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Baroda Rayon Corporation Ltd.

BSE: 500270 Sector: Industrials
NSE: BARODARAYN ISIN Code: INE461A01024
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Baroda Rayon Corporation Ltd. (BARODARAYN) - Auditors Report

Company auditors report

To the members of

The Baroda Rayon Corporation Limited

Report on the standalone financial statements

1.We have audited the accompanying standalone financial statements of The Baroda RayonCorporation Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2016 the Statement of Profit and Loss the Cash Flow Statement for the yearthen ended and a summary of the significant accounting policies and other explanatoryinformation.

Management’s Responsibility for the Standalone Financial Statements

2.The Company’s Board of Directors is responsible for the matters stated inSection 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation of these standalone financial statements to give a true and fair view of thefinancial position financial performance and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

Auditors’ Responsibility

3. Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

4. We have taken into account the provisions of the Act and the Rules made there underincluding the accounting standards and matters which are required to be included in theaudit report.

5. We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act and other applicable authoritative pronouncements issued by theInstitute of Chartered Accountants of India. Those Standards and pronouncements requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement.

6. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the financial statements. The procedures selected depend on theauditors’ judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the Company’spreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Company’s Directors as well as evaluating theoverall presentation of the financial statements.

7. 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.

8. Opinion

Attention is invited to followings:

a. As stated in note No.19 (a) in financial statements the accounts have been preparedon going concern basis. However the net worth of the Company had been fully eroded due tothe continued losses the Company’s entire operations have become standstill sinceAugust’ 2008 and there are many legal cases pending against the Company which mayaffect the future functioning of the Company.

b. Employee Union had filed the litigation for recovery of their total dues against theCompany at Gujarat High Court. The Company had referred the said matter with Hon’bleBIFR for making necessary modification in Modified Draft Rehabilitation Scheme (MDRS) fordetails refer to Note 22 of financial statements. Subject to the final verdict we areunable to express any opinion on probable liabilities which may arise in future.

c. The balances for Sundry Debtors Sundry creditors loans & advances bankbalances statutory and other liabilities as on 31st March’ 2016 are subject toconfirmation. The figures reported in the financial statement are as per the ledgeraccount.

d. On account of no manufacturing activities of operation since August’ 2008 andloss of key personnel we have not physically verified the stores & spares and fixedassets of the Company as on 31st March’ 2016.

e. Company has not applied the Schedule II of Companies Act’ 2013 for chargingdepreciation for details refer to Note 8 under Fixed Assets as per residuary method andthe effect of the changed depreciation is not arrived hence we cannot quantify itseffects on the reported losses resulting understatement of current losses andoverstatement of carrying value of fixed assets.

Subject to above paragraph (a) to (e) and paragraph mentioned under Report on OtherLegal and Regulatory Requirements under paragraph 10(d) relating to non-compliance ofAccounting Standard from (i) to (ii) in our opinion and to the best of our informationand according to the explanations given to us the aforesaid standalone financialstatements give the information required by the Act in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia of the state of affairs of the Company as at March 31 2016 and its losses and itscash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

9. As required by ‘the Companies (Auditor’s Report) Order 2016’ issuedby the Central Government of India in terms of sub-section (11) of section 143 of the Act(hereinafter referred to as the "Order") and on the basis of such checks of thebooks and records of the Company as we considered appropriate and according to theinformation and explanations given to us we give in the Annexure B a statement on thematters specified in paragraphs 3 and 4 of the Order.

10. As required by Section 143 (3) of the Act we report that:

(a) In view of huge accumulated losses of Rs. 3488848953/= and financialconstraints there was loss of key personnel and staff responsible for financial andaccounting matters as such the financial information and accounting data were prepared onthe basis of available information and we are expressing our opinion with such limitationsubject to these We have sought and obtained all the information and explanations whichto the best of 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) Except for the following Accounting Standards as referred below in our opinion theaforesaid standalone financial statements comply with the Accounting Standards specifiedunder Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.

i. We are unable to express an opinion on the financial impact not ascertained by theCompany that may arise on account of impairment of assets as required by AccountingStandard -28 relating to Impairment of Assets. As informed to us the impairment exercisewill be carried out at the time of operation of plant as entire plants are not inoperation since August’ 2008.

ii. The Company has not made any provision for the decline in the value of investmentrelated to investment in unquoted shares of Thai Baroda Industries Ltd for Rs. 57484744and equity shares in TAIB Capital Corporation Ltd for Rs. 2450000 which is contrary tothe Accounting Standard 13.

(e) On the basis of the written representations received from the directors as on March31 2016 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2016 from being appointed as a director in terms of Section 164 (2) of theAct.

(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 A.

(g) With respect to the other matters to be included in the Auditors’ Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our knowledge and belief and according to the information andexplanations given to us:

i. The Company has pending litigation with labour as referred in paragraph 8(b) aboveand note 24 relating to various legal cases which would impact its financial position;ii. As per the information provided to us the Company did not have any provision as atMarch 31 2016 as required under the applicable law or accounting standards for materialforeseeable losses if any on long term contracts.

iii. There has not been an occasion in case of the Company during the year under reportto transfer any sums to the Investor Education and Protection Fund by the Company.

For AMPAC & Associates
Chartered Accountants
(FRN 112236w)
Date: 30th May 2016 P. B. Sheth
Place: Mumbai Partner
Membership No. 044062

ANNEXURE A TO INDEPENDENT AUDITORS’ REPORT

(Referred to in paragraph 10(f) of the Independent Auditors’ Report of even dateto the members of The Baroda Rayon Corporation Limited on the standalone financialstatements for the year ended March 31 2016.)

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Act 1. We have audited the internal financial controls over financial reportingof The Baroda Rayon Corporation Limited ("the Company") as of March 31 2016 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.

Management’s Responsibility for Internal Financial Controls

2. The Company’s management is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued 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 safeguardingof its 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 Act.

Auditors’ Responsibility

3. 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 deemed to be prescribedunder section 143(10) of the Act to the extent applicable to an audit of internalfinancial controls both applicable to an audit of internal financial controls and bothissued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the 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.

5. 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 controlssystem over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

6. A company’s internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal financial control overfinancial reporting includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company’s assets that could havea material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

7. 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.

Opinion

8. Subject to our qualification & other comments of our main report &various comments regarding closure of operation & loss of key personnel in ouropinion the Company has in all material respects an adequate internal financialcontrols system over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at March 31 2016 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

For AMPAC & Associates
Chartered Accountants
(FRN 112236w)
Date: 30th May 2016 P. B. Sheth
Place: Mumbai Partner
Membership No. 044062

ANNEXURE B TO INDEPENDENT AUDITORS’ REPORT

(Referred to in paragraph 9 of the Independent Auditors’ Report of even date tothe members of on the standalone financial statements for the year ended March 31 2016.)

i (a) The Company has generally maintained proper records showing full particularsincluding quantitative details and situation of its fixed assets however the fixed assetsregister is not up dated due to loss of key personal responsible for its maintenance.

(b) According to the information given to us the Management has not physically verifiedthe Fixed Assets of the Company since 1998-99 We are unable to express any comments forany physical discrepancies/differences that may arise in respect of the verification ofFixed Assets.

(c) The title deeds of immovable properties as disclosed in Note 8 on fixed assets tothe financial statements are held in the name of the Company.

ii. The Company was maintaining proper records of inventory however after closure ofmanufacturing activity there are no records required to be maintained as there were noactivity accordingly there is no question of any discrepancies to be reported. Howeverthe Company has not considered the impairment aspect for the carrying value of stockwhich are old and obsolete.) Since the Company has not verified physically inventory nodiscrepancies are arrived.

iii. The Company has not granted any loans to parties covered in the registermaintained under Section 189 of the Act. There are no firms /LLPs/ other parties coveredin the register maintained under Section 189 of the Act hence the other clauses are notapplicable.

iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Companies Act 2013in respect of the loans and investments made and guarantees and security provided by it.

v. The Company has not accepted any deposits from the public within the meaning ofSections 73 74 75 and 76 of the Act and the Rules framed there under to the extentnotified. The old deposits have been paid except disputed deposit of Rs. 195000/=.

vi. Pursuant to the rules made by the Central Government of India the Company is notrequired to maintain cost records as specified under Section 148(1) of the Act in respectof its products. However there are no manufacturing activities since August’ 2008the Company has not maintained.

vii. (a) The statutory liabilities are restructured and deferred as per thecomprehensive rehabilitation scheme approved by the BIFR however various statutoryagencies are in process of granting their sanction as per said scheme for deferment andsettlement of said liabilities. Hence we are reporting the Undisputed Statutory dueswhich is subject to confirmation from respective departments and shown as per the ledgeraccount including provident fund Investor Education and Protection fund Employee’sState Insurance Income tax Sales tax Custom duty Excise duty cess and otherstatutory dues with appropriate authorities for a period more than six months from thedate they became payable which are as under;

SR. NO. STATUTORY DUES

AMOUNT ( Rs. )

a. Sales Tax/VAT & interest thereon

189340497.00

b. Custom Duty

68093056.00

c. Interest on excise duty

68727273.00

d. Income Tax/TDS/Wealth Tax/FBT

3006634.00

e. Provident Fund dues & interest thereon

57756370

f. Employee’s State Insurance dues

45711567

g. Water Tax & interest thereon

161145144.00

h. Textile Committee Cess

1219205.00

i. Water Cess (Gujarat Pollution Control Board)

834775.00

j. Electricity Duty (Power plant)

167801202.00

k. Professional Tax

2018192.00

l. Revenue Tax – Mamlatdar Surat

10315534

Note:

The said statutory dues are given as per the information and records produced beforeus. The company has received various notices from E.S.I. Provident fund offices etcclaiming penal interest damages and penalty for delay in deposit of their dues Which isnot ascertainable hence it is not provided in the books.

(b) According to the information and explanation given to us the company has disputeddues of Excise duties which are given below.

Sr. No. Name Of Statue Nature Of Dues Amount ( Rs. ) Period To Which The Amount Relates Forum Where Dispute Is Pending
1. Central Excise Act 1944 Excise Duty 1397249/- 1994-1995 Tribunal (CESTAT)
2. Central Excise Act 1944 Excise Duty 815533/- 1995-1996 Add. Commissioner Central Excise
3. Central Excise Act 1944 Excise Duty 76742/- 1996-1997 Add. Commissioner Central Excise
4. Central Excise Act 1944 Excise Duty 60028/- 1996-1997 Commissioner Appeals
5. Central Excise Act 1944 Excise Duty 2189465/- 1996-1997 Tribunal (CESTAT)
6. Central Excise Act 1944 Excise Duty 1611396/- 1997-1998 Add. Commissioner Central Excise
7. Central Excise Act 1944 Excise Duty 442805/- 1996-1997 Add. Commissioner Central Excise
8. Central Excise Act 1944 Excise Duty 101467/- 1998-1999 Tribunal (CESTAT)
9. Central Excise Act 1944 Excise Duty 189748/- 2006-2015 Asst. Commissioner Central Excise
10. Central Excise Act 1944 Excise Duty 442428525/- 2006-2015 Tribunal (CESTAT)

viii. According to the records of the Company examined by us and the information andexplanation given to us the Company has not defaulted in repayment of loans or borrowingsto any financial institution or bank or Government or dues to debenture holders as at thebalance sheet date except old debentures holder the details are as under:

The Company has paid all the dues to CDR members however PNB Asset Management Limitedwhich has not participated member under CDR scheme is as under:.

However as per company the settlement with the unsecured lenders under the CDR wasmade a part of the scheme filed with BIFR and pursuant to the sanction of the scheme theamount payable to Principal PNB mutual fund is Rs. 7766556/- being 42% of the principalamount of Rs. 18491800. The Company has made a payment of Rs. 776656/- on 11.11.2006against the said liability and the balance amount of Rs. 6989900 is awaitingconfirmation of the same.

ix. In our opinion and according to the information and explanations given to us thelong term & short term loan taken from the investor have been applied for the purposesfor which they were obtained.

x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement.

xi. There is no managerial remuneration payable during the year.

xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it the provisions of Clause 3(xii) of the Order are not applicable to the Company.

xiii. The Company has not entered into transactions with related parties in compliancewith the provisions of Sections 177 and 188 of the Act. Hence the details of such relatedparty transactions are not required to be disclosed in the financial statements asrequired under Accounting Standard (AS) 18 Related Party Disclosures specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.

xiv. The Company has not made any preferential allotment of shares during the yearunder review and the requirement of section 42 of the Companies Act 2013.

xv. The Company has not entered into any non cash transactions with its directors orpersons connected with him. Accordingly the provisions of Clause 3(xv) of the Order arenot applicable to the Company.

xvi. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.

Accordingly the provisions of Clause 3(xvi) of the Order are not applicable to theCompany.

For AMPAC & Associates
Chartered Accountants
(FRN 112236w)
Date: 30th May 2016 P. B. Sheth
Place: Mumbai Partner
Membership No. 044062