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Carona Ltd.

BSE: 509495 Sector: Others
NSE: N.A. ISIN Code: N.A.
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Carona Ltd. (CARONA) - Auditors Report

Company auditors report

ANNUAL REPORT 1999-2000 CARONA LIMITED AUDITORS' REPORT We have audited the attached Balance Sheet of CARONA LIMITED as at 31st March, 1999 and also the annexed Profit and Loss Account of the Company for the year ended on that date and report as under: 1. As required by the Manufacturing and other Companies (Auditor's Report) Order, 1988 issued by the Company Law Board in terms of Section 227(4A) of the Companies Act, 1956, we annex hereto a statement on the mattes specified in paragraphs 4 and 5 of the said Order. 2. Further to our comments in the Annexure referred to in Paragraph 1 above we report that: 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. In our opinion, proper books of account as required by law have been kept by the Company, so far as it appears from our examination of the books of the Company: The Balance Sheet and Profit and Loss Account dealt with by the report are in agreement with the books of account of the Company. 3. Attention is drawn to Note 23 in Schedule 17 with regard to Year 2000 compliance, which is solely a management responsibility. Audit is neither intended nor designed to identify or detect problems that may result from computer hardware, software or other automated processes' inability to properly process date as related to year 2000. However, in the opinion of the management, the problem of Year 2000 will not vitiate the assumption of going concern. 4. In our opinion and to the best of our information and according to the explanations given to us, the Accounts, subject to; Note No.3: (1) relating to non provision of Rs.352.07 lacs towards gratuity liability in respect of employees who have already left the Company (ii) relating to non provision of gratuity liability in respect of existing employees of the Company and accounting of the same on payment basis. Note No.4 relating in non-ascertainment by the Company of the Interest liability on delayed payments to Small Scale and/or Ancillary Industrial suppliers. Note No.6(1): relating to accounts being reported on going concern basis despite erosion of the entire networth of the Company. Note No.7: relating to balances in respect of debtors, creditors, loans and advances, etc. which are as per books of account only, since no confirmation have been called by the Company and since some of the accounts are under reconciliation: Note No.14: relating to certain Bank Accounts in the books of the Company, which are neither confirmed by the bankers nor reconciled by the Company: Note No.15: relating to granting of loans to body corporates, in contravention of the provisions of Sections 37 of the Companies Act, 1956.1he amounts of such loans can not be determined, since, these accounts are operated in the nature of current accounts: Note No.18: relating to certain amounts included in Sundry Creditors and advances recoverable in cash or kind, aggregating to Rs.22.82 lacs, which are under reconciliation. Note No.25: relating to non-provision of interest liability amounting to Rs. 105.28 Lacs upto 31.3.1999 On Partly Convertible Debentures which were redeemable at par on or before 24th August, 1997. and which are subject to non-payment of Provident Fund dues amounting to Rs.131.11 lacs as required under Section 418 of the Companies Act, 1956, give the information required by the Companies Act, 1956, in the manner so required and present a true and fair view: (a) in the case of the Balance Sheet, of the state of affairs of the Company, as at 31st March, 1999 and (b) in the case of Profit and Loss Account, of the LOSS for the year ended on that date. for S.A. SANGANI & ASSOCIATES Chartered Accountants Place: Mumbai. Date: 23rd September, 1999 (S.A. Sangani) Proprietor ANNEXURE REFERRED TO IN PARAGRAPH 1 OF OUR AUDITOR'S REPORT OF EVEN DATE OF THE ACCOUNTS FOR TIE YEAR ENDED 31ST MARCH, 1999 OF CARONA LIMITED The comments here under must be read in the context of and subject to the limitations expressed in Paragraphs 4 of our Report of even date to the members: On the basis of such checks as we considered appropriate and in terms of the information and explanations given to us, we state that: (i) The Company's records relating to its fixed assets are not adequately maintained. The Company also does not have proper records showing full particulars, including quantitative details and situation of fixed assets. Although the record show some of the particulars of fixed assets, they need to be updated Records of remaining fixed assets after fire at Company's factory at Aurangabad on 26th March, 1998 Also needs to be updated. As informed to us, fixed assets have not been physically verified by the management during the year. In view of the above, discrepancies if any, in fixed assets, could not be determined and accordingly the same have not been dealt with in the books of account. (Also refer note no.17 in Schedule '17" to the Accounts). (ii) None of the fixed assets has been revalued during the year (iii) As explained to us, the stocks of finished goods (including goods for trade), stores, spares and raw materials have been physically verified by the management at the close of the year. (iv) The procedures, as explained to us, which are followed by the Management, for physical verification of the above referred stocks, in our opinion, considering the size of the Company and the nature of its business, needs to be strengthened. (v) According to the records produced to us for our verification and on the basis of the information and explanations given to us, discrepancies which have been noticed on physical verification of stocks referred to in (iii) above, as compared to book records, are dealt with in the books of account by adjustment at the close of the year. (vi) We have examined and verified the stock verification records of the Company. On the basis of such an examination and the assistance received from the Company's technical and commercial staff and after considering the method of accounting adopted by the Company in relation to duties (as detailed in Note No.2 in Schedule '17Mn the Accounts), we have to state that the stocks have been valued at estimated values. The resultant effect on account of such estimations on the loss for the year has not been ascertained by the Company. (vii) According to the information and explanations given to us, 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. As certified by a Director there is no company under the same management within the meaning of Section 370(1 B) of the Companies Act, 1956. (viii) According to the information and explanations given to us, the Company has at the close of the financial year, loans and other advances in the nature of loans aggregating Rs. 178.89 lacs due from Five companies listed in the register maintained under Section 301 of the Companies Act, 1956, of which Rs.45.57 lacs are interest free. All the loans are without any stipulations as to repayment. Adhoc amounts have been recovered/adjusted during the year towards the principal amounts. Except for the recovery of small amount during the year, no further recoveries have been made towards interest aggregating Rs. 132.90 lacs upto 31.3.99. Considering the financial constraints faced by the Company, the granting of such loans are in our opinion prima-facie prejudicial to the interest of the Company. The Company has not granted any loan, secured or unsecured, to firms of other parties listed in the said register. As certified by a Director, there is no Company under the same management within the meaning of Section 370(1 B) of the Companies Act, 1956: (ix) In respect of loans and advances given to employees, the Company does not have adequate records showing employee-wise loans and its recovery. Therefore, we are unable to express any opinion on the same. The Company has given interest free loans amounting to Rs.16.96 lacs to subsidiary and other Companies. There are no agreed stipulation as to the rate of Interest or repayment of principal amount. The principal amount of the loan is yet to be recovered and no steps have been taken by the Company to recover the outstanding balances. (x) In our opinion and according to the information and explanations given to us, the internal control procedures were not commensurate with the size of the Company and the nature of its business with regard to the purchase of store, spares, raw materials, including components, plant and machinery, equipments and other assets and for the sale of goods. The same need to be improved. (xi) We are informed that there are no transactions of purchase or sale of goods and materials from the parties listed in the register maintained under section 301 of the Companies Act, 1956. The Company has however entered into an arrangement for providing services to two parties listed in the register maintained under section 301 of the Companies Act, 1956 for an amount which has aggregated to Rs.50,000 or more during the year to each such party. We are informed by the Management that the price at which the services are provided are reasonable having regard to prevailing market prices of similar services. (xii) According to the information and explanations given in us, the Company does not have a regular procedure for determination of unserviceable on damaged stores, spares, raw materials and finished goods. No provision, if any, for loss in this regard, have been made in the books of account of the Company. (xiii) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Section 58A of the Companies Act, 1956 and Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public, except that out of total matured deposit of Rs.40.63 lacs at the year end, Rs.34.41 lacs were claimed by the depositors and not repaid by the company. We are informed that all the deposits aggregating to Rs.40.63 have matured by 31st March, 1999. Accordingly liquid asset is not required to be maintained on the amount of Deposits matured during the subsequent financial year as laid down under the provisions of sub-rule (1) of rule 3A of Companies (Acceptance of Deposits) Rules, 1975. (xiv) In our opinion, reasonable records have been maintained by the Company for the sale and disposal of realisable scrap. As explained to us, the Company has no by products: (xv) The Company does not have any internal audit system in operation: (xvi) According to the information and explanations given to us, maintenance of cost records under Section 209(1 )(d) of the Companies Act, 1956, has not been prescribed by the Central Government for any of the products of the Company. (xvii) According to records of the Company, the Employees' Provident Fund dues and Employees' State Insurance dues have not been regularly deposited during the year with the appropriate authorities. provident Fund dues aggregating Rs.131.11 lacs and Employees State Insurance dues aggregating Rs.10.72 lacs were in arrears as at the end of the financial years. (xviii) On the basis of the records of the Company and subject to the method of accounting followed by it with regard to accounting of duties (as detailed in note No.3 in Schedule '17- to the Accounts), no undisputed amounts were payable and outstanding in respect of Wealth-tax and Customs Duty as at the last day of the financial year, for a period of more than six months from the date they became payable. However, Excise Duty and Sales Tax amounting to Rs.10.87 lacs and Rs.51.21 lacs respectively were outstanding at the close of the financial year, for a period of more than six months from the date they became payable. (xix) On the basis of (I) the examination of the books of account of the Company; (ii) the vouchers examined by us on the test check basis; (iii) the explanations given to us against our inquiries, and (iv) the checks and controls relating to authorising payments looking to the Company's needs and exigencies and to the best of our knowledge and belief, we have not come across any personal expenses charged to revenue account, except for those which were either incurred under service contract obligations with the employees or which were incurred in accordance with generally accepted business practices, which in our opinion and judgement and to the best of our knowledge and belief could be regarded as personal expenses; (xx) The Board for Industrial and Financial Reconstruction has declared the Company as a Sick Industrial Company within the meaning of Clause (0) of Sub Section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. (xxi) In respect of the trading activity of the Company, according to the information and explanations given to us, there were no damaged goods determined during the year. for S.A. SANGANI & ASSOCIATES Chartered Accountants Date: 23rd September, 1999 (S.A. Sangani) Place Mumbai. Proprietor

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