THE MEMBERS OF SUPREME TEX MART LIMITED
1. REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of Supreme Tex Mart Limited("the Company") which comprise the Balance Sheet as at March 31 2017 theProfit and Loss Statement and the Cash Flow Statement for the year then ended and asummary of significant accounting policies and other explanatory information.
2. 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 judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
3. AUDITORS' RESPONSIBILITY
Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made there under.
We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatements.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances but not for the purpose of expressing anopinion on whether the Company has in place an adequate internal financial controls systemover financial reporting and the operating effectiveness of such controls. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonablenessof the accounting estimates made by the Company's directors as well as evaluating theoverall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the financial statements
4. Emphasis on matter
The Company has prepared the accounts on going concern basis. The company has incurreda net loss of Rs. 4338.92 Lacs for the year ended 31st March 2017 (Rs.17884.09 Lacs) thecompany's current liabilities exceeded its current assets by Rs.16196.48 lacs and itstotal liabilities exceeded its total assets by Rs.19180.86 lacs. The lead bank State Bankof India and member banks ie Central Bank of India Union Bank of India SBER BankAllahabad Bank IDBI Bank and Canbank Factors Ltd have classified the accounts of thecompany as Non Performing Assets. The net worth of the company has been completely erodedas on the balance sheet date. The appropriateness of the going concern basis is inter aliadependent on the company's ability to turnaround the operations and ability of infusingrequisite funds for meeting its obligations and rescheduling of debts.
5. BASIS FOR QUALIFIED OPINION
Further we report that
i) The company has not provided for finance cost in respect of Banks/FinancialInstitutions except for Punjab & Sind Bank and UCO Bank but the company has neitherprovided nor acknowledge the liability in respect of other consortium banks and financialinstitutions. The exact quantification of interest/finance cost accrued during the yearhas not been ascertained. However as computed by the company an amount of Rs. 5857.57 Lacshas not been provided for which has resulted in understatement of loss and liabilitiesby Rs.5857.57 Lacs. (Refer Note No. 41 to the financial statements)
ii) In the absence of information of Secured Borrowings (Long Term and Short Term) weare unable to comment upon the exact liabilities towards banks and financial institutionsas on balance sheet date and its impact on financial statments.
iii) In the absence of details and records of liability towards creditors covered underthe Micro Small & Medium Enterprises Development Act 2006 we are unable to report thestatus as required by the Companies Act 2013.
iv) The company has credited capital reserve account by Rs. 4231.70 Lacs by writing offthe liability towards Banks/FI's and debited capital reserve by Rs. 420.91 Lacs byincreasing the liability towards Banks/FI's. The company has not produced any evidencefacilitating such adjustment. This has resulted in overstatement of reserves and surplusunder the head capital reserve and understatement of the liability by Rs. 3810.79 lacs.
v) The secured term loan borrowing except that of Punjab National Bank amounting to Rs.1560.33 lacs and IDBI amounting to Rs.1728.28 lacs should have been classified currentliabilities since recall notice under SARFAESI Act by all banks except Punjab & SindBank and UCO Bank has been served. This has resulted in overstatement of long termborrowing and understatement of current liabilities by Rs. 15876.18 Lacs.
vi) In respect of the following receivables the company has not provided completeinformation justifying their realiseability :
|Sr.No. Particulars || |
(Rs. In Lacs)
|i) Interest Receivable On account Interest Subsidy (Tuffs) || |
|ii) Insurance Claim Recoverable || |
|iii) Interest on Insurance Claim Recoverable || |
|iv) Amount Receivable (Union Bank) || |
|v) Amount Receivable (PNB) || |
|vi) FDR Receivable from Bank || |
|vii) Amount Receivable (Central Bank) || |
|viii) Vat (Notational) || |
|Total || |
The above receivables at Sr. (i) to (iii) amounting to Rs.2279.71 Lacs are outstandingfor last few years. The other receivables are due from banks who are secured creditors ofthe company. We are of the view that the bank in the normal course have adjusted theamount at Sr. No. (iv) to (vii) amounting to Rs.2232.43 Lacs against their outstanding.The necessary adjustment has not been made by the company. This has resulted inoverstatement of receivables and understatement of secured liabilities by Rs. 2232.43lacs. The consequential impact on the profit and loss amount has not been quantified bythe company.
vii) The company has made a provision for gratuity and leave encashment on estimatedbasis without actuarial valuation which in not in accordance with Accounting Standard-15on Employee Benefits. In the absence of actuarial valuation we are unable to comment onthe adequacy of the provision.
viii) The company has accounted for interest on security deposit with PSPCL amountingto Rs. 47.28 lacs on receipt basis against accrual method of accounting adopted by thecompany. In the absence of interest recoverable from PSPCL for the current year we areunable to quantify the effect of the same on loss of the company.
6. QUALIFIED OPNION
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 and Emphasis on matter paragraphs above the aforesaid financialstatements give the information required by the Act in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia of the state of affairs of the Company as at March 31 2017 and its loss and itscash flows for the year ended on that date.
7. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
As required by the Companies (Auditor's Report) Order 2016 issued by the CentralGovernment of India in terms of subsection (11) of Section 143 of the Act we give in the"Annexure - A" a statement on the matters specified in Paragraphs 3 and 4 ofthe order to the extent applicable.
8. As required by Section 143(3) of the Act we report that:
a. We have sought and obtained all the information and explanations except for thematters described in the Basis for Qualified Opinion and Emphasis on matter paragraphwhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;
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 Profit and Loss Statement and the Cash Flow Statement dealtwith by this Report are in agreement with the books of account.
d. In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014 except with the requirement of Accounting Standard (AS)-15 on"Employee Benefits" notified by the Companies (Accounts) Rules 2014;
e. On the basis of the written representations received from the directors as on March31 2017 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2017 from being appointed as a director in terms of Section 164 (2) ofthe Act.
f. 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"; and
g. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements as referred to in Note 26 to the financialstatements.
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any and as required on long-term contractsincluding derivative contracts.
iii. The company is not required to transfer any amount to the Investor Education andProtection 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 managementrepresentation we report that the disclosures are in accordance with books of accountmaintained by the Company and as produced to us by the Management Refer Note 47 tofinancial statements.
| ||For Datta Singla & Co. |
| ||Chartered Accountants |
| ||F.R.N. : 006185N |
|Place: Ludhiana ||Ashish Yashpal Bhardwaj |
|Dated: 30th May 2017 ||Partner |
| ||M. No. 501320 |