Auditors qualify McDowell accounts

MUMBAI, Sept 20: The auditors of Rs 1,227 crore McDowell amp; Co Ltd, belonging to the UB group of Vijay Mallya, have qualified the 100t...

MUMBAI, Sept 20: The auditors of Rs 1,227 crore McDowell amp; Co Ltd, belonging to the UB group of Vijay Mallya, have qualified the 100th balance sheet of the company for the year 1997-98 on several points including capital advances and overdue loans and advances.

8220;Capital advances of Rs 28.68 crore in earlier years are not supported by adequate documentation for work to be done,8221; auditors M Lakshminarayanan pointed out. They also said provisions have not been made in respect of disputed income tax and sales tax demands aggregating Rs 60.11 crore and excise demands of Rs 39.25 crore for wastages and distillation losses. With respect to various overdue debtors and loans and advances aggregating Rs 95.37 crore, including Rs 64.27 crore relating to debtors in Andhra Pradesh, the auditors said they were 8220;unable to form an opinion regarding the quantum of debts and advances which would ultimately become irrecoverable.

They further said the company has not made provisions for shortfall of Rs 18.41 crore inthe value of certain quoted investments. 8220;The company8217;s investments of Rs 10.89 crore in Mangalore Chemicals and Fertilisers is stated at cost despite the networth having been fully eroded. We are hopeful that the company will turn around fully. In fact, it made a profit of Rs 17 crore last year,8221; said A K Ravi Nedungadi, executive vice president finance of the company.

Clarifying the capital advances of Rs 28.68 crore, Nedungadi said 8220;these advances were made in earlier years for acquisition of land, plantation and construction contracts. Some of the projects were kept on hold because of prohibition in two states. Now these projects are progressing smoothly. We hope to complete projects worth Rs 100 crore in the next three years.8221;

Nedungadi attributed the overdue loans and advances of Rs 95.37 crore to prohibition in Andhra Pradesh. 8220;The prohibition in Andhra came suddenly.

Our money was stuck with distributors in AP as we used to send goods on credit. We8217;ve worked out an arrangement withthese distributors to recover this money. In fact, we have been recovering money from them,8221; he said, adding that the company has stopped the credit system and switched over to the cash-and-carry system.

Regarding non-provision for sales tax and excise demands, he said many of these demands were challenged by the company. The administration has imposed unrealistic tax demands in several places. 8220;We have advance deposits of Rs 50 crore with the income tax department,8221; he said.

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The auditors also pointed out non-reconciliation of certain bank accounts. 8220;Reconciliation of fixed deposit interest, debenture interest and dividend warrant accounts and the corresponding bank accounts are still in progress. The amount shown against book overdraft in current account with the bank on account of deposit, debenture interest accounts would be adjusted on clearance of the reconciliation,8221; the company said.