We have audited the attached Balance Sheet of Secals Limited (the Company)
as at 31 March 2000 and the Profit and Loss Account of the Company for the
period from 1 January 1999 to 31st March 2000 annexed thereto, and report
As required by the manufacturing and Other Companies (Auditor's Report)
Order, 1988 issued by the Company Law Board in terms of Section 227 (4A) of
the Companies Act, 1956, we enclose in the Annexure, a statement on the
matters specified in paragraphs 4 and 5 of the said Order.
2. We draw attention to Note 2 in Schedule P which states that these
financial statements have been prepared on the assumption of going concern
based on certain factors as described in the said note.
In view of the continuing losses incurred and consequent negative net
worth, the ability of the Company to continue as a going concern is
dependent upon continuing financial support of the principal shareholder,
the formulation and implementation of a suitable rehabilitation package,
including financial restructuring, and future profitable operations
Subsequent to the balance sheet date, the Company continues to undertake
normal business operations.
3. As more fully explained in Note 3(a) to Schedule P, in a case involving
a sales tax dispute, the Appellate Assistant Commissioner of Sales Tax
issued an order demanding the disputed sales tax amount of Rs.223.81 Lakhs
and waiving the penalty amount of Rs. 321.06 Lakhs. The Company has
appealed to the Sales Tax Appellate Tribunal against this order. Pending
decision by the Appellate Tribunal, the Company has not provided for the
disputed sales tax amount of Rs 223.81 Lakhs in these financial statement.
4. Further to our comments in the Annexure referred to in paragraph 1
(a) we have obtained all the information and explanations which to the best
of our knowledge and belief were necessary for the purpose of the 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 and loss account dealt with by this report
are in agreement with the books of account;
(d) in our opinion, the balance sheet and the profit and loss account
comply with the Accounting Standards referred to in sub-section (3C) of
section 211 of the Companies Act, 1956, to the extent applicable; and
(e) in our opinion, and to the best of our information and according to the
explanations given to us, subject to the uncertainty relating to the
Company's ability to continue as a going concern and the consequential
impact, if any, of the disputed sales tax case pending decision by the
Sales Tax Appellate Tribunal, the said accounts, give the information
required by the Companies Act, 1956, in the manner so required and give in
true and fair view:
i. in the case of the balance sheet, of the state of affairs of the Company
at 31 March 2000; and
ii. In the case of the profit and loss account, of the loss for the
period from 1 January 1999 to 31 March 2000
We have examined the attached cash flow statement of the Company for the
period from 1 January 1999 to 31 March 2000. The statement has been
prepared by the Company in accordance with the requirement of clause 32 of
the listing agreements with the stock Exchanges and is based on audited
financial statements of the Company at 31 March 2000
For Bharat S Raut & Co
August 9, 2000
ANNEXURE REFERRED TO IN PARAGRAPH 1 OF OUR REPORT OF EVEN DATE TO THE
MEMBERS OF SECALS LIMITED (THE COMPANY)
We report that:
1. The provisions of sub-paragraphs (B), (C) and (D) of paragraph 4 of the
Manufacturing and other Companies (Auditor's Report) order, 1988 are not
2. 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 machinery equipment and
other assets and for the sale of goods.
3. In our opinion, the Company has an internal audit system, commensurate
with the size of the Company and the nature of its business.
4. The Company has maintained proper records of fixed assets showing full
particulars including quantitative details and location. The Company has a
phased programme of physical verification of fixed assets which, in our
opinion, is reasonable having regard to the size of Company and the nature
of its assets. In accordance with this programme, certain fixed assets were
physically verified by Management during the period and no discrepancies
were noticed on such verification.
5. None of the fixed assets have been revalued during the period.
6. The inventories of work in progress, spares and components, consumable
and raw materials have been physically verified by Management during the
period. In our opinion, the frequency of such verification is reasonable.
In respect of stocks lying with the third parties, confirmations for most
of the stocks held by them have been received.
7. The procedures for physical verification of inventories followed by
Management are reasonable and adequate i relation to the size of the
Company and the nature of its business.
8. The discrepancies identified on such physical verification of
inventories as compared to book records were not material and have been
properly dealt with in the books of account.
9. On the basis of our examination of the valuation of inventories, we are
of the opinion that their valuation is fair and proper in accordance with
normally accepted accounting principles. There is no change in the basis of
valuation from that employed in the previous year.
10. The Company has a regular procedure for the determination of
unserviceable or damaged raw materials, consumables, spares, work in
progress, and adequate provision has been made in the accounts for the loss
arising on the items so determined
11. In our opinion, reasonable records were maintained by the Company for
sale and disposal of scrap. The operations of the Company are such that no
realisable by-products are produced.
12. We are informed by Management, that the Central Government has not
prescribed the maintenance of cost record under Section 209(1)(d) of the
Companies Act, 1956 for any of the products of the Company.
LOANS AND ADVANCES
13. 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 or from companies under the same
management as defined under Section 370 (1 B) of the Companies Act, 1956,
the rate of interest and other terms and conditions of which are,
primafacie, prejudicial to the interests of the Company.
14. 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 or to companies under the same
management as defined under Section 370(1B) of the Companies Act 1956, the
rate of interest and other terms and conditions of which are, prima facie,
prejudicial to the interests of the Company.
15. The Company has not given any loans or advances in the nature of loans
with the exception of recoverable advances to employee, the principal
amounts of which are being recovered regularly as stipulated. In the case
of an advance where principal recoveries are not as per stipulation,
Management has taken adequate steps to recover these advances. No interest
is charged on advances given to employees.
16. In our opinion, and according to the information and explanations given
to us, no transaction for purchase of good and materials and sale of goods,
materials and services aggregating to Rs.50,000 or more in respect of each
party was made in pursuance of contracts or arrangement entered in the
register maintained under Section 301 of the Companies Act, 1956.
17. In our opinion, and according to the information and explanations given
to us, the Company has complied with the provisions of section 58A of the
Companies Act, 1956 and the Companies (Acceptance of Deposits ) Rules, 1975
with regard to deposits accepted from the public
18. The Company has not been regular during the period in depositing
Provident Fund (PF) and Employee's State Insurance (ESI) dues with the
appropriate authorities. The delays ranged from 3 to 72 days during the
period. The PF dues for March 2000 amounting to Rs. 259,415 and ESI dues
for the period from January to March 2000 amounting to Rs.185,675 were
remitted subsequently by 4 August 2000.
19. On the basis of the examination of the books of account carried out by
us in accordance with generally accepted auditing practices, and according
to the information and explanations given to us, no personal expenses of
employees or directors were charged to the profit and loss account other
than those payable under contractual obligations or in accordance with
generally accepted business practices.
20. According to 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 are outstanding as at 31 March 2000
for a period of more than six months from the date they became payable.
21. The Company is a sick Industrial Company within the meaning of section
3(1)(o) to the Sick Industrial Companies (Special Provisions ) Act, 1985
(SICA). According to the information and explanations given to us, the
Board of Directors of the Company is in the process of making a reference
to the Board for Industrial and Financial Reconstruction as required by
section 15 of SICA
for Bharat S Raut & Co.,