You are here » Home » Companies » Company Overview » Kanel Industries Ltd

Kanel Industries Ltd.

BSE: 500236 Sector: Industrials
NSE: KANELOIL ISIN Code: INE252C01015
BSE LIVE 14:42 | 22 May Stock Is Not Traded.
NSE 05:30 | 01 Jan Stock Is Not Traded.
OPEN 3.61
PREVIOUS CLOSE 3.80
VOLUME 21
52-Week high 5.20
52-Week low 2.47
P/E
Mkt Cap.(Rs cr) 7
Buy Price 0.00
Buy Qty 0.00
Sell Price 3.61
Sell Qty 1824.00
OPEN 3.61
CLOSE 3.80
VOLUME 21
52-Week high 5.20
52-Week low 2.47
P/E
Mkt Cap.(Rs cr) 7
Buy Price 0.00
Buy Qty 0.00
Sell Price 3.61
Sell Qty 1824.00

Kanel Industries Ltd. (KANELOIL) - Auditors Report

Company auditors report

Independent Auditors Report

TO THE MEMBERS OF

KANEL INDUSTRIES LTD

Report on the Financial Statements:

We have audited the accompanying financial statements of KANEL INDUSTRIES LTD("the company") which comprise the Balance Sheet as at 31/03/2014 and theStatement of Profit and Loss and the Cash Flow Statement for the year then ended and asummary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements:

The Company’s Management is responsible for the preparation of these financialstatements that give a true and fair view of financial position financial performance andcash flows of the company in accordance with the accounting principles generally acceptedin India including Accounting Standards referred to in sub –section (3C) of section211 of the Companies Act 1956 ("the Act") read with the General Circular No.15/2013 dated 13th September 2013.This responsibility includes the design implementationand maintenance of internal control relevant to the preparation and presentation offinancial statements that give a true and fair view and are free from materialmisstatements whether due to fraud or error.

Auditor’s Responsibility: Our responsibility is to express an opinion on thesefinancial statements based on our audit. We conducted our audit in accordance with thestandards on auditing issued by the Institute of Chartered Accountants of India. Thosestandards require that we comply with ethical requirements and plan and perform the auditto obtain reasonable assurance about whether the financial statements are free frommisstatements.

An Audit involves performing procedure to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend uponauditor’s judgment including the assessment of the risk of material misstatements ofthe financial statements whether due to fraud or error. In making those risk assessmentthe auditor considers internal control relevant to the Company’s preparation and fairpresentation of the financial statements in order to design audit procedure that areappropriate in the circumstances. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made bymanagement as well as evaluating the overall presentation of financial statements.

We believe that audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion.

Opinion:

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid 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:

(a) in case of the Balance Sheet of the state of affairs of the Company as at31/03/2014;

(b) in case of Statement of Profit and Loss of the Loss of the Company for the yearended on that date; and

(c) In the case of Cash Flow statement of the cash flow for the year ended on thatdate

Report on Other Legal and Regulatory Requirements:

1. As required by the Companies (Auditor’s Report) Order2003("theorder") as amended issued by Central Government of India in terms of sub-section(4A) of section 227 of the Act we give in the Annexure a statements on the mattersspecified in paragraphs 4 and 5 of the order.

2. Further to our comments in the Annexure referred to above we comment that:

a. Delhi High Court has remanded back the company to BIFR in its pending appeal on 19thJanuary 2010 and thereafter in the next hearing held on 29/04/2010 and as per the orderof the Honorable Delhi High-court BIFR had appointed IDBI as OA to inspect the unit andsubmit the report thereon. In the last date of hearing on 29/08/2013 the honorable BIFRhas directed the company to revise and resubmit with OA the DRS with cutoff date as31/03/2013.The Company had submitted the revised DRS to OA as directed by the HonorableBIFR but in the hearing on 27/03/2014 due to late submission by OA (IDBI) with respect tocertain query of the BIFR the BIFR dismissed the company’s reference. However theCompany is filling an appeal with AAIFR against the order of BIFR.

b. Dividend declared in year 1995 1996 1997 and 1998 and remained unclaimed are duefor transfer to Investors Education and Protection Fund under the provisions of Sec 205Cof the Companies Act 1956. It has been informed by the management that details forunclaimed dividend are not provided by the nominated bank SBI [ Previously SBS ] Industrial finance Branch Ellisbridge Ahmedabad and SBI [ Previously SBS Isanpur BranchAhmedabad]. In absence of proper records and supporting evidences we could not quantifythe amount not transferred as required by the law and its compliance.

c. The Company has taken inter corporate loan of Rs 4.91 Lacs [unsecured ] andunsecured loans from related parties/firms of Rs. NIL and from Non Related person Rs.15lacs unsecured loan during the financial year under audit. The Closing Balance at the yearend are Rs. 681.77 Lacs in case of inter corporate loans and Rs.107.68 lacs for relatedparties and firms and from key management person and Rs.15 lacs from other parties. Nointerest provided on loan accounts. In absence of formal agreement or supporting otherdocumetns we could not comment and could not quantify the non provision of interestthereon.

Out of total Inter Corporate Loans as above the Company has taken Mortgage Loan of Rs.5 Crore from Adani Enterprises Ltd in earlier years. We are not provided any formal LoanAgreement copy except Mortgage Deed which does not contain any repayment terms andinterest rate. No interest is provided on such Loans. We are unable to comment upon nonprovision of interest repayment schedule etc. in absence of any formal agreement with thecompany and related documents and information. Account confirmation copy is not availablefor our verification.

d. Company has not made provision for doubtful Debtors of Rs 95.93 Lacs for thedebtors outstanding for the long time to that extent Current Assets have been overstatedand current years Losses and accumulated losses have been understated.

e. The Company has violated provisions of Income Tax Act 1961 by non filing Income TaxReturns from FY 2008-09 onwards. Proper records are not made available to us for ourverification and to compute Income Tax and related statutory liabilities. In thissituation we are unable to comment upon the non provision of statutory liabilities forcurrent year as well as for the earlier years.

f. The Company has not deducted TDS from Professional fees paid / credited on sum ofRs. 405000/- during the financial year under audit.

g. The Company has violated provisions of Sec 383A of the Companies Act. 1956 by nonappointing full time company secretary.

h. We have not received report on Corporate Governance as required by Clause 41 of thelisting agreement for our verification.

i. Internal Control system needs to be strengthen for recovery of outstanding dueshigh cash transactions and high cash on hand on balance sheet date.

j. Bank Balance certificate or Bank Statements for various banks including No lienaccounts with banks showing total balance of Rs. 89.30 Lacs are not available with thecompany. Management is of opinion that banks are not providing such required bankstatements or certificates hence all accounts are carried forward showing as bank balance.It is also not clarified that whether these bank balances in No-lien accounts arereceivable by the company or adjusted against bank loans setteled under OTS in earlieryears since all respective banks debts have been settled under OTS in earlier years.

In absence of such documents and clarifications we could not comment upon thegenuineness of balance with banks and as per our opinion current assets are overvalued tothe extent of this amount and to the extent losses are under valued.[ Read with NotesNo.26] In addition to our observation in clause (a) to (j) above the Naroda Unit has beeninoperative since last many years. There is Trading activities during the year under auditbut majority Financial indicators and operating indicators remained negative and to thedate of Audit report and in absence of formal developments for financial support there issubstantial doubt that it will be able to continue as a going concern even though thebooks of accounts of the Company has been prepared on the assumption of a Going Concernbasis. In this situation adjustments may be required to the recorded assets amounts atcurrent value and classification of liabilities is required. The financial statements donot disclose this fact.

Further to our comments in the annexure referred to in paragraph 2 above we report asfollows:

a. We have obtained all the information and explanation which to the best of ourknowledge and belief were necessary for the purposes of our audit except certain nonreceipt of confirmation of balances in respect of loans and Advances Deposits Debtorsand Creditors Banks and Financial Institutions. [Read with Notes No.27] and certaindocuments and records in relation to areas of non-compliance as mentioned in para (a) to(i) above.

b. In our opinion proper books of accounts as required by the law have been kept by theCompany so far as appears from our examination of the books of accounts.

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 accounts.

d. In our opinion Balance Sheet the Statement of Profit and Loss and Cash Flowstatements complied with the Accounting Standards referred to in Sub Sec 3C of Sec 211 ofthe Act read with General Circular 15/ 2013 dated 13/09/2013 of the Ministry of CorporateAffairs in respect of Sec 133 of the Companies Act. 2013.

(i) The Company has not complied with AS 28 introduced w.e.f. 1st April 2004 whilepreparing the financial statements. The Management have not assessed technically the Plantand Machineries at Naroda Unit to decided about its impairment or carrying Value. Thecarrying amount of the assets was not reviewed for indication of impairment of assets onbasis of internal/ external factors. Plant at Naroda Division has been in operative forSeventeen years. Plant & Machinery of book value of Rs.18.27 lacs less residual valuehas not been written off to the extent to come down to its carry value. Loss for the yearhas been under stated to the extent of book value of plant and machinery balance notwritten off.

(ii) The Company has not complied with AS 22 Accounting for Taxes on Income. Thecompany failed to file Income Tax Returns for the F Y 2008-09 onwards. In absence properdocuments and records we could not quantify the Income Tax liability for which provisionnot made.

Deferred Tax Assets/Deferred Tax Liabilities are not provided for in the books ofaccounts in absence of proper working and database from the management. We could notquantify the non provision for DTL or disclosures regarding DTA.[Read with Notes"2(e) of Main Audit Report and read with note no. 35"]

e. On the basis of written representation received from the Directors as on March 312014 and taken on record by the Board of Directors we report that none of the directorsis disqualified as on March 31 2014 from being appointed as a director in terms of clause(g) of sub-section (1) of the Section 274 of the Companies Act 1956.

For SHAH DINESH DAHYALAL & ASSOCIATES
Chartered Accountants
FIRM REGISTRATION NO. 120362W
Place: Ahmedabad Shah Dinesh D.
Date: 31/05/2014 Proprietor
MEMBERSHIP NO.: 106871

ANNEXURE TO THE AUDITORS’ REPORT OF KANEL INDUSTRIES LTD.

The annexure referred to in our report to the member of KANEL INDUSTRIES LTD.(‘the company’) for the year ended on 31st March 2014 we report that;

1. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) During the year fixed assets of the Company have not been physically verified bythe Management. The management decided to implement program of regular physicalverification of all fixed assets at least once in a two year which in our opinion isreasonable having regard to the size of Company present business operations and thenature of the Fixed Assets. In absence of physical verification report we could notcomment on material discrepancy in fixed assets of the company.

(c) During the year under audit the company has not disposed off the fixed assets butNaroda Unit is inoperative since last many years and in a situation of majority negativefinancial as well as operational indicators the going concern concept is affected [readwith point no. 2(i) of our main audit report]

2. (a) According to the information and explanation given to us inventories have beenphysically verified by the management during the year. In our opinion the frequency ofverification is reasonable having regard to the size of the company and the nature of itsbusiness.

(b) In our opinion and according to the information and explanation given to us theprocedures of physical verification of inventories followed by the management arereasonable and adequate in relation to the size of the company and the nature of itsbusiness.

(c) The Company is maintaining proper records of inventory. As there is no Inventory onbalance sheet date question of material discrepancies on physical verification betweenthe physical stocks and the book records does not arise.

3. In respect of Loans Secured or Un-secured granted by the company to companies firmsor other parties covered in register maintained U/S 301 of the Companies Act 1956according to the information and explanation given to us

(a) During the year the company has granted loans of Rs.7.30 lacs [ Rs. Nil inprevious year ] to related party and closing balance on balance sheet date Rs.NIL [ Rs.NIL in previous year ] and maximum balance outstanding during the year amounted to Rs.7.30 Lacs [ Rs. NIL in previous year ]

(b) Above referred loans are interest free and does not carry any other terms andconditions and as such the Loans in our opinion are prejudicial to the interest of thecompany.

(c) During the year Principal amount granted was received by the company. No interestcharged to the party. There is no question of regularity of repayment of interest.

4. (a) The Company has taken Unsecured loans from 1 related party covered in theregister maintained U/s 301 of the Companies Act. 1956. The maximum amount involvedduring the year was Rs.491500.

(b) In absence of proper loan agreement we could not comment on the interest providedor not. Management explained that above referred loans are interest free in our opinionthey are not prejudicial to the interest of the company.

(c) During the year there had been a repayment towards principal. No interest isprovided on any loan account. In absence of proper loan agreement and any other terms andconditions on which loan taken we are unable to comment on the regularity of repayment ofprincipal and payment of interest.

5. In our opinion and according to the information and explanations given to us thereare adequate internal control procedures commensurate with the size of the company thenature of its business and taking into consideration of overall business volume during theyear with regard to trading activities inventory fixed assets and with regard to thebusiness activities. On basis of our examination of the books and records of the Companyand according to the information and explanations given to us we have neither come acrossnor have been informed of any continuing failure to correct major weaknesses in theaforesaid internal control procedures except the high cash transactions during the yearhigh Cash on Hand on many dates and at the end of year balance confirmation from partiesBanks ESIC/PF departments and very slow debtors recovery implementation of verificationschedule of fixed assets. Internal controls should be strengthen in such sensitive area.

6. (a) Based on the audit procedures applied by us and according to the information andexplanations provided by the management we are of the opinion that the transaction thatneed to be entered into the register maintained under section 301 have been so entered ifrequired.

(b) In our opinion and according to the information and explanations given to us thetransactions made in pursuance of contracts or arrangements entered in the registermaintained under section 301 of the companies act 1956 and exceeding the value of Rs.Five lacs have been so entered if required.

7. On the basis of information and explanations given to us company has accepteddeposit in violation during the year from the public within in violation of section 58Aand 58AA of the companies act 1956 and companies (Acceptance of deposits) Rule 1975 withregard to acceptance and payment of deposits from public.

8. The company has no Internal Audit system during the year under Audit.

9. According to the information and explanation given to us the Central Government hasnot prescribed maintenance of cost records under section 209(1) (d) of the Companies Act1956 for any of the products of the company.

10. (a) According to the information and explanations given to us the Company has notbeen regular in depositing undisputed statutory dues towards Employees’ StateInsurance TDS Professional Tax Sales Tax Income Tax and Municipal Tax during theFinancial Year as well as of earlier years outstanding balance.

The undisputed dues as informed by the management which are outstanding for more thansix months as at the Balance Sheet date from the date they became payable were as follows.

SR. NATURE OF DUE AMOUNT OUTSTANDING AS ON 31/03/2014 [Rs. In Lacs] For more than 6 months And already due
01 Income Tax 98.10
02 TDS Payable 1.05
03 Sales Tax 17.53
04 E.S.I.C. 0.56
05 FBT tax 0.06
06 Professional Tax 0.34

[TDS is not deducted during the year at the time of payment or credit to the partiesand not paid to the Central Government such details are not included in above figures. ESIand Professional Tax are not paid during the year under audit and the company is notproviding for interest accrued on above all amounts payable. In absence of requiredstatutory records to ascertain the total amount relating to Interest thereon the aboveamount does not includes the interest and penalty portion. In absence of Sales TaxAssessment order/Return copy and non filing of Sales tax Returns for the F Y 2007-08 to2012-13 and in absence of required details and documents we are unable to quantify thestatutory liabilities relating to tax as well as of Interest and penalty there on].

Amount due as per demand notice served by the Income Tax department is Rs.136.37Lacsfor the various assessment years. It was explained by the management that difference isnot reconciled and not provided in books of account.

(b) According to the information and explanation given to us by the management of theCompany there are no dues of Sales Tax and Income Tax which have not been deposited onaccount of any dispute except as mentioned in clause "a" above and as mentionedbelow. We further reports that quantum of liability towards TDS payment is not worked outsince the Company has not complied with the provisions of Income Tax Act to the extent andno amount provided for. Fact mentioned as below does not includes such liability. We arefurther informed by the management that during the F Y 2013-14 there were no furtherOrder Notice or other developments relating to matters pending for earlier years as wellas for the year under Audit in case of Income tax and Sales tax Matter.

SR. NO. NATURE OF DUES AMOUNT [Rs. In Lacs] FORUM WHERE DISPUTE IS PENDING
01 Sales Tax 274.63 The Matter is remanded back to Asst. Comm.Of Sales tax. [A.Y. 1998-99]
02 Sales Tax 245.92 Pending with the Appellate tribunal of Sales Tax [A.Y. 1997-98]
03 Sales Tax 24.30 Appeal Pending with Jt. Commercial Tax Commissioner Appeal Division-1 [A.Y. 1999-2000]
04 Sales Tax 6.14 Appeal pending with Jt. Commercial Tax Commissioner Appeal Divi.-1 [A.Y. 2000-01]
05 Sales Tax 2.88 Appeal pending with Jt. Commercial Tax Commissioner Appeal Divi.-1 [A.Y. 2000-01]
06 Municipal Tax 10.95 Ahmedabad Municipal Corporation [Dues up to October 2004]

[Above details are based on records made available to us for the verification only.]

11. In our opinion the accumulated losses of the Company have exceeded fifty percentof the net worth as at the end of the financial year 2013-14. The Company has incurredCash Losses of Rs. 1.08 crores during the financial year under audit and the company hadincurred cash losses of Rs. 1.38 Crores the immediately preceding financial year.

12. We are of the opinion that banking dues have been settled under OTS in earlieryears and the company has generally not defaulted in repayment of dues to bank orfinancial institutions in year under audit. Further we report that the Company has takensecured Loans from the Company of Rs. 5 Crore in earlier year. There is no repaymenttowards principal or Interest. Management had not provided us copy of agreement containingterms and conditions for repayment and interest charges. In absence of the same we couldnot comment on repayment schedule or default status.

13. The Company has not granted any loans and advances on the basis of security by wayof pledge of shares debentures and other securities.

14. In our opinion the Company is not a chit fund nidhi mutual benefit fund ofsociety. Therefore the provisions of clause 4 (xiii) of the Companies (Auditor’sReport) Order 2003 are not applicable the Company.

15. In our opinion the Company is not dealing in or trading in shares securitiesdebenture and other investments. During the year under audit the company has donetransactions with Commodity market for agriculture products and there are Nil positionpending on 31st March 2014

16. In our opinion and according to information and explanations given to us theCompany has not given any guarantee for loans taken by others from banks or financialinstitutions during the year as per the information given by the management and availablerecords made available for our verification.

17. In our opinion no term loans were availed by the Company during the financial yearexcept unsecured loans taken from directors and related firms and their relatives asreported in Point No. 4(a).

18. According to the information and explanations given to us and on an overallexamination of the balance sheet of the company we report that the no funds raised onshort-term basis have been used for long-term investment and No long-term funds have beenused to finance short-term assets except core (permanent) working capital during the yearunder Audit.

19. Based on our examination of records and information provided to us by management wereport that the company has not made preferential allotment of shares to parties andcompanies covered in the register maintained under section 301 of the Act.

20. During the year covered by our audit report the company has not issued anydebentures.

21. The Company has not raised any money by public issue during the year.

22. According to the information and explanation given to us no fraud on or by thecompany has been noticed or reported during the course of our audit.

For SHAH DINESH DAHYALAL & ASSOCIATES
Chartered Accountants
FIRM REGISTRATION NO. 120362W
Place: Ahmedabad Shah Dinesh D.
Date: 31/05/2014 Proprietor
MEMBERSHIP NO.: 106871