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India Rubber Ltd.

BSE: 523788 Sector: Others
NSE: N.A. ISIN Code: N.A.
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India Rubber Ltd. (INDIARUBBER) - Auditors Report

Company auditors report

INDIA RUBBER LIMITED ANNUAL REPORT 2000-2001 AUDITORS' REPORT The Members of INDIA RUBBER LIMITED, SECUNDERABAD. We have audited the attached Balance Sheet of "M/s. INDIA RUBBER LIMITED" as at 31st March, 2001 and the annexed Profit & Loss Account for the year ended on that date. In accordance with the provisions of section 227 Sub- section (2) of the Companies Act, 1956 we report as under: 1. As required by the Manufacturing and Other Companies (Auditors Report) order 1988 issued by the Company Law Board under Section 227 (4A) of the Companies Act, 1956, we enclose in the annexure our report on the matters specified in paragraph 4 & 5 of the said order. 2. (A) Further to our comments in Annexure referred to in paragraph 1 above, we rapport as under: 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; to the extent furnished by the company. In view of the fact that the Company's plant is closed since October, 1999 and many of the staff/executives have left the company, the same has its own impact on the availability of relevant / required information, to a certain extent. 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 those books except for the stock records for work-in-progress [refer 2(A) (h)(ii)] below and paragraph 6 of the Annexure to this report; As regards secretarial matters and its compliance and as to the relevant records there to we could not verify in detail and we have depended on the certificate from the Managing Director. c) The said Balance Sheet and the Profit & Loss Account are in agreement with the books of account; d) In addition to our observations "in para 20 of Annexure" to the Auditors' Report, attention is also invited to note 1 of "Schedule 23" regarding the Company becoming 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; and the reference made by the company thereon to Board for Industrial and Financial Reconstruction (BIFR) having been rejected as not maintainable. e) The said Profit and Loss Account and Balance Sheet comply with the accounting standards referred to in section 211(3C) of the Companies Act, 1956 except in case of accounting standards AS-13 i.e., Accounting for investments [refer 2A(g)(i) below] f) On the basis of the written representation received from the Managing Director: and taken on record by the Board of Directors, we report that none of the Director is disqualified as on 31st March, 2001 from being appointed as a Director under clause (G) of sub-section (1) of Section 274 of the Companies Act, 1956. g) No provision has been made in respect of the following items (Rs. in lacs) i) permanent diminution in the value of long term investments which have been delisted from the stock exchange [refer also 2(A)(e) above] 3.00 ii) penal interest under Section 205A(4) of the Companies Act, 1956 on account of non-transfer of unpaid dividends to a separate account (refer also 2(A)(h)(i) below) 3.62 iii) Sundry Debtors - old (commented further below) 78.24 iv) Advances to associate concerns & others (commented further below) 141.82 v) Provision of interest on certain Unsecured Loans Amount not (as per Schedule 4 to Balance sheet) ascertainable vi) Income Tax demands for the Asst. years 97-98 and 2.09 98-99, which are undisputed. h) Our report on the accounts dealt with herein are subject to the following specific comments, in addition to those made in above paras and in Annexure to this report. i) Unpaid dividend amounting to Rs.5.60 lacs relating to the year 1994-95 pertaining to promoters shareholding (Out of total liability of Rs.7.84 lacs) together with interest thereon has not been transferred to "unpaid dividend account"/ Government as required by-Section 205 A of the Companies Act, 1956 as at 31st March, 2001. ii) In view of the non-maintenance of stock records for working progress; we are unable to express an opinion regarding the existence and valuation thereof amounting to Rs.3.72 lacs (refer paragraph 6 of Annexure to this report). Further, the inventories of raw materials and finished goods and work-in-progress and stores as certified and valued by Management and as verified from the relevant excise records (other than for work-in-progress) is considered and no physical verification thereon could be undertaken by us in view of the closure of the factory. iii) The Debtors, Creditors balances; and of parties/ accounts (from whom unsecured loans are obtained and to whom advances are paid and amounts are due as of date) have not been supported by confirmation of balances; Statement of accounts; reconciliation's thereof nor any correspondence thereto: iv) Major portion of the said sum in the above accounts as shown under Schedules 9 & 11 relate to opening balances. We are unable to express an opinion as to its recoverability or otherwise, in the absence of any correspondence thereof nor any confirmations and assurances as to neither its repayments: nor any candid explanations thereto. v) Sundry Debtors of Rs.78.24 lacs, as per "Schedule 9" represents entirely the debts older than 6 months which relate to earlier year's sales of more than 1-3 years, except Rs.8.57 lacs pertaining to the sales of the year under report which are also of more than six months old. In the absence of any correspondence nor candid written assurances as to its repayment, an opinion cannot be expressed by us as to its recoverability or otherwise. We are of the opinion that provisions there against should be made to the full extent. vi) Majority of the Loans & Advances due from firms/ and their associate concerns in which Directors and their relatives are interested and as to other advances, as mentioned under "Schedule 11" to Balance Sheet; are also old as commented under item 8 (b) of annexure to this report; and provisions there against have to be made. vii) The accounts are prepared on historical cost basis and on "going concern concept", as detailed under item 1 of accounting policies "Schedule 22", and thus the values as per books of accounts are adopted. The comments under item 1 of Annexure to Auditors' Report as to Fixed Assets and Fixed Assets register, reconciliations there of and its updating and not having periodical inspection/ verification reports, are also relevant for compliance In the absence of these supporting, we have completely depended on the certificate from the Managing Director including that of Fixed Assets of Unit - II, which are under capital works in progress and are not yet been put to use. I) Subject to the foregoing ard subject to making provisions to respect of items broughtout under paras (g) and (h) above having its own impact on the loss of the company for the year under report: in our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with significant accounting policies and notes on accounts as per "Schedule - 23", 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 31st March, 2001 ii) In the case of the Profit and Loss Account, of the "loss" for the year ended on that date. for P. S. IYYENGAR & Co., Chartered Accountants Place : Hyderabad (P. V. R. IYYENGAR) Date : 26.11.01 Partner Enclosure: Annexure- forming part of the report (as mentioned under item 1 above) ANNEXURE TO THE AUDITORS' REPORT (REFERRED TO IN PARAGRAPH I OF OUR REPORT OF EVEN DATE) 1. The Company has maintained certain records showing particulars including quantity details of fixed assets which need to be updated. In respect of Assets acquired for unit-II, which has not yet commenced commercial operations, (which are shown under capital works in progress as per Schedule 5 to Balance Sheet) the company has not incorporated the said details in the Fixed Assets register. Further the reconciliation of fixed assets as per the relevant register vis-a-vis the respective financial data as per Balance Sheet is pending. The Management informs that they have undertaken verification of fixed assets at the time of obtaining a detailed valuation report of both the units of the company and no major discrepancies have been found. We have relied on the undertaking from Management in this regard, since no reconciliation as cited above have been undertaken and no inspection reports thereon are available for the year under report, except valuation report by an independent valuer, which was undertaken in August, 2001. The Assets are considered at Historical cost and as per values as per the books of accounts on "going concern concept", as detailed under item - 2(h) (vii) of the main report and item 1 of 'Schedule-23' to Balance Sheet. 2. None of the fixed assets have been revalued during the year. 3. As explained to us, stocks of finished goods, stores, spare parts and raw materials have been physically verified by the management during the year. The confirmation from Management in this regard is only taken as the base for our report, as no periodical Inspection reports in respect of Physical verification of stocks have been compiled by the Management. In view of the closure of the factory, we have not undertaken any physical verification of inventories and we have considered the quantitative and value data as furnished and as confirmed by Management. 4. 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 as informed to us by Management, subject to our comments under 'Para 3' above. 5. We have been informed by Management that on by them, certain items of obsolete and damaged stocks under work-in-progress are written off and its value comes to Rs.14.27 lacs: which is depicted under "Material Consumption statement", as per 'Schedule - 17' to Balance Sheet. No supporting inspection / verification / reports thereof are available in this regard and we have completely relied on Management's statement in that respect. 6. In view of the non-maintenance of proper stock records in respect of work-in-progress we are unable to express our opinion regarding the existence and valuation thereof. Hence, work-in-progress and re-usable scrap is taken as valued and certified by management; subject to comments made under item-5 above. Subject to the above, in our opinion, the valuation of stocks is fair and proper, in accordance with the normally accepted accounting principles except that excise duty is not included in the valuation of finished goods lying in factory premises as referred in item 22 of Notes to accounts i.e. "Schedule 23". The valuation of stocks is on the same basis as in the preceding year. 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 except an unsecured loan from the Director, the terms and conditions of such loan are prima facie not prejudicial to the interest of the Company. 8. a) 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. b) The company has however to receive a sum of Rs.103.31 lacs and Rs.3.25 lacs from M/s. Diana International, Rs.22.15 Lacs from M/s. Ambadi Rubber Products being the advances made in earlier years by way of on account payments/and by way of maintaining running accounts and by the way of advances for purchases. These are classified under Loans Advances under schedule- 11 to Balance Sheet. We are unable to express an opinion in this regard in the absence of any correspondence/confirmations reconciliation; statement of accounts from the other party: and any assurances as to repayments thereof and any explanations/clarifications from Management. In all probability, we are of the opinion that, provisions against the said sums to the full extent will have to be made, which has not been done by the Company. 9. The advances to staff are outstanding since sometime and recoveries are not regular and arrears are found. However, the amount involved is marginal being Rs.1.23 lacs. Certain other advances made to other parties and items under earnest money paid against tenders etc., also depict old outstanding, which needs review and follow-up. Our comments under item 2(h) (iv), (v) of the main report as to old items under Sundry Debtors of Rs.78.24 lacs and the necessity for required provisions thereof to the full extent, which have not been made as of now and comments as to para 8 (b) above are relevant for consideration under- this para. 10. The company's production units are closed since October 1999; and during the year under report, there are no purchases of materials or machinery. As such the comments as to the Internal control procedures and other measures in regard to purchases of stores, raw materials including components; Plant & machinery /equipment, do not have much applicability. However, the internal controls as to accounting systems; upkeep of records; need improvement. 11. In our opinion and according to the information and explanations given to us, there are no purchases of goods and materials and sale of goods, materials and services made in purchase of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and aggregating to Rs.50,000/- or more during the year report. 12. As explained to us the company is in the process of establishing an adequate system for determining unserviceable or damaged stores, raw material and finished goods and the Management confirms that there was no such stock during the year. Nevertheless this area needs to be strengthened. Meantime the company, during the year has identified certain obsolete and damaged items under work-in-progress and has written off the same. 13. The Company has not accepted any deposits during the year to which provisions of Section 58A of the Companies Act, 1956 are applicable. 14. The Company has maintained relevant excise records for recording realisable scrap both generated/sold/and in stock. The Company has no by products 15. During the year under report the company is not having any Internal Audit system nor any reports thereto are available. Further, we have noticed that the reconciliation's of various accounts; upkeep of correspondence, files, maintenance of cash receipt books; periodical verification of inventories and Fixed Assets, review and followup of old outstanding under Sundry Debtors and Loans and Advances; and other systems all need improvement; as at present the same are found lacking. 16. We have been informed that the Central Government has not prescribed the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 for, any of the products of the company. 17. The Company has not been regular in depositing the Provident Fund and Employees State Insurance dues during the year with appropriate authorities. The extent of arrears are indicated below. Particulars Employers Employees Total Contribution Contribution (Amount Rs. in lacs) ESI 0.80 0.37 1.17 PF 2.32 0.88 3.20 18. i) The Company is presently having the Sales tax Liability (which is undisputed) of Rs.30.42 lacs (as per "Schedule 12" to Balance Sheet) pertaining to the period 98-99 and 99-00 relating to Sales from Head Office and branches. ii) The company has an undisputed liability towards Income Tax being Rs.2.09 lacs for the assessment years 97-98 and 98-99 which are not been provided in the books of accounts. Except the above, the company confirms that there were no other undisputed amounts outstanding as on the last day of the accounting year which pertains for a period more than six months from the date they became payable in respect of Income Tax, Sales Tax, Excise Duty, Customs Duty and Wealth Tax. iii) Further there are certain disputed liabilities as to Income Tax which are under appeal and which are reported under items 15 and 18 of notes to accounts under `Schedule 23'. 19. According to the information and explanation given to us and as per 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 business practices. 20. The Company is 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. This is further commented and explained under item (d) of main Audit Report. for P. S. IYYENGAR & Co., Chartered Accountants Place: Hyderabad, (P. V. R. IYYENGAR) Date : 26.11.01 Partner