haryana petrochemicals ltd Auditors report

HARYANA PETROCHEMICALS LIMITED ANNUAL REPORT 2002-2003 AUDITORS REPORT To The Members Haryana Petrochemicals Limited, We have audited the attached Balance Sheet of HARYANA PETROCHEMICALS LIMITED as at 31st March 2003 and also the Profit & Loss Account 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 audit. 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. Further to our comments as above we report: (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 appears from our examination of the books of the Company. (3) The Balance Sheaf and Profit & Loss Account dealt with by the report are in the agreement with the Books of Accounts. (4) In our opinion, the Balance Sheet and the Profit & Loss Account comply with requirements of Accounting standards referred to in Section 211(3C) of the Companies Act, 1956. (5) On the basis of written representation received from Directors of the company as at March 31, 2003 and taken on record by the Board of Directors, we report that no Director is disqualified from being appointed as Director of the Company in terms of Clause (g) of Sub-Section (1) of Section 274 of the Companies Act, 1956; However the debentures were not redeemed due to the financial hardship faced by the company for the past many years. 6) In our opinion and to the best of our information and according to the explanation given to us. The said accounts give the information required by the Companies Act, 1956 in the manner so required subject to: (a) Majority of Balance of Sundry Debtors, Sundry Creditors, Loans, and Advances recoverable/ payable are appearing since opening and are subject to confirmation/reconciliation, which are to be obtained from the parties and any adjustment entries as may arise out of confirmation! reconciliation of balances outstanding as debit credits in accounts of various parries may be adjusted as and when it is reconciled, the impact of which is not determinable. (b) Interest on all secured and unsecured loans have not been provided during the current year. In case the same is provided the loss should have been higher by Rs 36.40 Crores. The loss figure would be Rs 42.81 Crores instead of Rs 6.41 Crores. (c) Note No. 4 of Notes on Accounts of Schedule M regarding interest on default payment of lease rent. (d) Note No. 7 of Notes on Accounts of Schedule M regarding non-provision of bad debts during the current year. (e) Note No. 8 of Notes on Accounts of Schedule M regarding Sundry Debtors that include an amount of Rs. 160.41 lakhs from Shivani Synthetics Ltd. (f) Note No. 9 of Notes on accounts of Schedule M regarding non-receipt of confirmation from Institutional lenders and companys bankers i.e. LIC, SBI, IFCI, CBI, SBT, IDBI, UTI, ICICI, etc. (g) Note No. 10 of Notes on Accounts of Schedule M regarding recovery of advances amounting to Rs. 155.81 lakhs is doubtful in our opinion Necessary provisions have not been made. (h) Note No. 11 of Notes on Accounts of Schedule M regarding Investment Allowance of Rs 426.25 lakhs which was to be utilized as per section 32A (4)(II)(a) & (b) for acquisition of new machinery. (h) Note no 12 of Notes on Accounts regarding non apportionment of debenture redemption reserve account amounting to Rs 13.00 Crores due to loss during the year, the same needs to be created as and when there is sufficient profit in future years, and Note No. 14 of Notes on Accounts of Schedule M regarding the debentures of 14% and 19% non convertible redeemable debentures amounting to Rs.13.00 Crores which has not been reoeemed on its due date i.e. 15th December 1997 onwards due to the financial hardship faced by the company for the past many years. (i) Note No. 13 of Notes on Accounts of Schedule M regarding the investment of Rs. 20 lakes in Globe Synthetics may not have same value of realization in the ordinary course of business. (j) Raw Materials & Finished Goods have been revalued taking into account the current value and state of the inventories valued as on 31-03-2003. The value as per the management has been taken on market price as determined on the basis of sales price being the tower of sale or cost prices. I) In the case of Balance Sheet of state of affairs of the Company as at 31st March 2003. II) In the Profit & Loss Account of the loss for the year ended on that date. As required by the Manufacturing and other Companies (Auditors Report) Order, 1988 issued by the Company Law Board in terms of section 227 (4A) of the Companies Act. 1956 we report herewith a statement on the matter specified in paragraph 4 and 5 of the said order. 1. The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. The fixed assets have not been-physically verified during the year. 2. None of the fixed assets have been revalued during the year. 3. Physical verification has not been conducted at reasonable intervals during the year in respect of stores and spare parts, stock in-transit and material lying with third parties. Company has negligible stocks of finished goods and raw materials which are verified. 4. The stores & spares stocks have not been physically verified during the year. Company has negligible stocks of finished goods and raw materials which are verified. 5. Physical verification of stores & spares, during the year under audit was not done. There are neglgible stocks of finished goods and raw materials which are verified. As on date there are no adequate procedures for verification of inventories. 6. In our opinion, the valuation of stocks is fair & proper in accordance with the accepted accounting principles. The stocks have been valued at lower not cost or market price in line with the previous year policies. Since the raw materials, finished goods and stores 3 spares are old and obsolete, the management has to decide about the final disposal or use of these inventories. 7. The company has nor taken loans, secured or unsecured from companies, firms or other parties covered under section 301 of the Companies Act, 1956. 8. The company has not granted loans, secured or unsecured to companies, firms or other parties covered under section 301 of the Companies Act, 1956. 9. In respect of loans and advances in the nature of loans given in previous years by the Company where stipulations have been made, parties are not repaying the principal and interest amounts as stipulated. 10. Even though internal control procedures for purchase of stores raw materials including components, plant and machinery, equipment and other assets and for sale of goods exist, since the plant is being operated by third party and there are no purchases of manufacturing stores, & raw materials, in our opinion present system given the employee structure is commensurate with size and nature of business of the company. 11. There are no transaction for purchase of goods and materials and sale of goods and materials in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956. 12. As explained to us the company does not have a regular procedure for determination of unserviceable or damaged stores and materials. However provision is made in the accounts for the loss arising on the items found unserviceable or damaged as per management. 13. In our opinion and according to the information and explanations given to us the company has not accepted any deposit covered under section 58A of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975, with regard to the deposits accepted from the public. 14. In our opinion reasonable records have been maintained by the Company for sale and disposal or realization of by-products and scraps wherever significant. 15. In our opinion and according to the information and explanations given to us the company does not have internal Audit system. 16. As the factory is being operated by a third party, the responsibility to maintain cost accounts and records as prescribed by the Central Govt. under section.209(1)(d) of the Companies Act, 1956, rests with them. 17. A demand for Rs 11.68 lacs had been received from ESI Authorities. The same has been contested by the company in court and the matter is pending. Certain amounts of ESI and PF for previous years for other branches have not been deposited since the records of these branches are presently not available. The company has claimed that PF is not applicable to the company after closure of its factory. The matter is subjudice so as far as the applicability of PF to the company. Employees State Insurance has been deposited late for a part of the year for the amounts deducted during the year. 18. According to the information and explanations given to us there were no undisputed amounts payable of income tax, sales tax, custom duty and excise duty which have remained outstanding as at 31st March 2003 for a period of more than six months from the date the have become payable except as stated in our note on Contingent Liability. 19. According to the information and explanations given to us, no personal expenses of employees or directors have been charged to revenue account, other than those payable under contractual obligation or in accordance with generally accepted business practice. 20. The Company is a sick Industrial Company within the meaning of clause (o) of section 3(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. Consequent to reference made to B.I.F.R. under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985, the Company was declared sick and a scheme for Financial Reschedulement and revival plan was drawn up and submitted to IFCI. the Operating Agency appointed by B.I.F.R./I.F.C.I., he Operating Agency had invited open bids for the rehabilitation of the Company. Subsequently "The honorable Board for Industrial & Financial Reconstruction (BIFR) has recommended the winding up of the company to Punjab and Haryana High Court in Chandigarh." The company is legally examining the matter. For B. GUPTA & COMPANY Chartered Accountants Date : 30.08.2003 (H.K. JAGGI) Place : New Delhi Partner