The Members of Khaitan Electricals Limited
Report on the Financial Statements
We have audited the accompanying financial statements of Khaitan Electricals Limited("the Company") which comprise the Balance Sheet as at 31st March 2016the Statement of Profit and Loss the Cash Flow and a summary of the significant policiesand other explanatory information for the year then ended.
Managements responsibility for the financial statements
The Companys 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 Act read withRule 7 of the Companies (Accounts) Rules 2014. ements.stat
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 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 accordance with the Standards on
Auditing specified under Section 143(10) of the Act. Those standards require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the 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 the auditors judgement including theassessment of the risks of material misstatement of the financialstatements whether dueto fraud or error. In making accounting those risk assessments the auditor considersinternal financial control relevant to the Companys preparation of the financialstatements that give a true and fair view in order to design audit procedures that areappropriate in the circumstances. An audit also includes evaluating the appropriateness ofthe accounting policies used and the reasonableness of the accounting estimates made bythe Companys Directors as well as evaluating the overall presentation of thefinancial statements.
We believe that the audit evidence we have obtained is sufficient under Section 133 ofthe and appropriate to provide a basis for our audit opinion on the financial
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 Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at 31stMarch 2016 and its loss and its cash flows
Emphasis of Matter
We draw attention to note no.2.38 to the financialstatements. The company has incurrednet loss of Rs.9461.19 lacs during the year ended 31st March 2016 and as of that datethe Companys net worth is fully eroded and has a negative net worth of Rs.4502.06lacs indicating the existence of uncertainty that may cast doubt about the Companysability to continue as a going concern.
Considering the matters set out in the said note this financial statement is preparedon a going concern basis. Our opinion is not qualified in respect of this matter.
Report on other legal and regulatory requirements
1. As required by the Companies (Auditors 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 mattersspecified in paragraphs 3 and 4 of the Order.
2. As required by Section 143 (3) of the Act we report that:
i. 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.
ii. 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.
iii. 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.
iv. 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.
v. On the basis of the written representations received from the directors as at 31stMarch 2016 and taken on record by the Board of Directors none of the directors isdisqualified as at 31st March 2016 from being appointed as a director in terms of Section164 (2) of the Act.
vi. 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".
vii. With respect to the other matters to be included in the Auditors 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:
a. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements Refer Note No. 2.28 to the financial statements. b.The Company did not have any long-term contracts including derivatives contracts for whichthere were any material foreseeable losses. c. There has been no delay in transferringamounts required to be transferred to the Investor Education and Protection Fund by theCompany.
"Annexure A" to the Independent Auditors Report
Statement referred to in paragraph Report on Other Legal and RegulatoryRequirements of our report of even date to the members of Khaitan ElectricalsLimited on the financial statements for the year ended 31st March 2016.
(i) a) The Company has maintained proper records showing full particulars includingquantitative details and situation of its fixed assets.
b) The fixed assets were physically verified during the year by the management inaccordance with a regular programme of verification for physical verification of all fixedassets at reasonable intervals except fixed assets lying at Kolkata factory as thefactory has been seized by Kolkata Port Trust. According to the information &explanations given to us no material discrepancies were noticed on such verification.
c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company except title deeds of immovable properties having writtendown value of Rs. 79.31 lacs which were not made available to us for our verification.
(ii) The inventories (excluding stocks with third parties and inventories lying atKolkata factory which has been seized by Kolkata Port Trust) have been physically verifiedduring the year by the management at reasonable intervals and no material discrepancieswere noticed on such physical verification.
(iii) The company has granted unsecured loan to one Company covered in the registermaintained under section 189 of the Companies Act 2013. The Company has not granted anysecured/ unsecured loan to firms or other parties covered in the register maintained undersection 189 of the Act 2013.
a) According to the information and explanations given to us the terms and conditionsof the loan are not prima facie prejudicial to the interest of the company.
b) As informed to us the aforesaid loan is repayable on demand. The company is regularin payment of interest as and when demanded by the company.
c) In respect of the aforesaid loan there is no overdue amount. which in our opinionprovides
(iv) In our opinion and according to the information and explanations given to us thecompany has complied with the provision of section 185 & 186 of the Act with respectto the loans and investment made.
(v) The Company has not accepted any deposit within the meaning of section 73 to 76 orany other relevant provisions of the Act and the rules framed there under. The directivesissued by the Reserve Bank of India are not applicable to the Company.
(vi) We have broadly reviewed the books of account maintained by the Company in respectof products where pursuant to the rules made by the Central Government the maintenance ofCost records has been prescribed under section 148(1) of the Act and are of the opinionthat prima facie the prescribed accounts and records have been made and maintained. Wehowever as not required have not made a detailed examination of such records.
(vii) a) On the basis of our examination the Company has been generally irregular indepositing undisputed statutory dues including provident fund income tax sales taxvalue added tax employees state insurance duty of excise service tax and otherstatutory dues to the extent applicable with appropriate authorities.
According to the records the following statutory dues were outstanding as at 31stMarch 2016 for a period of more than six months from the date they became payable
|Name of the Statute ||Nature of Dues ||Period to which pertain ||Amount (Rs. In Lacs) ||Due date ||Paid on |
|Income Tax Act 1961 ||Tax deducted at sources ||2014-15 & 2015-16 ||33.10 ||7th of the succeeding month ||- |
|The Central/State Sales Tax Act ||Value Added Tax ||2015-16 ||267.98 ||20th of succeeding month ||- |
b) The disputed statutory dues aggregating to Rs. 1666.00 lacs that have not beendeposited on account of matters pending before appropriate authorities are as under:
|Name of the Statute ||Nature of the Dues ||Amount (Rs in Lacs) ||Period ||Forum where dispute is pending |
|Income Tax Act ||Income Tax ||12.15 ||2010-11 ||ITAT Hyderabad |
| ||Income Tax ||105.00 ||2013-14 ||Commissioner of Income tax (Appeals)-Hyderabad |
|State Sales Tax ||Sales Tax / Penalty ||1198.35 ||2000-01 2006-07 to 2013-14 ||AC DC Commissioner Revision Board of Commercial Taxes Tax Tribunal High Court. |
|The Central Excise Act 1944 ||Excise Duty ||338.03 ||1994-95 2000-01 to 2001-02 & 2007-08 to 2013-14 ||Commissioner of Central Excise Tribunal CESTAT |
| ||Penalty ||10.00 ||2008-09 ||Tribunal Delhi |
|Finance Act 1994 ||Service Tax ||2.47 ||2011-12 ||Asstt. Commissioner Service Tax |
|Total || ||1666.00 || || |
(viii) The Company does not have any loans or borrowings from Government or debentureholder during the year. However according to the records the Company have defaulted inrepayment of borrowings to following financial institutions or banks :
|Name of the financial institutions /banks ||Nature of dues ||Period to which pertain ||Amount (Rs. in lacs) ||Delays in days |
|Bank Of India ||Bills discounting ||2015-16 ||1165.94 ||1 to 313 days |
|Religare Finvest Limited ||Bills discounting ||2015-16 ||684.48 ||7 to 326 days |
(ix) The Company has not raised any money by way of initial public offer or furtherpublic offer (including debt instruments) or term loan during the year. (x) According tothe information and explanations given to us no material fraud by the Company or on theCompany by its officers or employees has been noticed or reported during the year.
(xi) According to the information and explanations given to us and based on ourexamination 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 to the Act.
(xii) In our opinion the Company is not a Nidhi Company. Therefore clause
(xii) of paragraph 3 of the said order is not applicable to the Company.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the 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 explanations given to us and based on ourexamination of the records of the
Company the Company has made preferential allotment of shares during the year. Theprovisions of section 42 of the Act have been complied with in this regard and amount hasbeen utilized for the purpose for which it was raised. The company has not made anyprivate placement of shares and fully or partly convertible debentures during the year.
(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with them. Accordingly clause (xv) ofparagraph 3 of the said order is not applicable to the Company.
(xvi) According to the information and explanations given to us the provisions ofSection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.
"Annexure B" to the Independent Auditors Report of Even Date on theFinancial Statements of Khaitan Electricals Limited
Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial control over financialreporting of Khaitan Electricals Limited ("the Company") as of March 312016 in conjunction with our audit of the financial statements of the Company for the yearended on that date.
Managements Responsibility for Internal Financial Controls
The Companys management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India ("ICAI"). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to Companys policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financialinformation as required under theCompanies Act 2013.
Our responsibility is to express an opinion on the Companys internalfinancialcontrols over financialreporting based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") and the Standards on Auditing to the extentapplicable to an audit of internal financialcontrols both issued by the ICAI.
Guidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financialcontrolsover financial reporting were 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 financialreporting 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 auditors judgement 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 Companys internal financial controlssystem over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
Acompanysinternal financialreporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally acceptedaccounting principles. A companys internal financial control over financialreporting procedures that (1) pertain to the maintenance of records that in reasonabledetail accurately and fairly reflect the transactions and criteria established by thedispositions of the assets of the Company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the Company are being made only in accordance with authorisations ofmanagement and directors of the Company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of theCompanys 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 financialcontrols overfinancialreporting to future periods are subject to the risk that the internalfinancialcontrol over financial inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancialcontrols system over financial and such internal financial controls operatingeffectively as at March 31 2016 based on the internal control over financialreportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the ICAI.
|For V. S. Rao & Co. ||For G. P. Agrawal & Co. |
|Chartered Accountants ||Chartered Accountants |
|(FR No. 003157S) ||(FR No. 302082E) |
|(CA. V. G. Tarak Nath) ||(CA. Rakesh Kumar Singh) |
|Partner ||Partner |
|Membership No.023302 ||Membership No. 066421 |
|Place: Kolkata || |
|Date: 28th May 2016 || |