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Sri Ganapathy Mills Company Ltd.

BSE: 521236 Sector: Industrials
NSE: N.A. ISIN Code: INE488F01018
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Sri Ganapathy Mills Company Ltd. (SRIGANAPMILLS) - Auditors Report

Company auditors report

The Members of

The Sri Ganapathy Mills Company Limited Tirunelveli

Report on the Financial Statements

We have audited the accompanying financial statements of The Sri Ganapathy MillsCompany Limited which comprise the Balance Sheet as at March 31 2016 and theStatement of Profit and Loss and Cash Flow Statement for the year then ended and asummary of significant 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 with respect to the preparation of these financialstatements that give a true and fair view of the financial position financial performanceand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the Accounting Standards specified under Section 133 of theAct read with Rule 7 of the Companies (Accounts) Rules 2014.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of 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.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor’s judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the Company’spreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances.

An audit also includes evaluating the appropriateness of the accounting policies usedand the reasonableness of the accounting estimates made by the Company’s Directorsas well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the financial statements give the information required by the Act in themanner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:

1. In the case of the Balance Sheet of the state of affairs of the Company as at March31 2016

2. In the case of the Statement of Profit and Loss of the profit for the year ended onthat date; and

3. In the case of the Cash Flow Statement of the cash flows for the year ended on thatdate

Emphasis of Matter:

a. We draw attention to Note No.8 to the financial statements which describers theuncertainty related to the outcome of the suits filed by the company.

b. We draw attention to Note No.4.a. to the financial statements which deals with nonprovisioning of Gratuity in compliance with AS15 issued by ICAI.

c. Also we draw attention to Note 20 to the financial statements which indicate thatthe company has accumulated losses and substantial erosion of Net Worth in addition tosuffered with cash losses in the current and previous years. These conditions along withother matters set forth in Note 20 indicate the existence of a material uncertainty thatmay cast significant doubt about the company’s ability to continue as a goingconcern. However the financial statements of the company have been prepared on a goingconcern basis for the reasons stated in the said note. Our opinion is not modified inrespect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order 2016 issued by theCentral Government of India in terms of sub-section (11) of section 143 of The CompaniesAct 2013 we give in the Annexure a statement on the matters specified in paragraphs 3 and4 of the Order.

2. 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 purpose 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 and proper returnsadequate for the purposes of our audit have been received from the branches not visited byus.

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

d) In our opinion the aforesaid financial statements comply with Accounting Standardsspecified under section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.

e) On the basis of written representations received from the directors as on March 312016 taken on record by the Board of Directors none of the directors is disqualified ason March 31 2016 from being appointed as a director in terms of Section 164(2) of theAct.

f) 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 disclosed the impact of pending litigations on its financialposition in its financial statements – Refer to Note 8 to the financial statements

ii) The company does not have any long-term contracts requiring a provision formaterial foreseeable losses.

iii) There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund.

For M/s.Krishnan and Raman
Chartered Accountants -FRN 01515S
Place : Tirunelveli (sd) K.V.RAMAN
Date : 03/08/2016 M.No.009790

ANNEXURE TO THE INDEPENDENT AUDITOR’S REPORT OF EVEN DATE ON THE INTERNALFINANCIAL CONTROLS OF THE SRI GANAPATHY MILLS COMPANY LIMITED

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

We have audited the Internal Financial Controls over financial reporting of The SriGanapathy Mills Company Limited as of March 31 2016 in conjunction with our audit of thefinancial statements of the Company 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.

These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company’s policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingand the Standards on Auditing issued by ICAI and deemed to be prescribed under section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls both applicable to an audit of Internal Financial Controls and bothissued by the Institute of Chartered Accountants of India. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively 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.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company’s internal financial controlssystem over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company’s internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal financial control overfinancial reporting includes those policies and procedures that

1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the Company.

2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the Company are being made only inaccordance with authorizations of management and directors of the Company; and

3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the Company’s assets that could havea material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

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

Opinion

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

For M/s.Krishnan and Raman
Chartered Accountants - FRN 01515S
Place : Tirunelveli (sd) K.V.RAMAN
Date : 03/08/2016 M.No.009790

ANNEXURE REFERRED TO IN PARAGRAPH 1 OF OUR REPORT OF EVEN DATE TO

THE MEMBERS OF THE SRI GANAPATHY MILLS COMPANY LIMITED ON THE

ACCOUNTS OF THE COMPANY FOR THE YEAR ENDED 31STMARCH 2016

In terms of Companies (Auditor’s Report) Order 2016 issued by Central Governmentof India in terms of Section 143(11) of The Companies Act 2013 we further report onthe matters specified in paragraph 3 and 4 of the said Order that: -

(i) In respect of FIXED ASSETS

a.The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.

b.As explained to us all fixed assets have been physically verified by the managementat reasonable intervals during the year which in our opinion is reasonable having regardto the size of the company and nature of its assets. No material discrepancy was noticedon such physical verification.

c.According to the information and explanations given to us and on the basis of ourexamination of the records of the company the title deeds of immovable properties areheld in the name of the company.

(ii) In respect of INVENTORIES

a.As explained to us the inventory has been physically verified at reasonableintervals during the year by the management. In our opinion the frequency of verificationis reasonable. The discrepancies noticed on verification between the physical stocks andthe book records were not material. The discrepancies have been properly dealt with in thebooks of accounts.

(iii) LOANS TO PARTIES LISTED U/S 189 OF THE ACT

a.As explained to us the company had not granted any loans secured or unsecured toany companies firms Limited Liability Partnerships or other parties covered in theregister maintained under section 189 of the Act.

(iv) COMPLIANCE WITH SECTIONS 185 & 186 OF THE ACT

a.In connection with matters specified u/s 185 of the act the Company has not advancedany loans directly or indirectly to any of its directors or to any other person in whomthe directors are interested or has given any guarantee or provided security inconnection with any loan taken by any other person.

b.The company has not made any investments in any other companies within the meaning ofsection 186(1) of the act.

c.In connection with matters specified under section 186(2) of the act the company hasnot advanced any loans directly or indirectly to any person or body corporate or hasgiven any guarantee or provided security in connection with any loan taken by any otherbody corporate or any other person or acquired any securities of companies in excess oflimits stipulated

(v) The Company has not accepted any deposits from the public.

(vi) It has been explained to us that the maintenance of cost records has not beenprescribed under section 148(1) of the Act.

(vii) In respect of STATUTORY DUES

a.According to the records maintained by the company and the information andexplanations given to us the company has been generally regular in depositing undisputedstatutory dues including provident fund income tax sales tax value added tax duty ofcustoms service tax cess.

b.According to the information and explanations given to us no undisputed amountspayable in respect of income tax wealth tax Service Tax sales tax custom duty exciseduty and Cess were in arrears as at 31-Mar-2016 for a period of more than six months fromthe date they became payable.

c.According to the records of the company and the information and explanations given tous the disputed statutory dues pertaining to earlier years aggregating to Rs. 52.36lakhs on account of matters pending before appropriate authorities is as under and forwhich no provision had been made in the accounts.

Nature of Due Forum where pending Rs. in lakhs
Tamil Nadu General Sales Tax Act 1956 Appellate Tribunal Madurai 4.68
Tamil Nadu General Sales Tax Act 1956 High Court Chennai 4.34
Tamil Nadu General Sales Tax Act 1956 Taxation Special Tribunal Chennai 2.90
Employees Provident Fund Miscellaneous Act 1958 High Court Chennai 28.54
Employees State Insurance Act 1974 Labour Court 11.90

(viii) Based on our audit procedures and according to the information and explanationsgiven to us we are of the opinion the company has defaulted in repayment of dues to afinancial institution or bank. The detail of period and the amount of default asascertained by the management is as follows

Name of Bank Principal Amount Interest Accrued and Due Period to which it relates
The Karur Vysya Bank Ltd 500000.00 154989.01 March 2016
The Karur Vysya Bank Ltd 333333.33 64740.00 March 2016

(ix) The company has not raised moneys by way of initial public offer or further publicoffer (including debt instrument) and term loans.

(x) Based upon the audit procedures performed and according to the information andexplanations given to us no fraud by the company or any fraud on the company by itsofficers or employees has been noticed or reported during the course of our audit thatcauses the financial statements to be materially misstated.

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

(xii) The Company is not a Nidhi Company and hence the provision of section 406(1) ofthe act does not apply to the company.

(xiii) Based upon the audit procedures performed and according to the information andexplanations given to us All transactions with related parties are in compliance withsections 177 and 188 of Companies Act 2013 where applicable and the details have beendisclosed in the Financial statements etc. as required by the applicable accountingstandards.

(xiv) The Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under review.

(xv) The Company has not entered into any non-cash transactions with directors orpersons connected with directors during the year.

(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.

For M/s.Krishnan and Raman
Chartered Accountants - FRN 01515S
Place : Tirunelveli (sd) K.V.RAMAN
Date : 03/08/2016 M.No.009790