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VKS Projects Ltd.

BSE: 534567 Sector: Engineering
NSE: VKSPL ISIN Code: INE213M01024
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VKS Projects Ltd. (VKSPL) - Auditors Report

Company auditors report

To

The Members of

VKS PROJECTS LIMITED

Report on the Financial Statements

1. We have audited the accompanying financial statements of VKS PROJECTS LIMITED(CIN- L74210MH1998PLC113596) ("The Company") which comprises the Balance Sheetas at March 31 2016 the Statement of Profit and Loss and Cash Flow Statement for theyear then ended and a summary of the significant accounting policies and otherexplanatory information.

Management's Responsibility for the Financial Statements

2. 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 to 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.

Auditors' Responsibility

3. Our responsibility is to express an opinion on these financial statements based onour audit.

4. 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.

5. We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act and other applicable authoritative pronouncements issued by theInstitute if Chartered Accountants of India. Those Standards and pronouncements requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement.

6. An audit involves performing procedures to obtain audit evidence about the amountsand the 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 a true and fair view in order to design audit proceduresthat are appropriate in the circumstances but not for the purpose of expressing anopinion on whether the Company has in place an adequate internal financial controls systemover financial reporting and the operating effectiveness of such controls. An audit alsoincludes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the financial statements.

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

Emphasis of Matter

8. We invite attention to Note no 25(ii) to the financial statements regardingnon reconciliation and non availability of balance confirmation from Various LendersSundry Creditors Trade Receivables and parties to whom Loans and Advances and Depositshave been made.

9. As referred in Note 25(iiii) to the financial statement the company have notcomplied with section 203 & section 134 (1) of Companies Act 2013.

Opinion

10. In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the above matter and subject to ourremarks as stated in notes hereunder vide "Annexure C" aforesaid financialstatements give the information required by the Act in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia of the state of affairs of the Company as at March 31 2016 and its loss and itscash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

11. As required by "the Companies (Auditor's Report) Order 2015 ("theOrder")" issued by the Central Government of India in terms of sub-section (11)of section 143 of the Act (hereinafter referred to as the "Order") and on thebasis of such checks of the books and records of the Company as we consider appropriateand according to the information and explanation given to us we give in the"Annexure A" statement on the matters specified in the paragraph 3 and 4 of theOrder.

12. 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 faras 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. 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 31 2016 from being appointed as a director in terms of Section 164 (2) of theAct; and

f. With respect to the adequacy of the Internal financial controls over financialreporting of the Company and operative effectiveness of such controls refer to ourseparate report in "Annexure B" to this report; 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 our opinionand to the best of our information and according to the explanations given to us:

• The Company has disclosed the impact if any of pending litigations as at March31 2016 on its financial position in its financial statements - Refer Note No. 25 (iv);

• the Company has made provision as required under the applicable law oraccounting standards for material foreseeable losses if any on long-term contractsincluding derivative contracts i.e Nil; and

• There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended March 312016- N.A.

For J. Maitra & Associates

Chartered Accountants

Firm Registration Number: 119676W

Joyashish Maitra

(Proprietor)

Membership Number: -107546

Place: Mumbai

Date: May 11 2016

Annexure A to Independent Auditors' Report (Referred to in our report of even date)

1) In respect of Fixed Assets:

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

b) As explained to us the assets have been physically verified by the management inaccordance with a phased program of verification of its Fixed Assets including CapitalWork in Progress adopted by the Company which in our opinion is reasonable consideringthe size and the nature of its business. No material discrepancies have been noticed onsuch physical verification however no such report provided to us for verification;

c) The title deeds of immovable properties are held in the name of the company.

2) INVENTORIES

a) According to the information and explanations given to us the inventory has beenphysically verified by the management during and at the close of the year.

b) In our opinion and according to the information and explanations given to us theprocedures of physical verification of inventory followed by the management as evidencedby the written procedures and instructions are reasonable and adequate in relation to thesize of the company and nature of its business.

d) The company is maintaining proper records of inventory. As explained to us nodiscrepancies were noticed on physical verification between physical stocks and bookrecords. However physical verification reports are not produced before us forverification.

3) In respect of the loans secured or unsecured granted or taken by the Companyto/from companies firms or other parties covered in the Register maintained under Section189 of the Companies Act 2013:

a) According to the information and explanations given to us the company has grantedunsecured loan. The amount and number of parties involved are INR 7527000/- and 2 partiesrespectively with closing balance being INR 6829000/- of 2 parties respectively.

b) The company has granted aforementioned advances as non-interest bearing advances.

c) Terms and conditions for the repayment of the loan granted at clause (a) above isnot specified hence regularity of receipt of loan amount could not be commented upon.

d) In view of clause 3(c) above clause 3(d) are not applicable.

e) According to the information and explanations given to us the company has takenunsecured loan. The amount and number of parties involved are INR 8569486/- and 1 partiesrespectively with closing balance being INR 14407556/- of 2 parties respectively.

f) The company has taken aforementioned advances as non-interest bearing advances.

g) Terms and conditions for the repayment of the loan granted at clause (a) above isnot specified hence regularity of receipt of loan amount could not be commented upon.

h) In view of clause 3(c) above clause 3(d) are not applicable.

4) In our opinion and according to the information and explanations given to us thecompany has complied with the provisions of section 185 and I86 of the Companies Act 2013In respect of loans investments guarantees and security.

5) In our opinion and according to the information and explanations given to us thecompany has not complied with the provision of section 76 or any other relevantprovisions of the Companies Act 2013 and the Companies (Acceptance of Deposits) Rules2013 with regard to the deposits accepted from the public and the directives issued by theReserve Bank of India in this matter. According to the information and explanation givento us no order has been passed by the Company Law Board or the National Company LawTribunal or the Reserve Bank of India or any Court or any other Tribunal in this regard.

6) We have broadly reviewed the records maintained by the Company pursuant to the rulesprescribed by the Central Government for maintenance of cost records under Sub-Section(1)of Section 148 of the act and are of the opinion that prima facie the prescribed costrecords have been maintained. However we have not made a detailed examination of the costrecords with a view to determine whether they are accurate or complete.

7) In respect of Statutory dues:

a) The Company is not regular (defaulted) in depositing with appropriate authoritiesundisputed statutory dues including Provident Fund Investor Education and ProtectionFund Employees' State Insurance custom duty excise duty and other statutory duesapplicable to it with a closing balance as on March 31 2016for Service Tax Sales Tax andIncome Tax. Service Tax dues as at the end of the year were Rs. 28162421/- Sales Taxwere of Rs. 629080 TDS were of Rs. 13896240/- and Income tax were Rs.27393083/-.

b) According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Investor Education and Protection Fund Employees'State Insurance custom duty sales tax excise duty and other statutory dues wereoutstanding as at March 31 2016 for a period of more than six months from the date werethey became payable except the followings.

Sr. No. Particulars Amount Outstanding for more than 6 months as on March 31 2016
1 Income Tax 27393083
2 Service Tax 28162421
3 Sales Tax 629080
4 Tax Deducted at Source 13896240

Note: The sales tax department has initiated proceedings for various financial yearsstarting from 2006-07 to 2012-13 on the company in the absence of the detailedinformation and explanation in respect of Tax Liability Interest and Penalty thereon weare unable to comment upon the impact of the same on the statement of profit and lossaccount.

c) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of wealth tax service tax and cess which havenot been deposited on account of any dispute however the demand raised by the sales taxdepartments are still pending for deposition however exact demand amount is not providedto us by the management hence impact of the same is not commented.

8) In our opinion and according to the information and explanations given to us andbased on the documents and records produced to us that the company has defaulted inrepayment of dues to financial institution and banks during the financial year coveredunder audit.

9) Based upon the audit procedures performed and the information and explanations givenby the management the company has not raised moneys by way of initial public offer orfurther public offer including debt instruments and term Loans. Accordingly theprovisions of clause 3 (ix) of the Order are not applicable to the Company and hence notcommentedupon.

10) Based upon the audit procedures performed and the information and explanationsgiven by the management we report that no fraud by the Company or on the company by itsofficers or employees has been noticed or reported during theyear.

11) Based upon the audit procedures performed and the information and explanationsgiven by the management the managerial remuneration has been paid or provided inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the CompaniesAct.

12) In our opinion the Company is not a Nidhi Company. Therefore the provisions ofclause 4 (xii) of the Order are not applicable to theCompany.

13) In our opinion all transactions with the related parties are incompliance withsection 177 and 188 of Companies Act 2013 and the details have been disclosed in theFinancial Statements as required by the applicable accounting standards.

14) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year underreview. Accordingly the provisions of clause 3 (xiv) of the Order are not applicable tothe Company and hence not commentedupon.

15) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not entered into any non-cash transactions withdirectors or persons connected with him. Accordingly the provisions of clause 3 (xv) ofthe Order are not applicable to the Company and hence not commentedupon.

16) In our opinion the company is not required to be registered under section 45 IA ofthe Reserve Bank of India Act 1934 and accordingly the provisions of clause 3 (xvi) ofthe Order are not applicable to the Company and hence not commentedupon.

For J. Maitra & Associates

Chartered Accountants

Firm Registration Number: 119676W

Joyashish Maitra

(Proprietor)

Membership Number: -107546

Place: Mumbai

Date: May 11 2016

Annexure - B TO THE INDEPENDENT AUDITORS' REPORT

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

We have audited the internal financial controls over financial reporting of VKSPROJECTS LIMITED ("the Company") as of 31 March 2016 in conjunction with ouraudit 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.

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 auditors' 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 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 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

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 31 March 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 J. Maitra & Associates

Chartered Accountants

Firm Registration Number: 119676W

Joyashish Maitra

(Proprietor)

Membership Number: -107546

Place: Mumbai

Date: May 11 2016

Annexure C to Independent Auditors' Report

1. Inability to comment on Inter Corporate Deposits and Other Loans and Advances takenfrom various parties as at March 2016 in the absence of third party confirmationreconciliation if any and other sufficient appropriate audit evidence.

2. No Provision is made for Interest Payable on Inter Corporate Deposits and OtherLoans and Advances taken by the Company and no provision made of Interest Receivable onInter Corporate Deposits and Other Loans and Advances provided by the Companyconsequently the profit/loss of the year are not ascertainable.

3. Inability to comment on Trade Payables and dues to Related Parties as at March 2016in the absence of the third party confirmation reconciliation if any and othersufficient appropriate audit evidence.

4. No Provision made for Interest payable on Loans taken from Banks and NBFC Companieswhich are already been declared as NPA consequently the loss is not ascertainable.

5. Inability to comment on Balance Recoverability if any of Trade Receivables andOther Short Term Loans and Advances as at March 2016 in the absence of sufficientappropriate audit evidence.

6. Inability to comment on Balance Recoverability if any of Sundry Deposits and OtherCurrent Assets as at March 2016 in the absence of sufficient appropriate audit evidence.

7. With reference to Fixed Deposits Accepted by the Company the Company has defaultedin repayment of dues as at March 2016. Further the Company has not made provisions forpenal interest as per the Companies (Acceptance of Deposits) Rule 2014. The Company hasnot intimated to the tribunal on monthly basis about the default in repayment as persection 73(4) of the Companies Act 2013 corresponding to section 58AA of the CompaniesAct 1956.

8. Inability to comment on impairment provisions if any as per the Accounting Standard28 "Impairment of Assets" on Plant and Machinery along with other fixed assetsamounting to INR 1098.85Lacs situated atvarious sites of the Company which have beengenerally operating at lower capacity in the absence of future cash flows projection andinformation about the value of use.

9. A notice has been issued by the State Bank of India under section 13 (12) read withrule 3 of the Security Interest (Enforcement) Rules 2002 for non repayment ofinstallments and interest thereon after the due date by the Company and therefore all theloan accounts became Non Performing Assets with effective from respective dates mentionedin such notice. We are informed that the Company has filed response against such noticesand requested to restructure the loan accounts. These factors along with other matter asset forth in said notice raise substantial doubt about the company's ability to continueas going concern in the foreseeable future however the company's financial statements havebeen prepared on going concern basis on the basis of management assurance.

10. Tangible Assets are stated at cost net of recoverable taxes trade discounts andrebates less accumulated depreciation.

11. Depreciation on Fixed Assets is provided to the extent of depreciable amount onWritten Down Value (W.D.V.) Method. Depreciation is provided based on useful life of assetdescribed in Schedule II to the Companies Act 2013.

12. The Sales Tax Department initiated proceedings for various financial years startingfrom 2006-07 to 201213 on the Company in the absence of the detailed information andexplanation in respect of Tax Liability Interest and Penalties thereon we are unable tocomment upon the impact of the same on the statement of profit and loss account.

13. It is informed to us that the Company has not complied with the provisions offiling of Returns for TDS during the period under review however the company has notprovided the effect of the same in the books of accounts.

14. As per explanation and information provided to us by the Company Management aboutthe Future Business of the Company Realization of Current Assets and Default in Repaymentof loans to Banks and NBFC's the Going Concern assumption of the Company in near futureis considered inappropriate as there is significant material impact on the Company'sGoing Concern after the due action taken by the Banks and NBFC's for default of repaymentof dues however the company's financial statements have been prepared on going concernbasis on the basis of management assurance.

15. The Company has not provided us the details of pending litigation against thecompany and its directors for various matters including the financial matters hence we arenot able to comment upon the financial impact of the same on the financial statements.

For J. Maitra & Associates

Chartered Accountants

Firm Registration Number: 119676W

Joyashish Maitra

(Proprietor)

Membership Number: -107546

Place: Mumbai

Date: May 11 2016