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Birla Cotsyn India Ltd.

BSE: 533006 Sector: Industrials
NSE: BIRLACOT ISIN Code: INE655I01024
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VOLUME 136049
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Sell Qty 9510435.00

Birla Cotsyn India Ltd. (BIRLACOT) - Auditors Report

Company auditors report

To the members of Birla Cotsyn (India) Limited

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of BIRLA COTSYN(INDIA) LIMITED ("the Company") which comprise the balance sheet as at 31stMarch 2016 the statement of profit and loss and 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 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.

Auditor’s Responsibility

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 accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made there under. We conducted our audit inaccordance 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 theaudit to obtain reasonable assurance about whether the financial statements are free frommaterial 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 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.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the standalone financial statements.

Basis for Qualified Opinion

1. With reference to note no.7(B)(a) regarding Inter Corporate Deposits of Rs.174560506/- and note no. 7(B)(c) regarding Deposits of Rs.445578/- taken from variousparties as at 31st March 2016 in the absence of third party confirmation reconciliationif 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 and272 of the Companies Act 2013 ("the Act") against the Company for non-paymentof dues. These matters are sub-judice and the impact if any of the outcome isunascertainable of this stage.

2. No provision has been made during the year for interest payable ofRs.18817328/- on Inter-Corporate and other Deposits taken by the Company. Consequentlythe loss for the period is lower by Rs.18817328/- and other current liabilities isunderstated by Rs.18817328/- as at 31st March2016.

3. With reference to note no. 7(B)(b) regarding dues to related parties of Rs.46549878/-and note no. 8(A)(a) trade payables of Rs.163013757/- as at 31st March2016 in the absence of third party confirmation reconciliation if any and othersupportive audit evidence we are unable to comment upon such balances.

4. No provision has been made in the current year for interest payable ofRs.7232271/- on loans taken from related parties by the Company and no provision hasbeen made for interest receivable of Rs.38047916/- on loans given to related parties bythe Company. Consequently the loss for the year is higher by Rs.30815645/- OtherCurrent Liabilities (Note No 8) is understated by Rs.7232271/- and Other Non-CurrentAssets (Note 13) is understated by Rs.38047916/-. Including unprovided interest ofearlier periods Other Current Liabilities (Note No 8) is understated by Rs.11006232/-and Other Non-Current Assets (Note 13) is understated by Rs.56967920/-.

5. With reference to Fixed Deposits accepted by the Company the Company hasdefaulted in repayment of dues of Rs. 43598500/- as at 31st March 2016. However onCompany’s petition / application under section 58A(9) of the Companies Act 1956 theHon’ble Company Law Board has passed an order dated 27th January 2016 forrescheduling the repayment of the deposits for a specified period under section 58A(9)read with section 74(2) of the Companies Act 2013.

6. With reference to note no. 12(c)(ii) regarding loans and advances to relatedparties includes loan of Rs.362108831/- given to four related parties which haveincurred losses and also have negative net worth as at 31st March 2015. In the absence oflatest audited accounts and detailed information of projected cash flows as at 31 March2016 or other supportive audit evidence we are unable to comment upon its impairment ifany.

7. With reference to note no. 10(E) regarding Plant &Machinery of Rs.490856040/-(net block) situated at factory units of the company which have been closeddown and are not operating at the year end in the absence of future cash flow projectionabout and information about the value in use we are unable to comment upon its impairmentprovision if any as per Accounting Standard 28 "Impairment of Assets".

8. With reference to note no.12(c)(i) regarding loan given to Foreignsubsidiary the Company has not restated the same at exchange rate prevailing on the lastday of the reported period as required by Accounting standard 11 "The effect ofchanges in foreign exchange rates". As a result the loan to foreign subsidiary forthe period is understated by Rs. 63823931/- and correspondingly Foreign CurrencyTranslation Reserve for the period is also understated by Rs. 63823931/-.

9. With reference to note no.12(a) regarding capital advance of Rs. 2270541/-as at 31st March 2016 given to various parties in the absence of third partyconfirmation reconciliation if any and other supportive audit evidence we are unable tocomment upon its recoverability in cash or kind if any.

10. With reference to note no.15(B) regarding trade receivables of Rs. 2740849/- asat 31st March 2016 in the absence of third party confirmation reconciliation if any andother supportive audit evidence we are unable to comment upon its balance recoverabilityif any.

Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis for QualifiedOpinion paragraph above and read with points mentioned in Emphasis of Matter paragraphthe aforesaid financial statements give the information required by the Act in the mannerso required 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 31st March2016 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 hasincurred net loss of Rs. 772235179/- during the year ended 31st March 2016 and as ofthat date the Company’s accumulated losses aggregate to Rs. 4227819343/-resulting in complete erosion of its net worth. Further as of that date company’scurrent liabilities exceeded its current assets by Rs. 4492758503/-. These factorsalong with other matters as set forth in said note raise substantial doubt about thecompany’s ability to continue as a going concern in the foreseeable future. Howeverthe company’s financial statement has been prepared on going concern basis asdisclosed by management in said note. Our opinion is not qualified in respect of thismatter.

2. We draw attention to Note no. 4A and 4B regarding notice issued by consortium ofbanks under section 13(2) of the Securitization and Reconstruction of Financial Assets andEnforcement of Security Interest (SARFAESI) Act 2002 for non-payment of principal andinterest thereon after the due date by the company and therefore all loans accounts becameNon Performing Assets effective from respective dates mentioned in such notice. We areinformed that the company is contesting the action taken under section 13(4) of SARFAESIAct and therefore the matter is sub-judice. These factors along with other matters as setforth in said notice raise substantial doubt about the company’s ability to continueas a going concern in the foreseeable future. However the company’s financialstatements have been prepared on going concern basis as disclosed by management in saidnote. 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 amountoutstanding as at 31st March 2016 Rs. 399733111/-which is not in compliance with therequirements 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 2016("theOrder") issued by the Central Government of India in terms of subsection (11) ofsection 143 of the Act we give in Annexure A a statement on the matters Specified inparagraphs 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 bestof our knowledge and belief were necessary for the purposes of our audit except for thematter described in the Basis for Qualified Opinion Paragraph.

(b) In our opinion proper books of accounts as required by law have been kept by theCompany 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 withby this Report are in agreement with the books of accounts.

(d) Except for the effects of the matters described in the Basis for Qualified Opinionparagraph and read with points mentioned in Emphasis of Matter paragraph in our opinionthe aforesaid standalone financial statements comply with the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.

(e) On the basis of the written representations received from the directors as on 31stMarch 2016 taken on the record by the Board of Directors none of the director isdisqualified as on 31st March 2016 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". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company’s internal financial controlsover financial reporting; and

(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 disclosed the impact of pending litigations on its financialposition 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. During the year the Company was required to transfer Rs. 150018/- of unclaimeddividend to Investor Education and Protection Fund. There is a delay in transferring suchsums to the said account and the same is pending for transfer as on 31st March 2016.

For Samria & Co.

Chartered Accountants

Firm Registration No: 109043W

(Adhar Samria)

Partner

M.No. 049174

Dated: 27th May 2016

ANNEXURE TO INDEPENDENT AUDITORS REPORT

Re: Birla Cotsyn (India) Ltd.

1 Fixed Assets:

1.1 The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets. 1.2 The fixed assets are physicallyverified during the year by the Management in accordance with a regular program ofverification which in our opinion is reasonable having regard to the size of the Companyand the nature of its assets. No material discrepancies were noticed on such verificationby the management between the book and physical verification records.

1.3 According to the information and explanations given to us and on the basis of ourexamination of the records of the company the title deeds of immovable properties areheld in the name of the company except in case of leasehold land at Khamgaon which was fora period of 30 years and the lease has expired on 31st July 2003. As informedto us Company’s application for renewal is still pending with the concernedauthorities.

2 Inventories:

2.1 According to the information and explanations given to us and on the basis of ourexamination of the records of the company inventory has been physically verified by theManagement during the year. In our opinion the frequency of verification is reasonableand no major discrepancies were noticed on physical verification.

3 Loans Granted:

3.1 According to information and explanations given to us the Company has not grantedany loans during the year secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013.

3.2 According to the information and explanations given to us the Company does not haveany loan or interest receivable from parties covered in the register maintained undersection 189 of the Companies Act 2013. In the earlier years the Company had granted loansto three bodies corporate who were covered in the register maintained under section 189 inthose years and which are still outstanding as at 31st March 2016. In case ofsuch loans since there are no terms for repayment of interest we cannot comment upon theregularity of the same. The terms of arrangements do not stipulate any repayment scheduleof principal and interest amount and the loans are repayable on demand. Accordinglyparagraph 3(iii)(b) of the Order is not applicable to the Company in respect of repaymentof the principal amount.

3.3 The terms of arrangements do not stipulate any repayment schedule of principal andinterest amount and the loans are repayable on demand. Accordingly paragraph 3(iii)(c) ofthe Order is not applicable to the Company in respect of overdue amount of principal andinterest.

4 Loans and Investments:

4.1 According to the information and explanations given to us and based on the auditprocedures conducted by us during the year the Company has not granted any loansinvestments guarantees or security covered under section 185 or section 186 of theCompanies Act 2013.

4.2 The Company has granted loans to bodies corporate in the earlier year which as onthe date of this balance sheet are in excess of the limit specified under section 186. Nospecial resolution has been passed in the General Meeting for the same.

4.3 The Company has granted interest free loan to its 100% subsidiary in the earlieryears which is receivable at the end of the current financial year. No special resolutionhas been passed in the General Meeting for the same.

4.4 In respect of loans of Rs. 334439599 given to four companies and outstanding ason 31st March 2016 the terms of the loan provide for payment of interest at arate higher than prescribed under section 186. However none of the companies to whom theloans have been given have paid interest to the Company and the Company has not made anyprovision for interest receivable from such loans in its books of accounts.

5 Deposit from Public:

5.1 The Company has defaulted in repayment of dues of Rs. 43598500/- till 31stMarch 2016. However on Company’s petition/application under section 58A(9) of theCompanies Act 1956 the Hon’ble Company Law Board has passed an order dated 27thJanuary 2016 for rescheduling the repayment of the deposits for a specified period undersection 58A(9) read with section 74(2) of the Companies Act 2013. The Company has repaidthe fixed deposit holders in compliance with the order passed by the Hon’ble CompanyLaw Board.

6 Maintenance of Cost Records:

6.1 We have broadly reviewed the cost records maintained by the Company pursuant to theCompanies (Cost Records and Audit) Rules 2014 as amended prescribed by the CentralGovernment under sub-section (1) of section 148 of the Companies Act 2013 and are of theopinion that prima facie the prescribed cost records have been made and maintained. Wehave however not made a detailed examination of the cost records with a view todetermine whether they are accurate or complete.

7 Remittance of Statutory Dues:

7.1 According to the information and explanations given to us and on the basis of ourexamination of the records of the Company amounts deducted / accrued in the books ofaccount in respect of undisputed statutory dues including provident fund employees stateinsurance income-tax sales-tax service tax customs duty excise duty VAT cess andother statutory have not been regularly deposited with the appropriate authorities andthere has been significant delay in the same.

7.2 According to the information and explanation given to us no undisputed amountspayable in respect of provident fund employees state insurance income tax wealth taxservice tax sales tax custom duty excise duty cess and other undisputed statutory dueswere outstanding at the end for the period of more than six month from the date theybecame payable except as stated below

Name of the Statute Nature of Dues Amount (Rs.) Period to which the Amount relates Due Date Date of Payment Remark (if any)
Income Tax Dividend Distribution tax 20165737 2009-10 04-10-2010 Not Paid
Income Tax TDS on Interest 2068460 2012-13 01-04-2012 to 31-12-2012 Not Paid
Income Tax TDS on FD Interest 276279 2014-15 01-04-2014 to 30-09-2014 Not Paid

7.3 According to the information and explanations given to us and as per the records ofthe Company examined by us there are no dues outstanding of sales tax custom dutyservice tax excise duty and cess which have not been deposited on account of anydispute. However according to information and explanations given to us the followingdues of income tax have not been deposited by the Company on account of disputes.

Name of the Statue Nature of Dues Amount in (Rs.) Period to which the amount relates Forum where dispute is pending
Income Tax Act1961 Income tax and interest 273281 Assessment Year 2008-2009 CIT (Appeals)
Income Tax Act1961 Income tax and interest 143466369 Assessment Year 2011-2012 CIT (Appeals)
Income Tax Act1961 Income tax and interest 34661725 Assessment Year 2012-2013 CIT (Appeals)
Income Tax Act1961 Income tax and interest 14204631 Assessment Year 2013-2014 CIT (Appeals)

8 Dues to Bank and Financial Institutions

8.1 In our opinion and according to the information and explanation given to us theCompany has defaulted in repayment of dues to financial institutions and banks forprincipal amount of Rs. 2332304243/- and interest amounting of Rs. 1680928179/-since May 2012. The Company has received notice issued by consortium of banks undersection 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcementof Security Interest Act 2002 for non-payment of principal and interest thereon after thedue date by the Company and therefore all loans accounts became Non Performing Assetseffective from respective dates mentioned in such notice. We are informed that the companyis contesting the action taken under section 13(4) of SARFAESI Act and therefore thematter is sub-judice.

Lender wise detail is provided in respect of default made to bank and financialinstitutions & Government.

Particulars Amount of Default as at the Balance sheet date (incl. Interest) Period of Default
Union Bank of India (Term Loan) 214859808 September 2012
Union Bank of India (Cash Credit) 188190281 December2012
Axis Bank (Term Loan) 133932939 September 2012
Axis Bank (Cash Credit) 90482063 December2012
Bank of India (Term Loan) 277405154 September 2012
Bank of India (Cash Credit) 852895553 September 2012
Indian Overseas Bank (Term Loan) 353105088 June 2012
Indian Overseas Bank (Cash Credit) 263903569 October 2012
Oriental Bank of Commerce (Term Loan) 139275927 September 2012
Canara Bank (Term Loan) 176970193 June 2012
Canara Bank (Cash Credit) 198305484 September 2012
State Bank of India (Term Loan) 155512449 February 2013
Catholic Syrian Bank (Term Loan) 97412446 September 2012
Catholic Syrian Bank (Cash Credit) 276409956 December 2012
Jankalyan Sahakari Bank (Term Loan) 34425826 May 2012
Bank of India-Housing Complex (Term Loan) 93435976 September 2012
Karur Vysya Bank (Cash Credit) 466709709 June 2012

9 Application of term loans/public issue/ follow on offer:

9.1 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.

10 Frauds

10.1 According to the information and explanations give to us and based on ourexamination of the records of the Company we have neither come across any instance offraud on or by the Company noticed or reported during the period nor have been informedof any such case by the management.

11 Managerial Remuneration:

11.1 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 ofsection 197 read with Schedule V to the Act.

12 Nidhi Company:

12.1 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.

13 Related party transaction:

13.1 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.

14 Preferential Allotment/private placement:

14.1 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.

15 Non Cash Transaction:

15.1 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.

16 Registration under RBI:

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

For Samria & Co.
Chartered Accountants
Firm Reg. No.: 109043W
(Adhar Samria)
Place: Mumbai Partner
Date: 27th May 2016 M. No: 049174

Annexure B to the Auditors’ Report

(Referred to in paragraph 2(f) under "Report on other legal and regulatoryrequirements" of our report of even date.)

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 BIRLACOTSYN (INDIA) LIMITED ("the Company") as of 31 March 2016 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 the Company’s policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.

Auditors’ Responsibility

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 2013 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 were 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 auditors’ 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 controlssystem over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

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 themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the Company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the Company are being made only in accordance with authorizations ofthe Management and directors of the Company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition use or dispositionof the Company’s assets that could have a material effect on the financialstatements.

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.

Opinion

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 2016 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 Samria & Co.
Chartered Accountants
Firm Reg. No.: 109043W
(Adhar Samria)
Place: Mumbai Partner
Date: 27th May 2016 M. No: 049174