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MMTC Ltd.

BSE: 513377 Sector: Others
NSE: MMTC ISIN Code: INE123F01029
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VOLUME 476484
52-Week high 101.60
52-Week low 41.80
P/E 264.83
Mkt Cap.(Rs cr) 7,680
Buy Price 76.80
Buy Qty 2784.00
Sell Price 0.00
Sell Qty 0.00
OPEN 77.50
CLOSE 78.10
VOLUME 476484
52-Week high 101.60
52-Week low 41.80
P/E 264.83
Mkt Cap.(Rs cr) 7,680
Buy Price 76.80
Buy Qty 2784.00
Sell Price 0.00
Sell Qty 0.00

MMTC Ltd. (MMTC) - Auditors Report

Company auditors report

TO THE MEMBERS OF MMTC LIMITED

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of MMTC LIMITED ("theCompany") which comprise the Balance Sheet as at March 31 2016 the Statement ofProfit and Loss Account and the Cash Flow Statement for the year then ended and summaryof 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 companiesAct 2013 ("theAct") 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 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 relevantto the preparation and presentation of thefinancial statements that give a true and fairviewand are free from material misstatementwhether due to fraud or error.

Auditor’s Responsibility:

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

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 Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Companies Act 2013 to the extent applicable.

Those Standards require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether the financial statements are freefrom 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 Fairview 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.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the 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 2016 and its profit and its cash flows for the year ended on that date.

Emphasis of matter

a. We draw attention to Note No. 6.2 (3) to the standalone financial statement inrespect of write back of provision towards diminution in the value of shares in ICEXamounting to Rs. 241.10 million subsequent to sale of its investment on profit andsubscription of right issue of the shares of ICEX.

b. We draw attention to Note No. 16 (ii) (b) to the standalone financial statement inrespect of recognition of interest income amounting to Rs. 389.90 million from theretained amount of Rs. 609.90 million. The amount was retained during 2014-15 out ofexport proceeds of "WheatA/c-FCI".

c. We draw attention to Note No. 19 (i) (c) and Note No. 21 to the standalone financialstatement in respect of fund based and non-fund based exposure of the company in NeelachalIspatNigam Limited.

d. We draw attention to Note No. 22 to the standalone financial statements in respectof non provision of liability if any in case of non-extension of time/waiver/write offof GR-1 forms.

e. We draw attention to Note No. 38 to the standalone financial statements in respectof Balances under Sundry Debtors/claims Recoverable/Loans & Advances/SundryCreditors/Other Liabilities which in many cases have not been confirmed and consequentreconciliation/adjustments if any required upon such confirmation are not ascertainable.

Our opinion is not modified in respect of these matters.

Other Matters

We did not audit the financial statements/financial information of 10 regional officesincluded in the standalone financial statements of the company whose financialstatements/financial information reflect total assets of INR 26710.90 Million as at March312016 and total revenue of INR 89060.21 Million for the year ended on that date asconsidered in the standalone financial statements. The financial statements/financialinformation of these branches have been audited by the branch auditors whose reports havebeen furnished to us and our opinion in so far as it relates to the amount and disclosuresincluded in respect of these branches is based solely on the report of such branchauditors.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act based on the comments in the auditors' reports of the corporate office &branch auditors of the company we give in the "Annexure-1" a statementon the matters specified in the paragraph 3 and 4 of the Order to the extent applicable.

2. As required by Section 143 (3) of the Act we report that:

a) 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.

b) 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 and proper returnsadequate for the purposes of our audit have been received from the branches not visited byus.

c) The reports on the accounts of the branch offices of the Company audited undersection 143 (8) of the Act by the Branch auditors have been sent to us and have beenproperly dealt with by us in preparing the report.

d) The Balance Sheet the Statement of Profit and Loss and Cash Flow Statement referredto in this report are in agreement with the books of account and with the returns receivedfrom the branches not visited by us.

e) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.

f) On the basis of the written representations received from the directors as on 31stMarch 2016 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2016 from being appointed as a director in terms of Section164 (2) of the Act.

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 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 financial statements - Refer Note 19;

II. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts

III. There was no amount which was required to be transferred to the Investor Education& Protection Fund by the Company during the year ended March 312016.

3. With respect to the adequacy of internal financial controls over financial reportingof the Company and operating effectiveness of such controls referto our separate reportin "Annexure-2"

4. As required by C & AG of India through sub directions dated 22-01-2016 issuedunder Section 143 (5) of the Companies Act for the year2015-16 we give our report in theattached "Annexure-3"

For O.P. Tulsyan & Company
Chartered Accountants
FRN: 500028N
Rakesh Agarwal
Date : 27.05.2016 Partner
Place : New Delhi Mem. No.: 081808

Annexure-1 to the Independent Auditors’ Report on the Standalone FinancialStatements of MMTC LTD.

(Referred to in Paragraph 1 under the "Other Legal & RegulatoryRequirement")

We further report that:

1. In Respect of Its Fixed Assets

i. The Company has maintained proper records in respect of its fixed assets showingfull particulars including quantitative details and situation of fixed asset.

ii. Based on the physical verification reports produced before us in our opinion thesaid assets have been physically verified by the management at reasonable intervals.

iii. Title Deeds of immoveable property are held in the name of the company except inthe cases mentioned below:

Region/Office Asset Description Gross Value Remarks
Corporate Office Land at Delhi 1316521 Lease Agreement is in Joint Name with State Trading Corporation
Corporate Office Office Building at Delhi 32637459 Ownership Document not available
Corporate Office Leasehold Land 11071815 Ownership Document not available
Bhubaneshwar Residential Building Roads Culverts & Electrical Installation 11632036 Lease deed expired in 2011

2. In Respect of Its Inventory

i. As explained to us the inventories have been physically verified during the year bythe management.

ii. As In our opinion and according to the information and explanation given to us nomaterial discrepancies were noticed during the course of physical verification.

iii. In our opinion and according to the information and explanation given to us theprocedure of physical verification of inventories followed by the management needs to bestrengthened in relation to the size of the MMTC Limited and the nature of its business.

3. Loans given to parties covered under section 189

The company has granted unsecured loan to one of its associate companies M/s NeelachalIspat Nigam

Limited.

i. In our opinion and according to the information and explanation given to us termsand conditions on which loan has been granted is not pre-judicial to the interest of thecompany.

ii. According to the information and explanation given to us there is no agreemententered with the company for granting loan hence we are unable to comment upon.

iii. Since there is no agreement between the company and the borrower we are unable tocomment upon overdue amount. However out of the total loan amount of Rs.9282.90 Millionas on 31st March 2016 Rs. 1300.00 Million was due on 31 March 2016 still remains due.

4. Compliance of Provision of Section 185 and 186 of the Companies Act 2013 in respectof loans guarantees and securities

According to the information and explanations given to us and as per the recordsverified by us the company has complied the provisions of Section 185 and 186.

5. Acceptance of Deposits

According to the information and explanations given to us the company has not accepteddeposits as per the directive issued by the Reserve Bank of India and the provision ofSection 73 to 76 or any other relevant provision of the Act and the rules framed thereunder.

6. Maintenance of Cost Records

As explained to us maintenance of cost records has not been prescribed by the CentralGovernment for the company under Section 148(1) of theAct.

7. Undisputed & Disputed Statutory Dues

i. According to the information and explanations given to us and as per the recordsverified by us the Company has been regular in depositing undisputed statutory duesincluding Income Tax Provident Fund dues Professional Tax ValueAdded Tax and ServiceTax with the appropriate authorities.

ii. There were no undisputed amount payable in respect of Income Tax Provident Funddues Professional Tax ValueAdded Tax and Service Tax and other statutory dues in arrearas at 31st March 2016 for more than six months from the date they became payable.

iii. In case if dues of Income Tax or sales tax or service tax or duty of custom orduty of excise or value tax or cess have not been deposited on account of any dispute areattached as Annexure A:

8. Loans from Banks/Financial Institutions/Government/Debentures

According to the information and explanations given to us and as per the recordsverified by us the company has not defaulted in repayment of loans or borrowings to afinancial institution bank Government or dues to debenture holders.

9. Proceeds of Public Issue (including debt instruments)/Term Loans

According to the information and explanations given to us and as per the recordsverified by us the Company has not raised any money during the year throughinitial/further public offer (including debt instruments). Also the Company has notavailed any term loans during the current or earlier years.

10. Frauds on or by the Company

According to the information and explanations given to us and as per the recordsverified by us carried out in accordance with the generally accepted auditing practicesin India we have neither come across any instance of fraud on or by the company or itsofficers noticed or reported during the year nor have we been informed of such case bythe management.

11. Managerial Remuneration

According to the information and explanations given to us and as per the recordsverified by us managerial remuneration has been paid/ provided for by the company duringthe year under review is within the purview of Section 197 read with Schedule V to theAct.

12. Nidhi Companies

The Company is not a Nidhi Company during the year under review and hence the criteriaas stipulated under Nidhi Rules 2014 are not applicable to the company.

13. Related Party Transactions

As per the information and explanations given during the course of our verification inour opinion all transactions with the related parties made by the company were incompliance with section 177 and 188 of the

Act to the extent applicable to the company during the year the relevant details inrespect of which have been appropriately disclosed in the financial statements.

14. Preferential Issue

During the year the company has not made any preferential allotment or privateplacement of equity shares or convertible debentures and hence the requirements of Section42 of the Act are not applicable.

15. Non-Cash Transactions with Director’s etc.

As perthe informations and explanations provided to us during the year the Companyhas not entered into any non-cash transactions with directors or persons connected withthe directors within the purview of section 192 of the Act are not applicable.

16. Provision of45-IAofthe Reserve Bank of India Act1934

According to the information and explanations given to us and as perthe recordsverified by us during the year the Company is not required to be registered underSection 45-IAofthe Reserve Bank of India Act 1934.

For O.P. Tulsyan & Company
Chartered Accountants
FRN: 500028N
Rakesh Agarwal
Date : 27.05.2016 Partner
Place : New Delhi Mem. No.: 081808

Annexure "A" to Clause 7 (iii) of Annexure 1 to Independent Auditors’Report on the Standalone Financial Statements of MMTC Limited

Mumbai Region

Nature of Statute Nature of Dues Year Amount Authority
Bombay Sales Tax Act Sales Tax 1986-87 308644 Jt. Comm. Of Sale tax
Bombay Sales Tax Act Sales Tax 1989-90 149606778 Jt. Comm. Of Sale tax
Bombay Sales Tax Act Sales Tax 1990-91 233046478 Jt. Comm. Of Sale tax
Bombay Sales Tax Act Sales Tax 1991-92 2898738 Jt. Comm. Of Sale tax
Bombay Sales Tax Act Sales Tax 2001-02 4503961 Jt. Comm. Of Sale tax
Maharashtra VAT Tax Sales Tax 2008-09 2604882 Jt. Comm. Of Sale tax
Maharashtra VAT Tax Sales Tax 2008-09 14213373 Jt. Comm. Of Sale tax
Maharashtra VAT Tax Sales Tax 2007-08 2399218 Jt. Comm. Of Sale tax
Maharashtra VAT Tax Sales Tax 2010-11 4582018 Jt. Comm. Of Sale tax
Maharashtra VAT Tax Sales Tax 2010-11 122470 Jt. Comm. Of Sale tax
Maharashtra VAT Tax Sales Tax 2009-10 1958379 Jt. Comm. Of Sale tax
Central Sale Tax1956 Sales Tax 2011-12 4825144 Jt. Comm. Of Sale tax
Central Sale Tax1956 Sales Tax 2008-09 5181978 Jt. Comm. Of Sale tax
Central Sale Tax1956 Sales Tax 2007-08 7197308 Jt. Comm. Of Sale tax
Custom Act1962 Custom Act 2012-13 345407691 Commissioner of customs

Bengaluru Region

Nature of Statute Nature of Dues Year Amount Authority
Service Tax Service Tax Not Mention 1026502

Chennai Region

Nature of Statute Nature of Dues Year Amount Authority
TNGST Act Sale Tax 1998-99 863114 Madras High Court'
TNGST Act Sale Tax 2000-01 443416 Sales Tax Appeals Tribunal
TNGST Act Sale Tax 1999-00 1152785 Madras High Court'
TNGST Act Sale Tax 2001-02 178566 Assistant Commissioner of Commercial Taxes
TNGST Act Vat & Penalty 2008-09 35508765 Jt. Commissioner of Commercial Taxes Appeals

Disputed Statutory Dues Which Have Not Been Deposited

Delhi Region

Nature of Statute Nature of Dues Year Amount Authority
Central Sale Tax1956 CST/LST/Interest

Penalty

2002-03 3745290 Commissioner DVAT
LST LST 1984-85 1165303 D.C. Appeal
LST/CST LST/CST 1986-87 65732207 Additional Commissioner
LST/CST LST/CST 1987-88 43186549 Additional Commissioner
LST/CST LST/CST 1988-89 40296672 Additional Commissioner
LST LST 1989-90 6187340 Additional Commissioner
LST LST 1990-91 2223198 Additional Commissioner
UP-LST/CST LST/CST 1990-91 617588 Moradabad Allahabad High Court
UP-LST LST 1991-92 470578 Moradabad Allahabad High Court
UP-LST LST 1992-93 264037 Moradabad Allahabad High Court
UP-LST LST 1994-95 195000 Sale Tax Authorities
UP-LST LST 1993-94 185100 Moradabad Allahabad High Court
UP-VAT VAT 1987-88 1635160 Kanpur Joint Commissioner
UP-VAT VAT 1993-94 921383 Commissioner UP-VAT
UP-VAT VAT 1996-97 1223616 Commissioner UP-VAT
UP-VAT Interest Penalty 2007-08 249828 Commissioner UP-VAT
Haryana-VAT LST 1992-93 424587 Faridabad Punjab & Haryana High Court Chandigarh
MP-VAT LST 1999-00 150004 Sale Tax Authority Indore
MP-VAT LST 1998-99 4730692 Assessing Authority Indore
Custom & Central Excise Custom Duty & Interest 1999-2000 27267919 Pending before Hon'ble High Court as per Direction of Supreme Court
Custom & Central Excise Custom Duty 2006-07 20000000 Dy. Commissioner of Customs
Custom & Central Excise Custom Duty 2007-08 15050000 Dy. Commissioner of Customs
Custom & Central Excise Custom Duty 2008-09 6180000 Dy. Commissioner of Customs
Custom & Central Excise Custom Duty 2009-10 6180000 Dy. Commissioner of Customs
Custom & Central Excise Excise

Tax/Interest

2010-11 1820878 Commissioner of Central Excise
Custom & Central Excise Excise

Tax/Interest

2011-12 191353780 Commissioner of Central Excise

Hyderabad Region

Nature of Statute Nature of Dues Year Amount Authority
CST CST 1989-90 149770 STAT
APGST APGST 1993-94 630615 STAT VIZAG
CST CST 1993-94 441446 STAT VIZAG
CST

CST

1994-95

204481

AC LTU

APGST APGST 1995-96 3803875 STAT VIZAG
CST CST 1995-96 597266 STAT VIZAG
APGST APGST 1991-92 2402576 STAT VIZAG
APGST APGST 1992-93 1396269 STAT VIZAG
APGST APGST 1993-94 1762687 STAT VIZAG
APGST APGST 1996-97 2880309 STAT VIZAG
CST CST 1996-97 2134306 STAT VIZAG
APGST APGST 1997-98 5843100 STAT VIZAG
APGST APGST 1998-99 5565147 STAT VIZAG
APGST APGST 1999-00 3904454 STAT VIZAG
APGST APGST 2000-01 252926 STAT VIZAG

2008-09

784474

STAT

CST VAT

CST VAT

2004-05

CST

2006-07

VAT

676058

AC LTU STAT

VAT VAT 2007-08 71000 AC Audit
VAT VAT 2010-11 33897216 CTO VIZAG
Kolkata Region
Nature of Statute Nature of Dues Year Amount Authority
Sale Tax Law Sale Tax 2005-2006 1131000 Appellate Board
Sale Tax Law Sale Tax 2006-07 7761000 Appellate Board
Sale Tax Law Sale Tax 2012-13 7862000 Appellate Board
Sale Tax Law West Bengal Vat 2012-13 4000 Appellate Board
Jaipur Region
Nature of Statute Nature of Dues Year Amount Authority
Rajasthan Sale Tax Act Sale Tax 2003-04 14946540 Rajasthan Kar Board Ajmer
Rajasthan Sale Tax Act Sale Tax 1999-2000 2607605 Rajasthan Kar Board Ajmer
Rajasthan Sale Tax Act Sale Tax 2010-11 32647269 Rajasthan Kar Board
Central Sale Tax1956 Central Sale Tax 1956 2010-11 5992494 Rajasthan Kar Board
Sale Tax Turnover Tax 2003-04 532992 High court
Rajasthan Value Added Tax Value Added Tax 2012-13 6816652 Rajasthan Kar Board
Central Sale Tax1956 Central Sale Tax 1956 2012-13 1163461 Rajasthan Kar Board

Disputed Statutory Dues Which Have Not Been Deposited

Vizag Region

Nature of Statute Nature of Dues Year Amount Authority
APGST APGST 1968-69 1856325 STAT Hybd
APGST APGST 1985-86 2505806 STAT VIZAG
APGST APGST 1986-87 27083841 STAT VIZAG
APGST APGST 1989-90 479000 STAT
APGST APGST 1991-92 1934139 AC LTU
CST CST 1994-95 841695 AC LTU
CST CST 1995-96 4862340 STAT VIZAG
CST CST 1996-97 3358889 STAT VIZAG
APGST APGST 1997-98 2527960 STAT VIZAG
CST CST 2007-08 104614 ADC
Service Tax Service Tax 2003-06 126526554 CESTAT Hyderabad

Bhubaneshwar Region

Nature of Statute Nature of Dues Year Amount Authority
Sale Tax Interest Penalty 1978-79 2650388 High Court of Orissa
Sale Tax Sale Tax 1978-79 3400919 High Court of Orissa
Sale Tax Sale Tax 1978-79 170046 High Court of Orissa
Sale Tax Interest Penalty 1979-80 653452 High Court of Orissa
Central Sale Tax1956 Central Sale Tax 1956 1982-83 3483020 High Court of Orissa
Sale Tax Interest Penalty 1978-79 35742030 High Court of Orissa
Sale Tax DEPB 2006-09 149822308 Addl. Commissioner Sale Tax Odisha
Sale Tax DEPB 2010-12 50843080 Addl. Commissioner Sale Tax Odisha
Value Added Tax Value Added Tax 2013-14 142818841 Addl. Commissioner Sale Tax Odisha
Central Sale Tax1956 Central Sale Tax 1956 2013-14 580705822 Addl. Commissioner Sale Tax Odisha
Excise Tax Excise Tax 2013-14 526310091 Addl. Commissioner Sale Tax Odisha
Central Excise Act Service Tax 2003-05 43195232 Customs Excise & Service Appellate Tribunal
Central Excise Act Service Tax 2003-07 168946005 Customs Excise & Service Appellate Tribunal
Central Excise Act Service Tax 2007-08 38683266 Customs Excise & Service Appellate Tribunal
Central Excise Act Service Tax 2008-10 83010407 Customs Excise & Service Appellate Tribunal
Central Excise Act Service Tax 2010-11 42951068 Commissioner of customs Excise & Service Tax Bhubaneswar
Central Excise Act Service Tax 2011-12 41655475 Commissioner of customs Excise & Service Tax Bhubaneswar

Bhubaneshwar Region

Nature of Statute Nature of Dues Year Amount Authority
Central Excise Act Service Tax 2009-12 339204060 Commissioner of customs Excise & Service Tax Bhubaneswar
Central Excise Act Service Tax 2009-11 7756072 Commissioner of customs Excise & Service Tax Bhubaneswar
Central Excise Act Service Tax 2012-13 3760319 Commissioner of customs Excise & Service Tax Bhubaneswar
Central Excise Act Service Tax 2012-13 35101874 Commissioner of customs Excise & Service Tax Bhubaneswar
Central Excise Act Service Tax 2013-14 491261 Commissioner of customs Excise & Service Tax Bhubaneswar
Central Excise Act Central Excise Act 2012-13 1490287737 Ass. Comm. CE&C Balasore Division Balasore

Corporate Office

Nature of Statute Nature of Dues Year Amount Authority
Income tax Act Income tax Act 2010-11 63093790 CIT(A)
Income tax Act Income tax Act 1996-97 35724124 AO
Income tax Act Income tax Act 2012-13 35464842 CIT(A)
Income tax Act Income tax Act 2009-10 23180210 CIT(A)
Income tax Act Income tax Act 1993-94 561821 ITAT
Income tax Act Income tax Act 1996-97 114601858 ITAT
Income tax Act Income tax Act 1997-98 10293042 ITAT
Income tax Act Income tax Act 1999-00 26066476 ITAT
Income tax Act Income tax Act 2000-01 18463021 ITAT
Income tax Act Income tax Act 2001-02 11765008 ITA/High Court
Income tax Act Income tax Act 2002-03 7304915 ITAT
Income tax Act Income tax Act 2003-04 1116907 ITAT
Income tax Act Income tax Act 2004-05 41985746 ITAT
Income tax Act Income tax Act 2005-06 781432 AO
Income tax Act Income tax Act 2006-07 4208767 AO
Income tax Act Income tax Act 2007-08 7350191 AO
Income tax Act Income tax Act 2008-09 2210119 AO
Income tax Act Income tax Act 2009-10 11938236 ITAT
Income tax Act Income tax Act 2010-11 90820808 CIT(A)
Income tax Act Income tax Act 2011-12 106088129 CIT(A)

Annexure-2 to the Independent Auditors’ Report of even date on the standalonefinancial statements of MMTC Ltd.

Report on the Internal Financial Controls over financial reporting under Section143(3)(i)of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of MMTC Ltd.("the Company") as of March 31 2016 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date.

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 (the ICAI). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to Company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required underthe CompaniesAct 2013.

Auditor’s Responsibility:

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal financial controls over financial reportingand the Standards on Auditing issued by the ICAI deemed to be prescribed under section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls. Those standards and the Guidance Note that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively 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 financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exist and testing and evaluating the designand operating effectiveness of the internal control based on the assessed risk . Theprocedures selected depend on the auditor's judgment including the assessment of risks ofmaterial misstatements 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 of our 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 includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

(2) Provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted principles andthat receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and

(3) Provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial 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.

Opinion:

In our opinion subject to a few areas in which improvement as discussed and agreedwith the management is required the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at March 31st 2016 basedon the internal control over financial reporting criteria established by the companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued bythe InstituteofCharteredAccountants of India.

For O.P. Tulsyan & Company
Chartered Accountants
FRN: 500028N
Rakesh Agarwal
Date : 27.05.2016 Partner
Place : New Delhi Mem. No.: 081808

Annexure-3

REPORT ON THE DIRECTIONS ISSUED BY CAG UNDER Section 143 (5) of the Companies Act2013 FOR THE FINANCIAL YEAR 2015-16

As referred to at Para 4 of the Independent Auditor’s Report on the standalonefinancial statements of MMTC Ltd.

Sl. No. Description Observation
1. If the Company has been selected for disinvestment a complete status report in terms of Valuation of Assets (Including Intangible assets and Land) and liabilities (Including Committed and General Reserve) may be examined including the mode and present stage of disinvestment process. As reported to us the company has not been selected for disinvestment.
2. Please report whether there are any cases of waiver/write off debts/loans/interest etc. if yes the reason there for and the amount involved As per explanation and information given to us and records verified by us an amount of Rs. 967972.00 (Old Debit Balances) has been written off during the financial year for the reason of non recovery from the parties.
3. Whether proper records are maintained for inventories lying with third parties and assets received as gift from Governments or other authorities. As per explanation and information given to us proper records are maintained for inventories lying with third parties. It is informed to us during the year no assets received as gift from Government or other Authorities.

 

For O.P. Tulsyan & Company
Chartered Accountants
FRN: 500028N
Rakesh Agarwal
Date : 27.05.2016 Partner
Place : New Delhi Mem. No.: 081808

Annexure-3

Revised Report* on the Directions issued by CAG Under Section 143 (5) Of The CompaniesAct 2013 for the Financial Year 2015-16

As referred to at Para 4 of the Independent Auditor’s Report dated 27.05.2016 onthe standalone financial statements of MMTC Ltd.

Sl. No. Description Observation
1. Whether the Company has cleartitle/lease deeds for freehold and leasehold respectively? If not please state the area of freehold and leasehold land for which title/lease deeds are not available? As per explanation and information given to us and records verified by us in respect of Corporate Office & DRO and based on audit reports read with CARO reports received from other auditors for 10 regional offices details of freehold and leasehold lands for which title/lease deeds are not clear/not available for verification are given below.
2. Please report whether there are any cases of waiver/write off debts/loans/interest etc. if yes the reason there for and the amount involved As per explanation and information given to us and records verified by us an amount of Rs. 967972/- (Old Debit Balances) has been written off during the financial year for the reason of non-recovery from the parties.
3. Whether proper records are maintained for inventories lying with third parties & assets received as gift/grant(s) from Govt. or other authorities. As per explanation and information given to us proper records are maintained for inventories lying with third parties. It is informed to us during the year no assets received as gift/grant from Government or other Authorities.

Freehold/Leasehold Land where title/lease deeds are not clear/not available forverification:

Region/Office Asset Description Gross Value Area Remarks
Corporate Office Land for Residential Colony at New Delhi 1316521 32.33 Acres Lease Agreement is in Joint Name of MMTC and State Trading Corporation
Corporate Office Leasehold Land at Scope Complex New Delhi 11071815 Not Available Ownership Document not available
Bhubaneshwar Office Residential Building Roads Culverts & Electrical Installation 11632036 2 Acres Cost of Residential Building Roads Culverts & Electrical Installation constructed on the Lease Hold Land at Paradeep which expired on 21.11.2011. Paradeep Port Trust has approved its renewal for 15 years. However final approval of Government is awaited.

 

For O.P. Tulsyan & Company
Chartered Accountants
FRN: 500028N
Rakesh Agarwal
Place : New Delhi Partner
Date : 06.07.2016 Mem. No.: 081808

* Our original report dated 27th May 2016 has been revised consequent to reviseddirections received from CAG regarding comments on (a) title deeds for land and(b) ongrants received from Government/others.

MANAGEMENT’S REPLY TO AUDITORS OBSERVATIONS IN THE AUDIT REPORT ON STANDALONEFINANCIAL STATEMENTS FOR 2015-16

AUDITOR’S OBSERVATION MANAGEMENT’S REPLY

 

Emphasis of Matter
a. We draw attention to Note No. 6.2 (3) to the standalone financial statement in respect of write back of provision towards diminution in the value of shares in ICEX amounting to Rs 241.10 million subsequent to sale of its investment on profit and subscription of right issue of the shares of ICEX. During the year the company divested 10% of its equity in ICEX at 100% premium through expression of interest. Further ICEX issued right issue of Rs 25 crore at a premium of 100% which was fully subscribed by shareholders of ICEX like R Next IBFSL and 10 other individual investors. Consequently the net worth has turned positive and it is expected that EPS will also turn positive after the exchange recommences its operations. The ICEX has already submitted its revival plan to SEBI.
Further in Dec. 2015 ICEX got the valuation of its shares done through SEBI registered Category-I merchant bankers who valued the equity shares of ICEX of face value of Rs 5/- each at Rs 10.3074 per share under different methods.
Accordingly management considered it appropriate to write back the provision made earlier for diminution in value of investment in ICEX.
b. We draw attention to Note No. 16 (ii) (b) to the standalone financial statement in respect of recognition of interest income amounting to Rs 389.90 million from the retained amount of Rs 609.90 million. The amount was retained during 2014-15 out of export proceeds of "Wheat A/c- FCI". The company had to recover dues from FCI which were outstanding from 1989 onwards. Since FCI did not settle the dues of MMTC despite persistent follow up at the highest level MMTC had no other option but to realize its legitimate dues along with interest out of the export proceeds of wheat shipment in May 2014.Accordingly the interest of Rs 389.90 million has been accounted foras income during the year.
c. We draw attention to Note No. 19 (i) (c) and Note No. 21 to the standalone financial statement in respect of fund based and non-fund based exposure of the company in Neelachal Ispat Nigam Limited. With regard to note no. 19 (i) (c) the company has issued corporate guarantee and comfort letter in favour of Financial Institutions/banks on behalf of Neelachal Ispat Nigam Limited (NINL) for securing principal and interest in respect of loan to NINL.
With regard to Note no. 21 the management expects revival of the steel sector globally. It also expects clearance of mining rights of iron ore mine allotted to NINL. Accordingly the Management expects that financial performance of NINL will improve in coming years.
d. We draw attention to Note No. 22 to the standalone financial statements in respect of non provision of liability if any in case of non-extension of time/waiver/write offofGR-1 forms This relates to GRs pending since 1991-92. Liability if any will be provided as and when any demand is raised and settled by the company. At present the liability if any on this account is unascertainable.
e. We draw attention to Note No. 38 to the standalone financial statements in respect of Balances under Sundry Debtors/claims Recoverable/Loans & Advances/Sundry Creditors/Other Liabilities which in many cases have not been confirmed and consequent reconciliation/adjustments if any required upon such confirmation are not ascertainable. Letters are issued to parties seeking confirmation of balances outstanding in the books of MMTC to confirm the balances. It is also mentioned that in case no communication is received before stipulated date the balance indicated shall be treated as confirmed. However the parties generally do not send specific confirmation. Regional Offices have not reported receipt of adverse communication.

Annexure-1 to Independent Auditor’s Report

1(iii) Title Deeds of immoveable property are held in the name of the company except inthe cases mentioned below:

The lease deed of the Land (MMTC Residential Colony) at Delhi is in the joint name ofState Trading Corporation (STC)& MMTC.

The land for construction of office complex was allotted to SCOPE by Ministry of Works& Housing Govt of India. So far no conveyance deed has been entered between SCOPE andthe Govt of India. The land was allotted to SCOPE on lease basis.

On the land allotted to SCOPE building was constructed by NBCC which comprised ofeight Cores which houses more than twenty CPSUs. MMTC was allotted 75741 Sq.ft. area. Theallotment letter is in possession of the company. None of the occupants of SCOPE complexare in possession of any lease agreement except for allotment letter issued by SCOPE

With regard to expiry of lease deed at Regional Office Bhubaneshwar Paradeep PortTrust has approved its renewal for 15 years. However final approval of Government isawaited.

Region/ Office Asset Description Gross Value (?) Remarks
Corporate Office Land at Delhi 1316521 Lease Agreement is in Joint Name with State Trading Corporation
Corporate Office Office Building at Delhi 32637459 Ownership Document not available
Corporate Office Leasehold Land 11071815 Ownership Document not available
Bhubaneshwar Residential Building Roads Culverts & Electrical Installation 11632036 Lease deed expired in 2011

 

2(iii) In our opinion and according to the information and explanation given to us the procedure of physical verification of inventories followed by the management needs to be strengthened in relation to the size of the MMTC Limited and the nature of its business. Suggestion has been noted and we have developed a robust system for physical verification of inventories.
3 The company has granted unsecured loan to one of its associate companies M/s Neelachal Ispat Nigam Limited. As on date MMTC has extended working capital finance of Rs 800 Crores and additional amount of Rs 130 Crores for repayment of loans to NINL with the approval of Board of Directors of MMTC vide
(ii) According to the information and explanation given to us there is no agreement entered with the company for granting loan hence we are unable to comment upon. its 416th meeting held on 7.7.2015 and the same was also approved through shareholders in compliance with CompaniesAct2013.
(iii) Since there is no agreement between the company and the borrower we are unable to comment upon overdue amount. However out of the total loan amount of Rs 9282.90 Million as on 31st March 2016 Rs 1300.00 Million was due on 31 March 2016 still remainsdue. Subsequently Board of Directors of MMTC vide its 425th meeting held on 27.05.2016 have further extended the working capital finance of Rs 800 crores upto 31.03.2017 and additional amount of Rs 130 Crores upto 30.09.2016. Accordingly MMTC has also taken Corporate Guarantee (CG) from NINL for equivalent amount of Rs 930 Crores ('800 Crs. + Rs 130 Crs.) to secure the working capital assistance extended to NINL. Therefore Board of Directors of both MMTC and NINL have approved this arrangement.
A formal communication regarding charging of interest rates by MMTC has also been communicated to NINLfromtimetotime as perthe interest rate slab fixed by MMTC Banking Division Corporate Office New Delhi. However a formal Loan Agreement will be entered into between MMTC and NINLduring currentyear.