| We have audited the attached Balance Sheet of M/s. UMA MAHESWARI MILLS
LIMITED, as at 31st March, 2001 and also the Profit and Loss Account
for the year 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.
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 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.
Subject to:
1) Regarding non-reconciliation/confirmation of balances of financial
institutions, sundry debtors, sundry creditors, loans and advances.
(Refer Note No. 11).
2) Regarding non provision of Interest on interest, penal interest and
other charges if any on financial institution (Refer Note No. 12).
3) Regarding non accounting of Transfer of 3,300 equity shares sold to
a finance company at par (Refer Note No. 14).
4) Regarding non accounting of Transfer of Personal house property to
Cholamandalam Investment Finance Company Limited. (Refer Note No. 15).
5) Regarding non provisions of bad and doubtful debts and advances
amounting to Rs. 2,78,06,916/- and Rs. 60,92,721/- respectively. (Refer
Note No. 17).
6) Non provision of Group Gratuity premium due to Life Insurance
Corporation of India for the year ended 31.3.2000 & 31.3.2001 amounting
to Rs. 5,00,778/- and Rs. 4,60,979/- respectively. (Refer Note No. 18).
7) Regarding non provision of minimum bonus for the year ended
31.3.2000 & 31.3.2001 amounting to Rs. 14,96,027/- and Rs. 19,29,793/-
respectively. (Refer Note No. 19).
8) Regarding non provision of interest on hire purchase loan for the
year ended 31.3.2000 & 31.3.2001 amounting to Rs. 34,06,646/- and
Rs. 3,91,732/- respectively (Refer Note No. 20).
9) Regarding non provision of interest payable to Bank and financial
institutions interest for the year ended 31.3.2000 & 31.3.2001
amounting to Rs. 2,62,87,931/- and Rs. 2,95,99,267/- respectively.
(Refer Note No. 21).
10) Regarding non provision of interest on companies loan, directors
loan and trade deposit for the year ended 31.3.2000 and 31.3.2001
amounting to Rs. 77,35,147/- and Rs. 77,86,962/- respectively. (Refer
Note No. 22).
11) Regarding non provision of carrying charges and interest for the
year ended 31.3.2000 an amounting of Rs. 75,96,348/-. (Refer Note
No. 23).
12) Regarding sale of machinery & Motor vehicles amounting to Rs.
42,97,615/- and Rs. 4,60,000/- respectively without the approval of
BIFR and respective charge holders (Refer note No. 24).
13) During the year deferred revenue expenditure public issue expenses
amounting to Rs. 40,91,076/- written off which is 1/5th of the expenses
(Refer Note No. 25).
14) Regarding Non compliance of section 58A for four years (Refer
Annexure to the Auditors Report 10).
15) Regarding non payment of PF and ESI dues for the year ended
31.3.1999 to 31.3.2001 amounting to Rs. 1,20,62,618/- & Rs. 34,10,467/-
respectively. (Refer Note No. 28).
As referred to in "Notes forming part of Accounts", and the consequent
effect of deviation as disclosed in the notes, the Balance Sheet gives
a true and fair view of the state of affairs as at 31.03.2001 and the
Profit and Loss Account gives a true and fair view of the loss of the
company for the year ended on that date.
As required by the Manufacturing and other Companies [Auditor's Report]
Order, 1988 issued by the Central Government of India in terms of
sub-section (4A) of section 227 of the Companies Act, 1956, we enclose
in the Annexure a statement on the matters specified in paragraphs 4
and 5 of the said Order.
Further without qualifying we state that:
The accumulated losses (before adjustment of Revaluation reserve) of
the Company have far exceeded its entire networth. The accounts have,
however, been prepared by the Management on a going concern basis as
explained in Note No. 27 of notes forming part of accounts. This being
technical matter in view of uncertainties and other facts and
circumstances of the case, we are unable to comment on the same.
However, should the company be unable to continue as a going concern,
the extent of the effect of the resultant adjustments on the networth
of the Company as at the Balance Sheet date and loss for the year is
presently not ascertainable.
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 accounts as required by law have
been kept by the Company so far as appears from our examination of
those books.
iii) The Balance Sheet and Profit and Loss Account dealt with by this
report are in agreement with books of accounts.
iv) In our opinion, the Balance Sheet and Profit and Loss Account dealt
with by this report comply with the accounting standards referred to in
Sub-section (3C) of section 211 of the Companies Act 1956;
v) On the basis of written representations received from the directors,
as on 31st March, 2001, and taken on record by the Board of Directors,
we report that none of the directors is disqualified as on 31st March
2001 from being appointed as a director in terms of clause(g) of
sub-section (1) of section 274 of the Companies Act, 1956;
vi) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts 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;
a) in the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March, 2001; and
b) in the case of the Profit and Loss Account, of the Loss for the year
ended on that date.
ANNEXURE TO THE AUDITORS' REPORT
1. The Company has not maintained proper records to show full
particulars including quantitative details and situation of Fixed
Assets. The Fixed Assets of the Company have been physically verified
by the management during the year and no serious discrepancies between
the book records and the physical inventory have been noticed.
2. None of the Fixed Assets have been revalued during the year.
3. The stock-in-trade (including raw materials) and the stock of stores
and spare parts of the Company at all its locations have been
physically verified by the management during the year. In our opinion,
the procedures of physical verification of stocks followed by the
management are reasonable and adequate in relation to the size of the
Company and nature of its business. The discrepancies between the
physical stocks and the book stocks, which have been properly dealt
with in the books of account, were not material. In our opinion and on
the basis of our examination, the valuation of stocks is fair and
proper and in accordance with the normally accepted accounting
principles and is on the same basis as in the previous year.
4. In our opinion, the terms and conditions of loans secured or
unsecured taken by the Company during the year, from Companies, Firms
and other parties listed in the Register maintained under section 301
of the Companies Act, 1956 are not prima facie, prejudicial to the
interest of the Company. There are no companies under the same
management as defined under section 370(1-B) of the Companies Act,
1956.
5. No loans have been granted to Companies, firms or other parties, as
listed in the register maintained under section 301. There are no
companies under the same management as defined under section 370 (1-B)
of the Companies Act, 1956.
6. Employees to whom loans or advances in the nature of loans have been
given by the company are repaying the Principal as stipulated or as
scheduled. The loans are interest free.
7. In our opinion, there is adequate internal control procedure
commensurate with the size of the company and the nature of its
business for the purchase of stores, raw materials including
components, plant and machinery equipments and other assets and for the
sale of goods.
8. In our opinion, the transactions of purchase of goods and materials
and sale of goods made in pursuance of contracts or arrangement entered
in the Register maintained under section 301 of the Companies Act, 1956
and aggregating during the year to Rs. 50,000/- or more in respect of
each party were made at price which were reasonable having regard to
prevalent market were made with other parties.
9. As explained to us, unserviceable or damaged stores, finished goods
and raw material are determined by the company. Adequate provisions has
been made in the accounts for the loss arising on the items so
determined.
10. In our opinion and according to the information and explanations
given to us, the company has not been complying with the provisions of
section 58A of the Companies Act, 1956 and the rules framed thereunder.
15% on liquid assets not deposited to separate bank and FD return not
yet filed to R. O. C.
11. In our opinion, reasonable records have been maintained by the
Company for the sale and disposal of realisable scrap/byproducts where
applicable and significant.
12. In our opinion, the Company has an internal audit system
commensurate with its size and nature of its business.
13. On the basis of the records produced, we are of the opinion that
prima facie, the cost records and accounts prescribed by the Central
Government under section 209(1)(d) of the Companies Act, 1956 have
been maintained by the Company. However, we are not required to carry
out and have not carried out any detailed examination of such accounts
and records.
14. According to the records maintained by the Company, Provident Fund
and Employees State Insurance dues have not been regularly deposited
with appropriate authorities amounting to Rs. 1,20,62,618/- and Rs.
34,10,467/- respectively for the under various period from April to
March 2001.
15. According to the books and records examined by us and the
information and explanations given to us, there was no undisputed
amounts payable in respect of Income-Tax, Wealth-Tax, Custom Duty,
Excise Duty and Sales Tax which have remained outstanding as at 31st
March, 2001 for a period exceeding six months from the date they become
payable.
16. According to the information and explanations given to us and on
the basis of the records 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 accounting business practice.
17. The Company is a Sick Industrial Company, within the meaning of
Section 3(l)(o) of the "Sick Industrial Companies (Special Provisions)
Act, 1985" and the company had referred to BIFR vide Case No. 90/2001.
18. In respect of the service activities of the Company:-
i) There is a reasonable system of recording receipts, issues and
consumption of materials and stores commensurate with the size and
nature of service activities undertaken and such system provided for a
reasonable allocation of the materials and stores consumed to the
relative jobs.
ii) There is a reasonable system of allocating man hours utilised to
the relative jobs commensurate with the size and nature of the Company.
iii) There is reasonable system of authorisation at proper levels with
necessary control on the issue of stores and allocation of stores and
labour to jobs. There is a reasonable system of internal control
commensurate with the size and nature of the company's service
activity.
For S. V. VISVANATHAN & ASSOCIATES,
M. J. VIJAYARAAGHAVAN
Camp: Salem, Partner,
Dated: 17th May 2002. Chartered Accountants, Auditors | 