serene industries ltd Auditors report

SERENE INDUSTRIES LIMITED AUDITORS REPORT TO The Members, We have audited the attached Balance Sheet of SERENE INDUSTRIES LIMITED as at 30th June, 1998 and the Profit Loss Account for the period ended on that date annexed thereto. We report as follows: 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 we annex hereto 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, i) 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. ii) In our opinion, proper books of account as required by the law have been kept by the Company so far as appears from our examination of such books, except cost accounts which have not been produced before us for our verification. iii) The Balance Sheet and Profit & Loss Account referred to in this report are in agreement with the books of accounts. iv) In our opinion and to the best of our information and according to the explanations given to us, the accounts read together with notes thereon and Subject to following notes appearing in schedule 15: a) Note No.2(d) regarding non-provisions of commitment charges, liquidated damages and penal interest on Term Loans/NCDs from banks amount being unascertainable. b) Note No. 2(e) regarding non-provision of interest on cash credit facility with consortium of banks for which interest has been suspended. The effect of the same on loss for the period and reserves is presently unascertainable. c) Note No.3 regarding depreciation amounting to Rs.563.75 lacs (Net) pertaining to earlier period debited to profit & loss account during the current period and hence current period loss has been overstated by Rs. 563.75 lac d) Note. No.4 regarding appreciation on conversion of plot of land into stock in trade which was treated as revenue income in the previous period now correctly transferred to capital reserve account and hence loss for the current period has been overstated by Rs. 750 lacs. e) Note No. 5 regarding write off of preliminary expenses pertaining to previous period amounting to Rs. 44.9 lacs (Net) if not written off, the loss for the current period would have been lower by Rs. 44.99 lacs. f) Note No. 6 wherein the Company has written off interest of Rs. 1976.11 lacs on term loans from financial institutions and NCDs pertaining to earlier periods and treated as capital work in progress. If the same was not written off loss for the period would have been lower by Rs.1978.11 lacs. g) Note No. 7 as stated therein Company has not accounted gains on account of fluctuations in foreign exchange rates amounting to Rs.5.94 lacs. The same is in contravention of accounting standard-11 of Institute of Chartered Accountants of India, if accounted the loss for the period would have been lower by Rs. 5.94 lacs. h) Note No. 11 as stated therein Company has not provided for doubtful debts amounting to Rs. 108.23 lacs, provided, loss for the period would have been more by Rs.108.23 lacs. i) Note No 19(c), in respect of investments in wholly owned subsidiary M/s. Seribright Colours Ltd., U.K. provision for diminution in value has not been made as in the opinion of the Board, these investments are long term in nature and diminution is temporary. The impact on the loss for the period and reserves is presently not ascertainable. j) Note No. 19(d), regarding prior period adjustments/Extraordinary items amounting to Rs. 3579.29 lacs and Rs. 3744.85 lacs respectively debited to profit & loss account as per the management decision. k) Note No.19(e) regarding loans/ICDs granted to parties, earlier period interest has been waived by the company amounting to Rs. 550.64 lacs, hence current period loss has been overstated by Rs. 550.64 lacs. l) Note. No 19(f) regarding non-provision for import duty for non- fulfillment of export obligations under advance license scheme, the impact of the same on the loss for the period under review is unascertainable m) Note No.19(g) as indicated therein the Company has written off capital work in progress amounting Rs.225 lac to the extent loss for the period has been overstated by Rs.225 lacs. n) Note No. 19(h) regarding non-provision of estimated liability for leave encashment amounting to Rs. 10.25 lacs. If provided loss for the period would have been more by Rs. 10.25 lacs. o) Note No. 19(i) as indicated therein the Company has not-created debenture redemption reserve. p) Note No. 20 as indicated therein the Company has given political contribution to Shiv Sena amounting to Rs.51,000 Included under Miscellaneous expenses, but has not complied with the provisions of the section 293A of the Companies Act, 1956, and q) Note No. 9 regarding non-confirmation of balances of Sundry Debtors, Sundry Creditors,Term Loans and Other Loans and Advances, give information required by the Companies Act., 1956 In the manner so required and give true and fair view: a. in the case of Balance Sheet of the state of affairs of the Company as at 30th June, 1998 and b. in the case of Profit & Loss Account for the Loss of the Company for the period ended 30th June, 1998. For Bharat Shroff & Company Chartered Accountants Mumbai B. B. Shroff Dated: 24th September, 1998 Proprietor Annexure referred to in paragraph (1) of the Auditors Report to the Members of Serene Industries Limited on the account for the period ended 30th June, 1998. 1. The Company has not maintained proper records showing full particulars including quantitative details and situation of all fixed assets except furniture and fixture. As explained to us the fixed assets have been physically verified by the management according to a phased programme designed to cover all the items of the fixed assets. Accordingly most of the assets have been physically verified by the management during the period in accordance with the programme of verification, In our opinion, the frequency of verification of fixed assets by the management IS at reasonable intervals, having regard to the size of the Company and the nature of the assets. No material discrepancies between the book records and the inventory have been noted in respect of the assets physically verified. Fixed Assets of the Company are not properly Insured. 2. None of the fixed assets have been revalued during the period. 3. In our opinion and according to the explanations given to us, the physical verification of The finished goods, store, spare parts and raw materials was conducted by the management wherever practicable, during the period. In our opinion 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 stock followed by the management were found reasonable and adequate in relation to the size of the Company and nature of its business. Stocks in possession and stocks,in transit as on 30th June, 1998 have been verified and valued by the management. 5. The discrepancies noticed on such verification, as compared to book records, which. were not significant, have been properly dealt with in the books of account. 6. In our opinion, the valuation of the above mentioned stocks is fair and proper in accordance with me normally accepted accounting principles, and is on the same basis as in the previous period. 7. The Company has not taken any loans from companies, firms or other parties under sections 301 (1 -c) of the Companies Act. 1956. The Company has not maintained register under section 301 & 307 of the ComPanies Act. 1956. 8. The Company has granted loans, secured of unsecured to Companies, firms or other parties which are required to be listed in the register maintained under section 301 of the Companies Act, 1956 or to Companys under the same management within the meaning of section 370 (1-i3) of the Companies Act, 1956. 9. In respect of Loans and Advances in the nature of loans given by the Company to its employees and others, they are repaying the amounts regularly as stipulated. Except that for the loans/ ICDs given to some parties, interest has bee waived and no time limit has been specified for repayment of principal amount. 10. In our opinion and according to the information and explanations given to us, there are adequate internal control procedure commensurate with the size of the Company and the nature of its business with regard to purchase of stores, raw materials including components, plant and machinery, equipments and other assets and for sale of goods. 11. According to the information and explanation given to us the transactions of purchase of goods and materials and sale of goods, materials and services made in pursuance of contracts or arrangement falling under section 301 of the Companies Act, 1956 and aggregating to Rs. 50,000/- or more, during the period in respect of each party have been made at prices which are reasonable having regard to the prevailing market prices for such goods, materials or service at the prices at which transactions for similar goods or materials or services have been made with other parties. 12. As explained to us, Company has a regular procedure for the determination of unserviceable or damaged stores and raw materials and finished goods and the necessary adjustments for the loss have been made in the accounts 13. The Company has received deposits from the public and have complied with the directives issued by the Reserve Bank of India and the provisions of section 58-A of the Companies Act, 1956 and the rules framed thereunder from time to time, and have not filed Return for the year ended 31st March, 1997 and 31st March,1998 14. In our opinion, reasonable records have been maintained by the Company for the sale and disposal of realisable by products and scrap. As explained to us, the Companys operations do not generate any significant realisable by-products and scrap. 15. Company does not have internal audit system for the period under review. 16. The Central Government under section 209 (1) (d) of the companies Act, 1956 has prescribed the cost audit of cost records of dyes. The cost audit has been completed for the period ended 30th June, 1996. The cost records for the period ended 31st December,1997 and 30th June, 1998 have not been produced before us for our verification. 17. The Company has been irregular in depositing Provident Fund and Employees State Insurance dues with appropriate authorities. The Provident Fund dues are in arrears amounting to Rs.28.23 lacs and ESIC/Profession Tax amounting to Rs. 0.12 lacs & Rs. 0.08 lacs respectively. 18. According to the information and explanations given to us, there are no undisputed amounts payable in respect of Income Tax, Wealth Tax, Customs Duty and Excise Duty which have remained outstanding as at 30th June,1998 except Sales Tax of Rs. 4.25 lacs for a period of more than six months from the date they became payable. 19. According to the information and explanations given to us and the record of the Company examined by us, no personal expenses have been charged to revenue account other than those payable under contractual obligations or in accordance with the generally accepted business practices. 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. 21. Shares and other Securities held by the company as investments are held in its own name. 22. In respect of Trading Activities of the Company, there were some stocks of damaged goods for which necessary adjustments for the loss have been made in the accounts. For Bharat Shroff & Company Chartered Accountants. Place : Mumbai B. B. Shroff Dated : 24th September, 1998 Proprietor