Mar 31, 2016
To,
THE MEMBERS OF
Soma textiles & industries limited
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of SOMA TEXTILES & INDUSTRIES LIMITED (âthe Companyâ), which comprise the Balance Sheet as at 31st March, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year ended, and a summary of the significant accounting policies and other explanatory information.
Managementâs Responsibility for the Standalone Financial Statements
The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (âthe Actâ) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditorâs Responsibility
Our responsibility is to express an opinion on these Standalone Financial Statements based on our audit.
We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under and the Order under section 143(11) of the Act.
We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. 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 the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, 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 on the standalone financial statements.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone 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, of the state of affairs of the Company as at 31st March, 2016, and its loss and its cash flows for the year ended on that date.
Emphasis of Matters
Without qualifying our opinion, we draw attention to the following matters:
Gross Block as at 31-03-2016 |
Accumulated Depreciation up to 31-03-2016 |
Net Block as at 31-03-2016 |
1837.09 |
1575.81 |
261.28 |
(a) With immediate effect on 14th May 2016, the Company closed down the spinning and winding unit/department at Ahmedabad because of its high operative cost and other adverse factors. Following are the details of the block of spinning unit assets, which have been re-classified as current assets (earlier classified as fixed assets) under the head âAssets Held for Sale'' at as 31st March, 2016.
The above events have occurred after the balance sheet date however the event being adjusting in nature, have been shown by the company as Held for Sale as per AS-10 as at 31st March, 2016. Quantification of fluctuation for difference of book value of such block & market value is not available and hence not made as at 31st March, 2016.
(b) The Company has defaulted in repayment of dues to banks and financial institutions and credit accounts with The State Bank of India, Dena Bank, ICICI Bank, IDBI Bank and EXIM Bank banks have been classified as NPAs. Hence, under The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, The State Bank of India, Dena Bank and ICICI Bank and assigned their respective outstanding loans together with underlying securities thereto along with all rights towards such loan to Invent Assets Securitization & Reconstruction Private Limited (Invent ARC) during the financial year 2015-16. Whereas IDBI Bank and EXIM Bank assigned their respective outstanding loans along with all rights towards such loan to Invent ARC on 29th April, 2016.
(c) As per the provisions of Section 23 of SICA Act, 1985 the Accumulated Losses of the company as at 31st March 2016 have resulted in erosion of more than 50% of its peak net worth during the four financial years immediately preceding the financial year ended on 31st March 2016. Consequent upon the Company had become a âPotentially Sick Companyâ under the said provision since FY 2013-14.
Other Matters
(a) We draw attention towards Note relating to accounts receivable of Soma Textiles FZC, an associate enterprise (currently registered in Umm Al Quwain Free Trade Zone) in the Director''s Reports, relating to account receivables. Originally, the debtors had requested the Company for a cooling period of two years for clearing their dues, i.e. till March, 2016, however, their financial position has still not improved & they have once again requested for a period of five years effectively ending on 31-3-2021. Total outstanding that remains of all debtors after receiving part payments remains at AED 6,20,06,411. The Independent Auditor of Soma Textiles FZC has not commented on this matter.
(b) The Company had advanced a loan to the tune of ''10,444.46 Lakhs (previous year Rs.9,852.39 Lakhs) to Soma Textiles FZC (UAE) out of GDR proceeds, classified as long term loan. This loan has been advanced by the Company as quasi equity in addition to the capital contribution to Soma Textiles FZC. When the said loan was given, the said company was a wholly owned subsidiary, however with effect from 31-03-2010, the Company''s holding in this company has diluted from 100% to 40%. In the financial statement of Soma Textiles FZC ended as at 31-03-2016 the accumulated loss reflects at AED 5,53,238 as against total capital of AED 9,00,000 (Including statutory reserve). Also, Soma Textiles FZC was registered in Hamriyah Free Trade Zone - Sharjah, which now has been transferred to Soma Textiles FZC -Umm Al Quwain Free Trade Zone, which is a different free trade zone. Our opinion is not qualified in this matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor''s Report) Order, 2016 (âthe Orderâ) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information & explanations given to us, we give in the Annexure âAâ a statement on the matters specified in the paragraph 3 and 4 of the Order, to the extent applicable.
2. As required by Section 143(3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account
(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.
(e) On the basis of the written representations received from the directors as on 31st March, 2016, taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2016 from being appointed as a director in terms of Section 164 (2) of the Act.
(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in Annexure âBâ.
(g) With respect to the other matters to be included in the Auditors'' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigation on its financial position in its financial statement (Refer note 31 to the financial statement);
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
ANNEXURE âAâ TO THE INDEPENDENT AUDITORâS REPORT
Referred to in paragraph 1 of âReport on Other Legal and Regulatory Requirements'' of the Independent Auditors'' Report of even date to the members of Soma Textiles & Industries Limited on the standalone financial statements for the year ended March 31, 2016.
I. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assts.
(b) As explained to us, the fixed assets have been physically verified by the management during the year in accordance with a phased programme of verification, which in our opinion provides for physical verification of all the fixed assets at reasonable intervals. We are informed that no material discrepancies were noticed on such verification.
(c) The title deeds of immovable properties other than self-constructed immovable property (buildings), as disclosed in fixed assets to the financial statements, are held in the name of the Company.
II. As explained to us, physical verification of inventory has been conducted at reasonable intervals by the management and the discrepancies noticed on verification between the physical stocks and the book records were not material having regard to the size of the Company, and the same have been properly dealt with in the books of account.
III. The Company has granted an unsecured interest free loan to its Associate, SOMA TEXTILE FZC. Such Associate is covered in the register maintained under section 189 of the Act. Total amount outstanding on 31st March 2016, was Rs.10,444.46 Lakhs.
(a) There are no terms and conditions set out by the company as on date for the loan given to Soma Textile FZC, therefore we are unable to report on regularity of receipt of principal amount.
(b) As there is no stipulation of repayment of loan by the Associate, we are unable to report on regularity of repayment of principal.
(c) As there is no set terms and conditions for the repayment, there are no overdue amounts in respect of the loan granted to the Associate.
In our opinion and according to the information and explanations given to us, the Company has not advanced any loan or given any guarantee or provided any security or made any investment covered under section 185 of the Act in the current year (FY 2015-16). The Company has not advanced any loan or given guarantees or provided security or made investments covered under section 186 of the Act in the current year (FY 2015-16). When the loan was issued to SOMA TEXTILE FZC, the provision under the old Companies Act has been complied.
V. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public within the meaning of Sections 73 to 76 or any other relevant provisions of the Act and rules framed there under.
VI. We have broadly reviewed the cost records maintained by the Company as specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013, and are of the opinion that, prima facie, the prescribed cost 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.
VII. (a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including
Provident Fund, Employees'' State Insurance, Income Tax, Wealth Tax, Sales Tax, Service Tax, Duty of Custom, Duty of Excise, Value added tax, Cess and other material statutory dues applicable to it. According to the information and explanations given to us, no undisputed amounts payable in respect of outstanding statutory dues were in arrears as at March 31, 2016 for a period of more than six months from the date they became payable.
(b) Following amount shave not been deposited as on March 31, 2016 on account of dispute are given below:
Name of Statute |
Nature of Dues |
Amount (Rs.in Lacs) |
Period to which it relates |
Forum where dispute is pending |
Central Excise Act, 1944 |
Recovery of CENVAT |
1.59 |
2004-05 |
The Dy. Commissioner of C. Excise, Div-I, Ahmedabad. |
Central Excise Act, 1944 |
Recovery of additional TTA duty of Yarn captively consumed |
24.85 |
2002-03 |
The Dy. Commissioner of C. Excise, Div-III, Ahmedabad. |
Central Excise Act, 1944 |
Refund claim for amount short received against refund claim of yarn duty after adjusting the old recovery |
0.98 |
2005-06 |
Commissioner of Central Excise, (Appeals), Ahmedabad |
Central Excise Act, 1944 |
Demand for old duty |
0.50 |
2008-09 |
CESAT, West Zone, Ahmedabad |
Central Excise Act, 1944 |
Recovery of transitional Cenvat |
5.81 |
2012-13 |
CESAT, West Zone, Ahmedabad (Appeal) |
The Income Tax Act-1961 |
Demand of Income Tax |
9.77 |
A.Y. 2006-07 |
Asst. Commissioner of Income Tax, Cir.-8, Ahmedabad |
Gujarat Sales Tax Act-1969 |
Additional Sales Tax |
6.17 |
1997-98, 1998-99 & 2000-01 |
Gujarat Value Added Tax Tribunal |
The Income Tax Act-1961 |
Demand of Sales Tax |
21.66 |
2005-06 |
Gujarat Value Added Tax Tribunal |
VIII. Based on our audit procedures and on the basis of information and explanation given to us by the management and in view of the restructuring package sanctioned by the CDR cell since withdrawn, we understand that the Company has defaulted in repayment of dues to banks and financial institutions. Accordingly Action has been taken under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002 (SARFAESI Act,2002) by the lending banks. State Bank of India, Dena Bank and ICICI Bank and assigned their respective outstanding loans advanced together with underlying securities and all rights thereto to Invent Assets Securitization& Reconstruction Private Limited(Invent ARC) during FY 2015-16.Whereas IDBI Bank and EXIM Bank have also assigned their respective outstanding loans together with all rights thereto on 29th April,2016 to the Invent ARC.
IX. To the best of our knowledge and belief and according to the information and explanations given to us, the Company did not raise any money by way of initial public offer or further public offer (including debt instruments) and term loans during the year. Accordingly, paragraph 3 (ix) of the Order is not applicable.
X. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year.
XI. To the best of our knowledge and belief and according to the information and explanations given to us, managerial remuneration has been paid/provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.
XII. The Company is not a Nidhi Company. Consequently, requirements of clause (xii) of paragraph 3 of the order are not applicable.
XIII. To the best of our knowledge and belief and according to the information and explanations given to us, all transactions with the related parties are in compliance with section 177 and 188 of the Act where applicable and the details have been disclosed in the Financial Statements as required by the applicable accounting standards.
XIV. To the best of our knowledge and belief and according to the information and explanations given to us, the Company has not made any preferential allotment or private placement of share or fully or partly convertible debentures during the year under review. Consequently, requirements of clause (xiv) of paragraph 3 of the order are not applicable.
XV. To the best of our knowledge and belief and according to the information and explanations given to us, the Company has not entered into any non-cash transactions with directors or persons connected with him. Accordingly provisions of clause 3(XV) of the order are not applicable to the Company.
XVI. According to the nature of the business, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Accordingly provisions of clause 3(XVI) of the order are not applicable to the Company.
ANNEXURE âBâ TO THE INDEPENDENT AUDITORSâ REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTS OF SOMA TEXTILES & INDUSTRIES LIMITED The Annexure referred to in paragraph 2(f) under the heading âReport on Other Legal and Regulatory Requirementsâ, in respect to the Internal Financial Control under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (âthe Actâ), for the year ended 31st March, 2016, we report that :
We have audited the internal financial controls over financial reporting of SOMA TEXTILES & INDUSTRIES LIMITED (âthe Companyâ) as of March 31, 2016 in conjunction with our audit of the financial statements of the Company for the year ended on that date.
Managementâs Responsibility for Internal Financial Controls
The Company''s management is responsible for establishing and maintaining internal financial controls based on âthe internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI)â. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.
Auditorâs Responsibility
Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the âGuidance Noteâ) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established an maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. 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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements of external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of dispositions of the assets of the company; (2) provide reasonable assurance that transactions recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Control over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatement due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods aresubject to the risk that the internal financial controls over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on âthe internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of Indiaâ.
For PIPARA & COMPANY
Chartered Accountants
Firm Regn. No. : 107929W
GYAN PIPARA
Place : Ahmedabad (Partner)
Date : 27th May, 2016 Membership No.034289
Mar 31, 2015
We have audited the accompanying financial statements of SOMA TEXTILES
& INDUSTRIES LIMITED, which comprise the Balance Sheet as at March 31,
2015, 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.
2. Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated
in Section 134(5) of the Companies Act, 2013 with respect to the
preparation and presentation of these financial statements that gives a
true and fair view of the financial position, financial performance and
cash flows of the Company in accordance with the accounting principles
generally accepted in India, including the Accounting Standards
specified under Section 133 of the Act, read with Rule 7 of the
Companies (Accounts) Rules, 2014.
This responsibility also includes maintenance of adequate accounting
records in accordance with the provisions of the Act for safeguarding
of the assets of the Company and for preventing and detecting frauds
and other irregularities; selection and application of appropriate
accounting policies; making judgments and estimates that are reasonable
and prudent; and design, implementation and maintenance of adequate
internal financial controls, that were operating effectively for
ensuring the accuracy and completeness of the accounting records,
relevant to the preparation and presentation of the financial
statements that give a true and fair view and are free from material
misstatement, whether due to fraud or error.
3. Auditor's Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit.
We have taken into account the provisions of the Act, the accounting
and auditing standards and matters which are required to be included in
the audit report under the provisions of the Act and the Rules made
there under.
We conducted our audit in accordance with the Standards on Auditing
specified under section 143(10) of the Act. 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 the disclosures in the financial statements. The
procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal financial control relevant
to the Company's preparation of the financial statements that give a
true and fair view in order to design audit procedures that are
appropriate in the circumstances. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness
of the accounting estimates made by the Company's Directors, 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 on the financial
statements.
4. Opinion
In our opinion and to the best of our information and according to the
explanations given to us, the aforesaid 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, 2015;
(b) In the case of the Statement of Profit and Loss, of the Loss for
the year ended on that date and;
(c) In the case of the Cash Flow Statement, of the cash flows of the
Company for the year ended on that date.
5. Emphasis of Matter
(a) We draw attention to Note 12.2 to the Financial Statement, relating
to Account Receivables of Soma Textiles FZC, an associate enterprise of
the company, whereby the debtors have requested the company for 2 years
cooling period i.e. till March 2016. The amount of such debtors is AED
6,26,31,823. We are unable to comment on said receivables of Soma
Textiles FZC, which are deemed to be good by Independent Auditor of
Soma Textiles FZC-'Business Management World Auditors & Business
Consultants'. The company has shown a loan amount of Rs.9852.39 lakhs
(Previous year Rs.9444.17 lakhs) given to Soma Textile FZC (UAE) out of
GDR proceeds, classifies as long term loan. This loan had been advanced
by the company as a Quasi- Equity (Note 12) in addition to the capital
of Soma Textile FZC when the said loan was given, the said company was
a wholly owned subsidiary, however, with effect from 31st March 2010,
the company's holding in this company has diluted from 100% to 40%. In
the financial statements of Soma Textile FZC ended as at 31.03.2015 the
accumulated loss reflects at AED 5,64,690 as against Total Capital of
AED 9,00,000 (including Statutory Reserves). Our opinion is not
qualified in this matter.
(b) Attention to the following is invited:
As per the provisions of Section 23 of SICA Act, 1985 the Accumulated
Losses of the company as at 31st March, 2015 have resulted in erosion
of more than 50% of its peak net worth during the four financial years
immediately preceding the financial year ended on 31st March, 2015.
Consequent upon, the company has become a "Potentially Sick Company"
under the said provision.
6. Report on Other Legal and Regulatory Requirements
(i) As required by the Companies (Auditor's Report) Order, 2015 ("the
Order") issued by the Central Government of India in terms of
sub-section (11) of section143 of the Act, we give in the Annexure a
statement on the matters specified in paragraph 3 & 4 of the said Order
to the extent applicable.
(ii) As required by section 143 (3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations
which to the best of our knowledge and belief were necessary for the
purposes of our audit;
(b) In our opinion proper books of account as required by law have been
kept by the Company so far as 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 aforesaid financial statements comply with the
Accounting Standards specified under Section 133 of the Act, read with
Rule 7 of the Companies (Accounts) Rules, 2014;
(e) On the basis of the written representations received from the
directors as on 31st March, 2015 taken on record by the Board of
Directors, none of the directors is disqualified as on 31st March, 2015
from being appointed as a director in terms of Section 164 (2) of the
Act;
(f) With respect to the other matters to be included in the Auditor's
Report in accordance with Rule 11 of the Companies (Audit and Auditors)
Rules, 2014, in our opinion and to the best of our information and
according to the explanations given to us:
I. The company has disclosed the impact of pending litigation on its
financial position in its financial statements- (Refer Note 31 to the
financial statements).
II. The Company did not have any long-term contracts including
derivative contracts for which there were any material foreseeable
losses.
III. There has been no delay in transferring amounts, required to be
transferred, to the Investor Education and Protection Fund by the
company.
ANNEXURE TO INDEPENDENT AUDITOR'S REPORT
(Reffered to in paragraph 1 under 'Report on Other Legal and Regulatory
Requirements' section of our report of even date)
(i) In respect of its fixed assets :
(a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of fixed assets.
(b) The Company has a phased programme of physical verification of
fixed assets which, in our opinion, is reasonable having regard to the
size of the company and nature of its assets. In accordance with this
programme, the management has verified fixed assets during the year and
no material discrepancies have been noticed on such verification.
(ii) In respect of its inventory:
(a) The management conducts regular physical verification of inventory
at reasonable intervals commensurate and adequate to the size of its
operations. In our openion the frequency of physical verification is
reasonable having regard to the size and nature of business of company.
(b) In our opinion and according to the information and explanation
given to us, the procedure 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 according to the information and explanation
given to us, the Company has maintained proper records of its
inventories. Some immaterial discrepancies were noticed on physical
verification which have been properly dealt with in the books of
account.
(iii) (a) The company has granted interest free loan (quasi-equity) to
its Associate, Soma Textile FZC. Total amount
outstanding on 31st March 2015 was Rs. 9852.39 lakhs.
(b) There are no terms and conditions set out by the Company as on date
for the loans given to Soma Textile FZC therefore, we are unable to
report on regularity of receipt of principal amount.
(c) As there is no stipulation of repayment of loan by Associate, we
are unable to report on overdue amount and reasonability of the steps
taken by the company for the recovery of the principal.
(iv) In our opinion, and according to the information and explanations
given to us, there is an adequate internal control procedures
commensurate with the size of the Company and the nature of its
business with regard to purchases of inventory and fixed assets and the
sale of goods and services. During the course of our audit, we have not
observed any major weakness in such internal control system.
(v) According to the information and explanations given to us,the
Company has not accepted any deposits from the public thus, directives
issued by Reserve Bank of India the Provisions of the section 73 to 76
and other relevant provisions of the Companies Act, 2013 and the rules
framed there under or any order passed by Company Law Board or National
Company Law Tribunal or Reserve Bank of India or any Court or any other
Tribunal do not apply to Company.
(vi) We have broadly reviewed the books of accounts maintained by the
company pursuant to the rules made by the Central Government of India,
regarding the maintenance of cost record under sub-section (1) of
section 148 of the Companies Act, 2013 and are of opinion that, prima
facie, the prescribed accounts & records have been maintained. We
have, however, not made a detailed examination of the cost records with
a view to determine whether they are accurate or complete.
(vii) According to information and explanation given to us in respect
of statutory dues:
(a) According to the information and explanations given to us, and on
the basis of our examination of the books of accounts, the Company has
generally been regular in depositing the undisputed statutory dues
including Income- Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty,
Custom Duty, Cess and other material Statutory dues during the period
with the appropriate authorities. At the end of the year, there were no
undisputed amount payable for a period of more than six months from the
date they became payable.
(b) Details of dues of Income Tax, Sales Tax, Wealth Tax, Service Tax,
Custom Duty, Excise Duty and Cess which have not been deposited as on
31.03.2015 on account of dispute are given below:
Name of Nature of Amount Period to Forum
Statute Dues (Rs. in which it where
Lacs) dispute
is
pending
relates
Central Recovery 1.59 2004-05 The Dy.
Excise Act, of CENVAT Commissi
1944 oner of C.
Excise,
Div-I,
Ahmedabad.
Central Recovery 24.85 2002-03 The Dy.
Excise Act, of additional Commissi
1944 TTA duty oner of C.
of Yarn Excise,
captively Div-III,
consumed Ahmedabad.
Central Refund claim for 0.98 2005-06 Commissioner
Excise Act, amount of Central
1944 short Excise,
received (Appeals),
against Ahmedabad
refund
claim of
yarn duty
after
adjusting
the old
recovery
Central Demand for 0.50 2008-09 CESAT, West
Excise Act, old duty Zone,
1944 Ahmedabad
Central Recovery 5.81 2012-13 CESAT,
Excise Act, of West
1944 transit Zone,
ional Cenvat Ahmedabad
(Appeal)
The Income Demand of 9.77 A.Y.Asst. Commissioner
Tax Income Tax of Income
Act-1961 2006-07 Tax,Cir.-8,
Ahmedabad
The Income Demand of 14.55 A.Y Commissioner
Tax Income Tax of Income
Act-1961 2007-08 Tax(Appeal),
Ahmedabad
Gujarat Additional 6.17 1997-98, Gujarat
Sales Tax Sales Tax 1998-99 Value
Act-1969 & 2000-01 Added
Tax
Tribunal
(c) There has been no delay in transferring amount, required to be
transferred, to the Investor Education and Protection Fund By Company.
(viii) The accumulated loss of the Company at the end of the financial
year exceeds fifty percent of its net worth and also the company has
incurred cash losses in the current financial year.
(ix) In our opinion and according to the information & explanations
given to us, the company has defaulted in repayment of dues to
financial institution and banks. (Please Refer Note 3.3 to Financial
Statements)
(x) In our opinion and according to the information and explanations
given to us, the Company has not given any guarantee for loans taken by
others from bank or financial institutions.
(xi) In our opinion and according to the explanations given to us the
term loans were applied only for the purpose for which they were
obtained.
(xii) To the best of our knowledge and according to the information and
explanations given to us, we report that no fraud on or by the company
has been noticed or reported during the year under audit and even up to
the date of our audit.
For PIPARA & COMPANY
Chartered Accountants
Firm Regn. No. : 107929W
GYAN PIPARA
Place : Ahmedabad (Partner)
Date : 30th May, 2015 Membership No.034289
Mar 31, 2014
1. We have audited the accompanying financial statements of Soma
Textiles & Industries Limited (the company), which comprise the Balance
Sheet as at March 31, 2014, 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
2. 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 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
3. 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.
4. 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 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 the accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
5. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
6. Emphasis of Matter
(a) We draw attention to Note 12.2 to the Financial Statements,
relating to Account Receivables of Soma Textiles FZC, an associated
enterprise of the company, whereby the debtors have requested the
company for 2 years cooling period. The amount of such debtors is AED
6,28,38,125/-. We are unable to comment on the said receivables of Soma
Textiles FZC, which are deemed to be good by the Independent Auditor of
Soma Textiles FZCÂ ''Business Management World Auditors & Business
Consultants''. The company has shown a loan amount of Rs. 9444.17 Lakhs
(Previous Year Rs. 8558.24 Lakhs) given to Soma Textile FZC (UAE) out of
GDR proceeds, classified as a long term loan. This loan had been
advanced by the Company as a Quasi- Equity (Note 12) in addition to the
Capital of Soma Textiles FZC. When the said loan was given, the said
Company was a wholly owned subsidiary, however, with effect from 31st
March, 2010, the Company''s holding in this company has diluted from
100% to 40%. In the financial statements of Soma Textile FZC ended as
at 31.03.2014 the accumulated loss reflects at AED 585,540 as against
Total Capital of AED 9,00,000 (including Statutory Reserves). Our
opinion is not qualified in this matter.
(b) We draw attention to Note 4 ''Other Long Term Liabilities''
[Non-Current Liabilities] whereby Trade Payables by the company against
purchase of goods, to the tune of Rs. 20,43,58,109/-, have been restated
as Long Term [Non-Current Liabilities] from its ordinary classification
as Short Term [Current Liabilities]. The company has obtained and
presented letter of confirmations from its creditors stating that their
payment is re-scheduled, becoming due as at April 2015, and that the
same is acceptable to these creditors. We have relied upon these
confirmation letters as received by the company from its vendors. Our
opinion is not qualified in this matter.
(c) We draw attention to Note 35 to the Financial Statements, whereby
the company has sold its Cotton Spinning Unit at Baramti, Pune to M/s
GTN Engineering (India) Ltd. at a Lump-sum consideration of Rs. 29.8
Crores under a Business Transfer Agreement signed on 01st April
2013,and the company has handed over the possession of the said unit to
M/s GTN Engineering (India) Ltd. on 09th June, 2013. Our opinion is not
qualified in this matter.
7. 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 Act in the manner so required and give a true and fair
view in conformity with the accounting principles generally accepted in
India:
(i) In the case of the Balance Sheet, of the state of affairs of the
Company as at March31, 2014;
(ii) In the case of the Statement of Profit and Loss, of the Loss for
the year ended on that date and;
(iii) In the case of the Cash Flow Statement, of the cash flows for the
year ended on that date;
8. Attention to the following is invited:
As per the provisions of section 23of SICA Act,1985, the Accumulated
Losses of the Company as at 31st March, 2014 have resulted in erosion
of more than 50% of its peak net worth during the four financial years
immediately preceding the financial year ended on 31st March, 2014.
Consequent upon, the Company has become a "Potentially Sick Company"
under the said provision.
9. Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditors'' Report) Order, 2003 as amended
by the Companies (Auditors'' Report) (Amendment) Order, 2004 (together
the ''Order'') issued by the Central Government of India in terms of
sub-section (4A) of section 227 of the Companies Act, 1956 of India and
on the basis of such checks of the books and records of the Company as
we considered appropriate and according to the information and
explanations given to us, we enclose in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order.
10. As required by section 227(3) of the Act, 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 purpose 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 and proper reports adequate for the purposes of our audit
have been received from the branch not audited by us. The financial
records of Baramati unit of the company for the period upto 9-6-2013
have been audited by M/S Shankarlal Jain & Associates, Chartered
Accountants, Mumbai, (Firm Registration No. 109901W) a copy of whose
report has been forwarded to us. We have relied on that report and have
appropriately dealt with the same in our report.
(iii) The Balance Sheet, Statement of Profit & Loss and Cash Flow
Statement dealt with by this Report are in agreement with the books of
accounts along with the audited report of the branch.
(iv) In our opinion, the Balance Sheet, the Statement of Profit and
Loss and the Cash flow statement comply with the Accounting Standards
notified under the Companies Act, 1956 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.
(v) 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.
ANNEXURE TO INDEPENDENT AUDITOR''S REPORT
(Reffered to in paragraph 1 under ''Report on Other Legal and Regulatory
Requirements'' section of our report of even date) (i) In respect of its
fixed assets :
(a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of fixed assets.
(b) The Company has a phased programme of physical verification of
fixed assets which, in our opinion, is reasonable having regard to the
size of the company and nature of its assets. In accordance with this
programme, the management has verified fixed assets during the year and
no material discrepancies have been noticed on such verification.
(c) The fixed assets disposed off during the year, including the Sale
of Cotton Spinning Unit of Baramati, in our opinion, although
consituted a division of the company, such disposal has, in our
opinion, not affected the going concern status of the Company.
(ii) In respect of its inventory:
(a) The management conducts regular physical verification of inventory
at reasonable intervals commensurate and adequate to the size of its
operations.
(b) In our opinion and according to the information and explanation
given to us, the procedure 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 according to the information and explanation
given to us, the Company has maintained proper records of its
inventories. Some immaterial discrepancies were noticed on physical
verification which have been properly dealt with in the books of
account.
(iii) (a) The company has granted interest free loan (quasi-equity) to
its Associate, Soma Textile FZC. Total amount outstanding on 31st March
2014 was Rs. 9444.17 lakhs.
(b) There are no terms and conditions set out by the Company as on date
for the loans given to Soma Textile FZC and therefore, we are unable to
comment on terms and conditions of the said loan.
(c) As there is no stipulation made for repayment of loan by Associate,
we are unable to report on regularity of receipt of principal amount.
(d) As there is no stipulation of repayment of loan by Associate, we
are unable to report on overdue amount.
(e) According to the information and explanations given to us the
Company has taken unsecured loans from companies, firm or other parties
covered in the register maintained under section 301 of the Companies
Act, 1956 and the same are as under.
(Rs. In lacs)
Opening Balance 500
No. of Parties involved : 1
Maximum Amount Involved during the year : 50
Amount Outstanding as on 31.03.2014 : 562
(f) Interest free unsecured loan has been taken from promoters to
fulfill stipulation of Financial Institutions so there is no rate of
interest specified. Terms and conditions of loans taken are prima facie
not prejudicial to the interest of the company;
(g) No stipulation has been specified for the repayment of these loan.
(iv) In our opinion and according to the information and explanations
given to us, there is an adequate internal control procedures
commensurate with the size of the Company and the nature of its
business with regard to purchases of inventory and fixed assets and the
sale of goods and services. During the course of our audit, we have not
observed any major weakness in such internal control system.
(v) In respect of contracts or arrangements entered in Register
maintained in pursuance Section 301 of Companies Act,1956, to the best
of our knowledge and belief and according to the information and
explanation given to us :
(a) The particulars of contracts or arrangements reffered to in section
301 that need to be entered in the Register maintained under the said
Section have been so entered.
(b) where each of such transaction is in excess of Rs. Five Lakhs in
respect of any party, the transaction have been made at prices which
are prima facie reasonable having regard to the prevailing market
prices at the relevant time.
(vi) According to the information and explanations given to us, the
Company has not accepted any deposits from the public thus, the
Provisions of the section 58A and 58AA and other relevant provisions of
the Companies Act,1956 and the rules framed there under or any order
passed by Company Law Board or National Company Law Tribunal or Reserve
Bank of India or any Court or any other Tribunal do not apply to
Company.
(vii) In our opinion and according to information and explanations
given to us, the Company has an adequate internal audit system
commensurate with its size and nature of its business.
(viii) We have broadly reviewed the books of accounts maintained by the
Company pursuant to the rules made by the Central Government of India,
regarding the maintenance of cost records under clause (d) of sub-
section (1)of section 209 of the Act and are of opinion that, prima
facie,the prescribed accounts & records have been maintained. We have,
however, not made a detailed examination of the cost records with a
view to determine whether they are accurate or complete.
(ix) According to information and explanation given to us in respect of
statutory dues:
(a) According to the information and explanations given to us, and on
the basis of our examination of the books of accounts, the Company has
generally been regular in depositing the undisputed statutory dues
including Income-
Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty, Custom Duty, Cess
and other material Statutory dues during the period with the
appropriate authorities. At the end of the year, there were no
undisputed amount payable for a period of more than six months from the
date they became payable. (b) Details of dues of Income Tax, Sales
Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty and Cess which
have not been deposited as on 31.03.2014 on account of dispute are
given below:
Name of Statute Nature of Dues Amount Period to
(Rs. in Lacs) which it
relates
Central Excise Act, Recovery of CENVAT 1.59 2004-05
1944
Central Excise Act, Recovery of additional 24.85 2002-03
1944 TTA duty of Yarn
captively consumed
Central Excise Act, Refund claim for 0.98 2005-06
1944 amount short received
against refund claim of
yarn duty after adjusting
the old recovery
Central Excise Act, Demand for old duty 0.50 2008-09
1944
Central Excise Act, Recovery of transitional 5.81 2012-13
1944 Cenvat
The Income Tax Demand of Income Tax 9.77 A.Y.
Act-1961 2006-07
The Income Tax Demand of Income Tax 14.55 A.Y.
Act-1961 2007-08
Gujarat Sales Tax Additional Sales Tax 6.17 1997-98,
Act-1969 1998-99
& 2000-01
Name of Statute Forum where dispute is pending
Central Excise Act, 1944 The Dy. Commissioner of C. Excise, Div-I,
Ahmedabad.
Central Excise Act, 1944 The Dy. Commissioner of C. Excise, Div-III,
Ahmedabad.
Central Excise Act, 1944 Commissioner of Central Excise, (Appeals),
Ahmedabad
Central Excise Act, 1944 CESAT, West Zone, Ahmedabad
Central Excise Act, 1944 CESAT, West Zone, Ahmedabad (Appeal)
The Income Tax Act-1961 Asst. Commissioner of Income Tax,
Cir.-8, Ahmedabad
The Income Tax Act-1961 Commissioner of Income Tax (Appeal),
Ahmedabad
Gujarat Sales Tax Act-1969 Gujarat Value Added Tax Tribunal
(x) The accumulated loss of the Company at the end of the financial
year exceeds fifty percent of its net worth and also the company has
incurred cash losses in the current financial year.
(xi) Company is under Corporate Debt Restructuring (CDR) package under
scheme of RBI which was duly approved and implemented. In our opinion
and according to the information & explanations given to us, the
company has not defaulted in repayment of dues to financial institution
and banks.
(xii) The company has not granted loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
Accordingly the provisions of clause 4(xii) of the order are not
applicable to the Company.
(xiii) The company is not a chit fund / nidhi company / mutual benefit
fund or society which would be governed by any special statute.
Accordingly this clause along with sub clauses does not apply.
(xiv) The company is not dealing or trading in shares, securities,
debentures and other investments. Accordingly this clause does not
apply.
(xv) In our opinion and according to the information and explanations
given to us and management representation received, the Company has not
given any guarantee for loans taken by others from bank or financial
institutions.
(xvi) In our opinion and according to the explanations given to us and
management representation received the term loans were applied only for
the purpose for which they were obtained.
(xvii) In our opinion, and according to the information & explanations
given to us and management representation received, funds raised on
short-term basis have, prima facie, not been used during the year for
long-term investment .
(xviii) According to the information & explanations given to us, during
the period under our audit report, the Company has not allotted any
shares on preferential basis to the parties and companies covered in
the register maintained under section 301 of the Act.
(xix) According to the information and explanations given to us, during
the period covered by our audit report, the Company has not issued
debentures.
(xx) According to the information and explanations given to us, the
Company has not raised any money by way of public issue during the
year.
(xxi) To the best of our knowledge and according to the information and
explanations given to us, no fraud by the Company and no material fraud
on the Company has been noticed or reported during the year.
For PIPARA & COMPANY
Chartered Accountants
Firm Regn. No. : 107929W
GYAN PIPARA
Place: Ahmedabad (Partner)
Date:30th May, 2014 Membership No.034289
Mar 31, 2013
Report On Financial Statement
1. We have audited the accompanying financial statements of Soma
Textiles & Industries Limited, which comprise the Balance Sheet as at
March 31, 2013, the Statement of Profit and Loss and Cash Flow
Statement for the year ended, and a summary of Significant Accounting
Policies and other explanatory information.
Management''s Responsibility For The Financial Statement
2. 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. 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
3. 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.
4. 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.
5. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Opinion
6. 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 Act in the manner so required and give a
true and fair view in conformity with the accounting principles
generally accepted in India:
(i) In the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March, 2013; (ii) In the case of the Statement of
Profit and Loss, of the Loss for the year ended on that date; and (iii)
In the case of the Cash Flow Statement, of the Cash Flows for the year
ended on that date. 7 Without qualifying our opinion, we draw
attention to Note No. 13, 13.1 and 13.2 regarding loan amount of
Rs. 8,558.24 Lacs (Previous Year Rs. 8,021.18 Lacs) given to Soma Textile
FZC (UAE) out of GDR proceeds, being classified as a long term loan
which had been advanced by the Company as a quasi- equity. When the
loan was given, the said Company was a wholly owned subsidiary,
however, with effect from 31st March, 2010, the Company''s holding has
diluted from 100% to 40% (of the paid up Capital of Soma Textile FZC Â
UAE). Hence the said Company has become an associate of Soma Textiles &
Industries Ltd. The loan amount is classified as Long Term under "Loans
& Advances" (Note 13 of Financial Statements).
In the financial statements of Soma Textile FZC the accumulated loss
reflects at AED 623,647 as against Total Capital of AED 900,000
(including Statutory Reserves); The said advance has been considered
good by the management placing reliance on the Statutory Auditor''s
Report of Soma Textile FZC (UAE) dated 16th April, 2013. The Audit was
conducted by an independent Auditor viz Business Management World
Auditors & Business Consultants, Dubai, U.A.E. for the financial year
ended 31st March, 2013.
8. The Company has signed Business Transfer Agreement on 01.04.2013 to
dispose off the Baramati Unit, situated at D-49, M.I.D.C., Baramati on
a slump sale basis as a going concern for a lumpsum consideration of Rs.
29.80 crores. The sale of the unit is governed by the terms &
conditions laid down in Business Transfer Agreement, transaction will
be given effect in books of accounts in the Financial Year 2013-14.
Report On Other Legal And Regulatory Requirements
9. As required by the Companies (Auditors'' Report) Order, 2003 as
amended by the Companies (Auditors'' Report) (Amendment) Order, 2004
(together the ÂOrder'') issued by the Central Government of India in
terms of sub-section (4A) of section 227 of the Companies Act, 1956 of
India and on the basis of such checks of the books and records of the
Company as we considered appropriate and according to the information
and explanations given to us, we enclose in the Annexure a statement on
the matters specified in paragraphs 4 and 5 of the said Order.
10. As required by section 227(3) of the Act, 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 purpose 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 and proper reports adequate for the purposes of our audit
have been received from the branch not audited by us. The financial
records of Baramati unit of the Company have been audited by M/S
Shankarlal Jain & Associates, Chartered Accountants, Mumbai, (Firm
Registration No. 109901W) a copy of whose report has been forwarded to
us. We have relied on that report and have appropriately dealt with the
same in our report.
(iii) The Balance Sheet, Statement of Profit & Loss and Cash Flow
Statement dealt with by this Report are in agreement with the books of
accounts along with the audited report of the branch.
(iv) In our opinion, the Balance Sheet, Statement of Profit & Loss
along with the Cash Flow Statement 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 representations received from the directors
as on 31st March, 2013 and taken on record by the Board of Directors,
none of the directors is 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 referred to in paragraph 3 of our report of even date to the
members of SOMA TEXTILES & INDUSTRIES LIMITED on the accounts for the
year ended on 31st March, 2013.
(i) (a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets.
(b) The Company has a phased programme of physical verification of
fixed assets which, in our opinion, is reasonable having regard to the
size of the Company and nature of its assets. In accordance with this
programme, the management has verified fixed assets during the year and
no material discrepancies have been noticed on such verification.
(c) The Company has not disposed off a substantial part of its fixed
assets during the year and the "Going Concern" status of the Company is
not affected.
(ii) (a) The management conducts regular physical verification of
inventory at reasonable intervals commensurate and adequate to the size
of its operations.
(b) In our opinion, 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) The Company is maintaining proper records of inventory. Some
immaterial discrepancies were noticed on physical verification which
have been properly dealt with in the books of account.
(iii) (a) The Company has granted interest free loan (quasi-equity) to
its Associate, Soma Textile FZC. Total amount outstanding on 31st
March, 2013 was Rs. 8,558.24 lacs.
(b) There are no terms and conditions set out by the Company as on date
for the loans given to Soma Textile FZC and therefore, we are unable to
comment on terms and conditions of the said loan.
(c) As there is no stipulation made for repayment of loan by Associate,
we are unable to report on regularity of receipt of principal amount.
(d) As there is no stipulation of repayment of loan by Associate, we
are unable to report on overdue amount.
(e) According to the information and explanations given to us the
Company has taken unsecured loans from companies, firm or other parties
covered in the register maintained under section 301 of the Companies
Act, 1956 and the same are as under.
(Rs. In lacs)
No. of Parties Involved Two Parties
Opening Balance 500
Loan Taken 244
Balance Outstanding at
the end of year 744
(f) Interest free unsecured loan has been taken from promoters to
fulfill stipulation of Financial Institution so there is no rate of
interest specified. Terms and conditions of loans taken are prima facie
not prejudicial to the interest of the Company;
(g) No stipulation has been specified for the repayment of these loan.
(iv) There is an adequate internal control system commensurate with the
size of the Company and the nature of its business, for the purchase of
inventory and fixed assets and for the sale of goods and service. (v)
(a) According to the information and explanations given to us, we are
of the opinion that the transactions that need to be entered into the
register maintained under Section 301 of the Companies Act, 1956 have
been so entered. (b) In our opinion and as explained 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 value of Rupees Five Lacs 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. (vi) The Company
has not accepted any deposits from the public during the year.
Therefore the provisions of Sections 58A, 58AA or any other relevant
provisions of the Act and the rules framed thereunder or any order
passed by Company Law Board or National Company Law Tribunal or Reserve
Bank of India or any Court or any other Tribunal do not apply to
Company. (vii) In our opinion and according to information and
explanations given to us, the Company has an internal audit system
commensurate with its size and nature of its business. (viii) In our
opinion, prima facie the Company has maintained proper cost records as
prescribed by the Central Government under clause (d) of sub-section
(1) of Section 209 of the Companies Act,1956. We have, however, not
made a detailed examination of cost records with a view to determine
whether they are accurate or complete.
(ix) (a) According to the information and explanations given to us and
on the basis of our examination of books of account, we are of the
opinion that the Company is generally regular in depositing undisputed
statutory dues including Provident Fund, Investor Education and
Protection Fund, Employees'' State Insurance, Income-tax, Sales-tax,
Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other
statutory dues with the appropriate authorities. At the end of the
year, there were no undisputed dues payable for a period of more than
six months from the date they became payable. (b) As on 31st March
2013, according to records of the Company, some statutory dues were
disputed and not deposited as given below:
Name of Statute Nature of Dues Amount Period to Forum where
dispute is
pending
(Rs.
in Lacs) which it
relates
Central Excise
Act, Recovery of CENVAT 1.59 2004-05 The Dy.
Commissioner
of C.
Excise, Div-I,
1944 Ahmedabad.
Central Excise
Act, Recovery of
additional 24.85 2002-03 The Dy.
commissioner
of C.
Excise, Div-III,
1944 TTA duty of Yarn Ahmedabad.
captively consumed
Central Excise
Act, Refund claim for 0.98 2005-06 Commissioner of
Central Excise,
(Appeals),
1944 amount short
received Ahmedabad
against refund
claim of yarn
duty after
adjusting
the old recovery
Central Excise
Act, Demand for old duty 0.50 2008-09 CESAT, West
Zone, Ahmedabad
1944
Central Excise
Act, Recovery of
transitional 5.81 2012-13 CESAT, West
Zone, Ahmedabad
(Appeal)
1944 Cenvat
The Income Tax Demand of Income 9.77 A.Y. Asst.
Commissioner of
Income Tax,
Act-1961 Tax 2006-07 Cir.-8,
Ahmedabad
The Income Tax Demand for Penalty 7.43 A.Y. Asst.
Commissioner of
Income Tax,
Cir.-8,
Act-1961 U/s. 271(1)(C) 2008-09 Ahmedabad
The Income Tax Demand of Income
Tax 14.55 A.Y. Commissioner of
Income Tax
(Appeal),
Act-1961 2007-08 Ahmedabad
Gujarat Sales
Tax Additional Sales
Tax 6.17 1997-98, Gujarat Value
Added Tax Tribunal
Act-1969 1998-99
& 2000-01
(x) The Company has accumulated losses at the end of the Financial
Year. However such losses do not exceed 50% of
its net worth.
(xi) Company is under Corporate Debt Restructuring (CDR) package under
scheme of RBI which was duly approved and implemented. Company has
defaulted in repayment of Loans and interest as stated in Note No 4.3
which is mentioned under head "Long term borrowing".
(xii) The Company has not granted loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
Accordingly the provisions of clause 4(xii) of the order are not
applicable to the Company.
(xiii) The Company is not a chit fund / nidhi Company / mutual benefit
fund or society which would be governed by any special statute.
Accordingly this clause along with sub clauses does not apply.
(xiv) The Company is not dealing or trading in shares, securities,
debentures and other investments. Accordingly this clause does not
apply.
(xv) The Company has not given any guarantee for loans taken by others
from bank or financial institutions. Accordingly this clause does not
apply.
(xvi) In our opinion and according to the explanations given to us the
term loans were applied only for the purpose for which they were
obtained.
(xvii) In our opinion and according to explanations given to us, the
funds raised on short-term basis have not been used for long-term
investment.
(xviii) The Company has not made any preferential allotment of shares
to parties and companies covered in the Register maintained under
Section 301 of the Act during the year and accordingly this clause does
not apply.
(xix) The Company has not issued debentures during the year.
Accordingly this clause does not apply.
(xx) The Company has not raised any money from public issue during the
financial year. Accordingly this clause does not apply.
(xxi) In our opinion and according to explanations given to us, no
fraud on or by the Company has been noticed or reported during the
year.
For Pipara & Co.
Chartered Accountants
(Firm Registration No. 107929W)
Gyan Pipara
Place: Ahmedabad Partner
Date:24th May, 2013 Membership No. 034289
Mar 31, 2012
We have audited the attached Balance Sheet of SOMA TEXTILES &
INDUSTRIES LIMITED, as at 31st March, 2012 and also the Profit and Loss
Statement and 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.
We have conducted our auditing & assurance procedures in accordance
with Auditing Standards generally accepted in India. Those standards
require that we plan and perform the audit procedures to obtain
reasonable assurance if the financial statements are free from material
misstatements. An audit includes examining, on test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
As required by the Companies (Auditors' Report) Order, 2003 as amended
by the Companies (Auditors' Report) (Amendment) Order, 2004 (together
the 'Order') issued by the Central Government in terms of sub-section
(4A) of Section 227 of the Companies Act, 1956 and on the basis of such
checks of the books and records of the Company as we considered
appropriate and according to the information and explanations given to
us, we enclose in the Annexure a statement on the matters specified in
paragraphs 4 and 5 of the said Order.
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 and proper reports adequate for the purposes of our audit
have been received from the branch not audited by us. The financial
records of Baramati branch of the Company have been audited by M/S
Shankarlal Jain & Associates, Chartered Accountants, Mumbai, (Firm
Registration No. 109901W) a copy of whose report has been forwarded to
us. We have relied on that report and have appropriately dealt with the
same in our report;
(iii) The Balance Sheet, Profit and Loss Statement and Cash Flow
Statement dealt with by this report are in agreement with the books of
account and with the audited reports from the branch;
(iv) In our opinion, the Balance Sheet, Profit and Loss Statement 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 representations received from the
directors, as on 31st March, 2012, and taken on record by the Board of
Directors, we report that none of the directors is disqualified as on
31st March, 2012 from being appointed as a director in terms of
clause(g) of sub-section(1) of Section 274 of the Companies Act, 1956;
(vi) Without qualifying our opinion, we draw attention to Note No. 13,
13.1 and 13.2 regarding loan amount of Rs. 8021.18 lakhs given to Soma
Textile FZC out of GDR proceeds, being long term loan which has been
termed by the Company as quasi-equity as when the loan was given, the
said Company was a wholly owned subsidiary. However, with effect from
31st March, 2010, upon dilution of the Company's holding to 40% from
100% of the paid up Capital of the said subsidiary, the said Company
has become an associate of the Company. However, the loan amount as
shown in the long term "Loans & Advances" has been considered as
good, relying on the statutory auditor report of Soma Textile FZC
conducted by the independent Auditor viz AL SAIF AUDITING &
ACCOUNTANTS, Sharjah,U.A.E. (as per the audited accounts as on 31st
March 2012) though the accumulated loss incured by the said Soma
Textile FZC as on 31st March 2012 is AED 6,56,046 as against Total
Capital of AED 9,00,000 (including Statutory Reserves).
(vii) In our opinion and to the best of our information and according
to the explanations given to us, accounts read together with the notes
thereon give the information required by the Companies Act, 1956, in
the manner so required and give a true and fair view in conformity with
the accounting principles generally accepted in India;
(a) In the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March, 2012;
(b) In the case of the Profit and Loss Statement, of the LOSS for the
year ended on that date; and
(c) In the case of Cash Flow Statement, of the Cash Flows for the year
ended on that date.
Annexure referred to in paragraph 3 of our report of even date to the
members of SOMA TEXTILES & INDUSTRIES LIMITED on the accounts for the
year ended on 31st March 2012.
(i) (a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets.
(b) The Company has a phased programme of physical verification of
fixed assets which, in our opinion, is reasonable having regard to the
size of the Company and nature of its assets. In accordance with this
programme, the management has verified fixed assets during the year and
no material discrepancies have been noticed on such verification.
(c) The Company has not disposed off a substantial part of its fixed
assets during the year and the "Going Concern" status of the Company
is not affected.
(ii) (a) The management conducts regular physical verification of
inventory at reasonable intervals commensurate
and adequate to the size of its operations.
(b) In our opinion, 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) The Company is maintaining proper records of inventory. Some
immaterial discrepancies were noticed on physical verification which
have been properly dealt with in the books of account.
(iii) (a) The Company has granted interest free loan (quasi-equity) to
its Associate, Soma Textile FZC. Total amount outstanding on 31st March
2012 was Rs. 8021.18 lakhs.
(b) There are no terms and conditions set out by the Company as on date
for the loans given to Soma Textile FZC and therefore, we are unable to
comment on terms and conditions of the said loan.
(c) As there is no stipulation made for repayment of loan by Associate,
we are unable to report on regularity of receipt of principal amount.
(d) As there is no stipulation of repayment of loan by Associate, we
are unable to report on overdue amount.
(e) According to the information and explanations given to us the
Company has taken unsecured loans from companies, firm or other parties
covered in the register maintained under Section 301 of the Companies
Act, 1956 and the same areas under.
(Rs. In lakhs)
No. of Parties involved Three Parties
Opening Balance 355
Loan Taken 145
Balance Outstanding at the end of year 500
(f) Interest free unsecured loan has been taken from promoters to
fulfill stipulation of Financial Institution so there is no rate of
interest specified. Terms and conditions of loans taken are prima facie
not prejudicial to the interest of the Company;
(g) No stipulation has been specified for the repayment of these loan.
(iv) There is an adequate internal control system commensurate with the
size of the Company and the nature of its business, for the purchase of
inventory and fixed assets and for the sale of goods and service.
(v) (a) According to the information and explanations given to us, we
are of the opinion that the transactions that need to be entered into
the register maintained under Section 301 of the Companies Act, 1956
have been so entered.
(b) In our opinion and as explained 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
value of Rupees Five Lacs 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.
(vi) The Company has not accepted any deposits from the public.
Therefore the provisions of Sections 58A, 58AA or any other relevant
provisions of the Act and the rules framed there under or any order
passed by Company Law Board or National Company Law Tribunal or Reserve
Bank of India or any Court or any other Tribunal do not apply to
Company.
(vii) In our opinion and according to information and explanations
given to us, the Company has an internal audit system commensurate with
its size and nature of its business.
(viii) In our opinion, prima facie the Company has maintained proper
cost records as prescribed by the Central Government under clause (d)
of sub-section (1) of Section 209 of the Companies Act,1956. We have,
however, not made a detailed examination of the cost records with a
view to determine whether they are accurate or complete.
(ix) (a) According to the information and explanations given to us and
on the basis of our examination of books of account, we are of the
opinion that the Company is generally regular in depositing undisputed
statutory dues
including Provident Fund, Investor Education and Protection Fund,
Employees' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service
Tax, Custom Duty, Excise Duty, Cess and any other statutory dues with
the appropriate authorities. At the end of the year, there were no
undisputed dues payable for a period of more than six months from the
date they became payable.
(b) As on 31st March 2012, according to records of the Company, some
statutory dues were disputed and not deposited as given below:
Name of Statute Nature of Dues Amount Period to Forum where
dispute is
pending
(Rs. in
Lakhs) which its
relates
Central
Excise Act, Recovery of
CENVAT 1.59 2004-05 The Dy.
Commissioner
of C. Excise
Div-I,
1944 Ahmadabad.
Central
Excise Act, Recovery of
additional 24.85 2002-03 The Dy.
Commissioner
of C. Excise
Div-III,
1944 TTA duty of
Yarn Ahmadabad.
captively
consumed
Central
Excise Act, Refund claim
for 0.98 2005-06 Commissioner
of Central
Excise,
(Appeals),
1944 amount short
received Ahmadabad
against refund
claim of yarn
duty after
adjusting the
old recovery
Central
Excise Act, Demand for old
duty 0.50 2008-09 CESAT, West
Zone,
Ahmadabad
1944
The Income Tax Demand of Income 9.77 A.Y. Asst. Commis
sioner of
Income Tax,
Act-1961 Tax 2006-07 Cir.-8,
Ahmadabad
The Income Tax Demand for
Penalty 7.43 A.Y. Asst. Commis
sioner of
Income Tax,
Cir.-8,
Act-1961 U/s. 271(1)(C) 2008-09 Ahmadabad
The Income Tax Demand for
Penalty 17.42 A.Y. Commissioner
of Income Tax
(Appeal),
Act-1961 U/s. 271(1)( C) 2006-07 Ahmadabad
The Income Tax Demand of
Income Tax 14.55 A.Y. Commissioner
of Income
Tax (Appeal),
Act-1961 2007-08 Ahmadabad
Gujarat
Sales Tax Additional
Sales Tax 6.17 1997-98, Gujarat Value
Added Tax Tribunal
Act-1969 1998-99
&2000-01
(x) The Company has accumulated losses at the end of the financial year
not exceeding 50% of its net worth.
(xi) Company is under Corporate Debt Restructuring (CDR) package under
scheme of RBI which was duly approved and implemented. Company has
defaulted in repayment of Loans and interest at Note No 4.3 which is
mentioned under head "Long term borrowing".
(xii) The Company has not granted loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
Accordingly this clause does not apply.
(xiii) The Company is not a chit fund / nidhi Company / mutual benefit
fund or society which would be governed by any special statute.
Accordingly this clause along with sub clauses does not apply.
(xiv) The Company is not dealing or trading in shares, securities,
debentures and other investments. Accordingly this clause does not
apply.
(xv) The Company has not given any guarantee for loans taken by others
from bank or financial institutions. Accordingly this clause does not
apply.
(xvi) The term loans were applied only for the purpose for which they
were obtained.
(xvii) In our opinion and according to explanations given to us, the
funds raised on short-term basis have not been used for long-term
investment.
(xviii) The Company has not made any preferential allotment of shares
to parties and companies covered in the Register maintained under
Section 301 of the Act during the year and accordingly this clause does
not apply.
(xix) The Company has not issued debentures during the year.
Accordingly this clause does not apply.
(xx) The Company has not raised any money from public issue during the
financial year. Accordingly this clause does not apply.
(xxi) In our opinion and according to explanations given to us, no
fraud on or by the Company has been noticed or reported during the
year.
For PIPARA & COMPANY
Chartered Accountants
Firm Registration No. 107929W
GYAN PIPARA
Place : Ahmedabad (Partner)
Date : 24th May, 2012 Membership No.034289
Mar 31, 2011
We have audited the attached Balance Sheet of SOMA TEXTILES &
INDUSTRIES LIMITED, as at 31st March, 2011 and also the Profit and Loss
Account and 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.
We conducted our audit in accordance with 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
disclosures 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.
As required by the Companies (Auditors' Report) Order, 2003 as amended
by the Companies (Auditors' Report) (Amendment) Order, 2004 (together
the 'Order') issued by the Central Government of India in terms of
sub-Section (4A) of Section 227 of the Companies Act, 1956 of India and
on the basis of such checks of the books and records of the Company as
we considered appropriate and according to the information and
explanations given to us, we enclose in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order.
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 and proper report adequate for the purposes of our audit
have been received from the branch not audited by us. The financial
records of Baramati branch of Company have been audited by Shankarlal
Jain & Associates, Chartered Accountants, Mumbai, (Firm Registration
No. 109901W) a copy of whose report has been forwarded to us. We have
relied on that report and have appropriately dealt with the same in our
report.
(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 and with the audited reports from the branch;
(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 representations received from the
directors, as on 31st March, 2011, and taken on record by the Board of
Directors, we report that none of the directors is disqualified as on
31st March, 2011 from being appointed as a director in terms of
clause(g) of sub-Section(l) of Section 274 of the Companies Act, 1956;
(vi) In our opinion and to the best of our information and according to
the explanations given to us, and subject to our observations in Note
No. 23 of Schedule 22(B) - Notes on Accounts, relating to income of Rs.
26,724,438/- shown by the Company under the head "Prior Period" in the
Profit and Loss Account, pertaining to its claims for Deemed Duty
Drawback for the period 1st April, 1994 to 31st March, 2003; and
further Note No. 24 of Schedule 22(B) - Notes on Accounts, pertaining
to amount of investment as well as amount advanced by the Company to
Soma Textile FZC, the said accounts read together with the notes
thereon give the information required by the Companies Act, 1956, in
the manner so required and give a true and fair view in conformity with
the accounting principles generally accepted in India;
(a) In the case of the Balance Sheet, of the state of affairs of the
Company as at 31 st March, 2011;
(b) In the case of the Profit and Loss Account, of the LOSS for the
year ended on that date; and
(c) In the case of Cash Flow Statement, of the Cash Flows for the year
ended on that date.
Annexure referred to in paragraph 3 of our report of even date to the
members of SOMA TEXTILES & INDUSTRIES LIMITED on the accounts for the
year ended on 31st March 2011.
(i) (a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets.
(b) The Company has a phased programme of physical verification of
fixed assets which, in our opinion, is reasonable having regard to the
size of the Company and nature of its assets. In accordance with this
programme, the management has verified fixed assets during the year and
no material discrepancies have been noticed on such verification.
(c) In our opinion, the Company has not disposed off a substantial part
of its fixed assets during the year and the going concerns status of
the Company is not affected.
(ii) (a) The management conducts regular physical verification of
inventory at reasonable intervals.
(b) In our opinion, 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) The Company is maintaining proper records of inventory. Some
immaterial discrepancies were noticed on physical verification which
have been properly dealt with in the books of account.
(iii) (a) The Company has granted interest free loan to its Associate,
Soma Textile FZC. Total amount outstanding on 31st March 2011 was
Rs.703,101,360/-.
(b) There are no terms and conditions set out by the Company as on date
for the loans given to Soma Textile FZC and therefore, we are unable to
comment on terms and conditions of the said loan.
(c) As there is no stipulation made for repayment of loan by Associate,
we are unable to report on regularity of receipt of principal amount.
(d) As there is no stipulation of repayment of loan by Associate, we
are unable to report on overdue amount.
(e) According to the information and explanations given to us the
Company has taken unsecured loans from companies, firm or other parties
covered in the register maintained under Section 301 of the Companies
Act, 1956 and the same are as under.
No. of Parties involved Three Parties
Loan Taken Rs. 35,500,000
Balance Outstanding at the end of year Rs. 35,500,000
(f) Interest free unsecured loan taken from promoters to fulfill
stipulation of Financial Institution so there is no rate of interest
specified. Terms and conditions of loans taken are prima facie not
prejudicial to the interest of the Company;
(g) No stipulation has been specified for the repayment of these loan.
(iv) There is an adequate internal control system commensurate with the
size of the Company and the nature of its business, for the purchase of
inventory and fixed assets and for the sale of goods and service.
(v) (a) According to the information and explanations given to us, we
are of the opinion that the transactions that need to be entered into
the register maintained under Section 301 of the Companies Act, 1956
have been so entered.
(b) In our opinion and as explained 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
value of Rupees Five Lacs 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.
(vi) The Company has not accepted any deposits from the public.
Therefore the provisions of Sections 58A, 58AA or any other relevant
provisions of the Act and the rules framed thereunder or any order
passed by Company Law Board or National Company Law Tribunal or Reserve
Bank of India or any Court or any other Tribunal do not apply to
Company.
(vii) In our opinion and according to information and explanations
given to us, the Company has a interna! audit system communsurate with
its size and nature of its business, which may be further strengthened.
(viii) In our opinion, the Company has maintained proper cost records
prescribed by the Central Government under clause (d) of sub-Section
(1) of Section 209 of the Act. However, we are not required to carry
out and have not carried out any detailed examination of such accounts
and records.
(ix) (a) According to the information and explanations given to us and
on the basis of our examination of books of account, we are of the
opinion that the Company is generally regular in depositing undisputed
statutory dues including Provident Fund, Investor Education and
Protection Fund, Employees' State Insurance, Income-tax, Sales-tax,
Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess and any other
statutory dues with the appropriate authorities. At the end of the
year, there were no undisputed dues payable for a period of more than
six months from the date they became payable.
(b) As on 31st March 2011, according to records of the Company, some
statutory dues were disputed and not deposited as given below:
Name of Statute Nature of Dues Amount (Rs.) Period to Forum where
dispute is pending
which its
relates
Central Excise
Act, Penalty for
filing 25,428 1996-97 CEGAT, Mumbai and
the Hon'ble High
Court
1944 wrong declaration 1997-98 of Gujarat,
Ahmedabad.
Central Excise
Act, Recovery of
CENVAT 158,973 2004-05 The Dy.
Commissioner of
C. Excise, Div-I,
1944 Ahmedabad.
Central Excise
Act, Recovery of
additional 2,485,486 2002-03 The Dy.
Commissioner of
C.Excise, Div-lll,
1944 TTA duty of Yam Ahmedabad.
captively
consumed
Central Excise
Act, Refund claim for 97,711 2005-06 Commissioner of
Central Excise,
(Appeals),
1944 amount short
received Ahmedabad
against refund
claim of yarn
duty after
adjusting the
old recovery
Central Excise
Act, Demand for
old duty 50,179 2008-09 OESAT, West Zone,
Ahmedabad
1944
The Income Tax Demand of Income 976,730 A.Y. Asst. Commissioner
of Income Tax,
Act-1961 Tax 2006-07 Cir.-8, Ahmedabad
The Income Tax Demand of
Income 26,076,000 A.Y. Asst. Commissioner
of Income Tax, Cir
Act-1961 Tax 2008-09 8, Ahmedabad
The Income Tax Demand for
Penalty 1,742,070 A.Y. Commissioner of
Income Tax
(Appeal),
Act-1961 U/s. 271(1)(C) 2006-07 Ahmedabad
The Income Tax Demand of
Income 2,213,276 A.Y. Commissioner of
Income Tax
(Appeal),
Act-1961 Tax 2007-08 Ahmedabad
Gujarat Sales
Tax Additional
Sales Tax 617,257 1997-98 Gujarat Value
Added Tax Tribunal
Act, 1969 1998-99
&2000-01
(x) The Company has accumulated losses at the end of the financial year
not exceeding 50% of its net worth. It has not incurred cash losses in
the financial year but incurred cash losses in the immediately
preceding financial year.
(xi) Company is under Corporate Debt Restructuring (CDR) package under
scheme of RBI which was duly approved and implemented. Company has not
defaulted in repayment of dues to any financial institution or bank as
per reschedulement under CDR package. ' , '
(xii) In our opinion and according to 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. Accordingly
this clause does not apply.
(xiii) The Company is not a chit fund / nidhi Company / mutual
benefit, fund or society which would be governed by any special statute.
Accordingly this clause along with sub clauses do As notà apply.
(xiv) In our opinion and according to explanation TO given to us, the
Company is not dealing or trading in shares, securities, debentures and
other investments. Accordingly this clause does not apply.
(xv) In our opinion and according to explanations given to us, the
Company has not given any guarantee for loans taken by others from bank
or financial institutions. Accordingly this clause does not apply.
(xvi) In our opinion and according to explanations given to us, the
term loans were applied only for the purpose for which they were
obtained.
(xvii) In our opinion and according to explanations given to us, the
funds raised on short-term basis have not been used for long-term
investment.
(xviii) The Company has not made any preferential allotment of shares
to parties and companies covered in the Register maintained under
Section 301 of the Act during the year and accordingly this clause does
not apply.
(xix) The Company has not issued debentures during the year.
Accordingly this clause does not apply.
(xx) The Company has not raised any money from public issue during the
financial year. Accordingly this clause does not apply.
(xxi) In our opinion and according to explanations given to us, no
fraud on or by the Company has been noticed or reported during the
year.
For PIPARA & COMPANY
Chartered Accountants
GYAN PIPARA
(Partner)
Place : Ahmedabad Membership No.034289
Date : 18th May, 2011 Firm Registration No. 107929W
Mar 31, 2010
We have audited the attached Balance Sheet of SOMA TEXTILES &
INDUSTRIES LIMITED, as at 31st March, 2010 and also the Profit and Loss
Account and 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.
We conducted our audit in accordance with 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
disclosures 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.
As required by the Companies (Auditors Report) Order, 2003 as amended
by the Companies (Auditors Report) (Amendment) Order, 2004 (together
the "Order") issued by the Central Government of India in terms of
sub-section (4A) of section 227 of the Companies Act, 1956 of India and
on the basis of such checks of the books and records of the Company as
we considered appropriate and according to the information and
explanations given to us, we enclose in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order.
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 and proper report adequate for the purposes of our audit
have been received from the branches not audited by us. The financial
records of Baramati branch of company have been audited by Shankarlal
Jain & Associates, Chartered Accountants, Mumbai, a copy of whose
report has been forwarded to us. We have relied on that report and have
appropriately dealt with the same in our report;
(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 and with the audited reports from the branches;
(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 representations received from the
directors, as on 31st March, 2010, and taken on record by the Board of
Directors, we report that none of the directors are disqualified as on
31st March, 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) In our opinion and to the best of our information and according to
the explanations given to us, and subject to our observations as
aforesaid, and particularly Note No. 23 of Schedule 22(B) of Notes on
Accounts, the said accounts read together with notes thereon give the
information required by the Companies Act, 1956, in the manner so
required and give a true and fair view in conformity with the
accounting principles generally accepted in India:
(a) In the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March, 2010;
(b) In the case of the Profit and Loss Account, of the LOSS for the
year ended on that date; and
(c) In the case of Cash Flow Statement, of the Cash Flows for the year
ended on that date.
Annexure referred to in paragraph 3 of our report of even date to the
members of SOMA TEXTILES & INDUSTRIES LIMITED on the accounts for the
year ended on 31st March 2010.
(i) (a) The company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets.
(b) The Company has a phased programme of physical verification of
fixed assets which, in our opinion, is reasonable having regard to the
size of the company and nature of its assets. In accordance with this
programme, the management has verified fixed assets during the year and
no material discrepancies have been noticed on such verification.
(c) In our opinion, the Company has not disposed off a substantial part
of its fixed assets during the year and the going concerns status of
the company is not affected.
(ii) (a) The management conducts regular physical verification of
inventory at reasonable intervals.
(b) In our opinion, 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) The company is maintaining proper records of inventory. Some
immaterial discrepancies were noticed on physical verification which
have been properly dealt with in the books of account.
(iii) (a) The company has granted interest free loan to its 100%
subsidiary, Soma Textiles FZE. Total amount outstanding on 31st March
2010 was Rs.707,878,454/-.
(b) The terms and conditions of loans given by the company are prima
facie not prejudicial to the interest of the company.
(c) As there is no stipulation made for repayment of loan by
subsidiary, we are unable to report on regularity of receipt of
principal amount.
(d) As there is no stipulation of repayment of loan by subsidiary, we
are unable to report on overdue amount.
(e) The company has not taken any loans, secured or unsecured from
companies, firms or other parties covered in the register maintained
under section 301 of the Act. Accordingly sub-clauses (f) and (g) are
not applicable.
(iv) There is an adequate internal control system commensurate with the
size of the company and the nature of its business, for the purchase of
inventory and fixed assets and for the sale of goods and service.
(v) (a) According to the information and explanations given to us, we
are of the opinion that the transactions that need to be entered into
the register maintained under section 301 of the Companies Act, 1956
have been so entered.
(b) In our opinion and as explained to us, the transactions made in
pursuance of contracts or arrangements entered into the register
maintained under section 301 of the Companies Act, 1956 and exceeding
value of Rupees Five Lacs 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.
(vi) The company has not accepted any deposits from the public.
Therefore the provisions of sections 58A, 58AA or any other relevant
provisions of the Act and the rules framed thereunder or any order
passed by Company Law Board or National Company Law Tribunal or Reserve
Bank of India or any Court or any other Tribunal do not apply to
company.
(vii) In our opinion and according to information and explanations
given to us, the company has a internal audit system commensurate with
its size and nature of its business, which may be further strengthened.
(viii) In our opinion, the company has maintained proper cost records
prescribed by the Central Government under clause (d) of sub-section
(1) of section 209 of the Act. However, we are not required to carry
out and have not carried out any detailed examination of such accounts
and records.
(ix) (a) According to the information and explanations given to us and
on the basis of our examination of books of account, we are of the
opinion that the company is generally regular in depositing undisputed
statutory dues including Provident Fund, Investor Education and
Protection Fund, Employees State Insurance, Income Tax, Sales Tax,
Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other
statutory dues with the appropriate authorities. At the end of the
year, there were no undisputed dues payable for a period of more than
six months from the date they became payable.
(b) As on 31st March 2010, according to records of the company, some
statutory dues were disputed and not deposited as given below:
Name of Statute Nature of Dues Amount Period to
(Rs.) which its
relates
Central Excise Act, Penalty for filing 25,428 1996-97
1944 wrong declaration 1997-98
Central Excise Act, Recovery of CENVAT 158,973 2004-05
1944
Central Excise Act, Recovery of additional 2,485,486 2002-03
1944 TTA duty of Yarn
captively consumed
Central Excise Act, Refund claim for 97,711 2005-06
1944 amount short received
against refund claim
of yarn duty after
adjusting
the old recovery
Central Excise Act, Demand for service tax 444,139 2005-06
1944 on goods transport
Central Excise Act, Demand for excise on 251,047 2006-07
1944 scrap sale
Central Excise Act, Demand for old duty 50,179 2008-09
1944
Gujarat Sales Tax Additional Sales Tax 617,257 1997-98
Act, 1969 1998-99
&2000-01
Name of Statute Forum where dispute is pending
Central Excise Act, CEGAT, Mumbai and the Honble High Court
1994 of Gujarat, Ahmedabad.
Central Excise Act, The Dy. Commissioner of C. Excise, Div-I,
1994 Ahmedabad.
Central Excise Act, The Dy. Commissioner of C. Excise, Div-III,
1994 Ahmedabad.
Central Excise Act Commissioner of Central Excise, (Appeals),
1994 Ahmedabad
Central Excise Act Dy. Commissioner Service Ta x Div - II
1994
Central Excise Act Asst. Commissioner of Central Excise.
1994
Central Excise Act CESAT, West Zone, Ahmedabad
1994
Central Sales Act Gujarat Value Added Ta x Tribunal
1969
(x) The company has accumulated losses at the end of the financial year
but the same are less than 50% of its net worth. It has incurred cash
losses in the financial year as well as in the immediately preceding
financial year.
(xi) Company is under Corporate Debt Restructuring (CDR) package under
scheme of RBI which was duly approved and implemented. Company has not
defaulted in repayment of dues to any financial institution or bank as
per reschedule under CDR package.
(xii) In our opinion and according to 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. Accordingly
this clause does not apply.
(xiii) The company is not a chit fund / nidhi company / mutual benefit
entity or society which would be governed by any special statute.
Accordingly this clause along with sub clauses does not apply.
(xiv) In our opinion and according to explanations given to us, the
company is not dealing or trading in shares, securities, debentures and
other investments. Accordingly this clause does not apply. (xv) In our
opinion and according to explanations given to us, the company has not
given any guarantee for loans taken by others from bank or financial
institutions. Accordingly this clause does not apply.
(xvi) In our opinion and according to explanations given to us, the
term loans were applied only for the purpose for which they were
obtained.
(xvii) In our opinion and according to explanations given to us, the
funds raised on short-term basis have not been used for long-term
investment.
(xviii) The company has not made any preferential allotment of shares
to parties and companies covered in the Register maintained under
section 301 of the Act during the year and accordingly this clause does
not apply.
(xix) The company has not issued debentures during the year.
Accordingly this clause does not apply. (xx) The company has not
raised any money from public during the financial year. Accordingly
this clause does not apply.
(xxi) In our opinion and according to explanations given to us, no
fraud on or by the company has been noticed or reported during the
year.
For PIPARA & COMPANY
CHARTERED ACCOUNTANTS
Firm Registration No. 107929W
GYAN PIPARA
Place: Ahmedabad PARTNER
Date:29th May, 2010 Membership No.034289
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