ANNUAL REPORT 1997-98
PANCHMAHAL CEMENT LIMITED
AUDITOR'S REPORT TO THE MEMBERS OF THE COMPANY
We have audited the attached Balance Sheet of the PANCHMAHAL CEMENT
LIMITED,VADODARA as at 30th September, 1998 and also annexed Profit and
Loss Account of the Company for the period ended on that date and report as
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 accounts as required by law have been
kept by the Company so far as it 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 the Profit and Account are In
compliance with the Accounting Standards referred to in subsection 3 (c) of
Section 211 of the Companies Act, 1965, subject to qualification made
5. We further report as under:
(i) The Company has not provided .for doubtful Sundry Debtors amounting to
Rs. 66,62,191/- and Loans and Advance Rs. 1,70,97,645/-'
(ii) Interest on Inter Corporate Deposites has not been provided and
thereby loss is understated by Rs.126.64 Lacs. Further,Security on the same
given could not be verified, and in absence of full particulars the same
could not be fully disclosed in the Balance Sheet (Refer Note No 3 of Sch.
(iii) The Company has not honoured Consent Decree of the High Court, Bombay
relating to the dues of FIs. However, the Company has provided interest
17.5 % on decretal amount. In absence of full particulars, we are unable to
opine in this regard (Refer Note No.7 of Sch.14)
(iv) Unsecured Debentures of Rs.550 Lacs have not been presented for
redemption on its due date. These debentures are included in the Balance
Sheet under Loans and Advances to be recovered. (Refer Note No. 6 of Sch
(v) There are various Civil Suits/Legal notices issued by various
authorities against the Company for recovery of their dues. The total
actual contingent liabilities are unascertainable. (Refer Note No. 14 of
(vi) During the year under review, no Lease Rent has been provided on ESP
Plant (accumulated Rs. 337.87 Lacs up to previous year). The Company is
treated this as preoperative expenses and not charged to revenue expenses
(Refer Note No.19 of Sch. 14)
(vii) Right Issue expenses incurred during the earlier years have been
shown as miscellaneous expenditure yet to be amortised. One tenth of such
expenses amounting to Rs. 14,54,827/- have not been amortised during the
year in view of huge losses. Had the expenses been provided, the loss would
have been higher by Rs. 14,54,827/-.
vii) All balances are subject to confirmation (Refer Note No 4 of Sch 14).
(ix) The Company has written off the accumulated losses upto March, 1990 of
Rs. 3,27,33,256/- and Miscellaneous Expenditure (to the extent not written
off) of Rs. 19,72,508/- against the revaluation reserve during the year
1990-91 and the Company has written off Rs. 32,79,135/- after adjusting
Profit of Rs.4,85,9851- of the year 1990-91 in the year 1991-92. The
practice is contrary to the accounting guidelines recommended by the
Institute of Chartered Accountants of India. If it had been followed the
reserve and surplus would be higher by Rs. 3,79,84,899/- and accumulated
losses should be Rs. 3,60,12,391/- and Miscellaneous Expenditure (to the
extent not written off) amounting to Rs. 19,72,508/- without giving effect
to prior year income adjustment. (Refer Note No. 2 of Sch. 14)
(x) The Company has not provided depreciation on extra and multiple shift
as per the provisions of Section 205 (2) (b) of the Companies Act,1956,
amounting to Rs. 5,13,14,674 /- on plant and machinery of Dahod works. The
company has also not provided Depreciation on all fixed assets as no
manufacturing activities carried out during the year.
(xi) Investment and stock of shales and securities could not be physically
verified and hence we are unable to express our opinion on the same.
(xii) Diminution in value of unquoted investments in shares and other
securities are not ascertained and provided for by the Company.
(xiii) The Company has still to complete formalities for increase in its
Authorised Capital from Rs.50 Crores to Rs.75 Crores and provide its
liability. (Refer Note No. 20 of Sch. 14).
(xiv) In absence of documents/confirmation for advances given in respect of
the business of real estate of Rs 78.06 Lacs. we are unable to express our
opinion on the same.
(xv) The contribution payable to Life Insurance Corporation for group
gratuity and superannuation policy is not provided and liability on account
is unascertainable and loss is understated to that extent.
(xvi) As per the Agreement between the Company & the Union/employees, the
Company is paying/providing salary & wages from December, 1996. In lieu of
details the liability on this account is unascertainable and loss is
understated to that extent.
6. In our opinion and to the best of our information and according to the
explanations given to us, the said Accounts, subject to our commencements
in paragraph 5 above and read together with other notes thereon 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 30th September,1998.
b) in the case of the Profit & loss Account of the loss for the period
ended on that date.
7. As required by the Manufacturing and other Companies (Auditors' Report)
Order 1988 and on the basis of such checks as we considered appropriate we
further state that:
i) We have been informed that the records showing full particulars
including quantitative details and situation of fixed assets are in the
process of updating. However we have been informed by the management that
the physical verification has been carried out by the management.
ii) None of the fixed assets have been revalued during the year.
iii) Physical verification as stated to us, was conducted by the management
in respect of finished goods, material in process, raw material and stores
& spares at reasonable intervals during the year under review.
iv) The procedure of verification of stock followed by the management are
reasonable and adequate in relation to the size of Company and the Nature
of its business.
v) We have been informed by the management that no significant
discrepancies been noticed on such verification. In our opinion, the value
of these stocks is in accordance with normally accepted accounting
vi) On the basis of our examination of available stock records, we are of
the opinion that the valuation of stock is in accordance with the normally
accepted accounting principles. However to determine whether market value
is lower than the cost in respect of valuation of stock, the certificate of
the management has been received. We are unable to form our oplnion In this
vii) In our opinion, Terms and Conditions of the Loans taken by the Company
from the Directors are not prima facie prejudicial to the interest of the
Company. The Company has not taken any other loans secured or unsecured
from companies, firms or other parties listed in the Register maintained
under section 301 & 30 (1-B) of the Companies Act, 1956.
viii) The Company has not granted loans to the companies, firms or other
parties listed in the Register maintained under section 301 of the
Companies Act, 1956 and / or to the companies under the same management as
defined under Sub-Section (1-B) of section 370 of the Companies Act, 1956.
ix) In respect of loans and advance in the nature of loans given by the
Company, the Company has taken reasonable steps to recover the money due
from the parties and employees to whom interest free loans or advances in
the nature of loans have been given are generally repaying the principal
amount as stipulated.
x) In, our opinion and according to the information and explanation given
to us, there are adequate internal control procedures commensurate with the
size of the Company and nature of its business with regard to purchase of
raw material; stores and spares, plant and machinery, equipment and other
assets and with regard to sale of goods.
xi) As explained there are no transactions of purchase of goods and
materials and sale of goods, materials and services, made in pursuance of
contracts or arrangement entered in the register maintained under section
301 and aggregating during the year to Rs. 50,000 or more in respect of
xii) We have been informed that the Company has not ascertained any
unserviceable damaged stores, raw materials and finished goods.
xiii) As per the information and explanations given to us, the Company has
not accepted any deposits during the year.
xiv) The Company has maintained reasonable records for sale of scrap and
there is no by-product.
xv) The Company has appointed a firm of the Chartered Accountants as
Internal Auditors for the year under review. In our opinion the internal
audit system is commensurate with the size of Company and nature of its
xvi) The Central Government has prescribed maintenance of cost records
under Section 209 (1) (d) and cost audit under Section 233 of the Companies
Act, 1956 in respect of manufacturing activities of the Company. We have
not examined such records in details however, such records have been prima
facie maintained by the Company.
xvii) The Company has some time irregularly deposited Provident Fund dues
with appropriate authority. We have been informed that Employees State
Insurance Act is not applicable to the Company.
xvii) According to the information and explanation given to us, no
undisputed amounts payable in respect of Income Tax, Wealth Tax, Excise
Duty except Sales Tax amounting to,Rs.2,28,21,882 and tax deducted at
source Rs. 10,00,755/- outstanding as at the last day of the financial year
for a period of more than six months from the date they become payable.
xix) No personal expenses have been charged to Profit & Loss Account.
xx) In our opinion the Company is not 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.
xxi) With respect to investment business:
The Company has maintained the Investment Register.
We are unable to physically verify the shares and thus we are unable to
express our opinion on Investments.
For R. J. SHAH & ASSOCIATES
R . J. SHAH
Date : 26-02-2000.