HSIIDC fails to abide by Companies Act: Auditor

Finds Haryana industry bodys expenditure inflated

 After a slew of government ministries were nailed by the Comptroller and Auditor General of India, it is now the turn of state government’s bodies to face the heat.

In a brazen violation of rules, the Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) reportedly prepared its accounts on cash basis and not on accrual basis, as is the normal practice to be followed under Section 209 (3) (b) of the Companies Amendment Act, 1988 read with accounting standard (AS) 1.

The matter came to light when the auditor’s report prepared by chartered accountants Vijay and Satish Bhatia for the financial year 2010-11 went public recently.

This may look inconsequential circumventing of statutory compliance, but in accounting terminology this is a serious anomaly and violation of the most basic principle of financial bookkeeping.

“This is a clear cut violation of the Companies Act, and it must have been done to hide the income that the company doesn’t want to disclose,” said a chartered accountant who works as a finance head with an MNC in New Delhi, requesting anonymity.

Accounts on cash basis

The auditor’s report clearly states: “Corporation is not following the provisions of Companies Act, 1956, by maintaining the accounts on cash basis in respect of income/loss.”

Besides not following the fundamental procedure of accounting, HSIIDC also resorted to several such illegitimate bookkeeping practices with a prima facie intent to minimise the reporting of actual income/profit.

While writing about the amount received from auction of plots, the report states, “The amounts received have been shown as current liabilities, while in our opinion total amount received should form part of the turnover of the industrial activity.” The report further says, “A sum of Rs 16.38 crore is outstanding on account of unclaimed refunds account, which is included in the amount of other liabilities.”

Cheques not cleared

While signalling towards inflated expenses, the report states, “Cheques amounting to Rs 89.98 lakh have been issued but not presented for payment. The cheques are as old as 1984, and the legal status of the allottees is not clear regarding who have not accepted the cheques or whom these have not been delivered to.”

Manmohan Gaind, general secretary, Manesar Industries Welfare Association, said, “The HSIIDC has close to Rs 2,000 crore in its coffer, but refrains from divulging it to the public, which is why it has started fudging its accounts. One can’t expect a government body to stoop so low.”

When Deccan Herald spoke to Rajeev Arora, managing director of HSIIDC, he said, “Yes, we followed cash system last year, but this year onwards we have started following the right (accrual) accounting practices.” On whether he could show this year’s auditor’s report to prove his point, he said, “This year’s report is not ready yet as we sought extension.”

Liked the story?

  • 0

    Happy
  • 0

    Amused
  • 0

    Sad
  • 0

    Frustrated
  • 0

    Angry