Mar 31, 2010
1. We have audited the attached Balance Sheet of Nuchem Limited as at
31st March, 2010 and also the Profit and Loss Account and the Cash Flow
Statement of the Company 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 auditing standards
oenerally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by the management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
3. As required by the Companies (Auditors Report) Order, 2003 as
amended by the Companies (Auditors Report) (Amendment) Order 2004
(Collectively the Order) issued by the Central Government of India in
terms of Section 227 (4A) of the Companies Act, 1956 and on the basis
of such checks as we considered appropriate and according to the
information and explanations given to us, we enclose in the Annexure a
statement on the matters specified in paragraphs 4 and 5 of the said
Order.
4. Further to our comments in the Annexure referred to 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 appears from our examination of
those books;
(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account;
(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash
Flow Statement, dealt with by this report, comply with the Accounting
Standards referred to in sub - section (3C) of Section 211 of the
Companies Act, 1956 except Accounting Standards AS-13 as explained in
Clause 4(g) below.
(e) The company has defaulted in repayment of principal amount of fixed
deposits and payment of interest thereon in respect of deposits
pertaining to earlier years. (Reference is drawn to our comments in
clause 6 of Annexure to this report). The company has been legally
advised that the defaults related to the period prior to enactment of
section 274(1)(g) of the Companies Act, 1956 and, therefore, the
present directors of the company do not attract any disqualification
under section 274(1)(g) of the Companies Act, 1956. Accordingly on
representation of the company based on legal opinion taken by it, and
written representations received from the directors of the company, as
on 31st March, 2010, none of the directors of the company is
disqualified to act as a director under Section 274(1)(g) of the
Companies Act, 1956.
(f) Refer note no. B - 13 of Schedule 17, the company has accounted for
net deferred tax assets accumulated upto the end of current accounting
year of Rs.1542.49 lacs on timing differences arising on unabsorbed
losses, depreciation and other matters under Income tax law. The
company has incurred losses in the recent past. In view of this, we are
unable to comment on the realisation of such assets against future
taxable Income.
(g) There is investment of Rs.204.33 lac in Nuchem Infrastructure
Limited, a subsidiary company. The companys proportionate share in the
losses of subsidiarys accumulated losses is Rs.257.71 lac (Previous
year Rs.268.82 lac) as per the latest audited Balance Sheet. Decline in
the value of investment in the subsidiary company has not been provided
tor in terms of Accounting Standard AS-13 Accounting for Investments
notified pursuant to the Companies (Accounting Standards) Rules, 2006.
We understand that management has been in the process of disinvestment
of subsidiary which includes sale of part of its holding in earlier
year. On the basis of report on valuation of assets of subsidiary done
by a professional firm and based on this valuation, the management
having sold part of its holding in the previous year, the management is
of the view that the companys stake in the subsidiary is fully covered
by the value of its assets.
(h) Reference is drawn to note no. B -6 of Schedule 17, wherein it has
been stated that in the process of financial restructuring
continuing from the initial relief package and modifications thereof,
the company entered into OTS arrangement with most of its term lenders
and has already made payment/s as per terms of sanction. Reliefs
thereof have been accounted for in earlier years.
During the year, the company has further entered into OTS arrangement
with one more Institution and payments are being made in terms of
sanction. The company is yet to make balance payment of Rs. 185.65 lac.
In case of this Institution, relief/s of Rs. 117.57 lac have been
considered in earlier years and Rs. 5.78 lac has been considered in the
current year. In case of default, leading to revoking of OTS, if any,
it would lead to increase in provision for interest for the year of Rs.
120.32 lac, total such unprovided for liability up to the end of the
year would be Rs.465.09 lac, apart from amounts treated as waived off
of Rs.97.07 lac in earlier years.
(i) The company has made disinvestment of 48.96% shareholding of Nuchem
Infrastructure Limited (formerly Nuchem Machine Tools Limited), a
subsidiary company, profit of Rs.2352.00 lac thereof was recognised in
the previous year. The company had received Rs.200 lac against the sale
consideration and realisation of the balance amount of Rs. 2348.00 lac
is due from March 2010 upto September 2012. Overdue amount as on
31.03.2010 is Rs.254.80 lac. The management is pursuing the matter and
in the opinion of the management, this amount will be realised within
the stipulated period. We have relied on the opinion of management in
this regard.
(j) During the year, the company has entered into an agreement to sell
in respect of one of its properties at Faridabad. The agreement is
subject to necessary approvals and clearances, including from the Banks
and Financial institutions, which are yet to be received. Pending the
approvals, the sale transaction resulting in a profit of a Rs. 610.68
Lac has not been recognised in this year accounts.
5. We further report that, had the observations made by us at clause
4(g) above been considered, accumulated losses would increase by
Rs.204.33 lac and Investment in subsidiary would reduce by Rs.204.33
lac, the impact of observation at 4(f) is not determinable at this
stage.
6. Subject to above, in our opinion and to the best of our information
and according to the explanations given to us, the said accounts read
with the Accounting policies and Notes thereon give the information
required by the Companies Act, 1956 in the manner so required and give
a true and fair view in conformity with the accounting principles
generally accepted in India:
i. In the case of Balance Sheet, of the state of affairs of the
Company as at 31st March, 2010;
ii. In the case of Profit and Loss Account, of the loss 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.
ANNEXURE TO AUDITORS REPORT (Annexure referred to in our report of
even date)
1 .a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets except in respect of furniture and fixtures as evidenced by the
records examined by us and the information made available to us.
b) The Management has physically verified fixed assets during the
period except furniture and fixtures and office equipments. In our
opinion, the frequency of such verification is reasonable having regard
to size of the company and nature of its assets. Discrepancies noticed
on such verification as compared to book records were not material and
have been properly adjusted in the books of account.
c) There was no substantial disposal of fixed assets during the year,
except that during the year, the company has entered into an agreement
to sell in respect of one of its properties at Faridabad (refer clause
4(j) above). This has not affected the going concern assumption.
2.a) The inventory, except material lying with third parties, in
transit and stock of semi finished goods at MDF Division, has been
physically verified by the management during the year. The semi
finished stock of MDF Division is physically verified at an interval of
two years as per policy. In our opinion, the frequency of such
verification is reasonable.
b) The procedures for the physical verification of inventory followed
by the management are , in our opinion, reasonable and adequate in
relation to the size of the Company and nature of its business.
c) In our opinion, the Company is maintaining proper records of
inventory. The discrepancies noticed on physical verification of
inventory as compared to book records were not material and have been
properly dealt with in the books of account. 3.a) The Company has not
granted any loans, secured or unsecured, to Companies, firms and other
parties covered in the register maintained under section 301 of the
Companies Act, 1956.
b) Since there are no such loans, comments on conditions regarding
repayment of the principal amount, interest thereon and overdue amounts
are not applicable.
c) The Company has taken unsecured interest free loan of Rs 1.40 Lac
(Maximum amount outstanding during the year and year end balance Rs
1.40 Lac) from a director and unsecured loan of Rs 468.83 lac(Maximum
amount outstanding during the year and year end balance Rs 468.83 Lac)
from its subsidiary company. The Company has not taken any other loan,
secured or unsecured, from companies, firms and other parties covered
in the register maintained under section 301 of the Companies Act,
1956.
d) The rate of interest where provided and other terms and conditions
are, prima facie, not prejudicial to the interest of the company.
e) Payment of principal amount and interest has not become due as on
31st March 2010 in respect of loan from the subsidiary and in other
case, the loan is repayable on demand and no demand has been received.
f) There is no overdue amount of principal or interest.
4. In our opinion, and according to the information and explanations
given to us during the course of audit, there are adequate internal
control systems commensurate with size of the Company and the nature of
its business with regard to purchase of inventory and fixed assets and
for the sale of goods and services. Further, on the basis of our
examination of the books and records of the company, carried out in
accordance with the generally accepted auditing practices in India, we
have neither come across nor have we been informed of any instance of
major weaknesses in the aforesaid internal control systems.
5.a) Based upon the audit procedures applied by us and according to the
information and explanations given to us by 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) In our opinion, and according to the information and explanations
given to us, each of these transactions made in pursuance of contracts
or arrangements required to be entered in the register maintained under
Section 301 of the Act and exceeding the value of Rs. five lac in
respect of each party during the year, has been made at prices which
are reasonable having regard to the prevailing market prices at the
relevant time, where such market prices are available.
6. In respect of deposits accepted from public in earlier years in
terms of section 58-A of the Companies Act, 1956 and Rules framed
thereunder, the company has not been able to make payments towards
principal and interest thereon in accordance with the Order dated
20.05.1997 of the Honble Company Law Board (CLB). The matter is before
the Court at the instance of Registrar of Companies in view of non
compliance of earlier Order dated 20.05.1997. In view of the liquidity
position, the Company approached Honble Company Law Board and had been
sanctioned revised Order dated 10.06.2005, effective 01.10.2005
envisaging payments over a period of 4 years. In view of continuing
losses and its consequent effect on its liquidity position, the company
has not been able to make payments as stipulated, the company has re
approached Honble Company Law Board seeking more time for making
payment of balance amounts as on 30.09.09. As informed, the companys
request is under consideration. The amounts including interest
outstanding as on 31.03.2010 is Rs. 222.47 tac.
7. In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
8. The Central Government has prescribed maintenance of cost records
under section 209 (1)(d) of the Companies Act, 1956 in respect of two
of the products of the company namely Formaldehyde and Brooksite . We
are of the opinion that, prima facie, the prescribed records have been
made and maintained. We are, however, not required to carry out a
detailed examination of the same.
9.a) According to the records of the company, undisputed statutory dues
including Employees Provident fund, Investor Education and Protection
fund, Employees State Insurance, Income-tax, Sales-tax, Wealth-tax,
Custom Duty, Excise Duty, Service Tax, Cess and other statutory dues,
as applicable, have not been regularly deposited with the appropriate
authorities during the year. There are arrears of Rs.51.52 lac,
Rs.14.65 lac ,Rs.0.58 lac, Rs.6.99 lac, Rs.2.01 lac and Rs.4.70 lac in
respect of Income tax.FBT, VAT, CST, ESI and Service Tax respectively
payable as at the end of the year for a period of more than six months
from the date they became payable.
b) According to the information and explanations given to us and as per
the books and records examined by us, there are no dues of income tax,
custom duty, excise duty, wealth tax, cess and service tax which have
not been deposited on account of any dispute, except the following in
respect of disputed sales tax/lncometax alongwith the forum where
dispute is pending:
Name of the Nature of dues Amount
Statute (Rs. in lacs)
Delhi Sales Tax Act 1975 Sales Tax 14.58
12.08
30.17
0.65
Haryana Value Added Tax VAT 129.79
Central Sales Tax Act 1956 CST 5.00
Central Sales Tax CST 0.50
3.98
5.37
115.17
Trade Tax 0.02
0.09
0.12
0.03
Income Tax 15.44
3.28
0.33
0.77
0.76
Name of the Period to which Forum where
Statue the amount relates dispute is pending
Delhi Sales Tax Act 1975 1984-85 Appellate Tribunal at Delhi
1985-86 - do -
1986-87 - do -
1993-94 Deputy Commissioner, (A) Delhi
Haryana Value Added Tax 2006-07 Joint ETC(A) Faridabad
Central Sales Tax Act 1956 1993-94 Deputy Commissioner, (A) Delhi
Central Sales Tax 1998-99 Appellate Tribunal at Chandigarh.
2003-04 Joint ETC(A) Faridabad.
2005-06 -do-
2006-07 -do-
Trade Tax 1995-96 The Trade Tax Officer NOIDA
1996-97 -do-
1997-98 -do-
2001-02 -do-
Income Tax 1994-95 CIT(A), FBD
1997-98 -do-
2006-07 -do-
2007-08 -do-
2008-09 -do-
10. The accumulated losses of the company as at the end of current
financial year have exceeded fifty percent of its net worth. The
company has incurred cash losses during the current accounting year.
There were no cash losses during immediately preceding accounting
period.
11. During the year, the company has defaulted in repayment of dues to
banks. The total amount of default as on 31.03.2010 has been Rs.
361.23 lac, with date of earliest default in February 2009.The defaults
have continued upto the close of the accounting year.
12. According to the information and explanations given to us, the
Company has not granted any loans and advances on the basis of security
by way of pledge of shares, debentures and other securities.
13. The Company does not fall within the category of Chit fund / Nidhi
/ Mutual Benefit fund / Society and hence the related reporting
requirements of the Order are not applicable.
14. According to the information and explanations given to us, the
Company is not dealing or trading in shares, securities, debentures and
other investments and hence the related reporting requirements of the
Order are not applicable.
15. TheXompany has given corporate guarantee of Rs.112.66 lac to a
bank against the working capital facilities taken by a company. The
terms and conditions of such guarantee do not, prima facie, appear to
be prejudicial to the interest of the company.
16. In our opinion and according to the information and explanations
given to us, the term loans raised during the year by the Company have
been applied for the purpose for which the said loans were obtained,
where such end use has been stipulated by the lenders.
17. According to the information and explanations given to us and as
per the books and records examined by us, as on the date of balance
sheet, the funds raised by the Company on short term basis have been
applied for payment of long term dues under OTS, to the extent of Rs.
1938.93 Lac.
18. The Company has not made any preferential allotment of shares,
during the year, to parties and Companies covered in the register
maintained under section 301 of the Companies Act, 1956.
19. The company does not have any debentures outstanding as at the
year end.
20. The Company has not raised any money by way of public issues
during the year.
21. During the course of our examination of the books and records of
the Company carried out in accordance with the generally accepted
auditing practices in India, we have neither come across any instance
of fraud on or by the Company, noticed and reported during the year,
nor have we been informed of such case by the management.
For D.& Talwar & Co. For S. S. Kothari Merita & Co.
Chartered Accountants Chartered Accountants
Firm Regn.No.-000993N Firm Regn.No.-000756N
Sd/- V. Talwar Sd/- Arun K. Tulsian
Partner Partner
Membership No. 7542 Membership No. 89907
Place : New Delhi
Dated : 12th November, 2010