Hindustan Photo Films Manufacturing Company Ltd.की ऑडीटर रिपोर्ट

Mar 31, 2011

1. We have audited the attached Balance Sheet of HINDUSTAN PHOTO FILMS MANUFACTURING COMPANY LIMITED as at 31st March 2011, the Profit and Loss Account and the Cash Flow Statement of the Company 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.

2. 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 misstatements. 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 issued by the Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure 'A' a statement on the matters specified in Paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure 'A' referred to in paragraph 3 above:

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, 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 attached Balance Sheet and the Profit and Loss Account dealt with by this report are in agreement with the books of account.

d) In our opinion, the Balance Sheet and the Profit and Loss Account comply with the requirements of the Accounting Standards referred to in sub-section 3(C) of Sec. 211 of the Companies Act, 1956 except non compliance of Accounting Standard (AS) 28 "Impairment of Assets", the impact of which is not ascertainable.

e) As the Company is a Government Company, the reporting requirement under section 227{3)(f) of the Companies Act, 1956 is not applicable in view of Circular No. GSR 829(E) dated 21st October 2003 issued by the Central Government.

f) In the absence of any mechanism to determine the liability for making provision, and pending notification by the Government u/s 441 A, the Company has not made provision for cess payable. Hence, we are not in a position to make any observation under Section 227 (3) (g) of the Companies Act, 1956.

g) During the year the company has not made provisions for debtors and for obsolete/non-moving stock for Rs. 25.61 lakhs and Rs. 17.74 lakhs respectively.

h) Attention is invited to the following:

(i) Schedule No. 4 of the Balance Sheet of the Company and the foot note to the Schedule, the secured "A" Series Bonds and secured loans amount to Rs. 6508.30 Crore (including interest). Of this total amount, only Rs. 539.99 Crore has been secured by fixed and current assets. The classification of the balance oft. 5968.31 Crore as "Secured" in our opinion is not correct.

(ii) The Company, as stated in Note No. 7 of Schedule 23, has not obtained confirmation of Balances in respect of unsecured loans from Govt, of India, Inter Corporate Deposits, Sundry Debtors, Loans & Advance, Sundry Creditors and Current Liabilities. Hence the consequential effect, if any, on the financial statements, on account of not obtaining the Confirmation of Balances is not ascertainable.

(in) Note No.13 of Schedule 23 regarding non payment of insurance premium to cover the Company's assets against risks.

(iv) Note No.15 of Schedule 23 regarding the loss that may arise on disposal of certain Plant & Machinery included in Fixed Assets which are no longer required and steels, valves and pipe fittings relating to Polyester Plant identified as surplus.

(v) Note No. 24 of Schedule 23 regarding non availability of information of out standings, interest paid/payable/accrued/unpaid for disclosures under the Micro, Small and Medium Enterprises Development Act, 2006.

(vi) Note No.25 of Schedule 23 regarding the amount that may be payable consequent upon the suit filed by HPF Officers Association for wage revision that is pending in Supreme Court.

(vii) Confirmation of Balance for Loans obtained from Banks is not available in respect of 11 Accounts and in respect of one case confirmation is available for interest only.

i) Attention is also invited to item No.1 of Statement of Accounting Policies wherein it is stated that the companies financial statements have been prepared on "GOING CONCERN BASIS" .We are unable to express our opinion in view of the following: (i) The company has incurred a net loss of T 1156.65 crore and a cash loss of Rs. 1124.99 crore in the current year.

(ii) The accumulated losses as on 31.03.2011 stand at Rs. 8213.04 crore as against the net owned shareholders funds of X 228.98 crore

(iii) The net worth has been fully eroded and the company has been consistently making significant losses for the past several years.

(iv) The company has been referred to BIFR in terms of Sick Industrial Companies (Special Provisions Act 1985) and the BIFR has confirmed its opinion for winding up the company under section 20(1) of the SICA vide order dated 30.01.2003. The company's appeal to the AAIFR against the order of BIFR has also been rejected. The Company in turn has obtained a stay in the Madras high Court against the order of AAIFR and the matter is pending in the High Court.

(v) The company's Current Liabilities has exceeded its Current Assets by 21.99 crore.

(vi) Though the company has negotiated its borrowings with its bankers and financial institutions and arrived at a 'One Time Settlement' package which involves waiver of accrued interest and payment of principal @ 40% and below based on Secured and Unsecured Creditors as part of the Revival Proposal submitted to the Government, the proposal is yet to be approved by the Govt.

(vii) The company's key financial ratios are quite adverse and there are substantial negative cash flows from operations.

(viii) The viability of the company appears to be doubtful as the company is not in a position to recover even the variable cost in respect of products manufactured by it.

j) The cumulative effect of our observation in Para 4 d, h (i), h(ii),h (iv),h (vi) and h (vii) on the loss for the year and the accumulated losses and net worth of the company is not ascertainable.

d) In our opinion and to the best of our information and according to the explanations given to us, in view of our observations in Para (g) and (h) above we are unable to express our opinion as to whether the said accounts give the information required by the Companies Act, 1956 in the manner so required and also give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) In the case of Balance Sheet, the state of affairs of the company as at 31st March 2011

(b) In the case of Profit & Loss Account, of the LOSS of the company 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.

Referred to in paragraph 3 of the Auditors' Report of even date to the members of HINDUSTAN PHOTO FILMS MANUFACTURING COMPANY limited on the financial statements for the year ended 31a March 2011

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

(b) As explained to us, the management, during the year, has physically verified the fixed assets partially. We understand that there is a phased program designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification, to the extent verified during the year, as claimed by the Company.

(c) In our opinion and according to the information and explanations given to us, no substantial part of the fixed assets has been disposed off by the Company during the year.

2. (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable.

(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) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records, which has been properly dealt with in the books of account, were not material.

3. The Company has neither granted nor taken any loans, secured or unsecured, to/from Companies, Firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. As the Company has not taken any loans from parties covered in the register maintained under section 301 of the Companies Act, 1956, Clauses (iii)(f) & (iii}(g) of the order are not applicable.

4. In our opinion and according to the information and explanations given to us, there are internal control procedures commensurate with the size of the company and the nature of its business for the purchase of inventory, fixed assets and for 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 weaknesses in the aforesaid internal control procedures.

5. In our opinion and according to the information and explanations given to us, there are no transactions made, in pursuance of contracts or arrangements referred to in section 301 of the Companies Act 1956 and hence entering of particulars of such contracts or arrangements in the register required to be maintained under that section does not arise. In the absence of transactions as aforementioned, information regarding whether they have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time is not given.

6. The company has not accepted any deposit from public.

7. During the year the Internal Audit has been carried out by a firm of Chartered Accountants. We are of the opinion that the internal audit coverage needs to be enlarged so as to cover the prime areas.

8. The Central Government has not prescribed the maintenance of Cost Records under clause (d) of Sub section (1) of Section 209 of the Companies Act, 1956 for the goods manufactured by the Company.

9. (a) As per the records of the Company examined by us, the undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Customs Duty, Income Tax (T.D.S), Sales Tax, Cess and other material statutory dues, have not been regularly deposited with the appropriate authorities and there have been delays in a number of cases which have been referred to in Annexure '1' along with amounts which were in arrears for a period of more than 6 months from the date they became payable. Statutory Dues such as Employees' State Insurance, Excise Duty, Property Tax and Service Tax as applicable, have generally been regularly deposited during the year.

(b) According to the information and explanations given to us and the records of the company examined by us, there are no dues of Sales Tax, Customs Duty and Excise Duty as at 31st March 2011, which have not been deposited on account of dispute.

10. The Company has accumulated losses as at 31st March 2011, which is more than the net worth of the Company. It has incurred a cash loss of Rs.1124.99 Crore in the financial year ended on that date and has incurred cash loss in the immediately preceding three financial year as well.

11. According to the records of the Company examined by us, the Company has defaulted in repayment of dues to financial institutions, banks and debenture holders as at the Balance Sheet date. The period and amount of default is reported in Annexure '2'.

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

13. The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the company.

14. In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

15. 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 banks or financial institutions during the year.

16. In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans obtained have been applied for the purposes for which they were obtained and during the year no new term loan has been taken.

17. On the basis of overall examination of the balance sheet of the company and according to the information and explanations given to us, in our opinion there are no funds raised on a short-term basis, which have been used for long-term investment and vise versa.

18. 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 during the year.

19. The company has created the securities for the bonds that were issued in earlier years. No debentures were issued during the financial year covered by our audit.

20. The company has not raised any money by public issues during the year.

21. During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.



FOR PADMANABHAN PRAKASH & CO

CHARTERED ACCOUNTANTS

FRN : 02509S

E. PRAKASH

Partner

M. No.019388

Date: 25.11.2011

Place: Chennai

---

Mar 31, 2010

1. We have audited the attached Balance Sheet of HINDUSTAN PHOTO FILMS MANUFACTURING COMPANY LIMITED as at 31st March 2010, the Drofit and Loss Account and the Cash Flow Statement of the Company 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.

2. 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 materia! misstatements. 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 issued by the Government of India in terms of sub- section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure A a statement on the matters specified in Paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure A referred to in paragraph 3 above:

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, 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 attached Balance Sheet and the Profit and Loss Account dealt with by this report are in agreement with the books of account.

d) In our opinion, the Balance Sheet and the Profit and Loss Account comply with the requirements of the Accounting Standards referred to in sub-section 3(C) of Sec. 211 of the Companies Act, 1956 excepting the non compliance of

(i) Accounting Standard (AS) 28 - "Impairment of Assets", the impact of which is not ascertainable.

e) As the Company is a Government Company, the reporting requirement under section 227(3)(f) of the Companies Act, 1956 is not applicable in view of Circular No. GSR 829(E) dated 21st October 2003 issued by the Central Government.

f) In the absence of any mechanism to determine the liability for making provision, and pending notification by the Government u/s 441 A, the Company has not made provision for cess payable. Hence, we are not in a position to make any observation under Section 227(3)(g) of the Companies Act, 1956.

g) a. Consequent upon the change in Accounting Policy in respect of Bad and Doubtful Debts and obsolete items the loss of the Company for the current year should have been more by Rs. 84.28 lakhs.

b. During the year the Company has not made provisions for debtors and for obsolete/non-moving stock for Rs. 63.61 lakhs and Rs. 20.67 lakhs respectively.

h) Attention is invited to the following:

Schedule No. 4 of the Balance Sheet of the Company and the foot note to the Schedule, the secured "A " Series Bonds and secured loans amount to f 5561.29 Crore (including interest). Of this total amount, only Rs. 544.34 Crore has been secured by fixed and current assets. The classification of the balance of Rs. 5016.95 Crore as "Secured" in our opinion is not correct.

ii. The Company, as stated in Note No. 7 of Schedule 23, has not obtained confirmation of Balances in respect of unsecured loans from Govt, of India, Inter Corporate Deposits, Sundry Debtors, Loans & Advance, Sundry Creditors and Current Liabilities. Hence the consequential effect, if any, on the financial statements, on account of not obtaining the Confirmation of Balances is not ascertainable.

iii. Note No.13 of Schedule 23 regarding non payment of insurance premium to cover the Companys assets against risks. iv. Note No.15 of Schedule 23 regarding the loss that may arise on disposal of certain Plant & Machinery included in Fixed Assets which are no longer required and steels, valves and pipe fittings relating to Polyester Plant identified as surplus. v. Note No.22 of Schedule 23 regarding non availability of information of outstandings, interest paid/payable/accrued/unpaid for disclosures under the Micro, Small and Medium Enterprises Development Act, 2006. vi. Note No.23 of Schedule 23 regarding the amount that may be payable consequent upon the suit filed by HPF Officers Association for wage revision that is pending in Supreme Court. vii. Confirmation of Balance for Loans obtained from Banks is not available in respect of three cases, and in respect of one case confirmation is available for interest only. In respect of Balance with Banks in current account balance confirmation was not available from four banks. i) Attention is also invited to item No.l of Statement of Accounting Policies wherein it is stated that the companies financial statements have been prepared on "GOING CONCERN BASIS". We are unable to express our opinion in view of the following: (i) The Company has incurred a net loss of Rs. 1009.22 crore and a cash loss of Z 977.09 crore in the current year.

(ii) The accumulated losses as on 31.03.2010 stand at Z7056.39 crore as against the net owned shareholders funds of Z 227.98 crore

(iii) The net worth has been fully eroded and the Company has been consistently making significant losses for the past several years.

(iv) The Company has been referred to BIFR in terms of Sick Industrial Companies (Special Provisions Act 1985) and the BIFR has confirmed its opinion for winding up the Company under section 20(1) of the SICA vide order dated 30.01.2003. The Companys appeal to the AAIFR against the order of BIFR has also been rejected. The Company in turn has obtained a stay in the Madras high Court against the order of AAIFR and the matter is pending in the High Court. (v) The Companys Current Liabilities has exceeded its Current Assets by Rs. 22.44 crore. (vi) The Company has been unable to renegotiate its borrowings from its bankers and financial institutions as it failed to comply with the terms and conditions specified in the loan agreements including non repayment of loans borrowed and interest thereon. (vii) The Companys key financial ratios are quite adverse and there are substantial negative cash flows from operations.

(viii) The viability of the Company appears to be doubtful as the Company is not in a position to recover even the variable cost in respect of products manufactured by it.

j) The cumulative effect of our observation in para 4 d) (i), i (i), i (ii), i (iv), i (vi) and i (vii) on the loss for the year and the accumulated losses and net worth of the Company is not ascertainable.

k) In our opinion and to the best of our information and according to the explanations given to us, in view of our observations in para (g),(h) and (i) above we are unable to express our opinion as to whether the said accounts give the information required by the Companies Act,1956 in the manner so required and also give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) In the case of Balance Sheet, the state of affairs of the Company as at 31st March 2010

(b) In the case of Profit & Loss Account, of the LOSS of the Company 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 A

Referred to in paragraph 3 of the Auditors Report of even date to the members of HINDUSTAN PHOTO FILMS MANUFACTURING COMPANY Limited on the financial statements for the year ended 31st March 2010

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

(b) As explained to us, the management, during the year, has physically verified the fixed assets partially. We understand that there is a phased program designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification, to the extent verified during the year, as claimed by the Company.

(c) In our opinion and according to the information and explanations given to us, no substantial part of the fixed assets has been disposed off by the Company during the year.

2. (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable.

(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) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records, which has been properly dealt with in the books of account, were not material.

3. The Company has neither granted nor taken any loans, secured or unsecured, to/from Companies, Firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. As the Company has not taken any loans from parties covered in the register maintained under section 301 of the Companies Act, 1956, Clauses (iii)(f) & (iii)(g) of the order are not applicable.

4. In our opinion and according to the information and explanations given to us, there are internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for 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 weaknesses in the aforesaid internal control procedures.

5. In our opinion and according to the information and explanations given to us, there are no transactions made, in pursuance of contracts or arrangements referred to in section 301 of the Companies Act 1956 and hence entering of particulars of such contracts or arrangements in the register required to be maintained under that section does not arise. In the absence of transactions as aforementioned, information regarding whether they have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time is not given.

6. The Company has not accepted any deposit from public during the year.

7. The Company has an inhouse internal audit system, which needs to be adequately strengthened commensurate with size of the Company and nature of its business.

8. The Central Government has not prescribed the maintenance of Cost Records under clause (d) of Sub section (1) of Section 209 of the Companies Act, 1956 for the goods manufactured by the Company.

9. (a) As per the records of the Company examined by us, the undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Customs Duty, Income Tax (T.D.S), Sales Tax, Cess and other material statutory dues, have not been regularly deposited with the appropriate authorities and there have been serious delays in a number of cases which have been referred to in Annexure 1 along with amounts which where in arrears for a period of more than 6 months from the date they became payable. Statutory Dues such as Employees State Insurance, Excise Duty, Wealth Tax and Service Tax as applicable, have generally been regularly deposited during the year.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of Sales Tax, Customs Duty and Excise Duty as at 31st March 2010, which have not been deposited on account of dispute, are furnished in Annexure 2.

10. The Company has accumulated losses as at 31st March 2010, which is more than the networth of the Company. It has incurred a cash loss of Rs. 977.09 Crore in the financial year ended on that date and has incurred cash loss in the immediately preceding three financial years as well.

11. According to the records of the Company examined by us, the Company has defaulted in repayment of dues to financial institutions, banks and debenture holders as at the Balance Sheet date. The period and amount of default is reported in Annexure3.

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

13. The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company.

14. In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

15. 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 banks or financial institutions during the year.

16. In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans obtained in earlier years were said to have been applied for the purposes for which they were obtained and during the year no new term loan has been taken.

17. On the basis of overall examination of the balance sheet of the Company and according to the information and explanations given to us, in our opinion there are no funds raised on a short-term basis, which have been used for long-term investment.

18. 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 during the year.

19. The Company has created the securities for the bonds that were issued in earlier years. No debentures were issued during the financial year covered by our audit.

20. The Company has not raised any money by public issues during the year.

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.

FOR PADMANABHAN PRAKASH & CO CHARTERED ACCOUNTANTS FRN 02509S

E.PRAKASH Date: 25th September 2 Partner

Place: Chennai M. No.019388

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Mar 31, 2009

1. We have audited the attached Balance Sheet of HINDUSTAN PHOTO FILMS MANUFACTURING COMPANY LIMITED as at 31st March 2009, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto. These financial statements are the responsibility of the compa- nys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. 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 state- ments are free of material misstatements. 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 issued by the Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure A a statement on the matters specified in Paragraphs 4 and 5 of the said Order.

4. Further to or comments in the Annexure A referred to in paragraph 3 above:

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, 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 attached Balance Sheet and the Profit and Loss Account dealt with by this report are in agreement with the books of account.

d) In our opinion, the Balance Sheet and the Profit and Loss Account comply with the requirements of the Accounting Standards referred to in sub-section 3(C) of Sec. 211 of the Companies Act, 1956 excepting the non compliance of

(i) Accounting Standard (AS) 28 - "Impairment of Assets", the impact of which is not ascertainable.

e) As the Company is a Government Company, the reporting requirement under section 227(3)(f) of the Companies Act, 1956 is not applicable in view of Circular No. GSR 829(E) dated 21st October 2003 issued by the Central Government.

f) In the absence of any mechanism to determine the liability for making provision, and pending notification by the Government u/s 441 A, the Company has not made provision for cess payable. Hence, we are not in a position to make any observation under Section 227 (3) (g) of the Companies Act, 1956.

g) Attention is invited to the following:

Schedule No. 4 of the Balance Sheet of the Company and the foot note to the Schedule, the secured "A" Series Bonds and secured loans amount to Rs.4759.44 Crore (including interest). Of this total amount, only Rs.527.93 Crore has been secured by fixed and current assets. The classification of the balance ofRs.4231.51 Crore as "Secured" in our opinion is not correct.

The Company, as stated in Note No. 7 of Schedule 23, has not obtained confirmation of Balances in respect of unsecured loans from Govt, of India, Inter Corporate Deposits, Sundry Debtors, Loans & Advance, Sundry Creditors and Current Liabilities. Hence the consequential effect, if any, on the financial statements, on account of not obtaining the Confirmation of Balances is not ascertainable.

iii. Note No. 13 of Schedule 23 regarding non payment of insurance premium to cover the Companys assets against risks.

iv. Note No. 14 of Schedule 23 regarding the loss that may arise on disposal of certain Plant & Machinery included in Fixed Assets which are no longer required and steels, valves and pipe fittings relating to Polyester Plant identified as surplus.

v. Note No. 22 of Schedule 23 regarding non availability of information of outstandings, inter- est paid/payable/accrued/unpaid for disclosures under the Micro, Small and Medium Enter- prises Development Act, 2006.

vi. Note No.23 of Schedule 23 regarding the amount that may be payable consequent upon the suit filed by HPF Officers Association for wage revision that is pending in Supreme Court.

vii. Confirmation of Balance for Loans obtained from Banks is not available in respect of five cases, and in respect of four cases confirmation is available for interest only. In respect of Balance with Banks in current account balance confirmation was not available from seven banks.

h) Attention is also invited to item No. 1 of Statement of Accounting Policies wherein it is stated that the companies financial statements have been prepared on "GOING CONCERN BASIS"

We are unable to express our opinion in view of the following: (i) The company has incurred a net loss of Rs.890.26 crore and a cash loss of Rs. 857.84 crore in the current year.

(ii) The accumulated losses as on 31.03.2009 stand at Rs.6047.18 crore as against the net owned shareholders funds of Rs.226.98 crore

(iii) The net worth has been fully eroded and the company has been consistently making significant losses for the past several years.

(iv) The company has been referred to BIFR in terms of Sick Industrial Companies (Special Provisions Act 1985) and the BIFR has confirmed its opinion for winding up the company under section 20(1) of the SiCA vide order dated 30.01.2003. The companys appeal to the AAIFR against the order of BIFR has also been rejected. The Company in turn has obtained a stay in the Madras high Court against the order of AAIFR and the matter is pending in the High Court.

(v) The companys Current Liabilities has exceeded its Current Assets by Rs.31.56 crore.

(vi) The company has been unable to renegotiate its borrowings from its bankers and Financial institutions as it failed to comply with the terms and conditions specified in the loan agreements including non repayment of loans borrowed and interest thereon.

(vii) The companys key financial ratios are quite adverse and there are substantial negative cash flows from operations.

(viii) The viability of the company appears to be doubtful as the company is not in a position to recover even the variable cost in respect of products manufactured by it.

i) The cumulative effect of our observation in para 4 d) (i), h (i), h (ii),h (iv), h (vi) and h (vii) on the loss for the year and the accumulated losses and net worth of the company is not ascertainable.

j) In our opinion and to the best of our information and according to the explanations given to us, in view of our observations in para (g) and(h) above we are unable to express our opinion as to whether the said accounts give the information required by the Companies Act,1956 in the manner so required and also give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) In the case of Balance Sheet, the state of affairs of the company as at 31st March 2009

(b) In the case of Profit & Loss Account, of the loss of the company 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 A

Referred to in paragraph 3 of the Auditors Report of even date to the members of HINDUSTAN PHOTO FILMS MANUFACTURING COMPANY Limited on the financial statements for the year ended 31st March 2009

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

(b) As explained to us, the management, during the year, has physically verified the fixed assets partially. We understand that there is a phased program designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification, to the extent verified during the year, as claimed by the Company.

(c) In our opinion and according to the information and explanations given to us, no substantial part of the fixed assets has been disposed off by the Company during the year.

2. (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable.

(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) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records, which has been properly dealt with in the books of account, were not material.

3. The Company has neither granted nor taken any loans, secured or unsecured, to/from Companies, Firms or

other parties covered in the register maintained under Section 301 of the Companies Act, 1956. As the Company has not taken any loans from parties covered in the register maintained under section 301 of the Companies Act, 1956, Clauses (iii)(f) & (iii)(g) of the order are not applicable.

4. In our opinion and according to the information and explanations given to us, there are internal control procedures commensurate with the size of the company and the nature of its business for the purchase of inventory, fixed assets and for 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 weaknesses in the aforesaid internal control procedures.

5. In our opinion and according to the information and explanations given to us, there are no transactions made, in pursuance of contracts or arrangements referred to in section 301 of the Companies Act 1956 and hence entering of particulars of such contracts or arrangements in the register required to be maintained under that section does not arise. In the absence of transactions as aforementioned, information regarding whether they have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time is not given.

6. The company has not accepted any deposit from public during the year

7. The company has an inhouse internal audit system, which needs to be adequately strengthened commensurate with size of the company and nature of its business.

8. The Central Government has not prescribed the maintenance of Cost Records under clause (d) of Sub section (1) of Section 209 of the Companies Act, 1956 for the goods manufactured by the Company.

9. (a) As per the records of the Company examined by us, the undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Customs Duty, Income Tax (T.D.S), Sales Tax, Cess and other material statutory dues, have not been regularly deposited with the appropriate authorities and there have been serious delays in a number of cases which have been referred to in Annexure 1 along with amounts which where in arrears for a period of more than 6 months form the date they became payable. Statutory Dues such as Employees State Insurance, Excise Duty, Wealth Tax and Service Tax as applicable, have generally been regularly deposited during the year.

(b) According to the information and explanations given to us and the records of the company examined by us, the particulars of dues of Sales Tax, Customs Duty and Excise Duty as at 31st March 2009, which have not been deposited on account of dispute, are furnished in Annexure 2.

10. The Company has accumulated losses as at 31st March 2009, which is more than the networth of the Company. It has incurred a cash loss of Rs. 857.84 Crore in the financial year ended on that date and has incurred cash loss in the immediately preceding three financial year as well.

11. According to the records of the Company examined by us, the Company has defaulted in repayment of dues to financial institutions, banks and debenture holders as at the Balance Sheet date. The period and amount of default is reported in Annexure3.

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

13. The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not appli- cable to the company.

14. In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

15. 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 banks or financial institutions during the year.

16. In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans obtained in earlier years were said to have been applied for the purposes for which they were obtained and during the year no new term loan has been taken.

17. On the basis of overall examination of the balance sheet of the company and according to the information and explanations given to us, in our opinion there are no funds raised on a short-term basis, which have been used for long-term investment.

18. 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 during the year.

19. The company has created the securities for the bonds that were issued in earlier years. No debentures were issued during the financial year covered by our audit.

20. The company has not raised any money by public issues during the year.

21. During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.

ANNEXURE-1

Referred to in clause 9(a) of Annexure A a statement on the matters specified in the Companies (Auditors Report) Order, 2003 of Hindustan Photo Films Manufacturing Company Limited for the year ended 31st March, 2009.

Name of the Statute Nature of the Amount Period to which Dues (RS. In lakh) the amount relates

Employees Provident PF 150.70 Oct. 2008 to Fund,1952 Contribution March 2009

Payment of Gratuity Gratuity Contribution 37.02 2008-09 Act, 1972

Income Tax Act, 1961 Tax deducted at 3616.04 Upto 2008-09 source (including int)

Income Tax Act, 1961 R&D Cess 4.94 1992-93

Companies Act, 1956 Unpaid principal and 35.96 1994-95 interest on HPF A series Bonds shown under Investor Education and Protection Fund











Companies Act, 1956

Name of the Statue Due date for Date of payment Payment/ remittance

Employees Provident Fund,1952 2008-09 Rs. 148.00 Lakh Paid in April 2009

Payment of Gratuity Act, 1972 2007-08 Rs. 18.00 Lakh remitted in April 2009

Income Tax Act, 1961 Various dates

Income Tax Act, 1961 1992-93 None of the Dues Companies Act, 1956 30.01.2002 has been Remitted

ANNEXURE-2

Referred to in clause 9(b) of Annexure A a statement on the matters specified in the Companies (Auditors Report) Order, 2003 of Hindustan Photo Films Manufacturing Company Limited for the year ended 31st March, 2009.

Name of the Period to which the amount Forum where dispute is Pending Amount statute relates (Rs. in lakh)

Sales Tax Act 1984-85 to 1992-93 Deputy Commercial Tax Officer, OOTACAMUND 78.32



FOR PADMANABHAN PRAKASH & CO CHARTERED ACCOUNTANTS

E.PRAKASH

Place: Chennai Partner

Date .20.09.2009 Membership # 019388