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Auditor Report of Hindustan Motors Ltd.

Mar 31, 2014

We have audited the accompanying financial statements of Hindustan Motors Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the six month period then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with accounting principles generally accepted in India, including the Accounting Standards notified under the Companies Act, 1956, read with General Circular 8/2014 dated 4 April 2014 issued by the Ministry of Corporate Affairs. 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.

Auditor''s Responsibility

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 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 Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. 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.

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 Companies Act, 1956 ("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, 2014;

(b) in the case of the Statement of Profit and Loss, of the loss for the six month period ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the six month period ended on that date.

Emphasis of Matters

We draw attention to following notes to the financial statements;

a) Note 46 regarding preparation of the accounts on a going concern basis. The Company has been incurring losses and its net worth stands fully eroded and also, its current liabilities exceed its current assets. Also, the Company has sold its Chennai Plant and has suspended operations in its Uttarpara plant. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern, which is dependent on the Company establishing profitable operations.

b) Note 31 (e) regarding the demand of Government of West Bengal (GoWB) for payment of Rs 19447 lacs along with interest thereon in relation to excess realization of the said sum from the sale of land at Hindmotor, West Bengal, in earlier years. As stated in the said Note, the Company is of the view that it has not committed any default of the said Government Order and based on the legal advice obtained by the Company, no provision is considered necessary by the management against the said claim of GoWB.

Our opinion is not qualified in respect of above matters.

Report on Other Legal and Regulatory Requirements

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, Statement of Profit and Loss, and 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 notified under the Companies Act, 1956, read with General Circular 8/2014 dated 4 April 2014 issued by the Ministry of Corporate Affairs;

(e) On the basis of written representations received from the directors as on March 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

Annexure to the Auditor''s Report

(REFERRED TO IN OUR REPORT OF EVEN DATE TO THE MEMBERS OF HINDUSTAN MOTORS LIMITED AS AT AND FOR SIX MONTH PERIOD ENDED MARCH 31, 2014)

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details

and situation of fixed assets.

(b) All fixed assets have not been physically verified by the management during the period but there is a regular programme of such verification in a phased manner to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. In respect of fixed assets lying with third parties, the management has a process of obtaining periodic confirmations. No material discrepancies were noticed on such verification/ confirmations during the period.

(c) The Company has sold substantial part of its fixed assets representing the Chennai Plant during the period covered by our report. There exists a doubt that the Company will be able to continue as a going concern in the foreseeable future. However, the accounts are continued to be prepared on a going concern basis. The financial statements and notes thereto disclose this fact and a matter of emphasis is added in our report.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the period.

(b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. In respect of the materials lying with third parties, the management has a process of periodic confirmation and reconciliation with the third parties.

(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of Clauses 4 (iii)(a) to (d) of the Order are not applicable to the Company and hence, not commented upon.

(e) The Company has taken loans from Companies covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the period was Rs. 1500 lacs and the period-end balance of loans taken from such parties was Rs. Nil.

(f) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

(g) The loans taken are re-payable on demand. As informed to us, the principal amount was repaid on demand and there has been no default on the part of the Company. The payment of interest has been regular considering the extended period for payment in some cases.

(iv) In our opinion and according to the information and explanations given to us, and having regard to the explanation that substantial portion of the items purchased are of a special nature and alternate sources do not exist for obtaining comparative quotations thereof, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

(v) (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 that need to be entered into the register maintained under Section 301 have been so entered.

(b) In our opinion and according to the information and explanations given to us and having regard to the explanation that purchases of certain items of inventories and fixed assets are of proprietary nature for which alternative sources are not available to obtain comparable quotations, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees five lacs have been entered into during the period at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

(vii) In our opinion, the Company has an internal audit system commensurate with the size of the Company and nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956, related to the manufacture of Vehicles, Spare Parts of Vehicles, Steel Products and Components and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues have generally been regularly deposited with the appropriate authorities though there has been a slight delay in a few cases, except for sales tax, excise duty and municipal tax where there have been serious delays in large number of cases.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees'' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the period-end, for a period of more than six months from the date they became payable, except for sales tax and municipal tax due as mentioned below :

Nature of the Nature of dues Amount Period to which Statute (Rs. in lacs) amount relates

The Central CST 166.83 April 2013 - Sales Tax August 2013 September 2013 Act,1956

West Bengal VAT 376.31 April 2013 - Value Added August 2013 Tax Act, 2003

The Central Sales Tax Deferral credit 411.10 July 2012 to Sales Tax July 2013 Act,1956

West Bengal Sales Tax Deferral credit 806.18 July2012to Sales Tax Act, July 2013 1994

The West Municipal Tax Bengal under Uttarpara 24.14 April2012- Kotrung March 2013 Municipal Act, Municipality 1993

Nature of the Due date Date of Statute Payment

The Central May 2013 to Not paid Sales Tax Act,1956

West Bengal May 2013 to Not paid Value Added September 2013 Tax Act, 2003

The Central July 2012 to Not paid Sales Tax July 2013 Act,1956

West Bengal July2012to Not paid Sales Tax Act, July 2013 1994

The West Bengal April2013 Not paid March 2013 Municipal Act, 1993

(c) According to the records of the Company, the dues outstanding of income-tax, sales tax, wealth tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows :

Nature of the Nature of dues Amount Period to Statute (Rs.in lacs) which amount relates

The Central Dispute on Account of 3987.15 1984-2013 Excise Act, Classification, Cenvat 1944 Credit,Assessable Value, Differential Excise Duty, Input Service Tax Credit, Excise duty on PDI

The Central Stock Transfer, Non- submission of 744.91 1995-2011 Sales Tax C/D Forms etc. Act,1956

Tamil Nadu Additional Sales tax etc. 5.52 1989-1996 Sales Tax Act, 1959

West Bengal Non Receipt of Sales tax 0.37 2003-2004 form, Interest, Penalty, Post Return revision board Sales Tax Act, Adjustment etc. 1994

West Bengal Disallowance of VAT Credit, 2459.16 2007-2011 Value Added enhancement of turnover Tax Act, 2003 with wrong calculation and taxed

West Bengal Provisional assessment 4437.98 Jan 2013- for non- June 2013 Value Added filing of returns and non- 2003 payment Tax - of tax under section 45

The Customs Dispute on account of 28.42 1990-2006 Classification,Duty on inclusion of Technical Act,1956 Know- how fees on imported goods, import of Engines, Short Levy, etc.

M.P. Exemption Notification 10.46 2002-2003 Commercial denied by Commissioner Appeal Tax Act, 1994

Nature of the Forum where dispute is pending Statute

The Central CESTAT, High Court/ Excise Act, Commissioner (Appeals) / 1944 Commissioner/Assistant / Commissioner of Central Excise/ CESTAT, Joint Commissioner The Central Additional Commissioner of Sales Tax Commercial Taxes /High Court / Act,1956 W.B. Commercial tax appellate & revision Board / Deputy Commissioner

Tamil Nadu Assistant Commissioner Sales Tax Act, 1959

West Bengal WB Commercial tax appellate & Sales Tax Act, 1994

West Bengal Taxation Tribunal of West Bengal/ Value Added West Bengal Commercial tax Tax Act, 2003 Appellate & Revision Board/ Additional Commissioner

West Bengal Additional Commissioner of Sales Value Added Appeal Tax Act, 2003

The Customs Commissioner/ Assistant Commissioner Appeals/ Tribunal Act,1956

M.P. Appellate Board,Bhopal Commercial Tax Act, 1994

(x) The Company''s accumulated losses at the end of the financial year are more than fifty percent of its net worth. The Company has not incurred cash loss during the period. In the immediately preceding financial year, the Company has incurred cash loss.

(xi) Based on our audit procedures and as per the information and explanations given to us by the management, the Company has overdrawn cash credit borrowings from bank during the period amounting to Rs. 2065.38 lacs with an overall delay of less than 90 days and Rs. 392.27 lacs with an overall delay of more than 90 days. There were no overdrawn cash credit borrowings as on the balance sheet date. The Company has delayed in repayment of dues to financial institutions and banks during the period to the extent of Rs. 879.33 lacs for less than 90 days and Rs. 439.61 lacs of such dues were in arrears as on the balance sheet date (since paid). The Company did not have any outstanding debentures during the period.

(xii) According to the information and explanations given to us and based on the documents and records produced before us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(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 Order 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 clause 4(xiv) of the Order are not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

(xvi) Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that the Company has used short term funds amounting to Rs. 6539.97 lacs (previous year Rs. 12863.22 lacs)for long term investment representing financing of the operating losses of the Company.

(xviii) The Company has not made any preferential allotment of shares to parties or Companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the period.

(xx) The Company has not raised any money through a public issue during the period.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the period.

For S.R. BATLIBOI & CO. LLP Chartered Accountants ICAI Firm Registration Number : 301003E

Per Raj Agrawal Place : Kolkata Partner Date : August 05, 2014 Membership No.: 82028


Sep 30, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Hindustan Motors Limited ("the Company"), which comprise the Balance Sheet as at September 30, 2013, the Statement of Profit and Loss and Cash Flow Statement for eighteen month period then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with accounting principles generally accepted in India, including the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 (read with the General Circular 15/2013 dated 13/09/2013 issued by the Ministry of Corporate Affairs) ("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.

Auditor''s Responsibility

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 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 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.

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 September 30, 2013;

(b) in the case of the Statement of Profit and Loss, of the loss for eighteen month period ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for eighteen month period ended on that date. Emphasis of Matter

We draw attention to following notes to the financial statements:

(a) Note 32 (e) regarding the demand for right of recompense by the Lenders under Corporate Debt Restructuring

Scheme. As stated in the said Note, in view of the Company''s request for reduction in the amount of recompense of interest which the Lenders have agreed to consider, no provision against the balance amount of recompense payable (net of Rs. 1500 lacs already paid to the Lenders), if any, is considered necessary by the management.

(b) Note 32 (f) regarding the demand of Government of West Bengal (GoWB) for payment of Rs. 19447 lacs along with interest thereon in relation to excess realization of the said sum from the sale of land at Hindmotor, West Bengal, in earlier years. As stated in the said Note, the Company is of the view that it has not committed any default of the said Government Order and based on the legal advice obtained by the Company, no provision is considered necessary by the management against the said claim of GoWB.

(c) Note 46 regarding preparation of these accounts on a going concern basis, although the entire net worth of the Company stands eroded. Management of the Company has initiated various measures to make the operations of the Company viable. These mitigating factors have been more fully discussed in above referred note, in view of which, the accounts have been continued to be prepared under the going concern assumption.

Our opinion is not qualified in respect of above matters.

Report on Other Legal and Regulatory Requirements

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, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 (read with the General Circular 15/2013 dated 13/09/2013 issued by the Ministry of Corporate Affairs);

(e) On the basis of written representations received from the directors as on September 30, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on September 30, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

Annexure to the Auditor''s Report

(Referred to in our Report of even date to the members of Hindustan Motors Limited as at and for eighteen month period ended September 30, 2013)

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) All fixed assets have not been physically verified by the management during the period but there is a regular programme of such verification in a phased manner to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. In respect of fixed assets lying with third parties, the management has a process of obtaining periodic confirmations. No material discrepancies were noticed on such verification / confirmations during the period.

(c) There was no disposal of a substantial part of fixed assets during the period.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the period.

(b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. In respect of the material lying with third parties, the management has a process of periodic confirmation and reconciliation with the third parties.

(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of Clauses 4 (iii)(a) to (d) of the Order are not applicable to the Company and hence, not commented upon.

(e) The Company has taken loans from Companies covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the period was Rs. 4,650 lacs and the period-end balance of loans taken from such parties was Rs. 1,300 lacs.

(f) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

(g) The loans taken are re-payable on demand. As informed to us, the principal amount was repaid on demand and there has been no default on the part of the Company. The payment of interest has been regular considering the extended period for payment in some cases.

(iv) In our opinion and according to the information and explanations given to us, and having regard to the explanation that substantial portion of the items purchased are of a special nature and alternate sources do not exist for obtaining comparative quotations thereof, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

(v) (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 that need to be entered into the register maintained under Section 301 have been so entered.

(b) In our opinion and according to the information and explanations given to us and having regard to the explanation that purchases of certain items of inventories and fixed assets are of proprietary nature for which alternative sources are not available to obtain comparable quotations, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees five lacs have been entered into during the financial year at prices are reasonable having regard to the prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

(vii) In our opinion, the Company has an internal audit system commensurate with the size of the Company and nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(l)(d) of the Companies Act, 1956, related to the manufacture of Vehicles, Spare Parts of Vehicles, Steel Products and Components and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) Undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues have generally been regularly deposited with the appropriate authorities though there has been a slight delay in a few cases, except for sales tax, excise duty and land revenue where there have been delays for longer durations.

(x) The Company''s accumulated losses at the end of the financial year are more than fifty percent of its net worth. The Companyhasincurred cashloss in the current and immediately preceding financialyear.

(xi) Based on our audit procedures and as per the information and explanations given to by the management, the Company has overdrawn cash credit borrowings from bank during the period amounting to 4626.14 lacs which were regularised over a period of time with an overall delay of less than 90 days and out of which Rs. 661 lacs of such overdrawn cash credit borrowings were in arrears as on the balance sheet date. The Company has not defaulted in repayment of dues to financial institution and has no outstanding dues in respect of debentures.

(xii) According to the information and explanations given to us and based on the documents and records produced before us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(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 Order 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 Clause 4(xiv) of the Order are not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial inititutions.

(xvi) Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that the Company has used short term funds amounting to Rs. 12863.22 lacs (previous year Rs. 14300 lacs) for long term investment representing acquisition of fixed assets and for financing the operating losses of the Company.

(xviii) The Company has not made any preferential allotment of shares to parties or Companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the period.

(xx) The Company has not raised any money through a public issue during the period.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the period.

For S.R.BATLIBOI & CO.LLP

Chartered Accountants

ICAI Firm Registration Number : 301003E

Per Raj Agrawal

Place: New Delhi Partner

Date : November 18, 2013 Membership No, 82028


Mar 31, 2012

1. We have audited the attached Balance Sheet of Hindustan Motors Limited ('the Company') as at March 31, 2012 and also the Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. 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.

3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 (the Order), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Without qualifying our opinion, attention is drawn to:

(a) Note 32 (f) to the financial statements regarding the demand for right of recompense by the Lenders under Corporate Debt Restructuring scheme. As stated in the said Note, in view of the Company's request for reduction in the amount of recompense of interest which the Lenders have agreed to consider, no provision against the balance amount of recompense payable (net of Rs 1500 lacs already paid to the Lenders), if any, is considered necessary by the management.

(b) Note 48 to the financial statements regarding preparation of these accounts on a going concern basis, although a substantial portion of the Company's net-worth stands eroded. Management of the Company has initiated various measures to make the operations of the Company viable. These mitigating factors have been more fully discussed in above referred note, in view of which, the accounts have been continued to be prepared under the going concern assumption.

5. Further to our comments in the Annexure referred to above, 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 purposes of our audit.

ii. 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 books. The Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement referred to in this report are in agreement with the books of account as submitted to us.

iii. In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

iv. On the basis of the written representations received from the directors, as on March 31, 2012, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

v. In our opinion and to the best of our information and according to the explanations given to us, the said financial statements give the information required by the Companies Act, 1956, 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, 2012;

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

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

Annexure to the Auditors' Report

(Referred to in our Report of even date to the members of Hindustan Motors Limited as at and for the year ended March 31, 2012)

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details

and situation of fixed assets.

(b) All fixed assets have not been physically verified by the management during the year but there is a regular programme of such verification in a phased manner to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. In respect of fixed assets lying with third parties, the management has a process of obtaining periodic confirmations. As informed, no material discrepancies were noticed on such verification during the year.

(c) There was no substantial disposal of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

(b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. In respect of the material lying with third parties, the management has a process of periodic confirmation and reconciliation with the third parties.

(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans,

secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, the provisions of clauses 4 (iii)(a) to (d) of the Companies (Auditors' Report) Order, 2003 (as amended) are not applicable to the Company and hence not commented upon.

(e) The Company has taken loans from five companies covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs 4350 lacs and the year-end balance of loans taken from such parties was Rs 3950 lacs.

(f) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

(g) The loans taken are re-payable on demand. As informed, the lenders have not demanded repayment of any such loans during the year and thus, there has been no default on the part of the Company. The payment of interest has been regular.

(iv) In our opinion and according to the information and explanations given to us, and having regard to the explanation that substantial portion of the items purchased are of a special nature and alternate sources do not exist for obtaining quotations thereof, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

(v) (a) According to the information and explanations provided by the management, we are of the opinion

that the particulars of contracts or arrangements referred to in Section 301 of the Act that need to be entered into the register maintained under Section 301 have been so entered.

(b) In respect of transactions made in pursuance of such contracts or arrangements and exceeding the value of Rs five lacs entered into during the financial year, because of the unique and specialized nature of the items involved, no comparison of prices paid can be made with prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(l)(d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, service tax, cess, income-tax, wealth-tax, customs duty and other material statutory dues have generally been regularly deposited with the appropriate authorities except for sales tax and excise duty where there have been delays.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable, except for service tax of Rs 1.50 lacs (since paid).

(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Nature of the Nature of dues Amount Period to which Forum where dispute is pending Statute (Rs in lacs) amount relates

The Central Dispute on Account of 3182.09 1984-2006 CESTAT, High Court/ Excise Act, Classifi cation, Cenvat Credit, Commissioner (Appeals)/ 1944 Assessable Value, Differential Excise Commissioner /Assistant / Duty, Input Service Tax Credit Commissioner of Central Excise/ CESTAT,Joint Commissioner The Central Stock Transfer Non-submission of 687.44 1995-2008 Additional Commissioner of Sales Tax Act, C/D Forms etc. Commercial Taxes / High Court / 1956 W.B. Commercial Tax Appellate & Revision Board /Deputy Commissioner

Tamil Nadu Additional Sales tax etc. 1.05 1989-1999 Deputy Commissioner (Appeals) Sales Tax, 1959 Tribunal West Bengal Non Receipt of Sales tax form 0.37 2003-2004 W.B. Commercial Tax Appellate Sales Tax Act, Interest, Penalty, Post Return & Revision Board 1994 Adjustment etc.

West Bengal Disallowance of VAT Credit 57.24 2007-2008 Additional Commissioner Value Added Tax Act, 2003 TheCustoms Dispute on account of Classifi cation, 17.79 1990-2006 Commissioner /Assistant Act, 1956 Duty on inclusion of Technical Commissioner Appeals / Tribunal Know-how fees on imported goods, import of Engines, Short Levy, etc. M.P. Exemption Notification denied by 22.43 2002-2003 Commissioner Appeal of Commercial Commissioner Appeal Commercial Tax Tax Act, 1994

(x) The Company's accumulated losses at the end of the financial year are more than fifty percent of its net worth. The Company has incurred cash loss in the current financial year whereas in previous financial year, the Company has not incurred cash loss.

(xi) Based on our audit procedures and as per the information and explanations given by the management, the

Company has overdrawn cash credit borrowings and delayed in repayment of a short term loan from a bank during the year, the details where of are as follows :

Period of Delay Amount (Rs in lacs)

Less than 30 days 2806.75

30 to 90 days 1349.46

The Company has not defaulted in repayment of dues to financial institution and has no outstanding dues in respect of debentures.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(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 Order are not applicable.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable.

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

(xvi) Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and on overall examination of the Balance Sheet of the Company, we report that the Company has used short term funds amounting to Rs 14300 lacs approximately as at the close of the year (previous year Rs 11600 lacs) for financing the operating losses of the Company.

(xviii) The Company has made preferential allotment of shares and warrants to companies covered in the register maintained under Section 301 of the Companies Act, 1956. In our opinion, the price at which shares have been issued is not prejudicial to the interest of the Company.

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money through a public issue during the year.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For S.R. BATLIBOI & CO.

Registration Number : 301003E

Chartered Accountants

Per Raj Agrawal

Place : New Delhi Partner

Date : April 30, 2012 Membership No.: 82028


Mar 31, 2010

1. We have audited the attached Balance Sheet of Hindustan Motors Limited (the Company) as at March 31, 2010 and also the Profit and Loss Account and the Cash Flow Statement 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.

2. 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.

3. As required by the Companies (Auditors Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to above, 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 purposes of our audit;

ii. 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 books and proper returns adequate for the purposes of our audit have been received from the Companys overseas branch not visited by us;

iii. The Balance Sheet, Profit and Loss Account and Cash Flow Statement referred to in this report are in agreement with the books of account as submitted to us;

iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

v. On the basis of the written representations received from the directors, as on March 31, 2010, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

vi. In our opinion and to the best of our information and according to the explanations given to us, the said statements of account, read together with the Notes appearing on Schedule 22, give the information required by the Companies Act, 1956, 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, 2010;

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

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

Annexure to the Auditors Report (Referred to in our Report of even date to the members of Hindustan Motors Limited as at and for the year ended March 31, 2010)

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) All fixed assets have not been physically verified by the management during the year but there is a regular programme of such verification in a phased manner to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. In respect of fixed assets lying with third parties, the management has a process of obtaining periodic confirmations. As informed, no material discrepancies were noticed on such verification during the year.

(c) There was no substantial disposal of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

(b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. In respect of the material lying with third parties, the management has a process of periodic confirmation and reconciliation with the third parties.

(c) The Company is maintaining proper records of inventory and no discrepancies were noticed on physical verification.

(iii) (a) As informed, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, the provisions of Clauses 4 (iii)(a) to (d) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable.

(e) The Company has taken loan from one company covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 200 lacs and the year-end balance of loan taken from such party was Rs. 150 lacs.

(f) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loan are not prima facie prejudicial to the interest of the Company.

(g) The loan taken is re-payable on demand. As informed, the lender has not demanded repayment of any such loan during the year and thus, there has been no default on the part of the Company. The payment of interest has been regular.

(iv) In our opinion and according to the information and explanations given to us, and having regard to the explanation that most of the items purchased are of a special nature and alternate sources do not exist for obtaining quotations thereof, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

(v) (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Act that need to be entered into the register maintained under Section 301 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) As informed, the Company has not accepted any deposits from the public.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(l)(d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, service tax, cess, income-tax, wealth-tax, customs duty and other material statutory dues have generally been regularly deposited with the appropriate authorities except for sales tax and excise duty where there have been delays.

According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(b) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Name of the Nature of dues Amount statute (Rs in lacs)

The Central Disputes on account of: 2492.79 Excise Act, Classification, CENVAT Credit, 1944 Assessable value, Differential Excise Duty, Input Service Tax Credit etc.

The Central Disallowance of Waiver on turnover 6431.44 Sales Tax Act, availed on car sales due to non- 1956 achievement of Bench- Mark, Stock Transfer, Non-submission of C/D Forms, etc.

Tamil Nadu Disallowance of Waiver on turnover 1168.00 Sales Tax Act, availed on car sales due to non- 1959 achievement of Bench-Mark, Additional Sales Tax, etc.

West Bengal Non-Receipt of Sales Tax Form, 0.37 Sales Tax Act, Interest, Penalty, Post Return 1994 Adjustment etc.

West Bengal Disallowance of VAT Credit 622.84 Value Added Tax Act, 2003

The Customs Disputes on account of: 17.75 Act, 1956 Classification, Duty on inclusion of technical know-how fees on imported goods, import of Engines, Short Levy, etc.



Name of the Period to which Forum where dispute is pending Statue amount relates

The Central Excise Act, 1944 1984-2006 Assistant/Deputy/Additional Commissioner, Commissioner, Commissioner (Appeals) and Appellate Tribunal

The Central Sales Tax Act, 1956 1989-2007 Deputy/Additional Commissioner, Appellate Deputy Commissioner, Tribunal Benches and Supreme Court

Tamil Nadu Sales Tax Act, 1959 1993-2003 Tribunal Bench and Supreme Court West Bengal Sales Tax Act, 1994 2003-2004 West Bengal Commercial Tax Appellate & Revision Board, Additional Commissioner

West Bengal Value Added Tax Act, 2003 2006-2007 Additional Commissioner of Commercial Taxes

The Customs Act, 1956 1990-2006 Assistant/Deputy Commissioner, Commissioner Appeals & Appellate Tribunal

(x) The Companys accumulated losses at the end of the financial year are more than fifty percent of its net worth. The Company has incurred cash losses in the current and the immediately preceding financial year.

(xi) Based on our audit procedures and as per the information and explanations given by the management, the Company has overdrawn cash credit borrowings from banks during the year, the details whereof are as follows:

Period of Default Amount (Rs. in lacs>

Less than 30 days 1408.10

30 to 90 days 1238.44

The Company has not defaulted in repayment of dues to a financial institution and has no outstanding dues in respect of debentures.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(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 Order are not applicable.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable.

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and on overall examination of the balance sheet of the Company, we report that the Company has used short term funds amounting to Rs. 8400 lacs approximately for financing the losses of the Company.

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money through a public issue during the year.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

ForS.R.BATLIBOI&CO. Regn.No,301003E Chartered Accountants

Per Raj Agrawal

Place: New Delhi Partner

Date: May 1, 2010 Membership No.: 82028

 
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