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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