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Mackinnon Mackenzie & Company Ltd.

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Mackinnon Mackenzie & Company Ltd. (MACKINNONMACKEN) - Auditors Report

Company auditors report

TO THE MEMBERS OF M/s. MACKINNON MACKENZIE & COMPANY LIMITED.

Report on the Financial Statements

We have audited the accompanying standalone financial statements of M/s. MACKINNONMACKENZIE & COMPANY LIMITED which comprise the Balance Sheet as at March 312015 andthe Statement of Profit and Loss the Cash Flow Statement for the year then ended and asummary of 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 standalone financial statements that give a true and fair view of the financialposition financial performance of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards referredspecified 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 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 financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal control relevant to the Company's preparation of the financialstatements that give a true and fair view in order to design audit procedures that areappropriate in the circumstances but not for the purpose of expressing an opinion onwhether the Company has in place an adequate internal financial control system overfinancial reporting and the operating effectiveness of such controls. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonablenessof the accounting estimates made by the Company's Directors as well as evaluating theoverall 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.

Basis for Qualified Opinion

As mentioned in Note 10 (c) of the financial statements the investments made atKolkata Rs 56000/- are presently not available for verification as the building isdestroyed by fire. As such we are unable to express an opinion as to the effect offinancial statements for the year.

As mentioned in Note 29 of the financial statements despite continued huge lossesresulting in total erosion of the net worth of the company the accounts for the year havebeen prepared on the assumption of going concern basis. Should the company be unable tocontinue as a going concern the extent of effect the resultant adjustments would have onthe net worth at the year end as the losses for the year is not ascertainable. As such weare unable to express an opinion as to the effect of financial statements for the year.

As mentioned in Note 15 of the financial statements Loans and Advances includes certainold balances amounting to Rs 818785 for which no provision for doubtful items if any hasbeen made in the accounts pending review confirmation of the same. As a result the effectof non-provision on the loss for the year cannot be ascertained. As such we are unable toexpress an opinion as to the effect of financial statements for the year.

As mentioned in Note 7 of the financial statements Trade Payables include an amount ofRs.2651925/- which represent old balances for which no write back has been made in theaccounts pending the review/ confirmation of the same. As a result the effect of suchwrite back if any on the loss for the year cannot be ascertained. As such we are unableto express an opinion as to the effect of financial statements for the year.

As mentioned in Note 8 of the financial statements certain old credit balancesoutstanding in various accounts amounting to Rs.14852774 for which no write back hasbeen made in accounts pending the review /confirmation of the same. As a result theeffect of such write back if any on the loss for the year cannot be ascertained. As suchwe are unable to express an opinion as to the effect of financial statements for the year.

As mentioned in Note 5 of the financial statements the Company's bankers had filed suitin Bombay High Court for recovery of loans which were transferred to the Debt RecoveryTribunal. The bankers have assigned entire debt due to them to a Company and suit filed bythese banks have been transferred back to Bombay High Court. Suits are for recovery ofRs.616605621/- outstanding as on 31st March 1991. However loans along with interestaccrued and due to the Company which has taken over the Debt as per the terms of loans andsubsequent understanding with the Company amounting to Rs 8256129338 are outstanding ason 31st March 2015 However no confirmations are available from Bank and the Company whichhas taken over the Debt for the same. We are therefore unable to comment on the effect ofthe same if any on secured loans due to Company which has taken over the Debt and thedebit balance of Surplus in Statement of Profit & Loss Account as at 31st March 2015.As such we are unable to express an opinion as to the effect of financial statements forthe year.

As mentioned in Note 31 of the financial statements non availability of confirmationsin respect of balances of secured and unsecured loans debtors certain bank balancesdeposits and creditors appearing in Schedule 57810 13 14 and 15 of the accountsrespectively. As such we are unable to express an opinion as to the effect of financialstatements for the year.

As mentioned in Note 24 of the financial statements provision for accrued liability forthe year in respect of gratuity and long term compensated absences has been made onarithmetical basis instead of based on actuarial valuation as required by AccountingStandard -15 "Employee Benefits" (the Standard). The effect on the Profit &Loss Account for the year had the Company determined the accrued liability for gratuityand long term compensated absences based on actuarial valuation has not been ascertained.Accordingly the disclosure requirement regarding the actuarial assumptions used foractuarial valuation is not complied with. Further the transitional liability/gain as atApril 12007 which is required to be determined in terms of the transitional provisionsof the Standard has not been ascertained and accounted for. As a result the effect of onthe loss for the year and debit balance of Surplus in Statement of Profit & LossAccount as at 31st March 2015 cannot be ascertained As such we are unable to express anopinion as to the effect of financial statements for the year.

As mentioned in Note 27 of the financial statements regarding non compliance ofrequirements under Micro Small and Medium Enterprise Development Act 2006 in absence ofinformation available with the company. As such we are unable to express an opinion as tothe effect of financial statements for the year.

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 paragraph the aforesaid standalone financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at 31st March 2015 and its loss for the year ended on thatdate:

Report on Other Legal and Regulatory Requirements

As required by section143 (3) of the Act we report that:

a. We have sought and except for the matters described in the Basis for QualifiedOpinion paragraph obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit;

b. Except for the possible effects of the matter described in the Basis for QualifiedOpinion paragraph above in our opinion proper books of account as required by law havebeen kept by the Company so far as appears from our examination of those books.

c. the Balance Sheet Statement of Profit and Loss and the Cash Flow Statement dealtwith by this Report are in agreement with the books of account ;

d. Except for the possible effects of the matter described in the Basis for QualifiedOpinion paragraph in our opinion the Balance Sheet Statement of Profit and Loss and theCash Flow Statement comply with the Accounting Standards specified under section 133 ofthe Act read with Rule 7 of the Companies (Accounts) Rules 2013;

e. The matter described in the Basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company.

f. On the basis of written representations received from the directors as on March312015 and taken on record by the Board of Directors none of the directors isdisqualified as on March 312015 from being appointed as a director in terms ofsection164(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 paragraph above.

h. 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 our opinionand to the best of our information and according to the explanations given to us:

i. The Company does have any pending litigations which would impact its financialposition which are as follows

a. The Hon Bombay High Court has approved the application for banks for transfer ofdebts owed to them along with the securities and mortgage charges in the past.Consequently suits filed by the banks before the Debt Recovery Tribunal had transportedthe company in place of the banks. During the year one of the suits filed by the bankscame for hearing before the said court. Subsequent to the close of the financial year theHon. Bombay High Court has passed a decree in favour of the company to dispose off/sellthe the immovable property and Flats belonging to the company to recover its dues of Rs686.30 crores. Total amount due to the company against debts of various banks taken overby them as on 31st Match 2015 is 825 6129338.

b. The Hon. Supreme Court has dismissed the appeal of the company filed against theorder of Hon. Bombay High Court in respect of retrenchment of certain workers and staffunder the Industrial Dispute Act done in the past and has directed the company to complywith conditions of the award passed by the Industrial Court. The company has filed areview petition against the said order.

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

For M/s. SACHIN P MULGAOKAR & CO.
CHARTERED ACCOUNTANTS
Firm Regn. No. : 108945W
Place: Mumbai (Sachin P Mulgaokar)
Dated: 29th May 2015 PROPRIETOR
Membership No : 40942

Annexure to the Independent Auditors’ Report.

(Referred to in paragraph 1 under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date)

(i) In respect of the Company's fixed assets:

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

(b) The fixed assets were physically verified during the year by the Management inaccordance with a regular programme of verification which in our opinion provides forphysical verification of all the fixed assets at reasonable intervals. According to theinformation and explanation given to us no material discrepancies were noticed on suchverification.

(ii) As the agency is carrying on agency business paragraph 3(ii) of the order is notapplicable.

(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms or other parties listed inthe Register maintained under Section 189 of the Companies Act 2013.

(iv) In our opinion and according to the information and explanations given to usthere is an adequate internal control system commensurate with the size of the company andthe nature of its business for the purchase of inventory fixed assets and for sale ofgoods. During the course of our audit we have not observed any major weakness in suchinternal control system.

(v) The company has not accepted any deposits from the public.

(vi) As informed to us the maintenance of cost records has not been prescribed undersub-section (1) of section 148 of the Companies Act 2013 in respect of activities carriedout by the company.

(vii) According to the information and explanations given to us and according to thebooks and records as produced and examined by us in our opinion:

(a) The Company is regular in depositing undisputed statutory dues includingIncome-Tax Service Tax and other material statutory dues as applicable with theappropriate authorities and there are no arrears of outstanding statutory dues as at thelast date of financial year concerned for a period of more than of six months from thedate they became payable. As explained to us the company did not have any dues on accountof Provident Fund Employees State Insurance Sales Tax Wealth Tax Customs Duty ExciseDuty Value Added Tax and Cess.

(b) According to the information and explanations given to us and the records of thecompany examined by us the particulars of income tax service tax as 31st March 2015which have not been deposited on account of any dispute pending are as under.

Name of the Statute Nature of Dues Relevant Financial Year Amount ( Rs) Forum where dispute is pending
Foreign Exchange Regulation Act Fine for alleged violation of Foreign Exchange Regulation Act by the company and its officer. 1979 100297000 Foreign Exchange Appellate Tribunal has allowed companies appeal against which the concerned government department ha s filed an appeal with the High Court of Bombay.
Income Tax Act 1961 Income Tax 2007-08 1893601 Commissioner of Income Tax (Appeals)

(viii) The Company has any accumulated losses at the end of the financial year and hasincurred cash losses during the year covered by our audit and in the immediately precedingfinancial year.

(ix) The Company did not have any outstanding dues to financial institutions banks ordebenture holders during the year.

(x) According to the information and explanation given to us the company has not givenany guarantees for loans taken by others from banks or financial institutions.

(xi) As informed to us Secured Loans were taken in the past for purchase of shipswhich have already been sold off but the company is not in a position to repay the balanceloan. Company's fixed assets like Building are mortgaged to the company which has takenover the debts due to the banks. Outstanding secured loans including interest as on 31stMarch 2015 is Rs 8256129.338

(xii) To the best of our knowledge and belief and according to the information andexplanations given to us no fraud by the Company and no material fraud on the Company hasbeen noticed or reported during the year.

For M/s. SACHIN P MULGAOKAR & CO.
CHARTERED ACCOUNTANTS
Firm Regn. No. : 108945W
Place: Mumbai (Sachin P Mulgaokar)
Dated: 29th May 2015 PROPRIETOR
Membership No : 40942