RADHIKA SPINNING MILLS LIMITED ANNUAL REPORT 2001-2002 AUDITORS' REPORT TO THE SHAREHOLDERS We have audited the attached Balance Sheet of M/s. Radhika Spinning Mills Ltd. as at 31st March, 2002 and the Profit and Loss Account for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. 1. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 2. As required by the Manufacturing and Other Companies (Auditors' Report) Order, 1988, issued by the Central Government of India in terms of Sub Section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraph 4 and 5 of the said Order. 3. Further to our comment in the Annexure referred to in above, we report that 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, proper books of accounts, as required by Law, have been kept by the Company so far it appears from our examination of such books. c) The Balance Sheet and the Profit and Loss Account dealt with by this report are in agreement with the books of accounts. d) In our opinion, Balance Sheet and Profit & Loss Account dealt with by this report, comply with the Accounting Standards referred to Section 211(3C) of the Companies Act, 1956 to the extent applicable. e) On the basis of the written representation received from the Directors, as on 31st March, 2002 and taken on record by the Board of Directors, we report that none of the director is disqualified as on 31st March, 2002 from being appointed as director in terms of Section 274(1) (g) of the Companies Act, 1956. f) In our opinion and to the best of our information and according to explanations given to us, the said accounts together with accounting policies and Notes thereon in Schedule V, give the information required by the Companies Act, 1956, in the manner as required and give a true and fair view in conformity with the accounting principles generally accepted in India: 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 31st March, 2002. Far Prakash Agarwal & Co. Chartered Accountants S.P. Agarwal Partner Place : New Delhi Dated : 14th August, 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 the Fixed Assets. As explained to us, all Fixed Assets have been physically verified by the Management at reasonable intervals. In our opinion, the frequency of verification is reasonable. No material discrepancies with respect to book records were noticed on such verification. 2. The Company has not revalued any of its Fixed Assets during the year. 3. The stock of Finished Goods, Raw Material and Store, Spare Parts and Tools have been physically verified by the Management at reasonable intervals during the year. 4. The procedure of physical verification of stock followed by the Management are, in our opinion, reasonable and adequate in relation to the size of the Company and the nature of its business. 5. The discrepancies noticed on physical verification of stock as compared to books or records were not material and have been properly dealt within the books of accounts. 6. In our opinion, the valuation of stock is fair and proper in accordance with generally accepted accounting principles and is on the same basis as in the preceding years. 7. The Company has taken unsecured interest free loan from a firm in which the Directors of the Company are partners. In our opinion, the terms and conditions are not prima facie prejudicial to the interest of the Company, 8. The Company has granted short term unsecured interest free advances in the normal course of business to a company under same Management u/s 370 (1B). Prima, facie the terms and conditions of such loans are not prejudicial to the interest of the Company. Except this, the Company has not granted any loans to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 19,56. 9. Loans and advances in the nature of interest free loans have been given to employees by the Company who are repaying the principal amount as stipulated. 10. There is an adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of Stores, Raw Material, Plant & Machinery, Equipments and other assets and for sale of products. 11. According to the information and explanation given to us, there are no transactions of purchase of goods and material made in pursuance of contracts or arrangements entered in the register maintained a/s 301 of the Companies Act, 1956 aggregating to Rs.50,000/- or more in respect of each party during the year. 12. As explained to us, the Company has regular procedure for the determination of unserviceable or damaged stores, raw material and finished products. Adequate provision has been made in the Accounts for the loss arising on the items so determined. 13. The Company has not accepted any deposit from the public to which provisions of Section 58A of the Companies Act, 1956, the Companies (Acceptance of Deposits) Rules, 1975 and the guidelines of Reserve Bank of India apply. 14. The Company is maintaining reasonable records for the sale and disposal of realisable waste. The Company has no by-products. 15. The Company has not yet setup formal Internal Audit System. However, the Company has adequate system of internal check and internal control. 16. During the year, the Company was not regular in depositing Provident Fund and Employee's State Insurance dues regularly. At the close of the year, Rs. 1,01,468/- was overdue on account of Provident Fund and Rs.36,0461- on account of Employee's State Insurance. 17. Except Rs.1,40,752/- towards Income Tax, there are no unpaid amounts payable in respect of Wealth Tax, Sales Tax, Custom Duty and Excise Duty as at 31st March, 2002 which are outstanding for a period of more than six months from the date they became payable. 18. According to the information and explanations given to us, no personal expenses of employees or Directors have been charged to Revenue Account other than those payable under contractual obligation or in accordance with generally accepted business practice. 19. Clauses xvi, xx of paragraph 4(A) of the said order are not applicable to the Company. For Prakash Agarwal & Co. Chartered Accountants S.P. Agarwal Partner Place : New Delhi Dated : 14th August, 2002