THE LAXMI VISHNU TEXTILE MILLS LTD.
AUDITOR'S REPORT TO THE MEMBERS OF THE LAXMI VISHNU TEXTILE MILLS LIMITED
We have audited the attached Balance Sheet of The Laxmi Vishnu Textile
Mills Limited as at 31st March, 1998 and also the Profit and Loss Account
of the Company for the year ended on that date annexed there to and report
1. 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 give in the Annexure a statement on the matters
specified in paragraph 4and 5 of the said order.
2. Further to our comments in the Annexure referred to in paragraph 1
(a) The Company's operations have been discontinued since June, 1995 due to
non-availability of working capital finance. The Board of Industrial and
Finance reconstruction (BIFR) was of the prima facie opinion that the
Company is no longer viable and is not likely to make its networth positive
within a reasonable time and to consider it just and equitable and in the
larger public interest to wind up the Company. However, the Company had
preferred an appeal before the Appellate Authority of Industrial and Finan
cial Reconstruction (AAIFR), New Delhi, against the order. The same has
workers' union have filed a petition against the order of the AAIFR in the
Mumbai High Court. In view of the above, in our opinion the Company is not
b) (i) The Company has not determined the liability for gratuity payable to
its employees on acturial basis as on 31st March. 1998. The accrued li
ability for gratuity as on 31st March, 1995 determined on acturial basis
amounting to Rs.324.45 lacs has not been provided for, as the Company
account for Gratuity as and when due as referred to in Note No.4 of Sched
ule 18. Interest on gratuity payable amounting to Rs. 109.95 lacs has also
not been provided.
(ii) Depreciation in respect of multiple shift allowance amounting in the
aggregate to Rs.255.32 lacs for the years 1983 to 1987 has not been provid
ed as referred to in Note No.5 Schedule 18. This is contrary to the ac
counting practice recommended by the Institute of Chartered Accountants of
(iii) Provision has not been made in the accounts for excise duty on yarn
used for captive consumption amounting to Rs.402.68 lacs as referred to in
Note No.9 (a) of Schedule 18.
(iv) Provision has not been made in the accounts for doubtful debts and
advances amounting to Rs.95.34 lacs and Rs.6.04 lacs respectively as re
ferred to in Note No.11 of Schedule 18.
(v) As stated in Note No.22 of Schedule 18 the Company has not circulated
requests for confirmation of balances of sundry Debtors,Creditors, Advances
and Deposits. These balances, therefore, remain unconfirmed and are sub
ject to consequential adjustments, if any.
(vi) Provision has not been made in the accounts for interest payable on
inter corporate deposits as the amount is not ascertainable as referred to
in Note No.6 of Schedule 18.
(vii) We are unable to express an opinion as to whether inventory valued at
Rs.28.80 lacs is realisable in view of the fact that the company's opera
tions have come to a standstill since June 1995 as referred to in Note
No.15 of Schedule 18.
(viii) Provision for Salaries have been made only in respect of Management
Staff as the Management Staff as the Management contends that salary
wages and retirement benefits are not payable in view of the Mills closure
due to Non-availability of Working Capital Finance as referred to in Note
No.16 of Schedule 18.
(ix) Provision has not been made in the accounts for single shift deprecia
tion for the year approximately amounting to Rs.36.69 lacs as referred to
in Note No.5 of Schedule 18.
(x) Provisions have not been made in the accounts for interest on loan from
Financial Institutions and Banks approximately amounting to Rs.110.27 lacs
and Rs.776.88 lacs respectively for the year as referred to in Note.6 of
(xi) Provision has not been made in the accounts for interest on statutory
liabilities (EPF, ESI, FP, EDLI, P. Tax, MST/CST) approximately amounting
to Rs.57.00 lacs for the year as referred to in Note No. 12 of Schedule 18.
(xii) Due to closure of the Mills, we were unable to physically verify
inventories on 31.3.1998 and have therefore relied on quantitative details
as per book records. Discrepancies if any between physical stock and book
records have not been dealt within accounts as referred in Note No.17 of
Consequent to the matters referred to in items (i) to (ix) above, loss for
the year is understated by Rs.1225.17 lacs and accumulated loss is under
stand by Rs.2207.62 lacs.
c) 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.
d) Subject to our paragraph (b) above, 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 those books.
e) The Balance Sheet and the Profit and Loss Account referred to in this
report are in agreement with the books of account.
f) Subject to para, 1, 2(a) 2(b) in our opinion and to the best of our
information and according to the explanations given to us. the said ac
counts given to us, the said accounts give the information required by the
Companies Act, 1956 in the manner so required and give a true and fair
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 Profit and Loss Account of the loss for the year ended
on that date.
for CHANDABHOY & JASSOOBHOY
Place : Mumbai, A.K. KOTWAL
Dated : 25th August, 1998. Partner
ANNEXURE TO THE AUDITOR'S REPORT
Referred to in Paragraph 1 of our report of even date on the accounts for
the year ended 31st March, 1998 of The Laxmi Vishnu Textile Mills Limited.
1. Fixed Assets records were not made available for verification and there
fore we are unable to comment as to whether these have been properly main
tained during the year. The fixed assets have not been physically verified
by the management during the year and therefore discrepancies have not been
identified between physical inventory and book records.
2. The Fixed Assets have not been revalued during the year.
3. The stocks of finished goods, stores and spares and work-in-process have
not been physically verified by the management during the year.
4. The discrepancies if any, between physical stock and book records have
not been determined and therefore not dealt with in the books of account.
5. We are unable to express our opinion on whether the valuation of stocks
as on 31.3.98 is fair and proper in accordance with normally accepted
6. The Company has taken interest free unsecured loan from a Company listed
in the register maintained under section 301 and 370 (1-c) of the Companies
Act, 1956 and the terms and conditions of such loan is prima facie not
prejudicial to the interest of the Company.
7. The Company has not granted any secured or unsecured loans to companies,
firms or other parties listed in the register maintained under Section 301
and 307 (1-C) of the Companies Act, 1956.
8. Employees to whom loans and advances in the nature of loans have not
repaid the principal amounts as stipulated.
9. There were no purchases of stores, raw materials including components,
plant and machinery, equipment, other assets and sale of goods during the
year and therefore the Company's internal control procedures in these areas
could not be verified as to its adequacy.
10. According to the information and explanations given to us, there were
no transactions of purchase of goods and materials and sale of goods materi
als and services aggregating Rs.50,000/- or more in respect of each party
in pursuance of contracts or arrangements entered in the register main
tained under Section 301 of the Companies Act, 1956.
11. The Company has not determined unserviceable or damaged stores, there
fore loss, if any, has not been determined. We are unable to express an
opinion on the realisation of stores and spare parts.
12. The Company has not accepted any deposits from the public during the
13. Records have not been maintained for sale and disposal of scrap. The
Company does not have any by-products.
14. The Company did not have an internal audit system during the year.
15. We have not been able to review the books of account maintained by the
Company pursuant to the order made by the Central Government for the main
tenance of cost records under Section 209(1) (d) of the Companies Act, 1956
as the records were not maintained.
16. The Company has been irregular in depositing the Provident Fund dues
and Employees State Insurance dues with the appropriate authorities. The
arrears of Provident Fund dues as at 31st March, 1997 amount to Rs.515.13
lacs and the arrears of Employees State Insurance dues amount to Rs.332.80
lacs. We are unable to quantity the arrears of Provident Fund dues and
Employees State Insurance dues for the year ended 31st March, 198.
17. According to the information and explanations given to us, there are no
undisputed amounts payable in respect of Income tax, Wealth tax, Sales tax,
custom duty and excise duty which were outstanding as at 31st March, 1988
for a period of more than six months from the date they become payable.
18. According to the information and explanations given to us, no personal
expenses have been charged to revenue account. other than those payable
under contractual obligations or in accordance with the generally accepted
19. The Company has become a Sick Industrial Company within the meaning of
clause (o) of sub section (i) of section 3 of the Sick Industrial Companies
(Special Provisions) Act, 1985. The Board for Industrial and Financial
Reconstruction (BIFR) bench is of the prima facie opinion that the Company
is no longer viable and is not likely to make its networth positive within
a reasonable time and is not likely to make its net worth positive within a
reasonable time and to consider it just and equitable and in the larger
public interest to wind up the Company. However, the Company has preferred
an appeal before the Appellate Authority for Industrial and Financial
Reconstruction (AAIFR), New Delhi, against the order. The same has been
dismissed by AAIFR on 15th January, 1998. The workers' union has filed a
petition in the high Court of Mumbai against the order of the AAIFR. The
matter is pending decision of the Mumbai High Court.
20. In our opinion clause (iv) of para 4A is not applicable to the company.
for CHANDABHOY & JASSOOBHOY
Place : Mumbai, A.K. KOTWAL
Dated : 25th August, 1998. Partner