The Members of
M/s. EMPEE SUGARS & CHEMICALS LIMITED.
Report on Financial Statements
We have audited the accompanying Standalone financial statements of M/s. EM PEESUGARS & CHEMICALS LIMITED ("the Company") which comprise the BalanceSheet as at 31st March 2017 the Statement of Profit and Loss for the yearended on that date along with the cash flow statement annexed thereto and a summary ofthe significant accounting policies and other explanatory information for the year thenended.
Management's Responsibility for the Financial Statements
The Company's Board of Directors are 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) 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 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 companies Act 2013. Those Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assuranceabout^whether 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 auditorsjudgment including the assessment of the risks of materia! 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.
Basis for Qualified Opinion
a) The accumulated losses of the company have exceeded the net worth of the company.Hence the company has made a reference to BIFR under the sick industrial companies Act andthe Company has been registered under BIFR vide case no:69/2014. However effective fromDecember 2016 BIFR proceedings have been abated. The Company is to make an applicationunder Insolvency and Bankruptcy Code 2016 before NCLT Hyderabad. However the accountshave been prepared on a going concern basis.
b) The company has received amount of Rs. 140.37 crores from 7th July 2008to 30th September 2012 (refer note no 4) towards share application money fromholding company Empee Distilleries Ltd. These shares could not be allotted to theapplicant company in view of the non-receipt of approval from the SEBI and stock Exchange.By virtue of the Rules of the Companies Acceptance and Deposit Rules these are publicdeposits to be repaid. However the Company is of Opinion that this issue will have to bedecided by NCLT Hyderabad as the proceedings under BIFR have since been abated.
c) Confirmation of Sundry debtors Trade payables. Advance to suppliers Cane advancesHarvester Advances and other deposit is subject to confirmation and reconciliation. (refernote no 81618 & 38)
d) The Sugar Unit at Ambasamudram has not been functioning for the last 4 yearsHowever no impairment of assets in accordance with AS 28 (Impairment of Assets) at thesugar unit at Ambasamudram has been considered in accounts and the financial impact of thesame is not presently ascertainable. /'
e) Interest has not been provided on loans amounting in all to Rs.486 Crores availedfrom banks and including Loans assigned by the banks in favor of Edelweiss AssetReconstruction Company Ltd.
f) Bank Balances amounting to Rs.35.63 lakhs included in Note. 17 is subject toConfirmation. 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 the aforesaid financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India: i
a) in the case of the Balance Sheet of the state of affairs of the Company as atMa.rch 31 2017;
b) in the case of the Profit and Loss Account of the Loss for the year ended on that'date;
c) in case of cash flow statement of the cash flows for the year ended on the date;
Report on Other Legal and Regulatory Requirements:-
1. As required by the Companies (Auditor's Report) Order 2016(" the Order")issued by the Central Government of India in terms of sub section (11) of section 143 ofthe Act we give in 'Annexure-A' a statement on the matters specified in the paragraph 3and 4 of the Order 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 is disqualifiedas on March 31 2017 from being appointed as a director in terms of sub- section (2) ofsection 164 of the Companies Act 2013.
f) With respect to the adequacy of the Interna! 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 theadequacy and operating effectiveness of the company's 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 does not have any pending litigations which would impact its financialposition except the cases listed below;
|S.No ||Case No ||Court ||Details of the case |
|1 . ||OP by way of Appeal against Arbitration award by three member arbitral tribunal ||Before High Court of Madras ||M/s ISGEC raised disputes against M/s ES.CL regarding settlement of dues in the supply and erection of boilers/turbines for our Ambasamudram and Naidupet projects. In the Arbitration Rs 13 crores with future interest @24% awarded by the tribunal to ISGEC and the Company has filed an appeal in the High Court of Madras. |
|2 ||Writ Petition no 244944 of 2011 ||Before High Court of Madras ||A writ was filed by the Company against payment due of Rs 100000000/- from TNEB for ESCL Ambasamudram unit (Electricity purchase charges issue). Writ is pending. |
|3 ||WP No. 211147of 2014 ||High court of Madras ||A writ was filed by the Company against TNEB's demand of E-Tax for Rs.45621938/- for Ambasamudram unit. |
|4 ||O.S. 18/2007 ||Before Principal District Court at Pondicherry ||A Claim of loss and interest of Rs 4000288/ due by the Company towards purchase of Molasses from Pondichery Co-Op Sugar Mills Ltd against ESCL is pending for trial. |
|5 ||Civil suit No.39 of 2006 ||Before High Court of Madras ||For recovery of claim against M/s Oriental insurance Co.Ltd under fire policy towards flood happened by act of God taken place during 2001 at Nayudupettah factory site is pending. |
|6 ||Wp No.23748 of 2014 ||High Court of AP ||A writ against Demand of Value Added Tax for Rs. 11936620/- by Sales tax against ESCL is pending. |
|7 ||Appeal before CE ||Customs and Excise Tribunal- SZ Bench at Chennai ||Appeal filed against the Order dt. 12-03-2014 the commissioner of Customs Tuticorin directed to pay differential duty in the purchase of coal amounting to Rs.61151119/- with penalty of Rs. 85000000/- and penalty of Rs. 100000/- against individual name of GM of ESCL company is pending. |
|8 ||Appeal No C/41475/2014- DB ||Before Customs Excise & Service Tax Appellate Tribunal Chennai ||The Commissioner of customs Tuticorin has filed an appeal against CE's order granting exemption for customs duty to the tune of Rs.28924422/- under notification 46/2011 for import of coal from Asian Countries against ESCL. Appeal preferred by C E is pending. |
II. The company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
III. There were no amounts which were required to be transferred to the InvestorEducation and Protection fund by the company.
IV. The company has provided requisite disclosures in the financial statements as toholdings as well as dealings in specified Bank Notes during the period from 8th November2016 to 30th December 2016. Based on the audit procedures and relying on the managementrepresentation we report that the disclosures are in accordance with books of accountmaintained by the Company and as produced to us by the Management (Refer Note No: 37)
| ||For VENKATESH&CO. |
| ||Chartered Accountants |
| ||F.R.NO.004636S |
| ||CA DASARATYV |
|Place: CHENNAI ||M.No.026336 |
|Date: 29/05/2017 ||Partner |
'Annexure A'to Independent Auditors' Report
(Referred to in paragraph 1 under the heading of "Report on other Legal andRegulatory Requirements" of our Report of even date)
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 the information provided to us the title deeds of immovable properties areheld in 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 given interest free loan to Empee Power Company India Limited of Rs.49.89 crores and EDL Marketing Private Limited of Rs. 5.45 crores without stipulation asto the repayment of principal.
a) The terms and conditions of the loan are not prejudicial to the interests of theCompany.
b) The schedule of repayment of principal has not been stipulated.
4. According to information and explanations given to us the company has complied withSections 185 and 186 of the Companies Act 2013.
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.
a) According to the records of the company there have been delays in depositingundisputed statutory dues including Provident Fund Income Tax Service Tax Duty ofExcise Value Added Tax Cess and other statutory dues to the appropriate authorities. Thedetails of the same as on the last day of the financial year concerned for a period ofmore than six months from the date they became payable are as follows:
|Name of the State Act ||Nature of Dues ||Amount involved Rs. in Lacs ||Period to which the case related ||Status |
|A.P. Sugar Cane regulation of Sugar Cane Act ||Andhra Pradesh Purchase tax payable ||522.66 ||1994 - 2001 ||Paid Rs. 133.49 Lakhs towards said dues |
|Finance Act 1994 ||Service Tax under Reverse Charge Mechanism - GTA ||25.85 ||2014-2015 || |
|Income Tax Act 1961 ||Tax Deducted at Source ||6.6 ||2015-2016 || |
|Central Excise Act 1944 ||Excise Duty ||31.00 ||2015-2016 || |
|Finance Act 1994 ||Service Tax Reverse Under Charge Mechanism ||1.99 ||2016-2017 || |
|Income Tax Act 1961 ||Tax Deducted at Source ||5.77 ||2016-2017 || |
|Central Excise Act 1944 ||Excise Duty ||5.98 ||2016-2017 || |
b) According to the information and explanations given to us and the records of thecompany examined by us there are no dues of Income Tax Sales Tax Service Tax Duties ofCustoms Duties of Excise Value Added Tax which have not been deposited on account of anydispute except the following.
|Name of the State Act ||Nature of Dues ||Amount involved Rs. in Lacs ||Period to which the case related ||Dispute is pending before |
|A.P. Sugar Cane regulation of Sugar Cane Act ||Andhra Pradesh Purchase tax payable ||729.59 ||1994 - 2001 ||Asst Cane Commissioner |
|AP Value Added Tax Act 2005 ||Value Added Tax ||119.37 ||2012 ||High Court of Ap |
|Customs Act1962 ||Duty of Customs ||1462.51 ||2014 ||Customs and Excise Tribunal -SZ Bench at Chennai |
|Customs Act 1962 ||Duty of Customs ||289.24 ||2014 ||Customs Excise & Service Tax Appellate Tribunal Chennai |
8. Based on our audit procedures and according to the information and explanationsgiven to us the entire borrowings of company over due. The company's application at BIFRhas been abated. The company is to make an application under Insolvency and BankruptcyCode 2016
9. According to the records of the company the company has not raised moneys by way ofinitial public offer or further public offer and has not obtained any term loans duringthe financial year. Hence comments under the clause are not called for.
10. According to information and explanations furnished to us no fraud by or on thecompany by its officers or employees has been noticed or reported during the year.
11. In view of Default in repayment of Loans the Managerial remuneration of Rs.57.04Lakhs provided during the year is in excess of the Limits provided under section 197 readwith schedule V of Companies Act 2013.
12. As the Company is not a Nidhi Company we do not comment on Net Owned Funds toDeposit ratio and unencumbered term deposits a specified in Nidhi Rules 2014.
13. All transactions with the related parties are in compliance with Sections 177 and188 of Companies Act 2013 where applicable and details have been disclosed in theFinancial Statements etc. as required by the applicable accounting standards.
14. The Company has not made any Preferential Allotment or Private placement of sharesor fully or partly convertible debentures during the year. Hence we do not comment onCompliance of section 42 of Companies Act 2013.
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.
16. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
| ||For Venkatesh& Co. |
| ||Chartered Accountants |
| ||F.R.No.0046365 |
| ||CA Dasaraty V |
|Place: Chennai ||M.No.026336 |
|Date: 29/05/2017 / ||Partner |
'ANNEXURE B' TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph (f) under "Report on Other Legal and RegulatoryRequirements' section 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 EMPEESUGARS AND CHEMICALS LIMITED ("the Company") as of March 31 2017 in conjunctionwith our audit of the 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"). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the 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 Indiaand the Standards on Auditing prescribed under Section 143(10) of the Companies Act 2013to the extent applicable to an audit of internal financial controls. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated 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 auditor's 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 controls systemover financial reporting.
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 reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the 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 ICAL
| ||For Venkatesh& Co. |
| ||Chartered Accountants |
| ||F.R.NO.004636S |
| ||CA Dasaraty V |
|Place: Chennai ||M. No.026336 |
|Date: 29/05/2017 ||Partner |