The Members of Katare Spinning Mills Limited
Standalone Financial Statements
I have audited the accompanying standalone financial statements of Katare SpinningMills Limited ("the Company") which comprise the Balance Sheet as at 31stMarch 2017 the Statement of Profit and Loss (statement of changes in equity) the CashFlow Statement for the year then ended and notes to the financial statements including asummary of the significant accounting policies and other explanatory information.
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 the preparation ofthese financial statements that 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.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
My responsibility is to express an opinion on these financial statements based on myaudit.
I 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.
I conducted my audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that I 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 of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.
I believe that the audit evidence I have obtained is sufficient and appropriate toprovide a basis for my audit opinion on the standalone financial statements.
Basis for qualified Opinion
a. As stated in Note No. 15 to the accounts the Company has included in othernon-current assets a sum of Rs. 428.00 lakh as deferred interest expenditure. In the pastthe Company had availed a term loan ICICI Bank Ltd (which was under OTS with them) whichwas subsequently assigned by ICICI to Kotak Mahindra Bank Ltd. Consequent upon assignmentThe Kotak Mahindra Bank Ltd filed suit against the Company in DRAT for recovery.
The Company has settled the said loan with Kotak Mahindra Bank Ltd for an agreed amountof Rs. 750 lakh of which Rs. 325 lakh was deposited before DRAT and Rs. 425 lakh is paidon or before 31/05/2013. Accordingly no loan balance is now outstanding.
b. The Company had a transferred balance in Capital Reserve of Rs. 150 lakh when theloan was settled with ICICI Bank Ltd. The said balance is then reversed from CapitalReserve and the balance Rs. 600 lakh represented the amount of interest from the year 2002to the date of settlement. The Company has deferred this interest amount of Rs. 600 lakhto be written off over a period of 7 years and have accordingly charged Rs. 172.00 lakh inthe two years (2012-2013 & 2013- 2014) but has not charged Rs. 258.00 lakh to thestatement of profit and loss for the year under audit (Rs. 86.00 lakh for the year underreview and Rs. 172.00 lakh in the preceding year 2014-15 and 2015-16) and balance Rs.170.00 lakh should have been remained to be carried forward as deferred revenueexpenditure.
c. Trade Receivables to the extent of Rs. 3.60 lakh and other current assets/advancesof Rs. 87.12 lakh aggregating to Rs. 90.72 lakh are bad for which no provision is made inthe accounts as referred to in Note No.17 and Note No.20 in the notes on accounts
d. Had the items reported in (b) and (c) above been charged to the statement of profitand loss the loss for the year of Rs.261.28 lakh would have been increased by Rs. 518.72lakh resulted into loss of Rs. 780.00 Lakh. To that extent it has resulted intooverstatement of year end net Current Assets and Reserves and Surplus by Rs. 780.00lakh.
e. No provision is made for payment for gratuity on actuarial basis as on 31 March 2017hence its impact on the net profit could not be ascertained as referred to Note No. 27(b)in the notes on accounts.
In my opinion and to the best of my information and according to the explanations givento me except for the effects of the matter described in the Basis for Qualified OpinionParagraph the aforesaid standalone financial statements give the information required bythe Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at 31st March 2017 and its Loss and its cash flows for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order) issuedby the Central Government in terms of sub-section (11) of section 143 of the Act I givein "Annexure A" a statement on matters specified in paragraphs 3 and 4 of thesaid order.
2. As required by Section 143 (3) of the Act I report that:
(a) I have sought and obtained all the information and explanations which to the bestof my knowledge and belief were necessary for the purposes of my audit.
(b) In my opinion proper books of account as required by law have been kept by theCompany so far as it appears from my 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 my opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with rule issuedthereunder;
(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 a 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 operative effectiveness of such controls refer to myseparate in "Annexure B" and
(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 my opinionand to the best of my information and according to the explanations given to me:
i. The Company does not have any pending litigations which would impact its financialposition;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company;
iv. The company has provided requisite disclosure in its standalone financialstatements as to holdings as well as dealings in Specified Bank Notes during the periodfrom 8th November 2016 to 30th December 2016 and these are in accordance with the booksmaintained by the company. Refer Note 29 to the standalone financial statements.
For G. M. Pawle
G. M. Pawle
ICAI Membership No.: 032561
Solapur 29 May 2017
ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT
The annexure referred to in the Independent Auditors' Report to the members of theCompany on the standalone financial statements for the year ended 31 March 2017 I reportthat
(i) In respect of its fixed assets :
a) The Company has maintained proper records showing full particulars includingquantitative details and the situation of the fixed assets.
b) Fixed assets have been physically verified by the management during the year inaccordance with the phased programme of verification adopted by the management which inmy opinion provides for physical verification of all the fixed assets at reasonableintervals. No material discrepancies were noticed on such verification. In my opinionthis periodicity of physical verification is reasonable having regard to the size of theCompany and nature of its assets.
c) According to the information and explanation given to me and on the basis of myexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.
(ii) In respect of its inventory :
a) The inventories of finished goods semi-finished goods stores spare parts and rawmaterials were physically verified at regular intervals by the Management.
b) The procedures of physical verification of inventories followed by the Managementwere reasonable and adequate in relation to the size of the Company and the nature of itsbusiness.
c) The Company has maintained proper records of its inventories. According toinformation and explanation given to me the discrepancies noticed on physicalverification of stocks as compared to book records were not material and have beenproperly dealt with in the books of account.
(iii) The Company has not granted any loans to companies firms or other partiescovered in the Register maintained under Section 189 of the Companies Act 2013 andtherefore paragraph 3(iii) of the Order is not applicable.
(iv) In my opinion and according to information and explanations given to me theCompany has complied with the provisions of Section 185 and 186 of the Act with respectto loans and investments made.
(v) The Company has not accepted any deposits from the public.
(vi) I have broadly reviewed the cost records maintained by the Company pursuant tothe Rules made by the Central Government under Section 148(1) of the Companies Act 2013and I am of the opinion that prima facie the prescribed cost records have been made andmaintained. I have however not made a detailed examination of these records with a viewto determining whether they are accurate or complete.
(vii) In respect of statutory dues:
a) According to the information and explanation given to me and on the basis of myexamination of the records of the Company amounts deducted/accrued in the books ofaccount in respect of undisputed statutory dues including provident fund employees StateInsurance income-tax sales tax value added tax wealth tax service tax excise dutycess and other material statutory dues have been regularly deposited during the year bythe Company with the appropriate authorities except outstanding Maharashtra Value AddedTax Liability of Rs. 798948.
According to the information and explanation given to me no undisputed amounts payablein respect of provident fund income-tax wealth tax excise duty sales tax value addedtax cess and other material statutory dues were in arrears as at 31 March 2017 for aperiod of more than six months from the date they became payable.
b) According to the information and explanation given to me there are no material duesof statutory nature which have not been deposited with the appropriate authorities onaccount of any dispute except the following dues which have not been deposited by thecompany on account of disputes:
|Name of the Statute ||Nature of dues ||Amount (in Rs.) ||Period to which the amount relates ||Forum where the dispute is pending |
|MVAT Act 2002 ||Sales Tax interest and penalty ||49670 ||FY 2005-06 ||DCST-AppealsSolapur |
|MVAT Act 2002 ||Sales Tax Interest and penalty ||740935 ||FY 2006-07 ||DCST-AppealsSolapur |
|MVAT Act 2002 ||Sales Tax interest and penalty ||1055741 ||FY 2008-09 ||DCST-AppealsSolapur |
|MVAT Act 2002 ||Sales Tax Interest and Penalty ||2652358 ||FY 2010-11 ||DCST-AppealsSolapur |
|Central Sales Tax1956 ||Sales Tax Interest and penalty ||844727 ||FY 2005-06 ||DCST-AppealsSolapur |
|MVAT Act 2002 ||Sales Tax Interest and Penalty ||310829 ||FY 2006-07 ||DCST-AppealsSolapur |
(viii) The Company has defaulted in the repayment of Installments of Term loan ofRs. 23562000 and unpaid interest thereon of Rs. 7440022 unapplied interest on termloan Rs. 27993575 and unapplied interest on cash credit of Rs. 16342412 to Bank ofIndia (aggregating towards loan Rs. 75338009) and the Special Capital Incentive in theform of loan of Rs. 316139 aggregating to Rs. 75654148 which remained unpaid as atthe date of the Balance Sheet.
(ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year. Accordinglyparagraph 3(ix) of the order is not applicable.
(x) According to the information and explanation given to me no material fraud bythe Company or on the Company by its officers or employees have been noticed or reportedduring the course of my audit.
(xi) According to the information and explanation given to me and on the basis ofmy examination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V of the Act.
(xii) In my opinion and according to the information and explanations given to methe Company is not a nidhi company. Accordingly paragraph 3(xii) of the order is notapplicable.
(xiii) According to the information and explanation given to me and on the basis ofmy examination of the records of the Company transaction with related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.
(xiv) According to the information and explanation given to me and based on myexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
(xv) According to the information and explanation given to me and on the basis ofmy examination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe order is not applicable.
(xvi) The Company is not required to be registered under section 45-IA of theReserve Bank of India Act 1934.
For G. M. Pawle
G. M. Pawle
ICAI Membership No.: 032561
Solapur 29 May 2017
"Annexure B" to the Independent Auditor's Report of even date on theStandalone Financial Statements of Katare Spinning Mills Limited.
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
I have audited the internal financial controls over financial reporting of KatareSpinning Mills Limited ("the Company") as of 31 March 2017 in conjunction withmy audit of the standalone financial statements of the Company for the year ended on thatdate.
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). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.
My responsibility is to express an opinion on the Company's internal financial controlsover financial reporting based on my audit. I conducted my audit in accordance with theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting (the"Guidance Note") and the Standards on Auditing issued by ICAI and deemed to beprescribed under section 143(10) of the Companies Act 2013 to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that I comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
My audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. My 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 financialstatements whether due to fraud or error.
I believe that the audit evidence I have obtained is sufficient and appropriate toprovide a basis for my 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 include those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable details 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 ofmanagement 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.
In my opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2017 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
For G. M. Pawle
G. M. Pawle
ICAI Membership No.: 032561
Solapur 29 May 2017