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Modi Industries Ltd.

BSE: 507210 Sector: Agri and agri inputs
NSE: N.A. ISIN Code: N.A.
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Modi Industries Ltd. (MODIINDS) - Auditors Report

Company auditors report

To the Members of


Report on the Standalone Financial Statements

( 1 ) We have audited the accompanying standalone financial statements ofModi Industries Limited ("the Company") which comprise the Balance Sheet as at31s t March 2015 the Statement of Profit and Loss CashFlow Statement for the year then ended and a summary of significant accounting policiesand other explanatory information. The attached Balance Sheet does not include Assetsand Liabilities including Contingent Liabilities and other additional information of SteelUnit as at 31st March 2015 but includes balances as on 31s t March1992 except for reduction of: (i) unsecured loan by Rs. 323.95Lac in view ofwrite-back of Rs. 278.95Lac during the financial year 2004-05 and payment of Rs.45Lac during the financial year 2005-06 on account of one-time settlement of dues of abank and (ii) net fixed assets by Rs. 689.38Lac (Previous year vision fordepreciation for the period 1s t April 1993 to 31s tMarch 2015 on fixed assets as stated in Note Rs. 682.56Lac) on account of pro 27(4)(c) of the standalone financial statements. The Statement of Profit and Loss doesnot include: (i) certain provisions as stated in Note 27(4)(f) and (ii) loss amountunascertained of the Steel Unit for the year 1992-93 in view of non-incorporation of thefinancial statements of the Steel Unit for the above year. The Cash Flow Statement exceptfor certain adjustments made as stated in foot-note 2 of cash flow statement does notinclude adjustments for Cash Flows from investing / financing activities and changes inassets and liabilities of Steel Unit in view of non-availability of audited Balance Sheetsof the Unit as on 31s t March 2014 and 31s tMarch 2015 {Refer Note 27(4)}.

( 2) 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 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 includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

( 3) 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 accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions 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 ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the

Company’s preparation of the financial statements that give a true and fair viewin order to design audit procedures that are appropriate in the circumstances but not forthe purpose of expressing an opinion on whether the Company has in place an adequateinternal financial controls system over financial reporting and the operatingeffectiveness of such controls. 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 overallpresentation of the financial statements.

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

( 4) Basis for Adverse Opinion

( A) The books of accounts vouchers and other documents of the Steel Unit for1992-93 were not made available to us and consequently audit could not be conducted inrespect of the same. {Note 27(4)}.Therefore as stated in Paragraph 1 above the attachedBalance

SheetStatement of Profit and Loss and Cash Flow Statement does not include: (a) thefinancial data / impact of working results and of declaration of closure / post-closuretransactions which includes realization of depot sales / dues from debtors provision /payment of final dues of employees and payments to various partiesand manufacturing /personnel / administration expenses etc. of the Steel Unit for the year 1992-93 duringwhich the Unit had operated for ten months the exclusion of which in our opinionsubstantially impairs the presentation of above standalone financial statements of theCompany especially in view of the fact that (i) the assets and liabilities of

Steel Unit constituted 28% and 43% respectively of the total Assets & Liabilitiesof the Company as at 31st March 1992 and the Income & Expenditure of the Steel Unitconstituted 30% and 32% respectively of the total Income & Expenditure of the Companyfor the said year which resulted in a loss of Rs. 787.22Lac for the Unit and (b)impact on assets liabilities and cash flows on account of non-incorporation oftransactions / balance sheets for the years 1993-94 to 2014-15 as stated in note 27(4)(c).

( B) Further to our comments in paragraphs 1 and 4(A) above and in the Annexurereferred to in paragraph 6(i) below we report that: i. Understatement ofaccumulated loss on account of non-incorporation of impact of operational / workingresults / declaration of closure and post closure transactions of Steel Unit for the year1992-93 amount / impact unascertained. {Refer Note 27(4) and Paragraph 4(A) above.} ii . Though the Company has been incurring huge losses continuously (losses for the fouryears i.e. 2011-12 to 2014-15 are Rs. 4276.10Lac Rs. 3489.48Lac Rs.4289.92Lac and Rs. 2505.50Lac respectively which aggregates to loss ofRs.14561Lac for 4 years) accumulated losses c alu 1001.45Lac of Rs. 21445.23Lac ason 31st March 2015 are far in excess of paid-up apital & reserves(excluding rev ation reserve) of Rs. as on that date and the company has beendeclared a sick company on 14t h March 1991 and was also issued ashow cause notice for winding up by the Board for Industrial & Financial Restructuringon 28t h October 2013 (presently the winding up order has beenstayed by theAppellate Authority for Industrial & Financial Restructuring) theaccounts have been prepared by the management on a going concern basis for the reasonsstated in Note 27(17). In our opinion these events / conditions cast significant doubt onthe ability of the company to continue as a going concern and the appropriateness of thesaid basis is inter-alia mainly dependent on the vacation of the winding-up ordersanction and implementation of the rehabilitation scheme government support / incentives/ subsidy for paying huge amount of farmers dues towards cane purchases for sugar season2014-15 and waiver off interest liability on these dues and also the company’sability to infuse requisite funds by sale of unproductive assets or otherwise for meetingsubstantial financial obligations including dues of farmers towards cane purchases.

i i i . Understatement of losses on account of non-provision of interest on loansobsolete inventories doubtful debtors / loan and advances and impairment loss andnon-physical verification of inventories and fixed assets etc. in Steel Unit as stated inNotes 27(4)(f)(i) to (vii) and 27(5) of the financial statements. Amount of non-provisionnot ascertained by the management. iv. Non-provision of impairment loss amountunascertained by the management of assets of Sugar and Electrode Units as stated in Note2 7(41).

v. (1) Non-provision of late payment surcharge / recovery charges Rs.302.66Lac (Previous year Rs. 302.66Lac) {Note 27(9)} and Non-provision of demandsof U.P. Power Corporation Ltd Rs. 1311.49Lac (Previous year Rs. 1311.49Lac){Note 27(4)(f) (viii)(c)};

( 2) Non-provision of ESI demand Rs. 63.51Lac (previous year Rs.62.35Lac) {Note 27(10)};

( 3) Non-provision of House-tax demand Rs. 188.63Lac (Previous year Rs.188.63Lac){Note27(11)};

( 4) Non-provision of simple penal and compound interest of Rs.32753.47Lac (for the year Rs. 4774.77Lac) on term loans / debentures and publicdeposits {Note 27(18)(a) and (f)} and interest / bank charges Rs. 3528.04Lac (forthe year Rs. 510.15Lac) on cash credit from banks {Note 27(18)(d) & (e)};

( 5) Non-provision of Wages Rs. 27.46Lac (Previous year Rs.27.46Lac) for the lock-out period {Note 27(21)};

( 6) Non-provision of recovery charges of Rs. 413.50Lac (Previous Year Rs.413.50Lac) {Note 27(35)(b)}.

( 7) Non-provision of interest upto 31s t March 2015 oncane dues for sugar season 2014-15 amounting to

Rs. 276.67Lac {Note 27(35)(g)} and

( 8) Accounting for amount recoverablef o Rs. 1588.44Lac as on 31stMarch 2015 towards financial assistance by way of reimbursement of part of sugar caneprice by State Govt. whereas the amount to be reimbursed if anyis yet to be quantifiedand recommended by the committee still to be appointed by the State Govt. for thispurpose. {Note 27(24)}.

( C ) Accounting treatment given to the manufacture and sale of Vodka and whisky bythe Distillery unit ("Unit") of company as stated in Note

2 7(16) whereas it has no impact on the net profit of the Unit for the year.

( D ) Confirmation of Debit / Credit balances of debtors / creditors and of certainbanks were not obtained. Impact on the financial statements is not ascertainable.{Note27(27)}.

( E ) Our audit observations under sections 143(1) & 186 of The Companies Act2013 are as under:

The company had given unsecured interest free security deposits amounting to: (i) Rs.1100Lac during May 2011 against temporary possession of 59 houses to Ashoka MercantileLimited ("AML") a related party and (ii) Rs. 147.63Lac during theearlier years against temporary possession of 9 houses to Modipon Limited("MPL") also a related party. The outstanding amounts as on 31s tMarch 2015 in the books of account of the company are Rs. 867.80Lac (47 houses)and Rs. 147.63 Lac (9 houses) in respect of AML and MPL respectively.

These houses are not occupied by any of the employees of the company till date i.e.mostly lying vacant. In our opinion the above unsecured loans given by the company {i.e.a sick company as mentioned in Note 27(17)} to two related parties amounting toRs.1015.43Lac ( As on 31s t March 2014 Rs. 1145.63Lac)have been shown as deposits by the company since date of payment on which interest @ 8.5%has now been charged w.e.f. 1s t April 2014 from AML since itexpressed its inability to refund the amount during 2014-15 and no interest has beencharged from MPL. {Refer Note 27(38)(4)(B) and Foot-note 7 of Note 27(38)}.

( F ) As stated by the management in Note 27(36) the Electrode Unit of the companyhas incurred expenditure for advertisement of products amounting to Rs. 155.38Lac(previous year Rs. 281.64Lac) including Rs. 153.12Lac by way ofadvertisement in newspapers through agents.

In the absence of sufficient appropriate audit evidence regarding prevailing marketrates / charges paid to newspaper publishers by agents we are unable to verify andexpress our opinion on these rates/charges paid by the company to agents. Observations& suggestions of Internal Auditors in this regard be also looked into.

( G) (i) As per the bottling contract mentioned in Note 27(16) the Distillery Unit ofthe company ("bottler") has agreed for blending manufacturing and bottling ofthe products for MI Spirit India Private Limited (MI Spirit) and MI Spirit will eitheritself or through "Modi Illva India Private Limited (Modi Illva) a company in whicha director of the company is also a director market the products and in case MI Spiritrequests the bottler to directly undertake any promotion of the products then expensesincurred by the bottler in connection with the promotion of the products shall bereimbursed by MI Spirit against the debit notes raised by the bottler.

(ii) We note that the Distillery Unit ("the Unit") has accounted for salepromotion expenses (cost of gift items) amounting to Rs. 250.99Lac ( PreviousyearRs. 222.20Lac) in its books of account during 2014-15. In view of the factsstated in sub-paragraph (i) above in our opinion the accounting for such expense in thebooks of account of the Unit is not proper since the same is to be debited to MI Spirit asstated above.

Further we could not verify / audit these expenses amounting to Rs. 215.11Lacincluded in above as the sale promotion policy and records if any relating to receiptand distribution of these gifts were not available with the Unit.

( i i i ) However the accounting of these sale promotion expenses in the books ofaccount of the Unit had no impact on the net profit of the Unit as the Unit is entitled toonly fixed manufacturing margin as stated in note 27(16) i.e. instead of sale promotionexpenses the Trade mark license & marketing fee’ expenses would have beenaccounted for in the books of account of the Unit resulting in no impact on net profit ofthe Unit.

( H) We further report that without considering items mentioned at 4 (B) (i) to(iv) 4(D)to 4(F) above the possible effects of which could not be determined had theobservations made by us in paragraphs 4(B) (v) and 4(C & G) above been consideredthe loss for the year would have been Rs. 42959.37Lac (as against the reportedloss of Rs. 2505.50Lac) negative balance of Reserves and Surplus in Note 2 wouldhave been Rs. 59256.56Lac (as against the reported negative figure ofRs.18802.69Lac) current assets would have been Rs. 16772.42Lac (as against thereported figure of Rs. 21299.82 Lac) current liabilities would have beenRs.77112.77Lac (as against the reported figure of Rs. 39092.67Lac) long-termborrowings would have been Rs. 3185.98Lac (as against the reported figure of Rs.5279.61Lac) gross revenue would have been Rs. 32931.25Lac (as against thereported figure of Rs. 36003.85Lac) trade mark license and marketing fees expensewould have been Rs. 250.99Lac (as against the reported figure of Rs. Nil)discount and sales promotion expense would have been Rs. 621.24Lac (as against thereported figure of Rs. 370.25Lac)and total expenses (including excise-duty) for theyear would have been Rs. 76530.95Lac (as against the reported figure of Rs.39149.68Lac).

( I) In view of the significance of our audit observations in paragraphs 1 and 4(A)to (H) above and especially in view of the fact that the state of affairs would changesubstantially in case the Statement of Profit and Loss for the financial year 1992-93 andBalance Sheet as at 31s t March 2015 of Steel Unit were includedwhich we are unable to quantify we are of the opinion the said standalone financialstatements DO NOT give a true and fair view: (a) In the case of the Balance Sheetof the state of affairs of the Company as at 31s t March 2015 (b)in the case of Statement of Profit and Loss of the loss for the year ended 31st March2015 and (c) in the case of Cash Flow Statement of the cash flows for the year ended onthat date.

( 5) Emphasis of Matter

(i) The Company has not deposited unpaid unclaimed public deposits and interest accruedthereon amounting to Rs. 9.72Lac with Investor Education & Protection Fund. Furtherunpaid amount of such unclaimed debentures if any as on 31.03.2015 has not beenidentified. { Note 27(30)}.

(ii) Cars costing Rs. 96.26Lac (Previous Year Rs.93.52Lac) purchased in the name ofemployees / others are yet to be transferred to the name of the company. However thesepersons have given disclaimer in favour of the company. (Refer Foot-Note D of Note 10).

(iii) We invite attention to Note 27(33) regarding entering into agreements to sell 215(previous year 215) residential quarters Note 27(34)(a) regarding entering into leaseincluding perpetual lease agreements for 27954.86 Sq. Meters of factory land &buildings and Note 27(34)(b) regarding entering into perpetual lease agreement for 1584Sq. Mtrs. of factory land for which the approvals of financial institutions to whom thesequarters and factory land & buildings are mortgaged were not obtained.

(iv) We invite attention to Foot-notes 8 9 & 11 of Note 27(38) and foot-note 6 ofNote 27(38) regarding post-facto approval of shareholders to be obtained by the company inthe ensuing annual general meeting for leasing agreements for premises and plant andmachinery respectively entered into with related parties and Foot-note 4 of Note 27(38)regarding granting of license to a related party to use its brand whereas all theseagreements requires prior approval of shareholders.

(v) We invite attention to Note 27(19)(a) regarding reasons for not making provisionfor disputed Sales-tax demand of Rs.2455.78Lac excluding interest (Previous year Rs.2455.78Lac) of closed Vanaspati Unit.

(vi) We invite attention to Note 27(35)(a) (c) (e) and (f) regarding demands ofrecovery charges & interest of Rs. 2659.71Lac (Previous Year Rs. 955.04Lac) onaccount of non-payment of cane price / commission / interest as the same are disputed bythe company / obtained stay order as stated therein. We also invite attention to Note27(35)(f) regarding issue of notification by the State Government for waiver off interestfor sugar season 2013-14 which is still awaited. vii) We invite attention to Note 27(31)regarding non-provision of diminution of ( Rs. 149.60Lac as on 31st March 2015(Previous Year Rs. 154.80Lac) in market value of one of its long-term investment in agroup company in view of the reasons stated in the Note i.e. the Modified RehabilitationScheme of the group company is still under consideration of the BIFR.

Our opinion is not qualified in respect of the matters mentioned in paragraph 5 above.

( 6) Report on Other Legal and Regulatory Requirements

(i) As required by the Companies (Auditors’ Report) Order 2015 issued by theCentral Government of India in terms of Sub-Section (11) of

Section 143 of the Companies Act 2013 we enclose in the Annexure a statement on thematters specified in paragraphs 3 and 4 of the said order except for certain mattersrelating to Steel Unit of the company in view of non-availability of information / detailson account of non-incorporation of: (i) financial statements of the Steel Unit for theyear 1992-93 and (ii) balance sheets for the years 1993-94 to 2 014-15 as stated innote 27(4)(c). {See Paragraph 4(A) above}.

(ii) As required by section 143(3) of the Act we report that: a. We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit except in respect of Steel Unit asmentioned above and the matters referred in paragraphs 4(F) & (G) above. In case ofSteel Unit no details information and explanations are available for the opening andclosing assets and liabilities as on 1s tApril2014 and 31st March 2015 respectively and for contingent liabilities and additionalinformation etc. as on 1s t April 2014 and 31s tMarch 2015 in view of non-incorporation of: (i) the financial statements of Steel Unitfor 1992-93 and (ii) Balance Sheets for the years 1993-94 to 2014- 15 as stated in note27(4)(c).{See paragraphs 1 and 4(A) above}; b. In our opinion proper books ofaccounts as required by Law have been kept by the Company so far as appears from ourexamination of those books except: (i) in respect of Steel Unit where audited balancesof opening and closing assets liabilities contingent liabilities and additionalinformation etc. as on 1s tApril2014and31s tMarch 2015 respectively were not available and consequently not incorporated in the booksof account and (ii)for the effects of other matters described in the Basis for adverseOpinion paragraph above. {See Paragraph 4(A) above}. c. The Balance Sheet referred toin this report is in agreement with the books of accounts of all units and accountingcentres taken together other than Steel Unit as on 31st March 2015 asconsolidated with the Balance Sheet of Steel Unit as stated in Note 27(4) (c)&(d) ofthe standalone financial statements and hence is not in agreement with the books ofaccount of the Company as a whole. Further the Cash

Flow Statement for the year ended on that date which does not include adjustments forCash Flows from investing / financing activities and changes in assets and liabilities inview of non-availability of audited Balance Sheet of Steel Unit as on 31s tMarch 2014 & 31s t March 2 015 is also not inagreement with the books of account. (Refer foot-note 2 of cash flow statement). Exceptfor non-incorporation of Statement of profit and loss of Steel Unit for the year 1992-93the Statement of Profit and Loss is in agreement with the books of accounts.

d. Subject to our observations in paragraph 4(B) above in our opinion theStatement of Profit and Loss and Balance Sheet so far as they relate to the remainingunits i.e. other than Steel Unit comply with the requirements of the Accounting Standardsreferred to in Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules2014. However in view of non-availability and consequently non-incorporation ofaudited (i) opening and closing balances as at 1s t April 2014 and31s t March 2015 respectively of assets liabilities contingentliabilities and other additional information etc. and (ii) Statement of Profit and Lossfor 1992-93 of Steel Unit {Refer Paragraph 4(A) above} the aforesaid standalone financialstatements do not comply with the requirements of Accounting Standards referred to inSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014 for theCompany as a whole. e In our opinion and to the best of our information and accordingto the explanations given to us the aforesaid standalone financial statements so far asthey relate to the remaining Units i.e. other than Steel Unit give the informationrequired by the Act in the manner so required except for non-disclosure of informationrelating to micro small and medium enterprises {Refer note 27(14)}. In the case of

Steel Unit in view of non-incorporation of Balance Sheets of Steel unit as at 31st March 2015 and 31s t March 2014 on account ofnon-availability and consequently non-incorporation of audited opening balances as on 1stApril2014and1s t April 2013 respectively of assetsliabilities contingent liabilities and other additional information etc. the standalonefinancial statements do not give theinformation required by the Companies Act 2013 in themanner so required for the Company as a whole. {Refer Note 27(4)}. f. The mattersdescribed in the Basis for Adverse Opinion paragraph above in our opinion can have anadverse effect on the functioning of the Company. g. On the basis of the writtenrepresentations received from the directors as on 31s t March 2015taken on record by the Board of Directors none of the directors is disqualified as on 31st March 2015 from being appointed as a director in terms of Section 164(2) ofthe Act.

Further the Company was legally advised earlier that provisions of Section 274(1)(g)of the Companies Act 1956 which corresponds to section 164(2) of the Companies Act2013 are prospective in nature and the defaults made by it prior to 13th December 2000for non-payment of deposits/interest on deposits on due dates and non-redemption ofdebentures on due dates are not covered by Section 274(1)(g) of the Companies Act 1956on which we have relied upon. h. The qualification relating to the maintenance ofaccounts and other matters connected therewith are as stated in the Basis for AdverseOpinion paragraph above.

i. 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 various pending litigations which could impact its financialposition and the same has been suitably disclosed under contingent liability / notes toaccounts under Note 27.

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

iii. An amount of Rs. 9.72Lac being unclaimed deposits and interest accruedtill date of maturity of deposit are yet to be transferred to the Investor Education andProtection Fund by the Company. Amount of unclaimed debentures and interest accrued tillmaturity is not yet quantified by the management.

for P.R. MEHRA & CO.
( Regn. No. 000051N )
Ramesh Chand Goyal
DATED: 18t h June 2015 Membership No.012628


As required by the Companies (Auditors’ Report) Order 2015 and on the basis ofsuch checks as were considered appropriate and according to the information andexplanations given to us we further report as under:

( A ) The following matters reported at paragraphs (B) 5 7(ii & iii)9 to 12 donot cover matters if any relating to closed Steel Unit of the company since: (i) thefinancial statements of the Steel Unit for the year 1992-93 have not been prepared andincorporated and consequently the audit of which has not been carried out and (ii) theBalance Sheets of Steel Unit for 1993-94 to 2014-15 have not been incorporated in therespective financial years due to non-availability of audited opening balances as on 1st April1993. {Refer Note 27(4) and paragraphs 1 & 4(A) of our main auditreport}.

( B ) Subject to our comments in paragraphs (A) above and paragraphs 4(F & G) inour main audit report of even date we further report as under:

( 1) Company’s Sugar Unit since inception and other Units since November 1968have generally maintained proper records including quantitative details and situation oftheir major fixed assets except for : (i) locations in case of furniture and fixtureand (ii) recording of additions/deletions of certain previous years. Fixed asset registerof Steel Unit has not been produced to us. No physical verification of assets has beenconducted by the Management since 1989 in Sugar Steel and Distillery Units and ofCorporate Office and since 2001-0 2 in respect of other units.

( 2) (a) The inventory of the company except for closed Steel Unit and stores andspare-parts of all Units has been physically verified during the year by themanagement. In respect of stocks lying with C&F / consignee agents these havesubstantially been confirmed.

(b) Subject to our observations in paragraph (a) above the procedures ofphysical verification of inventory followed by the management were found reasonable andadequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of records of inventory the company except forclosed Steel Unit has maintained proper records of inventory and the discrepanciesnoticed on verification between the physical stocks and book records were not material.

( 3) The Company has not given any loans secured or unsecured to companies firms orother parties covered in the register maintained u/s 189 of the Companies Act 2013 exceptfor unsecured interest free loan given to a company of Rs. 4.01Lac (net) during theprevious years the terms and conditions of which are prima facie not prejudicial to theinterest of the Company and repayment of the principal amount will be as per the terms ofsanctioned rehabilitation scheme of that company.Also refer our audit observations in thisregard given in paragraph 4(E) of our main audit report.

( 4) There is adequate internal control system commensurate with the size and nature ofthe Company’s business for the purchase of inventory and fixed assets and for thesale of goods and services. However internal control system in some of the keyareas including recovery from customers and balance confirmation of customers / suppliersneeds to be reviewed and strengthened to safeguard the interests of the company.Duringthe course of our audit except as stated above we have not observed anycontinuing failure to correct major weaknesses in internal control system.

( 5) In our opinion and according to the information and explanations given to us theCompany has complied with the directives issued by the Reserve Bank of India and theprovisions of Sections 73 to 76 or any other relevant provisions of the Companies Act andthe Rules a at the matur d/claimed deposits of t March 2015 and unclaimed frmed there under except th e Rs. 57.05Lac have not been paid before 31s depositsand interest due amounting to Rs. 9.72Lac outstanding as on 31st March 2015 havenot been deposited with the Investor education and protection fund. {Refer paragraph 5 (i)of our main audit report and Note 27(30)(b)}.

( 6) The Central Government has prescribed maintenance of cost records by theCompany in respect of manufacture of Sugar Electrode and Distillery Units and suchaccounts and records have been made and maintained.

( 7) (i) During the current year the company was regular in depositing with theappropriate authorities undisputedstatutory dues except in following cases:

(a) Sugar Steel and Distillery units of the company were generally not regular indeposit of Provident Fund (PF) dues and interest on overdue PF/FPS by Sugar &Distillery Units through the year and there were minor delay in deposit of PF dues of onemonth in Gas unit. There were also minor delays in all months in deposit of FPS dues inall the Units and Corporate Office.

(b) In respect of excise-duty dues there have been delays in deposit of dues of 6months in Sugar Unit and there were few days delay in most of the months in deposit ofdues in Electrode and Paint units. In respect of tax deducted at source dues these havebeen deposited in time except for minor delays in deposit in case of Sugar SteelDistillery & Electrode units. In respect of tax collection at source there have beendelays in certain months in Distillery and Electrode Units. In respect of sales-tax/ vatthese have been regularly deposited though there has been a slight delay in few cases incertain depots of Gas Paint & Electrode Units. In respect of service-tax there havebeen minor delays in deposit of dues of certain months by Paint Steel and DistilleryUnits. In respect of entry-tax there have been minor delays in deposit of dues of certainmonths by few depots of Paint Unit.

( c ) Investor Education and Protection Fund:

Ason31st March 2015 there were public deposits amounting to Rs.7.32Lacwhich has remained unclaimed and unpaid for a period of more than seven years and interestaccrued but not paid on these unclaimed deposits till the date of maturity amounts to Rs.2.40Lac.

Details of unclaimed and unpaid debentures for a period of more than seven years havenot been ascertained by the management.

These amounts have not been deposited with Investor Education and Protection Fund{Refer Note 27(30) of financial statements}.

(ii) On the basis of such checks as were considered appropriate and according to theinformation and explanations given to us Statement of Arrears of unpaid undisputedStatutory Dues (excluding of Steel Unit) outstanding for more than six months as on 31stMarch2015 as per books of account are as under :

Nature of dues (Rs. in Lac)


Interest on Provident Fund/FPS


Tax deducted at source/Tax collection at source


(Including interest on dues)
Water cess


Excise duty including interest


U.P. Trade Tax/CST


Commission on Cane purchases




(iii) According to the records of the company and based on information and explanationsfurnished to us the following custom duty

Excise duty Income-tax and sales-tax dues (excluding unascertainable amounts and ofSteel Unit for the period 1992-93 to 2014-

1 5) were not deposited on account of disputes pending at various forums:

Name of statute Nature of the dues Amount of dues (Rs. in Lac) Amount deposited under protest (Rs. in Lac) Period to which the amount relates Forum where disputes is pending
U.P.VAT Act VAT Tax Penalty Interest Exemption to New Units. 2584.59 5.98 1987-88 1990-91 & 1991-92 May 91 to March 96 Allahabad High Court.
VAT Tax and Penalty @ 661.18 314.23 1982-83 to 1986-87 1988-89 1992-93 1996-97 1997-98 1999-2000 to 2001-02 Commercial Tax Tribunal Ghaziabad
VAT Tax and Penalty 139.87 63.08 1986-87 + Interest 1994-95 & 1995-96 and 2007-08 Joint Commissioner (A)Ghaziabad.
VAT Tax 0.12 - 2005-06 Deputy Commissioner. (Assessment) Modinagar.
Penalty under VAT Tax 4.37 0.45 2008-09 Trade Tax Tribunal Ghaziabad.
Central Sales Tax Act Central Sales Tax 187.56 23.85 1985-86 1988-89 1992-93 1996-97 1997-98 1999-2000 to 2000-01 Commercial Tax Tribunal Ghaziabad.
Central Sales Tax 25.57 12.55 1994-95 and 1995-96 Joint Commissioner Sales Tax Ghaziabad
Central Sales Tax 1.01 - 2005-06 Deputy Commissioner (A)Modinagar
Sales Tax 14.40 14.40 2012-13 2013-14 Deputy Commissioner (Assessment) Modinagar
State Sales Tax Act State Tax 10.56 0.20 1992-93 Additional Commissioner Sales Tax Delhi.
Sales Tax 5.97 2.00 1985-86 1997-98 2002-03 2004-05 & 2005-06 State Tax
Sales Tax 0.82 0.05 2014-15 State Tax
Penalty (HGST) 0.30 - 1991-92 Tribunal Sales Tax Chandigarh.
State Tax 15.79 1.79 1989-90 to 1993-94 1998-99 and 2006-07 Deputy Commissioner (A) States


Name of statute Nature of the dues Amount of dues Amount deposited under protest Period to which the amount relates Forum where disputes is pending
(Rs. Lac) (Rs. Lac)
C e n t r a l Sales Tax Act (States) Central Sales Tax 1.92 0.29 1988-89 to 1992-93. Appellate Authority/DC (Appeals) Delhi
Central Excise & Custom Act Custom Duty *43.91 - 1.3.2001 to 25.4.2001 Civil Court Ghaziabad
Excise Duty 0.70 - 2002-03 and 2003-04 Supreme Court of India
Excise Duty 167.43 50.00 1985-86 Delhi High Court
0.49 0.25 2004-05 Allahabad High Court
0.74 0.20 1996-97 Commissioner of Central Excise Ghaziabad
**107.17 - February 1981 to February 1987 2002-03 to 2010-11 CESTAT
5.00 - Information not available. Information not available.
6.34 6.34 2009 onwards Supreme Court of India
Income Tax Penalty 209.59 - 2007-08 and 2008-09 CIT (appeal) New Delhi

@ Provided for Rs. 82.60 Lac in the Accounts.

*Provided for in the Accounts.

* *Provided for Rs. 32.20 Lac in the Accounts.

( 8) The accumulated losses of the Company at the end the Financial Year exceeds itsnet worth and the company was declared a sick industrial undertaking on 14t hMarch1991 and the Company has incurred cash losses in this Financial Year and in theimmediately preceding financial year.

( 9) In our opinion and according to the information and explanations given to us theCompany has defaulted in repayment of dues to Financial Institutions banks anddebenture-holders of the Company. The details of defaults and period of defaults are asunder:

( Rs. in Lac)


Loan Amount

Interest including unprovided interest

Total dues*

Period of default of principal amount
Loans from Financial Institutions 423.13 20229.86 20652.99 Loan amounts due since 1991-92
Loan from banks (Cash credit/ overdraft) 40.55 3545.65 3586.20 Entire amount due. Refer note 27(18) (c).
Debentures 537.32 17096.98 17634.30 53 Lac due since August 1990 Rs. 30 Lac due since December 1994 & Rs. 454.32 Lac due since February 1995 to February 1997.
Total 1001.00 40872.49 41873.49

*excluding amounts relating to Steel Unit but including dues of IDBI/IFCI relating toother units. Refer Note no. 27(5) regarding assignment of debts by bank and financialinstitutions and paragraph (A) above.

( 10) In our opinion and according to the information and explanations given to usduring the current year the Company has not given any guarantee for loans taken by othersfrom Banks or Financial Institutions. However in the past the Company had givenguarantees/ undertakings as mentioned in Note 27(39) of financial statements in respect ofcertain Companies (which presently have become Sick Industrial Undertakings) to FinancialInstitutions.

( 11) In our opinion and according to the information and explanations given to usterm loans were applied for the purpose for which loans were raised.

( 12) According to the information and explanation given to us no fraud on or by thecompany has been noticed or reported during the course of audit

For P.R. MEHRA & CO.
(Regn. No. 000051N)
Ramesh Chand Goyal
DATED : 18th June 2015 Membership No.012628