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DEVIDAYAL INDUSTRIES LIMITED
AUDITORS' REPORT TO THE MEMBERS OF DEVIDAYAL INDUSTRIES LIMITED
We have audited the attached Balance Sheet of DEVIDAYAL INDUSTRIES LIMITED,
as at 31S' March, 1998 and the Profit and Loss Account of the Company for
the year ended on that date annexed thereto. Incorporated in the accounts
are the returns from the branches audited by the Branch Auditors, whose
reports have been considered by us while preparing this report.
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 a statement on the matters
specified in paragraphs 4 and 5 of the said Order.
Further to our comments in the Annexure referred to in paragraph I above:
(a) 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.
(b) in our opinion, proper books of account as required by Law have been
kept by the Company so far as it appears from our examinations of such
books and proper returns adequate for the purpose of our audit have been
received from the Branches not visited by us;
(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 and to the best of our information and according to
the explanations given to us, the said accounts give the information
required by the Companies Act, 1956 in the manner so required.
We further report that the Company has not made provision against doubtful
debts, and advances claims aggregating to Rs 37.08 lakhs. Subject to this
and to Note No. 1.4 regarding non-provision of accruing liability of
gratuity Rs. 104.40 lakhs as on 31-03-1997 and of leave encashment to
employees, Note No 1.7 regarding accounting of certain interest on cash
basis, Note No. 2 regarding accounting for surplus in respect of land
development, Note No. 3 regarding accounting of excise duty refund of Rs.
2].18 lakhs which has not been released by the Central Excise Department as
it has filed further appeal in the matter, Note No. 4 regarding non-
provision of disputed excise duty, customs duty, income tax and sales tax
demands of Rs. 72.49 lakhs, Note No.7 regarding non confirmation of
debtors' balances, Note No. 8 regarding shortfall in the value of security
offered for secured loans, and Note No. 9 regarding non availability of
details of valuation of inventory, the said accounts give a true and fair
view:
(i) in the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March, 1998 and
(ii) in the case of the Profit and Loss Account, of the loss of the Company
for the year ended on that date.
For Haribhakti & Co.
Chartered Accountants
(Chetan Desai)
Partner
Mumbai: Dated: 20November, 1998
Annexure Referred to in paragraph I of our report of even date to the
members of Devidayal Industries Limited.
1. The Company has maintained proper records showing full particulars
including quantitative details and situation of fixed assets acquired up to
31' March,1990. We are informed that all the fixed assets except Electrical
Installations, Factory and Office Equipment and Furniture and Fixtures have
been physically verified by the Management during the year and that no
material discrepancies were noticed on verification.
2.None of the fixed assets was revalued during the year.
3.We are informed that the stocks of finished goods, spare parts and raw
materials have been physically verified by the Management. In our opinion,
the frequency of verification is reasonable.
4.The explained procedure and method of physical verification of stocks
followed by the Management are reasonable and adequate in relation to size
of the Company and nature of its business.
5.The discrepancies noticed on verification between the physical and book
records were not material.
6.As mentioned in the Note 10, the details of valuation of stock were not
available. Hence we are unable o comment whether the valuation of stock is
fair and proper, in accordance with the normally accepted accounting
principle and is on the same basis as in the preceding year.
7. The Company has not taken any loans from companies, firms or other
parties listed in the register maintained under section 301 Or the
Companies Act,1956 or from the Companies under the same management.
8. The Company has not granted any loans to Companies, firms or other
parties listed in the register maintained under Section 301 or to the
Companies under the same management as defined under sub-section (lB) of
Section 370 of the Companies Act. 1956.
9. In respect the loans given by the Company to its employees, the loan
installments and the interest thereon, wherever applicable, have been
recovered as stipulated till lock-out of the factory.
10. 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 stores, raw-materials including components, plant and machinery,
equipment and other assets and with regard to the sale of goods.
11. In our opinion and according to the information and explanations given
to us, the transactions of sale of goods made in pursuance of contracts or
arrangements entered in the register maintained under section 301 and
aggregating during the year to Rs. 50,000/- or more in respect of each
party have been made at prices which are reasonable having regard to the
prices at which transactions for similar goods have been made with other
parties. There was no such transaction for purchase of materials.
12. As explained to us, except at Madras branch, the Company has d regular
procedure for the determination of unserviceable or damaged stores and raw-
materials and finished goods. Adequate provision has been made in the
accounts for loss arising on items so determined.
13. The Company has not accepted any deposit from "public' attracting the
provisions of section 58A of the Companies Act,1956 and the Companies
(Acceptance of Deposits) Rules 1975.
14. In our opinion, reasonable records have been maintained by the Company
for the sale and disposal of realisable scrap. The Company does not have
any realisable by-product.
15. For a part of the year, the Company had an internal audit system
commensurate with he size and nature of its business.
16. We are informed that, the cost records required to be maintained by
the Company in respect of production of enamelled wires, pursuant to the
Order made by the Central Government, u/s 209(1)(d) of the Companies Act,
1956 are under compilation.
17. According to the records of the Company, Provident fund and Employees'
State Insurance dues have not been regularly deposited during the year with
the appropriate authorities. The arrears of such clues at the end of the
year aggregating to Rs.22.79 lakhs.
18. According to the information and explanations given to us, no
undisputed amounts payable in respect of income-tax, wealth-tax, sales-tax,
customs duty and excise duty were outstanding as at 31i' March, 1998 for a
period of more than six months from the date they became payable. except
for Income tax Rs.4.5() lakhs, Sales tax Rs.22.44 lakhs and Profession tax
Rs. 1.17 lakhs.
19. According to the information and explanations given to us, no personal
expenses of employees or directors have been charged to revenue account,
other than those payable under contractual obligations or in accordance
with generally accepted business practice.
20. The Company is a 'sick industrial company' within the meaning of
clause (0) of sub-section (1) of Section 3 of the Sick Industrial Companies
(Special Provisions) Act, 1985. The Company has made reference to the
Board of Industrial and Financial Reconstruction (BIFR). Further, vide an
order dated 19.01.1997, the Company has been declared 'Sick Industrial
Company' by BIFR.
21. The Company has reasonable system of recording receipts, issues and
consumption of materials and stores and allocating materials consumed to
the relative jobs, commensurate with its size and nature of its business.
22. There is a reasonable system of authorisation at proper levels and an
adequate system of internal control commensurate with its size of the
Company and the nature of its business on issue of stores and allocation of
stores and labour to jobs.
For Hstibhakti & Co.
Chartered Accountants
(Chetan Desai)
Mumbai: Dated: 20th November, 1998 Partner
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