The Members of
HMT Limited Bangalore
Report on the Standalone Financial Statements:
We have audited the accompanying standalone financial statements of HMT Limited(the Company) which comprises of the Balance Sheet as at 31st March 2016 the Statementof Profit & Loss Account and the Cash Flow Statement for the year then ended 31stMarch 2016 and a summary of the significant policies and other explanatory informationannexed hereto in which are incorporated in the accounts of Corporate Head Office auditedby us and the accounts of Tractor Division Pinjore Food Processing MachineryDivision Aurangabad and Common Services Division Bangalore audited by BranchAuditors appointed by C&AG of India has been forwarded to us as required by theCompanies Act 2013 which have been dealt with while preparing our report in the mannerconsidered necessary by us.
Management's Responsibility for the Standalone 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 preparation andpresentation of these standalone financial statements that give a true and fair view ofthe financial position financial performance and cash flows of the company in accordancewith the accounting principles generally accepted in India including accounting standardsspecified under section 133 of the Act read with Rule 7of the Companies (Accounts) Rules2014. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
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 there under.
We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe 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 internal financial control relevant to the Company's preparation andpresentation 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 financial reporting and the operating effectiveness of such controls.An audit also includes evaluating the appropriateness of the accounting policies used andthe reasonableness of the accounting estimates made by the Company's Directors as well asevaluating 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 financial statements.
Basis of our Qualified Opinion CHO:
1. The amount of Gratuity Provision (Unfunded) to be recognized in Balance Sheet as peractuary valuation report is Rs. 6356.05 Lakhs. Whereas as per Note No. 5 & Note No. 9the aggregate provision amounts to Rs. 6356.96 Lakhs. Due to such under provision thecompany's loss is overstated with Rs. 0.91 Lakhs.
Tractor Division Pinjore:
1. The company has sought confirmations of most of Trade Receivables Trade PayablesLoans & Advances although balances are subject to confirmations and reconciliationif any.
2. During the year 2015-16 Actuarial Valuation has not been obtained by the Companywith respect to the provisions made for Provident Fund and Outstanding amount has beenshown amounting to Rs. 5877.69 Lakhs
In our opinion and to the best of our information and according to the explanationsgiven to us and based on the consideration of the reports of other Branch Auditorsexcept for the effects of the matter described in the "Basis for QualifiedOpinion" paragraph 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 31st March 2016 and its loss and its cash flow for the yearended on that date.
1. We did not audit the financial statements of certain branches/units. These have beenaudited by other Branch Auditors whose reports have been furnished to us and our opinionis solely based on the reports of Other Branch Auditors.
2. The financial statements of Lamp Division have been merged with CHO Accounts and ourreport insofar as it relates to the amounts included in respect of this Division is basedsolely on Closing Balances of Last Year's Financial Statement of CHO Accounts.
3. The Physical share certificates for 260899037 Equity Shares of M/s. HMT MachineTools Ltd having value of Rs. 26089.90 Lakhs and 44300000 Preference Shares of M/s.HMT Machine Tools Ltd having value of Rs. 44300.00 Lakhs are not in the possession of theCompany.
4. Payments to third parties are being made relating to SUDMO-HMT Engineering (India)Ltd a Joint Venture are paid by the Company against which it receives the reimbursementsfrom them.
5. The report of Internal Auditor of Corporate Head Office is not quantifying thefailures of the statutory dues payable by the Company.
6. The amount of Rs.106957.00 -Tax Deducted at Source has been included inReceivables instead of Balances with Statutory Authority under Short Term Loans &Advances.
7. The Company has discharged the debt of State Bank of India but the discharge ofloan is not reflected in Index of Charges registered with Registrar of Companies for itsIndex Number 80046855.
8. Income of Royalty from HMT International Ltd is accounted for on the basis of lowerof 0.5% of Turnover or 7.5% of Profit before Tax of Flash Report whereas the above incomeshould be accounted for on the basis of audited financial statements.
9. The Branch Auditors of Tractor Division Pinjore have Reported the following othermatters:
1. Balance in Current Maturities of GOI Loans Statutory Dues and Working Capitaland Bridge Loan as given in Note 9 of Balance Sheet amounting Rs. 1153.84 Lakhs hasbeen given and we have relied on the basis of the Certificate received from theManagement.
2. During the year 2015-16 the Management has declared doubtful debts amountingRs.4850.16 Lakhs which is very high in percentage and full provision has been made in theProfit & Loss Account and accordingly provision has been made of interest receivableon debts amounting Rs.5016.11 Lakhs and we have relied upon the certificate obtained fromthe Management.
3. During the year 2015-16 the provision for obsolence has been shown by the Companyamounting Rs. 457.99 Lakhs and we have relied upon the Certificate received from theManagement of the Company.
4. During the year 2015-16 the provision for contingencies has been shown by theCompany amounting Rs. 273.19 lakhs and we have relied upon the certificate received fromthe Management of the Company.
5. During the year 2015-16 the Provision for Gratuity has been shown by the Companyamounting to Rs. 1102.92 lakhs and we have relied upon the certificate received from theManagement of the Company.
These matters give an unmodified opinion on Financial Statements of the unit.
Report on Other Legal and Regulatory Requirements:
1. As required by Section 143 (5) of the Act our submissions are as under:
a. we give in the Annexure A' a statement on the compliance to Directions issuedby the Comptroller and Auditor General of India
b. we have not received any statement on the compliance to specific sub directionsissued by the Principal Director Commercial Audit and Ex-Officio Member Audit BoardHyderabad for financial year 2015-16
2. As required by the Companies (Auditor's Report) Order 2015 (the Order')issued by the Central Gov ernment of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure B' a statement on the matters specified in theparagraph 3 and 4 of the Order to the extent applicable.
3. 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 the Statement of Profit and Loss and the Cash Flow Statementdealt with 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 with an exception to those mentioned in the paragraph ofBasis for Qualified Opinion and Other matters;
e) on the basis of the written representations received from the directors as on 31March 2016 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2016 from being appointed as a director in terms of Section164 (2) of the Act; and
f) 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 disclosed the impact of pending litigations on its financialposition in its Financial Statement as referred to in Note No. 39 (A) to 39 (E) of theFinancial Statement.
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any and as required on long-term contractsincluding derivative contracts; and
iii. There were no amounts required to be transferred to the Investor Education andProtection Fund by the Company.
| ||For M/s. DOKANIA S.KUMAR & CO. |
| ||Firm Registration Number : 322919E |
| ||CHARTERED ACCOUNTANTS |
| ||(CA. Sushil Kumar Dokania) |
|Place: Delhi ||Partner |
|Date: 30-05-2016 ||Membership No. 057020 |
Annexure A' to the Independent Auditors' Report
The Annexure referred to in our Independent Auditors' Report to the members of theCompany on the Standalone financial statements for the year ended 31 March 2016 we reportthat:
|Sl. No. ||Directions ||Auditor Observations |
|1. ||If the Company has been selected for disinvestment a complete status report in terms of valuation of Assets (including intangible assets and land) and Liabilities (including Committed & General Reserves) may be examined including the mode and present stage of disinvestment process. ||The Company has not been selected for disinvestment. |
|2. ||Please report whether there are any cases of waiver/ write off of debts/loans/interest etc. if yes the reasons there for and the amount involved. ||The Auditors of Tractor Division Pinjore have reported: |
| || ||The Unit has written off debts worth Rs.8.28 Lacs during the Financial Year 2015-16 after obtaining approval from the Chairman & Managing Director. |
| || ||No such cases have been noticed by us at CHO Level. |
|3. ||Whether proper records are maintained for inventories lying with third parties & assets received as gift from Govt. or other authorities. ||No inventories are maintained at CHO Level. Proper records have been maintained for assets received as gift from Govt. or other authorities |
| || ||As per the Report of Branch Auditors proper records have been maintained for inventories lying with third parties & assets received as gift from Govt. or other authorities. |
|4. ||A report on age-wise analysis of pending legal/ arbitration cases including the reasons of pendency and existence/ effectiveness of a monitoring mechanism for expenditure on all legal cases (foreign and local) may be given. ||The age wise analysis of pending legal/ arbitration cases of Other Units and CHO Level are enclosed in Annexure A-1' |
Annexure A-1' to the Annexure A' of the Independent Auditors' Report
The Annexure referred to in Annexure A' to our Independent Auditors' Report tothe members of the Company on the Standalone financial statements for the year ended 31March 2016 :
Corporate Head Office (CHO)
|Year /Date of Lodgement ||No. of Cases ||Reason for Pendancy |
|25-06-2012 ||1 ||Stay granted and Matter is due with High Court Bangalore against |
| || ||M/s Mallige Estate (P) Ltd. for Land taxes. |
|Not Available ||1 ||Case against LIC in Delhi is pending. No record is available for our verification |
As per Audit Report of Tractor Division Pinjore:
|Year of Lodgement ||No. of Cases ||Reason for Pendency |
|2015-16 ||5 ||Not provided by the Branch Auditor |
|2014-15 ||8 ||Not provided by the Branch Auditor |
|2013-14 ||24 ||Not provided by the Branch Auditor |
|2012-13 ||20 ||Not provided by the Branch Auditor |
|Prior to 2012-13 ||95 ||Not provided by the Branch Auditor |
As per Audit Report of Food Processing Machinery Division Aurangabad:
|Year of Lodgement ||No. of Cases ||Reason for Pendency |
|3331/1995 ||1 ||As a result of legal process |
|56/2002272/2002 ||2 ||As a result of legal process |
|115/2010 ||1 ||As a result of legal process |
|21063/2012 ||2 ||As a result of legal process |
|306/2012 ||1 ||As a result of legal process |
As per Audit Report of Common Services Division for 31/03/2015:
|Year of Lodgement ||No. of Cases ||Reason for Pendancy |
|OS 4916/2004 ||1 ||Cases being argued as time barred debts and hearing continued. |
| || ||NDOH for further evidence during 3rd June 2015 (out of court settlement is being explored) |
|SLP 13010/2006 ||1 ||Last Listed on during July 2011 |
|214/2006 ||1 ||Argument Stage. Next date of hearing on 01.06.2015 |
|WA 4152/09 arising out W P No. 4166/08 ||1 ||Writ Appeal admitted on 20.10.2010 listed on 18.02.2015 case put up for another bench. |
|2011 ||1 ||Writ petition to be filed in High Court or Dispute before Registrar of Co. Op. Society |
|MA 51/2013 ||1 ||Next Date of hearing on 20.06.2015 |
|MA 52/2013 ||1 ||Next Date of hearing on 20.06.2015 |
|CA 387/2013 ||1 ||Not yet listed |
|WP No.58755/13 ||1 ||Vakalath filed. Not yet listed |
|WP No. 56045 & ||1 ||Appeal filed to get stay vacated |
|56046 of 2015 || || |
Annexure B' to the Independent Auditors' Report
Referred to in point 2 under the heading "Report on Other Legal & RegulatoryRequirement" of our report of even date to the financial statements of the Companyfor the year ended March 31 2016 :
|Para # Cl. No. ||Particulars ||Remarks |
| || || |
|i) (a) ||whether the company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets. ||Yes. |
|(b) ||whether these fixed assets have been physically verified by the management at reasonable intervals; whether any material discrepancies were noticed on such verification and if so whether the same have been properly dealt with in the books of account. ||Yes verified by the management at reasonable intervals and no discrepancies were noticed on such verification. The periodicity of three years is reasonable having regard to the size of the Company and the nature of its assets. Last verification took place in the year 2013-14. |
|(c) ||whether the title deeds of immovable properties are held in the name of the company. If not provide the details thereof ||The title deeds of immovable properties are held in the name of the company except the land measuring 14.20 acres which was received in exchange agreement with Government Departments at Hyderabad. (as it is pending registration of transfer) |
|ii) ||whether physical verification of inventory has been conducted at reasonable intervals by the management and whether any material discrepancies were noticed and if so whether they have been properly dealt with in the books of account; ||Yes physical verification of inventory has been conducted at reasonable intervals and no material discrepancies were noticed by various units of the Company. |
|iii) ||whether the company has granted any loans secured or unsecured to companies firms Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the CompaniesAct 2013. ||As informed to us the company has granted loans to the bodies corporate but has not maintained a register U/s 189 of the Companies Act 2013. |
|iv) ||in respect of loans investments guarantees and security whether provisions of section 185 and 186 of the Companies Act 2013 have been complied with. If not provide the details thereof. ||As informed to us the company has granted loans to the bodies corporate but has not maintained a register U/s 189 of the Companies Act 2013. |
|v) ||in case the company has accepted deposits whether the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act 2013 and the rules framed there under where applicable have been complied with? If not the nature of such contraventions be stated; If an order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal whether the same has been complied with or not ? ||Not Applicable as company has not accepted any deposits during the year. |
|vi) ||whether maintenance of cost records has been specified by the Central Government under sub-section (1) of section 148 of the Companies Act 2013 whether such accounts and records have been so made and maintained. ||Food Processing Machinery Division - Not specified. Tractor Division Prescribed accounts and records have been made & maintained. Common Services Division Not Applicable Corporate Head Office Not Applicable |
|vii)(a) ||whether the company is regular in depositing undisputed statutory dues including provident fund employees' state insurance income-tax sales-tax service tax duty of customs duty of excise value added tax cess and any other statutory dues to the appropriate authorities and if not the extent of the arrears of outstanding statutory dues as on the last day of the financial year concerned for a period of more than six months from the date they became payable shall be indicated; ||Annexure - B-I' |
|(b) ||where dues of income tax or sales tax or service tax or duty of customs or duty of excise or value added tax have not been deposited on account of any dispute then the amounts involved and the forum where dispute is pending shall be mentioned. (A mere representation to the concerned Department shall not be treated as a dispute) ||Yes for Food Processing Machinery Division Sales Tax Liabilities for the year 1999-2000 of Rs. 39.05 Lakhs against Appeal before Sales Tax Tribunal Mumbai is pending. |
|viii) ||whether the company has defaulted in repayment of loans or borrowing to a financial institution bank Government or dues to debenture holders? If yes the period and the amount of default to be reported (in case of defaults to banks financial institutions and ||Food Processing Machinery Division - Company has not defaulted in repayment of loans or borrowing except default in repayment of loan to Government of India. Period wise details as given below: |
| ||Government lender wise details to be provided). ||Year ||Amount of Default(Principal) |
| || ||2014-15 ||1418800 |
| || ||2015-16 ||9221200 |
| || ||Tractor Division || |
| || ||Lender ||Amount of Default(Principal) |
| || ||Government of India ||294352000 |
| || ||Common Services Division || |
| || ||Lender ||Amount of Default(Principal) |
| || ||Government of India ||2007600 |
| || ||Corporate Head Office Yes there is continuous default in payment of principal and interest. Lender wise details is as under:- |
| || ||Lender ||Amount of Default(Principal) |
| || ||Government of India ||10880400 |
| || ||Dena Bank ||98650000 |
|ix) ||whether moneys raised by way of initial public offer or further public offer (including debt instruments) and term loans were applied for the purposes for which those are raised. If not the details together with delays or default and subsequent rectification if any as may be applicable be reported; ||Not Applicable as the Company has not raised moneys by way of initial public offer or further public offer including debt instruments and term Loans. |
| || || |
|x) ||whether any fraud by the company or any fraud on the Company by its officers or employees has been noticed or reported during the year; If yes the nature and the amount involved is to be indicated; ||Based upon the audit procedures performed and the information and explanations given by the management we report that no fraud by the Company or on the company by its officers or employees has been noticed or reported during the year. |
|xi) ||whether managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act? If not state the amount involved and steps taken by the company for securing refund of the same; ||Not Applicable as no managerial remuneration paid during the year. |
|xii) ||whether the Nidhi Company has complied with the Net Owned Funds to Deposits in the ratio of 1:20 to meet out the liability and whether the Nidhi Company is maintaining ten per cent unencumbered term deposits as specified in the Nidhi Rules 2014 to meet out the liability; ||Not Applicable |
|xiii) ||whether all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act 2013 where applicable and the details have been disclosed in the Financial Statements etc. as required by the applicable accounting standards; ||Yes |
|xiv) ||whether the company has made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and if so as to whether the requirement of section 42 of the Companies Act 2013 have been complied with and the amount raised have been used for the purposes for which the funds were raised. If not provide the details in respect of the amount involved and nature of non-compliance; ||Not Applicable the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review. |
|xv) ||whether the company has entered into any non-cash transactions with directors or persons connected with him and if so whether the provisions of section 192 of Companies Act 2013 have been complied with; ||Not Applicable as the company has not entered into any non-cash transactions with directors or persons connected with him. |
|xvi) ||whether the company is required to be registered under section 45-IA of the Reserve Bank of India Act 1934 and if so whether the registration has been obtained. ||Not Applicable. |
| ||For DOKANIA S.KUMAR & CO. |
| ||Firm Registration Number. 322919E |
| ||Chartered Accountants |
| ||(CA. Sushil Kumar Dokania) |
|Place: Delhi ||Partner |
|Date: 30/05/2016 ||Membership No.057020 |
Annexure B - I
|Sr. No. ||Nature of Statute ||Nature of Dues ||Amount (3) ||Period to which amount related |
| || ||Food Processing Machinery Division || || |
|1. ||Sales Tax ||Sales Tax Liability ||3905000.00 ||1999-2000 |
|2. ||Provident Fund ||Employees Contribution to PF ||5960012.00 ||Upto March 2016 |
|3. ||Provident Fund ||Employers Contribution to PF ||4656869.00 ||Upto March 2016 |
|4. ||Provident Fund ||PF Loan Recoveries ||1436280.05 ||Upto March 2016 |
|5. ||VPF ||Provident Fund ||2168500.00 ||Upto March 2016 |
| || ||Tractor Division || || |
|1. ||Pinjore Sales Tax ||Interest on Demand ||13224549.00 ||2001-02 to 2005-06 |
|2. ||Sales Tax ||Additional Demand ||786896.00 ||2011-12 |
|3. ||CPF ||Provident Fund ||97419562.00 ||Nov 13 to March 16 |
|4. ||EPF ||Provident Fund ||118342801.00 ||Nov 13 to March 16 |
|5. ||EPS ||Provident Fund ||18076022.00 ||Nov 13 to March 16 |
|6. ||VPF ||Provident Fund ||74484900.00 ||Nov 13 to March 16 |
|7. ||PF Loan & Interest ||Provident Fund ||150747727.00 ||Nov 13 to March 16 |
|8. ||Professional Tax ||Professional Tax ||126200.00 ||Nov 13 to March 16 |
| || ||Corporate Head Office || || |
|1. ||Income Tax* ||TDS Defaults ||820618.69 ||2014 15 |
|2. ||Income Tax* ||TDS Defaults ||2441242.29 ||2013- 14 |
|3. ||Income Tax* ||TDS Defaults ||2025509.08 ||2012-13 |
|4. ||Income Tax* ||TDS Defaults ||68584.56 ||2015-16 |
|5. ||Income Tax* ||TDS Defaults ||3578107.62 ||Prior Years |
|6. ||Greater Hyderabad ||Property Tax ||33063258.00 ||Previous Years |
| ||Municipal || || ||Arrear Penalty |
| ||Corporation || || ||Current Tax |
|7. ||SPF ||Employee's Contribution ||2042540.00 ||Since 31/07/2015 |
| || || || ||Upto March 2016 |
|8. ||VPF ||Employee's Contribution ||2449571.00 ||Since 31/07/2015 |
| || || || ||Upto March 2016 |
|9. ||PF ||Company's Contribution ||1838790.00 ||Since 31/07/2015 |
| || || || ||Upto March 2016 |
| ||TOTAL || ||539663539.29 || |
Annexure to the Independent Auditors' Report
Report on the Internal Financial Controls under Clause (i) of sub-section 3 of Section143 of the Act
We have audited the internal financial controls over financial reporting of HMT Limited(hereinafter referred to as the Company') as of 31st March 2016 inconjunction with our audit of the financial statements of the Company for the year endedon 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 (hereinafter referred to asICAI'). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to the Company'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the companies Act 2013(hereinafter referred to as 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(hereinafter referred to as the Guidance Note') and the Standards on Auditingissued by ICAI and deemed to be prescribed under section 143(10) of the Act to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the ICAI. Those Standards and the GuidanceNote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate internal financial controls overfinancial 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 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 of themanagement 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.
Disclaimer of Opinion
In our opinion on CHO Level the Company at CHO Level has in all material respectsadequate internal financial controls system over financial reporting and such internalfinancial controls over financial reporting were operating effectively as at March 312016 based on the internal control over financial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India.
The system of internal financial controls over financial reporting with regard to threeof the significant units of the Company namely Tractor Division at Pinjore FoodProcessing Unit at Aurangabad and Common Service
Division at Bangalore were not made available to us to enable us to determine if theCompany has established adequate internal financial control over financial reporting atthe aforesaid divisions and whether such internal financial controls were operatingeffectively as at March 31 2016.
We have considered the disclaimer reported above in determining the nature timing andextent of audit tests applied in our audit of the financial statements of the Company andthe disclaimer does not affect our opinion on the standalone financial statements of theCompany
For DOKANIA S. KUMAR & CO.
Firm Registration Number. 322919E
(CA. Sushil Kumar Dokania)
COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) OF THECOMPANIES ACT 2013 ON THE ACCOUNTS OF HMT LIMITED BANGALORE FOR THE YEAR ENDED 31 MARCH2016.
The preparation of financial statements of HMT Limited Bangalore for the year ended on31 March 2016 in accordance with the financial reporting framework prescribed under theCompanies Act 2013 (Act) is the responsibility of the management of the Company. TheStatutory Auditor appointed by the Comptroller and Auditor General of India under Section139(5) of Act is responsible for expressing opinion on these financial statements underSection 143 of the Act based on the independent audit in accordance with the Standards onAuditing prescribed under Section 143 (10) of the Act. This is stated to have been done bythem vide their Audit Report dated 30 May 2016.
I on the behalf of the Comptroller and Auditor General of India have conducted asupplementary audit under Section 143(6) (a) of the Act of the financial statements of HMTLimited Bangalore for the year ended on 31 March 2016. This supplementary audit has beencarried out independently without access to the working papers of the Statutory Auditorsand is limited primarily to inquiries of the Statutory Auditor and company personnel and aselective examination of some of the accounting records. Based on my supplementary auditI would like to highlight the following significant matters unde section 143(6)(b) of theAct which have come to my attention and which in my view are necessary for enabling abetter understanding of the financial statements and the related audit report :
A. Comments on financial position Balance Sheet Assets
Non Current Investments (Note 11) Rs.763.90 crores
The above includes equity investment of Rs. 43.96 crore in two subsidiary Companies -HMT Watches Limited (3 6.49 crore) and HMT Bearings Limited (3 37.47 crore). The CabinetCommittee on Economic Affairs (CCEA) Government of India approved (January 2016) theclosure of these two subsidiary Companies.
As of 31 March 2016 HMT Watches Liumited had total liabilities of Rs. 2960.85 crore asagainst the total assets of Rs. 295.53 crore. Similarly HMT Bearings Limited had totalliabilities Rs. 154.33 crore as against the total assets of Rs. 35.49 crore. Thus the networth of both the Companies has been completely eroded.
Despite the decision of Government of India to close the two subsidiary Companies andtheir adverse financial position the Company neither disclosed the fact of decision normade any provision as per Accounting Standard 13 towards diminution of investment in thesesubsidiary Companies.
| ||For and on behalf of the |
| ||Comptroller and Auditor General of India |
| ||(Arabinda Das) |
|Place : Hyderabad ||Principal Director of Commercial Audit & Ex-Officio Member Audit Board |
|Date : 07 September 2016 ||Hyderabad |
COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) OF THECOMPANIES ACT 2013 ON THE ACCOUNTS OF HMT LIMITED BANGALORE FOR THE YEAR ENDED 31STMARCH 2016
Balance Sheet Assets
Non Current Investments (Note 11) The Government of India Department of HeavyIndustry Rs.763.90 Crore vide letter dated 13th January 2016 havecommunicated the approval of CCEA for closure of three Subsidiary The above includesequity investment of Rs.43.96 crore Companies of HMT Limited viz. HMT Watches Limited intwo Subsidiary Companies HMT Watches Limited HMT Chinar Watches Limited and HMTBearings Limited (Rs.6.49 crore) and HMT Bearings Limited (Rs.37.47 and directed theCompanies to take appropriate action crore). The Cabinet Committee on Economic Affairs forclosure. Action has been initiated by the Companies (CCEA) Government of India approved(January 2016) for closure. the closure of these two Subsidiary Companies.
The CCEA approval provides for write-off of the entire dues As of 31st March2016 HMT Watches Limited had total of these Companies to the GoI on closure while fundsliabilities of Rs.2960.85 crore as against the total assets received from the sale ofmovable assets other receivables of Rs 295.53 crore. Similarly HMT Bearings Limited hadand funds available with these Companies are to be utilised total liabilities of Rs.154.33crore as against total assets for settlement of other liabilities of these Companies. ofRs 35.49 crore. Thus the net worth of both the Companies has been completely eroded.Equity Investment of Rs 43.96 crore have been made by HMT Limited in HMT Watches Limitedand HMT Bearings Despite the decision of Government of India to close the Limited. As itis expected that these investments could two Subsidiary Companies and their adversefinancial be realized to some extent from the proceeds of sale of position the Companyneither disclosed the fact of moveable assets other receivables and funds availabledecision nor made any provision as per Accounting with these Companies provisions fordiminution in value Standard 13 towards diminution of investment in these of theinvestment have not been made in the books of Subsidiary Companies.
HMT Limited during the financial year 2015-16.
|For and on the behalf of the ||For and on the behalf of the Board |
|Comptroller and Auditor General of India || |
|(Arabinda Das) ||(S. Girish Kumar) |
|Principal Director of Commercial Audit & ||Chairman & Managing Director |
|Ex-Officio Member Audit Board || |
|Place : Hyderabad ||Place : Bangalore |
|Date : 7.9.2016 ||Date : 7.9.2016 |