FINANCIAL INFORMATION
Director's Report 2000-2001 Addendum to director's report Annexure to the Directors’ report Address to Share holders

Annual Report 2000 - 2001

Addendum to directors’ report for the year 2000-01 in respect of observations made by statutory auditors on the accounts of hmt limited for the year ended 31st March 2001.

Sl. No. Statutory Auditors’ Observation Company’s Reply
1

Para 2(d):
In our opinion, the Profit and Loss Account and the Balance Sheet dealt with by this report comply with the Accounting Standards referred to in sub-section 3 © of Section 211 of the Companies Act, 1956 with the exception of Accounting Standard 9 issued by the Institute of Chartered Accountants of India on Revenue Recognition, having taken credit for interest waiver of Rs.5.90 crore under One Time Settlement with banks;

Interest waiver is one of the terms of offer of the One Time Settlement (OTS) placed before the bankers. Only upon the bankers’ acceptance to the terms including interest waiver, the Company proceeded with the payment of first installment to the banks under OTS. As such, the Company has correctly taken credit for interest waiver. During 1998-99, OTS was offered to Financial Institutions (FI) and waiver was taken credit on similar lines. Further, the accounting of interest waiver under the OTS with Banks pertains to realized gains resulting from the discharge of an obligation at less than its existing cost and as such it does not fall under the purview of AS-9.

2

Para 2(f) (i):
Interest amounting to Rs.8.21 crore not having been provided for on the Cash Credit Account with UCO Bank and the consequent overstatement of profits vide Note No.11.8;

Disclosure has been made in Explanatory Note 8 of Schedule 11.1 indicating that unilateral debit by Bank has been disputed. The entire interest debit is contested as the same is arbitrary and unjust based on the law of estoppel and limitation and therefore, not payable.

3

Para 2 (f) (ii):
Provision amounting to Rs.5.31 crore towards arrears of wages/pay/dearness allowance etc., due to employees of certain Units, pursuant to a revision of pay scale with effect from 01.01.1992 vide agreement approved by Govt.of India, not having been made but treated as contingent liability and the consequent overstatement of profits for the year to that extent vide Note 12.3; 

The wage settlement does not contemplate consideration of arrears, if any, until the Company’s financial performance improves. Clause 13.1 of the settlement reads as follows: “The arrears from 1.1.92 to 31.3.95 as well as fringe benefits and amenities, will be discussed based on the periodical review of the improvement in the financial performance of the Company”. As no commitment has been made for payment of arrears and the payment is contingent upon the improvement in the performance of the Company, correct disclosure has been made as a ‘contingent liability’.

4

Para 2 (f) (iii):
Liability towards arrears of wages/pay/dearness allowance etc., due to employees pursuant to a revision of pay scale with effect from 01/01/1997 not having been determined and provided for but regarded as contingent in nature and the consequent effect on the accounts not being ascertainable vide Note 2.7;

There is no settlement/agreement for revision of pay scale with effect from 1.1.97 with Employees’ Union/Officers’ Association. Further, our Administrative Ministry has stipulated certain conditions, subject to which the new scales could be implemented. As these conditions have not been fulfilled, no liability has arisen for payment of arrears. 

5

Para 2 (f) (iv):
Liability towards additional bonus for the year 1985-86 in respect of a Unit amounting to Rs.0.45 crore not having been provided for but regarded as contingent in nature in view of the matter being sub-judice before the High Court of Punjab and Haryana and the consequent effect on the accounts is not being ascertainable vide Note 12.1;

As the matter is pending before Court, the liability is contingent upon the Court’s verdict. As such no provision is considered necessary.

6

Para 2 (f) (v): 
Penalty and interest not having been determined and provided for on provident fund dues aggregating Rs.0.56 crore not remitted to the appropriate authorities by certain units and the consequent effect on the accounts not being ascertainable; 

As no demand has been made by the PF authorities for payment of interest on delayed remittance of PF dues, the same has not been provided for. Shortfall, if any, faced by the PF Trust in meeting the obligations, consequent to such delay in remittance will be accounted on claim basis.

7

Para 2 (f) (vi):
Provision not having been determined and made in respect of investments in shares other than those held in Gujarat State Machine Tools Corporation Ltd and in respect of advances towards equity shares pending to be allotted in Nigeria Machine Tools Limited and the consequent overstatement of profits vide Note Nos.9.1 and 9.2;

As the investments are made in the Subsidiaries on receipt of funds from the Government of India and the Revival Plan of Praga Tools Limited has been approved by the Central Government with additional infusion of funds, the investments are considered good.

8

Para 2 (f) (vii):
Provision amounting to Rs.0.17 crore not having been made on debts outstanding for more than 3 years and considered doubtful in our opinion and the consequent overstatement of profits for the year to that extent;

Though the debts are more than 3 years old, efforts are on to collect these debts.

9

Para 2 (f) (viii):
Arrears of Rent due from employees, outstanding for several years and considered irrecoverable amounting to Rs.0.11 crore not having been provided for and the consequent overstatement of profits for the year;

Efforts are on to collect these dues. 
10

Para 2 (f) (ix):
Gratuity amounting to Rs.5.89 crore, Settlement Allowance amounting to Rs.0.58 crore, Earned Leave Encashment amounting to Rs.1.69 crore, aggregating to Rs.8.16 crore and paid to the Employees who have voluntarily separated under the Voluntary Retirement Scheme not having been charged to revenue contravening the requirements of AS 5 (vide Schedule 7.1 Note Nos. 16.2;16.3 and 19) and the consequent overstatement of profits for the year;

As per the Company’s revised Accounting Policy, Lump sum Compensation including Gratuity, EL Encashment and Settlement Allowance paid to employees relieved under VRS is amortised proportionately over a period of 10 years. Suitable disclosure has been made in the Accounts as per the requirements of AS 5.

11

Para 2 (f) (x):
VRS Bond Issue expenditure amounting to Rs.1.69 crore not having been charged to revenue contravening the requirements of AS 5 (vide Note No. 20 and Schedule 7.1) and the consequent overstatement of profits for the year;

Disclosure has been made under Note No 14 stating the fact that balances under Sundry Debtors, Loans& Advances, and Current Liabilities are subject to confirmation, although confirmation is sought in some cases.
12

Para 2 (f) (xi):
The consequential effect, if any, on the accounts of the Company, pending reconciliation and confirmation of balances under Current Liabilities, Sundry Debtors and Loans & Advances vide Schedules 5.5; 6.1 and Note 14. 

Disclosure has been made under Note No 14 stating the fact that balances under Sundry Debtors, Loans& Advances, and Current Liabilities are subject to confirmation, although confirmation is sought in some cases.

13

Para 2 (f) (xii):
A sum of Rs.5.90 crore having been recognized as income, on waiver of interest, contrary to normally accepted accounting principles and in contravention of Accounting Standards 5 and 9 issued by the Institute of Chartered Accountants of India on Net Profits and Recognitions of Revenue, such waiver being determinable only on the discharge of the entire liability and compliance of all the terms and conditions of the one time settlement with Banks, 

Reply furnished above to Audit observation under sub-para (d) of Para 2 may be referred to. There is no non-compliance of AS-5 and AS-9. 

14

Para 2 (f) (xiii):
The omission to disclose as a separate item in the Profit and Loss Account of a sum of Rs.53.77 crore taken credit for as interest waiver from banks and Financial Institutions as Provisions withdrawn, not being in accordance with the requirements of Schedule VI Part II of the Companies Act, 1956 and AS 5 vide Schedule 8.3; 
Annexure to the Auditors’ Report:

Necessary disclosure has been made in the Schedule to Other Income under Schedule No.8.3. 

15

Para (xiii):
The Company has not complied with the provisions of Section 58A of the Companies Act, 1956 and the Rules framed there under in having defaulted in repayment of deposits and the interest thereon

The Company has taken steps to repay the deposits and interest. 

16

Para (xvii):
The Company has not been regular in depositing Provident Fund (PF) and the Employees State Insurance Corporation (ESI) dues with the appropriate authorities. PF dues of Rs.0.56 crore and the ESI dues of Rs.0.01 lakh were outstanding as on 31.03.2001 in respect of the closed units.

On realization of sale proceeds of Non Performing Assets of these Units, the dues will be settled.

17

Para (xviii):
There are undisputed amounts payable in respect of sales tax Rs. 0.58 crore, which were outstanding as on 31.03.2001for a period of more than 6 months from the date they became payable.

On realization of sale proceeds of Non Performing Assets of these Units, the dues will be settled.