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Lords Chemicals Ltd.

BSE: 530039 Sector: Industrials
NSE: N.A. ISIN Code: INE554C01014
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Lords Chemicals Ltd. (LORDSCHEMICALS) - Auditors Report

Company auditors report

TO

THE MEMBERS OF

LORDS CHEMICALS LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of LORDS CHEMICALS LIMITEDwhich comprise the Balance Sheet as at 31st March 2018 the Statement of Profit and Lossand the Cash Flow Statement for the year then ended and a summary of significantaccounting 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 Section134(5) of the Companies Act 2013 with respect to the preparation of these standalonefinancial statements that give a true and fair view of the financial position financialperformance and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the Accounting Standards specified under Section133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe preparation of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation 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 standalone financial statementsbased on our audit.

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 andthe disclosures in the financial statements. The procedures selected depend on theauditor’s 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 Company’spreparation of the financial statements that give a 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 the operating effectiveness of such controls.

An audit also includes evaluating the appropriateness of the accounting policies usedand the reasonableness of the accounting estimates made by the Company’s Directorsas well as evaluating the overall presentation of the financial statements. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion.

Basis for Qualified Opinion

I) Attention is drawn to Note No. 11: Valuation of Inventory. In the absence ofnecessary records relating to production we are unable to comment on the value ofinventory amounting to Rs. 37723979.80/-

II) The final dividend declared for FY 2011-12 of Rs. 62 65000/- has not yet beentransferred to Special Dividend Account as per the requirement of Section 205A of theCompanies Act 1956. Further the Company has not yet transferred the interest to SpecialDividend account as per the requirement of section 205A (4) of the Companies Act 1956.

III) Attention is drawn to Note No. 21 relating to payment of GratuityBonus & Leave Encashment which has not been accounted for in accordance with AS-15issued by the Institute of Chartered Accountants of India. Since the basis forprovisioning of the aforesaid expenses and liability could not be made available to us weare unable to assess the appropriateness of the same.

Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us subject to paragraph I to III of Basis for Qualified Opinion the saidfinancial statements give the information required by the Act in the manner so requiredand give a true and fair view in conformity with the accounting principles generallyaccepted in India.

(i) In the case of the Balance sheet of the state of affairs of the Company as at 31stMarch 2018 and (ii) In the case of the Statement of Profit and Loss of the Loss for theyear ended on that date. (iii) In the case of the Cash Flow statement of the cash flowsfor the year ended on that date.

Emphasis of Matter

(i) With reference to Note No. 6 & 12 For and Trade Payables ofRs.72280771.20/- & Trade Receivables of Rs.398637063.19/-respectivebalance confirmation from the parties has not been made available to us.

(ii) Attention is drawn to Note No. 14 & 7 - For Short Term Loans &Advances to Others of Rs. 31276754.63 /- and Advances from Customers of Rs.14843152.36/- respective balance confirmation from the parties has not been madeavailable to us.

(iii) The Hon’ble Calcutta High Court had vide its order dated 18th May 2012approved the merger of Lords Chemicals Limited (Transferee Company) with Jagati CokesPrivate Limited (Transferor Company) with effect from 1st April 2010. As per theinformation & explanation given to us by virtue of the liquidation order stillpending by the Honorable High Court all the assets and liabilities and income andexpenditure of the Transferor Company exists and continues to be in operation in the nameof Jagati Cokes Private Limited.

(iv) There is a material uncertainty as regard to the going concern ofthe company due to the following reasons-

(i) There is no Production during the Year. As informed by the management there istemporary shutdown.

(ii) There is arrear of dividend for the FY 2011-12. Dividend for further years has notbeen declared by the company.

(iii) Non compliance in payment of statutory dues as reported in Annexure toAuditor’s Report (Clause vii).

Report on Other Legal and Regulatory Requirements

1 . As required by the Companies (Auditor’s Report) Order 2015 ("theOrder") as issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the "Annexure A" a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.

2. As required by Section 143 (3) of the Act we report that:

(a) Except the matter laid down we have sought and obtained all the information andexplanations which to the best of our knowledge and belief were necessary for the purposesof our audit.

(b) Except for the effects of the matter described in the Basis for Qualified Opinionparagraph above in our opinion proper books of account as required by law have been keptby the Company so far as it appears from our examination of those books.

(c) The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.

(d) Except for the effects of the matter described in the Basis for Qualified Opinionparagraph above in our opinion the aforesaid standalone financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.

(e) The matter described in the Basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company.

(f) On the basis of the written representations received from the directors as on 31stMarch 2018 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2018 from being appointed as a director in terms of Section164 (2) of the Act.

(g) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph above.

(h) With respect to the adequacy of the Internal Financial Control over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate

Report in "Annexure-B" and

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. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.

ii. The Company is not required to transfer any amount to the Investor Education and

Protection Fund by the Company

For and on behalf of

P.D. Rungta & Co.

Chartered Accountants

Firm Registration No. 001150C

(CA Harsh Satish Udeshi)

Partner

Membership No. 301889

Date :

Place : Kolkata

ANNEXURE TO THE AUDITOR’S REPORT

Referred to in paragraph 1 under "Report on Other Legal and RegulatoryRequirements" of our report of even date on the accounts for the year ended 31stMarch 2018 of LORDS CHEMICALS LIMITED.

i. a) The Company has maintained proper records showing full particularsincluding quantitative details and situation of fixed assets.

b) All the assets have been physically verified by the management during the year basedon a phased programme of verification at reasonable intervals. According to theinformation given to us no material discrepancies were noticed on such verification.

c) The title deeds of immovable properties are held in the name of the company.

ii. As explained to us the inventories were physically verified during the year by themanagement at reasonable intervals.

In our opinion and according to the information and explanations given to us havingregard to the nature of the inventory the procedures of physical verification ofinventories followed by the Management are reasonable and adequate in relation to the sizeof the Company and the nature of its business.

iii. As informed to us the Company has granted loan and advances secured orunsecured to companies firms or other parties covered in the register maintained undersection 189 of the Companies Act 2013. The year end balance of loan given to such partiesis Rs. 767147700.41/-

a) The terms & conditions of the grant loan are prejudicial to the company’sinterest.

b) In our opinion and according to the information and explanations given to us thecompany has granted interest free loans to the parties covered in theregister maintained under section 189 of the Companies Act 2013 .The schedule ofrepayment of principal has not been stipulated and the repayments or receipts are notregular.

c) There are overdue amounts in the respect of the loans granted the parties listed inthe register maintained under section 189 of the Act. It seems that management had nottaken adequate step for recovery of the same.

iv. The Company has made no loans investments guarantees and security under sectionand 186 of the Companies Act 2013.

vi.The Company has not accepted any deposits from the public and hence the directivesissued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any otherrelevant provisions of the Act and the Companies (Acceptance of Deposit) Rules 2015 withregard to the deposits accepted from the public are not applicable.

vi. The Company is not required to maintain cost records under section 148 of theCompanies Act 2013.

vii. a) The company has generally been regular in depositing with appropriateauthorities undisputed statutory dues including excise duty sales tax exceptprovident fund employees’ state insurance professional tax income tax servicetax cess. Payment to PF & ESI Fund for the HO employees has not been deducted on aregular basis. The arrears of outstanding statutory dues as at 31.03.2018 for a period ofmore than 6 months from the date they become payable have been enlisted below:

Name of the Board Nature of Dues Amount Involved(Rs.)
Directorate of Commercial Taxes WB Professional Tax 2500/-
Central Board of Direct Taxes Corporate Dividend Tax 2032680/-
Directorate of Commercial Taxes WB Entry Tax 210372/-

b) As at 31st March 2018 according to the records of the Company and the informationand explanations given to us the disputed dues on account of income tax wealth taxsales tax service tax customs duty excise duty and cess outstanding is given below:

Name of the Statute Nature of dues Amount involved Rs. Period to which the amount relates Forum where dispute is pending
The Central Excise Act 1944 Central Excise 903120/- 2006-07 Central Excise & service Appellate Tribunal.
W.B. Sales Tax Act 1994 Sales Tax 985224/- 2003-04 to 2004-05 Appellate & Revisional Board
The VAT Act 2003 Value Added Tax 217459/- 2006-07 Appellate & Revisional Board
The Central Sales Tax Act 1956 Central Sales Tax 848973/- 2003-04 Appellate & Revisional Board
The Central Sales Tax Act 1956 Central Sales Tax 209149/- 2006-07 Appellate & Revisional Board
The Central Sales Tax Act 1956 Central Sales Tax 1039162/- 2010-11 Appellate & Revisional Board
The Income Tax Income Tax 132211 2007-08 Assessing Officer

 

The Income Tax Income Tax 367336 2008-09 Assessing Officer
The Income Tax Act 1961 Income Tax 1047235/- 2009-10 Rectification
The Income Tax Act 1961 Income Tax 81372/- 2011-12 Assessing Officer
The Income Tax Act 1961 Income Tax 9934987/- 2012-13 CIT Appeal Kolkata
The Income Tax Act 1961 Income Tax 9087650/- 2013-14 CIT Appeal Kolkata

viii. On the basis of our examination and according to the information andexplanations given to us referring to Note no. 5 to the financial statements the Companyhas defaulted in repayment of interest on institution banks. It has not issued anydebentures.

ix. Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not raised moneys by way of initial public offeror further public offer including debt instruments and Term Loans. Accordingly theprovisions of clause 3 (ix) of the Order are not applicable to the Company and hence notcommented upon.

x. Based upon the audit procedures performed and the information and explanations givenby the management we report that no fraud by the Company or on the company by itsofficers or employees has been noticed or reported during the year.

xi. According to the information and explanations given to us and the records examinedby us managerial remuneration has been paid or provided in accordance with the requisiteapprovals u/s 197 read with Schedule V to the Companies Act.

xii. In our opinion the Company is not a Nidhi Company. Therefore the provisions ofclause 3 (xii) of the Order are not applicable to the Company.

xiii. In our opinion all transactions with the related parties are in compliance withSection 177 and 188 of Companies Act 2013 and the details have been disclosed in theFinancial Statements as required by the applicable accounting standards.

xiv. Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year underreview. Accordingly the provisions of clause 3 (xiv) of the Order are not applicable tothe Company and hence not commented upon.

xv. Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not entered into any non-cash transactions withdirectors or persons connected with him. Accordingly the provisions of clause 3 (xv) ofthe Order are not applicable to the Company and hence not commented upon.

xvi. In our opinion the company is not required to be registered under section 45 IAof the Reserve Bank of India Act 1934 and accordingly the provisions of clause 3 (xvi)of the Order are not applicable to the Company and hence not commented upon.

For and on behalf of

P.D. RUNGTA & CO.

CHARTERED ACCOUNTANTS

Firm Registration No. 001150C

(CA. Harsh Satish Udeshi)

Partner

Membership No. 301889

Date :

Place : Kolkata

"ANNEXURE B" to the Independent Auditor’s Report of even date on theFinancial Statements of LORDS CHEMICALS LIMITED

Report on the Internal Financial Statements under clause (i) of sub-section 3 ofSection 143 of the Companies Act 2013 ("Act")

We have audited the Internal Financial Controls over financial reporting of LORDSCHEMICALS LIMITED as of March 31 2018 in conjunction with our audit of the FinancialStatements 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 Control 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 safeguardingof its 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.

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 deemed to beprescribed under section 143(10) of the Companies Act 2013 to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols 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 operative effectiveness of internal control based on the assessed risk. The proceduresselected depend on the Auditor’s Judgment including the assessment of the risks ofmaterial misstatements 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 controlssystem over 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 authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised 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 respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 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 issued by the Institute of CharteredAccountants of India.

For and on behalf of

P.D. RUNGTA & CO.

CHARTERED ACCOUNTANTS

Registration No- 001150C

CA Harsh Satish Udeshi

Partner

Membership No: 301889

Place- Kolkata

Dated- 25th day of May 2018.

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