TO THE MEMBERS OF M/s. MACKINNON MACKENZIE & CO. LIMITED.
Report on the Financial Statements
We have audited the accompanying financial statements ofMACKINNON MACKENZIE &CO. LIMITED ("the company") which comprise the Balance Sheet as at March 312017 the Statement of Profit and Loss Cash Flow Statement for the year then ended and asummary of significant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matter stated in section 134(5)of the Companies Act2013 ("the Act") with respect to the preparation of thesefinancial statements that give a true and fair view of the financial position financialperformance and cash flow 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
This responsibility also 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; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatement that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
Our responsibility is to express an opinion on these financial tatement based onour 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 Order under section 143(11) of the Act.
We conducted our audit of the financial statements in accordance with the Standards onAuditing specified under Section 143(10) of the Act. Those Standards require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the financial statements arefree from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statement. 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 theCompany'spreparationoffinancialstatements that give a true and fair view in order todesign audit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the company's Directors as well as evaluating theoverall preparation 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
As mentioned in Note 5 of the financial statements the Company's bankers had filed suitin Bombay High Court for recovery of loans which were transferred to the Debt RecoveryTribunal. The bankers have assigned entire debt due to them to a Company and suit filed bythese banks have been transferred back to Bombay High Court. Suits are for recovery of Rs616605621/- outstanding as on 31st March 1991. However loans along with interestaccrued and due to the Company which has taken over the Debt as per the terms of loans andsubsequent understanding with the Company amounting to Rs 8256129338 are outstanding ason 31st March 2017. The Hon. Bombay High Court has passed a decree in favour of the saidcompany in respect of two suits to dispose off/sell the immovable property and flatsbelonging to the company to recover its 702.79 crores together with interest. Total amountdue to the company as per the decree together with interest in respect of the two suits isRs 1876.39 crores as on 31st March 2017. No provision is made in respect of additionalamount due to the company as per decree amounting to Rs 1114.40 .crores.
As mentioned in Note 25 and 26 of the financial statements 60 Clerical workers and 35subordinate staff were retrenched on 4th August 1992 under the Industrial Dispute Act atMumbai. Each one was paid 15 days wages as per competed year of service and one months payin addition to other dues. The Industrial Court had given a judgment against the companyagainst which the company had filed an appeal before the Hon. Bombay High Court which toowas decided against the company. The Hon. Supreme Court has dismissed the appeal of thecompany filed against the order of the Hon. Bombay High Court and has directed the companyto comply with the conditions of the award passed the Industrial Court. The Hon. SupremeCourt has dismissed the review and curative petition filed by the company against the saidorder. The company has filed a compliance report as required by the order passed by theHon. Supreme Court. No further orders have been passed on this. No provision has been madein respect of dues to 7 (Seven) workers amounting to Rs.91.83 lakhs plus interest upto31st March 2017 to the retrenched staff as per the order of the Hon. Supreme Court. In sofar as the balance 88 workers are concerned the company has pleaded non-applicability.despite continued huge losses AsmentionedinNote30 resulting in total erosion of the networth of ofthefinancial the company the accounts for the year have been prepared on theassumption of going concern basis. Should the company be unable to continue as a goingconcern the extent of effect the resultant adjustments would have on the net worth at theyear end as the losses for the year is not ascertainable. As such we are unable toexpress an opinion as to the effect of financial statements for the year.
As mentioned in Note 15 of the financial statements Loans and Advances includes certainold balances amounting to Rs 818785 for which no provision for doubtful items if any hasbeen made in the accounts pending review confirmation of the same. As a result the effectof non-provision on the loss for the year cannot be ascertained. As such we are unable toexpress an opinion as to the effect of financial statements for the year.
As mentioned in Note 7 of the financial statements Trade Payables include an amount ofRs. 2651925/- which represent old balances for which no write back has been made in theaccounts pending the review/ confirmation of the same. As a result the effect of suchwrite back if any on the loss for the year cannot be ascertained. As such we are unableto express an opinion as to the effect of financial statements for the year.
As mentioned in Note 8 of the financial statements certain old credit balancesoutstanding in various accounts amounting to Rs.14852774 for which no write back hasbeen made in accounts pending the review /confirmation of the same. As a result theeffect of such write back if any on the loss for the year cannot be ascertained. As suchwe are unable to express an opinion as to the effect of financial statements for the year.
As mentioned in Note 24 of the financial statements provision for accrued liability forthe year in respect of term compensated absences has been made on arithmetical basisinstead of based on actuarial valuation as required by Standard). The effect on the Profit& Loss Account for the year had the AccountingStandard-15"EmployeeBenefits"
Company determined the accrued liability for gratuity and long term compensatedabsences based on actuarial valuation has not been ascertained. Accordingly thedisclosure requirement regarding the actuarial assumptions used for actuarial valuation isnot complied with. Further the transitional liability/gain as at April 1 2007 which isrequired to be determined in terms of the transitional provisions of the Standard has notbeen ascertained and accounted for. As a result the effect of on the loss for the year anddebit balance of Surplus in Statement of Profit & Loss Account as at 31st March 2017cannot be ascertained As such we are unable to express an opinion as to the effect offinancial statements for the year.
As mentioned in Note 10 (c) of the financial statements the investments made atKolkata Rs 56000/- are presently not available for verification as the building isdestroyed by fire. As such we are unable to express an opinion as to the effect offinancial statements for the year.
As mentioned in Note 30 of the financial statements non availability of confirmationsin respect of balances of secured and unsecured loans debtors certain bank balancesdeposits and creditors appearing in Schedule 57810 13 14 and 15 of the accountsrespectively. As such we are unable to express an opinion as to the effect of financialstatements for the year.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the Basis forQualified Opinion paragraph the aforesaid financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at 31st March 2017 and its loss for the year ended on that date:
Report on Other Legal and Regulatory Requirements
1. 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 bestof our knowledge and belief were necessary for the purpose of our audit;
b. in our opinion proper books of account as required by law have been kept by theCompany so far as 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 thepossible effects of the matter described in the Basis for Qualified Opinion aforesaidfinancial statements comply with the Accounting Standards specified under section 133 ofthe Act read with Rule 7 of the Companies ( 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 written representation received from the directors as on March 312017 taken on record by the Board of Directors none of the Directors is disqualified ason March 31 2017 from being appointed as a director in terms of Section 164(2) of theAct.
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 controls over effectiveness of suchcontrols refer to our separate Report in "Annexure A". i. With respect to theother matter to be included in the Auditor's Report in accordance with Rule 11 of theCompanies (Audit and Auditors) Rules 2014 in our opinion and to the best of ourinformation and according to the explanations given to us:
i. The Company does have pending litigations which would impact its financial positionwhich are as follows a. The Company's bankers had filed suit in Bombay High Court forrecovery of loans which were transferred to the Debt Recovery Tribunal. The bankers haveassigned entire debt due to them to a Company and suit filed by these banks have beentransferred back to Bombay High Court. Suits are for recovery of Rs.616605621/-outstanding as on 31st March 1991. However loans along with interest accrued and due tothe Company which has taken over the Debt as per the terms of loans and subsequentunderstanding with the Company amounting to Rs 8256129338 are outstanding as on 31stMarch 2017. The Hon. Bombay High Court has passed a decree in favour of the said companyin respect of two suits to dispose off/sell the immovable property and flats belonging tothe company to recover its dues of Rs 702.79 crores together with interest. Total amountdue to the company as per the decree together with interest in respect of the two suits isRs 1876.39 crores as on 31st March 2017.
b. 60 Clerical workers and 35 subordinate staff were retrenched on 4th August 1992under the Industrial Dispute Act at Mumbai. Each one was paid 15 days wages as percompeted year of service and one months pay in addition to other dues. The IndustrialCourt had given a judgment against the company against which the company had filedanappeal before the Hon. Bombay High Court which too was decided against the company. TheHon. Supreme Court has dismissed the appeal of the company filedagainst the order of theHon. Bombay High Court and has directed the company to comply with the conditions of theaward passed the Industrial
Court. The Hon. Supreme Court has dismissed the review and curative petition filed bythe company against the said order. The company has filed a compliance report as requiredby the order passed by the Hon. Supreme
Court. No further orders have been passed on this. In so far as the balance 88 workersare concerned the company has pleaded non- applicability. c. The Company did not have anylong-term contracts including derivative contracts for which there were any materialforeseeable losses. d. There were no amount which were required to be transferred to theInvestor Education and Protection Fund by the Company. e. The Company has providedrequisite disclosure in the financial statements as to holding as well as dealings inSpecified Bank Notes during the period from November 8 2016 to December 30 2016. Basedon audit procedure and relying on the management representation we report that thedisclosures are in accordance with books of account maintained by the company and asproduced and as produced to us by the Management
Refer Note 14 of the Standalone financial statements.
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of
Section 143(11) of the Act we give in "Annexure B" a statement ofthemattersspecifiedin paragraphs 3 and 4 of the Order.
Annexure "A" to the Independent Auditor's Report.
Report on the Internal Financial Control under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial MACKINNON MACKENZIE & COMPANY LIMITED controlsoverfinancialreportingof ("the Company") as of March 31 2017 in conjunction with our audit of thefinancial 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 Reporting issuedby the Institute of Chartered Accountants of India These responsibilities include thedesign implementation and maintenance of adequate internal financial control that wereoperating 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 CompaniesAct 2013
Our responsibility is to express an opinion on the Company's internal financial controlover financial reporting based on our audit.
We conducted our audit in accordance with the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting (the "Guidance Note") and thestandards on Auditing issued by ICAI and deemed to be prescribed under section 143(10) ofthe Companies Act 2013 to the extent applicable to an audit of internal financialcontrols both applicable to an audit of Internal Financial Controls and both issued bythe Institute of Chartered Accountants of India. Those standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting was established and maintained and if such controls operated effectively in allmaterial respects. Our audit involves performing procedures to obtain audit evidencesabout the adequacy of the internal financial control system over financial reporting andtheir operating effectiveness. Our audit of internal financial controls over financialreporting included obtaining an understanding of internal financial controls overfinancial reporting assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgment including theassessment of the risks of material misstatement of the financial statements whether dueto 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 Control 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 thepresentation 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) pertains 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 recorded as necessary to permit preparation of financial statement inaccordance with generally accepted accounting principles and that receipt 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 limitation of internal financial control over financialreporting including the management override of controls material misstatements due toerror or fraud may occur and not be detected. Also projections of any evaluation of theinternal financial control over financial reporting to future period are subject to therisk that the internal financial control over financial reporting may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
In our opinion to the best of the information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlsystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2017 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
Annexure "B" to the Independent Auditor's Report.
[Referred to in paragraph 1 under the heading Report on Other Legal &Regulatory Requirement' of our report of even date]
1) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets;
(b) The Fixed Assets were physically verified during the year by the Management inaccordance with a regular programme of verification which in our opinion provides forphysical verification of all the fixed assets at reasonable intervals. According toinformation and explanations given to us no material discrepancies were noticed on suchverification.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records the title deeds of immovable properties are held in the nameof the company. In respect of the assignment of Leasehold and Building in favour of thecompany we have relied on the copy of the letter issued by the Bombay Port Trust approvingthe assignment as the original letter is not in possession of the company. The groundlease of the premises of the company has expired on 22nd May 2017. The company has made anapplication for renewal of the lease.
2) As the company is carrying on agency business paragraph 3(ii) of the order is notapplicable.
3) The Company has not granted any loans secured or unsecured to companiesfirmsLimited Liability partnership or other parties covered in the Register maintainedunder section 189 of the Act.
4) In our opinion and according to the information and explanations given to us thecompany has complied with the provisions of section 185 and 186 of the Companies Act 2013in respect of loans investments guarantees and security.
5) According to the information and explanations given to us the company has notaccepted any deposit during the year.
6) As informed to us the maintenance of Cost records has not been specified by theCentral Government under sub-section (1) of Section 148 of the Act in respect to theactivities carried on by the company.
7) (a) According to information and explanations given to us and on the basis of ourexamination of the books of account and records the Company has been generally regularin depositing undisputed statutory dues including Provident Fund Income-Tax Sales TaxService Tax Duty of Customs Value added Tax Cess and any other statutory dues with theappropriate authorities. According to the information and explanations given to us noundisputed amounts payable in respect of the above were in arrears as at March 31 2017for a period of more than six months from the date on when they became payable. (b)According to the information and explanations given to us and the records of the companyexamined by us the particulars of income tax service tax as 31st March 2017 which havenot been deposited on account of any dispute pending are as under.
|Name of the Statute ||Nature of Dues ||Relevant Financial Year ||Amount ( Rs) ||Forum where dispute is pending |
|Foreign Exchange Regulation Act ||Fine for alleged violation of Foreign Exchange Regulation Act by the company and its officer. ||1979 ||100297000 ||Foreign Exchange Appellate Tribunal has allowed companies appeal against which the concerned government department ha s filed an appeal with the High Court of Bombay. |
8) In our opinion and according to the information and explanations given to us theCompany has not taken any loan either from banks financial institutions or from thegovernment and has not issued any debentures.
9) Based upon the audit procedure performed and the information and explanations givenby the management the company has not raised moneys by way of initial public offer orfurther public offer including debt instruments and Term Loans. 10) Based upon the auditprocedures performed and the information and explanations given by the management wereport that no fraud by the Company and no material fraud on the company by its officersor employees has been noticed or reported during the year.
11) As the company has not paid any Managerial Remuneration during the year provisionsof paragraph 3(xi) of the Order are not applicable. 12) In our opinion the company is nota Nidhi Company. Therefore the provisions of clause 3 (xii) of the Order are notapplicable to the Company.
13) 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. 14) The companyhas not made any preferential allotment or private placement of shares or fully or partlyconvertible debentures during the year under review.
15) In our opinion and according to the information and explanations given by themanagement the company has not entered into any non-cash transactions with directors orpersons connected with them. 16) In our opinion the company is not required to beregistered under section 45-IA of the Reserve Bank of India Act 1934
| ||For M/s. SACHIN P MULGAOKAR & CO. |
| ||CHARTERED ACCOUNTANTS |
| ||Firm Regn. No. : 108945W |
|Place: Mumbai ||(Sachin P Mulgaokar) |
|Dated: 23rd August 2017 ||PROPRIETOR |
| ||Membership No : 40942 |