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Model Financial Corporation Ltd.

BSE: 530877 Sector: Financials
NSE: N.A. ISIN Code: INE166B01019
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Model Financial Corporation Ltd. (MODELFINANCIAL) - Auditors Report

Company auditors report

MODEL FINANCIAL CORPORATION LIMITED ANNUAL REPORT 2000-2001 AUDITORS' REPORT To The Shareholders of Model Financial Corporation Limited Hyderabad, Andhra Pradesh. We have audited the attached Balance Sheet of M/s.Model Financial Corporation Limited, as at 30th September, 2001 and also the Profit and Loss Account for the fifteen months period 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. 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 a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the statement referred to above, we report that: (i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; 1. 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. 2. 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 the books. 3. The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account. 4. In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report are in compliance with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956. 5. On the basis of written representations from the directors, (except two of the Directors who have not furnished written representations) and taken on record by the Board of Directors, none of the other directors is disqualified as on September 30th , 2001, from being appointed as a Director under Section 274 (1) (g) of the Companies Act, 1956. 6. In our opinion and to the best of our information and according to the explanations given to us, and subject to : (i) Note No.4 of Schedule 19 regarding non-confirmation of balances of stock on hire, lease debtors and receivables under current assets. (ii) Note No.5 of Schedule 19 regarding reconciliation of balances of fixed deposits, recurring deposits and cash certificates which is reported to be in progress (iii) Note No. 6 of Schedule 19 regarding the agreement entered into by the Company on 15th March 2002 with Model Chit Corp Ltd (a company in which the directors are interested as Directors/Shareholders) for assignment of receivables viz hire purchase debtors, lease debtors, bills receivable and advances receivable effective 29 September, 2001 in consideration of Model Chit. Corp Limited clearing the dues of the bondholders of the Company. The said scheme had been filed before the High Court of Andhra Pradesh praying for the issuance of notices to the shareholders and bondholders of the Company for convening a meeting for the approval of the scheme of arrangement under Section 391 read with 394 of the Companies Act, 1956. The receivables in the books of the Company amounting to Rs. 2260.62 lacs including the erstwhile NPAs have been transferred to Model Chit Corp Limited. Consequently, the unrealised income amounting to Rs. 582.30 lacs (including unrecognised/unrealised income of Rs. 104.41 lacs of previous years) on such erstwhile NPAs is recognised as income for the period. This has resulted in understatement of loss by Rs. 860.03 lacs and under statement of liabilities by a like amount. (iv) The Company had treated all the overdue deposits as unclaimed deposits and in the absence of information to the contrary we have relied on the explanations given by the management And read together with the schedules and other notes thereon, 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 3 30th September, 2001, and (ii) In case of Profit and Loss Account of the Loss of the Company for the period ended on that date. As required by the Manufacturing Other Companies (Auditors Report) Order, 1988, issued by the Company Law Board in terms of Section 227 (4A) of the Companies Act, 1956, we report that : i) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. The fixed assets have been physically verified by the Management at reasonable intervals and no material discrepancies were noticed on such verification. ii) The Company has revalued land and buildings during the year. iii) Not applicable iv) Not applicable v) Not applicable vi) Not applicable vii) The Company has not taken any loans or advances from parties listed under Section 301 of the Companies Act, 1956. viii) The Company has not granted any loans secured or unsecured to Companies, Firms or Other Parties listed under Section 301 of Companies Act,1956, other than its subsidiary. The Company has not charged any interest for the year in respect of loan given to its subsidiaries. In terms of subsection (6) to section 370 of the Companies Act, 1956, the provisions of section 370 are not applicable. ix) In respect of loans and advances in the nature of loans given by the Company reference is invited to Para No 6 (iii) of this report, wherein the advances on which installments / interest is not serviced by the borrowers / customers have also been treated as standard assets contrary to prudential norms x) 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 with regard to purchase of plant and machinery, equipment and other assets and for the sale of assets. xi) Not applicable xii) Not applicable xiii) The company held deposits from the public during the year. The same were in excess of the limits specified under the Non-Banking Financial Companies (Reserve Bank) Directions, 1998.) The company has not filed with the Reserve Bank of India the Annual Return on Deposits as on March 31, 2001, and as on 30th September 2001. xiv) Not applicable xv) The Company has an internal audit system commensurate with its size and nature of business. xvi) Not applicable xvii) The Company is generally regular in depositing Provident Fund and ESI dues with the appropriate authorities. xviii) According to the information and explanations given to us, no undisputed amounts payable in respect of wealth-tax, sales tax, customs- duty and excise-duty were outstanding as at 30.09.2001 for a p riod of more than six months from the date they became payable except income-tax liability of Rs. 13.06 lacs. xix) According to the information and explanations given to us, no personal expenses of employees or directors have been charged to revenue account, other than these payable under contractual obligations or in accordance with generally accepted business practices. xx) The Company is not a sick industrial company within the meaning of clause (o) of sub-section (1) - of Sec.3 of the Sick Industrial Companies (Special Provisions) Act, 1985. xxi) Special provisions relating to a finance company 1) The Company has not granted any loans and advances on the basis of security by way of pledge of shares. 2) The provisions applicable to Chit Fund, Nidhi or Mutual Benefit Society are not applicable in case of this Company. 3) The Company has maintained adequate records to show full particulars of the transactions and contracts entered into in respect of dealings in shares, securities and other investments. The shares, securities and other investments have been held by the Company in its own name. Place: Secunderabad For Satyanarayana & Co., Date : 20.05.2002 Chartered Accountants G.Venkata Rathnam Partner