DHARNENDRA INDUSTRIES LIMITED ANNUAL REPORT 2002-2003 AUDITORS' REPORT To The Members of DHARNENDRA INDUSTRIES LIMITED We have audited the attached Balance Sheet of DHARNENDRA INDUSTRIES LIMITED as at 31st March, 2003 and also the Profit & Loss Account of the Company for the year ended on that date annexed thereto and the cash flow statement for the year ended on that date. These Financial Statements are the responsibility of the management of the Company. Our responsibility is to express an opinion on these financial statements based on our audit. We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supports the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis of our opinion We report that: 1. As required by the Manufacturing and other Companies (Auditor's Report) Order, 2000 issued by the Company Law Board in terms of Section 227 (4A) of the Companies Act, 1956, we give the Annexure a 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 above, we Report that: (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 accounts as required by law have been kept by the Company so far as appears from our examination of the books of accounts for the purpose of our audit except for matters referred in above Paragraphs and Notes to the Accounts. (C) The Balance Sheet referred to in this report is in agreement with the Books of Accounts. (D) In our opinion the Balance Sheet and Profit & 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 ,except note No.2 of Schedule-22 relating to retirement benefits (Accounting Standards-15) and note No. 3 relating to Accounting for Taxes (Accounting Standard -22). (E) On the basis of our review of the confirmations received from the companies in which the Directors of the Company are Directors and the information and explanation given to us, all the Directors of the company Is prime facie as at 31" March, 2003 disqualified from being appointed as a Director as per terms of clause (g) of subsection (1) of Section 274 of the Companies Act, 1956, (F) In our opinion and to the best of our information and according to the explanation given to us, and subject to our observation stated above the said Balance Sheet and Profit and Loss Account read together with notes thereon give the information required by the Companies Act, 1956 is the manner so required and give a true and fair view. 1. Note no. 2 of schedule-22 relating to retirement benefits which are accounted for on payment basis. The extent of non- compliance in value terms is not ascertainable; 2. Note No. 3 relating to non provision of Deferred Tax as per the Account Standard-22 the amount is not ascertainable. the said accounts read together with notes on accounts, give the information required by the companies Act, 1956 in the manner so required and the Balance Sheet gives true and fair view of the state of Company's affairs as at 31st March, 2003, the Profit & Loss Account gives a true and fair view of the Loss for the year ended on that date and cash flow statement true and fair view of the cash flows of the company on that date. For Bharat Parikh & Associates Chartered Accountant Place : Ahmedabad (Camp) Bharat Parikh Date : 05-09-2003 Partner ANNEXURE TO THE REPORT OF THE AUDITOR'S TO THE MEMBERS OF DHARNENDRA INDUSTRIES LTD. ON THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2003 AS REFERRED TO IN PARAGRAPH 1 THEREOF: 1. The Company was maintaining records of Fixed Assets with details available from books of account to indicate original value, Depreciation and Quantity. Due to flood in the year 2000, fixed assets register of the Company alongwith other documents were destroyed in the flood. The company is in process of preparing the same and has updated the records with the available information and with the physically inspection. We are further informed that, all the fixed Assets have been physically verified by the management at the year end. 2. None of the fixed assets have been revalued during the year. 3. The stocks of finished goods, spare parts, raw materials and components have been physically verified by the management during the year. In our opinion the frequency of the verification is reasonably. 4. The procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the company and nature of its business. 5. The discrepancies noticed on verification between physical stock and book records were not material. 6. In our opinion, the valuation of stocks of finished goods, stores and spares and raw materials, have been fair and proper in accordance with the normally accepted accounting principals and is on the same basis as in the earlier year. 7. During the year the company has taken unsecured loans from companies, firms or other parties listed in the register u/s. 301 of the Companies Act, 1956 and the terms and conditions are not prima facie prejudicial to the interest of the company. As informed to us there are no companies under the same management as defined u/s 370 (1B) of the Companies Act, 1956. 8. During the year the company has not granted loans from companies, firms or other parties listed in the register u/s 301 of the Companies Act, 1956. As informed to us mere are no companies under the same management as defined u/s.370 (1B) of the Companies Act, 1956. 9. In respect of loans and advances in the nature of loans given by the company to its employees, these are free of interest and not recovered regularly as stipulated by the Management. 10. In our opinion and according to the information and explanations given to us, there are adequate internal control commensurate with the size of the company and its nature of its business with regards to the purchases of trading goods, raw material including components, plant machinery. equipment, inventory and finance management and for the sale of goods. 11. In our opinion and according to the information and explanations given to us, there are no transactions for purchase of goods arid sales made pursuance of contracts and arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating to Rs.50,004/- or more. 12. As informed to us, the company has a procedure for determination of unserviceable and damaged stores, raw-material and finished goods. Adequate provision is being made in the accounts for the loss arising on determination of such items. 13. As informed to us, during the year company has not accepted deposits from public to which section 58-A of the Companies Act, 1956 of the Companies (Acceptance of Deposits) Rules, 1975, apply. 14. As explained to us, the company has no by-products and also not having any realizable scrap. 15. The company has taken steps to strengthen its internal audit control system commensurate with the size of the company and nature of its business. 16. We are informed that, maintenance of cost records has not been prescribed by the Central Government u/s.209 (1)(d) of the Companies Act, 1956 for any of the company's products. 17. According to the records of the company, Provident Fund and Employee's state insurance dues have not been regularly deposited during the period with the appropriate authorities. 18. According to the information and explanation given to us,there are no undisputed amounts payable in respect of Income-tax, Wealth tax, Sales tax, Customs duty and Excise duty as at 31st March, 2003, and which are outstanding for a period of more than six months from the date they became payable. 19. The company is a sick industrial company within the meaning of Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The Board of Directors will take a view about the sickness only after the annual accounts would be approved and adopted by the shareholders of the company at Annual General Meeting and would comply provisions of SICA based on the outcome of the Annual General Meeting. 20. As explained to us no damaged goods were determined in the case of goods traded by the company. For Bharat Parikh & Associates Chartered Accountant Place : Ahmedabad (Camp) Date : 0509-203 Bharat Parikh Partner