malanpur steel ltd Auditors report

HINDUSTHAN DEVELOPMENT CORPORATION LIMITED AUDITORS REPORT FOR THE YEAR 31ST MARCH, 1999. We have audited the attached Balance Sheet of Hindusthan Development Corporation Limited as at 31st March 1999 and also the Profit & Loss Account of the Company for the year ended on that date and report as follows: 1. 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. 2. The Balance Sheet and Profit & Loss Account dealt with by this Report are in agreement with the books of account. 3. In our opinion, the Profit and Loss Account and the Balance Sheet, except as mentioned in the notes in Schedule 12 (a) Note 16 and 17 regarding capitalisation of interest and other expenses incurred subsequent to the commissioning of certain plant and machinery, (b) Note 1 on inventories as stated in the Accounting Policy regarding inclusion of interest and administrative overheads for the purpose of computation of cost of finished stock and valuation of imported raw materials at market value (c) Note 23 regarding non-adjustment of outstanding interest and (d) Note 29 regarding accounting of insurance claim comply with the Accounting Standards referred to in Section 21113C) of the Companies Act, 1956. 4. Subject to the notes in Schedule 12 together with their resultant impact regarding (a) capitalisation of interest and other expenses incurred subsequent to the commissioning of certain plant and machinery at the Steel Unit of the Company which have been either allocated to the fixed assets or carried forward as capital work-in-progress and non-ascertainment of the significant impact there including on the loss for the year. The said practices are not in consonance with the Accounting Standards issued by the Institute of Chartered Accountants of India (Notes 16 and 17), (b) inclusive of interest and administrative overheads for the purpose of computation of cost of finished stock and valuation of imported raw materials at market value in the Steel Unit as stated in accounting policy on inventories and non-ascertainment of impact thereof (Note 1 on inventories), (c) provision of depreciation on certain plant and machinery considering these as continuous process plant on the basis of technical evaluation and non-ascertainment of the impact thereof (Note 1 on depreciation), (d) extent of recoverability of outstanding interest (Note 23), certain debts, advances and loans not being ascertainable and therefore cannot be commented upon by us, (Note 18(a) and 27 and Para 5(ix) below), (e) accounting of insurance claim pending acceptance thereof (Note 29), (f) non provision against obsolescence (amount unascertained) (Note 30) and in our opinion and to the best of our information and according to the explanations given to us: (i) Proper books of account as required by law have been kept by the Company so far as appears from our examination of the books; (ii) The said accounts, subject to our remarks as given above and read together with other notes thereon give the information required by the Companies Act, 1956 in the manner so required and give a-true and fair view: (a) In case of the Balance Sheet of the state of affairs of the Company as at 31st March, 1999, and (b) In case of the Profit and Loss Account of the loss for the year ended on that date. 5. As required by the Manufacturing and Other Companies (Auditor s Report) Order, 1988 issued by the Central Government under Section 227(4A) of the Companies Act, 1956 and according to the information and explanations given to us and on the basis of such checks as we considered appropriate, we further report that: (i) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets except those acquired by the Jute Unit prior to 1st April 1961 for which full particulars in respect of individual items of assets are not available. However, in certain units such records were under compilation. As explained to us, the fixed assets we physically verified by the management according to a phased programme designed to cover all the items of fixed assets over a period of three years which was to be complied with and/or und implementation in certain locations at the year end. As far as verified and reconciled during the year, there were no material discrepancies between such records and physical inventory. (ii) The Company has not revalued any of its fixed assets during the year. (iii) The stocks of finished goods, stores, spare parts and raw materials except materials in transit and Iying with third parties have been physically verified by the management during the year. In respect of raw and calcined petroleum coke and other materials which are stored in heaps, volumetric estimation technique or visual estimation survey method has been followed to ascertain the stock from time to time and adjustments are given effect to as and when determined. In respect of stocks Iying with the third parties, confirmation in certain cases were not available. (iv) Having regard to the above, 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. (v) The discrepancies noticed in respect of items verified during the year as compared to the book records were not material barring in certain cases which as ascertained have been adjusted from (vi) On the basis of our examination of stocks, we are satisfied that the valuation of stock of finished goods, stores, spare parts and raw materials except as given in Accounting Policy for inventories regarding Inclusion of administrative overhead and Interest for valuation of finished goods and valuation of imported raw materials at market price in the Steel Unit of the Company and non adjustment of modvat benefit from the value of stocks as given in Note 14 of Schedule 12 and read with Note 30 of Schedule 12 have been fair and proper and in accordance with the normally accepted accounting principles and except as given in Note 24 of Schedule 12 is on the same basis as in the preceding year (vii) During the year the Company has not taken any loan, secured or unsecured, from companies listed in the register maintained under Section 301 of the Companies Act 1956. As explained, there is no company under the same management as defined under Section 370(1-B) (since omitted) of the Companies Act 1956. (viii) The Company has granted unsecured loans and advances in the nature of loans to companies listed in the register maintained under Section 301 of the Companies Act, 1956. The rate of interest and other terms and conditions of such loans were prima-facie not prejudicial to the interest of the Company. As explained, there is no company under the same management as defined under Section 370(1-B) (since omitted) of the Companies Act, 1956. (ix) Loans given to certain bodies corporate as given in Note 181a) of Schedule 12 have become overdue for payment. Certain loans repayable on demand have been rescheduled in terms of High Court Orders, to be payable in instalments as stipulated by the Court(Note 23 of Schedule 12). Other loans including interest outstanding thereon aggregating to Rs 4 98 55 thousands have been stated to be repayable on demand. These loans together with interest accured thereon till 31st March, 1999 including on certain principal balances repaid during the year as stated by the management, have not been recalled. Excepting these, parties including employees to whom loans or advances in the nature of loans have been given by the Company, are generally repaying the principal amounts as per stipulations, where such stipulations exist and are also regular in payment of interest. (x) In our opinion and according to the information and explanations given to us, internal control procedures for the purchase of stores, raw- materials including components, plant and machinery equipments and other assets and for the sale of goods are commensurate with the size of the Company and nature of its business (xi) There are no transactions of purchase of goods and materials and sale of goods, materials and services aggregating during the year to Rs. 50,000 or more in respect of each party in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956. (xii) The Company has a procedure for determination of unserviceable or damaged stores, finished goods and raw materials. Necessary adjustments for the losses (except as given in Note 30 of Schedule 12) as and when determined are made in the accounts. (xiii) The Company has complied with the provisions of Section 58A of the Companies Act, 1956 and the rules made thereunder with regards to the deposits accepted from the public in earlier years. (xiv) In our opinion, reasonable records have been maintained by the Company for the sale and disposal of realisable by-products and scrap (xv) The company has an internal audit system designed to cover the entire operations of the company in a phased manner. In respect of the areas covered during the year, in our opinion, the system is commensurate with the size and nature of the business. (xvi) We have broadly reviewed the cost records maintained in respect of manufacture of jute goods and steel products in jute and steel units of the Company respectively and are of the opinion that prima-facie, the said records, as prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956, have been maintained. However we have not carried out any detailed examination of such accounts and records with a view to determine whether they are accurate or complete. We have been explained that maintenance of such records in respect of products of other units of the Company are not mandatory. (xvii) According to the records of the Company, Provident Fund and Employees State Insurance dues have generally been regularly deposited during the year with the appropriate authorities. (xviii) As per the records of the Company, there are no undisputed amounts of Income-tax, wealth-tax, sales tax, custom duty and excise duty outstanding as on 31 st March, 1999 for a period of more than SIX months from the date they became payable except Rs.35 45 thousands of sales tax, Rs.60 95 thousands of entry tax, Rs.1 25 thousand of service tax and Rs. 23 86 thousands of excise duty. (xix) During the course of our audit of the books of account carried out in accordance with generally accepted auditing practices we have not come across any personal expenses of employees or directors which have been charged to revenue account, other than those payable under contractual obligations or in accordance with generally accepted business practices (xx) The Company is not a sick industrial company within the meaning of Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985. (xxi) In respect of the trading activities according to the explanations and information given to us there were no damaged goods. (xxii) In respect of service activities of the Company namely processing of the raw-materials, fabrication and other job contracts, the Company has reasonable system of recording receipts, issues and consumption of materials alongwith reasonable system for authorisation at proper levels and adequate system of internal control for issue of stores, commensurate with the size of the Company and nature of its business. The allocation of materials and man hours to respective jobs are not made, but in our opinion, control is exercised on total materials and labour consumed. For Lodha & Co. Chartered Accountants P.L.VADERA PARTNER. Place: Calcutta Date: 28th May,1999