Mar 31, 2015
We have audited the accompanying financial statements of Hindustan
Fluorocarbons Limited ("the Company"), which comprise the Balance Sheet
as at 31st March 2015, the statement of Profit and Loss and the Cash
Flow Statement for the year then ended, and a summary of significant
accounting policies and other explanatory information.
2) Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated
in Section 134(5) of the Companies Act, 2013 ("the Act") with respect
to the preparation and presentation 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 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 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.
3) Auditor's Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit.
4) 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 rules made there
under.
5) We conducted our audit in accordance with the Standards on Auditing
specified under Section 143(10) of the Act. 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.
6) An audit involves performing procedures to obtain audit evidence
about the amounts and the 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 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 an adequate internal
financial controls system over financial reporting and the operating
effectiveness of such controls. An audit also includes evaluating the
appropriateness 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.
7) We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion on the
financial statements.
Opinion
8) In our opinion and to the best of our information and according to
the explanations given to us, the aforesaid 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 March 31, 2015 and its Loss and its Cash Flows for the year ended on
that date.
Other Matters
Without qualifying our report we refer to:
Note No.14A regarding Trade Receivables, Trade payables, sundry
balances of debit and credit of parties are subject to confirmation and
review by the management;
Report on Other Legal and Regulatory Requirements
9) As required by the Companies (Auditor's Report) Order, 2015, issued
by the Central Government of India in terms of sub-section (11) of
section 143 of the Act ( hereinafter referred to as the "Order") ,and
on the basis of such checks of the books and records of the Company as
we considered appropriate and according to the information and
explanations given to us, we give in the Annexure a statement on the
matters specified in the paragraph 3 and 4 of the Order, to the extent
applicable.
10) 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, the aforesaid 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) On the basis of the written representations received from the
directors as on March 31, 2015 taken on record by the Board of
Directors, none of the directors is disqualified as on 31 March 2015
from being appointed as a director in terms of Section 164 (2) of the
Act.
(f) 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 as on
31st March 2015 on its financial position in its financial statements;
ii. The Company has made provision, as required under the applicable
law or Accounting Standards, for material foreseeable losses, if any,
on long term contracts. The Company neither entered into any derivative
contract during the year nor have any outstanding derivative contract
at the end of the year;
iii. The provisions relating to transferring amounts to Investor
Education and Protection Fund is not applicable to the Company during
the year.
(g) As required under Section 143(5) of the Companies Act, we report
that: i. The Company has not been selected for disinvestment during
the financial year.
ii. During the period of audit, there are no cases of waiver/write off
of debts /loans/ interest etc.
iii. As per the information, explanations and records produced for our
verification, there are no inventories lying with the third parties at
the close of the year. Further no assets have been received as gift
from the Government and other authorities.
iv. The details of the pending legal/ arbitration cases along with the
quantum of amount and the present status are given under Note - 33 of
the financial statements. The case of Recovery from Debtor is pending
since last 4 years and case of Damages on delay payment of Provident
fund is pending since 2 years. Further the company have in existence
of monitoring mechanism for expenditure on legal cases.
ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT:
Referred to in paragraph 9 of the Independent Auditors' Report of even
date to the members of Hindustan Fluorocarbons Limited on the financial
statements as of and for the year ended March 31, 2015
(i) (a) The Company is maintaining proper records showing full
particulars, including quantitative details and situation, of fixed
assets.
(b) The fixed assets are physically verified by the Management during
the year and there is regular program of verification which, in our
opinion, is reasonable having regard to the size of the Company and the
nature of its assets. (ii) (a) The inventory has been physically
verified by the management during the year. In our opinion, the
frequency of verification is reasonable.
(b) In our opinion, the procedures of physical verification of
inventory followed by the management are reasonable and adequate in
relation to the size of the company and the nature of its business.
(c) On the basis of our examination of the inventory records, in our
opinion, the Company is maintaining proper records of inventory. The
discrepancies noticed on physical verification of inventory as compared
to book records were not material.
(iii) The Company has not granted any loans secured or unsecured to
Companies, firms or other parties covered in the registers maintained
under Section 189 of the Act.
(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 for the purchase of inventory and fixed assets and for the
sale of goods and services. Further, on the basis of our examination of
the books and records of the Company, and according to the Information
and explanations given to us, we have neither come across, nor have
been informed of, any continuing failure to correct major weaknesses in
the aforesaid internal control system.
(v) The Company has not accepted any deposits from the public within
the meaning of Sections 73 and 74 of the Act and the rules framed there
under to the extent notified.
(vi) We have broadly reviewed the books of accounts maintained by the
Company pursuant to the rules made by the Central Government of India,
the maintenance of cost records specified under sub-section (1) of
Section 148 of the Act, and are of the opinion that, prima facie, the
prescribed accounts and records have been made and maintained. We have
not, however, made a detailed examination of the records with a view to
determine whether they are accurate or complete.
(vii) (a) According to the information and explanations given to us and
the records of the Company examined by us, in our opinion the company
is regular in depositing undisputed statutory dues, including Income
tax, Sales tax/CST, Wealth Tax, Service tax, duty of customs, duty of
excise, cess and other material statutory dues as applicable to it,
with appropriate authority. However company contribution to Provident
fund and employees contribution to Provident fund amounting to
Rs.233.20 lakhs (Pr. Year 307.50 lakhs) is not paid by the company of
the period March 2014 to March 2015.
(b) According to the information and explanations given to us, there
are no material dues of Income tax, Sales tax/ CST, Wealth Tax, Service
tax, duty of customs, duty of excise, cess were in arrears, as on 31st
March 2015 for a period of more than six months from the date they
became payable except Company and Employees contribution to Provident
Fund unpaid for the period from March 2014 amounting to Rs.73.68 lakhs
(Pr. Year 106.16 lakhs).
(c) The provisions relating to transferring amounts to Investor
Education and Protection Fund is not applicable to the Company during
the year.
(viii) The accumulated losses of the company as at the end of the year
are more than fifty percent of its net worth. Further, the company has
incurred cash losses during the financial year covered by our audit and
also has incurred cash losses in the immediately preceding financial
year. The company is under the Scheme of BIFR and hence considered as a
Sick Company as per Sick Industries Companies (Special Provisions) Act
1985.
(ix) According to the records of the examined by us, the Company has
not defaulted in repayment of dues to financial institutions during the
current financial year. There are no overdue as on 31st March 2015.
(x) In our opinion and according to the information and the
explanations given to us, the company has not given any guarantees for
loans taken by others from banks and financial institutions.
(xi) In our opinion and according to the information and explanations
given to us, the term loans have been applied on an overall basis for
the purposes for which they were obtained.
(xii) According to the information and explanations given to us, no
material fraud on or by the Company has been noticed or reported during
the course of our audit nor have been informed of such case by the
Management.
For S Daga & Co.,
Chartered Accountants
(FRN 000669S)
Sd/-
Place: Hyderabad (Pavan Kumar Bihani)
Date: 25.05.2015 M.No.225603
Mar 31, 2014
We have audited the accompanying financial statements of HINDUSTAN
FLUOROCARBONS LIMITED ("the Company"), which comprise the Balance
Sheet as at March 31, 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.
Management''s Responsibility for the Financial Statements
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 September 13, 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. Auditor''s
Responsibility 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. 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 for 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.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion and to the best of our information and according to the
explanations given to us, the financial statement 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;
(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. Other Matters Without qualifying our report
we refer to:
Note No. 14A regarding Trade Receivables, Trade payables, sundry
balances of debit and credit of parties are subject to confirmation and
review by the management;
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor''s Report) Order, 2003
("the Order"), as amended, 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.
2. 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, Statement of Profit and Loss, and
Cash Flow Statement comply with the Accounting Standards referred to in
subsection (3C) of section 211 of the Companies Act, 1956 read with the
General Circular 15/2013 dated September 13, 2013 of the Ministry of
Corporate Affairs in respect of Section 133 of the Companies Act, 2013;
e. on the basis of written representations received from the directors
as on March 31, 2014, and taken on record by the Board of Directors,
none of the directors is disqualified as on March 31, 2014, from being
appointed as a director in terms of clause (g) of sub-section (1) of
section 274 of the Companies Act, 1956.
ANNEXURE TO AUDITORS REPORT: (Annexure referred to in Point 1 of Other
Legal and Regulatory Requirements of the Report of the Auditors)
1. (a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets.
(b) All the fixed assets have been physically verified by management
during the year and there is regular program of verification which, in
our opinion, is reasonable having regard to the size of the Company and
the nature of its assets. As informed no major material discrepancies
were noticed on such verification.
(c) During the year, the Company has not disposed off substantial part
of its fixed assets.
2. (a) As explained to us, the stocks of finished products,
stock-in-process and raw materials have been physically verified by the
management during the year. Stock of stores and spare parts are
reported to be physically verified in accordance with the procedure
followed by the management. In our opinion, the frequency of such
physical verification of stocks is reasonable.
(b) In our opinion, the procedure of physical verification of stocks
followed by the management is 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 and no
material discrepancies have been noticed on physical verification of
stocks compared to the books/records.
3. (a) The company has not granted any loans secured or unsecured to
Companies, Firms or other parties covered in the registers maintained
under section 301 of the Companies Act, 1956.
(b) The Company has taken secured loan from its holding company,
Hindustan Organics Company Limited, covered in the register maintained
under section 301 of the Companies Act 1956 and the maximum amount
involved during the year was Rs. 3759.14 lakhs (Pr. Year Rs.3956.23
lakhs) and the year - end balance is Rs. 3759.14 lakhs (Pr. Year Rs.
3701.43 lakhs )
(c) In our opinion, the rate of interest and other terms and conditions
on which loans have been taken from the holding company, are not prima
facie prejudicial to the interest of the company.
(d) The Company is irregular in repaying the principal amount as
stipulated and also irregular in payment of interest. The overdue of
principal and interest at the close of the year is Rs.2431.82 lakhs
(Pr. Year Rs. 1830.83 lakhs)
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 purchase of inventory, fixed assets and
with regard to the sale of goods. Further, on the basis of our
examination of the books and records of the company and according to
the information and explanations given to us, we have neither come
across nor have been informed of any continuing failure to correct
major weaknesses in the aforesaid internal control procedures.
5. (a) According to the information and explanations given to us, we
are of the opinion that the transactions that need to be entered in the
register maintained u/s 301 of the Companies Act, 1956 have been so
entered.
(b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts and
arrangements entered in the register maintained under section 301 of
the Companies Act 1956 in respect of transactions during the year, have
been made at prices which are reasonable having regard to the
prevailing market price at the relevant time.
6. The Company has not accepted any deposits from the public within the
meaning of section 58A, 58AA of the Companies Act 1956 or any other
relevant provisions of the act and the rules made there under.
7. The internal audit of the company has been entrusted to an
independent firm of Chartered Accountants to carry out the functions as
Internal Auditors. In our opinion the company has internal audit system
commensurate with the size and nature of business.
8. We have broadly reviewed the books of accounts maintained by the
Company pursuant to the rules made by the Central Government for the
maintenance of cost records u/s 209 (1) (d) of the Companies Act. 1956
and we are of the opinion that prima facie the prescribed accounts and
records have been made and maintained. We have not however made a
detailed examination of the records with a view to determine whether
they are accurate or complete.
9. (a) The company is generally regular in depositing with appropriate
authorities undisputed statutory dues including Income-tax, CST/VAT,
Wealth-tax, Service- tax, Customs duty, Excise duty, Cess and other
material statutory dues applicable to it. However company contribution
towards Provident Fund amounting to Rs.129.86 lakhs (Pr. Year Nil) is
not paid since March 2013. The arrears of CST/VAT outstanding at the
close of previous year have been deposited during the year.
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of income-tax, wealth tax,
service tax, sales tax, customs duty, excise duty 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 contribution to Provident Fund
unpaid since March, 2013 amounting to Rs.129.86 lakhs (Pr. Year Nil);
10. The accumulated losses of the company as at the end of the year are
more than fifty percent of its net worth. Further, the company has
incurred cash losses during the financial year covered by our audit and
also has incurred cash losses in the immediately preceding financial
year. The company is under the Scheme of BIFR and hence considered as a
Sick Company as per Sick Industries Companies (Special Provisions) Act,
1985.
11. The Company has not defaulted in repayment of dues to financial
institutions during the current financial year. There are no over dues
as on 31st March, 2014.
12. The Company has not granted any loans and advances on the basis of
shares, debentures and other securities of a similar nature and hence
maintenance of documents and records relating to such items are not
applicable.
13. In our opinion the Company is not a chit fund or a nidhi/mutual
benefit fund/society. Therefore, clause-4 (iii) of the Companies
(Auditor''s Report) Order, 2003, is not applicable to the Company.
14. The Company has not dealt in or traded in shares, securities,
debentures and other investments.
15. The Company has not given any guarantee for loans taken by others
from banks and financial institutions.
16. In our opinion, the term loans have been applied for the purpose of
which they were raised.
17. In our opinion and as per the explanations given to us, no funds
raised on short term basis have not been used for long term purposes
and vice-versa.
18. The Company has not made any preferential allotment of the shares
during the year.
19. The Company has not issued any debentures during the year.
20. The Company has not raised any money by public issues during the
year.
21. Based upon the audit procedures performed and explanations given by
the management, we report that no fraud on or by the Company has been
noticed or reported during the course of our audit.
For S Daga & Co.,
Chartered Accountants
(FRN 000669S)
Sd/-
Place: Hyderabad (Pavan Kumar Bihani)
Date : 19.05.2014 M.No. 225603
Mar 31, 2013
Report on the Financial Statements
We have audited the accompanying financial statements of HINDUSTAN
FLUOROCARBONS LIMITED ("the Company"), which comprise the Balance Sheet
as at March 31, 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.
Management''s Responsibility for the Financial Statements
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"). 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.
Auditors'' Responsibility
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. 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
judgement, 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. 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.
We believe that, the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Basis for Qualified Opinion
(I) The Company had incurred Rs.284.14 lakhs and Rs. 17.83 lakhs as
refurbishment expenditure on Plant & Machinery during the Financial
Year 2008-09 & 2009-10 respectively. As per the guidelines laid down in
scheme of BIFR, Modified Draft Rehabilitation Scheme (MDRS), it has
been stipulated that this sum shall be written off in 5 equal annual
installments. Accordingly, during the current financial year, a sum of
the Rs.61.49 lakhs has been written off on pro- rata basis. This
accounting treatment is a deviation from Accounting Standard (AS- 6)
notified as a mandatory accounting standard in Section 211(3C) of the
Companies Act 1956;
(II) The arrears payable on account of pay fixation in the revised
scale with effect from January 2007 vide wage revision settlement as
per DPE guidelines, had not been provided for in the books of the
company. The arrears payable at the close of the year was Rs.1070.34
lakhs (Pr. year Rs.1160 Lakhs). The company has implemented the wage
revision for officers and non officers'' with effect from January 2007
as per BIFR- MDRS, but has not been provided/charged to statement of
profit and loss on account of categorically stipulation made under the
scheme, that arrears are to be released subject to availability of
funds. This liability has been disclosed under contingent liability in
the financial statements and not provided for;
(III) "Creditors for capital advance of SRF Limited has been written
back in books amounting to Rs.342.35 lakhs which in the opinion of
management had ceased to be a liability in terms of agreement at the
close of year. This sum of Rs.342.35 lakhs has been shown in ''Other
non-operating income'' instead of reducing the amount from the value of
the concerned asset as on 31.03.2013, as required under Accounting
Standard 10 referred to in Section 211(3C) of the Companies Act 1956.
The Company''s records indicate that, had the management reduced the
amount written back from the value of concerned asset, the profit would
have reduced to losses for the year at Rs.247.47 lakhs. Accordingly,
fixed assets written down value would have reduced by 342.35 lakhs and
shareholders fund would have reduced by Rs.342.35 lakhs;"
(IV)Trade Receivables, Trade payables, sundry balances of debit and
credit of parties are subject to confirmation and review by the
management,
Qualified Opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the effects of the matter
described in the Basis for Qualified Opinion paragraph, the financial
statement 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;
(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 profit 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.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor''s Report) Order, 2003 ("the
Order") 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.
2. 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 accounts as required by law have
been kept by the company so far as appears from our examination of
those books and proper returns adequate for the purposes of our audit
have been received from branches not visited by us;
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
accounts and with the returns received from branches not visited by us;
d. in our opinion, the Balance Sheet, Statement of Profit and Loss,
and Cash Flow Statement comply with the Accounting Standards referred
to in subsection (3C) of section 211 of the Companies Act, 1956 except
AS Â 6 , AS Â 15 & AS - 10;
e. on the basis of written representations received from the directors
as on March 31, 2013, and taken on record by the Board of Directors,
none of the directors is disqualified as on March 31, 2013, from being
appointed as a director in terms of clause (g) of sub-section (1) of
section 274 of the Companies Act, 1956.
ANNEXURE TO AUDITORS REPORT:
(Annexure referred to in Point 1 of other Legal and Regulatory
Requirements of the Report of the Auditors)
1a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of fixed assets.
1b) All the fixed assets have been physically verified by the
management during the year and there is regular program of verification
which, in our opinion, is reasonable having regard to the size of the
Company and the nature of its assets. As informed no major material
discrepancies were noticed on such verification.
1c) During the year, the Company has not disposed off substantial part
of its fixed assets.
2a) As explained to us, the stocks of finished products,
stock-in-process and raw materials have been physically verified by the
management during the year. Stock of stores and spare parts are
reported to be physically verified in accordance with the procedure
followed by the management. In our opinion, the frequency of such
physical verification of stocks is reasonable.
2b) In our opinion, the procedure of physical verification of stocks
followed by the management is reasonable and adequate in relation to
the size of the Company and the nature of its business.
2c) The Company is maintaining proper records of inventory and no
material discrepancies have been noticed on physical verification of
stocks compared to the books/records.
3a) The company has not granted any loans secured or unsecured to
Companies, Firms or other parties covered in the registers maintained
under section 301 of the Companies Act, 1956.
3b) The company has taken secured loan from its holding company,
Hindustan Organics Company Limited, covered in the register maintained
under section 301 of the Companies Act 1956 and the maximum amount
involved during the year was Rs. 3956.23 lakhs (Pr. Year Rs.4021.06
lakhs ) and the year - end balance is Rs. 3701.43 lakhs (Pr. Year Rs.
3929.33 lakhs)
3c) In our opinion, the rate of interest and other terms and conditions
on which loans have been taken on the holding company, are not prima
facie prejudicial to the interest of the company.
3d) The Company is irregular in repaying the principal amount as
stipulated and also irregular in payment of interest. The overdue of
principal and interest at the close of the year is Rs.1830.83 lakhs
(Pr.Year Rs.1514.62 lakhs)
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 purchase of inventory, fixed assets and
with regard to the sale of goods. Further, on the basis of our
examination of the books and records of the company and according to
the information and explanations given to us, we have neither come
across nor have been informed of any continuing failure to correct
major weaknesses in the aforesaid internal control procedures.
5a) According to the information and explanations given to us, we are
of the opinion that the transactions that need to be entered in the
register maintained u/s 301 of the Companies Act, 1956 have been so
entered.
5b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts and
arrangements entered in the register maintained under section 301 of
the Companies Act 1956 in respect of transactions during the year, have
been made at prices which are reasonable having regard to the
prevailing market price at the relevant time.
6. The Company has not accepted any deposits from the public within
the meaning of section 58A, 58AA of the Companies Act 1956 or any other
relevant provisions of the act and the rules made there under.
7. The internal audit of the company has been entrusted to an
independent firm of Chartered Accountants to carry out the functions as
Internal Auditors. In our opinion the company has internal audit system
commensurate with the size and nature of business.
8. We have broadly reviewed the books of accounts maintained by the
Company pursuant to the rules made by the Central Government for the
maintenance of cost records u/s 209 (1) (d) of the Companies Act, 1956
and we are of the opinion that prima facie the prescribed accounts and
records have been made and maintained. We have not however made a
detailed examination of the records with a view to determine whether
they are accurate or complete.
9a) The company is generally regular in depositing with appropriate
authorities undisputed statutory dues including Provident fund,
Employee''s State Insurance, Income- tax, CST/VAT, Wealth- tax, Service-
tax, Customs duty, Excise duty, Cess and other material statutory dues
applicable to it. The arrears of CST/VAT, Provident fund etc.
outstanding at the close of previous year have been deposited during
the year.
9b) According to the information and explanations given to us, no
undisputed amounts payable in respect of Income-Tax, Wealth Tax,
Service Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in
arrears, as at 31st March 2013 for a period of more than six months
from the date they became payable;
10. The accumulated losses of the company as at the end of the year are
more than fifty percent of its net worth. Further, the company has
neither incurred cash losses during the financial year covered by our
audit nor in the immediately preceeding financial year. The company is
under the Scheme of BIFR and hence considered as a Sick Company as per
Sick Industries Companies (Special Provisions) Act 1985.
11. The Company has not defaulted in repayment of dues to financial
institutions during the current financial year. There are no over dues
as on 31st March, 2013.
12. The Company has not granted any loans and advances on the basis of
shares, debentures and other securities of a similar nature and hence
maintenance of documents and records relating to such items are not
applicable.
13. In our opinion the company is not a chit fund or a nidhi/mutual
benefit fund/society. Therefore, clause-4 (iii) of the Companies
(Auditor''s Report) Order, 2003, is not applicable to the Company.
14. The Company has not dealt in or traded in shares, securities,
debentures and other investments.
15. The Company has not given any guarantee for loans taken by others
from banks and financial institutions.
16. In our opinion, the term loans have been applied for the purpose of
which they were raised.
17. In our opinion and as per the explanations given to us, no funds
raised on short term basis have not been used for long term purposes
and vice-versa.
18. The Company has not made any preferential allotment of the shares
during the year.
19. The Company has not issued any debentures during the year.
20. The Company has not raised any money by public issues during the
year.
21. Based upon the audit procedures performed and explanations given by
the management, we report that no fraud on or by the Company has been
noticed or reported during the course of our audit.
For S Daga & Co.,
Chartered Accountants
(FRN 000669S)
Sd/-
Place: Hyderabad (Pavan Kumar Bihani)
Date : 27.05.2013 M.No. 225603
Mar 31, 2012
We have audited the attached Balance Sheet of Hindustan Fluorocarbons
Ltd., Hyderabad, as at March 31, 2012 the Statement of profit and Loss
and the Cash Flow Statement for the year ended on that date, which are
revised statements of the original Balance Sheet and Statement of
Profit and Loss covered by the audit report of Hindustan Fluorocarbons
Ltd., dated 25.05.2012. We have considered the earlier audit report
dated 25.05.2012 on the original accounts and also revised report dated
13.07.2012 and have examined the changes made therein which are as
under:
The reversal of excess provision of Gratuity amounting to Rs.65.89
lakhs has now been treated as Other non operating Income instead of
Exceptional Item, however due to change, there is no impact on profit
for the year from continuing operations.
Revised Audit Report:
In the light of C & AG's observations under Section 619(4) of the
Companies Act, 1956, on the accounts of the company, the above Audit
Report Dated 13.07.2012 is revised by modifying sub Paras 1(d) &
1(f)(V). This report is in substitution of our earlier report dated
13.07.2012.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the
Financial Statements based on our audit.
We conducted our audit in accordance with Audit 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 the management, as well as evaluating the overall Financial
Statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
I. As required by the Companies (Auditor's Report) Order, 2003, issued
by the Central Government of India in terms of subsection (4A) of
section 227 of the Companies Act, 1956, we enclose in the Annexure here
to a statement of the matters specified in paragraphs 4 & 5 of the said
Order.
II. Further to our comments in the Annexure referred to in paragraph I
above, 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 the Cash Flow
Statements dealt with by this report are in agreement with the books of
accounts.
(d) In our opinion, the Balance Sheet, Statement of Profit and Loss and
the Cash Flow Statement dealt with this report comply with the
Accounting Standards referred to in subsection (3C) of Section 211 of
the Companies Act. 1956, except AS Ã 6, AS- 15 & AS Ã 29.
(e) As per the Notification No. GSR. 829 (e) dated 21.10.2003 issued by
the Central Government clause(G) of sub-section(1) of Section 274 of
the Companies Act, 1956, is not applicable to the Government Company
and hence we offer no comment as to whether any of the Directors are
disqualified from being appointed as the Directors in terms of the said
section.
(f) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read together with the
Significant Accounting Policies and Notes thereon, subject to following
qualifications;
(I) The Company had incurred Rs.284.14 lakhs and Rs. 17.83 lakhs as
refurbishment expenditure on Plant & Machinery during the Financial
Year 2008-09 & 2009-10 respectively. As per the guidelines laid down in
scheme of BIFR, Modified Draft Rehabilitation Scheme (MDRS), it has
been stipulated that this sum shall be written off in 5 equal annual
installments. Accordingly, during the current financial year, a sum of
the Rs.61.49 lakhs has been written off on pro à rata basis. This
accounting treatment is a deviation from Accounting Standard ( AS-6)
issued by The Institute of Chartered Accountants of India (ICAI) and
incorporated as a mandatory accounting standard in Section 211(3C) of
the Companies Act 1956;
(II) An amount of Rs.223.57 lakhs was incurred towards VRS payments for
31 employees in accordance with BIFR's Modified Draft Rehabilitation
Scheme (MDRS) in Jan 2009. As per scheme, this amount is to be
amortized and charged to P & L Account over a period of 3 years on
pro-rata basis. Accordingly, the balance of Rs.37.27 Lakhs has been
amortized/written off during the year to Statement of profit & loss.
This is in accordance with BIFR's Modified Draft Rehabilitation Scheme
(MDRS). However, the aforesaid accounting treatment is a deviation from
the Accounting Standard (AS-15) issued by The Institute of Chartered
Accountants of India (ICAI) and incorporated as a mandatory accounting
standard in Section 211(3C) of the Companies Act;
(III) The arrears payable on account of pay fixation in the revised
scale with effect from 01-01-1997 vide wage revision settlement as per
DPE guidelines, have had not been provided for in the books of the
company. The arrears payable at the close of the year was Rs.1160
lakhs (Pr. year Rs.1552 Lakhs). As per BIFR-MDRS, the company has
implemented the wage revision for officers and non officers' with
effect from December 2010 and the arrears payable for the period before
that date has not been charged to profit and loss account on account of
categorically stipulation made under the scheme that arrears are to be
released subject to availability of funds. The company has accordingly
not provided for. This liability has been disclosed under contingent
liability in the financial statements;
(IV) Trade Receivables, Trade payables, sundry balances of debit and
credit of parties are subject to confirmation and review by the
management, 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:-
i) in the case of Balance Sheet of the state of affairs of the
company as at 31st March,2012.
ii) in the case of the Statement of Profit and Loss, of the result for
the year ended on that date and
iii) in the case of Cash Flow statement of the cash flows for the year
ended on that date.
Annexure to Auditors Report
(Referred to in Paragraph 1 of our report of even date)
1(a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets.
1(b) All the fixed assets have been physically verified by management
during the year and there is regular program of verification which, in
our opinion, is reasonable having regard to the size of the Company and
the nature of its assets. As informed no major material discrepancies
were noticed on such verification.
1(c) During the year, the Company has not disposed off substantial part
of its fixed assets.
2(a) As explained to us, the stocks of finished products,
stock-in-process and raw materials have been physically verified by the
management during the year. Stock of stores and spare parts are
reported to be physically verified in accordance with the procedure
followed by the management. In our opinion, the frequency of such
physical verification of stocks is reasonable.
2(b) In our opinion, the procedure of physical verification of stocks
followed by the management is reasonable and adequate in relation to
the size of the Company and the nature of its business.
2(c) The Company is maintaining proper records of inventory and no
material discrepancies have been noticed on physical verification of
stocks compared to the books/records.
3(a) The company has not granted any loans secured or unsecured to/from
Companies, Firms or other parties covered in the registers maintained
u/s 301 of the Companies Act, 1956.
3(b) The company has taken secured loan from its holding company,
Hindustan Organics Company Limited, covered in the register maintained
under section 301 of the Companies Act 1956 and the maximum amount
involved during the year was Rs.4021.06 lakhs (Pr. Year Rs.4019.15
lakhs ) and the year - end balance is Rs. 3929.33 lakhs (Pr. Year Rs.
4019.15 lakhs )
3(c) In our opinion, the rate of interest and other terms and
conditions on which loans have been taken on the holding company, are
not prima facie prejudicial to the interest of the company.
3(d) The Company is irregular in repaying the principal amount as
stipulated and also irregular in payment of interest. The overdue of
principal and interest at the close of the year is Rs. 1514.62 lakhs
(Pr. Year Rs. 916.62 lakhs)
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 purchase of inventory, fixed assets and
with regard to the sale of goods. Further, on the basis of our
examination of the books and records of the company and according to
the information and explanations given to us, we have neither come
across nor have been informed of any continuing failure to correct
major weaknesses in the aforesaid internal control procedures;
5(a) According to the information and explanations given to us, we are
of the opinion that the transactions that need to be entered in the
register maintained u/s 301 of the Companies Act, 1956 have been so
entered.
5(b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts and
arrangements entered in the register maintained under section 301 of
the Companies Act 1956 in respect of transactions during the year, have
been made at prices which are reasonable having regard to the
prevailing market price at the relevant time.
6. The Company has not accepted any deposits from the public within
the meaning of section 58A, 58AA of the companies Act 1956 or any other
relevant provisions of the act and the rules made there under.
7. The internal audit of the company has been entrusted to an
independent firm of Chartered Accountants to carry out the functions as
Internal Auditors. In our opinion the company has internal audit system
commensurate with the size and nature of business.
8. We have broadly reviewed the books of accounts maintained by the
Company pursuant to the rules made by the Central Government for the
maintenance of cost records u/s 209 (1) (d) of the Companies Act. 1956
and we are of the opinion that prima facie the prescribed accounts and
records have been made and maintained. We have not however made a
detailed examination of the records with a view to determine whether
they are accurate or complete.
9(a) The company is generally regular in depositing with appropriate
authorities undisputed statutory dues including Provident fund,
Employee's state Insurance, Income-tax, CST/VAT, Wealth-tax, Service-
tax, Customs duty, Excise duty, cess and other material statutory dues
applicable to it. The arrears of CST/VAT, Provident fund etc.
outstanding at the close of previous year have been deposited during
the year.
9(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of income à tax, wealth tax,
service tax, sales tax, customs duty, excise duty and cess were in
arrears, as at 31st March 2012 for a period of more than six months
from the date they became payable;
10. The accumulated losses of the company as at the end of the year are
more than fifty percent of its net worth. Further, the company has not
incurred cash losses during the financial year covered by our audit and
in the opinion of the previous auditor; the company has incurred cash
losses in the immediately preceding financial year. The company is
under the Scheme of BIFR and hence considered as a Sick Company as per
Sick Industries Companies (Special Provisions) Act 1985.
11. The Company has not defaulted in repayment of dues to financial
institutions during the current financial year. There are no over dues
as on 31st March, 2012.
12. The Company has not granted any loans and advances on the basis of
shares, debentures and other securities of a similar nature and hence
maintenance of documents and records relating to such items are not
applicable.
13. In our opinion the Company is not a chit fund or a nidhi/mutual
benefit fund/society. Therefore, clause-4 (iii) of the Companies
(Auditor's Report) Order, 2003, is not applicable to the Company.
14. The Company has not dealt in or traded in shares, securities,
debentures and other investments.
15. The Company has not given any guarantee for loans taken by others
from banks and financial institutions.
16. In our opinion, the term loans have been applied for the purpose
of which they were raised.
17. In our opinion and as per the explanations given to us, no funds
raised on short term basis have not been used for long term purposes
and vice-versa.
18. The Company has not made any preferential allotment of the shares
during the year.
19. The Company has not issued any debentures during the year.
20. The Company has not raised any money by public issues during the
year.
21. Based upon the audit procedures performed and explanations given
by the management, we report that no fraud on or by the Company has
been noticed or reported during the course of our audit.
For S. Daga & Co.,
Chartered Accountants
(FRN 000669S)
Sd/-
(Shantilal Daga)
Partner
M. No. 011617
Place: Mumbai
Date: 27.08.2012
Mar 31, 2011
We have audited the attached Balance Sheet of Hindustan Fluorocarbons
Ltd., Hyderabad, as at March 31, 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
the Financial Statements based on our audit.
We conducted our audit in accordance with Audit 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 the management, as well as evaluating the overall Financial
Statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
I As required by the Companies (Auditor's Report) Order, 2003, issued
by the Central Government of India in terms of subsection (4A) of
section 227 of the Companies Act, 1956, we enclose in the Annexure here
to a statement of the matters specified in paragraphs 4 & 5 of the said
Order.
II Further to our comments in the Annexure referred to in paragraph I
above, 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 the
books and proper returns adequate for the purposes of our audit have
been received from the branches not visited by us.
(c) 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.
(d)The Balance Sheet, Profit and Loss Account and the Cash Flow
Statements dealt with by this report are in agreement with the books of
accounts.
(e) In our opinion, the Balance Sheet, Profit and Loss Account and the
Cash Flow Statement dealt with this report comply with the Mandatory
Accounting Standards referred to in subsection (3c) of Section 211 of
the Companies Act. 1956.
(f) As per the Notification No. GSR. 829 (e) dated 21.10.2003 issued by
the Central Government clause(G) of sub-section(l) of Section 274 of
the Companies Act, 1956, is not applicable to the Government Company
and hence we offer no comment as to whether any of the Directors are
disqualified from being appointed as the Directors in terms of the said
section.
(g) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read together with the
Accounts Policies and Notes to Accounts annexed to this report, 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 subject to the
following qualifications.
i. Regarding Sundry Debtors / Sundry Creditors.
Sundry Debtors /Sundry Creditors are subject to confirmation by the
parties.
ii. Regarding Valuation of CERs as Closing Stock
With regard to CERs (Carbon Emission Reduc- tions), they are the
Credits issued by UNFCCC (United Nations Framework Convention on
Climate Change) to the company for successful reduction /incineration
of R-23 gas.R-23 gas falls in the list of gases having potential of
global warming and is eligible category of Carbon Credits as per the
KYOTO Protocol. Hence the company is eligible for claiming Carbon
Credits after the incineration of the R-23 gas. This asset is of
Intangible in nature but is treated as current asset
(Closing Stock) in the financial statements which is against the
accepted accounting practice. During the current financial year
2010-11, UNFCCC confirmed 420793 CERs to the company in its site
(www.unfccc.int) after deducting 2% i.e., 8587.62 CERs as adaptation
fund deduction. Of the above CERs received, the company had transferred
210652 CERs as instalments payment to SRF Ltd (BOT contractor) for the
Plant and Machinery (CDM Project) as per the agreement entered 14*,
August, 2007. After the above outflows of CERs, the company is left
with 210142 CERs treated as closing stock. The value of the CERs is
taken at Rs. 169706945/- adopting the value of 1 CER in the
International Exchange as on 31-03-2011 at 13.07 Euros and taking the
Euro value at Rs. 63.05 in terms of INR valued @98% of total value.
As per the Accounting Standard No.2 issued by the Institute of
Chartered Accountants of India, the value of stock should be taken at
cost or net realizable value whichever is less. In the instant case,
the cost of the CERs in books is Rs. 94.32 lacs, however the cost of
CERs is taken as nil as the entire cost of Rs.94.32 lacs is absorbed
into normal production cost and General expenditure. In view of the
above, we are of the opinion that PAT (before Prior period adjustment)
Rs.2,20,31,555.38 reported in profit and loss account is over stated to
the extent of Rs.2,99,87,120.00 (closing stock of CERs Rs.
16,97,06,945.00 less Opening WIP of CERs Rs.13,97,19,825.00) had the
company not valued the CERs as WIP or Stock.The current years PAT would
have resulted in a loss of Rs.79,55,564.62. It is pertinent to report
that the company is following the same policy of valuing CERs as WIP or
Stock since financial year 2008-09. The total affect to the profit &
loss account for the past three years 2008-09 to 2010-2011 is
Rs. 16,97,06,945.00 (Rs.7,72,04,112.00 in F.Y
2008-09 , Rs.625,15,713.00 in F.Y2009-10 and Rs.2,99,87,120.00 in F.Y
2010-11).AII the past years audit reports are qualified in this matter.
Also due to the policy of valuation of closing stock of CERs, followed
by company in the year Net Current Assets in balance sheet
Rs.4,19,21,328.54 would have resulted in a negative amount of
Rs.12,77,85,616.46 and the Profit and Loss figure in the balance sheet
under Head Miscellaneous Assets would be Rs.63,73,87,840.32 had this
policy not been followed for CERs in the past years also.
However, it is evident as events occurring after the balance sheet that
the balance CERs with the company realized an amount of Rs.
17,46,75,544/- to the company on 06-05-2011 in the SBH A/c
No.52117754462 vide sale transaction to a party in Europe vide
agreement dated 07.04.11 for sale of CERs and the expenditure
pertaining to the sale amounted to Rs.87.33 lacs.
iii. Regarding Refurbishment Expenditure:
The Company has incurred Rs.284.14 lakhs as refurbishment expenditure
on Plant & Machinery during the Financial Year 2008-09. As per the
guidelines laid down in BIFR, Modified Draft Rehabilitation Scheme
(MDRS) The amount shall be written off in 5 equal annual instalments as
per the BIFR Scheme. Now, in the current financial year, the Company
has written off Rs.61.49 lakhs during. This accounting treatment is a
deviation from Accounting Standard (AS-6) issued by The Institute of
Chartered Accountants of India (ICAI) and incorporated as a mandatory
accounting standard in Section 211 (3c) of the Companies Act. As per
AS-6 as any expenditure incurred for improvement in performance of the
Plant & Machinery should be capitalized and depreciated accordingly as
per Schedule - XIV applicable to the Company. However the Company is
following the guide lines contained in the BIFR's MDRS in this matter
deviating from mandatory AS-6 issued by ICAI.
iv. Regarding VRS Expenditure :
An amount of Rs.223.57 lacs had incurred towards VRS payment for 31
employees in accordance with BIFR's Modified Draft Rehabilitation
Scheme(MDRS) in Jan 2009. This amount is amortized and taken to P & L
Account over a period of 3 years (Rs.37.26 lacs in 2008- 09, Rs. 74.52
lacs in 2009-2010, Rs.74.52 Lacs in 2010-11 included in Schedule-15)
the balance of Rs.37.27 Lacs will be amortised in the next financial
year 2011-12. This is in accordance with BIFR's Modified Draft
Rehabilitation Scheme (MDRS).The above accounting treatment is a
deviation from the Accounting Standard (AS-15) issued by The Institute
of Chartered Accountants of India (ICAI) and incorporated as a
mandatory accounting standard in Section 211 (3c) of the Companies Act.
As per AS-15 VRS expenditure is to be written off over the pay back
period only and cannot be amortised. However the company is following
the BIFR Scheme. Hence the system followed for VRS accounting is
not in line with the mandatory AS-15 issued by ICAI.
v. Wage Revision : Non provision of the expenses in Profit and Loss
Account
The pay scales of the Board Level and below Board level executives have
been revised by the Board w.e.f 01.01.1997. In exercise of the powers
conferred under Articles of Association of the company, the president
had approved the pay revision and directed the company to implement the
pay revision w.e.f 01.01.1997 vide wage revision settlement as per DPE
guidelines. As per the presidential directive, fitment benefit shall be
payable @ 15% in the first stage and the balance fitment shall be paid
when the losses are fully recouped and to come into profits and the
company is able to absorb the financial burden consequent to revision.
As per the orders issued by the Board in pursuant to the presidential
directive, the actual payment of the pay revision shall be made subject
to availability of funds in the company. No provision for the above
wage revision is made by the company in the books of accounts. The
quantification was estimated by the company and shown as contingent
liability in the notes to accounts.
vi. Contribution to PF:
The management and the employees are contributing 10% each to the PF
trust instead of 12% each. The effect of difference of the same is
Rs.4.90 lacs.
vii. Regarding Payment of Interest to HOCL
The Company has debited an amount of Rs.135.99 lacs as payment of
Interest on Loans taken out of which the payment towards Interest on
Loan taken from HOCL the (Holding Company) pursuant to BIFR Scheme is
Rs.13.43 lacs. As per BIFR's MDRS the Company is not liable to pay any
interest on the loan amount received from the Holding Company M/s HOCL
pursuant to BIFR Scheme. Hence we are of the opinion that the company
has no obligation to pass the interest entry amounting to Rs.13.43
lakhs in its Profit and Loss Account and the amount payable to HOCL
shall be reduced to that extent.
viii. Retirement Benefits:
The company had provided Gratuity benefits and other retirement
benefits in the books of accounts and stated as point no. 8 in notes to
accounts for the current Financial year. However, no approved
acturial valuation was done by the company for the Gratuity and other
retirement benefits as required by AS-15 issued by ICAI. The Company
calculated the provision on Actual basis.
ix. Change in Accounting Policy -VSSC Research & Development
The company recognized amount received from VSSC Rs.20 lacs amount as
prior period income and Rs.15.00 lacs as Miscellaneous Income during
the year. The company entered into a MOU with Vikram Sarabhai Space
Center(VSSC) in Financial Year 2009-10 for research and development of
certain chemical compounds. As per the MOU it is a tripartite MOU with
each party having its own milestones and responsibilities. The company
income amounted to Rs.40.00 lacs in the MOU. The company raised invoice
of Rs.20.00 lacs from VSSC in Financial Year 2009- 10 and received the
same in the current financial year 2010-11.The second invoice was
raised for Rs. 15.00 lacs during the Financial Year 2010- 11.The
company treated the amount received in Financial year 2009-10 amounting
to Rs.20.00 lacs as Prior period Income and Rs. 15.00 lacs received in
the Year 2010-11 as "Miscellaneous Income". The above treatment of
income tantamount to a change in the accounting policy as indicated in
Policy no.6.1 in the Significant Accounting Policies of the company
vis-a-vis the policy followed in the previous year. Had there been no
change in the policy the Profit of the company for the year would have
been reduced by Rs.35.00 lacs and the "Current Liabilities" of the
company would have been increased by Rs.35.00 lacs as the same amount
should have been treated as "Advance from customers".
i) In the case of Balance Sheet of the state of affairs of the company
as at 31st March,2011.
ii) In the case of the Profit and Loss Account of the Profit for the
year ended on that date and
iii) In the case of Cash Flow statement of the cash flows for the year
ended on that date.
Annexure to Auditors' Report
(Referred to in Paragraph 1 of our report of even date)
1. In respect of its fixed assets:
a. The Company has maintained proper records showing full particulars,
including quantitative details and situation of fixed assets.
b. All the fixed assets have been physically verified by management
during the year and there is regular program of verification which, in
our opinion, is reasonable having regard to the size of the Company and
the nature of its assets. As informed no major material discrepancies
were noticed on such verification.
c. During the year, the Company has not disposed off substantial part
of its fixed assets.
2. In respect of its inventories:
a. As explained to us, the stocks of finished products,
stock-in-process and raw materials have been physically verified by the
management during the year. Stock of stores and spare parts are
reported to be physically verified in accordance with the procedure
followed by the management. In our opinion, the frequency of such
physical verification of stocks is reasonable.
b. In our opinion, the procedure of physical verification of stocks
followed by the management is 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 and no
material discrepancies have been noticed on physical verification of
stocks compared to the books/records.
d. There is no specific methodology of accounting for CER credits in
the stock records of the company as the items are shown as closina
stock.
3. The company has not granted/taken any loans secured or unsecured
to/from Companies, Firms or other parties covered in the registers
maintained u/s 301 of the Companies Act, 1956 except for an additional
loan taken from its holding company, HOCL, of Rs. 130.00 lacs and the
total amount outstanding as on 31.03.2011 is Rs. 4019.15 lacs including
the loans taken in earlier years. In our opinion the rate of interest
and other conditions governing the loan are prima facie not prejudicial
to the interest of 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 purchase of inventory, fixed assets and
with regard to the sale of goods.
5. In our opinion and according to the information and explanations
given to us, there are no transactions in pursuance of contracts or
arrangements entered in the register maintained u/s 301 of the
Companies Act, 1956, aggregating during the year to Rs. 500000/-
(Rupees Five Lacs only) or more in respect of any party.
6. The Company has not accepted any deposits from the public.
7. The Company has been getting the internal audit of it's accounts by
appointing a firm of Chartered Accountants as Internal Auditors. The
Internal Auditor Report was considered. During the financial year
under audit the company had got a special report of verification of
fixed assets from an independent chartered accountant firm which was
also considered for audit.
8. We have broadly reviewed the books of accounts maintained by the
Company pursuant to the rules made by the Central Government for the
maintenance of cost records u/s 209 (1) (d) of the Companies Act. 1956
and we are of the opinion that prima facie the prescribed accounts and
records have been made and maintained. We have not however made a
detailed examination of the records with a view to determine whether
they are accurate or complete.
9. As per the records of the Company, the Company is generally regular
in depositing with the appropriate authorities undisputed statutory
dues such as , Income Tax(TDS), Wealth Tax, Customs Duty, Income Tax,
Excise Duty, Cess and other statutory dues applicable to it, but not
regular in depositing periodical payments like Provident Fund, Central
Sales Tax /VAT and there are arrears of provident Fund ,VAT and CST for
more than 6 months. CST and VAT outstanding for a period more than 6
months amounts to Rs.45.74 lacs and Rs.17.12 lacs.PF arrears (company
contribution) amounted to Rs.52.77 lacs for more than 6 months due.
According to the information and explanation given to us, there are no
dues of PF, IE, & PF, ESI, VAT/Sales Tax, Income Tax, Customs Duty,
Wealth Tax, Excise Duty and Cess etc., which have not been deposited on
account of any dispute.
10. The accumulated losses of the company as at the end of the year
are more than fifty percent of its net worth. In our opinion the
company has incurred cash losses during the current financial year had
the CERs amounting to Rs.1697.07 lacs are not taken as Closing stock.
We have qualified in our audit report for inclusion of CERs as Closing
Stock which is not as per the AS-2 issued by ICAI (refer the
qualification in our main report).The company is under the Scheme of
BIFR and hence considered as a Sick Company as per Sick Industries
Companies (Special Provisions) Act 1985. Sec 441A of companies Act is
not applicable.
11. The Company has not defaulted in repayment of dues to financial
institutions during the current financial year. There are no over dues
as on 31st March, 2011.
12. The Company has not granted any loans and advances on the basis of
shares, debentures and other securities of a similar nature and hence
maintenance of documents and records relating to such items are not
applicable.
13. In our opinion the Company is not a chit fund or a nidhi/mutual
benefit fund/society. Therefore, clause-4 (iii) of the Companies
(Auditor's Report) Order, 2003, is not applicable to the Company.
14. The Company has not dealt in or traded in shares, securities,
debentures and other investments.
15. The Company has not given any guarantee for loans taken by others
from banks and financial institutions.
16. The Company has taken unsecured loan during the year covered by
our audit from HOCL(Parent company) to the tune of Rs. 130.00 lacs in
accordance with BIFR's MDRS. The secured loans are from SBH,
Gunfoundry, Hyderabad and Holding Company HOCL. We have not come across
any instances where such loans were applied for the purpose other than
the purpose for which the loans were obtained.
17. In our opinion and as per the explanations given to us no funds
raised on short term basis have not been used for long term purposes
and vice-versa.
18. The Company has not made any preferential allotment of the shares
during the year.
19. The Company has not issued any debentures during the year.
20. The Company has not raised any money by public issues during the
year.
21. Based upon the audit procedures performed and explanations given
by the management, we report that no fraud on or by the Company has
been noticed or reported during the course of our audit.
For Siva Krishna & Narayan
Chartered Accountants
Sd/-
(R.V.N. Sastry)
Partner M.No.206635
Place: Hyderabad
Date : 30.06.2011
Mar 31, 2010
We have audited the attached Balance Sheet of Hindustan Fluorocarbons
Ltd., Hyderabad, as at march 31, 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
the Financial Statements based on our audit.
We conducted our audit in accordance with Audit 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 the management, as well as evaluating the overall Financial
Statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
a) As required by the Companies (Auditors Report) Order, 2003, issued
by the Central Government of India in terms of sub-section (4A) of
section 227 of the Companies Act, 1956, we enclose in the Annexure here
to a statement of the matters specified in paragraphs 4 & 5 of the said
Order.
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, Profit and Loss Account and the Cash Flow
Statements dealt with by this report are In agreement with the books of
accounts.
d) In our opinion, the Balance Sheet, Profit and Loss Account and the
Cash Flow Statement dealt with this report comply with the Mandatory
Accounting Standards referred to in sub-section (3c) of Section 211 of
the Companies Act. 1956.
e) As per the Notification No. GSR. 829 (e) dated 21.10.2003 issued by
the Central Government
clause(G) of sub-section(l) of Section 274 of the Companies Act, 1956,
is not applicable to the Government Company and hence we offer no
comment as to whether any of the Directors are disqualified from being
appointed as the Directors in terms of the said section.
f) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read together with the
Accounts Policies and Notes to Accounts annexed to this report, 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 subject to the
following qualifications.
i) Regarding Sundry Debtors / Sundry Creditors.
Sundry Debtors /Sundry Creditors are subject to confirmation by the
parties.
ii) Regarding Valuation of HFC - 23 GAS.
The Company has reported a profit of Rs.306.27 lakhs after taking into
account incinerated HFC - 23 GAS (CFM-23/R-23) gas as closing Work in
Process, amounting to Rs.1397 lakhs
The Company has followed a policy of valuing Future Carbon
Credits(CERs) as closing WIP as similar to the policy followed in
previous financial year 2008-09 . The valuation of Opening WIP relating
to the Future Carbon Credits ( HFC-23 gas) in Financial Year 2009-10 is
Rs. 772.04 Lakhs and the Value of Future Carbon Credits (incinerated
HFC-23 gas) taken in Closing Stock is Rs.1397 lakhs.
HFC-23/R-23 gas produced by HFCL through its manufacturing process has
fallen into the list of gases having potential of global warming and is
in the eligible category of Carbon Credits as per the Kyoto Protocol.
Therefore the company is entitled to claim Carbon Credits after the
incineration of the Gas and confirmation by United Nations Framework on
Climatic Change UNFCCC as per the guidelines of UNFCCC.
It t is informed to us that, in the current financial year 2009-10,
42.5 Metric Tons of RG -23 Gas capable of generating a total of 497250
Carbon Credits (CERs) is incinerated by HFCL during employing external
agencies M/s SRF Ltd as Built- Operate-Transfer(BOT) contractor
agreeing to pay 30% share in total Carbon Credits (263800 Carbon
Credits equivalent to two installments) as contract price and also to
PWC as consultants giving 5% share of total Carbon Credits (i.e,
11672.5 CERs) and after the respective share apportionments the company
is eligible for 221777.50 Carbon Credits.The company is yet to get
confirmation from UNFCCC regarding the converted Carbon Credits as on
the date of this audit report. The company has valued the 221777.50
eligible / Future Carbon Credits as closing Work in process for value
of Rs.1397 lacs taking the lowest quote of Carbon Credits in past year
in Carbon Credits Exchange as basis
As per AS 2 issued by ICAI in respect of valuation of inventory, the
valuation of Stock should be done at cost or net realizable value of
the item whichever is low. As the entire cost relating to RG-23 Gas
production are absorbed in the production cost, the value to be
considered for valuation of WIP of RG 23 Gas/ Future Carbon Credit
should have been NIL.
The ICAI has issued an Exposure Draft and Guidance Note on valuation of
Carbon Credits dated 23-06-2009. As per the guidance note the Carbon
Credits can be valued as Closing Stock / WIP only after they recognized
by United Nations Framework Convention on Climate Change (UNFCCC) and
communicated to company. Till the Confirmation/ communication of
Carbon Credits by UNFCCC to company, the company at best can consider
it as a Contingent Asset.
As on date of Audit Report it is informed to us that 42.5 Metric Tons
of RG -23 Gas capable of generating a total of 497250 Carbon Credits
(CERs) is incinerated by HFCL employing an external agencies M/s SRF
Ltd as Built-Operate-Transfer(BOT) contractor agreeing to pay the price
of the contract by giving 30% share in total Carbon Credits (263800
Carbon Credits equivalent to two installments) and PWC as consultants
giving 5% share of total Carbon Credits (5%of total Carbon Credits i.e,
11672.5 CERs) and after the respective share apportionments the company
is eligible for 221777.50 Carbon Credits which was valued at Rs.1397
lakhs.
Therefore in our view the profit of the Company as reported by the
Company for the year amounting to 307.33 lakhs and Rs.306.27lakhs
before Prior period adjustment and after prior period adjustment would
have been converted into a Loss of Rs 317.63 lakhs and 1090.73 Lakhs
respectively had the above policy been followed.
Also due to the above effect the Net Current Asset would have been
Negative i.e. (-) Rs.240.95 lakhs as against reported (+)Rs.1156.05
lakhs and the Profit and Loss Account under the Misc. Asset would have
been Rs 6297.28 lakhs against the reported as Rs.4900.28 lakhs.
iii) Regarding Refurbishment Expenditure: The Company has incurred
Rs.284.14 lakhs as refurbishment expenditure on Plant & Machinery
during the Financial Year 2008-09. Out of the above the Company has
written off Rs.61.49 lakhs during the current year as per the
guidelines laid down in BIFR, Modified Draft Rehabilitation Scheme
(MDRS) The amount shall be written off in 3 equal annual installments
as per the BIFR Scheme. This is a deviation of A S 6 issued by ICAI as
any expenditure incurred for improvement in performance of the Plant &
Machinery should be capitalized and depreciated accordingly as per
Schedule - XIV applicable to the Company. However the Company is
following the guide lines contained in the BIFRs MDRS in this matter
deviating from A S issued by ICAI.
iv) Regarding Payment of Interest
The Company has debited an amount of Rs. 128.98 lakhs as payment of
Interest on Loans taken out of which the payment towards Interest on
Loan taken from HOCL the (Holding Company) pursuant to BIFR Scheme is
Rs.13.43 lakhs. As per BIFRs MDRS the Company is not liable to pay any
interest on the loan amount received from the Holding Company M/s HOCL
pursuant to of BIFR Scheme. Hence we are of the opinion that the
company has no obligation to pass the interest entry amounting to
Rs.13.43 lakhs in its Profit and Loss Account and the amount payable to
HOCL shall be reduced to that extent. Therefore in our view, the
Profit as reported by the Company as shown in the Profit and Loss for
the year 2009-10 amounting to Rs. 307.33 lakhs and Rs. 306.27 lakhs
before Prior Period Adjustment and after Period Adjustment would have
been converted into a Loss of Rs. 317.63 and Rs. 1090.73 Lakhs
respectively had the above policy been followed. The Net current assets
would have been negative i.e., Rs.240.95 lakhs (as against the reported
figure of Rs. 1156.05 lakhs) and the Profit & Loss under Misc. Assets
would have been Rs.6297.28 lakhs ( as against the reported figure of
Rs. 4900.28 lakhs).
i) In the case of Balance Sheet of the state of affairs of the company
as at 31SI March,2010.
ii) In the case of the Profit and Loss Account of the Profit for the
year ended on that date and
iii) In the case of Cash Flow statement of the cash flows for the year
ended on that date.
Annexure to Auditors Report
(Referred to in Paragraph 1 of our report of even date) 1. In respect
of its fixed assets:
a. The Company has maintained proper records showing full particulars,
including quantitative details and situation of fixed assets.
b. All the fixed assets have been physically verified by management
during the year and there is regular program of verification which, in
our opinion, is reasonable having regard to the size of the Company and
the nature of its assets.
As informed no material discrepancies were noticed on such
verification. c. During the year, the Company has not disposed off
substantial part of its fixed assets.
2. In respect of its inventories:
a. As explained to us, the stocks of finished products,
stock-in-process and raw materials have been physically verified by the
management during the year. Stock of stores and spare parts are
reported to be physically verified in accordance with the procedure
followed by the management. In our opinion, the frequency of such
physical verification of stocks is reasonable.
b. In our opinion, the procedure of physical verification of stocks
followed by the management is 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 and no
material discrepancies have been noticed on physical verification of
stocks compared to the books/records.
3. The company has not granted/taken any loans secured or unsecured
to/from companies, Firms or other parties covered in the registers
maintained u/s 301 of the Companies Act, 1956 except for an additional
loan taken from its holding company, HOCL, of Rs. 156.59 lacs and the
total amount outstanding as on 31.03.2009 was Rs. 3753.17 lacs
including the loans taken in earlier years. In our opinion the rate of
interest and other conditions governing the loan are prima facie not
prejudicial to the interest of 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 purchase of inventory, fixed assets and
with regard to the sale of goods.
5. In our opinion and according to the information and explanations
given to us, there are no transactions in pursuance of contracts or
arrangements entered in the register maintained u/s 301 of the
Companies Act, 1956, aggregating during the year to Rs. 500000/-
(Rupees Five Lacs only) or more in respect of any party.
6. The Company has not accepted any deposits from the public.
7. The Company has been getting the internal audit of its accounts by
appointing a firm of Chartered Accountants as Internal Auditors. The
Internal Auditor Report was considered.
8. We have broadly reviewed the books of accounts maintained by the
Company pursuant to the rules made by the Central Government for the
maintenance of cost records u/s 209 (1) (d) of the Companies Act. 1956
and we are of the opinion that prima facie the prescribed accounts and
records have been made and maintained. We have not however made a
detailed examination of the records with a view to determine whether
they are accurate or complete.
9. As per the records of the Company, the Company is generally regular
in depositing with the appropriate authorities undisputed statutory
dues such as VAT/Sales Tax, Income Tax, Wealth Tax, Customs Duty,
Income Tax, Excise Duty, Cess and other statutory dues applicable to
it, but not regular in depositing periodical payments like Provident
Fund, Central Sales fax and there are arrears of provident Fund .
Central Sales Tax outstanding for a period more than 6 months amounts
to Rs.33.77 lacs it become payable. According to the information and
explanation given to us, there are no dues of PF, IE, & PF, ESI,
VAT/Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty and
cess etc., which have not been deposited on account of any dispute.
10. The accumulated losses of the company as at the end of the year
are more than fifty percent of its net worth. In our opinion the
company has incurred cash losses during the current financial year if
HFC-23 gas valuation amounting to Rs. 1397 lakhs is not taken in to
account and we have qualified in our audit report for inclusion of
HFC-23 gas in the closing WIP valuating violating AS-2 issued by ICAI
(refer the qualification in our main report).
11. The Company has not defaulted in repayment of dues to financial
institutions during the current financial year. There are no over dues
as on 31st March, 2010.
12. The Company has not granted any loans and advances on the basis of
shares, debentures and other securities of a similar nature and hence
maintenance of documents and records relating to such items are not
applicable.
13. In our opinion the Company is not a chit fund or a nidhi/mutual
benefit fund/society. Therefore, clause-4 (iii) of the Companies
(Auditors Report) Order, 2003, is not applicable to the Company.
14. The Company has not dealt in or traded in shares, securities,
debentures and other investments.
15. The Company has not given any guarantee for loans taken by others
from banks and financial institutions.
16. The Company has taken secured loan during the year covered by our
audit from HOCL to the tune of Rs. 156.59 lacs in accordance with
BIFRs MDRS (the unsecured loans outstanding as on 31.03.2008 were
converted into secured loans during the year), from SBH, Gunfoundry,
Hyderabad and Rs. 100.97 lacs as Clean Credit and an additional Cash
Credit for Rs.100 lacs from SBH Gunforundry. We have not come across
any instances where such loans were applied for the purpose other than
the purpose for which the loans were obtained.
17. In our opinion and as per the explanations given to us no funds
raised on short term basis have not been used for long term purposes
and vice-versa.
18. The Company has not made any preferential allotment of the shares
during the year.
19. The Company has not issued any debentures during the year.
20. The Company has not raised any money by public issues during the
year.
21. Based upon the audit procedures performed and explanations given
by the management, we report that no fraud on or by the Company has
been noticed or reported during the course of our audit.
For Siva Krishna & Narayan
Chartered Accountants
Sd/-
Place: Mumbai (R.V.N. Sastry)
Date : 5.5.2010 Partner
M.No.206635