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Auditor Report of Haryana Financial Corporation

Mar 31, 2015

1. We have audited the accompanying financial statements of Haryana Financial Corporation (HFC), which comprise of the Balance Sheet as at 31st March,2015 and the Statement of Profit and Loss and cash flow statement for the year ended and a summary of significant accounting policies and other explanatory information.

Management's responsibility for the Financial Statements

2. Management is reponsible for the preparation of these Financial Statements that give a true and fair view of the financial position and financial performance and the cash flow of the Corporation in accordance with the accounting standards and principles generally accepted in India and as per the requirements of Small Industries Development Bank of India (SIDBI). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatements whether due to fraud or error.

Auditor's responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards on auditing issued by the Institute of Chartered Accountants of India and provisions of section 37 of the State Financial Corporations Act 1951 as amended by SFCs (Amendment) Act 2000. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedure selected depend upon the auditor's judgement , including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Corporation's preparation and fair presentation of the financial statements in order to design audit procedure that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our Audit opinion.

Opinion

6. In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true & fair view in conformity with the accounting principles laid down by SIDBI for SFCs and generally accepted in India ;

a) In the case of the Balance Sheet, of the state of affairs of the Corporation as at 31st March, 2015,

b) In the case of the Statement of Profit & Loss, of the Profit for the year ended on that date, and-

c) In the case of the Cash Flow Statement of the cash flow for the year ended on that date.

Report on other legal and Regulatory requirements

On the basis of our audit subject to Notes on Accounts as contained in Schedule "S", we report that ;

i) 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.

ii) In our opinion, proper books of accounts as required by law have been kept by the Corporation so far as appears from our examination of those books and proper returns adequate for the purpose of our audit have been received from Branches.

iii) The Balance Sheet, Statement of Profit & Loss and Cash Flow statements dealt with by this Report are in agreement with the books of accounts and with the returns received from the Branches.

iv) In our opinion the Balance Sheet, Statement of Profit & Loss and Cash Flow statements comply with the Accounting Standards and guide lines issued by SIDBI for SFCs from time to time.

v) The transactions of the Corporation that have come to our notice have been within the powers of the Corporation.

For R.p Mallick & Associates Chartered Accountants

Place : Chandigarh FCA (Prop.) Membership No.083882 Dated : 11th August, 2015 Firm Reed. No.04867N


Mar 31, 2013

We have audited the accompanying financial statements of Haryana Financial Corporation which comprise the Balance Sheet as at March 31, 2013, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position and financial performance of the Company in accordance with the accounting principles generally accepted in India including Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013;

b) in the case of the Statement of Profit and Loss, of the profit/ loss for the year ended on that date; and

c) In the case of the Cash Flow Statement, of the cash flow for the year ended on that date.

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A)of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, 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;

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 those books;

c) The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d) In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956; except AS 22 relating to the Taxes on Income read with notes forming part of accounts.

e) On the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

f) It may be noted that at present, no Rules relating to the amount of cess for rehabitation or revival or protection of assets of sick industrial companies, payable by a company under section 441A of the Act have been notified by the central Government. Thus, it would not be possible for the auditor to comment on the regularity or otherwise about the cess till the time relevant rules or regulations are issued.

On the basis of such checks as we considered appropriate and according to the information and explanation given to us during the course of our audit, we report that: (i) In Respect of the Fixed Assets:

a) The Company has no Fixed Assets during the year.

(ii) In respect of its Inventories:

a) The company has no any inventory during the year.

(iii) In respect of Loan:

a) The company has not taken any loans from Companies, Firms or other parties and directors and relative of the Director; Register maintained under section 301 of the Act.

b) In our opinion, the terms and conditions, on which loans have been taken from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act 1956 and from the companies under the same management, are not, prima facie, prejudicial to the interest of the company.

(iv) 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 regards to purchases of inventory, fixed assets and with regards to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

(v) In respect of Contracts or arrangements referred to in Section 301 of the Companies Act, 1956:

According to the information and explanations given to us, we are of the opinion that the transactions that need to be entered in into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

In our opinion and according to the information and explanation given to us, There is no any transaction more than Rs. 500000/- or more of purchase of goods and materials and sale of goods, materials and services, made in pursuance of contracts or arrangements entered in the registers maintained under section 301 and aggregating during the year in respect of each party, so this provision is not applicable. (vi) In our opinion and according to the information and explanations given to us, since the company has not accepted any deposits from the public the compliance with the provisions of sections 58A, 58AA or any other relevant provisions of the Act and the rules frame there under with regard to the deposits accepted from the public are not applicable to the company. No order has been passed by the applicable authorities.

(vii) In our opinion, the company has no required any internal audit system commensurate with the size and nature of its business.

(viii) The Central Government has not prescribed for maintenance of cost records under section 209(1) (d) of the Companies Act, 1956 for the products of the Company.

(ix) In respect of Statutory Dues:

a) According to the information and explanation given to us, the company is generally regular in depositing with the appropriate authorities, undisputed statutory dues including Provident Fund, ESIC, Income Tax, Sales Tax, Excise Duty, Cess and any other material statutory dues applicable to it.

b) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, wealth tax, sales tax, custom duty, excise duty and cess were outstanding, as at 31st March, 2013 for a period of more than six months from the date they become payable.

(x) The company have accumulated losses of Rs.4,56,59,161/-. The company has incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

(xi) In our opinion and according to the information and explanation given to us, the company has opted for One Time Settlement Scheme for repayment of dues to financial institutions or banks in earlier year.

(xii) According to the information and explanations given to us, the company has not granted loans and advances on the basis of securities by way of pledge of shares, debentures and other securities. Therefore the provisions of clause 4(xii) of the Companies (Auditors Report) order, 2003 are not applicable to the company

(xiii) In our opinion, the company is not a Chit Fund or a NIDHI Mutual Benefit Fund/Society.

Therefore the provisions of clause 4(xiii) of the Companies (Auditors Report) order, 2003 are not applicable to the company.

(xiv) In our opinion the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of the clause 4 of CARO 2003 are not applicable to the company as regards dealing in or trading in shares, securities and other investments.

(xv) As informed to us, the company has not given guarantees for loans taken by others from banks or financial institutions.

(xvi) In our opinion, on the basis of information & explanations given to us, the term loans were not applied for the purpose for which they were raised.

(xvii) In our opinion, on the basis of information and explanations given to us funds raised on Short term basis have not been used for Long-term investment.

(xviii) 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.

(xix) The company has not issued any debentures during the period covered by our audit report.

(xx) The company has not made any public issue of shares during the period covered by our audit report.

(xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the year.

Date : 27th May, 2013 For, Vishves A. Shah & Co.

Place : Ahmedabad Chartered Accountants

Firm No.121356w

Sd/-

(Vishves A. Shah)

Proprietor M. No. 109944


Mar 31, 2012

We have audited the attached Balance Sheet of Haryana Financial Corporation as at 31st March, 2012 and also the annexed Profit & Loss Account for the year ended on the date together with schedules forming integral part of the accounts. These financial statements are the responsibility of the Corporation''s 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 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 our opinion.

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 accounts have been kept by the Corporation so far as it appears from our examination of those records.

C) The Balance Sheet and Profit & Loss Account dealt with by this report are in agreement with books of account.

D) In our opinion and to the best of our information and according to the explanations given to us the said accounts give a true and fair view :

i) In case of Balance Sheet the State of Affairs of the Corporation as at 31st March, 2012 and

ii) In case of Profit & Loss Account of the Loss for the year ended on that date.

For Dhillon & Associates

Chartered Accounts

Charanjit kumar (F.C.A.)

Place : CHANDIGARH Partner

Membership No. 099126

Dated: 29th August, 2012 Firm R''egd. No. 002783N


Mar 31, 2010

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 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 our opinion.

A) Further to the above, we are giving our qualificatory remarks on the accounts, as below :

1. In respect of Note No. 2 (i) & (ii) (Schedule S) relating to Contingent Liabilities, opinion is constrained in the absence of exact amount determinable in respect of it.

2. In respect of Note No. 4 (Schedule S) relating to non-determination of diminution in the value of primary and collateral securities of all the loans and advances as on the date of Balance Sheet. Due to want of valuation report of these securities, the adequacy of provisioning of A/on Performing Assets cannot be ensured. The value of securities for classification of loans & advances are not taken on realization basis but is being taken as valued at the time of sanction of loan. Therefore, we are unable to form an opinion on the consequential adverse impact on the revenues and assets of the Corporation.

3. The earning per share, capital adequacy and other business ratios computed and disclosed in Annexure to Schedule S are subject to the impact of observations in para 1 to 2 above.

B) 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.

C) In our opinion, proper books of accounts have been kept by the Corporation so far as it appears from our examination of those records.

D) The Balance Sheet and Profit & Loss Account dealt with by this report are in agreement with books of account.

E) Subject to our qualificatory remarks referred in paragraph "A" above, in our opinion and to the best of our information and according to the explanations given to us the said accounts give a true and fair view :

i) In case of Balance Sheet the State of Affairs of the Corporation as at 31st March, 2010 and

ii) In case of Profit & Loss Account of the loss for the year ended on that date.

MANAGEMENTS REPLY TO THE AUDITORS REPORT

1. In respect of Auditors remarks at Serial No.A(1) The liability in respect of units disposed off but in dispute the amount is indeterminate. However, the final liability in each and every case shall be determined on the final disposal of the case by the honble Court.

The liability in respect of the claims lodged against the Corporation by ex-employees/ pensioners and other claims not acknowledged as debts, the amount is indeterminate. However, the final liability in respect of the claims of the ex-employees shall be determined at the time of final disposal of the case by the Honble Court/Authorities.

2. In respect of Auditors remarks at Serial No.A (2)

The value of primary and collateral securities of all the Loan & Advances as on the date of the Balance-Sheet is not re-assessed. However, the adequate provision against non-performing assets (NPAs) has already been made in the books of accounts as on 31.03.2010 as per the provisioning norms of SIDBI.

For Dhillon & Associates Chartered Accountants

Place : CHANDIGARH

Dated : 27th September, 2010


F.C.A Membership No. 090661


Mar 31, 2000

In accordance with the provisions of Section 37 (1) of the State Financial Corporation Act, 1951, we have examined the attached Balance sheet of Haryana Financial Corporation as at 31st March, 2000 and also the annexed Profit and loss Account for the year ended on that date.

We report that:

A 1. METHOD OF ACCOUNTING

The accounts of the Corporation have been maintained on cash basis (except for items as per points of Significant Accounting Policies) and not on accrual basis as per the requirement of clause 10(c) of fundamental assumptions of Accounting Policies (Accounting Standard - I). This is in contravention of basic concept of sound accounting principles. The balance sheet does not reveal correct particulars relating to its receivable, payable assets, liabilities, income and this has also resulted in non compliance of the following other accounting standards issued by the Institute of Chartered Accountants of India.

i) Accounting Standard-15

No provisions has been made for leave encashment payable to employees. ii) Accounting Standard -5 No Separate disclosure has been made for prior period and extra ordinary items related to previous year.

2. FIXED ASSETS

a) The Corporation has not maintained proper records of fixed assets owned so as to identify its location, quantity, gross and written down value itemwise. There is no system of physical verification of the fixed assets at its branches or head office by the Management. However, physical verification of fixed assets at head office has been made during the year but there is no record to verify the actual figures with book figure and its discrepancies.

b) Depreciation on lease assets has been charged as per Capital Recovery Method. Lease equalisation reserve has not been worked out against the differences between annual lease charge and depreciation provided on lease assets during the year as per the recommendation of ICAI on lease accounting.

c) The Corporation has not maintained proper record of equipments given on lease of Rs. 13.38 crores so as to identify its location, quantity, physical verification at regular intervals.

3. LOANS AND ADVANCES

I. The Corporation has not strictly followed the prudential guidelines issued by IDBI/RBI regarding assets classification and provisioning of assets. In some cases, accounts of the same party have been classified in different categories. A criterion of name alone has been taken into consideration for classification of advances of a single party is one category. This has resulted under provisioning which can not be quantified due to the non-availability of the necessary information. Further, the maintenance of accounts of Bhiwani Branch is quite pathetic and we are unable to form our opinion regarding correctness of the accounts of that branch and its impact on the financial statements of the Corporation.

II. In many cases, which includes most of the defaulted cases, the securities of the Corporation against its borrowing are not intact and there is substantial erosion in its value. Either the security was not adequates at the time of sanction of the advance or it has eroded afterwards. This has resulted into a huge loss and adversely effected the financial health of the Corporation since very poor recovery has been witnessed out of the sale of these inadequate securities of defaulted units. Loans shown as fully secured have become unsecured to the extent of the shortfall for which no provision has been made. The amount of under provision is unascertainable in the absence of required information.

III. The Corporation has auctioned about 200 units u/s 29 of SFCs Act during the year. The bid prices finally accepted by the Corporation are much less than the book value of primary securities. No effect has been given in the books for the accepted bid prices of the securities in the cases where sale has been confirmed but agreement has not been fully executed upto 31-03-2000 and the provision against these non standard assets has been made on the basis of the book value of the securities completely ignoring their real value evidence in the form of accepted bid prices. Again, this has resulted in under provisioning which we are unable to quantify due to the non-availability of the required information.

IV. As per the past practice, the Corporation has shown the provisions of Rs. 12.62 crores against advances in profit and loss appropriation account (below the line) whereas the same should have been shown in the profit and loss account (above the line). Resultantly, the loss for the year is Rs. 17.78 crores instead of Rs. 5.27 crores as depicted in profit and loss accounts.

V. In few cases units have been installed on the property other than the mortgaged with the Corporation resulting into further hardship in the recovery of the advances by resorting to legal recourse. Besides, the means of the promoters have not been verified at the time of the sanction of the advances and merely affidavits have been relied upon in some cases.

VI. At times, the Corporation has not got the mortgage of the land registered and mutation has not been changed in the revenue record in Corporations favour making the Corporation unable in safeguarding its interests to that extent.

VII. The figure of loans & advances is disclosed as per General Ledger balances in respect of various scheme of loans and advances. These balances have not been reconciled with their respective sub ledger and there is a difference of Rs. 6.70 Lacs as follows :-

Name of Branch Balance as per Balance as per Difference Sub -Ledger General Ledger

Bhiwani 34,80,31,239 34,85,27,278 4,96,039

Faridabad 51,05,53,914 51,07,27,147 1,73,233

Jind 21,12,20,304 21,12,21,511 1,207

6.70.479

VIII. Ad-hoc limits against bought out deals of Rs. 177.75 lacs is the opening balance for first three years and nothing has been received during the year. Corporation has advanced this loan against shares having negligible value at present and provision of Rs. 56.25 Lacs has been made on the basis of the face value of the shares. This provisions is insufficient to the extent of the difference as nothing is recoverable and realisable value of shares is negligible.

4. LEASE ASSET

a) Advance to lease equipment suppliers amounting to Rs. 799.71 Lacs is outstanding as an opening balance and no transaction has taken place in these accounts for the full year. This amount is doubtful of recovery as there is no documentary evidence of receiving the lease equipment by the borrower. No provision has been made against the same by corporation and as such loss is understated by this amount of non-provision.

b) It has been observed that the Corporation has not complied with the proper appraisal norms to identify the credit worthiness and genuineness of the borrowers and suppliers of lease assets. This has resulted into huge amount of unrecoverable lease finance. As per the.Managements own appraisal for the slackness, Corporation has identified and classified defaulters in Category -C and D amounting to Rs. 714.78 Lacs and 510.95 lacs respectively. FIR has been registered against Category D cases and the corporation doesnot have any security or means to recover this amount. No provision has been made against the same by Corporation and as such loss is understated by the amount of non provision.

c) Leasing security of Rs. 2158004 being rent security of three months has not been adjusted after expiring of lease. Effect has not been given to transfer the same to the credit of respective borrower accounts which are over stated as recoverable by this amount.

d) Corporation has not maintained or monitored any system for the proper insurance of the lease assets.

5. INVESTMENT

As per the guidelines issued by RBI (Feb.27, 1997) and institute of Chartered Accountants of India, if there is any permanent diminution in the value of equity investment the financial institution would provide in the books of accounts for diminution. Purchase value of equity investment is Rs. 9.93 crore whereas the market value as on the date of Balance sheet is only Rs. 1.76 crore. No provision has been made against the same by Corporation and as such loss is under stated by this amount of non-provision.

6. State Bank of India account of the Corporation shows balance of Rs. 4,94,186 whereas the statement shows the balance or Rs, 47,319 only. The difference of Rs. 4,46,867 is appearing since 1982-83 and even after 17 years it is pending reconciliation. There are various debit credit entries giving this net effect and we are unable to comment about its effect on the actual state of affairs of the Corporation.

7. Excess Income Tax deposit of Rs. 3.85 Crore has been shown under the head "other assets" against provision for taxation is nil. This amount represents excess disputed tax of earlier years and advance tax for 1999-2000 paid by the Corporation against which appeals have been filled with higher authorities. There is difference of Rs. 2 Lacs in reconciliation of the excess tax paid and its year-wise breakup of disputed tax due from department. No disclosure has been made in notes on account about the quantum of disputed tax as assessed by. Income Tax Department and disputed in appeal by the Corporation.

8. INTERNAL AUDIT

The Corporation has internal audit cell of two people for 18 branches, which has to visit each branch in every quarter as prescribed in the Corporation accounting manual. They conduct only pre audit and have visited only five branches and as such the internal audit system of the Corporation is not commensurate with the nature and size of the business of the Corporation. It needs to be streamlined and strengthened in order to have proper control and results.

9. The Corporation is maintaining GPF and CPF accounts but the money has not been invested in the prescribed securities and is being utilized by the corporation for its own business. Interest at the rate of 12% has been credited to the account holder at the year-end.

10. Rs. 20 Lacs shown as security with OTCI are charges for registration and not refundable in nature. This amount should have been booked as expense in the year of payment as per cash basis of accounting followed by the Corporation.

11. Notes on accounts as per schedule S and significant Accounting Policies form integral part of our audit report.

B 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 and have found them to be satisfactory.

C In our opinion, proper book of accounts as required by the State Financial Act 1951 and the regulation of the Corporation have been kept so far appears from our examination of the books of accounts.

D Subject to matter referred to in paragraph "A" above in our opinion and to the best of our information and according to the explanation given to us, the accounts together with schedules annexed thereto contain all the necessary particulars and are properly drawn up so as to exhibits a true and correct view.

i) In the case of Balance Sheet of the State of affairs of the Corporation as at 31 st March 2000.

ii) In the case of the Profit & Loss Account of the Corporation for the year ended on that date.

MANAGEMENTS REPLY TO THE AUDITORS REPORT

A.1 The Corporation has been consistently following the cash system of accounting w.e.f. 1st April, 1983. The system has been accepted by the Industrial Development Bank of India, Reserve Bank of India and Income Tax Department. The system is in consonance with the provisions of Section 145 of the Income Tax Act. The Accounting Standard-I (AS-I) lays down that in case of any deviation from basic accounting principles, a proper disclosure is required. Under the head Significant Accounting Policies (note A-l of Schedule S) a proper disclosure has been made by the Corporation to the effect that system of accounting has been changed from mercantile basis to cash basis w.e.f. 1.4.1983. Hence, there is no contravention of basic concept of sound accounting principles

(i)& ii) The Corporation is following cash system of accounting, expenses/income are accounted for in the books of accounts as and when paid/received.

2. a) The Corporation is maintaining dead stock articles register where all items of dead stock are entered with date and value of purchase.Physical verification of fixed assets at Head Office has been made during the year. Ah exercise has been undertaken to complete physical verification of fixed assets as per the recommendation of statutory auditors.

b) Corporation is maintaining its accounts on the basis of cash system of accounting for the purpose of recognition of income. As such lease rentals are accounted for only if actually received. The depreciation on leased assets is provided as per the Capital Recovery Method according to which the lease rentals received are split into the income portion and the capital recovered. The capital recovered is charged as depreciation in the books of accounts. The mater was referred to The Institute of Chartered Accountants of India and their opinion is under consideration.

c) The Corporation is maintaining computerised record of the leased equipments showing quantity, cost, deprecia- tion charged to date, written down value etc.

3. The Corporation has been following guidelines issued by Industrial Development Bank of India/Reserve Bank of India regarding assets classification and provisioning thereagainst in the best possible manner. However, keeping in view large number of loan accounts there may be errors in calculating the provisioning amount in few cases. Rectifications are made as and when the same is noticed. Branch Office Bhiwani has been advised to rectify the mistakes in accounts.

II. Please refer to note No.B-9 of schedule S of balance sheet.

III. In respect of cases sold during the year where full sale consideration has been received/sale agreement has been executed upto the close of the financial year, the value of security sold is deleted from the record. The Corporation is not getting its loan assets revalued at the close of the year and as such no effect with regard to dilution/ appreciation in value of securities is taken into account until the assets are finally liquidated. The Corporation is consistently following this system.

IV. The Corporation has correctly shown the working results of the Corporation in its profit & loss account. As per guidelines received from RBI/IDBI, these are not required to be shown above the line.

V. The auditors have not pointed out specific cases in this regard. Before the disbursement of loans, due care is taken while examining the title deeds by the Legal Department. As per declarations/affidavits given by the borrowers, their means are verified by the Appraising Officials.

VI. After studying the system prevailing in other Financial Institutions, the Corporation adopted system of Equitable Mortgage from March 1992. As per legal opinion, mutation of Equitable Mortgage is not compulsory. However, the Corporation is writing a registered letter to the concerned Sub-Registrar for making necessary entries in the revenue records about the Corporations charge over the property mortgaged to the Corporation.

VII. The loan accounts at Branch Office Jind have already been reconciled. Out of total outstanding loans of Rs.542.49 crores, there is meagre difference of Rs.6.69 lakhs crore in the borrowerwise reconciliation as per subsidiary and general ledger. Steps have already been initiated to reconcile the loan accounts.

VIII. The provisioning has been made against adhoc limits granted against bought out deals as per guidelines received from RBI/IDBI. The value of security has been taken as accepted at the time of grant of such facilities.

4. a) The Corporation is taking suitable recovery action for recovery of outstanding advances. FIRs have also been lodged in the cases where fraud/misutilisation of funds has taken place. The Corporation is also in the process of initiating action against the lessees/guarantors under Haryana Public Money (Recovery of Dues) Act 1979. The Corporation has also framed a comprehensive policy to recover this amount under one time settlement.

b) The Corporation has already taken disciplinary action against erring Officers/officials. The matter regarding provi- sion against category-C and D as indicated by the statutory auditors shall be viewed after the Corporation exhausts the remedies available as detailed in comments against para-4 (a) above for recovery of the amount and after the final adjudication of cases by the respective Courts.

c) As per terms of lease agreement this rent securities are to be adjusted at the expiry of lease period. Accordingly, the same shall be adjusted as and when the lease period expires.

d) As per lease agreement the lessees are required to get the leased equipments insured. This is be monitored by the Corporation.

5. Refer to note No.B-15 of scheduleS.

6. The Corporation is reviewing this account on constant basis and wherever the entries have been identified, necessary adjusting entries have been passed. The unreconciled amount pertains to the period prior to 31.3.87.

7. Refer to note No.B-3 of Schedule S.

8. The Internal Audit Cell has been suitably strengthened. The Internal Audit of the Branch Offices is carried out on half yearly/yearly basis depending upon the size of the Branches with regard to sanctions, disbursements, monitor- ing of recovery policies including charging of interest, review of verification and post sanction inspection reports, verification of securities, review of office working including maintenance of loan ledgers, reconciliation of ac- counts, checking of security/document register etc. During the next financial year 2000-2001, the Internal Audit Wing hasconducted audit of 15 Branches.

9. As per Provident Fund Regulations of the Corporation Provident Fund is to be held by the Corporation and is to be administered by the Executive Committee of the Board together with two representatives of the staff. These Regulations do not require investment of the funds in the prescribed securities. However, during the year 2000- 2001, an amount of Rs.3.85 crores has been invested in ICICI Bonds out of Provident Fund of Rs.7.13 crores as on 31.3.2000.

10. The payment of the security has given the Corporation the right to transact business at OTCEI and it is in the nature of capital expenditure.

For BAJAJ AJAY & CO. CHARTERED ACCOUNTANTS

SD/- PLACE : CHANDIGARH (AJAY BAJAJ)

DATE : 13TH JULY 2001 PARTNER

 
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