ANNUAL REPORT 1998-99 MANSAROVAR PAPER & INDUSTRIES LIMITED AUDITORS REPORT AUDITORS' REPORT TO THE SHAREHOLDERS OF MANSAROVAR PAPER & INDUSTRIES LTD. 1. We have audited the attached Balance Sheet of MANSAROVAR PAPER & INDUSTRIES LIMITED as at 31.03.1999 and also the annexed Profit and Loss Account for the year ended on that date. 2. As required by the Manufacturing the Other Companies (Auditors Report) Order, 1988 issued by the Company Law Board in terms of section 221 (4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in Paragraph21 and 5 of the said order. 3. Further to our comments in the annexure referred to in para 2 above, we report that: 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 accounts as required by law have been kept by the Company, so far as appears from our examination of the books; iii) The Balance Sheet and the Profit and Loss Account are in agreement with the books of account. iv) In our opinion, the Balance Sheet & Profit and Loss Account dealt with by this report comply with the accounting standards referred to in Section 211 (3C) of the Companies Act, 1956 to the extent applicable. v) We draw attention to: a) Note No. 3 regarding non adjustment of liability in respect of imported second hand machinery amounting to USD 6,50,000 and damages etc. (which are not yet ascertained) b) Note No. 4 regarding customs duty, demurrage and detention charges in respect of raw materials abandoned at Bombay / Nave Shewa Ports, c) Note No. 6 (a) regarding non-receipt of balance confirmations from parties showing Debit / Credit Balances. We are unable to express our opinion about the effect of the aforesaid matters on the results of the year. d) Subject to the foregoing, 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 and read with the other notes forming part of the statement of accounts give a true and fair view; i) In the case of Balance Sheet of the state of affairs of the company as at 31.03.1999 and ii) In the case of Profit and Loss Account of the loss for the year ended on that date. For V. SANKAR AIYAR & CO. Chartered Accountants PLACE : NAJIBABAD R. RAGHURAMAN DATED : 14th Oct, 1999 (Partner) Annexure referred to in our report of even date to the shareholders of MANSAROVAR PAPER & INDUSTRIES LIMITED for the year ended 31,03.1999 1. The Company has maintained proper records to show full particulars including quantitative details and situation of fixed assets. As per information and explanations given to us, the Company has physically verified all its fixed assets once during the year which is considered reasonable and no material discrepancies were noticed on such verification. 2. None of the fixed assets have been revalued during the year. 3. (i) The stock of finished goods stores, spare parts and raw materials have been physically verified during the year by the management. In our opinion, the frequency of such verification is reasonable. (ii) In our opinion and according to the information and explanations given to us, the procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (iii) The discrepancies noticed on verification between the physical stock and book records were not material. (iv) On the basis of our examination of stock records, and also considering the method of accounting in respect of excise duty referred to in note No. 5, in our opinion, the valuation of the above mentioned stocks is fair and proper in accordance with the normally accepted accounting principles and is on the same basis as in the preceding period. 4. The terms and conditions of unsecured loans taken from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not prima facie prejudicial to the interest of the Company. No loans have been taken from Companies under the same management within the meaning of section 370(1B) of the Companies Act, 1956. 5. The Company has not granted any loans, secured or unsecured to Companies, Firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. 6. Loans or advances in the nature of loans have not been given by the company except advances to employees of the company, which are interest free. The employees are repaying the principal amount in agreed instalments, 7. 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 and spares, raw materials, plant and machinery, equipment and other assets and for the sale of goods. 8. According to the information and explanations given to us, the transactions of purchases of goods and materials made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating to Rs 50,000 or more have been made at prices which are reasonable having regard to the prevailing market prices for such goods and materials or the prices at which transactions for similar goods and services have been made with other parties. There are no sale of goods, materials or services made to any such parties. 9. As explained to us, the company has a reasonable system for determination of unserviceable or damaged stores, raw materials and finished goods. The company has confirmed that there were no such materials requiring provision at the end of the year. 10. The company has not accepted deposits from the public. 11. As informed to us, the company has no by-products and the realisable scrap are not considered material. 12. A firm of Chartered Accountants has carried out internal audit of accounts and have submitted periodical reports. In our opinion, the internal audit system is commensurate with the size of the company and the nature of its business. 13. The Central Government has prescribed maintenance of Cost Records in respect of the paper industry under section 209 (1)(d) the Companies Act, 1956. We are informed that it has not been practicable to adopt the prescribed formats in respect of paper boards manufactured by the Company. We are further informed that the Company has maintained cost records in sufficient details to suit their requirements. We have not made a detailed examination of the records with a view to determine whether they are accurate of complete. 14. According to the records of the Company, the Company has not been regular in payment of Provident Fund dues with the appropriate authorities. The arrears outstanding as on 31st March, 1999 amount to Rs. 3,85,644 . We are informed that ESI scheme is not applicable to the Company. 15. According to the information and explanations given to us, there are no undisputed amounts payable in respect of income-tax, wealth-tax, sales tax, customs duty and excise duty outstanding for a period of more than six months as at 31.03.1999 from the date they became payable. 16. According to the information and explanations give to us, no personal expenses have been charged to revenue account, excepting those payable under contractual obligations or in accordance with generally accepted business practices. 17. The Company is a sick industrial company within the meaning of Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985. Accordingly the Company made a reference to BIFR as required under Section 15 of the Act, BIFR has sanctioned a scheme of rehabilitation which is under implementation. For V. SANKAR AIYAR & CO. Chartered Accountants PLACE : NAJIBABAD R. RAGHURAMAN DATED : 14th Oct, 1999 (Partner)