| We have audited the attached Balance Sheet of DESIGN AUTO SYSTEMS
LIMITED as at 31st March 2007 Profit & Loss Account and also the Cash
Flow Statement for the period from 01.07.2006 to 31.03.2007 annexed
there to. These financial statements are the responsibility of the
Companys 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 of material misstatements. An audit includes
examining on test basis, evidence supporting the amounts and
disclosures in financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements
presentation. We believe that our Audit provides a reasonable basis for
our opinion.
1. As required by the Companies (Auditors Report) (Amendment) Order,
2004, issued by the Company Law Board in terms of Section 227(4A) of
the Companies Act, 1956, we annex hereto 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:
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 it appears from our examination of
these books;
c) The Balance Sheet, Profit & Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of accounts;
d) In our opinion the said Profit & Loss Account, the Balance Sheet and
Cash Flow Statement comply with the accounting standards referred to in
Section 211 (3C) of the Companies Act, 1956 except in case of
Accounting Standard-15 regarding accounting of retirement benefits;
(Refer note 1(vi) of Sch.18) & Accounting Standard-13 regarding
accounting of investments; (Refer note 1(iv) of Sch.18), the decline in
value of investments, other than temporary, if any, could not be
ascertained in respect of quoted non-trade and unquoted non trade
equity shares for want of quotations/ desired information.
e) On the basis of written representations received from the Directors
of the Company as at 31 st March 2007 & taken on record by the Board of
Directors, we report that no Director is disqualified from being
appointed as Director of the Company under clause (g) of sub-section
(1) of Section 274 of the Companies Act, 1956; and
f) The balances of Sundry Debtors, Sundry Creditors and Loans and
Advances are subject to confirmation from the respective parties (refer
note No. 12 of schedule "18" of Notes on Accounts). In our opinion
sundry Debtors amounting to Rs. 9257748 and Advances of Rs. 2042171 are
doubtful of recovery. Hence loss for the year is understated by Rs
11299919 and the Sundry Debtors are overstated by Rs. 9257748 and
Advances are overstated by Rs.2042171.
g) The company is continuing its corporate guarantee of Rs. 150 Lacs to
Bank of Baroda against loans to Design Auto Distributions Ltd., without
obtaining prior permission from Central Government as per the
provisions of section 295 of Companies Act, 1956.
The Company is continuing advances to Sterling Auto Pvt. Ltd.
outstanding at the year end of Rs. 1957038/-, in which Mr.
Sarvesh Garg is a Director, without obtaining prior approval from
Central Government as per the provisions of section 295 of Companies
Act, 1956. h) As per terms and conditions of CDR Package the company
is liable for payment of interest sacrifice amount, the payment of
which will due at the end of CDR period (Refer Note No 6 of Notes on
Accounts in Schedule "18"). In our opinion the liability is
crystallised on year to year basis within the CDR period.
The company has not made provision for interest sacrifice amount for
the period of Rs. 144.00 Lacs in the accounts and total amount remains
unprovided Rs. 804.74 Lacs.
Therefore the Loss for the year is understated by Rs 144.00 Lacs and
Secured Loans are understated by Rs. 804.74
Lacs i) As per the modified CDR package, the provision for differential
interest of IDBI portion of FITL II loan was required to be
made but not made by the company. (Refer note no. 7 of notes on
accounts of schedule 18). The company has estimated
the amount of provision at Rs. 3548311/-, therefore the loss for the
year & secured loans are understated by Rs. 3548311/-
j) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read with the notes
thereon in Schedule No. 18 give the information required by the
Companies Act, 1956, in the manner so required and subject to the
remarks in para (f) to (i) give a true and fair view: i) In the case of
Balance Sheet, of the state of affairs of the Company as at 31st March
2007, and; ii) In the case of Profit & Loss Account, of the Loss for
the period ended on that date, iii) In the case of Cash Flow Statement,
of the cash flows for the period ended on that date.
ANNEXURE TO AUDITORS REPORT
1. (a) The Company has maintained proper records showing full
particulars including quantitative details and situation of its fixed
assets. However it has not been updated properly.
(b) We have been informed that the fixed assets of the Company are
physically verified by the Management according to a phased program
designed to cover all the items at reasonable interval, which in our
opinion, is reasonable having regard to the size of company and the
nature of its assets, and no material discrepancies were noticed on
such verification.
(c) During the period no substantial parts of fixed assets have been
disposed off by the company.
2. (a) The inventory has been physically verified during the period by
the management. In our opinion the frequency of verification is
reasonable.
(b) In our opinion, the procedures of physical verification of
inventory followed by the Management are reasonable and adequate in
relation to the size of the Company and nature of its business.
(c) The Company is maintaining proper records of inventory. The
discrepancies in the physical stocks and the book stock noticed on
physical verification as mentioned in paragraph 2(a) above were not
material.
3. (a) As per the information & explanation given to us and the
records produced to us for our verification the company has granted
unsecured loan to a company covered in the register maintained under
section 301 of the Companies Act, 1956. The maximum amount involved
during the period was Rs. 1957038/- and closing balance was same.
(b) In our opinion, the rate of interest and other terms and conditions
on which loan have been granted to Companies, Firms or other parties
listed in the register maintained U/s 301 of the Companies Act, 1956
are not prima facie prejudicial to the interest of the company except
the loan of Rs. 1957038/- given as above.
(c) In respect of the aforesaid loans, the company is regular in
receiving the principal amount as stipulated and has been regular in
receiving interest, wherever applicable.
(d) In respect of the aforesaid loans, there is no overdue amount more
than Rupees One Lakh from the parties listed in register maintained U/s
301 of the Companies Act, 1956 except in case of one company mentioned
above.
(e) As per the information & explanation given to us, and the records
produced to us for our verification the Company has taken interest free
unsecured loan from two Companies & one other party covered in the
register maintained under Section 301 of the Companies Act, 1956. The
maximum amount involved during the year was Rs. 211214427- and the
year-end balance was Rs.20760192/-.
(f) In our opinion, other terms and conditions on which unsecured loans
have been taken from Companies, Firms or other parties listed in the
register maintained U/s 301 of the Companies Act, 1956 are not prima
facie prejudicial to the interest of the company.
(g) In respect of the aforesaid loans, the company is regular in
repaying the principal amounts as stipulated and has been regular in
payment of interest, where applicable. The parties are repaying the
principal amounts as stipulated and are also regular in payment of
interest, where applicable.
4. In our opinion, and according to the information and explanations
given to us there are internal control procedures with regard to
purchase of inventory, fixed assets and with regard to the sale of
goods and services and the same needs to be further strengthened to
make them commensurate with the size of the Company and nature of its
business.
5. (a) According to the information & explanation given to us, we are
of the opinion that the provisions of Section 58A of the Companies Act,
1956 and the Companies (Acceptance of Deposits) Rules 1975, were
applicable with regard to the deposits accepted by it from the public.
Since the Company has not defaulted in repayments of deposits,
compliance of Section 58AA or obtaining any order from the National
Company Law Tribunal, does not arise.
6. In our opinion, the Company has an internal audit system but the
same needs to be improved further to make them commensurate with its
increasing size and nature of its business.
7. As per the information and explanation given to us, maintenance of
cost records has not been prescribed by the Central Government under
Section 209 (1)(d) of the Companies Act, 1956 for the products
manufactured by the Company.
8. According to the books and records as produced and examined by us
in accordance with generally accepted auditing practices in India and
also based on Management representations, undisputed statutory dues in
respect of Provident Fund, Employees State Insurance, Investor
Education Protection Fund, Income Tax, Wealth Tax, Sales Tax, Excise
Duty, Custom Duty, Cess and other material statutory dues have
generally been regularly deposited by the Company during the year with
the appropriate authorities in India except following Dues:
Statutes Nature of demand Amount (In Rs.) Period
Sales tax Tax/interest/penalty 947404/- 2001-02
Provident Fund Employer & Employee
Contribution 3488891/- 2006-07
FBT Tax Provision 362000/- 2005-06
VAT Taxes on Sales 3725621/- 2005-07
9. According to the records of the Company and the information and
explanation given to us upon our enquiries in this regards, disputed
dues in respect of Sales tax, Company Law and Income tax unpaid as at
the last day of the period, are as follows:
S. No. Statutes Nature of demand
(i) Sales tax Tax/I nterest/Penalty
Tax /Interest/Penalty
(ii) Company Additional fees
Law
(iii) Income Tax Tax
Forums Amount (In Rs.) Period
Tribunal 3214200/- 1998-99
Tribunal 627300/- 1999-00
ROC,
M.P. 2688944/- 2001-02
ITAT 128290/- 1994-95
10. In our opinion the accumulated losses of the company are not more
than 50% of its net worth The Company has incurred the cash losses
during the period amounting to Rs.6294884/- and it has also incurred
cash loss of Rs. 41714299/- in the immediately preceding financial
period.
11. According to the records of the company it has not defaulted in
repayment of its dues to any financial institution or bank during the
period except the dues of IIBI amounting Rs. 14.69 Lacs.
12. The Company has not granted any loans or advances on the basis of
security by way of pledge of shares, debentures and other securities.
13. In our opinion, considering the nature of activities carried on by
the Company during the period, the provisions of any special statute
applicable to chit fund/ nidhi /mutual benefit fund/ societies are not
applicable to it.
14. The Company has not dealt or traded in shares , securities,
debentures or other investments during the period but sold certain
Shares held as investment.
15. In our opinion, and according to the information and explanations
given to us the Company has given Corporate guarantee for Working
Capital loans taken by Design Auto Distributions Limited from banks,
terms and conditions whereof are not prejudicial to the interest of the
company.
16. According to the information & explanation given to us the Company
has not obtained any term loan during the year under review.
17. According to the information and explanations given to us and on
an overall examination of the Balance Sheet of the Company, short term
funds amounting Rs. 133.74 Lacs, have been invested in creation of
Fixed Assets.
18. The Company has not raised any money by public issue during the
period.
19. As per the information and explanations given to us and on the
basis of examination of records, no material fraud on or by the Company
was noticed or reported during the period.
For S. N. KABRA & CO,
Chartered Accountants,
Place : Indore S.N. KABRA
Date : 12th September, 2007 Proprietor | 