We have audited the attached BALANCE SHEET of NEWTON ENGINEERING AND
CHEMICALS LIMITED (hereinafter referred to as the `Company) as at 31st
MARCH, 2002 and also the PROFIT AND LOSS ACCOUNT of the Company for the
year ended on that date annexed thereto. 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.
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 the financial
statements are free of material mis-statement. 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 statments
presentation. We believe that our audit provides reasonable basis for
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 annexed
hereto a statement on the matters specified in paragraphs 4 and 5 of
the said Order.
Further to our Comments in the Annexure referred to above, we 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
b) In our opinion, proper books of accounts as required by law have
been kept by the Company far as appears from our examination of such
c) The Balance Sheet and Profit and Loss Account dealt with by this
report are in agreement with the books of account.
d) In our opinion, the Balance Sheet and the Profit and Loss Account
comply with the Accounting Standards referred to in sub-section (3C) of
Section 211 of the Companies Act, 1956.
e) On the basis of the written representations received from the
Directors of the Company as on 31st March, 2002, and taken on record by
the Board of Directors, We report that none of Directors is
disqualified as on 31st March, 2002 from being appointed as a director
in terms of clause (g) of sub section (1) of Section 274 of the
Companies Act, 1956.
f) In our opinion, and to i a best of our information and according to
explanations given to us, the said accounts read together with the
Significant Accounting Policies and Notes forming part thereof, 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 of the
Company at 31st March, 2002.
ii) in the case of Profit and Loss account of the `PROFIT of the
Company for the year ended on that date.
ANNEXURE REFERRED TO IN PARAGRAPH (I) OF OUR REPORT OF EVEN DATE TO
THE MEMBERS OF NEWTON ENGINEERING & CHEMICALS LIMITED.
1) As informed to us, proper records of fixed assets (including the
fixed assets acquired on merger/amalgamation of Newton Engineering &
Construction Company Limited) showing full particulars including
quantitative details, item wise depreciation and situation of fixed
assets, are in progress. We have been informed that most of the fixed
assets have been physically verified by the Management at the close of
the year and that no serious discrepancies have been noticed on such
2) None of the fixed assets of the Company have been revalued during
3) The stock of finished goods, stores, spare parts, raw materials and
other construction materials of the Company lying at various sites have
been physically verified by the Management at the end of the year.
4) In our Opinion, the procedures of physical verification of stocks
followed by the Management were found reasonable and adequate in
relation to the size of the Company and nature of its business.
5) As informed, the discrepancies noticed on verification between the
physical stocks and book records were not material in relation to the
operations of the Company and have been properly dealt with in the
books of account.
6) In our opinion, the valuation of stock is fair and proper in
accordance with the normally accepted accounting principles and is on
the same basis as in the previous year.
7) According to the information and explanations given to us, unsecured
loans has been obtained from company, firms or other parties listed in
the register manitained under Section 301 of the Companies Act, 1956
and/or from Companies under the same Management as defined under
Section 370 (1-B) of the said Act. The rate of interest and other terms
and conditions of such loans, where stipulated, are prime facie not
prejudicial to the interest of the Company, in terms of sub section (6)
of Section 370 of the Act, provisions of Section are not applicable to
a Company on or after 31st October, 1998.
8) According to the information and explanations given to us the
Company has granted interest free loans to company, firms or other
parties listed in register maintained under Section 301 of the
Companies Act, 1956 and/or from Companies under the same Management as
defined under Section 370(1-B) of the said Act. The terms and
conditions of such loans are prime facie not prejudicial to the
interest of the Company. There are, however, no stipulations with
regards to repayment of these loans, in terms of sub section (6) of
Section 370 of the Act, provisions of section are not applicable to a
Company on or after 31st October, 1998.
9) In respect of loans and advance in the nature of loans given by the
Company, where stipulations have been made, parties are repaying the
principal amounts and interest as stipulated. The employees to whom
interest free loans and advances in the nature of loans have been given
by the Company are repaying the principal amount as stipulated.
10) in our opinion and according to the information and explanations
given to us, there are internal control procedures commensurate with
the size of the Company and nature of its business with regard to
purchase of stores, raw materials including components, plant and
machinery, equipment and other assets and for the sale of goods.
11) in our opinion and according to the information and explanations
given to us, the transactions of purchase of goods, 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 year to Rs. 50,000
or more in respect of each party have been made at prices which are
reasonable having regard to She prevailing market prices for such goods
or the prices at which the transactions for similar goods have been
made with other parties.
12) As explained to us, the Company has reviewed its stock of raw
materials, stores and finished goods at the time of physical
verification for the purpose of determination of unserviceable and/or
damaged items and on this basis no provision is considered necessary by
the management as no loss is anticipated.
13) In respect of the Deposits accepted from the shareholders of the
Company, the provisions of Section 58A of the Companies Act 1956 and
the Rules framed thereunder have been compiled with.
14) The value of realisable scraps generated out of its activities,
being insignificant, no quantitative records are maintained. However
records have been maintained in respect of sale and disposal of such
scraps. The Company has no by product.
15) The Company has an internal audit system covering certain
operations of the Company. However, in our opinion internal audit
system needs to be strengthened so as to extend its scope to cover the
wide spread operations of various sites of the Company. As informed to
us, steps are being taken to introduce Internal Audit Department.
16) The Central Government has not prescribed maintenance of cost
records under Section 209(1)(d) of the Companies Act, 1956.
17) As per the records of the Company, delays have been observed in
remitting the Provident Fund and Employees State Insurance dues with
the appropriate authorities. However there were no arrears at the close
of the year.
18) According to the information and explanations given to us, there
are no undisputed amounts payable in respect of Income Tax, Wealth Tax,
Custom Duty and Excise Duty outstanding for a period of more than six
months as at 31st March, 2002 from the date they became payable. In
respect of Sales tax, as informed, the account is under reconciliation
and as such undisputed amount payable, if any, for over six months
cannot be ascertained.
19) During the course of our examination of the books of account
carried out in accordance with generally accepted auditing practices,
we have not come across any personal expenses which have been charged
to Profit & Loss Account, nor have we been informed of any such case by
the management, other than those payable under contractual obligation
and/or accepted business practices.
20) The Company is not a sick industrial Company within the meaning of
Clause (O) of Section 3 (1) of the Sick Industrial Companies (Special
Provisions) Act, 1985.
In respect of service activities.
21) According to the information and explanations given to us, the
Company has a reasonable system, commensurate with its size and nature
of its business, for recording receipts, issues and consumption of
materials and stores and allocating materials consumed to each
22) The Company has a reasonable system of allocation of man-hours
utilised to the relative contracts, commensurate with its size and
nature of its business.
23) The Company has a reasonable system of authorisation at proper
levels, and an adequate system of internal control commensurate with
the size of the Company and the nature of its business, as regards the
issue of stores and allocation of stores and labour to each contract.
Hitesh J. Desai
Date: 26-6-2002 For Haribhakti & Co.
Place: VADODARA Chartered Accountants