DETAILS OF ATTENDANCE OF DIRECTORS WHOSE TERM HAS ENDED DURING 2013
DETAILS OF ATTENDANCE OF DIRECTORS WHOSE TERM HAS ENDED DURING 2013-14
TO MEMBERS OF DCM FINANCIAL SERVICES LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of DCM Financial Services Limited("the Company") which comprise the Balance Sheet as at March312014 and the Statement of Profit and Loss and Cash Flow Statement for the year thenended and a summary of significant accounting policies and other explanatory infbrmation.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation of these financial statements that give atrue and fair view of the financial position financial performance and cash flows of theCompany in accordance with the Accounting Standards referred to in sub-section (3C) ofSection 211 of the Companies Act 1956 ("the Act") read with theGeneral Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairsin respect of Section 133 of the CompaniesAct 2013. This responsibility includes thedesign implementation and maintenance of internal control 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 conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India. Those Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the 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 and fair presentation ofthe financial statements in order to design audit procedures that are appropriate in thecircumstances but not for the purpose of expressing an opinion on the effectiveness ofthe Company's internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of the accounting estimates made bymanagement as well as evaluating the overall presentation of the financial statements. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion.
Basis for Qualified Opinion
(i) Recognition of rental income of Rs. 68.26 lacs during the financial year ended31" March 2014 which should not have been recognized in view of uncertainty inrealization of such income & also non provision of doubtful debts against rentalreceivable of Rs. 499.43 lacs pertaining to previous years which have not yet beenrealized. Had these been rectified in the financial statements the net loss for the yearended 31" March 2014 and cumulative net loss as at 31" March 2014 would havebeen overstated by Rs 68.26 Lacs and Rs 567.69 Lacs respectively. Similarly Current Assetswould have been understated by Rs 567.69 Lacs.
(ii) No provision of Rs 826.38 Lacs (Rs 14020.03 Lacs towards accumulated Interest asat 31" March 2014) which is simple interest calculated @10% per annum as stipulatedin the Fresh Restructuring Scheme filed before Hon'ble Delhi High Court towards Intereston Debentures Term Loans & Bank Fixed Deposits and Inter Corporate Deposits havebeen provided in the financial statements. Had these been provided for in the financialstatements the net loss for the year ended 31* March 2014 and cumulative net loss aswell as Current / Non Current Liabilities as at 31" March 2014 would have beenoverstated by Rs. 826.38 Lacs and Rs. 14020.03 Lacs respectively. This is a contraventionof the Accounting Standard 1 on Disclosure of Accounting Policies issued by Ministry ofCorporate Affairs Government of India. The same has been explained inNote4.1.fNote4.1.g.(i) Note4.2.c&4.2.d Note 4.3.2 Note 4.3.3 Note 4.4(f) and Note 4.6.
(iii) For redemption of debentures of Rs 8.75 Lacs debenture redemption reserve isrequired to be created. Debenture redemption reserve of Rs 8.75 lacs has not been createddue to insufficient profits. The same has been explained in Note 2.2.
(iv) The value of assets charged as security in favor of banks debenture-holders &financial institutions have been depleted over a period of time. The depletion has not yetbeen ascertained by the Company. To the extent of shortfall if any the liability isunsecured whereas the same has been shown as secured. The same has been explained in Note4.1.d and Note 4.2.D&4.3.1.
(v) Fixed Deposits and Bills Payable as per Fixed Deposit Register maintained by theCompany are Rs. 5642.96 lacs whereas the same as perfinancials books comes to Rs. 5632.27lacs. Their is a difference of Rs. 10.69 lacs which is un-reconciled in the Fixed DepositRegister. The reason is either lack of identification of depositors or no claim orconfirmation having been received by the company. The provision of such differentialamount has not been made in the books of accounts. The provision of such differentialamount has not been made. The same has been explained in Note 4.4.(d)& Note 4.4.(e).
(vi) Due to liquidity crisis in the past minimum liquid assets @ 15% of Fixed Depositsas per directives of Reserve Bank of India under Non Banking Company Prudential Norms hasnot been maintained by the company. The company has applied to RBI and Company Law Boardfor exemption from maintaining minimum liquid assets and payment of penal interest but thedisposal of the application is still pending. The same has been explained in Note 4.4.(g).
(vii) Till June 2007 Group Companies funded expenditure or repayments made by thecompany worth Rs. 549.71 Lacs. The same has been shown or credited to the ShareApplicationAccount in the financial statements of the Company. Company had already passed specialresolution to allot appropriate shares however the same is subject to sanction of FreshRestructuring Scheme by the Hon'ble Delhi High Court. In view of pending approval oracceptance of Fresh Restructuring Scheme in the Hon'ble Delhi High Court no shares eitherhave been allotted by the Company or repaid or refunded the said share application money.As per Section 73(2) of the CompaniesAct 1956 Interest is payable against such shareapplication money. Company has not made any provision in the financials towards Interestpayable on the unpaid amount of share application money in compliance with Section 73(2)of the CompaniesAct 1956. The company has not attempted to determine the financialimpact accordingly the financial impact of the same is not ascertainable.
(viii) The accounts and financials of the company have been prepared on going concernon the assumption and premises made by the management of the Company that (a) The freshrestructuring scheme would be approved by the Hon'ble Delhi High Court in totality whichis still pending for approval & acceptance (b) The promoters of the company haveprovided letter of support (c) adequate finances and opportunities would be available inthe foreseeable future to enable the company to start operating on a profitable basis and(d) injection of Rs. 19.50 crores as promoters quota which has already been infused by themanagement group. The same has been explained in Note 29.
(ix) Contingent liabilities and Other Commitments
ix.(a) Punjab & Sind Bank has filed a recovery suit before the Debt RecoveryTribunal (DRT) for recovery of Rs. 1217.52 lacs against which the amount payable to themas per books of accounts is Rs. 803.40 lacs. The company contends that the dues of theBank will be settled as per the fresh restructuring scheme and consequently no provisionfor the difference of Rs. 414.12 lacs has been made.
This is subject to approval of fresh restructuring scheme which is pending beforeHon'ble Delhi High Court and since the Company has not made payment of interest &principal in accordance with the concession granted by Punjab & Sind Bank Rs. 1217.52became payable to Punjab & Sind Bank. No provision for the difference of Rs. 414.12lacs has been made by the Company. Besides Interest from 1st April 2005 to till 31stMarch 2014 overdue interest default charges are not provided for. The Company has notattempted to determine the financial impact accordingly the net loss for the year isunderstated and cumulative net loss is also understated to that extent. ix.(b) InduslndBank filed a recovery suit before the Debt Recovery Tribunal (DRT) of Rs. 1042.42 lacsagainst which the amount payable to them as per books is Rs. 577.00 lacs. The companycontends that the dues of the Bank are to be anticipated to be settled as per the freshrestructuring scheme and consequently no provision for the difference of Rs. 465.42 lacshas been made.
This is subject to approval of fresh restructuring scheme which is pending beforeHon'ble Delhi High Court and since the Company has not made payment of interest &principal in accordance with the concession granted by Indusind Bank Rs. 1042.42 becamepayable to Indusind Bank. No provision for the difference of Rs. 465.42 lacs has been madeby the Company. Besides Interest from 1" April 2005 to till 31" March 2014overdue interest default charges are not provided for. The Company has not attempted todetermine the financial impact accordingly the net loss for the year is understated andcumulative net loss is also understated to that extent.
ix.(c) During the year ended 30" June 2009 the Company had received Rs. 100.00lacs from one of the Debtors and reduced the balance recoverable from the debtors account.Subsequently the Hon'ble Punjab and Haryana Court deemed that payment to be an out of turnpayment and asked the company to deposit the amount. The Company had filed a SLP with theHon'ble Supreme Court of India which has been dismissed by them. The Company is liable todeposit the amount mentioned above which has yet to be deposited.
ix.(d) There is an award passed by the arbitrator against the company in the matter ofMS Shoes East Limited on May 282012 for Rs. 51.28 lacs i.e. claim amount along withinterest of Rs. 307 lacs for an underwriting given by the company in the year 1995 for thepublic issue of M/s MS Shoes East Ltd. The same has been contested by Company beforeHon'ble Delhi High Court.
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 the financial statements give the information required by the Act inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India.:-
(a) in the case of the Balance Sheet of the state of affairs of the Company as atMarch 312014;
(b) in the case of the Profit and Loss Account of the loss forthe yearended on thatdate; and
(c) in the case of the Cash Flow Statement of the cash flows for theyearendedonthatdate.
Emphasis of Matter
We draw your attention to The directives issued by the Reserve Bank of India and theprovisions of section 58A and 58AA of the Companies Act 1956 to the extent applicableon deposits accepted in the earlier years and outstanding deposits at the end of thecurrent year have not been complied with particularly relating to the register ofdepositors which does not agree with the general ledger general provisions regardingdefault in repayment of deposits default in payment of interest and maintenance of liquidassets. A notice has also been issued by the Reserve Bank of India for the company to showcause why penal action should not be taken against the company as prescribed under the RBIAct. Our opinion is not qualified in this matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2003 ("the Order")issued by the Central Government of India in terms of sub-section (4A) of section 227 ofthe Act we give in the Annexure a statement on the matters specified in paragraphs 4 and5 of the Order.
2. As required by section 227(3) of the Act we report that;
a. we have 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 matter described in the Basis for Qualified Opinion paragraph in ouropinion proper books of account as required by law have been kept by the Company so far asappears 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 ofaccount;
d. except for the matter described in the Basis for Qualified Opinion paragraph in ouropinion the Balance Sheet Statement of Profit and Loss and Cash Flow Statement complywith the Accounting Standards referred to in sub-section (3C) of section 211 of theCompanies Act 1956 read with the General Circular 15/2013 dated 13th September 2013 ofthe Ministry of Corporate Affairs in respect of Section 133 of the CompaniesAct 2013.
e. On the basis of written representations received from the directors as on March 312014 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 312014 from being appointed as a director in terms of clause (g) ofsub-section (1) of section 274 of the Companies Act 1956 except under sub clause (B)& clause (g) of sub section (1) of Section 274 of the said Act.
| ||ForV.Sahai Tripathi &Co. |
| ||Chartered Accountants |
| ||Firm's Registration Number: 000262N |
|Place : New Delhi ||(Manish Mohan) |
|Dated: 30* May 2014 ||Partner |
| ||Membership No. 91607 |
ANNEXURE TO AUDITOR'S REPORT
(Referred to in paragraph (1) of our report on other legal and regulatory requirementsof Independent Auditor's Report of even date)
Annexure referred to in paragraph (1) of the report on other legal and regulatoryrequirements of Independent Auditor's Report to the members of DCM Financial ServicesLimited on the financial statements for the year ended March 312014
1. (a) The company is maintaining records showing full particulars includingquantitative details and situation offixed assets lying/situated at the Head Office andbranch office.
(b) The fixed assets (other than the assets given on lease/hire purchase) have beenphysically verified by the management in a phased manner so that the entire assets lyingat the Head Office and branches are covered within a period of three years. There is aprogram of verification of such fixed assets which in our opinion is reasonable havingregard to the size of the company in terms of number & nature of assets & manpoweravailable. As explained to us by the management no material discrepancies were noticed onsuch verification.
(c) Fixed assets worth Rs. 0.26 lacs were disposed off during the year ended 31s1March 2014. The company has not disposed off a substantial part of its fixed assetsduring the year to affect the status of the company as a going concern.
2. (a) According to the information and explanations given to us physical verificationof stock of shares and securities was conducted by the management at periodic intervals.
(b) In our opinion the procedures followed by the company for physical verification ofstock of shares and securities are reasonable and adequate in relation to the size of thecompany and the nature of its business except matter stated at Point No.-14 of thisAnnexure.
(c) The company is maintaining records of stock of shares and securities and there wereno discrepancies noticed by them on their physical verification except matterstated at PointNo.-14 of this Annexure.
3. In respect of loans secured or unsecured granted or taken by the company to/ fromcompanies firms or other parties covered in the register maintained under section 301 ofthe CompaniesAct 1956:-
a) To the best of our knowledge and according to the information and explanations givento us the Company has not taken any unsecured loan from the Companies firms or otherparties covered in the register maintained under Section 301 of the Companies Act 1956during the financial year ending 31st March-2014.
b) To the best of our knowledge and according to the information and explanations givento us the Company has not granted any unsecured loan(s) to any party firms or Companiescovered in the register maintained under Section 301 of the CompaniesAct 1956 during thefinancial year ending 31-March-2014.
c) Accordingly the rest of the sub-clauses are not applicable to the Company duringthe reporting period ending 31 -March-14.
4. In our opinion and according to the information and explanations given to us thereare adequate internal control procedures commensurate with the size of the company and thenature of its business for the purchase of inventories and fixed assets and for the sale/realization of services and there was no continuing failure to correct major weakness inthe internal control system.
5. lnrespectoftransactionscoveredunderSection301 of the CompaniesAct 1956:-
(a) According to the information and explanations given to us we are of the opinionthat there . are no transactions which are required to but have not been entered in theregister maintained under section 301 of the CompaniesAct 1956.
b) In our opinion and according to the information and explanations given to us therewere no transactions during the year exceeding the value of rupees five lakhs in respectof any party made in pursuance of contracts or arrangements entered in the registermaintained under section 301 of the CompaniesAct 1956.
6. In our opinion and according to the information and explanations given to us thecompany has not accepted deposits during the year. The directives issued by theReserve Bank of India and the provisions of section S8A and 58AA of the Companies Act1956 to the extent applicable on deposits accepted in the earlier years and outstandingdeposits at the end of the current year have not been complied with particularly relatingto the register of depositors which does not agree with the general ledger generalprovisions regarding default in repayment of deposits default in payment of interest andmaintenance of liquid assets. A notice has also been issued by the Reserve Bank of Indiafor the company to show cause why penal action should not be taken against the company asprescribed under the RBI Act.
7. In our opinion the company has an internal audit system which is commensurate withits size and nature of its business.
8. As explained to us maintenance of cost records has not been prescribed by theCentral Government under clause (d) of sub-section (1) of section 209 of the Act.
9. (a) According to the information and explanations given to us and on the basis ofour examination of the books of accounts in our opinion the company is generally regularin depositing the undisputed statutory dues including Provident Fund Employees StateInsurance Income-tax Sales tax Wealth tax Service Tax Custom Duty Excise Duty cessand any other statutory dues as applicable with the appropriate authorities. According tothe information and explanations given to us there were no undisputed amounts payable inrespect of the above dues which were outstanding as at 31 st March 2014 for a period ofmore than six months from the date of their becoming payable
(b) As explained by the management there is a disputed demand of Rs. 152.12 lakhs andRs. 141.74 lakhs for the Assessment Year 2009-10 and 2010-11 respectively for payment ofincome tax under the Income Tax Act 1961 which is disputed by the company as the broughtforward losses under the Income Tax Act has not been allowed by the department. Therectification application for deletion of above said two demands has been filed by thecompany which is pending before the appropriate authorities.
10. The company has accumulated losses of more than 50% of its net worth as at 31-March 2014 but has not incurred cash losses during the preceding financial year as wellas during the current year as per the statement of profit & loss. However afterconsidering the impact of qualifications referred to in the Main Auditor's Report thereis a loss in both the said two financials years.
11. The company has defaulted in the repayment of dues to the debenture holdersfinancial institution and banks as explained in Note Nos. 4.1 to 4.3 and NoteNo 4.5 of Notes to Accounts.
12. As explained to us by the management the company has not granted any loans oradvances on the basis of security by way of pledge of shares debentures and othersecurities.
13. The company is not a chit fund nidhi mutual benefit fund or a society.Accordingly the provisions of clause (xiii) of the Order are not applicable.
14. According to the information and explanations given to us during the period ended31- March 2014 the company has not entered into any transactions of dealing or trading inshares securities debentures and other investments for which proper records of suchtransactions are required to be maintained. Shares securities debentures and otherinvestments have been held by the company in its name except in cases of bad deliverieswhere shares held as stock in trade were not in the name of the company. These have beenremoved from the records during the year. The value of quoted securities which are inphysical form & has not yet been converted into DEMAT Form have been reconciled atvalue of Rs. 1 such securities.
15. According to the information and explanations given to us the company has notgiven any guarantees for loans taken by others from banks or financial institutions duringthe year.
16. According to the information and explanations given to us no term loans wereobtained by the company during the year.
17. According to the information and explanations given to us no short termloans/inter-corporate deposits were raised by the company during the year.
18. During the year the company has not made any preferential allotment of shares toparties and companies covered in the register maintained under Section 301 of theCompaniesAct 1956. Accordingly clause 4(xviii) of the order is not applicable.
19. The company has not issued any debentures during the year.
20. The company has not raised any money by public issue during the year.
21. During the course of our examination of the books and records of the company andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud on or by the company advised or reported during the year norhave we been informed of such cases by the management.
| ||ForV.Sahai Tripathi &Co. |
| ||Chartered Accountants |
| ||Firm's Registration Number: 000262N |
|Place : New Delhi ||(Manish Mohan) |
|Dated: 30th May 2014 ||Partner |
| ||Membership No. 91607 |