Mar 31, 2010
1. We were engaged to audit the attached Balance Sheet of Parekh
Platinum Limited as at 31st March, 2010, the Profit and Loss Account
and the Cash Flow Statement for the year ended on that date annexed
thereto. These financial statements are the responsibility of the
Companys management.
2. Our responsibility is to express an opinion on these financial
statements based on our audit in accordance with the standards on
auditing issued by the Institute of Chartered Accountants of India. In
view of matters described in para 3 herein below we were not able to
obtain sufficient appropriate audit evidence to provide a basis for an
audit opinion.
3 (a) As referred to in Note 6 and 7 to accounts under Schedule 18 the
Company defaulted in repayment of borrowings from banks and financial
institutions. The lenders initiated recovery proceedings and
accordingly IFCI Ltd.("IFCI"), representing the consortium of lenders,
initiated action against the Company under the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interests (SARFESI) Act, 2002. In September, 2009, IFCI took forceful
physical possession of the Companys manufacturing plant at Gandhinagar
including land, building, plant & machinery. These assets aggregating
Rs. 6729.44 lakhs comprise almost the entire fixed assets of the
Company. It issued a public notice for auction of these assets and
eventually sold off some of the said assets. The Company requested IFCI
to furnish the details thereof. However, IFCI has not responded till
date. In view thereof, the Company does not have details to record
accounting entries in respect of deletion of the assets from the
Balance Sheet, profit or loss arising therefrom, resulting tax
liabilities and it continues to show these assets in its books of
account. Further, since the Company does not have details regarding
discharge of its various liabilities out of the realizations, its
liabilities also have not been given any effect for such discharge.
We have also tried to seek confirmations from IFC! regarding related
details and realizations from the sale of the Companys Fixed Assets,
discharge of liabilities etc, but, IFCI has not yet responded to us.
As a result, we are unable to comment on the amount of Fixed Assets
aggregating to Rs. 6729.44 lakhs carried in the Balance Sheet as well
as profit or loss on account of sale thereof which should have been
reflected in the profit and loss account.
(b) As referred to in Note 6 to Accounts under Schedule 18 the Company
has defaulted in the payments of its dues to Secured Lenders and has
provided interest in this respect on the basis of the sanctioned terms
upto March 31, 2005. Provision for interest for the period April 1,
2005 to March 31, 2010 has not been made. As such considering (a) and
(b) above, the balances in respect of borrowings from Banks and
Financial Institutions aggregating Rs. 44459.57 lakhs are subject to
confirmation and reconciliation and accordingly, we are unable to
comment on the quantification of liability in respect of borrowings
from Banks and Financial Institutions, and are also unable to comment
on the amount of provision that may be required on account of interest
on these borrowings.
(c) As referred to in note no. 11 to Accounts under Schedule 18, Sundry
Debtors, Loans & Advances and Deposit include debts due from related
parties aggregating Rs.11.97 Lacs , Rs 6468.40 Lacs and Rs 1500.00 Lacs
respectively. No provision has been made in the accounts and the amount
of provision has not been ascertained for any possible loss arising on
account of erosion in the net worth of these related parties due to
losses suffered by them and doubtful nature of their Debts, Loans &
Advances, etc.
In respect of this matter, based on the evidence made available to us,
we are unable to comment on the realisability of these Debtors, Loans &
Advances and Deposits, ana are also unable to express an opinion as to
the amount of provision that may be required in this respect .
(d) As referred to in note no. 16 of Schedule 18 being Notes on
Accounts, the company has during the year under consideration written
back long outstanding current liabilities aggregating Rs. 2068.60 Lacs
as no longer payable. In the absence of availability of adequate direct
evidences, we have not been able to verify the above write back.
(e) As referred to in note no. 4 of Schedule 18 being Notes on
Accounts, the management is of the opinion that the provisions in
respect of current liabilities is not in excess of the amount
reasonably considered necessary. However, in view of absence of
positive direct confirmation of various parties in this respect we are
unable to express an opinion in this respect.
4. In view of the significance of the matters described in para 3
herein above, we have not been able to obtain sufficient appropriate
audit evidence to provide a basis for an audit opinion. Accordingly we
do not express an opinion on the financial statements.
5. As stated in Notes 5 and 9 to Accounts under Schedule 18 the net
worth of the Company has eroded. The Company has not been able to
renegotiate its borrowings from the lenders. The properties of the
Company have been taken over and some of them have been sold off. The
products of the Company continued to be manufactured at Mumbai from
leased assets upto 5th Novemeber 2010 when the Company declared a lock
out in view of labour unrest.The Management is confident of continued
operations on lifting of lock out and the accounts are prepared on a
going concern basis. In our opinion, this situation indicates the
existence of a material uncertainty which casts significant doubt on
the Companys ability to continue as a going concern.
6. 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, (The Act) we give in the
Annexure a statement on the matters specified in paragraphs 4 and 5 of
the said order.
7. As required by section 227(3) of the Companies Act, 1956, we report
that:
(a) As described in para 3 hereinabove, we were unable to obtain all
the information and explanations, which to the best of our knowledge
and belief were necessary for the purpose of our audit.
(b) Due to the possible effects of the matters described in para 3
hereinabove, we are unable to state whether 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) Due to the possible effects of the matters described in para 3
hereinabove we are unable to state whether 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.
(e) Subject to the reliance placed by us on the legal opinion obtained
by the Company from a practicing Company Secretary stating that
privately placed debentures cannot be construed as "Debentures" for the
purpose of section 274 (1)(g) of the Companies Act 1956 (refer note no.
13 of Schedule 18 and on the basis of written representations received
from Directors as on 31s March 2010 and taken on record by the Board
of Directors, we report that none of the directors is disqualified as
on 31st March, 2010 from being appointed as director in terms of clause
(g) of sub-section (1) of Section 274 of the Companies Act, 1956.
ANNEXURE REFERRED TO IN PARAGRAPH "3" OF THE AUDITORS REPORT TO THE
MEMBERS OF PAREKH PLATINUM LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED
31st MARCH, 2010.
1 (a) The records containing the quantitative details and situation of
Fixed Assets maintained by the Company were destroyed in the floods at
the Companys office in July, 2005.
(b) As referred to in para 3a of our audit report, physical possession
of almost the entire fixed assets of the company have been taken over
by IFCI. Hence the fixed assets have not been physically verified by
the Management during the year under consideration.
(c) As referred to in para 3a of our audit report and note no. 6 & 7 to
Accounts under Schedule 18, IFCI has taken over physical possessions of
almost the entire fixed Assets of the Company and accordingly this
situation indicates the existence of a material uncertainty which casts
significant doubts on the Companys ability to continue as a going
concern.
2 (a) As explained to us, in respect of Mumbai operations, inventories
have been physically verified during the year by the Management and in
our opinion, the frequency of verification is reasonable. In respect of
Gandhinagar operations, as referred to in note no. 6 & 7 of Schedule 18
being Notes on Accounts, in view of the action taken by IFCI Ltd., the
inventories are no longer in the possession of the Company.
(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 in respect of the Mumbai operations, are
reasonable and adequate, in relation to the size of the Company and the
nature of its business.
(c) On the basis of our examination of the inventory records of the
Mumbai operations of the Company, we are of the opinion that, except
for process inventory the Company is maintaining proper records of its
inventory. The discrepancies noticed on physical verification of
inventory, taken at the year-end, as compared to book records, have
been properly dealt with in the books of accounts and the same were not
material.
3 (a) During the year under consideration, the Company has granted
interest free unsecured loan to a firm covered in the register
maintained under section 301 of the Companies Act, 1956. The maximum
amount involved during the year was Rs. 6468.40 lakhs and the year end
balance is Rs. 6468.40 lakhs
(b) In respect of interest free unsecured loans aggregating Rs. 6468.40
lakhs at the year end granted by the Company, the terms of repayment
are not stipulated. In our opinion, the granting of these unsecured
loans without interest and without any stipulation as regards its
repayment is prima facie prejudicial to the interest of the Company.
Reference is invited in this respect to Note No 11 of Schedule18 being
Notes on Accounts and to our observation in para 3(c) of the Auditors
Report of even date.
(c) Since the unsecured loans granted are interest free and no terms
and conditions are stipulated in respect of the principal amount, in
our opinion, the recovery of the principal amount and interest cannot
be termed as regular.
(d) The Company has not taken any steps for recovery of the principal
amount.
(e) The Company has taken a loan from an individual covered in the
register maintained under section 301 of the Companies Act, 1956. The
maximum amount involved during the year was Rs. 30.06 lakhs and the
year end balance was Rs. 22.55 lakhs
(f) According to the information and explanations provided to us, the
loan is interest free and no terms and conditions are stipulated in
respect of the principal amount and hence cannot be prejudicial to the
interest of the Company.
(g) Since the unsecured loan received is interest free and no terms and
conditions are stipulated in respect of the principal amount, in our
opinion, the repayment of the principal amount and interest cannot be
termed as irregular.
4. In our opinion and according to the information and explanations
given to us, there are generally 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
sale of goods. Further, on the basis of our examination of the books
and records of the Company and according to the information and
explanations given to us we have neither come across nor have been
informed of any continuing failure to correct major weaknesses in the
aforesaid internal control procedures.
5 (a) In our opinion and according to the information and explanations
given to us, 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, the transactions made in
pursuance of contracts or arrangements entered in the register
maintained under section 301 of the Companies Act, 1956 and exceeding
the value of rupees five lakhs in respect of any party during the year
have been made at prices which are reasonable having regard to the
prevailing market prices at the relevant time.
6 The Company has not accepted deposits from public. Hence directives
issued by the Reserve Bank of India and the provisions of Section 58A
and 58AA and any other relevant provisions of the Companies Act 1956
and the rules framed thereunder are not applicable for the year under
audit.
7 The Company has no formal internal audit system commensurate with the
size and nature of its business. However the Company has built-in
internal control system.
8 According to the information and explanations given to us, the
Centra! Government has not prescribed maintenance of cost records under
section 209(1 )(d) of the Companies Act, 1956, for any of the products
of the Company.
9. (a) According to the records of the Company and the information and
explanations given to us, we have to state that,
i. Undisputed statutory dues in respect of Provident Fund, Employees
State Insurance, Sales tax, customs duty, excise duty and cess have
generally been regularly deposited with the appropriate authorities
though there has been a slight delay in a few cases.
ii. Undisputed statutory dues in respect of Investor Education and
Protection Fund and Income tax have not been regularly deposited with
the appropriate authorities and there have been delays. The undisputed
dues outstanding for more than six months, as at 31s March 2010, from
the date they became payable are as under:
Name of the
statute Nature of the dues Amount -
Rs. lakhs Period to which the
amt relates
Investor
Education & Unclaimed 2.04 1996-97
Protection Fund Dividend 5.06 1997-98
Income tax
Act, 1961 TDS, 8.54 FY 2003-04 & 2005-06
Income tax and
Interest 21.35 AY 1996-97, 1999-2000
& 2001-02
b) According to the information and explanations given to us and on the
basis of our examination of the records of the Company, the following
disputed statutory dues have not been deposited with the appropriate
authorities:
Name of the
statute Nature of dues Amount Period to which
Rs. lakhs the amt relates
Sales tax,
Ahmedabad Tax, interest and 45.05 FY 2000-01
penalty
66.38 FY 2001-02
Income tax,
Mumbai Interest 38.45 A.Y.2000-01
on MAT Income
Income tax,
Mumbai Block Assessment 23949.72 Block Assessment
Name of the Statue Forum where dispute
is pending
Sales tax, Ahmedabad Deputy Commissioner
of SalesTax, Ahmedabad
Joint Commissioner
of Salestax, Ahmedabad
Income tax, Mumbai Commissioner of Income
Tax (Appeals)
Income tax,Mumbai ITAT, Mumbai
10. The accumulated losses of the Company exceeded 50% of its net worth
at the end of the financial year and the Company has earned a profit
during the current financial year but has incurred cash losses during
the immediately preceding financial year.
11 The Company has defaulted in repayment of dues to financial
institutions, banks and debenture holders. Further as referred to in
Note No 6 of Schedule 18 being Notes on Accounts, no provision for
interest has been made for the period from 1st April 2005 to 31s March
2010. Subject to this the period and amount of default which are
continuing as at the balance sheet date are as under:
Particulars Period Amount
Since Rs. Lakhs
Outstanding
Dues to Financial Dec, 1998 14909.91
Institution
(Including interest)
Dues to Banks July, 2001 27365.44
(Including interest)
Dues to Debenture Jan., 2001 2078.08
holders
(Including interest)
Total 44353.43
12 Based on our examination of documents and records and information
given by the Company, the Company has not granted loans and advances on
the basis of security by way of pledge of shares, debentures and other
securities.
13 In our opinion, the provisions of any special statute applicable to
chit fund/nidhi/mutual benefit fund/ societies are not applicable to
the company.
14 In our opinion, the Company is not dealing/trading in shares,
securities, debentures and other investments.
15 According to the information and explanations given to us and the
representations made by the Management, the Company has not given any
guarantee for loans taken by others from Banks and Financial
Institutions .
16 On the basis of the records examined by us and according to the
information and explanations given to us the Company has not obtained
any term loans during the year under consideration and in respect of
term loans obtained by the Company in the earlier years, we are
informed that the same were applied for the purpose for which they were
obtained. .
17 According to the information and explanations given to us and on the
overall examination of the balance sheet of the company, in our
opinion, no funds raised on short- term basis have been used for
long-term investments.
18 According to the information and explanations given to us the
Company has not made any preferential allotment of shares during the
year under consideration to parties and companies covered in the
register maintained under section 301 of the Act.
19 On the basis of the records and documents examined by us and
according to the information and explanations given to us, in our
opinion the company has created securities in respect of debentures
issued.
20 According to the information and explanations given to us, the
Company has not raised any money by way of public issues during the
year under consideration.
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 and according to the information and explanations
given to us, subject to note no.6 of schedule 18 being Notes on
Accounts, we have neither come across any instance of materia! fraud on
or by the company, noticed or reported during the year, nor have we
been informed of such a case by the management.
For M/s. Kastury & Talati
Chartered Accountants
Firm Registration No 104908W
Dhiren P. Talati
Partner
M.NO.F41867
Place: Mumbai
Date: 27,th November, 2010