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Modern Insulators Ltd.

BSE: 515008 Sector: Engineering
NSE: MODINSULAT ISIN Code: N.A.
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Modern Insulators Ltd. (MODINSULAT) - Auditors Report

Company auditors report

INDEPENDENT AUDITORS' REPORT

To

The Members

Modern Insulators Limited

Report on the Financial Statements

We have audited the accompanying standalone financial statements of ModernInsulators Limited ("the Company") which comprise of the Balance Sheet asat March 31 2016 the Statement of Profit and Loss Cash Flow Statement for the year thenended and a summary of significant accounting policies and other explanatory information. Management'sResponsibility for the Financial Statements The Company's Board of Directors isresponsible for the matters stated in Section 134(5) of the Companies Act 2013 ("theAct") with respect to the preparation of these financial statements that give a trueand fair view of the financial position financial performance and cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Accounting Standards specified under Section 133 of the Act read with Rule7 of the Companies (Accounts) Rules 2014. This responsibility also includes maintenanceof adequate accounting records in accordance with the provisions of the Act forsafeguarding the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal controls that were operating effectively for ensuringthe accuracy and completeness of the accounting records relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial misstatement 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 there under.

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 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 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. An audit also includes evaluating the appropriateness ofthe accounting policies used and the reasonableness of the accounting estimates made bythe Company's Directors as well as evaluating the overall presentation of the financialstatements.

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

Basis for Qualified Opinion

(a) Provision for taxation (including interest) estimated at ' 944.69

lacs for current year (upto the year ' 10044.90 lacs) has not been made in accounts inview of proposed amalgamation proceedings awaiting approvals from Board for Industrial andFinancial Reconstruction. Meanwhile Income Tax department has completed assessments forAssessment Years 2008-09 to 2013-14 wherein substantive assessment orders have been passedallowing losses pertaining to proposed amalgamation with nil liability and at the sametime protective assessment orders have been made (presuming that no amalgamation had takenplace) with demand of ' 5276.43 lacs which shall be effective if the amalgamation schemeis not sanctioned; no appeal of the company is pending against aforesaid protectiveassessment orders (Note No.31)

(b) Balances of Trade Payables & Trade Receivables are subject toreconciliations/confirmations (Note No.8.1 & 15.2).

(c) The company has not received information from vendors regarding their status underthe Micro Small and Medium Enterprises Development Act 2006 and hence disclosure relatingto amounts unpaid as at the year end together with interest paid/payable under this Acthave been considered as dues of trade payables other than micro and small enterprises.(Note No.8.2).

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effect of the matters described in "Basis for Qualifiedopinion" paragraph above the aforesaid financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India:

(a) In the case of the Balance Sheet of the state of affairs of the Company as atMarch 31 2016;

(b) In the case of the Statement of Profit and Loss of the profit for the year endedon that date; and

(c) In the case of the Cash Flow Statement of the cash flows for the year ended onthat date.

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 Section 143(11) of the CompaniesAct 2013 and on the basis of such checks of the books and records of the company as weconsidered appropriate and according to the information and explanations given to us wegive in the Annexure A a statement on the matters specified in paragraphs 3 and 4 of theOrder.

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 appears from our examination of those books.

iii. The Balance Sheet Statement of Profit and Loss and Cash Flow Statement dealt withby this Report are in agreement with the books of account.

iv. Except for the effects of the matter described in the Basis for Qualified Opinionparagraph in our opinion the Balance Sheet Statement of Profit and Loss and Cash FlowStatement comply with the accounting standards specified under Section 133 of the Actread with Rule 7 of the Companies (Accounts) Rules 2014.

v. On the basis of written representations received from the directors as on March 312016 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2016 from being appointed as a director in terms of section 164 (2) ofthe 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 ourreport in Annexure B and

vii. 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:

a. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements.

b. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.

c. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

For B.L. Verma & Co.
Chartered Accountants
(Firm Regn. No.001064C)
(B.L. Verma)
Place : Jaipur Partner
Date : 25th June 2016 (Membership No.010900)

ANNEXURE A FORMING PART OF THE INDEPENDENT AUDITORS' REPORT

Referred to in the report of even date of the Auditors to members of

MODERN INSULATORS LIMITED.

(i) (a) The company is maintaining proper records showing full

particulars including quantitative details and situation of fixed assets exceptfurniture & fixtures for which detailed records are not maintained.

(b) As per the information and explanations given to us most of the fixed assets havebeen physically verified during the year by management in accordance with a phasedprogramme of verification at reasonable intervals. According to the information andexplanations 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.

(ii) As per the information and explanations given to us the inventories have beenphysically verified during the year by the management. In our opinion the frequency ofverification is reasonable and no material discrepancies were noticed on physicalverification during the year.

(iii) (a) The Company had given unsecured loan to its subsidiary

company covered under section 189 of the Companies Act. The said loan is withoutinterest and principal amount is repayable on demand (Refer Note No. 30).

(b) The Company has given interest free loan to a Company covered under section 189 ofthe Companies Act in view of proposed amalgamation awaiting approval from Board forIndustrial and Financial Reconstruction. Since the amount paid is in connection toproposed amalgamation scheme no terms have been specified for repayment of loan andinterest. In view of likely advantage to the Company on such amalgamation granting ofsuch loan is not prejudicial to the interest of the Company (Refer Note No. 29).

(iv) According to the information and explanations given to us the Company hascomplied with the provisions of section 185 and 186 of the Companies Act 2013 in respectof loans investments guarantees and security.

(v) According to the information and explanations given to us the Company has notaccepted any deposits from the public during the year.

(vi) According to the information and explanations given to us the central governmenthas prescribed maintenance of cost records under section 148 (1) of the Companies Act2013 for the products of the company. We have broadly reviewed the books of accountmaintained by the Company and are of the opinion that prima facie

the prescribed accounts and records have been made and maintained. We had not howevercarried out detailed examination of the same to determine whether they are accurate andcomplete.

(vii) (a) According to the records of the company the company is generally regular indepositing with appropriate authorities undisputed statutory dues including providentfund employees' state insurance sales tax service tax duty of customs duty of excisevalue added tax cess and other statutory dues applicable to it and no undisputedstatutory dues as noted above is outstanding for a period of more than six months from thedate it became payable. The company has not paid/provided income tax (refer comments underthe Head "Basis for Qualified Opinion" in Auditors' Report and Note No.31 ofFinancial Statement).

(b) According to the information and explanations given to us and the records of theCompany examined by us the particulars of dues of sales tax value added tax duty ofexcise and Service Tax etc. as applicable as at 31st March 2016 which have not beendeposited on account of dispute are as follows:

Name of the Statute Nature of dues Amount ( Rs. in lacs) Period to which the amount relates Forum where the dispute is pending
Central Excise Excise Duty 98.57 Various years Central Excise
Act 1944 & from and Service Tax
Service Tax 2005-06 to Appellate
2010-11 Tribunal Delhi
21.48 2012-13 Commissioner
& Central Excise
2013-14 (Appeals) Jaipur
167.84 2004-05 Departmental
to authorities at
2015-16 various places

(viii) Based on our audit and as per the information and explanations given by themanagement the company has not defaulted in repayment of dues to bank during the year.The company does not have any dues to debenture holders and loans from financialinstitutions/government.

(ix) The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) and term loans during the year.

(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or any fraud on the company by the officers oremployees noticed or

reported during the year nor have we been informed of any such case by the Management.

(xi) The managerial remuneration has been paid or provided in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theCompanies Act 2013.

(xii) This clause of the CARO 2016 is not applicable to the Company as the company isnot a Nidhi Company.

(xiii) According to the information and explanations given to us all transactions withthe related parties are in compliance with sections 177 and 188 of Companies Act 2013where applicable and the details of such transactions have been disclosed in the FinancialStatements etc. as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us the company has notmade any preferential allotment or private

placement of shares or fully or partly convertible debentures during the year underreview.

(xv) According to the information and explanations given to us the company has notentered into any non-cash transactions with directors or persons connected with them andtherefore this clause is not applicable.

(xvi) This clause of the CARO 2016 is not applicable to the Company as the company isnot required to be registered under section 45- IA of the Reserve Bank of India Act 1934.

For B.L. Verma & Co.
Chartered Accountants
(Firm Regn. No.001064C)
(B.L. Verma)
Place : Jaipur Partner
Date : 25th June 2016 (Membership No.010900)

ANNEXURE B FORMING PART OF THE INDEPENDENT AUDITORS' REPORT

Referred to in the report of even date of the Auditors to members of MODERNINSULATORS LIMITED

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of MODERNINSULATORS LIMITED ("the Company") as of March 31 2016 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls The Company'smanagement is responsible for establishing and maintaining internal financial controlsbased on 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 by the Institute ofChartered Accountants of India. These responsibilities include the design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013.

Auditors' 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 Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance N ote require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting were 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 exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error. Webelieve that the

audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion on the Company's internal financial controls system over financialreporting.

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 ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2016 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls over Financial Reporting issued by the Institute of CharteredAccountants of India.

For B.L. Verma & Co.
Chartered Accountants
(Firm Regn. No.001064C)
(B.L. Verma)
Place : Jaipur Partner
Date : 25th June 2016 (Membership No.010900)