To the Members of JINDAL COTEX LTD.
Report on the Standalone financial statements
We have audited the accompanying standalone financial statements of JINDAL COTEX LTD.(the Company) which comprise the Balance Sheet as at March 31 2017 and theStatement of Profit and Loss and Cash Flow Statement for the year then ended and asummary of significant accounting policies and other explanatory information.
Management's Responsibility for the Standalone financial statements
The Management and board of directors of the company are responsible for the mattersstated in Section 134(5) of the Companies Act 2013 ('the act') with respect to thepreparation of these standalone financial statements that 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 Companies (Accounts) Rules2014. This responsibility includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; design implementation and maintenance of adequate internal financial controlsthat are operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error. Auditors' Responsibility Our responsibilityis to express an opinion on these standalone financial statements based on our audit. Wehave taken into account the provisions of the Act the accounting and auditing standardsand matters which are required to be included in the audit report under the provisions ofthe Act and the Rules made there under. We conducted our audit in accordance with theStandards on Auditing specified under Section 143(10) of the Act. Those Standards requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the standalone financial statements are free frommaterial misstatement. An audit involves performing procedures to obtain audit evidenceabout the amounts and disclosures in the standalone financial statements. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror. In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the standalone financial statements that give atrue and fair view in order to design audit procedures that are appropriate in thecircumstances but not for the purpose of expressing an opinion on whether the Company hasin place an adequate internal financial controls system over financial reporting and theoperating effectiveness of such controls An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of the accountingestimates made by the Company's management and Board of Directors as well as evaluatingthe overall presentation of the standalone financial statements. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for auditopinion.
In our opinion and to the best of our information and according to the explanationsgiven to us the standalone financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India: a) In the case of the Balance Sheet of the stateof affairs of the Company as at March 31 2017 b) In the case of the Statement of Profitand Loss of the Loss for the year ended on that date; and c) In the case of the Cash FlowStatement of the cash flows for the year ended on that date.
Emphasis of Matter
We draw our attention on the following: a) Note No. 2 to the standalone financialstatements which indicate that the company has accumulated losses of Rs. 236.80 Crores asat 31st March 2017 and has eroded its entire net worth and has become potentially sickcompany. Reference under the provisions of Section 23 of Sick Industrial Company (SpecialProvisions) Act 1985 (SICA) has been generated on 22nd January2016. However SICA hasbeen repealed by Ministry of Finance w.e.f 01-12-2016.Hence there are conditionsindicating an uncertainty on the going concern. However the standalone financialstatements have been prepared by the management on a going concern basis in spite of thereason stated in the said note. b) Note no.10 to 12 to the standalone financial
27 statements regarding the company's Non-current investments Non-current assets andlong term loans/advances including amount advanced and invested in M/S JindalInternational FZE its \foreign subsidiary company carried in the balance sheet atRs.157.69 crores. The amount invested /outstanding since 2011. There has been no change inthe above said amount since then. c) Manufacturing facilities at present all location ofthe company (Except Wind Mill) have been suspended due to severe financial constraints.The Company has leased out all its units. d) There is non-submission of various statutoryreturns acknowledged by the respective authorities non provision/deposition of variousoverdue statutory liabilities like PF/Service Tax/TDS/ Vat & CST/WCT/TCS/ESI &related over dues viz Interest and penalty exact amount of which could not be ascertainedin present scenario. e) Since all the accounts of the company have been declaredsub-standard over a period of time the banks have started recovery action against theCompany under SARFAESI Act. Hence balances with banks are subject to confirmation. f) NoteNo. 35 to the financial statement on various litigations/suits pending in the court of lawat different levels. There is uncertainty regarding the outcome of law suits filed againstthe company g) Actuarial valuation of employee benefits was not conducted during the year.h) The company has outstanding deposits received/accepted from General Public in shape ofFDR for different time frames for maturity. Due to financial constraints the company wasnot able to repay the deposits within the scheduled time period. The Company applied tothe Company Law Board for the deferment of repayments of deposits (refer clause g of noteno. 3 of financial statements) I) The company has booked bad debts against the debtors(refer note 14 of financial statements).
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 (theOrder) issued by the Central Government of India in terms of sub-section (11) ofsection143 of the Act we give in the Annexure A statement on the matters Specified inparagraphs 3 and 4 of the Order. 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 best ofour knowledge and belief were necessary for the purpose of our audit; b) In our opinionproper books of account as required by law have been kept by the Company so far as appearsfrom our examination of those books c) The Balance Sheet & Statement of Profit andLoss and cash flow statement dealt with by this Report are in agreement with the books ofaccount. d) In our opinion the aforesaid financial statements comply with the applicableAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014. e) On the basis of written representations received fromthe directors as on March 31 2017 and taken on record by the Board of Directors none ofthe directors is disqualified as on March 31 2017 from being appointed as a director interms of Section 164(2) of the Act. f) With respect to the adequacy of the internalfinancial controls over financial reporting of the Company and the operating effectivenessof such controls refer to our separate report in "Annexure "B"; and g) Inour opinion and to the best of our information and according to the explanations given tous we report as under with respect to other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014:: i.The Company did not have any long-term contracts including derivative contracts; as suchthe question of commenting on any material foreseeable losses thereon does not arise. ii.There has not been an occasion in case of the Company during the year under report totransfer any sums to the Investor Education and Protection Fund. The question of delay intransferring such sums does not arise. iii.The company has disclosed the impact of itspending litigations on its financial position in its financial statements refer note no 35to financial statements. iv.The company has provided requisite disclosures in itsstandalone financial statements as to holdings as well as dealings in specified bank notesduring the period from 8 November 2016 to 30 December 2016. Refer note 39 to thestandalone financial statements. However we have not verified it as detail of SBNdenomination wise is not available.
| ||For Raj Gupta & Co |
| ||Chartered Accountants |
| ||FRN: 000203N |
|Place: Ludhiana ||Raj Kumar Gupta |
|Date : 30/05/2017 ||(Partner) |
| ||Membership No.: 017039 |
| ||28 |
ANNEXURE A TO THE INDEPENDENT AUDITORS' REPORT
Referred to in Paragraph 1 under the heading "Report on Other Legal and RegulatoryRequirements."
On the basis of such checks as we considered appropriate and according to theinformation and explanations given to us during the course of our audit we report that:
I. 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 Fixed Assets have been physically verified by the managementin a phased manner designed to cover all the items over a period of regular intervalswhich in our opinion is reasonable having regard to the size of the company and nature ofits business.
(c) According to information and explanation given to us the title deeds of immovableProperty are held in the name of the company. However we have not verified the same asthey are pledged with the bank & not made available to us. ii. In respect ofInventories :-
(a) According to information and explanations given to us the inventories have beenphysical verified during the year by the management. In our opinion the frequency ofverification is reasonable.
(b) In our opinion and according to the information and explanations given to us theprocedures of physical verification of inventories followed by the management arereasonable and adequate in relation to the size of the company and the nature of itsbusiness.
(c) The company has maintained proper records of inventory. Since all the manufacturingactivities have been suspended it does not hold any kind of raw material and finishedstock; it is only engaged in trading activity & hold Inventory of stock in trade. TheStock is subject to confirmation from management. iii. According to the information andexplanations given to us the Company has not granted any loans secured or unsecured tocompanies firms Limited Liability partnerships or other parties covered in the Registermaintained under section 189 of the Act. Accordingly the provisions of clause 3 (iii) (a)to (C) of the Order are not applicable to the Company and hence not commented upon. iv. Inour opinion and according to the information and explanations given to us the company hasnot granted loans during the year. So the provisions of section 185 and 186 of thecompanies act2013 are not applicable. However the Company has complied with theprovisions of Section 185 and 186 of the Companies Act 2013 in respect of investmentmade. In our opinion and according to the information and explanations given to us theCompany has not given any guarantee for loan taken by others from a bank or financialinstitution during the year .However Company has outstanding corporate guarantees ofRs.327.20 crore for loan outstanding by its subsidiaries from banks and financialinstitutions. v. In our opinion and according to the information and explanations given tous the company has not accepted any deposit from the public covered under Section 73 to76 of the Companies Act 2013. However for the repayment of the fixed deposits receivedin earlier years by the company from the public the company has taken permission from theHon'ble Company Law Board New Delhi for extension of time for repayment of fixeddeposits as the company was unable to repay the same on due dates due to financial crisis.vi. 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 (l)of section 148 of the act and are of the opinion that prima facie the prescribed accountshave been prepared and maintained. However we have not made the detailed examination ofrecords. vii. (a) According to the information and explanations given to us and based onthe records of the company examined by us the company is not regular in depositing theundisputed statutory dues including Provident Fund Employees' State InsuranceIncome-tax Sales-tax Service Tax Custom Duty Excise Duty and other material statutorydues as applicable with the appropriate authorities in India as follows;
TCS Rs.161061 VAT Rs.8711210 CST Rs.466303 PF Payable Rs.5768010 & ESIPayable Rs.3850029
(b) 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. The question of reporting delay in transferring such sums does not arise. (c) Thecompany has accumulated losses at the end of the financial year which has exceeded networth of the company in the preceding 4 financial years. As such company has becomepotentially sick. However the company has incurred cash loss during the current financialyear as well as immediately preceding financial year. viii. According to the records ofthe Company examined by us and the information and explanations given to us the Companyhas defaulted in repayment of loans or borrowings to banks and financial institution. Thecompany has not issued any debentures during the year. Banks have recalled entireoutstanding of the company and started recovery proceedings under SARFAESI ACT. ix TheCompany did not raise any money by way of initial public offer or further public offer(including debt instruments) and term loans during the year. Accordingly paragraph 3 (ix)of the Order is not applicable. x During the course of our examination of the books andrecords of the company carried in accordance with the auditing standards generallyaccepted in India we have neither come across any instance of fraud on or by the Companynoticed or reported during the course of our audit nor have we been informed of any suchinstance by the Management. xi. Based on the audit procedures performed and theinformation and explanations given by the management the managerial remuneration has beenpaid or provided in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V to the Companies Act. xi. In our opinion and accordingto the information and explanations given to us the Company has not given any guaranteefor loan taken by others from a bank or financial institution during the year .HoweverCompany has outstanding corporate guarantees of Rs.327.20 crore for loan outstanding byits subsidiaries from banks and financial institutions. xii In our opinion and accordingto the information and explanations given to us the Company is not a Nidhi company.Accordingly paragraph 3(xii) of the Order is not applicable. xiii. Based upon the auditprocedures performed and the information and explanations given by the management alltransactions with the related parties are in compliance with section 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the Standalonefinancial statements as required by the applicable accounting standards. xiv. According tothe information and explanations give to us and based on our examination of the records ofthe Company the Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year. xv. According to theinformation and explanations given to us and based on our examination of the records ofthe Company the Company has not entered into non-cash transactions with directors orpersons connected with him. Accordingly paragraph 3(xv) of the Order is not applicable.xvi In our opinion the Company is not required to be registered under section 45 IA ofthe Reserve Bank of India Act1934 and accordingly the provisions of clause 3 (xvi) ofthe order are not applicable to the Company and hence not commented upon.
Annexure - B to Independent Auditors' Report (Referred to in our report of even date)Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of JINDALCOTEX LTD. as of 31st March 2017 in conjunction with our audit of the Standalonefinancial statements of the Company for the 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'). 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.
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 auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness. Ouraudit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the standalone financial statements whether due to fraud or error. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the Company's internal financial controls system overfinancial reporting.
Meaning of Internal Financial Controls over Financial Reporting A company's internalfinancial control over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation ofstandalone 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 standalone 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 thecompany's assets that could have a material effect on the standalone 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.
In our opinion the Company is not fully in operation so we cannot assure theeffectiveness of internal financial controls system over financial reporting and givereasonable assurance that transactions are recorded as necessary to permit preparation ofstandalone 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.
| ||For Raj Gupta & Co |
| ||Chartered Accountants |
| ||FRN: 000203N |
|Place: Ludhiana ||Raj Kumar Gupta |
|Date : 30/05/2017 ||(Partner) |
| ||Membership No.: 017039 |