The Members of
M/s. Empee Distilleries Limited.
Report on Financial Statements
We have audited the accompanying Standalone financial statements of M/s. EmpeeDistilleries Limited (the Company) which comprise the Balance Sheet as at 31stMarch 2017and the Statement of Profit and Loss the Cash Flow statement for the yearended from 01/04/2016 to 31/03/2017 and a summary of the significant accounting policiesand other explanatory information for the year ended.
Management s Responsibility for the Financial Statements
The Company s Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 (the Act) with respect to the preparation of thesestandalone 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) Rules 2014. 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 appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating 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 standalone financial statementsbased on our audit.
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 thereunder.
We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the companies Act 2013. 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 financial control relevant to the Company s preparation and fairpresentation of the financial statements in order to design audit procedures that areappropriate in the circumstances. 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.
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.
Basis for Qualified Opinion
a. The company has made an investment of Rs.1.59 Crores as Equity Shares and furtherinvestment by way of share application money of Rs.140.36 Crores to its subsidiary EmpeeSugars and Chemicals Limited and Rs.20.68 Crores as investment in Equity Shares of EmpeeHotels Limited. The Companies Empee Sugars and Chemicals Limited & Empee HotelsLimited have been incurring losses. No Provision for diminution in the value of investmentin respect of these companies have been considered in the accounts.
b. Other Loans & Advances amounting to Rs.40.35 Crores out of 40.98 Crores underthe head other Current Assets Sundry Debtors to Rs.65.08 Crores and Loan and advances torelated parties Rs.41.88 Crores Other Long Term Liabilities Rs.38.92 Crores and TradePayable of Rs.79.34 Crores are subject to confirmation and reconciliation. The impact onprofitability is not ascertainable.
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 the Standalone financial statements give the information required bythe Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India:
a) in the case of the Balance Sheet of the state of affairs of the Company for as atMarch 31 2017;
b) in the case of the Profit and Loss Account of the Loss for the year ended on thatdate; and
c) in the case of the Cash Flow Statement of the cash flows for the year ended on thatdate.
Report on Other Legal and Regulatory Requirements :-
1. As required by the Companies (Auditor s Report) Order 2016(the Order) issued by theCentral Government of India in terms of sub section (11) of section 143 of the Act wegive in Annexure A a statement on the matters specified in the paragraph 3 and 4 of theOrder to the extent applicable.
2. As required by section 143(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) In our opinion proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books.
c) The Balance Sheet Statement of Profit and Loss and Cash flow statement dealt withby this Report are in agreement with the books of account.
d) In our opinion aforesaid standalone financial statements comply with the AccountingStandards referred to in Section 133 of the Companies Act 2013 read with Rule 7 of theCompanies (Accounts) Rules 2014.
e) On the basis of written representations received from the directors as on March 312017 and taken on record by the Board of Directors none of the directors aredisqualified as on March 31 2017 from being appointed as a director in terms ofsub-section (2) of section 164 of the Companies Act 2013.
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 on the adequacyand operating effectiveness of the company s Internal financial controls over financialreporting.
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 the following pending litigations which would impact its financialposition.
|S No ||Case No ||Amount ||Status |
|1. ||Appeal filed by EDL and others before CE Tribunal Chennai. ||Customs and Excise Tribunal-SZ Bench at Chennai ||The order dt.12-3-2014 of the Commissioner of customs Tuticorin directed to pay differential duty in the purchase of coal amounting to Rs.2860189/- with penalty of Rs 3000000/- and penalty of Rs 100000/- against individual name of GM of EDL. Appeal with CE Tribunal is pending. |
|2. ||Appeal C/41496/ 2014-DB ||Before Customs Excise & Service Tax Appellate Tribunal Chennai ||The commissioner of customs Tuticorin filed an appeal against its orders granting exemption for customs duty to the tune of Rs. 3523458/- under notification 46/2011 for coal import from Asian countries against EDL. |
|3. ||RFA No 119/2015 filed by us against judgment in OS 537/2008 dt.29-8-2014 filed by M/s Vintage Marketing ||Before High Court of Kerala ||Case relates to marketing services - Judgment and Decree for Rs 1801418 with costs and interest @18% per annum passed by Sub Judge Palakkad against EDL but EDL has filed an appeal before the High Court. Appeal is pending. |
|4. ||OP732of 2015 before High Court of Madras against Arbitration Award passed by Retd. Justice J.Kanakaraj ||Before High Court of Madras ||OP filed against the award of payment of 1500000/- with 12 % interest from the year 2005 against the Arbitration raised by Mrs.Indumathi of RVS Enterprises Pondicherry against EDL and others. Counter Claim by EDL was also filed. OP is pending. |
|5. ||CP No.4/2015 ||Before High Court of Madras ||Winding up petition filed by M/s Hambuja Road- ways for the alleged recovery of debt of principal cost and interest of Rs.1520729/-against EDL. Under the orders of the Madras High Court Hambuja Roadways transferred the case to NCLT and is pending. |
|6. ||First appeal 264 of 2013 Filed by EDL ||Before Dist Court at Nashik Maharastra ||Appeal filed against the judgment in Suit 11/2002 by M/s Dolphin Impressions P Ltd Nashik for the claim of Rs 543661/- with interest @24% p.a. |
|7. ||Arbitration ||Before Retd. Justice K.P. Sivasubramaniam ||Initiated by M/s Khoday India Ltd against EDL for dispute and claim of Rs. 224511819/- with interest.Counter claim was filed by the company for Rs.226965608/-.Arbitration is in progress. |
|8. ||MACT OP No.1375 of 2014 ||Small causes Court Motor accident Claims Tribunal Chennai ||Accident -Compensation of Rs 400000/- against involvement of vehicle TN01AC 2460 TATA ACE of Empee Distilleries Ltd by Miss. Abinaya D/o Karunakaran. Pending for disposal. |
|9. ||OA 87/2017 ||Before DRT II Chennai ||UBI filed an original application against the EDL for a claim of Rs.12.45 Crores. The Company is in discussion with UBI for restructuring the loan. |
II. The company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
III. A Sum of Rs.354760/- has been transferred on 28.09.2016 to Investor Educationand Protection fund by the company during this year.
IV. The company has provided requisite disclosures in the Standalone financialstatements as to holdings as well as dealings in specified Bank Notes during the periodfrom 8th November 2016 to 30th December 2016. Based on the audit procedures and relying onthe management representation we report that the disclosures are in accordance with booksof account maintained by the Company and as produced to us by the Management (Refer NoteNo: 4.9)
| ||For Venkatesh & Co. |
| ||Chartered Accountants |
| ||F.R.No.004636S |
|Place : Chennai ||CA Dasaraty V |
|Date : 29/05/2017 ||M.No.026336 |
| ||Partner |
ANNEXURE A TO INDEPENDENT AUDITORS REPORT
(Referred to in paragraph 1 under the heading of Report on other Legal and RegulatoryRequirements of our Report of even date)
1. As required by the Companies (Auditor s Report) Order 2016 issued by the CentralGovernment in terms of section 143 (11) of the Companies Act 2013 and on the basis ofsuch checks of the books and records of the Company as we considered appropriate andaccording to the information and explanations given to us during the course of the auditwe report that
a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets on the basis of available information.
b) As explained to us all the fixed assets have been physically verified by themanagement in a phased periodical manner which in our opinion is reasonable havingregard to the size of the company and the nature of its assets. No material discrepancieswere noticed on such physical verification.
c) As per information provided to us the title deeds of immovable properties are heldin the name of the company.
2. In our opinion and according to the information and explanations given to us theinventories have been physically verified during the year by the management and nomaterial discrepancies were noticed during the physical verification.
3. The company has outstanding loans amounting to Rs.41.88 crores granted to itsrelated parties without stipulation as to the repayment of principal and interest.
a) In the light of above we do not comment on terms and conditions of grant of suchloans.
b) In the light of above we do not comment on repayment of the principal amount andinterest and other conditions.
c) In the light of above we do not comment on the reasonable steps have been taken bythe company for recovery of the principal and interest.
4. According to the information and explanations given to us in respect of Loansinvestments guarantees and security the provisions of sections 185 and 186 of CompaniesAct 2013 were complied with :
5. According to the information and explanations given to us the Company has notaccepted any deposits from the public. Therefore the provisions of section 73 to section76 the Companies Act 2013 and rules framed there under are not applicable.
6. In our opinion and according to the explanations given to us maintenance of costrecords has been specified by the Central Government under sub-section (1) of section 148of the companies Act2013. We are not made available with the cost records with a view todetermine whether they are accurate or complete.
7. a) According to the information and explanation given to us and according to thebooks and records as produced and examined by us in our opinion the Company has beendepositing undisputed statutory dues such as Provident fund sales tax customs duty cessand other statutory dues with some delay except for the FY 2016-17 TDS amounting toRs.14.37 lakhs for the FY 2011-12 Income tax of Rs. 8.28 Crores for the FY 2012-13Income tax of Rs.1.77 Crore and for the FY 2015-16 Income tax of Rs.66.83 Lakhs has notbeen paid as on date.
b) According to the records of the Company and according to the information andexplanations given to us there are no dues of Income tax Wealth tax Sales tax Exciseduty and cess which have not been deposited on account of any dispute except as statedhere under :-
|Sl No ||Name of the statue ||Nature of Dues ||Amount In Lacs ||Period to which the amount relates ||Forum where dispute is pending |
|1 ||Income Tax Act 1961 ||Income Tax ||190.00 ||2005-06 ||Income Tax Appellate Tribunal |
|2 ||Income Tax Act 1961 ||Income Tax ||24.49 ||2008-09 ||Commissioner of Income Tax (Appeals) |
|3 ||Income Tax Act 1961 ||Income Tax ||346.09 ||2009-10 ||Commissioner of Income Tax (Appeals) |
|4 ||Income Tax Act 1961 ||Income Tax ||154.10 ||2010-11 ||Commissioner of Income Tax (Appeals) |
|5 ||Income Tax Act 1961 ||Income Tax ||496.25 ||2012-13 ||Commissioner of Income Tax (Appeals) |
|6 ||Income Tax Act 1961 ||Income Tax ||53.92 ||2013-14 ||Commissioner of Income Tax (Appeals) |
|7 ||Income Tax Act 1961 ||Income Tax ||594.65 ||2014-15 ||Commissioner of Income Tax (Appeals) |
|8 ||Central Excise Act 1944 ||Customs and Excises ||59.60 ||2013-14 ||The order dt.12-3-2014 of the Commissioner of customs Tuticorin directed to pay differential duty in the purchase of coal amounting to Rs. 2860189/-with penalty of Rs 3000000/ and penalty of Rs.100000/-against individual name of GM of EDL |
8. Based on our audit procedures and according to the information and explanationsgiven to us except in the following case the company has not defaulted in repayment ofdues to financial institutions and banks after
| || || || ||(Amount in Lacs) |
|Name of the Bank ||Principal Over Due ||Interest Over Due ||Total Over Due ||Total Liability as on 31.03.2016 |
|Union Bank of India ||521.14 ||290.41 ||811.50 ||1272.82 |
9. In our Opinion and according to the information and explanations given to usthecompany has not issued shares to the public during the year. The Company has raisedRs.47.50 Crores by issue of 14% Redeemable Non-Convertible debentures during the year. Theproceeds from this issue are utilised for the stated purposes.
10. In our Opinion and according to information and explanations furnished to us nofraud on or by the Company has been noticed or reported during the year.
11. In view of the default in repayment of Term Loan to M/s. Union Bank of India theManagerial Remuneration of Rs.85.04 Lakhs paid during the year is in excess of the Limitsprovided under section 197 read with schedule V of Companies Act 2013.
12. The company is not a Nidhi company we do not comment on Net Owned Funds toDeposits ratio and unencumbered term deposits as specified in Nidhi Rules 2014.
13. In our opinion the Company has complied with the provisions of sections 177 and188 of the Companies Act 2013 for all the transactions with related parties and thedetails have been disclosed as required by the applicable accounting standards.
14. The Company has made preferential allotment of shares and has complied with theprovisions of the Companies Act 2013 and the SEBI regulation in this regard.
15. According to the information and explanations given to us the Company has notentered into any non-cash transactions with directors or persons connected with him. Hencewe do not comment on Compliance of Section 192 of Companies Act 2013.
16. The Company is not required to be registered under 45-IA of the Reserve bank ofIndia Act 1934.
| ||For Venkatesh& Co. |
| ||Chartered Accountants |
| ||F.R.No.004636S |
| ||CA Dasaraty V |
|Place : Chennai ||M.No.026336 |
|Date : 29.05.2017 ||Partner |
ANNEXURE B TO INDEPENDENT AUDITORS REPORT
(Referred to in paragraph (e) under Report on Other Legal and Regulatory Requirementssection of our report of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 (the Act)
We have audited the internal financial controls over financial reporting of EMPEEDISTILLERIES LIMITED (the Company) as of March 31 2017 in conjunction with our audit ofthe financial statements of the Company for the year ended on that 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). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company s policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013 (The Act).
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) issued by the Institute of Chartered Accountants of India and theStandards on Auditing prescribed under Section 143(10) of the Companies Act 2013 to theextent applicable to an audit of internal financial controls. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively 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 auditor s judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We bsaudit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the Company s internal financial controls system over financialreporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company s internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company s internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company s assets that could have amaterial effect on the Standalone financial statements.
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.
In our opinion the Company has in all material respects an adequate internalfinancial control system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st March 2017 based on theinternal controls over financial reporting criteria established by the Company consideringthe essential components of internal controls stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by ICAI.
| ||For Venkatesh& Co. |
| ||Chartered Accountants |
| ||F.R.No.004636S |
| ||CA Dasaraty V |
|Place : Chennai ||M.No.026336 |
|Date : 29.05.2017 ||Partner |