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Modipon Ltd.

BSE: 503776 Sector: Industrials
NSE: MODIPON ISIN Code: INE170C01019
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52-Week high 65.85
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P/E
Mkt Cap.(Rs cr) 55
Buy Price 47.50
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Sell Price 49.80
Sell Qty 30.00
OPEN 47.50
CLOSE 47.50
VOLUME 1
52-Week high 65.85
52-Week low 21.25
P/E
Mkt Cap.(Rs cr) 55
Buy Price 47.50
Buy Qty 49.00
Sell Price 49.80
Sell Qty 30.00

Modipon Ltd. (MODIPON) - Auditors Report

Company auditors report

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 2016 the Statement ofProfit 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.

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 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 Rs 1000.54 Lakhs up to March 31 2008on overdue amounts payable to a supplier resulting in understatement of liabilities anddebit balance of reserve and surplus by Rs 1000.54 Lakhs each; and (b) the amount ofinterest to be provided for in the books of account for the period April 1 2008 to March31 2016 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 2016 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 Rs 1021.15 Lakhs (original cost '1.95 Lakhs) for which theapproval 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 Rs 882.29 Lakhs andunsecured loan '1125.57 Lakhs) for use without any charges/rent/security deposit and nolease 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(c)]

6. (a) In the earlier years Punjab National Bank (PNB) had approved one timesettlement of its outstanding dues of Rs 1900 lacs vide its approval letters dated April02 2014 and April 12 2014. The company had paid Rs 930 lacs till June 30 2015. Howeveras the Company could not make payment as per agreed terms of OTS hence application ofrevival of OTS was again approved by PNB vide its letter dated July 02 2015. The agreedrevise payments terms are as under:

• Rs 200 lacs by September 30 2015

• Rs 200 lacs by December 31 2015 and

• Rs 570 lacs by March 31 2016.

• The entire amount of interest @ 10.25% (Simple) along with expenses of Rs 5.54lacs are to be paid by June 30 2016.

Further from July 01 2015 the company has paid Rs 870 lacs till March 31 2016 andbalance OTS amount of Rs 100 lacs remain to be paid/cleared.

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.

(b) The outstanding liability in the books of the company is higher than the OTS amountby '183.90 lacs. However interest on OTS amount has been provided as per the agreementamounting to Rs 91.89 lacs for the year ended March 31 2016.

(c) Had the interest been provided as per original terms on the principal amount theinterest for the year ended on March 31 2016 would have been higher by Rs 491.15 lacs ('1867.45. lacs for the period April 01 2009 to March 31 2016).(Refer Note 31(b)).

7. As stated in note [31(d)(i) and (ii)] the amounts paid by the assignee i.e. AshokaMercantile Limited (AML) a related party to Abu Dhabi Commercial Bank (ADCB) on accountof One Time Settlement (OTS) of dues of the bank was accounted for in the books of theCompany to the extent of OTS amount paid to the ADCB by AML and the balance amount of Rs153.92 Lakhs is still lying unallocated under unsecured loans in view of pendingsuccessful implementation of OTS of the dues of PNB as the settlement of assigned dueswith AML is linked to the OTS of dues with PNB.

8. As stated in note [31(c)(i)] the amount paid to Karnataka Bank by Ashoka MercantileLimited (AML) a related party during the year ended March 31 2012 on account of OTS ofdues of the bank was accounted for in the books of the Company to the extent of OTS amountpaid to the Karnataka Bank by AML and the balance amount of Rs 339.20 Lakhs is still lyingunallocated under unsecured loans in view of pending successful implementation of OTS ofthe dues of PNB as the settlement of dues with AML is linked to the OTS of dues with PNB.

9. 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 Rs232.04 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.

Qualified Opinion

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 2016 its profit 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 2016 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.

Opinion

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 March312016 its profit 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 2016 taken on record by the Board of Directors none of the directors is disqualifiedas on March 312016 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 A".

(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 the Companythe Company has disclosed the impact of pending litigations on its financial position inits financial statements- Refer Note No. 23(vi) to the financial statements.

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

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and protection Fund by the Company.

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 B" a statement on the matters specified in paragraphs 3 and 4 ofthe order.

For S.R. Dinodia & Co. LLP.
Chartered Accountants
Regn. No. 001478N/N500005
Sd/-
(Sandeep Dinodia)
Place : New Delhi Partner
Date: 28th May 2016 M. No. 083689

ANNEXURE 'A' TO THE INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THE FINANCIALSTATEMENT OF MODIPON LIMITED

Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section143 of the Companies Act 2013 ("the Act") We have audited the internalfinancial controls over financial reporting of Modipon Limited ("the Company")as of March 31 2016 in conjunction with our audit of the financial statements of theCompany 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 (ICAI). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired 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 note require 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 exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

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 authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized 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

According to the information and explanation given to us the Company has notestablished its internal financial controls over financial reporting on criteria based onor considering the essential components of internal control stated in Guidance Note onAudit of Internal Financial Controls over Financial Reporting issued by the Institute ofChartered Accountants of India. Because of this reason we are unable to obtain sufficientappropriate audit evidence to provide a basis for our opinion whether the Company hasadequate internal financial controls over financial reporting and whether such internalfinancial controls were operating effectively as at March 312016.

We have considered the disclaimer reported above in determining the nature timing andextent of audit tests applied in our audit of the financial statements of the Company anddisclaimer does not affect our opinion on the financial statements of the Company.

For S.R. Dinodia & Co. LLP.
Chartered Accountants
Regn. No. 001478N/N500005
Sd/-
(Sandeep Dinodia)
place : new Delhi Partner
Date: 28th May 2016 M. No. 083689

ANNEXURE 'B' TO THE INDEPENDENT AUDITORS' REPORT

The Annexure referred to in independent Auditors' Report to the members of the Companyon the financial statements for the year ended March 312016; we report that:

i) In respect of fixed assets:

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

b) the Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified at periodic intervals. In accordance with this programmefor the year no material discrepancies were noticed on such verification. In our opinionsuch periodicity of physical verification is reasonable having regard to the size of theCompany and the nature of its assets.

c) on the basis of written representation received from the management of the Companythe title deeds of immovable properties held in the name of the Company are mortgaged withthe Banks for securing the long term borrowings and credit limits raised by the Company.Following title deeds have not been provided to us:

(Amount in Rs Lakhs)

Net book value of immovable property as on March 312016 (A) Title deeds available (B) Title deed not available (A-B)
17.44 14.78 2.66

ii) On the basis of information and explanation provided by the management the Companydoes not any inventory therefore the provisions of paragraph 3 (ii) (a) to (b) are notapplicable to the Company.

iii) (a) to (c) According to the information and explanation given to us the Companyhad not granted loans secured or unsecured to any of the Companies firms or otherparties covered in the register maintained under section 189 of the Companies Act 2013.therefore the provisions of paragraph 3(iii) (a) to (c) of the Companies (Auditor'sReport) order 2016 are not applicable to the Company.

iv) According to the information and explanation given to us the Company has compliedwith the provisions of section 186 of the Companies Act 2013 in respect of Investmentsmade.

v) the Company has not accepted any deposits from the public. Accordingly theprovisions of paragraph 3(v) of the Companies (Auditor's Report) order 2016 are notapplicable to the Company.

vi) On the basis of available information and explanation provided to us the CentralGovernment has not prescribed maintenance of cost records under sub-section (1) of section148 of the Companies Act 2013 read with Companies (Cost Records and Audit) AmendmentRules 2014 dated December 31 2014 to the current operations carried out by the Company.Accordingly the provisions of paragraph 3(vi) of the Companies (Auditor's Report) order2016 are not applicable to the Company.

vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the company amounts deducted/accrued in the books ofaccount in respect of undisputed statutory dues including Income tax Sales tax Servicetax duty of Customs duty of Excise Value Added Tax Cess and other material statutorydues have generally been regularly deposited during the year by the Company with theappropriate authorities According to the information and explanations given to usfollowing undisputed amounts payable in respect of Income tax Sales tax Service taxduty of Customs duty of Excise Value Added Tax Cess and other material statutory dueswere in arrears as at 31st March 2016 for a period of more than six months from the datethey became payable:

Name of the Statute Nature of Dues Amount (Rs in Lakhs)
Sales Tax Laws Sales Tax Payable-Branch 1.49
Sales Tax Laws 1% State Development Tax .01
Sales Tax Laws 12%U.P.Trade Tax 2.83
Sales Tax Laws 2.5%U.P.Trade Tax .01
Sales Tax Laws 3% Central Sales Tax .06
Sales Tax Laws Sales Tax .01
Sales Tax Laws 8% U.P.Trade Tax .01
Sales Tax Laws Turnover Tax .01
Sales Tax Laws Vat Collection 4% .02
Central Excise Laws Excise Duty From Amount Payable 82.60
Income Tax Laws Income Tax Deducted At Source 47.60
Total 134.65

(b) According to the records of the Company examined by us and the information andexplanations given to us there were no dues of income tax or sales tax or service tax orduty of customs or duty of excise or value added tax except the following which have notbeen deposited on account of any dispute:

The Following are the particulars of above Dues on account of Sales Tax duty ofExcise duty of Customs Water Tax and Income Tax as at March 31 2016 that have beendisputed by the Company in Appeals pending before the Appellate Authorities

Name of the Statute Nature of Dues Amount (In Lacs Rs) Period to which amount relates Forum where dispute is pending
Sales Tax Laws Sales Tax 94.22 2004-05 Commissioner
1428.88 2005-06 (Appeal)
1010.75 2006-07
Sales Tax Laws Sales Tax 1.41 1991-92 High Court
Sales Tax Laws Sales Tax 12.43 2007-08 Addl. Commissioner
Customs Law Custom Duty 74.66 1982-83 Asst. Commissioner
Custom Duty 19.39 2002-03 Appellate Tribunal
The Uttar Pradesh Water Supply and Sewerage (Amendment) Act 1999 Water Tax 7.11 1997-98 & 1998-99 Additional Civil Judge
Central Excise Law Excise Duty 115.75 1983-84 High Court
Income tax Non - 107-71 2006-07 to High Court
Act1961 Deduction of TDS 109.84 2008-09 ITAT/ Commissioner (A)
Civil Suit Trade payables 95.08 2008-09 Delhi High Court
Civil Suit Trade payables 18.13 2009-10 District Court Saket Delhi

(c) On the basis of information and explanations given to us by the management noamount was required to be transferred to investor education and protection fund inaccordance with the relevant provisions of the Companies Act 1956 (1 of 1956) and rulesmade there under.

viii) In our opinion and according to the information and explanation given to us thedetails of default in respect of dues to a bank are as under:

(a) In the earlier years punjab National Bank (pNB) had approved one time settlementof its outstanding dues of Rs 1900 lacs vide its approval letters dated April 02 2014 andApril 12 2014. The company had paid Rs 930 lacs till June 30 2015. However as theCompany could not make payment as per agreed terms of OTS hence application of revival ofOTS was again approved by PNB vide its letter dated July 02 2015. The agreed revisepayments terms are as under:

• Rs 200 lacs by September 30 2015

• Rs 200 lacs by December 312015 and

• Rs 570 lacs by March 312016.

• The entire amount of interest @ 10.25% (Simple) along with expenses of Rs 5.54lacs are to be paid by June 30 2016.

Further from July 012015 the company has paid Rs 870 lacs till March 31 2016 andbalance OTS amount of Rs 100 lacs remain to be paid/cleared.

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.

(b) 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 91.89 lacs for the year ended March 312016

(c) Had the interest been provided as per original terms on the principal amount theinterest for the year ended on March 31 2016 would have been higher by Rs 491.15 lacs ('1867.45 lacs for the period April 01 2009 to March 31 2016).

Further No Debentures have been issued by the company during the year thereforeprovisions of this clause is not applicable to the company.

ix) The Company did not raise any money by the way of initial public or further publicoffer (including debt instruments) during the year. However the term loans taken duringthe year were applied for the purpose for which the same has been raised.

x) According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees has been noticed or reported during theyear.

xi) The Company has paid/provided managerial remuneration in accordance with provisionsof section 197 read with Schedule V to the Companies Act 2013 as applicable to theCompany.

xii) The Company is not a Nidhi Company and hence the provisions of paragraph 3(xii)of the Order are not applicable to the Company.

xiii) During the course of our examination of the books and records of the Company alltransactions entered with the related parties are in compliance with sections 177 and 188of Companies Act 2013 and the details have been disclosed in the financial statementsetc as required by the applicable accounting standards.

xiv) The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions of paragraph 3(xiv) of the Order are not applicable to the Company.

xv) The Company has not entered into any non-cash transactions with directors orpersons connected with him and hence provisions of section 192 of the Companies Act 2013are not applicable.

xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of paragraph 3(xvi) of the Order arenot applicable to the Company.

For S.R. Dinodia & Co. LLP.
Chartered Accountants
Regn. No. 001478N/N500005
Sd/-
(Sandeep Dinodia)
Place : New Delhi Partner
Date: 28th May 2016 M. No. 083689