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Kanel Industries Ltd.

BSE: 500236 Sector: Industrials
NSE: KANELOIL ISIN Code: INE252C01015
BSE 00:00 | 04 Mar Kanel Industries Ltd
NSE 05:30 | 01 Jan Kanel Industries Ltd
OPEN 11.00
PREVIOUS CLOSE 10.88
VOLUME 6605
52-Week high 11.85
52-Week low 0.00
P/E
Mkt Cap.(Rs cr) 20
Buy Price 0.00
Buy Qty 0.00
Sell Price 10.88
Sell Qty 12333.00
OPEN 11.00
CLOSE 10.88
VOLUME 6605
52-Week high 11.85
52-Week low 0.00
P/E
Mkt Cap.(Rs cr) 20
Buy Price 0.00
Buy Qty 0.00
Sell Price 10.88
Sell Qty 12333.00

Kanel Industries Ltd. (KANELOIL) - Auditors Report

Company auditors report

TO

THE MEMBERS OF KANEL INDUSTRIES LTD.

Report on the Indian Accounting Standards (Ind AS) Financial Statements

We have audited the accompanying Ind AS financial statements of KANEL INDUSTRIESLTD. ("the Company") which comprise the Balance Sheet as at 31st March2018 the Statement of Profit and Loss (including other comprehensive income) thestatement of Changes in Equity and the Statement of the Cash Flow Statement for the yearthen ended and a summary of the significant accounting policies and other explanatoryinformation.

Management's Responsibility for the 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 Ind AS financial statements that give a true and fair view of the financialposition financial performance (including other comprehensive income) cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards specified in the companies (Indian AccountingStandards) Rules 2015 as amended under Section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating 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.

Auditor's Responsibility

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 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.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances but not for the purpose of expressing anopinion on whether the Company has in place an adequate internal financial controls systemover financial reporting and the operating effectiveness of such controls. An audit alsoincludes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the financial statements.

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

Further we report that

i) The Company has taken inter corporate loan of Rs NIL [ unsecured ] and unsecuredloans from related parties/firms of Rs. 76.00 lacs and from Non Related person Rs.24.21Lacs during the financial year under audit. The Closing Balance at the yearend are Rs.395.33 Lacs in case of related paties and firms and from key management person andRs.449.22 lacs from other parties. No interest provided on loan accounts. In absence offormal agreement or supporting other documents we could not comment and could notquantify the non provision of interest thereon.

Out of total Inter Corporate Loans as above the Company has taken Mortgage Loan of Rs.5 Crore from Adani Enterprises Ltd in earlier years [closing balance at year end is Rs.3.40 Crores.] . We are not provided any formal Loan Agreement copy except Mortgage Deedwhich does not contain any repayment terms and interest rate. No interest is provided onsuch Loans. We are unable to comment upon non provision of interest repayment scheduleetc. in absence of any formal agreement with the company and related documents andinformation. [ Read with Notes No. 11 to the financial Statements ]

ii) Company has not made provision for doubtful Debtors of Rs 305.15 LacsWhich are long outstanding and chances for recovery are very less as per our opinionthese are bad debts to that extent Current Assets have been overstated and current yearsLosses and accumulated losses have been understated. [Read with Notes No. 05 to thefinancial Statements ]

iii) The Company has violated provisions of Income Tax Act 1961 by non filing IncomeTax Returns from FY 2008-09 onwards. Proper records are not made available to us for ourverification and to compute Income Tax and related statutory liabilities. In thissituation we are unable to comment upon the non provision of statutory liabilities forcurrent year as well as for the earlier years. [Read with Notes No 34 to the financialStatements ]

iv) The Company has not deducted TDS from Professional fees paid / credited on sum ofRs 2.00 during the financial year under audit.

v) After repealed of SICA Act all matters pending with BIFR court abandoned andcompany is planning to approach NCLT as other alternative option to resolve the pendingmatters. Company got registerd with Industries Commissionerate Gujarat to declare thecompany as sick industrial enterprise to avail relief. Company is preparing DRS to repaythe dues of secured creditors as well as statutory dues.

vi) The Naroda Unit has been inoperative since last many years. Company is doingTrading activities during the year under audit but majority Financial indicators andoperating indicators remained negative and to the date of Audit report and in absence offormal developments for financial support on repeal of SICA all matters pending withBIFR court cancelled and matters came to original status for the resolution there issubstantial doubt that it will be able to continue as a going concern even though thebooks of accounts of the Company has been prepared on the assumption of a Going Concernbasis. In this situation adjustments may be required to the recorded assets amounts atcurrent value and classification of liabilities is required. The financial statements donot disclose this fact.

vii) The company has not paid Listing Fees for Ahmedabad Jaipur and Calcuttal stockexchange.

viii) The company has not submitted quarterly compliances to the Exchange within thetime as per the Regulations of SEBI (LODR)2015

ix) The company has not appointed Company Secratery and Chief Financial Officer as perSec 203 of the Companies Act 2013.

QUALIFIED OPINION

In our opinion and to the best of our information and according to the explanationsgiven to us subject to our comments in above paragraph the afore said financial statementsgive the information required by the Act in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India:

(a) in case of the Balance Sheet of the state of affairs of the Company as at 31/03/2018

(b) in case of Statement of Profit and Loss of the Loss of the Company for theyear ended on that date; and

(c) In the case of Cash Flow statement of the cash flow for the year ended on thatdate

(d) and the change in equity for the year ended on that date.

Report on Other Legal and Regulatory Requirements

01. As required by Sec 143 (3) of the Act we report that:

a. We have sought and obtained all the information and explanations which to thebest of our knowledge and belief were necessary for the purpose of our audit except asmentioned above.

b. In our opinion proper books of accounts as required by the law have been kept by theCompany so far as appears from our examination of the books of accounts.

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 accounts.

d. In our opinion Balance Sheet the Statement of Profit and Loss and Cash Flowstatements complied with the Accounting Standards referred to in Sec 133 of the CompaniesAct 2013read with rules 7 of the Companies (Accounts) rules 2014 except:

i. The Company has not complied with AS 28 introduced w.e.f. 1st April 2004while preparing the financial statements. The Management have not assessed technically thePlant and Machineries at Naroda Unit to decide about its impairment or carrying Value. Thecarrying amount of the assets was not reviewed for indication of impairment of assets onbasis of internal/external factors. Plant at Naroda Division has been in operative forEighteen years. Plant & Machinery of book value of Rs.9.13 lacs less residual valuehas not been written off to the extent to come down to its carry value. Loss for the yearhas been under stated to the extent of book value of plant and machinery balance notwritten off.

ii. The Company has not complied with AS 22 Accounting for Taxes on Income.The company failed to file Income Tax Returns for the F Y 2008-09 onwards. In absenceproper documents and records we could not quantify the Income Tax liability for whichprovision not made. Deferred Tax Assets/Deferred Tax Liabilities are not provided for inthe books of accounts in absence of proper working and database from the management. Wecould not quantify the non provision for DTL or disclosures regarding DTA. [Read withnote no. 36"]

e. On the basis of written representation received from the Directors as on March 312018

and taken on record by the Board of Directors we report that none of the directors isdisqualified as on March 31 2018 from being appointed as a director in terms ofsubsection (2) of the Section 164 of the Companies Act 2013.

f. With respect to the adequacy of the internal financial controls over financialreporting of

the company and the operating effectiveness of such control referred to our separatereporting "Annexure-A". Our Report express an unmodified opinion on the adequacyand operating effectiveness of the company's internal financial control over financialreporting.

g. With respect to the other matters to be included in Auditor's Report in accordancewith

Rule 11 of the Companies (Audit and Auditors) Rule2014 in our opinion and to thebest of our information and according to the explanations given to us:

01 The Companies has not disclosed the impact of pending litigations on its financialposition in its financial statements. Management informed that there are no pendinglitigations pending with any departments which may have financial effect in future but asper our opinion the company has not filled Income Tax Return since FY 2008-09 company hasnot done Tax Audit for the previous years also No sales tax return filed for the F Y2007-08 to FY 2012-13 Demand notices received from Sales Tax department for variousassessment years for the Meda Adraj Unit Kadi which have been sold out in earlier yearscertain matters are pending with different forum in sales tax department [ refer noteno.35 ] BIFR matter is restated to original status on repeal of SICA Act and theexpenses incurred by the company for professional fees for lawyers which shows some mattermight be under litigation and its exact status and its probable effect on financialstatement is not disclosed by the management with us.

02 Company has made provision as required under the applicable law or AccountingStandards for material foreseeable losses if any on long term contracts includingderivative contract.

03 There has been delay in transferring amounts required to be transferred to theinvestor's education and protection fund by the company. Dividend declared in year 19951996 1997 and 1998 and remained unclaimed are due for transfer to Investors Education andProtection Fund under the provisions of Sec 125 of the Companies Act 2013. It has beeninformed by the

management that details for unclaimed dividend are not provided by the nominated bankSBI [ Previously SBS ] Industrial finance Branch Ellisbridge Ahmedabad and SBI [Previously SBS Isanpur Branch Ahmedabad]. In absence of proper records and supportingevidences we could not quantify the amount not transferred as required by the law and itscompliance.[Read with Notes No.33 to the financial Statements ]

02 As required by the Companies (Auditors' Report) Order2016(the"order") issued by the Central Government in terms of Section 143(11) of theAct We give in Annexure -B a statement on the matters specified in paragraphs 3and 4 of the Order.

For
SURESH I PATEL & CO.
CHARTERED ACCOUNTANTS
FRN:117974
Sd/-
Suresh I Patel
Proprietor Date : 30/05/2018
M.NO. 104539 Place: Ahmedabad

ANNEXURE - A TO THE INDEPENDENT AUDITORS' REPORT

"Annexure A" to the Independent Auditor's Report of even date on theStandalone Financial Statements of KANEL INDUSTRIES LTD. Company limited (Referred to inparagraph 1(f) under 'Report on Other Legal and Regulatory Requirements of our report ofeven date)

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 KANELINDUSTRIES LTD. Company Limited ("The Company") as of March 31 2018 inconjunction with our audit of the standalone financial statements of the Company for theyear 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial control system over financial reporting and their operatingeffectiveness. Our audit of

internal financial controls over financial reporting assessing the risk that amaterial weakness exists and operating effectiveness of internal control based on theassessed risk. The procedures selected depend upon on the auditor's judgment includingthe assessment of the risks of material misstatement of the financial statements whetherdue to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material aspects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2018 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls over Financial Reporting issues by the Institute of CharteredAccountants of India.

For
SURESH I PATEL & CO.
CHARTERED ACCOUNTANTS
FRN:117974
Sd/-
Suresh I Patel
Proprietor Date: 30/05/2018
M.NO. 104539 Place: Ahmedabad

ANNEXURE - B TO THE INDEPENDENT AUDITORS' REPORT

Reports under The Companies (Auditor's Report) Order 2016 (CARO 2016) for the yearended on 31st

March 2018

To

The Members of KANEL INDUSTRIES LTD.

(1) In Respect of Fixed Assets

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

(b) During the year fixed assets of the Company have not been physicallyverified by the Management. The management decided to implement program of regularphysical verification of all fixed assets at least once in a two year which in ouropinion is reasonable having regard to the size of Company present business operationsand the nature of the Fixed Assets. In absence of physical verification report we couldnot comment on material discrepancy in fixed assets of the company and its accountingeffect.

(c) The Title Deed of the Immovable properties are held in the name of the company

(2) In Respect of Inventories

Physical verification of inventory has been conducted at reasonable intervals by themanagement.

(3) Compliance under section 189 of The Companies Act 2013

As informed the company company has not granted any loans secured or unsecured tocompanies firms or other parties covered in the register maintained under section 189 ofthe Companies Act 2013 during the year under audit hence requirements of clause (a) (b)and (c) are not applicable.

(4) Compliance under section 185 and 186 of The Companies Act 2013

While doing transaction for loans investments guarantees and security provisions ofsection 185 and 186 of the Companies Act 2013 have been complied with.

(5) Compliance under section 73 to 76 of The Companies Act 2013 and Rules framed thereunder while accepting Deposits

The company has not accepted any Deposits.

(6) Maintenance of cost records

To the best of our knowledge and as explained the Central Government has notprescribed maintenance of cost records under sub-section (1) of section 148 of theCompanies Act 2013 for the products of the company.

(7) Deposit of Statutory Dues

According to the information and explanations given to us the Company is not regularin depositing undisputed statutory dues towards Employees' State Insurance TDSProfessional Tax Income Tax and Municipal Tax during the year under audit.

The undisputed dues as informed by the management which are outstanding for more thansix months as at the Balance Sheet date from the date they became payable were as follows.

SR.

NO.

NATURE OF DUE AMOUNT OUTSTANDING AS ON 31/03/2018 [Rs. In Lakhs] For more than 6 months
01 Income Tax 71.76
02 TDS Payable 1.05
03 Sales Tax 18.11
04 E.S.I.C. 0.88
05 FBT tax 0.06
06 Professional Tax 0.34
07 Municipal Tax 4.08

TDS is not deducted during the year under audit and not paid to central government isRs.0.20 lacs+Interest such details are not included in above figure since the company hasnot complied with the provisions of income tax act and not provided in books of accounts.Provisions of ESI and Professional Tax are also not complied with by the company and noprovision for such liability provided in books of account. In absence of requiredstatutory records to ascertain the total amount relating to Interest thereon the aboveamount does not includes the interest and penalty portion. In absence of Sales TaxAssessment order/Return copy and non filing of Sales tax Returns for the F Y 2007-08 to2012-13 and in absence of required details and documents we are unable to quantify thestatutory liabilities relating to tax as well as of Interest and penalty there on andtotal statutory liability outstanding at the end of financial year under audit.

Amount due as per demand notice served by the Income Tax department is Rs.136.37 Lacsfor the various assessment years previously. In continuation to its follow-up it wasexplained by the management that no final order received from the concern department butRs.26.34 lacs paid during the year under audit against Outstanding Income tax liabilities.No fresh order passed by the department during the year under audit for previousassessment years hence liability could not quantified while preparing books of accountsas explained by the management.

(b) According to the information and explanation given to us by the management of theCompany there are no dues of Sales Tax and Income Tax which have not been deposited onaccount of any dispute except as mentioned in clause "a" above and as mentionedbelow. We are further informed by the management that during the F Y 2017-18 there wereno further Order Notice or other developments relating to matters pending for earlieryears with different forum as well as for the year under Audit in case of Income tax andSales tax Matter except as mentioned below for demand notices received from Sales Taxdepartment for various assessment years but management have not accepted in absence oforiginal assessment order from the sales tax department.

SR. NATURE OF DU ES AMOUNT FORUM WHERE DISPUTE IS PENDING
NO. [Rs. In Lakhs]
01 Sales Tax 274.63 The Matter is remanded back to Asst. Comm.Of Sales tax. [A.Y. 1998-99]
02 Sales Tax 245.92 Pending with the Appellate tribunal of Sales Tax [A.Y. 1997-98]
03 Sales Tax 24.30 Appeal Pending with Jt. Commercial Tax Commissioner Appeal Division-1 [A.Y. 1999-2000]
04 Sales Tax 6.14 Appeal pending with Jt. Commercial Tax Commissioner Appeal Divi.-1 [A.Y. 2000-01]
05 Sales Tax 2.88 Appeal pending with Jt. Commercial Tax Commissioner Appeal Divi.-1 [A.Y. 2000-01]
06 Municipal Tax 10.95 Ahmedabad Municipal Corporation [Dues up to October 2004]

Demand Notices received from Sales Tax department for following assessment years whichhave not been accepted by the management in absence of Original Assessment Orders. Detailsof Demand Notices are as follows.

Year Principal Tax Penalty 45 (6) Penalty 45 (2) Interest 47 (14) K Short

Payments

Amount paid Amount

payable

Total as per notice
A B C D E F G=A-F
1995-96 701894 0 0 0 0 0 701894 701894
1996-97 8778494 3592960 12000 56732 4310352 2791894 5986600 13958644
1997-98 1532 920 0 2573 0 1532 5025
2001-02 9024410 8121969 0 6003566 0 9024410 23149945
2002-03 7304504 4385302 0 3944432 0 7304504 15634238
2001-02 144 127 0 78 0 144 349
2002-03 8324903 4994942 0 4495448 0 8324903 17815293

[Above details are based on records made available to us for the verification only.]

(8) Repayment of Loans and Borrowings

Based on our audit procedures and as per the information and explanations given by themanagement we are of the opinion that the company has not defaulted in repayment of duesto a financial institution bank of debenture holders. Banking debts have been settledunder OTS in earlier years.

(9) Utilization of Money Raised by Public Offers and Term Loan For which they Raised

The company has not raised any money by way of initial public offer or further publicoffer {including debt instruments) and term loans during the year under audit hence thisclause is not applicable.

(10) Reporting of Fraud During the Year

Based on our audit procedures and the information and explanation made available to usno such fraud noticed or reported during the year.

(11) Managerial Remunearion

N.A.

(12) Compliance by Nidhi Company Regarding Net Owned Fund to Deposits Ratio

As per information and records available with us The company is not Nidhi Company.

(13) Related party compliance with Section 177 and 188 of companies Act - 2013

Company has not complied with provisions of Sec 177 of the Compamies Act 2013 by notforming any Audit Committee during the year under Audit hence all transactions includingtransactions with related parties are not reviewed by the audit committee. though companyhas disclosed in financial statements transactions with related parties as required.

All transactions with the related parties are in compliance with section 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the FinancialStatements etc. as required by the applicable accounting standards.

(14) Compliance under section 42 of Companies Act - 2013 regarding Private placement ofShares or Debentures

N.A

(15) Compliance under section 192 of Companies Act - 2013

The company has not entered into any non-cash transactions with directors or personsconnected with him and the provisions of section 192 of Companies Act 2013 have beencomplied with.

(16) Requirement of Registration under 45-IA of Reserve Bank of India Act 1934

The company is not required to be registered under section 45-IA of the Reserve Bank oflndia Act.

For
SURESH I PATEL & CO.
CHARTERED ACCOUNTANTS
FRN:117974
Sd/-
Suresh I Patel
Proprietor Date: 30/05/2018
M.NO. 104539 Place: Ahmedabad