TO THE MEMBERS OF THE BARODA RAYON CORPORATION LIMITED
REPORT ON THE STANDALONE FINANCIAL STATEMENTS
We have audited the accompanying standalone financial statements of The Baroda RayonCorporation Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2017 the Statement of Profit and Loss the Cash Flow Statement for the yearthen ended and a summary of the significant accounting policies and other explanatoryinformation.
Management's Responsibility for the Standalone 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 standalone financial statements to give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting 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 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.
Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.
We have taken into account the provisions of the Act and the Rules made there underincluding the accounting standards and matters which are required to be included in theaudit report.
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 of 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.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditors' 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. 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 audit opinion on the standalone financial statements.
Attention is invited to followings:
a. As stated in note No.19 ( a) in financial statements the accounts have beenprepared on going concern basis. However the net worth of the Company had been fullyeroded due to the continued losses the Company's entire operations have become standstillsince August' 2008 and there are many legal cases pending against the Company which mayaffect the future functioning of the Company.
b. Employee Union had filed the litigation for recovery of their total dues against theCompany at Gujarat High Court. The Company had referred the said matter with Hon'ble BIFRfor making necessary modification in Modified Draft Rehabilitation Scheme (MDRS) fordetails refer to Note 22 of financial statements. In pursuant to Government NotificationS.O. No 3568(E) dated 25.11.2016 and S.O.3569(E) dated 25.11.2016 BIFR has been wound upw.e.f. 01.12.2016 and all the pending cases are now transferred to National Company LawTribunal (NCLT). The application for such transfer shall be made by the company to NCLTwithin 180 Days under section 4(b) of Sick Industrial Companies (Special Provisions)Repeal Act 2003. In pursuant to Insolvency and Bankruptcy Code (Removal of Difficulties)Order 2017 vide notification dated 24/05/2017 issued by Ministry of Corporate Affairsrelating to amendment to the Sick Industrial Companies ( Special Provisions) Repeal Act2003 provided that any scheme sanctioned under sub-section (4) or any scheme underimplementation under sub-section (12) of section 18 of the Sick Industrial Companies(Special Provisions) Act 1985 shall be deemed to be an approved resolution plan undersub-section ( 1) of section 31 of the Insolvency and Bankruptcy Code 2016 and the sameshall be dealt with in accordance with the provisions of Part II of the said Code.Subject to the final verdict we are unable to express any opinion on probableliabilities which may arise in future.
c. The balances for Sundry Debtors Sundry creditors loans & advances bankbalances statutory and other liabilities as on 31st March' 2017 are subject toconfirmation. The figures reported in the financial statement are as per the ledgeraccount.
d. No provision for interest has been provided in the profit & loss account foroverdue loans availed in Modified Draft Rehabilitation Scheme (MDRS) for Rs. 21097.27lacs hence there is understatement of reported loss and accumulated losses reported underNote for details refer to Note 34.
e. We have relied on the information & documents submitted to us by management forphysical verification of stores & spares Fixed assets.
Subject to above paragraph (a) to (e) and paragraph mentioned under Report on OtherLegal and Regulatory Requirements under paragraph 10(d) relating to non-compliance ofAccounting Standard from (i) to (ii) in our opinion and to the best of our informationand according to the explanations given to us the aforesaid standalone 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 2017 and its losses and itscash flows for the year ended on that date.
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 Act(hereinafter referred to as the "Order") and on the basis of such checks of thebooks and records of the Company as we considered appropriate and according to theinformation and explanations given to us we give in the Annexure "A" astatement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143 (3) of the Act we report that:
(a) In view of huge accumulated losses of Rs 3489599330/= and financial constraintsthere was loss of key personnel and staff responsible for financial and accountingmatters as such the financial information and accounting data were prepared on the basisof available information and we are expressing our opinion with such limitation subjectto these We have sought and obtained all the information and explanations which to thebest of 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 ) Except for the following Accounting Standards as referred below in our opinionthe aforesaid standalone financial statements comply with the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.
i. We are unable to express an opinion on the financial impact not ascertained by theCompany that may arise on account of impairment of assets as required by AccountingStandard -28 relating to Impairment of Assets. As informed to us the impairment exercisewill be carried out at the time of operation of plant as entire plants are not inoperation since August' 2008.
ii. The Company has not made any provision for the decline in the value of investmentrelated to investment in unquoted shares of Thai Baroda Industries Ltd for Rs 57484744and equity shares in TAIB Capital Corporation Ltd for Rs 2450000 which is contrary tothe Accounting Standard 13.
(e) On the basis of the written representations received from the directors as on March31 2017 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2017 from being appointed as a director in terms of Section 164 (2) of theAct.
(f) 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 "B".
(g) 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 knowledge and belief and according to the information andexplanations given to us: i. The Company has pending litigation with labour as referred inparagraph 8(b) above and note 24 relating to various legal cases which would impact itsfinancial position;
ii. As per the information provided to us the Company did not have any provision as atMarch 31 2017 as required under the applicable law or accounting standards for materialforeseeable losses if any on long term contracts.
iii. There has not been an occasion in case of the Company during the year under reportto transfer any sums to the Investor Education and Protection Fund by the Company.
iv. The Company has disclosed in the financial statements as to holding as well asdealings in Specified Bank Notes ( SBN) during the period from 8th November 2016 to 30thDecember 2016 and these are in accordance with books of account maintained by the Company(Refer Note 35 to the financial statements)
ANNEXURE A TO INDEPENDENT AUDITORS' REPORT
The Annexure referred to in our Independent Auditor's Report to the members of theCompany on the standalone financial statements for the year ended 31st March2017 we report that:
i (a) The Company has generally maintained proper records showing full particularsincluding quantitative details and situation of its fixed asset
(b) According to the information given to us the management has physically verifiedthe Fixed Assets of the Company in current financial year. The Company has recognizeddiscrepancies/differences in the verification of Fixed Assets.
(c ) The title deeds of immovable properties as disclosed in Note 8 on fixed assets tothe financial statements are held in the name of the Company
ii. The Company was maintaining proper records of inventory however after closure ofmanufacturing activity there are no records required to be maintained as there were noactivity accordingly there is no question of any discrepancies to be reported. Howeverthe Company has not considered the impairment aspect for the carrying value of stockwhich are old and obsolete.
iii. The Company has not granted any loans to parties covered in the registermaintained under Section 189 of the Act. There are no firms /LLPs/ other parties coveredin the register maintained under Section 189 of the Act hence the other clauses are notapplicable.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Companies Act 2013in respect of the loans and investments made and guarantees and security provided by it.
v. The Company has not accepted any deposits from the public within the meaning ofSections 73 74 75 and 76 of the Act and the Rules framed there under to the extentnotified. The old deposits have been paid except disputed deposit of Rs 195000/=.
vi. Pursuant to the rules made by the Central Government of India the Company is notrequired to maintain cost records as specified under Section 148(1) of the Act in respectof its products. However there are no manufacturing activities since August' 2008 hencethe Company has not maintained.
vii. (a) The statutory liabilities are restructured and deferred as per thecomprehensive rehabilitation scheme approved by the BIFR however various statutoryagencies are in process of granting their sanction as per said scheme for deferment andsettlement of said liabilities. Hence we are reporting the Undisputed Statutory dueswhich is subject to confirmation from respective departments and shown as per the ledgeraccount including provident fund Investor Education and Protection fund Employee's StateInsurance Income tax Sales tax Custom duty Excise duty cess and other statutory dueswith appropriate authorities for a period more than six months from the date they becamepayable which are as under;
|SR. NO. ||STATUTORY DUES ||AMOUNT |
| || ||(Rs. ) |
|a. ||Sales Tax/VAT & interest thereon ||189340497.00 |
|b. ||Custom Duty ||68596547.00 |
|c. ||Interest on excise duty ||68727273.00 |
|d. ||Income Tax/TDS/Wealth Tax/FBT ||4460043.00 |
|e. ||Provident Fund dues & interest thereon ||32000000.00 |
|f. ||Employee's State Insurance dues ||40197407.00 |
|g. ||Water Tax & interest thereon ||161145144.00 |
|h. ||Textile Committee Cess ||636223.00 |
|i. ||Water Cess (Gujarat Pollution Control Board) ||834775.00 |
|j. ||Electricity Duty (Power plant) ||167801202.00 |
|k. ||BSE Listing fees ||634796.00 |
|L. ||Surat Municipal Corporation ||5126911.00 |
|M. ||Revenue Tax Mamlatdar Surat ||10958116.00 |
The said statutory dues are given as per the information and records produced beforeus. The company has received various notices from E.S.I. Provident fund offices etcclaiming penal interest damages and penalty for delay in deposit of their dues Which isnot ascertainable hence it is not provided in the books.
(b) According to the information and explanation given to us the company has disputeddues of Excise duties which are given below.
|SR. NO. ||NAME OF STATUE || ||NATURE OF DUES ||AMOUNT (Rs) ||PERIOD WHICH AMOUNT RELATES ||FORUM DISPUTE PENDING WHERE IS |
|1. ||Central Act 1944 ||Excise ||Excise Duty ||1397249/- ||1994-1995 ||Tribunal (CESTAT) |
|2. ||Central Act 1944 ||Excise ||Excise Duty ||2189465/- ||1996-1997 ||Tribunal (CESTAT) |
|3. ||Central Act 1944 ||Excise ||Excise Duty ||101467/- ||1998-1999 ||Tribunal (CESTAT) |
|4. ||Central Act 1944 ||Excise ||Excise Duty ||189748/- ||2009-2010 ||Asst. Commissioner Central Excise |
|5. ||Central Act 1944 ||Excise ||Excise Duty ||442428525/- ||2006-2008 ||Tribunal (CESTAT) |
|6. ||Central Act 1944 ||Excise ||Service Tax ||1045703/- ||2005-2006 ||Asst. Commissioner Central Excise |
Note: Company have requested to BIFR for waiver of duty Interest penalty and fine andalso refund of Rs.70 lakh along with case law related to above Item number 4& 5. It isalso mentioned in MDRS circulated dated 13th October 2015.
viii. According to the records of the Company examined by us and the information andexplanation given to us the Company has not defaulted in repayment of loans or borrowingsto any financial institution or bank or Government or dues to debenture holders as at thebalance sheet date except the following the details are as under:
The Company has paid all the dues to CDR members however PNB Asset Management Limitedwhich has not participated member under CDR scheme is as under:.
However as per company the settlement with the unsecured lenders under the CDR wasmade a part of the scheme filed with BIFR and pursuant to the sanction of the scheme theamount payable to Principal PNB mutual fund is Rs 7766556/- being 42% of the principalamount of Rs 18491800. The Company has made a payment of Rs 776656/- on 11.11.2006against the said liability and the balance amount ofRs 6989900 is awaiting confirmationof the same.
ix. In our opinion and according to the information and explanations given to us thelong term & short term loan taken from the investor have been applied for the purposesfor which they were obtained.
x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement.
xi. There is no managerial remuneration payable during the year.
xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it the provisions of Clause 3(xii) of the Order are not applicable to the Company.
xiii. The Company has not entered into transactions with related parties in compliancewith the provisions of Sections 177 and 188 of the Act. Hence the details of such relatedparty transactions are not required to be disclosed in the financial statements asrequired under Accounting Standard ( AS ) 18 Related Party Disclosures specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.
xiv. The Company has not made any preferential allotment of shares during the yearunder review and the requirement of section 42 of the Companies Act 2013.
xv. The Company has not entered into any non cash transactions with its directors orpersons connected with him. Accordingly the provisions of Clause 3(xv) of the Order arenot applicable to the Company.
xvi. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
Accordingly the provisions of Clause 3(xvi) of the Order are not applicable to theCompany.
ANNEXURE B TO INDEPENDENT AUDITORS' REPORT
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 internal financial controls over financial reporting of The BarodaRayon Corporation Limited ( "the Company") as of March 31 2017 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat 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 Act.
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 deemed to be prescribedunder section 143(10) of the Act to the extent applicable to an audit of internalfinancial controls both applicable to an audit of internal financial controls and bothissued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements 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 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 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 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 ofunauthorised acquisition use or disposition of the company's assets that could have amaterial 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.
Subject to our qualification & other comments of our main report & variouscomments regarding closure of operation & loss of key personnel in our opinion theCompany has in all material respects an adequate internal financial controls system overfinancial reporting and such internal financial controls over financial reporting wereoperating effectively as at March 31 2017 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India.
| ||For AMPAC & ASSOCIATES |
| ||Chartered Accountants |
| ||Firm Registration Number: 112236W |
| ||PIYUSH SHETH |
| ||Partner |
| ||Membership Number: 044062 |
|Place: Mumbai || |
|Date: May 30 2017 || |