10

Central Sales Tax Act,1956 5.70 Assistant Commissioner of Sale Tax

5.70

Name of Statute Amount of Dispute Forum where dispute is (Rs. in lacs) pending

ESI Corporation 2.17 Employees Insurance Court (Industrial)

Central Excise Act,1944 13.35 Appeal with CESTAT, Bangalore. Remanded to J.C.Ex Ernakulam

Finance Act 1994 8.75 Commissioner of Central Excise Appeals, Ernakulam

Finance Act 1994 2.14 Asst.Commissioner of Central Excise, Muvattupuzha

Sr. Name of Statute Nature of Dues Period to which the No. dispute relates

5 Finance Act 1994 Availing of CEVAT credit on outdoor 04/06 to 11/08 catering services (16.59 32.89)

6 Finance Act 1994 Availing of CEVAT credit on outdoor 12/08 to 09/09 catering services

7 Finance Act 1994 Availing of CEVAT credit on service tax 04/03 to 12/06 on transportation of final products to Rasayani Depot

8 Central Excise Act 1944 Duty on sale of waste/scrap 5/09 to 1/02 and 5/02 to 3/03

9 Customs Act 1962 Demand to remit duty for excess quantity Nov.08 of imported Benzene

10 Finance Act 1994 Availing of CENVAT credit on Hiring of 01/09 to 12/09 Bus, Car and on Capital Goods

11 Finance Act 1994 Service Tax on commercial coaching, 04/09 to 03/10 renting of immovable property

12 Finance Act 1994 Availing of CENVAT credit on outdoor 10/09 to 09/10 catering, insurance, etc

13 Finance Act 1994 Availing of CENVAT credit on Hiring of 01/10 to 11/10 Bus, Car, etc

14 Central Excise Act 1944 Excess amount collected from Rasayni 03/10 Sales

15 Finance Act 1994 Service Tax on commercial coaching, 04/10 to 03/11 renting of immovable property

16 Finance Act 1994 Bus, Car transportation to employees 12/10 to 10/11

17 Finance Act 1994 Insurance renewal/Tyre retrading charge 07/11 to 05/12

18 Finance Act 1994 Bus, Car transportation to employees 11/11 to 06/12

19 Finance Act 1994 Commercial coaching, renting of 04/11 to 03/12 immovable property

Total

Name of Statute Amount of Dispute Forum where dispute is (Rs. in lacs) pending

Finance Act 1944 57.12 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1944 27.99 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1944 35.79 Commissioner of Central Excise Appeals, Erankulam

Central Excise Act 1994 1.78 CESTAT, Bangalore appeal filed by the department

Customs Act 1962 1.01 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1994 3.61 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1994 2.03 Deputy Commissioner of Central Excise

Finance Act 1994 18.57 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1994 2.55 Deputy Commissioner of Central Excise

Central Excise Act 1944 0.28 Deputy Commissioner of Central Excise

Finance Act 1994 1.83 Commissioner of Central Excise Appeals

Finance Act 1994 1.22 Commissioner of Central Excise Appeals

Finance Act 1994 6.31 Commissioner of Central Excise Appeals

Finance Act 1994 0.35 Commissioner of Central Excise Appeals

Finance Act 1994 1.42 Commissioner of Central Excise Appeals

188.17

10. The accumulated losses of the Company at the year-ended exceed its paid-up capital and reserves and its net worth is fully eroded. The Company has incurred cash losses during the year and also in the immediately preceding fi nancial year.

11. Based on our audit procedures and the information and explanations given to us, we are of the opinion that the Company has not defaulted in repayment of its dues to the bond holders during the current year.

12. According to the information and explanations given to us, adequate documents and records are maintained for loans granted to subsidiary company and others on the basis of security given to them.

13. Clause (xiii) of the Order is not applicable as the Company is not a chit fund company or nidhi / mutual benefi t fund / society.

14. The Company is not dealing in or trading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has given guarantee of Rs. 1253 lacs for loan taken by subsidiary - Hindustan Flurocarbons Ltd., from State Bank of Hyderabad. Based on the explanations given to us, in our opinion, the terms and conditions of this guarantee are not prejudicial to the interest of the Company.

16. In our opinion and according to the information and explanations given to us, the term loans raised by the Company during the year were applied for the purposes for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year.

19. The Company has raised Rs. 10,000 lacs through issue of bonds during the year, which is guaranteed by the Government of India by way of registered bond trust deed.

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

21. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the fi nancial statements and as per the information and explanations furnished by the management, we report that no fraud has been noticed or reported by the Company during the year.



For Ford, Rhodes, Parks & Co.

Chartered Accountants

Firm''s Registration No. 102860W



Sd/-

S.B.Prabhu

Place : Mumbai Partner

Date : 29th May, 2013 Membership No. 35296


Mar 31, 2012

1. We have audited the attached Balance Sheet of Hindustan Organic Chemicals Limited as at 31st March, 2012, together with the Statement of Profit and Loss of the Company for the year ended on that date annexed thereto and the Cash Flow statement of the Company for the year ended on that date, in which is incorporated the Balance Sheet, Statement of Profit and Loss and the Cash Flow Statement of the branch audited by other independent auditors, whose report we have considered in preparing this report. 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 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 (Auditor's Report) Order, 2003 issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956, as amended to date; 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 the books;

c) The Balance Sheet and the Statement of Profit and Loss dealt with by this report are in agreement with the books of account;

d) 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 standard referred to in Section 211 (3C) of the Companies Act, 1956.

e) The conditions specified in Section 274(1)(g) of the Companies Act, 1956 in respect of qualifications of directors is not applicable to the Company being a government company.

f) No provision has been made in the financial statements for the following amounts (refer respective notes in the notes to the financial statements):

i) Penal interest of Rs. 672.56 lacs on overdue loan from Government of India (note no 4B(ii)),

ii) Loss on account of misappropriation of Company's fund amounting to Rs. 64.81 lacs, pending final report from CBI and outcome of the civil suit (note no.37),

iii) Liabilities of wages revision for the period 1.01.1997 to 31.12.2000. Rs. 2308.08 lacs at Rasayani unit (note no. 33A),

iv) Liabilities of wages revision for the period 1.01.2007 to 31.3.2008 Rs. 278.96 lacs. to Officers and Rs. 246.31 lacs to Staff at Rasayani unit (note no.33B and 33C),

v) Claims of JNPT short provided in respect of:

a) Minimum guaranteed throughput charges of Rs. 1612.50 lacs,

b) Lease rentals and escalation on leased land of Rs. 621.55 lacs, (note no. 34E)

c) Water charges of Rs. 0.65 lacs, and

d) Way leave charges of Rs. 297.10 lacs,

g) Capital work in progress includes an amount of Rs. 2976.65 lacs incurred on JNPT tank terminal project. The construction has been suspended for more than four years and the lease has been called off by the lessor - JNPT after the expiry of the lease period in June 2010. The status of the project is stagnant, incomplete and of no utility since long. No provision is made for the impairment in the value of this asset, if any, pending ascertainment of the recoverable amount (note no. 34E).

h) The balances of sundry debtors, sundry creditors, loans and advances, other current assets and other debit / credit balances are pending confirmation and reconciliations (note no.42).

i) We further report that had the effects of the items mentioned in paragraph (f) above been considered, the loss for the year would have been higher by Rs. 6102.52 lacs, resulting into a loss of Rs. 13909.37 lacs and the accumulated loss as at the year-end would have been higher by the same amount i:e Rs. 6102.52 lacs. Further, the long-term liabilities / provisions as at the year-end would have been higher by Rs. 6102.52 lacs.

We also report that the effect of the items mentioned in paragraphs (g) and (h) above on the loss for the year and on the Balance Sheet is not ascertainable. j) Wage arrears in respect of the kochi unit of the Company which had not been provided in earlier years amounting to Rs. 93.69 lacs has been paid / provided during the year and charged as current years wage expense in the statement of profit and loss. In our opinion, the same should have reflected as a prior period expense item as the Company should have made provision for the same in earlier years. k) Subject to our comments in paragraphs (f) to (j) above, in our opinion and to the best of our information and according to the explanations given to us, the 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 31st March, 2012;

ii) in the case of the Statement of Profit and Loss, 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

(Referred to in paragraph 3 thereof)

As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956 (the Act), as amended to date, and on the basis of such checks as we considered appropriate and according to the information and explanations given to us during the course of the audit, we further report that: -

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets.

(b) As explained and informed to us, the management has conducted physical verification of major items of fixed assets during the year and we are informed that no material discrepancies were noticed on such verification.

(c) During the year, the Company has not disposed off a substantial part of fixed assets so as to affect the going concern status of the Company.

2. (a) The inventory has been physically verified by the management at reasonable intervals during the year.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business, except for inventory in storage tanks at Kochi unit which does not have the system of taking dip measurements. Instead, reliance is placed on the electronic reading reported by the Distribution Control System.

(c) The Company has maintained proper records of inventory. As explained to us, the discrepancies between the physical inventory and the book records noticed on physical verification were not material and have been properly dealt with in the books of accounts.

3. (a) Based on information, 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 and as such clauses (iii)(b),(c) and (d) are not applicable.

(b) Based on information, the company has not taken any loans, secured or unsecured, from companies, firms, or other parties listed in the register maintained under section 301 of the Companies Act, 1956 and as such clauses (iii)(f) and (g) are not applicable.

4. 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. During the course of our audit, we have neither been informed nor have we observed any continuing failure to correct major weaknesses in internal control systems.

5. According to the information and explanation given to us there were no transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956. Sub Clause (b) of clause (v) is hence not applicable.

6. In our opinion and according to the information and explanations given to us, Company has not accepted deposits from the public. Hence the provisions of section 58A and 58AA of the Companies Act, 1956 with regard to acceptance of deposits from public and the rules framed there under, to the extent applicable, except Rule 3A of the Companies (Acceptance of deposits) Rules,1975 regarding investment in liquid assets, are not applicable. We have been informed by the management that no order has been received by the company, from Company Law Board, National Company Law Tribunal, or Reserve Bank of India or any court or any other tribunal under section 58A and 58AA.

7. The Company has an internal audit system, which, in our opinion, is commensurate with its size and nature of its business.

8. We have broadly reviewed the books of account maintained by the Company in pursuance to the rules made by the Central Government for the maintenance of the cost records under section 209 (1) (d) of the Companies Act, 1956 for certain products of the company and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however made a detailed examination of records with a view to determine whether they are accurate or complete.

9. a) According to the information and explanations given to us and on the basis of the examination of the books of account carried out by us, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other statutory dues with the appropriate authorities. There were no undisputed arrears of statutory dues outstanding as at 31st March, 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 by management and the records of the Company examined by us, there were no disputed dues in respect of Income Tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty and Cess which have not been deposited as on 31st March, 2012 except as stated below:

A. Rasayani Unit :

Sr Name of Statute Nature of Period to No Dues which the dispute relates

1. Customs Act Custom duty NA

Total

2. Central Excise Act Molten Sulphur 1994-95 Classification

3. Central Excise Act Molten Sulphur 1999-2000 Classification

4. Central Excise Act Shortage of inputs

5. Central Excise Act Shortage of inputs

6. Central Excise Act Shortage of inputs

7. Central Excise Act ARO Case

8. Central Excise Act Clearance of SSA to fertilizer manufacturing units

9. Central Excise Act Reversal of 2006-2007 CENVAT Credit availed on inputs lost in flood.

Total

10. Income Tax Act 1961 Penalty under AY 1999-2000 section 271(1)(c )

11. Income Tax Act 1961 Penalty under AY 2003-04 section 271(1)(c )

12. Income Tax Act 1961 Penalty under AY 2004-05 section 271(1)(c )

13. Income Tax Act 1961 Penalty under AY 1999-00 section 271(1)(c )

14. Income Tax Act 1961 Disallowance of AY 2009-10 Expenses

15. Income Tax Act 1961 Disallowance of AY 2008-09 Expenses

Total

B Kochi Unit :

1. Employees Family Damage for 11/95 Pension Scheme default payment to 12/97

2. ESI Corporation ESI contribution 1.04.92 to of employees 31.10.92

3. Central Excise Disallowance of 2004-05 Act,1944 CENVAT Credit availed on the ground that duty is paid by debiting DEPB license

4. Finance Act 1994 Non payment of 4/06 to 3/08 Service Tax on commercial coaching/ training (1.92 6.01)

5. Finance Act 1994 Non payment of 04/08 to Service Tax on 03/09 commercial coaching/ training and renting of immovable property to Sterling Gas

A. Rasayani Unit:

Name of Statute Amount of Forum where dispute is pending disputes (Rupees in lacs)

Customs Act 10.80 Customs, Excise and Service Tax Appellate Tribunal

Total 10.80

Central Excise Act 15.53 Customs, Excise and Service Tax Appellate Tribunal

Central Excise Act 7.62 Commissionerate

Central Excise Act 13.64 Commissionerate

Central Excise Act 18.66 High Court

Central Excise Act 5.84 High Court

Central Excise Act 19.28 Customs, Excise and Service Tax Appellate Tribunal

Central Excise Act 112.78 Commissionerate

Central Excise Act 18.66 Commissionerate

Total 212.01

Income Tax Act 1961 91.08 Commissioner of Income Tax Appeals, Mumbai

Income Tax Act 1961 607.27 Commissioner of Income Tax Appeals, Mumbai

Income Tax Act 1961 63.23 Commissioner of Income Tax Appeals, Mumbai

Income Tax Act 1961 57.55 Income Tax Appellate Tribunal, Mumbai

Income Tax Act 1961 63.49 Commissioner of Income Tax Appeals, Mumbai

Income Tax Act 1961 9.60 Commissioner of Income Tax Appeals, Mumbai

Total 892.22

B Kochi Unit:

Employees Faimly Pension Scheme 18.05 High Court of Kerala.

ESI Corporation 2.17 Employees Insurance Court (Industrial)

Central Excise Act,1944 12.17 Appeal with CESTAT, Bangalore. Remanded to J.C.Ex Ernakulam

Finance Act 1994 8.34 Commissioner of Central Excise Appeals, Ernakulam

Finance Act 1994 2.00 Asst.Commissioner of Central Excise, Muvattupuzha

Sr Name of Statute Nature of Period to No Dues which the dispute relates

6. Finance Act 1994 Availing of CEVAT 04/06 to credit on outdoor 11/08 catering services (16.59 32.89)

7. Finance Act 1994 Availing of CEVAT 12/08 to credit on outdoor 09/09 catering services

8. Finance Act 1994 Availing of CEVAT 01/05 to credit on service 08/06 tax on transportation of final products to customers premises

9. Finance Act 1994 Availing of CEVAT 04/03 to credit on service 12/06 tax on transportation of final products to Rasayani Depot

10. Finance Act 1994 Security services 02/06 to and repair works 12/06 at HOC township

11. Central Excise Duty on sale of 5/09 to Act 1944 waste/scrap 1/02 and 5/02 to 3/03

12. Customs Act 1962 Demand to remit Nov.08 duty for excess quantity of imported Benzene

13. Finance Act 1994 Availing of 01/09 to CENVAT credit 12/09 on Hiring of Bus, Car and on Capital Goods

14. Finance Act 1994 Service Tax on 04/09 to commercial 03/10 coaching, renting of immovable property

15. Finance Act 1994 Availing of 10/09 to CENVAT credit 09/10 on outdoor catering, insurance, etc

16. Finance Act 1994 Availing of 01/10 to CENVAT credit 11/10 on Hiring of Bus, Car, etc

17. Central Excise Excess amount 03/10 Act 1944 collected from Rasayni Sales

18. Income Tax Demand for short AY 2008-09 Act 1961 collection/ Non and 2009-10 payment of TDS for Assessment Year 2008-09 and 2009-10

19. Income Tax Demand for short AY 2008-09 Act 1961 collection/ Non payment of TDS for Assessment Year 2008-09

Name of Statute Amount of Forum where dispute is pending disputes (Rupees in lacs)

Finance Act 1994 53.05 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1994 26.10 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1994 4.84 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1994 33.90 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1994 0.97 Commissioner of Central Excise Appeals, Erankulam

Central Excise Act,1944 1.37 CESTAT, Bangalore appeal filed by the department

Customs Act 1962 0.90 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1994 3.31 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1994 1.89 Deputy Commissioner of Central Excise

Finance Act 1994 16.69 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1994 2.37 Deputy Commissioner of Central Excise

Central Excise Act 1944 0.26 Deputy Commissioner of Central Excise

Income Tax Act 1961 3.55 Commissioner of Income Tax Appeals, Erankulam

Income Tax Act 1961 0.52 Commissioner of Income Tax Appeals, Erankulam

Sr Name of Statute Nature of Period to No Dues which the dispute relates

20. Income Tax Demand for short AY 2011-12 Act 1961 collection/ Non payment of TDS for Assessment Year 2011-12

21. Income Tax Demand for short AY 2010-11 Act 1961 collection/ Non payment of TDS for Assessment Year 2010-11

22. KVAT Act 2003 Disallowance of AY 2009-10 input tax credit on sales to SEZ units

23. KVAT Act 2003 Disallowance of AY 2010-11 input tax credit on computer purchased for ERP implementation

Total

Name of Statute Amount of Forum where dispute is pending disputes (Rupees in lacs)

Income Tax Act 1961 10.39 Commissioner of Income Tax Appeals, Erankulam

Income Tax Act 1961 0.40 Commissioner of Income Tax Appeals, Erankulam

KVAT Act 2003 33.56 D.C. (Appeals), dept. of Commercial Taxes, Ernakulam

KVAT Act 2003 4.11 D.C. (Appeals), dept. of Commercial Taxes, Ernakulam

Total 240.91

10. The accumulated losses of the Company at the year-end exceed fifty percentage of its net worth. During the year, the Company has incurred cash losses. It has not incurred cash losses as per its financial statements during the immediately preceding financial year. However, after giving effect to the qualifications in the auditors' report, there are cash losses during that year.

11. The Company has not defaulted in repayment of dues to the bond holders during the current year.

12. According to the information and explanations given to us, adequate documents and records are maintained for loans granted to subsidiary company and others on the basis of security given by them.

13. Clause (xiii) of the Order is not applicable as the Company is not a chit fund company or nidhi / mutual benefit fund / society.

14. The Company is not dealing in or trading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has given guarantee of Rs.1253 lacs for loan taken by subsidiary - Hindustan Flurocarbons Ltd from State Bank of Hyderabad. Based on the explanations given to us, in our opinion, the terms and conditions of this guarantee are not prejudicial to the interest of the Company.

16. In our opinion and according to the information and explanations given to us, the term loans raised by the Company during the year were applied for the purposes for which the loans were obtained.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year.

19. The Company has raised Rs. 10,000 lacs through issue of bonds during the previous year, which is guaranteed by GOI by way of registered bond trust deed.

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

21. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations furnished by the management, we report that no fraud has been noticed or reported by the Company during the year.

For Ford, Rhodes, Parks & Co.

Chartered Accountants

Firm's Registration No. 102860W

Sd/-

S.B.Prabhu

Place : Mumbai Partner

Date : 29th May, 2012 Membership No. 35296


Mar 31, 2011

We have audited the attached Balance Sheet of Hindustan Organic Chemicals Limited. (HOCL) as at 31st March, 2011, the Profit and Loss Account and also the Cash flow Statement for the year ended on that date annexed thereto, in which is incorporated the Balance Sheet, Profit & Loss Accounts and the Cash Flow Statement of the branch audited by other auditors appointed by the Central Government. In preparing this report, we have considered the report on the accounts of the branch audited by the branch auditors together with the particulars and information relating thereto, furnished to us by the management. 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 misstatements. 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 over all 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 we annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the annexure referred 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, the Company has kept proper books of account as required by law so far as appears from our examination of the books and proper returns adequate for the purpose of our audit have been received from the units except stated specially in report elsewhere.

c) The Balance sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account.

d) In our opinion and to the best of our information and according to the explanations given to us, the Balance Sheet, Profit & Loss Account and Cash Flow Statement read with the Schedule 22 Part B, notes thereon forming part of the accounts comply with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956.

e) The conditions specified in Section 274(l)(g) of the Companies Act, 1956 in respect of qualifications of directors is not applicable to the company being government company.

f) Reference is invited to the following Notes on Accounts in Part B of Schedule 22 with regard to non-provision/pending charge to the Profit and Loss Account:

i) Note No 4 (b) regarding penal interest of Rs.519.01 lacs on overdue loan from Government of India,

ii) Note No.8 (c) regarding non provision on account of misappropriation of Company's fund to the tune of Rs64.81 lacs, pending final report from CBI and outcome of the civil suit.

iii) Note No. 10 (a) regarding liabilities of wages revision for the period 1.01.1997 to 31.12.2000 Rs.2308.08 lacs at Rasayani Unit.

Note No. 10 (b) regarding liabilities of wages revision for the period 1.01.2007 to 31.3.2008 Rs. 278.96 lacs to Officers and Rs. 246.31 lacs to Staff at Rasayani Unit. Note No. 10 regarding liabilities of wages revision for the balance amount of arrears of pay and allowances amounting to Rs.98.60 lacs payable to Officers at Kochi Unit. g) In respect of the following items, no provision/charge to Profit and Loss Accountshas been done for claims of JNPT of Rs.2007.99 lacs as under:

i. regarding claims of JNPT of minimum guaranteed throughput charges of Rs.1256.25 lacs.

ii. Regarding short provision of Rs.453.99 lacs on account of lease rentals and escalation on leased land payable to JNPT

iii regarding claims of of JNPT of water charges of Rs 0.65 lacs and

iv regarding claims of JNPT of way leave charges of Rs 297.10 lacs.

h) Reference is also invited to the following notes on accounts in Part B precise impact of which on the balance sheet and the Profit and Loss Accounts could not be ascertained for the reasons stated therein.

i) Note No. 5(b)(1) regarding amount of Rs.2976.65 lacs incurred on JNPT tank terminal project as expenditure towards construction continues to appear under Capital work in progress, the construction has been suspended for more than three years and the lease has been called off by the lessor JNPT after the expiry of the lease in June 2010. The status of the project is stagnant incomplete and of no utility since long. No provision is made for the depreciation of the asset value if any pending ascertainment of recoverable amount which is the higher of an asset's net selling price and value in use.

ii) Note No.5 (d) of Part 8 - Others, ERP Implementation at Kochi. It is observed that ERP was implemented w.e.f. 16.09.2010. Data upto 31.08.2010 was transferred to SAP. Further entries upto 31st March 2011 were made in SAP. Since in-depth training to staff for the operation of SAP was not extended and that an EDP audit of SAP was not implemented it is recommended that a Migration Audit and EDP Audit be conducted for ensuring that adequate internal control and data security are in place.

iii) Note No 17 regarding pending confirmation and reconciliation of balances of sundry debtors, sundry creditors, loans and advances, other current assets and other debit/credit balances. Further Bank balances are subject to direct confirmation from the Banks, even though confirmations are received by the Company.

i) We further report that had the effect of items mentioned at (f) and (g) above considered, profit for the year would have been decreased by Rs.5523.76 lacs resulting into a loss of Rs. 2952.17 lacs and the accumulated loss as at the year end would be higher by the same amount i.e. Rs. 5523.76 Lacs. Further, the current liabilities/provisions would have been higher by Rs.'5523.76 lacs and the balance of profit and loss account in the asset side of the balance sheet would have been higher by Rs. 5523.76 Lacs.

j) We also report that the effect of items mentioned at (h) above is not ascertainable.

k) Subject to our comments in para (i) and Q) above, in our opinion and to the best of our information and according to the explanation given to us, the said accounts read together with the Significant accounting policies and Notes on accounts appearing in the Schedule 22, give the information required by the Companies Act 1956, in the manner so required and gives the true and fair view in conformity with the Accounting Principles generally accepted in India:

a. In the case of Balance Sheet, of the state of affairs of the company as at 31st March 2011

b. In the case of Profit & Loss Account, of the Profit for the year ended on that date and

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

COMPANIES (AUDITOR'S REPORT) ORDER, 2003. Annexure referred to in Paragraph 3 of our Report of even date

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(i) (b) As explained and informed to us, the Management has conducted physical verification of major items of fixed assets during the year and we are informed that no material discrepancies were noticed on such verification.

(i) (c) No substantial part of the Fixed Asset has been disposed off during the year so as to affect the going concern.

(ii) (a) As per information and explanation given to us the management has carried out physical verification of inventories at reasonable intervals during the year. In our opinion the frequency of such verifications is reasonable.

(ii) (b) In our opinion 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. However in respect of inventory in storage tanks, Kochi unit does not have the system of taking dip measurements. Instead, reliance is placed on the electronic reading reported by the Distribution Control System.

(ii) (c) The company is maintaining proper records of inventories. It is explained to us that no material discrepancies on such physical verification were noticed.

(iii) a) Based on information, 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 and as such clauses (Hi)(b), (c)and (d) are not applicable. e) Based on information, the company has not taken any loans, secured or unsecured, from companies, firms, or other parties listed in the register maintained under section 301 of the Companies Act, 1956 and as such clauses (iii)(f) and (g) are not applicable.

(iv) In our opinion and according to the information and explanation given to us, there is an adequate internal control system for the purchase of inventories and fixed assets and for the sale of goods and services commensurate with the size of the Company and the nature of its business. During the course of our audit, we have not observed any major weakness in internal control system.

(v) According to the information and explanation given to us there were no transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956. Sub Clause (b) of clause (v) is hence not applicable.

(vi) In our opinion and according to the information and explanations given to us, Company has not accepted deposits from the public. Hence the provisions of section 58A and 58AA of the Companies Act, 1956 with regard to acceptance of deposits from public and the rules framed thereunder, to the extent applicable, except Rule 3A of the Companies (Acceptance of deposits) Rules, 1975 regarding investment in liquid assets, are not applicable. We have been informed by the management that no order has been received by the company, from Company Law Board, National Company Law Tribunal, or Reserve Bank of India or any court or any other tribunal under Section 58A and 58AA.

(vii) In our opinion the company has an internal audit system commensurate with its size and nature of its business.

(viii) We have broadly reviewed the books of account maintained by the company in pursuance to the rules made by the Central Government for the maintenance of the cost records under section 209 (1) (d) of the Companies Act, 1956 for certain products of the company and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however made a detailed examination of records with a view to determine whether they are accurate or complete.Cost Audit has been prescribed by the Governmnent of India for the year 2010-11 for both the units of the Company.

(ix) (a) The company is generally regular in depositing undisputed statutory dues including investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues wherever applicable with appropriate authorities.

(ix) (b) According to the information and explanations given to us no undisputed amount payable in respect of sales tax, income tax, wealth tax, excise duties, custom duties, cess and other statutory dues were in arrears as at 31st March 2011 for a period of more than six months from the date they become payable.

(ix) (c) According to the records of the company, details of outstanding dues of income tax, sales tax, wealth fix, service tax, custom duty, excise duty and cess which are not been deposited on account of any dispute are given below:

Sr. Name of Statute Nature of Dues Period to which Amount of Forum where dispute is pending No. the disputes disputes relates (Rs. in lace)

1. Resayani Unit

1. Customs Act Custom duty NA 10.80 Customs, Excise and Service Tax Appellate Tribunal

Total 10.80

1. Central Excise Act Molten Sulphur 1994-95 15.53 Customs, Excise and Service Tax Appellate Tribunal Classification

2. Central Excise Act Molten Sulphur 1999-2000 7.62 Commisslonerate Classification

3. Central Excise Act Shortage of inputs 13.64 Commissionerate

4. Central Excise Act Shortage of inputs 18.66 High Court

5. Central Excise Act Shortage of inputs 5.84 High Court

6. Central Excise Act ARO Case 19.28 Customs, Excise and Service Tax Appellate Tribunal

7. Central Excise Act Clearance of SSA to 112.78 Commissionerate fertilizer manufacturing units

8. Central Excise Act Reversal of CENVAT Credit 2006-2007 18.66 Commissionerate availed on inputs lost in flood.

Total 212.01

1. Income Tax Act 1961 Penalty under Section AY 1999-2000 91.08 Commissioner of Income Tax Appeals, Mumbai 271(1)(c)

2. Income Tax Act 1961 Penalty under Section AY 2003-04 607.27 Commissioner of Income Tax Appeals, Mumbai 271(1)(c)

3. Income Tax Act 1961 Penalty under Section AY 2004-05 63.23 Commissioner of Income Tax Appeals, Mumbai 271(1)(c)

4. Income Tax Act 1961 Disallowance of Expenses AY 2007-08 20.78 Income Tax Appellate Tribunal,Mumbai

5. Income Tax Act 1961 Disallowance of Expenses AY 2008-09 1376.95 Commissioner of Income Tax Appeals, Mumbai

Total 2159.31

2. Kochi Unit

1. Employees Family Damage for default payment 11/95 to 12/97 18.05 High Court of Kerala. Pension Scheme

2. ESI Corporation ESI Contribution of 1/04/1992 to 2.17 Employees Insurance Court (Industrial) employees 31/10/1992

3. Central Excise Act,1944 Disallowance of CENVAT 2004-05 11.09 Appeal with Customs, Excise and Service Tax Appellate Credit availed on the ground Tribunal, Bangalore. Remanded to J.C.Ex Ernakulam that duty is paid by debiting DEPB license

4. Central Excise Act,1944 Disallowance of CENVAT 10/04 to 05/05 0.59 Customs, Excise and Service Tax Appellate Tribunal, Credit availed on the ground Bangalore that duty is paid by debiting DEPB license

5. Finance Act, 1994 Non payment of Service Tax 4/06 to 3/08 7.93 Commissioner of Central Excise Appeals, Ernakulam on commercial coaching / training (1.92 6.01)

6. Finance Act,1994 Non payment of Service Tax 04/08to 03/09 1.86 Asst. Commissioner of Central Excise Muvattupuzha on commercial coaching/ training and renting of immovable property to Sterling Gas

7. Finance Act 1994 Availing of CEVAT credit on 04/06 to 11/08 49.48 Commissioner of Central Excise Appeals, Erankulam outdoor catering services (16.59 32.89)

8. Finance Act, 1994 Availing of CEVAT credit on 12/08 to 09/09 24.21 Commissioner of Central Excise Appeals, Erankulam outdoor catering services

9. Finance Act, 1994 Availing of CEVAT credit on 01/05 to 08/06 4.55 Commissioner of Central Excise Appeals, Erankulam service tax on transportation of final products to customers premises

10. Finance Act, 1994 Availing of CEVAT credit on 04/03 to 12/06 32.01 Commissioner of Central Excise Appeals, Erankulam service tax on transportation of final products to Rasayani Depot

11. Finance Act 1994 Security services and repair 02/06 to 12/06 0.97 Commissioner of Central Excise Appeals, Erankulam works at HOC township

12. Central Excise Act, 1944 Duty on sale of waste/scrap upto 01/02 and 9.10 CESTAT, Bangalore appeal filed by the department 05/02 to 03/03

13. Customs Act, 1962 Demand to remit duty for Nov.08 0.79 Commissioner of Central Excise Appeals, Erankulam excess quantity of imported Benzene

14. Finance Act, 1994 Availing of CENVAT credit 01/09 to 12/09 3.01 Commissioner of Central Excise Appeals, Erankulam on Hiring of Bus, Car and on Capital Goods

15. Finance Act, 1994 Service Tax on commercial 04/09 to 03/10 1.75 Deputy Commissioner of Central Excise coaching, renting of immovable property

16. Finance Act, 1994 Availing of CENVAT credit 10/09 to 09/10 14.81 Commissioner of Central Excise Appeals, Erankulam on outdoor catering, insurance, etc

17. Finance Act, 1994 Availing of CENVAT credit 01/10 to 11/10 2.05 Deputy Commissioner of Central Excise on Hiring of Bus, Car, etc

18. Central Excise Act, 1944 Excess amount collected 03/10 0.24 Deputy Commissioner of Central Excise from Rasayni Sales

19. Finance Act, 1994 Utilisation of CENVAT credit 05/09 to 12/09 1.52 Deputy Commissioner of Central Excise for 100% payment when only 90% paid

20. Income Tax Act, 1961 Demand for short collection/ AY 2008-09 and 3.55 Commissioner of Income Tax Appeals, Erankulam Non payment of TDS for 2009-10 Assessment Year 2008-09 and 2009-10

Total 189.73

(x) During the year, Company has not incurred cash losses. It has incurred cash losses during the immediately preceding financial year. However after giving effect to the qualifications in the auditors report, there will be cash loss during the year.

(xi) The Company has not defaulted in repayment of dues to the bond holders during the current year.

(xii) According to the information and explanations given to us, adequate documents and records are maintained for loans granted to subsidiary Company on the basis of security given by them.

(xiii) The Company is not a chit fund/nidhi/mutual benefit fund/ society as such clauses (xiii)(a) to (d) are not applicable.

(xiv) The Company is not a trader or dealer in any shares, securities or debentures of other companies.

(xv) According to the information and explanation given to us, the Company has given guarantee of Rs.12.53 crores for loan taken by M/s Hindustan Flurocarbons Ltd. from State Bank of Hyderabad, the terms and conditions thereof are not prejudicial to the interest of the Company.

(xvi) In our opinion and according to the information and explanation given to us, the Company has taken term loans during the year and same were applied for the purpose for which the loans were obtained.

(xvii) Based on our examination of the books of account and Balance Sheet of the units, we are of the opinion that funds raised oh short term basis have not been used for long term investments.

(xviii) Company has not made any preferential allotment of shares to parties/companies covered in the register maintained u/s 301 of the Companies Act, 1956.

(xix) The Company has raised Rs.100 crores by way of issuing bonds during the year, which is guaranteed by GOI by way of registered bond trust deed.

(xx) The Company has not raised any money through public issues during the year.

(xxi) Based upon the audit procedure performed for the purpose of reporting the true arid fair view of the financial statements and as per the information and explanation furnished by the management we report that no fraud is noticed or reported during the year by the Company.

For NBS & Co.(FRN 110100W) Chartered Accountants

Sd/-

Devdas Bhat

Date : 30/05/2011 M.No. 48094

Partner.

Place: DELHI












Mar 31, 2010

We have audited the attached Balance Sheet of Hindustan Organic Chemicals Limited. (HOCL) as at 31sl March, 2010 the Profit and Loss Account and also the Cash flow State- ment for the year ended on that date annexed thereto, in which is incorporated the Balance Sheet, Profit & Loss a/c and the Cash Flow Statement of the branch audited by other auditors appointed by the Central Government. In prepar- ing this report, we have considered the report on the ac- counts of the branch audited by the branch auditors to- gether with the particulars and information relating thereto, furnished to us by the management. These financial state- ments are the responsibility of the Companys Manage- ment. 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 rea- sonable assurance about whether the financial statements are free of material misstatements. An audit includes ex- amining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessingjhe accounting principles used and sig- nificant estimates made by the management as well as evaluating the over all financial statement presentation. We believe that our audit provides a reasonable basis for our opinion..

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 we annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the annexure referred 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, the Company has kept proper books of account as required by law so far as appears from our examination of the books and proper returns adequate for the purpose of our audit have been received from the units except stated specially in report elsewhere.

c) The Balance sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report are in agree- ment with the books of account.

d) In our opinion and to the best of our information and according to the explanations given to us, the Balance Sheet, Profit & Loss account and Cash Flow State- ment read with the Schedule 22 Part B, notes thereon forming part of the accounts comply with the Account- ing Standards referred to in Section 211 (3C) of the Companies Act, 1956.

e) The conditions specified in Section 274(l)(g) of the Companies Act, 1956 in respect of qualifications of di- rectors is not applicable to the company being govern- ment company.

f) Reference is invited to the following Notes on Accounts in Part B of Schedule 22 with regard to non-provision/ pending charge to the Profit and Loss Account:

i) Note No 2 (c) regarding penal interest of Rs.348.37 lacs on overdue loan from Government of India,

ii) Note No 8 (i) regarding liabilities of wages revision forthe period 1.01.1997 to 31.12.2000 Rs.2308.08 lacs.

The pay scales of the Board level and below Board level executives have been revised by the Board with effect from 01.01.2007. In exercise of the pow- ers conferred under Article 139 of the Articles of Association of the Company, the President has ap- proved the pay revision and directed the company to implement the pay revision with effect from 01.01.2007 as per DPE guidelines. As per the presidential directive, fitment benefit proposed shall be payable @15% in the first stage and the balance fitment benefit shall be paid when the dip in profit is fully recouped to the original level and the company is able to absorb the financial bur- den consequent on revision. As per the orders is- sued by the company in pursuance of the presi- dential directives, the actual payment of revised salary including fitment benefit payable @ 15% in the first stage is payable from 01.08.2009 and the arrears from 01.01.2007 to 31.07.2009 would be considered to be paid in installments in two finan- cial years, i.e financial year 2010-2011 and 2011- 2012, subject that the company generates Ad- equate cash resources through improved produc- tivity and profitability. No provision has been made by the company for liability arising on account of pay revision amounting to Rs.772.86 Lakhs for Officers Category and Rs.706.74 lakhs for Staff/ Workmen of Rasayani and Kochi units for the pe- riod from 01.01.2007 to 31.07.2009 as per presi- dehtial orders. [Refer note 8(i) and (ii) of Rasayani Unit and Kochi Unit of Part B of Schedule 22 form- ing part of the accounts wherein the company has taken the view that the non-provision is in accor- dance with the pay revision order of the Compe- tent Authority.] Hi) Note No.6 (d) regarding non provision on account of misappropriation of Companys fund to the tune of Rs64.81 lacs.pending final report from CBI and outcome of the civil suit.

g) In respect of the following items, no provision/charge to profit and loss a/c has been done,

i. regarding claims of JNPT of minimum guaranteed throughput charges of Rs. 1284.34 lacs.

ii. Regarding short provision of Rs:426.01 lacs on account of escalation @ 10% per annum on lease rentals on leased land payable to JNPT.

iii. Regarding Rs.273.91 lacs on account of decree order passed by the Civil Court, Panvel in ease of M/s Narendra Construction Company.

h) Reference is also invited to the following notes on ac- counts in Part B Schedule 22 with regards to pending accounting treatment, the precise impact of which on the balance sheet and the profit and loss a/c could not be ascertained for the reasons stated therein. i) Note No 17 regarding pending confirmation and* reconciliation of balances of sundry debtors, sun- dry creditors, loans and advances, other current assets and other debit/credit balances. Further Bank balances are subject to direct con- firmation from the Banks, even though confirma- tions are received by the Company.

i) We further report that had the effect of items men- toned at (f) and (g) above considered, loss forthe year would have been increased by Rs.6185.12 lacs result- ing into a loss of Rs. 14492.91 lacs and the accumu- lated loss as at the year end would be higher by the same amount i:e Rs. 6185.12 Lacs. Further, the cur- rent liabilities/provisions would have been higher by Rs.6185.12 lacs and the balance of profit and loss account in the asset side of the balance sheet would have been higher by Rs.6185.12.

j) We also report that the effect of items mentioned at (h) above is not ascertainable.

k) Subject to our comments in para (i) and (j) above, in our opinion and to the best of our information arid ac- cording to the explanation given to us, the said ac- counts read together with the Significant accounting policies and Notes on accounts appearing in the Sched- ule 22, give the information required by the Compa- nies Act 1956, in the manner so required and gives the true and fair view in conformity with the Accounting Principles generally accepted in India:

In the case of Balance Sheet, of the state of af- fairs of the company as at 31 st March 2010.

In the case of Profit & Loss account, of the Loss - for the year ended on that date and

In the case of the Cash Flow Statement, of the cash flows for the year ended on that date COMPANIES (AUDITORS REPORT) ORDER, 2003. Annexure referred to in Paragraph 3 of our Report of even date

(i) (a) The Company has maintained proper records show- ing full particulars including quantitative details and situ- ation of fixed assets.

(i) (b) As explained and informed to us, the Management has conducted physical verification of major items of fixed assets during the year and we are informed that no material discrepancies were noticed on such verifica- tion.

(i) (c) NO substantial part of the Fixed Asset has been dis- posed off during the year so as to affect the going con- cern.

(ii) (a) As per information and explanation given to us the management has carried out physical verification of inventories at reasonable intervals during the year. In our opinion the frequency of such verifications are rea- sonable.

(ii) (b) In our opinion the procedure of physical verification of inventories followed by the management are reason- able and adequate in relation to the size of the Com- pany and the nature of its business. However in re- spect of inventory in storage tanks, Kochi unit does not have the system of taking dip measurements. In- stead, Reliance is placed on the electronic reading reported by the Distribution Control System.

(ii) (c) The company is maintaining proper records of inven- tory. It is explained to us that no material discrepan- cies on such physical verification were noticed.

(iii) a) Based on information, 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 and as such . clauses (iii)(b),(c) and (d) are not applicable.

e) Based on information, the company has not taken any loans, secured or unsecured, from companies, firms, or other parties listed in the register maintained under section 301 of the Companies Act, 1956 and as such clauses (iii)(f) and (g) are not applicable.

(iv) In our opinion and according to the information and expla- nation given to us, there is an adequate internal control system for the purchase of inventories and fixed assets and for the sale of goods and services commensurate with the size of the company and the nature of its business. During the course of our audit, we have not observed any major weakness in internal control system.

(v) According to the information and explanation given to us there were no transactions that need to.be entered into the register maintained under section 301 of the Companies Act, 1956. Sub Clause (b) of clause (v) is hence not appli- cable.

(vi) In our opinion and according to the information and expla- nations given to us, Company has not accepted deposits from the public. Hence the provisions of section 58A and 58AA of the Companies Act, 1956 with regard to accep- tance of deposits from public and the rules framed there under, to the extent applicable, except Rule 3A of the Com- panies (Acceptance of deposits) Rules,1975 regarding in- vestment in liquid assets, are not applicable. We have been informed by the management that no order has been re- ceived by the company, from Company Law Board, National Company Law Tribunal, or Reserve Bank of India or any court or any other tribunal under section 58A and 58AA.

(vii) In our opinion the company has an internal audit system commensurate with its size and nature of its business. (viii) We have broadly reviewed the books of account maintained by the company in pursuance to the rules made by the Cen- tral Government for the maintenance of the cost records under section 209 (1) (d) of the Companies Act, 1956 for certain products of the company and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however made a de- tailed examination of records with a view to determine whether they are accurate or complete.

(ix) (a) The company is generally regular in depositing undis- puted statutory dues including investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues wherever applicable with appropriate authorities. However a unreasonable delay beyond period of more than two months in de- positing Provident Fund and general delay in deposit- ing TDS dues of the Company with appropriate authori- ties is observed.

(ix) (b) According to the information and explanations given to us no undisputed amount payable in respect of sales tax, income tax, wealth tax, excise duties, custom du- ties, cess and .other statutory dues were in arrears as at 31st March 2010 for a period of more than six months from the date they become payable.

(ix) (c) According to the records of the company, details of out- standing dues of income tax, sales fax, wealth tax, ser- ! vice tax; custom duty, excise duty and cess which are not been deposited on account of any dispute are given below.

SI. Name of Statute Nature of Dues No. Rasayani Unit .

1 Customs Act Customs Duty

1. Central Excise Act Molten Sulphur Classification

2. Central Excise Act Molten Sulphur Classification

3. Central Excise Act Shortage of inputs

4. Central Excise Act Shortage of inputs

5. Central Excise Act Shortage of inputs

6. Central Excise Act Shortage of inputs

7. Central Excise Act ARO Case

8. Centraf Excise Act Clearance of SSA to fertilizer

manufacturing units

9. Central Excise Act Reversal of CENVAT

Credit availed on inputs lost in flood.

2.Kocht Unit

1. Employees Family - Damage for default payment Pension Scheme

2. ESI Contribution of employees 1/

3. Central Excise Act, Disallowance of CENVAT Credit 1944 availed on the ground that duty is paid by debiting DEPB license

4. Central Excise Act, - Disallowance of CENVAT Credit 1944 availed on the ground that duty is paid by debiting DEPB license

5. Finance Act 1994 Non payment of Service Tax on

commercial coaching/training

6. Finance Act 1994 Non payment of Service Tax on

commercial coaching/training and

renting of immovable property to Sterling Gas

7. Finance Act 1994 Availing of CEVAT credit on

outdoor catering services

8. Finance Act 1994 Availing of CEVAT credit on outdoor

catering services ;

9. Finance Act 1994 Availing of CEVAT credit ori service tax on transportation of final products to customers premises

10. Finance Act 1994 Availing of CEVAT credit on service tax

on transportation of-final products to Rasayani Depot

11. Finance Act 1994 Security services and repair works at HOC township

12. Cental Excise Act Duty on sale of waste/scrap upto 1944

13. Cental Excise Act Demand for additional remittance 1944 of 75% on GTA (abatement)

14. Customs Act 1962 Demand to remit duty,for excess

quantity of imported Benzene



nnua/ Report 2009-2010

Name of Statute Period to Amount Forum where

which dispute of Disputes Dispute

relates (Rs. In lacs) is pending

Customs Act NA 10.80 Customs, Excise and Service Tax Appellate Tribunal

Total 10.80.

Central Excise Act 1994-95 15.53 Customs, Excise and Service Tax Appellate Tribunal

Central Excise Act 1999-2000 7.62 Commissionerate

Central Excise Act 2002-2003 8.82. Commisstonerate

Central Excise Act - 13.64 Commisstonerate

Central Excise Act - 18.66 High Court

Central Excise Act - 5.84 High Court

Central Excise Act - 19.28 Customs, Excise and

Service Tax Appellate Tribunal Central Excise Act - 112.78 Commissionerate

Central Excise Act 2006-2007 18.66 Commissionerate

Total 212.01

2.Kocht Unit

Employees Family 11/95to12/97 18.05 High Court of Kerala. Pension Scheme

ESI Corporation 1/04/1992 to 1944 31/10/1992 2.17 Employees Insurance Court (Industrial)

Central Excise Act, 2004-05 10.31 Appeal with Customs, 1944 Excise and Service Tax Appellate Tribunal, Bangalore. Recommended to J.C.Ex Ernakulam

Central Excise Act, 10/04 to 05/05 0.59 Customs, Excise and 1944 Service Tax . Appellate Tribunal, Bangalore

Finance Act 1994 4/06to3/08 7.64 ommissioner of Central

Excise Appeals, Emakulam

Finance Act 1994 04/08 to 03/09 1.76 Asst.Commissioner of

Central Excise, Muvattupuzha

Finance Act 1994 04/06 to 11/08 46.90 Commissioner of Central

Excise Appeals, Erankulam

Finance Act 1994 12/08 to 09/09 22.84 Asst.Commissioner of

Central Excise, Muvattupuzha

Finance Act 1994 01/05 to 08/06 4.34 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1994 04/03 to 12/08- 30.65 Commissioner of Central Excise Appeals, Erankulam

Finance Act 1994 02/06 to 12/06 0.97 Commissioner of Central

Excise Appeals, Erankulam

Cental Excise Act 01/02 and 05/02 1944 to 03/03 8.81 CESTAT Bangalore appeal filed by.the department

Cental Excise Act 04/07 to-02/08 15.79 Joint Commissioner of Central 1944 Excise Appeals, Erankulam

Customs act 1962 Now.08 0.71 Commissioner of Central Excise Appeals, Erankulam

Total 171.53

(x) During the year, company has incurred cash losses .It has not incurred cash losses during the immediately pre- ceding financial year. However, after giving effect to the qualifications in the auditors report, there will not be any effect on cash loss.

(xi) The company has not defaulted in repayment of dues to the bond holders during the current year.

(xii) According to.the information and. explanations given to us*, adequate documents and records are maintained for loans granted to subsidiary company on the basis of security given by them.

(xiii) The Company is not a chit funti/nidhi/mutual benefit fund/ society as such clauses (xiii) (a) to (d) are not applicable.

(xivj The Company is not a trader or dealer iri any shares, securities or debentures of other companies.

(xv) According to the information and explanation given to us, the,company has given guarantee of Rs.3.45 crores for loan taken by IWs Hindustan Flurocarbons Ltd from State Bank of Hyderabad, the terms and conditions thereof are not prejudicial to the interest of the com- pany.

(xvi) In our opinion and according to the information and ex- " planation givento us, the company has taken term loans during the year and same were applied for the purpose - - for which the loans were obtained.

(xvii) Based on our examination of the books of account and Balance Sheet of the units, we are of the opinion that funds raised on short term basis have not been used for long term investments.

(xviii) Company has not made any preferential allotment of shares to parties/companies covered in the register maintained u/s 301 of the companies Act 1956.

(xix) The company has raised Rs.100 crores by way of issu- ing bonds during the year, in respect of which proper security is created.

(xx) The company has not raised any money, through public _ issues during the year.

(xxi) Based upon the audit procedure performed for the pur- pose of reporting the true and fair view of the financial statements and as per the information and "explanation furnished by the management we report that no fraud is noticed or reported during the year by the company.

For NBS & Co

Chartered Accountants

S/d

CA Devdas Bhat

Partner

M.No. 48094

Date : 21 May, 2010

Place : Mumbai

 
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