We have audited the attached Balance Sheet of Bharat Commerce and
Industries Limited as at 31st March, 2002 signed by us under reference
to this report and the relative Profit & Loss Account for the year
ended on that date and report as under :-
1. The accounts of the Company except for Nanjangud, Thane and Rajpura
Units have been prepared on the basis of going concern for the reasons
stated in Note No. 7 in Schedule 23 of Notes. However, having regard to
(a) the accumulated tosses of the Company being much in excess of its
paid-up share capital and reserves, (b) the Companys current assets
being in negative and also substantial accounts being overdue on long
term loans, (c) approval having been received for permanent closure of
the three Units of the Company, (d) stoppage of operations at the
fourth Unit for more than two years and (e) the Company having been
declared a Sick industrial Company in terms of the provisions of the
Sick Industrial Companies (Special Provisions) Act, 1985, the ability
of the Company to continue as a going concern is contingent upon the
approval of the Rehabilitation Proposal submitted to the Board for
industrial & Finance Reconstruction (BIFR), which is under the
consideration of Operating Agency of BIFR.
2. Subject to above and read together with our comments in
Manufacturing and Other Companies (Auditors Report) Order 1988, given
in para 3 infra, 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, except to the extent stated in Note Nos. 14 and 15 in Schedule
(b) in our opinion, subject to Note No. 13 in Schedule 23, proper books
of account, have been kept by the Company as required by law, so far as
appears from our examination of those books.
c) The Balance Sheet and the relative Profit and Loss Account dealt
with by this report are in agreement with this books of account.
(d) In our opinion, she Balance Sheet and Profit and Loss Account
comply with the mandatory Accounting Standards referred in Sub-section
(3C) of Section 211 of the Companies Act, 1956.
(e) in our opinion and according to the information and explanations
given to us, no person appointed as a director in the company during
the year under audit was, prima facie, disqualified from being
appointed as a director under Clause (g) of Sub-section (1) of Section
274 of the Act.
(f) Attention Is invited to the following Notes appearing in Schedule
23 of Notes to Accounts.
(i) Note No. 7(f) regarding nor : provision of workers wages for the
months of June 2000 to December 2001 as per the Order of the Labour
Commissioner amounting to Rs. 1050.12 lacs at Nagda Unit of the Company
In view of the reasons stated in the said Note.
(ii) Note No. 8 regarding non-provision of power demand raised by
Madhya Pradesh Electricity Board amounting to Rs.276.66 Lacs which is
being disputed by the Company.
(iii) Note No. 9 regarding non-provision of DPG commission charges
(including interest thereon) amounting to Rs.27.97 lacs for the reason
explained in the said Note.
(iv) Note No 10 regarding non-provision of income tax liabilities
amounting to Rs.54.09 lacs as the Company is in appeal there against.
(v) Note No. 12 regarding non-provision of doubtful loans and advances
amounting to Rs. 182.80 Sacs for the reason explained in the said Note.
(vi) Note No. 13 regarding non-provision of interest payable to certain
parties amounting to Rs. 440.90 lacs for the reason explained in the
(vii) Note No. 15 regarding non-provision of penal interest and
liquidated damages in respect of defaults on repayment of principal and
interest on loans from various financial institutions and banks, the
amount where of has not been ascertained.
Without considering our observations in para 1 and 2 (f) (vii) above,
the impact of which on the financial statements could not be
determined, had the impact of our other observations in para 2(f) been
considered. the loss for the year would have been Rs.3017.42 lacs
instead of Rs.1733.92 lacs and accumulated losses at the end of the
year would have been Rs. 7935.99 lacs instead of Rs.5932.83.
In our opinion and to the best of our information and according to the
explanations givers to us, the said Balance Sheet and Profit and Los?
Account, read together with the Notes appearing in Schedule 23, and
subject to non disclosure of She amount payable to Small Scale
Industrial Undertakings as stated in Note No. 14 in Schedule 23 give in
the prescribed manner the information required by the Companies Act,
1956. However, in view of our comments in para (1) above and the
quantum of unprovided liabilities as set cut in para 2(f) above, we
are not in a position to comment whether the statements of account give
a true and fair view :
(i) in the case of Balance Sheet, of the State of Affairs of the
Company as at 31st March, 2002,
(ii) in the case of Profit and Loss Account of the Loss of the Company
for the year ended on that date.
3. As required by the Manufacturing and other Companies (Auditors
Report) Order, 1988, issued by the Central Government, to the extent
applicable, and on the basis of such checks as we considered
appropriate, we further report that :
(i) The Company has maintained proper records to show full particulars
including quantitative details and situation of fixed assets. As
informed to us, no physical verification of fixed assets has been
carried out during the last few years and as such, the discrepancies
therein, if any, as compared to book records could not be ascertained.
(ii) The fixed assets of the Company have not been revalued during the
(iii) Physical verification has been conducted by the management at
reasonable intervals in respect of stocks of finished goods, stores,
spare parts and raw materials in respect of Rajpura Unit only. In
respect of other Units, no physical verification has been conducted in
respect of stock of finished goods, stores, spare parts and raw
materials and the same have been considered as per the balances
appearing in the books.
(iv) The procedure followed by the management for such physical
verification at the Rajpura Unit are, in our opinion, reasonable and
adequate in relation to the size of the Company and the nature of its
(v) No material discrepancies have been noticed on such physical
verification as compared to book records.
(vi) In our opinion on the basis of our examination, we are satisfied
that the valuation hi the stocks subject to our comments in Para (xii)
below is fair and proper in accordance with normally accepted
accounting principles and is on the same basis as followed in the
(vii) The Company has not taken any loan, secured or unsecured, from
the companies, firms or other parties listed in the register maintained
under Section 301 of the Companies Act, 1956 and/or companies under She
same management as defined under Section 370 (1B).
(viii) The Company has not given any loan, secured or unsecured, to
companies, firms or other parties listed in the register maintained
under Section 301 of the Companies Act, 1956 and/or companies under the
same management as defined under Section 370 (1B).
(ix) Rs.84.69 lacs (including bill discounting charges) are recoverable
from some parties since. earlier years against bills discounted and
loans given and we are informed that the Company is making efforts for
their recovery. Loans and advances in the nature of interest free loans
giver, to employees are being generally repaid as stipulated.
(x) In our opinion and according to the information and explanations
given to us, the internal control procedures for the purchase of raw
materials, consumable stores including components, plant and machinery,
equipment and other assets and for sale of goods are commensurate with
the size of the Company and the nature of its business.
(xi) 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 made in pursuance of contracts or
arrangements 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.
(xii) As explained to us, the Company has a regular procedure for the
determination of unserviceable or damaged stores, raw materials and
finished goods. We are informed that adequate provision has been made
in the accounts for the loss arising on the items so determined.
However, in view of the physical verification of stocks not having
been conducted, the loss arising on such items, in the opinion of the
management, is not likely to be material, is not ascertainable and
hence, not provided for in the accounts.
(xiii) The Company has complied with the provisions of Section 58A of
the Companies Act, 1956 and the Companies (Acceptance of Deposits)
Rules, 1975 as well as relevant directives of Reserve Bank of India
with regard to the deposits received from its employees, their
(xiv) In our opinion, reasonable records have been maintained for the
sale and disposal of realisable scrap. The Companys operations did not
generate any by-products.
(xv) in our opinion, the scope and coverage of the internal audit is
commensurate with the size of the Company and the nature of its
(xvi) We have broadly reviewed, without making a detailed examination
of the records, the books of account, maintained by the Company
pursuant to the Order made by the Central Government for She
maintenance of the cost records under Section 209 (1) (d) of the
Companies Act, 1956, and are of the opinion that, prima facie, the
prescribed accounts and records have been maintained.
(xvii) The Company has generally been regular in depositing Provident
Fund and Employees State Insurance; dues with the appropriate
(xviii) According to the information and explanations given to us and
the books and records examined by us, except for Rs.42.77 lacs in
respect of sales tax, there are no undisputed amounts payable in
respect of Income Tax, Wealth Tax, Sales Tax, Custom Duty and Excise
Duty outstanding as at March 31, 2002 for a period exceeding six months
from the date they become payable.
(xix) The Company has a policy of authorising expenditure based on
reasonable checks and controls. This policy is intended to ensure that
expenses are authorised on the basis of contractual obligations or
accepted business practices having regard to the Companys business
needs and exigencies. In terms of these observations, we have not come
across any expenses charged to Profit & Loss Account which, in our
knowledge and belief, could be regarded as personal expenses.
(xx) The Company is a Sick industrial Company within the meaning of
Section 3(1) (O) of Sick Industrial Companies (Special Provisions) Act,
1985 and has made a reference to the Board for Industrial and Financial
Reconstruction (BIFR) in this regard.
For ands on behalf of
Place : New Delhi D. Bhatia & Co.
Dated : 31.07.2002 Chartered Accountants