Home  »  Company  »  McNally Bharat E  »  Quotes  »  Auditor Report
Enter the first few characters of Company and click 'Go'

Auditor Report of McNally Bharat Engineering Company Ltd.

Mar 31, 2015

1. We have audited the accompanying standalone financial statements of McNally Bharat Engineering Company Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Financial Statements

2. The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements to give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

3. Our responsibility is to express an opinion on these standalone financial statements based on our audit.

4. We have taken into account the provisions of the Act and the Rules made thereunder including the accounting standards and matters which are required to be included in the audit report.

5. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards and pronouncements require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

6. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

7. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone financial statements.

Basis for Qualified Opinion

8. We draw your attention to Note 44 (III) to the financial statements regarding remuneration aggregating Rs 560 Lakhs paid/payable to two whole-time directors and an erstwhile Chairman of the Company in excess of the limits prescribed under Section 197 of the Act read with Schedule V to the Act for which requisite approval from shareholders by way of special resolution is pending; and in case of the aforesaid Chairman, the Company is yet to obtain approval from the Central Government. The consequential impact of this matter on financial statements is presently not ascertainable.

Qualified Opinion

9. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and except for the indeterminate effects of the matter referred to in Basis for Qualified Opinion paragraph above, 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 profit/loss and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

10. As required by 'the Companies (Auditor's Report) Order, 2015, issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act (hereinafter referred to as the "Order"), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

11. As required by Section 143 (3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, except for the effects of the matter referred to in the Basis for Qualified Opinion paragraph above, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(e) On the basis of the written representations received from the directors as on March 31,2015 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31,2015 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above.

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

i. The Company has disclosed the impact, if any, of pending litigations as at March 31, 2015 on its financial position in its standalone financial statements - Refer Note 32;

ii. The Company has made provision as at March 31, 2015, as required under the applicable law or accounting standards, for material foreseeable losses on long-term contracts - Refer Note 43(iii). The Company did not have any loss on long term derivative contract as at March 31, 2015.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended March 31,2015.

Annexure to Independent Auditors' Report

Referred to in paragraph 10 of the Independent Auditors' Report of even date to the members of McNally Bharat Engineering Company Limited on the standalone financial statements as of and for the year ended March 31, 2015

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

(b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of 3 years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies have been noticed on such verification.

ii. (a) The inventory has been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

iii. The Company has granted unsecured loans, to a company covered in the register maintained under Section 189 of the Act. The Company has not granted any secured/ unsecured loans to firms or other parties covered in the register maintained under Section 189 of the Act.

(a) In respect of the aforesaid loans, the parties are repaying the principal amounts, as stipulated, and are also regular in payment of interest as applicable.

(b) In respect of the aforesaid loans, there is no overdue amount more than Rupees One Lakh.

iv. In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across, nor have been informed of, any continuing failure to correct major weaknesses in the aforesaid internal control system.

v. The Company has not accepted any deposits from the public within the meaning of Sections 73, 74, 75 and 76 of the Act and the rules framed there under to the extent notified.

vi. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the rules made by the Central Government of India, the maintenance of cost records has been specified under sub- section (i) of Section 148 of the Act, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained.

We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

vii. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, undisputed statutory dues including Service Tax, Sales Tax, Value Added Tax, Provident Fund, Tax deducted at source, Works Contract Tax, Employees' State Insurance and Tax collected at source have not been regularly deposited with the appropriate authorities and there have been serious delays in a large number of cases and is regular in depositing undisputed statutory dues including Wealth Tax, Duty of Customs, Duty of Excise and cess, as applicable with the appropriate authorities.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income tax, sales tax, wealth tax, service tax, duty of customs and duty of excise duty as at March 31, 2015 which have not been deposited on account of a dispute, are as follows:

Name of the statute Nature of dues Amount Period to

(Rs. lakhs) which the amount relates

Central Excise Act, 1944 Excise Duty and 129.51 1989-93

penal interest thereon

Finance Act, 1994 Service Tax 16.81 2005-06

4.24 2006-08

APGST Act, 1957 Sales Tax 4.16 1994-95

Rajasthan Sales 1.33 2005-06 Tax Act, 1994

UP Trade Tax Act, 1948 1.30 2003-04

Central Sales Tax Act, 1956 470.27 2006-07

Central Sales Tax Act, 1956 26.00 2007-08

Central Sales Tax Act, 1956 29.46 2008-09

Central Sales Tax Act, 1956 258.24 2013-14

Central Sales Tax Act, 1956 217.09 2011-12

WBST Act, 1994 3.90 2003-04

West Bengal Value Added VAT 72.27 2005-2006 Tax Act, 2003

West Bengal Value Added 182.58 2006-2007 Tax Act, 2003

West Bengal Value Added 65.67 2007-08 Tax Act, 2003

West Bengal Value Added 79.84 2008-09 Tax Act, 2003

West Bengal Value Added 20.26 2009-10 Tax Act, 2003

APVATAct 12.62 2010-11

APVATAct 0.94 2011-12

MP VAT Act 548.57 2011-12

Bihar VAT Act 47.12 2010-11

Bihar VAT Act 29.34 2011-12

Income-tax Act, 1961 Income tax 1,339.55 2010-11

Name of statute Forum where the dispute is pending

Central Excise Act,1944 Commissioner of Central Excise, Pondicherry

Finance Act,1994 Addl Commissioner of Service Tax CESTAT, Kolkata

APGS Act,1957 Sales Tax Appellate Tribunal - Hyderabad Rajastan Sales Tax Act,1994 Deputy commissioner (Appeals), Udaipur

UP Trade Tax Act,1948 Deputy commissioner (Appeals) Robertsgunj

Central Sales Tax Act,1956 West Bengal Appellate and Revisional Board

Central Sales Tax Act,1956 West Bengal Appellate and Revisional Board

Central Sales Tax Act,1956 West Bengal Appellate and Revisional Board

Central Sales Tax Act,1956 Addl Commissioner of CT (Appeals)

Central Sales Tax Act,1956 Addl Commissioner of CT (Appeals)

WBST Act,1994 Depty. Commissioner, Commercial Taxes, Kolkata

West Bengal Value Added Tax,2003 West Bengal Appellate and Revisional Board

West Bengal Value Added tax,2003 West Bengal Appellate and Revisional Board

West Bengal Added Tax,2003 West Bengal Appellate and Revisional Board

west Bengal Value Added tax,2003 West Bengal Appellate and Revisional Board

West Bengal Value Added Tax,2003 West Bengal Appellate and Revisional Board

APVAT Act Asst. Commissioner Commercial Tax, Andhra Pradesh

APVAT Act Asst. Commissioner Commercial Tax, Andhra Pradesh

MP VAT Act Add! Commissioner of CT (Appeals)

Bihar Vat Act JCCT appeals (Patna)

Bihar Vat Act JCCT appeals (Patna)

Income Tax Act,1961 Commissioner of Income Tax (Appeals)

c) The amount required to be transferred to Investor Education and Protection Fund has been transferred within the stipulated time in accordance with the provisions of the Companies Act, 1956 and the rules made thereunder.

viii. The Company has no accumulated losses as at the end of the financial year and it has incurred cash losses in the financial year ended on that date and has not incurred cash losses in the immediately preceding financial year.

ix. According to the records of the Company examined by us and the information and explanations given to us, except for dues to ICICI Bank for the period of i day aggregating Rs. 2,71,50,000, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

x. In our opinion, and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

xi. In our opinion, and according to the information and explanations given to us, the term loans have been applied, on an overall basis, for the purposes for which they were obtained.

xii. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management.

For Lovelock & Lewes

Firm Registration No. 301056E

Chartered Accountants

Prabal Kr. Sarkar

Partner

Kolkata, May 30, 2015 Membership No: 52340


Mar 31, 2014

1. We have audited the accompanying financial statements of McNally Bharat Engineering Company Limited (the "Company"), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information, which we have signed under reference to this report.

Management''s Responsibility for the Financial Statements

2. The Company''s 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 notified under the Companies Act, 1956 (the "Act") read with the General Circular 15/2013 dated September 13, 2013, of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors- Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence, about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors'' 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 auditors consider internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

6. Opinion

In our opinion, and to the best of our information and according to the explanations given to us, the accompanying 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:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014:

(b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Emphasis of Matter

7. We draw your attention to Note 44 (III) to the financial statements regarding remuneration paid to two whole-time directors and Chairman of the Company, in excess of the limits prescribed under Section 198 of the Act, for which approval from Central Government is awaited. Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

8. As required by ''the Companies (Auditor''s Report) Order, 2003'', as amended by ''the Companies (Auditor''s Report) (Amendment) Order, 2004'', issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act (hereinafter referred to as the "Order"), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

9. As required by section 227(3) of the Act, we report that:

(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

(c) The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this report comply with the Accounting Standards notified under the Companies Act, 1956, read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013;

(e) On the basis of written representations received from the directors as on March 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act.

Annexure to Independent Auditors'' Report

Referred to in paragraph 8 of the Independent Auditors'' Report of even date to the members of McNally Bharat Engineering Company Limited on the financial statements as of and for the year ended March 31, 2014.

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

(b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of 3 years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies have been noticed on such verification.

(c) In our opinion, and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the Company during the year.

ii. (a) The inventory has been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

iii. (a) The Company has granted unsecured loans, to a company covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year and the year-end balance of such loans aggregated to Rs.61 lacs and Rs.61 lacs, respectively. The Company has not granted any secured/ unsecured loans to firms or other parties covered in the register maintained under Section 301 of the Act.

(b) In our opinion, the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the Company.

(c) In respect of the aforesaid loans, the parties are repaying the principal amounts, as stipulated, and are also regular in payment of interest as applicable.

(d) In respect of the aforesaid loans, there is no overdue amount more than Rupees One Lacs.

(e) The Company has taken unsecured loans, from one company covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year and the year-end balance of such loans aggregated to Rs. 4000 lacs and Rs. Nil, respectively. The Company has not taken any secured/ unsecured loans from firms or other parties covered in the register maintained under Section 301 of the Act.

(f) In our opinion, the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the Company.

(g) In respect of the aforesaid loans, the Company is regular in repaying the principal amounts, as stipulated, and is also regular in payment of interest, as applicable.

iv. In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across, nor have been informed of, any continuing failure to correct major weaknesses in the aforesaid internal control system.

v. According to the information and explanations given to us, there have been no contracts or arrangements that need to be entered in the register maintained under Section 301 of the Act.

vi. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

vii. In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.

viii. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

ix. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing undisputed statutory dues in respect of service tax, sales tax, value added tax, provident fund, tax deducted at source, works contract tax, employees'' state insurance and tax collected at source though there has been a slight delay in a few cases, and is regular in depositing undisputed statutory dues, including investor education and protection fund, income tax, wealth tax, customs duty, and other material statutory dues, as applicable, with the appropriate authorities.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues of income-tax, sales-tax, wealth-tax, service-tax, customs duty, and excise duty which have not been deposited on account of any dispute. The particulars of dues of income tax, sales tax, service tax, and excise duty as at March 31, 2014 which have not been deposited on account of a dispute, are as follows:

Name of the statute Nature of dues Amount Period to (Rs.Lacs) which the amount relates

Central Excise Excise Duty and 129.51 1989-93 Act, 1944 penal interest thereon

Finance Act 1994 Service Tax 16.81 2005-06

5.64 2003-04

4.24 2006-08

APGST Act, 1957 Sales Tax 4.16 1994-95

Rajasthan Sales 1.33 2005-06 Tax Act, 1994

UP Trade 1.30 2003-04 Tax Act, 1948

Central Sales 470.27 2006-07 Tax Act, 1956

Central Sales 26.00 2007-08 Tax Act, 1956

Central Sales 29.46 2008-09 Tax Act, 1956

WBST Act, 1994 3.90 2003-04

West Bengal Value VAT 72.27 2005-06 Added Tax Act, 2003

West Bengal Value 182.59 2006-07 Added Tax Act, 2003

West Bengal Value 65.67 2007-08 Added Tax Act, 2003

West Bengal Value 79.84 2008-09 Added Tax Act, 2003

West Bengal Value A 20.26 2009-10 dded Tax Act, 2003

Income-tax Act, 1961 Income tax 1,339.55 2010-11



Name of the statue Forum where the dispute is pending

Central Excise Act, 1944 Commissioner (Appeals)

Finance Act''1994 Commissioner (Appeals)

Customs, Excise & Service Tax Appellate Tribunal

Customs, Excise & Service Tax Appellate Tribunal

APGST Act, 1957 Appellate Tribunal

Rajasthan Sales Tax Act, 1994 Commissioner (Appeals)

UP Trade Tax Act, 1948 Commissioner (Appeals)

Central Sales Tax Act, 1956 Appellate and Revisional Board

Central Sales Tax Act, 1956 Appellate and Revisional Board

Central Sales Tax Act, 1956 Appellate and Revisional Board

WBST Act, 1994 Commissioner (Appeals)

West Bengal Value Added Tax Act, 2003 West Bengal Appellate and Revisional Board

West Bengal Value Added Tax Act, 2003 West Bengal Appellate and Revisional Board

West Bengal Value Added Tax Act, 2003 West Bengal Appellate and Revisional Board

West Bengal Value Added Tax Act, 2003 West Bengal Appellate and Revisional Board

West Bengal Value A dded Tax Act, 2003 West Bengal Appellate and Revisional Board

Income-tax Act, 1961 Commissioner (Appeals)

x. The Company has no accumulated losses as at the end of the financial yearand it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

xi. According to the records of the Company examined by us and the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

xii. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of Clause 4(xii) of the Order are not applicable to the Company.

xiii. As the provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to the Company, the provisions of Clause 4(xiii) of the Order are not applicable to the Company.

xiv. 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.

xv. In our opinion, and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

xvi. In our opinion, and according to the information and explanations given to us, the term loans have been applied for the purposes for which they were obtained.

xvii. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that the no funds raised on short-term basis have been used for long-term investment.

xviii. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year. Accordingly, the provisions of Clause 4(xviii) of the Order are not applicable to the Company.

xix. The Company has not issued any debentures during the year and does not have any debentures outstanding as at the beginning of the year and at the year end. Accordingly, the provisions of Clause 4(xix) of the Order are not applicable to the Company.

xx. The Company has not raised any money by public issues during the year. Accordingly, the provisions of Clause 4(xx) of the Order are not applicable to the Company.

xxi. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management.

For Lovelock & Lewes

Firm Registration No. 301056E

Chartered Accountants

Prabal Kr. Sarkar

Partner Kolkata, May 30, 2014 Membership No: 52340


Mar 31, 2013

Report on the Financial Statements

1. We have audited the accompanying financial statements of McNally Bharat Engineering Company Limited (the "Company"), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information, which we have signed under reference to this report.

Management''s Responsibility for the Financial Statements

2. The Company''s 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'' of India (the "Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence, about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors'' 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 auditors consider internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

6. In our opinion, and to the best of our information and according to the explanations given to us, the accompanying 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:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013;

(b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

7. As required by ''the Companies (Auditor''s Report) Order, 2003'', as amended by ''the Companies (Auditor''s Report) (Amendment) Order, 2004'', issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act (hereinafter referred to as the "Order"), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

8. As required by section 227(3) of the Act, we report that:

(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those;

(c) The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Act;

(e) On the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act.

ANNEXURE TO INDEPENDENT AUDITORS'' REPORT

Referred to in paragraph 7 of the Independent Auditors'' Report of even date to the members of McNally Bharat Engineering Company Limited on the financial statements as of and for the year ended March 31, 2013.

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

(b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies have been noticed on such verification.

(c) In our opinion, and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the Company during the year.

ii. (a) The inventory has been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

iii. (a) The Company has granted unsecured loans, to two companies covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year and the year-end balance of such loans aggregated to Rs. 61,00,000. The Company has not granted any secured/ unsecured loans to firms or other parties covered in the register maintained under Section 301 of the Act.

(b) In our opinion, the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the Company.

T(c) In respect of the aforesaid loans, the parties are repaying the principal amounts, as stipulated, and are also regular in payment of interest as applicable.

(d) In respect of the aforesaid loans, there is no overdue amount more than Rupees One Lakh.

(e) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Therefore, the provisions of Clause 4(iii) (f) and (g) of the said Order are not applicable to the Company.

iv. In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across, nor have been informed of, any continuing failure to correct major weaknesses in the aforesaid internal control system.

v. According to the information and explanations given to us, there have been no contracts or arrangements that need to be entered in the register maintained under Section 301 of the Act.

vi. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

vii. In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.

viii. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

ix. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing undisputed statutory dues in respect of service tax, income tax, sales tax and excise duty, though there has been a slight delay in a few cases, and is regular in depositing undisputed statutory dues, including provident fund, investor education and protection fund, employees'' state insurance, wealth tax, customs duty and other material statutory dues, as applicable, with the appropriate authorities.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues of income-tax, wealth-tax and customs duty, which have not been deposited on account of any dispute. The particulars of dues of sales tax, service tax and excise duty as at March 31, 2013 which have not been deposited on account of a dispute, are mentioned in attached Appendix A.

x. The Company has no accumulated losses as at the end of the financial year and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

xi. According to the records of the Company examined by us and the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or bank. The Company has not issued any debentures as at the balance sheet date.

xii. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of Clause 4(xii) of the Order are not applicable to the Company.

xiii. As the provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to the Company, the provisions of Clause 4(xiii) of the Order are not applicable to the Company.

xiv. 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.

xv. In our opinion, and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

xvi. In our opinion, and according to the information and explanations given to us, the term loans have been applied for the purposes for which they were obtained.

xvii. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that no funds raised on short-term basis have been used for long-term investment.

xviii. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year. Accordingly, the provisions of Clause 4(xviii) of the Order are not applicable to the Company.

xix. The Company has not issued any debentures during the year and does not have any debentures outstanding as at the beginning of the year and at the year end. Accordingly, the provisions of Clause 4(xix) of the Order are not applicable to the Company.

xx. The Company has not raised any money by public issues during the year. Accordingly, the provisions of Clause 4(xx) of the Order are not applicable to the Company.

xxi. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management.



For Lovelock & Lewes

Firm Registration No. 301056E

Chartered Accountants

Prabal Kr. Sarkar

Partner

Kolkata, May 29, 2013 Membership No: 52340


Mar 31, 2012

1. We have audited the attached Balance Sheet of McNally Bharat Engineering Company Limited (the "Company") as at 31st March 2012, and the related Statement of Profit and Loss and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditor's Report) (Amendment) Order, 2004 (together the "Order"), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of 'The Companies Act, 1956' of India (the 'Act') and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the 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 ofthose books;

(c) The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act;

(e) On the basis of written representations received from the directors, as on 31st March 2012 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act;

(f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give, in the prescribed manner, the information required by the Act, 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 asat31st March 2012;

(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, of the cash flows for the year ended on that date.

Annexure to Auditors' Report

Referred to in paragraph 3 of the Auditors' Report of even date to the members of McNally Bharat Engineering Company Limited on the financial statements as of and for the year ended 31st March 2012

1. (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation, of fixed assets.

(b) The fixed assets are physically verified bythe Management according to a phased programme designed to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified bythe Management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

(c) In our opinion, and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed of bythe Company during the year.

2. (a) The inventory has been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3. (a) The Company has granted unsecured loans, to two companies covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year and the year-end balance of such loans aggregate to Rs. 14,81,40,945. The company has not granted any loans to firms or other parties covered in the register maintained under Section 301 of the Act.

(b) In our opinion, the terms and conditions of such loans are not prima facie prejudicial to the interest of the Company. The loans are interest free.

(c) In respect of the aforesaid loans, the parties are repaying the principal amounts, as per terms.

(d) In respect of the aforesaid loans, there is no overdue amount more than Rupees One Lakh.

(e) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly the paragraphs (f) and (g) of the Order are not applicable.

4. In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across, nor have been informed of, any continuing failure to correct major weaknesses in the aforesaid internal control system.

5. According to the information and explanations given to us, there have been no contracts or arrangements referred to in Section 301 of the Act during the year to be entered in the register required to be maintained under that Section. Accordingly, the question of commenting on transactions made in pursuance of such contracts or arrangements does not arise.

6. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

7. In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.

8. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

9. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, except for dues in respect of service tax, income tax, employees' state insurance, professional tax and sales tax, the Company is regular in depositing undisputed statutory dues, including provident fund, investor education and protection fund, wealth tax, customs duty, excise duty and other material statutory dues, as applicable, with the appropriate authorities.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income tax, sales tax, value added tax, wealth tax, service tax, customs duty and excise duty as at 31st March 2012 which have not been deposited on account of a dispute, are mentioned in attached AppendixA.

10. The Company has no accumulated losses.

11. According to the records of the Company examined by us and the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or bank as at the balance sheet date. There is no debenture.

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.

13. The provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to the Company.

14. In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

15. In our opinion, and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

16. In our opinion, and according to the information and explanations given to us, the term loans have been applied, on an overall basis, forthe purposes forwhich theywere obtained.

17. On the basis of an overall examination of the balance sheet of the Company, in our opinion, and according to the information and explanations given to us, there are no funds raised on a short-term basis which have been used for long-term investment.

18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year.

19. The Company has not issued any debentures during the year; and does not have any debentures outstanding as at the year end.

20. The Company has not raised any money by public issues during the year.

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management.

Appendix - A

Referred to in paragraph 9(b) of the Annexure to Auditors' Report

Name of The Statute Nature of dues Amount (Rs.)

Central Excise Act,1944 Excise duty and penal 12,951,359 interest thereon Finance Act,1994 Service Tax 109,647,427

Finance Act,1994 Service Tax 2,838,829

Finance Act,1994 Service Tax 180,682,597

Finance Act,1994 Service Tax 423,800

Finance Act,1994 Service Tax 3,980,137

Finance Act,1994 Service Tax 2,820,444

West Bengal Value Added Tax Act, 2003 VAT 13,008,951

West Bengal Value Added Tax Act, 2003 VAT 74,525,243

Bihar Finance Act,1981 VAT 5,387,227 Adopted by Govt of Jharkhand

APGST Act, 1957 Sales Tax 41 6,084

OST Act,1947 Sales Tax 166,333

WBST Act,1994 Sales Tax 390,375

Rajasthan Sales Tax Act,1994 Sales Tax 132,840

UP Trade Tax Act,1948 Sales Tax 130,111

Central Sales Tax Act,1956 Central Sales Tax 250,901

Name of the Statute Period to Forum in which the dispute is pending which the amount relates

Central Excise Act,1944 1989-1993 Commisioner of Central Excise, Pondicherry

Finance Act,1994 2006-2010 Commissioner of Service Tax, Kolkata

Finance Act,1994 2002-2009 Commissioner (Appeals), Central Excise, Allahabad

Finance Act,1994 2003-2005 CESTAT, Kolkata

Finance Act,1994 2006-2008 Commisioner (Appeals), Central Excise, Kolkata

Finance Act,1994 2004-2007 The Additional/Joint Commissioner, Service Tax, Kolkata

Finance Act,1994 2004-2007 Addl. Commissioner, Service Tax

West Bengal Value Added Tax Act, 2003 2004-2006 West Bengal Appellate and Revisional Board

West Bengal Value Added Tax Act, 2003 2006-2007 Senior Joint Commissioner Corporate Division, Kolkata

Bihar Finance Act,1981 2003-2004 DCCT Chirkunda Adopted by Govt of Jharkhand

APGST Act, 1957 1994-1998 Sales Tax Appellate Tribunal - Hyderabad

OST Act,1947 2003-2004 Asst. Commissioner, Comercial Taxes, Cuttack

WBST Act,1994 2003-2004 Deputy Commisioner, Commercial Taxes, Kolkata

Rajasthan Sales Tax Act,1994 2005-2006 Deputy Commisioner (Appeals), Udaipur

UP Trade Tax Act,1948 2003-2004 Deputy Commisioner (Appeals)

Central Sales Tax Act,1956 2005-2006 Senior Joint Commisioner,Sales Tax



For Lovelock & Lewes

Firm Registration Number: 301056E

Chartered Accountants

Prabal Kr. Sarkar

Kolkata Partner

1st June, 2012 Membership Number 52340


Mar 31, 2011

I. We have audited the attached Balance Sheet of McNally Bharat Engineering Company Limited (the "Company") as at 31st March 20ii, and the related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditor's Report) (Amendment) Order, 2004 (togetherthe "Order"), issued by the Central Government of India in terms of sub-section (4A) ofSection 227 of 'The Companies Act, 1956' of India (the 'Act') and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

4. Furtherto our comments in the Annexure referred to in paragraph 3 above, we report that:

(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary forthe 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 Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) ofSection 211 of the Act;

(e) On the basis of written representations received from the directors, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2011 from being appointed as a director in terms of clause (g) of sub- section (1) of Section 274 of the Act;

(f) In ouropinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give, in the prescribed manner, the information required by the Act, 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 31st March 2011;

(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows forthe year ended on that date.

ANNEXURE TO AUDITORS'REPORT

Referred to in paragraph 3 of the Auditors' Report of even date to the members of McNally Bharat Engineering Company Limited on the financial statements for the year ended 31st March 2011

1. (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation, of fixed assets.

(b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed of by the Company during the year.

2. (a) The inventory has been physically verified by the Management during the year. In ouropinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3. The Company has not granted / taken any loans, secured or unsecured, to/from companies, firms or other parties covered in the register maintained underSection 301 of the Act. Accordingly the paragraphs 4("i)(b),(c), (d),(f),and (g) of the Order are not applicable.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

5. According to the information and explanations given to us, there have been no contracts or arrangements referred to in Section 301 of the Act during the year to be entered in the register required to be maintained under that Section. Accordingly, the question of commenting on transactions made in pursuance of such contracts or arrangements does not arise.

6. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

7. In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

8. The Central Government of India has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act for any of the products of the Company.

9. (a) According to the information and explanations given to us and the records of the Company examined by us, in ouropinion, except dues in respect of service tax, income tax, employee's state insurance and sales tax where there have been significant delays, the Company is generally regular in depositing undisputed statutory dues including investor education and protection fund, wealth tax, customs duty, excise duty and other material statutory dues as applicable, with the appropriate authorities. The extent of the arrears of statutory dues outstanding as at 31st March 2011, for a period of more than six months from the date they became payable are as follows:

Name of the Nature of Amount Period to Due date Date of Statute Dues Rs. which the Payment amount relates

Assam Value Value Added Tax Rs 20937 june'2010 21st July, 2010 8th April, 2011 Added Tax Act

BiharValue Value Added Tax Rs. 324835 August'2010 15th September, 2010 5th April, 2011 Added Tax Act

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income-tax, sales-tax, value added tax, wealth-tax, service-tax, customs duty, excise duty and cess as at 31st March 2011 which have not been deposited on account of a dispute, are mentioned in Annexure attached.

10. The Company has no accumulated losses as at 31st March 2011 and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

11. According to the records of the Company examined by us and the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

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.

13. The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund/ societies are not applicable to the Company.

14. In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

15. In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company, for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

16. In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans have been applied forthe purposes for which they were obtained.

17. On the basis of an overall examination of the balance sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short term basis which have been used for long term investment.

18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year.

19. The Company has no debentures outstanding at the year-end.

20. The Company has not raised any money by public issues during the year.

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the Management.











ANNEXURE-A

[Referred to in paragraph 9 (b) of the Auditor's Report on matters specified in paragraphs 4 and 5 of Companies (Auditor's Report) Order, 2003]

NAME OF THE NATUREOFDUES AMOUNT (Rs.) PERIOD TO WHICH FORUM IN WHICH STATUTE THE AMOUNT THE DISPUTE IS PENDING RELATES

Central Excise Act, 1944 Excise duty and penal 12,951,359.00 1989-1993 Commisioner of Central Excise, interest thereon Pondicherry

Finance Act,1994 Service Tax 109.647.427.00 2006-2010 Commissioner of Service Tax, Kolkata

Finance Act, 1994 Service Tax 2,838,829.00 2002-2009 Commissioner (Appeals), Central Excise, Allahabad

Finance Act, 1994 Service Tax 180,682,597.00 2003-2005 CESTAT, Kolkata

Finance Act, 1994 Service Tax 423,800.00 2006-2008 Commisioner (Appeals), Central Excise, Kolkata

Finance Act, 1994 Service Tax 3,980,137.00 2004-2007 The Additional/ joint Commissioner, Service Tax, Kolkata

Finance Act, 1994 Service Tax 2,820,444.00 2004-2007 Addl. Commissioner, Service Tax

West Bengal Value Added VAT 13,008,951.00 2004-2006 West Bengal Appellate and Tax Act, 2003 Revisional Board

West Bengal Value Added VAT 74,525,243.00 2006-2007 Senior joint Commissioner Tax Act, 2003 Corporate Division, Kolkata

Bihar Finance Act, 1981 VAT 5,376,372.00 2003-2004 DCCT Chirkunda Adopted by Govt of jharkhand

APGST Act'1957 SalesTax 3,070,036.00 1994-1998 Sales Tax Appellate Tribunal- Hyderabad

OST Act, 1947 Sales Tax 166,333.00 2003-2004 Asst. Commissioner, Comercial Taxes, Cuttack

WBST Act,1994 Sales Tax 390,375.00 2003-2004 Deputy Commisioner, Commercial Taxes, Kolkata

Rajasthan Sales Tax Act,1994 SalesTax 132,840.00 2005-2006 Deputy commisioner (Appeals), Udaipur

UP Trade Tax ACt, 1948 SalesTax 130,111.00 2003-2004 Deputy commisioner (Appeals)

Central Sales Tax Act, 1956 Central Sales Tax 250,901.00 2005-2006 Senior joint Commisioner, Sales Tax



For Lovelock & Lewes

Firm Registration Number: 301056E

Chartered Accountants

Partha Mitra

Partner

Kolkata, 27th June, 2011 Membership Number 50553


Mar 31, 2010

1. We have audited the attached Balance Sheet of McNally Bharat Engineering Company Limited (the "Company") as at 31 st March 2010, and the related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003, as amended by the Companies (Auditors Report) (Amendment) Order, 2004 (together the "Order"), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of The Companies Act, 1956 of India (the Act) and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

4 Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the 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 Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) In our opinion, the Balance Sheet, Profit and Loss Account 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;

(e) On the basis of written representations received from the directors, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act;

(f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give, in the prescribed manner, the information required by the Act, 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 31st March 2010;

(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.



ANNEXURE TO AUDITORS REPORT

Referred to in paragraph 3 of the Auditors Report of even date to the members of McNally Bharat Engineering Company Limited on the financial statements for the year ended 31st March 2010

1. (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation, of

fixed assets.

(b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed of by the Company during the year.

2. (a) The inventory has been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3. (a) The Company has granted unsecured loans, to one company covered in the register maintained under Section 301

of the Act. The maximum amount involved during the year and the year-end balance of such loan aggregate to Rs. 550,00,000/-, and Rs. Nil, respectively.

(b) In our opinion, the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the Company.

(c) In respect of the aforesaid loans, the parties are repaying the principal amounts as stipulated and are also regular in payment of interest, where applicable.

(d) In respect of the aforesaid loans, there is no overdue amount more than Rupees One Lakh.

(e) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly the paragraphs 4 (iii) (f),and (g) of the Order are not applicable.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements

referred to in Section 301 of the Act have been entered in the register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees Five Lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

7. In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

8. The Central Government of India has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act for any of the products of the Company.

9. (a) According to the information and explanations given to us and the records of the Company examined by us, in our

opinion, except dues in respect of service tax, income tax, employees state insurance and sales tax where there have been significant delays, the Company is generally regular in depositing undisputed statutory dues including investor education and protection fund, wealth tax, customs duty, excise duty and other material statutory dues as applicable, with the appropriate authorities. The extent of the arrears of statutory dues outstanding as at 31 st March 2010, for a period of more than six months from the date they became payable are as follows:

Name of the Nature of Amount Period to Due date Date of Statute Dues Rs. which the Payment amount relates

Finance Act Service Rs. April- On the 5th 7th May Tax 798516 August of 2010 2009 the next month

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income-tax, sales-tax, wealth-tax, service-tax, customs duty, excise duty and cess as at 31 st March 2010 which have not been deposited on account of a dispute, are mentioned in Annexure attached.

10. The Company has no accumulated losses as at 31st March 2010 and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

11. According to the records of the Company examined by us and the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

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.

13. The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund/ societies are not applicable to the Company.

14. In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

15. In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company, for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

16. In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans have been applied for the purposes for which they were obtained.

17. On the basis of an overall examination of the balance sheet of the Company, in our opinion and according to the information and explanations given to us, short-term funds to the extent of Rs 1373048 (in 000) has been used for long-term purposes.

18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year.

19. The Company has no debentures outstanding at the year-end.

20. The Company has not raised any money by public issues during the year.

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the Management.

ANNEXURE - A

[Referred to in paragraph 9 (b) of the Auditors Report on matters specified in paragraphs 4 and 5 of Companies (Auditors Report) Order, 2003]

NAME OF THE NATURE OF DUES AMOUNT (Rs.) PERIOD TO WHICH STATUTE THE AMOUNT RELATES

CENTRAL EXCISE Excise duty and Penal 12,951,359 1989-90 to ACT, 1944 Interest thereon 1992-93

SUB-TOTAL 12,951,359

APGST ACT, 1957 Sales Tax 3,070,036 1994-95 to 1997-98

OST ACT, 1947 Sales Tax 166,333 2003-04

WBST ACT, 1994 Sales Tax 390,375 2003-04

CENTRAL SALES TAX ACT, Sales Tax 250,901 2005-06 1956

RAJASTHAN Sales Tax 132,840 2005-06

SALES TAX ACT, 1994

UP TRADE TAX ACT, 1948 Sales Tax 1 30,111 2003-04

SUB-TOTAL 4,140,596

West Bengal Value VAT/CST 13,008,951 2004-05 to 2005-06 Added Act, 203

-DO- VAT/CST 74,525,243 2006-07

Bihar Finance Act, 1981 VAT/CST 5,376,372 2003-04 Adopted by Govt. of harkhand

SUB-TOTAL 92,910,566

Finance Act,1994 Service Tax 104,806,129 Oct 2006 to Mar 2009

-DO- Service Tax 2,838,829 Apr 2003 to Jan 2009

-DO- Service Tax 180,682,597 2003-04 & 2004-05

-DO- Service Tax 423,800 2006-07 & 2007-08

SUB-TOTAL 288,751,355

NAME OF THE FORUM IN WHICH STATUTE THE DISPUTE IS PENDING

CENTRAL EXCISE Commissioner of Central ACT, 1944 Excise, Pondicherry



APGST ACT, 1957 Sales Tax Appellate Tribunal, Hyderabad

OST ACT, 1947 Assistant Commissioner, Commercial Taxes, Cuttack

WBST ACT, 1994 Senior joint Commissioner, Commercial Taxes, Kolkata

CENTRAL SALES TAX ACT, Senior joint Commissioner, 1956 Commercial Taxes, Kolkata

RAJASTHAN Deputy Commissioner, Appeals SALES TAX ACT, 1994

UP TRADE TAX ACT, 1948 Deputy Commissioner, Appeals

West Bengal Value Added Act, 203 West Bengal Appellate and Revisional Board



-DO- Senior joint Commissioner Corporate Division, Kolkata

Bihar Finance DCCT Chirkunda Act, 1981 Adopted by Govt. of harkhand

Finance Act,1994 Commissioner of Service Tax, Kolkata



-DO- joint Commissioner, Central Excise, Allahabad



-DO- CESTAT, Kolkata

-DO- Commissioner Appeals Kolkata

For Lovelock & Lewes

Chartered Accountants

Firm Registration Number: 301056E

Partha Mitra

Partner

Kolkata, 1 3th August 2010 Membership Number 50553

 
Subscribe now to get personal finance updates in your inbox!