| We have audited the accompanying standalone financial statements of
Arvind Remedies Limited ("the Company"), which comprise the Balance
Sheet as at June 30, 2015, and the Statement of Profit and Loss and
Cash Flow Statement for the period then ended, and a summary of
significant accounting policies and other explanatory information.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated
in section 134(5) of the Companies Act 2013 ("the Act") with respect to
the preparation of these standalone financial statements that give a
true and fair view of the financial position, financial performance and
cash flows of the Company in accordance with the accounting principles
generally accepted in India, including the Accounting Standards
referred specified under section 133 of the Act, read with Rule 7of the
Companies (Accounts) Rules, 2014. This responsibility also includes
maintenance of adequate accounting records in accordance with the
provisions of the Act for safeguarding the assets of the Company and
for preventing and detecting frauds and other irregularities; selection
and application of appropriate accounting policies; making judgments
and estimates that are reasonable and prudent; and design,
implementation and maintenance of adequate internal financial controls
that were operating effectively for ensuring the accuracy and
completeness of the accounting records, relevant to the preparation and
presentation of the financial statements that give a true and fair view
and are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We have taken into account the
provisions of the Act, the accounting and auditing standards and
matters which are required to be included in the audit report under the
provisions of the Act and the Rules made there-under.
We conducted our audit in accordance with the Standards on Auditing
specified under section143(10) of the Act. Those Standards require that
we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor's judgment, including the assessment of
the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Company's preparation of the
financial statements that give a true and fair view in order to design
audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on whether the Company has in
place an adequate internal financial control system over financial
reporting and the operating effectiveness of such controls. An audit
also includes evaluating the appropriateness of accounting policies
used and the reasonableness of the accounting estimates made by the
Company's Directors, as well as evaluating the overall presentation of
the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified audit opinion.
Basis for Disclaimer of Opinion
6. The Company has destroyed pharmaceutical raw material,
stock-in-process and finished goods of value Rs. 19729.67 lakhs during
the period under audit under self certification and no external
agencies including Drug Control Authorities, Central Excise and
Pollution Control Board were involved in the process. We have been
informed that there was strike by employees between third week of
December 2014 to second week of February 2015.
7. During the period under audit, the company has accounted for return
for assets of capital expenditure as (part financed by the Banks by way
of Term Loan) is set out below. Also, confirmations from the equipment
vendors acknowledging receipt of the returned items were not available.
Particulars Amount in Rs. lakhs
Assets held under Fixed Assets -
capitalized in FY 2013-14 4348.83
gross block value
Held under "Capital Expenditure
on New Projects (Pending 5965.61
Allocation) "
Total amount of capital assets
returned to the supplier 10314.44
8. Letters seeking confirmation of balances were sent to various
Debtors aggregating toRs. 477,49.64 lakhs representing substantial
portion of total receivables.
o Replies confirming dues to the Company we received for Rs.381,59.12
lakhs and We have not received replies for the balance. Also, we
observe that Sales and Purchase transactions have been carried out with
the same business entities and the receivables and payables thereon are
set off against each other with minimum bank/cash transactions. And, we
observe that in several debtors' accounts (including state owned
Enterprises) the receivables are netted with transfers entries to other
parties or accounts.
9. For the Financial year 2013-14, the tax liability has been reported
on book profit of Rs. 1847.51 lakhs as against Rs. 8639.43 lakhs,
though tax provisioning in accounts was made for book profit of
Rs.8639.43 lakhs.
10. In the absence of audited financial statement of the Company's
subsidiary Arvind Remedies Inc, USA and Arvind Remedies LLC, USA we are
unable to provide for diminution in the value of investments, should in
case such subsidiary company has incurred losses. Consequently, we were
unable to determine whether any adjustments to these amounts were
necessary.
Disclaimer of Opinion
In our opinion and to the best of our information and according to the
explanations given to us, consequent to the possible effects of the
matter described in the Basis for our Disclaimer of Opinion paragraph,
we are unable to state whether the aforesaid standalone financial
statements give the information required by the Act in the manner so
required and give a true and fair view in conformity with the
accounting principles generally accepted in India of the state of
affairs of the Company as at 30th June 2015, and its Profit& Loss and
its cash flows for the period ended on that date.
Other Matters
Report on Other Legal and Regulatory Requirements
As required by section 143 (3) of the Act, we report that:
a) We have sought and, except for the matters described in the Basis
for Disclaimer of Opinion paragraph, obtained all the information and
explanations which to the best of our knowledge and belief were
necessary for the purpose of our audit;
b) Except for the possible effects of the matter described in the Basis
for Disclaimer of Opinion paragraph above and other transactional
accounts including Statutory dues and credits thereon and related
accounts, in our opinion books of account as required by law have been
kept by the Company so far as appears from our examination of those
books.
c) The Balance Sheet, Statement of Profit and Loss and Cash Flow
Statement dealt with by this Report are in agreement with the books of
account. Except for the possible effects of the matter described in the
Basis for Disclaimer of Opinion paragraph, in our opinion, the Balance
Sheet, Statement of Profit and Loss and Cash Flow Statement comply with
the Accounting Standards specified under section 133 of the Act, read
with Rule 7 of the Companies (Accounts) Rules, 2013 except in respect
of the following matters;
i. There has been change in the manner of charging depreciation as
necessitated by Companies Act, 2013 under Schedule II under straight
line basis to amortize the asset value over its useful economic life.
ii. The company has provided for Leave Encashment and Gratuity payable
on adhoc basis which is not in compliance with Accounting Standard 15
of the Institute of Chartered Accountants of India. iii. Though the
Company operates in trading and manufacturing segments, segmental
reporting is done on geographical lines and not on operational lines.
iv. Consolidated financial statement has not been prepared since no
audited financial statements were available for its Subsidiary
companies.
v. The company has submitted interim financial reports to the Stock
Exchanges till Q.E 31st December 2014. It is observed that though
accounting for return of capital assets of Rs. 10314.44 lakhs have been
accounted from April 2014 to December 2014, the same has not featured
in Limited Review for the quarter ended 30th June 2014 and 30th
September 2014.
vi. The assets other than Fixed Assets which are depreciated,
Inventories which was written off substantially during the period all
other both current and non-current assets are reported as carried in
the books of accounts and no provision has been made for any
irrecoverable as may be necessary. vii. No provision for any
contingent liability including the consequential Income Tax liability
as mentioned in paragraph 4 of Disclaimer of Opinion, as may arise have
been reported.
d) The matter described in the Basis for Disclaimer of Opinion
paragraph above, in our opinion, may have an adverse effect on the
functioning of the Company.
e) On the basis of written representations received from the directors
as on June 30, 2015,and taken on record by the Board of Directors, none
of the directors is disqualified as on June 30, 2015, from being
appointed as a director in terms of section 164(2) of the Act.
f) The qualification relating to the maintenance of accounts and other
matters connected therewith are as stated in the Basis for Disclaimer
of Opinion paragraph above.
g) With respect to the other matters to be included in the Auditor's
Report in accordance with Rule 11 of the Companies (Audit and Auditors)
Rules, 2014, in our opinion and to the best of our information and
according to the explanations given to us:.
i. The Company has not disclosed the impact of pending litigations on
its financial position in its financial statements
ii. As informed to us the Company is not required to make any
provision, as required under the applicable law or accounting
standards, for material foreseeable losses, if any, on long-term
contracts including derivative contracts since there is no long-term
contracts including derivative contracts.
iii. There has been no delay in transferring amounts, required to be
transferred, to the Investor Education and Protection Fund by the
Company.
The Annexure referred to in our report to the members of the Company
for the period ended on 30th June 2015. We report that:
(i) (a) the company is maintaining records showing full particulars,
including quantitative details and situation of fixed assets;
(b) we were informed that these fixed assets have been physically
verified by the management at reasonable intervals and that no material
discrepancies were noticed on such verification.
(ii) (a) we were informed that physical verification of inventory has
been conducted at reasonable intervals by the management;
(b) the procedures of physical verification of inventory followed by
the management needs to be strengthened in order to be reasonable and
adequate in relation to the size of the company and the nature of its
business.
(c) the company is maintaining records of inventory and the material
discrepancies were noticed on physical verification have been properly
dealt with in the books of account.
(iii) the company has not granted any loans, secured or unsecured to
companies, firms or other parties covered in the register maintained
under section 189 of the Companies Act.
(iv) the internal control system in practice is not commensurate with
the size of the company and the nature of its business, for the
purchase of inventory and fixed assets and for the sale of goods and
services.
(v) the company has not accepted any deposits and compliance
requirements related to relevant statues is not applicable.
(vi) the Central Government has prescribed maintenance of cost records
as specified by the under sub-section (1) of section 148 of the
Companies Act, 2013 and the same has not been maintained.
(vii) (a) the company was not regular in depositing undisputed
statutory dues including provident fund, employees' state insurance,
income-tax, sales-tax, wealth tax, service tax, duty of customs, duty
of excise, value added tax, cess and any other statutory dues with the
appropriate authorities and if not, the extent of the arrears of
outstanding statutory dues as at the last day of the financial year
concerned for a period of more than six months from the date they
became payable is indicated below.
Employees' Provident Fund - Rs.55.00 lakhs
Employees' State Insurance-Rs. 5.87 lakhs
Income tax - Direct payable by the company-1576.98 lakhs
Dividend Tax payable - Rs. 92.62 lakhs
Income Tax- In respect of Tax deduction at source- Rs.18.79 lakhs
Sales Tax& VAT-97.24 lakhs, excluding tax liability as may arise
consequent to
stock destroyed (as mentioned in paragraph 1 of of Basis of Disclaimer
of Opinion)
the VAT credit in respect of which were availed by the company.
Service Tax -
Excise duty- 9.22 lakhs
Professional tax-Rs. 3.73 lakhs (excluding Company's contribution)
(b) Apart from the above, we have been informed that there has been no
instances dues of income tax or sales tax or wealth tax or service tax
or duty of customs or duty of excise or value added tax or cess have
not been deposited on account of any dispute.
(c ) the amount required to be transferred to investor education and
protection fund in accordance with the relevant provisions of the
Companies Act, 1956 (1 of 1956) and rules made there under has been
transferred to such fund within time.
(viii) the accumulated losses at the end of the financial year has
completely eroded the net worth of the company and the Company has
incurred cash losses of Rs. 29581.47 lakhs during the period under
audit. However, no cash losses have been reported in the immediately
preceding financial year;
(ix) the company has defaulted in repayment of dues to banks and the
period and amount of default is reported below and few banks have
issued notice under Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002;
Total dues as
Bank on 30th June 2015
Allahabad Bank 14,777.96
Punjab National Bank 7,749.16
Corporation Bank 7,320.11
Idbi Bank Ltd 5,107.80
Indian Overseas Bank 1,094.42
KarurVysya Bank Ltd 5,419.89
Punjab National Bank 6,979.04
State Bank Of India 3,966.61
United Bank Of India 11,153.63
(x) we have been informed that the company has not given any guarantee
for loans taken by others from bank or financial institutions.
(xi) the term loans were not applied for the purpose for which the
loans were obtained in respect of assets acquisition made in financial
year 2013-14. The assets which were part financed by bank were returned
to the vendors and the amount receivable from such vendors is
appropriated against such parties' ledger account balances and have not
been repaid to the bank on return of the assets.
(xii) As informed to us there has been no fraud on the company has been
noticed or reported during the period. As mandated by Punjab National
Bank, being the leader of the consortium of lenders Forensic Audit of
the Company was carried out by a firm of Chartered Accountants.
For Vivekanandan Associates
Chartered Accountants (FRN : 005268S)
R. Lakshminarayanan (Mem No. 204045)
Partner
Chennai 7th March 2016
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