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Vadilal Industries Ltd.

BSE: 519156 Sector: Agri and agri inputs
NSE: VADILALIND ISIN Code: INE694D01016
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OPEN 925.90
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VOLUME 2809
52-Week high 979.00
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Mkt Cap.(Rs cr) 679
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OPEN 925.90
CLOSE 921.85
VOLUME 2809
52-Week high 979.00
52-Week low 477.10
P/E
Mkt Cap.(Rs cr) 679
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Vadilal Industries Ltd. (VADILALIND) - Auditors Report

Company auditors report

To The Members of Vadilal Industries Limited

REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

Disclaimer of Opinion

We were engaged to audit the accompanying standalone financial statements of Vadilal Industries Limited (the Company) which comprise the Balance Sheet as at 31st March 2019 and the Statement of Profit and Loss (including Other Comprehensive Income) the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended and a summary of significant accounting policies and other explanatory information.

We do not express an opinion on the accompanying standalone financial statements of the Company. Because of the significance of the matters discussed in the Basis for Disclaimer of Opinion section of our report we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone financial statements.

Basis for Disclaimer of Opinion

We refer to the following.

1. Note 50(A) to the standalone financial statements describes disputes on various financial operational and governance matters between the promoter directors of the Company and the numerous allegations made against each other from August 2018 till July 2019 vide their respective communications to the Board of Directors of the Company. Furthermore two erstwhile Independent Directors have in their resignation letters dated June 19 2019 addressed to the Company have raised concerns in respect of the aforesaid disputes between the promoter directors and hostile environment in the meetings of the Board of Directors and its committees. We provided to the Audit Committee and Board of Directors our suggestions to have these allegations investigated by an independent external agency to determine whether any irregularities / non-compliances / illegalities have occurred in relation to the allegations. The promoter directors have communicated to Audit Committee and Board of Directors their withdrawal of all the above allegations on July 22 2019 except for the matters referred in Paragraphs 2 and 3 below.

As per a resolution passed by the Board of Directors on 30th March 2019 the promoter directors ceased to be Managing Directors of the Company and it was resolved in the same meeting to appoint Professional Management as Director / Manager / CEO for the Company and that in the interim period the Promoter Directors would continue to manage the business affairs of the Company without remuneration.

2. Note 50(B) to the standalone financial statements pertaining to the allegation made by Promoter Director 1 and the Chief Financial Officer on August 112018 with respect to potential personal expenses amounting to Rs25.33 lakhs as official business expenses by Promoter Director 2. The Board of Directors of the Company at their meeting held on March 30 2019 has initiated an independent investigation by an external consultant along with an external legal firm the scope of which inter-alia covers ascertainment of irregularities if any with respect to these potential personal expenses. As per the information and explanations given to us the external consultant is currently conducting their investigations and they may make a determination on whether the payments were inappropriate / illegal and its consequential impact if any including on compliance of relevant laws / regulations.

3. Note 50(B) to the standalone financial statements which refers to suspicion raised by Promoter Director 2 on July 22 2019 with respect to personal travel expenses of approximately Rs23 lakhs suspected to have been claimed as business expense by Promoter Director 1.

4. Note 41 to the standalone financial statements which refers to the status of on-going litigations filed against the Company under Section 241 and 242 of the Companies Act 2013 pertaining to prevention of oppression and mismanagement of the Company.

5. Due to the possible effects of the matters described in paragraphs 1 to 4 above we are unable to state whether the remuneration of Rs355.96 lakhs paid by the Company to its promoter directors during the year is in accordance with the provisions of section 197 of the Act and any consequential effect thereof on these standalone financial statements.

The Audit Committee and the Board of Director in their meeting held on August 23 2019 resolved to initiate independent inquiries into the matters referred in paragraph 1 and 3 above.

Pending completion of the aforesaid inquiries / investigations and resolution of the above matters we are unable to determine if any adjustments are necessary to the aforesaid financial statements on account of the aforesaid matters any restatement of prior years' including any consequential effect thereof.

Emphasis of Matter

We draw attention to footnote 5 of Note 46 to the standalone financial statements which describe the key terms of a contract entered into by the Company with Vadilal Enterprises Limited a related party for sale of its goods.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position financial performance including other comprehensive income cash flows and changes in equity of the Company in accordance with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended (Ind AS) and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the standalone financial statement that give a true and fair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone financial statements management is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company's financial reporting process.

Auditor's Responsibility for the Audit of the Standalone Financial Statements

Our responsibility is to conduct an audit of the entity's financial statements in accordance with the Standards on Auditing and to issue an auditor's report. However because of the matters described in the Basis of Disclaimer of Opinion section above we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone financial statements.

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(1)(e) we report that in respect of the expenses stated in paragraphs 2 and 3 of the Basis for Disclaimer of Opinion section above we are unable to comment on whether personal expenses have been charged to revenue account.

2. As required by Section 143(3) of the Act based on our audit we report to the extent applicable that:

a) As described in the Basis for Disclaimer of Opinion section above we have sought but were unable to obtain all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) Due to the possible effects of the matter described in the Basis for Disclaimer of Opinion section above we are unable to state whether proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

c) The Balance Sheet the Statement of Profit and Loss including Other Comprehensive Income the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account.

d) Due to the possible effects of the matters described in the Basis for Disclaimer of Opinion section above we are unable to state whether the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act.

e) The matter described in the Basis for Disclaimer of Opinion section above in our opinion may have an adverse effect on the functioning of the Company.

f) On the basis of the written representations received from the directors as on 31st March 2019 taken on record by the Board of Directors none of the directors is disqualified as on 31st March 2019 from being appointed as a director in terms of Section 164 (2) of the Act.

g) The reservation relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Disclaimer of Opinion paragraph above.

h) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls refer to our separate Report in Annexure A. Our report expresses an adverse opinion on the Company's internal financial controls over financial reporting for the reasons stated therein.

i) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act as amended due to the possible effects of the matter described in paragraph 1 to 4 in the Basis for Disclaimer of Opinion section above we are unable to state whether the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.

j) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended in our opinion and to the best of our information and according to the explanations given to us:

i. Due to the possible effects of the matters described in the Basis for Disclaimer of Opinion section above we are unable to state whether the Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements.

ii. The Company has made provision required under the applicable law or accounting standards for material foreseeable losses if any on long term contracts including derivative contracts.

iii. There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company except Rs0.15 lakh which is held in abeyance pending resolution of a legal dispute.

3. 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 on the matters specified in paragraphs 3 and 4 of the Order which is subject to the possible effects of the matters described in the Basis for Disclaimer of Opinion section above and the material weakness described in the Basis for Adverse Opinion in our separate Report on the Internal Controls over Financial Reporting.

For Deloitte Haskins & Sells LLP
Chartered Accountants
(Firm's Registration No.117366W/W-100018)
Kartikeya Raval
(Partner)
Date : August 23 2019(Membership No. 106189)
Place : AhmedabadUDIN: 19106189AAAAMZ2877

ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 2(h) under 'Report on Other Legal and Regulatory Requirements' of our report of even date)

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 (the Act)

We have audited the internal financial controls over financial reporting of Vadilal Industries Limited (the Company) as of March 312019 in conjunction with our audit of the standalone 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 internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to the company's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the internal financial controls over financial reporting of the Company based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note) issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Companies Act 2013 to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgement including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our adverse audit opinion on the Company's internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition use or disposition of the company'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 financial reporting including the possibility of collusion or improper management override of controls material misstatements due to error or fraud may occur and not be detected. Also projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Basis for Adverse Opinion

According to the information and explanations given to us and based on our audit a material weakness has been identified as at March 31 2019 relating to inadequate entity level controls with regards to assessment and closure of the various financial operational and governance related matters emanating out of the numerous allegations made by promoter directors and two erstwhile independent directors against each other and their consequential impact if any on the standalone financial statements of the Company.

A 'material weakness' is a deficiency or a combination of deficiencies in internal financial control over financial reporting such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

Adverse Opinion

In our opinion to the best of our information and according to the explanations given to us because of the possible effects of the material weakness described in Basis for Adverse Opinion paragraph above on the achievement of the objectives of the control criteria the Company has not maintained adequate and effective internal financial controls over financial reporting as of March 312019 based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

We have considered the material weakness identified and reported above in determining the nature timing and extent of audit tests applied in our audit of the standalone financial statements of the Company for the year ended March 312019 and the material weakness has affected our opinion on the said standalone financial statements of the Company and we have issued a disclaimer of opinion on the standalone financial statements of the Company.

For Deloitte Haskins & Sells LLP
Chartered Accountants
(Firm's Registration No.117366W/W-100018)
Kartikeya Raval
(Partner)
Date : August 23 2019(Membership No. 106189)
Place : AhmedabadUDIN: 19106189AAAAMZ2877

ANNEXURE B TO THE INDEPENDENT AUDITOR'S REPORT

Annexure referred to in paragraph 3 on Report on Other Legal and Regulatory Requirements' on our report of even date and to be read subject to the possible effects of the matters described in the Basis of Disclaimer of Opinion section above and the material weakness described in the Basis of Adverse Opinion in our separate Report on the Internal Controls over Financial Reporting.

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

(b) The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified in a phased manner over a period of three years. In accordance with this programme a portion of the fixed assets has been physically verified by the Management of the Company during the year and discrepancies noted on such verification have been properly dealt with the books of accounts. In our opinion this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.

(c) According to the information and explanations given to us and the records examined by us and based on the examination of the registered sale deed / transfer deed / conveyance deed provided to us we report that the title deeds comprising all the immovable properties of land and buildings which are freehold are held in the name of the Company as at the balance sheet date except for the following:

Particulars of the land and buildingGross Block (as at March 31 2019)Net Block (as at March 31 2019)Remarks
Freehold land located at Dwarka admeasuring 58096 Sq mtrs.Rs 338.44 lakhsRs 338.44 lakhsThe title deeds are not readily available.
Freehold land located at Bareilly admeasuring 94 Sq yrds.Rs 8.82 lakhsRs 8.82 lakhsThe title deeds are not readily available.
Residential Flat in Maruti Centre Ahmedabad admeasuring carpet area 4750 Sq FtRs 13.34 lakhsRs 4.72 lakhsThe title deeds are not readily available.
Investment property located at Mahalaya Complex Ahmedabad admeasuring 1360 Sq FtRs 20.69 lakhsRs 19.40 lakhsThe title deed is not yet on name of the Company
House Building Located at Pushpak Bungalows Hill Darshan Co. Op. Housing Society Limited Ahmedabad admeasuring 200 Sq. Yd.Rs 13.39 lakhsRs 8.64 lakhsThe title deeds are not readily available.

Immovable properties of freehold and leasehold land and buildings whose title deeds have been pledged as security for loans are held in the name of the Company based on the confirmation directly received by us from lender.

In respect of following immovable property of leasehold land & building and disclosed as fixed asset in the standalone financial statements final lease deed / sale agreement is yet to be executed in the name of the Company:

Particulars of the land and buildingGross Block (as at March 31 2019)Net Block (as at March 31 2019)
Leasehold land admeasuring 7825 Sq. Mtrs. at Bareily Uttar PradeshRs 586.82 lakhsRs 586.82 lakhs

(ii) As explained to us the inventories were physically verified during the year by the Management at reasonable intervals and no material discrepancies were noticed on physical verification.

(iii) The Company has not granted any loans secured or unsecured to companies firms Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act 2013.

(iv) In our opinion and according to the information and explanations given to us the Company has complied with the provisions of Sections 185 and 186 of the Companies Act 2013 in respect of grant of loans making investments and providing guarantees and securities as applicable.

(v) In our opinion and according to the information and explanations given to us the Company has complied with the provisions of Sections 73 to 76 or any other relevant provisions of the Companies Act 2013 and the Companies (Acceptance of Deposits) Rules 2014 as amended with regard to the deposits accepted except filing of annual return in Form DPT-3 as required under section 73(2) of the Companies Act 2013 read with rule 16 of Companies (Acceptance of Deposits) Rules 2014 as amended for the financial year 2018-19. According to the information and explanations given to us no order has been passed by the Company Law Board or the National Company Law Tribunal or the Reserve Bank of India or any Court or any other Tribunal.

(vi) To the best of our knowledge and according to the information and explanations given to us the Company is not required to maintain cost records pursuant to Companies (Cost Records and Audit) Rules 2014 as amended prescribed by the Central Government under section 148(1) of the Companies Act 2013.

(vii) According to the information and explanations given to us in respect of statutory dues:

(a) The Company has generally been regular in depositing undisputed statutory dues including Provident Fund Income-tax Sales Tax Service Tax Customs Duty cess Goods and Service Tax and other material statutory dues applicable to it to the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Provident Fund Income-tax Service Tax Customs Duty cess Goods and Service Tax and other material statutory dues in arrears as at March 312019 for a period of more than six months from the date they became payable.

(c) Details of dues of Sales tax Excise Duty and Income-tax which have not been deposited as on 31st March 2019 on account of disputes are given below:

Name of StatuteNature of DuesForum where dispute is pendingPeriod to which the amount relatesAmount involved (In Lacs)Amount unpaid (In Lacs)
1 Central Sales tax act and Sales tax act of various statesSales tax and penaltyHigh Court1998-9939.0723.24
Additional tax demandJT Comm S. Tax2000-0112.4912.49
Sales tax demandDC Appeal-4 Mehsana2000-0120.7415.74
Sales tax demandDy. Comm S. Tax2001-021.551.55
Sales tax demandSales Tax Tribubal Bhubneshwar2002-032.100.60
Sales tax asst duesJC-1 Appeal Ahmedabad2003-042.392.39
Purchase taxJC-1 Appeal Ahmedabad2003-040.460.46
Sales taxSales Tax Tribunal2004-053.673.67
Sales tax and penaltySales Tax Tribunal2010-1124.8114.81
Sales taxAdnl Comm Grade-22012-132.391.42
Sales taxAdnl Comm Grade-22013-143.081.54
Sales taxAdnl Comm Grade-22016-1745.8430.25
Sales taxJC-Corporate Bareilly2010-118.027.25
Sales taxAdnl Comm Grade-2 Appeal Bareilly2013-149.344.67
Sales taxAdnl Comm Grade-2 Appeal Bareilly2012-130.66-
Sales taxAdnl Comm Grade-2 Appeal Bareilly2017-180.25-
Sales taxAdnl Comm Grade-2 Appeal Bareilly2015-163.832.50
Sales taxDeputy Commissioner Sales Tax2004-050.19-
2 Central Excise Act 1944Excise dutyAsst. Commissioner1988-894.584.58
Excise dutyAsst. Commissioner2003-044.284.28
Excise dutyCustoms Excise & Service Tax Appellate Tribunal2011-12 to 2014-1534.1434.14
3 Income tax Act 1961Income taxAO2007-0828.7728.21
Income taxITAT1996-971.931.93
Income taxAO2006-071.371.37
Income taxCircle 4 (1)(2) Ahmedabad2015-167.727.53
Income taxCircle 4 (1)(2) Ahmedabad2016-1733.0833.08
Income taxHigh Court1992-9350.4650.46

(viii) In our opinion and according to the information and explanations given to us the Company has not defaulted in the repayment of loans or borrowings to banks and financial institutions. The Company has not taken any loans or borrowings from government or has not issued any debentures.

(ix) In our opinion and according to the information and explanations given to us money raised by way of term loans has been applied by the Company during the year for the purpose for which they were raised other than temporary deployment pending application of proceeds. The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments).

(x) Except for the possible effects of the matters described in the Basis for Disclaimer of Opinion section in our audit report on the Financial Statements on which we are unable to comment to the best of our knowledge and according to the information and explanation given to us no fraud by the Company and no material fraud on the Company has been noticed or reported during the year.

(xi) Due to the possible effects of the matter described in paragraph 1 to 4 in the Basis for Disclaimer of Opinion section above we are unable to state whether the remuneration paid by the Company to its promoter directors during the year is in accordance with the provisions of section 197 of the Act.

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of the Order is not applicable.

(xiii) In our opinion and according to the information and explanations given to us and considering the legal opinion taken by the Company on the compliances with the provisions of section 177 and 188 of the Companies Act 2013 in respect of an agreement entered into by the Company with Vadilal Enterprises Limited a related party (Refer footnote 5 of Note 46 to the standalone financial statements) the Company is in compliance with Section 188 and 177 of the Companies Act 2013 where applicable for all transactions with the related parties and the details of related party transactions have been disclosed in the standalone financial statements etc. as required by the applicable accounting standards.

(xiv) During the year the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures and hence reporting under clause (xiv) of the Order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us during the year the Company has not entered into any non-cash transactions with its directors or directors of its subsidiaries or persons connected with them and hence provisions of section 192 of the Companies Act 2013 are not applicable.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

For Deloitte Haskins & Sells LLP
Chartered Accountants
(Firm's Registration No.117366W/W-100018)
Kartikeya Raval
(Partner)
Date : August 23 2019(Membership No. 106189)
Place : AhmedabadUDIN: 19106189AAAAMZ2877

   

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