SERENE INDUSTRIES LIMITED
We have audited the attached Balance Sheet of SERENE INDUSTRIES LIMITED as
at 30th June, 1998 and the Profit Loss Account for the period ended on that
date annexed thereto. We report as follows:
1. As required by the Manufacturing and Other Companies (Auditors' Report
Order 1988 issued by the Company Law Board in terms of Section 227 (4A) of
the Companies Act. 1956 we annex hereto statement on the matters specified
in paragraphs 4 and 5 of the said Order.
2. Further to our comments in the Annexure referred to in Paragraph (1)
i) 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.
ii) In our opinion, proper books of account as required by the law have
been kept by the Company so far as appears from our examination of such
books, except cost accounts which have not been produced before us for our
iii) The Balance Sheet and Profit & Loss Account referred to in this report
are in agreement with the books of accounts.
iv) In our opinion and to the best of our information and according to the
explanations given to us, the accounts read together with notes thereon and
Subject to following notes appearing in schedule 15:
a) Note No.2(d) regarding non-provisions of commitment charges, liquidated
damages and penal interest on Term Loans/NCD's from banks amount being
b) Note No. 2(e) regarding non-provision of interest on cash credit
facility with consortium of banks for which interest has been suspended.
The effect of the same on loss for the period and reserves is presently
c) Note No.3 regarding depreciation amounting to Rs.563.75 lacs (Net)
pertaining to earlier period debited to profit & loss account during the
current period and hence current period loss has been overstated by Rs.
d) Note. No.4 regarding appreciation on conversion of plot of land into
stock in trade which was treated as revenue income in the previous period
now correctly transferred to capital reserve account and hence loss for the
current period has been overstated by Rs. 750 lacs.
e) Note No. 5 regarding write off of preliminary expenses pertaining to
previous period amounting to Rs. 44.9 lacs (Net) if not written off, the
loss for the current period would have been lower by Rs. 44.99 lacs.
f) Note No. 6 wherein the Company has written off interest of Rs. 1976.11
lacs on term loans from financial institutions and NCD's pertaining to
earlier periods and treated as capital work in progress. If the same was
not written off loss for the period would have been lower by Rs.1978.11
g) Note No. 7 as stated therein Company has not accounted gains on account
of fluctuations in foreign exchange rates amounting to Rs.5.94 lacs. The
same is in contravention of accounting standard-11 of Institute of
Chartered Accountants of India, if accounted the loss for the period would
have been lower by Rs. 5.94 lacs.
h) Note No. 11 as stated therein Company has not provided for doubtful
debts amounting to Rs. 108.23 lacs, provided, loss for the period would
have been more by Rs.108.23 lacs.
i) Note No 19(c), in respect of investments in wholly owned subsidiary M/s.
Seribright Colours Ltd., U.K. provision for diminution in value has not
been made as in the opinion of the Board, these investments are long term
in nature and diminution is temporary. The impact on the loss for the
period and reserves is presently not ascertainable.
j) Note No. 19(d), regarding prior period adjustments/Extraordinary items
amounting to Rs. 3579.29 lacs and Rs. 3744.85 lacs respectively debited to
profit & loss account as per the management decision.
k) Note No.19(e) regarding loans/ICD's granted to parties, earlier period
interest has been waived by the company amounting to Rs. 550.64 lacs, hence
current period loss has been overstated by Rs. 550.64 lacs.
l) Note. No 19(f) regarding non-provision for import duty for non-
fulfillment of export obligations under advance license scheme, the impact
of the same on the loss for the period under review is unascertainable
m) Note No.19(g) as indicated therein the Company has written off capital
work in progress amounting Rs.225 lac to the extent loss for the period has
been overstated by Rs.225 lacs.
n) Note No. 19(h) regarding non-provision of estimated liability for leave
encashment amounting to Rs. 10.25 lacs. If provided loss for the period
would have been more by Rs. 10.25 lacs.
o) Note No. 19(i) as indicated therein the Company has not-created
debenture redemption reserve.
p) Note No. 20 as indicated therein the Company has given political
contribution to Shiv Sena amounting to Rs.51,000 Included under
Miscellaneous expenses, but has not complied with the provisions of the
section 293A of the Companies Act, 1956, and
q) Note No. 9 regarding non-confirmation of balances of Sundry Debtors,
Sundry Creditors,Term Loans and Other Loans and Advances, give information
required by the Companies Act., 1956 In the manner so required and give
true and fair view:
a. in the case of Balance Sheet of the state of affairs of the Company as
at 30th June, 1998 and
b. in the case of Profit & Loss Account for the Loss of the Company for the
period ended 30th June, 1998.
For Bharat Shroff & Company
Mumbai B. B. Shroff
Dated: 24th September, 1998 Proprietor
Annexure referred to in paragraph (1) of the Auditors Report to the Members
of Serene Industries Limited on the account for the period ended 30th June,
1. The Company has not maintained proper records showing full particulars
including quantitative details and situation of all fixed assets except
furniture and fixture. As explained to us the fixed assets have been
physically verified by the management according to a phased programme
designed to cover all the items of the fixed assets. Accordingly most of
the assets have been physically verified by the management during the
period in accordance with the programme of verification, In our opinion,
the frequency of verification of fixed assets by the management IS at
reasonable intervals, having regard to the size of the Company and the
nature of the assets. No material discrepancies between the book records
and the inventory have been noted in respect of the assets physically
verified. Fixed Assets of the Company are not properly Insured.
2. None of the fixed assets have been revalued during the period.
3. In our opinion and according to the explanations given to us, the
physical verification of The finished goods, store, spare parts and raw
materials was conducted by the management wherever practicable, during the
period. In our opinion frequency of verification is reasonable.
4. In our opinion and according to the information and explanations given
to us, the procedures of physical verification of stock followed by the
management were found reasonable and adequate in relation to the size of
the Company and nature of its business. Stocks in possession and stocks,in
transit as on 30th June, 1998 have been verified and valued by the
5. The discrepancies noticed on such verification, as compared to book
records, which. were not significant, have been properly dealt with in the
books of account.
6. In our opinion, the valuation of the above mentioned stocks is fair and
proper in accordance with me normally accepted accounting principles, and
is on the same basis as in the previous period.
7. The Company has not taken any loans from companies, firms or other
parties under sections 301 (1 -c) of the Companies Act. 1956. The Company
has not maintained register under section 301 & 307 of the ComPanies Act.
8. The Company has granted loans, secured of unsecured to Companies, firms
or other parties which are required to be listed in the register maintained
under section 301 of the Companies Act, 1956 or to Company's under the same
management within the meaning of section 370 (1-i3) of the Companies Act,
9. In respect of Loans and Advances in the nature of loans given by the
Company to its employees and others, they are repaying the amounts
regularly as stipulated. Except that for the loans/ ICD's given to some
parties, interest has bee waived and no time limit has been specified for
repayment of principal amount.
10. In our opinion and according to the information and explanations given
to us, there are adequate internal control procedure commensurate with the
size of the Company and the nature of its business with regard to purchase
of stores, raw materials including components, plant and machinery,
equipments and other assets and for sale of goods.
11. According to the information and explanation given to us the
transactions of purchase of goods and materials and sale of goods,
materials and services made in pursuance of contracts or arrangement
falling under section 301 of the Companies Act, 1956 and aggregating to Rs.
50,000/- or more, during the period in respect of each party have been made
at prices which are reasonable having regard to the prevailing market
prices for such goods, materials or service at the prices at which
transactions for similar goods or materials or services have been made with
12. As explained to us, Company has a regular procedure for the
determination of unserviceable or damaged stores and raw materials and
finished goods and the necessary adjustments for the loss have been made in
13. The Company has received deposits from the public and have complied
with the directives issued by the Reserve Bank of India and the provisions
of section 58-A of the Companies Act, 1956 and the rules framed thereunder
from time to time, and have not filed Return for the year ended 31st March,
1997 and 31st March,1998
14. In our opinion, reasonable records have been maintained by the Company
for the sale and disposal of realisable by products and scrap. As explained
to us, the Company's operations do not generate any significant realisable
by-products and scrap.
15. Company does not have internal audit system for the period under
16. The Central Government under section 209 (1) (d) of the companies Act,
1956 has prescribed the cost audit of cost records of dyes. The cost audit
has been completed for the period ended 30th June, 1996. The cost records
for the period ended 31st December,1997 and 30th June, 1998 have not been
produced before us for our verification.
17. The Company has been irregular in depositing Provident Fund and
Employee's State Insurance dues with appropriate authorities. The Provident
Fund dues are in arrears amounting to Rs.28.23 lacs and ESIC/Profession Tax
amounting to Rs. 0.12 lacs & Rs. 0.08 lacs respectively.
18. According to the information and explanations given to us, there are no
undisputed amounts payable in respect of Income Tax, Wealth Tax, Customs
Duty and Excise Duty which have remained outstanding as at 30th June,1998
except Sales Tax of Rs. 4.25 lacs for a period of more than six months from
the date they became payable.
19. According to the information and explanations given to us and the
record 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
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.
21. Shares and other Securities held by the company as investments are held
in its own name.
22. In respect of Trading Activities of the Company, there were some stocks
of damaged goods for which necessary adjustments for the loss have been
made in the accounts.
For Bharat Shroff & Company
Place : Mumbai B. B. Shroff
Dated : 24th September, 1998 Proprietor