TERRYFAB (INDIA) LIMITED ANNUAL REPORT 2000-2001 AUDITORS REPORT To, The Shareholders, M/s. Terryfab (India) Limited, Jaipur. We have audited the attached Balance Sheet of Terrfab (India) Limited as at March 31, 2001 and also the Profit and Loss Account of the Company for the year ended on that date, annexed thereto, and report that:- 1. As required by the Manufacturing and other Companies (Auditor's Report) Order, 1988 issued by the Company Law Board in terms of Section 227 (4A) of the Companies Act, 1956, we enclose in Annexure-I, a statement on the matters specified in paragraphs 4 and 5 of the said order. 2. Our observations on the statement of accounts referred to above are given in Annexure II of this Report. (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 account, as required by law have been kept by the Company, so far as it appear from our examination of the books of account; (c) The Balance Sheet and the Profit and Loss Account dealt with by this report are in agreement with the books of account; (d) On the basis of written representations received from the directors as on 31.03.2001 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31.03.2001 from being appointed as a director in terms clause (g) of sub section (1) of section 274 of the Companies Act, 1956. (i) In our opinion, and to the best of our information and according to the explanations given to us, the accounts read together with Significant Accounting Policies and Notes on Accounts as referred is in Schedule "P" there to and further subject, to our observations in Annexures I & II of this report, (a) generally comply with the accounting standards referred to in sub section (3C) of section 211 of the Companies Act, 1956 ; (b) 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 the Company as at March 31, 2001 and (ii) In the case of the Profit and Lass Account, of the loss of the Company for the year ended on date date. For S. BHANDARI & CO. Chartered Accountants -Sd- Place : Jaipur (S.C. Bhandari) Dated : 26th May, 2001 Partner ANNEXURE - I AS REFERRED TO IN PARA 1 OF AUDITORS' REPORT OF EVEN DATE OF TERRYFAB (INDIA) LIMITED, FOR THE YEAR ENDED ON MARCH 31, 2001 1. The Company has maintained records of Fixed Assets but without showing particulars of quantitative details and locations thereof. According to the information and explanation given to us the Fixed Assets have been verified by the management during the financial year. In our opinion, the frequency of such verification is reasonable. However, in absence of complete details regarding location etc. of Fixed Assets same could not be compared with the records and discrepancies, if any, could not be determined. 2. None of the fixed assets have been revalued during the year. 3. The stock of finished goods, stores, spare parts and raw materials have been physically verified by the management at reasonable intervals. 4. The procedures of physical verification of stock followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business. 5. The discrepancies noticed on physical verification of stock compared to book records, which in our opinion were not material, have been properly dealt with in books of account. 6. On the basis of our examination of stock records, we are of the opinion that the valuation of stocks of finished goods, stores and spares and raw material have been fair and proper and is in accordance with the normally accepted accounting principle except valuation of finished goods at realisable value and not at lower of cost and realisable value as required by Accounting Standard -2 (As-2) on valuation of inventories issued by the Institute of Chartered Accountants of India. The valuation is on the same basis as in the previous year. 7. According to the information and explanations given to us the Company has not taken any loans, secured/unsecured from Companies, firms or other parties listed in register maintained under section 301 of the Companies Act, 1956 and from the companies under the same Management defined under sub section (1 B) of section 370 of the Companies Act, 1956. 8. The Company has not granted loans to Companies firms and other parties listed on register maintained under section 301 and to the companies under the same management as defined under sub section (1B) of section 370 of the Companies Act, 1956 9. Loans and Advances in the nature of Loans given to the Employees are being regularly recovered. 10. In our opinion the internal control procedures for the purchase of stores, raw material, including consumable, plant and machinery, equipments, other assets and sale of goods need to be further strengthened. 11. According to the information and explanations given to us, there are no transactions of purchase of goods and material and sale of goods/material and service made in pursuance of contracts or agreements required to be entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the period to Rs. 50,000/- or more in respect of each party. 12. As explained to us, the Company has a regular procedure for the determination of unserviceable or damaged stores, raw materials and finished goods. 13. According to the information and explanations given to us, the Company has not accepted any deposits from the public covered under section 58 A of the Companies Act, 1956. 14. As per information and explanation given to us, there are no realisable by-products. Consequently, question of maintaining the records for the same done not arise. However, company has maintained records for realisable Scrap. 15. In our opinion although the Company has an internal audit system but it is not commensurate with its size and the nature of its business. It needs to be adequately strengthened. 16. As informed to us the maintenance of cost records have not been prescribed by the Central Government U/s 209 (1) (d) of the Companies Act, 1956. 17. The Company is not regular in depositing provident fund dues with the appropriate authorities. However, as per information given to us Employees State Insurance Act is not applicable to the Company. 18. As informed to us, there are no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sale Tax, Customs Duty and Excise Duty as at 31st March, 2001 which are outstanding for a period of more than six months from the date they became payable. 19. According to the information and explanations given to us and on the basis of the records 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 practice. 20. The Company is a sick industrial Company within the meaning of Clause (O) of Sub Section (1) of Sec. 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. Reference to Board of Industrial and Financial Reconstruction has been made by the Company. For S. BHANDARI & CO. Chartered Accountants -Sd- Place : Jaipur (S.C. Bhandari) Dated : 26th May, 2001 Partner ANNEXURE-II AS REFERRED TO IN PARA 2 OF AUDITOR REPORT OF EVEN DATE OF TERRYFAB (INDIA) LIMITED, FOR THE YEAR ENDED ON MARCH 31, 2001 1. Our report is subject to significant accounting policies and notes on the statement of accounts as contained in Schedule "P" and more specifically referred hereunder :- (i) CST reimbursement claims is accounted for other than on accrual basis (as required by AS-9) (Para I(1)(b)). (ii) Finished goods are valued as at net realisable value and not on lower of cost or net realisable value and also that cost does not exclude CST reimburseable. (As required by AS-2) (Para I (4)). (iii) No provision of liability for gratuity and leave encashment benefits on retirement of employees on accrual basis as on 31.03.2001 has been made (As required by AS-15) (Para II (5)). (iv) No aggregation of amount payable to SSI Suppliers and also bifurcation in 30 days and more than 30 days of the same has been done and also no provision for interest due if any, as per "the interest on delayed payments to Small Scale and Ancillary Industries Undertaking Act, 1993" has been made (Para II (6)). (v) No provision for the penal interest on the term loan from Central Bank of India has been made. (Para II (14)). (vi) Balance of sundry debtors, creditors and loans and advances are subject to confirmation and reconciliation. (Para II (11)). (vii) Rs. 1 lac is due from director (Para II (12)). For S. BHANDARI & CO. Chartered Accountants -Sd- Place: Jaipur (S.C. Bhandari) Dated: 26th May, 2001 Partner