The statutory auditors to Tata Finance, N M Raiji & Co, have extensively qualified the company's audited financial statements for 2001-02.
Though the auditors have made 12 qualifying statements, they have drawn attention to four which pertain to non-compliance with the non-banking financial companies prudential norms (Reserve Bank) directions, non-banking financial companies acceptance of public deposits(Reserve Bank) directions, payment of interim dividend on preference shares without approval of the board of directors and in violation of Section 205 of the Companies Act, excess payment of remuneration to former directors and refund of dividend to Niskalp Investments & Trading Company (NITCL).
Explaining their qualifications on the non-compliance of the Reserve Bank's prudential norms, the auditors have stated, "the required capital adequacy ratio is not maintained as per Regulation 10 due to provisions made by the company for diminution in value of investments and losses incurred by the company under the erstwhile management."
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However, they go on to add, "The new management has sought time from the Reserve Bank of India to correct the position."
The auditors also said that, "The company has given further assistance of Rs 55.60 crore to a company to whom inter corporate deposits( ICDs) of more than 25 per cent of its owned funds were given in the earlier years. However on account of repayment of Rs 58.13 crore, the total exposure to the company has been reduced."
In yet another qualification the auditors have said, " Certain fixed deposits from the public/shareholders were renewed during the period which is in excess of limits specified in the non-banking financial companies' acceptance of public deposits (Reserve Bank) directions 1998."
The qualifications go on to include a dividend payment which, "In July 2001, the erstwhile management of the company paid a dividend of Rs 4.69 lakh on cumulative redeemable preference shares though for the period the company has incurred losses. The payment of the said dividend was not approved by the board of directors."
The company has initiated steps to recover the same, the auditors said. The auditors have also mentioned that "The erstwhile management paid salaries and perquisites to the then managing director and whole -time directors in excess of their entitlements as per the terms of their appointment approved by the shareholders and Schedule XIII to the Companies Act, 1956. Such excess recoverable as on March 31, 2002 is Rs 13.12 lakh."
In another qualification, the auditors have drawn attention to the fact that "the company has received equity dividend of Rs 10.73 crore and preference dividend of Rs 20 lakh from NITCL in the year ended June 30, 2000, which was accounted as dividend income in that year. The same has been revoked by the board of directors of NITCL on account of losses incurred by NITCL during the period. The company has received intimation from NITCL to refund the said dividend paid earlier. Considering that NITCL was a subsidiary of the company at the time of declaration of dividend, the management of the company has refunded the dividend which has been shown as an extra-ordinary item in the profit and loss account for the period."