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Shipping Corporation of India Ltd.

BSE: 523598 Sector: Infrastructure
NSE: SCI ISIN Code: INE109A01011
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OPEN 116.20
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VOLUME 137178
52-Week high 134.60
52-Week low 49.80
P/E 11.70
Mkt Cap.(Rs cr) 5,219
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 116.20
CLOSE 114.55
VOLUME 137178
52-Week high 134.60
52-Week low 49.80
P/E 11.70
Mkt Cap.(Rs cr) 5,219
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Shipping Corporation of India Ltd. (SCI) - Auditors Report

Company auditors report

To the Members of

The Shipping Corporation of India Limited

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying Standalone Financial Statements of The ShippingCorporation of India Limited ("the Company") which comprise the Balance Sheetas at March 31 2021 the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Changes in Equity and the Statement of Cash Flows for the yearthen ended and notes to the Standalone Financial Statements including a summary ofsignificant accounting policies and other explanatory information (hereinafter referred toas "Standalone Financial Statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Financial Statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted inIndia of the state of affairs of the Company as at March 31 2021 its profit (includingother comprehensive income) changes in equity and its cash flows for the year ended onthat date.

Basis for Opinion

We conducted our audit of the Standalone Financial Statements in accordance withStandards on Auditing (SAs) specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor’sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India ("ICAI") together with theethical requirements that are relevant to our audit of the Standalone Financial Statementsunder the provisions of the Act and Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI’s Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion on the Standalone Financial Statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Financial Statements of the current year.These matters were addressed in the context of our audit of the Standalone FinancialStatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.

Sr. No. Key Audit Matter Auditor’s Response
1 Accuracy of recognition measurement presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 "Revenue from Contracts with Customers" (revenue accounting standard) Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
The application of the revenue accounting standard involves certain key judgments relating to identification of distinct performance obligations determination of transaction price of the identified performance obligations the appropriateness of the basis used to measure revenue recognized over a period. Additionally revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date. (Refer Note No 33 to the Standalone Financial Statements) Evaluated the design of internal controls relating to Implementation of the revenue accounting standard.
Selected a sample of continuing and new contracts and tested the operating effectiveness of the internal control relating to identification of the distinct performance obligations and determination of transaction price.
Selected a sample of continuing and new contracts and performed the following procedures:
Read analyzed and identified the distinct performance obligations in these contracts.
Compared these performance obligations with that identified and recorded by the Company.
Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue.
In respect of samples relating to fixed price contracts progress towards satisfaction of performance obligation used to compute recorded revenue was verified
Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts
2. Impairment testing of Fleets in line with the Ind AS 36
The Company at every reporting period assesses market conditions and other specific risks to determine if there are any triggering events that may be indicators of an impairment of the fleets. We have obtained the management’s view to gain an overview of the triggering events market conditions (present & future) operational factors and other key assumptions supporting the impairment assessment.
The impairment loss if any is recognized in the Statement of Profit and Loss in the period in which impairment takes place. We have performed the following procedures for verification of impairment testing of Fleets:
The provision for impairment of fleets is identified as a Key Audit Matter as it involves significant management assumptions and judgment to assess the market conditions and other associated risks in assessment of provisions. Understanding the process for collecting the inputs into the valuation models to evaluate the design of the Company’s controls over its impairment assessment and challenged the appropriateness of the inputs and significant assumptions including the cash flow projections discount rate costs and expenses.
Assessing the reasonableness of fair value of vessel considered by the management by comparing the same with the valuations provided by external professional valuers.
3. The direct access of certain overseas foreign agents to fund collected on account of freight and other charges.
Liner division of the Company has been carrying out its vessels operations and container marketing activities at various ports in India and abroad through its agency network. Agents perform various activities such as marketing booking clearing of cargo port calls of vessels & also collection of freight on behalf of the Company. We assessed the Company’s process to evaluate Agents on timely basis to identify the impact on the revenue and collection of funds.
The Company depends on its agents for operation of Liner segment business. The Company has obtained bank guarantee from major agents & also reviewed the same periodically to confirm its validity and completeness with respect to risk exposure on revenue due to direct access to agents.
Since all the activities are performed by the agents there is requirement of funds. Collection of income is done directly by agents and subsequently remitted to the Company.
Therefore it involves a risk on the part of the Company and hence is identified as a Key Audit Matter.
4. Evaluation of Dry Docking Cost & Repair Expenses of Vessels:-
As per Ind AS 16 ‘Property Plant and Equipment’ subsequent costs like expenditure on major maintenance refits or repairs including planned dry-dock are included in the asset’s carrying amount or recognized as a separate asset as appropriate when they meet the recognition criteria i.e. only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. To assess the recognition of dry docking cost & repair cost we performed the following process:
A shipping company on periodic basis is required to bring all ships into dry dock for major inspection and overhaul. Overhaul expenditure might at first sight seem to be a repair to the ships but it is actually a cost incurred in getting the ship back into seaworthy condition. Evaluated the design of internal controls relating to the major cost like repairs & dry-docking which are of two types i.e. planned dry-dock & emergency dry-dock.
The dry docking cost and repairs expenses of vessels are considered as Key Audit Matter as it requires management judgment to assess future economic benefits from the expenditure incurred and the measurement of the cost. Selected a sample to verify the operating effectiveness of the internal control relating to identification of the distinction between the two cost i.e. repair & dry-dock cost.
Tested the relevant information technology systems’ relating to the dry-dock & Fleet related expenses.
5. Provisions for taxes and Contingent Liabilities
The Company is involved in various taxes and other disputes for which final outcomes cannot be easily predicted and which could potentially result in significant liabilities. The assessment of the risks associated with the litigations is based on complex assumptions which require the use of judgment and such judgment relates primarily to the assessment of the uncertainties connected to the prediction of the outcome of the proceedings and to the adequacy of the disclosures in the financial statements. Because of the judgment required the materiality of such litigations and the complexity of the assessment process the area is a key matter for our audit. Our audit procedure in response to this key Audit Matter included among others
Assessment of the process and relevant controls implemented to identify legal and tax litigations and pending administrative proceedings.
Assessment of assumptions used in the evaluation of potential legal and tax risks performed by the legal and tax department of the Company considering the legal precedence and other rulings in similar cases.
Inquiry with the legal and tax departments regarding the status of the most significant disputes and inspection of the key relevant documentation.
Analysis of opinion received from the experts where available.
Review of the adequacy of the disclosures in the notes to the financial statements.
We have observed that the provision for tax estimated as above including the deferred tax has not resulted in material deviation from the applicable rate of tax after considering the exemptions deductions and disallowances as per the provisions of the Income Tax Act.

Emphasis of Matter

We draw attention to the following matters in the notes to the Standalone FinancialStatements: (i) Note no. 42 regarding matter continued since FY 2014-15 regarding paymentof Performance Related Pay (PRP) of Rs. 1104 lakhs vis-a-vis DPE guidelines with respectto computation of profits from core activities and non-observance of "BellCurve".

The Company is pursuing the matter with the Ministry of Ports Shipping and Waterwaysfor resolution and final decision.

(ii) Note no. 44 regarding Strategic Disinvestment process by the Government of Indiain respect of the Company. The disinvestment process and the procedural aspects inrelation to the same are in progress.

(iii) Note no. 45 regarding the confirmations of trade receivables trade payables anddeposits and the action being taken and the management's assertion that the company isfollowing up with the parties for reconciliation and that it would not have any materialdifference affecting the financial statements.

Our opinion is not modified in respect of these matters.

Other Information

The Company’s Board of Directors is responsible for the other information. Theother information comprises the information included in the Director’s Reportincluding Annexures to Director’s Report Business Responsibility Report CorporateGovernance and Shareholder’s Information but does not include the StandaloneFinancial Statements and our auditor’s report thereon. Our opinion on the StandaloneFinancial Statements does not cover the other information and we do not express any formof assurance conclusion thereon. In connection with our audit of the Standalone FinancialStatements our responsibility is to read the other information and in doing so considerwhether the other information is materially inconsistent with the Standalone FinancialStatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. If based on the work we have performed on the other information obtained priorto the date of this auditor’s report we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements

The Company’s Management and Board of Directors are responsible for the mattersstated in section 134(5) of the Act with respect to the preparation of these StandaloneFinancial Statements that give a true and fair view of the financial position financialperformance (including other comprehensive income) changes in equity and cash flows ofthe Company in accordance with the Ind AS and other accounting principles generallyaccepted in India. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe Standalone Financial Statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.

In preparing the Standalone Financial Statements management is responsible forassessing the Company’s ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company’sfinancial reporting process.

Auditor’s Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the StandaloneFinancial Statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor’s report that includes our opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of this Standalone Financial Statements. As part of an auditin accordance with SAs we exercise professional judgment and maintain professionalskepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the

Standalone Financial Statements whether due to fraud or error design and performaudit procedures responsive to those risks and obtain audit evidence that is sufficientand appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.

Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.

Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor’s report to therelated disclosures in the Standalone Financial Statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor’s report. However future events or conditionsmay cause the Company to cease to continue as a going concern.

Evaluate the overall presentation structure and content of the

Standalone Financial Statements including the disclosures and whether the StandaloneFinancial Statements represent the underlying transactions and events in a manner thatachieves fair presentation.

Materiality is the magnitude of misstatements in the Standalone Financial Statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the Standalone Financial Statements may be influenced. Weconsider quantitative materiality and qualitative factors in

(i) planning the scope of our audit work and in evaluating the results of our work; and

(ii) to evaluate the effect of any identified misstatements in the Standalone FinancialStatements.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the Standalone Financial Statementsof the current year and are therefore the key audit matters. We describe these matters inour auditor’s report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

Other Matter

The audit of Standalone Financial Statements for the year ended March 31 2020 wascarried out and reported by the joint auditors V Sankar Aiyar & Co. and Haribhakti& Co. LLP one of whom is predecessor audit firm vide their unmodified audit reportdated May 29 2020 which has been furnished to us by the management and relied upon by usfor the purpose of our audit of the Standalone Financial Statements.

Our opinion is not modified in respect of this matter.

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 section 143(11) of theAct we give in "Annexure 1" a statement on the matters specified in paragraphs3 and 4 of the Order to the extent applicable.

(2) 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 purposes 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 (including Other ComprehensiveIncome) the Statement of Changes in Equity and the Statement of Cash Flows dealt with bythis report are in agreement with the books of account;

d. In our opinion the aforesaid Standalone Financial Statements comply with the Ind ASprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended;

e. In our opinion and to the best of our information and according to the explanationsgiven to us the Company being a Government Company section 164(2) related todisqualifications for appointment of directors is not applicable to it in accordance withexceptions modifications and adaptations provided vide Notification No. G.S.R. 463 (E)dated June 5 2015 issued by Ministry of Corporate Affairs (the "Notification").

f. With respect to the adequacy of the internal financial controls with reference toStandalone Financial Statements of the Company and the operating effectiveness of suchcontrols refer to our separate report in "Annexure 2";

g. With respect to the other matter to be included in the Auditor’s Report inaccordance with the requirements of section 197(16) of the Act: In our opinion and to thebest of our information and according to the explanations given to us the Company being aGovernment Company section 197 of the Act related to the managerial remuneration is notapplicable to it in accordance with exceptions modifications and adaptations providedvide Notification No. G.S.R. 463 (E) dated June 5 2015 issued by Ministry of CorporateAffairs.

h. 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 as amended inour opinion and to the best of our information and according to the explanations given tous:

(i) The Company has disclosed the impact of pending litigations on its financialposition in its Standalone Financial Statements – Refer Note 28 to the StandaloneFinancial Statements;

(ii) The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts;

(iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

3. As required under sub section (5) of Section 143 of the Act in case of theGovernment Company we give in the "Annexure 3" a statement on the mattersspecified in the directions and sub-directions issued by office of the Comptroller andAuditor General of India.

For V. Sankar Aiyar & Co. For CHOKSHI & CHOKSHI LLP
Chartered Accountants Chartered Accountants
FRN: 109208W FRN: 101872W/W100045
G Sankar Dhananajay Jaiswal
Partner Partner
Membership No. 46050 Membership No. 187686
UDIN: 21046050AAAAEB8567 UDIN: 21187686AAAAEB3361
Place: Mumbai
Date:13/05/2021

ANNEXURE 1 TO THE INDEPENDENT AUDITOR’S REPORT

[Referred to in paragraph 1 under ‘Report on Other Legal and RegulatoryRequirements’ in the Independent Auditor’s Report of even date to the members ofthe company on the Standalone Financial Statements for the year ended March 31 2021]

Based on the audit procedures performed for the purpose of reporting a true and fairview on the Standalone Financial Statements of the Company and taking into considerationthe information and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit we report that:

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

(b) As per the information and explanations given to us the fixed assets have beenphysically verified by the management at reasonable intervals which in our opinion isreasonable having regard to the size of the Company and the nature of its assets.According to information and explanations given to us no material discrepancies werenoticed on such verification.

(c) According to the information and explanation given to us and on the basis of ourexamination of records of the Company the title deeds of immovable properties recorded asfixed assets in the books of account of the Company are held in the name of the Companyexcept for the details given below for which no records were made available to us forverification and in respect of some properties the written agreements are not on thetraditional stamp papers however such agreements are written on green ledger papers andduly signed by the all concerned parties.

(Amount Rs. in lakhs)

Land/ Building Total number of Flats / Garage Leasehold/ Freehold/ Tittle deeds Gross Block as on March 31 2021 Net Block as on March 31 2021 Remarks
GONDAVALI APTS 10 Not Available 18.79 7.52 Share certificates are available.
CHITRAKOOT APTS 02 Not Available 4.57 0.71 Share certificates are available.
KAVITA APTS 1 Not Available 2.62 1.05 Share certificates are available.
LANDS END APTS 1 Not Available 2.76 0.51 Share certificates are available.
AJANTA APTS 1 Not Available 2.35 0.94 Share certificates are available.
RAJHANS APTS 1 Not Available 1.47 0.12 Share certificates are available.
SOMMERSET HOUSE 1 Not Available 4.20 0.77 Share certificates are available.
ANITA APTS (Garage) 1 Not Available 0.12 0.02 Share certificates are available.
ASHARYA APTS (Garage) 1 Not Available 0.16 0.01 Share certificates are available.
SATNAM APTS (Garage) 1 Not Available 0.10 0.02 Share certificates are not available.
VIJAY APTS (Garage) 3 Not Available 0.70 0.21 Share certificates are not available.

(ii) The inventory has been physically verified by the management during the year. Inour opinion the frequency of verification is reasonable. As informed no materialdiscrepancies were noticed on physical verification carried out during the year.

(iii) The Company has granted loans secured or unsecured to companies firms LimitedLiability Partnerships or other parties covered in the register maintained under section189 of the Act.

(a) The terms and conditions of the aforesaid loans granted by the Company are notprejudicial to the interest of the Company.

(b) In case of loans granted the terms of arrangement do not stipulate any repaymentschedule and the loans are repayable on demand subject to the approval from othershareholders. Payment of interest has been stipulated and the receipts thereof areregular.

(c) In respect of the aforesaid loans there are no overdue amount for more than ninetydays in respect of the loans granted

(iv) Based on information and explanation given to us since the Company has notadvanced loans to the Directors/ to a Company in which the Directors are interested theprovisions of section 185 of the Act are not applicable to the Company. Further theCompany has complied with the provisions of section 186 of the Act.

(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public within the provisions of sections 73to 76 of the Act and the rules framed there under. Therefore paragraph 3(v) of the Orderis not applicable to the Company.

(vi) The Central Government has not prescribed the maintenance of cost records for anyof the business activities carried out by the Company under sub-section (1) of section 148of the Act and the rules framed there under. Therefore paragraph 3(vi) of the Order isnot applicable to the Company.

(vii) (a) According to the information and explanation given to us the Company isgenerally regular in depositing with appropriate authorities undisputed statutory duesincluding provident fund employees’ state insurance income tax goods and servicestax (GST) customs duty cess and any other material statutory dues applicable to it.There were no undisputed amounts payable in respect of provident fund employees’state insurance income tax GST customs duty cess and any other material statutory duesapplicable to it were outstanding at the year end for a period of more than six monthsfrom the date they became payable. (b) According to the information and explanation givento us the dues outstanding with respect to income tax sales tax service tax valueadded tax goods and service tax customs duty excise duty on account of any dispute areas follows:

(Amount in Rs. lakhs)

Name of the statute Nature of dues The Forum / Authority where Dispute is pending Period to which the amount relates Sum of Amount Involved Sum of Amount Paid Under Protest Sum of Unpaid Amount
Finance Act 1994 Service Tax CESTAT April 09 to June 2017 183399.26 3136.00 180263.26
Finance Act 1994 Service Tax Commissioner (Appeals) Oct 12 to Mar 13 195.44 5.00 190.44
Finance Act 1994 Service Tax Joint Commissioner LTU Oct 15 to Jun 17 437.14 18.00 419.14
AP VAT Act 2005 VAT CTO 2011-12 10.00 0 10.00
Sales Tax VAT Bombay High Court 1993-941994-95 & 2017-18 215.64 95.00* 120.64
Income Tax Act 1961 U/s 195 Bombay High Court 2003-04 to 2005-06 9820.00 0 9820.00
Income Tax Act 1961 Tax U/s 143(3) Bombay High Court 2004-05 1804.00 0 1804.00
Income Tax Act 1961 Tax U/s 147 ITAT Mumbai 2005-06 1619.00 0 1619.00
Income Tax Act 1961 Tax U/s 143(3) Bombay High Court 2006-07 2883.97 0 2883.97
Income Tax Act 1961 Tax U/s 143(3) ITAT Mumbai 2007-08 1010.34 0 1010.34
Income Tax Act 1961 Tax U/s 143(3) ITAT Mumbai 2008-09 104.00 0 104.00
Income Tax Act 1961 Tax U/s 143(3) ITAT Mumbai 2009-10 1165.15 0 1165.15
Income Tax Act 1961 Tax U/s 201(1) 201(1A) CIT(A) Mumbai 2010-11 2170.00 109.00 2061.00
Income Tax Act 1961 Tax U/s 143(3) CIT(A) Mumbai 2011-12 186.00 0 186.00
Income Tax Act 1961 Tax U/s 143(3) CIT(A) Mumbai 2012-13 300.00 0 300.00
Income Tax Act 1961 Tax U/s 143(3) CIT(A) Mumbai 2014-15 4991.00 851.00 4140.00
Income Tax Act 1961 Tax U/s 143(3) CIT(A) Mumbai 2015-16 621.00 0 621.00
Income Tax Act 1961 Tax U/s 143(3) CIT(A) Mumbai 2016-17 1115.50 0 1115.50

*(According to the directions received from Bombay High Court in respect of financialyear 2017-18 the Company has deposited the amount of Rs. 95 lakhs with the Prothonotaryand Senior master of High Court until the issue is decided by the Hon’ble court.)

(viii) According to the information and explanations given to us the Company has notdefaulted in repayment of loans or borrowings to financial institutions & banks. TheCompany has not issued any debentures.

(ix) The company has unutilized proceeds amounting to Rs. 13385 lakhs raised throughfurther public offer (FPO) in the earlier years. During the year also company has notutilized the same and the unutilized proceeds are kept in fixed deposits. Also in ouropinion the term loans have been applied for the purpose for which those have beenraised.

(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of fraud by the Company or any fraud on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such instance by themanagement.

(xi) The Company is a Government company and the provisions of section 197 read withSchedule V to the Act are not applicable to the Company. Accordingly paragraph 3(xi) ofthe Order is not applicable to the Company.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Therefore paragraph 3(xii) of the Order is not applicableto the Company.

(xiii) According to the information and explanation given to us all transactionsentered into by the Company with the related parties are in compliance with sections 177and 188 of Act where applicable and the details have been disclosed in the StandaloneFinancial Statements as required by the applicable accounting standards.

(xiv) The Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under review. Thereforeparagraph 3(xiv) of the Order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us theCompany has not entered into any non-cash transactions with directors or persons connectedwith them during the year and therefore paragraph 3(xiv) of the Order is not applicableto the Company.

(xvi) According to the information and explanation given to us the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.

For V. Sankar Aiyar & Co. For CHOKSHI & CHOKSHI LLP
Chartered Accountants Chartered Accountants
FRN: 109208W FRN: 101872W/W100045
G Sankar Dhananajay Jaiswal
Partner Partner
Membership No. 46050 Membership No. 187686
UDIN: 21046050AAAAEB8567 UDIN: 21187686AAAAEB3361
Place: Mumbai
Date:13/05/2021

ANNEXURE 2 TO THE INDEPENDENT AUDITOR’S REPORT

[Referred to in paragraph 2(f) under ‘Report on Other Legal and RegulatoryRequirements’ section in our Independent Auditor’s Report of even date to themembers of The Shipping Corporation of India Limited on the Standalone FinancialStatements for the year ended March 31 2021] Report on the Internal Financial Controlswith reference to Standalone Financial Statements under clause (i) of sub-section 3 ofsection 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls with reference to Standalone FinancialStatements of The Shipping Corporation of India Limited ("the Company") as ofMarch 31 2021 in conjunction with our audit of the Standalone Financial Statements of theCompany 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 with reference to financial statementscriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India ("ICAI"). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence toCompany’s policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing specified under section143(10) of the Act to the extent applicable to an audit of internal financial controlsboth issued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness.

Our audit of internal financial controls with reference to financial statementsincluded obtaining an understanding of internal financial controls with reference tofinancial statements assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal controls based on theassessed risk. The procedures selected depend 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 controlswith reference to financial statements.

Meaning of Internal Financial Controls with reference to Financial Statements

A company's internal financial control with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control withreference to financial statements includes those policies and procedures that

(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.

Inherent Limitations of Internal Financial Controls with reference to FinancialStatements

Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

Opinion

In our opinion and to the best of our information and according to explanations givento us the Company has in all material respects adequate internal financial controlswith reference to financial statements and such internal financial controls with referenceto financial statements were operating effectively as at March 31 2021 based on theinternal control with reference to financial statements criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote issued by the ICAI.

For V. Sankar Aiyar & Co. For CHOKSHI & CHOKSHI LLP
Chartered Accountants Chartered Accountants
FRN: 109208W FRN: 101872W/W100045
G Sankar Dhananajay Jaiswal
Partner Partner
Membership No. 46050 Membership No. 187686
UDIN: 21046050AAAAEB8567 UDIN: 21187686AAAAEB3361
Place: Mumbai
Date:13/05/2021

ANNEXURE 3 TO THE INDEPENDENT AUDITOR’S REPORT

Annexure 3(a) - Directions under Section 143(5) of the Companies Act 2013

On the Accounts of The Shipping Corporation of India Limited for the financial year2020-21

Directions Auditors’ comments including Action taken wherever required to be taken Impact on the Accounts and financial statements
1 Whether the company has system in place to process all the accounting transactions through IT system? If NO the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications if any may be stated. The company has one Accounting System i.e. SAP and other major operating softwares such as Danaos Afsys etc. All these softwares are integrated with each other and there are no transactions which are accounted outside the IT System. No Impact
2 Whether there is any restructuring of an existing loan or cases of waiver/write off of debts /loans/interest etc. made by a lender to the company due to the company’s inability to repay the loan? If yes the financial impact may be stated. As observed during the course of audit and explained to us there is no restructuring of an existing loan or cases of waiver/write off of debts /loans/interest etc. made by a lender to the company due to the company’s inability to repay the loan. No Impact
3 Whether funds received/receivable for specific schemes from central/ state agencies were properly accounted for/ utilized as per its term and conditions? List the cases of deviation. As observed during the course of audit and explained to us the Company has received a subsidy during the current financial year and two subsidies in earlier years status of the same is as follows:- Impact
a) During the year the Company has received subsidy amounting to Rs. 21.10 crores for carrying out Cargo Shipping Service between India and Maldives and out of the above an amount of Rs. 8.62 crore has been utilised as per the terms and conditions specified in the sanction letter dated 10.08.2020. Further the unutilized amount of Rs. 12.48 crores has been disclosed as liability after adjusting the expenses net of income against the subsidy amount as on 31.03.2021. The balance amount is placed in Fixed Deposit and Interest earned against such deposit will be remitted to the Consolidated Fund of India after finalisation of accounts. Also the same is in compliance with the provisions of Ind AS 20 Government Grants.
b) Related to Myanmar Service the Company has accounted and utilised the grant as per its terms and conditions and the amount spent in excess of the grant amounting to Rs. 4.67 crores is shown as receivable and provision for doubtful advances is created on the same. No Impact

 

c) The Company had received from the Ministry of Ports Shipping and Waterways subsidy of Rs. 19 crores in the financial year 2017-18 provided for running direct shipping services between India to Bangladesh - Myanmar and Srilanka - Maldives. However the Company awaited direction from the Ministry to start the service and hence action for in-chartering of the vessel was deferred by the Company. In the financial year 2019-20 Ministry of Ports Shipping and Waterways directed to refund the subsidy amount. Accordingly subsidy and interest earned thereon from date of receipt of funds till the date of refund amounting to Rs. 20.53 crores has been transferred to Ministry of Ports Shipping and Waterways during the financial year 2019-20. No Impact

Annexure 3(b) - Sub-directions under Section 143(5) of the Companies Act 2013 inrespect of the Shipping Corporation of India Limited for the financial year 2020-21

Sub-directions Auditors’ comments including Action taken wherever required to be taken Impact on the Accounts and financial statements
1 Whether Substantial portion of Revenue Booked/ invoices raised are reversed or cancelled? As observed during the course of audit and explained to us no substantial portion of revenue booked / invoices raised by the company are reversed or cancelled except that in the normal course of business and due to provision created at the cut-off date as per relevant Ind AS. No Impact
2 State the system for providing Impairment to vessels To determine Impairment of each vessel carrying amount of the vessel is compared with its recoverable amount. Where the carrying amount of the vessel exceeds the recoverable amount an impairment loss for the vessel is recognized. Recoverable amount of the vessel is higher of its Market Value or Value in use as on the balance sheet date. Market value of vessels at Balance Sheet date are based on valuation reports provided by reputed valuation firms. Value in use of vessels is based on projections of Future Cash inflows & Outflows generated from the use of the vessel and its subsequent sale. Cash inflows and outflows used in the calculation are based on market report of research and advisory firms as well as best available management estimates. Cash Inflow on sale of vessels is considered as their Scrap Value at the end of their useful life. The Value in use of Vessels as on the reporting date is arrived at by discounting the Net Cash Inflows by using Weighted Average Cost of Capital (WACC). No Impact
3 State the system for bifurcating repairs and expense for capitalization and charging to revenue. Whether repairs and expenses which do not add to useful Iife of vessels are capitalized? As per the company's accounting policy expenses incurred during the planned dry docking of vessels and other major repair expenses of vessels like replacement of auxiliary engine etc. are capitalised in the asset’s carrying amount if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably as per the recognition criteria of Ind AS 16. All other repairs and expenses that do not meet the recognition criteria of Ind AS 16 are charged to revenue. As observed during the course of audit repairs and other expenses which do not add to useful life of vessels are not capitalised by the Company and the same are charged to revenue. No Impact
4 Whether Title to all investments /FD actually available with the Company? Title to all Investments including investments in shares & fixed deposits are available with the company. No Impact
5 Whether balance payable to Agents as at the year-end is correctly reflected under the "Liability" head in Balance Sheet? Yes as observed during the course of audit at the end of the year and explained to us where money is payable to the agent such balances are disclosed under the "Liability" head in the balance sheet subject to reconciliation with Agents. No Impact

Annexure 3(c) – Additional Directions Received from C&AG for the financialyear 2020-21

Directions Auditors’ comments including Action taken wherever required to be taken Impact on the Accounts and financial statements
1 Compliance to directions and additional directions issued under section 143 (5) of the Companies Act 2013. Refer Annexure 3(a) & 3(b) above for the Auditor’s comments Refer Annexure 3(a) & 3(b) above for the impact
2 Compliance to Last Year Assurances by the Company and issues raised in Management letter issued to the Management on 14.08.2020 for the financial year 2019-20 The brief details of action taken by the Company are as under: In respect of borrowings and dividend necessary disclosures have been given in the notes to the financial statements. In respect of Performance Related Pay and Confirmation with regard to Trade Receivables / Payables and Deposits the disclosures have been suitably modified / elaborated. As regards valuation of inventories of stores and spares the matter has been examined by an internal committee of the Company and considering its recommendation which is based on shipping industry practice and materiality concept the Company has felt it appropriate to continue with the same practice followed consistently since earlier years.
3 Changes in Accounting policies if any during the year and its corresponding Impact There is no change in the significant accounting policy having impact in the current financial year. No Impact

4 System of Internal controls in place The Company has an internal control system thatNo Impact is commensurate with the current size scale and complexity of its operations.Internal financial controls framework and Risk Control Matrix (RCM) for various businessprocesses are in place. The internal control systems (including Internal FinancialControls over Financial Reporting) are reviewed on an ongoing basis and necessary changesare carried out to align with the changing business / statutory requirements.

Internal audit is carried out by a firm of Chartered Accountants on quarterly basis.The scope and authority of the Internal Audit function is defined in the Internal AuditPlan which is approved by the Audit Committee. To maintain its objectivity andindependence the Internal Audit function submits quarterly reports to the Audit Committeeof the Board. The Internal Audit examine evaluate and report on the adequacy andoperative effectiveness of the internal control systems in the company its compliancewith the laid down policies and procedures and ensure compliance with applicable laws andregulations. Based on the report of internal audit function process owners undertakecorrective action in their respective areas and thereby strengthen the controls.Significant audit observations and corrective actions thereon are reviewed deliberatedand presented to the Audit Committee of the Board.

5 Financial impact of COVID 2019 Based on the assessment carried out by the external NoImpact firm of Chartered Accountants for the Company there is no significant financialimpact of COVID-19.

6 Reconciliation of unidentified credits/debits in Bank The Company has a process inplace whereby all No Impact Reconciliation Statements entries in the bank statements areduly identified with the entries in the books of account and entries appearing in the bankstatements but not reflected in the books of account and vice versa are duly included inthe monthly bank reconciliation statement for giving necessary effect in the subsequentmonth.

7 Reviewing of old credit/debit balances. The Company has a process in place wherebyall old No Impact open debit and credit items are periodically reviewed for takingnecessary action to clear these items. Major percentage of old debit balances are underlitigation and the old credit balance is mainly due to international sanctions.

For V. Sankar Aiyar & Co. For CHOKSHI & CHOKSHI LLP
Chartered Accountants Chartered Accountants
FRN: 109208W FRN: 101872W/W100045
G Sankar Dhananajay Jaiswal
Partner Partner
Membership No. 46050 Membership No. 187686
UDIN: 21046050AAAAEB8567 UDIN: 21187686AAAAEB3361
Place: Mumbai
Date:13/05/2021

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