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Auditor Report of Kitply Industries Ltd.

Mar 31, 2014

We have audited the accompanying financial statements of KITPLY INDUSTRIES LIMITED which comprise the Balance Sheet as at March 31, 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 Statements

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 referred to in sub-section (3C) of 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 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 financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India, Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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 judgments, 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 but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

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 audit opinion.

Option

In our opinion and to the best of our information and according to the explanations given to us, 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:

a) in the case of Balance Sheet, of the state of affairs of

the Company as at March 31, 2014;

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

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

Emphasis of Matter

We draw attention to the following Notes to the Financial Statements which describes the following matters related to the Company:

a) Note 40 which describes that the Company's net worth has been fully eroded. Also considering below-mentioned point (b) and (c) under emphasis of matter paragraph along with this point, there is a clear indication that there is existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern, which is dependent on establishing profitable operations in line with the Company's business plans, as well as satisfactory settlement of disputes and litigation in favour of the Company. Further, the Company has made a reference to the Hon'ble Board for Industrial & Financial Reconstruction (BIFR) pursuing to the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 and it has also been registered u/s 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985. As described in the above note, the Company is hopeful for working out a rehabilitation scheme, in view of which, the accompanying financial statements have been prepared under the going concern assumption, and consequently, no adjustments, if any, have been made in the financial statements.

b) Note 39(c) which descries that no provision has been made for interest amounting to Rs, 425.27 lacs (including Rs, 84.36 lacs for the year) and liquidated damages of Rs,170.89 lacs claimed by certain lenders. In view of pending disposal of the suits filed by the above- mentioned lenders as well the Company in this matter, no liability thereof is considered payable.

c) Note 38 which descries that no provision is made for demand from a lender amounting to Rs, 3,210.37 lacs towards principal and interest on withdrawal of One Time Settlement entered in earlier years, due to alleged non fulfillment of agreed conditions by the Company.

However, the above amount, in the opinion of the management is not payable as the Company has fully complied with payment term as per CDR (Corporate Debt Restructuring) terms and the Company has also been legally advised that the above demand is not tenable.

d) Note 42 which descries that no provision has been made for interest amounting Rs, 60 lacs on loan ofRs, 400 lacs from an unsecured creditor since the same is disputed by the Company and the matter is subjudice. Moreover, according to BIFR's (Board for Industrial and Financial Reconstruction) summary record of proceedings of the hearing held on 21.09.2012 and 11.02.2013 against Miscellaneous Application No. 341/2012, Case No. 23/2012 made by the Company, the company is restrained from making any payment to unsecured creditors without prior approval of the Board till next date of hearing. At present a stay order has been granted on the sickness of the company by Hon'ble AAIFR.

e) Note 4 (A) (b) to (g) of the financial statements which describes that the Company has failed to pay agreed installments towards redemption of various Debentures which were due in 2013-14 due to the sickness of the Company.

Our opinion is not qualified in respect of the above matters.

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 paragraphs 4 and 5 of the said Order.

2. As required by section 227(3) of the Act, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

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

(d) In our opinion, the Balance Sheet, Statement of Profit 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) On the basis of the written representations received from the directors, as on March 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014 from being appointed as a director in terms of clause (g) of sub- section (1) of Section 274 of the Companies Act, 1956.

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

(b) Fixed assets were physically verified by the management in the previous year in accordance with a planned programme of verifying them once in three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) The Company has not disposed of any substantial part of its fixed assets so as to affect its going concern status.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

(b) 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.

(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on such physical verification.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to Companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956

(b) The Company has taken loans inform of debentures from two parties covered in the register maintained under section 301 of the Act. The maximum outstanding amount of such loans during the year and the year- end balance due to such parties was Rs, 1,103.20 lacs (including Rs, 880 lacs not bearing interest).

(c) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

(d) As per stipulations, the above loans have not become due for repayment and thus, there has been no default on the part of the company. Further, interest on the above loans, wherever applicable, was not due for payment during the year.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business, for the purchase of fixed assets, inventory and for the sale of goods. During the course of our audit, we have neither come across nor have we been infirmed of any major weakness or continuing failure to correct of major weaknesses in the aforesaid internal control systems of the company.

(v) (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Act, that need to be entered into the register maintained under the above section, have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees five lacs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, directives issued by Reserve Bank Of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Act, and the rules framed there under, to the extent applicable, have not been complied with in respect of loan of Rs, 400 lacs taken from a party. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank Of India or any Court or any other Tribunal.

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

(viii) We have broadly reviewed the books of accounts maintained

by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Act in respect of its products and are of the opinion that prima facial, the prescribed accounts and records have been made and maintained.

(ix) (a) According to the information and explanations given to us, the Company is not 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, Customs duty, Excise duty, Cess and other material statutory dues as applicable with the appropriate authorities. Moreover there have been serious delays in a large number of cases and also certain amounts are not yet paid as indicated in (b) below.

(b) According to the information and explanations given to us, undisputed dues in respect of Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income tax, Wealth tax, Service tax, Sales tax, Customs duty, Excise duty, Cess and other material statutory dues which were outstanding, at 31st March, 2014 for a period of more than six months from the date they became payable are as follows :

Name of Nature of Amount the Statute the Dues (Rs, in lacs) Central Sales Sales Tax Liability 35.54 Tax/Maharashtra Sales Tax Act

Entry Tax Act Entry Tax Liability 0.83 Chhattisgarh

Uttar Pradesh Purchase Tax 2.63 Sales Tax Act Liability

Income Tax Act, Tax Deducted at 102.57 1961 Source (TDS) & Interest thereon

Fringe Benefit Tax 49.54 & Interest thereon

Employees Provident Fund 76.39 Provident Fund Act Dues

Employees State ESI 4.53 Insurance Act

Sales Tax on Professional Tax 3.58 Employment

Central Excise Excise Duty & 1499.56 and Customs Act, 1944 Interest thereon

Value Added Tax Value Added Tax 173.61 Payable

Name of the Statute Period to Due Date which the amount relates

Central Sales 2002-13 to 2004-15 & Tax/Maharashtra 2009-10 to 2011-12 Sales Tax Act

Entry Tax Act 2010-11 & 2011-12 Subsequent month Chhattisgarh after accrual

Uttar Pradesh 2013-14 Sales Tax Act

Income Tax Act, 2008-09- to 2012-14 1961 2007-08 to 2012-14 Quarterly after (only interest part) accrual Employees Provident Fund Act 2009-10 to 2013-14 Subsequent month after accrual Employees State 2010-11 to 2012-14 Insurance Act

Sales Tax on 2004-05 to 2013-14

Central Excise 1995-96 to 1999-2000 Subsequent month and Customs & 2002-03 to 2013-14 after accural Act, 1944 Value Added Tax 2005-06 to 2013-14 (c) According to the records of the Company, the dues outstanding in respect of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty & Cess on account of any dispute, are as follows : -

Name of Nature of Amount the Statute the Dues (Rs, in lacs)

Central Excise and Differential Excise Duty 559.17 Customs Act, 1944

Denial of benefit of 330.02 Exemption

Service Tax on GTA 35.21

Cenvat Credit reversal on 18.25 Non-Excisable Product

Differential Excise Duty 5.07

U.P. Sales Tax / U.P. Purchase Tax/Form C & F 107.75 VAT Act / Central Pending / Various Other Sales Tax Act, 1956 matters



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

Central Excise and 1980-81 to 1984-85 & CESTAT, Kolkata Customs Act,1944 1994-95 to 1996-97

2007-08 to 2010-11 CESTAT, Kolkata

2004-05 to 2005-06 CESTAT, Kolkata

2000-01 CESTAT, Delhi

This case was pending under CESTAT, Meerut until immediately preceding previous year but as 2005-06 explained by the Management such case was decided in previous year

U.P.Sales Tax/U.P Asst. Comm/Dy. vat aCT/cENTRAL Various Years sALES tAX aCT,1956 Comm./Joint Comm./ Member Tribunal Bench/High Court

(x) The Company's accumulated losses at the end of the financial year are more than fifty percent of its net worth and it has incurred cash losses in the current and immediately preceeding financial year.

(xi) Dues ofRs, 41.64 lacs (including interest on debentures aggregating to Rs, 31.10 lacs recalled by the lenders, have been disputed by the Company as stated in Note 38 to the accompanying financial statements and hence we are unable to comment whether there is a default in respect of the above recalled dues. Read with the above, based on our audit procedures and as per the information and explanations given by the management, the Company has not defaulted in repayment of dues to financial institutions, banks or debenture holders except Rs, 3,780.88 lacs (including interest Rs, 1,758.48 lacs) towards certain debentures which have become due for repayment on 31st March, 2014.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a Nidhi/ Mutual Benefit Fund/society and therefore, the provisions of sub clause (a), (b), (c) and (d) of clause (xiii) of paragraph 4 of the Order are not applicable to the Company.

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

(xv) According to the information and explanations provided to us, the Company has not granted any Guarantee for loans taken by others from banks or financial institutions.

(xvi) Based on the information and explanations given to us by the management, the term loans raised during the immediately preceding previous years by the Company have been were applied for the purpose for which these loans were obtained, where such end use has been stipulated by the lenders. However, during the previous year, no term loans were raised by the Company

(xvii) 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.

(xviii) According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties covered in the Register maintained under section 301 of the Companies Act, 1956. Accordingly the provision of clause (xviii) of paragraph 4 of the Order is not applicable to the Company.

(xix) According to the information and explanations given to us, the Company had created security in respect of debentures issued in earlier years and outstanding during the year.

(xx) The Company has not raised any money through a public issue during the year. Therefore, the provision of clause (xx) of paragraph 4 of the Order is not applicable to the Company.

(xxi) 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 given by the management, we report that no fraud on or by the the Company has been noticed or reported during the year.

For Krishanu Bhattacharyya & Associates

Chartered Accountants

FRN: 324327E



CA Krishanu Bhattacharyya

Place : Kolkata Partner

Date: November 30, 2014 M. No. 059934


Mar 31, 2013

We have audited the accompanying financial statements of of the Balance Sheet as at 31st March, 2013 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 Statements

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 accounting principles generally accepted in India, including the Accounting Standards referred to in sub-section (3C) of 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 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 financial statements based on our audit we conducted our audit in accordance with the Standards on auditing issued by the Institute of Chartered Accountants of India, those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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 statement, 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 the 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 audit opinion.

Basis for qualified opinion

(a) As indicated in Note No. 36 to the financial statements, no provision has been made towards interest and redemption premium amounting to Rs,2,200.00 lacs (including Rs,1,200.00 lacs for the year) and Rs,4687.51 lacs (including Rs,2,192.57 lacs to be adjsuted against Securities Premium account) respectively on debentures of Rs,12,000.00 lacs, on and from 1st April, 2011 for the reasons mentioned therein.

(b) As indicated in Note No. 37 to the financial statements, no provision has been made for interest amounting to Rs,60.00 lacs on loan of Rs,400.00 lacs from an unsecured creditor since the same is disputed by the Company and the matter is subjudice.

Had the impact of above items been considered, loss for the year would have been Rs,5,918.11 lacs as against the reported loss of Rs,1,163.17 lacs.

Our audit opinion on the financial statements for the previous year was also qualified in respect of the item (a) above.

Qualified option

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 stated 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 :

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

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

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

Emphasis of Matter

We draw attention to the following Notes to the financial statements

a) As stated in Note No. 35, the Company's net-worth has been fully eroded and we also draw reference to paragraphs (b) and (c) below. Taken together, these conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern, which is dependent on establishing profitable operations in line with the Company's business plans as well as satisfactory settlement of disputes/litigation in favour of the Company Further, the Company has made a reference to the Hon'ble Board for Industrial & Financial Reconstruction (BIFR) pursuant to the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 and it has also been registered u/s 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985. As indicated in the above note, the Company is hopeful of working out a rehabilitation scheme, in view of which, the accompanying financial statements have been prepared under the going concern assumption, and consequently, no adjustments, if any, have been made in the financial statements.

b) Note No. 34(c) regarding non-provision of interest amounting to Rs, 425 27 lacs (including Rs, 84.36 lacs for the year) and liquidated damages of Rs, 170.89 lacs claimed by certain lenders. Pending disposal of the suits filed by the above lenders as well the Company in the above matter no liability thereof is considered payable.

c) Note No. 33 regarding non-provision of demand from a lender amounting to Rs, 3,210.37 lacs towards principal and interest on withdrawal of One Time Settlement entered in earlier years, due to alleged non fulfillment of agreed conditions by the Company. However, the above amount, in the opinion of the management is not payable and the Company has also been legally advised that the above demand is not tenable.

Our opinion is not qualified in respect of the above matters.

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 paragraphs 4 and 5 of the said Order.

2. As required by section 227(3) of the Act, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

(c) The Balance Sheet, Statement of Profit and Loss

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

(d) Except for the matters stated 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 referred to in sub-section (3C) of Section 211 of the Act;

(e) On the basis of the written representations received from the directors, as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013 from being appointed as a director in terms of clause (g) of sub section (1) of Section 274 of the Act.

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

(b) Fixed assets were physically verified by the management in the previous year in accordance with a planned programme of verifying them once in three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) There was no disposal of a substantial part of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

(b) 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.

(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on such physical verification.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act.

Accordingly, the provisions of clauses 4 iii (a) to (d) of the Order are not applicable to the Company.

(b) The Company has taken loans in the form of debentures from two parties covered in the register maintained under section 301 of the Act. The maximum outstanding amount of such loans during the year and the year-end balance due to such parties was Rs, 1,077.60 lacs (including Rs, 880 lacs not bearing interest).

(c) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

(d) As per stipulations, the above loans have not become due for repayment and thus, there has been no default on the part of the company. Further, interest on the above loans, wherever applicable, was not due for payment during the year.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system 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. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the company in respect of these areas.

(v) (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Act, that need to be entered into the register maintained under the above section, have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Act, and the rules framed there under, to the extent applicable, have not been complied with in respect of loan of Rs,400 lacs taken from a party. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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

(viii) We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Act in respect of its products and are of the opinion that prima facia, the prescribed accounts and records have been made and maintained.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales- tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues have not been regularly deposited with the appropriate authorities and there have been serious delays in a large number of cases and also certain amounts are not yet paid as indicated in (b) below.

(b) According to the information and explanations given to us, undisputed dues in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other material statutory dues which were outstanding, at the year end for a period of more than six months from the date they became payable are as follows :

Name of Nature of Amount the statute the dues (Rs, in lacs)

Central Sales Sales Tax Liability 35.54 Tax/Maharashtra Sales Tax Act

Entry Tax Act Entry Tax 0.83 Chhattisgarh Liability

Uttar Pradesh Purchase Tax 2.63 Sales Tax Act Liability

Income Tax Act, Tax Deducted at 113.47 1961 Source & Interest thereon

Fringe Benefit Tax 44.44 & Interest thereon

Employees Provident Fund 62.11 Provident Fund Act Dues

Employees State ESI 3.98 Insurance Act

State Tax on Professional Tax 3.37 Employment

Central Excise and Excise Duty & 1435.53 Customs Act, 1944 Interest thereon

Value Added Tax Value Added Tax 173.53 Payable



Name of the Atatute Period to Due Date which the amount relates

Central Sales 2002-03 to Subsequent month Tax/Maharashtra 2004-05 & after accrual Sales Tax Act 2009-10 to 2011-12

Entry Tax Act 2009-11 & 2011-12 Subsequent month after accrual Uttar Pradesh 2002-03 Sales Tax Act Subsequent month after accrual Income Tax Act, 2008-09 to Quarterly after 2012-13 accrual 1961

Employees Provident Fund Act 2009-10 to 2012-13 Subsequent month after accrual

Employees State 2010-11 to 2012-13 Subsequent month after accrual Insurance Act

State Tax on 2004-05 to 2012-13 Subsequent month after accrual Employment

Central Excise and 1995-96 to 1999-2000 Subsequent month & 2002-13 to 2012-13 after accrual Customs Act, 1944

Value Added Tax 2005-06 to 2012-13 Subsequent month after accrual (c) According to the records of the Company, the dues outstanding in respect of sales tax, income tax, customs duty, wealth tax, service tax, excise duty & cess on account of any dispute, are as follows : -

Name of Nature of Amount the statute the dues (Rs, in lacs)

Central Excise and Differential Excise Duty 559.17 Customs Act, 1944

Denial of benefit of 330.02 Exemption

Differential Excise Duty 5.07

Service Tax on GTA 35.21

Cenvat Credit reversal on 18.25 Non-Excisable Product

U.P. Sales Tax/U.P. Purchase Tax/C/F Forms 107.75 Vat Act/Central Pending/Various Other Sales Tax Act, 1956 Matters



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

Central Excise and 1980-81 to 1984-85 & CESTAT, Kolkata Customs Act,1944 1994-95 to 1996-97

2007-08 to 2010-11 CESTAT, Kolkata

2005-06 CESTAT, Meerut

2004-05 to 2005-06 CESTAT, Kolkata

2000-01 CESTAT, Delhi

U.P.Sales Tax/U.P Various years Asst. Comm/Dy. Vat Act/Central Comm./Joint Comm./ Sales Tax Act,1956 Member Tribunal Bench/High Court

(x) The Company's accumulated losses at the end of the financial year are more than fifty percent of its net worth and it has incurred cash losses in the current and immediately preceding financial year.

(xi) Dues of Rs, 41.64 lacs (including interest on debentures aggregating to Rs, 31.10 lacs recalled by the lenders, have been disputed by the Company as stated in Note 33 to the accompanying financial statements and hence we are unable to comment whether there is a default in respect of the above recalled dues. Read with the above, based on our audit procedures and as per the information and explanations given by the management, the Company has not defaulted in repayment of dues to financial institutions, banks or debenture holders except Rs, 3,780.88 lacs (including interest Rs, 1,758.48 lacs) towards certain debentures which has become due for repayment on 31st March, 2013.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society and therefore, the provisions of clause 4 (xiii) of the Order are not applicable.

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

(xv) According to the information and explanations provided to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

(xvi) Based on the information and explanations given to

us by the management, term loans were applied for the purpose for which these loans were obtained.

(xvii) 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.

(xviii) The Company has not made any preferential allotment of shares during the year to parties or companies covered in the register maintained under section 301 of the Act.

(xix) According to the information and explanations given to us, the Company had created security in respect of debentures issued in earlier years and outstanding during the year.

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

(xxi) 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 given by the management, we report that no fraud on or by the Company has been noticed or reported during the year.

For S. R. BATLIBOI & CO.

Chartered Accountants

Firm Registration Number : 301003E



per R. K. Agrawal

Place : Kolkata Partner

Dated : May 30, 2013 Membership No. 16667


Mar 31, 2012

1. We have audited the attached Balace Sheet of Kitply Industries Limited as at 31st March, 2012 and also the Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Without qualifying our opinion, attention is drawn to the following Notes :-

a. As stated in Note 35, the Company's net-worth has been fully eroded and we also draw reference to paragraphs 4 (b) and 4 (c) below and the related notes in the financial statements. Taken together, these conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern, which is dependent on establishing profitable operations in line with the Company's business plans, as well as satisfactory settlement of disputes/litigation in favour of the Company. Further, the Company has made a reference to the Hon'ble Board for Industrial & Financial Reconstruction (BIFR) pursuant to the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 and it has since been permitted to be registered u/s 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985. These mitigating factors have been more fully discussed in Notes 33, 34(c) and 35 to the accompanying financial statements, in view of which the accompanying financial statements have been prepared under the going concern assumption, and consequently, no adjustments, if any, have been made to the carrying values of assets and liabilities.

b. Note 34 (c) regarding non-provision of interest amounting to Rs. 34,090,685 (including Rs. 8,436,000 for the year) and overdue interest and liquidated damages of Rs. 17,088,575 claimed by certain lenders. The above lenders have also filed petition before the Hon'ble Guwahati High Court under the relevant provisions of the Companies Act, 1956 for the winding up of the Company due to non-payment of above dues. However, the Company has also filed a suit in the court for specific performance and pending its disposal, no liability thereof is considered payable.

c. Note 33 regarding non-provision of demand from a lender amounting to Rs. 321,037,000 towards principal and interest on withdrawal of One Time Settlement entered in earlier years, due to alleged non fulfillment of agreed conditions by the Company. However, the above amount, in the opinion of the management is not payable and the Company has also been legally advised that the above demand is not tenable.

5. Attention is drawn to Note 38 regarding non provision of interest and redemption premium amounting to Rs.100,000,000 and 268,788,913 respectively on debentures of Rs. 1,200,000,000 held by India Debt Management Private Limited, effective from 1st April, 2011 for the reasons mentioned therein. Had the above liability been considered in the accounts, loss for the year would have been Rs. 1,191,506,948 as against the reported loss of Rs. 1,041,975,342 and reserves & surplus as at the balance sheet date would have been (-) Rs. 3,799,083,644 as against the reported figure of (-) Rs. 3,430,294,731.

6. Further to our comments in the Annexure referred to above, we report that :

i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from sales branches not visited by us;

iii. The balance sheet, statement of profit and loss and cash flow statement dealt with by this report are in agreement with the books of account;

iv. In our opinion, the balance sheet, statement of profit and loss and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

v. On the basis of the written representations received from the directors, as on 31st March, 2012, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on

31st March, 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts except for the effect of our observation stated in para (5) above, 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 :

a) in the case of balance sheet, of the state of affairs of the Company as at 31st March, 2012;

b) in the case of statement of profit and loss, of the loss for the year ended on that date; and

c) in the case of cash flow statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS' REPORT

(REFERRED TO IN OUR REPORT OF EVEN DATE TO THE MEMBERS OF KITPLY INDUSTRIES LIMITED AS AT AND FOR THE YEAR ENDED 31ST MARCH, 2012)

(i) (a) The Company has maintained proper records

showing full particulars, including quantitative details and situation of fixed assets.

(b) Fixed assets have been physically verified by the management during the year and no material discrepancies were identified on such verification.

(c) There was no disposal of a substantial part of fixed assets during the year.

(ii) (a) The management has conducted physical

verification of inventory at reasonable intervals during the year.

(b) The procedures of physical verfication of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on such physical verification.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clauses 4 iii (a) to (d) of the Order are not applicable to the Company.

(b) The Company has taken loans in the form of debentures from two parties covered in the register maintained under section 301 of the Companies Act, 1956. The maximum outstanding

amount of such loans during the year was Rs. 107,760,421 and the year-end balance due to such parties was Rs. 107,760,421(including Rs. 88,000,000 not bearing interest)

(c) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

(d) As per stipulations, the above loans have not become due for repayment and thus, there has been no default on the part of the company. Further, interest on the above loans, wherever applicable, was not due for payment during the year.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system 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. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the company in respect of these areas.

(v) (a) According to the information and explanations

provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 that need to be entered into the register maintained under the above section, have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956, and the rules framed there under, to the extent applicable, have not been complied with in respect of loan of 400 lacs taken from a party. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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

(viii) To the best of our knowledge and as explained, the Central Government has not prescribed the maintenance of cost records under clasue (d) of sub- section (1) of section 209 of the Companies Act, 1956 for the products of the Company.

(ix) (a) Undisputed statutory dues including provident

fund, investor education and protection fund, employees' state insurance, income-tax, sales- tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues have not been regularly deposited with the appropriate authorities and there have been serious delays in a large number of cases and also certain amounts are not yet paid as indicated in (b) below.

(b) According to the information and explanations given to us, undisputed dues in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other material statutory dues which were outstanding, at the year end for a period of more than six months from the date they became payable are as follows :

Name of Nature of Amount Period to Due Date the statute the dues (Rs.in lacs) which the amount relates

Central Sales Sales Tax Liability 28.97 2002-03, Subsequent month Tax/ Maharashtra 2003-04, 2004-05, after accrual Sales Tax Act 2009-10 & 2010-11

Entry Tax Act Entry Tax 0.82 2010-11 & 2011-12 Subsequent month Chhatt isgarh Liability after accrual

Uttar Pradesh Purchase Tax 2.63 2002-03 Subsequent month Sales Tax Act Liability after accrual

Income Tax Act, Tax Deducted at 81.25 2008-09, 2009-10, Subsequent month 1961 Source & 2010-11 & 2011-12 after accrual Interest thereon

Fringe Benefit Tax 39.35 2007-08 to Quarterly after & Interest thereon 2011-12 accrual

Employees Provident Fund 47.01 2009-10, 2010-11 & Subsequent month Provident Fund Act Dues 2011-12 after accrual

Employees State ESI 1.26 2010-11 & 2011-12 Subsequent month

Insurance Act after accrual

State Tax on Professional Tax 3.29 2007-08 to Subsequent month Employment 2011-12 after accrual

Central Excise and Excise Duty & 357.90 1999-2000, 2002-03 Subsequent month

Customs Act, 1944 Interest thereon to 2011-12 after accrual

Value Added Tax Value Added Tax 31.63 2009-10, 2010-11 & Subsequent month Payable 2011-12 after accrual

(c) According to the records of the Company, the dues outstanding in respect of sales tax, income tax, customs duty, wealth tax, service tax, excise duty & cess on account of any dispute, are as follows : -

Name of Nature of Amount Period to which the Forum where the statute the dues (Rs.in lacs) amount relates dispute is pending

Central Excise and Differential Excise Duty 559.17 1980-81 to 1984-85 & CESTAT, Kolkata

Customs Act, 1944 1994-95 to 1996-97

Denial of benefit of 330.02 2007-08 to 2010-11 CESTAT, Kolkata exemption

Differential Excise Duty 5.07 2005-06 CESTAT, Meerut

Service Tax on GTA 35.21 2004-05 to 2005-06 CESTAT, Kolkata

Cenvat Credit reversal on 18.25 2000-01 CESTAT, Delhi Non-Excisable Product

Excise duty on 1,023.46 1995-1996 to Supreme Court

prelaminated Particle 1999-2000 Board

U.P. Sales Tax/U.P. Purchase Tax/C/F Forms 107.75 Various years Asst. Comm/Dy. Vat Act/ Central Pending/ Various Other Comm./ Joint Comm./ Sales Tax Act, 1956 Matters Member Tribunal Bench/High Court

(x) The Company's accumulated losses at the end of the financial year are more than fifty percent of its net worth and it has incurred cash losses in the current and immediately preceeding financial year.

(xi) Dues of Rs. 1,835,368,119 (including interest and redemption premium) pertaining to debentures aggregating to Rs. 1,203,110,000 recalled by the lenders, have been disputed by the Company as stated in Notes 33 and 38 to the accompanying financial statements and hence we are unable to comment whether there is a default in respect of the above recalled dues. Read with the above, based on our audit procedures and as per the information and explanations given by the management, the Company has not defaulted in repayment of dues to financial institutions, banks or debenture holders.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society and therefore, the provisions of clause 4 (xiii) of the Order are not applicable.

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

(xv) According to the information and explanations provided to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

(xvi) Based on the information and explanations given to us by the management, term loans were applied for the purpose for which these loans were obtained.

(xvii) According to the information and explantions 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.

(xviii) The Company has not made any preferential allotment of shares during the year to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us, the Company had created security in respect of debentures issued in earlier years and outstanding during the year.

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

(xxi) 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 given by the management, we report that no fraud on or by the the Company has been noticed or reported during the year.



For S. R. BATLIBOI & CO.

Firm Registration

Number : 301003E Chartered Accountants

22, Camac Street

Block , 3rd Floor per R.K.Agrawal

Kolkata 700 016 Partner

Dated : May 30, 2012 Membership No.16667

 
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