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Auditor Report of Oswal Spinning & Weaving Mills Ltd.

Mar 31, 2014

We have audited the accompanying financial statements of OSWAL SPINNING AND WEAVING MILLS LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2014, the Statement of Profit and Loss and the Cash Flow Statement for the period then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position and financial performance of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

Opinion

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

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 profit for the period ended on that date.

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

Emphasis of Matter

Without qualifying our opinion, we draw attention to the following:

a) We draw attention to Note-16 to the financial statements which describes the doubtful nature of the Trade Receivables to the extent of Rs. 92,91,903.00 receivable for more than 3 years against which no provision for doubtful debts has been made by the company. However, The company is taking requisite steps to recover the amount.

b) We draw attention to Note-29 to the financial statements which describes that during the year the Company has changed rate of charging depreciation on cotton spinning unit from the rate prescribed for Continuous Process Plant to General Plant and Machinery as per rates specified in Schedule XIV of the Companies Act, 1956. Consequently the difference of Depreciation relating to earlier years amounting to Rs.1,26,16,898.42/- has been provided during the year as an Exceptional Item. Had the depreciation been provided as per previous rate then the depreciation for the period on cotton spinning unit would have been Rs.2,25,66,538/- instead of Rs. 98,20,049/-. The Company''s records indicate that had the depreciation been provided as previous rate :-

i. The Profit would have been Rs.35,92,603.40/- as against the reported figure of Rs. 37,22,194.40/-.

ii. Balance of Surplus would have been Rs 5,95,15,484.20- as against the reported figure of Rs. 5,96,45,075.20/-.

iii. Fixed Assets (excluding Capital Work-in-progress) would have been Rs.17,27,61,591.70/- as against the reported figure of Rs.17,28,91,182.70/-

c) We draw attention to Note-30(iii) to the financial statements which describes that Kotak Mahindra Bank Ltd. has issued a notice under section 13(2) of the SARFAESI Act, 2002 demanding Rs. 63.43 crores (calculated upto 04/04/2014) from the Company in respect of various commitments, defaults, penalties and interest thereon, which the Company has contested illegal and without any basis before the Hon. High Court of Punjab and Haryana, for which petition has been admitted on 29/05/2014 and further proceedings under section 13(4) of SARFAESI Act, 2002 has been stayed.

d) We draw attention to Note-30(iv) to the financial statements which describes that State Bank of Patiala (SBOP) has filed an application before the Debts Recovery Tribunal (DRT) Chandigarh for recovery of an amount of Rs. 4.09 cr. (being NPV of Rs. 2.88 cr. of CRPS of Rs. 5.38 cr. and interest thereon). These CRPS have already been issued by the Company to the Bank. Further the Company had agreed to pay the NPV of CRPS because SBOP had informed the Company that they had waived the amount of Rs. 5.29 cr. being interest payable by the Company to SBOP. However, later on it has transpired that instead of waiving this amount of Rs. 5.29 cr., SBOP has transferred the same to Kotak Mahindra Bank Limited (KMBL) vide assignment agreement dated 16.11.2007 thereby misleading the Company that they have waived the interest and thus violating the terms and conditions of the agreement that they had with the Company. On this ground the application of the bank is being contested by the Company in the DRT.

e) We draw attention to Note-30(v) to the financial statements which describes that IFCI has filed an application before the Debts Recovery Tribunal (DRT) Chandigarh for recovery of an amount of Rs. 2347.02 lacs (Rs. 1269.82 lacs being amount of FITL and balance amount being interest thereon). IFCI has also filed a company petition with the Punjab and Haryana High Court under section 433, 434 & 439 for Recovery of the above mentioned amount/winding up of the Company. The Company is contesting the application in the DRT and Company petition in Punjab and Haryana High Court on the ground that by way of assignment of debt IFCI has assigned/transferred the entire dues including FITL of Rs. 1269.82 lacs payable by the Company to IFCI on 16.11.2007 in favour of Kotak

Mahindra Bank Limited vide Assignment Agreement dated 16.11.2007 and after that nothing is due and payable by the Company to IFCI.

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) 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 except as specifically mentioned in Point 11 of the Annexure;

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

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

d) In our opinion, the Balance Sheet, Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

e) On the basis of written representation received from the Directors as on 31st March 2014, and taken on record by the Board of Directors, we report that none of the directors are 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 Companies Act, 1956.

ANNEXURE TO THE AUDITOR''S REPORT

The Annexure referred to in paragraph 1 under the heading ''Report on Other Legal and Regulatory Requirements'' of the Our Report of even date to the members of OSWAL SPINNING AND WEAVING MILLS LIMITED on the accounts of the company for the period ended 31st March, 2014.

On the basis of such checks as we considered appropriate and according to the information and explanation given to us during the course of our audit, we report that:

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

(b) All the assets have not been physically verified by the management during the period but there is a regular programme of verification, which, in our opinion, is reasonable, having regard to the size of the company and the nature of its business. 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 fixed assets and therefore does not affect the going concern assumption.

2. (a) As explained to us, inventories have been physically verified during the period by the management at reasonable intervals.

(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) In our opinion and on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. No material discrepancy was noticed on physical verification of stocks by the management as compared to book records.

3. (a) The company has taken loan from four companies and 17 other parties covered in the register maintained under section 301 of the Companies Act 1956. The maximum amount involved during the period was Rs.5,27,10,698/62 and the period end balance of loans was Rs.4,91,10,698/62

(b) The rate of interest and other term and conditions of such loans are, in our opinion, prima facie not prejudicial to the interests of the Company.

(c) According to information and explanations given to us, the parties from whom loans and advances in the nature of loans have been taken, the interest and principal amounts are being repaid as stipulated.

(d) The company has not granted loan to companies covered in the register maintained under section 301 of the Companies Act, 1956. So Para No. e, f, g are not applicable.

4. In our opinion and according to the information and explanations given to us, there is generally an adequate internal control procedure commensurate with the size of the company and the nature of its business, for the purchase of inventories & fixed assets and payment for expenses & for sale of goods. During the course of our audit, no major instance of continuing failure to correct any weaknesses in the internal controls has been noticed.

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 transactions entered into by the company with parties covered u/s 301 of the Act exceeding five lakh rupees in a financial period have been made at prices which are prima facie reasonable.

6. The Company has not accepted any deposits from the public covered under section 58A and 58AA of the Companies Act, 1956.

7. As per information & explanations given by the management, the Company has an internal audit system commensurate with its size and the nature of its business.

8. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

9. (a) According to the records of the company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess to the extent applicable and any other statutory dues have generally been regularly deposited with the appropriate authorities. According to the information and explanations given to us there were no outstanding statutory dues as on 31st of March, 2013 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there is no amounts payable in respect of income tax, wealth tax, service tax, sales tax, customs duty and excise duty which have not been deposited on account of any disputes except Sale Tax penalty amounting to Rs.135000/- demanded in year 2000-2001 which is disputed in Sale Tax Appellate Authority.

10. The accumulated losses of the company are not more than its net worth. The company has not incurred cash losses during the financial period covered by our audit and immediately preceding financial period.

11. We are unable to express an opinion on term loan from Kotak Mahindra Bank Limited as information regarding repayment terms have not been provided to us by the company. In case of all other term loans, the company has not defaulted in repayment of dues to banks.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. The Company is not a chit fund or a nidhi /mutual benefit fund/society. Therefore, the provision of this clause of the Companies (Auditor''s Report) Order, 2003 (as amended) is not applicable to the Company.

14. According to information and explanations given to us, the Company is not trading in Shares, Mutual funds & other Investments.

15. According to the information and explanations given to us, the Company has not given any guarantees for loan taken by others from a bank or financial institution.

16. Based on our audit procedures and on the information given by the management, we report that the company has not raised any term loans during the period.

17. Based on the information and explanations given to us and on an overall examination of the Balance Sheet of the Company as at 31 st March, 2014, we report that no funds raised on short- term basis have been used for long-term investment by the Company.

18. Based on the audit procedures performed and the information and explanations given to us by the management, we report that the Company has not made preferential allotment of shares during the period to parties covered in the register maintained under section 301 of the Act.

19. The Company has no outstanding debentures during the period under audit.

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

21. Based on the audit procedures performed and the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the period, nor have we been informed of such case by the management.

FOR DASS KHANNA & CO. CHARTERED ACCOUNTANTS (Firm Regn No. 000402N)

PLACE : LUDHIANA (RAKESH SONI) DATED : 30.05.2014 PARTNER M.NO. 83142


Mar 31, 2013

Report on Financial Statements

We have audited the accompanying financial statements of OSWAL SPINNING AND WEAVING MILLS LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2013, the Statement of Profit and Loss and the Cash Flow Statement for the period then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position and financial performance of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control releVantio the preparation and presentation of the f/nancial statements that give a true and fair view and are free from material misstatement, whether due to fra''ud or error.

Auditor''s Responsibility v

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 qualified audit opinion.

Basis of Qualified Opinion

Depreciation on Spinning Plant in case of cotton spinning unit has been provided at rate prescribed for continuous plant. Had the depreciation been provided as the general plant & machinery, the depreciation for the period on cotton spinning unit would have been Rs. 31,87,501/- instead of Rs. 5,04,36,595.96/-. The Company''s records indicate that had the depreciation been provided as the general plant & machinery :-

a. The Profit would have been Rs. 11,72,20,811/- as against the reported figure of Rs. 6,99,71,716.96/-. .

b. Balance of Surplus would have been Rs. (1,49,56,710)/- as against the reported figure of Rs. (6,22,05,804.04)/-.

c. Fixed Assets (Excluding Capital Work-in- progress) would have been Rs. 14,71,71,821/- as against the reported figure of Rs.

16,59,19,515.96/-.

Penal interest on term loan of Kotak Mahindra Bank

Limited has not been provided in the books maintained

by the company. .

Qualified Opinion

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

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

b) In the case of the Statement of Profit and Loss, of the profit for the period ended on that date.

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

Emphasis of Matter

We draw attention to Note-16 to the financial statements which describes the doubtful nature of the Trade Receivables to the extent of Rs. 98,11,654.40 receivable for more than 3 years against which no provision for doubtful debts has been made by the company. However, The company is taking requisite steps to recover the amount.

Our opinion is not qualified in respect of this matter.

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 theAnnexure 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) we have obtained al( the^mformation and explanations which- to the best of our knowledge and belief were necessary for the purpose of our audit except as specifically mentioned in Point 11 of the Annexure;

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

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

d) In our opinion, the Balance Sheet, Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

e) On the basis of written representation received from the Directors as on 31st March 2013, and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 31st March 2013 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 AUDITOR''S REPORT

The Annexure referred to in paragraph 1 under the heading ''Report on Other Legal and Regulatory Requirements'' of the Our Report of even date to the members of OSWAL SPINNING AND WEAVING MILLS LIMITED on the accounts of the company for the period ended 31st March, 2013.

On the basis of such checks as we considered appropriate and according to the information and explanation given to us during the course of our audit, we report that:

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

(b) All the assets have not been physically verified by the management during the period but there is a regular programme of verification, which, in our opinion, is reasonable, having regard to the size of the company and the nature of its business. 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 fixed assets and therefore does not affect the going concern assumption.

2. (a) As explained to us, inventories have been1 physically verified during the period by the management at reasonable intervals.

(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) In our opinion and on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. No material discrepancy was noticed on physical verification of stocks by the management as compared to book records.

3. (a) The company has taken loan from four companies and 17 other parties covered in the register maintained under section '''' 301'' of the Companies Act 1956. The maximum amount involved during the period was Rs.6,26,20,698/- and the period end balance of loans was Rs.4,97,10,698.62/-

(b) The rate of interefet and other term and conditions of such loans are, in our opinion, prima facie not prejudicial to/ihe interests of the Company.

(c) According to information and explanations given to us, the parties from whom loans and advances in the natwe of loans have been taken, the interest and principal amounts are being repaid as stipulated.

(d) The company has not granted loan to companies covered in the register maintained under section 301 of the Companies Act, 1956. So Para No. e, f, g are not applicable.

4. In our opinion and according to the information and explanations given to us, there is generally an adequate internal control procedure commensurate with the size of the company and the nature of its business, for the purchase of inventories & fixed assets and payment for expenses & for sale of goods. During the course of our audit, no major instance of continuing failure to correct any weaknesses in the internal controls has been noticed.

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 transactions entered into by the company with parties covered u/s 301 of the Act exceeding five lakh rupees in a financial period have been made at prices which are prima facie reasonable.

6. The Company has not accepted any deposits from the public covered under section 58A and 58AA of the Companies Act, 1956.

7. As per information & explanations given by the management, the Company has an internal audit system commensurate with its size and the nature of its business.

8. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete. x,

9. (a) According to the records of the company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess to the extent applicable and any other statutory dues have generally been regularly deposited with the appropriate authorities. According to the information and explanations given to us there were no outstanding statutory dues as on 31st of March, 2013 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there is no amounts payable in respect of income tax, wealth tax, service tax, sales tax, customs duty and excise duty which have not been deposited on account of any disputes except Sale Tax penalty amounting to Rs.135000/-demanded in year 2000-2001 which is disputed in Sale Tax Appellate Authority.

10. The accumulated losses of the company are not more than its net worth. The company has not incurred cash losses during the financial period covered by our audit and immediately preceding financial period.

11. We are unable to express an opinion on term loan from Kotak Mahindra Bank Limited as information regarding repayment terms have not been provided to us by the company. In case of all other term loans, the company has not defaulted in repayment 6f dues to banks.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the1 ba,sis p/security by way of pledge of shares, debentures and other securities. '' '' J )

13. The Company is not a chit fund or a nidhi /mutual benefit fund/society. Therefore, the provision of this clause of the Companies (Auditor''s Report) Order, 2003 (as amended) is nof applicable to the Company.

14. According to information and explanations given to us, the Company is not trading in Shares, Mutual funds & other Investments.

15. According to the information and explanations given to us, the Company has not given any guarantees for loan taken by others from a bank or financial institution.

16. Based on our audit procedures and on the information given by the management, we report that the company has not raised any term loans during the period.

17. Based on the information and explanations given to us and on an overall examination of the Balance Sheet of the Company as at 31 st March, 2013, we report that no funds raised on short- term basis have been used for long-term investment by the Company.

18. Based on the audit procedures performed and the information and explanations given to us by the management, we report that the Company has not made preferential allotment of shares during the period to parties covered in the register maintained under section 301 of the Act.

19. The Company has no outstanding debentures during the period under audit.

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

21. Based on the audit procedures performed and the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the period, nor have we been informed of such case by the management.

FOR DASS KHANNA & CO.,

CHARTERED ACCOUNTANTS

(Firm Regn No. 000402N)

PLACE : LUDHIANA (RAKESH SONI)

DATED : 30.05.2013 PARTNER

M.NO. 83142


Dec 31, 2011

1 We have audited the attached balance sheet of OSWAL SPINNING AND WEAVING MILLS LIMITED, as at 31st December 2011, the profit and loss account and also the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

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

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

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

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

(iv) 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

(v) On the basis of written representation received from the Directors as on 31st December 2011, and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 31st December 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956

(vi) We report that :-

1. Depreciation on Spinning Plant in case of cotton spinning unit, has been provided at rate prescribed for continuous plant. Had the depreciation been provided as the general plant & machinery, the depreciation for the year on cotton spinning unit would have been Rs 43,07,922/'- instead of Rs. 4,30,30,626-

2. Penal Interest on Term Loan of Kotak Mahindra Bank Limited has not been provided .

We further report that had the observation made by us in (1) above been considered for the year.

a) The Profit would have been Rs. 5,03,76,387/- as against Profit reported figure of Rs. 1,16,53,683-.

b) Debit Balance of Profit & Loss Account would have been Rs 9,94,64,417/- as against reported figure of Rs. 13,81,87,121/-.

c) Fixed Assets would have been Rs. 11,32,68,350/ as against the reported figure of Rs. 17,70,54,814/-.

In our opinion and to the best of our information and according to the explanations given to us, the said accounts subject to above and Non provision in respect of Debtors not considered good and read together with notes on accounts as per Annexure 'P' 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:

1. In the case of the balance sheet, of the state of affairs of the company as at 31st December, 2011.

2. In the case of the profit and loss account, of the profit for the year ended on that date; and

3 In the case if the cash flow statement, of the cash flows for the year ended on that date

ANNEXURE TO THE AUDITOR'S REPORT

(REFERRED TO IN PARAGRAPHGRAPH (3) OF OUR REPORT OF EVEN DATE ON THE STATEMENT OF ACCOUNTS OF OSWAL SPINNING AND WEAVING MILLS LIMITED FOR THE YEAR ENDED 31st DECEMBER , 2011.)

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

b) The company has system of physical verification of its fixed assets at the year end In our opinion, the system is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

c) During the year, the company has not disposed off a substantial part of the fixed assets which affected the going concern status of the company.

2. a) The inventory has been physically verified during the year by the management. 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) The company is maintaining proper records of inventory. No discrepancies noticed on verification between the physical stocks and the book records.

3. a) The company has taken loan from Four companies and 17 other parties covered in the register maintained under section 301 of Companies Act 1956. The maximum amount involved during the year WSS Rs.5,35,20,699/- and the year end balance of loans was Rs.4,95,20,699/-

b) The rate of interest and other terms and conditions in respect of loans taken are not prima-facie prejudicial to the interest of the Company

c) According to information and explanations given to us, the parties from whom the loans and advances in the nature of loans have been taken, the interest wherever applicable and principal amounts are being repaid as stipulated.

d) The company has not granted loan to companies covered in the register maintained under section 301 of the Companies Act, 1956.So Para No e, f, g are Not Applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control system 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 and service. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system.

5. a) According to the information and explanations give to us, we are of the opinion that there were no particulars of contracts or arrangements that need to be entered into the register required to be maintained under section 301 of the Companies Act, 1956.

b) In view of the above, clause (v) (b) of this order is not applicable for the current year.

6. According to the information and explanations given to us, The company has not accepted deposits from the public within the meaning of Section 58A, section 58AA or any other relevant provision of the companies Act, 1956 and the companies(Acceptance of Deposit) rules, 1975.

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 books of account relating to materials, labour and other items of cost maintained by the company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

9. a) The company is regular in depositing with appropriate authorities undisputed Provident Fund, ESI, Income Tax, Service Tax with the Appropriate Authorities.

b) According to the information and explanations given to us, there are no dues of provident fund ,ESI, Income Tax, Sale Tax; Excise Duty, Custom duty, wealth tax, Service tax, which have not been deposited on account of any dispute except Sale Tax penalty amounting to Rs. 135000/- demanded in year 2000-2001 which is disputed in Sale Tax Appellate Authority.

10. The accumulated losses of the company are not more than its net worth. The company has not incurred cash losses during the financial year covered by our audit and immediately preceding financial year.

11. The company has not provided any information and explanation regarding the revised repayment schedule of Term Loan due to Kotak Mahindra Bank Limited, so we are not able to express any opinion on repayment dues in respect of the said Term Loan.

12. According to the information and explanations given to us, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. The company is not a chit fund ora nidhi/mutual benefit fund/ society.

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

15. According to the information and explanations given to us the company has not given any guarantees for loans taken by others from banks or financial institutions.

16. The company has not raised Term loan 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 during the year company has not applied any funds on long -term basis out of short term funds.

18. According to the information and explanations given to us, during the year, company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

19. According to the information and explanations given to us, the company has created security in respect of debentures issued.

20 The company has not raised any money by way of public issue during the year.

21. In our opinion and according to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit.

FOR DASS KHANNA & CO.,

CHARTERED ACCOUNTANTS

(Firm Regn No.000402N)

(R.D. KHANNA)

PLACE : LUDHIANA PARTNER

DATED .24.05.2012 M.NO 12391


Sep 30, 2010

1. We have audited the attached balance sheet of OSWAL SPINNING AND WEAVING MILLS LIMITED, as at 30th September 2010, the profit and loss account and 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 conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosure in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

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

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

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

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

(iv) 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.

(v) On the basis of written representation received from the Directors as on 30th September 2010, and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 30th September 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

(vi) We report that :-

1. Depreciation on Spinning Plant in case of cotton spinning unit, has been provided at rate prescribed for continuous plant. Had the depreciation been provided as the general plant & machinery, the depreciation for the year on cotton spinning unit would have been Rs. 66,55,030/- instead of Rs. 4,37,08,556/-.

2. Non Provision of Penal Interest amounting to Rs. 67,92,857/- on term loan.

We further report that had the observation made by us in (1) above been considered for the year.

a) The Profit would have been Rs. 4,01,24,317/ - as against Profit reported figure of Rs.98,63,648/-.

b) Debit Balance of Profit & Loss Account would have been Rs.11,95,80,135/- as against reported figure of Rs.14,98,40,804/-.

c) Fixed Assets would have been Rs. 11,75,76,272/- as against the reported figure of Rs. 23,92,96,700/-.

In our opinion and to the best of our information and according to the explanations given to us, the said accounts subject to above and Non provision in respect of Debtors not considered good and read together with notes on accounts as per Annexure P 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:

1. In the case of the balance sheet, of the state of affairs of the company as at 30th September, 2010.

2. In the case of the profit and loss account, of the profit for the year ended on that date; and

3. In the case if the cash flow statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT (REFERRED TO IN PARAGRAPHGRAPH (3) OF OUR REPORT OF EVEN DATE ON THE STATEMENT OF ACCOUNTS OF OSWAL SPINNING AND WEAVING MILLS LIMITED FOR THE YEAR ENDED 30th SEPTEMBER, 2010.)

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

b) The company has system of physical verification of its fixed assets at the year end .In our opinion, the system is reasonable having regard to the size of the company and the natureof its assets. No material discrepancies were noticed on such verification.

c) During the year, the company has not disposed off a substantial part of the fixed assets which affected the going concern status of the company.

(ii) a) The inventory has been physically verified during the year by the management. 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) The company is maintaining proper records of inventory. No discrepancies noticed on verification between the physical stocks and the book records

(iii) (a) The company has taken loan from Five companies and 18 other parties covered in the register maintained under section 301 of the Companies Act 1956. The maximum amount involved during the year was Rs.6,15,20,699/- and the year end balance of loans was Rs.6,15,20,699/-

(b) The rate of interest and other terms and conditions in respect of loans taken are not prima-facie prejudicial to the interest of the Company.

(c) According to information and explanations given to us, the parties from whom the loans and advances in the nature of loans have been taken, the interest wherever applicable and principal amounts are being repaid as stipulated.

(d) The company has not granted loan to companies covered in the register maintained under section 301 of the Companies Act, 1956.So Para No.e, f, g are Not Applicable.

(iv) In our opinion and according tp the information and explanations given to us, there are adequate internal control system 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 and service. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system.

(v) (a) According to the information and explanations give to us, we are of the opinion that there were no particulars of contracts or arrangements that need to be entered into the register required to be maintained under section 301 of the Companies Act, 1956.

(b) In view of the above, clause (v) (b) of this order is not applicable for the current year.

(vi) According to the information and explanations given to us, The company has not accepted deposits form the public within the meaning of Section 58A, section 58AA or any other relevant provision of the companies Act, 1956 and the companies(Acceptance of Deposit) rules, 1975

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

(viii) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) The company is regular in depositing with appropriate authorities undisputed Provident Fund, ESI, Income Tax, Service Tax with the Appropriate Authorities.

(b) According to the information and explanations given to us, there are no dues of Provident fund ,ESI, Income Tax, Sale Tax, Excise Duty, Custom duty, wealth tax, Service tax, which have not been deposited on account of any dispute except Sale Tax penalty amounting to Rs 135000/- demanded in year 2000-2001 which is disputed in Sale Tax Appellate Authority.

(x) The accumulated losses of the company are not more than its net worth. The company has not incurred cash losses during the financial year covered by our audit and immediately preceding financial year.

(xi) The company has shown that Non Convertible Debentures of Rs. 1.65 crore has been paid off as on balance sheet date but evidence has not been produced for the verification. However, In our opinion and according to the information and explanations given to us, the company has defaulted in repayment of Term Loan due to KOTAK MAHINDRABANK LIMITED for Rs.22.45 Crore.

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

(xiii) The company is not a chit fund or a nidhi/mutual benefit fund/ society.

(xiv) The company is not dealing in or trading in shares, securities, debentures and other investments.

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

(xvi) The company has not raised Term loan during the year.

(xvii)According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that during the year company has not applied any funds on long -term basis out of short term funds.

(xviii)According to the information and explanations given to us, during the year, company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

(xix) According to the information and explanations given to us, the company has issued debentures during the year. Accordingly, the provisions ot clause 4(XIX) of the order are not applicable to the company.

(xx) The company has not raised any money by way of public issue during the year.

(xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit.

FOR DASS KHANNA & CO.,

CHARTERED ACCOUNTANTS

(Firm Regn No. 000402 N)

PLACE: LUDHIANA (R.D. KHANNA)

DATED : 24.02.2011 PARTNER

M.NO. 12391



 
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