HINDUSTHAN DEVELOPMENT CORPORATION LIMITED
AUDITORS' REPORT FOR THE YEAR 31ST MARCH, 1999.
We have audited the attached Balance Sheet of Hindusthan Development
Corporation Limited as at 31st March 1999 and also the Profit & Loss
Account of the Company for the year ended on that date and report as
1. 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.
2. The Balance Sheet and Profit & Loss Account dealt with by this Report
are in agreement with the books of account.
3. In our opinion, the Profit and Loss Account and the Balance Sheet,
except as mentioned in the notes in Schedule 12 (a) Note 16 and 17
regarding capitalisation of interest and other expenses incurred subsequent
to the commissioning of certain plant and machinery, (b) Note 1 on
inventories as stated in the Accounting Policy regarding inclusion of
interest and administrative overheads for the purpose of computation of
cost of finished stock and valuation of imported raw materials at market
value (c) Note 23 regarding non-adjustment of outstanding interest and (d)
Note 29 regarding accounting of insurance claim comply with the Accounting
Standards referred to in Section 21113C) of the Companies Act, 1956.
4. Subject to the notes in Schedule 12 together with their resultant impact
regarding (a) capitalisation of interest and other expenses incurred
subsequent to the commissioning of certain plant and machinery at the Steel
Unit of the Company which have been either allocated to the fixed assets or
carried forward as capital work-in-progress and non-ascertainment of the
significant impact there including on the loss for the year. The said
practices are not in consonance with the Accounting Standards issued by the
Institute of Chartered Accountants of India (Notes 16 and 17), (b)
inclusive of interest and administrative overheads for the purpose of
computation of cost of finished stock and valuation of imported raw
materials at market value in the Steel Unit as stated in accounting policy
on inventories and non-ascertainment of impact thereof (Note 1 on
inventories), (c) provision of depreciation on certain plant and machinery
considering these as continuous process plant on the basis of technical
evaluation and non-ascertainment of the impact thereof (Note 1 on
depreciation), (d) extent of recoverability of outstanding interest (Note
23), certain debts, advances and loans not being ascertainable and
therefore cannot be commented upon by us, (Note 18(a) and 27 and Para 5(ix)
below), (e) accounting of insurance claim pending acceptance thereof (Note
29), (f) non provision against obsolescence (amount unascertained) (Note
30) and in our opinion and to the best of our information and according to
the explanations given to us:
(i) Proper books of account as required by law have been kept by the
Company so far as appears from our examination of the books;
(ii) The said accounts, subject to our remarks as given above and read
together with other notes thereon give the information required by the
Companies Act, 1956 in the manner so required and give a-true and fair
(a) In case of the Balance Sheet of the state of affairs of the Company as
at 31st March, 1999, and
(b) In case of the Profit and Loss Account of the loss for the year ended
on that date.
5. As required by the Manufacturing and Other Companies (Auditor s Report)
Order, 1988 issued by the Central Government under Section 227(4A) of the
Companies Act, 1956 and according to the information and explanations given
to us and on the basis of such checks as we considered appropriate, we
further report that:
(i) The Company has maintained proper records showing full particulars
including quantitative details and situation of fixed assets except those
acquired by the Jute Unit prior to 1st April 1961 for which full
particulars in respect of individual items of assets are not available.
However, in certain units such records were under compilation. As explained
to us, the fixed assets we physically verified by the management according
to a phased programme designed to cover all the items of fixed assets over
a period of three years which was to be complied with and/or und
implementation in certain locations at the year end. As far as verified and
reconciled during the year, there were no material discrepancies between
such records and physical inventory.
(ii) The Company has not revalued any of its fixed assets during the year.
(iii) The stocks of finished goods, stores, spare parts and raw materials
except materials in transit and Iying with third parties have been
physically verified by the management during the year. In respect of raw
and calcined petroleum coke and other materials which are stored in heaps,
volumetric estimation technique or visual estimation survey method has been
followed to ascertain the stock from time to time and adjustments are given
effect to as and when determined. In respect of stocks Iying with the third
parties, confirmation in certain cases were not available.
(iv) Having regard to the above, 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.
(v) The discrepancies noticed in respect of items verified during the year
as compared to the book records were not material barring in certain cases
which as ascertained have been adjusted from
(vi) On the basis of our examination of stocks, we are satisfied that the
valuation of stock of finished goods, stores, spare parts and raw materials
except as given in Accounting Policy for inventories regarding Inclusion of
administrative overhead and Interest for valuation of finished goods and
valuation of imported raw materials at market price in the Steel Unit of
the Company and non adjustment of modvat benefit from the value of stocks
as given in Note 14 of Schedule 12 and read with Note 30 of Schedule 12
have been fair and proper and in accordance with the normally accepted
accounting principles and except as given in Note 24 of Schedule 12 is on
the same basis as in the preceding year
(vii) During the year the Company has not taken any loan, secured or
unsecured, from companies listed in the register maintained under Section
301 of the Companies Act 1956. As explained, there is no company under the
same management as defined under Section 370(1-B) (since omitted) of the
Companies Act 1956.
(viii) The Company has granted unsecured loans and advances in the nature
of loans to companies listed in the register maintained under Section 301
of the Companies Act, 1956. The rate of interest and other terms and
conditions of such loans were prima-facie not prejudicial to the interest
of the Company. As explained, there is no company under the same management
as defined under Section 370(1-B) (since omitted) of the Companies Act,
(ix) Loans given to certain bodies corporate as given in Note 181a) of
Schedule 12 have become overdue for payment. Certain loans repayable on
demand have been rescheduled in terms of High Court Orders, to be payable
in instalments as stipulated by the Court(Note 23 of Schedule 12). Other
loans including interest outstanding thereon aggregating to Rs 4 98 55
thousands have been stated to be repayable on demand. These loans together
with interest accured thereon till 31st March, 1999 including on certain
principal balances repaid during the year as stated by the management, have
not been recalled. Excepting these, parties including employees to whom
loans or advances in the nature of loans have been given by the Company,
are generally repaying the principal amounts as per stipulations, where
such stipulations exist and are also regular in payment of interest.
(x) In our opinion and according to the information and explanations given
to us, internal control procedures for the purchase of stores, raw-
materials including components, plant and machinery equipments and other
assets and for the sale of goods are commensurate with the size of the
Company and nature of its business
(xi) There are no transactions of purchase of goods and materials and sale
of goods, materials and services aggregating during the year to Rs. 50,000
or more in respect of each party in pursuance of contracts or arrangements
entered in the register maintained under Section 301 of the Companies Act,
(xii) The Company has a procedure for determination of unserviceable or
damaged stores, finished goods and raw materials. Necessary adjustments for
the losses (except as given in Note 30 of Schedule 12) as and when
determined are made in the accounts.
(xiii) The Company has complied with the provisions of Section 58A of the
Companies Act, 1956 and the rules made thereunder with regards to the
deposits accepted from the public in earlier years.
(xiv) In our opinion, reasonable records have been maintained by the
Company for the sale and disposal of realisable by-products and scrap
(xv) The company has an internal audit system designed to cover the entire
operations of the company in a phased manner. In respect of the areas
covered during the year, in our opinion, the system is commensurate with
the size and nature of the business.
(xvi) We have broadly reviewed the cost records maintained in respect of
manufacture of jute goods and steel products in jute and steel units of the
Company respectively and are of the opinion that prima-facie, the said
records, as prescribed by the Central Government under Section 209(1)(d) of
the Companies Act, 1956, have been maintained. However we have not carried
out any detailed examination of such accounts and records with a view to
determine whether they are accurate or complete. We have been explained
that maintenance of such records in respect of products of other units of
the Company are not mandatory.
(xvii) According to the records of the Company, Provident Fund and
Employees State Insurance dues have generally been regularly deposited
during the year with the appropriate authorities.
(xviii) As per the records of the Company, there are no undisputed amounts
of Income-tax, wealth-tax, sales tax, custom duty and excise duty
outstanding as on 31 st March, 1999 for a period of more than SIX months
from the date they became payable except Rs.35 45 thousands of sales tax,
Rs.60 95 thousands of entry tax, Rs.1 25 thousand of service tax and Rs. 23
86 thousands of excise duty.
(xix) During the course of our audit of the books of account carried out in
accordance with generally accepted auditing practices we have not come
across any personal expenses of employees or directors which have been
charged to revenue account, other than those payable under contractual
obligations or in accordance with generally accepted business practices
(xx) The Company is not a sick industrial company within the meaning of
Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act,
(xxi) In respect of the trading activities according to the explanations
and information given to us there were no damaged goods.
(xxii) In respect of service activities of the Company namely processing of
the raw-materials, fabrication and other job contracts, the Company has
reasonable system of recording receipts, issues and consumption of
materials alongwith reasonable system for authorisation at proper levels
and adequate system of internal control for issue of stores, commensurate
with the size of the Company and nature of its business. The allocation of
materials and man hours to respective jobs are not made, but in our
opinion, control is exercised on total materials and labour consumed.
For Lodha & Co.
Date: 28th May,1999