To the Members of
Sutlej Textiles and Industries Limited
Report on the Financial Statements
We have audited the accompanying financial statements of SUTLEJ TEXTILES AND INDUSTRIESLIMITED ("the Company") which comprise the Balance Sheet as at 31st March2016 the Statement of Profit and Loss the Cash Flow Statement and a summary of thesignificant accounting policies and other explanatory information for the year then endedin which are incorporated the financial statements for the year ended on that date auditedby the branch auditor of the Companys unit at Kathua in the State of Jammu andKashmir and Baddi in the State of Himachal Pradesh.
Managements Responsibility for the Financial Statements
The Companys 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 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 thereunder. We conducted our audit in accordancewith the Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we 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 the amounts anddisclosures in the financial statements. The procedures selected depend on theauditors 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 Companyspreparation 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 includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Companys Directors as well as evaluating theoverall 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.
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 theCompanies Act 2013 in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at 31st March 2016 and its profit and its cash flows for the year ended onthat date.
We did not audit the financial statements of Kathua and Baddi Units included in thefinancial statements of the Company whose financial statements reflect total assets ofRs.105262.85 lakhs as at 31st March 2016 and total revenues of Rs.159807.05 lakhs for theyear ended on that date as considered in the financial statements. The financialstatements of the Kathua and Baddi units have been audited by the branch auditor whosereports have been furnished to us and our opinion in so far as it relates to the amountsand disclosures included in respect of the branches is based solely on the report ofbranch auditor.
Our opinion is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order 2016 (theOrder) issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Companies Act 2013 we give in the Annexure A a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.
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 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 and proper returnsadequate for the purposes of our audit have been received from branches not visited by us.
(c) The reports on the accounts of the Kathua and Baddi units of the Company auditedunder Section 143 (8) of the Act by branch auditor have been sent to us and have beenproperly dealt with by us in preparing this report.
(d) 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 and with thefinancial statements received from the Kathua and Baddi units not visited by us.
(e) 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.
(f ) On the basis of the written representations received from the directors as on 31stMarch 2016 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2016 from being appointed as a director in terms of Section164 (2) of the Act.
(g) With respect to the adequacy of the internal financial control 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 Auditors 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 Note 7 and 18A(1&2) to the financialstatements;
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses on long-term contracts including derivativecontracts Refer Note 20 to the financial statements;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
Annexure referred to in paragraph 1 of our report of even date on the other legal andregulatory requirements (Re: Sutlej Textiles and Industries Limited)
(i) a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b. Fixed Assets have been physically verified by the management at reasonable intervalexcept in Bhilad unit where major fixed assets have been physically verified by themanagement during the year as per regular programme of verification. No materialdiscrepancies were noticed on such verification.
c. According to information and explanations given by the management the title deedsof immovable properties included in fixed assets except immovable properties havingoriginal cost of Rs. 300.32 lakhs (WDV as on 31st March 2016 Rs. 271.65 lakhs) for whichregistration is pending are held in the name of the respective units. These title deedsand possession letters have been given as security against the term and other loans takenfrom banks and as informed to us the original title deeds are kept with the lenders assecurity and therefore same could not be made available for our verification.
(ii) As explained to us inventories (except stock lying with third parties ) werephysically verified during the year by the management at reasonable intervals during theyear and no material discrepancies were noticed on such physical verification.
(iii) The Company has granted unsecured loan to a company covered in the registermaintained under Section 189 of the Companies Act 2013. The terms and conditions of thegrant of such loan is not prejudicial to the interest of the Company. The Company hasstipulated schedule of repayment of principal and payment of interest and repayment of theprincipal amount and receipt of interest are regular. The Company has not granted any loanto firms Limited Liability Partnerships or other parties covered in the registermaintained under section 189 of the Companies Act 2013.
(iv) The Company has complied with provisions of section 186 of the Companies Act 2013in respect of loan granted and Investments made. According to information and explanationsgiven by the management no loan or guarantee or security under section 185 and noguarantee and security under section 186 of the Companies Act 2013 have given during theyear.
(v) The company has not received any deposit covered under section 76 of the CompaniesAct 2013 during the year. Therefore provisions of clause 3(v) of the order are notapplicable to the company.
(vi) We have broadly reviewed the books of accounts maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records undersection 148 (1)of the Companies Act 2013 and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. We have not however madea detailed examination of the same.
(vii) a. According to the records of the Company the Company is generally regular indepositing undisputed statutory dues including Provident Fund Employees StateInsurance Income-tax Sales-tax Service tax Duty of Customs Duty of Excise ValueAdded Tax Cess and other material statutory dues deducted/accrued in the books with theappropriate authorities. There was no undisputed outstanding statutory dues as at the yearend for a period of more than six months from the date they became payable.
b. According to the records of the Company there are no dues outstanding of IncomeTax Sales Tax Service Tax Duty of Customs Duty of Excise and Value Added Tax onaccount of any dispute other than the followings:
|Name of Statute ||Nature of Dues ||Amount (net of paid) ||Forum where Dispute is Pending ||Related Period |
| || ||(Rs. in lakhs) || || |
|The Central Excise Act 1944 ||Disallowances & Penalty and interest on payment of service tax through Cenvat ||36.05 ||Commissioner (Appeals) Jaipur ||Oct. 05 to Mar. 06 |
|The Central Excise Act 1944 ||Demand & Penalty for Service Tax ||23.91 ||CESTAT New Delhi ||Dec.05 to Oct.06 |
|The Central Excise Act 1944 ||Penalty against non-reversal of Cenvat credit on exempted goods ||8.50 ||Rajasthan High Court Jaipur ||May99 to Feb.2002 |
|Rajasthan Tax on Entry of Goods into Local Areas Act 1999 ||Entry Tax and Interest ||34.59 ||Supreme Court Delhi ||Apr. 06 to Mar. 16 |
|Rajasthan Electricity (Duty) Act 1962 ||Demand of Urban Cess on purchase of electricity ||258.30 ||Rajasthan High Court Jaipur ||Apr 2010 to Mar 16 |
|The Central Excise Act 1944 ||Demand of rebate erroneously granted and paid by Department ||138.35 ||Additional Commissioner of Central Excise Jammu ||2008-2012 |
|The Central Excise Act 1944 ||Demand towards Excise duty on Textile Committee Cess ||17.64 ||CESTAT New Delhi ||2000 2005 |
|The Central Excise Act 1944 ||Excise duty on Clearance of Yarn at Single Stage ||23.66 ||High Court of Jammu and Kashmir Jammu ||1995 1996 |
|The Central Excise Act 1944 ||Excise Duty on Clearance of Capital goods and Scrap Sales interest and penalty thereon ||22.40 ||CESTAT New Delhi ||2009-2012 |
|The Central Excise Act 1944 ||Demand of rebate erroneously granted and paid by Department ||365.01 ||Commissioner of Central Excise (Appeals)Chandigarh ||2014-15 |
|Gujarat Tax on Entry of Specified Goods into Local Areas Act 2001c ||Entry Tax Penalty and Interest thereon ||1213.11 ||Commercial Tax Officer Vapi ||Apr 06 to Mar 16 |
|Himachal Pradesh Tax on Entry of Goods into Local Area Act 2010 ||Entry Tax on purchase of raw material ||508.29 ||High Court of Himachal Pradesh ||2010-11 to 2015-16 |
|The Central Excise Act 1944 ||Demand towards excise duty on textiles committee cess ||52.52 ||Central Excise & Service Tax Appellate Tribunal New Delhi ||2010-11 |
(viii) The Company has not defaulted in repayment of dues to banks. The Company did nothave any outstanding loan from any financial institution Government and dues todebenture holders .
(ix) According to the information and explanations given to us the Company has notraised any monies by way of initial public offer or further public offer (including debtinstruments). Further in our opinion and according to the explanations given to us termloans were applied for the purpose for which loans were raised.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven to us we report that no fraud by the Company or no fraud on the Company by theofficers and employees of the Company has been noticed or reported during the year .
(xi) According to the information and explanations given by the management managerialremuneration has been paid / provided in accordance with the requisite approvals mandatedby the provisions of section 197 read with schedule V to the Companies Act 2013 exceptcommission Rs. 495 lakhs payable to Chairman and other directors for which approval fromshareholders are being taken in ensuing Annual General Meeting.
(xii) In our opinion the Company is not a Nidhi company. Therefore the provisions ofclause 3(xii) of the order are not applicable to the Company.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 of theCompanies Act 2013 where applicable and the details have been disclosed in the FinancialStatements as required by the applicable accounting standards.
(xiv) According to the information and explanations given by the management theCompany has not made any preferential allotments or private placement of shares or fullyor partly convertible debentures during the year under review.. Therefore the provisionsof clause 3(xiv) of the order are not applicable.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withdirectors. Therefore the provisions of clause 3(xv) of the order are not applicable.
(xvi) In our opinion the Company is not required to be registered under section 45-IAof the Reserve Bank of India Act 1934. Therefore the provisions of clause 3 (xvi) of theorder are not applicable.
Report on the Internal Financial controls under Clause (i) of Sub - section 3 ofSection 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of SutlejTextiles and Industries Limited as of March 31 2016 in conjunction with our audit of thefinancial statements of the Company for the year ended on that date.
Managements Responsibility for Internal Financial Controls
The Companys management is responsible for establishing and maintaining internalfinancial controls based on the internal control over the 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 includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to companys 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.
Our responsibility is to express an opinion on the companys 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 of and plan and perform the audit to obtain reasonable assurance aboutwhether adequate 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 exist and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors judgement 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 Companys internal financial controlssystem over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A Companys 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 companys internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorization ofmanagement and directors of the company ; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompanys 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 controlsover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
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 the financial reporting criteria established by the companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls over Financial Reporting issued by the Institute ofChartered Accountants of India.
| ||For SINGHI & CO. |
| ||Chartered Accountants |
| ||Firms Reg. No.302049E |
| ||B. K. Sipani |
|Place : New Delhi ||Partner |
|Date : 11th May2016 ||Membership No. 088926 |