Bhagheeratha Engineering Ltd.की ऑडीटर रिपोर्ट

Mar 31, 2012

I. We have audited the attached Balance Sheet of M/s Bhagheeratha Engineering Limited, Kochi, at as 31st March 2012the Profit and loss Account of the Company for the year ended on that date annexed thereto and also Cash Flow Statement for year ended on that date annexed Thereto. These financial statements are responsibility of Company's Management Our responsibility is to express an opinion on these financial statements based on our audit.

ii. We conducted our audit in accordance will, auditing standards generally accepted in India these 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 amounts and Disclosures In financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating overall financial statement Presentation. We believe that our audit provides a reasonable basis for our opinion.

iii. As required by Companies (Auditors Report) Order 2003, issued by Central Government of India In terms of sub-section (4A) of Section S?7 of the Companies Act, 1956, we enclose in Annexure a statement on matters specified in paragraphs 4 and 5 of the said Order, to the extent applicable to the Company.

iV. Further to our comments in Annexure referred to in paragraph III above we report that:

1. we have obtained all Information and explanations, which to best of our knowledge and belief were necessary for the purposes of our audit.

2. In our opinion, proper books of accounts as required by law have been kept by Company so far as It appears from our examination of these books.

3. The Balance Sheet, Profit and Loss Account and Cash Flow Statement Dealt with by this report are In agreement with books of accounts

4. In our opinion, the Balance Sheet, the Profit and Loss Account and Cash Plow Statement deal with by this report comply with Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act. 1956.

5. On basis of written representations received from directors, as on 31st March, 2012, and taken on record by the Board of Directors, we report that none of directors is disqualified as on 31st March, 2012 from being appointed as a Director in terms of clause (g) of sub-soclion (1) of Section 274 ol the Companios Act, 1956.

6. i) Loan liability to consortium of Bankers as at

31.03.2012 as per me books of Company is Rs 10122 lakhs. All these accounts am defaulter! since the financial year 200S-2006.Company was under a Corporate Debt Restructure, scheme with Bankers slnco2005. Stance the company could not comply with terms Stipulated by bankers, terms of Scheme are no more applicable. But the company is still providing Interest on the above loans as per terms agreed up Oh by Bankers in CDR Scheme. company has provided interest at a concessional rate of 8.25 % p.a on loans amounting to Rs.38W lakhs at 17.8% en Rs.423 lakhs and no interest is charged on balance amount of Rs.5889 lakhs, (lor which interest moratorium was originally allowed) The Bankers have filed suits tor recovery of these advances. It is understood that Company has now submitted a scheme for One Time Settlement of these loans which is under consideration of banks. the balance In loan accounts aro not confirmed and reconciled .total liability as claimed by Bankers in Debt Recovery Tribunel is reported to be Rs. 12339 Lakhs and this is disputed by Company. Since the matter is under litigation, shot! provisions of Interest and other charges it any on these loan accounts aro not presently ascertainable. (Rotor Note No. 5 )

(ii) Balance with Bankers . (a )Fixed deposits of Rs.29 lakhs is appropriated by Bankers towards their loan accounts. Company has disputed these appropriations by ibe bankers anil /ins not given effect to the same in its books. Since the matter is in litigation, we are not In a position to comment on the cor met no ss of tint deposits shown by the company (b) Deposits amounting to this.5OO lakhs is earmarked by the Bankers against liability to one of the crediters of the Company on basis of a court order. . (Refer Note No. 1b)

(III) The Company has not provided overdue interest on hire purchase loans outstanding Rs.281 lakhs availed from two hire purchase finance Companies, who have taken possession of the hypothecated assets, Pending settlement of accounts in respect of the assets seized by thern. Liability if any en this account is presently not ascertainable. (Holer Note.No 5.)

(iv) Receivables against Uncertified work amounting to Hs.623 lakhs, Security deposit and Withholding from contract income amounting to Rs.330 lakhs relating to closed projects are pending realization due to dispute with the clients and are in different stages of aibitration/logal proceedings. we are not in a position to comment on realisation of the above amounts at this stage.(Rater Nete.No35)

(v) Balances in Trade Payables & expenses payable amounting to Rs.4020 Lakhs and receivables, loans & advances and clients" accounts amounting to Rs.1498 Lakhs are long outstanding and subject to confirmation Impact of our observations in Para 6 (I). (ii) , (iii) (iv) and

(v) on accounts of company is not presently ascertainable

Subject to nir observation In Para IV (6) above, in our opinion |ru i lo the host of our Information and according to the explanations givon to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view In confermity with the accounting principles generally accepted in India:

a. In case of Balance Sheet, of the state of affairs of Company as at 31st March, 2012;

b. In case of Profit and Loss Account, of the profit for the year ended on that date; and

c. In case of the Cash now Statement, of cash flows of the Company for the year ended on that date.

ANNEXURE TO AUDITORS' REPORT

Referred to In paragraph III of our report of even date

I. (a) Company has maintained proper records showing full particulars including quantitative details and situation of all fixed assets.

(b) Physical verification of fixed assets was carried out by the Management during year as per its program of verification. In this Regard, we report that:

(i) Three major projects of Company were terminated during the year 2005-06 and another project during 2008-09 by the respective clients, The machinery, Equipment and vehicles situated at three of such projects are under the custody of the clients. W.D.V of such assets as on 31.3.12 is Rs.45 lakhs. Machinery, Equipment and vehicles in another project are compulsorily retained in the project as per stay order issued by court on a dispute with client. W.D.V .of such assets as at 31.3.12 is Rs.170 lakhs.

(ii) Some of the creditors of the Company in one of the projects have taken possession of certain machinery, equipments and vehicles demanding settlement of their dues from the Company. W.D.V .of such assets as at 31.3.12 is Rs.28 lakhs. Pending Settlement of disputes with the above parties, the company continues to Carry the value of the above assets in books of account.

(iii) Two Hire purchase finance Companies have taken over Machinery, Equipment and Vehicles financed by them due to default in repayment of their dues , W.D.V .of such assets as on 31.3.12 is lis. 17 lakhs. In spite of above taking over, the Company continues to carry both the assets and liabilities in its books, pending settlement of disputes.

It is reported that the Company has no access or control over the assets referred to in pares (i),(ii) and (iii) above and is not in a position to physically verily the same. To the above extent, we are not In a position to comment on the discrepancies and / or impairment losses, it any, in respect of such assets. (c) fixed assets disposed of by Company during the year are not substantial so as to affect the going concern assumption. '?. Inventory as on 31.3.2012 Includes stock of construction materials and spares amounting to Hs.2B9 lakhs under the custody of the clients in similar circumstances as explained In clause (I) above, pending settlement of disputes with the clients. It is reported that the Company is not In a position to verify the stock physically and consequently any loss Including deterioration In quality is not assessed and dealt with in accounts.

Subject to above,

(a) As explained to us, Inventory has been physically verified during year by the management. In our opinion, the frequency of vorification is reasonable.

(b) According to the Information and explanation given to us, in our opinion, the procedures for physical verification of Inventories followed by the management weroe reasonable and adequate In relation to size of Company and nature of its business.

(c) According to the information and explanations given to us, In our opinion, the Company has maintained proper records of Inventory. the discrepancies noticed on verification between the physical stocks and the book records wero not material, having regard to the size of operation of the Company.

3. Company has not granted loans to any parties listed In the register Maintained under section 301 of the Companies Act, 1G56 and hence Reporting under clause nos. 3(a) to (d) are not applicable.

(a) Company has taken loans from 39 persons covered In the register maintained under section 301 of Companies Act, 1956. Maximum amount Involved during the year was Rs. 14.8 lakhs and same balance is outstanding at the year- end.

(b) In our opinion the rate of Interest and other terms and conditions on which loans have been taken from the parties listed In the register maintained under Section 301 of Companies Act, 1956 are not prima face, prejudicial to Interest t of the Company.

(c) repayment schedules for above loans taken are not fixed, Hence, we are not In a position to comment on the regularity of the repayment and overdue position of these loans.

4. In our opinion and according io the Information and explanations given to us, there is adequate Internal control system commensurate with size of the company and till nature of its business with regard to purchases of Inventory, fixed assets and with regard to sale of goods and services. Further on the basis ol our examination of the books and records of the Company, and according to Information and explanations given Io us, we have neither come across nor have been informed of any Continuing failure to correct major weakness In the above said internal Control system.

5. (a) According to Information and explanations

given to us, we are of the opinion that the particulars

of contracts or arrangements referred to in section 301 that needed to be entered Into Inn register maintained under the said Section have been so entered. (Ii) In our opinion and according to Information and explanations given to us, them were no transactions with parties listed In register maintained under section 301 of the Companions Act, 1956, oxceeding the value of rupees five lakhs in respect of any party during two year.

6. According to information and explanations given to us, we are of the opinion that the Company has not complied with the provisions ot section 5BA and other

relevant provisions at the companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1978 with regard to deposits accepted from public. Following are the contraventions noticed. (a) Company has Defaulted in repayment of deposits

Matured amounting I is. 20 lakhs as at 31.03.12. (h) Company has not Maintained prescribed liquid

Deposits as at 31.03.2012.

(c) Considering the negative not worth as at 31.03.2011, balance ol deposits outstanding as on 31.03.2012 oxceeds limit prescribed.

(d) Company has not filed the return ol deposits during the year.

(e) Company has not tiled intimation regarding the default made by it In repayment of deposits to small depositors to lee Company taw Board as required under Section 5BAA.

7. Company had no internal audit system during the year.

8. To host of our knowledge and Information given to us, Central Government has not proscribed maintenance of cost records under section 209-(i} (d) of Companies Act, 1956 for the company.

9. (a) According to the information and explanations

given to us and according to the books and records as produced and examined by us, Company is generally regular In depositing undisputed statutory duos like, Income tax, sales tax, service tax, wealth lax and Other material statutory dues applicable to It. (b).According to the Information and explanations given to us, there are no dues of Customs duty, Wealth tax, Excise duty, loss and Sales tax, which have not been deposited on account of any dispute.

10. Company has accumulated losses as at 31" March 2012 of more than fifty percent of not worth.The Company has not incurred cash loss during the financial year covered by our audit anil has Incurred cash loss of Hs.627 lakhs during the immediately preceding financial your.

11. According to information and explanations given to us, all the credit facilities availed by Company from the consortium of banks are over due through out the financial year, the balance outstanding as on 31.03.2012 is Rs.10122 lakhs.

12. In our opinion and according to the Information and explanations given to us, Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities,

13. In our opinion, the company is not a chit fund or a nidhi mutual fund/society. Therefore, the provisions of clause A (xiii) of Companies (Auditor's Report) Order, 2003 are not applicable to Company,

14. In our opinion and according to Information and explanations given to us, the Company is not a dealer or trader in shares, securities or other Investments.

15. In our opinion and according to the information and explanations given lo us, the Company lias not given any guarantees for loans taken by others from banks and other financial institutions.

16. In our opinion and according to the information and explanations given to us, the Company has not raised any term loans during the year.

17. According to the information and explanations given to us and on an overall examination ol balance Sheet of the Company, in our opinion, no funds raised on short term basis have been used for long term Investments.

16. According to the Information and explanations given to us, during Year the Company has not undo any prefrontal allotment at shares to Parties and companies covered In the register maintained under Section 301 of the Companies Act, 1956.

19. According to the Information and explanations given to us, the Company has not issued any debentures during year.

20. The Company has not raisect any money through public issue during the year.

21. According to the Information and explanations given to us, miliauil nil or by the Company has been noticed or reported during Course of our audit.

For P.C. VARGHESE & CO. Chartered Accountants (FRN. 004526S) Sd/- P.C. VARGHESE, B.Com, F.C.A.

Partner (Membership No. 10408)

KOCHI -18 24.08.2012

---

Mar 31, 2010

I. We have audited the attached Balance Sheet of M/s. Bhagheeratha Engineering Limited, Kochi, as at 31st March 2010, the Profit and Loss Account of the Company for the year ended on that date annexed thereto and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

II. We conducted our audit in accordance with auditing standards generally accepted in India. These 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.

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

IV. Further to our comments in the Annexure referred to in paragraph III above we report that:

1. 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.

2. in our opinion, proper books of accounts as required by law have been kept by the Company so far as it appears from our examination of those books.

3. the Balance Sheet, the Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of accounts

4. in our opinion, the Balance Sheet, the 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.

5. 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 is 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.

6. (i) On the basis of the terms agreed upon in the Corporate Debt Restructuring scheme, the company has provided interest at a concessional rate of 8.25 % p.a on the term loans and overdraft amounts of Rs.4122 lakhs availed from the consortium of bankers and also no interest is charged on term loans of Rs.4037 lakhs for which interest moratorium was allowed. Now it is learned that the Company is no longer covered by the CDR scheme and therefore the above concessional rate of interest on the loans and overdraft are no more applicable. It is understood that the Company has now submitted a scheme for One Time Settlement of these loans and overdrafts which is under the consideration of the banks. Short provisions if any on this account is not presently ascertainable.

(ii) The Company has not provided overdue interest on hire purchase loans availed from financiers, who have taken possession of the hypothecated assets, ponding settlement of accounts in respect of the assets seized by them. Liability if any on this account is not presently ascertainable.

Impact of our observations in Para 6 (i) and (ii) on the accounts of the company is not presently ascertainable.

Subject to our observation in Para IV (6) above, in our opinion and to the best of our information and according to the explanations given to us, the said accounts 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 case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT Referred to in paragraph III of our report of even date

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

(b) Physical verification of fixed assets was carried out by the management during the year as per its program of verification. In this regard, it is reported that:

(i) Three major projects of the Company were terminated during the year 2005-06 and another project during 2008-09 by the respective clients. The Machinery, Equipment and vehicles situated at three of such projects are under the custody of the clients. W.D.V of such assets as on 31.3.10 is Rs.61 lakhs. Machinery, Equipment and vehicles in another project are compulsorily retained in the project as per the stay order issued by court on a dispute with the client. W.D.V .of such assets as at 31.3.10 is Rs.313 lakhs.

(ii) Some of the creditors of the Company in one of the projects have taken possession of certain machinery, equipments and vehicles demanding settlement of their dues from the Company. W.D.V .of such assets as at 31.3.10 is Rs 115 lakhs. Pending settlement of disputes with the above parties, the company continues to carry the value of the above assets in the books of account.

(iii) Three Hire purchase finance Companies have taken over the Machinery, Equipment and Vehicles financed by them due to default in repayment of their dues . W.D.V .of such assets as on 31.3.10 is Rs.205 lakhs. In spite of the above taking over, the Company continues to carry both the assets and liabilities in its books, pending settlement of disputes.

It is reported that the Company has no access or control over the assets referred to in paras (i), (ii) and (Hi) above and is not in a position to physically verify the same. To the above extent, we are not in a position to comment on the discrepancies and / or impairment losses, if any, in respect of such assets.

(c) The fixed assets disposed of by the Company during the year are not substantial so as to affect the going concern assumption.

(2) Inventory as on 31.3.2010 includes stock of construction materials and spares amounting to Rs. 311 lakhs under the custody of the clients in the similar circumstances as explained in clause (1) above, pending settlement of disputes with the clients. It is reported that the Company is not in a position to verify the stock physically and consequently any loss including deterioration in quality is not assessed and dealt with in the accounts. Subject to the above,

(a) As explained to us, the inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) According to the information and explanation given to us, in our opinion, the procedures for physical verification of inventories followed by the management were reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) According to the information and explanations given to us, in our opinion, the Company has maintained proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material, having regard to the size of the operation of the Company.

3. Company has not granted loans to any parties listed in the register maintained under section 301 of the Companies Act, 1956 and hence reporting under clause nos. 3(a) to (d) are not applicable.

(e) The Company has taken loans from 39 persons covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 14.8 lakhs and the same balance is outstanding at the year-end.

(f) In our opinion the rate of interest and other terms and conditions on which loans have been taken from the parties listed in the register maintained under Section 301 of the Companies Act, 1956 are not prima facie, prejudicial to the interest of the company.

(g) The repayment schedules for the above loans taken are not fixed. Hence, we are not in a position to comment on the regularity of the repayment and the overdue position of these loans.

4. In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. Further on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weakness in the above said internal control system.

5. (a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 that needed to be entered into the register maintained under the said Section have been so entered.

(b) In our opinion and according to the information and explanations given to us, there were no transactions with parties listed in the register maintained under section 301 of the Companies Act, 1956, exceeding the value of rupees five lakhs in respect of any party during the year.

6. According to the information and explanations given to us, we are of the opinion that the Company has not complied with the provisions of section 58A and other relevant provisions of the companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to deposits accepted from public. The following are the contraventions noticed.

(a) Company has defaulted in repayment of deposits matured amounting Rs. 88.20 lakhs as at 31.03.10.

(b) Company has not maintained the prescribed liquid deposits as at 31.03.2010.

(c) Considering the negative net worth as at 31.03.2009, the balance of deposits outstanding as on 31.03.2010 exceeds the limit prescribed.

(d) Company has not filed the return of deposits during the year.

(e) Company has not filed intimation regarding the default made by it in repayment of deposits to small depositors to the Company Law Board as required under Section 58AA.

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

8. To the best of our knowledge and information given to us, Central Government has nq,t prescribed maintenance of cost records under section 209-(1) (d) of the Companies Act, 1956 for the company.

9. (a) According to the information and explanations given to us and according to the books and records as produced and examined by us, Company is generally regular in depositing undisputed statutory dues like, income tax, sales tax, service tax, wealth tax and other material statutory dues applicable to it.

(b). According to the information and explanations given to us, there are no dues of Customs duty, Wealth tax, Excise duty, Cess, Sales tax, and Fringe Benefit Tax which have not been deposited on account of any dispute.

10. The Company has accumulated losses as at 31st March 2010 of more than fifty percent of the net worth. The Company has incurred cash losses amounting Rs.1673 lakhs during the financial year covered by our audit and also Rs.1151 lakhs during the immediately preceding financial year.

11. According to the information and explanations given to us, all the credit facilities availed by the Company from the consortium of banks are over due through out the financial year. The balance outstanding as on 31.03.2010 is Rs.9035 lakhs.

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

13. In our opinion, the company is not a chit fund or a nidhi mutual fund/society. Therefore, the provisions of clause 4 (xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

14. in out opinion and according to the ir formation and explanations given to us. the Company is not a dealer or trader in shares, securities or other investments.

15. In our opinion and according to the information and explanations given to us, the Company has not given any guarantees for loans taken by others from banks and other financial institutions.

16. In our opinion and according to the information and explanations given to us, the Company has not raised any term loans during the year.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, in our opinion, no funds raised on short term basis have been used for long term investments.

18. According to the information and explanations given to us, during the year the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

19. According to the information and explanations given to us, the Company has not issued any debentures during the year.

20. The Company has not raised any money through public issue during the year.

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

For P.C. VARGHESE & CO. Chartered Accountants

(FRN. 004526S)

Sd/-

KOCHI - 18 P.C. VARGHESE, B.Com, F.C.A.

11.08.2010 Partner

(Membership No. 10408)