Real Value Appliances Ltd Auditors Report.

REAL VALUE APPLIANCES LIMITED ANNUAL REPORT 2000-2001 AUDITORS REPORT To the Members of REAL VALUE APPLIANCES LIMITED We have audited the attached Balance Sheet of Real Value Appliances Limited as at 30th June, 2001 and Profit and Loss Account of the Company for the year ended on that date annexed thereto and report that: 1. 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, and on the basis of such checks of the books and records of the Company as considered appropriate and information and explanations given to us during the course of the audit, we give in the Annexure, a statement on the matters specified in Paragraphs 4 and 5 of the said order. 2. Further to our comments in the Annexure referred to in Paragraph 1 above, we report that: a) 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, b) 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 those books, c) The Balance Sheet and Profit and Loss Account dealt with by this Report are in agreement with the books of accounts, d) In our opinion, the Profit and Loss Account and Balance Sheet complies with the mandatory accounting standards referred to in Sub-Section (3C) of Section 211 of the Companies Act, 1956, subject to Note No. 7 and 9 of Schedule 17 for non-provision of interest on interest bearing liabilities, and non-provision of Financial Hire Charges and Lease Rentals. e) On the basis of the written representations received from the directors and taken on record by the board of Directors, none of the directors is disqualified as on 30.06.2001 from being appointed as a director of the Company in terms of Section 274 (1) (g) of the Companies Act, 1956. f) In our opinion and to the best of our information and according to the explanation given to us, the accounts subject to: i] Note No.7(B) relating to certain principal amounts payable to creditors as determined by Board for Industrial & Financial Reconstruction (BIFR) order which are subject to reconciliation with the Books of Accounts of the Company. ii] Note No. 7(D) regarding non-provision of interest on interest bearing liabilities upto 30th June, 2001 amounting to Rs.98,56,41,607/- iii] Note, No. 7(E) regarding non-provision of interest on interest bearing liabilities for the year ended 30th June, 2001 amounting to Rs. 28,36,39,966/- (Previous year Rs.27,91,35,648/-) iv] Note No. 8 regarding non-provision of interest on loans taken for capital work in progress amounting to Rs.46,01,77,691/- upto 30th June, 2001. v] Note No. 9 regarding non-provision of Financial Hire Charges and Lease Rentals amounting to Rs.70,82,119/- (Previous year Rs. Nil ) We further report that without considering item mentioned in f(i) above, the effect of which could not be determined, had the observation made by us and paragraph f(ii) & (iii) & (iv) been considered: 1. the loss for the year would have been Rs. 30,06,39,809/- (as against the reported figure of Rs.99,17,724/-) 2. Accumulated losses would have been Rs.189,57,53,639/- (as against the reported figure of Rs. 61,93,89,947/-) 3. The capital work in progress would have been Rs.80,50,56,459/- (as against the reported figure of Rs. 33,82,33,104/-) 4. Secured Loans would have been Rs.2,43,75,13,460/- as against the reported figure of Rs.1,05,75,66,117/-) 5. Unsecured Loans would have been Rs.51,34,35,361/- (as against the reported figure of Rs. 30,64,43,019/-) and; 6. The negative Net Current Assets would have been Rs.19,48,25,496/- (as against the reported figure of Rs.4,56,60,253/-) and read with other notes give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view: a] In the case of Balance Sheet, of the state of affairs of the Company as at 30th June, 2001. and b] In the case of Profit and Loss Account, of the Loss for the year ended on that date. For SURESH C. MANIAR & CO. Chartered Accountants R. K. SETH Partner Mumbai 28th November, 2001 ANNEXURE REFERRED TO IN PARAGRAPH 1 OF OUR REPORT OF EVEN DATE ON THE ACCOUNTS OF REAL VALUE APPLIANCES LIMITED FOR THE YEAR ENDED 30th JUNE, 2001. 1. The Company has maintained proper records, showing full particulars including quantitative details and situation of fixed assets. We are informed that major portion of the fixed assets were physically verified during the year by the management and no serious discrepancies were noticed on such verification of assets over a reasonable period of time. 2. None of the fixed assets have been revalued during the year. 3. The stocks of finished goods, stores, spare parts and raw materials have been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable. 4. In our opinion and according to the information and explanations given to us, 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. 5. No material discrepancies have been noticed on physical verification of stocks as compared to the book records. 6. On the basis of our examination of stock records, we are of the opinion that the valuation of stocks, is fair and proper and in accordance with the normally accepted accounting principles. 7. In our opinion, the rate of interest and other terms and conditions on which loans have been obtained from Companies, firms and other parties listed in the register maintained under Section 301 of the Companies Act, 1956 are not prima facie prejudicial to the interest of the Company. There are no Companies under the same management as defined under sub-section (1- B) of Section 370 of the Companies Act, 1956. 8. The company has granted unsecured loans to the companies and other parties listed in the register maintained u/s 301 of the Companies Act, 1956. No interest has been received / accrued on the same. The repayment terms and conditions have not been stipulated. There are no companies under the same management as defined under sub-section (1-B) of section 370 of the Companies Act, 1956. 9. Certain loans and advances in the nature of loans given by the company to various parties have not earned any interest. The repayment of these principal amounts have been delayed and same is under negotiation for future repayment. 10. 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 stores, raw materials, equipment and other assets and with regard to the sale of goods. 11. In our opinion and according to the information and explanations give to us, the transactions of purchase of goods and materials, sale of goods, materials and services made in pursuance of contracts or arrangement entered in the Register maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to Rs.50,000/- or more in respect of each party have been made at prices which are reasonable, having regard to prevailing market prices for such goods, materials or services or the process at which transactions for similar goods materials or services have been made with other parties. 12. As explained to us, the Company has a regular procedure for the determination of unserviceable or damage stores, raw materials and finished goods. Adequate provision has been made in the accounts for the loss arising on the items so determined. 13. In our opinion and according to the information and explanations given to us, the company has not complied with various provisions of 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 the sale and disposal of realizable scrap. The Company has no by products. 15. In our opinion, the Company has an adequate internal audit system commensurate with the size of the Company and nature of its business; 16. The Central Government has not prescribed maintenance of Cost Records by the Company under Section 209(1)(d) of the Companies Act, 1956 for any of its products. 17. According to the records of the Company, there have been delays in depositing Provident Fund and Employees State Insurance dues during the year with the appropriate authorities. Accordingly, there was arrears of Rs. 40,77,117/- as on 30th June 2001. 18. According to the information and explanation given to us, no undisputed amounts payable in respect of Excise Duty and Wealth Tax were outstanding as at 30th June, 2001 for a period of more than six months from the date they became payable except Income Tax of Rs.9,71,712/- Customs Duty of Rs. 13,51,00,972/- and Sales Tax of Rs. 38,69,668/-. 19. According to the information and explanations given to us, no personal expenses have been charged to revenue account. 20. The Company is a 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 and reference has been made to the Board for Industrial and Financial Reconstruction under Section 15 of the Act. The rehabilitation scheme has been approved by the Board of Industrial & Financial Reconstruction (BIFR) on 4th August, 2000. 21. In respect of service activity, the Company has a reasonable system of recording receipts, issues and consumption of materials and stores commensurate with the size and nature of its business. In our opinion, the system provides for a reasonable allocation of materials consumed and man hours utilized to the relative jobs. Further, there is a reasonable system of authorization at proper levels and an adequate internal control system, commensurate with the size of the Company and the nature of its business on the issue of stores and allocation of stores and labour to jobs. 22. In respect to trading activities of the Company, damaged goods which were not significant, have been determined by the Company and necessary provision for the loss has been made in the accounts. For SURESH C. MANIAR & CO. Chartered Accountants R. K. SETH Partner Mumbai: 28th November, 2001