panchmahal cement ltd Auditors report

ANNUAL REPORT 1997-98 PANCHMAHAL CEMENT LIMITED AUDITORS REPORT TO THE MEMBERS OF THE COMPANY We have audited the attached Balance Sheet of the PANCHMAHAL CEMENT LIMITED,VADODARA as at 30th September, 1998 and also annexed Profit and Loss Account of the Company for the period ended on that date and report as under: 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. In our opinion, proper books of accounts as required by law have been kept by the Company so far as it appears from our examination of the Books. 3. The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the Books of Account. 4. In our opinion the Balance Sheet and the Profit and Account are In compliance with the Accounting Standards referred to in subsection 3 (c) of Section 211 of the Companies Act, 1965, subject to qualification made hereunder. 5. We further report as under: (i) The Company has not provided .for doubtful Sundry Debtors amounting to Rs. 66,62,191/- and Loans and Advance Rs. 1,70,97,645/- (ii) Interest on Inter Corporate Deposites has not been provided and thereby loss is understated by Rs.126.64 Lacs. Further,Security on the same given could not be verified, and in absence of full particulars the same could not be fully disclosed in the Balance Sheet (Refer Note No 3 of Sch. 14) (iii) The Company has not honoured Consent Decree of the High Court, Bombay relating to the dues of FIs. However, the Company has provided interest 17.5 % on decretal amount. In absence of full particulars, we are unable to opine in this regard (Refer Note No.7 of Sch.14) (iv) Unsecured Debentures of Rs.550 Lacs have not been presented for redemption on its due date. These debentures are included in the Balance Sheet under Loans and Advances to be recovered. (Refer Note No. 6 of Sch 14) (v) There are various Civil Suits/Legal notices issued by various authorities against the Company for recovery of their dues. The total actual contingent liabilities are unascertainable. (Refer Note No. 14 of Sch. 14) (vi) During the year under review, no Lease Rent has been provided on ESP Plant (accumulated Rs. 337.87 Lacs up to previous year). The Company is treated this as preoperative expenses and not charged to revenue expenses (Refer Note No.19 of Sch. 14) (vii) Right Issue expenses incurred during the earlier years have been shown as miscellaneous expenditure yet to be amortised. One tenth of such expenses amounting to Rs. 14,54,827/- have not been amortised during the year in view of huge losses. Had the expenses been provided, the loss would have been higher by Rs. 14,54,827/-. vii) All balances are subject to confirmation (Refer Note No 4 of Sch 14). (ix) The Company has written off the accumulated losses upto March, 1990 of Rs. 3,27,33,256/- and Miscellaneous Expenditure (to the extent not written off) of Rs. 19,72,508/- against the revaluation reserve during the year 1990-91 and the Company has written off Rs. 32,79,135/- after adjusting Profit of Rs.4,85,9851- of the year 1990-91 in the year 1991-92. The practice is contrary to the accounting guidelines recommended by the Institute of Chartered Accountants of India. If it had been followed the reserve and surplus would be higher by Rs. 3,79,84,899/- and accumulated losses should be Rs. 3,60,12,391/- and Miscellaneous Expenditure (to the extent not written off) amounting to Rs. 19,72,508/- without giving effect to prior year income adjustment. (Refer Note No. 2 of Sch. 14) (x) The Company has not provided depreciation on extra and multiple shift as per the provisions of Section 205 (2) (b) of the Companies Act,1956, amounting to Rs. 5,13,14,674 /- on plant and machinery of Dahod works. The company has also not provided Depreciation on all fixed assets as no manufacturing activities carried out during the year. (xi) Investment and stock of shales and securities could not be physically verified and hence we are unable to express our opinion on the same. (xii) Diminution in value of unquoted investments in shares and other securities are not ascertained and provided for by the Company. (xiii) The Company has still to complete formalities for increase in its Authorised Capital from Rs.50 Crores to Rs.75 Crores and provide its liability. (Refer Note No. 20 of Sch. 14). (xiv) In absence of documents/confirmation for advances given in respect of the business of real estate of Rs 78.06 Lacs. we are unable to express our opinion on the same. (xv) The contribution payable to Life Insurance Corporation for group gratuity and superannuation policy is not provided and liability on account is unascertainable and loss is understated to that extent. (xvi) As per the Agreement between the Company & the Union/employees, the Company is paying/providing salary & wages from December, 1996. In lieu of details the liability on this account is unascertainable and loss is understated to that extent. 6. In our opinion and to the best of our information and according to the explanations given to us, the said Accounts, subject to our commencements in paragraph 5 above and read together with other notes thereon give the information required by the Companies Act, 1956 in the manner so required and present a true and fair view: a) in the case of the Balance Sheet of the State of Affairs of the Company as at 30th September,1998. b) in the case of the Profit & loss Account of the loss for the period ended on that date. 7. As required by the Manufacturing and other Companies (Auditors Report) Order 1988 and on the basis of such checks as we considered appropriate we further state that: i) We have been informed that the records showing full particulars including quantitative details and situation of fixed assets are in the process of updating. However we have been informed by the management that the physical verification has been carried out by the management. ii) None of the fixed assets have been revalued during the year. iii) Physical verification as stated to us, was conducted by the management in respect of finished goods, material in process, raw material and stores & spares at reasonable intervals during the year under review. iv) The procedure of verification of stock followed by the management are reasonable and adequate in relation to the size of Company and the Nature of its business. v) We have been informed by the management that no significant discrepancies been noticed on such verification. In our opinion, the value of these stocks is in accordance with normally accepted accounting principles. vi) On the basis of our examination of available stock records, we are of the opinion that the valuation of stock is in accordance with the normally accepted accounting principles. However to determine whether market value is lower than the cost in respect of valuation of stock, the certificate of the management has been received. We are unable to form our oplnion In this respect. vii) In our opinion, Terms and Conditions of the Loans taken by the Company from the Directors are not prima facie prejudicial to the interest of the Company. The Company has not taken any other loans secured or unsecured from companies, firms or other parties listed in the Register maintained under section 301 & 30 (1-B) of the Companies Act, 1956. viii) The Company has not granted loans to the companies, firms or other parties listed in the Register maintained under section 301 of the Companies Act, 1956 and / or to the companies under the same management as defined under Sub-Section (1-B) of section 370 of the Companies Act, 1956. ix) In respect of loans and advance in the nature of loans given by the Company, the Company has taken reasonable steps to recover the money due from the parties and employees to whom interest free loans or advances in the nature of loans have been given are generally repaying the principal amount as stipulated. x) In, our opinion and according to the information and explanation given to us, there are adequate internal control procedures commensurate with the size of the Company and nature of its business with regard to purchase of raw material; stores and spares, plant and machinery, equipment and other assets and with regard to sale of goods. xi) As explained there are no transactions of purchase of goods and materials and sale of goods, materials and services, made in pursuance of contracts or arrangement entered in the register maintained under section 301 and aggregating during the year to Rs. 50,000 or more in respect of each party. xii) We have been informed that the Company has not ascertained any unserviceable damaged stores, raw materials and finished goods. xiii) As per the information and explanations given to us, the Company has not accepted any deposits during the year. xiv) The Company has maintained reasonable records for sale of scrap and there is no by-product. xv) The Company has appointed a firm of the Chartered Accountants as Internal Auditors for the year under review. In our opinion the internal audit system is commensurate with the size of Company and nature of its business. xvi) The Central Government has prescribed maintenance of cost records under Section 209 (1) (d) and cost audit under Section 233 of the Companies Act, 1956 in respect of manufacturing activities of the Company. We have not examined such records in details however, such records have been prima facie maintained by the Company. xvii) The Company has some time irregularly deposited Provident Fund dues with appropriate authority. We have been informed that Employees State Insurance Act is not applicable to the Company. xvii) According to the information and explanation given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Excise Duty except Sales Tax amounting to,Rs.2,28,21,882 and tax deducted at source Rs. 10,00,755/- outstanding as at the last day of the financial year for a period of more than six months from the date they become payable. xix) No personal expenses have been charged to Profit & Loss Account. xx) In our opinion the Company is not Sick Industrial Company within the meaning of Clause (O) of sub-section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. xxi) With respect to investment business: The Company has maintained the Investment Register. We are unable to physically verify the shares and thus we are unable to express our opinion on Investments. For R. J. SHAH & ASSOCIATES Chartered Accountants R . J. SHAH Proprietor Place: Vadodara Date : 26-02-2000.