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Auditor Report of Kothari Industrial Corporation Ltd.

Mar 31, 2014

We have audited the accompanying financial statements of Kothari Industrial Corporation Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2014, 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 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") read with the General Circular 15/2013 13th dated 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 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 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 audit opinion.

Basis for Qualified Opinion

The Company has not provided for the following amounts in the accounts :-

a) Interest payable to a trade creditor amounting to Rs.161.33 lacs and interest payable on an advance amounting to Rs.74.39 lacs.

b) Any further amount payable to State Bank of India (Assignee : Kotak Mahindra Bank) in addition to the liability provided for in the books of accounts (grouped under Long-term borrowings) since the said sum has not been finally quantified.

c) The effect of such non-provision of (a)and (b) above on the profit or loss of the Company as well as on the true and fair view of the state of affairs of the Company as at 31st March 2014 is not ascertainable.

Opinion

In our opinion and to the best of our information and according to the explanations given to us except for the effect/ possible effects of the matters described in the "Basis for Qualified Opinion" paragraph, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31,2014; b) In the case of the Statement of 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.

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 Order.

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

a) Except for the effect of the matters described in para "Basis for Qualified Opinion", we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

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

c) The Balance Sheet, 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 described in para "Basis for Qualified Opinion", in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956 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) On the basis of 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.

ANNEXURE TO INDEPENDENT AUDITORS'' REPORT

Referred to in paragraph 1 under the heading "Report on other Legal and Regulatory Requirements" Section of our report even date.

1. In Respect of Fixed Assets:

a) the company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets on the basis of available information.

b) as explained to us, fixed assets have been physically verified by the management at reasonable intervals; no material discrepancies were noticed on such verification.

c) in our opinion and according to the information and explanations given to us, the company has not disposed off substantial part of its fixed asset during the year and the going concern status is not affected.

2. In Respect of Inventories:

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

b) in our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

c) On the basis of our examination of the records of inventory, we are of the opinion that the company is maintaining proper records of inventory. The discrepancies noticed during physical verification between the physical stocks and the book records were not material.

3. a) The company has not granted any loans, secured/unsecured, from companies, firms (or) other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

b) The company has not taken any loans during the year from parties listed in the register maintained under section 301 of the Companies Act, 1956.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, no major weakness has been noticed in the aforesaid internal controls.

5. a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, the particulars of contracts or arrangements referred to in section 301 of the Act have been entered in the register required to be maintained under that section.

b) As per information & explanations given to us and in our opinion, the company has not made any transactions exceeding the value of five lakhs rupees in pursuance of contract or arrangements entered in the register maintained u/s 301 of the Companies Act. 1956.

6. The Company has not accepted any deposits from public. Hence the directions issued by the Reserve Bank of India and the provisions of Section 58A and 58AA of the Companies Act 1956 and the Companies (Acceptance of Deposits) Rules, 1975 do not apply.

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

8. We have broadly reviewed the cost records maintained by the company pursuant to the companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government of India under Section 209(1)(d) of the Companies Act, 1956, and are opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however not made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. a) The Company is not regularly depositing undisputed statutory dues including provident fund, service tax, income tax (tax deducted at source), professional tax and property tax.

b) According to the information and explanations given to us, the extent of arrears outstanding as on 31st March 2014 for a period of more than six months from the date they became payable, as certified by the Management is as under :-

Service Tax 18.88

Income Tax (TDS) 25.50

Provident Fund 1.01

Professional Tax 14.07

Property Tax 42.18

c) According to the information and explanations given to us, details of disputed Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty, Value Added Tax and Cess which have not been deposited on account of disputes are given below.

10 The Company has accumulated losses at the end of the financial year which are more than 50% of its net worth of the Company. The Company has incurred cash loss during the current year as well in the immediate preceding financial year also.

11. Based on our examination of the books and on the information and explanation given by the management, the company has defaulted in repayment of dues to financial institutions and banker(s) and the matter is pending adjudication before the Hon''ble Debt Recovery Tribunal, Chennai.

12. The company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

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

14. Based on our examination of the records and evaluation of the related internal controls, we are of the opinion that proper records have been maintained of the transaction and contracts in relation to shares, debentures and other instruments and timely entries have been made in those records. We also report that the company has held the shares, securities in its own name

15. The Company has not given any guarantee for loans taken by others from bank or financial institutions during the year.

16. According to the information and explanations given to us, the Company has not taken any term loan during the year.

17. According to the information and explanations given to us and on an overall examination of the financial statement of the Company, funds raised on short term basis have, prima facie, not been utilized 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 Companies Act.

19. During the period covered by our audit report, the Company has not issued any debentures.

20. The Company has not raised any money by way of public issues during the year.

21. Based upon the audit procedures performed and based on the available information and explanations given by the management we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For M/s. B.B.Naidu & Co. Chartered Accountants Firm Reg.No:002291S (A.Sekar) Place: Chennai Partner Date: 28th May 2014 Membership No. :18784


Mar 31, 2010

We have audited the attached Balance Sheet of M/s Kothari Industrial Corporation Ltd., Chennai - 600034 as of 31st March, 2010, the Profit and Loss Account for the year ended on that date annexed thereto and the Cash Flow statement for the year ended on that date. These financial statements are the responsibility of the Companys management: Our responsibility is to express an opinion on these financial statements based on our audit.

1. We conducted our audit in accordance with auditing standards generally accepted in India. These 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 presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

2. As required by the Companies (Auditors Report) Order, 2003 and amended by the Companies (Auditors Report) (Amendment) Order, 2004, issued by the Central Government 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.

3. Attention is invited, without qualifying our Report to note no.1 in Schedule No.16 to the accounts mentioning the reasons by the management for presenting the accounts on principles applicable to a "Going Concern".

4. Further to our comments in the annexure referred to above, we state that:

(i) In our opinion, proper books of account as required by law have been maintained so far as appears from the examination of those books



(ii) The Balance Sheet and Profit and Loss Account and the Cash Flow Statement referred to in this report are in agreement with such books of account referred to in paragraph (i) above.

(iii) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statements dealt with this report comply with the Accounting Standards referred to in Section 211 (3c) of the Companies Act, 1956 .

(iv) In our opinion, the said accounts together with the accounting policies and notes on accounts and read with para 4 above, give the information required under the Companies Act, 1956 in the manner required.

5 On the basis of written representations received from the Directors as on 31st March, 2010 and taken on record by the Board of Directors, we report that none of the Directors are disqualified as on 31st March, 2010 from being appointed as a Director in terms of clause (g) of sub-section(l) of Section 274 of the Companies Act, 1956.

6. We report that

(i) the Balance Sheet gives a true and fair view of the state of the companys affairs as at 31st March, 2010

(ii) the Profit & Loss Accounts gives true and fair view of the loss for the year.

(iii) In the case of the Cash flow Statement for the year ended 31st March, 2010, the cash flows for the year ended on that date.



ANNEXURE REFERRED TO IN OUR REPORT OF EVEN DATE ON THE ACCOUNTS FOR THE PERIOD ENDED 31.03.2010



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

(b)AII the fixed assets have been physically verified by the Management in a phased manner according to the Companys procedure.

2. (a) The inventories have been periodically physically verified during the year by the Management which in our opinion, the frequency of verification is reasonable.

(b)The procedures of physical verification of inventories followed by the Management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) On the basis of our examination of the records of inventory, we are of the opinion that the company is maintaining proper records of inventory. The discrepancies noticed during physical verification between the physical stocks and the book records were not material.

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

(b)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.

(c) The Company has maintained proper records of inventory. The discrepancies noticed on verification between the physical stock and the book records were not material and the same has been properly dealt with in the accounts.

4. (a) The Company has not granted any loan during the year to any party listed in the Register maintained under Section 301 of the Companies Act. 1956.

b) The Company has not taken any loan from parties listed in the register maintained under section. 301 of the Companies Act 1956.

5. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of inventory and fixed assets and with regard to the sale of goods and there are no major weaknesses in such internal control.

6 Based on the Register maintained under Section 301 of the Companies Act transactions exceeding the value of five lakh rupees in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

7. The Company has not accepted any deposits from public during the year

8. The internal audit is being carried out by an external firm of Chartered Accountants, which in our opinion is commensurate with the size of the company and nature of its business.

9. The maintenance of cost records under Section 209(1 )(d) of the Companies Act, 1956 does not apply to any of the products of the company.

10. (a) According to the records of the Company, the company has not fully deposited with appropriate authorities undisputed statutory dues i.e., Income Tax amounting to Rs.8.77 lakhs.

(b) According to the information and explanation given to us, no undisputed amounts payable in respect of income-tax, sales-tax, customs duty and excise duty were outstanding as at 31.3.2010 for a period of more than six months from the date they became payable.

(c) According to the records of the company, there are dues of sales tax, income-tax, customs duty/wealth-tax, excise duty/cess which have not been deposited on account of disputes with statutory authorities, which is furnished below:





Details of Dispute Nature of Forum of Dispute Period Amount

Dispute Rs. in

Lakhs Tamilnadu TNGST &CST D.C.C.T. Appeals 1988-89 872.97

Branch Transfer of to Fertilisers STAT and 1991-92

Non-receipt of C Forms and High Court Stay

Disputed tax on sulphur loan

II - Kamataka

Turnover tax on NPK Mixture KST STAT - Stay 1996-97 3.8 III - Kerala

Disputed rate of tax KGST STAT - Stay 2001-02 0.05

Total 876.89



REMANDED BACK TO

ASSESSING AUTHORITIES D.C.C.T. Appeals, 1985-86 to 77.42

Branch Transfer of fertilizers, TNGST & CST STAT and High Court 1997-98

Non-receipt of C Forms and

Disputed Taxes



11. The Company has accumulated losses, however such accumulated losses of the Company are not more than its net worth as at the end of the financial year. The Company has incurred cash losses during the current financial year.

12. Based on our examination of the books and on the information and explanation given by the management, the company has defaulted in repayment of dues to financial institutions and banker(s) and the matter is pending adjudication before the Honble Debt Recovery Tribunal, Chennai.

13. The Company has not granted loans and advances on the basis of security by way of pledge of shares and other securities.

14. In our opinion, according to the information and explanation given to us. the nature of activities of the company does not attract in special statute applicable to Chit Fund and Nidi/Mutual Benefit Fund / Societies.

15. Based on our examination of the records and evaluation of the related internal controls, we are of the opinion that proper records have been maintained of the transaction and contracts in relation to shares, debentures and other instruments and timely entries have been made in those records. We also report that the company has held the shares, securities in its own name.

16. The company has not given guarantee for loans taken by others from banks and financial institutions during the year.

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. Based on our examination of record and the information provided to us by the Management we report that the company has not made preferential allotment of shares to parties and companies covered in the register maintained under Sec.301 of the Act.

19. The Company has not issued any debentures during the year.

20. The Company has not raised any money by public issues during the period covered by our audit.

21. Based upon the audit procedures performed and based on the available information and explanations given by the management we report that no fraud on or by the Company has been noticed or reported during the course of our audit.



For B.B. NAIDU & CO

Regn.No.002291S

Chartered Accountants



A.SEKAR

Place:Chennai Partner

Date : 24.08.2010 Membership No. 18784




Jun 30, 2003

We have audited the attached Balance Sheet of Kothari Industrial Corporation Limited as at 30th June 2003 and Profit & Loss Account of the Company for the period ended on that date annexed thereto both of which we have signed under reference to this report. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

We have conducted our audit in accordance with auditing standards generally accepted in India. The 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.

1. We have broadly obtained all the information and explanations, excepting Granite Division (refer note no. 10(ii) ), which to the best of our knowledge and belief were necessary for the purpose of our audit.

2. In our opinion, proper books of account as required by law, have been kept by the Company with the exception of those relating to Granite Division so far as appears from our examination of those books.

3. The Balance Sheet and the Profit and Loss Account and Cash Flow Statement dealt with by this Report are in agreement with such books referred to in Paragraph 2 above.

4. In our opinion, the Balance Sheet and Profit and Loss Account and Cash flow statement dealt with by this report comply with the Accounting Standards referred in sub-section (3 C) of section 211 of the Companies Act 1956. With the exception of non observance of accrued basis of accounting referred to in this specific qualifications listed in para 7 of this report.

5. In view of the Company not having redeemed the debentures and repaid the term loan to

financial institutions and certain matured fixed deposits for a period exceeding three years, we report that all the Directors are disqualified as on 30.6.2003 from being appointed as Directors in any other Public Limited Company in terms of Section 274(1) (g) of the Companies Act, 1956. The Company has been advised by counsel that there is no bar from the defaulting Directors of the Company from being reappointed Directors in the same defaulting Company.

6. In our opinion, the said accounts together with the accounting policies and notes in Schedule No. 17, give the information required under the Companies Act, 1956 in the manner so required.

7. Attention is invited to

i) Note No. 7(ii) relating to non provision for disputed sales tax demands aggregating to Rs.891.97 lacs

ii) Non provision for power tariff consequent to withdrawal of concessional power tariff relating to earlier years Rs.328.73 lacs (note 7(iii)

iii) An amount of Rs.659.77 lacs is due by a public company which is under liquidation. (Note 12(b) (i)) and overdue amount of Rs.842.58 lacs (Note 12(b)(iii)) both being related parties.

iv) The advances referred to in para (iii) above have been to companies with which there is no direct business nexus and the end use of these amounts by the receipient companies which, we are informed, are controlled by the promoters, his family members and associates, have not been made known to us to comment on the propriety of these transactions or the recoverability of these amounts.

v) Non provision for potential liability for unfulfilled export obligation pertaining to textile division amounting to Rs. 84.07 lacs. (Note 7(vii))

vi) Non provision for Overdue and Penal interest and other charges in respect of certain Non Convertible Debentures, which have become overdue for redemption. (Note 3(i)). Consequentially, the bank borrowings and outstanding liability to debenture holders, are understated in the Balance Sheet.

vii) Non incorporation of the transactions of the Granite Division during the year. (Note 10(ii)).

viii)The Company has yet to give effect to the order of City Civil Court, Chennai regarding refund of share monies. (Note 2(v)&(vi))

ix) The Company has not given effect to the consent decree filed with Supreme Court regarding disputed share allotment (Note 2 (vii))

x) The liability on account of shortfall. between the realisable value of certain leased machineries of Kothari Mill No.2 repossessed by the leasing company and the amount that would become ultimately payable, has not been quantified and provided for. (Note 17(a)).

xi) The Suspension of construction activities at Brewery Project in Andhra Pradesh (Note 18(i))

xii) Legal possession of certain plantation lands acquired is over due and yet to be registered by the company (Sch 5 Note 2)

xiii)We have not audited the unpaid dividend bank accounts of the company in the absence of complete details / bank statements and the consequential payments to the Investor Education and Protection Fund.

xiv)Non provision of interest on certain unsecured advances to related parties (Note 16(iii).

xv) Non provision of diminution in the value of investment in subsidiary M/s. Kothari (Madras) International Limited (Note No.19).

xvi)The company has not conducted Audit Committee meetings during the period.

xvii)Advances include Rs.273.70 Lacs due from Kothari Group Employees Gratutity Fund representing Gratutity paid directly to employees by the Company. In the absence of ascertainment of the quantum of gratutity liability either on acturial basis or otherwise, it has not been possible

to ascertain whether the gratutity liability has been recognised in full in the accounts and whether the amount of Rs.273.70 lacs shown as due from the Gratuity fund is recoverable in the absence of the accounts of the fund made available to us.

8. a. We are unable to express any opinion on

(i) the quantum of liability relating to item (i), (ii), (v) in paragraph (7),

ii) the realisability of the amounts referred to in paragraph (7) (iii) & (iv) above and

iii) the effect of impact of significant matters mentioned in paragraph (7) (vi),(vii), (viii), (ix) ,(x), (xi), (xii) and (xv) the quantum thereof not having been quantified or estimated by the company

iv) The effect of unadjusted shortfall between the revalued assets and the reduced Revaluation Reserve on account of periodical utilisation of the Reserve in the earlier years for absorbing capital losses on disposal of certain divisions in the past years amount not quantified by the management.

b. Considering developments which have taken place after the Balance Sheet date referred to in Note No. 26 and erosion in networth besides the exposure of the company in regard to guarantees issued by the company which might devolve on the company we are unable to express any opinion on the financial viability of the company. The future profitability would depend upon further financial assistance / restructuring scheme in the absence of which the presentation of the accounts on principles applicable to a going concern in our opinion is inappropriate.

c. The future survival of the Company would depend upon the successful resolution of certain winding up petitions filed by certain creditors before the various courts.

9. In view of our observations in paragraphs (7) and (8) above, and the consequent effect thereof on the Reserves and the Loss for the period both being not quantifiable, we

are unable to express our opinion on the true and fair view in the case of :-

(a) the Balance Sheet as at 30th June 2003 of the state of the Companys affairs as at 30th June 2003;

(b) the Profit and Loss Account for the period ended 30th June 2003 the Loss for the period ended on that date; and

(c) the Cash flow statement for the period ended 30th June 2003 the cashflows for the period ended on that date.

10. The company has not prepared Corporate Governance report and Management Discussion and Analysis report for our verification.

In terms of the Manufacturing and Other Companies (Auditors Report) Order, 1988 and on the basis of such checks as we considered appropriate, we further state that:

1. a. The Company has maintained records

showing quantitative details and situation of fixed assets at divisions which are being updated to include additions/deductions during the period. All the assets have not been physically verified by the management during the year. However there is a regular programme of verification (with the exception of Granite Division) 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.

b. No fixed assets have been revalued during the year.

2. a. As explained to us, the stocks of finished goods, raw materials, stores and spares at all locations (with the exceptions of Granite Division) have been physically verified by the Management at reasonable periods and those at stock points/third parties with reference to independent confirmations wherever received. The bulk stock of certain raw materials/ Finished goods in the Fertiliser Division are being verified during the lean period when such Stocks are less in quantity:

b. In our opinion, the procedures of physical

verification of stocks followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. In our opinion, the discrepancies noticed on verification between the physical stocks and the Book stocks, which were not material, were properly dealt with in the books of account after review.

d. The valuation of raw materials, semi- finished goods and stores has been at cost. Stocks of Finished goods comprising of Fertilisers have been valued this year at lower of Cost and net realisable value. Tea is valued as in the previous year at since net realised/ realisable value being a plantation product.

3. a. In our opinion, the rates of interest and the terms and conditions of loans obtained from companies, firms or other parties listed in the registers maintained under Section 301 of the Companies Act are prima facie not prejudicial to the interests of the Company. In view of the deletion of the Section 370 of the Companies Act there is no requirement to make a statement in this regard.

b. Loans and advances in the nature of loans, have been given to planter customers and employees who are repaying the principal amounts as stipulated and also are generally regular in payment of interest wherever applicable. Loans and advances includes overdue amount of Rs.120.99 lacs given to a public limited company under liquidation, listed in the register maintained under Section 301 of the Companies Act,1956, and Rs.1502.35 lacs to two companies, which are Related Parties, including one company which is under liquidation. There are no stipulations regarding time of repayment of these loans and no portion of Interest nor principal have been recovered during the year. These balances have not been confirmed.

4. In our opinion and according to the information and explanations given to us during the course of our audit, the internal

control procedures for the purchase of materials, stores, packing materials, components, plant and machinery, equipment and other assets and with regard . to sale of goods are adequate considering the size of the Company and the nature of its business (Except Granite division).

5. In our opinion and according to the information and explanations given to us, the transactions of purchase of goods and materials and sale of goods, materials and services, made in pursuance of contracts or arrangements entered in the registers maintained under Section 301 of the Companies Act, 1956 and aggregating during the period to Rs.50000 or more in respect of each party have been made at prices which are reasonable having regard to prevailing market prices for such goods, materials or services or the prices at which transactions for similar goods, materials or services have been made with other parties.

6. Unserviceable or damaged stores, raw materials and trading stocks are determined at the close of the period and adequate amounts are being written off after review in the accounts. (Except Granite division).

7. The Company has complied with the provisions of Section 58A of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975, with regard to the deposits accepted from the public, with the exception certain delay in repayment of matured deposits together with interest amounting to Rs.0.46 lacs, (since paid)

8. In our opinion, reasonable records have been maintained by the Company for the sale and disposal of realisable scrap and by- products.

9. The internal audit was carried out by an external firm of Chartered Accountants and is commensurate with the size of the Company and the nature of its business.

10.According to the records produced and information given to us, we have seen that prima facie the cost records and the accounts as prescribed by the Central Government for Fertilisers, and Sulphuric Acid under Section 209(1)(d) of the Companies Act, 1956 have been made and maintained by the Company and no examination of such records and accounts has been carried out by us. Since Fertiliser and Sulphuric Acid Plants were not functioning during the period, no cost audit report was filed.

11. There have been delays in remitting Provident Fund and Employees State Insurance dues with appropriate authorities. The company has continued the default in remittances of these payments.

12.According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, sales tax, customs duty and excise duty were outstanding as at 30th June 2003 for a period of more than six months from the date they became payable, with the exception of income tax amounting to Rs.2.57 lacs which has since been remitted.

13. In the absence of full details relating to certain expenses we are unable to affirm that no personal expenses of employees or directors have been charged to revenue account, other than those payable under contractual obligations or in accordance with generally accepted business practice.

14. Without taking into the cumulative financial impact of the qualificatory remarks in the Audit report, we are unable to express our opinion that the Company is not a sick industrial company within the meaning of Clause (o) of sub-section (i) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985.

For M K DANDEKER & CO FOR B B NAIDU & CO Chartered Accountants Chartered Accountants

K J DANDEKER B SURENDER Membership No.18533 Membership No.6020 Partner Partner

Place : Chennai Date : 3rd September 2005

 
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