TO THE MEMBERS OF HINDUSTAN MOTORS LIMITED
1. We have audited the attached Balance Sheet of Hindustan Motors Limited ('theCompany') as at March 31, 2011 and also the Profit and Loss Account and the Cash FlowStatement for the year ended on that date annexed thereto. These financial statements arethe responsibility of the Company's management. Our responsibility is to express anopinion on these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted inIndia. Those Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.
3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued bythe Central Government of India in terms of sub-section (4A) of Section 227 of theCompanies Act, 1956 (the Order), we enclose in the Annexure a statement on the mattersspecified in paragraphs 4 and 5 of the said Order.
4. Without qualifying our opinion, attention is drawn to Note 3 (f) in Schedule 22regarding the demand for right of recompense by the Lenders under Corporate DebtRestructuring scheme. As stated in the said Note, in view of the Company's request forreduction in the amount of recompense of interest which the Lenders have agreed toconsider, no provision against the balance amount of recompense payable (net of Rs 1500lacs already paid to the Lenders), if any, is considered necessary by the management.
5. Further to our comments in the Annexure referred to above and read together with ourcomments in paragraph 4 above, we report that:
i. We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the purposes of our audit.
ii. In our opinion, proper books of account as required by law have been kept by theCompany so far as appears from our examination of such books. The Balance Sheet, Profitand Loss Account and Cash Flow Statement referred to in this report are in agreement withthe books of account as submitted to us.
iii. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt with by this report comply with the accounting standards referred to in sub-section(3C) of Section 211 of the Companies Act, 1956.
iv. On the basis of the written representations received from the directors, as onMarch 31, 2011, and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on March 31, 2011 from being appointed as a director in termsof clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.
v. In our opinion and to the best of our information and according to the explanationsgiven to us, the said statements of account, read together with the Notes appearing onSchedule 22, give the information required by the Companies Act, 1956, in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India;
a) in the case of the Balance Sheet, of the state of affairs of the Company as at March31, 2011;
b) in the case of the Profit and Loss Account, of the profit for the year ended on thatdate; and
c) in the case of Cash Flow Statement, of the cash flows for the year ended on thatdate.
| ||For S.R. BATLIBOI & CO. |
| ||Regn. No.: 301003E |
| ||Chartered Accountants |
| ||Per Raj Agrawal |
|Place : New Delhi ||Partner |
|Date :May16,2011 ||Membership No.: 82028 |
ANNEXURE TO THE AUDITORS' REPORT
(Referred to in our Report of even date to the members of Hindustan Motors Limited asat and for the year ended March 31, 2011)
(i) (a) The Company has maintained proper records showing full particulars, includingquantitative details and situation of fixed assets.
(b) All fixed assets have not been physically verified by the management during theyear but there is a regular programme of such verification in a phased manner to cover allthe items over a period of three years which, in our opinion, is reasonable having regardto the size of the Company and the nature of its assets. In respect of fixed assets lyingwith third parties, the management has a process of obtaining periodic confirmations. Asinformed, no material discrepancies were noticed on such verification during the year.
(c) There was no substantial disposal of fixed assets during the year.
(ii) (a) The management has conducted physical verification of inventory at reasonableintervals during the year.
(b) The procedures of physical verification of inventory followed by the management arereasonable and adequate in relation to the size of the Company and the nature of itsbusiness. In respect of the material lying with third parties, the management has aprocess of periodic confirmation and reconciliation with the third parties.
(c) The Company is maintaining proper records of inventory and no materialdiscrepancies were noticed on physical verification.
(iii) (a) As informed, the Company has not granted any loans, secured or unsecured tocompanies, firms or other parties covered in the register maintained under Section 301 ofthe Companies Act, 1956. Therefore, the provisions of clauses 4 (iii)(a) to (d) of theCompanies (Auditor's Report) Order, 2003 (as amended) are not applicable.
(e) The Company has taken loans from three companies covered in the register maintainedunder Section 301 of the Companies Act, 1956. The maximum amount involved during the yearwas Rs 1500 lacs and the year-end balance of loans taken from such parties was Rs 1500lacs.
(f) In our opinion and according to the information and explanations given to us, therate of interest and other terms and conditions for such loans are not prima facieprejudicial to the interest of the Company.
(g) The loans taken are re-payable on demand. As informed, the lenders have notdemanded repayment of any such loans during the year and thus, there has been no defaulton the part of the Company. The payment of interest has been regular.
(iv) In our opinion and according to the information and explanations given to us, andhaving regard to the explanation that substantial portion of the items purchased are of aspecial nature and alternate sources do not exist for obtaining quotations thereof, thereis an adequate internal control system commensurate with the size of the Company and thenature of its business, for the purchase of inventory and fixed assets and for the sale ofgoods and services. During the course of our audit, we have not observed any majorweakness or continuing failure to correct any major weakness in the internal controlsystem of the Company in respect of these areas.
(v) (a) According to the information and explanations provided by the management, weare of the opinion that the particulars of contracts or arrangements referred to inSection 301 of the Act that need to be entered into the register maintained under Section301 have been so entered.
(b) In respect of transactions made in pursuance of such contracts or arrangements andexceeding the value of Rupees five lacs entered into during the financial year, because ofthe unique and specialized nature of the items involved, no comparison of prices paid canbe made with prevailing market prices at the relevant time.
(vi) The Company has not accepted any deposits from the public.
(vii) In our opinion, the Company has an internal audit system commensurate with thesize and nature of its business.
(viii) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records underSection 209(1)(d) of the Companies Act, 1956, and are of the opinion that prima facie, theprescribed accounts and records have been made and maintained.
(ix) (a) Undisputed statutory dues including provident fund, investor education andprotection fund, employees' state insurance, service tax, cess, income-tax, wealth-tax,customs duty and other material statutory dues have generally been regularly depositedwith the appropriate authorities except for sales tax and excise duty where there havebeen delays.
Further, since the Central Government has till date not prescribed the amount of cesspayable under Section 441 A of the Companies Act, 1956, we are not in a position tocomment upon the regularity or otherwise of the Company in depositing the same.
(b) According to the information and explanations given to us, no undisputed amountspayable in respect of provident fund, investor education and protection fund, employees'state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, exciseduty, cess and other undisputed statutory dues were outstanding, at the year end, for aperiod of more than six months from the date they became payable, exceptfor sales taxoft 277.95 lacs (since paid).
(c) According to the records of the Company, the dues outstanding of income-tax, salestax, wealth-tax, service tax, customs duty, excise duty and cess on account of anydispute, are as follows:
|Name of the Statute ||Nature of dues ||Amount (t in lacs) ||Period to which amount relates ||Forum where dispute is pending |
|The Central Excise Act, 1944 ||Dispute on Account of Classification, Cenvat Credit, Assessable Value, Differential Excise Duty, Input Service Tax Credit ||2841.51 ||1984-2006 ||CESTAT, High Court / Commissioner (Appeals)/ Commissioner/Assistant / Commissioner of Central Excise/ CESTAT, Joint Commissioner |
|The Central Sales Tax Act, 1956 ||Stock Transfer, Non-submission of C/D Forms etc. ||438.39 ||1995-2008 ||Additional Commissioner of Commercial Taxes /High Court / W.B. Commercial Tax Appellate & Revision Board / Deputy Commissioner |
|Tamil Nadu Sales Tax, 1959 ||Additional Sales tax etc. ||308.22 ||1989-1999 ||Deputy Commissioner (Appeals) Tribunal |
|West Bengal Sales Tax Act, 1994 ||Non Receipt of Sales tax form Interest, Penalty, Post Return Adjustment etc. ||0.37 ||2003-2004 ||W.B. Commercial Tax Appellate & Revision Board |
|West Bengal Value Added Tax Act, 2003 ||Disallowance of VAT Credit ||57.24 ||2007-2008 ||Additional Commissioner |
|The Customs Act, 1956 ||Dispute on account of Classification, Duty on inclusion of technical Know-how fees on imported goods, import of Engines Short Levy, etc. ||17.75 ||1990-2006 ||Commissioner/ Assistant Commissioner Appeals / Tribunal |
|M.P. Commercial Tax Act, 1994 ||Exemption Notification denied by Commissioner Appeal ||8.58 ||2002-2003 ||Commissioner Appeal of Commercial Tax |
(x) The Company's accumulated losses at the end of the financial year are more thanfifty percent of its net worth and the Company has not incurred cash loss during theyear. In the immediately preceding financial year, the Company had incurred cash loss.
(xi) Based on our audit procedures and as per the information and explanations given bythe management, the
Company has overdrawn cash credit borrowings and delayed in repayment ofa short termloanfrom bank during the year, the details whereofare asfollows:
|Period ofDefault || |
Amount (Rs in lacs)
|Less than 30 days || |
|30 to 90 days || |
The Company has not defaulted in repayment of dues to a financial institution and hasno outstanding dues in respect of debentures.
(xii) According to the information and explanations given to us and based on thedocuments and records produced to us, the Company has not granted loans and advances onthe basis of security by way of pledge of shares, debentures and other securities.
(xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund/ society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable.
(xiv) In our opinion, the Company is not dealing in or trading in shares, securities,debentures and other investments. Accordingly, the provisions of clause 4(xiv) of theOrder are not applicable.
(xv) According to the information and explanations given to us, the Company has notgiven any guarantee for loans taken by others from banks or financial institutions.
(xvi) Based on information and explanations given to us by the management, term loanswere applied for the purpose for which the loans were obtained.
(xvii) According to the information and explanations given to us and on overallexamination of the balance sheet of the Company, we report that the Company has used shorttermfunds amounting to Rs 11600 lacs approximately as at the close of the year (previousyear Rs 8400 lacs)for financing the operating losses of the Company.
(xviii) The Company has not made any preferential allotment of shares to parties orcompanies covered in the register maintained under Section 301 of the Companies Act, 1956.
(xix) The Company did not have any outstanding debentures during the year.
(xx) The Company has not raised any money through a public issue during the year.
(xxi) Based upon the audit procedures performed for the purpose of reporting the trueand fair view of the financial statements and as per the information and explanationsgiven by the management, we report that no fraud on or by the Company has been noticed orreported during the course of our audit.
| ||For S.R. BATLIBOI & CO. |
| ||Regn. No.: 301003E |
| ||Chartered Accountants |
| ||Per Raj Agrawal |
|Place : New Delhi ||Partner |
|Date : May 16, 2011 ||Membership No.: 82028 |