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Auditor Report of Thirumalai Chemicals Ltd.

Mar 31, 2014

We have audited the accompanying financial statements of Thirumalai Chemicals Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub- section (3C) of section 211 of the Companies Act, 1956("the Act") read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. 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 entity''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of 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 year ended on that date; and

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure 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;

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

c) the balance sheet, statement of profit and loss, and cash flow statement dealt with by this Report are in agreement with the books of account;

d) in our opinion, the balance sheet, statement of profit and loss, and cash flow statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 read with the General Circular 15/2013 dated September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013; and

e) on the basis of written representations received from the directors as on March 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

Referred in Paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our report of even date.

On the basis of such checks as considered appropriate and in terms of the information and explanations given to us, we state as under:

1 (a) The company is maintaining proper records showing full

particulars including quantitative details and situation of the fixed assets;

(b) As per the information and explanations given to us, the fixed assets have been physically verified by the management during the year in accordance with the phased programme of verification adopted by the Company and no material discrepancies were noticed on such verification;

(c) During the year, the company has discontinued its Maleic Anhydride plant and has disposed off part of the plant. However, the fixed assets disposed off by the company were not substantial and therefore does not affect the going concern assumption;

2 (a) As explained to us, the inventories have been physically verified during the year by the management. In our opinion, having regard to the nature and location of stocks, the frequency of the physical verification is reasonable;

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

(c) In our opinion, the Company is maintaining proper records of inventory and the discrepancies noticed on physical verification of the same were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account;

3 (a) As per the information and explanations given to us, the Company has not granted any loans, secured or unsecured to any company, form or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Hence, clause 3(b), 3(c) and 3(d) of the Order are not applicable for the year;

(b) As per the information and explanations given to us, the Company has not taken any unsecured loans from parties covered in the register maintained under section 301 of the Companies Act, 1956. Hence, clause 3(f) and 3(g) of the Order are not applicable for the year;

4 In our opinion and as explained to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fxed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls and there is no continuing failure for the same;

5 (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under Section 301 have been so entered;

(b) In our opinion and as explained to us, the terms and conditions of the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 are reasonable having regard to the prevailing market prices at the relevant time;

6 In our opinion and according to the explanations given to us, the Company has generally complied with the provisions of Section 58A and 58AA or any other relevant provision of the Companies Act, 1956 and rules made there under for the deposits accepted from the public;

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

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

9 (a) According to the information and explanations given

to us and the records examined by us, the Company is regular in depositing with appropriate authorities 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 and other statutory dues and there are no undisputed statutory dues outstanding as at 31st March 2014, for a period of more than six months from the date they became payable;

(b) Disputed statutory dues that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

Name of the Nature of Amount Financial Forum where Statute the dues (Rs.) year/s to dispute is

which the pending

amount

relates

Tamilnadu Interest 7,537,505 2000-01 Madras High

General on belated to 2005-06 Court

Sales Tax Act payments

of tax

Foreign Penalty 99,363,453 1995-96 Appellate

Exchange Tribunal

Management constituted

Act under Foreign

Exchange Management Act

Income Tax Penalty 10,566,447 2009-10 Commissioner Act of Income Tax,

Appeals

Amounts paid under protest and not charged to Statement of Proft and Loss have not been included above. [Refer Note C.32(B) to the financial statements]

10 The company does not have any accumulated losses as on 31st March 2014. The company has not incurred any cash losses during the financial year and in the immediately preceding financial year;

11 Based on the information and explanations given to us, the Company has not defaulted in repayment of any dues to financial institutions and banks;

12 Based on our examination of the records and as explained to us, the Company has not granted any loans and/ or advances on the basis of security by way of pledge of shares, debentures and other securities;

13 The Company is not a chit fund, nidhi, mutual benefit fund or a society;

14 During the year, the Company has not made any dealing and trading in shares, securities, debentures and other investments. The Company holds all shares, debentures and other investments held by the company in own name;

15 According to the information and explanations given to us, the Company has given corporate guarantee to bank for and on behalf of step-down subsidiary amounting to Rs. 587,047,000 the terms and conditions whereof in our opinion are not prima facie prejudicial to the interest of the Company;

16 In our opinion and according to the information and explanations given to us, the term loans have been applied for the purpose for which they were obtained;

17 As explained to us and on an overall examination of the balance sheet of the Company, in our opinion there are no funds raised on short-term basis, which have been used for long term investments by the Company;

18 During the year the Company has not made any preferential allotment of shares to the parties or companies covered in the register maintained under section 301 of the Companies Act, 1956;

19 During the year the Company has not issued any debentures accordingly, the clause (xix) of the paragraph 4 of the Order is not applicable to the Company;

20 The Company has not raised any money by way of public issues during the year. Therefore, the provisions of clause (xx) of the paragraph 4 of the Order are not applicable to the Company;

21 As per the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For and on behalf of

CNK & Associates LLP,

Chartered Accountants

Firm Registration No.: 101961W

H. V. Kishnadwala Place: Mumbai Partner

Date : 12th May, 2014 Membership No.: 037391


Mar 31, 2013

We have audited the accompanying financial statements of Thirumalai Chemicals Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with 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 misstatements.

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

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of 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 year ended on that date; and

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

Emphasis of Matter

We draw attention to Note E.5 to the financial statements regarding exposure of Rs. 411,879,337 in Optimistic Organic Sdn Bhd on account of transfer of advances and other amounts due to the company from erstwhile TCL Industries (Malaysia) Sdn Bhd. As detailed in the said note, the Company expects that the same would be recovered in the foreseeable future.

We further draw attention to Note E.7 to financial statements regarding provision made for commission payable to non- executive directors amounting to Rs. 5,302,414. The same is subject to approval by the members at next general meeting. Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. 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 Act, we give in the Annexure 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;

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

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

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

e) On the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

Annexure to the Independent Auditors'' Report

Referred in Paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our report of even date.

On the basis of such checks as considered appropriate and in terms of the information and explanations given to us, we state as under:

1 (a) The company is maintaining proper records showing full particulars including quantitative details and situation of the fixed assets;

1 (b) As explained to us, an independent chartered engineer, valuer and appraiser appointed by the company had carried physical verification of the fixed assets in December 2011. As informed to us, the company has also initiated a phased physical verification of fixed assets over a period of 3 years. Discrepancies noticed on such verification, which were not material, have been appropriately dealt with in the accounts;

1 (c) The fixed assets disposed off by the company were not substantial and therefore does not affect the going concern assumption;

2 (a) As explained to us, the inventories have been physically verified during the year by the management. In our opinion, having regard to the nature and location of stocks, the frequency of the physical verification is reasonable;

2 (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business;

2 (c) In our opinion, the Company is maintaining proper records of inventory and the discrepancies noticed on physical verification of the same were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account;

3 (a) As per the information and explanations given to us, the Company has not granted any loans, secured or unsecured to any company, firm or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Hence, clause 3(b), 3(c) and 3(d) of the Order are not applicable for the year;

3 (e) As per the information and explanations given to us, the Company has taken unsecured loans from a company covered in the register maintained under section 301 of the Companies Act, 1956. The details of such unsecured loan taken is as under:

Name of Balance as Maximum Party on 31 March balance 2013 (Rs.) outstanding during the year (Rs.)

Ultramarine & Nil 13,642,774 Pigments Ltd

3 (f) In case of the aforesaid unsecured loan taken, the rate of interest and the other terms and conditions are not prima-facie prejudicial to the interests of the Company;

3 (g) In case of the aforesaid unsecured loan, the repayment of principal amount and interest is regular;

4 In our opinion and as explained to us, there are adequate internal control procedures commensurate with the 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. During the course of our audit, no major weakness has been noticed in the internal controls and there is no continuing failure for the same;

5 (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under Section 301 have been so entered;

5 (b) In our opinion and as explained to us, the terms and conditions of the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 are reasonable having regard to the prevailing market prices at the relevant time;

6 In our opinion and according to the explanations given to us, the Company has generally complied with the provisions of Section 58A and 58AA or any other relevant provision of the Companies Act, 1956 and rules made there under for the deposits accepted from the public;

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

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

9 (a) According to the information and explanations given to us and the records examined by us, the Company is regular in depositing with appropriate authorities 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 and other statutory dues and there are no undisputed statutory dues outstanding as at 31st March, 2013, for a period of more than six months from the date they became payable;

9 (b) Disputed statutory dues that have not been deposited on account of disputed matters pending before appropriate authorities are as under:

Name of Nature of Amount Financial Forum where the the dues (Rs.) Year/s to dispute is Statute which the pending amount relates

Central Excise 99,945 2005-06 Assistant Excise Duty Commissioner Act of Central Excise

Income Penalty 18,169,912 1995-96 Income Tax Tax Act Appellate Tribunal

Foreign Penalty 99,363,453 1995-96 Appellate Exchange Tribunal Management constituted Act under Foreign Exchange Management Act

Tamlinadu Interest on 7,537,505 2000-01 to Madras General belated 2005-06 High Court Sales payments Tax Act of tax

Amounts paid under protest and not charged to Statement of Profit and Loss Account have not been included above. [Refer Note C.32(B) to the financial statements]

10 The company does not have any accumulated losses as on 31st March 2013. The company has not incurred any cash losses during the financial year and in the immediately preceding financial year;

11 Based on the information and explanations given to us, the Company has not defaulted in repayment of any dues to financial institutions and banks;

12 Based on our examination of the records and as explained to us, the Company has not granted any loans and/or advances on the basis of security by way of pledge of shares, debentures and other securities;

13 The Company is not a chit fund, nidhi, mutual benefit fund or a society;

14 During the year, the Company has not made any dealing and trading in shares, securities, debentures and other investments. The Company holds all shares, debentures and other investments held by the company in own name;

15 According to the information and explanations given to us, the Company has not given any guarantees for loans taken by another company from banks where it has substantial interest;

16 In our opinion and according to the information and explanations given to us, the term loans have been applied for the purpose for which they were obtained;

17 As explained to us and on an overall examination of the balance sheet of the Company, in our opinion there are no funds raised on short-term basis, which have been used for long term investments by the Company;

18 During the year the Company has not made any preferential allotment of shares to the parties or companies covered in the register maintained under section 301 of the Companies Act, 1956;

19 During the year the Company has not issued any debentures accordingly, the clause (xix) of the paragraph 4 of the Order is not applicable to the Company;

20 The Company has not raised any money by way of public issues during the year. Therefore, the provisions of clause (xx) of the paragraph 4 of the Order are not applicable to the Company;

21 As per the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For and on behalf of

Contractor Nayak & Kishnadwala

Chartered Accountants

Firm Registration No. : 101961W

H. V. Kishnadwala

Partner

Membership No. : 37391

Place : Mumbai

Date : 29th May, 2013

 
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