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 31 2017the Statement of Profit and Loss the Cash Flow Statement for the year then ended and asummary of the significant accounting policies and other explanatory information.
Management's Responsibility for the standalone financial statements
2. 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 to 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 of 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.
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 theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers the internal financial control relevant to the Company's preparation ofthe financial statements that give a true and fair view in order to design auditprocedures 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 Company's Directorsas 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 Basisfor Qualified Opinion herein below the aforesaid standalone financial statementsgive the information required by the Act in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2017 and its profit and its cash flowsfor the year ended on that date.
Basis for Qualified Opinion
1. The attention is invited to note no.3 to the financial statements towardsthe fact that the Company's financial facilities / arrangements including Term LoansWorking Capital Facilities and Non Fund Based Credit Facilities have expired and theaccounts with the Banks have turned into Non Performing Assets since more than 3 years.
Some of the bank lenders have initiated legal proceedings against the Company forrecovery of their respective debts at the Debt Recovery Tribunal and have taken symbolicpossession of the securities u/s. 13(4) of the SARFAESI Act 2002. However the Company hasbeen able to renegotiate with the secured lenders and arrive at a amicable settlement ofits debts. The Company has made the settlement of its total debt outstanding with thesecured lenders. Accordingly some of the lenders have been settled completely on one timesettlement basis and others have agreed for deferred payment along with some upfrontpayment based on their respective terms of settlement. In view of the above settlementthe Company has not provided the interest on the outstanding dues payable as per thesettlement terms on the outstanding agreed amount of settlement amounting to `880.11 lakhs for the year ended March 31 2017. Had the same been accounted for the netprofit (after tax) would have decreased and current liabilities for the year ended March31 2017 would have increased by that amount. In addition to this the Company has beencontinuously incurring substantial losses since past few years and as on March 31 2017the Company's current liabilities exceed its current assets by ` 22562.88 lakhs.Further the networth of the Company has fully eroded and the Company had also filedregistration u/s. 15(1) of the erstwhile Sick Industrial Companies (Special Provisions)Act 1985 before the erstwhile Hon'ble Board for Industrial & FinancialReconstruction.
All the above events indicate a material uncertainty that casts a significant doubt onthe Company's ability to continue as a going concern and therefore it may be unable torealize 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 the fact that the Company has not provided forimpairment or diminishing value of its assets/investment as per Accounting Standard28 Accounting for Impairment of Assets' as notified under Section 133 of the CompaniesAct 2013. The effect of such Impairment or diminishing value has not been quantified bythe management and hence the same is not ascertainable.
3. We draw attention to the fact that financial statements are subject toreceipt of confirmation of balances from many of the debtors loans & advancesinvestments banks sundry creditors and other liabilities. Pending receipt ofconfirmation of these balances and consequential reconciliations / adjustments if anythe resultant impact on the financial statements is not ascertainable.
4. We draw attention to the facts that the non-ascertainment of completeparticulars of dues to Micro Small and Medium enterprises if any under MSMED Act 2006and provisions towards interest if any is not ascertained at this stage which is not inconformity with para14 of Accounting Standard 29-Provision Contingent Liabilitiesand Contingent Assets.
Report on other legal and regulatory requirements
9. As required by the Companies (Auditor's Report) Order 2017' issued by theCentral 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' a statement onthe 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 2017 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2017 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 Auditor's 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 312017 on its financial position in its standalone financial statements; ii) The Companyhas made provision as at March 31 2017 as required under the applicable law or AccountingStandards for material foreseeable losses if any on long-term contracts includingderivative contracts except as stated in basis for qualifications above;
iii) There were no amounts required to be transferred to the Investor Education andProtection Fund by the Company during the year ended March 31 2017.
iv) The Company has provided requisite disclosures in Note No. 33 to these financialstatements as to holding of Specified Bank Notes on November 8 2016 and December 30 2016as well as dealing in Specified Bank Notes during the period from November 8 2016 toDecember 30 2016. Based on our audit procedures and relying on the managementrepresentation regarding the holding and nature of cash transactions including SpecifiedBank Notes we report that these disclosures are in accordance with the books of accountsmaintained by company as produced to us.
For Deepak Maru & Co.
ICAI Firm Regn. No.:115678W
| ||Jaymin P. Shah |
| ||Partner |
| ||Mem.No.118113 |
|Place: Mumbai || |
|Date: May 30 2017 || |
Annexure A' to the Independent Auditors' Report
Referred to in paragraph 10(f) of the Independent Auditor's Report of even date to theMembers of Euro Ceramics Ltd on standalone financial statement for the year ended March31 2017.
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 2017 in conjunction with our auditof the standalone 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.
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") 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 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 authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised 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 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 2017 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 |
| ||Partner |
| ||Mem.No.118113 |
|Place: Mumbai || |
|Date: May 30 2017 || |
Annexure-B' to the Independent Auditors' Report
(Referred to in paragraph 9 of the Independent Auditors' Report of even date to themembers of Euro Ceramics Limited on the standalone financial statements as of and for theyear ended March 31 2017)
(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 assets have been physically verified by themanagement in a phased periodical manner which in our opinion is reasonable havingregards to the size of the Company and nature of its assets. No material discrepancieswere noticed on such physical 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) 2.17 Acres of Land (` 0.95 lakhs) are yet pending to be registered with GovernmentAuthorities.
(2) 48.24 Acres of Land (` 34.89 lakhs) are either yet to be converted intoNon-Agricultural from Agricultural purpose or there are discrepancies 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 parties covered in the register maintained undersection 189 of the Companies Act 2013. Hence we are unable to comment as to regularity ofrepayments of principal and interest amount.
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. The Company had filed an application within the meaning of section 74(2)with the National Company Law Tribunal requesting to allow further time for compliancehowever the National Company Law Tribunal has dismissed the extension request.
(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 employee's state insuranceincome tax sales tax service tax duty of customs duty of excise value added tax cessand other material statutory dues as applicable to it and there are no arrears ofoutstanding statutory dues as at the year end for a period of more than six months fromthe 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 2017 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 ` ||Period to which the amount relates ||Forum where the dispute is pending |
| || ||1185.11 ||Financial ||Commissioner |
| ||Custom ||lakhs ||Year 2005- ||of Customs |
|The || || || || |
| ||Duty and || ||2013 ||(Appeals) |
|Customs || || || || |
| ||Penalty ||1782.77 ||Financial ||Commissioner |
|Act 1962 || || || || |
| ||thereon ||lakhs ||Year 2006- 2014 ||of Customs (Appeals) |
c) There were no amounts required to be transferred to the Investor Education andProtection Fund by the Company during the year ended March 31 2017.
(viii) In our opinion and according to the information and explanations given to us theCompany had defaulted in repayment of loans and interests dues to the banks. Some of thebank lenders have initiated legal proceedings against the Company for recovery of theirrespective debts at the Debt Recovery Tribunal and have taken symbolic possession of thesecurities u/s. 13(4) of the SARFAESI Act 2002. However the Company has been able torenegotiate with the secured lenders and arrive at a amicable settlement of its debts. TheCompany has made the settlement of its total debt outstanding with the secured lenders.Accordingly some of the lenders have been settled completely on one time settlement basisand others have agreed for deferred payment along with some upfront payment based on theirrespective terms of settlement. In view of the above settlement the Company has notprovided the interest on the outstanding dues payable as per the settlement terms on theoutstanding agreed amount of settlement amounting to ` 880.11 lakhs for the yearended March 31 2017 as given under:
|Name of the Bank ||Principal Outstanding as on the date of turning NPA ||Agreed Settlement Amount ||Amount Paid upto March 31 2017 as per settlement terms ||Interest Outstanding as per agreed terms of settlement as on March 31 2017 |
|State Bank of India ||25598.96 ||14500.00 ||5800.00 ||777.07 |
|The Cosmos ||5805.03 ||4000.00 ||1430.00 ||103.04 |
|Co-Op Bank Ltd || || || || |
|Total ||31403.99 ||18500.00 ||7230.00 ||880.11 |
(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 not applicableto it the provisions of Clause 3 (xii) of the Order are not applicable to the Company.
(xiii)In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Act where applicable for alltransactions with the related parties and the details of related party transactions havebeen 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 |
| ||Partner |
| ||Mem.No.118113 |
|Place: Mumbai || |
|Date: May 30 2017 || |