TO THE MEMBERS OF
1. Report on the Stand alone Financial Statements
We have audited the accompanying standalone financial statements of LML Limited ("theCompany") which comprise the Balance Sheet as at 31st March 2015 the Statement ofProfit and Loss and Cash Flow Statement for the year then ended and a summary of thesignificant accounting policies and other explanatory information.
2. Managements Responsibility for the stand alone 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 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 standalone financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
3. Auditors Responsibility
Our responsibility is to express an opinion on these stand alone financial statementsbased on our audit. We have taken into account the provisions of the Act the accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made thereunder.
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 standalone 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 theauditors 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 Companyspreparation 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 financialcontrol 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 Companys Directors aswell as evaluating 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 qualified audit opinion on the standalone financial statements.
4. Basis of Qualified Opinion
a) As mentioned in note no. 26 of standalone financial statements balances ofsome of the trade receivable/ payable lenders and loans and advances being subject toconfirmation/ reconciliation and subsequent adjustments if any. As such we are unable toexpress any opinion as to the effect thereof on the financial statement for the year.
b) As mentioned in note no. 27 of standalone financial statements the Companyhas valued the inventories except finished goods at cost instead of at cost or realizablevalue whichever is lower which is not in compliance with the Accounting Standard 2 Valuation of Inventories prescribed in under Section 133 of the Act readwith Rule 7 of the Companies (Accounts) Rules 2014. As explained to us theprocess of possible utilization of slow / non-moving items of inventory will be undertakenupon - finalization of the product plan and the restructuring/revival plan and itsimplementation. Since the realizable value as on 31st March 2015 has notbeen determined we are unable to express any opinion as to the effect thereof on thestandalone financial statement for the year.
c) As mentioned in note 31of standalone financial statements the Company hasbecome a Sick Industrial Company due to erosion of its net worth and its currentliabilities have also exceeded its current assets by Rs. 63269.13 lakhs asat Balance Sheet date. These factors along with other matters as set forth in the saidnote raise doubt that the Company will be able to continue as a going concern. TheCompany is in the process of restructuring/revival of its business under the aegis of BIFRand has submitted the draft revival scheme and as directed by BIFR the Company has alsosubmitted the updated revival scheme considering this the accounts have been prepared ona going concern basis. The Companys ability to continue as a going concern isdependent upon successful restructuring and revival of its business. In case the goingconcern concept is vitiated necessary adjustments will be required on the carrying amountof Assets and Liabilities which are not ascertainable.
d) As mentioned in note no. 38 of standalone financial statements regarding noncompliance of requirements under Micro Small and Medium Enterprises Development Act 2006in the absence of information available with the Company. As such we are unable toexpress any opinion as to the effect thereof if any on the standalone financialstatements for the year.
The consequential possible effects of sub Para (a) (b) (c) and (d) above on assetsand liabilities as at 31st March 2015 and loss for the year ended 31stMarch 2015 are not ascertainable.
5. Qualified Opinion
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the Basis forQualified Opinion in paragraph 4 above the aforesaid standalone financialstatements give the information required by the Act in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia of the state of affairs of the Company as at 31st March 2015 and its profit andits cash flows for the year ended on that date.
6. Report on Other Legal and Regulatory Requirements
A) As required by the Companies (Auditors Report) Order 2015 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Companies Act 2013 we give in the Annexure a statement on the mattersspecified in paragraph 3 and 4 of the Order to the extent applicable.
B) As required by Section 143 (3) of the Act we report that:
(a) We have sought and except for the matters described in the Basis of QualifiedOpinion paragraph 4 above obtained all the information and explanations whichto the best of our knowledge and belief were necessary for the purposes of our audit.
(b) Except for the possible effects of the matter described in the Basis for QualifiedOpinion in paragraph 4 above In our opinion proper books of account asrequired by law have been kept by the Company so far as it appears from our examination ofthose books.
(c) The Balance Sheet Statement of Profit and Loss and Cash Flow Statement dealt withby this Report are in agreement with the books of account.
(d) Except for the possible effects of the matter described in the Basis forQualified Opinion in paragraph 4 above in our opinion the Balance SheetStatement of Profit and Loss and Cash Flow Statement comply with the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.
(e) The matter described in the Basis for Qualified Opinion in paragraph 4 above inour opinion may have an adverse effect on the functioning of the Company.
(f) On the basis of the written representations received from the directors as on 31stMarch 2015 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2015 from being appointed as a director in terms of Section164 (2) of the Act.
(g) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion in paragraph 4 above.
(h) 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:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements Refer Note 25 to the financialstatements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses Refer Note 25 to the financialstatements;
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
|For Khandelwal Jain & Co. ||For PARIKH & JAIN |
|Chartered Accountants ||Chartered Accountants |
|Firm Regn. No. 105049W ||Firm Regn. No. 001105C |
|(Manish Singhal) ||(A. K. Jain) |
|(Partner) ||(Partner) |
|M. No. 502570 ||M. No. 071253 |
|Place: Gurgaon || |
|Date: 29th May 2015 || |
ANNEXURE TO THE INDEPENDENT AUDITORS REPORT
Annexure referred to in paragraph 6A of the Independent Auditors Report of evendate to the Members of LML Limited on the standalone financial statements for theperiod ended 31st March 2015;
I. (a) The Company has maintained proper records showing full particulars includingquantitative details and situations of its Fixed Assets however these records are inthe process of updation.
(b) As per the information and explanations given to us the Company has formulated aprogramme of physical verification to cover all major categories of fixed assets over aperiod of three years. Accordingly some categories of the fixed assets have beenphysically verified during the year and no material discrepancies were noticed on suchverification. In our opinion the frequency of verification is reasonable having regardto the size of the Company and nature of its business.
II. (a) As per the information furnished the Inventories have been physically verifiedby the management at reasonable intervals during the period. In our opinion having regardto the nature and location of stocks the frequency of physical verification isreasonable. In case of materials lying with other parties they are subject toconfirmations.
(b) In our opinion and according to the information and explanations given to usprocedures of physical verification of inventory followed by the management are reasonableand adequate in relation to the size of the Company and the nature of its business. Asexplained to us Company is in process of restructuring/revival of its business under theaegis of BIFR which inter alia includes finalization of the product plan and therestructuring/revival plan and its implementation. The process of possible utilization ofslow/non-moving items of inventory will be undertaken inter-alia upon finalization of theproduct plan and restructuring/revival plan. The requisite accounting effect if any willbe given upon such ascertainment / determination and approval of revival plan.
(c) The Company is maintaining proper records of Inventory. In our opinion thediscrepancies noticed on physical verification of stocks were not material in relation tothe operation of the Company and the same have been properly dealt with in the books ofaccount.
III. As per the information furnished the Company has not granted any loans securedor unsecured to companies firms and other parties covered in the register maintainedunder Section 189 of the Companies Act 2013. Accordingly paragraphs 3(iii) (a) and (b)of the Order are not applicable.
IV. 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 and thenature of its business for the purchase of inventory and fixed assets and for the sale ofgoods and services. During the course of our audit no major weaknesses has been noticed inthe internal controls.
V. The Company has not accepted any deposits within the meaning of the provisions ofsections 73 to 76 or any other relevant provisions of the Companies Act 2013 and therules framed there under.
VI. According to the information and explanations given to us the Central Governmenthas not prescribed the maintenance of cost records under sub-section (1) of section 148 ofthe Companies Act 2013 for the products of the company.
VII. (a) According to the information and explanations given to us and the recordsexamined by us undisputed statutory dues including income tax sales tax employeesstate insurance provident fund and other statutory dues applicable to it have not beenregularly deposited with the appropriate authorities and there have been delays in anumber of cases. According to information and explanations given to us undisputed arrearsof statutory dues outstanding as at 31st March 2015 for a period of morethan six months from the date they became payable are as under: -
|S.N ||Name of the Statute ||Nature of Dues ||Rs. In Lakhs |
|1) ||Provident Fund ||Employers Contribution ||142.61 |
| || ||Employee Contribution ||42.43 |
|2) ||Sales Tax ||Sales Tax Dues ||1065.47 |
|3) ||Employee State Insurance ||Employer and Employees Contribution ||23.47 |
|4) ||Income Tax Act ||Income Tax Deducted at Source ||89.66 |
| || ||Income Tax Collected at Source ||1.28 |
| || ||Fringe Benefit Tax ||178.00 |
|5) ||Professional Tax ||Professional Tax ||0.63 |
(b) According to the records of the Company the dues of Sales Tax/VAT Income TaxExcise Duty and Service Tax which has not been deposited on account of disputes and theforum where the disputes are pending are as under:
|Name of The Statute ||Nature of Due ||Amount Rs. in Lakhs) ||Period ||Forum Where Pending |
|The Central Excise Act 1944 ||Modvat credit duty on off cuts or inputs valuation classification & cenvat ||469.14 ||1989-90 to 2006-07 ||Commissioner Appeal Tribunal (CESTAT) Supreme Court |
|Central Sales Tax Act Local Sales Tax Act & Local Entry Tax Act ||Non- submission of declaration forms entry tax penalty interest stock transfer and other issues ||12909.08 ||1989-90 to 2007-08 ||Appellate Authority Tribunal High Court |
|Customs Act 1962 ||(i) Duty ||12.16 ||2001-02 ||Reassessment of amount pending with Customs Mumbai |
| ||(ii) Valuation & Concession ||12.69 ||1986-87 & 1994-95 ||Assistant Commissioner |
|Income-Tax Act 1961 ||Disputed Disallowances ||2145.11 ||A.Y. 1997-98 to 2006-07 ||ITAT |
| ||Disputed Disallowances ||1028.14 ||A.Y. 1995-96 to 1999 2000 ||High Court |
| ||Disallowances/Penalty ||222.29 ||A.Y. 2007 08 & A.Y.2010 11 ||CIT (A) |
(c) According to the information and explanations given to us and as certified by themanagement there are no amount required to be transferred to investor education andprotection fund in accordance with the relevant provisions of the Companies Act 2013 andrules made there under
VIII. The accumulated losses of the Company as at 31stMarch 2015are more than fifty percent of its net worth at the end of the financial year. The Companyhas incurred cash losses during the financial year and also in the immediately precedingfinancial year.
IX. The Company has executed a Multi-Partite Agreement with Banks and FinancialInstitutions (Secured Lenders) on March 28 2005. Based on our auditprocedures and the information and explanations given to us the Company is in default inrespect to the payments to the Secured Lenders as given below.
|Nature of the Dues ||Period of Default ||Amount (Rs in lakhs) |
|Principal ||More than 12 months ||10308.81 |
|Interest ||More than 12 months ||12987.20 |
|Interest ||Jun-14 ||726.01 |
|Interest ||Sep-14 ||756.86 |
|Interest ||Dec-14 ||780.70 |
|Interest ||Mar-15 ||787.80 |
The Company is in Default in the payments of Interest to Foreign Currency ConvertibleBonds holders:
|Period of Default ||Amount (Rs in lakhs) |
|More than 12 months ||194.17 |
X. Based on our examination of records and information and explanations given to usthe Company has not given any guarantee for loans taken by others from bank or financialinstitutions.
XI. Based on our examination of the records and information and explanations given tous no fresh term loan has been obtained by the Company during the year.
XII. To the best of our knowledge and belief and according to the information andexplanations given to us no fraud on or by the Company has been noticed or reportedduring the course of our audit.
| ||For Khandelwal Jain & Co. ||For PARIKH & JAIN |
| ||Chartered Accountants ||Chartered Accountants |
| ||Firm Regn. No. 105049W ||Firm Regn. No. 001105C |
| ||(Manish Singhal) ||(A. K. Jain) |
| ||(Partner) ||(Partner) |
| ||M. No. 502570 ||M. No. 071253 |
|Place: Gurgaon || || |
|Date: 29th May 2015 || || |