| 1. We have audited the attached Balance Sheet of KINETIC MOTOR COMPANY
LIMITED (the 'Company') as at 31st December 2011, the Profit and Loss
Account and also the Cash Flow Statement for the fifteen months period
ended on that date annexed thereto. These financial statements are the
responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with the 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 misstatement. 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 management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
3. As required by the Companies (Auditor's Report) Order, 2003 as
amended by the Companies (Auditor's Report) (Amendment) Order, 2004
(together the 'Order') issued by the Central Government of India in
terms of sub section (4A) of section 227 of the Companies Act, 1956
(the 'act') and on the basis of such checks of the books and records of
the Company as we considered appropriate and according to the
information and explanations given to us, we enclose in the Annexure a
statement on the matters specified in paragraphs 4 and 5 of the said
Order.
4. We draw attention to Note 20 - Schedule 13 regarding certain
transactions of purchase of components which require approval of the
Central Government under Section 297 of the companies Act, 1956.
5. We draw attention to Note 19 - Schedule 13 regarding the
appropriateness of the going concern basis used for the preparation of
these financial statements, as the validity of the going concern basis
depends upon undertaking the new business and the financial support
from the promoters of the Company. Based on the undertaking of the new
business subsequent to the period end and financial support from
promoters, these financial statements have been prepared on a going
concern basis.
6. We draw attention to Note 23 - Schedule 13 regarding the resolution
passed by the board of directors in respect of proposed scheme of
amalgamation of the Company with the Kinetic Engineering Limited w.e.f
the appointed date being 1st January, 2012, subject to the sanction by
the High Court.
7. Further to our comments in the paragraphs 4,
5 & 6 and Annexure referred to in paragraph 3 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 purposes of our
audit;
(b) In our opinion, proper books of account, as required by law, have
been kept by the company so far as appears from our examination of
those books;
(c) The Balance Sheet, the Profit and Loss Account and Cash Flow
Statement dealt with by this report are in agreement with the books of
accounts;
(d) In our opinion, the Balance Sheet, the Profit and Loss Account and
Cash Flow Statement dealt with by this report comply with the
accounting standards referred to in sub section (3C) of section 211 of
the Companies Act, 1956;
(e) On the basis of written representations received from the
directors, as on 31st December 2011 and taken on record by the Board of
Directors, we report that none of the directors is disqualified as on
31st December 2011 from being appointed as a director in terms of
clause (g) of sub section (1) of section 274 of the Companies Act,
1956;
(f) In our opinion and to the best of our information and according to
the explanations given to us, the said financial statements read
together with the notes thereon and attached thereto give the
information required by the Companies Act, 1956, in the manner so
required and give a true and fair view in conformity with the
accounting principles generally accepted in India:
(i) in the case of the Balance Sheet, of the state of affairs of the
company as at 31st December 2011;
(ii) in the case of the Profit and Loss Account, of the Profit of the
Company for the period ended on that date; and
(iii) In the case of the Cash Flow Statement, of the cash flows for the
period ended on that date.
ANNEXURE TO THE AUDITOR'S REPORT
(Referred to in paragraph 3 of our report of even date to the members
of KINETIC MOTOR COMPANY LIMITED on the financial statements for the
fifteen months period ended 31st December, 2011)
(i) (a) The company has maintained proper
records showing full particulars including quantitative details and
situation of fixed assets.
(b) According to the information and explanations given to us, all the
fixed assets have been physically verified, at regular intervals by the
management during the period, which in our opinion is reasonable having
regard to the size of the company and the nature of its assets. No
material discrepancies were noticed on such verification.
(c) The Company has disposed off substantial part of its Fixed Asset
during the period. However, as per the information and explanations
provided to us, the Company is exploring the avenues for undertaking
new business and after considering the financial support from the
promoters of the Company, in our opinion the risk of going concern is
mitigated.
(ii) (a) As per the information furnished, the inventories have been
physically verified during the period by the management. In our
opinion, having regard to the nature and location of inventory, the
frequency of verification is reasonable. However, there is no inventory
at the end of the period.
(b) In our opinion and according to the information and explanations
given to us, the procedures of physical verification of inventories
followed by the management are reasonable and adequate in relation to
the size of the company and the nature of its business.
(c) The company has maintained proper records of inventory. In our
opinion the discrepancies noticed on verification of physical stocks
and the book records were not material and have been properly dealt
with the books of account.
(iii) (a) According to information and explanation given to us, the
company has not granted any loans secured or unsecured to companies,
firms or other parties covered in register maintained under Section 301
of Companies Act, 1956. Accordingly, Sub-Clauses (b), (c) and (d) are
not applicable
(b) The Company has taken interest free unsecured loans during the
period from two companies covered in register maintained under section
301 of Companies Act, 1956.The Maximum amount outstanding during the
period was Rs. 2459.77 lakhs and the period end balance was Rs. 2416.77
Lakhs.
(c) In our opinion, the other terms and conditions in respect of
interest free unsecured loans taken by the Company from parties
(referred to in
(e) above) is not prima-facie prejudicial to the interest of the
Company.
(d) In respect of the aforesaid loans taken, there are no stipulations
as regards repayment of loans.
(iv) 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 for purchase of fixed assets and inventory. In respect of sale
of goods, the internal control is generally adequate. During the course
of our audit no major weaknesses has been noticed in internal control
system.
(v) (a) On the basis of audit procedures performed by us and according
to the information and explanations given to us, we are of the opinion
that the contracts and arrangements that needed to be entered into the
register maintained under section 301 of the Companies Act, 1956 have
been so entered in the register.
(b) In our opinion and according to explanations given to us, the
transactions i.e. purchases made in pursuance of contracts or
arrangements entered in the register maintained under section 301 of
the Companies Act, 1956 have been made in pursuance of contracts or
arrangements entered in register maintained under section 301 of
Companies Act, 1956. Most of items purchased are of special nature and
alternative quotations are not available and hence we are unable to
comment whether these were at the market prices then prevailing.
(vi) The company has not accepted any deposits from public to which the
provisions of sections 58A, 58AA, or any other provisions of the
companies Act, 1956 and the companies (Acceptance of Deposits) Rules,
1975 apply.
(vii) The Company has an internal audit system, which is commensurate
with the size and nature of its business have formal internal audit
system.
(viii) According to the information and explanations given to us, the
Central Government has not prescribed the maintenance of cost records
under clause
(d) of sub-section (1) of section 209 of the Companies Act, 1956 with
regard to the nature of the business/activity of the Company.
(ix) a) According to the information and explanations given to us and
the records of the Company examined by us, in our opinion, the Company
is not regular in depositing the undisputed statutory dues including
protection fund, state value added tax & Service tax and Tax Deducted
at Source (TDS), wherein the periods of delays ranged from 1 days to
275 days . However the Company is generally regular in depositing the
undisputed statutory dues including investor education and protection
fund, employee's state insurance, income tax, custom duty, excise duty,
cess and other material statutory dues as applicable, with the
appropriate authorities.
Based on our audit procedure and according to the information and
explanations given to us, undisputed dues payable in respect of
provident fund (Company's contribution amounting to Rs.
732,600/-,Employees' provident fund amounting to Rs. 732,600/-) and Tax
Deducted at Source amounting to Rs. 583,571/- were in arrears, as at
31st December, 2011 for the period more than six months from the date
they became payable. However there are no undisputed dues payable in
respect of employee's state insurance, income tax, state value added
tax, service tax, customs duty, excise duty and cess which are in
arrears for a period of more than six months from the date they become
payable.
b) According to the information and explanations given to us, there are
no dues other than below in respect of income tax, wealth tax, service
tax, state value added tax, customs duty, excise duty and cess which
have not been deposited on account of any dispute.
Nature of the dues Amounts involved Forum where dispute
(dues to the extent is pendinq
not deposited)
(Rs. In lakhs.)
Central Sales Tax Appellate Deputy
( Assessment years
1994-1995, Commissioner,
1999-2000,2000-2001) 39.74 Commercial Tax, Indore
Central Sales Tax 20.57 Madhya Pradesh
( Assessment years
2001-2002) Commercial Tax Tribunal,
Bhopal
Central Sales Tax 5.34 Madhya Pradesh
( Assessment years
1998-1999) Commercial Tax Tribunal,
Bhopal
Central Sales Tax 13.52 Appellate Deputy
( Assessment years
2002-2003) Commissioner,
Commercial Tax, Indore
Central Sales Tax 27.70 Appellate Deputy
( Assessment years
2003-2004) Commissioner,
Commercial Tax, Indore
Central Sales Tax 0.89 Appellate Deputy
( Assessment years
2008-2009) Commissioner,
Commercial Tax, Indore
Sales Tax Kolkatta 0.60 Sales Tax Tribunal,
( Assessment years
2001-2002) Kolkatta
Sales lax Behrampur 4.50 Special Additional
(Assessment years
1999-2000, Commissioner
2000-2001,
2001-2002) Commercial Tax,
Behrampur
Entry Tax 0.64 Deputy Commissioner
(Assessment years
1994-1995, Commercial Tax,
1995-1996) Indore
Entry Tax 7.77 Appellate Deputy
( Assessment
years 2007-08) Commissioner,
Commercial Tax, Indore
Madhya Pradesh
Commercial Tax 1.88 Madhya Pradesh
( Assessment years
1998-1999) Commercial Tax Tribunal,
Bhopal
Madhya Pradesh
Commercial Tax 0.78 Appellate Deputy
( Assessment
years 1999-2000) Commissioner,
Commercial Tax, Indore
Madhya Pradesh
Commercial Tax 13.34 Appellate Deputy
( Assessment years
2007-08, Commissioner,
2008-09) Commercial Tax, Indore
Excise Duty 50.47 Supreme Court
2000 to 2003
Excise Duty 42.10 High Court Madhya
1987 to 1991 Pradesh - Indore Branch
Excise Duty 8.04 High Court Madhya
1995 Pradesh - Indore Branch
Excise Duty 10.18 Commissioner Appellate
1986 to 1988 Tribunal, Delhi
Excise Duty 156.19 Commissioner Appellate
2004 to 2007 Tribunal
(x) Based on our audit procedures and on the information and
explanations given by the management, we are of the opinion that, the
accumulated losses of the company exceeds fifty percent of its net
worth. Further, the Company has incurred cash losses in the current
financial period and in the immediately preceding financial year.
(xi) In accordance with the terms of Debentures issued and based on the
information and explanations given by the management, we are of the
opinion that the company had not defaulted in the repayment of dues
debentures holder. Further, the Company has no loans from the Banks and
financial institution.
(xii) The Company has not granted loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
Accordingly, clause 4(xii) of the Order is not applicable.
(xiii) The Company is not a chit fund, nidhi or mutual fund or a
society. Accordingly, clause 4(xiii) of the Order is not applicable.
(xiv) The Company has maintained proper records of transactions and
contracts in respect of dealing in securities and that timely entries
have been made therein. Based on the information and explanations
given by the management, all securities have been held by the company
in its own name.
(xv) According to the information and explanation given to us, the
company has not given any guarantee for loans taken by others from bank
or financial institutions. Accordingly clause 4(xv) of the Order is not
applicable.
(xvi) There were no term loans taken during the period.
(xvii) According to the information and explanations given to us and on
an overall examination of the balance sheet of the company, in our
opinion, no funds raised on short term basis have been used for long
term investment.
(xviii)According to the information and explanations given to us, the
company has made preferential allotment of shares to a company covered
in the register maintained under section 301 of the Act and the price
at which the shares have been issued is prima facie not prejudicial to
the interest of the Company.
(xix) The Company has not created a pledge on 90,00,000 Equity shares
of Mahindra Two Wheeler Limited which was required as per debenture
subscription Agreement dated 12th July 2011 with Debenture holders in
respect of 90,000 non convertible debentures issued during the period.
(xx) The company has not raised any money by public issue during the
period. Accordingly clause 4(xx) of the Order is not applicable.
(xxi) During the course of our examination of the books and records of
the Company, carried out in accordance with the generally accepted
auditing practices in India, and according to the information and
explanations given to us, we have neither come across any instance of
material fraud on or by the Company, noticed or reported during the
period, nor have we been informed of such case by the management.
For Lakhani & Co.
Chartered Accountants
Firm Regn No.:105524W
Parag Modi
Partner
Pune : February 29, 2012 M.No.114105 |