We have audited the attached Balance Sheet of the Sponge Iron India Limited as 31st March, 1999 and the Profit and Loss Account for the year ended on that date annexed thereto and report that:

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.

In our opinion proper books of accounts as required by law have been kept by the company so far as it appears from our examination of such books.

The Balance Sheet and Profit and Loss Account referred to this report are in agreement with the books of account. 

In our opinion and to the best of our information and according to the explanations given to us the said accounts read with the notes forming part thereof, subject to the note numbers:

1(b) relating to a claim of Rs. 36.54 lakhs from APSEB for which no provision is made.

5 relating to non-provision of penal interest of Rs. 929.29 lakhs on Government of India Loans. 

6 relating to inter-corporate deposit of Rs. 127.81 lakhs with a central public sector undertaking from whom both principal and interest are long overdue. No provision has been made against this deposit.

7 relating to Submerged Arc Furnace(SAF). An amount of Rs. 4,052.69 lakhs has been kept in Capital Work-in-progress without capitalization of asset though the trial runs were successfully completed during 1995-96, itself. This has resulted in understatement of fixed assets-gross block by the like amount and non-provision of depreciation of Rs. 187.61 lakhs on this asset resulting in understatement of loss by same amount.

8 relating to non-provision in accounts for the estimated liability on account of leave to the credit of employees as on 31/03/1999.

11 relating to non-availability of balance confirmation from concerned parties.

give a true and fair view- 

i) In the case of Balance Sheet, of the Statement of Affairs of the Company as at 31st March, 1999 and 

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

As required by the Manufacturing and Other Companies (Auditors' Report) Order, 1988 issued by the Central Government in terms of Section 227 (4A) of Companies Act, 1956 and on the basis of such checks as we considered appropriate, on the matters specified in paragraphs 4 and 5 of the said Order, we further state that:

According to the information and explanations given to us, the company has maintained proper records showing full particulars of quantity and situation of Fixed Assets. A substantial portion of the fixed assets has been physically verified by the Management during the period which in our opinion is reasonable having regard to the Company. No material discrepancies were noticed on such verification.

As explained to us, none of the fixed assets have been revalued during the year.

Physical verification has been conducted by the Management at reasonable intervals in respect of finished goods, stores, spare parts and raw-materials.

The procedures of physical verification of stocks followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

Discrepancies noticed on physical verification of stocks as compared to book records were not material and the same have been properly dealt with in the books of account.

In our opinion, the valuation of stocks is fair and proper and in accordance with the normally accepted accounting principles and is same as in the earlier years.

According to the information and explanations given to us the Company has not taken any loan from companies, firms or other parties required to be listed in the Registers, to be maintained under Section 301 and 370(1-B) of the Companies Act, 1956.

Inter-corporate deposits of Rs. 127.81 lakhs represents amount repayable by a central public sector undertaking at short notice. The principal amount interest thereon have become overdue. Interest of Rs. 42.61 lakhs for the year and Rs. 117.97 lakhs cumulative has not been taken into the books. (Note no. 6).

In our opinion and according to the information and explanation given to us there are adequate internal controls for purchase of stores, raw-materials including components, plant and machinery, equipment, other assets and for sale of goods.

In our opinion and according to the information given to us, there are no transactions of purchase of goods and materials or sale of goods and materials or sale of goods and materials and services, aggregating to Rs. 50,000/- or more made in pursuance of contracts or arrangements entered in the register under Section 301 of the Companies Act, 1956.

The Company has a regular procedure for determination of unserviceable or damaged stores. Adequate provision has been made in the accounts for the loss arising on the non-moving items determined.

The Company has not accepted any deposits from the public.

According to the information and explanations given to us, the waste products are valued at selling price and accounted for.

A firm of Chartered Accountants has been appointed to conduct the internal audit of the Company during the year. In our opinion such system of Internal  Audit is commensurate with the size and nature of its business.

Maintenance of cost records has not been prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956 for this Company.

The Company has been regular in depositing Provident Fund dues. The Employee's State Insurance Act does not apply to this Company.

Income tax of Rs. 4.07 lakhs is not paid since no demand is stated to have been received from the Department. According to the information and explanations given to us, there are no other undisputed dues in respect of Wealth-tax, Sales-tax, Customs duty outstanding as on 31st March, 1999 for a period of more than six months from the date they become payable.

According to information and explanations given to us, no personal expenses of Employees of Directors have been charged to revenue account, other than those payable under contractual obligations or in accordance with generally accepted business practice.

The Company is not a Sick Industrial Company with the meaning of clause (O) of sub-section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985.

In respect of consultancy service activities rendered by the Company in connection with establishment of Sponge Iron Plants, in our opinion and according to the information and explanations given to us, the Company has a reasonable system of recording receipts, issues and consumption of material (equipment) commensurate with the size and nature of service activities; the system provides for reasonable allocation of expenditure to respective projects; there is reasonable system of internal control commensurate with the size of the Company and the nature of its service activities.

In respect of Company's trading activity, we are informed that there are no damaged goods in stocks.