We have audited the attached Balance Sheet of HITKARI CHINA LIMITED as
at 31st March, 2001 and the Profit & Loss Account for the year ended on
that date annexed thereto and 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 such
(c) The Balance Sheet and Profit & Loss Account referred to in this
report are in agreement with the books of account.
(d) In our opinion the Balance Sheet and Profit & Loss Account complies
with the Accounting Standards referred to in section 211 (3C) of the
Companies Act, 1956.
(e) On the basis of information and explanations given to us and
representations obtained by the Company, there are no Directors of the
Company who are disqualified under Section 274 (I) (g) of the Companies
Act, 1956 from being appointed as Directors.
(f) In our opinion and to the best of our information and according to
the explanations given to us, the said Balance Sheet and Profit & Loss
Account read together with the notes thereon in Schedule `K' annexed to
the Balance Sheet i.e., (a) Note No. (7) regarding non-confirmation and
reconciliation of accounts, (b) Note No. (8) as to non provision and
non quantification of the interest and (c) Note Nos. (9) and (10) as to
non provision and non quantification of various liabilities upto 31st
March, 2001 and their effect on loss and reserves of the company and
ail other notes on accounts and schedules annexed thereto give the
information required by the Companies Act, 1956 in the manner so
required and give a true and fair view:-
i) insofar as it relates to the Balance Sheet, of the state of affairs
of the Company as at 31st March, 2001; and
ii) insofar as it relates to the Profit & Loss account of the loss of
the company for the year ended on that date.
As required by the Manufacturing and Other Companies (Auditors' Report)
Order, 1988 issued by the Company Law Board in terms of section 227
(4A) of the Companies Act, 1956 and on the basis of such checks as we
considered appropriate, we further report that:-
1. The company has maintained proper records showing full particulars
including quantitative details and situation of fixed assets. All the
assets have been physically verified by the management at the end of
the year which in our opinion is reasonable having regard to the size
of the company acid the nature of its assets. No material discrepancies
were noticed on verification.
2. None of the fixed assets have been revalued during the year.
3. The stocks of raw materials, semi finished & finished goods,
stores, saggars, moulds, fuels and packing materials have been
physically verified by the management at the end of the year. In our
opinion, the frequency of verification is reasonable.
4. The procedures of physical verification of stocks followed by the
management are reasonable and adequate in relation to the size of the
company arid the nature of its business.
5. The discrepancies noticed on verification between the physical
stocks and the book records were not material.
6. On the basis of our examination of stock records, we are of the
opinion that the valuation of stocks is fair and proper in accordance
with the normally accepted accounting principles and is on the same
basis as in the the preceeding year.
7. The company has taken interest free loans from companies, firms or
other parties covered under section 301 and from a company under the
same management as defined cinder section 370 (1 B) of the Companies
Act, 1956 and the terms and conditions are prima-facie not prejudicial
to the interest of the company.
8. The company has not granted loans, secured or unsecured to
companies, firms or other parties covered under section 301 or to
company under the same management as defined under section 370 (1 B) of
the Companies Act, 1956.
9. The company has not given loans or advances in the nature of loans
with stipulation of instalments in respect of the repayment of the same
and interest thereon. However, the company has given interest free
advances to employees and reasonable steps have been or are being taken
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 with regard to purchase of materials, plant and machinery,
equipments and other assets and with regard to the sale of goods.
11. According to the information and explanations given to us, no
transactions of purchase of goods and materials were made in pursuance
of contracts or arrangements covered under section 301 of the Companies
Act, 1956 and aggregating during the year to Rs. 50,000.00 or more in
respect of each party. However, sales have been made as per management,
at prevailing market rates.
12. As explained to us, the company has a regular procedure for the
determination of unserviceable or damaged stores, raw materials, semi
finished and finished goods, saggars and moulds etc. and provision has
been made in the accounts for the loss which has arisen.
13. In our opinion and according to the information and explanations
given to us the company has not accepted any deposit covered under
section 58A of the Companies Act, 1956 and the rules framed thereunder.
14. The company has neither realisable scrap nor by-product.
15. In our opinion the scope of rote-real audit reeds to be
strengthened and extended in order to be commensurate with the size of
the company & nature of its business.
16. The central Government has not prescribed the maintenance of cost
records under section 209 (1) (d) of the Companies Act, 1956 for the
items dealt with by the company.
17. The company has not been regular in depositing dues under the
Provident Fund & Employees State Insurance Schemes and the arrears as
on 31st March, 2001 have not been quantified.
18. According to the information and explanations given to us, no
undisputed amounts payable in respect of Income Tax, Wealth-tax,
Customs duty and Excise duty (except for Rs. 31.90 lacs being
undisputed Sales Tax not paid but provided for) were outstanding as at
31st March, 2001 for a period of more than six months from the date the
same became payable.
19. 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 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 section 3 of the Sick Industrial
companies (Special Provisions) Act, 1985.
21. We may mention that a Partner of our firm is a relative of a
Director of the Company though the said Director has no substantial
interest in the Company