The Members of
Sonal Adhesives Limited Report
on the Financial Statements
I have audited the accompanying financial statements of Sonal Adhesives Limited(the Company') which comprise the Balance Sheet as at 31 Mar 2017 the Statement ofProfit and Loss and Cash Flow Statement for the year then ended and a summary ofsignificant 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 preparationand presentation of these financial statements that give a true and fair view of thefinancial position financial performance and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
My responsibility is to express an opinion on these financial statements based on myaudit. I 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. I conducted my audit in accordancewith the Standards on Auditing specified under section 143(10) of the Act. Those Standardsrequire that I comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement. An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give true and fair view in order to design audit procedures thatare appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of the accountingestimates made by Company's Directors as well as evaluating the overall presentation ofthe financial statements. I believe that the audit evidence I have obtained is sufficientand appropriate to provide a basis for my audit opinion on the financial statements.
Basis of Qualified Opinion
i. The banking facility availed from SBI have became NPA as per RBI guidelines andconsequently the said bank has stopped charging interest. During the year under review noprovisions have been made for unapplied interest on account of NPA not charged by thebank which is not in accordance with the generally accepted accounting principles.
ii. The balance of SBI Term Loan Cash Credit and other credit facilities appearing inthe books of accounts are not in accordance with the bank statement and are subject toreconciliation process.
iii. Two of its creditors had filed Winding up petition which is pending with HighCourt Mumbai. Also creditors have given winding up notices to the company againstrecovery of their dues which poses a question on the going concern assumption.
iv. The Company has received notice under section 13(2) of the SARFAESI Act forattachment of its assets from State Bank of India. Pursuant to this the Company has beenintimated of the symbolic possession taken by the State Bank of India on 22ndFeb 2016. Matter is pending in Debts Recovery Tribunal Pune and Debt Recovery AppellateTribunal Mumbai.
v. As informed to me the Company had given corporate guarantee of Rs. 38262938/-for credit facilities availed by M/S Sonal Impex Ltd. The same has been classified as NPAby the bank the guarantee been has invoked and company has been called upon by the bankto repay the entire amount.
vi. As told by management Rs. 8879575 Worth of Debtors are more than 3 years old thesame being time barred should have been written off but no provision for the same hadbeen provided in books of accounts. The same is the case with Sundry creditors as permanagement the same is under settlement process.
In my opinion and to the best of the information and according to the explanationsgiven to me except for the effects/possible effects of the matter described in the Basisfor Qualification of Opinion paragraph above the aforesaid Financial Statements give theinformation required the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India;
i. In the case of Balance Sheet of the state of affairs of the company as at March 312017;
ii. In the case of Statement of Profit and Loss of the loss for the year ended on thatdate; and
iii. In the case of Cash Flow Statement of the cash flows for the year ended on thatdate.
Emphasis of Matter
i. Note No. 5.3 6.1 to the Financial Statements which inter-alia describes theuncertainty related to the outcome of the cases/notices filed/given against the Company.
ii. The accumulated losses of the Company exceed its net worth as at the financial yearend. Also the Company has incurred cash losses during the year.
iii. Considering the overall financial health of the Company it may require furtherfund infusion for growth and expansion. Report on other legal and regulatory requirements
i. As required by The Companies (Auditors Report) Order 2016 ("the Order")issued by the Central Government of India in terms of subsection(11) of section 143 of theAct I give in the Annexure A a statement on the matters specified in paragraphs 3 and 4of the said order.
ii. As required by section 143(3) of the Companies Act 2013 I report that:
a. As described in the Basis of Qualification of Opinion Paragraph I was unable toobtain all the information and explanations which to the best of my knowledge and beliefwere necessary for the purpose of my audit;
b. In my opinion proper books of account as required by law have been kept by theCompany so far as appears from my examination of those books;
c. The Balance Sheet Statement of Profit and Loss and the Cash Flow Statement dealtwith by this Report are in agreement with the books of account.
d. Except for the effects of the matter described in the Basis for Qualified /Disclaimer Opinion / Emphasis of Matter paragraphs in my opinion the aforesaid financialstatements comply with the Accounting Standards specified under section 133 of the Actread with Rule 7 of the Companies (Accounts) Rules 2014.
e. On the basis of written representations received from the directors as on 31stMarch 2017 and taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2017 from being appointed as a director in terms ofSection 164(2) of the Act.
f. with respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer toseparate report in "Annexure B" and
g. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in my opinionand to the best of my information and according to the explanations given to me:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements- Refer Note 24.5 to the financial statements;
ii. The Company does not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses
iii. The amounts which were required to be transferred to the Investor Education andProtection Fund by the Company have been transferred.
Rohan Agrawal & Co
M. No. 123127
Date: 30th May 2017
ANNEXURE-A TO THE INDEPENDENT AUDITORS' REPORT
The annexure referred to my Independent Auditors' Report to the members of the companyon the financial statements for the year ended 31st March 2017 I report that:
1. 1) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
2) Physical verification of the same has been carried out by the management.
3) Title deeds of Immovable properties are held in the name of the company.
2. The inventory of the company has been physically verified by the management duringthe year at reasonable intervals.
3. As per the information and explanations given to me and the records produced beforeme for my verification the Company has not granted unsecured loan to companies firmsLLPs or other parties covered in the register maintained under section 189 of theCompanies Act 2013.Accordingly clause 3 (iii) (a) & (b) of the Order is notapplicable to the Company.
4. The Company has not given any loans guarantees or made any investments undersection 185 of the Companies Act 2013. However it had given guarantee against loan to M/sSonal Impex Ltd. the same has been classified as NPA by the bank during the year and thecompany has been called upon to discharge in full the liability by paying to the bank. Theguarantee amount does not exceeds the limit as per provisions of section 186.
5. The company has not accepted loans & deposits u/s 73 to 76 or any other relevantprovisions of the Companies Act 2013 and the rules framed there under.
6. The Company is not required to maintain cost records specified by the CentralGovernment under sub-section (1) of section 148 of the Companies Act 2013 hence thisclause is not applicable.
7. 1) According to the records of the company undisputed statutory dues includingprovident fund investor education and protection fund employees state insurance duesincome-tax wealth tax service tax customs duty excise duty cess and other materialstatutory dues applicable have been paid on timely basis. Except for the following :-
|Particulars of Statutory dues ||Amount ||Date of Order |
|CST (FY 2011-12) ||Rs. 321695 ||28th May 2015 |
2) According to the information and explanations given to me and the records of theCompany as examined by me there are no disputed dues of income-tax sales-tax VATservice tax customs duty excise duty wealth tax and cess which have not beendeposited.
8. The Company has defaulted in payment of loans to banks during the year the previousfinancial period. The details of such default are as under:
|Bank Name ||Total Amount Defaulted ||Date default started |
|State Bank of India ||Rs. 234191956 ||Feb 2015 |
Rs. 234191956.00 does not include unapplied interest for FY. 2016-17.
9. During the year no money was raised by way of initial public offer (including debtinstrument) and no fresh loans have been raised by the company. The term loans raised inthe past by the Company were applied for the purpose for which they had been raised.
10. Based upon the audit procedures performed and information and explanations given bythe management I report that no fraud on or by the company has been noticed or reportedby its officers or employees during the year.
11. Managerial Remuneration has been paid in accordance with section 197 of schedule Vof Companies Act 2013.
12. This clause is not applicable since the company is not a NIDHI company.
13.1) T ransactions with related parties are in accordance with the provisions ofsection 177 & 188.
2) Details of the same have been disclosed in the financial statements.
14. The company has not made any preferential allotment or private placement of sharesor convertible debentures; hence this clause is not applicable.
15. The Company has not entered into any non-cash transactions with directors orconnected persons; hence this clause is not applicable.
16. The company is not required get registration u/s 45-IA of RBI Act 1934.
Rohan Agrawal & Co
M. No. 123127
Date: 30th May 2017
Annexure - B to the Auditors' Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
I have audited the internal financial controls over financial reporting of SonalAdhesives Limited ("the Company") as of 31 March 2017 in conjunction with myaudit of the standalone financial statements of the Company for the year ended on thatdate. 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.
My responsibility is to express an opinion on the Company's internal financial controlsover financial reporting based on my audit. I conducted audit in accordance with theGuidance Note on Audit of Internal Financial Controls over Financial Reporting (the"Guidance Note") and the Standards on Auditing issued by ICAI and deemed to beprescribed under section 143(10) of the Companies Act 2013 to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that I comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
My audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. My 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.
I believe that the audit evidence I have obtained is sufficient and appropriate toprovide a basis for my audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance 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.
In my 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 31 March 2017 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.
Rohan Agrawal & Co
M. No. 123127
Date: 30th May 2017