Indu Nissan Oxo Chemicals Industries Limited
We have audited the accompanying financial statements of
Indu Nissan Oxo Chemicals Industries Limited which comprise of the Balance Sheetas at March 31 2017 and the Statement of Profit and Loss and Cash Flow Statementof the Company for the year ended on that date annexed thereto and a summary ofsignificant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that 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 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 financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made there under. We conducted our audit in 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 the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders 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 accounting policies used and the reasonableness of the accountingestimates made by Company's Directors as well as evaluating the overall presentation ofthe financial statements.
We believe that the audit evidence we have sought and obtained is sufficient andappropriate to provide a basis for our qualified audit opinion.
Basis for Qualified Opinion
(a) Attention is invited to sub-note No. 2 (d) of Note No.
29. The Company has defaulted in redemption of Debentures which fell due on the 10thof July 1998 aggregating to Rs.550.18 Lac and the amount of interest including penalinterest calculated at simple interests accrued as of 31st March 2013 is Rs.1422.04 Lacof which the Company has unilaterally written back interest element of RS. 1334.01 Lacmentioning that it is in process of negotiating with debenture holders as to the repaymentof dues and the Company does not anticipate any interest payment and the same has beentreated by the Company as other revenues. The Company has reached to settlement with thedebenture holders post year end. The debenture holders have agreed to settle the amountpayable @ 30% of principal amount outstanding subject to certain terms and conditions. TheCompany is in process of liquidating some of its assets and pay off the debenture holders.In case the Company is not able to pay the settled amount within stipulated period thesettlement may be cancelled by the debenture holders. The Company has approached BIFR forthe permission to sell the assets and is confident of getting the permission. The Companyin anticipation of liquidating the assets and paying off the debenture holders has writtenback the balance amount not payable to capital reserve. The Company following tosettlement does not anticipate additional interest liability as demanded by the debentureholders due to which Company has not provided interest for the current year as well ascompany has written back the interest of RS. 133401338 provided in the earlier years.The above position continues since last year order from the BIFR. However the Law on SickIndustrial companies is repealed and the BIFR is dissolved. The powers of BIFR are nowvested with NCLT for which the Company can make an application. We are unable to form ouropinion on this as the entire matter is contingent and subject to approval of BIFR andnow NCLT subject to the application being made and admitted for sale of assets andfurther the Company is able to sell the assets post such approval in open market and fetchnecessary amount to pay off the debenture holders but for which entire settlement may getcancelled.
(b) Attention is invited to sub-note No. 6 of Note No. 29 -Other Notes to Accountsregarding confirmation of account of various parties the balances have been taken as perbooks of account. We in the absence of confirmations are unable to ascertain the natureof adjustments that may be required in respect of various accounts and the resultanteffects thereof on the accounts.
(c) Attention is invited to sub-note no. 2 (a) of Note No.
29 - Other Notes to Accounts. In respect of Inter Corporate Deposits received fromHimalaya Machinery Limited the Company had based on legal opinion written back interestamounting to Rs. 23.43 Lac during the financial year ended 31st March 2002. Further theCompany has not provided any interest for the period 1.10.2000 to 31.03.2017 theinterest of which works out to Rs. 191.8 Lac calculated at simple rests @ 27%. Includingcurrent year's interest of Rs. 11.64 Lac.
d) Provision for Gratuity payable to employees has been made only up to 31st March2006 based on management estimates. Provision for gratuity and retirement benefits for thecurrent year has not been made. In the absence of any actuarial valuation we are unable toquantify the impact of the same on the Statement of Profit and Loss. This practice of theCompany is not in conformity with the AS 15. Attention is invited to sub-note no. 2(h) of Note No. 29 as regards the decision of hon'ble Labour Court directing the Companyto pay a sum of RS. 1299.61 Lac towards labor payments. The Company has filedmiscellaneous application before the hon'ble Court for review instead of filing furtherappeal. Meanwhile the Company has been able to reach to settelement with few of theemployees and has paid agreed amount of gratuity to these employees as per settlementarrived. To that extent the Company may have lower liability subject to hon'ble Court'sdirections. Considering the significance of amount we are not able to form our opinion inthis regard.
(e) Attention is invited to sub-note no. 2 (b) of Note No. 29 of Other Notes toAccounts. Based on management's perception the Company had written back Interest accruedon Working Capital Loans amounting to Rs 493 Lac during preceding financial years. We areinformed that the management is in negotiation with the bankers as regards repayment ofthe working capital loans at a reduced principal amount and no interest. However nofinality has been reached as to reduced payment of loan or for that matter non payment ofinterest. No provision for interest payable on this account is made during the year whichthe Company otherwise used to provide every year amounting to Rs. 52.98 Lac up to March31 2010 on an estimated basis. This year no amount has been quantified by the managementas not provided. During immediately preceding previous year the Company had paid Rs.500000 as advance against this account to ARCIL which were shown as reduction in loanamount and the final amount was shown at Rs. 12066944. However the Company has notbeen able to reach the settlement and deposit of Rs. 500000 has been refunded to theCompany. In absence of any supporting evidence available or for that matter anyconfirmation from the bankers we are unable to express our opinion on this item;
(f) Attention is invited to Note no. 7 (d) of Notes to Accounts. Based on management'sperception the Company has not provided for interest on term loan payable to KotakMahindra Bank. We are explained by the management that it is in negotiation with thebankers as regards repayment of the term loan at a reduced amount than what has beenstanding to the credit of bankers although no tangible and Convincing correspondence wasmade available to us. No finality has been reached as to reduced payment of loan as statedabove. No provision for interest payable on this account is made during the year whichthe Company otherwise used to provide every year amounting to Rs. 112.88 Lac up to March31 2011 on an estimated basis. This apart interest provided uptill earlier years isshown as payable unlike writing back the same in lines with other bank and debentures.
This year no amount has been quantified by the management as not provided. In absenceof any supporting evidence available or for that matter any confirmation from the bankerswe are unable to express our opinion on this item;
(g) in absence of confirmations from creditors especially 35 outstandingbalances shown in accounts including interest provided and payable thereon.
(h) The Company has not carried out physical verification of closing stock of Rs. 2.58Lac and the valuation is based on management's estimates and no evidence of physicalavailability of stock was provided to us.
The Management has informed us that in its view the stock is worthless and may notfetch material amount in view of which it has valued the stock at zero net realisablevalue. As regards cash in hand of RS. 3.23 Lac we are informed that the same is inpossession of the Managing Director. In view of this closing stock of Rs. 0 and cash inhand of Rs. 3.23 Lac are accepted as certified by the management;
(i) Accounts of the Company are prepared on Going Concern basis although entire networth is eroded and there are no material business activities carried out by the Company.The Management was hopeful of revival of the Company with the help of BIFR. Howeverconsiderable period has elapsed after approaching BIFR which has now ceased and theCompany not making fresh application to NCLT for revival we are unable to state whetherthe Company remains a going concern;
(j) the combined effect of the above qualifications over financial results is notdeterminable in view of absence of relevant components and information from themanagement.
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 paragraph the financial statements give the information required by the Act inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:
(i) in case of the Balance Sheet of the state of affairs of the Company as at 31stMarch 2017;
(ii) in case of Statement of Profit and Loss of the Profit of the Company forthe year ended on that date.
(iii) in case of cash flow statement of cash flow of the Company for the year ended onthat date.
Emphasis of Matter
(a) Attention is invited to sub-note no. 2 (c) of Note No. 29 - Other Notes toAccounts. The Custom department had imposed penalty of Rs.1000 Lac on the Company whichwas disputed by the Company. On appeal before CESTAT the said penalty was reduced to Rs.700 Lac vide order dated March 31 2011 Subsequently CESTAT removed the penalty levied bythe department. At Present department is in appeal before Hone'ble High Court of Gujaratand hence no provision for this liability is made in the accounts contending this beingcontingent liability. Our opinion is not qualified in respect of this matter.
(b) Attention is invited to sub-note no. 2 (e) of Note No. 29 - Other Notes toAccounts. Amount receivable from RSEB (Rajasthan State Electricity Board) in respect ofAssets given on Lease is shown at Rs.412.19 Lac against security deposit received fromRSEB of Rs.653.09 Lac. We have been informed that Company has filed a suit against RSEBbefore Rajasthan High Court for the recovery of Rs.964.92 Lac inclusive of interest @ 20%after making adjustment of DPA (Deferred Payment Agreement) decision of which remainspending. Our opinion is not qualified in respect of this matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure A a statement on the matters specified in the paragraph3 and 4 of the order
2. As required by Section143 (3) of the Act we report that:
(a) we have sought and obtained all the information and explanation exceptmentioned earlier in this report more particularly confirmations from lenders andcreditors including the secured lenders / creditors which to the best of ourknowledge and belief were necessary for the purpose of our audit;
(b) in our opinion proper books of account except fixed asset and stock registers asrequired by law have been kept by the Company so far as appears from our examination ofthose books;
(c) the Balance Sheet Statement of Profit and Loss and Cash flow Statement dealt withby this 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) The Company has defaulted in redemption of Debentures which fell due on the 10thof July 1998 aggregating to Rs.550.18 Lac and the amount of interest including penalinterest calculated at simple rests accrued as of 31st March 2013 is Rs.1422.04 Lac (ofwhich the Company had unilaterally written back interest element of RS. 1334.01 Lac in theyear ended 31st March 2013 and no provision is made for the year ending 31st March 2015)thereby the directors of the Company are disqualified from being appointed as directorunder sub section 2 of section 164 of the Companies Act 2013 (although the Company hasreached to settlement with debenture holders no payment has actually been made as statedin Basis for Qualified Opinion)
(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"; 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:
i. We are informed that the Company has pending litigations as described in accountsand our report which are likely to impact its financial position;
ii. The Company has made provisions as required under the applicable law or accountingstandard for material foreseeable losses if any on long-term contracts includingderivative contracts.
iii. There has been delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.
iv. The Company has provided requisite disclosures in its financial statements as toholdings as well as dealings in Specified Bank Notes during the period from 8th November2016 to 30th December 2016 and these are in accordance with the books of accountmaintained by the Company.
FOR SHAH SHAH & SHAH
M. No. : 049361
FRN : 116457W
Mumbai : May 26 2017
ANNEXURE "A" REFERRED TO IN REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTSOF OUR REPORT OF EVEN DATE
IN CASE OF Indu Nissan Oxo Chemical Industries Limited
(i) (a) The Company has not maintained proper records showing full particulars ofincluding quantitative details and situation of fixed assets since the same is notupdated.
(b) As plant of the Company is not in operation the Company has not carried outphysical verification of the assets at periodic intervals. In respect of assets given onlease no confirmation from the lessee has been produced before us stating that theassets leased under the agreements are existing but owing to dispute with the lessee thesame cannot be confirmed.
The Company has written off some non existing assets during preceding years based onperception of the management.
(c) As per records presented before us the title deeds of immovable properties areheld in the name of the Company.
(ii) (a) We have been informed by the management that Stock of goods have beenphysically verified by the management at reasonable intervals during the year; though norecords of physical verification or valuation on the date of balance sheet were producedbefore us. The stock of stores packing material and semi finished goods is valued basedon Chartered Engineers' Certificate dated 13/10/2010 as reduced by the stock sold duringearlier year and a further written off of value on the management's estimate as to netrealizable value.
(iii) The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained undersection 189 of the Companies Act 2013.
(a) Since no loans are granted the sub-clause dealing with terms and conditions beingprejudicial to the companies Interest in not applicable.
(b) Since no loans are granted the sub-clause dealing with rate of interest and otherterms and conditions of loans given by the company are not applicable.
(c) Since no loans are granted the sub-clause dealing with overdue amount more thanninety days and reasonable steps taken by the Company for recovery of the principal andinterest is not applicable.
(iv) As per records maintained and explanation given to us the Company has not grantedLoans to directors and other parties listed under section 185 of the Companies Act 2013 orfor that matter given loans and made investments or given guarantees and securities inexcess of limits prescribed by section 186 of the Companies Act 2013.
(v) The Company has not accepted any deposits from public within the meaning of theprovisions of section 73 or any other provisions of the Companies Act 2013 and the rulesmade there under. We have been informed by the management that there has been no orderpassed by the Company law Board or National Company Law Tribunal or Reserve Bank of Indiaor any Court or any other Tribunal on the Company with respect to compliance of theprovisions of section 73 or any other provisions of the Companies Act 2013. The Companyhas defaulted in repayment of debentures as mentioned in our report earlier.
(vi) We have been informed by the management that the Central Government has notprescribed the method of maintenance of cost records u/s. 148 (1) of the Companies Act2013 in relation to the Company.
(vii) (a) The Company has defaulted in payment of undisputed statutory dues as givenbelow. The extent of arrears of Statutory Dues outstanding exclusive of interest that maybe charged by the Revenue Authorities (after adjusting pre-paid taxes) for more than sixmonths as on the year end is as follows :
|Nature of ||Amount ( Rs. ) |
|Statutory Dues ||(in lacs) |
|Investor Education and Protection Fund ||16.26 |
|Income Tax ||119.47 |
|Bajwa Gram Panchayat ||13.34 |
employees profession tax. Similarly Company's own profession tax has also not beenpaid. Similarly the Company has not provided for Service Tax payable under Reverse Chargemechanism on directors' sitting fees. The amount of arrears and default has not beenquantified by the Management.
The Company has requested the Income-tax Department to adjust refunds of subsequentyears against outstanding dues of earlier years for which we are informed no communiquis received from the Income-tax Department except with respect to Assessment Year 1995-96where the demand is adjusted against refund of Assessment Year 2010-11.
In the case of Income tax deducted at source the Company has deducted tax on paymentbasis whereas provisions of chapter VXII-B of the Income-tax Act 1961 require deduction oftax on payment or credit in the books of account whichever is earlier. Details of paymentswherein tax should have been deducted on credit basis are not available. Hence we areunable to state the exact amount of the defaulted tax deducted at source liability. Theabove mentioned amount is tax deducted at source on payments made but not deposited withthe Central government. Rent paid in Court as described in Sub Note no. 2 (j) of Note No.29 the Company has not made TDS stating that the same is merely a deposit with hon'bleCourt as per directions.
(b) As per information and explanation given to us the following are details ofdisputed statutory dues that has not been paid to the concerned authorities.
| ||Name of the Statutory Dues ||Forum where dispute is pending ||Period to which the amount relates ||Unpaid Amount ( Rs. in Lacs) |
| ||Income tax ||ITAT-Ahmedabad ||1999-00 ||0.63 |
|2 ||Custom Duty ||Gujarat High Court ||1995-96 ||700 |
|3 ||Excise Penalty ||CES Appellate ||2004-05 to || |
| || ||Tribunal ||2007-08 ||0.41 |
|4 ||Income tax || || || |
| ||Penalty ||ITAT-Ahmedabad ||2007-08 ||18.01 |
|5 ||Income Tax ||ITAT-Ahmedabad ||2007-08 ||Nil |
| ||Quantum || || ||Because of |
| || || || ||Brought |
| || || || ||forward |
| || || || ||loss |
|6 ||Income tax || || || |
| ||Penalty ||ITAT-Ahmedabad ||2006-07 ||45.72 |
(a) The Company has defaulted in redemption of debentures which fell due on the 10thJuly 1998 aggregating to Rs 550.18 lacs and the amount of interest accrued as of date isRs. 1422.04 Lac calculated on simple rests inclusive of penal interest as agreed upon interms and conditions of issue of the debenture. As stated in our report the Company hasnot made provision for interest on debentures during the current year. the Company hasunilaterally written back interest element of RS. 1334.01 Lac mentioning that it is inprocess of negotiating with debenture holders as to the repayment of dues and the Companydoes not anticipate any interest payment and the same has been treated by the Company asother revenues. The Company has reached to settlement with the debenture holders post yearend. The debenture holders have agreed to settle the amount payable @ 30% of principalamount outstanding subject to certain terms and conditions. The Company is in process ofliquidating some of its assets and pay off the debenture holders. In case the Company isnot able to pay the settled amount within stipulated period the settlement may becancelled by the debenture holders. The Company has approached BIFR for the permission tosell the assets and is confident of getting the permission. The Company in anticipationof liquidating the assets and paying off the debenture holders has written back thebalance amount not payable to capital reserve. Since the event in opinion of Company isoccurring after the balance sheet date that requires adjustment to the amount payable onbalance sheet date this adjustment is carried out. The Company following to settlementdoes not anticipate additional interest liability as demanded by the debenture holders dueto which Company has not provided interest for the current year as well as company haswritten back the interest of RS. 133401338 provided in the earlier years. We are unableto form our opinion on this as the entire matter is contingent and subject to approval ofBIFR which is now ceased and the Company not making application to NCLT for sale ofassets and further the Company is able to sell the assets post such approval in openmarket and fetch necessary amount to pay off the debenture holders but for which entiresettlement may get cancelled.
(b) In respect of term loans from financial institution the Company has defaulted inrepayment of their dues. Following table brings out the amount of default and the periodfrom which default is made:
|Term Loans from Finanacial Institutions ||Principal ( Rs. In Lacs) ||Interest ( Rs. In Lacs) ||Total ( Rs. In Lacs) ||Principal ||Default commencing from Interest |
|1 Kotak Mahindra Bank (taken over from IDBI Bank) ||261.3 ||1447.44 ||1708.74 ||31-Mar-08 ||30-Sep-08 |
|TOTAL ||261.3 ||1447.44 ||1708.74 || || |
interest payable on above loan during the current year. The figure of default ininterest excludes interest not provided during the current year in absence of anyconfirmation from the bank to this effect.
| || || || ||Default commencing from |
|Sr. No. Cash Credits from Banks ||Principal ( Rs. In Lacs) ||Interest ( Rs. In Lacs) ||Total ( Rs. In Lacs) ||Principal ||Interest |
|1 A R C I L (UBI) ||125.67 ||Nil ||125.67 ||30-Sep-98 ||30-Sep-98 |
|TOTAL ||125.67 ||Nil ||125.67 || || |
ARCIL interest outstanding is indicated as zero in view of write back of interestpayable during earlier years.
(ix) We have been informed by the management that no money was raised by way of InitialPublic offer or Further Public offer(including Debt instrument) and in case of term Loansthe amount was applied for the purpose for which they are taken.
(x) As informed by the management there has not been noticed or reported any fraud onor by the Company or its officers or employees during the year.
(xi) During the year the Company has not paid managerial remuneration. In view of thisthe clause requiring reporting on managerial remuneration being paid or provided inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Companies Act is not applicable.
(xii) Since the Company is not a Nidhi Company the provisions of this clause are notapplicable to the Company.
(xiii) In our view and as per the explanation given to us by the managementtransactions with the related parties are in compliance with section 177 and 188 of theCompanies Act 2013 wherever applicable and details have been disclosed in the Financialstatements as
40 required by the applicable accounting standard.
(xiv) we have been informed by the management that Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year under review.
(xv) As per the explanation given to us by the management and as per recordsmaintained the Company has not entered into any non-cash transactions with directors orany persons connected with him as prescribed by section 192 of the Companies Act 2013.
(xvi) In our view the Company has not carried out any activities in nature ofactivities carried out by non banking financial companies and thus is not required to getregistered under section 45-IA of the Reserve Bank of India Act 1934.
FOR SHAH SHAH & SHAH
M. No. 049361
MUMBAI : May 26 2017
IN CASE OF Indu Nissan Oxo Chemical Industries Limited
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 InduNissan Oxo Chemicals Industries Limited ("the Company") as of 31 March 2017in conjunction with our audit of the standalone financial statements of the Company forthe year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
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 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 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.
According to the information and explanations given to us and based on our audit thefollowing material weaknesses have been identified as at March 31 2017:
1. The Company does not have Internal audit function being carried out following tofinancial health although it is under legal obligation to do so.
2. As stated in our Audit Report many creditors secured and unsecured are subject toconfirmation and reconciliation. The secured lenders have not given their accountconfirmations which involve significant amount payable. Under these circumstances in ourview there remains a material weakness in internal financial control over financialreporting.
3. The Company has not properly maintained fixed assets and inventory Registers /Records. We are informed that these assets are not physically verified by the managementon a regular / periodical intervals. In view of this the objective of safeguarding ofassets in our view is not met adequately.
A material weakness' is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the company's annual or interim financialstatements will not be prevented or detected on a timely basis.
In our opinion except for the effects / possible effects of the material weaknessesdescribed above on the achievement of the objectives of the control criteria the Companyhas maintained in all material respects adequate internal financial controls overfinancial reporting and such internal financial controls over financial reporting wereoperating effectively as of 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.
We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the March 31 2017standalone financial statements of the Company and these material weaknesses do notaffect our opinion on the standalone financial statements of the Company.
FOR SHAH SHAH & SHAH
M. No. 049361
Mumbai : May 26 2017