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Modistone Ltd.

BSE: 509117 Sector: Auto
NSE: N.A. ISIN Code: N.A.
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Modistone Ltd. (MODISTONE) - Auditors Report

Company auditors report

MODISTONE LIMITED ANNUAL REPORT 2000-2001 AUDITORS' REPORT We have audited the attached Balance Sheet of Modistone Limited as at 30th September 2001 and also the Profit and Loss Account of the Company for the year ended on that date annexed thereto and report that : 1. a) Reference is invited in the following Note to Accounts (Note No. 13) Wherein it is stated that the Board for Industrial and Financial Reconstruction (BIFR) vide its order dated 15th April 1998 had declared the Company as a "Sick Industrial Company: and appointed IFCI as the Operating Agency. The rehabilitation proposals submitted by the Company/Promoters have not been found acceptable to IFCI/Banks. The BIFR in its last hearing held on 25th April, 2001 has recorded its opinion to wind up the Company and has forwarded the same to Mumbai high court for further proceedings according to law. Meanwhile Modistone Employees Union has filed a writ petition in the high court of judicature at Mumbai challenging interalia, order dated 25.04.2001 of BIFR and proceedings in this regard are in progress. Not with standing the above, the accounts have been prepared on the postulate of "going concern". b) In view of what has been stated in paragraph 1 (a) and also in the absence of any revival proposals from the Company/promoters and continued lockout in Company's Plant in Mumbai and various other offices and godowns, we are unable to express our opinion on the accounts being prepared on "going concern" basis. 2. As required by the Manufacturing and Other Companies (Auditor's Report) Order 1988 and on the basis of such checks as we considered appropriate, we give in the annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order. 3. Further to our comments in paragraph 2 above. (a) 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. (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 the books. (c) The Balance Sheet and Profit & Loss Account dealt with by this report are in agreement with the books of account. (d) In our opinion the Balance Sheet and Profit & 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, except for our comments in para (h) (ii) to (ix) and note 4 below; (e) Based on representation made by all the Directors of the Company and the information and explanations as made available, the Directors of the Company do not prima facie have any disqualification as referred to in clause (g) of sub-section 1 of Section 274 of the Act. (f) The inventories and sundry debtors form security against cash credit loans from Banks. In view of the continued lockout in Mumbai plant, the values of inventories and sundry debtors may not be fully realisable and therefore security available to Banks may have diminished. (g) Reference is invited to following notes to accounts where we are unable to report the effect of consequential adjustments on the accounts of the Company: (i) Note No.9 regarding inability to obtain some of the accounting and financial records lying in various offices of the company and in the Plant necessary for preparing the annual accounts due to lockout. (ii) Note No 11 regarding loans/balances of advances/do-posits and sundry creditors of the company, some of which are subject to confirmation/reconciliation. (iii) Note No. 16 regarding continued lockout and suspension of operations in the factory in Mumbai, and consequently inventories i.e. Raw Materials, Work-in-Process and Stores & Spare parts have remained unused for over 4 years. Further, a part of stock of finished goods, being slow moving, have also remained unsold. These inventories have become partly deteriorated/damaged and obsolete and their values have declined and hence the same may not be fully realisable. Amount at present is unascertainable in the absence of technical evaluation. (iv) Note No. 17 regarding Sundry Debtors which include old dues of Rs.378.90 lacs and against which there exist provision of Rs.132.29 lacs. Though the company is making efforts to realise the debts, recoveries are slow and it may face difficulty in realising these old dues as the Company's operations are closed. (h) No provision has been made in the accounts in respect of following : i) Depreciation on the appreciation entered in the books by writing up the fixed assets to appraised values as determined by independent valuers for reasons stated in Note No. 9. However this has no impact on the loss for the year as equivalent amount will be withdrawn from the revaluation reserve to compensate the charge of depreciation on appreciation. ii) Loan and interest accrued thereon amounting to Rs. 21.50 lacs given to a company declared a sick industrial undertaking under the Sick Industrial undertaking under the Sick Industrial Companies (Special Provisions) Act, 1985 where, we are unable to formulate an opinion on recoverability of amount due (Note No. 10). iii) In respect of Excise duty liability in relation to PME case referred to in Note No. 12 where Assessing Authority has raised a demand for Rs. 1589 lacs and the Company's appeal against the said Order is pending before the Commissioner of Central Excise (Appeals). The Company has provided Rs. 660 lacs being the adhoc amount paid and bank guarantee invoked. The balance liability is undetermined until the disposal of appeal and hence unprovided for. iv) Interest amounting to Rs. 1685.52 lacs due to Financial Institutions and Banks (Note No. 15 (i) & (ii)). v) Interest due on short term loan and raw materials loan from Holding Company and also on security deposits from customers amount not ascertained (Note No. 15 (iii)). vi) Interest liability on customs duty on bonded materials amounting to Rs. 40.18 lacs (Note No. 15 (iv)]. vii) Interest liability on account of non-payment of Gratuity in respect of employees who are no longer in the services of the Company estimated at Rs. 163 lacs [Note No. 15 (v) 1. 4. Subject to matters stated in paragraphs 1,3(g) and 3 (h) above, in our opinion and to the best of our information and according to the explanations given to us, the said accounts read with the notes, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view : a) In the case of the Balance Sheet of the state of affairs of the Company as at 30th September, 2001 and b) In the case of the Profit and Loss Account of the loss for the year ended on that date. For FORD, RHODES, PARKS & CO. Chartered Accountants Place : New Delhi A.D.SHENOY Date 7th March, 2002 Partner ANNEXURE REFERRED TO IN PARAGRAPH 2 OF THE REPORT 1. The company's Fixed assets registers have not been updated. The fixed assets have not been physically verified by the Management during the year due to continued lockout at Plant and some sale office/depots. In view of non verification and updation of records showing quantitative details and situation of fixed assets, it is not possible for us to comment on discrepancies or condition of assets. 2. None of the fixed assets have been revalued during the period. 3. i) The stocks of finished goods, stores, spare parts, raw materials and work-in-process have not been physically verified by the Management during the year due to continuous lock-out and suspension of operations in factory and other places as explained in Notes 9 & 16. ii) In view of non-verification, it is not possible for us to comment on discrepancies and condition of inventories. iii) As explained in Note No. 16, the inventories have become substantially deteriorated/damaged and obsolete and their values have declined. However the same book value of stocks have been carried forward in the accounts. 4. In our opinion, the rate of interest and terms and conditions on which unsecured loans have been obtained from a company listed in the register maintained under Section 301 of the Companies Act, 1956 are not prima facie prejudicial to the interest of the Company. No provision for payment of interest on aforesaid loan has been made in the accounts as explained in Note 15 (iii). 5. Recovery of loan and interest accrued thereon given to a company as mentioned in Note No. 10 will be in the manner as may be decided by the Board for Industrial and Financial Reconstruction (BIFR). 6. In respect of loans given by the Company to its employees, steps are being taken to recover the same from final settlement claims of respective employees. 7. As explained in Note No. 14 and 16, the Company's operations in factory/some depots have been suspended due to confined lock-out and there are no purchases of stores, raw materials, plant and machinery, equipment and other assets. In view of above, there is no application of this clause with regard to adequate internal control and procedures. 8. In our opinion and according to the information and explanations given to us, there are no transactions of sale of goods and materials made in pursuance of arrangements entered in the register maintained under Section 301 of the Companies Act, 1956. Hence the clause is not applicable. 9. As explained to us, uns-erviceable or damaged stores and raw materials have not been determined by the company due to continued lockout in the Factory and some depots. In the absence of technical evaluation, we are unable to comment on the non-provision in the accounts for the loss arising on the items so determined. 10. The Company has not accepted or renewed any deposits from the public during the year and has only unclaimed matured deposits in the books. In respect of these cases, the company has complied with the provisions of Section 18A of the Companies-s-Act, 1956, and the rules framed thereunder. 11. During the year there were no sale of disposal scrap. The Company has no by-products. 12. In view of continued lock-out and suspension of operations, no internal audit was carried out during the year. 13. During the year, there were no manufacturing activity carried in the Factory due to continued lock-out and hence maintenance of cost records under Section 209 (1) (d) does not apply. 14. According to the records of th6 Company, Provident Fund and Employees' State Insurance dues have been regularly deposited with the appropriate authorities during the year. 15. According to the books and records examined by us and the information and explanations given to us, there were no undisputed amounts payable in respect of Income-tax, wealth tax, sales tax, customs duty and excise duty which have remained outstanding as at 30th September, 2001. 16. According to the. information and explanations given to us and the records of the Company examined by us, no personal expenses have been charged to revenue account other than those payable under contractual obligation or in accordance with generally accepted business practice. 17. The Company is a Sick Industrial Company within the meaning of clause (o) of Section 3 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985, as mentioned in Note. 13. 18. There were no damaged goods in the case of goods purchased by the Company for resale. For FORD, RHODES, PARKS & CO. Chartered Accountants Place : New Delhi A.D.SHENOY Date 7th March, 2002 Partner