To the Members of Shalimar Wires Industries Limited
Report on the Financial Statements
We have audited the accompanying Financial Statements of SHALIMAR WIRES INDUSTRIESLIMITED ("the Company") which comprise the Balance Sheet as at 31st March2017 the Statement of Profit and Loss and the Cash Flow Statement for the year thenended and a summary of the Significant Accounting Policies and other explanatoryinformation.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies act 2013 ("the Act") with respect to the preparation ofthese Financial Statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions 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 judgements 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.
Our responsibility is to express an opinion on these Financial Statements based on ouraudit.
We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor's judgement including assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the Financial Statements.
Basis for Qualified Opinion
(a) In view of dissolution of the Board for Industrial & Financial Reconstruction(BIFR) with effect from 1st December 2016 present status of the matters which had beenpending before the BIFR particularly with regard to the Company's repayment schedules ofdebts are not presently ascertainable except in respect of ARCIL. However the Companycontinues to maintain same status quo in respect of the repayment schedules and followsame principles of accounting as followed earlier as the Company is in the processregistering with the National Company Law Tribunal (NCLT) with a suitable ResolutionScheme in continuation with the earlier sanctioned/proposed revival plans by the BIFR.
(b) No provision has been made against Long Term and Short Term Loans and Advancesgiven by the Company which remained unrealised for long amounting to Rs. 40617747 andRs.16094626 respectively (Refer Footnote- (i) of Note No.14 & Note No-19)
(c) No provision has been made for Claims Receivable remaining outstanding for longamounting to Rs. 2697618. (Refer Note No. 15)
(d) No provision has been made for Trade Receivables remaining outstanding for longamounting to Rs.11786175. (Refer Note No. 17)
(e) No provision has been made for Interest on Debentures and Interest on Term Loanpayable to IDBI for Rs. 45156396 and Rs.74200898 respectively due to reasons stated inFootnote No (b) (iii) to Note No. 4.
(f) The Accounting Standard on Contingent Liabilities have not been fully complied withas disclosed in Footnote No. 2 to 4 of Note No. 29 the quantum of non-provision inrespect whereof is not ascertained pending settlement / disposal of disputes.
(g) Non-provision of Items indicated in (a) to (f) above constitute a departure fromthe Accounting Standards referred to in Section 133 of the Act. Without considering ItemNos. (a) & (f) above whose impact on the Company's Statement of Profit and Loss ispresently non-ascertainable had the provisions indicated in Item Nos. (a) to (d) beenmade
(i) The Profit for the year would have decreased by Rs. 190553460
(ii) Long Term and Short Term Loans & Advances would have decreased byRs.40617747 and Rs. 16094626 respectively
(iii) Other Non-Current Assets would have decreased by Rs. 2697618
(iv) Trade Receivables would have decreased by Rs. 11786175
(vi) Other Current Liabilities would have increased by Rs. 119357294 and
(vii) The Shareholders' Fund would have been lower by Rs. 190553460
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matters described in the Basis for QualifiedOpinion paragraph above the aforesaid Financial Statements give the information by theAct in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at 31st March 2017 and its profit and its cash flows for the year ended on that date.
Emphasis of Matters
We draw your attention to the following matters in the Notes to the FinancialStatements:
1. Note No. 29 to the financial statements which describe the uncertainty related tothe outcome of the lawsuits indicated therein.
2. Note No. 37 in the financial statements which indicates that the Company hasaccumulated losses and its net worth has been fully eroded and the Company's currentliabilities exceeded its current assets as at the Balance Sheet date. These conditionsalong with other matters set forth in Notes to Financial Statements indicate theexistence of a material uncertainty that may cast significant doubt about the Company'sability to continue as a going concern. However although the Company incurred net loss inearlier years during the year the Company earned net profit. In view of above theseFinancial Statements of the Company have been prepared on a going concern basis for thereasons stated in the said Note.
Our opinion is not modified in respect of these matters.
Report on Other Legal and Regulatory Requirements
i) As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Sub-section (11) of Section 143of the Act we enclose in the Annexure - A a statement on the matters specified inthe said Order to the extent applicable to the Company.
ii) As required by Section 143(3) of the Act we report that
a) We have sought and except for the matters described in the Basis for QualifiedOpinion paragraph obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit;
b) Except for the possible effects of the matters described in the Basis for QualifiedOpinion paragraph above in our opinion proper books of account as required by law havebeen kept by the Company so far as 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 possible effects of the matters described in the Basis for QualifiedOpinion paragraph in our opinion the Balance Sheet the Statement of Profit and Loss andthe Cash Flow Statement comply with the Accounting Standards specified under Section 133of the Act read with Rule 7 of the Companies(Accounts) Rules 2014;
e) The matters described in the Basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company;
f) The going concern matter described in sub-paragraph (3) under the Emphasis ofMatters paragraph above in our opinion may have an adverse effect on the functioning ofthe Company;
g) On the basis of written representations received from the Directors as on 31stMarch 2017 taken on record by the Board of Directors none of the Director isdisqualified as on 31st March 2017 from being appointed as a director in terms of Section164(2) of the Act.
h) With respect to the adequacy of the Internal Financial Controls over FinancialReporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in Annexure - B.
i) With respect to the other matters to be included in the Auditor's Report inaccordance with amended
Rule 11 of the Companies (Audit and Auditors) Rules 2014 read with Rule 11(d) of theCompanies (Audit and Auditors) Amendment Rules 2017 in our opinion and to the best ofour information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition wherever ascertainable - Refer Note No. 29
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable loss.
iii. The Order dated 10th June 2010 of the erstwhile Board for Industrial andFinancial Reconstruction has exempted the Company from transferring any amount to theInvestor Education and Protection Fund.
iv. The Company has provided requisite disclosures in the financial statements as toholdings as well as dealings in Specified Bank Notes during the period from 8th November2016 to 30th December 2016. Based on audit procedures and relying on the managementrepresentations we report that subject to Footnote of Note No.31 regardingdenominations-wise details of the payments of non-permitted transactions in SBN currencydisclosures are in accordance with books of account maintained by the Company and asproduced to us by the Management - Refer Note .
| ||For S. S. KOTHARI & CO. |
| ||Chartered Accountants |
| ||FR No. 302034E |
| ||P. K. BHATTACHARYA |
|Place : Kolkata ||Partner |
|Date : 16th May 2017 ||(Membership No. 015899) |
Annexure - B to the Auditors' Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of ShalimarWires Industries Limited ("the Company") as of 31 March 2017 in conjunction withour audit of the Financial Statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India ('ICAI'). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on .Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our 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 operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement 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 controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with 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.
According to the information and explanations given to us and based on our audit thefollowing material weakness has been identified as at 31 March 2017 :
a) The Company's internal control system for customer acceptance credit evaluation andestablishing customer credit limits for sales need to be strengthened adequately so as tonegate the potential possibility of recognising revenue without establishing reasonablecertainty of ultimate collection.
A 'material weakness' is a deficiency or a combination of deficiencies in internalfinancial control over financial reporting such that there is a reasonable possibilitythat a material misstatement on the Company's annual or interim financial statements willnot be prevented or detected on a timely basis.
In our opinion except for the possible effects of the material weakness describedabove on the achievement of the objectives of the control criteria the Company hasmaintained in all material respects adequate internal financial controls over financialreporting and such internal financial controls over financial reporting were operatingeffectively as of March 31 2017 based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India.
We have considered the material weakness identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the March 31 2017Financial Statements of the Company and the material weakness does not affect our opinionon the Financial Statements of the Company.
| ||For S. S. KOTHARI & CO. |
| ||Chartered Accountants |
| ||FR No. 302034E |
| ||P. K. BHATTACHARYA |
|Place : Kolkata ||Partner |
|Date : 16th May 2017 ||(Membership No. 015899) |