TO THE MEMBERS OF C MAHENDRA EXPORTS LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of C Mahendra Exports Limited("the Company") which comprise the Balance Sheet as at March 31 2015 theStatement of Profit and Loss and the Cash Flow Statement for the year ended on that dateand a summary of the significant accounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
The Companys 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 financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities selection and application of theappropriate accounting policies making judgements and estimates that are reasonable andprudent; and design implementation and maintenance of internal financial controls thatwere operating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
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 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 anddisclosures 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 financials control relevant to the Companyspreparation of the financial statements and give a true and fair view in order to designaudit procedures that are appropriate in the circumstances but not for the purpose ofexpressing an opinion on whether the Company has in place an adequate internal financialcontrols system over financial reporting and the operating effectiveness of such controls.An audit also includes evaluating the appropriateness of the accounting policies used andthe reasonableness of the accounting estimates made by the Companys Directors aswell as evaluating the overall presentation of 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 financial statements.
Basis for qualified opinion Basis for Disclaimer of Opinion
1. Reference is invited to note no. 1 regarding preparation of accounts on a GoingConcern basis and the reasons stated therein the Companys operating results havebeen materially affected due to various factors including non availability of finance inview of the consortium bankers recalling the financial facilities granted symbolicpossession of premises taken by the Bankers Factory has ceased to carry on manufacturingactivity. These events cast significant doubts on the ability of the Company to continueas a going concern since the volumes of business have also drastically dropped in the last12 months. The appropriateness of the going concern assumption is dependent on theCompanys ability to raise adequate finance from alternate means and/ or recoveriesfrom overseas debtors to meet its short term and long term obligations as well as toestablish consistent business operations. In absence of any convincing audit evidences nopositive steps taken by the management non recovery of trade receivables on due datesnon payment of liabilities including Income Tax dues and in view of multiple uncertaintiesstated above we are unable to determine the possible effects on the financial statements.We are also unable to conclude on the ability of the company to carry on as a goingconcern.
2. Reference is invited to note no.42 most banks have not provided balanceconfirmations hence we also unable to confirm the bank balance (including working capitalfacility and overdraft) and interest payable thereon since the accounts are freezed by theconsortium of banks and as a result facility has been ceased to be operational. and noticeunder section 13(2) of The Securitisation and Reconstruction of Financial Assets andEnforcement of Security Interest Act2002 is received by the Company.
No provision for interest is made amounting to Rs 915371518/- since all the bankaccounts have become non performing assets (NPA)
3. Reference is invited to note no. 43 regarding Trade Receivables amounting to Rs.11949340981/- which are outstanding for more than 1 year from invoice date. Asexplained therein the recoveries from these trade receivables have been almostnegligible. There have been defaults on the payment obligations by the debtors on the duedates. As informed by the management no reply is received from any parties to whom legalnotices were sent. No confirmations are obtained. In view of the above we are unable tocomment on the realisability of the debts and any provision to be made for unrealisabilityin the carrying amounts of these balances and the consequential impact on the financialstatements.
4. In absence of audited / unaudited results of subsidiaries and step downsubsidiaries we were unable to obtain sufficient appropriate audit evidence about thecarrying amount of Companys investment in various subsidiaries as at March 31 2015.Consequently we were unable to determine whether any adjustments to these amounts werenecessary. The said investments continue to be valued at cost.
5. No valuation has been carried out by an independent valuer as done in earlier yearsaccordingly the determination of estimated net realizable value is made by managementhence we were unable to satisfy ourselves by alternative means concerning the inventoryheld at 31st March 2015 which are stated in the Balance Sheet at Rs.1630190777/-
6. The factory has ceased to carry on manufacturing activity since October 2014. TheManagement has not carried out impairment of assets test as required by AccountingStandard (AS) 28 regarding Impairment of Assets. Hence we are unable to comment upon theimpact in the financial statements.
Disclaimer of Opinion
Because of the significance of the matters described in the Basis for Disclaimer ofOpinion paragraph specifically relating to the multiple uncertainties created above wehave not been able to obtain sufficient appropriate audit evidence to provide a basis foran audit opinion. Accordingly we do not express an opinion on the aforesaid financialstatements.
Emphasis of Matters
We draw attention to the following matters in the Notes to the financial statements:
1. Reference is invited to note no.43 of the financial statements the Companysadvances to the extent of Rs. 11706797/- we are unable to ascertain whether suchbalances are fully recoverable. Accordingly we are unable to ascertain the impact ifany that may arise in case any of these advances are subsequently determined to bedoubtful of recovery. Had the Company provided for the same the loss for the period wouldhave been higher by the said amount.
2. Reference is invited to note no. 47 to the Companies Act 2013 ("the Act")coming in to effect from April 1 2014 the Company has not realigned the remaining usefullife of fixed assets in accordance with the provisions prescribed under Schedule II to theAct and has continued to provide depreciation as per old Companies Act 1956 hence we areunable to comment upon the impact in the financial statements.
3. Reference is invited to note no.48 the management has confirmed that no financialadjustment is required to be made in the financial statements on account of variousallegations amongst promoters and defamation notice received by the Managing Director ofthe company.
4. Reference is invited to note no.50 regarding absence of any intimation received fromvendors regarding the status of their registration under "Micro Small and MediumEnterprises Development Act 2006" the company is unable to comply with thedisclosures required to be made under the said Act.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order 2015 ("theOrder") issued by the Central Government of India in exercise of powers conferred bySection 143 (11) of the Act we enclose in the Annexure a statement on the mattersspecified in paragraphs 3 and 4 of the Order
2. As required by Section 143(3) of the Act we report that:
a) As described in the basis of Disclaimer of opinion paragraph we sought but wereunable to obtain all the information and explanations which to the best of our knowledgeand belief were necessary for the purpose of our audit;
b) Due to possible effects of the matter described in the basis for Disclaimer ofopinion paragraph we are unable to state whether proper books of account as required bylaw have been kept by the Company so far as appears from our examination of those books.
c) Due to possible effects of the matter described in the basis for Disclaimer ofopinion paragraph we are unable to state whether The Balance Sheet the Statement ofProfit and Loss and the Cash Flow Statement dealt with by this Report are in agreementwith the books of account.
d) Due to possible effects of the matter described in the basis for Disclaimer ofopinion paragraph we are unable to state whether the aforesaid financial statementscomply with the Accounting Standards specified under Section 133 of the Act read withRule 7 Companies (Accounts) Rules 2014.
e) On the basis of written representations received from the Directors as on March 312015 taken on record by the Board of Directors none of the Directors are disqualified ason March 31 2015 from being appointed as a Director in terms of Section 164(2) of theAct.
f) The reservation relating to the maintenance of accounts and other matters connectedtherewith are as stated in the Basis for Disclaimer of Opinion paragraph above.
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 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 34 to the financial statements;
ii. The Company did not have any long term contracts including derivative contracts forwhich there were any materials foreseeable losses.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
For R. H. Modi & Co.
(Firm Reg. No. 106486W)
R. H. Modi
Membership No. : 037643
Place : Mumbai
Date : 26.08.2015
ANNEXURE TO THE INDEPENDENT AUDITOR REPORT
(Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements section of our report of even date)
i. In respect of its fixed assets:
(a) The Company has not satisfactorily maintained records showing particulars includingquantitative details and situation of fixed assets. In the absence of on updated fixedasset register and due to non-availability of records of physical verification we areunable to ascertain the appropriateness of the same.
(b) As explained to us most of the assets have been physically verified by theManagement during the year in accordance with a phased programme of verification adoptedby the company and no material discrepancies were noticed on such verification. However weare unable to verify the reasonableness of the same as necessary documentary evidenceswere not made available for our verification
ii. In respect of its inventories:
(a) As explained to us the company has conducted physical verification at reasonableintervals in respect of inventory. However we have not received any documentary evidenceto verify the same.
(b) In the absence of documentary evidence we are unable to ascertain whether theprocedures of physical verification of stock followed by the Management are reasonable andadequate or in relation to the size of the company and the nature of its business.
(c) In our Opinion the company is not maintaining proper records of inventory. In theabsence of records we are unable to ascertain whether discrepancies if any were noticed onphysical verification of stocks.
iii. The Company has granted unsecured loan to 3 Companies covered in the registermaintained under section 189 of the Act which is repayable on demand. The maximum amountoutstanding during the year Rs.267150/- and the year end balance of such loan is Rs.NIL.There is no interest charged and other terms and conditions of the loan granted are primefacie not prejudicial to the interest of the Company.
iv. In our opinion and according to the information and explanations given to us thereis an adequate internal control system commensurate with the size of the Company and thenature of its business with regard to purchase of inventories and fixed assets except incase of sale of goods and services. In our opinion and according to the information andexplanations given to us there is no continuing failure to correct major weakness ininternal control system.
v. In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public in accordance with the provisions ofsections 73 to 76 of the Act and the rules framed there under
vi. According to the information and explanations given to us the Central Governmentof India has not prescribed the maintenances of cost records under Section 148(1) of theCompanies Act 2013 in respect of the operations of the Company during the year.Accordingly clause (vi) of the Order in not applicable to the Company.
vii. According to the information and explanations given to us in respect of statutorydues:
(a) The Company is not regular in depositing undisputed statutory dues includingProvident Fund Employees State Insurance Sales- tax / Value Added Tax Service taxCustoms duty Excise Duty Cess and other applicable statutory dues with the appropriateauthorities except for following dues which are undisputed and outstanding for the periodexceeding 6 months
|Particulars ||Amount (Rs). |
|Income Tax AY 2013-14 ||41743490 |
|Income Tax AY 2014-15 ||15382910 |
|Wealth Tax AY 2014-15 ||200555 |
|Dividend Distribution Tax AY 2012-13 ||10236842 |
|Dividend Distribution Tax AY 2013-14 ||3650783 |
|Dividend Distribution Tax AY 2014-15 ||1529550 |
|Interest on Dividend Distribution Tax AY 2012-13 ||1854411 |
|Interest on Dividend Distribution Tax AY 2013-14 ||235250 |
|Vat Payable ||25771 |
.(b) According to the records of the Company there are no dues of Income Tax SalesTax Service tax Custom Duty Wealth Tax Excise Duty Value added tax or Cess which havenot been deposited as on 31st March 2015 on account of any dispute except thefollowing
|Name of the statue ||Nature of dues ||Amount Rs. ||Period to which it relates ||Forum where dispute is pending |
|Custom Act1962 ||Penalty ||11000000 ||2007-2008 ||Appellate Tribunal |
|Finance Act 1994 (Service Tax Provisions) ||Service Tax ||15494737 ||2006-2011 ||High Court |
|Income Tax Act1961 ||Income Tax ||220910 ||2007-2008 ||Income Tax Appellate Tribunal |
|Income Tax Act1961 ||Income Tax ||98612870 ||2008-2009 ||Commissioner of Income Tax - Appeals |
|Income Tax Act1961 ||Income Tax ||12716980 ||2009-2010 ||Commissioner of Income Tax - Appeals |
|Income Tax Act1961 ||Income Tax ||63652219 ||2007-2008 ||Commissioner of Income Tax - Appeals |
|Income Tax Act1961 ||Income Tax ||42635270 ||2011-2012 ||Commissioner of Income Tax - Appeals |
(c) There was no amount which was required to be transferred to the Investor Educationand Protection Fund by the Company.
viii The Company has no accumulated losses as at the end of the year. However it hasincurred cash loss in the current financial year but it did not incur cash losses in theimmediately preceding financial year
ix. The company has defaulted in payment of loans to banks as under. As per noticeunder section 13(2) of The Securitisation and Reconstruction of Financial Assets andEnforcement of Security Interest Act dated 30.12.2014 07.02.2015 and 03.03.2015 receivedfrom various bank.
|BANK NAME ||TOTAL AMOUNT DEFAULTED ||DATE OF DEFAULT STARTED |
|Bank of Baroda ||1931283319.09 ||25/08/2014 |
|Bank of India ||1495364938.93 ||30/06/2014 |
|Canara Bank ||478613419.98 ||23/07/2014 |
|Central Bank of India ||1261679158.50 ||05/08/2014 |
|Corporation Bank ||1017518507.37 ||31/12/2014 |
|H.D.F.C Bank Ltd ||275274428.34 ||18/06/2014 |
|Indian Bank ||393634704.00 ||06/02/2014 |
|Punjab National Bank ||697943405.71 ||31/03/2014 |
|State Bank of Bikaner & Jaipur ||413381224.13 ||12/10/2014 |
|State Bank of India ||556107944.00 ||08/10/2014 |
|State Bank of Mysore ||469353902.56 ||17/06/2014 |
|State Bank of Patiala ||366286324.20 ||21/06/2014 |
|State Bank of Travancore ||366453625.33 ||26/11/2014 |
|Union Bank of India ||1439257047.89 ||26/11/2014 |
|TOTAL ||11162151947.00 || |
The said defaults do not consider any levies of interest and penal interest charged bythe banks / provided by the company after the date of the defaults or its subsequentreversals by some banks. Some of the Banks have not confirmed the balances outstanding tothem even after writing to them.
The Company does not have any outstanding due from financial institutions and/or by wayof debentures.
x. As informed to us the Company had given guarantees of Rs. 689048800/- for creditfacilities availed by its overseas subsidiary namely C Mahendra NV (Formerly known as CMahendra BVBA) from bank. The overseas subsidiary has defaulted in its dues to bank andbank has issued demand notice calling for payment.
xi. In our opinion and according to the information and explanations given to us theterm loans have been applied by the Company during the year for the purposes for whichthey were obtained.
xii. The management has stated that no financial adjustment is required on variousallegations among promoters defamation notice received by the Managing Director of theCompany. Subject to the this during the course of our examination of the books andrecords of the company carried out in accordance with the generally accepted auditingpractices in India and according to the information and explanations given to us we haveneither come across any instance of fraud by the company noticed or reported during theyear nor have we been informed of such case by the management.
For R. H. Modi & Co.
(Firm Reg. No. 106486W)
R. H. Modi
Membership No. : 037643
Place : Mumbai
Date : 26.08.2015