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Indu Nissan Oxo Chemicals Industries Ltd.

BSE: 500208 Sector: Industrials
NSE: INDUNISSAN ISIN Code: INE599C01019
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Indu Nissan Oxo Chemicals Industries Ltd. (INDUNISSAN) - Auditors Report

Company auditors report

To

The Members

Indu Nissan Oxo Chemicals Industries Limited

We have audited the accompanying financial statements of Indu Nissan Oxo ChemicalsIndustries Limited which comprise of the Balance Sheet as at March 31 2016and the Statement of Profit and Loss and Cash Flow Statement of the Company for the yearended on that date annexed thereto and a summary of significant accounting policies andother explanatory information.

Management’s Responsibility for the Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section134 (5) of the Companies Act 2013 ("the Act") with respect to the preparationof these standalone financial statements that 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 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.

Auditor’s Responsibility

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 accordancewith the Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on theauditor’s 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 internal financial control relevant to the Company’spreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of theaccounting estimates made by Company’s Directors as well as evaluating the overallpresentation of the financial statements.

We believe that the audit evidence we have sought and obtained is sufficient andappropriate to provide a basis for our qualified audit opinion.

Basis for Qualified Opinion

(a) Attention is invited to sub-note No. 2 (d) of Note No. 29. The Company hasdefaulted in redemption of Debentures which fell due on the 10th of July 1998aggregating to Rs.550.18 Lac and the amount of interest including penal interestcalculated at simple interests accrued as of 31st March 2013 is Rs.1422.04 Lac of whichthe Company has unilaterally written back interest element of RS. 1334.01 Lac mentioningthat it is in process of negotiating with debenture holders as to the repayment of duesand the Company does not anticipate any interest payment and the same has been treated bythe Company as other revenues. The Company has reached to settlement with the debentureholders post year end. The debenture holders have agreed to settle the amount payable @30% of principal amount outstanding subject to certain terms and conditions. The Companyis in process of liquidating some of its assets and pay off the debenture holders. In casethe Company is not able to pay the settled amount within stipulated period the settlementmay be cancelled by the debenture holders. The Company has approached BIFR for thepermission to sell the assets and is confident of getting the permission. The Company inanticipation of liquidating the assets and paying off the debenture holders has writtenback the balance amount not payable to capital reserve. The Company following tosettlement does not anticipate additional interest liability as demanded by the debentureholders due to which Company has not provided interest for the current year as well ascompany has written back the interest of RS. 133401338 provided in the earlier years.The above position continues since last year where the Company has not been able to obtainany order from the BIFR. We are unable to form our opinion on this as the entire matter iscontingent and subject to approval of BIFR for sale of assets and further the Company isable to sell the assets post such approval in open market and fetch necessary amount topay off the debenture holders but for which entire settlement may get cancelled.

(b) Attention is invited to sub-note No. 6 of Note No. 29 -Other Notes to Accountsregarding confirmation of account of various parties the balances have been taken as perbooks of account. We in the absence of confirmations are unable to ascertain the nature ofadjustments that may be required in respect of various accounts and the resultant effectsthereof on the accounts.

(c) Attention is invited to sub-note no. 2 (a) of Note No. 29 - Other Notes toAccounts. In respect of Inter Corporate Deposits received from Himalaya Machinery Limitedthe Company had based on legal opinion written back interest amounting to Rs. 23.43 Lacduring the financial year ended 31st March 2002. Further the Company has not provided anyinterest for the period 1.10.2000 to 31.03.2016 the interest of which works out to Rs.180.15 Lac calculated at simple rests @ 27%. Including current year’s interest of Rs.11.64 Lac.

(d) Provision for Gratuity payable to employees has been made only up to 31st March2006 based on management estimates. Provision for gratuity and retirement benefits for thecurrent year has not been made. In the absence of any actuarial valuation we are unable toquantify the impact of the same on the Statement of Profit and Loss. This practice of theCompany is not in conformity with the AS – 15. Attention is invited to sub-note no. 2(h) of Note No. 29 as regards the decision of hon’ble Labour Court directing theCompany to pay a sum of RS. 1299.61 Lac towards labor payments. The Company has filedmiscellaneous application before the hon’ble Court for review instead of filingfurther appeal. Considering the significance of amount we are not able to form ouropinion in this regard.

(e) Attention is invited to sub-note no. 2 (b) of Note No. 29 of Other Notes toAccounts. Based on management’s perception the Company had written back Interestaccrued on Working Capital Loans amounting to Rs 493 Lac during preceding financial years.We are informed that the management is in negotiation with the bankers as regardsrepayment of the working capital loans at a reduced principal amount and no interest.However no finality has been reached as to reduced payment of loan or for that matternon payment of interest. No provision for interest payable on this account is made duringthe year which the Company otherwise used to provide every year amounting to Rs. 52.98Lac up to March 31 2010 on an estimated basis. This year no amount has been quantifiedby the management as not provided. During the year the Company has paid Rs. 500000 asadvance against this account to ARCIL which is shown as reduction in loan amount and thefinal amount is shown at Rs. 12066944. In absence of any supporting evidence availableor for that matter any confirmation from the bankers we are unable to express our opinionon this item;

(f) Attention is invited to Note no. 7 (d) of Notes to Accounts. Based onmanagement’s perception the Company has not provided for interest on term loanpayable to Kotak Mahindra Bank. We are explained by the management that it is innegotiation with the bankers as regards repayment of the term loan at a reduced amountthan what has been standing to the credit of bankers although no tangible and Convincingcorrespondence was made available to us. No finality has been reached as to reducedpayment of loan as stated above. No provision for interest payable on this account is madeduring the year which the Company otherwise used to provide every year amounting to Rs.112.88 Lac up to March 31 2011 on an estimated basis. This apart interest provideduptill earlier years is shown as payable unlike writing back the same in lines with otherbank and debentures. This year no amount has been quantified by the management as notprovided. In absence of any supporting evidence available or for that matter anyconfirmation from the bankers we are unable to express our opinion on this item;

(g) in absence of confirmations from creditors especially secured creditors we areunable to opine on the outstanding balances shown in accounts including interest providedand payable thereon. Similarly the creditors written back amounting to RS. 11.38 Lacwhich also include statutory dues not payable according to the Company and shown asincome are all based on the management’s perception and no tangible evidence wasplaced for our verification;

(h) The Company has not carried out physical verification of closing stock of Rs. 2.58Lac and the valuation is based on management’s estimates and no evidence ofphysical availability of stock was provided to us.

As regards cash in hand of RS. 4.98 Lac we are informed that the same is inpossession of the Managing Director. In view of this closing stock of RS. 2.58 Lac andcash in hand of Rs. 4.98 Lac are accepted as certified by the management;

(i) Accounts of the Company are prepared on Going Concern basis although entire networth is eroded and there are no material business activities carried out by the Company.The Management is hopeful of revival of the Company with the help of BIFR. Howeverconsiderable period has elapsed after approaching BIFR and we are unable to state whetherthe Company remains a going concern; (j) the combined effect of the above qualificationsover financial results is not determinable in view of absence of relevant components andinformation from the management.

Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis for QualifiedOpinion paragraph the financial statements give the information required by the Act inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:

(i) in case of the Balance Sheet of the state of affairs of the Company as at 31stMarch 2016;

(ii) in case of Statement of Profit and Loss of the Profit of the Company forthe year ended on that date.

(iii) in case of cash flow statement of cash flow of the Company for the year ended onthat date.

Emphasis of Matter

(a) Attention is invited to sub-note no. 2 (c) of Note No. 29 - Other Notes toAccounts. The Custom department had imposed penalty of Rs.1000 Lac on the Company whichwas disputed by the Company. On appeal before CESTAT the said penalty was reduced to Rs.700 Lac vide order dated March 31 2011 Subsequently CESTAT removed the penalty levied bythe department. At Present department is in appeal before Hone’ble High Court ofGujarat and hence no provision for this liability is made in the accounts contending thisbeing contingent liability. Our opinion is not qualified in respect of this matter.

(b) Attention is invited to sub-note no. 2 (e) of Note No. 29 - Other Notes toAccounts. Amount receivable from RSEB (Rajasthan State Electricity Board) in respect ofAssets given on Lease is shown at Rs.412.19 Lac against security deposit received fromRSEB of Rs.653.09 Lac. We have been informed that Company has filed a suit against RSEBbefore Rajasthan High Court for the recovery of Rs.964.92 Lac inclusive of interest @ 20%after making adjustment of DPA (Deferred Payment Agreement) decision of which remainspending. Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure A a statement on the matters specified inthe paragraph 3 and 4 of the order.

2. As required by Section143 (3) of the Act we report that:

(a) we have sought and obtained all the information and explanation exceptmentioned earlier in this report more particularly confirmations from lenders andcreditors including the secured lenders / creditors which to the best of ourknowledge and belief were necessary for the purpose of our audit; (b) in our opinionproper books of account as required by law have been kept by the Company so far as appearsfrom our examination of those books; (c) the Balance Sheet Statement of Profit and Lossand Cash flow Statement dealt with by this Report are in agreement with the books ofaccount; (d) in our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014.

(e) on the basis of written representations received from the Directors as on the dateof balance sheet and taken on record by the board of directors we report that none ofthe directors is disqualified as on the said date from being appointed as a director interms of Section 164 (2) of the Act.

(f) The Company has defaulted in redemption of Debentures which fell due on the 10thof July 1998 aggregating to Rs.550.18 Lac and the amount of interest including penalinterest calculated at simple rests accrued as of 31st March 2013 is Rs.1422.04 Lac (ofwhich the Company had unilaterally written back interest element of RS. 1334.01 Lac in theyear ended 31st March 2013 and no provision is made for the year ending 31st March 2015)thereby the directors of the Company are disqualified from being appointed as directorunder sub section 2 of section 164 of the Companies Act 2013 (although the Company hasreached to settlement with debenture holders no payment has actually been made as statedin Basis for Qualified Opinion)

(g) with respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B"; and (h) With respect to the other matters to beincluded in the Auditor’s Report in accordance with Rule 11 of the Companies (Auditand Auditors) Rules 2014 in our opinion and to the best of our information and accordingto the explanations given to us:

i. We are informed that the Company has pending litigations as described in accountsand our report which are likely to impact its financial position; ii. The Company has madeprovisions as required under the applicable law or accounting standard for materialforeseeable losses if any on long-term contracts including derivative contracts. iii.There has been delay in transferring amounts required to be transferred to the InvestorEducation and Protection Fund by the Company.

FOR SHAH SHAH & SHAH

CHARTERED ACCOUNTANTS

(Mehul Shah)

PARTNER

Mumbai:

May 28 2016

M. No. 049361

FRN: 116457W

ANNEXURE "A" REFERRED TO IN REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTSOF OUR REPORT OF EVEN DATE IN CASE OF

Indu Nissan Oxo Chemical Industries Limited

(i) (a) The Company has not maintained proper records showing full particulars ofincluding quantitative details and situation of fixed assets since the same is notupdated.

(b) As plant of the Company is not in operation the Company has not carried outphysical verification of the assets at periodic intervals. In respect of assets given onlease no confirmation from the lessee has been produced before us stating that theassets leased under the agreements are existing but owing to dispute with the lessee thesame cannot be confirmed.

The Company has written off some non existing assets during preceding years based onperception of the management.

(c) As per records presented before us the title deeds of immovable properties areheld in the name of the Company.

(ii) (a) We have been informed by the management that Stock of goods have beenphysically verified by the management at reasonable intervals during the year; though norecords of physical verification or valuation on the date of balance sheet were producedbefore us. The stock of stores packing material and semi finished goods is valued basedon Chartered Engineers’ Certificate dated 13/10/2010 as reduced by the stock soldduring earlier year and a further written off of value on the management’s estimateas to net realizable value.

(iii) The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained undersection 189 of the Companies Act 2013.

(a) Since no loans are granted the sub-clause dealing with terms and conditions beingprejudicial to the companies Interest in not applicable.

(b) Since no loans are granted the sub-clause dealing with rate of interest and otherterms and conditions of loans given by the company are not applicable.

(c) Since no loans are granted the sub-clause dealing with overdue amount more thanninety days and reasonable steps taken by the Company for recovery of the principal andinterest is not applicable.

(iv) As per records maintained and explanation given to us the Company has not grantedLoans to directors and other parties listed under section 185 of the Companies Act 2013 orfor that matter given loans and made investments or given guarantees and securities inexcess of limits prescribed by section 186 of the Companies Act 2013.

(v) The Company has not accepted any deposits from public within the meaning of theprovisions of section 73 or any other provisions of the Companies Act 2013 and the rulesmade there under. We have been informed by the management that there has been no orderpassed by the Company law Board or National Company Law Tribunal or Reserve Bank of Indiaor any Court or any other Tribunal on the Company with respect to compliance of theprovisions of section 73 or any other provisions of the Companies Act 2013. The Companyhas defaulted in repayment of debentures as mentioned in our report earlier.

(vi) We have been informed by the management that the Central Government has notprescribed the method of maintenance of cost records u/s. 148 (1) of the Companies Act2013 in relation to the Company.

(vii) (a) The Company has defaulted in payment of undisputed statutory dues as givenbelow. The extent of arrears of Statutory Dues outstanding exclusive of interest that maybe charged by the Revenue Authorities (after adjusting pre-paid taxes) for more than sixmonths as on the year end is as follows:

Nature of Statutory Dues Amount (Rs) (in lacs)
Investor Education and Protection Fund 16.26
Income Tax 119.47
Sales Tax 47.85
Service Tax 1.2
Bajwa Gram Panchayat 11.97

The Company has not been collecting and paying employees profession tax. SimilarlyCompany’s own profession tax has also not been paid. Similarly the Company has notprovided for Service Tax payable under Reverse Charge mechanism on directors’ sittingfees. The amount of arrears and default has not been quantified by the Management.

The Company has unilaterally written back certain statutory dues like tax deducted atsource and state profession tax for employees and carried them to income contending thatthe same are not payable any more.

The Company has requested the Income-tax Department to adjust refunds of subsequentyears against outstanding dues of earlier years for which we are informed no communiquis received from the Income-tax Department except with respect to Assessment Year 1995-96where the demand is adjusted against refund of Assessment Year 2010-11.

In the case of Income tax deducted at source the Company has deducted tax on paymentbasis whereas provisions of chapter VXII-B of the Income-tax Act 1961 require deduction oftax on payment or credit in the books of account whichever is earlier. Details of paymentswherein tax should have been deducted on credit basis are not available. Hence we areunable to state the exact amount of the defaulted tax deducted at source liability. Theabove mentioned amount is tax deducted at source on payments made but not deposited withthe Central government. Rent paid in Court as described in Sub Note no. 2 (j) of Note No.29 the Company has not made TDS stating that the same is merely a deposit withhon’ble Court as per directions.

(b) As per information and explanation given to us the following are details ofdisputed statutory dues that has not been paid to the concerned authorities.

Name of the Statutory Dues Forum where dispute is pending Period to which the amount relates Unpaid Amount (Rs in Lacs)
1 Income tax ITAT-Ahmedabad 1999-00 0.63
2 Custom Duty Gujarat High Court 1995-96 700
3 Excise Penalty CES Appellate 2004-05 to
Tribunal 2007-08 0.41
4 Income tax Penalty ITAT-Ahmedabad 2007-08 18.01
5 Income Tax Quantum ITAT-Ahmedabad 2007-08 Nil Because of Brought forward loss
6 Income tax Penalty ITAT-Ahmedabad 2006-07 45.72

(viii) (a) The Company has defaulted in redemption of debentures which fell due on the10th July 1998 aggregating to Rs 550.18 lacs and the amount of interest accrued as of dateis Rs. 1422.04 Lac calculated on simple rests inclusive of penal interest as agreed uponin terms and conditions of issue of the debenture. As stated in our report the Companyhas not made provision for interest on debentures during the current year. the Company hasunilaterally written back interest element of RS. 1334.01 Lac mentioning that it is inprocess of negotiating with debenture holders as to the repayment of dues and the Companydoes not anticipate any interest payment and the same has been treated by the Company asother revenues. The Company has reached to settlement with the debenture holders post yearend. The debenture holders have agreed to settle the amount payable @ 30% of principalamount outstanding subject to certain terms and conditions. The Company is in process ofliquidating some of its assets and pay off the debenture holders. In case the Company isnot able to pay the settled amount within stipulated period the settlement may becancelled by the debenture holders. The Company has approached BIFR for the permission tosell the assets and is confident of getting the permission. The Company in anticipationof liquidating the assets and paying off the debenture holders has written back thebalance amount not payable to capital reserve. Since the event in opinion of Company isoccurring after the balance sheet date that requires adjustment to the amount payable onbalance sheet date this adjustment is carried out. The Company following to settlementdoes not anticipate additional interest liability as demanded by the debenture holders dueto which Company has not provided interest for the current year as well as company haswritten back the interest of RS. 133401338 provided in the earlier years. We are unableto form our opinion on this as the entire matter is contingent and subject to approval ofBIFR for sale of assets and further the Company is able to sell the assets post suchapproval in open market and fetch necessary amount to pay off the debenture holders butfor which entire settlement may get cancelled.

(b) In respect of term loans from financial institution the Company has defaulted inrepayment of their dues. Following table brings out the amount of default and the periodfrom which default is made:

Default commencing from
Sr No Term Loans from Finanacial Institutions Principal (Rs In Lacs) Interest (RsIn Lacs) Total (RsIn Lacs) Principal Interest
1 Kotak Mahindra Bank (taken over from IDBI Bank) 261.3 1447.44 1708.74 31-Mar-08 30-Sep-08
TOTAL 261.3 1447.44 1708.74

As stated in our report the Company has not provided for interest payable on aboveloan during the current year. The figure of default in interest excludes interest notprovided during the current year in absence of any confirmation from the bank to thiseffect.

Default commencing from
Sr. No. Cash Credits from Banks Principal (RsIn Lacs) Interest (RsIn Lacs) Total (RsIn Lacs) Principal Interest
1 ARCIL (UBI) 120.67 Nil 120.67 30-Sep-98 30-Sep-98
TOTAL 120.67 Nil 120.67

In case of ARCIL interest outstanding is indicated as zero in view of write back ofinterest payable during earlier years.

(ix) We have been informed by the management that no money was raised by way of InitialPublic offer or Further Public offer( including Debt instrument) and in case of termLoans the amount was applied for the purpose for which they are taken.

(x) As informed by the management there has not been noticed or reported any fraud onor by the Company or its officers or employees during the year.

(xi) During the year the Company has not paid managerial remuneration. In view of thisthe clause requiring reporting on managerial remuneration being paid or provided inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Companies Act is not applicable.

(xii) Since the Company is not a Nidhi Company the provisions of this clause are notapplicable to the Company.

(xiii) In our view and as per the explanation given to us by the managementtransactions with the related parties are in compliance with section 177 and 188 of theCompanies Act 2013 wherever applicable and details have been disclosed in the Financialstatements as required by the applicable accounting standard.

(xiv) we have been informed by the management that Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year under review.

(xv) As per the explanation given to us by the management and as per recordsmaintained the Company has not entered into any non-cash transactions with directors orany persons connected with him as prescribed by section 192 of the Companies Act 2013.

(xvi) In our view the Company has not carried out any activities in nature ofactivities carried out by non banking financial companies and thus is not required to getregistered under section 45-IA of the Reserve Bank of India Act 1934.

FOR SHAH SHAH & SHAH

CHARTERED ACCOUNTANTS

(Mehul Shah)

PARTNER

Mumbai :

May 28 2016

M. No. 049361

FRN: 116457W