CAVALET INDIA LIMITED
B.N.GOVINDA PRASAD # 22/2,1\1.J. Chambers, 3rd Floor,
Chartered Accountants Tasker Town, Bangalore-560 051
AUDITORS REPORT TO THE MEMBERS OF CAVALET INDIA LIMITED
We have audited the attached Balance Sheet of CAVALET INDIA LIMITED as at
31st March 1997 and the Profit and Loss account of the Company for the year
ended on that date and report that:
1. As required by the Manufacturing and other Companies (Auditors Report)
Order, 1988, issued by the Central Government in exercise of powers
conferred by Section 227 (4A) of the Companies Act, 1956, and on the basis
of such checks of the books and records as we consider appropriate and
according to the information and explanations given to us during the course
of our audit, we enclose in Annexure, a statement on the matters specified
in para 4 and 5 of the said Order.
2. Further to our comments in the Annexure referred to in paragraph 1 above
and subject to -
a) non-reconciliation of allotment monies receivable of individual
shareholder's folios as stated in paragraph 2 of Schedule-Q;
b) non reconciliation and confirmation of advances on capital account as
stated in paragraph 7 of Schedule Q;
c) non reconciliation and confirmation of individual balances of Sundry
Creditors as stated in paragraph 9 of Schedule Q;
d) Non quantification and consequently not providing for company's
liability towards Provident Fund, Gratuity and Superannuatuion benefits as
stated in paragraph 12 of Schedule Q;
e) Shot-provision of depreciation amounting to Rs. 5,039,596.98 as stated
in paragraph 13 of Schedule Q;
f) Non-provisions of interest on Bridge Loan from Vysya Bank Limited,
amounting to Rs. 34,93,306.00 as stated in paragraph 14 of Schedule Q;
g) Non-provision of interest/hire-purchase charges, if any, on overdue
payments of hire purchase loan for acquiring Dies and Tools from Weizmann
Industries Limited, amounting to Rs. 19,97,453.00 as stated in paragraph 15
of Schedule Q;
h) Short-provision of interest amounting to Rs. 14,52,770 on Term Loan
from M/s. K.S.I.I.D.C. Limited and amounting to Rs. 11,94,259.00 on Term
Loan from M/s. K.S.F.C. Limited as stated in paragraph 16 of Schedule Q;
i) non compliance with the provisions of Section 383A of the Companies
Act, 1 956, regarding appointment of a whole time Company Secretary as
stated in paragraph 19 of Schedule Q;
we have obtained al the information and explanations which to the best of
our knowledge and belief were necessary for the purpose of our audit.
3. In our opinion, proper Books of Account as required by law have been
kept by the Company so far as appears from out examination of those books.
4. The Balance Sheet and the Profit and Loss Account dealt with by this
report are in agreement with the Books of Account.
5. In our opinion and to the best of our information and according to the
explanations given to us, the said Balance Sheet and the Profit and Loss
account read with the notes thereon and subject to what has been stated in
para 2 above, give the information required by the Companies Act, 1956, in
the manner so required and give a true and fair view:
i) In the case of the Balance sheet, of the State of affairs of the Company
as at 31st March 1997; and
ii) In the case of the Profit and Loss account, of the Loss for the year
ended on that date.
For B.N. Govinda Prasad
B. N. GOVINDA PRASAD
ANNEXURE REFERRED TO IN PARAGRAPH 1 OF THE REPORT OF EVEN DATE OF THE
AUDITORS TO THE MEMBERS OF CAVALET INDIA LIMITED ON THE ACCOUNTS FOR THE
YEAR ENDED ON 31ST MARCH 1997
In our opinion, based on the information and explanations furnished to us
and such checks we consider appropriate in the normal course of our audit
and to the best of our knowledge and belief, we further report that:
1. The Company has maintained proper records to show full particulars
including quantitative details and situations of fixed assets. The fixed
assets of the Company have been physically verified by the management at
reasonable intervals and no materials discrepancies have been noticed on
2. None of the fixed assets were revalued by the Company during the year.
3. The physical verification of stores, spare parts and raw materials have
been conducted by the namagement at reasonable intervals and no materials
discrepancies have been noticed on such physical verification. As per
information and explanations obtained, the procedures of physical
verifications of stocks followed by the management are generally reasonable
and adequate in relation to the size of the Company and the nature of it's
4. In our opinion, the valuation of inventories is fair and proper in
accordance with the normally accepted accounting principles and is on the
same basis as in the previous year.
5. The Company has taken loans from directors & firms in which the
directors are interested as directors and/or partners during the year under
review. These loans are unsecured and non-interest bearing and the terms
and conditions of the loans, in our opinion, are not prima facie
prejudicial to the interest of the Company. No register is maintained under
Section 370 (1B) of the Companies Act, 1956, since there are no companies
under the same management to whom loans have been made.
6. 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, and also to the Companies under the
same management as defined under section (1B) of Section 370 of the
Companies Act, 1956.
7. In our opinion and according to the information and explanations given
to us, there are adequate internal control procedures 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, equipment
and other assets and for the sale of goods.
8. According to the information and explanations given to us, there were no
purchase of goods and materials exceeding or equal to Rs. 50,000/- in
aggregate during the year in pursuance of contracts or arrangements entered
in the register maintained u/s 301 of the Companies Act, 1956. During the
year under review, there have been sale of goods to a firm in which
directors are interested and according to the information and explanations
given to us, the terms of such sale are reasonable.
9. The Company has not accepted any deposits from the public within the
meaning of the provisions of Section 58A of the Companies Act, 1956.
10. The activities of the Company did not result in generation of any
significant scrap or by-product.
11. The Company did not have any formal Internal Audit System during the
year under review. However, the Company has explained that it's internal
control procedures involve reasonable internal checking of it's financial
records which is considered adequate under the circumstances.
12. As informed to us, the Central Government has not prescribed
maintenance of cost records Under Section 209 (1) (d) of the Companies Act,
1956 in respect of the activities of the Company.
13. We are given to understand that consequent to M/s. K.S.I.I.D.C. Limited
taking possession of the factory premises, most of the labour force have
left. Hence, the Company has not taken necessary steps for registration
under the Provident Fund law. The Company has been generally regular in
depositing Employees' State Insurance dues with the appropriate
14. According to the information and explanations given to us, there were
no undisputed amounts payable in respect of Wealth tax, Sales tax, Customs
Duty and Excise Duty outstanding as at 31st March 1997 for a period of more
than six months from the date they became payable Rs. 1,82,330 levied as
Income Tax for the Assessment Year 1993-94 has neither been paid nor
appealed against by the Company.
15. According to the information and explanations given to us and the
records examined by us, no personal expenses of employees or directors have
been charged to Profit and Loss account, other than those payable under
contractual obligation or in accordance with the generally accepted
16. The Company is not a sick industrial company within the meaning of
clause (o) of sub-section (1) of Section 3 of Sick Industrial Companies
(Special Provisions) Act, 1985.
For B.N. Govinda Prasad
B.N. GOVINDA PRASAD