ii) Loans from bank are secured by hypothecation of stocks of raw material, stores, finished goods, stock in process and book debts including documents of title and second charges over all immovable assets including fixed plant and machinery, attached to the earth both present and future, and guaranteed by Shri, Kuldip Raj Narang, K.K. Chawla, Shri S.L. Chopra and Shri. Karun Raj Narang, the then directors of the company.

1. Sales tax loan from PICUP is to be secured by way of second charge over properties/assets of the Noida unit of the Company and additional first and/or second charge over other properties of the company and/or guaranteed by the directors.

2. Loan from other Financial institutions represents the portion of the unpaid interest on secured loans not covered by the book value of the securities as at dose of the period due to IFCI, IDBI, ICICI.

**3. The lease hold-land buildings is mortgaged (equitable) under IFCI and as such the lease hold documents are lying with the said institution.

4. Land includes development of property Rs. 57.158.05.

5. Building for depreciation purpose has been segregated as factory and Non-Factory as estimated by Factory Management.

6. Earnings from service charges, commission, consultancy and jobwork etc shown under the head Other Income are accounted for on the basis of bills raised on completion of each job work.

A) CONTINGENT LIABILITIES :-

1. Contingent Liabilities not provided for :

a) Excise Bond - Rs. 2,00,000.00 (Previous Period - Rs. 2,00,000.00)

b) Bill of exchange discounted with bankers Rs. 24,75,859.11 (Previous Period - Rs. 31,00,308.62)

c) Claim for royalty disputed by the company - Rs. 54,30,125.96 (Previous Period Rs. 54,30,125.96)

d) An alleged claim of income tax department for assessment year 1991-92 is disputed in appeal Rs. 5,81,636.00. Income Tax assessment have been completed upto assessment year 1996-97.

e) An alleged claim of a contractor for Rs. 26,13,590.00 (Previous Period Rs. 24,62,263.00) including interest there on.

2. Some amounts shown as recoverable in schedule 7 & 8 and payables in schedule 3, 4 & 9 are subject to confirmation of the relevant parties. These accounts when reconciled may affect different heads of Profit & Loss Account and the Balance Sheet.

3. No provision has been made for doubtful loan & advance and Sundry debtors aggregating to Rs. 27,82,282.45

4. Provision for accrued leave encashment Of continuing employees has not been determined and as such not provided. To the extent of this liability the accounts are not maintained on accrual basis.

5. To verify the MODVAT claim the consumption of raw material and stores could not be reconciled with relevant excise records because the copies of stock statements and relevant records submitted to the excise department could not be located therefore not produced to auditors for their verification.

6. Share Application Refund account Rs. 2,74,407.00 (Previous Period-Rs. 2,74,407.00) and calls unpaid on account of allotment money - Rs. 1,06,000.00 ( Previous Period Rs. 1,06,000.00) is pending for reconciliation due to non-receipt of details from bank.

7. Balance confirmation from the financial institutions (IFCI, IDBI & ICICI) in respect of principal & interest due from the company at the close of the period are still to be obtained, therefore could not be produced before auditors for verification. Consequently auditors have relied upon the balance appearing in the books of the company.

8. No provision has been made for diminution in the value of investments in shares of bodies corporate amounting to Rs. 6,50,000.00.

9. Closing stock of raw-material, stores & spares, finished goods and semi finished goods are accounted for on the basis of physical verification of such stock by the Management because the quantitative records of raw material stores, finished goods and semi finished goods are under the reconciliation with relevant figure of accounting records.

10. The service tax on payment to some of the transporters relating to earlier year has not been deducted and therefore not deposited. The liability on this account has not been determined and as such not provided by the company.

11. The statement of Company's Account with its bankers are issued by the relevant bankers without authenticating the same on the plea that most of them ate computerised. Therefore, the auditors have relied upon such unauthenticated statements.