To the Members of Arvind Remedies Limited
Report on the Stand alone Financial Statements
We have audited the accompanying standalone financial statements of Arvind RemediesLimited ("the Company") which comprise the Balance Sheet as at June 30 2015and the Statement of Profit and Loss and Cash Flow Statement for the period then endedand 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 preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsreferred specified under section 133 of the Act read with Rule 7of the Companies(Accounts) Rules 2014. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on ouraudit. 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 undersection143(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 anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal control relevant to the Company's preparation of the financialstatements that give a true and fair view in order to design audit procedures that areappropriate in the circumstances but not for the purpose of expressing an opinion onwhether the Company has in place an adequate internal financial control system overfinancial reporting and the operating effectiveness of such controls. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonablenessof the accounting estimates made by the Company's Directors as well as evaluating theoverall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion.
Basis for Disclaimer of Opinion
6. The Company has destroyed pharmaceutical raw material stock-in-process andfinished goods of value Rs. 19729.67 lakhs during the period under audit under selfcertification and no external agencies including Drug Control Authorities Central Exciseand Pollution Control Board were involved in the process. We have been informed that therewas strike by employees between third week of December 2014 to second week of February2015.
7. During the period under audit the company has accounted for return forassets of capital expenditure as (part financed by the Banks by way of Term Loan) is setout below. Also confirmations from the equipment vendors acknowledging receipt of thereturned items were not available.
|PARTICULARS || |
AMOUNT IN RS. LAKHS
|Assets held under Fixed Assets capitalized in FY 2013-14 gross block value || |
|Held under "Capital Expenditure on New Projects (Pending Allocation) " || |
|Total amount of capital assets returned to the supplier || |
8. Letters seeking confirmation of balances were sent to various Debtors aggregatingtoRs. 47749.64 lakhs representing substantial portion of total receivables. o Repliesconfirming dues to the Company we received for Rs.38159.12 lakhs and We have notreceived replies for the balance. Also we observe that Sales and Purchase transactionshave been carried out with the same business entities and the receivables and payablesthereon are set off against each other with minimum bank/cash transactions. And weobserve that in several debtors' accounts (including state owned Enterprises) thereceivables are netted with transfers entries to other parties or accounts.
9. For the Financial year 2013-14 the tax liability has been reported on bookprofit of Rs. 1847.51 lakhs as against Rs. 8639.43 lakhs though tax provisioning inaccounts was made for book profit of Rs.8639.43 lakhs.
10. In the absence of audited financial statement of the Company's subsidiary ArvindRemedies Inc USA and Arvind Remedies LLC USA we are unable to provide for diminution inthe value of investments should in case such subsidiary company has incurred losses.Consequently we were unable to determine whether any adjustments to these amounts werenecessary.
Disclaimer of Opinion
In our opinion and to the best of our information and according to the explanationsgiven to us consequent to the possible effects of the matter described in the Basis forour Disclaimer of Opinion paragraph we are unable to state whether the aforesaidstandalone financial statements give the information required by the Act in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at 30th June 2015and its Profit& Loss and its cash flows for the period ended on that date.
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 ofOpinion paragraph obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit;
b) Except for the possible effects of the matter described in the Basis for Disclaimerof Opinion paragraph above and other transactional accounts including Statutory dues andcredits thereon and related accounts in our opinion books of account as required by lawhave 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 withby this Report are in agreement with the books of account. Except for the possible effectsof the matter described in the Basis for Disclaimer of Opinion paragraph in our opinionthe Balance Sheet Statement of Profit and Loss and Cash Flow Statement comply with theAccounting Standards specified under section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2013 except in respect of the following matters;
i. There has been change in the manner of charging depreciation as necessitated byCompanies Act 2013 under Schedule II under straight line basis to amortize the assetvalue over its useful economic life.
ii. The company has provided for Leave Encashment and Gratuity payable on adhoc basiswhich is not in compliance with Accounting Standard 15 of the Institute of CharteredAccountants of India.
iii. Though the Company operates in trading and manufacturing segments segmentalreporting is done on geographical lines and not on operational lines.
iv. Consolidated financial statement has not been prepared since no audited financialstatements were available for its Subsidiary companies.
v. The company has submitted interim financial reports to the Stock Exchanges till Q.E31st December 2014. It is observed that though accounting for return of capital assets ofRs. 10314.44 lakhs have been accounted from April 2014 to December 2014 the same has notfeatured 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 waswritten off substantially during the period all other both current and non-current assetsare reported as carried in the books of accounts and no provision has been made for anyirrecoverable as may be necessary.
vii. No provision for any contingent liability including the consequential Income Taxliability as mentioned in paragraph 4 of Disclaimer of Opinion as may arise have beenreported.
d) The matter described in the Basis for Disclaimer of Opinion paragraph above in ouropinion 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 302015and taken on record by the Board of Directors none of the directors is disqualifiedas on June 30 2015 from being appointed as a director in terms of section 164(2) of theAct.
f) The qualification relating to the maintenance of accounts and other mattersconnected 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 inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand 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 financialposition in its financial statements
ii. As informed to us the Company is not required to make any provision as requiredunder the applicable law or accounting standards for material foreseeable losses if anyon long-term contracts including derivative contracts since there is no long-termcontracts including derivative contracts.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
For Vivekanandan Associates
Chartered Accountants (FRN : 005268S)
R. Lakshminarayanan (Mem No. 204045)
Chennai 7th March 2016
The Annexure referred to in our report to the members of the Company for the periodended on 30th June 2015. We report that:
(i) (a) the company is maintaining records showing full particulars includingquantitative details and situation of fixed assets;
(b) we were informed that these fixed assets have been physically verified by themanagement at reasonable intervals and that no material discrepancies were noticed on suchverification.
(ii) (a) we were informed that physical verification of inventory has been conducted atreasonable intervals by the management;
(b) the procedures of physical verification of inventory followed by the managementneeds to be strengthened in order to be reasonable and adequate in relation to the size ofthe company and the nature of its business.
(c) the company is maintaining records of inventory and the material discrepancies werenoticed 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 firmsor other parties covered in the register maintained under section 189 of the CompaniesAct.
(iv) the internal control system in practice is not commensurate with the size of thecompany and the nature of its business for the purchase of inventory and fixed assets andfor the sale of goods and services.
(v) the company has not accepted any deposits and compliance requirements related torelevant statues is not applicable.
(vi) the Central Government has prescribed maintenance of cost records as specified bythe under sub-section (1) of section 148 of the Companies Act 2013 and the same has notbeen maintained.
(vii) (a) the company was not regular in depositing undisputed statutory dues includingprovident fund employees' state insurance income-tax sales-tax wealth tax servicetax duty of customs duty of excise value added tax cess and any other statutory dueswith the appropriate authorities and if not the extent of the arrears of outstandingstatutory dues as at the last day of the financial year concerned for a period of morethan 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 company1576.98 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 tostock destroyed (as mentioned in paragraph 1 of of Basis of Disclaimer of Opinion) the VATcredit in respect of which were availed by the company.
Service Tax -
Excise duty 9.22 lakhs
Professional taxRs. 3.73 lakhs (excluding Company's contribution)
(b) Apart from the above we have been informed that there has been no instances duesof income tax or sales tax or wealth tax or service tax or duty of customs or duty ofexcise 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 inaccordance with the relevant provisions of the Companies Act 1956 (1 of 1956) and rulesmade thereunder has been transferred to such fund within time.
(viii) the accumulated losses at the end of the financial year has completely erodedthe net worth of the company and the Company has incurred cash losses of Rs. 29581.47lakhs during the period under audit. However no cash losses have been reported in theimmediately preceding financial year;
(ix) the company has defaulted in repayment of dues to banks and the period and amountof default is reported below and few banks have issued notice under Securitisation andReconstruction of Financial Assets and Enforcement of Security Interest Act 2002;
|BANK || |
TOTAL DUES AS ON 30TH JUNE
| || |
|Allahabad Bank || |
|Punjab National Bank || |
|Corporation Bank || |
|Idbi Bank Ltd || |
|Indian Overseas Bank || |
|KarurVysya Bank Ltd || |
|Punjab National Bank || |
|State Bank Of India || |
|United Bank Of India || |
(x) we have been informed that the company has not given any guarantee for loans takenby others from bank or financial institutions.
(xi) the term loans were not applied for the purpose for which the loans were obtainedin respect of assets acquisition made in financial year 2013-14. The assets which werepart financed by bank were returned to the vendors and the amount receivable from suchvendors is appropriated against such parties' ledger account balances and have not beenrepaid to the bank on return of the assets.
(xii) As informed to us there has been no fraud on the company has been noticed orreported during the period. As mandated by Punjab National Bank being the leader of theconsortium of lenders Forensic Audit of the Company was carried out by a firm of CharteredAccountants.
For Vivekanandan Associates
Chartered Accountants (FRN : 005268S)
R. Lakshminarayanan (Mem No. 204045)
Chennai 7th March 2016