ONIDA FINANCE LIMITED ANNUAL REPORT 2001-2002 AUDITORS' REPORT TO THE MEMBERS OF ONIDA FINANCE LIMITED We have audited the attached Balance Sheet of Onida Finance Limited as at 31st March, 2002 and Profit and Loss Account of the Company for the year ended on the date annexed thereto. These financial statements are the responsibility of the Company's Management. Our responisbility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally acc -epted in India. Those Standard require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 1. As required by the Manufacturing and other Companies (Auditors Report) Order, 1988 issued by the Company Law Board in terms of Sections 227 (4A) of the Companies Act, 1956 and on the basis of such checks as we considered appropriate and according to the information and explanations given to us we enclose in the Annexure a statement of the matters specified in Para- graphs 4 & 5 of the said order to the extent applicable. 2. Further to our comments in the annexure referred in paragraph 1 above, a) 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; b) in our opinion books of account as required by law have been kept by the Company so far as appears from our examination of the books; c) the Balance Sheet and Profit and Loss Account as referred to in this report are in agreement with the books of account; d) On the basis of the written representation received from the directors of the Company as at 31.03.2002 and taken on record by the board of direc- tors we report that no director is disqualified from being appointed as a director of the Company under clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 except Mr. K.D.Dwivedi, Director of the Company. e) In our opinion, the Profit and Losss Account and balance sheet comply with the mandatory accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. f) We report that had the observations made by us in note no. 3, 4, 5 & 9 given in Schedule 15 been considered, the loss for the year would have been Rs. (4,60,92,375/-) (as against the reported loss of Rs. 1,72,72,657/-) accumulated losses would have been Rs. 25,79,85,147/- (as against the reported figure of Rs. 22,91,65,429/-). We further report that impact of our observations given is note no. 5 in schedule 15 in respect of confirmation of balances can not be ascertained. g) In our opinion and the best of our information and according to the expl -anations given to us, the accounts read with the accounting policies and notes attached there to or appearing there on, subject to our comments on notes no. 3 regarding debentures, no. 4(b) regarding value of secured loan as the securities pledged/hypothecated are diminished substantially for which amount is not ascertainable no. 4(c) regarding valuation of long term investment where we are unable to comment at this stage whether it is a permanent fall in the value of the investment no. 9 regarding non provision of interest amounting to Rs 2,88,19,718 and the loss for the year is lower to that extent, no. 11 regarding non provision of debentures redemption reserves, no. 18 regarding compliance of RBI directives, no. 19, regarding non-adjustments of fixed assets and no. 20 regarding deferred tax gives 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 31st March, 2002. ii. In the case of the Profit and Loss Account of the Loss for the year ended on that date. FOR J.L. GARG & CO. Chartered Accountants AJAY RASTOGI (Partner) Place : New Delhi Dated : 16-07-2002 ANNEXURE TO THE AUDITORS REPORT (Referred to in Paragraph 1 of our Report of Even Date) 1. The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.During the year no physical verification of the assets was done by the management, hence we are unable to comment on any discrepancies between books records and physical verification. Further confirmation certificates from the lessee regarding existence and condition of such assets have also not been obtained. 2. None of the fixed assets has been revalued during the year. 3. The Stocks of shares have been physically verified by the management during the year. 4. In our opinion and according to the information and explanations given to us, the procedures of physical verification of stock of shares followed by the management is reasonable and adequate in relation to the size of company and the nature of its business. 5. According to information and explanations given to us no discrepanceis was noticed on physical verification of stocks as compare to the stock records. 6. In our opinion and on the basis of our examination of the stock records, the valuation is fair and proper in accordance with the normally accepted accounting principles and is on the same basis as in the previous year. 7. The company has not taken loans from the companies,firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956 or from companies under the same management within the meaning of Section 370 (1B) of the Companies Act, 1956. 8. No Loans and advances in the nature of loans have been given by the companies, firms and other parties listed in the register maintained under Section 301 of the Companies Act, 1956 and/or to the Companies under the same management as defined under Section 370 (1B) of companies Act, 1956 except to subsidiries where there is no stipulation for repayment of inte- rest and principal. 9. In respect of Loans and advances given to the employees and other cor- porate bodies we are unable to comment on recovery of principal and recovery of interest as there is no stipulation in this regard. 10. 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 for the purchase of plant and machinery, equipment and other assets including shares and deben- tures and, for the sale of shares and debentures. There is no transactions of purchase of stores and raw materials including components. 11. In our opinion and according to the information and explanations given to us, the transactions for the purchase and sales of goods, materials and services made in pursuance of contracts and arrangements entered in the register maintained under section 301 and aggregating during the year to Rs. 50,000 or more in respect of each party, have been made at prices, which in our opinion, are reasonable having regard to prevailing market prices for such goods, materials or services or the prices at which similar transactions have been made with other parties, and the company's business needs and exigencies. 12. In our opinion and according to the information and explanations given to us, the company has generally complied with the directives issued by the Reserve Bank of India and the provisions of section 58A of the Companies Act 1956 to the extent applicable with regard to the deposits accepted form the public except that (a)The Reserve Bank of India its letter no. DNBS.ND.N0.30675.1.5.6056/98-99 dt. 14.12.98 rejected the application of the Company for registration for carrying on its existing business as a non-banking finance company, in exercise of its powers conferred under section 45-1A of RBI Act, 1934. (b) Pursuant to the directives issued by RBI in October, 1998, the company stopped acceptance of fresh public deposits. Out of total principal outstanding amounts of Fixed Deposits from public of Rs. 1,13,77,648/- as on 31.03.2002 (Rs. 3,53,42,873 as on 31.03.2001). The aforesaid amount excludes an interest of Rs. 14,80,000(previous Rs. 44,66,000/-) not provided in the books of account. (c) The company could not maintain SLR requirement as envisaged as per the provisions of RBI directives. (d) The Company Law Board in exercise of the powers conferred by section 450A of the Reserve Bank of India Act, 1934 passed an order on 13.10.98. which was not complied by the Company. (e) The Company has not filed required periodic returns with the Reserve Bank of India. (f) The Deposits due thereon aggregating to Rs. 1,13,77,648/- principal, claimed and remained not paid as at 31st March, 2002. The aforesaid amount excludes an interest of Rs. 14,80,000/- (Rs. 44,66,000/-) not provided in the books of account. The Company has not complied with the prescribed liquidity requirement as required in paragraph 6(1) of the non banking fina -ncial companies acceptance of public deposits (Reserve Bank) Directions, 1999. 13. The Company's internal audit system need to be further strengthened with the size and nature of its business. 14.According to the records of company, Provident Fund and Employee's State Insurance dues have generally been regularly deposited during the year with appropriate authorities. 15.According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sale Tax, Custom Duty and Excise Duty were outstanding as at 31st March, 2002 for a period of more than six months from the date they became payable, except tax deducted at source. 16. According to the information and explanations given to us and on the basis of books of account of the company examined by us, no personal expenses have been charged to revenue account, other than those payable under contractual obligations or in accordance with generally accepted business practices. 16. The Company is not a Sick Industrial Company within the meaning of clause (O) of Sub-Section (1) of Section 3 of the Sick Industrial companies (Special provisions), Act, 1985. 17. The Company has not granted any loans and advances on the basis of sec- urity by way of pledge of shares, debentures and other similar securities. 18. In our opinion and according to the information and explanations given to us, the Company has maintained proper records of transactions and con- tracts as to dealings in shares, securities, debentures and other investments and timely entries have been made therein. The same have been held by the Company in its own name except to the extent of exemption gran- ted under Section 49 of the Companies Act, 1956 or in the process of transfer to its name. FOR J.L. GARG & CO. Chartered Accountants AJAY RASTOGI (Partner) Place : New Delhi Date : 16-07-2002