1995 NIHON NIRMAAN LIMITED AUDITORS REPORT We have audited the attached Balance Sheet of NIHON NIRMAAN LIMITED, Gotan as at 31 st March, 1995 and also the attached Profit & Loss Account of the Company for the year ended on that date and report that in our opinion and as per the information and explanations furnished to us and the Books and Records examined by us in the normal course of Audit: 1. The Company has generally maintained proper records of Fixed Assets showing full particulars including quantitative details and situations thereof. The fixed assets of the Company have not been physically verified during the year and as such, we are unable to comment on the discrepancies, if any, between the physical inventory and book records. 2. None of the fixed assets have been revalued during the year. 3. The stock of finished goods/stores and spares, raw materials etc. at the plant has not been physically verified during the Year due to suspension of activities at the plant and therefore, the discrepancies, if any, between the physical stock and book records remain undetermined. However, the stock of finished goods lying at the sales depots have been physically verified and the discrepancies between the physical stock and book records have been duly adjusted. The procedures followed for such physical verification of stocks are, in our opinion, not adequate in relation to the size and nature of the Company's business. Subject to Note Nos. 1(E) (b), 11 and 13 on Schedule `N' and Clause V(j) below, the valuation of above mentioned inventories, is in our opinion, fair and proper in accordance with the normally accepted accounting principles and is on the same basis as in the previous year. 4. As informed to us, no loan has been taken from or given to any Companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956 and also that there is no company under the same management as this Company under section 370 (1-B) of the said Act. 5. Interest free loans and advances in the nature of loans given to the employees and others are generally being recovered as per stipulations, where applicable. 6. 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 the purchases of stores, raw materials including components, plant and machinery, equipments and other assets and for the sale of goods. 7. According to the information and explanations given to us 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, made in pursuance of contracts or arrangements entered in the register maintained under Section 301, of the Companies Act, 1956. 8. Due to suspension of activities at the plant, the Company could not determine the stock of unserviceable or damaged stores and raw materials, if any, as on the Balance Sheet date and the quantum of loss, if any, arising on such items, therefore, remains unadjusted. 9. As informed, the Company has not accepted any deposit from the public within the purview of Section 58A of the Companies Act, 1956 and the Companies (Acceptance of Deposit) Rules, 1975. 10. In our opinion, reasonable records have been maintained by the Company for the sale and disposal of significant scraps. As informed, there is no by product arising out of the manufacturing process of the Company. 11. The Company had no internal audit system throughout the year which needs to be introduced commensurate with the size and nature of its business. 12. Although the Company has been prescribed to maintain cost records under section 209(1)(d) of the Companies Act, 1956 in respect of Cement, yet due to suspension of the activities at the plant throughout the year, no cost records, as informed, were required to be maintained by the Company. 13. The Company has generally been regular in depositing Provident Fund dues with the appropriate authority in due time and as informed, there was no arrear of such dues as on the Balance sheet date. The provisions of Employees' State Insurance Scheme are stated to be not applicable to the Company. 14. According to the information and explanations given to us, the undisputed amount payable in respect of Income Tax, Sales Tax, Customs Duty and Excise Duty outstanding for a period of more than 6 months as at 31st March, 1995, from the date they became payable, aggregated to Rs. 3,77,419 as on the Balance Sheet date. 15. The Company has a policy of authorising expenditure based on reasonable checks and balances. The policy is intended to ensure that expenses are authorised on the basis of contractual obligations or accepted business practices, having regard to the Company's business needs and exigencies. In terms of these observations, we have not come across any expenses charged to Revenue Account which, in our opinion and judgement and to the best of our knowledge and belief, could be regarded as personal expenses. 16. In our opinion, the Company has become a sick Industrial Company within the meaning of section 3(1) (o) of the Sick Industrial Companies (Special Provisions) Act, 1985. However as we understand, the Company's application to the Board for Industrial and Financial Reconstruction, has been rejected on the ground that the Company does not yet fall within the meaning of Section 3(1)(o) of the sick Industrial Companies (Special Provisions) Act, 1985.- Subject to and in terms of the above, we further report that :- i) The Company's Accounts have been prepared on a going concern basis, although the Company has become a Sick Company under the Provisions of Sick Industrial Companies (Special Provisions) Act, 1985. Should the Company be unable to continue as going concern, the extent of resultant adjustments if any, and the consequential effect thereof on the Company's accounts is not presently ascertainable. ii) We have, subject to Note No.: 14 on Schedule- `N' obtained all the information and explanations which to the best of our knowledge and belief, were necessary for the purpose of our audit. iii) In our opinion, proper books of account as required by Law, subject to Note No.: 1(A)(II) and 14 on Schedule `N' regarding accounting of certain expenses on cash bass and non-availability of various stock records, have been kept by the Company so far as appears from our examination of those books. iv) The Balance Sheet and the Profit & Loss Account dealt with by this Report are in agreement with the Books of Account as submitted to us. v) Attention is drawn to the following Notes on Schedule `N' whose impact on the Company's accounts is indicated in the respective notes below : a) Note No.: 1(A) (II) regarding non-provision of Bonus, medical reimbursement and leave payments to employees (amount unascertained) which as per consistent practice are accounted for on cash basis. b) Note No.: 3 (i) regarding non-provision of gratuity amounting to Rs. 1,70,324. c) Note No. :3 (ii) regarding non-provision of doubtful debts/advances aggregating to Rs. 3,68,31,495. d) Note No. :3.(iii) regarding non-provision of overdue interest (including penal interest) amounting to Rs. 8,20,52,557 (including Rs. 3,52,83,110 for the year) claimed by the Financial Institutions, pending their decision on the Company's application for waiver thereof. e) Note No.: 3 (iv) regarding non-provision of Income Tax demand amounting to Rs. 36,69,227 for earlier years, pending disposal of the Company's appeal filed there against. f) Note No.: 3 (v) regarding non-provision of wages aggregating to Rs. 48 lacs (approximately) payable to the workers during the period of suspension of activities at the plant, pending disposal of the case by the High Court at Jodhpur. g) Note Nos. 6 & 7 regarding non-provision of depreciation for the year amounting to Rs. 2,26,40,223 and non-appropriation of Rs. 1,59,92,734 from the revaluation reserve during the year. h) Note No. 11 regarding valuation of inferior quality of clinkers, the exact impact whereof on the Company's financial results is not presently ascertainable. i) Note No.: 13 regarding non provision of Customs Duty and port charge etc. (amount no ascertainable) against imported spares lying at Calcutta and Bombay Ports. j) Note No.: 14 regarding non-determination/ non-adjustment of discrepancies, if any, in the stocks lying at plant, due to non- availability of relevant records owing to suspension of activities at the plant. Further, in the absence of adequate details as to the physical condition of stores and spares, raw materials, work in progress, finished goods etc., we are unable to comment as to the fair valuation of such inventories as on the Balance Sheet date. k) Note No.: 16 regarding non-adjustment of proportionate deferred revenue expenses Rs. 1,67,84,694( including Rs 83,92,347 for the year) due to adverse operating results of the Company. l) Note No.: 18(a) regarding accounting of Excise Duty payment aggregating to Rs.4,53,22,032 as refunds receivable, about which we are unable to offer our comments due to non-receipt of any confirmation/communication from the concerned authorities. m) Note No.: 18 (b) & (c) regarding non-provision of Excise duty demands aggregating to Rs. 1,66,89,335 as well as interest and other charges Rs. 36,41,826. Against the above demands, the sum of Rs. 47,51,232 paid by the company is appearing as recoverable advances but due to pending appeals, we are unable to offer our comments on the above matter. n) Note No.: 20 regarding non-adjustment of certain credits aggregating to Rs. 10,35,040 (net) given by the banks, pending reconciliation thereof. o) Note No.: 21 regarding non-availability of balance confirmation from certain banks and its consequent non-reconciliation. p) Note No.: 22 regarding non-provision of interest aggregating to Rs. 5,77,73,979 on term loans as well as working capital, from financial institutions and banks. Subject to the above and read with other Notes appearing on Schedule `N', the said statements of accounts, in our opinion and the best of our information and according to explanations given to us, give the information required by the Companies Act, 1956, in the manner so required and give true and fair view: i) In the case of the Balance Sheet, of the State of Affairs of the Company as at 31st March, 1995 and ii) In the case of Profit & Loss Account, of the Loss of the Company (subject to the observations in Clause (v) above) for the year ended on that date. For S.R. BATLIBOI AND COMPANY Chartered Accountants R.K. Agrawal (Partner) Place: Calcutta, Dated: 28th September, 1995.