To the Members of Cifco Finance Limited. Report on the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of CIFCO FINANCELIMITED which comprisesofBalance Sheet as at 31st March 2017 and the Statement ofProfit and Loss and the Cash Flow Statement for the year ended on that date and a summaryof significant accounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
2. The Companys Board of Directors is responsible for the matters 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 the maintenance of adequate accounting records in accordancewith the provision of the Act for safeguarding of the assets of the Company and forpreventing and detecting the frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of internal financial control thatwere operating 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.
3. Our responsibility is to express an opinion on these standalone financial statementsbased on our 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. 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.
6. An audit involves performing procedures to obtain audit evidence about the amountsand disclosures 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 true and fair view in order to designaudit procedures that are appropriate in the circumstances but not for the purpose ofexpressing an opinion on whether the Company has in place an adequate internal financialcontrol system over financial reporting and operating effectiveness of such controls. Anaudit also includes evaluating the appropriateness of accounting policies used and thereasonableness of the accounting estimates made by Companys 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.
Basis for Qualified opinion
8 Preparation of accounts of the Company on the basis of the assumption of goingconcern without making any adjustment for recoverability/classification of assets and itsamounts and classification of liabilities and its amounts inspite of the followingindicators:
i The application of the Company to carry on business of a Non-Banking FinancialInstitution has been rejected by the Reserve Bank of India (Department of Non BankingSupervision) by its order of November 25 1998; nevertheless as the Company has beenlegally adviced it carries on activities of a non-banking financial company for thebenefit of deposit holders; (Refer Note 15(2) to the Accounts)
ii . Attention is invited to Note 15(5) to the Accounts relating to the Order ofSpecial Court for repayment of principal amount Rs 28800000 with interest. The Companyhas made payment of only Rs. 31487341/- against outstanding amount deposit andinterest. Balance amounting to Rs. 135536591/- in the aggregate of principal andinterest is still outstanding. Non provision of interest for the current year Rs.5760000/-.
iii. a. Attention is invited to Note 15 (6) (a) to the Accounts relating to delay inrepayment of outstanding principals of Public Deposits matured and interest thereon forwhich the Company is to follow a Schedule of Repayment as per the directions issued by theCompany Law Board. According to the said directions the Company was expected to pay up toMarch 31 2017 an aggregate sum of Rs 74873015/- to its deposit holders. Neverthelessthe Company has not been able to adhere to the said Schedule of Repayment. During theyear it has paid only Rs. 67000/- and the balance of Rs. 74806015/- remains unpaid.The aggregate principal amount of Public Deposits matured and not paid as on March 312017 is Rs. 53719656/-.
b. Attention is also invited to Note 6.b. to the Accounts relating to delay in paymentof 19% Non convertible Debenture - 1997 series (NCDs) which have already become due forredemption; for the said Debentures the Company is to follow a Schedule of Repayment onthe same lines with the Order of CLB for Public Deposits. Accordingly the Company wasexpected to pay upto March 31 2017 an aggregate sum of Rs.9252835/-. Nevertheless theCompany has not been able to adhere to the said Schedule of Repayment. During the yearcompany paid Rs. NIL . The aggregate overdue NCDs as on March 31 2017 was Rs.9252835/-.iv. Our remarks in Para 1 2 & 3 above - whether considering the said circumstancesthe Company would be able to continue as a going concern and consequential effects andadjustments if any on the Accounts; and v. Non redemption of 10% cumulative preferenceshares of Rs. 12000000 due for redemption on 31st March 2003 ( refer note 9to the Accounts)
9. In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis for QualifiedOpinion paragraphthe aforesaid standalone financial statements give the informationrequired by the Act in the manner so required and give true and fair view in conformitywith the accounting principles generally accepted in India of state of affairs of theCompany as at 31st March 2017 and its loss and its cash flows for the yearended on that date.
Report on Other Legal and Regulatory Requirements
10 As required by the Companies (Auditors Report) Order 2017 issued by theCentral Government of India in terms of sub-section (11) of Section 143 of theAct(hereinafter referred to as the "Order")and on 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 B a statement on thematters specified in the paragraph 3 and 4 of the Order to the extent applicable.
11 As required by Section 143(3) of the Act we report that:
a) We have sought all the information and explanations which to the best of ourknowledge 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 appears from our examination of those books and proper returns adequatefor the purposes of our audit have been received from branches not visited by us;
c) The Balance Sheet Statement of Profit and Loss Account and 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 (as amended).
e) The matter described in the Basis for Qualified Opinion paragraph above inouropinion may have an adverse effect on the functioning of the Company.
f) In our opinion and as per the information and according to explanation given to usall of the Directors are prima facie disqualified as on 31st March 2017from beingappointed as a director in terms section 164(2) of the Act.
g) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls we refer to ourseparate Report in "Annexure A".
h) With respect to the other matters included in the Auditors Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to our 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.
ii. The Companydid not have any long-term contracts including derivatives contracts forwhich there were any material foreseeable losses.
iii. There were no amounts which required to be transferred to the Investor Educationand Protection Fund by the Company. iv. The Company has provided requisite disclosures inthe financial statements as to the holdings aa well as dealings in Specified Bank Notesduring the period 8th November 2016 to 30th December 2016. Basedon the audit procedures and relying on the management representation we report that thedisclosures are in accordance with the Books of Account maintained by the Company and asproduced before us by the management. Refer note to the financial statements.
For M D PANDYA & ASSOCIATES
A. D. PANDYA
Dated : 20th May 2017
Annexure A to the Independent Auditors Report
Referred to in Para 11(g) of the Independent Auditors; Report of even date to themembers of the Company on the Standalone Financial Statements for the year ended 31stMarch 2017.
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 CIFCOFINANCE LIMITED ("the Company") as of March 31 2017 in conjunction with ouraudit of the financial 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 essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls over Financial Reporting issued byThe Institute of Chartered Accountants of India. These responsibilities include thedesign implementation and maintenance of adequate internal financial controls that wereoperating 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 specified under Section143(10) of the Act to the extent applicable to an audit of internal financial controlsboth issued 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 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 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 refl ect 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 authorizations 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 controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
Disclaimer of Opinion
According to the information and explanation given to us as the Company is not carryingon any activities it has not established internal financial controls system overfinancial reporting on criteria based on or 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. Because ofthis reason we are unable to obtain sufficient appropriate audit evidence to provide abasis of our opinion whether the Company had adequate internal financial controls over thefinancial reporting and whether such internal financial controls were operatingeffectively as at 31st March 2017.
We have considered the disclaimer reported above in determining the nature timing andextent of audit tests applied in our audit of the standalone financials statements of theCompany and disclaimer does not affect our opinion on the standalone financial statementsof the Company.
For M D PANDYA & ASSOCIATES
A. D. PANDYA
Dated : 20th May 2017
Annexure B to the Independent Auditors Report
Referred to in Para 10 of the Independent Auditors; Report of even date to the membersof the Company on the Standalone Financial Statements for the year ended 31stMarch 2017. i a The records of Fixed Assets maintained by the Company have not beenproperly updated. i b The Fixed Assets have not been physically verified by the managementduring the year. i c The title deeds of immovable property is held in name of the Companyii. The provisions of clause 4 (ii) of the Companies (Auditors Report) Order 2017 are notapplicable to the Company. iii a The Company has not granted any loans secured orunsecured to companies firms or other parties covered in the register maintained underSection 189 of the Companies Act 2013. Accordingly provisions of subclause (b) & (c)are not applicable. iv The Company has not granted any loans or any investments orprovided any guarantee or securities to the parties covered under Sections 185 & 186of the Companies Act 2013. Accordingly the provision of Clause iv are not applicable.
v The Company was required to repay the deposits as per the Schedule of Repayment ofPublic Deposits approved by the Company Law Board. However the Company has not been ableto adhere to the said Schedule of Repayment (Refer Note 15(6). Further in our opinion andaccording to the information and explanation given to us the Company has also notcomplied with the directives issued by the Reserve Bank of India in terms of Non-BankingFinancial Companies Acceptance of Public Deposits (Reserve Bank) Directions 1998 and moreparticularly the following:
a) Not obtaining credit rating.
b) Not regularizing public deposits held in excess of permissible limits
c) Non-payment of interest till date of repayment in respect of deposits matured butrepaid later:
d) Non- submission of various returns to the Reserve Bank of India:
e) Not maintaining of minimum percentage of liquid assets. vi The provisions of Clause4 (vi) of the Companies (Auditors Report) Order 2017 are not applicable to the Company.
vii a According to the records of the Company the Company is generally regular indepositing with appropriate authorities undisputed statutory dues in respect of ProvidentFund Employees State Insurance Sales-tax Wealth tax Custom Duty Excise Dutyvalue added taxcess and any other statutory dues with appropriate authorities.except fornonpayment of Income tax amounting to Rs. 279.03 lacs (Previous year Rs. 279.03 lacs).
According to the information and explanations given to us no undisputed amountspayable in respect Provident Fund Employees State Insurance Sales-tax Wealthtax Custom Duty Excise Duty value added tax cess and any other statutory dues were inarrears as at 31st March 2017 for a period of more than six months from thedate they became payableexcept for nonpayment of Income tax amounting to Rs. 279.03 lacs(Previous year Rs. 279.03 lacs).
vii b According to the information and explanations given to us there were no dues inrespect of wealth tax sales tax service tax duty of custom and value added tax whichhave not been deposited on account of any dispute except for income tax as detailed below:
|Name of statutory dues ||Amount Rs in crores ||Forum where dispute is pending |
|Income tax ||3.00 ||ITAT |
viii According to information and explanation given to us the Company has defaulted inrepayment of dues to the debenture holders:
|Lender ||Amount due in- cluding interest ||Period of Default |
|Debentures ||92.52lacs ||16 years |
ix According to information and explanation given to us the Company has not raised anymoney by way of initial public offer further public offer (including debt instruments)and term loansduring the year.
x According to the information and explanation given to us no fraud on or by theCompany has been noticed or reported during the year.
xi According to the information and explanations given to us the Company has not paidor provided for any managerial remuneration within the meaning of Section 197 of the Act.
xii In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company.
xiii According to the information and explanations given to us and based on ourexamination of the records of the details of such transactions with the related partiesare in compliance with section 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements are required by theapplicable accounting standards.
xiv During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.
xv According to the information and explanations given to us and the representationobtained from the management the Company has not entered into any non cash transactionswith Directors or persons connected with him.
xvi According to the information and explanations given to us the Company was requiredto be registered under section 45I of the Reserve Bank of India . Act 1934. Theapplication for carrying on non banking finance business had been rejected. Refer note15(2).
For M D PANDYA & ASSOCIATES
Regno ; 107325W
A. D. PANDYA
Dated : 20th May 2017