TO THE MEMBERS
1. We have audited the attached Balance Sheet of HARBOR NETWORK SYSTEMS LIMITED
as at 31" March, 2004 and also the Profit and Loss Account and the Cash Flaw
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.
2. We have 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 (a) examining, on a test basis, evidence to support the financial statement
amounts and disclosures in the financial statements (b) assessing the accounting
principles used in the preparation of financial statements (c) assessing significant
estimates made by management in the preparation of the financial statements and (d)
evaluating 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 Central
Government 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.
4 Further to our comments in the Annexure referred to in paragraph (3) above and
subject to notes as below and read with other notes thereon we report that:
a) Note No. 11 regarding non-provision in diminution in the value of investment
amounting to Rs. 97,00,000/- in erstwhile subsidiary company Goldhammer Securities
b) Note No. 12 & 13 regarding non-provision of the interest on loan amount of Rs.
24,96,960/- from Punjab & Sind Bank and Rs.48, 89,115/-from Priya Ltd. as these
parties have filed cases in the court for recovery. No provision for interest has been
made due to disputed nature of transactions.
c) Note No. 14 regarding non-provision in diminution, if any, in the value of shares
held as stock in trade as the market value of these shares is not ascertainable.
5. 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
6. 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 the books of the Company.
7. The Balance Sheet and Profit and Loss Account referred to in this report are in
agreement with the books of account of the Company.
8. In our opinion, the accounts comply with the Accounting Standards referred to in
Section 211(3C) of the Companies Act, 1956;
9. On the basis of written representations received from the directors, as on 31st
March, 2004, and taken on record by the Board of Directors, in our opinion, none of the
directors is disqualified from being appointed as director u/s Section 274(l)(g) of the
Companies Act, 1956;
10. Subject to the foregoing and other notes in Schedule J, in our opinion and to the
best of our information and according to the explanations given to us, the said Balance
Sheet and Profit and Loss Account real 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
i. In the case of Balance Sheet, of the state of affairs of the Company as at 31st
March 2004 and
ii. In the case of Profit and Loss Account of the loss of the Company for the year
ended on that date
iii. In the case of the cash flow statement, of the cash flows for the year ended on
||For MEHTA & PARMAR
|Mumbai: 30th June, 2004
||Memb. No. 36540
Annexure to Auditors' Report (Referred to in paragraph 1 of our report of even date on
the accounts of Harbor Network Systems Limited for the year ended 31st March 2004).
In terms of the information and explanations given to us and the books and records
examined by us in the normal course of audit and to the best of our knowledge and belief,
we stale as under:-
1 The Company has maintained proper records showing full particulars including
quantitative details and situation of Fixed Assets These fixed assets were physically
verified by the Management during the year. The frequency of the verification is
considered reasonable having regard to the size of the Company and nature of its assets.
We have been informed that no discrepancies were noticed on such physical verification.
Substantial part of fixed assets have not been disposed of during the year, which will
affect its status as going concern
2 The stocks of shares have been physically verified by the management during the year
and no discrepancies have been noticed on physical verification between the physical
stocks and book records We are informed that no material discrepancies between physical
stocks and book records were noticed on such verification
3. The procedures of physical verification of stocks followed by the management are
reasonable and adequate in relation to the size of the Company and nature of its business.
The Company is maintaining proper records of inventory There were no discrepancies between
physical stocks and book records
4 In our opinion valuation of stocks is fair and proper in accordance with normally
accepted accounting principles and is on the same basis as in earlier year Refer Note No.
15 in Schedule 'J'
5 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
6 In respect of loans and advances in the nature of loans given by the company, in the
absence of terms as to repayment of principal amounts and payment of interest on such
loans/deposits, we are not able to comment in respect thereof
7 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 with regard to purchase of inventory and fixed assets and for sale
of goods In our opinion, there is no continuing failure to correct major weaknesses in
8 There are no transactions exceeding the value of five lakh rupees in the financial
year in respect of any party
9 The company has not accepted any deposits from the public under the provisions of
section 58A of the Companies Act, 1956 and the rules framed there under and the directives
issued by Reserve Bank of India and the provisions of Non Banking Financial Companies
(Reserve Bank) directions 1977.
10. The company has no formal Internal Audit system
11. The Central Government has not prescribed the maintenance of cost records by the
Company under section 209(l)(d) of the Companies Act, 1956 for any of its products.
12 According to the information and explanations given to us, the provisions of the
Employees Provident Fund and Miscellaneous Provisions Act, 1952 and Employees State
Insurance Scheme, 1948 are not applicable to the Company
13. According to the information and explanations given to us, no undisputed amounts
payable in respect of wealth tax, custom duty and excise duty were outstanding as at 31st
March, 2004 for a period of more than six months from the date they became payable.
Disputed dues to Sales Tax amounting to Rs 2,16,065/-, Professional Tax of Rs 13,395/-,
service tax Rs. 62,677/-, and Rs 15,633.50 for Tax Deducted at Source
14 The company has registered cash losses for the last 6 years, however the accumulated
losses are less than 50% of its net worth.
15 There was a claim by Punjab & Sind Bank against the company towards invocation
of Bank Guarantee However the Company had contested the claim successfully with the
appropriate authorities Punjab & Sind Bank has filed an appeal against the said order
with the Appellate authorities (Ref Note No 72 of Schedule 'J'
16 The company is not dealing or trading in shares, debentures, securities or other
17 The company is not a chit fund, nidhi or mutual benefit fund/society
18 The company has not given any guarantee for loans taken by others from bank or
19 The Company has not availed any term loan during the current financial year
20. According to the information and explanations i given to us and on an overall
examination of the Balance Sheet and the Cash Flow statement of the company, the company
has not raised any funds i during the year
21 In our opinion and according to the information and explanations given to us, the
company has not made any preferential allotment of shares during the year to parties and
companies covered in the register maintained u/s 301 of the Companies Act 1956
22 The Company has not issued any debentures during the year, and accordingly the
question of creating security in respect thereof does not arise
23 The Company has not made any public issue during the year and accordingly the
question of disclosing the enduse of money raised by public issue does not arise
24 According to the information and explanation given to us, no fraud on or by the
company has been noticed or reported during the course of our audit
||For MEHTA &PARMAR
|Mumbar 30th June, 2004
||Memb No 36540