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Auditor Report of Murli Industries Ltd.

Mar 31, 2014

1. Report on the Financial Statements

We have audited the accompanying financial statements of MURLI INDUSTRIES LIMITED, which comprise the Balance Sheet as at 31st March 2014, and the Statement of Profit and Loss for the period of nine months ended, and a summary of the significant accounting policies and other explanatory information.

2. Management''s Responsibility for the Financial Statements

The Company''s 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 principles generally accepted in India including Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956. 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.

3. 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 the 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 the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the 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.

4. Basis of Qualified Opinion

i. As mentioned in note no. 48, forming an integral part of the financial statements of the company have been prepared on the going concern basis notwithstanding the fact that the networth of the company is completely eroded and the company has a negative networth of (Rs. 418.14 crores) as on balance sheet date. (Note No. 49) The company may be restrained from any excavation of limestone from mines since ''Royalty on limestone'' amounting to Rs. 9.33 Crores remains to be paid to the government. (Note No.51) The Sales Tax Department has attached the movable & immoveable properties & assets of the Cement Unit of the company, for the recovery of its Statutory Sales Tax Dues (including interest) worth Rs. 63.08 Crores. All such moveable & immovable assets are listed separately by the Sales Tax Department and prohibited their transfer, sale, mortgage, gift, transfer etc. At the same time Royalty on Limestone & Sales Tax is refundable under Mega Project PSI, 2007 subject to payment of liability. (Note No. 57) The consortium banks have also recalled their debts to the company. The borrowings outstanding to the consortium banks as at 31.03.2014 have been classified as long term without taking cognizance of the recall of loans by bank. This is deviation from requirements of the new Schedule VI of the Companies Act. The appropriateness of the going concern basis is interalia dependent on the company''s ability to infuse requisite funds for meeting its obligations, rescheduling of its debts, other liabilities and resuming normal operations, (Note No.50) & on the decision and order of the BIFR.

ii. As mentioned in note no. 31 and 32, the company has not complied with Accounting Standards-15 (Employee Benefits) & Accounting Standards-11(Effects of changes in Foreign exchange Rates). Amount remains to be unascertained for both.

iii. As mentioned in note no. 39, the balances of trade receivables and payables, lenders, loans and advances & deposits are subject to confirmation / reconciliation and subsequent adjustments if any. As such, we are unable to express any opinion as to effect thereof on the financial statements of the period under audit.

iv. As mentioned in note no. 44, regarding recognition of deferred tax credit on account of unabsorbed losses and depreciation, up till date is Rs. 226.95 crores( last balance sheet date Rs. 226.95 Crores). This does not satisfy the virtual certainty test for recognition of deferred tax credit as laid down in Accounting Standard-22. As such we do not express our opinion on the reasonability of recognition of the income.

v. The company has written off a sum of Rs. 43.39 Crores (also refer Pt. No. (ii) (c) of the Annexure to the Auditor''s Report) pertaining to the stock of Soya bean have been written off under the head ''Quality Rebate & Shortages'' in the profit & loss account.

vi. Advances given to suppliers of machineries amounting to Rs. 11.06 Crores should have been written off on account of the violations of the conditions mentioned under the agreement and as informed by supplier of machinery.

vii. The Company has Capitalized expenses to the tune of Rs. 25.40 Crores in ''Pulp Mill Unit'' till the date of last balance sheet, which also appears as on the balance sheet date, the same should have been written off to the Profit & Loss Account. As a result of above the negative reserves of the company on the balance sheet date is understated by Rs. 25.40 Crores.

viii. The company has no policy of ascertaining impairment losses, which is in contravention of Accounting Standard 28. As such, we are unable to express any opinion as to effect thereof on the financial statements of the period under audit.

ix. All loan accounts of the company from Banks except vehicle loan accounts have been treated as Non Performing Assets (NPAs) by the respective banks due to non payment of dues, the consortium banks have recalled their debts to the company. The company has recorded the interest on these accounts for the period till 31st March 2014 @10.50% p.a. instead of the actual payable amount which varies from 10.50% to 18% p.a. The difference between the exact interest as chargeable by the bank and interest accounted for by the company remains unquantifiable. As such non current liabilities are overstated and current liabilities are understated. The amount of over/ under statement remains to be unascertained.

x. The Company has liability outstanding in respect of FCCB (Foreign Currency Convertible Bonds) issued of US$ 5.5 million the due date of payment of which was 6th of Feb, 2012. The lenders have not exercised option for conversion. Hence the amount is payable at the agreed enhanced value. The amount outstanding in respect of the same is being shown in the balance sheet at original conversing rate of Rs. 43.94 per US$ as at the time of actual receipt of the amount. The actual liability due in respect of the same as per terms comes to 149.81% of US$5.5 Million i.e. US$ 8.27 Million and the rate as on 31st March 2014 being Rs. 59.9376 per US$ (Rs. 59.52 per US $ as on 30.06.2013), the liability in respect of the same is understated by Rs. 25.22 Crores (Rs. 24.88 Crores as on 30.06.13). As such loss of the company is under stated to that extent. The redemption reserve in respect of repayment of the same has also not been created.

The company has a liability of 7.52 Million USD($) as external commercial borrowing which has been booked @ 45.05 per USD($), the interest liability on the same is LIBOR 3.9% (4.2% 3.9%), the liability on account of the same comes to Rs. 3.65 Crores. Moreover the liability on account of difference in foreign exchange has also not been accounted for amounting to Rs. 11.19 Crores (Rs. / USD as on 31.03.2014 is 59.9356). Total liability on this account amounting to Rs. 14.84 Crores has not been provided.

xi. Accounting Standard -5, Net Profit or loss for the period, Prior Period Items & change in accounting policies requires the company to disclose the nature & amount of Prior period items to be disclosed separately in a manner that their impact on current profit or loss can be perceived. The company has not complied with the provisions thereby inflating the current period''s losses by Rs. 23.78 crores.

xii. The company has recognized the Mega Vat Receivable under the head ''Short Term Loans & Advances'' even though the pre-condition as mentioned under the Eligibility Certificate of its being paid prior to its claim has not been complied with.

The consequential effect of sub para [i, ii, iii, viii, ix & xii] above on the assets and liabilities as at 31st March 2014 and loss for the period of nine months ended 31st March 2014 are not ascertainable. Had the effect of above as stated in sub para [iv ,v, vi, vii, x & xi] been given, the loss for the period under audit would have been increased by Rs. 31.01Crores towards the current financial year of nine months & Rs. 252.35 Crores pertaining to prior periods and the negative networth would have been increased by Rs. 283.86 Crores.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the matters described in the Basis of Qualified Opinion Paragraph as mentioned above read together with the other notes, give information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the principles generally accepted in India;

i. In the case of the Balance Sheet, of the state of affairs of the Company as on 31st March, 2014;

ii. In the case of the Profit and Loss Account, of the loss for a period of nine months ended on that date; and

iii. In the case of cash flow statement, of the cash flows for a period of nine months ended on that date.

6. Emphasis of Matter Attention is drawn to :

a. The company has not shown the amounts of loans maturing shortly under the sub-head "Current Maturities of Long Term Loans" under "Other Current Liabilities", but the same are shown under the head "Long Term Borrowings" under "Non Current Liabilities" Similarly the company has not disclosed the details of loans and their terms and conditions including repayment etc including defaults. This is deviation from requirements of the new Schedule VI of the Companies Act.

b. The company has an investment of Rs. 0.05 Crores in each of four, wholly owned subsidiaries namely Murli Cement Limited, Murli Cement (Karnataka) Limited, Murli Cement (Maharashtra) Limited, Murli Cement (Rajasthan) Limited. The company has not complied with Accounting Standard 21 by presenting the Consolidated Financial Statements. As explained these companies have not started operations as such Consolidated Financial Statements have not been prepared.

c. The non-current assets of the company as on balance sheet date include a sum of Rs. 33.03 Crores (Rs. 31.07 Crores as on last balance sheet dated 30.06.2013) spent on Rajasthan, Karnataka, Gujarat which includes land. These should have been part of fixed assets.

d. The apparent casting error of Re 1 is on account of rounding off effect, appropriate formula for which is being implemented in the sysytem.

7. Report on Other Legal and Regulatory Requirements

A. 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.

B. 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 it appears from our examination of those 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 and the Statement of Profit and Loss 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 31st March, 2014 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2014 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act;

ANNEXURE TO THE AUDITOR''S REPORT

(AS REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE)

(I) a) The company has not maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b) Physical verification of the same has not been carried out by the management.

c) During the period under audit, the Company has not disposed off any of its assets.

(ii) a) As explained to us, Physical verification of inventory has been conducted by the management at reasonable intervals.

b) As also certified by management 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 nature of its business.

c) As informed by the management the company is in process of making adequate records of inventory. Except for Soyabean, pending updating of records and reconciliation, book balances as at March 31,2014 have been adopted. As of now the company is having records, which are not adequate. Material discrepancies were noticed at the time of physical verification. It is observed that the management has written off a sum of Rs. 43.39 Crores on account of shortage observed in the raw material (soya bean) stock.

As per the documents produced by the management and the explanations given by them, the process carried out for the physical verification of the stock is commensurate with the size & nature of the company; but as far as the valuation of the same is considered, the management was unable to explain the exact basis for the valuation hence we are unable to express our opinion on the same and hence there is a diversion to compliance of Accounting Standard 2.

(iii) a) The company has granted interest free unsecured loan to companies, firms or other parties covered in the register maintained u/s.301 of the Act. The amount involved is Rs. 7.98 Crores and the number of party involved are four.

b) The rate of interest and other terms and conditions of the unsecured loans given by the Company mentioned in (a) above are prima facie prejudicial to the interest of the Company, since these loans are interest free and no specific terms have been specified for their repayment.

c) As per the information and explanation given by the management, there are no specific terms and conditions for repayment of principal and interest due there on.

d) As there is no specific repayment due dates, there are no over dues shown.

e) The company has taken unsecured loan from companies, firms and other parties concerned in the register maintained u/s 301 of the Act. The amount involved in the transactions is Rs. 7.28 Crores & number of parties involved is 34.

f) As per the information and explanations given by the management, there are no specific terms and conditions for repayment of principal and interest due thereon; hence, prima facie it seems that the terms of accepting the loan are not prejudicial to the interest of the company.

(iv) In our opinion and according to the information and explanations given to us, the internal control systems needs to be strengthened considering the size of the company and the nature of its business.

(v) a) The company has entered into the Register of Contracts & arrangements referred to in section 301 of the Companies Act, 1956.

b) The transactions in pursuance of such contracts have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

(vi) The company has not accepted any deposits during the period under audit from Public within the meaning of Section 58A, Section 58AA or any other relevant provisions of the Companies Act, 1956 and the rules made there under.

(vii) The company has not appointed internal auditor for period of this audit report. This is a violation of section 227 of the Companies Act, 1956 and further the company is a listed company. We are unable to ascertain whether the company has monitored internal control policies and processes. In absence of internal audit system, the completeness, adequacy and independence will have a bearing of efficacy of internal control system and audit risk.

(viii) We have broadly reviewed the cost records maintained by the company pursuing to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government u/s. 209(1)(d) of the Companies Act, 1956 and our of the opinion that primafacie the prescribed cost records have been maintained. However, no cost auditor''s report has been provided to us. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) According to the information and explanation given to us in respect of statutory dues :

a) The company has generally not been regular in depositing the undisputed statutory dues which are as follows:

Statute Amount (Rs. Crores)

Service Tax 1.02

Employees Share of Provident Fund 0.31

Employer''s Share of Provident Fund 0.89

Professional Tax 0.90

Excise Duty 1.73

VAT & CST 46.54

b) Details of dues of Income-tax, Sales Tax, Custom Duty, Excise Duty and Cess which have not been deposited as on 31st March, 2014 on account of disputes are given below:

Sr. Particulars Amount (Rs. in crores) Pending Since No.

1 Central Excise & Customs 0.12 2002

2 Commission on FCCB 0.43 2008 3 Central Excise & Customs 0.39 2008

4 Central Excise & Customs 2.37 2007

5 Central Excise & Customs 3.43 2009

6 Central Excise & Customs 0.28 2010

7 SEBI Not Ascertainable 2011-2012

8 Income Tax (A.Y -07-08) 0.67 2011-2012

9 Income Tax (A.Y -08-09) 20.02 2011-2012

10 Income Tax (A.Y -09-10) 4.48 2011-2012

11 Interest on VAT 5.65 2011-2012

12 Central Excise & Customs 1.77 2013

Sr. Particulars Forum No.

1 Central Excise & Customs High Court, Nagpur

2 Commission on FCCB CESTAT, Mumbai 3 Central Excise & Customs CESTAT, Mumbai

4 Central Excise & Customs High Court, Nagpur

5 Central Excise & Customs CESTAT, Mumbai

6 Central Excise & Customs CESTAT, Mumbai

7 SEBI SEBI

8 Income Tax (A.Y -07-08) ITAT

9 Income Tax (A.Y -08-09) CIT(A)

10 Income Tax (A.Y -09-10) CIT(A)

11 Interest on VAT Appeal (for interest)

12 Central Excise & Customs

(x) At the end of the period under audit, the company has accumulated losses of Rs. 432.56 crores. The cash losses of the company during the period of nine months under audit are Rs. 183.14 crores. The networth of the company is completely eroded and the company has a negative networth of (Rs. 418.14 crores) as on balance sheet date.

(xi) The company has defaulted in repayment of dues to financial institutions and banks amounting to Rs. 1435.01 crores.

(xii) The company has not granted any loans and/or advances on the basis of securities by way of pledge of shares, debentures and other securities.

(xiii) The provisions of any special statute applicable to chit fund and nidhi/mutual benefit fund/societies are not applicable to the company.

(xiv) The company is not a dealer or trader in shares, securities, debentures and other investments.

(xv) The Company has given Guarantee to SICOM Ltd. on behalf of Nandlal Enterprises Ltd. for an Inter Corporate Deposit of Rs. 20 crores. The company has assigned rights on the limestone mining lease awarded to the company, admeasuring 42.16 hectares of land. The terms of the guarantee are prejudicial to the interest of the company.

(xvi) As per the information and explanations given, the company has received forced loan amounting to Rs. 4.08 Crores, during the year on account of encashment of Bank Guarantee by WCL on cancellation of fuel supply agreement.

(xvii) As in the past the company has continued to use short term loans for long term purposes.

(xviii) During the period under audit the company has not made preferential allotment of shares to parties or companies covered in the Register maintained u/s 301 of the Act.

(xix) The company has outstanding FCCBs (bonds) amounting to Rs. 24.17 crores (as per balance sheet amount) which have already become due in February 2012 which are not secured. The details in respect of same are pointed out in sub point no "x" in Basis of Qualified Opinion.

(xx) The company has not raised any money through a public issue during the period under audit.

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

FOR DEMBLE RAMANI & CO. Chartered Accountants Registration No. 102259W

NAGPUR Anand Deshpande Dated : 29th May, 2014 Partner M. No.033618


Jun 30, 2013

1. Report on the Financial Statements

We have audited the accornpanyingfinancial statements of MURLI NDUSTRIES LIMITED, which comprise the Balance Sheet as at 30th June 2013, and the Statement of Profit and Loss for the period of fifteen months then ended, and a summary of the significant accountingpolicies and other explanatory information.

2. Management''sResponsibilityforthe Financial Statements

The Company''s 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 principles generally accepted in India including Accounting Standards referred to in sub- section (3C) of section 211 of the Companies Act, 1956. 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.

3. 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 the 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 the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the 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.

4. Basis of Qualified Opinion

i. As mentioned in note no. 48, the financial statements of the company have been prepared on the going concern basis notwithstanding the fact that the networth of the company is completely eroded and the company has a negative networth of (Minus Rs.189.82 crores) as on balance sheet date. The appropriateness of the said basis is interalia dependent of the Company''s ability to infuse requisite funds for meeting its obligations, reschedulement of its debts and resuming normal operations.

ii. As mentioned in note no. 31 and 32, the company has not complied with Accounting Standards-15 (Employee Benefits) & Accounting Standards-11(Effects of changes in Foreign exchange Rates).

iii. As mentioned in note no. 39, the balances of trade receivables and payables, lenders and loans and advances are subject to confirmation / reconciliation and subsequent adjustments if any. As such, we are unable to express any opinion as to effect thereof on the financial statements of the period under audit.

iv. As mentioned in note 43, the Company has Capitalized expenses to the tune of Rs.3.16 Crores incurred in ‘Pulp Mill Unit'', instead of charging these expenses to Profit & Loss A/c. As a result of above the loss of the Company for the period of fifteen months ended 30th June, 2013 is understated by Rs. 3.16 Crores.

v. As mentioned in note 44 regarding recognition of deferred tax credit on account of unabsorbed losses and depreciation during the year amounting to Rs. 88.76 crores (last year 138.19 crores) total amount recognized up till date is Rs. 226.95 crores. This does not satisfy the virtual certainty test for recognition of deferred tax credit as laid down in Accounting Standard-22. As such we do not express our opinion on the reasonability of recognition of the income. As such loss after tax for the period under audit is understated by Rs.88.76 crores. The networth of the company is overstated by Rs.226.95 crores as on balance sheet date.

vi. As mentioned in note 45, the company has not ascertained impairment loss on account of inoperative Pulp Unit from last some years.

vii. The company has no policy of ascertaining impairment losses, which is in contravention of Accounting Standard 28. As such, we are unable to express any opinion as to effect thereof on the financial statements of the period under audit.

viii. All loan accounts of the company from Banks except from IDBI Bank and vehicle loan accounts have been treated as Non Performing Assets (NPAs) by the respective banks due to non payment of dues. The company has recorded the interest on these accounts for the period till 30th June 2013 @10.50% p.a. instead of the actual payable amount which varies from 10.50% to 18% p.a. The difference between the exact interest as chargeable by the bank and interest accounted for by the company remains unquantifiable. As such non current liabilities are overstated and current liabilities are understated. The amount of over/ under statement remains unascertained.

ix. The Company has liability outstanding in respect of FCCB (Foreign Currency Convertible Bonds) issued of US$ 5.5 million the due date of payment of which was 6th of Feb, 2012. The lenders have not exercised option for conversion. Hence the amount is payable at the agreed enhanced value. The amount outstanding in respect of the same is being shown in the balance sheet at original conversation rate of Rs.43.94 per US$ as at the time of actual receipt of the amount. The actual liability due in respect of the same as per terms comes to 149.81% of US$5.5 Millon i.e. US$ 8.27 Million and the rate as on 30th June 2013 being Rs.59.52 per US$, the liability in respect of the same is understated by Rs.24.88 Crores. As such loss of the company is under stated to that extent. The redemption reserve in respect of repayment of the same has also not been created.

x. Accounting Standard - 5, Net Profit or loss for the period, Prior Period Items & change in accounting policies requires the company to disclose the nature & amount of Prior period items to be disclosed separately in a manner that their impact on current profit or loss can be perceived. The Company has not complied with the provisions thereby inflating the current period''s losses by Rs. 7.16 crores.

xi. As per the requirements of Accounting Standard - 26 VIntangible Assets”, any deferred revenue expenditure is to be written off in the Profit & loss Statement, since they do not meet the definition of an Vasset” under AS-26, The Company has not written off its expenses amounting to Rs.12.90 Crores.

The consequential effect of sub para[ii, iii, vi, vii & viii ] above on the assets an liabilities as at 30th June 2013 and loss for the period of fifteen months ended 30th June 2013 are not ascertainable. Had the effect of above as stated in sub para [iv,v, ix ,x & xi ] have been given, the loss for the period under audit would have been higher by Rs.122.54 Crores.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the matters described in the Basis of Qualified Opinion Paragraph as mentioned above read together with the other notes, give information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the principles generally accepted in India;

i. In the case of the Balance Sheet, of the state of affairs of the Company as on 30th June, 2013;

ii. In the case of the Profit and Loss Account, of the loss for a period of fifteen months ended on that date; and

iii. In the case of cash flow statement, of the cash flows for a period of fifteen months ended on that date.

6. Emphasis of Matter Attentionisdrawnto:

a. The company has not shown the amounts of loans maturing shortly under the sub-head VCurrent Maturities of Long Term Loans” under VOther Current Liabilities”, but the same are shown under the head VLongTerm Borrowings” under VNon Current Liabilities” Similarly the company has not disclosed the details of loans and their terms and conditions including repayment etc including defaults. This is deviation from requirements of the new Schedule VI of the CompaniesAct.

b. The company has an investment of Rs. 0.05 Crores in each of four, wholly owned subsidiaries namely Murli Cement Limited, Murli Cement (Karnataka) Limited, Murli Cement (Maharashtra) Limited, Murli Cement (Rajasthan) Limited. The company has not complied with Accounting Standard 21 by presenting the Consolidated Financial Statements. As explained these companies have not started operations as such Consolidated Financial Statements have not been prepared.

c. The non-current assets of the company include a sum of Rs. 31.07 Crores spent on Rajasthan, Karnataka which includes land. These should have been part of fixed assets.

7. Report on Other Legal and Regulatory Requirements

A. As required by the Companies (Auditor''s Report) Order, 2003 (Vthe 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.

B. 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 it appears from our examination of those 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 and the Statement of Profit and Loss 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 30th June, 2013 taken on record by the Board of Directors, none of the directors is disqualified as on 30th June, 2013 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act.

ANNEXURE TO THE AUDITOR''S REPORT

(AS REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE)

(I) a) The company has not maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b) Therefore, physical verification of the same has not been carried out;

c) During the period under audit, the Company has not disposed off any of its assets

(ii) a) As explained to us, Physical verification of inventory has been conducted by the management at reasonable intervals.

b) As also certified by management 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 nature of its business.

c) As per the documents produced by the management and the explanations given by them, the process carried out for the physical verification of the stock is commensurate with the size & nature of the company; but as far as the valuation of the same is considered, the management was unable to explain the exact basis for the valuation hence we are unable to express our opinion on the same and hence there is a diversion to compliance of Accounting Standard 2.

(iii) a) The company has granted interest free unsecured loan to companies, firms or other parties covered in the register maintained u/s.301 of the Act. The amount involved is Rs.2.44 Crores and the number of party involved are two.

b) The rate of interest and other terms and conditions of the unsecured loans given by the Company mentioned in (a) above are prima facie prejudicial to the interest of the Company, since these loans are interest free and no specific terms have been specified for their repayment.

c) As per the information and explanations given by the management, there are no specific terms and conditions for repayment of principal and interest due thereon.

d) As there is no specific repayment due dates, there are no over dues shown.

e) The company has taken unsecured loan from companies, firms and other parties concerned in the register maintained u/s 301 of the Act. The amount involved in the transactions is Rs.6.81 Crores & no. of parties involved is 34.

f) As per the information and explanations given by the management, there are no specific terms and conditions for repayment of principal and interest due thereon; hence, prima facie it seems that the terms of accepting the loan are not prejudicial to the interest of the company.

(iv) In our opinion and according to the information and explanations given to us, the internal control systems needs to be strengthened considering the size of the company and the nature of its business.

(v) a) The company has entered into the Register of Contracts & arrangements referred to in section 301 of the Companies Act, 1956.

b) The transactions in pursuance of such contracts have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

(vi) The company has not accepted any deposits during the period under audit from Public within the meaning of Section 58A, Section 58AA or any other relevant provisions of the Companies Act, 1956 and the rules made there under.

(vii) The company has not appointed internal auditor for period of this audit report. This is a violation of section 227 of the Companies Act, 1956 and further the company is a listed company. Vfe are unable to ascertain whether the company has monitored internal control policies and processes. In absence of internal audit system, the completeness, adequacy and independence will have a bearing of efficacy of internal control system and audit risk.

(viii) We have broadly reviewed the cost records maintained by the company pursuing to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government u/s. 209(1)(d) of the Companies Act, 1956 and our of the opinion that primafacie the prescribed cost records have been maintained. However, no cost auditor''s report has been provided to us. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) According to the information and explanation given to us in respect of statutory dues :

a) The company has generally not been regular in depositing the undisputed statutory dues e.g. Provident Fund, Excise Duty including VAT amounting to Rs.43.37 Crores.

b) Details of dues of Income-tax, Sales Tax, Custom Duty, Excise Duty and Cess which have not been deposited as on 30th June, 2013 on account of disputes are given below:

(x) At the end of the period under audit, the company has accumulated losses of Rs.204.25 crores. The cash losses of the company during the period of fifteen months under audit are Rs. 243.07 crores. The networth of the company is completely eroded and the company has a negative networth of (Minus Rs.189.82 crores) as on balance sheet date.

(xi) The company has defaulted in repayment of dues to financial institutions and banks; details.

(xii) The company has not granted any loans and/or advances on the basis of securities by way of pledge of shares, debentures and other securities.

(xiii) The provisions of any special statute applicable to chit fund and nidhi/mutual benefit fund/societies are not applicable to the company.

(xiv) The company is not a dealer or trader in shares, securities, debentures and other investments.

(xv) The Company has given Guarantee to SICOM Ltd. on behalf of Nandlal Enterprises Ltd. for an Inter Corporate Deposit of Rs. 20 crores. The company has assigned rights on the limestone mining lease awarded to the company, admeasuring 42.16 hectares of land. The terms of the guarantee are prejudicial to the interest of the company.

(xvi) In our opinion and as per the information and explanations given, VNo new Term Loans” have been raised during the period under audit.

(xvii) As in the past the company has continued to use short term loans for long term purposes.

(xviii) During the period under audit the company has not made preferential allotment of shares to parties or companies covered in the Register maintained u/s 301 of the Act.

(xix) The company has outstanding FCCBs (bonds) amounting to Rs24.17 crores (as per balance sheet amount) which have already become due in February 2012 which are not secured. The details in respect of same are pointed out in sub point no Vviii” in Basis of Qualified Opinion.

(xx) The company has not raised any money through a public issue during the period under audit.

(xxi) Based on the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the company has been noticed or reported during the period under audit. FOR DEMBLE RAMANI & CO.

Chartered Accountants

Registration No. 102259W

NAGPUR Anand Deshpande

Dated- 29-08-2013 Partner

M. No.033618


Mar 31, 2011

1. We have audited the attached Balance Sheet of MURLI INDUSTRIES LIMITED Nagpur as on 31st March 2011, the Profit and Loss Account and also the cash flow statement for the year ended on that date annexed there to. 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 have conducted our audit in accordance with the auditing standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosure in the financial statement. 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 statement on the COMPANIES (AUDITOR'S REPORT) ORDER, 2003 as amended by amendment order 2004 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 matter specified in the paragraphs 4 & 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 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 it appears from our examination of such books,

(c) The Balance Sheet and Profit and Loss Account referred to in this report are in agreement with the books of account,

(d) We draw attention to note 9 of part A of Schedule S', the Company has not provided for retirement of employees as per AS-15.

(e) We draw attention to note (vi) of part B of Schedule 'S', the company has not complied with AS-11 regarding 'Foreign Exchange Transactions' & also we draw attention to Note (xii) of part B Schedule 'S', the Company has not made any Provision for Deferred Tax Liability.

(f) We also draw attention to note (vii) of part B of Schedule 'S'. The Company has maintained excise and service tax records in manual as well as computerized formats. The manual records relating to some of the units have been audited and accepted by the Excise department. However, the amounts reflected in the records maintained on computer, which are incorporated in the balance sheet, are pending reconciliation with the manual records. The impact of the same on the profitability of the company remains unquantifiable.

(g) We draw attention to note (xx) of part B of schedule 'S', The Company has Capitalized expenses to the tune of Rs. 3.49 Crores incurred in 'Pulp Mill Unit'. Instead of charging these expenses to Profit & Loss A/c, the Company has capitalized the same and will be depreciated over the period of time. As a result of above the loss of the Company for the year ended 31st March, 2011 is understated by Rs. 3.49 Crores.

(h) In our opinion and subject to point no. (d), (e), (f) & (g) above and in point no.(ii)(c) mentioned in the annexure to this report, the Profit & Loss Account, Balance Sheet & Cash Flow Statement comply with the accounting standards referred to in sub-section (3C) of Section 211 of The Companies Act, 1956;

(i) In our opinion and to the best of our information and according to the explanations given to us, the said Balance Sheet, Profit and Loss Account and Cash Flow Statement read together with the significant accounting policies and notes to accounts, 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 principles generally accepted in India;

(I) In the case of the Balance Sheet, of the state of affairs of the Company as on 31st March, 2011;

(II) In the case of the Profit and Loss Account, of the profit for the year ended on that date; and

(III) In the case of cash flow statement, of the cash flows for the year ended on that date.

5. On the basis of the written representation received from the Directors as on 31st March 2011 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2011 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 the Auditors Report (As Referred to in paragraph 3 of our Report of even Date)

(i) a) The company is in process of streamlining proper records showing full particulars, including quantitative details and situation of fixed assets.

b) Therefore, physical verification of the same has not been carried out;

c) During the year, the Company has not disposed off any of its assets. As such going concern status of the Company is not affected.

(ii) a) As explained to us, Physical verification of inventory has been conducted by the management at reasonable intervals.

b) In our opinion and on the basis of certificate of member of ICWA 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 nature of its business.

c) As informed to us, the company is maintaining proper records of inventory. The company's inventories, as stated in the management's certificate, have been valued at average price which constitutes the departure from the AS-2.

(iii) a) The company has granted interest free unsecured loan to companies, firms or other parties covered in the register maintained u/s.301 of the Act. The amount involved is Rs.1,64,93,173 and the number of party involved are two.

b) The rate of interest and other terms and conditions of the unsecured loans given by the Company mentioned in (a) above are prima facie prejudicial to the interest of the Company, since these loans are interest free and no specific date has been specified for their repayment.

c) As per the information and explanations given by the management, there are no specific terms and conditions for repayment of principal and Interest due thereon.

d) As there is no specific repayment due dates, there are no overdue.

e) The company has taken unsecured loan from companies, firms and other parties concerned in the register maintained u/s 301 of the Act. The amount involved in the transactions is Rs.653.28 Lacs & no. of parties involved are 32.

g) As per the information and explanations given by the management, there are no specific terms and conditions for repayment of principal and Interest due thereon; hence, prima facie it seems that the terms of accepting the loan are prejudicial to the interest of the company.

(iv) In our opinion and according to the information and explanations given to us, the internal control systems needs to be strengthened considering the size of the company and the nature of its business.

(v) a) The company has entered into the Register the Contracts & arrangements referred to in section 301 of the Companies Act, 1956. b) The transactions in pursuance of such contracts have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

(vi) The company has not accepted any deposits during the year from Public within the meaning of Sections 58A, Section 58AA or any other relevant provisions of the Companies Act, 1956 and the rules made there under.

(vii)The internal audit system of the Company needs to be strengthened, in order to be commensurate with the size & nature of the business of the Company. Further it is suggested that the management should take prompt corrective actions in respect of important suggestions pointed in Internal Audit Report.

(viii) As informed to us, the company has maintained cost records in pursuance to section 209 (1) (d) of the Companies Act, 1956 for the respective products of the company.

(ix) a) According to the information and explanations given to us and as per our observations of the records, except Professional Tax, Income Tax, TDS , VAT and Wealth Tax there is no major delay in depositing undisputed statutory dues.

b) As informed to us, there is a dispute with Central Excise & Customs Department involving an amount of Rs. 7.02 Crores.

Particulars Figure in Rs. Pending Since Forum

Central Excise & Customs Payment 1206834 2002 High Court,Nagpur

Commission on FCCB 4338466 2008 CESTAT Mumbai

Excise 3866335 2008 CESTAT Mumbai

Capital Goods Import 23692405 2007 High Court, Nagpur

Offcut sales 34348897 2009 CESTAT Mumbai

Offcut sales 2804176 2010 CESTAT Mumbai

(x) The Company does not have accumulated losses at the end of the financial year.

(xi) The company has defaulted in repayment of dues to financial institutions and banks; hence the bankers have agreed for restructuring of debt under CDR mechanism. The company does not have borrowing by way of debentures.

(xii) The Company has not granted any loans and/or advances on the basis of securities by way of pledge of shares, debentures and other securities.

(xiii) The provisions of any special statute applicable to chit fund and nidhi/mutual benefit fund/societies are not applicable to the Company.

(xiv) The Company is not a dealer or trader in shares, securities, debentures and other investments.

(xv) The Company has given Guarantee to SICOM Ltd. on behalf of Nandlal Enterprises Ltd. for an Inter Corporate Deposit of Rs. 20 crores. The company has assigned rights on the limestone mining lease awarded to the company, admeasuring 42.16 hectares of land.

(xvi) In our opinion and as per the information and explanations given, The Term Loan raised during the year has been applied for the purpose for which it has been raised.

(xvii) On the basis of overall examination of the balance sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on short-term basis, which have been used for long-term purposes.

(xviii) During the year Company has made preferential allotment of shares to parties or companies covered in the register maintained u/s 301 of the Act. The price at which shares have been issued is not prejudicial to the interests of the Company.

(xix) The Company does not have any outstanding debentures during the year.

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

(xxi) Based on the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the financial year under Audit.

FOR DEMBLE RAMANI & CO.,

Chartered Accountants

Registration No. 102259W

Place : NAGPUR Anand Deshpande, Partner

Date : 12.09.2011 Membership No. 033618














Mar 31, 2010

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

2. We have conducted our audit in accordance with the auditing standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is freefrom material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosure in the financial statement. 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 ouropinion.

3. As required by the statement on the COMPANIES (AUDITORS REPORT) ORDER, 2003 as amended by amendment order 2004 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 matter specified in the paragraphs 4 & 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 necessaryforthe 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 it appears from our examination of such books,

(c) The Balance Sheet and Profit and Loss Account referred to in this report are in agreement with the books of account,

(d) Without qualifying our opinion we draw attention to note (xviii)of Schedule S B, The Company has Capitalized expenses to the tune ofRs. 549 Lacs incurred in Pulp Mill Unit. Instead of charging these expenses to Profit & Loss A/c., the Company has capitalized the same and will be depreciated over the period of time. As a result of above the profit of the Company for the year ended 31 st March, 2010 is higherbyRs. 549 Lacs.

(e) We draw attention to note (iv) of ScheduleS B The Company has not complied with AS-11 regarding Foreign Exchange Transactions & also we draw attention to Note (ix) of Schedule S
(f) We also draw attention to note 9 of Schedule , the Company has not provided for retirement of employees as perAS-15.

(g) In our opinion and subject to point no. (d) & (e) above, the Profit & Loss Account, Balance Sheet & Cash Flow Statement comply with the accounting standards referred to in sub-section (3C) of Section 211 of The CompaniesAct, 1956;

(h) In our opinion and to the best of our information and according to the explanations given to us, the said Balance Sheet, Profit and Loss Account and Cash Flow Statement read together with the significant accounting policies and notes to accounts, give the information required by the Companies Act, 1956in the manner so required and giveatrueandfairviewin conformitywiththe principles generally accepted in India; i) lnthecaseofBalance Sheet, of thestate of affairsoftheCompanyason 31st March, 2010; ii) InthecaseoftheProfitandLoss Account, of the profit for the year ended on that date and iii) I n the Case of Cash Flow Statement, of the cash flows forthe year ended on that date.

5. On the basis of the written representation received from the Directoas on 31 st March 2010and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31 st March 2010 for being appointed as a Director in terms of clause (g) of sub section (1) of Section 274 of the Companies Act, 1956;

Annexure to the Auditors Report (As Referred to in paragraph 3 of our Report of even Date)

(i) a) The Company is in the process of streamlining proper records showing full particulars, including quantitative details and situation of fixed assets.

b) As per information given to us, the Company have regular programme for physical verification of fixed assets. During the year, the management has carried out physical verification of fixed assets of the company, no material discrepancies were noticed on such verification.

c) During the year, the Company has not disposed any of its assets, As such going concern status of the Company is not affected.

(11) a) As explained to us, physical, verification of inventory has been conducted by the management at reasonable intervals.

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

c) As informed to us, the Company is maintaining proper records of inventory. It was further informed that the discrepancies noticed on physical verification of stock were not material in relation to the operations of the Company and have been properly dealt with in the books of the Company.

(iii) a) The Company has granted interest free unsecured loan to companies, firms or other parties covered in the register maintained u/s.301 of the Act. The amount involved is Rs. 1,14,03,573/- and the number of party involved is one.

b) The rate of interest and other terms and conditions of the unsecured loans given by the Company are not prima facie prejudicial to the interest of the Company. However, the Company has granted an interest freeunsecuredtoanofRs.1,14,03,573/-toMurUTyres Ltd.

c) As per the information and explanations given by the management, there are no specific terms and conditions for repayment of principal and interest due thereon.

d) As there is no specific repayment due dates, there are no overdues.

e) The Company has taken unsecured loan from companies, firms and other parties concerned in the register maintained u/s 301 of the Act. The amount involved in the transactions is Rs. 469.05 Lacs & number of parties involved is 31.

f) The rate of interest and other terms and conditions of the unsecured loans taken by the Company are not

prima facie prejudicial to the interest of the Company.

g) As per the information and explanations given by the management, there are no specific terms and conditions for repayment of principal and interest due thereon.

iv) In our opinion and according to the information and explanation given to us, the internal control systems needs to be strengthened considering the size of the company and the nature of its business.

(v) a) The company has entered in its register the contracts & arrangements referred to in section 301 of the

CompaniesAct, 1956. b) The transactions in pursuance of such contracts have been made at prices which are reasonable having

regard to prevailing market prices at the relevant time. (vi) The company has not accepted any deposits during the year from Public within the meaning of Sections

58A, Section 58AAor*ny other relevant provisions of the Companies Act, 1956 and the rules made there

under.

(vll) The internal audit system of the Company needs to be strengthened commensurate with the size and nature of the business of the Company.

(viii) The Company has maintained cost records in pursuance to section 209 (1) (d) of the Companies Act, 1956 for the respective products of the Company, however no detailed examination of such records has been carried out.

(ix) a) According to the information and explanation given to us and as per our observations of records, except Professional Tax there is no major delay 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, Cess and other statutory dues wherever applicable with the appropriate authorities.

b) As informed to us, there is a dispute with Central Excise & Customs Department involving an amount of

Rs. 12.06 Lacs.

Particulars Amount in Rs. Pending Since Forum

Central Excise & Customs Payment 12,06,834/- 2002 High Court, Nagpur

(x) The Company does not have accumulated losses at the end of the financial year.

(xi) The Company has not defaulted in repayment of dues to a financial institution and bank. The Company does not have borrowing by way of debentures.

(xii) The Company has not granted any loans and/or advances on the basis of securities by way of pledge of shares, debentures and other securities.

(xiii) The provisions of any special statute applicable to chit fund and nidhi/mutual benefit fund/societies are

not applicable to the Company. (xiv) The Company is not a dealer or trader in shares, securities, debentures and other investments. (xv) The Company has given Guarantee to SICOM Ltd. on behalf of Nandlal Enterprises Ltd. for an Inter

Corporate Deposit ofRs.20crores.

(xvi) In our opinion and as per the information and explanations given, the term loan raised during the year has been applied forthe purpose for which it has been raised.


(xviii) During the year Company has made preferential allotment of shares to parties or companies covered in the register maintained u/s 301 of the Act. The price at which shares have been issued is not prejudicial to the interests of the Company.


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

(xxi) Based on the audit procedures performed and information and explanation given by the management, we report that no fraud on or by the Company has been noticed or reported during the financial year under Audit.

For Demble Ramani a Co., Chartered Accountants

Registration No. 102259W

Place : Nagpur

Date : 16-08-2010 Anand Despande, Partner

 
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