Mar 31, 2018
Report on the Standalone Ind AS financial statements
We have audited the accompanying Standalone Ind AS financial statements of Kirloskar Electric Company Limited (âthe Companyâ), which comprise the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended and a summary of significant accounting policies and other explanatory information for the year then ended, in which are incorporated the Returns audited by the branch auditors M/s Sundar & Associates, Chartered Accountants of the Kuala Lumpur office of the Company in Malaysia (hereinafter referred to as âStandalone Ind AS financial statements'').
Managementâs 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 (âthe Actâ) 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 including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act, read with relevant rules thereunder. 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 judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditorsâ Responsibility
Our responsibility is to express an opinion on these Standalone Ind AS 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 thereunder. 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 the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Standalone Ind AS financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the Standalone Ind AS financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the Standalone Ind AS 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 Standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. 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 Standalone Ind AS financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the Standalone Ind AS financial statements.
Basis for Qualified Opinion
Attention of the Members is invited to note 37(20) to the Standalone Ind AS financial statements regarding the amounts due to the Company from certain subsidiaries towards part consideration receivable on sale/assignment of certain immovable properties, receivables, interest charged and expenses reimbursed. We have relied on the management''s representations that it is confident of realization of amounts due to the said subsidiaries aggregating to Rs. 14,516.72 lakhs (Rs. 13,504.63 lakhs as at March 31, 2017) against which provision is recognized for an amount of Rs. 2,970.77 lakhs. Pending disposals/ realization of assets by the subsidiaries, shortfall in realization of the amount outstanding (net of provision), if any, could not be ascertained.
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 above, the aforesaid Standalone Ind AS 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, 2018, and its loss including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.
Other Matters
We did not audit the financial statements/information of one branch, the Kuala Lumpur office of the Company, included in the Standalone Ind AS financial statements of the Company whose financial statements reflect total assets of Rs.188 lakhs as at March 31, 2018 and total revenues of Rs. 1 lakh for the year ended on that date, as considered in the Standalone Ind AS financial statements. The financial statements of the said office have been audited by the branch auditors (M/s Sundar & Associates, Chartered Accountants) whose report has been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors. Our report is not qualified in respect of this matter.
Emphasis of Matter:
(a) Attention of the members is invited to note 37(21) of the financial statements, where in the directors have detailed the reasons for preparing these Standalone Ind AS financial statements on a going concern basis, though the Company/ Group (consisting of the Company, its subsidiaries and associate) have incurred losses and their networth (after excluding revaluation reserve) has been eroded. There are certain overdue payments to creditors and banks. The appropriateness of the said basis is subject to the Company adhering to the restructuring plan and infusion of requisite funds with its attendant uncertainties. We have relied on the representations made to us by the Company.
(b) Attention of the members is invited to note 37(1 a)(vii)of the Standalone Ind AS financial statements which sets out that the Company has filed Special Leave Petition in respect of demands of resale tax and sales tax penalty of Rs. 527 lakhs and Rs. 362 lakhs respectively before the Honourable Supreme Court of India. Management has represented to us that it is not probable that there will be an outflow of economic benefits and hence no provision is required to be recognized in this regard. We have relied on this representation.
Report on Other Legal and Regulatory Requirements:
1. As required by the Companies (Auditor''s Report) Order, 2016 (âthe Orderâ), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the âAnnexure Aâ a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.
2. As required by the 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 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 it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us.
c. The report on the accounts of the Kuala Lumpur office in Malaysia of the Company audited under Section 143 (8) of the Act by branch auditors have been forwarded to us and have been duly dealt with by us while preparing this report.
d. The Balance Sheet, the Statement of Profit and Loss, the Statement of Cash Flows and the Statement of Changes in Equity dealt with by this report are in agreement with the books of account and with the returns received from the branches not visited by us.
e. In our opinion, the aforesaid Standalone Ind AS financial statements comply with the Indian Accounting Standards specified under section 133 of the Act, read with relevant rules thereunder.
f. On the basis of the written representations received from the directors as on March 31, 2018 taken on the record by the Board of Directors, none of the directors is disqualified as on that date from being appointed as a director in terms of section 164(2) of the Act.
g. 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 âAnnexure Bâ.
h. With respect to other matters to be included in the Auditors report in accordance with rule 11 of the Companies (Audit and Auditors) Rules, 2014 as amended, in our opinion and to the best of our information and according to the explanations given to us,
i The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 37(1a) to the financial statements.
ii The Company did not have any long-term contracts and has not entered into any derivative contracts. Accordingly no provision is required to be recognised in respect of material foreseeable losses under applicable laws or accounting standards.
iii There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
ANNEXURE âAâ TO THE INDEPENDENT AUDITORSâ REPORT
1. a. The Company has maintained proper records showing full particulars including quantitative details and situation of Property, plant and equipment (PPE). However comprehensive description of assets and their current location need to be updated in the asset records.
b. Management has physically verified these PPE in various units as per a phased program of physical verification, which is at reasonable intervals. The discrepancies noticed on such verification were not material however the same has been properly dealt with in the books of account.
c. According to the information and explanation given to us and as represented to us by the company, the title deeds of Immoveable properties are held in the name of the Company.
2. The Company has a program of physical verification of inventory which is conducted at reasonable intervals by the management. Certain mistakes noticed in the inventory records have been corrected to the extent identified based on physical verification taken from time to time. The Company is in the process of identifying and analysing the differences adjusted/to be adjusted in the books of account on a comprehensive basis as reported in note 37(7) of the financial statements and consequently we are not in a position to comment on the extent of discrepancies and any further adjustments required in the books of account.
3. The Company has not granted any loans to companies, firms, Limited liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. For this purpose, we have relied on the representations of the management that monies due from parties referred to in note 37(9) to the financial statements are advances and not in the nature of loans.
4. In our opinion and according to the information and explanations given to us, the company has not granted any loans or provided any guarantees or security to the parties covered under section 185 of the Companies Act, 2013. In our opinion and according to the information and explanations given to us, the company has complied with the provisions of section 186 of the Companies Act, 2013 in respect of investments made or guarantees given to the wholly owned subsidiaries covered under section 186 of the Companies Act, 2013. There were no loans given nor securities provided to wholly owned subsidiaries covered under section 186 of the Companies Act, 2013.
5. In our opinion and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 of the Companies Act, 2013 or any other relevant provisions of the said Act and the rules framed there under, with regard to deposits accepted from the public. There were no delays in repayment of deposits during the financial year ended March 31, 2018 and the management has represented to us that there are no deposits unpaid as laid down in section 74 and other relevant provisions of the Companies Act, 2013. Further and according to the Company no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.
6. We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of section 148 of the Act and read with paragraph 2 above regarding inventory records, we are of the opinion that prima facie the prescribed accounts and records have been made and maintained.
7. a. The Company has been regular in depositing undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues barring delays in few cases in certain months in respect of provident fund and excise duty. According to the information and explanations given to us, there are no undisputed amounts payable in respect of above mentioned statutory dues which were in arrears, as at March 31, 2018 for a period of more than six months from the date they became payable except in respect of dues of excise duty amounting to Rs. 342.49 lakhs payable for December 2016, March 2017 to May 2017.
b. According to the information and explanations given to us, the following dues of Sales Tax, Income Tax, Excise Duty, Value Added Tax, Service Tax and Cess had not been deposited as at March 31, 2018 with the relevant authorities on account of disputes.
(Rs. In Lakhs)
Name of the statue |
Nature of the dues |
Amount (Rs in Lakhs.) |
Period to which the amount relates |
Forum where dispute is pending |
Karnataka Sales Tax Act, 1957 |
Resale tax demanded |
527.07 |
2003 - 2005 |
Supreme Court |
Karnataka Value Added Tax Act, 2003 |
VAT penalty demanded |
362.18 |
2005 - 2008 |
Supreme Court |
Karnataka Value Added Tax Act, 2003 |
VAT demanded |
88.59 |
2006 - 2007 to 2014-15 |
Joint Commissioner of Commercial Tax (Appeals) |
The Central Excise, 1944 |
Cenvat availment |
76.02 |
January, 2018 to April 2010, October 2008 to April 2010, September 2010 to March 2011 |
Commissioner of Central Excise (Appeals) |
The Central Sales Tax Act, 1956 & The Bombay Sales Tax Act, 1959 |
Sales tax demand |
1,823.25 |
1999 - 2000, 2005-2006, 2007-2008 and 2008-2 009, 2011-12, 2012-13 |
Joint Commissioner of Commercial Taxes |
The West Bengal Sales Tax Act |
Sales Tax demand |
73.47 |
2011-12, 2012-13, 2013-14 & 2014-15 |
Commercial Taxes Appellate board and Senior joint commissioner Central Audit Unit-1 Kolkata |
(Rs. In Lakhs)
Lenderâs Name |
As at March 31, 2018 |
Period of delay |
|
Principal |
Interest |
||
BANK OF INDIA |
14.02 |
2.39 |
Less than 90 days |
BANK OF INDIA |
30.06 |
19.03 |
Less than 90 days |
AXIS BANK |
2,540.00 |
280.65 |
Less than 180 days |
AXIS BANK |
21.14 |
5.38 |
Less than 180 days |
AXIS BANK |
42.96 |
27.90 |
Less than 180 days |
CORPORATION BANK |
2,234.00 |
25.55 |
Less than 90 days |
STATE BANK OF INDIA (STATE BANK OF HYDERABAD) |
1.93 |
0.67 |
Less than 90 days |
1.83 |
0.16 |
Less than 90 days |
|
3.99 |
2.73 |
Less than 90 days |
|
STATE BANK OF INDIA (STATE BANK OF MYSORE) |
1.70 |
0.59 |
Less than 90 days |
1.60 |
0.56 |
Less than 90 days |
|
5.16 |
3.49 |
Less than 90 days |
|
STATE BANK OF INDIA (STATE BANK OF TRAVANCORE) |
2.32 |
0.78 |
Less than 90 days |
2.85 |
0.31 |
Less than 90 days |
|
9.12 |
5.96 |
Less than 90 days |
8. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of loans or borrowings to banks except for the following instances of delay/default in repayment of principal amount and interest in the below table. There are no loans taken from financial institution, Government or dues to debenture holders by the Company.
9. The company has not raised moneys by way of initial public offer or further public offer (including debt instruments) or fresh term loans from banks during the year.
10. According to the information and explanation given to us, there are no frauds reported by the Company or any fraud on the company by its officers or employees has been noticed or reported during the year.
11. According to the information and explanations given by the management, the managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act 2013.
12. The Company is not a Nidhi Company. Accordingly, the provisions of clause 11 of the said Order are not applicable.
13. In our opinion and according to the information and explanation given to us and as represented to us by the management, all transactions with the related parties are in compliance with section 177 and 188 of Companies Act, 2013 and the details have been disclosed in the Standalone Ind AS financial statements as required by the applicable accounting standards.
14. According to the information and explanations given to us and based on our examination of the records, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.
15. As represented to us by the management and according to the information and explanation given to us by the management, the Company has not entered into any non-cash transactions with directors or persons connected with him. Accordingly, the provisions of clause 15 of the said Order are not applicable.
16. According to the information and explanation given, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Accordingly the provisions of clause 16 of the Order is not applicable.
ANNEXURE-B TO THE INDEPENDENT AUDITORSâ REPORT
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (âthe Act")
We have audited the internal financial controls over financial reporting of Kirloskar Electric Company Limited (âthe Companyâ) as of March 31, 2018 in conjunction with our audit of the Standalone Ind AS financial statements of the Company for the year ended on that date. Managementâs Responsibility for Internal Financial Controls
The Company''s management is responsible for establishing and maintaining internal financial controls based on âthe internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of Indiaâ. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditorsâ Responsibility
Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the âGuidance Noteâ) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the Standalone Ind AS financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the Standalone Ind AS financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2018, based on âthe internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of Indiaâ.
for Ashok Kumar, Prabhashankar & Co.,
Chartered Accountants
Firm Regn. No. 004982S
A. Umesh Patwardhan
Partner
M. No. 222945
Date:May 28, 2018
Place: Bengaluru
Mar 31, 2016
Abridge Report on the Abridge Standalone Financial Statements:
The accompanying abridged financial statements, which comprise the abridged balance sheet as at March 31, 2016, the abridged statement of profit and loss and abridged cash flow statement for the year then ended, and related notes, are derived from the audited financial statements of Kirloskar Electric Company Limited (âthe Companyâ) as at and for the year ended March 31, 2016. We expressed a qualified audit opinion on those financial statements in our report dated May 25, 2016.
The abridged financial statements do not contain all the disclosures required by the accounting principles generally accepted in India, including the accounting standards specified under section 133 of the Companies Act, 2013 (âthe Actâ), read with rule 7 of the Companies (Accounts) Rules, 2014. Reading the abridged financial statements, therefore, is not a substitute for reading the audited financial statements of the Company.
Managementâs Responsibility for the Abridge Standalone Financial Statements:
Management is responsible for the preparation of a summary of the audited financial statements in accordance with the accounting standards specified under section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014 and accounting principles generally accepted in India.
Auditorâs Responsibility:
Our responsibility is to express an opinion on the abridged financial statements based on our procedures, which were conducted in accordance with Standard on Auditing (SA) 810, âEngagements to Report on Summary Financial Statementsâ issued by the Institute of Chartered Accountants of India.
Basis for Qualified Opinion:
Attention of the members is invited to note 52 of the financial statements, regarding amounts due to the Company from certain subsidiaries towards part consideration receivable on sale/assignment of certain immoveable properties and receivables. We have relied on managementâs representations that it is confident of realization of amounts due from the said subsidiaries aggregating to Rs, 14,950.73 lakhs (previous year Rs, 18,452.51 Lakhs). Shortfall in realization of consideration receivable, if any, could not be ascertained.
Qualified Opinion:
In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, the abridged financial statements derived from the audited financial statements of the Company as at and for the year ended March 31, 2016 are a fair summary of those financial statements, in accordance with the accounting standards specified under section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014 and accounting principles generally accepted in India.
Other Matter:
We did not audit the financial statements/information of one branch, the Kuala Lumpur office of the Company, included in the standalone financial statements of the Company whose financial statements reflect total assets of Rs, 224.47 lakhs as at 31st March, 2016 and total revenues of Rs, 0.69 lakhs for the year ended on that date, as considered in the standalone financial statements. The financial statements of the said office have been audited by the branch auditors (M/s Sundar & Associates, Chartered Accountants) whose report has been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.
Emphasis of Matter:
(a) Attention of the members is invited to note 53 of the financial statements, where in the directors have detailed the reasons for compiling the financial statements on a going concern basis, though the net worth of the group, consisting of the Company, its subsidiaries and associate has been eroded. The appropriateness of the said basis is subject to the Company adhering to the restructuring plan and infusion of requisite funds to it. We have relied on the representations made to us by the management. Our report is not qualified in this respect.
(b) Attention of the members is invited to note 54 of the financial statements which sets out that the Company has filed special leave petition in respect of demands for resale tax and sales tax penalty of Rs, 527 lakhs and Rs, 362 Lakhs respectively before the honourable Supreme Court of India. Management has represented to us that it is not probable that there will be an outflow of economic benefits and hence no provision is required to be recognized in this regard. We have relied on this representation. Our report is not qualified in this respect.
Report on the Standalone Financial Statements:
We have audited the accompanying standalone financial statements of Kirloskar Electric Company Limited (âthe Companyâ), which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss, the Cash Flow Statement, and a summary of significant accounting policies and other explanatory information for the year then ended, in which are incorporated the financial statements audited by the branch auditors M/s Sundar & Associates, Chartered Accountants of the Kuala Lumpur office of the Company in Malaysia.
Managementâs Responsibility for the Standalone Financial Statements:
The Companyâs Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (âthe Actâ) 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 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 judgmentsâ 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.
Auditorâs Responsibility:
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.
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 the 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 the disclosures in the financial statements. The procedures selected depend on the auditorâs 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 Companyâs preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Companyâs Directors, 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 qualified audit opinion on the standalone financial statements.
Basis for Qualified Opinion:
Attention of the members is invited to note 52 of the financial statements, regarding amounts due to the Company from certain subsidiaries towards part consideration receivable on sale/assignment of certain immovable properties and receivables. We have relied on managementâs representations that it is confident of realization of amounts due from the said subsidiaries aggregating to Rs, 14,950.73 lakhs (previous year Rs, 18,452.51 Lakhs). Shortfall in realization of consideration receivable, if any, could not be ascertained.
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 above, 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 March 31, 2016, and its loss and its cash flows for the year ended on that date.
Other Matter
We did not audit the financial statements/information of one branch, the Kuala Lumpur office of the Company, included in the standalone financial statements of the Company whose financial statements reflect total assets of Rs, 224.47 lakhs as at 31st March, 2016 and total revenues of Rs, 0.69 lakhs for the year ended on that date, as considered in the standalone financial statements. The financial statements of the said office have been audited by the branch auditors (M/s Sundar & Associates, Chartered Accountants) whose report has been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.
Emphasis of Matter:
(a) Attention of the members is invited to note 53 of the financial statements, where in the directors have detailed the reasons for compiling the financial statements on a going concern basis, though the net worth of the group, consisting of the Company, its subsidiaries and associate has been eroded. The appropriateness of the said basis is subject to the Company adhering to the restructuring plan and infusion of requisite funds to it. We have relied on the representations made to us by the management. Our report is not qualified in this respect.
(b) Attention of the members is invited to note 54 of the financial statements which sets out that the Company has filed special leave petition in respect of demands for resale tax and sales tax penalty of '' 527 lakhs and '' 362 Lakhs respectively before the honourable Supreme Court of India. Management has represented to us that it is not probable that there will be an outflow of economic benefits and hence no provision is required to be recognized in this regard. We have relied on this representation. Our report is not qualified in this respect.
Report on Other Legal and Regulatory Requirements:
1. As required by the Companies (Auditorâs Report) Order, 2016 (âthe Orderâ), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the âAnnexure Aâ a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.
2. As required by the 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 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 it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us.
c. The report on the accounts of the Kuala Lumpur office in Malaysia of the Company audited under Section 143 (8) of the Act by branch auditors have been forwarded to us and have been duly dealt with by us while preparing this report.
d. 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 and with the returns received from the branches not visited by us.
e. In our 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.
f. On the basis of the written representations received from the directors as on March 31, 2016 taken on the record by the Board of Directors, none of the directors is disqualified as on that date from being appointed as a director in terms of section 164(2) of the Act.
g. 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 âAnnexure Bâ.
h. With respect to other matters to be included in the Auditors 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 financial statements - Refer Note 23 to the financial statements;;
ii The Company did not have any long-term contracts and has not entered into any derivative contracts. Accordingly no provision is required to be recognized in respect of material foreseeable losses under applicable laws or accounting standards.
iii There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
1. a. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. However comprehensive description of assets and their current location need to be updated in the asset records.
b. Fixed Assets are physically verified by the management during the year 2014-15. Management has informed us that its programme of verification of Fixed Assets envisages verification over three years which in our opinion is reasonable. No material discrepancies were observed during such verification which were already adjusted in the preceding year.
c. According to the information and explanation given to us and as represented to us by the company, the title deeds of Immoveable properties are held in the name of the Company except in respect of the following:
Rs, in Lakhs
Sl. No |
Land / Building |
Whether Leasehold / Freehold |
Book Value (as at March 31, 2016) |
Remarks, if any |
1. |
Land at Govenahalli |
Leasehold Land |
68.70 |
The title deeds are in the name of Kaytee Switchgear Limited erstwhile subsidiary of the Company (refer note 35(c) of the Financial Statements |
2. |
Land at Hubli |
Freehold Land |
369.09 |
|
3. |
Land at Tumkur |
Freehold Land |
30.14 |
2. The Company has a program of physical verification of inventory which is conducted at reasonable intervals by the management. Certain mistakes noticed in the inventory records have been corrected to the extent identified based on physical verification taken from time to time. The Company is in the process of identifying and analysing the differences adjusted/to be adjusted in the books of account on a comprehensive basis as reported in note 39 of the financial statements. Consequently we are not in a position to comment on the extent of discrepancies and any further adjustments required in the books of account.
3. The Company has not granted any loans to companies, firms, Limited liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. For this purpose, we have relied on the representations of the management that monies due from parties referred to in note 41 to the financial statements are advances and not in the nature of loans.
4. In our opinion and according to the information and explanations given to us, the company has not granted any loans or provided any guarantees or security to the parties covered under section 185 of the Act, except guarantee on behalf of a wholly owned subsidiary of the Company where the provisions of section 185 of the Act does not apply by virtue of Rule 10 of the Companies (Meetings of Board and its Powers) Rules, 2014. In our opinion and according to the information and explanations given to us, the company has complied with the provisions of section 186 of the Companies Act, 2013 to the extent applicable in respect of investments made or guarantees given to the wholly owned subsidiaries covered under section I86 of the Act (refer note 49 of the financial statements). There were no loans given nor securities provided to wholly owned subsidiaries covered under section I86 of the Act.
5. In our opinion and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 of the Companies Act, 2013 or any other relevant provisions of the said Act and the rules framed there under, with regard to deposits accepted from the public. Further and according to the Company no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.
6. We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of section 148 of the Act and read with paragraph 2 above regarding inventory records, we are of the opinion that prima facie the prescribed accounts and records have been made and maintained.
7. a. There have been delays in depositing undisputed statutory dues during the year. Delays ranged up to 3 months in respect of provident fund, up to 2 months in the case of income tax deducted at source and excise duty, and up to 1 month in Employeesâ State Insurance and service tax. According to the information and explanations given to us, there were no undisputed amounts payable in respect of above mentioned statutory dues which were in arrears, as at March 31, 2016 for a period of more than six months from the date they became payable except in respect of arrears of water charges due to revision in rates for the period relating from August 2011 to March 2015 payable to Karnataka Water Board, Hubballi Division amounting to '' 38.13 lakhs.
b. According to the information and explanations given to us, the following dues of Sales Tax, Income Tax, Customs Duty, Excise Duty, Value Added Tax, Service Tax and Cess had not been deposited as at March 31, 2016 with the relevant authorities on account of disputes.
Name of the statue |
Name of the dues |
Amount (Rs,. in Lakhs) |
Period to which the amount relates |
Forum where dispute is pending |
Karnataka Sales Tax Act, 1957 |
Resale tax demanded |
229.07 |
2003 - 2005 |
Supreme Court |
Karnataka Value Added Tax Act, 2003 |
VAT penalty demanded |
181.06 |
2005 - 2008 |
Supreme Court |
Karnataka Value Added Tax Act, 2003 |
VAT demanded |
49.59 |
2006 - 2007 & 2008 - 2009 |
Joint Commissioner of Commercial Tax (Appeals) |
The Central Excise, 1944 |
Excise demand |
2.18 |
April 1993 & April 2001 |
High Court of Karnataka |
Excise demand |
2.62 |
September 2006 and September 2007 |
Central Excise and Service Tax Appellate Tribunal |
|
Cenvat availment |
89.33 |
January 2008 to April 2010, October 2008 to April 2010, September 2010 to March 2011 |
Commissioner of Central Excise (Appeals) |
|
The Customs Act, 1962. |
Customs demand |
10.53 |
1994 to 1999 |
Asst. Commissioner of Customs |
The Income Tax Act, 1961 |
Income tax demand |
25.19 |
Assessment Year 2010 - 2011 |
Commissioner of Income Tax (Appeals) |
The Income Tax Act, 1961 |
Income tax demand |
174.13 |
Assessment Year 2012 - 2013 |
Commissioner of Income Tax (Appeals) |
The Income Tax Act, 1961 |
Income tax demand |
1,159.82 |
Assessment Year 2013 - 2014 |
Commissioner of Income Tax (Appeals) |
The Central Sales Tax Act, 1956 & The Bombay Sales Tax Act, 1959 |
Sales tax demand |
20.66 |
1999 - 2000 |
Maharastra Sales Tax Tribunal, Mumbai |
The Central Sales Tax Act, 1956 & The Bombay Sales Tax Act, 1959 |
Sales tax demand |
1,344.12 |
1999 - 2000, 2005-2006, 2007-2008 and 2008-2009 |
Joint Commissioner of Commercial Taxes |
The Central Sales Tax Act, 1956 & Maharastra Value Added Tax Act, 2002 |
Sales tax demand |
3,196.41 |
2010-11 |
The President, Maharashtra Sales Tax Tribunal, Mumbai (in respect of CST demand) & Deputy Commissioner of Sales Tax (Appeals) Pune |
8. In our opinion and according to the information and explanations given to us, there are no defaults in repayment of dues to banks as at March 31, 2016 taking into consideration the terms and conditions of the Master Restructuring Agreement (âMRAâ) referred to in note 55 of the financial statements. There are no loans taken from financial institution, Government or dues to debenture holders by the Company.
9. The company has not raised moneys by way of initial public offer, further public offer (including debt instruments), or fresh term loans from banks during the year.
10. According to the information and explanation given to us, there are no frauds or any fraud on the company by its officers or employees have been noticed or reported during the year.
11. According to the information and explanations given by the management, managerial remuneration paid or provided is in accordance with the requisite approvals mandated by the provisions of section 197 read with schedule V to the Act.
12. The Company is not a Nidhi Company. Accordingly, the provisions of clause 3(xii) of the said Order are not applicable.
13. In our opinion and according to the information and explanation given to us and as represented to us by the management, all transactions with related parties are in compliance with section 177 and 188 of Companies Act, 2013 and details have been disclosed in the Financial Statements as required by the applicable accounting standards.
14. The Company during the year 2014-15 issued and allotted 15,95,890 Compulsorily Convertible Preference Shares (âCCPSâ) of Rs, 100/- each to Mr. Vijay R Kirloskar by way of preferential placement as referred to in Note 3 Foot note 1(c) of the financial statements out of which 777,485 CCPS were converted to 25,54,156 equity shares of Rs, 10/- each at a premium of Rs, 20.44 per equity share on February 11, 2016. Since there was only a conversion of CCPS into equity shares was done during the year, no comments regarding utilization of the funds received and compliance with section 42 of the Act have been made.
15. As represented to us by the management and according to the information and explanation given to us by the management, the Company has not entered into any non-cash transactions with directors or persons connected with him. Accordingly, the provisions of clause 3(xv) of the said Order are not applicable.
16. According to the information and explanation given, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Accordingly clause 3(xvi) of the Order is not applicable to the Company.
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (âthe Actâ)
We have audited the internal financial controls over financial reporting of Kirloskar Electric Company Limited (âthe Companyâ) as of March 31, 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.
Managementâs Responsibility for Internal Financial Controls
The Companyâs management is responsible for establishing and maintaining internal financial controls based on âthe internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of Indiaâ. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to companyâs policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditorsâ Responsibility
Our responsibility is to express an opinion on the Companyâs internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the âGuidance Noteâ) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditorâs judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companyâs internal financial controls system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A companyâs internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companyâs internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companyâs assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on âthe internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of Indiaâ.
For B.K. RAMADHYANI & CO LLP
Chartered Accountants
Firm Registration No. 002878S/S200021
VASUKI H S
Date: May 25, 2016 Partner
Place: Bangalore Membership No. 212013
Mar 31, 2015
We have audited the accompanying standalone financial statements of
Kirloskar Electric Company Limited ("the Company"), which comprise the
Balance Sheet as at March 31, 2015, the Statement of Profit and Loss,
the Cash Flow Statement, and a summary of significant accounting
policies and other explanatory information for the year then ended, in
which are incorporated the Returns audited by the branch auditors M/s
Sundar & Associates, Chartered Accountants of the Kuala Lumpur office
of the Company in Malaysia.
Management's Responsibility for the Standalone Financial Statements:
The Company's Board of Directors is responsible for the matters stated
in section 134(5) of the 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 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 judgements 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.
Auditor's Responsibility:
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. 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
the ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatements 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 control 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. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
qualified audit opinion.
Basis for Qualified Opinion:
Attention of the members is invited to note 54 (a), (b) and (d) of the
financial statements, which sets out the sale of certain assets
comprising of immoveable property and book debts by the Company to its
wholly owned subsidiaries and the consequent recognition of profits
resulting there from. We have relied on the representation of the
management that it is confident of realization of the entire amounts
due from the said subsidiaries of Rs 18,452.51 lacs. Ultimate shortfall
in realization of assets transferred to its subsidiaries, if any, is
not ascertainable at this stage. The transactions between the Company
and its wholly owned subsidiaries referred to notes 54 are subject to
the approval of the members by way of special resolutions in terms of
section 188 of the Companies Act, 2013, rule 15 (2) of the Companies
(Meetings of Boards and its Powers), Rules, 2014 and other applicable
provisions, if any.
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 above, 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 March 31,2015, and its
loss and its cash flows for the year ended on that date.
Other Matter
We did not audit the financial statements/information of one branch,
the Kuala Lumpur office of the Company, included in the standalone
financial statements of the Company whose financial statements reflect
total assets of Rs. 438.75 lakhs as at 31 st March, 2015 and total
revenues of Rs.425.68 lakhs for the year ended on that date, as
considered in the standalone financial statements. The financial
statements of the said office have been audited by the branch auditors
(M/s Sundar & Associates, Chartered Accountants) whose report has been
furnished to us, and our opinion in so far as it relates to the amounts
and disclosures included in respect of these branches, is based solely
on the report of such branch auditors.
Emphasis of Matter:
(a) Attention of the members is invited to note 54 (c) of the financial
statements regarding execution of deeds of immovable properties in
favour of certain subsidiaries before March 31, 2015, the legal advice
obtained by the Company that these properties have already vested in
the relevant subsidiaries on the date of execution of the concerned
deeds, even though payment of stamp duty and registration will be done
subsequently. We have relied on the legal opinion obtained by the
Company in this respect and management's representation that the
payment of duty will be made within the time limit and registration
completed. Our report is not qualified in this respect.
(b) Attention of the members is invited to note 55 of the financial
statements, where in the directors have detailed the reasons for
compiling the financial statements on a going concern basis, even
though the net worth of the group, consisting of the Company, its
subsidiaries and its associate has been eroded. The appropriateness of
the said basis is subject to the Company adhering to the restructuring
plan and infusion of requisite funds to it. We have relied on the
representations made to us by the management. Our report is not
qualified in this respect.
(c) Attention of the members is invited to note 57 of the financial
statements which sets out that the Company has filed special leave
petitions in respect of demands for resale tax and sales tax penalty of
Rs.527 lakhs and Rs.362 Lakhs respectively before the honourable
Supreme Court of India. Management has represented to us that it is not
probable that there will be an outflow of economic benefits and no
provision is required to be recognized in this respect. We have relied
on this representation. Our report is not qualified in this respect.
Report on Other Legal and Regulatory Requirements:
1. As required by the Companies (Auditor's Report) Order, 2015 ("the
Order") issued by the Central Government 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.
2. As required by the 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
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 it appears from our examination of
those books and proper returns adequate for the purposes of our audit
have been received from the branches not visited by us.
c. The report on the accounts of the Kuala Lumpur office in
MalaysiaoftheCompanyauditedunderSection143(8)of the Act by branch
auditors have been forwarded to us and have been duly dealt with by us
while preparing this report.
d. 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 and with the returns received from the branches not visited by
us.
e. In our 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.
f. On the basis of the written representations received from the
directors as on March 31, 2015 taken on the record by the Board of
Directors, none of the directors is disqualified as on that date from
being appointed as a director in terms of section 164(2) of the Act.
g. With respect to other matters to be included in the Auditors 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 financial statements - Refer note 23 to the
financial statements.
ii The Company did not have any long-term contracts and has not entered
into any derivative contracts. Accordingly no provision is required to
be recognized in respect of material foreseeable losses under
applicable laws or accounting standards.
iii There has been no delay in transferring amounts, required to be
transferred, to the Investor Education and Protection Fund by the
Company as required to be so transferred and there has been no delay in
such remittance.
ANNEXURE REFERRED TO IN PARAGRAPH 1 UNDER THE HEADING "REPORT ON OTHER
LEGAL AND REGULATORY REQUIREMENTS" OF OUR REPORT OF EVEN DATE TO THE
MEMBERS OF KIRLOSKAR ELECTRIC COMPANY LIMITED
1. a. The Company has maintained proper records showing full
particulars including quantitative details and situation of fixed
assets. However comprehensive description of assets and their current
location need to be updated in the asset records.
b. Management during the year has physically verified fixed assets in
certain units as per a phased program of physical verification. The
discrepancies noticed on such verification were not material however
the same has been properly dealt with in the books of account.
2. a. Inventories have been physically verified during the year by the
management at reasonable intervals.
b. 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 has implemented SAP ECC 6 systems at all its units.
Certain mistakes and omissions noticed during the year have been
corrected based on physical verification taken from time to time. The
Company is in the process of quantifying the differences adjusted/to be
adjusted in the books of account on a comprehensive basis as reported
in note 39 of the financial statements and consequently we are not in a
position to comment on the extent of discrepancies and any further
adjustments required in the books of account.
d. We have relied on the representation of the management that the
consumption of materials and components is in line with production/
industry norms.
3. The Company has not granted any loans to companies, firms and other
parties covered in the register maintained under section 189 of the
Companies Act, 2013. For this purpose, we have relied on the
representations of the management that monies due from parties referred
to in note 41 to the financial statements are advances and not in the
nature of loans.
4. Having regard to the explanations given to us, that some of the
bought out items/ assets are proprietary and/ or are customised to the
requirements of the Company and as such comparative quotations are not
available, there are adequate internal control procedures with regard
to purchases of inventory, fixed assets and for the sale of goods and
services. However as detailed in notes 37 and 39 to the financial
statements the same needs to be further strengthened to be commensurate
with the size of the Company and the nature of its business. We have
not observed during the course of our audit any continuing failure to
correct the major weaknesses in the internal controls, except as stated
above.
5. In our opinion and according to the information and explanations
given to us, the Company has complied with the provisions of sections
73 to 76 of the Act or any other relevant provisions of the Act and the
rules framed there under, with regard to deposits accepted from the
public. Further and according to the Company no order has been passed
by the Company Law Board or National Company Law Tribunal or Reserve
Bank of India or any Court or any other Tribunal.
6. We have broadly reviewed the Cost Records maintained by the Company
as prescribed by the Central Government under sub- section (1) of
section 148 of the Act and read with paragraph 2(c) above regarding
inventory records, we are of the opinion that prima facie the
prescribed accounts and records have been made and maintained. We have
not made a detailed examination to ensure their accuracy or
completeness.
7. a. The Company has been regular in depositing undisputed statutory
dues including Investor Education and Protection Fund, Sales Tax,
Customs Duty, Value added Tax, Cess and other applicable statutory dues
with the appropriate authorities barring delays in certain months
ranging up to 5 months in the case of income tax deducted at source, up
to 4 months delay in respect of provident fund and up to 2 months delay
in Employees' State Insurance, excise duty and service tax. According
to the information and explanations given to us, there are no
undisputed amounts payable in respect of above mentioned statutory dues
were in arrears, as at March 31, 2015 for a period of more than six
months from the date they became payable.
b. According to the information and explanations given to us, the
following dues of Sales Tax, Income Tax, Customs Duty, Excise Duty,
Value Added Tax, Service Tax and Cess had not been deposited as at
March 31, 2015 with the relevant authorities on account of disputes.
Name of the Nature of the Amount
statue dues (Rs in Lakhs.)
Karnataka Sales Resale tax
TaxAct, 1957 demanded 339.07
Karnataka Value
Added TaxAct, VAT penalty
2003 demanded 181.06
Karnataka Value
Added TaxAct,
2003 VAT demanded 35.61
The Central
Excise, 1944 Excise demand 2.18
Excise demand 2.62
Cenvatavailment 92.24
The Customs Act, Customs
1962 demand 10.53
The Income Tax Income tax
Act, 1961 demand 15.56
The Income Tax Income tax
Act, 1961 demand 174.13
The Central Sales Sales tax 20.66
Tax Act, 1956 & demand
The Bombay Sales Works contract 96.49
TaxAct, 1959 tax
The Central Sales
TaxAct, 1956 &
The Bombay Sales Sales tax 1,190.43
TaxAct, 1959 demand
The Central Sales
TaxAct, 1956 &
Maharastra Value
Added TaxAct, Sales tax
2002 demand 3,196.41
Name of the Period to which Forum where
statue the amount dispute is
relates pending
Karnataka Sales 2003-2005 Supreme Court
Tax Act,1957
Karnataka Value
Added Tax Act,2003 2005-2008 Supreme Court
Karnataka Value
Added Tax Act,2003 Joint Commissioner of
2006 - 2007 & Commercial Tax
2008-2009 (Appeals)
The Central
Excise,1944 April 1993 & High Court of
April 2001 Karnataka
September 2006 Central Excise and
and September 2007 Service Tax Appellate
Tribunal
June 2006,January
2008 to April 2010&
October 2008 to Commissioner
April 2010, September of Central Excise
2010 to March 2011 (Appeals)
The Customs Act,1962 1994 to 1999 Asst. Commissioner of
Customs
The Income Tax
Act,1961 Assessment Year Commissioner of
2010-2011 Income Tax (Appeals)
The Income Tax
Act,1961 Assessment Year Commissioner of
2012-2013 Income Tax (Appeals)
The Central Sales
Tax Act,1956 & 1999 - 2000 Maharastra Sales Tax
The Bombay Sales
Tax Act,1959 Tribunal, Mumbai
1996-1997 to Joint Commissioner of
2004 - 2005 Commercial Taxes
The Central sales
Tax Act,1956 & 1999-2000, Joint Commissioner of
2005-2006 and Commercial Taxes
2008-2009
The Central Sales The President,
Tax Act,1956 & Maharashtra Sales Tax
maharashtra Value Tribunal, Mumbai (in
Added Tax Act, respect of CST demand)
2002 2010-2011 & Deputy Commissioner
of Sales Tax (Appeals)
Pune
c. According to the information and explanations given to us, the
Company has transferred the matured deposits amounting to Rs.2.44 lakhs
by remitting to Investor Protection Fund, in accordance with the
relevant provisions of the Companies Act, 1956 (1 of 1956) and rules
made thereunder.
8. In our opinion, the Company's accumulated losses as at the end of
the financial year are more than fifty per cent of its net worth as at
the year end. The Company has incurred cash losses during the financial
year covered by our audit amounting to Rs 9,487.51 lakhs and has
incurred cash losses during the preceding financial year amounting to
Rs 2,929.18 lakhs.
9. In our opinion and according to the information and explanations
given to us, the Company had delayed repayment in certain months during
the year however those loans were restructured by the consortium of
banks (as referred vide note 54 of the financial statements) of the
Company and there are no defaults in repayment of dues to banks as at
March 31, 2015 taking into consideration of the restructuring program
carried out by the Company. The delay in repayment in respect of a term
loan with a bank ranged from 16 to 80 days during the year amounting to
Rs 139.14 lakhs.
10. In our opinion, the terms and conditions on which the Company has
given a guarantee to its wholly owned subsidiary, in respect of loans
taken by its wholly owned subsidiary from a bank, is not prima facie
prejudicial to its interest.
11. According to the information and explanations given to us, term
loans are utilized for the purpose for which it was sanctioned.
12 According to the information and explanations given to us and to the
best of knowledge and belief, no material frauds on or by the Company
that causes material misstatement to the financial statement have been
noticed or reported during the year.
For B.K. RAMADHYANI & CO. LLP
Chartered Accountants
Firm Registration No. 002878S/S200021
(CA. C R Krishna)
Partner
Membership No. 027990
Place : Bangalore
Date : May 29, 2015
Mar 31, 2013
Report on the Financial Statements:
We have audited the accompanying financial statements of Kirloskar
Electric Company Limited ("the Company") which comprise of Balance
Sheet as at March 31, 2013, Statement of Profit and Loss and the Cash
Flow Statement for the year ended on that date and a summary of
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 fair presentation of the financial statements
that 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. 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 qualified audit opinion.
Basis of our Qualified Opinion:
(i) Note 10 to the financial statements regarding complete particulars
(including interest payable) of dues to micro, small and medium
enterprises not being ascertained, with consequential non provision for
interest due.
(ii) Note 37 (a) to the financial statements regarding confirmation of
balances from trade receivables being awaited and accounts of certain
trade receivables being subject to review/reconciliation/identification
of doubtful debts. Debts above two years and considered as good by
management is estimated at Rs.7,940.45 lakhs. The relevant accounts are
subject to adjustments, if required after management completes review,
reconciliation and identification of further doubtful debts.
(Hi) Para 2(c) of the annexure to this report and Note 38 to the
financial statements regarding certain mistakes and omissions noticed
in the inventory records have been corrected to the extent identified
based on physical inventory taken from time to time. Further, work in
progress at certain units as at March 31, 2013 with aggregate carrying
value of Rs. 5,658.81 lakhs includes non moving and old inventories in
respect of which physical identification/ reconciliation/assessment of
net realizable value and reusability is under progress. The
determination of cost or net realizable value in respect of work in
progress is not in line with Accounting Standard (AS) - 2.
(iv) Note 40 to the financial statements regarding realizable value of
assets held for sale fRs. 793.09 lakhs) being assessed by management
without the support of an external valuation or quotations from
prospective buyers.
In all cases referred to above, effect on revenue, assets and
liabilities is not ascertainable. We do not express any independent
opinion in these matters.
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 matters
described in the Basis for Qualified Opinion paragraph, the said
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:
(i) in the case of the balance sheet, of the state of affairs of the
Company as at March 31, 2013;
(ii) in the case of the statement of profit and loss, of the profit for
the year ended on that date; and
(iii) In the case of the cash flow statement for the year ended on that
date.
Emphasis of Matter:
Attention is invited to note 51 of the financial statements, that Lloyd
Dynamowerke GmbH & Co. KG, Germany ("LDW") has incurred losses for the
year, management''s representation that it has sufficient orders in
hand, is confident of earning profits in the subsequent years and that
the diminution in the carrying value of the investments held by the
Company in Kirsons BV (immediate holding company of LDW) of Rs. 15,458.53
lakhs is considered temporary and no provision is considered necessary.
Our report is not qualified in this respect.
Report on Other Legal and Regulatory Requirements:
1. As required by the Companies (Auditor''s Report) Order, 2003, as
amended by the Companies (Auditor''s Report) (Amendment) Order 2004
issued by the Company Law Board, in terms of subsection 4A of section
227 of the Act ("the Order"), we enclose in the annexure a statement on
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 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 appears from our examination of
those books.
c. The report on the accounts of the Kuala Lumpur office in Malaysia
not visited by us but audited by M/s Sundar & Associates, Chartered
Accountants has been forwarded to us and has been dealt with in the
manner considered appropriate by us while preparing our report.
d. 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.
e. In our opinion, the Balance Sheet, Statement of Profit & Loss and
cash flow statement dealt with by this report comply with the
accounting standards referred to in sub-section (3C) of section 211 of
the Act except for valuation of work in progress being not in line with
Accounting Standard - 2 as referred in note 38 of the financial
statements.
f. On the basis of written representations received from the
directors, as on March 31, 2013 and taken on record by the board of
directors, we report that none of the directors are 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 Act.
g. Since the Central Government has not issued any notification as to
the rate at which the cess is to be paid under section 441A of the Act,
nor has issued any rules under the said section, prescribing the manner
in which such cess is to be paid, no cess is due and payable by the
Company.
ANNEXURE REFERRED TO IN PARA 1 UNDER THE HEADING "REPORT ON OTHER LEGAL
AND REGULATORY REQUIREMENTS" OF OUR REPORT OF EVEN DATE TO THE MEMBERS
OF KIRLOSKAR ELECTRIC COMPANY LIMITED
1. a. The Company has maintained proper records showing full
particulars including quantitative details and situation of fixed
assets. However comprehensive description of assets and their current
location need to be updated in the asset records.
b. The management during the year has physically verified the fixed
assets during the year. In our opinion and as represented to us by the
Company the differences so identified and yet to be adjusted in the
books of accounts are not material.
c. During the year, the Company has not disposed off a substantial
part of its fixed assets and as such the provisions of clause 4(i) (c)
of the Order are not applicable to the Company.
2. a. Inventories have been physically verified during the year by
the management. In our opinion, the frequency of verification is
reasonable. Certain stocks lying with third parties amounting to
1142.37 lakhs and at port are subject to confirmation/ reconciliation.
b. 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 has implemented SAP ECC 6 systems at all its units.
Certain mistakes and omissions noticed during the year have been
corrected based on physical verification taken from time to time (refer
note 38 of the financial statements). The Company is in the process of
quantifying the differences to be adjusted in the books of account on a
comprehensive basis. Accordingly, we are unable to state whether the
discrepancies between books/records and inventory are material and
whether they have been properly dealt with in the books of account.
d. We have relied on the representation of the management that the
consumption of materials and components is in line with production/
industry norms.
3. a. The terms and conditions on which fixed deposits were accepted
from a director and a relative of a director are prima facie not
prejudicial to the interests of the Company. The maximum amount
involved during the year and amount outstanding at the end of the year
were Rs. 45.00 lakhs. b. The Company has not granted any loans to
companies, firms and other parties covered in the register maintained
under section 301 of the Companies Act, 1956. For this purpose, we have
relied on the representations of the management that monies due from
parties referred to in note 41 to the financial statements are advances
and not in the nature of loans.
4. Having regard to the explanations given to us that some of the
bought items/ assets are proprietary and/ or are customised to the
requirements of the Company and as such comparative quotations are not
available and subject to notes 37 and 38 to the financial statements,
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 and for the sale of goods. We have not observed
during the course of our audit any continuing failure to correct the
major weaknesses in the internal controls, subject to note 37 and 38 of
the financial statements.
5. a. According to the information and explanations given to us, we
are of the opinion that contracts that need to be entered into the
register maintained under section 301 of the Companies Act, 1956 have
been so entered. b. In respect of transactions made in pursuance of
such contracts or arrangements exceeding the value of f 500,000 entered
into during the year the Company has represented to us that their rates
are comparable to market prices. However considering the proprietary
nature of certain items and in the absence of comparable prices from
other parties we are unable to comment whether the transactions were
made at prevailing market prices at the relevant time.
6. In our opinion and according to the information and explanations
given to us, the Company has complied with the provisions of sections
58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance
of Deposits) Rules, 1975 with regard to deposits accepted from the
public. Further and according to the Company no order has been passed
by the Company Law Board or National Company Law Tribunal or Reserve
Bank of India or any Court or any other Tribunal.
7. The Company has an internal audit system in place conducted through
an external agency. According to the information and explanation given
to us the management has a policy, for covering all relevant areas of
internal audit in a phased manner from time to time, which in our
opinion is commensurate with size and nature of the business of the
Company.
8. We have broadly reviewed the Cost Records maintained by the Company
as prescribed by the Central Government under clause (d) of sub section
(1) of 209 of the Companies Act, 1956 and are of the opinion that prima
facie the prescribed accounts and records have been made and
maintained, subject to paragraph 2(c) above regarding inventory
records. We have not made a detailed examination to ensure their
accuracy or completeness.
9. a. The Company has been regular in depositing undisputed statutory
dues including Provident Fund, Investor Education and Protection Fund,
Employees'' State Insurance, Income Tax, Sales Tax, Customs Duty, Excise
Duty, Service Tax, Cess and other applicable statutory dues with the
appropriate authorities barring delays in certain months.
b. According to the information and explanations given to us, there
are no undisputed amounts payable in respect of Income Tax, Wealth Tax,
Sales Tax, Customs Duty, Excise Duty, Service Tax and Cess were in
arrears, as at March 31, 2013 for a period of more than six months from
the date they became payable except for matured deposits amounting to Rs.
244,000 have not been remitted to Investor Protection Fund, pending
resolution of disputes regarding beneficiaries.
10. In our opinion, the Company did not have accumulated losses as at
the end of the year. The Company has not incurred cash losses during
the financial year covered by our audit and the immediately preceeding
financial year. This is without taking cognizance of our comments in
basis of qualified opinion paragraph of our report.
11. In our opinion and according to the information and explanations
given to us, the Company has not defaulted in repayment of dues to
banks & financial institutions.
12 The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities
and as such the provisions of clause 4(xii) of the Order are not
applicable to the Company.
13. In our opinion, the Company is not a chit fund or a nidhi /mutual
benefit fund/ society. Therefore, the provisions of clause 4(xiii) of
the Order are not applicable to the Company.
14. In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Order are not applicable to the
Company.
15. In our opinion, the terms and conditions on which the Company has
given guarantees in a prior year for loans taken by its wholly owned
subsidiary from a bank is not prima facie prejudicial to its interest.
16. According to the information and explanations given to us, there
are no term loans taken from banks. Accordingly the provisions of
clause 4 (xvi) of the Order is not applicable.
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 Rs. 7,254.99 lakhs funds raised on short- term basis have been used
for long-term investment.
18. According to the information and explanations given to us, the
Company has not made any preferential allotment of shares to parties
covered in the register maintained under section 301 of the Act.
19. According to the information and explanations given to us, no
debentures were outstanding at the end of the year. Accordingly, the
provisions of clause 4 (xix) of the Order is not applicable
20. The Company has not raised any monies by public issue during the
year. Accordingly, the provisions of clause 4(xx) of the Order are not
applicable to the Company.
21. According to the information and explanations given to us and to
the best of knowledge and belief, no material frauds on or by the
Company that causes material misstatement to the financial statement
have been noticed or reported during the year.
For B.K.RAMADHYANI & CO.
Chartered Accountants
Firm Registration No. 002878S
(CA C R KRISHNA)
Place : Bangalore Partner
Date : May 30, 2013 Membership number 027990
Mar 31, 2012
We have audited the attached Balance Sheet of Kirloskar Electric
Company Limited, Bangalore as at March 31, 2012, the statement of
Profit and Loss and also the Cash Flow statement for the year ended on
that date annexed thereto.
1 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 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 As required by the Companies (Auditor's report) Order, 2003, as
amended by the Companies (Auditor's Report) (Amendment) Order 2004
issued by the Company Law Board, in terms of subsection 4A of section
227 of the Companies Act, 1956 ('Order'), we enclose in the annexure
a statement on matters specified in paragraphs 4 and 5 of the Order.
Further to our comments in the annexure referred to above, we report
that:
4 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.
5 In our opinion, subject to paragraph 8 of the annexure, the Company
has kept proper books of account as required by law, so far as it
appears from our examination of such books.
6 The report on the accounts of the Kuala Lumpur office in Malaysia not
visited by us but audited by M/s Sundar & Associates, Chartered
Accountants has been forwarded to us and has been dealt with in the
manner considered appropriate by us while preparing our report.
7 The Balance Sheet, the Statement of Profit and Loss and Cash Flow
Statement dealt with by this report are in agreement with the Books of
Account and the audited returns received from the Kuala Lumpur office
of the Company.
8 In our opinion, the Balance Sheet, the Statement of Profit and Loss
and Cash Flow Statement dealt with by this report comply in all
material respects with the mandatory accounting standards (AS) referred
to in subsection (3C) of section 211 of the Companies Act, 1956 as
applicable, subject to note 37 (b) to the financial statements
(valuation of Inventories).
9 On the basis of written representations received from directors as on
March 31, 2012 and taken on record by the Board of Directors, we report
that none of the directors of the Company are disqualified as on that
date from being appointed as a director under clause (g) of sub-section
(1) of section 274 of the Companies Act, 1956.
10 Attention of the members is invited to:
i Note 9 to the financial statements regarding complete particulars
(including interest payable) of dues to micro, small and medium
enterprises not being ascertained, with consequential non provision for
interest due.
ii Note 36 to the financial statements regarding accounts of certain
debtors, creditors, loans and advances, balances between the Company,
its erstwhile subsidiary Kaytee Switchgear Limited and the operating
business of Kirloskar Power Equipments Limited being subject to
review/reconciliation/identification. Further debts above two years and
considered as good by management is estimated at Rs. 2,386.24 lakhs.
The relevant accounts are subject to adjustments, if required after
management completes review, reconciliation and identification of
further doubtful debts/advances.
iii. Note 2 of annexure to this report and Note 37 to the financial
statements regarding SAP ERP systems being in the process of
stabilization/cleansing of data and modifications required in the
processes to bring the determination of cost and net realisable value
of inventories at certain units in line with Accounting Standard 2.
Accordingly, value of inventories adopted in the financial statements
of Rs.13,174.60 lakhs is as certified by the management and could not
be verified by us.
iv Note 39 to the financial statements regarding realizable value of
assets held for sale of Rs. 793.09 lakhs being assessed by management
without the support of an external valuation or quotations from
prospective buyers.
v Note 40 to the financial statements regarding amounts due from
certain companies of Rs.431.93 lakhs, which have incurred losses and
whose net worth has been partially or wholly eroded, being considered
good of recovery.
In all cases referred to above, effect on financial statements is not
ascertainable. We do not express independent opinion in these matters.
11 In our opinion and to the best of our knowledge and according to the
information and explanations given to us, the said accounts read with
the other notes give the information as required by the Companies Act,
1956 in the manner so required and subject to paragraph
10 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, 2012 B In the case of the Statement of Profit
and Loss, of the profits of the Company for the year ended on that date
and C In the case of Cash Flow Statement, of the cash flows of the
Company for the year ended on that date.
1. a. The Company has maintained proper records showing full
particulars including quantitative details and situation of fixed
assets.
However comprehensive description of assets, their current location and
accumulated depreciation need to be updated in the asset record.
b. The management during the year has physically verified fixed assets
as per a program of verification. We understand that reconciliation is
in progress and that difference, if any, will be assessed after
completion of reconciliation. Fixed assets lying with third parties are
subject to confirmation.
c. During the year, the Company has not disposed off a substantial
part of its fixed assets and as such the provisions of clause 4(i) (c)
of the Order are not applicable to the Company.
2. a. Inventories have been physically verified during the year by the
management. In our opinion, the frequency of verification is
reasonable. Certain stocks lying with third parties, stock lying at
port and with inter-units are subject to confirmation/reconciliation.
b. 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 except at certain units
where the same need to be strengthened.
c. The Company has implemented SAP ECC 6 systems at a majority of its
units. Certain mistakes and omissions to the extent identified during
the year have been corrected based on physical verification taken from
time to time (refer note 37 (a) of the financial statements). The
Company is in the process of quantifying the excess and shortages
adjusted in the books of account on a comprehensive basis. Accordingly,
we are unable to state whether the discrepancies between book records
and inventory are material and whether they have been properly dealt
with in the books of account.
d. We have relied on the representation of the management that the
consumption of materials and components is in line with production/
industry norms.
3. a. The terms and conditions on which fixed deposits were accepted
from a director and a relative of a director are prima facie not
prejudicial to the interests of the Company. The maximum amount
involved during the year and amount outstanding at the end of the year
were Rs. 45.00 lakhs.
b. The Company has not granted any loans to companies, firms and other
parties covered in the register maintained under section 301 of the
Companies Act, 1956. For this purpose, we have relied on the
representations of the management that monies due from parties referred
to in note 40(a) to the financial statements are advances and not in
the nature of loans.
4. Having regard to the explanations given to us that some of the
bought items / assets are proprietary and / or are customised to the
requirements of the Company and as such comparative quotations are not
available and subject to notes 36 and 37 to the financial statements,
there are adequate internal control procedures commensurate with the
size of the Company and the nature its business with regard to
purchases of inventory and fixed assets and for the sale of goods. We
have not observed during the course of our audit any continuing failure
to correct major weaknesses in the internal controls, subject to note
36 and 37 to the financial statements.
5. a. According to the information and explanations given to us, we
are of the opinion that transactions that need to be entered into the
register maintained under section 301 of the Companies Act, 1956 have
been so entered. Attention is invited to note 49 to the financial
statements regarding prior approval of the Central Government not
having been obtained in respect of certain contracts in which directors
are interested, in terms of section 297 of the Act.
b. No comments can be made on the reasonability of the rates in
respect of the transactions so made and exceeding Rs. 500,000 in
respect of any one party since there are no similar transactions with
third parties at the relevant time.
6. The Company has complied with the provisions of sections 58A and
58AA of the Companies Act, 1956 and the Companies (Acceptance of
Deposits) Rules, 1975 with regard to deposits accepted from the public.
7. We have been informed by the management that an independent agency
has been appointed for conducting internal audit of certain units and
their report is awaited. Under the circumstances, we cannot comment
whether the Company's internal audit system is commensurate with its
size and nature of business.
8. We have broadly reviewed the Cost Records maintained by the Company
as prescribed by the Central Government under clause (d) of sub section
(1) of 209 of the Companies Act, 1956 and are of the opinion that prima
facie the prescribed accounts and records have been made and
maintained, subject to paragraph 2(c) above regarding inventory
records. We have not made a detailed examination to ensure their
accuracy or completeness.
9. a. The Company has been regular in depositing undisputed statutory
dues including provident fund, employees' state insurance, sales tax,
wealth tax, service tax, customs duty, excise duty, cess and other
statutory dues with the appropriate authorities and barring delays in
certain months and non payment of certain dues detailed in paragraph
9(b) below.
b. We have been informed by the management that the customs duty
payable of Rs 4,119,078 referred to in our report dated June 25, 2007
to the members of the Company is old, not subsisting and not payable.
Matured deposits aggregating to Rs. 244,000 have not been remitted to
Investor Protection Fund, pending resolution of disputes regarding
beneficiaries. According to the information and explanations given to
us, pending completion of reconciliation in respect of professional
tax, employees' state insurance and income tax deducted at source in
respect of certain branches / offices, we are unable to identify
amounts outstanding for more than 6 months, if any. However the
following undisputed statutory dues were outstanding as at March 31,
2012 outstanding for a period of more than six months from the date
they became payable:
Name of the
Statute Nature of
Dues Amount Period to Due Date Date of
Payment
Rs which it
relates
The
Finance
Act, 1994 Service
tax on
Goods 19,816 April to 5th of
subsequent Rs 3,654
paid on
Transport
Agency August
2011 month 21-May-2012 &
Rs 19,816
paid on
21-May-2012
c. According to the information and explanations given to us, the
following dues of sales tax, income tax, customs tax, excise duty,
service tax and cess had not been deposited as at March 31, 2012 with
the relevant authorities on account of disputes.
Name of the
statute Nature of
the dues Amount Period to Forum where
dispute
(Rs) which the is pending
amount
relates
Central
Sales Tax Demands at
Various
Branches of
the Company 781,446 1985 to 2001 Sales Tax
Appellate
Tribunal
Local Sales
Tax at Demands at
Various
Branches of
the Company 1,596,910 1985 to 2001 Sales Tax
Appellate
Tribunal
Various
Branches
Local Sales
Tax at Demands at
Various
Branches of
the Company 2,459,790 1999 to 2000 Joint
Commissioner of
Sales tax
Various
Branches
Central
Sales Tax Demands at
Various
Branches of
the Company 1,178,688 1999 to 2000 Joint
Commissioner of
Sales tax
Central
Sales Tax Sales tax
demand. 4,532,781 2002 to 2005 Commissioner of
Sales Tax (A)
Bombay Sales
Tax Act Sales tax
demand 505,585 2002 to 2005 Commissioner of
Sales Tax (A)
Central
Sales Tax Sales tax
demand. 54,648,404 1999-2000, Maharastra
Sales Tax
Tribunal,
2001-2002 & Mumbai
2002-2003
Bombay
Sales Tax
Act Sales tax
demand 575,331 1999-2000, Maharastra
Sales Tax
Tribunal,
2001-2002 & Mumbai
2002-2003
Works
Contract
Tax Act Sales tax
demanded 1,004,030 2001-2002 & Maharastra
Sales Tax
Tribunal,
2002-2003 Mumbai
Karnataka
Sales Tax
Act Resale tax
demanded 36,912,070 2002 - 2005 High Court of
Karnataka
Karnataka
Value VAT penalty
demanded 38,051,249 2005 - 2008 High Court of
Karnataka
Added Tax
Act, 2003
The Customs
Act, 1962. Customs
demand 5,154,369 1994 to 1999 Asst.
Commissioner of
Customs
The Central
Excise, 1944 Excise
demand 217,927 April 1993 High Court of
Karnataka
Works
Contract
Tax Act Sales tax
demanded 1,253,188 1996-1997 & Joint
Commissioner of
sales Tax
1998-1999
Central
Sales Tax Sales tax
demand. 10,091,942 1996-1997 & Joint
Commissioner of
sales Tax
1998-1999
The Central
Excise, 1944 Excise
demand 129,023 September
2006 Central Excise
and Service Tax
Appellate
Tribunal
The Central
Excise, 1944 Excise demand 133,370 September
2007 Central Excise
and Service Tax
Appellate
Tribunal
The Central
Excise, 1944 Cenvat
credit demand 574,282 April 2008 to Commissioner of
Central Excise
June 2009 (Appeals)
The Income
Tax Act,
1961 Income tax
demand 7,947,186 Assessment Commissioner of
Income Tax
year
2008-2009 (Appeals)
The Income
Tax Act,
1961 Income tax
demand 9,525,224 Assessment Commissioner of
Income Tax
year 2009-10 (Appeals)
10. In our opinion, the Company did not have accumulated losses as at
year end. The Company has not incurred cash losses during the financial
year covered by our audit and the immediately preceding financial year.
This is without taking cognizance of our comments in paragraph 10 of
our report.
11. In our opinion and according to the information and explanations
given to us, the Company has not defaulted in repayment of dues to
banks & financial institutions.
12 The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities
and as such the provisions of clause 4(xii) of the Order are not
applicable to the Company.
13. In our opinion, the Company is not a chit fund or a nidhi /mutual
benefit fund/ society. Therefore, the provisions of clause 4(xiii) of
the Order are not applicable to the Company.
14. In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Order are not applicable to the
Company.
15. In our opinion, the terms and conditions on which the Company has
given guarantees for loans taken by its wholly owned subsidiary from a
bank is not prima facie prejudicial to its interest.
16. In our opinion, the Company had no terms loans outstanding from
banks as at the year. Accordingly, the provisions of clause 4 (xvi) of
the Order is not applicable.
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 Rs.6,341.76 lakhs funds raised on short- term basis have been used
for long-term investment.
18. According to the information and explanations given to us, the
Company has not made any preferential allotment of shares to parties
covered in the register maintained under section 301 of the Act.
19. According to the information and explanations given to us, no
debentures were outstanding at the end of the year. Accordingly, the
provisions of clause 4 (xix) of the Order is not applicable
20. The Company has not raised any monies by public issue during the
year. Accordingly, the provisions of clause 4(xx) of the Order are not
applicable to the Company.
21 According to the information and explanations given to us, no
material frauds on or by the Company that causes material misstatement
to the financial statement have been noticed or reported during the
year.
For B. K. Ramadhyani & Co.,
Chartered Accountants
Firm Registration No 002878S
B. K. Ramadhyani & Co., CA. C R KRISHNA
4B, Chitrapur Bhavan Partner
8th Main, 15th cross, Malleswaram, Membership number 027990
Bangalore - 560 055
Date: May 28, 2012
Mar 31, 2011
We have audited the attached Balance Sheet of Kirloskar Electric
Company Limited, Bangalore as at March 31, 2011, the Profit and Loss
Account and also the Cash Flow statement for the year ended on that
date annexed thereto.
1 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 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 As required by the Companies (Auditor's report) Order, 2003, as
amended by the Companies (Auditor's Report) (Amendment) Order 2004
issued by the Company Law Board, in terms of subsection 4A of section
227 of the Companies Act, 1956('Order'), we enclose in the annexure a
statement on matters specified in paragraphs 4 and 5 of the Order.
Further to our comments in the annexure referred to above, we report
that:
4 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.
5 In our opinion, subject to paragraph 8 of the annexure, the Company
has kept proper books of account as required by law, so far as it
appears from our examination of such books.
6 The report on the accounts of the Kuala Lumpur office in Malaysia not
visited by us but audited by M/s Sundar & Associates, Chartered
Accountants has been forwarded to us and has been dealt with in the
manner considered appropriate by us while preparing our report.
7 The Balance Sheet, the Profit and Loss Account and Cash Flow
Statement dealt with by this report are in agreement with the Books of
Account and the audited returns received from the Kuala Lumpur office
of the Company.
8 In our opinion, the Balance Sheet, the Profit and Loss Account and
Cash Flow Statement dealt with by this report comply in all material
respects with the mandatory accounting standards referred to in
subsection (3C) of section 211 of the Companies Act, 1956 as
applicable, subject to note 22 (b) of Schedule 'O' (valuation of
Inventories) (AS 2).
9 On the basis of written representations received from directors as on
March 31, 2011 and taken on record by the Board of Directors, we report
that none of the directors of the Company are disqualified as on that
date from being appointed as a director under clause (g) of sub-section
(1) of section 274 of the Companies Act, 1956.
10 Attention of the members is invited to:
i) Note 21 of schedule 'O' regarding accounts of certain debtors,
creditors, loans and advances, reconciliation of balances between the
Company, its erstwhile subsidiary KSL and operating business of KPEL
being under review/reconciliation. The relevant accounts are subject to
adjustments, if required after completion of review, reconciliation and
identification of further doubtful debts/advances.
ii) Note 22 of schedule 'O' regarding SAP ECC 6 systems implemented
being subject to stabilization/cleansing of data and modifications
required in the processes to bring the determination of cost and net
realizable value of inventories at certain units in line with
Accounting Standard 2. Accordingly, value of inventories adopted in the
financial statements is as assessed by the management and not verified
by us.
iii) Note 24 of schedule 'O' regarding realizable value of assets held
for sale being assessed by management without the support of an
external valuation or quotations from prospective buyers
iv) Note 25 of schedule 'O' regarding amounts due from certain
companies of Rs.23.692 million, which have incurred losses and whose
net worth has been partially or wholly eroded.
In all cases referred to above, effect on revenue is not ascertainable.
We do not express any independent opinion in these matters.
11 In our opinion and to the best of our knowledge and according to the
information and explanations given to us, the said accounts subject to
note 20 of schedule 'O' to the financial statements read with the other
notes and schedules give the information as required by the Companies
Act, 1956 in the manner so required and subject to paragraph 10 above,
paragraph 2 of the annexure to this report 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, 2011
B In the case of the profit and loss account, of the profits of the
Company for the year ended on that date and
C In the case of cash flow statement, of the cash flows of the Company
for the year ended on that date.
ANNEXURE TO AUDITORS' REPORT
(AS REFERRED TO IN PARA 3 OF OUR REPORT TO THE MEMBERS OF KIRLOSKAR
ELECTRIC COMPANY LIMITED)
1. a. The Company has maintained proper records showing full
particulars including quantitative details and situation of fixed
assets.
b. The management during the year has physically verified a portion of
fixed assets in respect of certain units. We have been informed by the
management that no material discrepancies were observed. However, a
comprehensive physical verification needs to be carried out. Fixed
assets lying with third parties are subject to confirmation.
c. During the year, the Company has not disposed off a substantial
part of its fixed assets and as such the provisions of clause 4(i) (c)
of the Order are not applicable to the Company.
2. a. Inventories have been physically verified during the year by
the management. In our opinion, the frequency of verification is
reasonable. Certain stocks lying with third parties are subject to
confirmation.
b. The procedures of physical verification of inventories followed by
the management need to be improved to make them reasonable and adequate
in relation to the size of the Company and the nature of its business.
c. The Company has implemented SAP ECC 6 systems at certain units.
Certain mistakes and omissions noticed during the year have been
corrected based on physical inventory taken from time to time (refer
note 22(a) of schedule O). The Company is in the process of quantifying
the excess and shortages adjusted in the book of account. Stock records
at certain units are under updation. Accordingly, we are unable to
state whether the discrepancies between book records and inventory are
material and have been properly dealt with in the books of account
d. We have relied on the representation of the management that the
consumption of materials and components is in line with production/
industry norms.
3. a. The terms and conditions on which two fixed deposits were
accepted from a director and a relative of a director are prima facie
not prejudicial to the interest of the Company. The maximum amount
involved during the year and the amount outstanding as at the end of
the year were Rs. 3.500 million.
b. The Company has not granted any loans to companies, firms and other
parties covered in the register maintained under section 301 of the
Companies Act, 1956. For this purpose, we have relied on the
representations of the management that monies due from parties referred
to in note 19 & 25(a) of schedule 'O' are advances and not in the
nature of loans.
4. Having regard to the explanations given to us that some of the
bought out items/assets are proprietary and/or special and/or are
customised to the requirements of the Company and as such comparative
quotations are not available and subject to notes 21 & 22 of schedule
'O', 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 and fixed assets and for the sale of goods. We
have not observed during the course of our audit any continuing failure
to correct major weaknesses in internal controls, subject to note 21 of
Schedule 'O'.
5. a. According to the information and explanations given to us, we
are of the opinion that transactions that need to be entered into the
register maintained under section 301 of the Companies Act, 1956 have
been so entered.
b. No comments can be made on the reasonability of the rates in respect
of the transactions so made and exceeding Rs. 500,000 in respect of any
one party since there are no similar transactions with third parties at
the relevant time.
6. The Company has complied with the provisions of sections 58A and
58AA of the Companies Act, 1956 and the Companies (Acceptance of
Deposits) Rules, 1975 with regard to deposits accepted from the public.
7. The Company's internal audit system needs to be strengthened in
terms of coverage and periodicity to make the same commensurate with
the size and nature of its business.
8. We have broadly reviewed the Cost Records maintained by the Company
as prescribed by the Central Government under clause (d) of sub section
(1) of 209 of the Companies Act, 1956 and are of the opinion that prima
facie the prescribed accounts and records have been made and
maintained, subject to paragraph 2(c) above regarding inventory
records. We have not made a detailed examination to ensure their
accuracy or completeness.
9. a. The Company has been regular in depositing undisputed statutory
dues including provident fund, employees' state insurance, income tax,
sales tax, customs duty, excise duty, cess and other statutory dues
with the appropriate authorities barring delays in certain months and
non payment of certain dues detailed in paragraph 9(b) below. Further,
since the Central Government has till date not prescribed the amount of
cess payable under section 441 A of the Companies Act, 1956, we are not
in a position to comment upon the regularity or otherwise of the
Company in depositing the same.
b. We have been informed by the management that the customs duty
payable of Rs. 4,119,078 referred to in our report dated June 25, 2007 to
the members of the Company is old, not subsisting and not payable.
Matured deposits aggregating to Rs. 244,000 have not been remitted to
Investor Protection Fund, pending resolution of disputes regarding
beneficiaries. According to the information and explanations given to
us, the following undisputed statutory dues were outstanding as at
March 31, 2011 outstanding for a period of more than six months from
the date they became payable.
Name of the
Statute Nature of Dues Amount Period to Due Date Date of
Payment
Rs. which it
relates
The
Maharashtra MVAT 784,648 2008-2009 March 31,
2010 Unpaid as
on date
VAT Act, 2002
The Service
Tax Act Service tax on
Goods 5,503 April
2010 to 5th of
subsequent Unpaid as
on date
Transport Agency August
2010 month
c. According to the information and explanations given to us, the
following dues of sales tax, income tax, customs tax, excise duty,
service tax and cess had not been deposited as at March 31, 2011 with
the relevant authorities on account of disputes.
Name of the
statue Nature of the dues Amount Period to Forum where
dispute is
(Rs.) which the pending
amount
relates
Central
Sales Tax Demands at Various
Branches of the Company 781,446 1985 to
2001 Sales Tax
Appellate
Tribunal
Local Sales
Tax at Demands at Various
Branches of the Company 1,596,910 1985 to
2001 Sales Tax
Appellate
Tribunal
Various
Branches
Local Sales
Tax at Demands at Various
Branches of the Company 2,459,790 1999 to
2000 Joint
Commissioner
of Sales tax
Various
Branches
Central
Sales Tax Demands at Various
Branches of the Company 1,178,688 1999 to
2000 Joint
Commissioner
of Sales tax
Central
Sales Tax Sales tax demand. 4,532,781 2002 to
2005 Commissioner
of Sales Tax(A)
Bombay Sales
Tax Act Sales tax demand 505,585 2002 to
2005 Commissioner
of Sales Tax(A)
Central
Sales Tax Sales tax demand. 54,648,404 1999-
2000, Maharastra
Sales Tax
Tribunal,
2001-
2002 & Mumbai
2002-
2003
Bombay Sales
Tax Act Sales tax demand 334,085 1999-
2000, Maharastra
Sales Tax
Tribunal,
2001-
2002 & Mumbai
2002-
2003
Works
Contract
Tax Act Sales tax demanded 1,004,030 2001-
2002 & Maharastra
Sales Tax
Tribunal,
2002-
2003 Mumbai
Kamataka
Sales Tax
Act Resale tax demanded 36,906,894 2002 -
2005 High Court of
Karnataka
Karnataka
Value VAT penalty demanded 38,051,249 2005 -
2008 High Court
of Karnataka
Aded Tax
Act, 2003
The Customs
Act, 1962. Customs demand 5,154,369 1994 to
1999 Asst.
Commissioner
of Customs
The Central
Excise, 1944 Excise demand 217,927 April
1993 High Court of
Karnataka
The Central
Excise, 1944 Excise demand 129,023 September
2006 Central Excise
and Service Tax
Appellate
Tribunal
The Central
Excise, 1944 Excise demand 133,370 September
2007 Central Excise
and Service Tax
Appellate
Tribunal
The Central
Excise, 1944 Cenvat credit demand 574,282 April
2008 to Commissioner of
Central
June
2009 Excise(Appeals)
The Income
Tax Act, 1961 Income tax demand 9,306,736 Assessment Commissioner
of Income Tax
year 2008
-2009 (Appeals)
10. In our opinion, the Company does not have accumulated losses. The
Company has not incurred cash losses during the financial year covered
by our audit and the immediately preceding financial year. This is
without taking cognizance of our comments in paragraph 10 of our
report.
11. In our opinion and according to the information and explanations
given to us, the Company has not defaulted in repayment of dues to
banks & financial institutions except for delays in certain months.
12 The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities
and as such the provisions of clause 4(xii) of the Order are not
applicable to the Company.
13. In our opinion, the Company is not a chit fund or a nidhi /mutual
benefit fund/ society. Therefore, the provisions of clause 4(xiii) of
the Order are not applicable to the Company.
14. In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Order are not applicable to the
Company.
15. In our opinion, the terms and conditions on which the Company has
given guarantee for loan taken by its wholly owned subsidiary from a
bank is not prima facie prejudicial to the interest of the company.
16. In our opinion, the Company has not taken any terms loans during
the year and hence clause 4 (xvi) of the Order is not applicable.
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 Rs.498.785 million funds raised on short- term basis have been
used for long-term investment.
18. According to the information and explanations given to us, the
Company has not made any preferential allotment of shares to parties
covered in the register maintained under section 301 of the Act.
19. According to the information and explanations given to us, the
debentures issued by the Company to the Industrial Development Bank of
India to an extent of Rs.49.4 million in terms of the scheme of
arrangement approved by the honourable High Court of Karnataka under
sections 391 to 394 of the Companies Act, 1956 stand redeemed.
20. The Company has not raised any monies by public issue during the
year. Accordingly, the provisions of clause 4(xx) of the Order are not
applicable to the Company.
21 According to the information and explanations given to us, no
material frauds on or by the Company that causes material misstatement
to the financial statement have been noticed or reported during the
year.
For B.K.RAMADHYA Nl & CO.
Chartered Accountants
Firm Registration No 002878S
CA SHYAM RAMADHYANI
Bangalore Partner
Date: May 28, 2011 Membership number 019522
Mar 31, 2010
We have audited the attached Balance Sheet of Kirloskar Electric
Company Limited, Bangalore as at March 31, 2010, the Profit and Loss
Account and also the Cash Flow statement for the year ended on that
date annexed thereto.
1 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 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 As required by the Companies (AuditorÃs report) Order, 2003, as
amended by the Companies (AuditorÃs Report) (Amendment) Order 2004
issued by the Company Law Board, in terms of subsection 4A of section
227 of the Companies Act, 1956(ÃOrderÃ), we enclose in the annexure a
statement on matters specified in paragraphs 4 and 5 of the Order.
Further to our comments in the annexure referred to above, we report
that:
4 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.
5 In our opinion, subject to paragraph 8 of the annexure, the Company
has kept proper books of account as required by law, so far as it
appears from our examination of such books.
6 The report on the accounts of the Kuala Lumpur office in Malaysia not
visited by us but audited by M/s Sundar & Associates, Chartered
Accountants has been forwarded to us and has been dealt with in the
manner considered appropriate by us while preparing our report.
7 The Balance Sheet, the Profit and Loss Account and Cash Flow
Statement dealt with by this report are in agreement with the Books of
Account and the audited returns received from the Kuala Lumpur office
of the Company.
8 In our opinion, the Balance Sheet, the Profit and Loss Account and
Cash Flow Statement dealt with by this report comply in all material
respects with the mandatory accounting standards (AS) referred to in
subsection (3C) of section 211 of the Companies Act, 1956 as
applicable, subject to note 23 (b) of Schedule "O" (valuation of
Inventories).
9 On the basis of written representations received from directors as on
March 31, 2010 and taken on record by the Board of Directors, we report
that none of the directors of the Company are disqualified as on that
date from being appointed as a director under clause (g) of sub-section
(1) of section 274 of the Companies Act, 1956.
10 Attention of the members is invited to:
i) Note 22 of schedule "O" regarding certain debtors, creditors, loans
and advances, reconciliation of balances between the Company, erstwhile
subsidiary KSL and operating business of KPEL being under
review/reconciliation. We have relied on the representations of the
management that the effect of the same on the revenue of the year is
not material.
ii) Note 23 (b) of schedule O regarding valuation of inventories of
certain units not being in line with Accounting Standard 2.
Inventories at these units are as assessed by the management and have
been adopted as such in the financial statements. Effect on revenue,
if any is not ascertainable and
iii) Note 26 of schedule O regarding amounts due from certain
companies of Rs.22.718 million, which have incurred losses and whose
net worth have been partially or wholly eroded. We have relied on the
representations of the management that the said debts/advances are good
of recovery. We do not express any independent opinion in this matter.
11 In our opinion and to the best of our knowledge and according to the
information and explanations given to us, the said accounts subject to
note 21 of schedule O to the financial statements read with the other
notes and schedules give the information as required by the Companies
Act, 1956 in the manner so required and subject to paragraph 10 above
and paragraph 2 of the annexure to this report 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, 2010
B In the case of the profit and loss account, of the profits of the
Company for the year ended on that date and.
C In the case of cash flow statement, of the cash flows of the Company
for the year ended on that date.
ANNEXURE TO AUDITORS REPORT
(AS REFERRED TO IN PARA 3 OF OUR REPORT TO THE MEMBERS OF KIRLOSKAR
ELECTRIC COMPANY LIMITED)
1. a. The Company has maintained proper records showing full
particulars including quantitative details and situation of fixed
assets.
b. The management during the year has physically verified a portion of
fixed assets in respect of certain units. We have been informed by the
management that no material discrepancies were observed. However, a
comprehensive physical verification needs to be carried out. Fixed
assets lying with third parties are subject to confirmation.
c. During the year, the Company has not disposed off a substantial
part of its fixed assets and as such the provisions of clause 4(i) (c)
of the Order are not applicable to the Company.
2. a. Inventories have been physically verified during the year by
the management. In our opinion, the frequency of verification is
reasonable. Certain stocks lying with third parties and at port are
subject to confirmation.
b. The procedures of physical verification of inventories followed by
the management need to be improved to make them 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 in terms of
quantities except in respect of inventories of certain units and
work-in-progress, where records are under updation. The discrepancies
noticed on verification between the physical stocks and the book
records wherever maintained were not material.
d. We have relied on the representation of the management that the
consumption of materials and components is in line with production/
industry norms.
3. a. The terms and conditions on which a fixed deposit was accepted
from a director is prima facie not prejudicial to the interests
of the Company.
b. The Company has not granted any loans to companies, firms and other
parties covered in the register maintained under section 301 of the
Companies Act, 1956. For this purpose, we have relied on the
representations of the management that monies due from parties referred
to in note 20 & 26(a) of schedule ÃOÃ are advances and not in the
nature of loans.
4. Having regard to the explanations given to us that some of the
bought out items/assets are proprietary and/or special and/or are
customised to the requirements of the Company and as such comparative
quotations are not available and subject to note 22 of schedule O
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 and fixed assets and for the sale of goods. We
have not observed during the course of our audit any continuing failure
to correct major weaknesses in internal controls, subject to note 22 of
Schedule O.
5. a. According to the information and explanations given to us, we
are of the opinion that transactions that need to be entered into the
reister maintained under section 301 of the Companies Act, 1956 have
been so entered.
b. No comments can be made on the reasonability of the rates in respect
of the transactions so made and exceeding Rs. 500,000 in respect of any
one party since there are no similar transactions with third parties at
the relevant time.
6. The Company has complied with the provisions of sections 58A and
58AA of the Companies Act, 1956 and the Companies (Acceptance of
Deposits) Rules, 1975 with regard to deposits accepted from the public.
7. In our opinion, the CompanyÃs internal audit system needs to be
strengthened to make the same commensurate with the size and nature of
its business.
8. We have broadly reviewed the Cost Records maintained by the Company
as prescribed by the Central Government under clause (d) of sub section
(1) of 209 of the Companies Act, 1956 and are of the opinion that prima
facie the prescribed accounts and records have been made and
maintained, subject to inventory records of certain units being under
updation. We have not made a detailed examination to ensure their
accuracy or completeness.
9. a. The Company has been regular in depositing undisputed statutory
dues including provident fund, employees state insurance, income tax,
sales tax, customs duty, excise duty, cess and other statutory dues
with the appropriate authorities barring delays in certain months.
b. We have been informed by the management that the customs duty
payable of Rs. 4,119,078 referred to in our report dated June 25, 2007
to the members of the Company is old, not subsisting and not payable.
According to the information and explanations given to us, there are no
other undisputed statutory dues as at March 31, 2010 outstanding for a
period of more than six months from the date they became payable.
Matured deposits aggregating to Rs. 244,000 have not been remitted to
Investor Protection Fund, pending resolution of disputes regarding
beneficiaries.
c. According to the information and explanations given to us, the
following dues of sales tax, income tax, customs tax, excise duty,
service tax and cess had not been deposited as at March 31, 2010 with
the relevant authorities on account of disputes.
Name of the
statue Nature of
the dues Amount Period to Forum where
dispute is
(Rs.) which the pending
amount
relates
Central
Sales Tax Demands at
Various
Branches of
the Company 781,446 1985 to 2001 Sales Tax
Appellate
Tribunal
Local
Sales Tax at Demands at
Various
Branches of
the Company 3,872,324 1985 to 2001 Sales Tax
Appellate
Tribunal
Various
Branches
Local
Sales Tax at Demands at
Various
Branches of
the Company 2,459,790 1999 to 2000 Joint Comm-
issioner of
Sales tax
Various
Branches
Central
Sales Tax Demands at
Various
Branches of
the Company 1,241,688 1999 to 2000 Joint Commis-
sioner of
Sales tax
Central
Sales Tax Sales tax
demand. 54,648,404 1999-2000, Maharastra
Sales Tax
Tribunal,
2001-2002 & Mumbai
2002-2003
Bombay
Sales Sales tax
demand 334,085 1999-2000, Maharastra
Sales Tax
Tribunal,
Tax Act 2001-2002 & Mumbai
2002-2003
Works
Contract Sales tax
demanded 1,004,030 2001-2002 & Maharastra
Sales Tax
Tribunal,
Tax Act 2002-2003 Mumbai
Karnataka
Sales Resale tax
demanded 36,906,894 2002- 2005 High Court
of Karnataka
Tax Act
Karnataka
Value VAT penalty
demanded 38,051,249 2005-2008 High Court
of Karnataka
Added Tax
Act, 2003
The Customs
Act Customs
demand 5,049,397 1994to1999 Asst.
Commiss-
ioner of
1962. Customs
The Central Excise
demand 217,927 April 1993 High Court
of Karnataka
Excise, 1944
The Central Excise
demand 129,023 September
2006 Central
Excise and
Service Tax
Excise, 1944 Appellate
Tribunal
The Central Excise
demand 133,370 September
2007 Central
Excise and
Service Tax
Excise, 1944 Appellate
Tribunal
The Central Excise
demand 931,120 May 2009 Superdent
of Central
Excise.
Excise, 1944
The Central Cenvat
credit
demand 1,154,811 April 2008 to Central
Excise
and Service
Tax Excise,
1944 June 2009 Appellate
Tribunal
10. In our opinion, the Company doesnÃt have accumulated losses. The
Company has not incurred cash losses during the financial year covered
by our audit and the immediately preceding financial year.
11. In our opinion and according to the information and explanations
given to us, the Company has not defaulted in repayment of dues to
banks & financial institutions.
12 The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities
and as such the provisions of clause 4(xii) of the Order are not
applicable to the Company.
13. In our opinion, the Company is not a chit fund or a nidhi /mutual
benefit fund/ society. Therefore, the provisions of clause 4(xiii) of
the Order are not applicable to the Company.
14. In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Order are not applicable to the
Company.
15. In our opinion, the terms and conditions on which the Company has
given guarantees for loans taken by its wholly owned subsidiary from a
bank is not prima facie prejudicial to the interest of the company.
16. In our opinion, the Company has used the terms loans for the
purpose for which it has been taken.
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 Rs.304.317 million funds raised on short- term basis have been
used for long-term investment.
18. According to the information and explanations given to us, the
Company has not made any preferential allotment of shares to parties
covered in the register maintained under section 301 of the Act.
19. According to the information and explanations given to us, the
Company has issued debentures to the Industrial Development Bank of
India to an extent of Rs.49.4 million in terms of the scheme of
arrangement approved by the honourable High Court of Karnataka under
sections 391 to 394 of the Companies Act, 1956. The Company has created
securities in respect of the said debentures.
20. The Company has not raised any monies by public issue during the
year. Accordingly, the provisions of clause 4(xx) of the Order are not
applicable to the Company.
21 According to the information and explanations given to us, no
material frauds on or by the Company that causes material misstatement
to the financial statement have been noticed or reported during the
year.
For B.K.RAMADHYA NI & CO.
Chartered Accountants
Firm Registration No. 002878S
CA SHYAM RAMADHYANI
Bangalore Partner
Date: July 10, 2010 Membership number 019522