MAZDA ENTERPRISES LIMITED
To The Members of
MAZDA ENTERPRISES LIMITED
We have audited the attached Balance Sheet of Mazda Enterprises Limited as
at March 31, 1998 and the Profit and Loss Account for the year ended on
that date annexed thereto and report that:
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,
except otherwise stated.
2. 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 the books
except as stated in paragraphs 5 and 7 below.
3. The balance sheet and profit and loss account dealt with by this report
are in agreement with the books of account except as stated in paragraph
4. The accounts of the Company for the year have been prepared on "going
concern" basis. On account of absence of adequate revenue generation cou
pled with lack of adequate assets to meet substantial liabilities, and the
appointment of Receiver by the High Court of Mumbai to take charge of the
Company's goods, debt, and assets, as stated in note 2 of schedule 15, in
our opinion it is uncertain that the Company will be able to continue
operations in the forseeable future. Consequently, the Company might be
unable to realise its assets and discharge its liabilities in the normal
course of business. Consequently, the accounts do not include adjustments
relating to the recoverability and classification of recorded asset amounts
or to the amounts and classification of liabilities that might be necessary
should the company be unable to continue as a going concern. For the rea
sons stated above, the basis of preparing accounts on "going concern"
assumption, in our opinion is incorrect.
5. (i) No provision has been made for:
a. Interest amounting to Rs.124.08 lakhs on amounts payable to notified
b. Income tax and sales tax demand of Rs.128.34 lakhs and Rs.161.84 lakhs
respectively disputed in appeal.
c. Rs.209.14 lakhs being dimunition in market value of the Company's quoted
Stock-in-trade. The Company has valued Stock-in trade and Investments at
cost instead of at lower of cost or market value as recommended by the
Institute of Chartered Accountants of India.
(ii) Attention is invited to Note No.3 (c) regarding stock-in trade of
Rs.24.82 lakhs receivable from a broker representing outstanding deliver
ies. We are unable to express our opinion thereon.
(iii) To the extent of non provisions stated in paragraph 5 above, the loss
of the Company for the year, the debit balance of profit and loss account
and current liabilities and provisions have been understated by Rs.648.22
(iv) Confirmation were not available in respect of aggregate balances of
Rs.11.24 lakhs in current and fixed deposit accounts with certain banks
included under cash and bank balances. These balances therefore remain
unverified and are subject to adjustment, if any. More over cash in hand
aggregating to Rs.0.13 lakhs was not available for our verification.
(v) Sundry debtors includes Rs.53.03 lakhs due from a notified broker. We
are unable to express an opinion on the recoverability or otherwise of the
(vi) Sundry Debtors outstanding for a period exceeding six months and
considered good Rs.83.59 lakhs are due from brokers and certain packaging
parties. We are unable to express an opinion on the recoverability or
otherwise of the aforesaid amount.
vii) The Company's share of loss in the partnership firm for the year ended
March 31, 1998 is based on unaudited accounts of the firm.
viii) Attention is invited to Note no.5(a) regarding Managerial remunera
tion to the former Managing Director in the earlier years which is subject
to the approval of the Central Government.
(ix) Attention is invited to Note no.6 regarding confirmation of balances
not having been obtained in respect of Sundry Debtors, Sundry Creditors
including amount payable to a Company under same management, Loans and
Advances and Deposits. Theses balances therefore are subject to adjust
ments, if any, on obtaining confirmations from the parties.
x) Other liabilities includes Rs.2.49 lakhs being the discrepancy on ac
count of difference in accounts relating to the earlier period.
6) In our opinion and to the best our information and according to the
explanations given to us, the said accounts, subject to our reservations
contained in paragraphs 4 and 5 above and read with notes thereon give the
information required by the Companies Act, 1956 in the manner so required
and give a true and fair view:
i) in the case of the Balance Sheet of the state of affairs of the Company
as at March 31, 1998; and
ii) in the case of the Profit and Loss Account of the loss for the year
ended on that date.
7. As required by the Manufacturing and Other Companies (Auditor's Report)
Order, 1988 issued by the Company Law Board and on the basis of such checks
of the books and records as we considered appropriate and according to the
information and explanations given to us during the course of our audit, we
further state that
i) The Company has maintained records of fixed year, and explanations given
to us, the frequency and procedures of physical verification of stock-
investment need to be streamlined so as to be commensurate with the size of
the Company and nature of its business.
v) In respect of unsecured loan of Rs.41 lakhs from Growmore Research and
Assets Management Limited, the rate of interest and other terms and condi
tions of the said loan are not known and accordingly we are unable to
report on the matters specified in clause (vii) of para 4(A) of the above
vi) 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, to transactions in shares and
securities are not adequate in so far as certain weaknesses were observed
in relation to their authorisation, detailed checks or procedures to ensure
control over securities, backup systems, transfers in the name of the
Company, physical custody records, reconcilliations and procedures.
viii) In our opinion, and according to information and explanation given to
us, there were no purchase and sale of shares to the companies listed in
the register maintained under section 301 of the Companies Act, 1956 and
aggregating to Rs.50,000/- or more in respect of each such Company.
ix) The Company has not accepted any deposits from the public.
x) The Company did not have an internal audit system during the year...lm6
xi) We are informed that the Central Government has not prescribed mainte
nance of cost records under section 209(1)(d) of the Companies Act, 1956
for any of the Company's activities.
xii) The Company did not have any employees and therefore the question of
depositing provident fund dues and E.S.I.C dues with appropriate authori
ties does not arise.
iii) According to the information and explanations given to us, there are
no undisputed amounts payable in respect of Sales Tax, Wealth Tax, Customs
Duty and Excise Duty except Income tax amounting to Rs.5.43 lakhs which
were outstanding as at March 31, 1998 for a period of more than six months
from the date they became payable.
xiv) In the course of our audit we have not come across
xv) We are informed that the Company is not 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.
xvi) In respect of the transactions of purchase and sale of shares,
adequate records have been maintained by the Company so far as it appears
from our verification of the related books of account except as stated in
paragraphs (iii) and (vii) above. The shares have been held in the name of
the Company except as stated in note no.3 of Schedule 15 and exemption
available under section 49 of the Companies Act, 1956. Companies (Auditor's
Report) Order, 1988 are not considered applicable for the year under re
For and on behalf of
T M MULLAJI & CO
Place : Mumbai,
Date : August 31, 1998