To The Members of Modipon Limited Report on the Financial Statements
We have audited the accompanying financial statements of Modipon Limited ("theCompany") which comprise the Balance Sheet as at March 31 2017 the Statementof Profit and Loss the Cash Flow Statement for the year then ended and a summary of thesignificant accounting policies and other explanatory information.
Management's Responsibility for the 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 financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
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 anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view 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 qualified audit opinion. Basis for Qualified Opinion
1. Balance confirmation certificates were not obtained by the Company from creditorsloans and advances given/received house/shop security depositors in-operative currentaccounts with banks and loan account with Punjab National Bank (PNB). Consequentadjustments required if any has not been carried out in the financial results. [ReferNote No. 24]
2. (a) The Company has not provided interest of ' 1000.54 Lakhs up to March312008 on overdue amounts payable to a supplier resulting in understatement ofliabilities and debit balance of reserve and surplus by ' 1000.54 Lakhs each; and(b) The amount of interest to be provided for in the books of account for the period April1 2008 to March 312017 has not been ascertained. [Refer Note No. 23(d)]
3. The amount of interest to be provided for in the books of account if any for theperiod April 1 2007 to March 31 2017 to Small and Micro Enterprise has not beenascertained. [Refer Note No. 28]
4. During the year ended March 31 2009 the Company has sold 68042 sq.yds. of itsvacant land at Modinagar for ' 1021.15 Lakhs (original cost ' 1.95 Lakhs)for which the approval of bank is pending. [Refer Note No. 30(b)]
5. During the year 2011-12 the Company has given physical possession of its vacant 59(46 as on March 31 2015) houses located at Modinagar Uttar Pradesh to a lender i.e.Ashoka Mercantile Limited (AML) a related party (balance outstanding of loan taken fromAML as on March 31 2015 as per books of account: secured loan ' 882.29 Lakhs andunsecured loan ' 1125.57 Lakhs) for use without any charges/ rent/security depositand no lease rent agreement has been entered into with AML. The Company contends that thetemporary possession of houses for use without charges was given to AML as security onlyas the Company was unable to repay the loans taken from AML. [Refer note to Note No. 32]
6. (a) In the earlier years Punjab National Bank (PNB) had
approved one time settlement of its outstanding dues of Rs.1900 lacs vide its approvalletters dated April 2nd 2014. The company had paid ' 930.00 lacs till June 302015. However as the Company could not make payment as per agreed terms of OTS henceapplication of revival of OTS was again approved by PNB vide its letter dated July 2nd2015. The agreed revise payments terms are as under:
Rs. 200 lacs by September 30th 2015
Rs. 200 lacs by December 31st 2015 and
Rs. 570 lacs by March 31st 2016.
The entire amount of interest @ 10.25% (Simple) along with expenses of '5.54 lacs are to be paid by June 30th 2016.
(b) Further from July 01 2015 the company has paid Rs.870 lacs till March 312017 andbalance OtS amount of Rs. 100 lacs plus overdue interest remain to be paid/ cleared.
(c) Further the company has requested vide letter dated 17th March 2017 and willing todischarge its residual OTS liability of Rs. 1.00 Crore and further request for waiver ofinterest component on OTS settlements. However the Lender Punjab National Bank hasdeclined to entertain the final settlement of OTC due vide letter dated 20th March 2017 asa result the total OTS amount as at 31st March 2017 stands Rs.1.00 Crores plus outstandingoverdue interest there in.
Since the Company is unable to fulfil the agreed terms of OTS we are unable to commenton the implication of same on the financials of the Company.
(d) The outstanding liability in the books of the company is higher than the OTS amountby Rs.183.90 lacs. However interest on OTS amount has been provided as per the agreementamounting to Rs. 10.25 lacs on Rs. 100.00 Lacs for the year ended March 31st 2017 (Refernote 31(b))
(e) In the absence of any documentary evidences from the management as well as PNB weare unable to quantify the amount of interest on the amount of Rs.183.90lacs; the amountof Rs.183.90lacs is over and above the loan amount on account of the sales tax liabilityon PNB on account of the auction held by the bank for old plant and machinery of thecompany.
7 (a) As stated in note [31(d)(i) and (ii)] the amounts paid
by the assignee i.e. Ashoka Mercantile Limited (AML) a related party to Abu DhabiCommercial Bank (ADCB) on account of One Time Settlement (OTS) of dues of the bank wasaccounted for in the books of the Company to the extent of OTS amount paid to the ADCB byAML and the balance amount of ' 153.92 Lakhs is still lying unallocated underunsecured loans in view of pending successful implementation of OTS of the dues of PNB asthe settlement of assigned dues with AML is linked to the OTS of dues with PNB.
(b) As stated in note [31(c)(i)] the amount paid to Karnataka Bank by AshokaMercantile Limited (AML) a related party during the year ended March 31 2012 onaccount of OTS of dues of the bank was accounted for in the books of the Company to theextent of OTS amount paid to the Karnataka Bank by AML and the balance amount of '339.20 Lakhs is still lying unallocated under unsecured loans in view of pendingsuccessful implementation of OTS of the dues of PNB as the settlement of dues with AML islinked to the OTS of dues with PNB.
(c) As stated in note [31(c)(ii)] the part payment made to Bank of Baroda by AshokaMercantile Limited (AML) a related party during the year ended March 312013 on accountof OTS of dues of the bank was accounted for in the books of the company to the extent ofOTS amount paid to the Bank of Baroda by AML and the Company and the balance amount of '232.04 Lakhs is still lying unallocated under unsecured loans in view of pendingsuccessful implementation of OTS of the dues of PNB as the settlement of dues with AML islinked to the OTS of dues with PNB.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in paragraphs in the 'Basisfor Qualified Opinion the aforesaid 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 March 31 2017 its loss and cash flows for the year ended on that date.
Emphasis of Matter
The above financial results of the Company for the year ended March 31 2017 has notbeen prepared on a going concern basis since the Company has closed its manufacturingoperations since May 19 2007 (closure of factory w.e.f. September 8 2007) on account ofhuge losses incurred and sale of entire plant & machinery during the year ended March31 2010. [Refer Note No. 25]
Our opinion is not qualified in respect of this matter.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at March31 2017 its loss and cash flows for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1. 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.
(c) The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014.
(e) In our opinion there are no financial transactions or matters that may have adverseeffect on the functioning of the Company.
(f) On the basis of the written representations received from the directors as on March31 2017 taken on record by the Board of Directors none of the directors is disqualifiedas on March 312017 from being appointed as a director in terms of Section 164(2) of theAct.
(g) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B".
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
(i) On the basis of written representations received from the management of theCompany the Company has disclosed the impact of pending litigations on its financialposition in its financial statements- Refer Note No. 23(vi) to the financial statements.
(ii) The Company did not have any long term contracts including derivative contractsfor which there were any material foreseeable losses.
(iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company;
(iv) The Company has provided requisite disclosures in its Standalone financialstatements as to holdings as well as dealings in Specified Bank Notes during the periodfrom 8 November 2016 to 31 December 2016 and these are in accordance with the books ofaccounts maintained by the Company. Refer Note No. 33 to the Standalone financialstatements.
2. 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 Act we givein "Annexure A" a statement on the matters specified in paragraphs 3 and 4 ofthe Order.
| ||For B M Chatrath & Co LLP |
| ||Chartered Accountants |
| ||LLPIN: AAJ-0682 |
| ||Sd/- |
| ||(Bharat C. Swain) |
|Place: New Delhi ||Partner |
|Date: 12th May 2017 ||Membership No.501999 |