This Audit report is a revised Independent Auditors Report to override to our earlierindependent Audit report in the light of observations of C & AG of India as mentionedat 3 of the report
The Members of
Andhra Bank Financial Services Limited
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Andhra BankFinancial Services Limited ('the Company') which comprise the balance sheet as at 31March 2017 the statement of profit and loss and the cash flow statement for the year thenended 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 Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparationand presentation of these standalone financial statements that give a true and fair viewof the financial position financial performance and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.
We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made there under.
We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at 31 March 2017 and its profit and its cash flows for the year ended on that date.
Other matters required to be reported for NBFC
The Company was applied for registration as per the provisions of the Reserve Bank ofIndia Act 1934 and received a communication from Reserve Bank of India on 28.01.2005rejecting the application for certificate of registration as an NBFC
Further as per the directions of Reserve Bank of India vide letter dated 28.01.2005the company has disposed off all its financial assets except certain shares which are inthe physical form. However the Company has approached Reserve Bank Of India vide theirletter dated 09.01.2008 with a request to treat the company as Non Bank Non FinancialInstitution. In response to this Reserve Bank of India replied on 05.12.2008 that it hastaken the contents mentioned on record.
The Board of Directors of the Company has passed a resolution for non acceptance of anypublic deposits. Accordingly the Company has not accepted any public deposits during thefinancial year.
As the Company is not carrying out any non banking financial activities the prudentialnorms relating to the income recognition accounting standards asset classification andprovision of bad and doubtful debts are not applicable to it.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure A a statement on the matters specified in the paragraph3 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 bestof our knowledge and belief were necessary for the purposes of our audit.
(b) in our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
(c) the balance sheet the statement of profit and loss and the cash flow statementdealt with by this Report are in agreement with the books of account;
(d) in our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014;
(e) on the basis of the written representations received from the directors as on 31March 2017 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2017 from being appointed as a director in terms of Section164 (2) of the Act;
(f) with respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B"; and
(g) with respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of Companies (Audit and Auditors) Rules2014 in our opinion andto 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 financialposition in its financial statements. - Refer Annexure C to thefinancial statements.
(ii) the Company has made provisions wherever applicable as per law or accountingstandards for material foreseeable losses if any.
(iii) The Company is not required to transfer any amount to the Investor Education andProtection Fund.
(iv) The disclosure requirements as envisaged in NotificationNo.G.S.R.308(E) dated30.03.2017 is not applicable to the Company as the Company did not have any holdings ordealings in Specified Bank Notes (SBNs) during the period from 08th November 2016 to 30thDecember 2016.
3. as per the C & A G observations and letter date: 26.05.2017 We report onDirections u/sec 143(5) of the Companies Act2013 as under;
1. The company does not have any free hold or lease hold landed properties.
2. There are no cases of waiver/write off of debts/loans/interest etc during the yearunder audit.
3. The Machinery of the Company which is given on lease is lying with M/s IncabIndustries Ltd Kolkatta. The Company has not received its lease rentals since October1992. Hence the asset is valued at Rs.1/- in the books of accounts prior to the financialyear 2016-17.
Further the Company has not received any asset(s) as gift/grant(s) from the Governmentor other authorities during the year under audit.
for GHANTASALA & Co.
Firm's registration number: 000921S
Membership number: 217227
Annexure - A to the Auditors' Report
The Annexure referred to in Independent Auditors' Report to the members of the Companyon the standalone financial statements for the year ended 31 March 2017 we report that:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets
(b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified in a phased manner. In accordance with this programmefixed assets were verified during the year and no discrepancies were noticed on suchverification. In our opinion this periodicity of physical verification is reasonablehaving regard to the size of the Company and the nature of its assets.
(ii) The Company has stock of Shares in Physical form. The physical verification ofstock has been conducted at reasonable intervals by the Management and no discrepancieswere noticed.
(iii) The Company has not granted any loans to persons covered in the registermaintained under section 189 of the Companies Act 2013 ('the Act'). Hence paragraph3(iii) of the Order is not applicable to the Company.
(iv) The Company does not have any loans and investments. Hence this clause 3 (iv) ofthe Order is not applicable.
(v) The Company has not accepted any deposits from the public.
(vi) The Central Government has not prescribed the maintenance of cost records undersection 148(1) of the Act for any of the services rendered by the Company.
(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including service tax and income tax havebeen regularly deposited during the year by the Company with the appropriate authorities.
According to the information and explanations given to us no undisputed amountspayable in respect of income tax service tax were in arrears as at 31st March 2017 for aperiod of more than six months from the date they became payable.
(viii) The Company does not have any loans or borrowings from any financialinstitution banks government or debenture holders during the year. Accordinglyparagraph 3 (viii) of the Order is not applicable.
(ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year. Accordinglyparagraph 3 (ix) of the Order is not applicable.
(x) According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees has been noticed or reported during thecourse of our audit.
(xi) According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions of Sec197 read with Schedule V to the Companies Act 2013.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.
(xiv) According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.
(xvi) The Company's application for registration was rejected by Reserve Bank of Indiavide their letter No. DNBS (H) CMS No.2238/HYQ 0472/2004-05 dated 28.01.2005 and requiredthe company to pass a specific Board Resolution for not to carry on the business as NonBanking Financial Institution.
for GHANTASALA & Co.
Firm's registration number: 000921S
Membership number: 217227
Annexure - B to the Auditors' Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of Andhra BankFinancial Services Limited ("the Company") as of 31 March 2017 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 20l3 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2017 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
for GHANTASALA & Co.
Firm's registration number: 000921S
Membership number: 217227
ANNEXURE C referred to in our Report of even date to the members of Andhra Bankfinancial Services Limited on the legal matters.
According to the information and explanations given to us and on the basis of ourexamination of the available documents the Company has the following legal/arbitrationcases pending during the year.
I. CIVIL SUITS
|SL. NO. ||PARTICULARS ||STATUS |
|1. ||Civil Suit No.1 of 1998 in the Special Court Mumbai-Standard Chartered Bank (SCB) Vs Andhra Bank Financial Services Limited defendants and Andhra Bank H.P.Dalal and the Custodian are the Respondents. ||Initially the Civil Suit was filed in the High Court Mumbai on 27.11.1992 numbered as 3764 of 1992 subsequently transferred to Special Court Mumbai and numbered as 1 of 1998. It has come for hearing on 21.11.2014. The Plaintiff sought time to file draft issues and the Court adjourned the matter for 6 weeks. Latest position is that the case is adjourned to 17.02.2017. After that no communication has been received. |
|2. ||Tamilnadu News Print & Papers Ltd (TNPL) Vs Andhra Bank Financial Services Ltd - Civil Appeal No.2291-2292 of 2011 before Supreme Court ||I TNPL filed a civil suit in the High Court Madras claiming interest at 24% in the security transactions of 1992. Division Bench of Madras High Court gave an order for interest at 12% p.a instead of 24% |
| || ||ii. Aggrieved by the disallowance portion of interest TNPL had preferred other side appeal (309/01) before Division Bench of Madras High Court. |
| || ||iii. Aggrieved by the decree of the Suit the Company preferred other side appeal (328/01) which was admitted by Division Bench of Madras High Court |
| || ||iv. On 21.01.2010 the OSA No. 309/01 preferred by TNPL was dismissed and partly allow OSA 328/01 preferred by the Company. As per the judgment the Company is liable to pay Rs.880412 along with interest @12% p.a. from 02.04.2001 to till the date of realization to TNPL. |
| || ||v. Aggrueved by the said Order TNPL filed SLP (C) No11659- 11660 of 2010 before Hon'ble Supreme Court of India and Leave was granted on 01.03.2001. The suit was not come up for regular hearing. |
| || ||vi. On 05.4.2010 the Company has filed a petition No.2718 o f 2010 in Madras High Court for refund of money deposited earlier in the Madras High Court (Rs.1.42 Crore) along with applicable interest after adjusting the money payable to TNPL as per High Court Order. Accordingly the petition was considered by Madras High Court on 29.09.2010 and ordered the TNPL to pay the amount to the Company before 08.10.2010 . |
| || ||vii. Aggrieved by the said order on 29.09.2010 by Madras High court TNPL moved to the Hon'ble Supreme Court and the Court granted interim stay to TNPL on 07.10.2010 subject to deposit of amount payable to the Company. |
| || ||viii. The petition No.2718 of 2010 filed by the Company was closed on 27.10.2010 on deposit of a sum of Rs.2.51 Crore by TNPL in Madras High Court as per the directions of the Hon'ble supreme Court. |
II. LABOUR SUITS
|SL.NO. ||PARTICULARS ||STATUS |
|1. ||Appeal before the Central Govt Industrial Tribunal (CGIT) Hyderabad ||On 23.03.2011 one person who worked on a temporary basis in the Company has filed a complaint seeking employment in the Andhra Bank with a copy to Andhra Bank Financial Services Ltd. His application for employment was rejected in the Andhra Bank since there is no privity of contract with Andhra Bank. Now he has filed an appeal before CGIT |
III. INCOME TAX APPEALS
|Asst Year ||High Court Appeal No. ||Date ||Remarks |
|1993-94 ||ITTA320/2006 ||25.07.2006 ||Out of the total seven appeals filed by the Company against the orders of the ITAT Hyderabad one appeal was already admitted on 29.12.2005 and other three appeals relating to the Asst Years 1994-951995-96 and 1996-97 were heard and admitted on 24.07.2013 and the remaining three have to be admitted relating to the Asst Years 1993-941997-98 and 1999-00. These cases have yet to come up for regular hearing. |
|1994-95 ||ITTA 425/2005 ||22.10.2005 |
|1995-96 ||ITTA 114/2012 ||11.09.2006 |
|1995-96 ||ITTA 445/2005 ||22.10.2005 |
|1996-97 ||ITTA 424/2005 ||22.10.2005 |
|1997-98 ||ITTA 229/2007 ||02.07.2007 |
|1999-00 ||ITTA 228/2007 ||02.07.2007 |
|SL.NO. ||PARTICULARS ||STATUS |
|1. ||Interest Tax appeals filed by the Tax Department ||On 04.10.2002 Income Tax department filed two appeals for Asst Year 1996-97 & 1997-98 against the Orders of the ITAT Hyderabad Bench relating to the interest Tax which was admitted by the High Court. |
| || ||The Income Tax department treating the Hire Purchase & Leasing transactions is as loans and the interest & rentals received from the Hire Purchase and leasing transactions were considered under Interest Tax purview. The judgment up to the ITAT was in favour of the Company. However the department went on appeal to High court. Now the appeals filed by the department were admitted in the Court and not yet come up for hearing. |
| ||for GHANTASALA & Co. |
| ||Chartered Accountants |
| ||Firm's registration number: 000921S |
| ||HUMAYUN SHAIK |
| ||Partner |
| ||Membership number: 217227 |
|Hyderabad || |
|Date: 30.05.2017 || |