1. We have audited the attached Balance Sheet of GKN Driveline (India)
Limited, as at December 31, 2009, and the related Profit and Loss
Account and Cash Flow Statement for the year ended on that date annexed
thereto, which we have signed under reference to this report. These
financial statements are the responsibility of the companys
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
2. We conducted our audit in accordance with the auditing standards
generally accepted in India. Those Standards 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
3. As required by the Companies (Auditors Report) Order, 2003, as
amended by the Companies (Auditors Report) (Amendment) Order, 2004,
issued by the Central Government of India in terms of sub-section (4A)
of Section 227 of The Companies Act, 1956 of India (the Act) and on
the basis of such checks of the books and records of the company as we
considered appropriate and according to the information and
explanations given to us, we give in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to in paragraph 3
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 purposes of our
(b) In our opinion, proper books of account as required by law have
been kept by the company so far as appears from our examination of
(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account;
(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash
Flow Statement dealt with by this report comply with the accounting
standards referred to in sub-section (3C) of Section 211 of the Act;
(e) On the basis of written representations received from the
directors, as on as on December 31, 2009 and taken on record by the
Board of Directors, none of the directors is disqualified as on
December 31, 2009 from being appointed as a director in terms of clause
(g) of sub-section (1) of Section 274 of the Act;
(f) In our opinion and to the best of our information and according to
the explanations given to us, the said financial statements together
with the notes thereon and attached thereto give in the prescribed
manner the information required by the Act and give a true and fair
view in conformity with the accounting principles generally accepted in
(i) in the case of the Balance Sheet, of the state of affairs of the
company as at December 31, 2009;
(ii) in the case of the Profit and Loss Account, of the profit for the
year ended on that date; and
(iii) in the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
ANNEXURE TO AUDITORS REPORT [Referred to in paragraph 3 of the
Auditors Report of even date to the members of GKN Driveline (India)
Limited on the financial statements for the year ended December 31,
1. (a) The company is maintaining proper records showing full
particulars including quantitative details and situation of fixed
(b) The fixed assets of the company have been physically verified by
the management during the year and no material discrepancies between
the book records and the physical inventory have been noticed. In our
opinion, the frequency of verification is reasonable.
(c) In our opinion and according to the information and explanations
given to us, a substantial part of fixed assets has not been disposed
of by the company during the year.
2. (a) The inventory has been physically verified by the management
during the year. In respect of inventory lying with third parties,
these have substantially been confirmed by them. In our opinion, the
frequency of verification is reasonable.
(b) In our opinion, the procedures of physical verification of
inventory followed by the management are reasonable and adequate in
relation to the size of the company and the nature of its business.
(c) On the basis of our examination of the inventory records, in our
opinion, the company is maintaining proper records of inventory. The
discrepancies noticed on physical verification of inventory as compared
to book records were not material.
3. (a) The company has not granted any loans, secured or unsecured, to
companies, firms or other parties covered in the register maintained
under Section 301 of the Act.
(b) The company has not taken any loans, secured or unsecured, from
companies, firms or other parties covered in the register maintained
under Section 301 of the Act.
4. In our opinion and according to the information and explanations
given to us, having regard to the explanation that certain items
purchased are of special nature for which suitable alternative sources
do not exist for obtaining comparative quotations, there is an adequate
internal control system commensurate with the size of the company and
the nature of its business for the purchase of inventory, fixed assets
and for the sale of goods. Further, on the basis of our examination of
the books and records of the company, and according to the information
and explanations given to us, we have neither come across nor have been
informed of any continuing failure to correct major weaknesses in the
aforesaid internal control system.
5. (a) In our opinion and according to the information and
explanations given to us, the particulars of contracts or arrangements
referred to in Section 301 of the Act have been entered in the register
required to be maintained under that section.
(b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of such contracts or
arrangements and exceeding the value of Rupees Five Lakhs in respect of
any party during the year have been made at prices which are reasonable
having regard to the prevailing market prices at the relevant time.
6. The company has not accepted any deposits from the public within
the meaning of Sections 58A and 58AA of the Act and the rules framed
7. In our opinion, the company has an internal audit system
commensurate with its size and nature of its business.
8. We have broadly reviewed the books of account maintained by the
company in respect of products where, pursuant to the Rules made by the
Central Government of India, the maintenance of cost records has been
prescribed under clause (d) of sub-section (1) of Section 209 of the
Act and are of the opinion that prima facie, the prescribed accounts
and records have been made and maintained. We have not, however, made a
detailed examination of the records with a view to determine whether
they are accurate or complete.
9. (a) According to the information and explanations given to us and
the records of the company examined by us, in our opinion, the company
is regular in depositing the undisputed statutory dues including
provident fund, investor education and protection fund, employees
state insurance, income-tax, sales-tax, wealth tax, service tax,
customs duty, excise duty, cess and other material statutory dues as
applicable with the appropriate authorities.
(b) According to the information and explanations given to us and the
records of the company examined by us, the particulars of dues of
income-tax and excise duty as at December 31, 2009, which have not been
deposited on account of a dispute, are as follows -
Name of the Name of dues Amount(Rs.)
Income Tax Income Tax and 10,884,100
Act, 1961 Interest thereon
Central Excise Excise Duty 5,086,070
Act, 1944 Demands &
penalty thereon 5,735,728
Name of the Statue Period to which the Forum where
amount relates dispute is pending
Act, 1961 Assessment Year Commissioner of
2005-2006 and Income Tax (A)
Act, 1944 2000-01 to 2005-06 CESTAT
2006-07 and 2007-08 Central Excise
10. The company has no accumulated losses as at December 31, 2009 and
it has not incurred any cash losses in the financial year ended on that
date or in the immediately preceding financial year.
11. According to the records of the company examined by us and the
information and explanation given to us, the company has not defaulted
in repayment of dues to any financial institution or bank or debenture
holders as at the balance sheet date.
12. The company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
13. The provisions of any special statute applicable to chit fund /
nidhi / mutual benefit fund/societies are not applicable to the
14. In our opinion, the company is not a dealer or trader in shares,
securities, debentures and other investments.
15. In our opinion and according to the information and explanations
given to us, the company has not given any guarantee for loans taken by
others from banks or financial institutions during the year.
16. The company has not obtained any term loans.
17. On the basis of an overall examination of the balance sheet of the
company, in our opinion and according to the information and
explanations given to us, there are no funds raised on a short-term
basis which have been used for long-term investment.
18. The company has not made any preferential allotment of shares to
parties and companies covered in the register maintained under Section
301 of the Act during the year.
19. The company has no outstanding debentures at the year-end.
20. The company has not raised any money by public issues during the
21. During the course of our examination of the books and records of
the company, carried out in accordance with the generally accepted
auditing practices in India, and according to the information and
explanations given to us, we have neither come across any instance of
fraud on or by the company, noticed or reported during the year, nor
have we been informed of such case by the management.
For Lovelock and Lewes
Membership Number A - 57134
Place: New Delhi
Date: March 18, 2010