| We have audited the accompanying standalone financial statements of
BIRLA COTSYN (INDIA) LIMITED ("the Company") which comprise the Balance
Sheet as at 31st M arch, 2015, the Statement of Profit and Loss and
Cash Flow Statement for the year 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 and presentation 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 specified under Section 133 of the Act, read with
Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility
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 standalone
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 Section 143(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 the 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 financial 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 controls system over financial reporting and the operating
effectiveness of such controls. An audit also includes evaluating the
appropriateness of the 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 on the
standalone financial statements.
Basis for Qualified Opinion
1. With reference to note no. 7(B)(b) regarding inter corporate
deposits of Rs. 17,96,88,787/- taken from various parties as at 31st
March, 2015 in the absence of third party confirmation, reconciliation,
if any and other supportive audit evidence, we are unable to comment
upon such balances.
Further, few such parties have already filed winding up petition under
section 271 and 272 of the Companies Act, 2013 ("the Act") against the
Company for non-payment of dues (Section 433 & 434 of the Companies
Act, 1956). These matters are sub- judice and the impact, if any, of
the outcome is unascertainable of this stage.
2. With reference to note no. 7(B)(c) regarding dues to related
parties of Rs. 9,15,49,878/- and note no. 8(A)(a) trade payables of Rs.
22,69,36,818/- as at 31st March, 2015, in the absence of third party
confirmation, reconciliation, if any and other supportive audit
evidence, we are unable to comment upon such balances.
3. No provision has been made in the current year for interest payable
of Rs.37,73,961/- on loans taken from related parties by the Company
and no provision has been made for interest receivable of
Rs.1,89,20,004/- on loans given to related parties by the Company.
Consequently the loss for the year is higher by Rs.1,51,46,043/-, Other
Current Liabilities (Note No 8) is understated by Rs.37,73,961/- and
Other Non-Current Assets (Note 13) is understated by Rs.1,89,20,004/-.
4. With reference to Fixed Deposits accepted by the Company, the
Company has defaulted in repayment of dues of Rs. 4,33,29,363/- as at
31st March, 2015. However, on Company's petition / application under
section 58A(9) of the Companies Act, 1956, the Hon'ble Company Law
Board has passed an order dated 19th May, 2015 for rescheduling the
repayment of the deposits for a specified period under section 58A(9)
read with section 74(2) of the Companies Act, 2013.
5. With reference to note no 12(a) regarding capital advances of
Rs.94,55,65,044/- as at 31st March, 2015 given to various parties, the
Company has made a provision of Rs.94,32,23,851/-given to various
equipment suppliers and other parties mainly towards implementing
Weaving Project. The amount represents balances outstanding for more
than five years in respect of projects of the Company which have not
taken off. In the absence of third party confirmation, reconciliation,
if any and other supportive audit evidence, we are unable to comment
upon its recoverability in cash or kind, if any.
6. With reference to note no. 17(a) regarding loan of Rs.7,29,98,404/-
given to one related party, which has incurred losses and also has
negative net worth as at 31st March 2013, in the absence of latest
audited accounts and detailed information of projected cash flows as at
31 March, 2015 or other supportive audit evidence, we are unable to
comment upon its impairment, if any. With reference to note no.12(d)
regarding loans given to other related parties of Rs.33,89,08,208/- as
at 31st March, 2015, in the absence of third party confirmation,
reconciliation if any and other supportive audit evidence, we are
unable to comment upon such balances
7. With reference to note no. 10(D) regarding Plant & Machinery of Rs.
Rs.37,35,48,883/- situated at one factory unit of the company has been
generally operating at lower capacity. In the absence of future cash
flow projection and information about the value in use, we are unable
to comment upon its impairment provision, if any as per Accounting
Standard 28 "Impairment of Assets".
Qualified Opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the effects of the matter
described in the Basis for Qualified Opinion paragraph above and read
with points mentioned in Emphasis of Matter paragraph, the aforesaid
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 31st March, 2015, and its loss and its
cash flows for the year ended on that date.
Emphasis of Matter
1. We draw attention to the Note no. 3(e) in the financial Statements.
The company has incurred net loss of Rs.1,64,41,10,595/- during the
year ended 31st March, 2015 and as of that date, the Company's
accumulated losses aggregate to Rs.345,55,84,162/- resulting in
complete erosion of its net worth. Further, as of that date, company's
current liabilities exceeded its current assets by Rs.3,91,88,56,757/-
subject to the effects of matters described in the Basis for Qualified
Opinion paragraph. These factors along with other matters as set forth
in said note raise substantial doubt about the company's ability to
continue as a going concern in the foreseeable future. However, the
company's financial statement has been prepared on going concern basis
as disclosed by management in said note. Our opinion is not qualified
in respect of this matter.
2. We draw attention to Note no. 4A and 4B regarding notice issued by
consortium of banks under section 13(2) of the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest
(SARFAESI) Act 2002 for non-payment of principal and interest thereon
after the due date by the company and therefore all loans accounts
became Non Performing Assets effective from respective dates mentioned
in such notice. We are informed that the company is contesting the
action taken under section 13(4) of SARFAESI Act and therefore the
matter is sub-judice. These factors along with other matters as set
forth in said notice raise substantial doubt about the company's
ability to continue as a going concern in the foreseeable future.
However, the company's financial statements have been prepared on going
concern basis as disclosed by management in said note. Our opinion is
not qualified in respect of this matter.
Other Matters
The company had given loan to three related parties in earlier years
and the amount outstanding as at 31st March, 2015 Rs.44,47,33,111/-
(including interest till 31st March, 2015) which is not in compliance
with the requirements of section 185 of the Companies Act, 2013.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2015("the
Order") issued by the Central Government of India in terms of
sub-section (11) of section 143 of the Act, we give in Annexure a
statement on the matters Specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations
which to the best of our knowledge and belief were necessary for the
purposes of our audit except for the matter described in the Basis for
Qualified Opinion Paragraph.
(b) In our opinion, proper books of accounts as required by law have
been kept by the Company so far as it 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
accounts.
(d) Except for the effects of the matters described in the Basis for
Qualified Opinion paragraph, and read with points mentioned in Emphasis
of Matter paragraph, in our opinion, the aforesaid standalone financial
statements comply with the Accounting Standards specified under Section
133 of the Act, read with Rule 7 of the Companies (Accounts) Rules,
2014.
(e) On the basis of written representations received from the directors
as on 31st March, 2015 taken on the record by the Board of Directors,
none of the director is disqualified as on 31st March, 2015 from being
appointed as a director in terms of Section 164(2) of the Act.
(f) 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 disclosed the impact of pending litigations on its
financial position in its financial statements- Refer Note 26 to the
financial statements;
II. The Company does not have any long term contracts including
derivative contracts; as such the question of commenting on any
material foreseeable losses does not arise
III. There has not been an occasion in case of the Company during the
year under report to transfer any sums to the Investor Education and
Protection Fund. The question of delay in transferring such sums does
not arise.
ANNEXURE TO THE INDEPENDENT AUDITOR'S REPORT
1 Fixed Assets:
1.1 The Company has maintained proper records showing full particulars
including quantitative details and situation of fi xed assets.
1.2 The fi xed assets are physically verifi ed during the year by the
Management in accordance with a regular program of verifi cation which,
in our opinion is reasonable having regard to the size of the Company
and the nature of its assets. No material discrepancies were noticed on
such verifi cation by the management between the book and physical
verifi cation records.
2 Inventories:
2.1 As per the information given to us, inventory has been physically
verifi ed by the Management during the year. In our opinion, the
frequency of verifi cation is reasonable.
2.2 In our opinion and according to the information and explanations
given to us, the procedures of physical verifi cation of such inventory
followed by the Management are reasonable and adequate in relation to
the size of the Company and the nature of its business
2.3 In our opinion and according to the information and explanations
given to us, the Company is maintaining proper records of inventory and
no major discrepancies were noticed on physical verifi cation.
3 Loans borrowed or given:
3.1 According to information and explanations given to us the Company
has granted loans to three bodies corporate covered in the register
maintained under section 189 of the Companies Act, 2013.
3.2 In the case of the loans granted to the bodies corporate listed in
the register maintained under section 189 of the Act, since there are
no terms for repayment of interest we cannot comment upon the
regularity of the same. The terms of arrangements do not stipulate any
repayment schedule and the loans are repayable on demand. Accordingly,
paragraph 3(iii)(b) of the Order is not applicable to the Company in
respect of repayment of the principal amount.
3.3 There are no overdue amounts of more than rupees one lakh in
respect of the loans granted to the bodies corporate listed in the
register maintained under section 189 of the Companies Act, 2013.
4 Internal Control System:
4.1 In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business for the
purchases of inventory and fi xed assets and for the sale of goods and
services.
4.2 As regards purchase of fi xed assets and capitalization of work in
progress, the Company needs to strengthen internal controls for keeping
proper identifi cation of Assets.
5 Deposit from Public:
5.1 The Company has defaulted in repayment of dues of Rs. 4,33,29,363/-
till 31st March, 2015. However, on Company's petition / application
under section 58A(9) of the Companies Act, 1956, the Hon'ble Company
Law Board has passed an order dated 19th May, 2015 for rescheduling the
repayment of the deposits for a specifi ed period under section 58A(9)
read with section 74(2) of the Companies Act, 2013.
6 Maintenance of Cost Records:
6.1 We have broadly reviewed the cost records maintained by the Company
pursuant to the Companies (Cost Records and Audit) Rules, 2014, as
amended, prescribed by the Central Government under sub-section (1) of
section 148 of the Companies Act, 2013, and are of the opinion that,
prima facie, the prescribed cost records have been made and maintained.
We have, however, not made a detailed examination of the cost records
with a view to determine whether they are accurate or complete.
7 Remittance of Statutory Dues:
7.1 Undisputed statutory dues including provident fund, investor
education and protection fund, employees state insurance, income-tax,
sales-tax, wealth-tax, service tax, customs duty, excise duty, cess
have not been regularly deposited with the appropriate authorities and
there has been signifi cant delay in the same.
7.2 According to the information and explanation given to us, no
undisputed amounts payable in respect of provident fund, investor
education and protection fund, employees state insurance, income tax,
wealth tax, service tax, sales tax, custom duty, excise duty, cess and
other undisputed statutory dues were outstanding at the end, for the
period of more than six month from the date they became payable, except
as stated below
Name of the Nature of Dues Amount (Rs.) Period to which
Statute the
Amount relates
Income Tax Dividend
Distribution tax 1,93,32,677 2009-10
Income Tax TDS on Interest 20,68,460 2012-13
Income Tax TDS on FD Interest 2,76,279 2014-15
Name of the
Statute Due Date Date of
payment
Income Tax 04-10-2010 Not paid
Income Tax 01-04-2012 to Not Paid
31-12-2012
Income Tax 1-04-2014 to 30-09- Not Paid
2014
7.3 According to the information and explanations given to us and as
per the records of the Company examined by us, there are no dues
outstanding of sales tax, income tax, custom duty, wealth tax, service
tax, excise duty and cess, which have not been deposited on account of
any dispute.
7.4 The amounts 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.
8 Accumulated Losses:
8.1 In our opinion, the accumulated losses of the company are more than
Fifty percent of its net worth. The Company has not incurred any cash
losses during the fi nancial year covered by our audit and in the
immediately preceding fi nancial year.
9 Dues to Bank and Financial Institutions
9.1 In our opinion, and according to the information and explanation
given to us, the Company has defaulted in repayment of dues to fi
nancial institutions and banks for principal amount of Rs.
232,43,04,243/- and interest amounting of Rs. 106,35,40,174/- since
May 2012. The Company has received notice issued by consortium of banks
under section 13(2) of the Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act 2002 for non-
payment of principal and interest thereon after the due date by the
Company and therefore all loans accounts became Non Performing Assets
effective from respective dates mentioned in such notice. We are
informed that the company is contesting the action taken under section
13(4) of SARFAESI Act and therefore the matter is sub-judice.
10 Guarantees given by the Division for Loans Taken by Others:
10.1 According to the information and explanations given to us and
records produced, the Company has not given any guarantee for loans
taken by others from banks or fi nancial institutions.
11 End Use of Term Loans raised:
11.1 The Company has not taken any term loans during the year under
audit. Hence the question of application of term loans for the purposes
for which they were obtained does not arise.
12 Frauds
12.1 During the course of our examination of the books and records of
the Company, carried out in accordance with the generally accepted
auditing practices in India and according to the information and
explanation given to us, we have neither come across any instance of
fraud on or by the Company, noticed or reported during the period, nor
have been informed of any such case by the management.
For Samria & Co.,
Chartered Accountants
Firm Reg. No.: 109043W
(Adhar Samria)
Place: Mumbai Partner
Date : 29th May, 2015 M. No: 049174 |