We have audited the attached Balance Sheet of J. F. LABORATORIES
LIMITED as at March 31,2011. The Company's project has not carried out
any revenue operations during the period from April 1,2010 to March 31,
2011 and has, therefore, not prepared a Profit and Loss Account for the
period ended on that date. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express the opinion on these financial statements based on our audit:
We have conducted the audit in accordance with the auditing standards
generally accepted in India. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on test basis, evidence supporting the amount and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by the management as well as evaluating overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
1. As required by the Companies Auditor's Report Order, 2003, issued
by the Government of India in terms of section 227(4A) of the Companies
Act, 1956, we enclose in the annexure a statement on the matters
specified in paragraphs 4 and 5 of the said Order.
2. We draw attention to Note 1 and 2, Schedule 9 in the financial
statements regarding substantial delay in setting up the project
pending commissioning of plant for commercial production, non
resolution of problems regarding stabilisation of the process
technology for a prolonged period of time, project activities being
suspended since long during recovery proceedings, defaults in repayment
of debts, recalling of debts, recovery proceedings initiated by the
Banks/ Institutions/ Debenture Trustees, outcome of the recovery
proceedings and auction sale of the Project Undertaking of the Company
as set out in Note 5(e) of Schedule 9, the presumption of going concern
is irretrievably jeopardized. Inasmuch as the Company's substratum is
adversely affected, for matters in respect of its corporate status need
to be addressed vis a vis the members and other project participants,
the accounts are prepared on the balance sheet date on historical cost
convention without any presumption of a going concern and adhere to the
accounting requirements of the ICAI relating to the Impairment of
Assets and recognizes any exceptional losses for the said event - refer
Note 1,2 and 5
3. We also draw attention to Note 5(b) Schedule 9 in the financial
statements regarding non-provision of any interest on debentures due to
the modification of the terms thereof and Debenture Trustees have filed
suit for recovery of the Debenture dues including interest, and Note
5(d) regarding provision of the liability as per the claims/orders made
to/by the Hon'ble Debt Recovery Tribunal, Mumbai though no provision
has been made for further Interest thereon.
4. We also draw attention to Note No. 8 Schedule 9 in the financial
statements regarding balances of various accounts subject to
confirmation and reconciliation.
5. Further to our comments in the Annexure referred to in paragraph 1
and paragraph 2 to 4 above, we report that:
(a) We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purposes of our
audit.
(b) In our opinion, the Company as required by law has kept proper
books of account so far as it appears from our examination of such
books.
(c) The Balance Sheet referred to in this Report is in agreement with
the books of account.
(d) In our opinion and to the best of our information and according to
the explanations given to us and except as stated in Para 2 to 4 above,
the Balance Sheet complies with the accounting standards issued by the
Institute of Chartered Accountants of India as referred to in Section
211 (3C) of the Companies Act, 1956.
(e) On the basis of written representation received from the Directors,
and taken on record by the Board of Directors, 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 1 of Section 274 of the Companies
Act, 1956.
(f) In our opinion, and to the best of our information and according to
the explanations given to us, the Balance Sheet read with Annexure
referred to in paragraph 1 and paragraph 2 to 4 above regarding
accounts are prepared on the balance sheet date on historical cost
convention without any presumption of a going concern, non provision of
interests on borrowings and debentures, auction sale of the Project
Undertaking of the Company In view of the DRT Order and read together
with the note thereon, gives the information required by the Companies
Act, 1956 in the manner so required and also give a true and fair view
subject to above, in accordance with generally accepted accounting
principles of the state of affairs of the Company as at 31st March,
2011.
ANNEXURE REFERRED TO IN PARA (1) OF THE REPORT OF EVEN DATE OF THE
AUDITORS TO THE MEMBERS OF J. F. LABORATORIES LIMITED ON THE ACCOUNTS
FOR THE PERIOD FROM 1st APRIL, 2010 TO 31st MARCH, 2011
1. a) The Company has not produced the records of Fixed Assets for our
verification.
b) According to the information and explanations given to us, the Fixed
Assets have not been physically verified by the management during the
year, in view of the order of the Debt Recovery Tribunal, possession of
the properties of the company has been taken by the Recovery Officer on
19.03.2004.
c) The entire Project undertaking and all the assets and properties
comprised therein were auctioned and sold under orders of the Hon'ble
Debt Recovery Tribunal I, Mumbai on 19th February, 2009 and the sale
was confirmed on 30th March, 2009.
2. The inventory has not been physically verified by the management;
in view of the order of the Debt Recovery Tribunal possession of the
inventory of the company has been taken by the Recovery Officer on
19.03.2004 and auctioned as mentioned above.
3. In respect to Loan taken and granted:
a) The company has taken loan from four number of companies covered in
the register maintained under Section 301 of the Companies Act, 1956.
The Amount of Rs 13,21,605/- taken during the period and the period-end
balance of loans taken from such parties was Rs. 8,94,69,000/-. The
company has not granted any loans, secured or unsecured to the
companies, firms and other parties covered in the register maintained
under section 301 of the Companies Act, 1956.
b) In our opinion the rate of interest and other terms and conditions
of loans taken by the company, secured or unsecured, are prima facie
not prejudicial to the interest of the company.
c) As per the information and explanations given to us, the loans are
in nature of interest free promoters advances towards subscription of
shares in the company and accordingly the question of any repayment or
interest thereon does not arise.
4. In our opinion and according to the information and explanations
given to us, there are adequate internal control procedures
commensurate with the size of the Company and the nature of its
business for the purchase of inventory and fixed assets.
5. a) As per the information and explanations given to us and on the
basis of examination of relevant records, in our opinion transactions
that need to be entered into a register in pursuance of Section 301 of
the Act have been so entered;
b) As per the information and explanations given to us transactions of
loans taken from companies covered in the register maintained under
Section 301 of the Act, is non-interest bearing;
6. The Company has not accepted any fixed deposits from the public
during the year and therefore the question of compliance with the
directives issued by the Reserve Bank of India and the provision of
Section 58A and 58AA of the Companies Act, 1956 and the rules framed
there under does not arise.
7. In our opinion and according to the information and explanations
given to us, the company has no formal Internal Audit System as such
but its control procedures ensure reasonable internal checking of its
financial and other records commensurate with its size and nature of
its business;
8. Since the company has not yet started commercial production,
question of maintenance of cost records prescribed by the Central
Government under clause (d) of sub section (1) of Section 209 of the
Act, if any, does not arise;
9. a) As per the information and explanations given to us, in our
opinion the Company is regular in depositing undisputed statutory dues
including Provident Fund, Employees State Insurance, Income Tax, Sales
Tax, Wealth Tax, Custom Duty, Excise Duty, cess and any other statutory
dues with the appropriate authorities except following items, which are
outstanding for a period of more than six months from the date they
became payable.:
(i) an amount of Rs. 2,40,972/- pertaining to unclaimed application
money refundable on PCD to be transferred to Investor Education and
Protection Fund; and
(ii) liability towards income tax and interest thereon as per
assessment order and demand notice for earlier years of Rs. 68,34,874/-
for which department has issued notice of attachment of bank account
dated 28/01/2009 b) According to the information and Explanations given
to us, there are no dues on account of sales tax, income tax, wealth
tax, custom duty, excise duty, cess that has not been deposited on
account of any dispute except as stated above.
10. Since the company has not yet started commercial production and
has not prepared any Profits Loss Account so far, question of
accumulated losses and cash losses does not arise;
11. The company has defaulted in repayment of dues to financial
institutions and banks. Having regard to the substantial delay in
setting up the project, non-start of commercial production, recovery
proceeding has been initiated by the Banks and Institutions. The entire
outstanding amount of Rs. 61,30,24,496 and interest not provided as
referred in note 5(d) of schedule 9 in the financiaI statements is
considered to be in default since the dates of recalling or due;
12. The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities,
hence the question of deficiency in maintenance of adequate documents
and records does not arise;
13. Since the company is not dealing or trading in shares, securities,
debentures and other investments the question of maintaining proper
record etc. are not applicable;
14. As per the information and explanation given to us, the company
has not given any guarantee for loans taken by others from banks or
financial institutions;
15. The company has not obtained any term loan during the period;
16. As per the information and explanations given to us in our
opinion, the funds raised on short term basis have not been used for
long term investment and vice-versa;
17. 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;
18. The company has not issued any debentures during the period;
19. The company has not raised money by public issues during the
period;
20. As per the information and explanations given to us no fraud has
been noticed or reported during the period;
21. The other clauses of the aforesaid Order are not applicable to the
Company.
For Jhawar Mantri & Associates
Firm Regn. No. 113221W
Chartered Accountants
(B.P.Mantri)
Partner
Membership No. 45701
Place: Mumbai
Date : 17th August, 2011
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