| We have audited the attached Balance sheet of Usha (India) Limited as
at 31st March, 2004, the profit and loss account and the Cash flow
statement for the year ended on that date annexed thereto in which the
accounts of the branches are incorporated. 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.
We conducted our audit in accordance with 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 from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement. 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.
1. As required by the Companies (Auditors Report) Order, 2003, issued
by the Central Government of India in terms of section 227(4A) of the
Companies Act, 1956 and on the basis of such checks of books and
records of the Company as were made available/provided to us and
according to the information and explanations given to us during the
course of audit, We enclose in the annexure, a statement on the matters
specified in paragraphs 4 & 5 of the said order:
2. Further to our comments referred to in paragraph 1 above, we report
and invite attention as under :-
a) 1) Accounts of the Company have been prepared on going concern basis
inspite of the fact that entire networth of the company has been wiped
off. In respect of the default by the company in repayment of
borrowings from banks/Financial Institutions and other liabilities the
company has been unable to re-negotiate its borrowings and liabilities
from the respective bankers/Institutions and other creditors. In view
of various financial. Operating and other indications there is
significant uncertainty that the company will be able to continue as
going concern. Consequently adjustments may be required to the
recorded assets amount and classification of liabilities/loans.
ii) Search & Seizure operation was carried out at the premises of the
company by the Income Tax Authorities on 14.02.2001. During the course
of search various books of accounts/documents/records were seized. The
books of accounts for the period up to the date of Search were
recompiled from the available subsidiary records & information
available in the computer system of the company. The opening Balances
have been taken on the basis of those recompiled books of account only.
The resultant impact on the accounts is presently unascertained. (Refer
to Note No.B.12 of Schedule `O').
iii) No provision has been made for liquidated charges/Penal interest
payable to hanks/financial institutions for delay and default in
repayment of their loans/debentures and also no provision has been made
for interest on certain Liabilities/loans from Banks/Institutions,
(amount unascertained) (Refer Note No.B.16, B.19, B.28 and B.29 of
Schedule `O').
iv) The accompanying statement of accounts does not comply with the
Accounting Standard (AS-17) - `Segment Reporting' issued by the
Institute of Chartered Accountants of India and accordingly are subject
to omission of disclosure of information dealt and required therein
(Refer Note No B. 36 of schedule `O').
v) Note No.B.12 and B.14 of Schedule `O' regarding balances of Sundry
Debtors, Creditors, Loans, Advances and other liabilities being subject
to confirmation and reconciliation. The resultant impact on the
accounts is presently not ascertainable.
vi) Note No.B.15 of Schedule `O' regarding some unconfirmed bank
balances with schedule bank in current accounts and margin money
accounts and regarding non-confirmations of loans from banks, financial
institution. The banks statement of various accounts including Current
accounts are not available with the company for any part of the year.
The resultant impact thereof on the accounts is presently
unascertained.
vii) Note No. B.26 of Schedule `O' regarding taking over of possession
of company's immovable property by lender bank under the Securitisation
And Reconstruction of Financial Assets And Enforcement of Security
Interest Act, 2002. In the opinion of management no effect is required
to be taken in the accounts.
viii) The dividend on preference shares declared in the earlier years
amounting to Rs. 70560 thousand is still unpaid and has not been
transferred to unpaid dividend account as required by section 205A of
`The companies Act, 1956' (Refer Note No 8.37 of schedule `O').
ix) Note No. B.27 of Schedule `O' regarding pending adjustment relating
to investments amounting to Rs. 39816 thousand. The impact on the
amount is presently unascertained.
x) Miscellaneous income as shown in Schedule L includes Rs. 1987
thousand for which no proper documents evidence/satisfactory
explanation has been provided to us (Refer Note No. B.30 of schedule
`O')
xi) Inventories have not been physically verified during the year.
Hence the differences between physical stock and books records remained
unascertained. Also the net realizable value used for valuation of most
of the inventories is merely the estimate of management. No documentary
evidence/basis is available for it. The Excise records containing
movement of inventories and payment of Excise duty/availment of MODVAT
has not been provided in respect of Gauriganj Division and Bhimtal
Division. Even Book records of inventories in respect of Gauriganj
Division has not been made available to us. (Also Refer Note No. B.31
of Schedule `O'.
xii) The various documentary records relating to Fixed Assets,
borrowing, old Contingent liability figures, guarantees, investments,
remained unavailable to us by the company. (Also Refer Note No. B.12
and B.22 of Schedule `O'.
xiii) Note No. B.13 regarding revocation of various guarantees given by
the company. In the opinion of management, no effect is required to be
taken in the accounts.
xiv) On the basis of test checks carried out during the course of our
audit, certain expenses charged in the Profit & Loss account under
various heads were found to be without proper supportings/documentary
evidences. (Refer Note No. 8.25 of Schedule `O'.
b) On an overall consideration and in view of remarks in Para (a) above
and in annexure referred to in Para 1 above we have not been provided
all the information and explanations which to the best of our knowledge
and belief were necessary for the purposes of our audit.
c) On an overall consideration and in view of remarks in Para (a) above
and in annexure referred to in Para 1 above, In our opinion, proper
books of account, as required by law have not been kept by the Company
so far as appears from our examination of such books.
d) The balance sheet, profit and loss account and cash flow statement
dealt with by this report are in agreement with the books of account
and returns.
e) On an overall consideration and in view of remarks in Para (a) above
and in annexure referred to in Para 1 above, In our opinion, the
balance sheet, profit and loss account and cash flow statement do not
comply with the accounting standards referred to in Section 211 (3C) of
the Companies Act, 1956.
f) The directors of the company have not produced written
representation as to whether any other companies, in which they are
director as on 31st March, 2004, had not defaulted in terms of section
274(1)(g) of the Companies Act, 1956. However, the company has failed
to redeem its debentures on due date as further explained in note
no.B.3(a)(i)(ii) and (iii) of schedule "O" on notes to the account and
also payment of dividend on preference shares and such failure
continues for more than one year, therefore, all the directors of the
company (other than nominee directors of institutions) are prima facie
disqualified from being appointed as a director in any other public
company in terms of clause (g) of sub section (1) of section 274 of the
companies act, 1956.
g) In our opinion and to the best of our information and according to
the explanations (to the extent given to us), on an overall
consideration and in view of remarks in para (a), (b), (c) and (e), the
said accounts read together with Notes thereon, do not give the
information required by the Companies Act,1956, in the manner so
required and do not give a true and fair view in conformity with the
accounting principles generally accepted in India :
i) In the case of balance sheet of the state of the company's affairs
as at 31st March, 2004 ;
ii) In the case of profit and loss account of the loss for the year
ended on that date ; and
iii) In the case of cash flow statement, of the cash flows for the year
ended on that date.
For and on behalf of
P.BHOLUSARIA & Co.
Chartered Accountants
(AMIT GOEL)
Partner
M.NO.: 92648
Place: New Delhi
Date : 2nd September, 2004
ANNEXURE TO THE AUDITOR'S REPORT
(Referred to in paragraph (1) of our report of even data on the
Accounts of Usha (India) Ltd. for the year ended 31st March 2004)
1.a The Company has not produced before us record showing full
particulars including quantitative details and situation of its fixed
assets. (Refer Note No.B-22 of schedule `O')
b. Physical verification of Fixed Assets was not carried out by the
management during the year.
c. The company has not disposed of substantial part of the fixed assets
during the year.
2.a As explained to us, inventories have not been physically verified
by the management during the year.
b. Since inventories have not been physically verified during the year,
no comments can be made with regard to reasonability and adequacy of
procedures of physical verification.
c. In our Opinion, the company is maintaining proper record of
inventories except for Gauriganj Branch. Since inventories were not
physically verified during the year, We are unable to comment about the
discrepancies between the physical stocks and book records.
3. According to the information and explanation given to us during the
year the company has neither granted nor taken any loans, secured or
unsecured, to or from companies, firms and other parties covered in the
register maintained under Section 301 of the Companies Act, 1956.
In view of what has been stated above, clause (iii)(b), (iii)(c) and
(iii)(d) of para 4 of the order are not applicable to the company.
Reference is however invited to note no. B-24 of schedule `O' regarding
outstanding doubtful loans of Rs. 38764 thousand granted to
subsidiary/erstwhile subsidiary companies in earlier years We have
neither been provided evidence regarding any steps taken by the company
for the recovery of these loans nor there are any stipulations in
writing regarding the terms and conditions of interest or repayment.
4. In our opinion and according to the information and explanations
given to us the internal control procedures had to be strengthened to
be commensurate with the size of the Company and the nature of its
business for the purchase of inventory and fixed assets and for sale of
goods.
5. According to the information and explanation given to us the company
has not entered into any transaction during the year, which needed to
be entered into the register maintained under section 301 of the
Companies Act, 1956.
6. The Company has not accepted any deposits from the public during the
year.
7. The Company has an internal audit system. However the areas and
scope of internal audit need to be enlarged to make it commensurate
with its size and nature of its business.
8. According to the information and explanations given to us the
maintenance of Cost records has not been prescribed under section
209(1)(d) of Companies Act, 1956.
9.a. According to the available records of the Company, undisputed
statutory dues including Provident Fund, Investor Education and
Protection Fund. Employees' State Insurance, Income Tax, Sales-Tax,
Wealth Tax, Custom Duty, Excise Duty, Cess and other statutory dues as
applicable to the Company have not been generally regularly deposited
by the company during the year with the appropriate authorities. As
stated to us and as per books of account, no undisputed amount payable
in respect of the aforesaid dues were outstanding as at 31s March, 2004
for a period of more than six months from the date of becoming payable.
We have however not been provided the necessary information and
documentary evidence including assessment orders made during the year
in respect of various dues which in our opinion were been (recorded in
the books of accounts and no undisputed amount payable in respect of
aforesaid dues were outstanding as at 31st March 2004 for a period of
more than 6 months from the date they become payable). In view thereof
and as further stated in Note given below in Para (b), We are unable to
comment about any undisputed amount of statutory dues, outstanding for
more than 6 months as at 31st March 2004 the date of there becoming
payable.
b. Subject to note given below the disputed statutory dues that have
not been deposited on account of matters pending before appropriate
authorities as per the list provided by the Company are as under :-
Sl Nature Forum where Dispute Amount (Rs.)
No. of Dues is pending
(a) Income Tax Commissioner of Incom Tax (Appeal) Rs.37464 thousand
(b) Income Tax Income Tax Appellate & Tribunal Rs. 140 thousand
(c) Sales Tax Asst. Commissioner Rs. 1992 thousand
(Sales Tax) Appeal,Delhi
(d) Sales Tax Sales Tax Tribunal, Chandigarh Rs. 32820 thousand
(e) Sales Tax JETC (A), Faridabad Rs. 24692 thousand
(f) Sales Tax A.C. (Taxation) Rs. 159 thousand
(g) Custom Assessing Officer Rs. 9891 thousand
(h) Custom CESTAT Rs. 112 thousand
(i) Excise Duty Supreme Court Rs. 50 thousand
(j) Property Assessing Officer Rs. 245 thousand
Tax
Note :-
The aforesaid detail is as provided by the Company. However the
supporiting evidence regarding the amount of demand such as assessment
orders/demand notices could note be provided by the company. Also the
evidence of pending disputes such as filing of appeal/representation
made by company has also not been made available to us. We are
therefore unable to comment whether the aforesaid particulars are
complete and correct.
10. The accumulated losses of the Company as at the year end are more
than 50% of its net worth. The Company has incurred Cash losses during
the year as well as in the immediately preceding financial year.
11. As per the information and explanation given to, and as per balance
sheet as on 31.3.2004, the company has defaulted in repayment of dues
to financial institutions, bank and debenture holders as under :-
Amount Due date of Payment Date of Remarks
Payment
i) Rs. 500000 15.04.99-Rs. 50000 thousand Refer Schedule `C'
thousand 15.07.99-Rs. 70000 thousand and Note No. B.
15,10.99-Rs. 100000 thousand 3(a)(i) of Schedule `O'
15.01.00-Rs. 30000 thousand
15.04.00-Rs. 50000 thousand
15.07.00-Rs. 70000 thousand
15.10.00-Rs. 100000 thousand
15.01.01-Rs. 30000 thousand
Rs. 500000 thousand Not Paid
ii) Rs. 30000 3 Yearly installement Not Paid Refer Schedule `C'
thousand of Rs. 10000 thousand and Note No- B.
each starting from 3.2.1999 3 (a)(ii)of Schedule`O'
iii) Rs. 50000 03.02.2000 Not Paid Refer Schedule `C'
thousand and Note No. B.
3(a)(ii) of Schedule `O'
iv) Rs. 30000 1.4.1999-Rs. 10,000 thousand Not Paid Refer Schedule `C'
thousand 1.4.2000-Rs, 10,000 thousand and Note No. B.
1.4.2001-Rs. 10,000 thousand 3(a)(ii)of Schedule `O'
Rs. 30000 thousand
v) Rs. 664952 Proportionate amount as per Not Paid Refer Schedule `C'
thousand principal due as aforesaid
(Interest accrued
and due on I to IV
above)
vi) Rs. 45905 F.Y 2001-02 Not Paid Refer Schedule'C'
thousand (Exact date not available) and Note No. B.29
of Schedule `O'
vii) Rs 140000 14 quarterly installement Not Paid Refer Schedule `C'
thousand of Rs. 10000 thousand each and Note No. B.29
starting from1.10.1999 3(b)(i) of Schedule `0'
viii) Rs 177481 16 quarterly installement Not Paid Refer Schedule`C'
thousand Rs.11250 thousand each of Note No. B-
Starting from 15.01.1999 3(b)(i) of
Schedule `O'
ix) Rs 16414 3 half yearly Not Paid Refer Schedule`C'
thousand installement of US$ and Note No. B-
61666.66 from 15th May 2001 3(b)(iii) of Schedule`O'
and 3 half yearly installement
of US$ 63300 from 15th July 2001
x) Rs. 249704 Proportionate amount Not Paid Refer Schedule `C'
thousand as per principal due as aforesaid
(Interest accrued
and due as
on VII to IX above)
xi) Rs. 37724 Sept 2001 Rs. 19108 Not Paid Refer Schedule
thousand thousand and March 2002 and Note No. B.16
Rs. 18616 thousand of Schedule `O'
xii) Rs. 58572 F.Y.2001-02 Not Paid Refer Note
thousand (EXACT DATE NOT available) No. B-28 of
schedule `O'
xiii) Rs. 180000 12.01.1999 Not Paid Refer Schedule `A'
thousand and Note No. B-2(i)
(Redeemable of Schedule `O'
Preference Shares)
xiv) Rs 70560 Dividend Provided Not Paid Refer Schedule `J'
thousand upto 31.12.2000 and Note No. B-.37
(Dividend on (Exact due date of dividend of Schedule `O'
Preference payment not available)
Share)
Note :- The aforesaid detail and amounts are as per the books of
account of company and other available information. The above detail
does not include unprovided interest, the amount of which is
unascertained. Similarly the above detail also does not include amount
payable to bank/institutions on account of revocation of guarantees
given by the company on behalf of others. (Refer Note No. B-13 of
Schedule `O')
12. In our opinion and according to the information and explanation
given to us, no loans and advances have been granted by the Company on
the basis of security by way of pledge of shares, debentures and other
securities.
13. In our opinion, The Company is not a chit fund or a nidhi/mutual
benefit fund/society. Therefore, clause (xiii) of Para 4 of the order
is not applicable to the company.
14. As per the informations and explanation given to us, during the
year.the company has not done any transaction/contracts in securities,
debenture sand other investment. As informed to us, all the investments
are held by the company in its own name except to the extent of
exemption under section 49 of the Companies Act, 1956. We have, however
not been provided physical certificates/depository statements for the
investment held. Hence we are unable to comment about the same. Also
the complete details/confirmation and status of investment pledged by
the company are available with it.
15. As per the information and explanation given to us, during the year
the company has not given any guarantee for loans taken by others from
banks or financial institutions. In respect of guarantees given in
earlier year, in view of Note no. B-13 of Schedule "O" the terms and
conditions of guarantees are, in our opinion, prejudicial to the
interest of the company.
16. As per the information and explanation given to us and on the basis
of examination of balance sheet the company has not obtained any term
loan during the year. In respect of term loans obtained during the
earlier year's we are unable to comment as to whether the term loans
were applied for the purposes for which the loans were obtained as we
have not audited the accounts of those earlier years.
17. As per the information and explanation given to us and on an
overall examination of the Balance Sheet of the Company, we report that
the company has not raised any funds during the year either on long
term or on short term basis.
18. During the year, the Company has not made any preferential
allotment of shares to parties and companies covered in the Register
maintained under Section 301 of the Companies Act, 1956.
19. As per the information and explanation given to us,during the year,
the company has neither issued any debentures nor created any
securities in respect of debentures. In respect of debentures issued
during the earlier years and creation of securities in respect thereto
reference is invited to note no.B.3(a) of schedule `O'. Since we have
not audited the accounts of those earlier year, nor necessary documents
in the regard has been made available to us, we are unable to comment
about the same (Also refer note no. B-12 and note no. B-22 of Schedule
`O'
20. The Company has not raised any money by way of public issue during
the year.
21. As informed to us by the management, no major fraud on or by the
company has been noticed or reported during the year. Reference is how
ever invited to Note No. B.25 of Schedule `O' Regarding non
availability of evidence in respect of some of the expenses. In term of
said note we are unable to state whether or not there was some fraud
involved in it.
For P.BHOLUSARIA & CO.
Place: New Delhi Chartered Accountants
Date: 2nd September, 2004 AMIT GOEL
M.No.: 92648 |