Auditor Report of Cranes Software International Ltd.
Mar 31, 2023
INDEPENDENT AUDITOR''S REPORT
To the members of CRANES SOFTWARE INTERNATIONAL LIMITED
Report on the Audit of the Standalone Ind AS Financial Statements
Qualified Opinion
We have audited the accompanying Standalone Financial Statements of Cranes Software International Limited
("the Company"), which comprise the Balance Sheet as at March 31,2023, the Statement of Profit and Loss
(including Other Comprehensive Income), and the Statement of Cash Flows for the year ended on that date and
a summary of significant accounting policies and other explanatory information (hereinafter referred to as the
"Standalone Financial Statements").
In our opinion and to the best of our information and according to the explanations given to us except for the
effect of the matters described in the "Basis for Qualified Opinion" section of our report, the aforesaid Standalone
Financial Statements give the information required by the Companies Act, 2013 (the "Act") in the manner so
required and give a true and fair view in conformity with the Accounting Standards prescribed under section 133
of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting
principles generally accepted in India, of the state of affairs of the Company as at March 31,2023 and its loss,
total comprehensive income, changes in equity and its cash flows for the year ended on that date.
We conducted our audit in accordance with the standards of auditing (SAs) specified under section 143(10) of
the Act. Our responsibilities under these standards are further described in the Auditor''s Responsibilities for the
audit of the statement section of our report. We are independent of the company in accordance with the code of
ethics issued by the institute of Chartered Accountants of India (The ICAI) together with the ethical requirements
that are relevant to our audit of the financial statements under the provisions of the Act and the rules there under
and we have fulfilled our other ethical responsibilities in accordance with these requirements and the code of
ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our
opinion
1. The attached Balance Sheet as at 31st March, 2023 is drawn on the basis of the Principle of ''Going
Concern''. We opine as follows in this connection:
i. Due to Negative Net-worth and pending cases, it cast a significant uncertainty on the Company ability
to continue as a going concern, however the management is hopeful for recovery hence the financials
result prepared on going concern basis.
ii. Investment - As per Company accounting policy the Company has adopted fair value model to value
the investment, but the company has been continuously valued all investment at cost price. Due to
non-availability of current market value of investments we are unable to comment on the quantum of fair
value adjustments required by the company. Details of Investment and Net-worth is as follows.
iii. Expected credit loss: following assets are non-performing in nature hence As per IND AS 109 "Financials
instrument" the company needs to provide ECL by following lifetime ECL model.
iv. Legal proceedings u/s.138 of the Negotiable Instruments Act has been initiated by Bank of India.
v The Company has been defaulted in booking and payment of various statutory dues to various statutory
authorities.
vi. In our opinion the securities provided to Banks are not adequate to cover the amounts outstanding to
them as on the date of Balance Sheet.
vii. Loan availed by the company from ''UPS Capital Business Credit'' remains unpaid and is overdue since
April 2014. The management is of the view that the liability of INR 696.37 lakhs (including interest)
reflected in the financial statements will adequately cover its liability on settlement of dues and therefore
no provision for interest is provided for the period ended 31st March, 2023.
viii. In continuation to the point ''vii'' above, the company has also discontinued the restatement of the
Exchange fluctuation gain / loss on account of the outstanding due towards ''UPS Capital Business
Credit'' and the interest due thereon, in line with the Ind AS-21 "The Effects of Changes in Foreign
Exchange Rates". Had such restatement of liability been made in the books in the normal course, the
present loss for the period ended 31st March,2023
ix. The banks which had extended financial facilities to the company have treated the outstanding from
the company as "Non-Performing Assets" since 2009. In order to achieve the desired congruency on
this issue, the Company has also not provided for interest amounting to INR 5050.28 lakhs on such
outstanding amounts for the period ended 31st March, 2023 due to various banks, though the
confirmation of such dues were not made available to us from the respective banks/financial institutions.
Had the said interest been provided in the books in the normal course, the present loss for the period
ended 31st March, 2023 would have been higher by INR 5050.28 lakhs.
x. Wilful defaulter: The bank of India has declared Company and promotors as "wilful defaulter".
xi. The management is in negotiation with the Foreign currency convertible bond holders for settling its
dues. The management is of the view that the liability of INR 38,695 lakhs (including interest amounting
to INR 9,610 lakhs) reflected in the financial statements will adequately cover its liability on settlement
of dues with the Foreign currency convertible bond holders and therefore no provision for interest is
provided for the period ended 31st March, 2023. Had such interest been provided in the books in the
normal course, the present loss for the period ended 31st March, 2023 would have been higher by INR
1654.73 lakh
xii. In continuation to the point ''xi'' above, the company has also discontinued the restatement of the
Exchange fluctuation gain / loss on account of the outstanding due towards Foreign currency convertible
bond and the interest due thereon, in line with the IND AS-21 "The Effects of Changes in Foreign
Exchange Rates". Had such restatement of liability been made in the books in the normal course, the
present loss for the period ended 31st March, 2023 would have been higher by INR 1890.00 lakhs.
xiii. There are undisputed statutory dues including dues on current year''s transactions, on account of
Provident Fund Contribution, Employee State Insurance, Income Tax, Service tax, Sales Tax, Goods
and Service tax, Dividend Distribution Tax and the like, not deposited by the Company in favour of the
respective statutory authorities.
xiv. The company has not complied with RBI guidelines since March 2011
We conducted our audit of the Standalone Financial Statements in accordance with the Standards on Auditing
("SA"s) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described
in the Auditor''s Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are
independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants
of India ("ICAI") together with the ethical requirements that are relevant to our audit of the Standalone Financial
Statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical
responsibilities in accordance with these requirements and the ICAI''s Code of Ethics. We believe that the audit
evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the Standalone
Financial Statements.
The attached Balance Sheet as at 31st March, 2023 is drawn on the basis of the Principle of ''Going Concern''. We
opine as follows in this connection:
a. Redemption of Foreign currency convertible bond
Redemption of Foreign currency convertible bond amounting to INR. 29,085.00 lakhs (42 million Euros)
to the holders of the bonds have fallen due during April 2011 and is yet to be redeemed as on the date
of Balance Sheet. On a petition filed by the Foreign currency convertible bond holders, The Hon''ble
High Court of Karnataka issued a winding up order against the company, which indicates the existence
of material uncertainty that may cast significant doubt on the company''s ability to continue as a going
concern.
b. Term loans and working capital loan availed by the company from Bank of India amounting to INR
39,006.21 lakhs remain unpaid and are overdue since 2009, remain unpaid and are overdue since 2009.
The lender has filed cases before the Debt Recovery Tribunal (DRT) / Hon''ble Courts, etc for recovery of
dues. These proceedings are in various stages of disposal before the "DRT" and the respective Hon''ble
Courts. Winding up petition has been filed by Bank of India against the company, before the Hon''ble
High Court of Karnataka for non-payment of principal and the accrued interest thereon.
c. In our opinion the securities provided to Banks are not adequate to cover the amounts outstanding to
them as on the date of Balance Sheet.
d. We would like to draw the attention of the members to note no. 25 of the standalone Ind AS Financial
Statements regarding default of payments to various statutory authorities.
e. We draw attention to Note No. 33 of the standalone Ind AS Financial Statements regarding the
investments (including receivables) made in wholly owned subsidiaries. As explained by the management,
it being a long term and strategic investment, there is a reasonable certainty that there will be no
diminution in the value of the investment and is confident of recovery of receivables and therefore no
provisioning has been considered necessary. The details of investments (including receivables) in
subsidiaries are as under.
f. The company had invested in the below mentioned wholly owned subsidiaries. Due to the cumulative
losses in the subsidiaries, the value of investment is eroded.
g. The company has not provided for diminution / impairment in the value of its investments in the above
wholly owned subsidiaries, as required by the IND AS-36.
h. The Company has drawn and utilized an amount INR 43.78 lakhs from the ''CSIL Employees
Comprehensive Gratuity Trust'' fund for the purpose not intended in terms of ''The Payment of Gratuity
Act, 1972''.(See note No. 14 of the Financial Statements)
i. The company has provided for doubtful debts of INR 1,606.35lakhs during the year, towards due from a
subsidiary.
j. We would like to draw the attention of the members to note no. 22 of the financial statements regarding
write off of advance due from a subsidiary amounting to INR 4794.30 lakhs. The company has not
complied with the required permissions from the regulatory authorities towards the write off of advances.
k. We would like to draw the attention of the members to note no. 22 of the financial statements regarding
write back of advances due to a subsidiary amounting to INR 1660.35 lakhs. The company has not
complied with the required permissions from the regulatory authorities towards the write back of advances.
l. There are undisputed statutory dues including dues on current year''s transactions, on account of
Provident Fund Contribution, Employee State Insurance, Income Tax, Service tax, Sales Tax, Goods
and Service tax, Dividend Distribution Tax and the like, not deposited by the Company in favor of the
respective statutory authorities.
m. Earnings in foreign exchanges are not realized within the periods stipulated under FEMA and permission
is awaited from the statutory authorities to write off the same.
n. The management is of the opinion that the all assets, investments have at least the value as stated in
the Balance Sheet, if realized in the ordinary course of business.
Our Report is not qualified in respect of the above matters.
Key Audit Matters(a) Adoption of Ind AS 115- Revenue from contracts with customers:
As described in note number 2B to the financial statements, the company has adopted Ind AS 115 Revenue
from Contracts with Customers which is the new accounting standard. Considering the nature of the industry,
where revenue is recognized on basis the terms of each contract with customers, these commercial
arrangements can be complex and significant judgments relating to identification of distinct performance
obligations, determination of transaction price of identified performance obligation and the appropriateness
of basis used to measure revenue recognized over the time period is applied in selecting the accounting
basis in each case. Additionally, new revenue accounting standard contains disclosures which involves
disaggregated revenue and periods over which the remaining performance obligations will be satisfied
subsequent to the balance sheet date.
(b) Assessment of the appropriateness of provisions recognized and contingent liabilities disclosed
in respect of certain tax matters
(Refer notes 27 of the standalone Ind AS financial statements and Annexure A of the Audit Report)
As at March 31,2023, the Company has significant tax exposures and is subject to periodic assessments/
challenges by tax authorities on transfer pricing, income tax and a range of indirect tax matters.
Consequent to such tax assessments and demands relating to past several years, the Company has paid
certain amounts under protest at various dates. The Company has also filed appeals with various appellate
authorities against such demands.
Management judgement is involved in assessing the likelihood of ultimate outcome of the tax disputes to
decide on the accounting/ disclosure requirements. In certain complex matters the probable amount of the
outflows determined by management is supported by opinions obtained from external tax counsels/ experts
(management tax experts).
We considered this a key audit matter as:
a. The amounts involved are significant to the standalone Ind AS financial statements
b. Change in the management''s judgements and estimates may significantly affect the provisions
recognized or contingent liabilities disclosed
c. Matters of disputes are complex in some cases due to the industry in which the Company operates
and may lack clarity under tax laws.
How our audit addressed the key audit mattersOur responses:
We assessed the Company''s process to identify the impact of adoption of the new revenue accounting standard.
Our audit procedures to address the risk of material misstatement relating to revenue recognition includes
testing of design and operating effectiveness of controls and substantive procedures as follows:
a. Evaluated the design and operating effectiveness of internal controls relating to the implementation of new
revenue standard;
b. Evaluated detailed analysis performed by the management on each stream of revenue contracts.
c. Selected samples from all streams of contracts to carry out a detailed analysis on recognition of revenue as
per the five steps given in standard. Performed revenue transaction testing on samples selected from each
stream of revenue where each input to revenue recognition, including estimates
Our audit procedures included the following:
a. Understood, assessed and tested the design and operating effectiveness of the Company''s controls in
respect of identifying potential tax exposures and/or the accounting and disclosures thereof.
b. Evaluated the related accounting policy for provisioning for tax exposures/ disclosure of contingent liabilities.
c. Obtained management''s assessment in respect of tax demands on whether tax outflow is either probable,
possible or remote.
d. Along with the auditors'' experts, where necessary, evaluated the management''s assessment as follows:
o Read the correspondences received during the year from the tax authorities.
o Read views provided by the management, management tax experts as applicable.
o Assessed management''s positions on significant tax exposures for reasonableness.
o Ensured completeness of litigations by inquiring with the management, review of board minutes, and
review of significant legal expenses.
o Evaluated the objectivity, competence and capabilities of the management tax experts
o Evaluated the adequacy of disclosures made in the standalone Ind AS financial statements.
Based on the above procedures, we considered the management''s assessment in recognizing provisions and
disclosing contingent liabilities in respect of the stated tax matters, as reasonable.
Information Other than the Standalone Ind AS financial statements and Auditor''s Report thereon
The Company''s Board of Directors are responsible for the preparation of the other information. The other information
comprises the information included in the Board''s Report including Annexures to Board''s Report, Business
Responsibility Report but does not include the financial statements and our auditor''s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the accompanying financial
statements or our knowledge obtained during the course of our audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Management''s Responsibility for the Standalone Ind AS financial statements
The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act,
2013 ("the Act") with respect to the preparation of these standalone Ind AS financial statements that give a true
and fair view of the financial position, financial performance and cash flows of the Company in accordance with
the accounting principles generally accepted in India, including the Accounting Standards specified under Section
133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes
maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of 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 financial statements that give a true and fair view and are free from material misstatement, whether due to
fraud or error.
In preparing the 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 on the accompanying Financial Statements
Our objective is to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
a. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
b. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible
for expressing our opinion on whether the company has adequate internal financial controls system in
place and the operating effectiveness of such controls.
c. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
d. Conclude on the appropriateness of management''s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures
in the financial statements or, if such disclosures are inadequate, to modify our opinion. our conclusions are
based on the audit evidence obtained up to the date of our auditor''s report. However, future events or
conditions may cause the Company to cease to continue as a going concern.
e. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,
and whether the financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or aggregate
makes it probable that the economic decisions of a reasonably knowledgeable user of standalone financial
statement may be influenced. We consider quantitative materiality and quantitative factors in (i) planning the
scope of audit work and evaluating the results thereof; and (ii) to evaluate the effect of any identified misstatements
in standalone financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the standalone financial statements of thecurrent period and are therefore the
key audit matters. We describethese matters in our auditor''s report unless law or regulation precludes public
disclosure about the matter or when, in extremelyrare circumstances, we determine that a matter should not
becommunicated in our report because the adverse consequencesof doing so would reasonably be expected to
outweigh the publicinterest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143(3) of the Act, based on our audit we report that:
a) We have sought and obtained all the information and explanations which to the best of 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 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, Statement
of Changes in Equity and the Statement of Cash Flows dealt with by this Report are in agreement with
the books of account.
d) In our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards
specified under Section 133 of the Act.
e) Three out of four Directors of the company being directors of other companies which have not filed its
annual return with the Registrar of Companies for a period of more than 3 years as on the date of
Balance Sheet, leading to non-compliance and disqualification from being appointed as a director. The
Registrar of the Companies Karnataka had ordered for removal of directors in terms of Section 164(2) of
the Companies Act, 2013. The said directors have obtained an interim stay from the Hon''ble High Court
of Karnatakaon 26th of October 2018On the basis of the written representations received from the
directors as on March 31,2023 taken on record by the Board of Directors, none of the directors is
disqualified as on March 31,2023 from being appointed as a director in terms of Section 164(2) of the
Act.
f) 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 unmodified opinion on the adequacy and operating effectiveness of the Company''s
internal financial controls over financial reporting.
g) 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: In our opinion and to the best of our information
and according to the explanations given to us, the remuneration paid by the Company to its directors
during the year is in accordance with the provisions of section 197 of the Act.
h) 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:
1) The Company has disclosed the impact of pending litigations on its financial position in its
Standalone Financial Statements.
2) The Company has made provision, as required under the applicable law or accounting standards,
for material foreseeable losses, if any, on long-term contracts including derivative contracts.
3) The Company was not required to transfer any amounts to the Investor Education and Protection
Fund.
4) (a) The Management has represented that, to the best of its knowledge and belief, no funds (which
are material either individually or in the aggregate) have been advanced or loaned or invested
(either from borrowed funds or share premium or any other sources or kind of funds) by the
Company to or in any other person or entity, including foreign entity ("Intermediaries"), with the
understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether,
directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever
by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the
like on behalf of the Ultimate Beneficiaries;
(b) The Management has represented, that, to the best of its knowledge and belief, no funds
(which are material either individually or in the aggregate) have been received by the Company
from any person or entity, including foreign entity ("Funding Parties"), with the understanding,
whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly,
lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the
Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of
the Ultimate Beneficiaries;
(c) Based on the audit procedures that have been considered reasonable and appropriate in the
circumstances, nothing has come to our notice that has caused us to believe that the
representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above,
contain any material misstatement.
2. As required by the Companies (Auditor''s Report) Order, 2020 (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.
Chartered Accountants
Registration No.118424W
Partner
Membership No.009889
October 25, 2023 UDIN : 23009889BGWUYK5714
Bengaluru
Mar 31, 2015
1. We have audited the accompanying standalone financial statements of
Cranes Software International Limited ("the Company"), which comprise
the Balance Sheet as at 31st March, 2015, the Statement of Profit and
Loss, the Cash Flow Statement for the year then ended, and a summary of
the significant accounting policies and other explanatory information.
2. The Company's Board of Directors is responsible for the matters
stated in Section 134(5) of the Companies Act, 2013 ("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 and cash flows of the Company in accordance with the
accounting principles generally accepted in India, including the Ac-
counting Standards specified under Section 133 of the Act, read with
Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility
also includes maintenance of adequate accounting records in accordance
with the provisions of the Act for safeguarding of 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 main- tenance 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 financial
statements that give a true and fair view and are free from material
misstatement, whether due to fraud or error.
3. Our responsibility is to express an opinion on these standalone
financial statements based on our audit. We have taken into account the
provisions of the Act, the accounting and auditing standards and
matters which are required to be included in the audit report under the
provisions of the Act and the Rules made there under.
4. We conducted our audit in accordance with the Standards on Auditing
specified under Section 143(10) of the Act and other applicable
authoritative pronouncements issued by the Institute of Chartered
Accountants of India. Those Standards and pronouncement require that we
comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free from material misstatement.
5. An audit involves performing procedures to obtain audit evidence
about the amounts and the disclosures in the standalone financial
statements. The procedures selected depend on the auditor's judg- ment,
including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those
risk assessments, the auditor considers internal financial control
relevant to the Company's preparation of the financial statements that
give a true and fair view in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing
an opinion on whether the company has in place adequate internal
financial controls system over financial reporting and the operating
effectiveness of such controls. An audit also includes evaluating the
appropri- ateness of the accounting policies used and the
reasonableness of the accounting estimates made by the Company's
Directors, as well as evaluating the overall presentation of the
financial statements.
6. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion on the
standalone financial statements.
Basis for Qualified Opinion
7. The attached Balance Sheet as at 31st March, 2015 is drawn on the
basis of the Principle of 'Going Concern'. We opine as follows in this
connection :
7.1 An advance of Rs. 23,958.53 lakhs is due from a party for an
inordinate period and in our opinion recovery of the same is doubtful.
However, the company continues to classify such amounts as 'Good'.
However, no evidence has been given to us to consider those amounts as
recoverable as on the date of Balance Sheet.
7.2 Attention of the members is invited to note 3.11 of the Notes
regarding recognition of deferred tax credit on account of unabsorbed
losses and allowances aggregating to Rs.26,965.82 lakhs (year ended
March 31, 2014 Rs. 22,559.89 lakhs). This does not satisfy the virtual
certainty test for recognition of deferred tax credit as laid down in
Accounting Standard 22.
7.3 Reference is drawn to note no. 3.33 of the Notes regarding the
amounts classified under "Fixed As- sets" including "Intangible Assets
Under Development" amounting to Rs. 32,252.28 lakhs. No evi- dence has
been produced before us for testing its impairment and in the absence
of the same, we are unable to express any opinion on the impairment to
such asset. In our opinion, such test of impairment as on the date of
Balance Sheet is mandatory, especially in view of the higher degree of
the obsoles- cence of software which is stated to be under various
stages of development, though no further devel- opments have been
carried out during the recent years.
7.4 The appropriateness of the 'Going Concern' concept based on which
the accounts have been prepared is interalia dependent on the Company's
ability to infuse requisite funds for meeting its obligations,
rescheduling of debt and resuming normal operations.
8 We further report that, except for the effect, if any, of the matters
stated in paragraphs 7.3 above, whose effect are not ascertainable, had
the observations made in paragraphs 7.1 and 7.2 above been considered,
the loss after tax for the year ended March 31, 2015 would have been
higher by Rs. 50,924.36 lakhs.
Qualified Opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the matters expressed in Basis for
Qualified opinion and Emphasis of matter paragraph the aforesaid
standalone financial statements give the information required by the
Act in the manner so required and give a true and fair view in
conformity with the accounting principles generally accepted in India,
of the state of affairs of the Company as at 31st March, 2015, its loss
and its cash flows for the year ended on that date.
Emphasis of Matter
1. Redemption of Foreign currency convertible bond amounting to Rs.
28,354.20 lakhs (42 million Euros) to the holders of the bonds have
fallen due during April 2011 and is yet to be redeemed as on the date
of Balance Sheet. A winding up petition has been filed by the trustees
of the Foreign Currency Convertible Bond holders against the Company,
before the Hon'ble High Court of Karnataka for non-payment of principal
and the accrued interest thereon.
2. Term loans and working capital loans availed by the company from
various banks amounting to Rs. 58,550.95 lakhs, which includes an
amount of Rs. 4,425.04 lakhs taken over by an Asset Reconstruction
Company, remain unpaid and are overdue since 2009. The lenders have
filed cases before the Debt Recovery Tribunal (DRT) / Hon'ble Courts,
etc for recovery of dues. These proceedings are in various stages of
disposal before the "DRT" and respective Hon'ble Courts. Winding up
petitions have been filed by Canara Bank and Bank of India against the
company, before the Hon'ble High Court of Karnataka for non-payment of
principal and the accrued interest thereon.
3. SBI Capital, a Creditor, has initiated a winding up petition
against the company, before the Hon'ble High Court of Karnataka for
non-payment of its dues.
4. In our opinion the securities provided to Banks are not adequate to
cover the amounts outstanding to them as on the date of Balance Sheet.
5. We would like to draw the attention of the members to note no. 3.27
of the financial statements regarding default of payments to various
statutory authorities.
6. We further draw attention on the following non compliances under
the Companies Act, 2013 and rules thereon
a. Non-appointment of Woman Director as required under the second
proviso to Section 149(1) of the said Act.
b. Non-appointment of Chief Financial Officer as required under
section 203 of the said Act.
c. The Company has drawn and utilised an amount Rs. 43.77 lakhs from
the 'CSIL Employees Comprehensive Gratuity Trust' fund for the purpose
not intended in terms of 'The Payment of Gratuity Act, 1972'.(See note
No. 3.05 of the Financial Statements)
Our Report is not qualified in respect of the above matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2015 ("the
order"), issued by the Central Govern- ment of India in terms of
sub-section (11) of section 143 of the Act, we give in the Annexure a
statement on the matters specified in paragraphs 3 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 best of 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 the Company so far as it appears from our examination of
those books;
(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash
Flow Statement dealt with by this Report are in agreement with the
books of account.
(d) In our opinion, except for the matters expressed in paras 7.2 and
7.3 of the Basis for Qualified opinion, the aforesaid standalone
financial statements comply with the Accounting Standards specified
under Section 133 of the Act, read with Rule 7 of the Companies
(Accounts) Rules, 2014.
(e) In our opinion, the qualifications and matters specified in the
"Emphasis of Matter" paragraph, 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 31 st March, 2015 taken on record by the Board of
Directors, none of the directors is disqualified as on 31st March, 2015
from being appointed as a director in terms of Section 164 (2) of the
Act.
(g) 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, in our opinion and 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
financial position in its finan- cial statements - Refer Note No. 3.27
to the financial statements;
ii. The Company did not have any long-term contracts including
derivative contracts for which there were any material foreseeable
losses;
iii. The Company has not transferred an amount of Rs. 3.93 Lakhs,
which is required to be trans- ferred to the Investor Education and
Protection Fund.
ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT
The Annexure referred to in our Independent Auditor's re port to the
members of Cranes Software International Limited ('the Company') on the
standalone financial statements for the year ended on 31st March 2015.
We report that:
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 fixed assets are verified in a phased manner over
a period of three years. In accordance with this programme, certain
fixed assets were verified during the year and no material
discrepancies were noticed on such verification. In our opinion, this
periodicity of physical verification is reasonable having regard to the
size of the Company and the nature of its assets.
ii) (a) In our opinion and according to the information and
explanations given to us, the management has conducted the physical
verification of inventory at reasonable intervals during the year under
review.
(b) In our opinion and according to the information and explanations
given to us, the procedures of physical verification of inventory
followed by the management are reasonable and adequate in relation to
the size of the Company and nature of its business.
(c) According to the information and explanations given to us, we are
of the opinion that the Company is maintaining proper records of
inventory and no material discrepancies were noticed on their physical
verification.
iii) (a) The Company has in the past granted interest free loans to its
subsidiary companies covered in the register maintained under section
189 of the Companies Act, 2013. However, the Company has not granted
any loan, secured or unsecured, to firms or other parties covered in
the register maintained under section 189 of the Companies Act, 2013.
(b) In the case of the loans granted to the bodies corporate listed in
the register maintained under section 189 of the Act, the terms of
arrangements do not stipulate any repayment schedule and the loans are
repayable on demand. Accordingly, paragraph 3(iii)(b) of the Order is
not applicable to the Company in respect of repayment of the principal
amount.
(c) There are no overdue amounts of more than rupees one lakh in
respect of the loans granted to the bodies corporate listed in the
register maintained under section 189 of the Act.
iv) In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the company and the nature of its business, with
regard to the purchase of inventory and fixed assets and for the sale
of goods and services. We have not observed any major weakness in the
internal control system during the course of the audit.
v) The company has not raised any deposits from public as covered by
provisions of Sections 73 to 76 or any other relevant provisions of the
Companies Act and the rules framed thereunder.
vi) The Central Government has not prescribed the maintenance of cost
records under section 148(1) of the Act, for any of the services
rendered by the Company.
vii) (a) On Examination of the books of accounts and other records of
the Company we report that the company has defaulted in depositing its
undisputed statutory dues including Provident Fund, Investors Education
and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax,
Service Tax, Wealth Tax, Customs duty, and Cess with the appropriate
authorities. The following statutory liabilities are pending for
payment for a period of more than six months from the date they became
payable:
(Rs. In Lakhs)
Name of the Statute Nature of dues Amount to
be paid
Employee's Provident
Fund & Miscellaneous
Provision Act Provident Fund 12.19
Employees State
Insurance Act ESI 3.85
Income Tax Act Withholding Taxes 271.27
Finance Act Service Tax 184.49
Commercial Taxes Act Sales Tax/Value Added Tax 71.26
Income Tax Act Self Assessment Tax 89.02
Wealth Tax Act Wealth Tax 0.88
Income Tax Act Dividend Distribution Tax 273.88
Income Tax Act Fringe Benefit Tax 0.41
Investor Education
Protection Fund Unclaimed Dividend 0.97
(b) According to the information and explanations given to us, there
are no disputed amounts as at 31st March 2015 in respect of Provcident
Fund, Employees' State Insurance, Income Tax, Sales Tax, Service Tax,
Wealth Tax, Customs duty and Cess and other applicable statutory dues
with the exception of the following:
(Rs. In Lakhs)
Period to
Name of the statute Nature of dues Amount which amount
relates
Income Tax Act, 1961 Income Tax 6728.44 2009-10
Chapter V of the 2004-05 to
Finance Act, 1994 Service Tax 756.02 2007-08
Chapter V of the 2008-09 to
Finance Act, 1994 Service Tax 630.45 2012-13
The Employees
Provident Employer and 51.87 1996-1997 to
Fund and Miscellaneous Employee 2013-14
Provisions Act, 1972 Provident Fund
The Foreign Exchange Penalty for 50.00 2006
Regulation Act, 1999 Contravention of
Section 42(1) of
the FEMA, 1999
Name of the Statute Forum where dispute is pending
Income Tax Act, 1961 Income Tax Appellate Tribunal
Chapter V of the Finance Act, 1994 Customs, Excise and Service Tax
Appellate Tribunal
Chapter V of the Finance Act, 1994 Commissioner, Service Tax, Bangalore
The Employees Provident Fund Assistant / Regional Provident Fund
Commissioner
The Foreign Exchange Regulation
Act, 1999 Director, Directorate of Enforcement.
(c) According to the information and explanations given to us, an
amount of Rs. 3.93 Lakhs required to be transferred to investor
education and protection fund in accordance with the relevant
provisions of the Companies Act, 1956 (1 of 1956) and rules made
thereunder has not been transferred to such fund within time.
viii) The Company has accumulated losses amounting to Rs. 12,600 lakhs
as at March 31, 2015 which is more than 50% if its Net worth. The
Company has also incurred cash losses of Rs. 3,733.89 lakhs in the
current financial year ended on that date and incurred cash loss of Rs.
16,142.52 lakhs in the immediate preceeding financial year.
ix) There are defaults in repayment of dues to various financial
institutions and banks as at the balance sheet date. The amount of
defaults and the period are tabulated below
(Rs. In Lakhs)
Name of the Banks & Amount of
default Period of
financial institutions (including
accrued Default
interest)
Bank of India 25,555.83 From 2009 to Till
Date
Canara Bank 8,050.43 From 2009 to Till
Date
Industrial Development Bank of India 4,871.58 From 2009 to Till
Date
State Bank of Mysore 4,186.97 From 2009 to Till
Date
Bank of India 5,994.76 From 2009 to Till
Date
State Bank of Travancore 5,466.33 From 2009 to Till
Date
Jammu and Kashmir Bank Limited 1,951.06 From July 2013 to
Till Date
x) In our opinion and according to the information and the explanations
given to us, the Company has not given any guarantee for loans taken by
others from banks or financial institutions.
xi) Based on information and explanations given to us by the
management, term loans were applied for the purpose for which the loans
were obtained.
xii) During the course of our examination of the books of accounts
carried on in accordance with the generally accepted auditing practices
in India and according to the information and explanations given to us,
we have neither come across any instance of fraud on or by the company,
noticed or reported during the year nor have been informed of such case
by the management.
For S.JANARDHAN & ASSOCIATES
Chartered Accountants
Firm Registration No. 005310S
Bengaluru Vijay Bhatia
May 29, 2015 Partner
Membership No.201862
Mar 31, 2014
1. We have audited the accompanying financial statements of Cranes
Software International Limited, which comprise the Balance Sheet as at
March 31st, 2014, and the Statement of Profit and Loss and Cash flow
Statement for the year then ended, and a summary of significant
accounting policies and other explanatory information.
2. Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position,
financial performance and cash flows of the Company in accordance with
the Accounting Standards referred to in sub-section (3C) of section 211
of the Companies Act, 1956 ("the Act") read with the General
Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate
Affairs in respect of Section 133 of the Companies Act, 2013. This
responsibility includes the design, implementation and maintenance of
internal control relevant to the preparation and presentation of the
financial statements that give a true and fair view and are free from
material misstatement, whether due to fraud or error.
3. Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatement.
4. An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor''s judgment, including the
assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
Company''s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in
the circumstances, but not the purpose of expressing an opinion on the
effectiveness of the entity''s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and
the reasonableness of the accounting estimates made by management, as
well as evaluating the overall presentation of the financial
statements.
5. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
6. The attached Balance Sheet as at 31st March, 2014 is drawn on the
basis of the Principle of ''Going Concern''. We opine as follows in
this connection:
6.1 Redemption of Foreign currency convertible bond amounting to Rs.
34,682.13 lakhs (42 million Euros) to the holders of the bonds have
fallen due during April 2011 and is yet to be redeemed as on the date
of Balance Sheet.
6.2 Legal proceedings u/s. 138 of the Negotiable Instruments Act have
been initiated by various Banks against the company. These Banks have
applied to the Debt Recovery Tribunal (DRT) / Hon''ble Courts, etc for
recovery of dues. These proceedings are in various stages of disposal
before the "DRT" and respective Hon''ble Courts.
6.3 In our opinion the securities provided to Banks are not adequate to
cover the amounts outstanding to them as on the date of Balance Sheet.
6.4 An advance of Rs. 23,950.68 lakhs is due from a party for an
inordinate period and in our opinion recovery of the same is doubtful.
However, the company continues to classify such amounts as ''Good''.
However, no evidence has been given to us to consider those amounts as
recoverable as on the date of Balance Sheet.
6.5 Attention of the members is invited to note 3.11 of the Notes
regarding recognition of deferred tax credit on account of unabsorbed
losses and allowances aggregating to Rs. 22,559.89 lakhs (year ended
March 31,2013 Rs. 13,249.77lakhs). This does not satisfy the virtual
certainty test for recognition of deferred tax credit as laid down in A
ccounting Standard 22.
6.6 The subsidiary company M/s. Systat Software Inc has out of amounts
due to the company, written back a sum of 2.6 Million USD equivalent to
Rs. 1,562.60 Lakhs during the year under reference. The Company has
created a provision in the Statement of Profit and Loss for a similar
amount in the books of the company. The company is yet to apply to the
Reserve Bank of India seeking its approval for write off of this amount
in accordance with the provisions of the Foreign Exchange Management
Act, 1999.
6.7 Reference is drawn to note no. 3.34 of the notes regarding the
amounts classfied under "Fixed Assets" including "Intangible
Assets Under Development"amounting to Rs. 35,469.53 lakhs. No
evidence has been produced before us for testing its impairment and in
the absence of the same, we are unable to express any opinion on the
impairment to such asset. In our opinion, such test of impairment as on
the date of Balance Sheet is mandatory, especially in view of the
higher degree of the obsolescence of software which is stated to be
under various stages of development, though no further developments
have been carried out during the recent years. In the light of the
above, the appropriateness of the ''Going Concern'' concept based on
which the accounts have been prepared is interalia dependent on the
Company''s ability to infuse requisite funds for meeting its
obligations, rescheduling of debt and resuming normal operations.
7. Further to the above, we would like to draw the attention of the
members to note no. 3.28 regarding default of payments to various
statutory authorities;
8. We further report that, except for the effect, if any, of the
matters stated in paragraphs 6.7 above, whose effect are not
ascertainable, had the observations made in paragraphs 6.4 and 6.5
above been considered, the loss after tax for the year ended March
31,2014 would have been higher by Rs. 46,510.57lakhs.
9. In our opinion and to the best of our information and according to
the explanation given to us, the financial statements give the
information required by the Act in the manner so required and subject
to our observations as stated in para 6 and para 8 as above give a true
and fair view in conformity with the accounting principles generally
accepted in India:
a) in the case of the Balance Sheet, of the state of affairs of the
Company as at March 31,2014;
b) in the case of the Statement of Profit and Loss, of the loss for the
year ended on that date; and
c) in the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
10. As required by the Companies (Auditor''s Report) Order, 2003
issued by the Central Government of India in terms of sub-section (4A)
of section 227 of the Act, we give in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the Order.
11. As required by section 227(3) of the Act, we report that:
a) We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
audit;
b) In our opinion proper books of account as required by law have been
kept by the Company so far as appears from our examination of those
books
c) The Balance Sheet, Statement of Profit and Loss, and Cash Flow
Statement dealt with by this Report are in agreement with the books of
account.
d) In our opinion, the Balance sheet, the Statement of Profit and Loss
and the Cash flow Statement dealt with by this report comply with the
Accounting Standards referred to in sub-section (3C) of section 211 of
the Companies Act, 1956 ("the Act") read with the General Circular
15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs
in respect of Section 133 of the Companies Act, 2013 subject to Para
No. (6.5) as stated above regarding recognition of Deferred Tax Asset
on account of Carried forward losses and Para No. (6.7) as stated above
regarding impairment test of Fixed Assets both tangible and intangible
along with Intangible Assets under Development.
e) On the basis of the written representations received from the
directors as on March 31,2014, taken on record by the Board of
Directors, none of the directors is disqualified as on March 31,2014,
from being re-appointed as a director in terms of clause (g) of
sub-section (1) of section 274 of the Companies Act, 1956;
ANNEXURE
1. (a) The Company has maintained proper records showing full
particulars including quantitative details and situation of fixed
assets.
(b) The fixed Assets have been physically verified by the management
during the year.
(c) The Company has not disposed off any substantial part of the fixed
assets during the year.
2. (a) The inventories have been physically verified during the year by
the management. In our opinion the
frequency of verification is reasonable.
(b) In our opinion, and according to the information and explanations
given to us, the procedures of physical verification of inventories
followed by the management are reasonable and adequate in relation to
the size of the company and the nature of its business.
(c) The company is maintaining proper records of inventories. The
discrepancies noticed on verification between the physical stocks and
the book records were not material.
3. (a) The Company during the year has granted unsecured loan of Rs.
1024.10 Lakhs to five subsidiary
Companies covered in the register maintained under Section 301 of the
Companies Act, 1956. The maximum amount involved during the year was
Rs. 11,856.22 lakhs and the year-end balance was Rs. 11,773.42 lakhs.
Apart from the above, the Company has not granted any loan, secured or
unsecured, to firms or other parties covered in the register maintained
under Section 301 of the Companies Act, 1956.
(b) In our opinion and according to the information and explanations
given to us, the terms and conditions on which such loans have been
granted are not prima facie prejudicial to the interest of the Company.
(c) The receipt of the principal amount is in accordance with the terms
and conditions of such granted loan.
(d) There are no overdue amounts due from such parties.
(e) The company has not taken any loan from Companies, Firms and other
parties covered in the register maintained under section 301 of the
Companies Act, 1956. Accordingly, the provisions of clause (3)
(f) and (3) (g) of Companies (Auditor''s Report) Order, 2003 are not
applicable to the Company.
4. In our opinion and according to the information and explanations
given to us, there are adequate internal control procedures
commensurate with the size of the Company and the nature of its
business with regard to the purchases of inventory, fixed assets and
with regard to sale of goods and services. During the course of our
audit, we have not observed any continuing failure to correct major
weaknesses in internal control.
5. a. According to the information and explanations given to us, we are
of the opinion that the particulars of
all contracts and arrangements referred to in section 301 of the
Companies Act 1956 have been entered in the register required to be
maintained under that section. b. In our opinion and according to the
information and explanations given to us, the transactions made in
pursuance of contracts or arrangements entered in the register
maintained under section 301 of the Companies Act, 1956 and exceeding
the value of Rs. 5 lakhs in respect of any party during the year, have
been made at prices, which are reasonable having regard to the
prevailing market prices at the relevant time.
6. The company has not accepted any deposit from the public and as such
the provisions of clause 4(vi) of the said Order are not applicable.
7. In our opinion, the company''s in house internal audit system needs
to be further strengthened to render it commensurate with the size and
nature of its business.
8. The Central Government has not prescribed the maintenance of cost
records as required under clause (d) of sub-section (1) of section 209
of the Companies Act, 1956.
9. (a) According to the information and explanations given to us, there
have been delays and defaults
in depositing of undisputed statutory dues including , Provident Fund,
Investors Education and Protection Fund, Employees'' State Insurance,
Income Tax, Sales Tax, Service Tax, Wealth Tax, Customs Duty and Cess
with the appropriate authorities. As on 31st March, 2014, the following
amounts are still to be deposited on account of undisputed statutory
liabilities:
(Rs. in Lakhs)
Name of the Statute Nature of dues Amount to be paid
Employee''s Provident Fund Provident Fund 31.90
& Miscellaneous Provision Act
Commercial Taxes Act Professional Tax 0.22
Employee State Insurance Act ESI 3.24
Income Tax Act Withholding Taxes 256.63
Service Tax Service Tax 156.15
Commercial Taxes Act Sales Tax/Value Added Tax 68.64
Income Tax Act Self Assessment Tax 696.96
Wealth Tax Act Wealth Tax 0.88
Income Tax Act Dividend Distribution Tax 273.88
Income Tax Act Fringe Benefit Tax 0.41
Investor Education Unclaimed Dividend 0.97
Protection Fund
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of Provident fund, Investors
Education and Protection Fund, Employees State Insurance, Income Tax,
Wealth Tax, Service Tax, Customs Duty, Sales Tax and Cess were in
arrears as at 31st March 2014 for a period of more than six months from
the date they became payable except in the following cases which is
still due for payment:
(Rs. in Lakhs)
Name of the Statute Nature of dues Amount to be paid
Employee''s Provident Fund Provident Fund 20.73
& Miscellaneous Provision Act
Employees State Insurance Act ESI 3.08
Income Tax Act Withholding Taxes 213.53
Service Tax Service Tax 97.49
Commercial Taxes Act Sales Tax/Value Added Tax 50.08
Income Tax Act SelfAssessment Tax 696.96
Wealth Tax Act Wealth Tax 0.88
Income Tax Act Dividend Distribution Tax 273.88
Income Tax Act Fringe Benefit Tax 0.41
Investor Education Unclaimed Dividend 0.97
Protection Fund
(c) According to the information and explanations given to us, there
are no dues of Sales tax, Service tax, Income tax, Customs duty, Wealth
Tax and Cess, which have not been deposited on account of any dispute
except in respect of the following:
(Rs. in Lakhs)
Name of the Nature of Disputed Assessment
Statute dues Amount Year
Income Tax Act, Income 3,278.23 2008 - 09
1961 Tax
Income Tax Act, Income 5,942.48 2009 - 10
1961 Tax
Chapter V of the Service 756.02 2004 - 05 to
Finance Act, 1994 Tax 2007 - 08
Chapter V of the Service 630.45 2004 - 05 to
Finance Act, 1994 Tax 2007 - 08
Name of the Statues Forum where dispute is pending
Income Tax Act,Income 1961 Tax Tax Appellate Tribunal
Income Tax Act,Income 1961 Tax Income Tax Appellate Tribunal
Chapter V of the Customs, Excise and Service Tax
Finance Act, 1994 Appellate Tribunal
Chapter V of the Department
Finance Act, 1994 Authorities
10. The Company has accumulated losses, as at March 31, 2014. The
Company has also incurred cash losses of Rs. 16,142.52 lakhs in the
financial year ended on that date and Rs. 22,565.33 lakhs cash losses
in the immediate preceding financial year.
11. There are defaults in repayment of dues to some financial
institution and banks as at the balance
sheet date. The amount of defaults and the period are tabulated below
(Rs. in Lakhs)
Amount of default Period of default
Name of the Banks & Financial (including accrued
Institutions interest)
Bank of India 22,295.79 From 2009 till date
Allahabad Bank 3,797.96 From 2009 till date
Canara Bank 5,535.66 From 2009 till date
Industrial Development 4,104.76 From 2009 till date
Bank of India
State Bank of Mysore 3,676.65 From 2009 till date
Bank of India 5,277.27 From 2009 till date
State Bank of Travancore 4,824.13 From 2009 till date
The company has not issued any Debentures during the year.
12. According to the information and explanations given to us, the
company has not granted any loans and advances on the basis of
securities by way of pledge of shares and debentures.
13. In our opinion, the Company is not a chit fund or a Nidhi / Mutual
Benefit Fund / Society. Therefore the provisions of clause (xiii) of
para 4 of the Order are not applicable.
14. According to the information and explanations given to us, the
Company is not dealing in or trading in any shares and securities and
hence the provisions of Para (xiv) of the order are not applicable.
15. According to the information and explanations given to us, the
company has not given any guarantee for loans taken by others from
banks or financial institutions.
16. In our opinion and according to the information and explanations
given to us, the term loan(s) have been applied for the purpose for
which they were raised.
17. According to the information and explanations given to us and on an
overall examination of the balance sheet of the company, we report that
no funds raised on short term basis have been used for long term
investments.
18. The company has not made any preferential allotment of shares
during the year and hence the provisions of clause (xviii) of para 4 of
this Order are not applicable.
19. The company has not issued any debentures during the year and hence
the provisions of clause (xix) of para 4 of this Order are not
applicable.
20. The company has not raised any money by way of public issues during
the year and hence the provisions of clause (xx) of para 4 of this
Order are not applicable.
21. During the course of our examination of the books of accounts
carried on in accordance with the generally accepted auditing practices
in India and according to the information and explanations given to us,
we have neither come across any instance of fraud on or by the Company,
noticed or reported during the year nor have been informed of such case
by the management.
For S.JANARDHAN & ASSOCIATES
Chartered Accountants
Firm Registration No. 005310S
Bangalore Vijay Bhatia
May 29, 2014 Partner, Membership No.201862
Mar 31, 2013
1. We have audited the accompanying financial statements of Cranes
Software International Limited, which comprise the Balance Sheet as at
March 31st, 2013, and the Statement of Profit and Loss and Cash flow
Statement for the year then ended, and a summary of significant
accounting policies and other explanatory information.
2. Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position,
financial performance and cash flows of the Company in accordance with
the Accounting Standards referred to in sub-section (3C) of section 211
of the Companies Act, 1956. This responsibility includes the design,
implementation and maintenance of internal control relevant to the
preparation and presentation of the financial statements that give a
true and fair view and are free from material misstatement, whether due
to fraud or error
3. Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatement.
4. An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor''s judgment, including
the assessment of the risk of material misstatement of the financial
statements, whether due to fraud or error. In Making those risk
assessments, the auditor considers internal control relevant to the
Company''s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in
the circumstances. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of
the accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
5. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
6. The attached Balance Sheet as at 31st March, 2013 is drawn on the
basis of the Principle of "Going Concern" . We opine as
follows in this connection :
6.1 A winding up petition has been filed by the Trustees of Foreign
Currency Covertible Bond holders against the Company u/s 434 of the
Companies Act, 1956 before the Hon''ble high Court of Karnataka
for non-payment of principal (due for redemption in March 2011) and the
accrued interest thereon.
6.2 Cases are filed u/s 138 of the Negotiable Instruments Act by
various Banks against the company. These Banks have opplied to the
Debt Recovery Tribunal / Hon''ble Courts, etc for recovery of
dues and provisions of SARFAESI have also been invoked against the
company. These cases are in various stages of disposal before the
respective Hon''ble Courts.
6.3 In our opinion the securities provided to Banks are not adequate to
cover the amounts outstandaing to them as on the date of Balance Sheet.
6.4 There are several overdue Trade Receivables and Advances
recoverable from parties for an inordinate period and however, the
company has classified such amounts as "ÂGood''. However, no
evidence has been given to us to consider those amounts as recoverable
as on the date of Balance Sheet. In this connection, a sum of Rs.
21,300 lakhs has been provided in the books of account as provision for
bad and doubtful debts against Trade Receivable, which in our opinion
is inadequate and further provision to the extent of Rs. 10,974.50
lakhs on account of Trade Receivables and a sum of Rs. 23,610.83 lakhs
on account of advances have not been made in the accounts.
6.5 Attention of the members is invited to note 3.11 of the Notes
regarding recognition of deferred tax credit on account of unabsorbed
losses and allowances aggregating to Rs. 11,802.46 lakhs (year ended
March 31,2012 Rs. 11,953.94 lakhs) (Total amount utilized for the year
ended March 31, 2013 amounts to Rs. 151.48 lakhs). This does not
satisfy the virtual certainty test for recognition of deferred tax
credit as laid down in Accounting Standard 22.
6.6 Reference is drawn to note no. 3.34 of the notes regarding the
amounts classfied under "Fixed Assets" including
"Intangible Assets Under Development" amounting to Rs.
36,914.80 lakhs. No evidence has been produced before us for testing
its impairment and in the obsence of the same, we are unable to express
any opinion on the impairment to such asset. In our opinion, such test
of impairment as on the date of Balance Sheet is mandatory, especially
in view of the higher degree of the obsolescence of software which is
stated to be under various stages of development, though no further
developments have been carried out during the recent years. In the
light of the above, the appropriateness of the "ÂGoing
Concern'' concept based on which the accounts have been prepared
is interalia dependent on the Company''s ability to infuse
requisite funds for meeting its obligations, rescheduling of debt and
resuming normal operations.
7. Further to the above, we would like to draw the attention of the
members to the following i) Note No. 3.28 regarding default of payments
to various statutory authorities;
ii) Note No. 3.46 regarding default in payment of dividend
8. We further report that, except for the effect, if any, of the
matters stated in paragraphs 6.6 above, whose effect are not
ascertainable, had the observations made in paragraphs 6.4 and 6.5
above been considered, the loss after tax for the year ended March 31,
2013 would have been higher by Rs. 46,378.80 lakhs.
9. In our opinion and to the best of our information and according to
the explanation given to us, the financial statements give the
information required by the Act in the manner so required and subject
to our observations as stated in para 6 and para 8 as above give a true
and fair view in conformity with the accounting principles generally
accepted in India:
a) In the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2013;
b) in the case of the Statement of Profit and Loss, of the loss for the
year ended on that date; and
c) In the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
10. As required by the Companies (Auditor''s Report) Order, 2003
issued by the Central Government of India in terms of sub-section (4A)
of section 227 of the Act, we give in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the Order.
11. As required by section 227(3) of the Act, we report that:
a) We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
audit;
b) in our opinion proper books of account as required by law have been
kept by the Company so far as appears from our examination of those
books
c) the Balance Sheet, Statement of Profit and Loss, and Cash Flow
Statement dealt with by this Report are in agreement with the books of
account.
d) In our opinion, the Balance sheet, the Statement of Profit and Loss
and the Cash flow Statement dealt with by this report comply with the
Accounting Standards referred to in sub-section (3C) of section 211 of
the Companies Act, 1956 subject to Para No. (6.5) as stated above
regarding recognition of Deferred Tax Asset on account of Carried
forward losses and Para No. (6.6) as stated above regarding impairment
test of Fixed Assets both tangible and intangible along with intangible
assets under Development.
e) On verification of records and documents available with the company
we report that all of the Directors have been disqualified from being
appointed as a director in terms of clause (g) of sub-section (1) of
section 274 of the Companies Act, 1956;
ANNEXURE
1. (a) The Company has maintained proper records showing full
particulars including quantitaive details and situation of fixed
assets.
(b) The fixed Assets have been physically verified by the management
during the year.
(c) The Company has not disposed off any substantial part of the fixed
assets during the year.
2. (a) The inventories have been physically verified during the year
by the management. In our opinion the frequency of verification is
reasonable.
(b) In our opinion, and according to the information and explanations
given to us, the procedures of physical verification of inventories
followed by the management are reasonable and adequate in relation to
the size of the Company and the nature of its business.
(c) The company is maintaining proper records of inventories. The
discrepancies noticed on verification between the physical stocks and
the book records were not material.
3. The Company has not granted/taken any loans, secured or unsecured,
to/from companies, firms or other parties covered in the register
maintained under section 301 of the Companies Act, 1956. In view of the
above, clause 4 (iii) (b), (c), (d), (f) and (g) of the said order are
not applicable.
4. In our opinion and according to the information and explanations
given to us, there are adequate internal control procedures
commensurate with the size of the Company and the nature of its
business with regard to purchases of inventory, fixed assets and with
regard to the sale of goods and services. During the course of our
audit, we have not observed any continuing failure to correct major
weaknesses in internal control.
5. (a) According to the information and explanations given to us, we
are of the opinion that the particulars of all contracts and
arrangements referred to in section 301 of the Companies Act 1956 have
been entered in the register required to be maintained under that
section.
(b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts or
arrangements entered in the register maintained under section 301 of
the Companies Act, 1956 and exceeding the value of Rs. 5 lakhs in
respect of any party during the year, have been made at prices, which
are reasonable having regard to the prevailing market prices at the
relevant time.
6. The company has not accepted any deposit from the public and as
such the provisions of clause 4(vi) of the said Order are not
applicable.
7. In our opinion, the company''s in house internal audit system
needs to be further strengthened to render it commensurate with the
size and nature of its business.
8. The Central Government has not prescribed the maintenance of cost
records as required under clause (d) of sub-section (1) of section 209
of the Companies Act, 1956.
9. (a) According to the information and explanations given to us,
there have been delays and defaults in depositing of undisputed
statutory dues including, Provident Fund, Investors Education and
Protection Fund, Employees'' state Insurance, Income Tax, Sales
Tax, Service Tax, Wealth Tax, Customs duty, and Cess with the
appropriate authorities. As of 31st March, 2013, the following amounts
are still to be deposited on account of statutory liabilities:
(Rs. in Lakhs)
Amount to be
Name of the Statute Nature of dues
Deposited
Employee''s Provident Fund Provident Fund 75.08
& Miscellaneous Provisions
Act
Commercial Taxes Act Professional Tax 23.80
Employee State Insurance Act ESI 2.80
Income Tax Act Withholding Taxes 770.27
Service Tax Service Tax 103.60
Commercial Taxes Act Sales Tax/Value Added Tax 55.39
Income Tax Act Self Assessment Tax 696.96
Wealth Tax Act Wealth Tax 0.88
Income Tax Act Dividend Distribution Tax 273.88
Income Tax Act Fringe Benefit Tax 0.41
Investor Education
Protection Fund Unclaimed Dividend 0.96
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of Provident fund, Employees
State Insurance, Income Tax, Wealth Tax, Service Tax, Customs Duty,
Sales Tax and Cess were in arrears as at 31st March 2013 for a period
of more than six months from the date they became payable except in the
following cases which are still due for payment:
(Rs. in Lakhs)
Name of the Statute Nature of dues Amount Due
Employee s Provident Fund Provident Fund 62.37
& Miscellaneous Provision
Act
Commercial Taxes Act Professional Tax 22.35
Employees State
Insurance Act ESI 1.99
Income Tax Act Withholding Taxes 722.2
Service Tax Act Service Tax 84.65
Commercial Taxes Act Sales Tax/Value Added Tax 23.05
Income Tax Act Self Assessment Tax 607.94
Wealth Tax Act Wealth Tax 0.88
Income Tax Act Dividend Distribution Tax 273.88
Income Tax Act Fringe Benefit Tax 0.41
Investor Education
Protection Fund Unclaimed Dividend 0.60
(c) According to the information and explanations given to us, there
are no dues of Sales tax, Service tax, Income tax, Customs duty, Wealth
Tax, and Cess, which have not been deposited on account of any dispute
except in respect of the following:
(Rs. in Lakhs)
Name of the Nature of Disputed Assessment
Statute dues Amount Year
Income Tax Act, Income 2459.72 2008 - 09
1961 Tax
Chapter V of
the Service 756.02 2004 - 05 to
Finance Act,
1994 Tax 2007 - 08
Forum where dispute is pending
Income Tax Appellate Tribunal
Customs, Exicise and Service
Tax Appellate Tribunal
10. The Company has accumulated losses, as at March 31, 2013. The
Company has also incurred cash losses of Rs. 22,565.33 lakhs in the
financial year ended on that date and Rs. 3,920.17 lakhs cash losses in
the immediate preceding financial year.
11. There are defaults in repayment of dues to some financial
institution and banks as at the balance sheet date. The amount of
defaults and the period are tabulated below:
(Rs. in Lakhs)
Amount of default Period of default
Name of the Banks &
Financial Institutions (including accrued
interest)
Bank of India 20,673.04 From 2009 till date
Allahabad Bank 3,258.58 From 2009 till date
Canara Bank 4,768.37 From 2009 till date
Industrial Development
Bank of India 3,527.20 From 2009 till date
State Bank of India 10,361.31 From 2009 till date
State Bank of Mysore 3,228.52 From 2009 till date
Bank of India 4,750.31 From 2009 till date
State Bank of
Travancore 4,257.37 From 2009 till date
The company has not issued any Debentures during the year
12. According to information and explanations given to us, the Company
has not granted any loans and advances on the basis of securities by
way of pledge of shares and debentures.
13. In our opinion, the company is not a chit fund or a Nidhi / Mutual
Benefit fund / Society. Therefore the provisions of clause (xiii) of
para 4 of the Order are not applicable.
14. According to the information and explanations given to us, the
company is not dealing in or trading in any shares and securities and
hence the provisions of para (xiv) of the order are not applicable.
15. According to the information and explanations given to us, the
company has not given any guarantee for loans taken by others from
banks or financial institutions.
16. In our opinion and according to the information and explanations
given to us, the term loan(s) have been applied for the purpose for
which they were raised.
17. According to the information and explanations given to us and on
an overall examination of the balance sheet of the company, we report
that no funds raised on short term basis have been used for long terms
investments.
18. The company has not made any preferential allotment of shares
during the year and hence the provisions of clause (xviii) of para 4 of
this Order are not appliable.
19. The company has not issued any debentures during the year and
hence the provisions of clause (xix) of para 4 of this Order are not
applicable.
20. The company has not raised any money by was of public issues
during the year and hence the provisions of clause (xx) of para 4 of
this Order are not applicable.
21. During the course of our examination of the books of accounts
carried on in acordance with the generally accepted auditing practices
in India and according to the information and explanations given to us,
we have neither come across any instance of fraud on or by the company,
noticed or reported during the year nor have been informed of such case
by the management.
for S.JANARDHAN & ASSOCIATES
Chartered Accountants
Firm Registration No. 005310S
Seattle, USA Vijay Bhatia
May 30, 2013 Partner
Membership No.201862
Mar 31, 2011
1. We have audited the attached Balance Sheet of Cranes Software
International Limited as at 31st March 2011, the Profit and Loss
Account and the Cash Flow Statement for the year ended on that date,
annexed thereto. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing standards
generally accepted in India. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
3. The attached Balance Sheet as at 31st March, 2011 is drawn on the
basis of the Principle of 'Going Concern'. We opine as follows in this
connection :
3.1 A petition has been filed by the ex-principal supplier of the
company 'The Math works Inc.' for Winding up of the company u/s.434 of
the Companies Act, 1956 before the High Court of Karnataka for
non-payment of dues. The Management has represented that a settlement
arrangement has been executed with the Party. We are yet to be shown
conclusive evidence of the same, and whether the terms of such
settlement are being implemented by the Company, enabling adhere to the
same.
3.2 The petition has been filed by the Trustees of Foreign Currency
Convertible Bond holders for winding up of the company u/s 434 of the
Companies Act,1956 before the High Court of Karnataka for nonpayment of
principal and the accrued interest thereon due for redemption in March,
2011. The Management has represented that admission of this matter is
currently progressing before the Hon'ble High Court. Meanwhile, the
Management also represents that discussions have been initiated with a
large number of Bondholders to enable, explore and evolve a mutually
acceptable course of action so that matters are not precipitated.
Conclusive progress on these actions is yet to be evidenced to us.
3.3 There are several cases filed u/s.138 of the Negotiable Instruments
Act against the company are in various stages of disposal in the
respective Hon'ble Courts.
3.4 Some Banks and lending institutions have applied to the DRT /
Hon'ble Courts, etc for recovery of dues and provisions of SARFAESI
have also been invoked against the company. These cases are in various
stages of disposal in the respective Hon'ble Courts.
3.5 The Company is also fighting various legal cases from creditors and
employees for non- payment of dues to them. We are told that these
cases are in various stages of disposal in the respective Hon'ble
Courts.
3.6 The security provided to Banks and other lending institutions is
not adequate to cover the amounts outstanding as appearing in the
Balance Sheet.
3.7 There has been a further reduction in staff strength, though
marginal, in the year under review.
3.8 The Book Debts and Trade Advances outstanding for more than one
year, and even more are still being regarded as Company's good current
assets in the financial statements as at 31/03/2011, and being
classified as such in the reports. However, nothing has come to our
knowledge to satisfy ourselves of these Current Assets continue to be
'good'. In this connection we state that no provision for bad and
doubtful debts to the extent of Rs.310.67 Crores and Rs.236.95 Crores
on account of the advances has been made in the accounts.
3.9 The company has not carried out the exercise of assessing the value
of intangible assets appearing in the books with a view to provide for
any impairment.
3.10 The expenses incurred for the purposes of developing different
version of software were capitalized and classified as "CAPITAL WORK IN
PROGRES" for preceding financial years are continued without any
further development. In the absence of further development and
"TECHNICAL CERTIFICATE" about the viability of these versions of
software, we are not able to express any favourable opinion on CAPITAL
WORK IN PROGRESS.
3.11 The Company has incurred a cash loss of Rs.76.37Crore for the
year under review.
In the light of the above, we are unable to give an opinion on the
reasonableness and applicability of the principle of 'Going Concern'.
Nevertheless, in the absence of any conclusive evidence to indicate the
contrary, the statements and Accounts thereon are prepared based on the
principles of 'Going Concern' and our opinion is based on the same as
well.
4. Further to the above, we additionally opine as follows :
4.1 The Company has defaulted in discharge of undisputed statutory dues
like Provident Fund, ESI, VAT, Income Tax, including Tax deducted at
source and Dividend Tax and Service Tax.
4.2 The Company has recognized Deferred Tax asset in respect of the
carried forward losses to the extent of Rs.590/- Lakhs; in the absence
of any reasonable certainty of future taxable income, consideration of
this Asset may be 'Doubtful'.
4.3 The Company has not paid dividend declared in the Annual General
meeting held on 29th September 2009 for the FY ending 31st March 2011.
5. As required by the Companies (Auditor's Report) Order, 2003, as
amended by the Companies (Auditor's Report) (Amendment) order, 2004
issued by Government of India in terms of sub-section (4A) of section
227 of the Companies Act, 1956, we enclose in the Annexure a statement
on the matters specified in paragraphs 4 and 5 of the said Order.
6. Further to our comments in the Annexure referred to above, we
report that:
i) we have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purposes of our
audit;
ii) in our opinion, proper books of account as required by law have
been kept by the Company so far as appears from our examination of
those books;
iii) the Balance Sheet, the Profit and Loss Account and the Cash Flow
Statement dealt with by this report are in agreement with the books of
account;
iv) in our opinion, the Balance Sheet, the Profit and Loss Account and
the Cash Flow Statement dealt with by this report comply with the
Accounting Standards referred to in sub-section (3C) of section 211 of
the Companies Act, 1956;
v) on the basis of written representations, as on 31st March 2011 and
taken on record by the Board of Directors, we report that none of the
Directors is disqualified as on 31st March 2011 from being appointed as
a director in terms of clause (g) of sub-section (1) of section 274 of
the Companies Act, 1956;
vi) in our opinion and to the best of our information and according to
the explanations given to us, subject to Para nos ( 3 ) and ( 4 ) above
the said accounts give the information required by the Companies Act,
1956, in the manner so required and give a true and fair view in
conformity with the accounting principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March 2011;
(b) in the case of the Profit and Loss Account, of the loss of the
Company for the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows of the
Company for the year ended on that date.
ANNEXURE
(Referred to in paragraph 3 of our report of even date)
(i) (a) The Company has generally maintained records showing
particulars including quantitative details and situation of fixed
assets. Movements of fixed assets took place in the immediately
preceding financial year resulting incomplete records, updations are
under progress.
(b) Not all the Fixed Assets have been physically verified by the
management during the year.
(c) The Company has not disposed off substantial part of fixed assets
during the year and therefore do not affect the going concern
assumption on this account.
(ii) (a) The inventory has been physically verified during the year by
the management. In our opinion, the frequency of verification is
reasonable.
(b) In our opinion and according to the information and explanations
given to us, the procedures of physical verification of inventories
followed by the management are reasonable and adequate in relation to
the size of the Company and the nature of its business.
(c) The company is maintaining proper records of inventory. The
discrepancies noticed on verification between the physical stocks and
the book records were not material.
(iii) The Company has not granted/taken any loans, secured or
unsecured, to/from companies, firms or other parties covered in the
register maintained under section 301 of the Companies Act, 1956. In
view of the above, clause 4 (iii) (b), (c), (d), (f) and (g) of the
said order are not applicable.
(iv) In our opinion and according to the information and explanations
given to us, there are adequate internal control procedures
commensurate with the size of the Company and the nature of its
business with regard to purchases of inventory, fixed assets and with
regard to the sale of goods and services. During the course of our
audit, we have not observed any continuing failure to correct major
weaknesses in the internal control system.
(v) (a) According to the information and explanations given to us, we
are of the opinion that the particulars of all contracts and
arrangements referred to in section 301 of the Companies Act 1956 have
been entered in the register required to be maintained under that
section.
(b) In our opinion and according to the information and explanations
given to us, the contracts and arrangements entered in the register
maintained under section 301 of the Companies Act, 1956 have been made
at prices which are reasonable having regard to the prevailing market
prices at the relevant time.
(vi) The company has not accepted any deposit from the public and as
such the provisions of clause 4(vi) of the said Order are not
applicable.
(vii) In our opinion, the company's in house internal audit system
needs to be further streamlined to render it commensurate with the size
and nature of its business.
(viii) The Central Government has not prescribed the maintenance of
cost records as required under clause
(d) of sub-section (1) of section 209 of the Companies Act, 1956.
(ix) (a) According to the information and explanations given to us,
there have been delays and defaults in depositing of undisputed
statutory dues including, Provident Fund, Employees' state Insurance,
Income Tax, Sales Tax, Service Tax, Wealth Tax, Customs duty, and Cess
with the appropriate authorities. As of 31st March, 2011, the following
amounts are still to be deposited out of the total liabilities:
(Rs. in Lakhs)
Name of the Statute Nature of dues Amount to be
Deposited
Employee's
Provident Fund Provident Fund 77.46
& Miscellaneous
Provisions Act
Commercial Taxes Act Professional Tax 9.88
Employee State
Insurance Act ESI 0.73
Income Tax Act TDS 537.44
Service Tax Act Service Tax 328.10
Sales Tax /
Value Added Tax Value Added Tax 11.47
Income Tax Act Self Assessment Tax 607.90
Wealth Tax Act Wealth Tax 0.88
(b)According to the information and explanations given to us, no
undisputed amounts payable in respect of Provident fund, Employees
State Insurance, Income Tax, Wealth Tax, Service Tax, Customs Duty,
Sales Tax and Cess were in arrears as at 31st March 2011 for a period
of more than six months from the date they became payable except in the
below case which is still due for payment:
(Rs. in Lakhs)
Name of the Statute Nature of dues Amount Due
Income Tax Act Corporate Dividend Tax 373.88
Employee's
Provident Fund Provident Fund 68.46
& Miscellaneous
Provision Act
Commercial Taxes Act Professional Tax 8.01
Employee State
Insurance Act ESI 0.34
Income Tax Act TDS 471.93
Service Tax Act Service Tax 326.65
Sales Tax /
Value Added Tax Value Added Tax 10.28
Income Tax Act Self Assessment Tax 607.90
Wealth Tax Act Wealth Tax 0.88
(c) According to the information and explanations given to us, there
are no dues of Sales tax, Service tax, Income tax, Customs duty, Wealth
Tax, and Cess, which have not been deposited on account of any dispute
except in the below said cases:
(Rs. in Lakhs)
Name of the Nature of Disputed Assessment Forum where dispute is
Statute dues Amount Year pending
Income
Tax Act, Income 3849.18 2003-2004 Commissioner of
Income Tax,
1961 Tax to 2007-08 Appeals
Sales
Tax Act, Sales 34.21 2005-06 to Commissioner of
Commercial
1956 Tax 2007-08 Taxes Appeal
Service
Tax Act, Service 523.34 2004-05 to Customs, Exicise
and Service
1994 Tax 2007-08 Tax Appelate Tribunal
(x) The Company has accumulated losses, as at March 31, 2011. The
Company has also incurred cash losses of Rs.76.37crores in the
financial year ended on that date and Rs.220crores cash losses in the
immediate preceding financial year.
(xi) There are defaults in repayment of dues to some financial
institution and banks although there are no dues to debenture holders
as at the balance sheet date. The amount of defaults and the period are
tabulated bellow:
(Rs. in Lakhs)
Amount of default Period of default/
Name of the Banks &
(including accrued delay
Financial Institutions interest)
Bank of India 18,493.26 From 2009 till date
State Bank of Travancore 3,212.31 From 2009 till date
Jammu & Kashmir Bank Limited 5,597.54 From 2009 till date
Hongkong and Shanghai
Banking Corporation Limited 17,642.23 From 2009 till date
Allahabad Bank 2,859.03 From 2009 till date
Canara Bank 3,451.61 From 2009 till date
Industrial Development
Bank of India 2,492.51 From 2009 till date
India bulls Financial
Services Limited 230.00 From 2009 till date
State Bank of Mysore 2,789.76 From 2009 till date
State Bank of India 8,021.22 From 2009 till date
Yes Bank 3,255.66 From 2009 till date
(xii) According to information and explanations given to us, the
Company has not granted loans and advances on the basis of security by
way of pledge of shares, debentures and other securities.
(xiii) In our opinion and according to the information and explanation
given to us, the Company is not a chit fund or a Nidhi /mutual benefit
fund/ society.
(xiv) In our opinion and according to the information and explanations
given to us, the Company is not dealing in or trading in shares,
securities, debentures and other investments.
(xv) In our opinion and according to information and explanations given
to us, and as per our examination of relevant records, there are no
guarantees outstanding as at 31/03/2011.
(xvi) In our opinion and according to the information and explanations
given to us, a categorical examination of the application of financing
received by the Company compared to the purposes as stipulated in the
terms of the sanction has not been possible.
(xvii) According to the information and explanations given to us during
this audit, we have not come across situations of funds raised on
short-term basis being used for long-term investment.
(xviii) During the year the Company has not made any preferential
allotment of shares to parties and companies covered in the register
maintained under section 301 of the Companies Act, 1956.
(xix) During the period, the Company has not raised any funds by issue
of debentures.
(xx) During the year under review the Company has not raised any money
through public issue and hence the provisions of this para is not
applicable.
(xxi) During the course of our examination of the books of accounts
carried out in accordance with the generally accepted auditing
practices in India and according to the information and explanations
given to us, no fraud on or by the Company, has been noticed or
reported during the course of our audit.
for S.JANARDHAN & ASSOCIATES
Chartered Accountants
FRN : 005310S
Balakrishna S. Bhat
Bangalore Partner
September 7, 2011 Membership No.202976
Mar 31, 2010
1. We have audited the attached Balance Sheet of Cranes Software
International Limited as at 31st March 2010, the Profit and Loss
Account and the Cash Flow Statement for the year ended on that date,
annexed thereto. These financial statements are the responsibility of
the Companys management. Our responsibility is to express an opinion
on these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing standards
generally accepted in India. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
3. The attached Balance Sheet as at 31st March, 2010 is drawn on the
basis of the Principle of Going Concern. We opine as follows in this
connection :
i) A Principal supplier of the company The Mathworks Inc. has filed a
petition for Winding up of the company u/s.434 of the Companies Act,
1956 before the High Court of Karnataka for non-payment of dues.
ii) The Trustees of Foreign Currency Convertible Bond holders due for
redemption in March, 2011 have served a legal notice on the Company for
non-payment of interest due on the Bonds from September, 2009 and
stated that a Petition u/s.434 for winding up of the company would be
filed in the event of non-payment of interest.
iii) The company has also received several legal notices from creditors
and employees for non- payment of dues to them.
iv) The security provided to Banks and other lending institutions is
not adequate to cover the amounts outstanding as appearing in the
Balance Sheet.
v) The Company has incurred a cash loss of Rs. 220.08 Crore for the
year under review
vi) There has been a considerable erosion of staff strength for the
year under review
vii The ability of the company to recover the book debts/trade advances
representing substantial part of these assets shown in the Balance
Sheet particularly in the absence of confirmation of balances and any
tangible evidence for follow up of collection
viii) The company has not carried out the exercise of assessing the
value of intangible assets appearing in the books with a view to
provide for any impairment
vix) There are several cases filed u/s.138 of the Negotiable
Instruments Act against the company
x) Some Banks and lending institutions have applied the DRT for review
of dues and provisions of SARFAESI have also been invoked against the
company
In the light of the above, we are unable to give an opinion on the
reasonableness and applicability of the principle of Going Concern.
Nevertheless, in the absence of any conclusive evidence to indicate the
contrary, the statements are prepared based on the principles of Going
Concern and our opinion is based on the same as well.
4. Further to the above, we additionally opine as follows :
i) The company has defaulted in discharge of undisputed statutory dues
like Provident Fund, ESI, VAT, Income Tax, including Tax deducted at
source and Dividend Tax and Service Tax.
ii) Non provision for the book debts to the extent of Rs.319.84 Crore
and Rs. 234.44 Crore on account of the advances, which in the auditors
opinion is doubtful.
iii) Recognition of Deferred Tax asset in respect of the carried
forward losses to the extent of Rs.102 Crore, in the absence of any
reasonable certainty of future taxable income
iv) Non payment of dividend declared in the Annual General meeting held
on 29th September 2009 for the FY ending 31st March 2009.
v) As required by the Companies (Auditors Report) Order, 2003, as
amended by the Companies (Auditors Report) (Amendment) order, 2004
issued by Government of India in terms of sub- section (4A) of section
227 of the Companies Act, 1956, we enclose in the Annexure a statement
on the matters specified in paragraphs 4 and 5 of the said Order.
6. Further to our comments in the Annexure referred to above, we
report that:
i) we have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purposes of our
audit;
ii) in our opinion, proper books of account as required by law have
been kept by the Company so far as appears from our examination of
those books;
iii) the Balance Sheet, the Profit and Loss Account and the Cash Flow
Statement dealt with by this report are in agreement with the books of
account;
iv) in our opinion, the Balance Sheet, the Profit and Loss Account and
the Cash Flow Statement dealt with by this report comply with the
Accounting Standards referred to in sub-section (3C) of section 211 of
the Companies Act, 1956;
v) on the basis of written representations, as on 31st March 2010 and
taken on record by the Board of Directors, we report that none of the
Directors is disqualified as on 31st March 2010 from being appointed as
a director in terms of clause (g) of sub-section (1) of section 274 of
the Companies Act, 1956;
vi) in our opinion and to the best of our information and according to
the explanations given to us, subject to Para nos ( 3 ) and ( 4 ) above
the said accounts give the information required by the Companies Act,
1956, in the manner so required and give a true and fair view in
conformity with the accounting principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March 2010;
(b) in the case of the Profit and Loss Account, of the loss of the
Company for the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows of the
Company for the year ended on that date.
ANNEXURE
(Referred to in paragraph 3 of our report of even date)
(i) (a) The Company has generally maintained records showing
particulars including quantitative details and situation of fixed
assets. During the year, there have been a large number of movements of
such Fixed Assets amongst locations; these movements and the
consequential impact are yet to be comprehensively reflected in the
above records.
(b) The Fixed Assets have generally been physically verified by the
management during the year.
(c) The Company has not disposed off substantial part of fixed assets
during the year and therefore do not affect the going concern
assumption on this account.
(ii) (a) The inventory has been physically verified during the year by
the management. In our opinion, the frequency of verification is
reasonable.
(b) In our opinion and according to the information and explanations
given to us, the procedures of physical verification of inventories
followed by the management are reasonable and adequate in relation to
the size of the Company and the nature of its business.
(c) The company is maintaining proper records of inventory. The
discrepancies noticed on verification between the physical stocks and
the book records were not material.
(iii) The Company has not granted/taken any loans, secured or
unsecured, to/from companies, firms or other parties covered in the
register maintained under section 301 of the Companies Act, 1956. In
view of the above, clause 4 (iii) (b), (c), (d), (f) and (g) of the
said order are not applicable.
(iv) In our opinion and according to the information and explanations
given to us, there are adequate internal control procedures
commensurate with the size of the Company and the nature of its
business with regard to purchases of inventory, fixed assets and with
regard to the sale of goods and services. During the course of our
audit, we have not observed any continuing failure to correct major
weaknesses in the internal control system.
(v) (a) According to the information and explanations given to us, we
are of the opinion that the particulars of all contracts and
arrangements referred to in section 301 of the Companies Act 1956 have
been entered in the register required to be maintained under that
section.
(b) In our opinion and according to the information and explanations
given to us, the contracts and arrangements entered in the register
maintained under section 301 of the Companies Act, 1956 have been made
at prices which are reasonable having regard to the prevailing market
prices at the relevant time.
(vi) The company has not accepted any deposit from the public and as
such the provisions of clause 4(vi) of the said Order are not
applicable.
(vii) In our opinion, the company has an in house internal audit system
which needs to be further streamlined to render it commensurate with
the size and nature of its business.
(viii) The Central Government has not prescribed the maintenance of
cost records as required under clause
(d) of sub-section (1) of section 209 of the Companies Act, 1956.
(ix) (a) According to the information and explanations given to us, the
Company was yet to deposit undisputed statutory dues including,
Provident Fund, Employees state Insurance, Income Tax, Sales Tax,
Service Tax, Wealth Tax, Customs duty, and Cess with the appropriate
authorities. As of 31st March, 2010, the following amounts were still
to be deposited out of the total liabilities:
(Rs. in Lakhs)
Name of the Statute Nature of dues Amount to be
Deposited
Employee`s Provident Fund Provident Fund 265.30
& Miscellaneous Provisions
Act
Commercial Taxes Act Professional Tax 5.70
Employee State Insurance Act ESI 0.20
Income Tax Act TDS 453.00
Service Tax Act Service Tax 274.2
Sales Tax Value Added Tax 16.50
Income Tax Act Self Assessment Tax 607.90
Wealth Tax Act Wealth Tax 0.80
(b)According to the information and explanations given to us, no
undisputed amounts payable in respect of Provident fund, Employees
State Insurance, Income Tax, Wealth Tax, Service Tax, Customs Duty,
Sales Tax and Cess were in arrears as at 31st March 2010 for a period
of more than six months from the date they became payable except in the
below case which is still due for payment:
(Rs. in Lakhs)
Name of the Statute Nature of dues Amount Due For the Period
Income Tax Act Corporate Dividend Tax 233.85 F Year 2007-08
40.03 F Year 2008-09
(c) According to the information and explanations given to us, there
are no dues of Sales tax, Service tax, Income tax, Customs duty, Wealth
Tax, and Cess, which have not been deposited on account of any dispute
except in the below said cases:
(Rs. in Lakhs)
Name of the Nature of Disputed Assessment Forum where dispute is
Statute dues Amount Year pending
Income Tax
Act, Income 3849.18 2003-2004 Commissioner of Income
Tax,
1961 Tax to 2007-08 Appeals -VI
Sales Tax
Act, Sales 104.1 2005-06 to Commissioner of
Commercial
1956 Tax 2007-08 Taxes, Appeals
Service Tax
Act, Service 523.34 2004-05 to Customs, Exicise and
Service
1994 Tax 2007-08 Tax Appelate Tribunal
(x) The Company does not have any accumulated losses, as at March 31,
2010. The Company has incurred cash losses of Rs.220crores in the
financial year ended on that date and there are no cash losses in the
immediate preceding financial year.
(xi) There are defaults in repayment of dues to some financial
institution and banks although there are no dues to debenture holders
as at the balance sheet date.
(xii) According to information and explanations given to us, the
Company has not granted loans and advances on the basis of security by
way of pledge of shares, debentures and other securities.
(xiii) In our opinion and according to the information and explanation
given to us, the Company is not a chit fund or a Nidhi /mutual benefit
fund/ society.
(xiv) In our opinion and according to the information and explanations
given to us, the Company is not dealing in or trading in shares,
securities, debentures and other investments.
(xv) In our opinion and according to information and explanations given
to us, and as per our examination of relevant records, the terms and
conditions on which guarantees are given are not prejudicial to the
interest of the Company.
(xvi) In our opinion and according to the information and explanations
given to us, a categorical examination of the application of financing
received by the Company compared to the purposes as stipulated in the
terms of the sanction has not been possible.
(xvii) According to the information and explanations given to us during
this audit, we have not come across situations of funds raised on
short-term basis being used for long-term investment.
(xviii) During the year the Company has not made any preferential
allotment of shares to parties and companies covered in the register
maintained under section 301 of the Companies Act, 1956.
(xix) During the period, the Company has not raised any funds by issue
of debentures.
(xx) The end use of money raised by preferential issue and Foreign
Currency Convertible bonds is disclosed in the Notes on Accounts to the
financial statement. We have verified the same, based on the
information and explanation given to us.
(xxi) During the course of our examination of the books of accounts
carried out in accordance with the generally accepted auditing
practices in India and according to the information and explanations
given to us, no fraud on or by the Company, has been noticed or
reported during the course of our audit.
for S.JANARDHAN & ASSOCIATES
Chartered Accountants
FRN : 005310S
Balakrishna S. Bhat
Bangalore Partner
September 30, 2010 Membership No.202976
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