ARIHANT INDUSTRIES LIMITED
Arihant Industries Limited
We have audited the attached Balance Sheet of ARIHANT INDUSTRIES LIMITED as
at 31 st March,1998 and the Profit & Loss Account for the year ended on
that date annexed thereto both signed by us under reference to this report
and report that:- .
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 account as required by Law have been
kept by the company, so far as appears from our examination of such books.
c) The Balance Sheet and Profit and Loss Account dealt with by this report
are in agreement with the books of accounts.
d) In our opinion, and to the best of our information and according to the
explanations given to us, the said accounts, subject to Note No.6 regarding
non confirmation of balances and the effects thereof on Profit & Loss
Account cannot be reflected, Note No.11 regarding non-provision of Gratuity
8 Leave with Wages during the year amounting to Rs.5330734/ - aggregating
Rs.9601379/- (Previous year Rs.42,70.645/-) resulting in under statement of
Loss for the year by Rs.5330734/ -, non provision of interest on over-due
bills Rs.97,605/- and Lease rent on machine amounting to Rs.20435798/-
being accounted for on cash basis Note No. 12 regarding allocation of
debentures and rights-cum public issue expenses amounting to Rs.12979426/-
to fixed assets instead of treating a deferred revenue resulting in higher
provision of depreciation by Rs.976489/- and lower provisions of deferred
revenue expenditure by Rs.12,97,943/-, consiquently the revaluation &
deferred revenue expenditure has been under stated by Rs. 6593185/-, Note
No.13 regarding provisions for bad and doubtful debts Note No.14 regarding
previous year expenses/income Rs.189081/- & Rs. 2500180 respectively, Note
No.18 regarding financial expenses shown net of interest income of
Rs.11508746/-, Note No.21 regarding revaluation of some of the fixed assets
namely Land, Building and Plant and Machinery, Note No.22 regarding capital
work-in-progress, regarding allocation of trial run expenditure net of
income amounting to Rs.19707168/- to plant & machinery instead of charging
to Profit & Loss Account, during 1995-96, consequently depreciation for the
year has been over stated by Rs.1112721/- (upto Previous year 3130828/-).
Plant & Machinery and Reserve and Surplus over stated for Rs.15463619/- and
revaluation reserve understated by Rs. 15463619/- and general reserve
overstated by Rs.15463619/-, Regarding delay in creation of securities, in
favour of debenture-trustees on which additional interest amounting to
Rs.14.83 lacs not provided.
Regarding non compliance of Section 205A(4) and 205A(5) of the Companies
Act, 1956 relating to transfer of un- claimed dividend and interest thereof
amount to Rs.4229536/- to General Revenue Account of the Central Government
regarding cash-in-hand including imprest with staff of Rs.232.05 lacs
account thereof is yet to be adjusted, regarding Note No.16 Balance with
scheduled banks in current accounts, Secured loans from banks which
includes cheques deposited/in hand for Rs.1247.66 lacs and cheque issued
amounting to Rs.1293.33 lacs and read together with other notes(as per
Annexure 'U') give the information required by the Companies Act, 1956 in
the manner so required and give a true and fair view:
i) in case of Balance Sheet of the state of affairs of the Company as at 31
st March, 1998 and
ii) in case of Profit and loss account, of Loss for the year ended on that
date. As required by the Manufacturing and other Companies (AUDITORS
REPORT) Order, 1988 issued by the Central Government in exercise of the
power conferred by Section 227 (4A) of the Companies Act,1956 and according
to the information and explanations given to us and on the basis of such
checks as we considered appropriate, we further state that:
A.1. The Company has maintained proper records showing full particulars
including quantitatives details and situation of Fixed Assets. All the
assets have not been physically verified by the Management during the year
but there is a regular programme of verification 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 verification.
2. Some of the Fixed Assets namely land, Building and Plant Machinery have
been revalued during the year at their fair market value on the basis of
the valuer's report. The difference arising on the re-valuation have been
separately disclosed in the Balance Sheet.
3. The Stock of finished goods, spare parts and raw materials have been
physically verified during the year by the management. In our opinion, the
frequency of verification is reasonable.
4. The procedure of physical verification of stocks followed by the
management are reasonable and adequate in relation to the size of the
company and the nature of its business.
5. The discrepancies noticed on verification between the physical stocks
and the book records were not material.
6. On the basis of our examination of stock records, we are of the opinion
that the valuation of stock is fair and proper in accordance with the
normally accepted accounting principles and is of the same basis as in the
7. The company has not taken any loans, secured or unsecured from
Companies, Firms or other parties listed in the register maintained under
section 301 of the Companies Act, 1956 (1 of 1956) and defined under sub-
section (1 B) of section 370 of the Companies Act, 1956 (1 of 1956).
8. The Company has not granted any loans Secured or Unsecured to Companies,
Firms or other parties listed in the register maintained under Section 301
of the Companies Act,1956 (1 of 1956), however, the company has granted
Loan to the Company under the same management within the meaning of Section
370 (18) of the Companies Act 1956 (1 of 1956).
9. In respect of loans and advances given by the company to the employees
the principal amounts are recovered as stipulated but no interest is being
charged, in respect of other loans and advances there is no stipulation
regarding repayment of principal. However, the company has provided
interest on most of these advances.
10. In our opinion and according to the information and explanations given
to us there are adequate internal control procedure commensurate with the
size of the company and the nature of its business with regard to purchase
of stores, raw materials including components, plant 8 machinery, equipment
and other assets and also with regard to the sale of goods.
11. In our opinion and according to the information and explanations given
to us, the transactions of purchase of goods and materials and sale of
goods, materials and services made in pursuance of Contracts or
arrangements 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 have been made at prices which are reasonable
having regard to prevailing market price for such goods, materials or
services, the price at which transactions for similar goods materials or
service have been made with other parties.
12. During the period under review, no part of stores, raw materials and
finished goods were determined as unserviceable or damaged by the
13. In our opinion and according to information and explanation given to
us, the company has compiled with provisions of Section 58A of the
Companies Act, 1956 and Companies (Acceptance of Deposit Rules, 1975) with
regard to the deposit accepted from the Public.
1,. In our opinion, reasonable records have been maintained by the Company
for the sale and disposal of its realisable by products and scrap.
15. The Company has an adequate internal audit system commensurate with
size and nature of the business of the company.
16. We have broadly reviewed the books of accounts maintained by the
company pursuant to the Order made by the Central Govt. for the maintenance
of cost Records under Section 209 (1)(d) of the Companies Act, 1956 and are
of the opinion that prima facie the prescribed accounts and records have
been made and maintained.
17. According to the records of the Company provident fund and employees
state insurance dues have been regularly deposited during the year with the
18. According to information and explanations given to us, No undisputed
amount in respect of Income Tax, wealth Tax, Sales Tax, Customs Duty and
Excise Duty were outstanding as at 31 st March, 1998 for a period of more
than six months from the date they become payable.
19. According to information and explanations given to us, no personal
expenses of employees or directors have been charged to revenue account
other than those payable under contractual obligations or in according with
generally accepted business practices.
20. The Company is not a sick industrial company within the meaning of
clause "O" of sub section (1) of Section (3) of the Sick Industrial
Companies (Special Provisions) Act, 1985.
B. In respect of service activities of the company
i) The company has a reasonable system of recording receipts, issues and
consumption of materials and stores cum-mensurate with the size and nature
of its business and the charges are made on the basis of predetermined
rates which do not require the allocation of man hours consumed to the
il The company has reasonable system of authorisation at proper levels with
necessary control on the issue of stores but the allocation of stores and
labour to jobs does not arise due to reasons stated above.
C. In respect of trading activities of the company there are no stock of
for DASS KHANNA & CO.