To The members of Euro Ceramics Limited
Report on the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of Euro CeramicsLimited ("the Company") which comprise the Balance Sheet as at March 312016 the Statement of Profit and Loss the Cash Flow Statement for the year then endedand a summary of policies and other the significant explanatory information.
Managements Responsibility for the standalone financial statements
2. The Companys Board of Directors is responsible for the matters stated insection 134(5) of the Companies Act 2013 (the Act) with respect to the preparationof these standalone financial statements to give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
3. Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.
4. We have taken into account the provisions of the Act and the Rules made there underincluding the Accounting Standards and matters which are required to be included in theaudit report.
5. We have conducted our audit in accordance with the Standards on Auditing specifiedunder section 143(10) of the Act and other applicable authoritative pronouncements issuedby the Institute of Chartered Accountants of India. Those Standards and pronouncementsrequire that we comply with the ethical requirements and plan and perform the audit toobtain reasonable assurance about whether the financial statements are free from materialmisstatement.
6. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures 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 the internal financial control relevant to the Companyspreparation of the financial statements that 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 the financial reporting and the operating effectiveness of suchcontrols. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of the accounting estimates made by the CompanysDirectors as well as evaluating the overall presentation of the financial statements.
7. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on standalone financial statements.
8. In our opinion and to the best of our information and according to the explanationsgiven to us except for the matters illustrated and described in the Basis forQualified Opinion herein below the aforesaid standalone financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2016 and its loss and its cash flowsfor the yearended on that date.
Basis for Qualified Opinion
1. The attention is invited to note no.3 to the financial statements towards the factthat the Companys financial facilities/ arrangements including Term Loans WorkingCapital Facilities and Non Fund Based Credit Facilities have expired and the accounts withthe Banks have turned into Non Performing Assets since more than 3 years.
The Company is unable to renegotiate restructure or obtain replacement of financingarrangements and the banks have initiated legal proceedings for the recovery from theCompany u/s. 19 of the Debt Recovery Tribunal (DRT) u/s. 13(2) of the Securitization& Reconstruction of Financial Assets & Enforcement of Security (Second) Interest(SARFAESI) Act 2002 and winding up petition at Mumbai High Court. In addition to thisthe Company has been continuously incurring substantial losses since past few years and ason March 31 2016 the Companys current liabilities exceed its current assets by Rs.43842.60 lakhs. Further the networth of the Company has fully eroded and the Company hasfiled for registration u/s. 15(1) of the Sick Industrial Companies (Special Provisions)Act 1985 before the Honble Board for Industrial & Financial Reconstruction.
All the above events indicate a material uncertainty that casts a significant doubt onthe Companys ability to continue as a going concern and therefore it may be unableto realize its assets and discharge its liabilities in the normal course of business. Thefinancial results do not disclose the fact that the fundamental accounting assumption ofgoing concern has not been followed.
2. Attention is also drawn to note no.34 to the financial statements the Company onthe basis of registration filedu/s. 15(1) of the Sick Industrial Companies (SpecialProvisions) Act 1985 before the Honble Board for Industrial & FinancialReconstruction and the hearings for which are in process for determination of sickness;has not provided for interest on financing facilities amounting to Rs. 10250.96 lakhs forthe year ending March 31 2016 subject to reconciliation with banks. Had the same beenprovided the loss for the year ending March 31 2016 would have increased by Rs.10250.96 lakhs. The corresponding liabilities would also have increased by Rs. 10250.96lakhs as at March 31 2016.
3. Attention is also drawn to the fact that the Company has not provided for impairmentor diminishing value of its assets/ investment as per Accounting Standard 28 Accounting for Impairment of Assets as notified under the Companies (AccountingStandards) Rules 2006 read with the General Circular 15/2013 dated 13th September 2013of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act 2013.The effect of such Impairment or diminishing value has not been quantified by themanagement and hence the same is not ascertainable.
4. We draw attention to the fact that financial statements are subject to receipt ofconfirmation of balances from all of the debtors loans & advances investmentsbanks sundry creditors and other liabilities.
Pending receipt of confirmation of these balances and consequential reconciliations /adjustments if any the resultant impact on the financial statements is notascertainable.
5. We draw attention to the facts that the non-ascertainment of complete particulars ofdues to Micro Small and Medium enterprises if any under MSMED Act 2006 and provisionstowards interest if any is not ascertained at this stage which is not in conformity withpara14 of Accounting Standard 29-Provision Contingent Liabilities and ContingentAssets.
Report on other legal and regulatory requirements
9. As required by the Companies (Auditors Report) Order 2016 issuedby the Central Government of India in terms of sub-section (11) of section 143 of the Act(hereinafter referred to as the Order) and on the basis of such checks of thebooks and records of the Company as we considered appropriate and according to theinformation and explanations given to us we give in the Annexure-B astatement on the matters specified in paragraphs 3 and 4 of the Order.
10. 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;
b) In our opinion proper books of account 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 the Cash Flow Statement dealtwith by this Report are in agreement with the books of account;
d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under section 133 of the Act read with rule 7 of theCompanies (Accounts) Rules 2014 except for as stated in basis for qualifications above.
e) On the basis of the written representations received from the directors as on March31 2016 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2016 from being appointed as director in terms of section 164 (2) of theAct.
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-A.
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 knowledge and belief and according to the information andexplanations given to us:
i) The Company has disclosed the impact if any of pending litigations as at March 312016 on its financial position in its standalone financial statements;
ii) The Company has made provision as at March 31 2016 as required under theapplicable law or Accounting Standards for material foreseeable losses if any onlong-term contracts including derivative contracts except as stated in basis forqualifications above;
iii) There has been delay in transferring unclaimed dividend amounting to Rs. 0.37lakhs pertaining to financial year 2007-08 into the Investor Education and ProtectionFund by the Company during the year ended March 31 2016.
For Deepak Maru & Co.
ICAI Firm Regn. No.:115678W
CA. Jaymin P. Shah
Date: May 30 2016
Annexure A to the Independent Auditors Report
Referred to in paragraph 10(f) of the Independent Auditors Report of even date tothe Members of Euro Ceramics Ltd on standalone financial statement for the year endedMarch 31 2016.
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 EuroCeramics Ltd. ("the Company") as of March 31 2016 in conjunction with our auditof the standalone financial statements of the Company for the year ended on that date.
Managements Responsibility for Internal Financial Controls
The Companys 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 companys policies the safeguardingof its 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.
Our responsibility is to express an opinion on the Companys 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 was 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 Companys internal financial controlssystem over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A companys 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 companys 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 authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompanys 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 to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2016 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
For Deepak Maru & Co.
ICAI Firm Regn. No.:115678W
CA. Jaymin P. Shah
Date: May 30 2016
Annexure-B to the Independent Auditors Report
(Referred to in paragraph 9 of the Independent Auditors Report of even date tothe members of Euro Ceramics Limited on the standalone financial statements as of and forthe year ended March 31 2016)
(i) a) The Company has maintained proper records showing full particulars includingquantitative details and situation of its fixed assets.
b) As explained to us all the fixed been physically verified by the management in aphased periodical manner which in our opinion is reasonable having regards to the sizeof the Company and nature of its assets. No material discrepancies were noticed on suchphysical verification.
c) According to the information and explanations given to us and the records examinedby us and based on the examination of the conveyance deed provided to us we report thatthe title deeds comprising all the immovable properties of land and buildings are heldin the name of the Company as at the balance sheet date except As follows:
(1) 21.20 Acres of Land (Rs.49.31 lakhs) are yet pending to be registered withGovernment Authorities.
(2) 48.24 Acres of Land (Rs.34.89 lakhs) are either yet to be converted intoNon-Agricultural from Agricultural purpose or there are dicrepancies in respect ofmeasurement as compared to Government Records.
(ii) As explained to us the inventories were physically verified during the year bythe Management at reasonable intervals and no material discrepancies were noticed onphysical verification.
(iii) According to the information and explanation given to us the Company has grantedunsecured loans to party covered in the register maintained under section 189 of theCompanies Act.
(a) In our opinion and according to the information and explanations given to us theterms and conditions of the grant of such loan have not been specifically defined andhence we are unable to comment as to whether the same are prejudicial to the interest ofthe Company or not.
b) In our opinion and according to the information and explanations given to us thereare no stipulations made regarding repayment of principal amount and interest in respectof loans granted by the Company to assets have parties covered in the registermaintained under section 189 of the Companies Act 2013. Hence we are unable to comment asto regularity of repayments of principal and interest amount.
c) In absence of specific stipulations for repayment of principal and interest we areunable to comment on the overdue amounts in respect thereof and steps taken for theirrecovery.
(iv) In our opinion and according to the information and explanation given to us theCompany has neither granted any loans nor provided any guarantees nor any securities inrespect of any loans to any party covered under section 185 or section 186 of the Act.
(v) In our opinion and according to the information and explanations given to us theCompany during the year has not accepted any deposits from the public within the meaningof section 73 & 76 of the Companies Act 2013 and the Rules framed there under to theextent notified. Further in respect of deposits accepted by the company before thecommencement of this Act within the meaning of section 74 & 75 of the Companies Act2013 and the Rules framed there under to the extent notified the principal amount of suchdeposits and interest due thereon remained unpaid even after expiry of one year from suchcommencement. However the Company duly filed an application within the meaning of section74(2) with the Company Law Board requesting to allow further time for compliance. Howeverthe final decision of the Tribunal as required under section 75 (1) of the Companies Act2013 is still awaited.
However in our opinion and according to the information and explanations given to usthe Company has not appropriated within the prescribed period of 365 days from the date ofreceipt the amount received by it for the supply of goods / provision of services thatwere received in normal course of and for the purpose of its business amounting to Rs.135.06 lakhs. The said amount tantamount to acceptance of deposit within the meaning ofsec.73 to sec.76 of the Companies Act 2013 and the rules framed there under. The Companyhas not complied with Companys Acceptance of Deposits Rule as provided in sec.73 to76 of the Companies Act 2013 to that extent.
(vi) The Central Government of India has not specified the maintenance of cost recordsunder sub-section (1) of section 148 of the Companies Act 2013 for any of the products ofthe Company.
(vii) In respect of Statutory Dues:
a) According to the information and explanation given to us and the records of theCompany examined by us in our opinion the Company has been facing liquidity stress sincepast few years due to which there were delays in depositing various undisputed statutorydues with appropriate authorities including provident fund employees stateinsurance income tax sales tax service tax duty of customs duty of excise valueadded tax cess and other material statutory dues as applicable to it and there are noarrears of outstanding statutory dues as at the yearend for a period of more than sixmonths from the date they became payable.
b) According to the information and explanation given to us and the records of theCompany examined by us there are no dues of income tax sales tax service tax duty ofexcise value added tax as at March 31 2016 which have not been deposited on account ofany dispute. However there are dues of duty of customs which have not been deposited onaccount of a dispute which are as under:
|Name of the Statute ||Nature of Dues ||Amount Rs. ||Period to which the amount relates ||Forum where the dispute is pending |
|The Customs Act 1962 ||Custom Duty and Penalty thereon ||1185.11 lakhs ||Financial Year 2005- 2013 ||Commissioner of Customs (Appeals) |
| || ||1782.77 lakhs ||Financial Year 2006- 2014 ||Commissioner of Customs (Appeals) |
c) There has been delay in transferring unclaimed dividend amounting to Rs. 0.37 lakhspertaining to financial year 2007-08 into the Investor Education and Protection Fund bythe Company during the year ended March 31 2016.
(viii) In our opinion and according to the information and explanations given to us theCompany has defaulted in repayment of loans and interests dues to the banks and financialinstitution as under:
|Name of the Bank ||Principal Outstanding ||Interest Outstanding ||Default since |
| ||(Rs. in Lakhs) ||(Rs. in Lakhs) || |
|State Bank of India ||25598.96 ||14383.08 ||December 2012 |
|The Cosmos Co-Op Bank Ltd ||5805.03 ||4552.31 ||April 2012 |
|ICICI Bank Ltd ||8919.33 ||6625.90 ||October 2012 |
|Bank of India ||4239.69 ||2425.20 ||April 2012 |
|Indusind Bank ||540.27 ||271.57 ||October 2012 |
|Total ||45103.28 ||28258.06 || |
(ix) The Company has not raised any moneys by way of initial public offer furtherpublic offer (including debt instruments). The term loans were applied for the purposesfor which those are raised.
(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement.
(xi) The Company has paid/provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theAct.
(xii) As the Company is not a Nidhi Company and the Nidhi Rules 2014 are notapplicable to it the provisions of Clause 3 (xii) of the Order are not applicable to theCompany.
(xiii) In our opinion and according to the information and explanations given to usthe Company is in compliance with Section 177 and 188 of the Act where applicable forall transactions with the related parties and the details of related party transactionshave been disclosed in the standalone financial statements as required by the applicableaccounting standards.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause 3(xiv) of the Order is not applicable to the Company.
(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsDirectors or persons connected to its Directors and hence provisions of Section 192 of theAct are not applicable.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934
For Deepak Maru & Co.
ICAI Firm Registration No:115678W
CA. Jaymin P. Shah
Date: May 30 2016