Mar 31, 2018
INDEPENDENT AUDITOR''S REPORT
To the Members of SHAH ALLOYS LIMITED AHMEDABAD
Report on the Standalone Financial Statements
We have audited the accompanying Standalone Ind AS Financial Statements of M/s SHAH ALLOYS LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss, (including the statement of Other Comprehensive Income) ,the Statement of Cash flows, the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information, (herein after referred to as "Standalone Ind AS financial statements").
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 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 accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act, read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting principles generally accepted in India.
This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Ind AS 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 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 there under.
We conducted our audit of the Standalone Ind AS financial statements in accordance with the Standards on Auditing, as specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Financial Statements. The procedures selected depend on the auditor''s 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 of Qualified Opinion
1. The Company has not provided for foreign exchange loss in the financial results on the Principal amount of 1,00,00,000 USD and on the Premium amount of 48,25,500 USD of the Foreign Currency Convertible Bonds (FCCB) which had become due for payment on September 22, 2011 and remain unpaid as at March 31, 2018, which constitutes a departure from the Indian Accounting Standard- 21. "The Effects of Changes in Foreign Exchange Rates which requires that each foreign currency monetary items should be reported using the closing rate as at the balance sheet date. Non provision of the foreign exchange loss on the aforesaid Foreign Currency Convertible Bonds (FCCB) and the Premium amount relates to the period from September 23. 2011 to March, 2018. Had the company followed the Accounting Standard and made the provision for foreign exchange on the above FCCB for the Year ending on 31st March,2018, then the profit of the company for the Year ending on 31st March,2018 would have been lower by rs 30.46 lacs and to that extent the liability would have been higher. However, the company has not provided for foreign exchange fluctuation on the above FCCB since September 2011 and accordingly the total net loss on foreign exchange works out to Rs. 2405.23 lakhs which has not been provided by the company. Thus, balance of Reserve and surplus and the current liabilities have been understated by Rs 2405.23 lakhs as on 31st March,2018. (Refer Note No 34 of Notes forming part of Standalone IND AS Financial Statements)
2. For the year ending on 31st March,2018, the company has discontinued to make the provision of interest on loans from banks and financial institutions (excluding loans assigned to various ARCs). Had the company continued the said practice of making provision of interest on loans from banks and financial institutions for the year ended on 31st March 2018 the profit of the year would have been lower by Rs. 1305.63 lakhs and current liabilities would have been higher to that extent. (Refer Note No 35 of Notes forming part of Standalone IND AS Financial Statements)
3. The Company has not assessed the impact of Effective Interest Method to the finance cost as per the requirement of Ind AS 109 ''Financial Instruments and hence, the effect of the same, if any, on the financial results is not identifiable therefore, we are unable to comment upon its impact on the Financial results for the year ended March 31, 2018. (Refer Note No 36 of Notes forming part of Standalone IND AS Financial Statements)
Qualified Opinion
In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph 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 31st March, 2018, and its Profits, total comprehensive income, the changes in equity and its cash flows for the year ended on that date.
OTHER MATTER
The Comparative financial information of the Company for the year ended 31st March 17 and the transition date opening â balance sheet as at 1 April, 2016 included in these standalone Ind AS financial statements, are based on the previously issued statutory financial statements prepared in accordance with the Companies (Accounting Standards) Rules, 2006 audited Predecessor auditor and their reports for the years ended 31 March 2017 and 31 March 2016 dated 27th May 2017 and 30th May, 2016 respectively expressed an unmodified opinion on those standalone financial statements, as adjusted for the differences in the accounting principles adopted by the Company on transition to the Ind AS, which have been audited by us.
Our opinion is not modified in respect of these matters. Emphasis of Matters
1) Note 42 to the standalone INDAS financial statements which states that the Company''s current liabilities exceeded its current assets as at the previous year balance sheet date. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern. However, considering the profit earned by the company for the year ended on 31st March 2018 and also considering the view of the management, the financial results of the Company have been prepared on a "going concern basis".
2) During the year under review, the Company has received Refund of Electricity Duty from Uttar Gujarat Vij Company limited (UGVL) vide their letter dated 27th November,2017 amounting to Rs. 2874 lakhs for the period from February 2008 to December 2016 and the same is shown under the Head "Exceptional Items" in the standalone financial statements for the year ending on 31st March, 2018. (Refer Note No 39 of Notes forming part of Standalone IND AS Financial Statements)
3) Attention is invited to Note 41 of the Standalone IND AS Financial Statements which states that the balance confirmation from the suppliers, customers as well as to various loans or advances given have been called for, but the same are awaited till the date of audit. Thus, the balances of receivables, trade payables as well as loans and advances have been taken as per the books of accounts submitted by the company and are subject to confirmation from the respective parties
4) Note no 40 to the Standalone IND AS Financial statements about the settlement agreement entered in to by the company with effect from 19th Januray 2018, for the entire dues in respect of various facilities and assistance provided by Karur Vysya Bank and IDBI Bank which is now assigned to Asset Reconstruction Company (India) Ltd. Further settlement agreement entered in to by the company on 23rd February, 2018, for the entire dues in respect of various facilities and assistance provided by Bank of Maharashtra and Punjab National Bank which is now assigned to Invent Assets Securitization & Reconstruction Pvt. Ltd.The company has accounted for the Waiver of Principal portion of Loan facilities under Capital Reserve Account and Waiver of Interest portion (as per books of the company) as Income in the statement of Profit and loss.The said agreements provide for the settlement of entire dues in respect of financial assistance and facilities with the underlying Securities for the payment of Rs. 6600 lakhs towards full and final settlement against the total liability (Principal and Interest as per the books of the company ) of Rs. 28090 lakhs resulting in to the waiver of liability (Principal and Interest) amounting to Rs. 21490 lakhs. Out of the said waiver of liability (Principal and Interest) of Rs. 21490 lakhs, the waiver of Principal portion of Rs. 10923 lakhs has been accounted under capital reserve account in the Statement of Assets and Liabilities as at 31st March 2018 and waiver of Interest Liability of Rs.10567 lakhs has been shown as income in the Statement of Profit and loss and has been reflected as an Exceptional Item in the Statement of Profit and loss for the year ended on 31st March 2018.
5) Attention in invited to Note No 43 of the Standalone IND AS financial statements which states about the Provision for taxation particularly provision for tax liability u/s 115JB (2) (vii) of Income Tax Act, 1961 has been considered after taking into account the fact that the company was registered and declared "SICK" by the Hon''ble Board for Industrial and Financial Reconstruction (BIFR) and accordingly the same has been computed and reflected in the books of accounts.
Our opinion is not qualified on the above matters. Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government of India in terms of Section 143(11) of the Act, we give in the Annexure-"A" a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act, we report that:
(a) We have sought and, except for the matters described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
(b) Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
(c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the books of account.
(d) The matter described under the Emphasis of Matters paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.
(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 issued there under.
(f) On the basis of the written representations received from the directors as on 31st March, 2018 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2018 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 "Annexure B".
(h) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014 as amended, in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its Financial Position as referred to in Note no.45 to the Standalone Ind AS Financial Statements.
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
For Parikh & Majmudar |
|
Chartered Accountants |
|
FR No. 107525W |
|
[C.A (Dr) Hiten M. Parikh] |
|
Place: Ahmedabad |
PARTNER |
Date: 30/05/2018 |
Membership No. 40230 |
Annexure A to Independent Auditors'' Report
REFERRED TO IN PARAGRAPH "REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENT OF OUR REPORT OF EVEN DATE TO THE MEMBERS OF SHAH ALLOYS LIMITED:
(i) In respect of its fixed assets:
(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets on the basis of available information.
(b) As explained to us, a major portion of fixed assets are physically verified by the management during the year in accordance with a phased program of verification adopted by company. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and nature of its assets. As informed to us, no material discrepancies were noticed on such physical verification.
(c) According to the information and explanation given to us and on the basis of our examination of records of the company, title deeds of the immovable properties held are in the name of the company.
(ii) In respect of its inventories:
As explained to us, inventories(excluding goods in transit and goods lying at port) were physically verified by management at reasonable intervals during the year. In our opinion, the frequency of the verification is reasonable. The discrepancies noticed on verification between the physical stocks and the book records were not material.
(iii) In respect of loans, Secured or unsecured granted by the company to the companies, firms, limited liability partnership or other parties covered in the register maintained u/s 189 of the companies Act, 2013:
According to the information and explanations given to us and on the basis of records produced before us, the company has not granted any loan, secured or unsecured to the companies, limited liability partnership or firms or other parties covered in the register maintained u/s 189 of the companies Act,2013 and hence sub-clause (a)&(b) & (c) of paragraph 3 of companies auditor''s report order 2016 are not applicable to the company.
(iv) The company has complied with the provisions of Section 185 and 186 with respect to the investment made and guarantee given. (v) The Company has not accepted any deposits from the public.
(vi) We have broadly reviewed the books of accounts maintained by the company pursuant to the rules made by the Central Government of India for the maintenance of Cost records specified under section 148 of Companies Act 2013 and are of the opinion that prima facie, the prescribed accounts & records have been made and maintained. We have however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.
(vii) In respect of statutory dues:
(a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including provident fund, ESIC, income-tax, sales tax, Goods & Service Tax, service tax, , duty of customs, duty of excise, value added tax, cess and other statutory dues have been generally regularly deposited during the year with the appropriate authorities.
According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, sales tax, value added tax, duty of customs, duty of excise, Goods & Service Tax ,service tax, cess and other material statutory dues were in arrears as at 31st March 2018 for a period of more than six months from the date they became payable.
b) On the basis of records produced before us for our verification and according to the information and explanations given to us, the details of disputed dues that have not been deposited as on 31st March, 2018 on account of matters pending before the appropriate authorities, are as under:
Sr. No. |
Name of the Statute |
Nature of the Dues |
Period to which the amount Relates |
Forum where the dispute is pending |
Amount under dispute not yet deposited (in Rs. Lakhs) |
1 |
Gujarat Value Added Tax Act,2003 |
Value Added Tax |
2006-07 |
Joint Commissioner, VAT Ahmedabad |
381.28 |
2 |
Custom, Service tax and Excise |
Service tax |
January 2004 to May 2005 |
Custom Excise and Service Tax, Appellate Tribunal, Ahmedabad |
2.15 |
3 |
Custom, Service tax and Excise |
Excise duty |
November 2005 to February 2006 |
Custom Excise and Service Tax, Appellate Tribunal, Ahmedabad |
34.87 |
4 |
Custom, Service tax and Excise |
Excise duty |
2006-07 to 2007-08 |
Gujarat High Court |
44.02 |
5 |
Custom, Service tax and Excise |
Service tax |
January 2005 to July 2011 |
The Commissioner of Central Excise, Ahmedabad III |
51.58 |
6 |
Custom, Service tax and Excise |
Service tax |
April 2012 to October 2012 |
Custom Excise and Service Tax, Appellate Tribunal, Ahmedabad |
23.43 |
7 |
Custom, Service tax and Excise |
Service tax |
November 2012 to March 2013 |
The Addl. Commissioner of Central Excise, Ahmedabad III |
1.71 |
8 |
Custom, Service tax and Excise |
Service tax |
2013-14 |
The Joint Commissioner of Central Excise, Ahmedabad III |
1.48 |
9 |
Custom, Service tax and Excise |
Service tax |
November 1997 to June 1998 |
Gujarat High Court |
25.43 |
10 |
Custom, Service tax and Excise |
Excise duty |
September 2010 to December 2013 |
Custom Excise and Service Tax, Appellate Tribunal, Ahmedabad |
1909.76 |
11 |
Custom, Service tax and Excise |
Service tax |
December 2014 to May 2015 |
The Dy, Commissioner of Central Excise Division Kalol, Ahmedabad III |
0.87 |
12 |
Custom, Service tax and Excise |
Service tax |
June 2015 to December 2015 |
The Asst. Commissioner of Central Excise & CGST, Division Kalol |
6.01 |
13 |
Custom, Service tax and Excise |
Service tax |
January 2016 to July 2016 |
The Asst. Commissioner of Central Excise & CGST, Division Kalol |
8.83 |
14 |
Custom, Service tax and Excise |
Service tax |
August 2016 to June 2017 |
The Asst. Commissioner of Central Excise & CGST, Division Kalol |
12.70 |
(viii) Consequent upon the sanction of the restructuring package given under CDR mechanism by banks and financial institutions, the company was required to start repaying the loans sanctioned by banks/institutions and debentures holders from June 2011 onwards, however the company has made default in repaying the dues as per the terms stipulated in CDR Rework Proposal. The amount and the period of default in respect of term loan, Non convertible Debentures, Funded interest term Loans, Interest Payable, on the said facilities are as under :
AME OF THE BANK/F.I.N |
NATURE OF FACILITY |
Amount (in Rs. Lakhs) of Default as at 31-03-2018 |
Period Of Default (No of Days) |
HDFC BANK |
Term Loan |
1021.98 |
1-2466 |
Funded Interest Term loan |
404.47 |
1-1551 |
|
Interest Payable |
877.89 |
1-2527 |
|
INDIAN OVERSEAS BANK |
Non convertible Debenture |
854.17 |
1-2466 |
Funded Interest Term loan |
615.73 |
1-1551 |
|
Interest payable |
311.33 |
1-2800 |
|
LIC OF INDIA |
TERM LOAN |
549.04 |
1-2466 |
Funded Interest Term loan |
333.01 |
1-1551 |
|
Non convertible Debenture |
6833.33 |
1-2466 |
|
Interest Payable |
51.58 |
1-2831 |
Moreover, the company, in September 2006 has raised us $10 million through unsecured zero coupon foreign currency convertible bonds (FCCB), due on 22 September 2011.on full conversion of FCCB, the FCCB will be converted into 26,41,143 equity shares of Rs. 10 each at a premium of Rs. 165 per share, at the option of bondholders at any time before the maturity of bonds. On conversion capital will increase by Rs. 264.11 Lakhs and share premium by Rs. 4357.58 Lakhs .If bonds are not converted, the company will have to repay the bonds at premium and in us $. The bonds were convertible into equity shares at the option of bond holders at any time on or after 20th sept 2006 and upto and including 8th September 2011. And hence as on 31st march 2018, this conversion option with bond holders is not being in effect. The company has provided the premium till 22nd Sept 2011 which has been adjusted against security premium in accordance with section 52 of Companies Act, 2013.
However, the company has defaulted in repayment of foreign currency convertible bond (FCCB) dues on its maturity. The default is subsisting since 2381 days.
(ix) According to the information & explanations given to us, the Company did not raise any money by way of initial public offer or further public offer (including debt instruments) nor has obtained any term loans during the year under review. Accordingly, paragraph 3(ix) of the Order is not applicable
(x) According to the information and explanations given to us, no fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit.
(xi) The Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V of the Companies act 2013.
(xii) In our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable.
(xiii) The company has complied with section 177 and 188 of companies act 2013,in respect of transactions with the related parties and relevant details have been disclosed in the financial statements as required by applicable accounting standards.
(Xiv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year
(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.
(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.
For Parikh & Majmudar |
|
Chartered Accountants |
|
Firm Reg. No. 107525W |
|
[C.A. (Dr) Hiten M. Parikh] |
|
Place: Ahmedabad |
PARTNER |
Date : 30/05/2018 |
M. No. 040230 |
ANNEXURE B TO THE INDEPENDENT AUDITOR''S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF SHAH ALLOYS LIMITED
Report on the Internal Financial Controls over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")
We have audited the internal financial controls over financial reporting of M/s SHAH ALLOYS LIMITED ("the Company") as of 31 March 2018 in conjunction with our audit of the financial statements of the Company for the year ended on that date.
Management''s Responsibility for Internal Financial Controls
The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India
(''ICAI''). 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.
Auditor''s'' 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 "Guidance Note") 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 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 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 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, to the best of our information & according to the explanations given to us, 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 31st March 2018, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
For Parikh & Majmudar |
|
Chartered Accountants |
|
FR No. 107525W |
|
[C.A (Dr) Hiten M. Parikh] |
|
Place: Ahmedabad |
PARTNER |
Date: 30/05/2018 |
Membership No. 40230 |
Mar 31, 2016
INDEPENDENT AUDITOR''S REPORT
To the Members of SHAH ALLOYS LIMITED AHMEDABAD
Report on the Financial Statements
We have audited the accompanying financial statements of Shah Alloys Limited (''the Company''), which comprise the Balance sheet as at March 31, 2016, the Statement of Profit and Loss , the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.
Management''s Responsibility for the Financial Statements
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 financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor''s Responsibility
Our responsibility is to express an opinion on these 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 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 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. 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 audit opinion on the financial statements.
Basis for Qualified Opinion
1. The Company has not provided for foreign exchange loss in the financial statements on the Principal amount of 1,00,00,000 USD and on the Premium amount of 48,25,500 USD of the Foreign Currency Convertible Bonds(FCCB) which had become due for payment on September 22, 2011 and remain unpaid as at March 31, 2016, which constitutes a departure from the Accounting Standard - 11, "The Effects of Changes in Foreign Exchange Rates", which requires that each foreign currency monetary items should be reported using the closing rate as at the balance sheet date. Non provision of the foreign exchange loss on the aforesaid Foreign Currency Convertible Bonds (FCCB) and the Premium amount relates to the period from September 23, 2011 to March 31, 2016. The Company''s record indicate that had management done the provision, the Exchange loss for the Year ended 31st March 2016 would have been higher by Rs, 5,54,78,504/-. Accordingly, profits for the Year ended 31st March 2016 has been over-stated by Rs, 5,54,78,504/- and negative balance of reserves and surplus has been understated by Rs, 25,96,30,086/- as at 31st March 2016.
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 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:
1) In case of the Balance Sheet ,of the state of affairs of the Company as at March 31, 2016 ,
2) In case of the Statement of profit and loss, of the profits for the year ended on that date
3) In case of the Cash flow Statement, of the cash flows for the year ended on that date.
Emphasis of Matters
We draw attention to the following matters in the Notes to the Financial Statements:
1) Note No 39 to the financial statements regarding the Company having accumulated losses and its net worth has been fully eroded. The Financial Statements indicates that the Company has incurred a net loss during the previous years and, the Company''s current liabilities exceeded its current assets as at the current and previous year balance sheet date. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern. However, the financial statements of the Company have been prepared on a going concern basis.
2) Note No 34 to the financial statements, regarding the transfer/assignment of secured loans with all their rights, title and interest in the financial documents by banks to the Asset Reconstruction companies.
3) During the year ended 31st March 2016, the company has carried out a techno-economic assessment for the valuations of its Capital Projects to identify the impairment loss and provision thereof, if any. Based on the said techno-economic assessment of the Capital Projects, the Company has provided for Rs, 3,58,50,355/- as per Note 40 to the financial statements The same is in accordance with the notified Accounting Standard 28 on Impairment of asset which states that impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount.
4) Note 42 to the Financial Statements about the settlement agreement entered into by the company with effect from 15th June 2015 and 11th August 2015 for the entire dues in respect of the various facilities and assistance provided respectively by Union Bank of India and State bank of India which is now assigned to Invent Assets Securitization & Reconstruction Private Limited.
The Company has accounted for the Principal Portion of Waiver of loan facilities as Capital Reserve and Waiver of interest as Income which has been offered in the Statement of Profit and Loss.
The said agreements provides for the settlement of entire dues in respect of financial assistance and facilities with the underlying securities for the payment of Rs, 146,15,00,000/- towards full and final settlement against the total liability(Principal and Interest) of Rs, 607,34,85,227/ - resulting into the waiver of liability (Principal and Interest) for the amount of Rs, 461,19,85,227/-.
Out of the said waiver of liability (Principal and Interest) for the amount of Rs, 461,19,85,227/-, the waiver of liability of Principal portion of Rs, 213,94,42,763/- has been shown as a capital Reserves in the Statement of Assets and Liabilities as at 31st March 2016 and waiver of interest liability for Rs, 247,25,42,464/- has been offered as Income in the Statement of profit and Loss and has been shown as an Extra ordinary item in the Results for the period ended 31st March 2016.
Our opinion is not modified in respect of these matters.
Report on Other Legal and Regulatory Requirements
i) As required by the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government of India in terms of subsection (11) of section 143 of the Act, we give in the Annexure A , a statement on the matters specified in the paragraph 3 and 4 of the Order, to the extent applicable.
ii) 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) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above , in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
c) The Balance sheet, the Statement of Profit and loss and the Cash flow statement dealt with by this Report are in agreement with the books of account;
d) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above , in our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;
e) The going concern matter as described in sub-paragraph (1) under the Emphasis of Matters paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.
f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure B"; and
g) On the basis of the written representations received from the directors as on March 31, 2016 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of Section 164 (2) of the Act; and
h) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, 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 21 to the financial statements;
ii) The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses;
iii) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
The Annexure referred to in Independents Auditor''s Report to the members of the Company on the Standalone financial statement for the year ended 31st March 2016, we report that:
1. In respect of its Fixed Assets:
i) The company has maintained proper records showing full particulars including quantitative details and situation of the fixed assets on the basis of available information.
ii) As explained to us, a major portion of the fixed assets has been physically verified by the management during the year in accordance with a phased program of verification adopted by the Company. In our opinion, the frequency of verification is reasonable having regard to the size of the company and nature of its assets. As informed to us, no material discrepancies were noticed on such physical verification.
iii) According to the information and explanation given to us and on the basis of our examination of records of the company, the title deeds of the immovable properties held are in the name of the company.
2. In respect of its inventories:
As explained to us, inventories (excluding Goods in Transit and Goods lying at Port) were physically verified by the management at reasonable intervals during the year. In our opinion, the frequency of the verification is reasonable. The discrepancies noticed on verification between the physical stocks and the book records were not material.
3. In respect of Loans, Secured or Unsecured granted by the company to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013:
According to the information and explanations given to us and on the basis of the records produced before us, the company has not granted any Loan, Secured or Unsecured to the companies or firms or other parties covered in the register maintained under section 189 of the Companies Act 2013 and hence sub-clause (a) & (b) & (c) of paragraph 3 of the Companies Auditor''s Report Order 2016 are not applicable to the Company.
4. The Company has complied with the provision of Section 185 & 186 of Companies Act, 2013 with respect of loans, investments and guaranty made.
5. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposit and hence the provisions of Section 73 to 76 or any other relevant provisions of the Companies Act and the Companies (Acceptance of Deposits) Rules, 2014 with regard to the deposits accepted are not applicable to the Company. Therefore, the provisions of Clause (v) of paragraph 3 of the Companies Auditor''s Report Order 2016 are not applicable to the Company. According to the information and explanations given to us, no order has been passed by 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 as specified under Section 148 of the Companies Act, 2013 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.
7. In respect of the Statutory dues:
i) According to the records of the company, undisputed Statutory dues including provident fund, employees state insurance, income-tax, sales-tax, wealth-tax, service tax,duty of customs, duty of excise ,value added tax, cess and any other statutory dues have not been generally regularly deposited during the year with the appropriate authorities. On the basis of records produced before us for our verification and according to the information & explanation given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2016 for a period of more than six months from the date of becoming payable.
ii) On the basis of records produced before us for our verification and according to the information and explanations given to us, the details of disputed dues of '' 27,02,89,483/- have not been deposited as on 31st March, 2016 on account of matters pending before the appropriate authorities. The details of which are as under:
Sr. No. |
Name of the Statute |
Nature of the Dues |
Period to which the amount relates |
Forum where the dispute is pending |
Amount involved (in '') |
1 |
Income Tax Act, 1961 |
Income Tax |
1997-98 |
Gujarat High court |
1,30,000/- |
2 |
Sales Tax Act |
Sales Tax |
1995-96 |
Deputy commissioner of Sales Tax (Tribunal) Ahmadabad |
6,99,000/- |
3 |
Gujarat Value Added Tax Act, 2003 |
Value Added Tax |
2006-07 |
Deputy Commissioner, VAT Ahmadabad |
3,81,27,791/- |
4 |
Central Excise Act, 1944 |
Excise Duty and Service Tax |
1997-98, 1998-99 and 2004-05 to 2014-15 |
Central Excise & Service tax Appellate Tribunal / Joint / Deputy Commissioner of Central Excise/ Additional Commissioner of Central Excise |
23,13,32,692/- |
8. Consequent upon the sanction of the restructuring package given under CDR mechanism by banks & financial institution, the company was required to start repaying the loans sanctioned by banks/institutions and debenture holders from June 2011 onwards, however the company has made default in repaying the dues as per the terms stipulated in the CDR rework proposal. The Amount and the period of default in respect of Working Capital facilities, Term Loan, WCTL, Non-convertible Debentures, Funded Interest Term Loans, Interest payable on the said facilities are as under:
NAME OF THE BANK/F.I. |
NATURE OF FACILITY |
Amount (in Rs,) of Default as at 31-03-2016 |
Period Of Default ( No of Days) |
IDBI BANK |
Working Capital |
26 10 45 535 |
1-2131 days |
Non Convertible Debenture |
6 04 16 667 |
1 -1736 days |
|
Term Loan |
12 08 33 333 |
1 -1736 days |
|
Funded Interest Term Loan |
7 58 75 594 |
1 -821 days |
|
Interest payable |
10 92 66 519 |
1-2070 days |
|
KARUR VYSYA BANK |
Term Loan |
15 10 41 667 |
1 -1736 days |
Funded Interest Term Loan |
4 57 77 676 |
1 -821 days |
|
Interest payable |
6 09 36 463 |
1-1791 days |
|
AXIS BANK |
Working Capital |
9 46 34 923 |
1-2101 days |
Working Capital Term Loan |
5 41 33 333 |
1 -1736 days |
|
Funded Interest Term Loan |
1 22 17 104 |
1 -821 days |
|
Interest payable |
13 07 04 984 |
1-2101 days |
|
HDFC BANK |
Term Loan |
7 22 86 368 |
1 -1736 days |
Funded Interest Term Loan |
2 24 70 581 |
1 -821 days |
|
Interest payable |
7 31 28 186 |
1-1827 days |
|
BANK OF BARODA |
Working Capital |
49 87 22 365 |
1-2162 days |
Working Capital Term Loan |
19 99 79 166 |
1 -1736 days |
|
Term Loan |
2 06 32 292 |
1 -1736 days |
|
Funded Interest Term Loan |
5 00 73 649 |
1 -821 days |
|
Interest payable |
41 30 86 393 |
1-2131 days |
|
ORIENTAL BANK OF COMMERCE |
Term Loan |
9 45 15 553 |
1 -1736 days |
Funded Interest Term Loan |
2 07 86 890 |
1 -821 days |
|
Interest payable |
2 22 40 214 |
1-1096 days |
|
INDIAN OVERSEAS BANK |
Non Convertible Debenture |
6 04 16 667 |
1 -1736 days |
Funded Interest Term Loan |
3 42 07 322 |
1 -821 days |
|
Interest payable |
2 01 09 516 |
1-2070 days |
|
BANK OF MAHARASHTRA |
WCTL |
5 01 45 821 |
1 -1736 days |
Working Capital |
20 10 09 696 |
1-2221 days |
|
TERM LOAN |
1 64 16 732 |
1 -1736 days |
|
FITL |
1 62 87 471 |
1 -821 days |
|
Interest payable |
20 65 56 584 |
1-2070 days |
|
PUNJAB NATIONAL BANK |
Working Capital |
25 07 36 016 |
1-2131 days |
WCTL |
4 62 14 433 |
1 -1736 days |
|
TERM LOAN |
13 74 63 931 |
1 -1736 days |
|
FITL |
4 31 56 034 |
1 -821 days |
|
Interest payable |
39 27 03 456 |
1-2070 days |
|
L.I.C. OF INDIA |
TERM LOAN |
3 88 34 625 |
1 -1736 days |
FITL |
1 85 00 570 |
1 -821 days |
|
Non Convertible Debenture |
48 33 33 333 |
1 -1736 days |
|
Interest payable |
84 02 79 077 |
1-2070 days |
Moreover, the Company, in September 2006, has raised US $ 10 million through Unsecured Zero Coupon Foreign Currency Convertible Bonds (FCCB), due on 22nd September, 2011. On full conversion of FCCB, the FCCB will be converted in to 26,41,143 Equity shares of Rs 10 each at a premium of Rs 165 per share, at the option of the Bondholders at any time before the maturity of the bonds. On Conversion, Capital will increase by Rs 2,64,11,430 and Share Premium by Rs 43,57,88,570/-. If Bonds are not converted, the company will have to repay the
bonds at a premium & in US Dollars. The company has provided the premium till 22nd September, 2011 which has been adjusted against Security Premium in accordance with Section 52 of the Companies Act, 2013.
However, the company has defaulted in repayment of the foreign currency convertible bond (FCCB) dues on its maturity. The default is subsisting since 1652 days.
9. According to the records of the company, the company has neither raised any monies by way of Initial Public Offer or Further Public Offer nor has the company obtained any term loan. Hence, in our opinion, the requirements of clause (ix) of Paragraph 3 of the Order do not apply to the Company.
10. Based on the audit procedures performed and representation obtained from management we report that, no case of material fraud by the Company or on the Company by its officers and employee has been noticed or reported for the year under audit.
11. The Company has provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V of the Companies Act, 2013.
12. In our opinion, and to the best of our information and according to the explanations provided by the management, we are of the opinion that the company is not a nidhi company. Hence, in our opinion, the requirements of clause (xii) of Paragraph 3 of the Order do not apply to the Company.
13. The Company has complied with Section 177 and 188 of Companies Act, 2013, in respect of transactions with the related parties and relevant details have been disclosed in the financial statements as required by the applicable accounting standards.
14. The Company has not made any preferential allotment or private placement of shares or full or convertible debentures during the year under review. Hence, the provisions of Clause (xiv) of paragraph 3 of the Order are not applicable to the Company.
15. The Company has not entered into any non-cash transactions with directors or persons connected with him. Therefore, the provisions of Clause (xv) of paragraph 3 of the Order are not applicable to the Company.
16. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934
ANNEXURE B TO THE INDEPENDENT AUDITOR''S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF SHAH ALLOYS LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")
We have audited the internal financial controls over financial reporting of Shah Alloys Limited (''the Company) 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.
Management''s Responsibility for Internal Financial Controls
The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to 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.
Auditors'' 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 "Guidance Note") 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 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 I/we have obtained is sufficient and appropriate to provide a basis for my /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 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 the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
For Talati & Talati
Chartered Accountants
(Firm Reg. No: 110758W)
Umesh Talati
Place : Ahmedabad Partner
Date : May 30, 2016 Mem No. : 034834
Mar 31, 2015
Report on the Financial Statements
We have audited the accompanying financial statements of Shah Alloys
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 significant accounting
policies and other explanatory information.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated
in Section 134(5) of the Companies Act, 2013 ("the Act") with respect
to the preparation of these financial statements that give a true and
fair view of the financial position, financial performance and cash
flows of the Company in accordance with the accounting principles
generally accepted in India, including the Accounting Standards
specified under Section 133 of the Act, read with Rule 7 of the
Companies (Accounts) Rules, 2014. This responsibility also includes
maintenance of adequate accounting records in accordance with the
provisions of the Act for safeguarding the assets of the Company and
for preventing and detecting frauds and other irregularities; selection
and application of appropriate accounting policies; making judgments
and estimates that are reasonable and prudent; and design,
implementation and maintenance of adequate internal financial controls,
that were operating effectively for ensuring the accuracy and
completeness of the accounting records, relevant to the preparation and
presentation of the financial statements that give a true and fair view
and are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these 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 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 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.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion on the financial
statements.
Basis for Qualified Opinion
1. As informed to us, Management is of the view that they do not
anticipate execution of its ongoing project of Cold Rolling Mill (CRM)
Plant. However, due and adequate provision / write off / impairment
which should have been made in the books of accounts has not been made.
Out of the total book value of Capital work in progress of Rs.
18,31,84,363/-, the management has charged back only expense of
pre-operative expense, trial run expense and borrowing cost element for
Rs. 5,72,84,008/- to the statement of profit and loss during the
current year which was earlier capitalized. For the remaining balance
of the book value of Capital work in progress, the company has not
carried out any Techno-economic assessment during the year ended 31
March 2015 for the valuations of its ongoing Capital Project and hence
identification of impairment loss and provision thereof, if any, has
not been made. The same is not in accordance with notified Accounting
Standard 28 on "Impairment of asset" which states that impairment loss
is recognized when the carrying amount of the an asset exceeds its
recoverable amount . The consequential impact of adjustment, if any, on
the financial results due to non-provision / write off / impairment is
currently not ascertainable and therefore we are unable to comment on
its consequential financial impact, if any, on the financial results.
2. The Company has not provided for foreign exchange loss in the
financial statements on the Principal amount of 1,00,00,000 USD and on
the Premium amount of 48,25,500 USD of the Foreign Currency Convertible
Bonds(FCCB) which had become due for payment on September 22, 2011 and
remain unpaid as at March 31, 2015, which constitutes a departure from
the Accounting Standard - 11, "The Effects of Changes in Foreign
Exchange Rates", which requires that each foreign currency monetary
items should be reported using the closing rate as at the balance sheet
date. Non provision of the foreign exchange loss on the aforesaid
Foreign Currency Convertible Bonds (FCCB) and the Premium amount
relates to the period from September 23, 2011 to March 31, 2015. The
Company's record indicate that had management done the provision, the
Exchange loss for the financial year 2014-15 would have been more by
Rs. 3,69,30,321/-. Accordingly, loss for the current financial year
2014-15 has been under-stated by Rs. 3,69,30,321/- and reserves and
surplus has been overstated by Rs. 20,41,51,583/-.
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 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:
1) In case of the Balance Sheet ,of the state of affairs of the Company
as at March 31, 2015 ,
2) In case of the Statement of profit and loss, of the loss for the
year ended on that date
3) In case of the Cash flow Statement, of the cash flows for the year
ended on that date.
Emphasis of Matters
We draw attention to the following matters in the Notes to the
Financial Statements:
1) Note No 38A to the financial statements regarding the Company having
accumulated losses and its net worth has been fully eroded. The
Financial Statements indicates that the Company has incurred a net
loss/net cash loss during the current and previous year(s) and, the
Company's current liabilities exceeded its current assets as at the
current and previous year balance sheet date. These conditions indicate
the existence of a material uncertainty that may cast significant doubt
about the Company's ability to continue as a going concern. However,
the financial statements of the Company have been prepared on a going
concern basis for the reasons stated in the said Note 36 to the
financial statements.
2) Note No 34 to the financial statements, regarding the
transfer/assignment of secured loans with all their rights, title and
interest in the financial documents by banks to the Asset
Reconstruction companies.
Our opinion is not modified in respect of these matters.
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 the paragraph 3 and 4 of the
Order, to the extent applicable.
2. As required by Section 143 (3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations
which to the best of our knowledge and belief were necessary for the
purposes of our audit.
(b) Except for the effects of the matter described in the Basis for
Qualified Opinion paragraph above , in our opinion, proper books of
account as required by law have been kept by the Company so far as it
appears from our examination of those books;
(c) The Balance sheet, the Statement of Profit and loss and the Cash
flow statement dealt with by this Report are in agreement with the
books of account;
(d) Except for the effects of the matter described in the Basis for
Qualified Opinion paragraph above , in our opinion, the aforesaid
financial statements comply with the Accounting Standards specified
under Section 133 of the Act, read with Rule 7 of the Companies
(Accounts) Rules, 2014;
(e) The going concern matter as described in sub-paragraph (1) under
the Emphasis of Matters paragraph above, in our opinion, may have an
adverse effect on the functioning of the Company.
(f) On the basis of the written representations received from the
directors as on March 31, 2015 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; and
(g) With respect to the other matters to be included in the Auditor's
Report in accordance with Rule 11 of the Companies (Audit and Auditors)
Rules, 2014, in our opinion and to the best of our information and
according to the explanations given to us:
(i) The Company has disclosed the impact of pending litigations on its
financial position in its financial statements  Refer Note 21 to the
financial statements;
(ii) The Company did not have any long term contracts including
derivative contracts for which there were any material foreseeable
losses;
(iii) There were no amounts which were required to be transferred to
the Investor Education and Protection Fund by the Company.
Annexure to Independent Auditors' Report Referred to in paragraph 1
under the heading of "Report on Other Legal and Regulatory
Requirements" of our report of even date.)
i) In respect of its Fixed Assets:
a) The company has maintained proper records showing full particulars
including quantitative details and situation of the fixed assets on the
basis of available information.
b) As explained to us, a major portion of the fixed assets has been
physically verified by the management during the year in accordance
with a phased program of verification adopted by the Company. In our
opinion, the frequency of verification is reasonable having regard to
the size of the company and nature of its assets. As informed to us, no
material discrepancies were noticed on such physical verification.
ii) In respect of its inventories:
a) As explained to us, inventories (excluding Goods in Transit and
Goods lying at Port) were physically verified by the management at
reasonable intervals during the year. In our opinion, the frequency of
the verification is reasonable.
b) In our opinion and according to the information and explanations
given to us, the procedures of physical verification of inventories
followed by the management are reasonable and adequate in relation to
the size of the company and nature of its business.
c) In our opinion and according to the information and explanations
given to us, the company has maintained proper records of inventories.
As explained to us, there was no material discrepancies noticed on
Physical Verification of Inventories as compared with the book records.
iii) In respect of Loans, Secured or Unsecured granted by the companyto
companies, firms or other parties covered in the register maintained
under section 189 of the Companies Act, 2013:
According to the information and explanations given to us and on the
basis of the records produced before us, the company has not granted
any Loan, Secured or Unsecured to the companies or firms or other
parties covered in the register maintained under section 189 of the
Companies Act 2013 and hence sub-clause (a) & (b) of paragraph 3 of the
Companies Auditor's Report Order 2015 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
purchases of inventory, fixed assets and for the sales of goods and
services. During the course of our audit, we have not observed any
continuing failure to correct major weaknesses in internal controls
system.
v) In our opinion and according to the information and explanations
given to us, the Company has not accepted any deposit and hence the
provisions of Section 73 to 76 or any other relevant provisions of the
Companies Act and the Companies (Acceptance of Deposits) Rules, 2014
with regard to the deposits accepted are not applicable to the Company.
Therefore, the provisions of Clause (v) of paragraph 3 of the Companies
Auditor's Report Order 2015 are not applicable to the Company.
According to the information and explanations given to us, no order has
been passed by Company Law Board or National Company Law Tribunal or
Reserve Bank of India or any Court or any other Tribunal.
vi) We have broadly reviewed the cost records maintained by the Company
as specified Central Government under sub Section (1) of Section 148 of
the Companies Act, 2013 and are of the opinion that the prescribed cost
records have been maintained. We have, however, not made a detailed
examination of the cost records with a view to determine whether they
are accurate or complete.
vii) In respect of the Statutory dues:
a) According to the records of the company, undisputed Statutory dues
including provident fund, employees state insurance, income-tax,
sales-tax, wealth-tax, service tax,duty of customs, duty of excise
,value added tax, cess and any other statutory dues have not been
generally regularly deposited during the year with the appropriate
authorities. On the basis of records produced before us for our
verification and according to the information & explanation given to
us, no undisputed amounts payable in respect of the aforesaid dues were
outstanding as at 31st March, 2015 for a period of more than six months
from the date of becoming payable.
b) On the basis of records produced before us for our verification and
according to the information and explanations given to us, the details
of disputed dues of Rs. 7,64,25,452/- have not been deposited as on
31st March, 2015 on account of matters pending before the appropriate
authorities. The details of which are as under :
Sr. Name of the Statute Nature of Period to which
No. the Dues the amount relates
1 Income Tax Act, 1961 Income Tax 1997-98
2 Sales Tax Act Sales Tax 1995-96
3 Gujarat Value Added Value Added Tax 2006-07
Tax Act, 2003
4 Central Excise
Act, 1944 Excise Duty 1997-98,
and Service Tax 1998-99
and 2004-05 to
2013-14
Name of the Statute Forum where the Amount
dispute is pending involved (in Rs.)
Income Tax Act, 1961 Gujarat High court 1,30,000/-
Sales Tax Act Deputy commissioner of 6,99,000/-
Sales Tax (Tribunal) Ahmedabad
Gujarat Value Added
Tax Act, 2003 Deputy Commissioner, 3,81,27,791/-
VAT Ahmedabad
Central Excise Act,
1944 Central Excise & 3,74,68,661/-
Service tax Appellate
Tribunal / Joint / Deputy
Commissioner of Central
Excise/ Additional
Commissioner of Central
Excise
viii) On the basis of information and explanations given to us and on
the basis of records produced before us, the company's accumulated
losses at the end of the financial year are more than fifty percent of
its net worth. The company has incurred cash losses amounting to Rs
108,89,32,013/- during the current year .The company has incurred cash
losses amounting to Rs 156,64,00,658/- in the immediately preceding
financial year.
ix) Consequent upon the sanction of the restructuring package given
under CDR mechanism by banks & financial institution, the company was
required to start repaying the loans sanctioned by banks/institutions
and debenture holders from June 2011 onwards, however the company has
made default in repaying the dues as per the terms stipulated in the
CDR rework proposal. The Amount and the period of default in respect of
Term Loan, WCTL and Non-convertible Debentures are as under:
Particulars Period to which Default Period for which
the default
relates (Amount in
Rs.) the default
subsists
Term Loan 2011-12 17,37,96,292 1095-1370 days
2012-13 19,60,41,787 730-1005 days
2013-14 19,60,41,790 365-640 days
2014-15 20,90,51,014 1-270 days
Working Capital Term
Loan From Bank 2011-12 18,64,03,089 1095-1370 days
2012-13 22,36,83,707 730-1005 days
2013-14 22,36,83,707 365-640 days
2014-15 22,36,83,707 1-270 days
Non-Convertible
Debenture 2011-12 10,41,66,667 1095-1370 days
2012-13 12,50,00,000 730-1005 days
2013-14 12,50,00,000 365-640 days
2014-15 12,50,00,000 1-270 days
As per the CDR Terms, Interest on Term Loan, Working capital term loan
(WCTL) and Non-convertible debentures (NCD) had to be parked up to May
2011 into a separate account called Funded Interest Term loan (FITL).
However, from June 2011 onwards, the interest on Term Loan, Working
capital term loan (WCTL) and Non-convertible debentures (NCD) has to be
serviced as and when due.
However, the company has defaulted in payment of interest on Term Loan,
Working capital term loan (WCTL) and Non-convertible debentures (NCD).
The Amount and the period of default are as listed under:
Particulars Period to
which Default Period for which
the default
relates (Amount in
Rs.) the default
subsists
Interest on Term Loan 2011-12 12,04,69,127 1095-1431 days
2012-13 15,73,65,814 730-1066 days
2013-14 13,33,73,691 365-700 days
2014-15 9,47,04,719 1-335 days
Interest on Working
Capital Term Loan 2011-12 14,95,31,027 1095-1431 days
2012-13 17,89,46,966 730-1066 days
2013-14 17,89,46,953 365-700 days
2014-15 13,53,05,256 1-335 days
Interest on Non-Convertible
Debenture 2011-12 8,18,90,411 1095-1431 days
2012-13 9,80,00,000 730-1066 days
2013-14 9,80,00,000 365-700 days
2014-15 8,90,00,000 1-335 days
As per the terms of the CDR, Principal and Interest on funded interest
term loan (FITL) was required to be paid as and when it was due. The
company has made the default in payment of Principal and interest on
FITL. The amount and the period of default are as mentioned below:
Particulars Period to
which Default Period for which
the default
relates (Amount in
Rs.) the default
subsists
Funded Interest Term
Loan (FITL) 2013-14 13,37,23,870 365-455 days
2014-15 26,74,47,740 1-270 days
Interest on Funded
Interest Term Loan(FITL) 2010-11 4,31,63,185 1461-1704 days
2011-12 7,98,16,025 1096-1339 days
2012-13 8,25,18,348 730-1066 days
2013-14 7,71,66,458 365-700 days
2014-15 6,13,23,453 1-335 days
As per the terms of the CDR, Interest on working capital facilities was
required to be paid as and when it was due. The company has made the
default in payment of interest on the working capital facilities. The
amount and the period of default are as mentioned below:
Particulars Period to
which Default Period for which
the default
relates (Amount in
Rs.) the default
subsists
Interest on working
capital facilities 2010-11 22,69,93,827 1461-1734 days
2011-12 37,17,47,750 1096-1369 days
2012-13 39,44,65,648 730-1066 days
2013-14 44,18,08,307 365-700 days
2014-15 31,15,15,625 1-335 days
Moreover, the Company, in September 2006, has raised US $ 10 million
through Unsecured Zero Coupon Foreign Currency Convertible Bonds
(FCCB), due on 22nd September, 2011. On full conversion of FCCB, the
FCCB will be converted in to 26,41,143 Equity shares of Rs 10 each at a
premium of f 165 per share, at the option of the Bondholders at any
time before the maturity of the bonds. On Conversion, Capital will
increase by f 2,64,11,430 and Share Premium by Rs. 43,57,88,570/-. If
Bonds are not converted, the company will have to repay the bonds at a
premium & in US Dollars. The company has provided the premium till 22nd
September, 2011 which has been adjusted against Security Premium in
accordance with Section 52 of the Companies Act, 2013.
However, the company has defaulted in repayment of the foreign currency
convertible bond (FCCB) dues on its maturity. The default is subsisting
since 1286 days
x) In our opinion, the terms & conditions on which the company has
given guarantee for loans taken by others from Banks or financial
institutions are not prejudicial to the interest of the company.
xi) According to the information & explanations given to us, the
Company has not raised any term loan during the year under audit.
xii) In our opinion and according to the information and explanations
given to us and based on management representation, no material fraud
on or by the company has been noticed or reported during the financial
year covered by the audit.
For Talati & Talati
Chartered Accountants
(Firm Reg. No. : 110758W)
Umesh Talati
Place : Ahmedabad Partner
Date : May 22, 2015 Membership No: 034834
Mar 31, 2014
We have audited the accompanying financial statements of M/s SHAH
ALLOYS LIMITED ("the Company"), which comprise the Balance Sheet as at
March 31, 2014, the Statement of Profit and Loss and Cash Flow
Statement for the year then ended and a summary of significant
accounting policies and other explanatory information.
Management''s Responsibility for the Financial Statements
Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position,
financial performance and cash flows of the Company in accordance with
the Accounting Standards notified under the Companies Act, 1956 ("the
Act") read with General Circular 15/2013 dates 13th September 2013.
This responsibility includes the design, implementation and maintenance
of internal control relevant to the preparation and fair presentation
of the financial statements that give a true and fair view and are free
from material misstatement, whether due to fraud or error.
Auditors'' Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatements.
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 controls 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 Company''s
internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of the accounting
estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Basis for Qualified Opinion
The Company has not provided for foreign exchange loss in the financial
statements on the Principal amount of1,00,00,000 USD and on the Premium
amount of48,25,500 USD of the Foreign Currency Convertible Bonds(FCCB)
which had become due for payment on September 22, 2011 and remain
unpaid as at March 31,2014, which constitutes a departure from the AS-
11, "The Effects of Changes in Foreign Exchange Rates" Accounting
Standards notified under the Companies Act, 1956 ("the Act") read with
General Circular 15/2013 dates 13th September 2013, which requires that
each foreign currency monetary items should be reported using the
closing rate as at the balance sheet date. Non provision of the foreign
exchange loss on the aforesaid Foreign Currency Convertible Bonds
(FCCB) and the Premium amount relates to the period from September
23,2011 to March 31,2014. The Company''s record indicate that had
management done the provision, the Exchange loss for the financial year
2013-14 would have been more by '' 8,46,61,018/-. Accordingly, loss for
the current financial year 2013-14 has been understated by ''
8,46,61,018/- and reserves and surplus has been overstated by ''
16,72,21,262/-. Qualified Opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the effects of the matter
described in the Basis for Qualified Opinion paragraph, the financial
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
We draw your attention to Note No 36 to the financial statements,
regarding the transfer/assignment of secured loans with all their
rights, title and interest in the financial documents by banks to the
Asset Reconstruction companies.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor''s Report) Order, 2003 ("the
Order") issued by the Central Government of India in terms of Section
227(4A) of the Act, we give in the Annexure a statement on the matters
specified in paragraphs 4 and 5 of the Order.
2. As required by Section 227(3) of the Act, we report that:
a. We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
audit;
b. In our opinion, proper books of account as required by law have been
kept by the Company so far as appears from our examination of those
books;
c. The Balance Sheet, 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. except for the matter described in the Basis for Qualified Opinion
paragraph, in our opinion, the Balance Sheet, Statement of Profit and
Loss and the Cash Flow Statement comply with the Accounting Standards
notified under the Companies Act, 1956 read with the General Circular
15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in
respect of section 133 of the Companies Act, 2013;
e. On the basis of the written representations received from the
directors as on March 31, 2014, taken on record by the Board of
Directors, none of the directors is disqualified as on March 31, 2014,
from being appointed as a director in terms of Section 274(1)(g) of the
Companies Act, 1956.
Annexure to Independent Auditors'' Report
Referred to in Paragraph 1 under the heading of "report on other legal
and regulatory requirements" of our report of even date
i. In respect of its Fixed Assets
(a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of the fixed assets on the
basis of available information.
(b) As explained to us, a major portion of the fixed assets has been
physically verified by the management during the year in accordance
with a phased program of verification adopted by the company. In our
opinion, the frequency of verification is reasonable having regard to
the size of the company & nature of its assets. As informed to us, no
material discrepancies were noticed on such physical verification.
(c) According to the information and explanations given to us, the
Company has not disposed off a substantial part of its fixed assets
during the year and the going concern status of the Company is not
affected.
ii. In respect of its inventories:
(a) As explained to us, inventories (excluding goods in transit) were
physically verified by the management at reasonable intervals during
the year.
(b) In our opinion & according to the information & explanations given
to us, the procedures of physical verification of inventories followed
by the management were reasonable & adequate in relation to the size of
the company & nature of its business.
(c) In our opinion and according to the information and explanations
given to us, the company is maintaining proper records of inventory.
The discrepancies, noticed on verification, between the physical stocks
and the book records were not material.
iii. In respect of Loans secured or unsecured , granted or taken by the
company to / from companies, firm or other parties covered in the
register maintained under section 301 of the Companies Act, 1956:
(a) According to the information & explanations given to us and on the
basis of records produced before us, the company has granted a loan to
a company in earlier years, covered in the register maintained under
section 301 of the Companies Act, 1956. The maximum amount involved
during the year was '' 80,00,00,000/- and the year-end balance of loan
granted to such party is '' 80,00,00,000/-.
(b) In our opinion, the rate of interest and other terms and conditions
on which loan has been granted to the company listed in the register
maintained under section 301 of the Act are not prejudicial to the
interest of the company.
(c) On the basis of information and explanation given to us and on the
basis of records produced before us in respect of loans granted by the
company in the earlier years to a party covered under the register
maintained under section 301 of the Companies Act, 1956, recovery of
the said loan has been fixed by the Corporate Debt Restructuring (CDR)
Cell. As per the terms of CDR, the company has to recover ''
10,00,00,000/- in the financial year 2011-12; ''20,00,00,000/- in the
financial year 2012-13 and ''20,00,00,000/- in 2013-14, totaling to ''
50,00,00,000 as at March 31, 2014 . However till date, the company has
not recovered the same.
(d) Based on our audit procedures and the information and explanation
made available to us, reasonable steps have been taken by the
Management of the company for recovery of the principal amount.
(e) According to information and explanation given to us and on the
basis of records produced before us during the Year 2013-14, the
company has taken loan from three parties covered in the register
maintained under section 301 of the Companies Act, 1956 amounting to ''
16,08,51,000. The Maximum amount involved during the year is ''
16,01,72,787 and the year-end balance of loans taken from such parties
is '' 14,81,72,787.
(f) In our opinion, the rate of interest and other terms and conditions
on which loan has been taken from the parties listed in the register
maintained under section 301 of the Act are not prejudicial to the
interest of the company.
(g) On the basis of records produced before us and on the basis of
information and explanation given to us and as per the schedule
stipulated for the terms and condition in respect of loans taken by the
company, the repayment of the said loan is not due for repayment during
2013-14.
iv. In our opinion & according to the information & explanations given
to us, there are adequate internal control systems commensurate with
the size of the company & nature of its business for the purchase of
inventory, fixed assets and also for the sales of goods and services.
During the course of our audit, we have not observed any continuing
failure to correct major weaknesses in internal controls systems.
v. In respect of the contracts or arrangements referred to in section
301 of the Companies Act, 1956:
(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 Companies Act, 1956 have been entered in the
register required to be maintained under section 301 of the Companies
Act, 1956.
(b) In our opinion, and according to information and explanation given
to us, the transactions of Purchase of goods and materials, sale of
goods and materials and services made in pursuance of contracts or
arrangements entered in the register maintained under section 301 of
the Companies Act, 1956 and aggregating during the year to '' 5,00,000/-
or more in respect of each party, have been made at prices which are
reasonable, having regard to the prevailing market prices for such
goods, materials & services or the prices at which the transactions for
similar goods, materials & services have been made with other parties.
vi. According to information and explanation given to us, the Company
has not accepted any deposit from the public during the year.
Therefore, the provisions of Clause (vi) of paragraph 4 of the
Companies (Auditors Report) Order, 2003 are not applicable to the
Company.
vii. The Company has appointed internal auditors and has carried out
internal audit during the year. In our opinion the scope needs to be
strengthened to make it commensurate with the size of the company & the
nature of its business.
viii. We have broadly reviewed the cost records maintained by the
Company pursuant to the Companies (Cost Accounting Records) Rules, 2011
prescribed by the Central Government under Section 209(1)(d) of the
Companies Act, 1956 and are of the opinion that the prescribed cost
records have been maintained. We have, however, not made a detailed
examination of the cost records with a view to determine whether they
are accurate or complete.
ix. In respect of the Statutory dues:
(a) According to the records of the company, undisputed Statutory dues
including provident fund, employees State Insurance, Investors
Education & Protection Fund, Income-tax, Wealth-tax, Service Tax,
Sales-tax, Customs duties, excise duty, Cess and other statutory dues
have not been generally regularly deposited during the year with the
appropriate authorities. On the basis of records produced before us for
our verification and according to the information & explanation given
to us, no undisputed amounts payable in respect of the aforesaid dues
were outstanding as at 31st March, 2014 for a period of more than six
months from the date of becoming payable.
(b) On the basis of records produced before us for our verification and
according to the information and explanations given to us, the details
of disputed Income Tax, Sales Tax, Excise and Service Tax dues
aggregating to '' 40,79,95,054/- (Net of Payments) that have not been
deposited as on 31st March, 2014 on account of matters pending before
appropriate authorities, are as under.
Name of the Statute Nature Period to Forum where the
of the which the dispute is pending
Dues amountrelates
Income Tax Act, 1961 Income Tax 1997-98 Gujarat High court
Sales Tax Act Sales Tax 1995-96 Deputy commissioner of
Sales tax (Tribunal)
Ahmedabad
Gujarat Value Added Value 2006-07 Deputy Commissioner,
Tax Act, 2003 Added Tax VAT Ahmedabad
Gujarat Value Added Value 2007-08 Deputy Commissioner,
Tax Act, 2003 Added Tax VAT Ahmedabad
Central Excise Excise Duty 2004-05 to Central Excise & Service
Act, 1944 and Service to 2013-14 tax Appellate Tribunal
/ Joint /Tax Deputy
Commissioner of
Central Excise
Name of the Statute Amount involved (in Rs)
Income Tax Act, 1961 1 30 000/-
Sales Tax Act 6 99 000/-
Gujarat Value Added Tax Act, 2003 4 06 27 791/-
Gujarat Value Added Tax Act, 2003 33 91 08 911/-
Central Excise Act, 1944 2 74 29 352/-
x. The company''s accumulated losses at the end of financial year are
more than fifty percent of its net worth. It has incurred cash losses
amounting to '' 156 64 00 658/- during the current year and the company
has incurred '' 138 07 80 940/- cash losses in the immediately preceding
previous year.
xi. Consequent upon the sanction of the restructuring package given
under CDR mechanism by banks & financial institution, the company was
required to start repaying the loans sanctioned by banks/institutions
and debenture holders from June 2011 onwards, however the company has
made default in repaying the dues as per the terms stipulated in the
CDR rework proposal. The Amount and the period of default in respect of
Term Loan, WCTL and Non convertible Debentures are as under:
Particulars Period to which the Default Period for which
default relates (Amount in Rs) default subsists
2011-12 17 37 96 292 730-1005 days
Term Loan 2012-13 19 60 41 787 365-640 days
2013-14 19 60 41 790 1-270 days
2011- 12 18 64 03 089 730-1005 days
Working Capital Term Loan 2012- 13 22 36 83 707 365-640 days
from Bank
2013- 14 22 36 83 707 1-270 days
2011-12 10 41 66 667 730-1005 days
Non Convertible Debenture 2012-13 12 50 00 000 365-640 days
2013-14 12 50 00 000 1-270 days
As per the CDR Terms, Interest on Term Loan, Working capital term loan
(WCTL) and Non convertible debentures (NCD) had to be parked up to May
2011 into a separate account called Funded Interest Term loan (FITL).
However, from June 2011 onwards , the interest on Term Loan, Working
capital term loan (WCTL) and Non convertible debentures(NCD) has to be
serviced as and when due.
However, the company has defaulted in payment of interest on Term Loan,
Working capital term loan (WCTL) and Non convertible debentures (NCD).
The Amount and the period of default are as listed under:
Particulars Period to which the Default Period for which
default relates (Amount in Rs) default subsists
2011-12 12 04 69 127 730-1066 days
Interest on Term Loan 2012-13 15 73 65 814 365-700 days
2013-14 13 33 73 691 1-335 days
2011- 12 14 95 31 027 730-1066 days
Interest on Working 2012- 13 17 89 46 966 365-700 days
Capital Term Loan 2013- 14 17 89 46 953 1-335 days
2011- 12 8 18 90 411 730-1066 days
Interest on Non Convertible 2012- 13 9 80 00 000 365-700 days
Debenture 2013- 14 9 80 00 000 1-335 days
As per the terms of the CDR, Principal and Interest on funded interest
term loan (FITL) was required to be paid as and when it was due. The
company has made the default in payment of Principal and interest on
FITL. The amount and the period of default are as mentioned below:
Particulars Period to which the Default Period for which
default relates (Amount in Rs) default subsists
Funded Interest Term Loan 2013-14 13 37 23 870 1-90 days
(FITL)
2010-11 4 31 63 185 1096-1339 days
Interest on Funded Interest 2011-12 7 98 16 025 730-1066 days
Term
Loan(FITL) 2012-13 8 25 18 348 365-700 days
2013-14 7 71 66 458 1-335 days
As per the terms of the CDR, Interest on working capital facilities was
required to be paid as and when it was due. The company has made the
default in payment of interest on the working capital facilities. The
amount and the period of default are as mentioned below:
Particulars Period to which the Default Period for which
default relates (Amount in Rs) default subsists
2010-11 22 69 93 827 1096-1369 days
Interest on working 2011-12 37 17 47 750 730-1066 days
capital facilities 2012-13 39 44 65 648 365-700 days
2013-14 44 18 08 307 1-335 days
Moreover, the Company, in September 2006, has raised US $ 10 million
through Unsecured Zero Coupon Foreign Currency Convertible Bonds
(FCCB), due on 22nd September, 2011. On full conversion of FCCB, the
FCCB will be converted in to 26,41,143 Equity shares of '' 10 each at a
premium of '' 165 per share, at the option of the Bondholders at any
time before the maturity of the bonds. On Conversion, Capital will
increase by '' 2,64,11,430 and Share Premium by '' 43,57,88,570/-. If
Bonds are not converted, the company will have to repay the bonds at a
premium & in US Dollars. The company has provided the premium till 22nd
September, 2011 which has been adjusted against Security Premium in
accordance with Section 78 of the Companies Act, 1956.
However, the company has defaulted in repayment of the foreign currency
convertible bond (FCCB) dues on its maturity. The default is subsisting
since 921 days .
xii. In our opinion & according to the information & explanation given
to us, no loans & advances have been granted by the company on the
basis of security by way of pledge of shares, debentures & other
securities.
xiii. In our opinion, the company is not a chit fund or a nidhi /
mutual benefit fund/ society, etc. Therefore, the provisions of Clause
(xiii) of paragraph 4 of the Companies (Auditors Report) Order, 2003
are not applicable to the Company.
xiv. According to the information & explanations given to us, the
company is not dealing or trading in shares, securities debentures &
other investments. Therefore, the provisions of Clause (xiv) of
paragraph 4 of the Companies (Auditors Report) Order, 2003 are not
applicable to the Company
xv. In our opinion, the terms & conditions on which the company has
given guarantee for Loans taken by others from Banks or financial
institutions are not prejudicial to the interest of the company.
xvi. According to the information & explanations given to us, the
Company has not raised any term loan during the year under audit.
xvii. According to the information and explanations given to us and on
an overall examination of the financial statements and other records of
the company and after placing reliance on the reasonable assumptions
made by the company, we are of the opinion that funds raised on short
term basis have not been used for long term investment.
xviii. During the period covered under audit report, the company has
not made any preferential allotment of shares to the parties and
Companies covered in the register maintained under section 301 of the
Act.
xix. During the period covered under audit report, the company has not
issued any debentures accordingly the provisions of clause (xix) of the
Companies (Auditors Report) Order, 2003 are not applicable to the
company.
xx. During the period covered under audit report, the company has not
raised any money by way of public issue during the year.
xxi. In our opinion and according to the information and explanations
given to us and based on the management representation, no material
fraud on or by the company has been noticed or reported during the
financial year covered by the audit.
For, Talati & Talati
Chartered Accountants
Firm Regn No.: 110758W
Umesh Talati
Place: Ahmedabad Partner
Date: May 28, 2014 Membership No.: 034834
Mar 31, 2013
Report on the Financial Statements
We have audited the accompanying financial statements of M/s SHAH
ALLOYS LIMITED ("the Company"), which comprise the Balance Sheet as at
March 31, 2013, the Statement of Profit and Loss and Cash Flow
Statement for the year then ended and a summary of significant
accounting policies and other explanatory information.
Management''s Responsibility for the Financial Statements
Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position,
financial performance and cash flows of the Company in accordance with
the accounting principles generally accepted in India including
Accounting Standards referred to in Section 211(3C) of the Companies
Act, 1956 ("the Act"). This responsibility includes the design,
implementation and maintenance of internal control relevant to the
preparation and presentation of the financial statements that give a
true and fair view and are free from material misstatement, whether due
to fraud or error.
Auditors'' Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatements.
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 audit opinion.
Opinion
In our opinion and to the best of our information and according to the
explanations given to us, the aforesaid financial statements give the
information required by the Act in the manner so required and give a
true and fair view in conformity with the accounting principles
generally accepted in India:
We report that:
No foreign exchange loss has been provided in the financial statements
on the Principal amount of 1,00,00,000 USD and on the Premium amount of
48,25,500 USD of the Foreign Currency Convertible Bonds(FCCB) which had
become due for payment on September 22, 2011 and remain unpaid as at
March 31, 2013. Non provision of the foreign exchange loss on the
aforesaid Foreign Currency Convertible Bonds (FCCB) and the Premium
amount relates to the period from September 23, 2011 to March 31, 2013.
This is contrary to Accounting Standard (AS) 11, "The Effects of
Changes in Foreign Exchange Rates", which requires that each foreign
currency monetary items should be reported using the closing rate as at
the balance sheet date. Had this Accounting Standard been followed, the
Exchange loss for the financial year 2012-13 would have been more by Rs.
4,79,27,876/-. Accordingly, loss for the current financial year 2012-13
has been under-stated by Rs. 4,79,27,876/- and reserves and surplus has
been overstated by Rs. 8,25,60,244/-.
Without qualifying our opinion, we would like to draw your attention to
Note No. 40, regarding expense on account of purchase of Power in the
last financial year 2011-12 due to which the results of the company are
not comparable to the extent of Rs. 31,09,85,750/- (a) In the case of the
Balance Sheet, of the state of affairs of the Company as at March 31,
2013;
(b) In the case of the Statement of Profit and Loss, of the loss for
the year ended on that date; and
(c) In the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor''s Report) Order, 2003 ("the
Order") issued by the Central Government of India in terms of Section
227(4A) of the Act, we give in the Annexure a statement on the matters
specified in paragraphs 4 and 5 of the Order.
2. As required by Section 227(3) of the Act, we report that:
a. We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
audit;
b. In our opinion, proper books of account as required by law have
been kept any so far as 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 Balance Sheet, the Statement of Profit and
Loss, and the Cash Flow Statement comply with the Accounting Standards
referred to in section 211(3C) of the Act;
e. On the basis of the written representations received from the
directors as on March 31, 2013, 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 Section 274(1)(g) of the
Act.
Annexure to Independent Auditor''s Report
Referred to in Paragraph 1 under the heading of "report on other legal
and regulatory requirements" of our report of even date
i. In respect of its Fixed Assets
(a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of the fixed assets on the
basis of available information.
(b) As explained to us, a major portion of the fixed assets has been
physically verified by the management during the year in accordance
with a phased program of verification adopted by the company. In our
opinion, the frequency of verification is reasonable having regard to
the size of the company & nature of its assets. As informed to us, no
material discrepancies were noticed on such physical verification.
(c) According to the information and explanations given to us, the
Company has not disposed off a substantial part of its fixed assets
during the year and the going concern status of the Company is not
affected.
ii. In respect of its inventories:
(a) As explained to us, inventories (excluding goods in transit) were
physically verified by the management at reasonable intervals during
the year.
(b) In our opinion & according to the information & explanations given
to us, the procedures of physical verification of inventories followed
by the management were reasonable & adequate in relation to the size of
the company & nature of its business.
(c) In our opinion and according to the information and explanations
given to us, the company is maintaining proper records of inventory.
The discrepancies, noticed on verification, between the physical stocks
and the book records were not material.
iii. In respect of Loans secured or unsecured , granted or taken by
the company to / from companies, firm or other parties covered in the
register maintained under section 301 of the Companies Act, 1956:
(a) According to the information & explanations given to us and on the
basis of records produced before us, the company has granted a loan to
a company in earlier years, covered in the register maintained under
section 301 of the Companies Act, 1956. The maximum amount involved
during the year was Rs. 80,00,00,000/- and the year-end balance of loan
granted to such party is Rs. 80,00,00,000/-.
(b) In our opinion, the rate of interest and other terms and conditions
on which loan has been granted to the company listed in the register
maintained under section 301 of the Act are not prejudicial to the
interest of the company.
(c) On the basis of information and explanation given to us and on the
basis of records produced before us in respect of loans granted by the
company in the earlier years to a party covered under the register
maintained under section 301 of the Companies Act, 1956, recovery of
the said loan has been fixed by the Corporate Debt Restructuring (CDR)
Cell. As per the terms of CDR, the company has to recover Rs.
10,00,00,000/- in the financial year 2011-12 and Rs. 20,00,00,000/- in
the financial year 2012-13 .However till date, the company has not
recovered the same.
(d) Based on our audit procedures and the information and explanation
made available to us, reasonable steps have been taken by the
Management of the company for recovery of the principal amount.
(e) According to information and explanation given to us and on the
basis of records produced before us during the Year 2012-13, the
company has taken loan from two parties covered in the register
maintained under section 301 of the Companies Act, 1956 amounting to Rs.
1,25,00,000/- . The Maximum amount involved during the year and the
year- end balance of loans taken from such parties is Rs. 1,25,00,000/-.
(f) In our opinion, the rate of interest and other terms and conditions
on which loan has been taken from the parties listed in the register
maintained under section 301 of the Act are not prejudicial to the
interest of the company.
(g) On the basis of records produced before us and on the basis of
information and explanation given to us and as per the schedule
stipulated for the terms and condition in respect of loans taken by the
company, the repayment of the said loan is not due for repayment during
2012-13.
iv. In our opinion & according to the information & explanations given
to us, there are adequate internal control systems commensurate with
the size of the company & nature of its business for the purchase of
inventory, fixed assets and also for the sales of goods and services.
During the course of our audit, we have not observed any continuing
failure to correct major weaknesses in internal controls systems.
v. In respect of the contracts or arrangements referred to in section
301 of the Companies Act, 1956:
(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 Companies Act, 1956 have been entered in the
register required to be maintained under section 301 of the Companies
Act, 1956.
(b) In our opinion, and according to information and explanation given
to us, the transactions of Purchase of goods and materials, sale of
goods and materials and services made in pursuance of contracts or
arrangements entered in the register maintained under section 301 of
the Companies Act, 1956 and aggregating during the year to Rs. 5,00,000/-
or more in respect of each party, have been made at prices which are
reasonable, having regard to the prevailing market prices for such
goods, materials & services or the prices at which the transactions for
similar goods, materials & services have been made with other parties.
vi. According to information and explanation given to us, the Company
has not accepted any deposit from the public during the year.
Therefore, the provisions of Clause (vi) of paragraph 4 of the
Companies (Auditors Report) Order, 2003 are not applicable to the
Company.
vii. The Company has appointed internal auditors and has carried out
internal audit during the year. In our opinion, based on the size,
nature and extent of the business, the internal audit system of the
company is commensurate with the size and nature of the business.
viii. We have broadly reviewed the cost records maintained by the
Company pursuant to the Companies (Cost Accounting Records) Rules, 2011
prescribed by the Central Government under Section 209(1)(d) of the
Companies Act, 1956 and are of the opinion that the prescribed cost
records have been maintained. We have, however, not made a detailed
examination of the cost records with a view to determine whether they
are accurate or complete.
ix. In respect of the Statutory dues:
(a) According to the records of the company, undisputed Statutory dues
including provident fund, employees State Insurance, Investors
Education & Protection Fund, Income-tax, Wealth-tax, Service Tax,
Sales-tax, Customs duties, excise duty, Cess and other statutory dues
have not been generally regularly deposited during the year with the
appropriate authorities. On the basis of records produced before us for
our verification and according to the information & explanation given
to us, no undisputed amounts payable in respect of the aforesaid dues
were outstanding as at 31st March, 2013 for a period of more than six
months from the date of becoming payable.
(b) On the basis of records produced before us for our verification and
according to the information and explanations given to us, the details
of disputed Income Tax, Sales Tax, Excise and Service Tax dues
aggregating to Rs. 40,36,36,953/- (Net of Payments) that have not been
deposited as on 31st March, 2013 on account of matters pending before
appropriate authorities, are as under.
Sr. Name of the Nature Period to
No. Statute of the which the
Dues amount
relates
1 Income Tax Act, 1961 Income Tax 1997-98
2 Sales Tax Act Sales 1995-96
Tax
3 Gujarat Value Added Value 2006-07
Tax Act, 2003 Added Tax
4 Gujarat Value Added Value 2007-08
Tax Act, 2003 Added Tax
5 Central Excise Excise Duty 2004-05 to
Act, 1944 and Service to 2011-12
Tax
Forum where the Amount
dispute is pending involved
(in Rs.)
Gujarat High court 1,30,000/-
Deputy commissioner of Sales 6,99,000/-
Tax (Tribunal) Ahmedabad
Deputy Commissioner, 4,06,27,791/-
VAT Ahmedabad
Deputy Commissioner, 33,91,08,911/-
VAT Ahmedabad
Central Excise & Service tax 2,30,71,251/-
Appellate Tribunal / Joint /
Deputy Commissioner of
Central Excise
x. The company''s accumulated losses at the end of financial year are
more than fifty percent of its net worth. It has incurred cash losses
amounting to Rs. 138,07,80,940/- during the current year and the company
has incurred Rs. 207,77,08,543/- cash losses in the immediately preceding
previous year.
xi. Consequent upon the sanction of the restructuring package given
under CDR mechanism by banks & financial institution, the company was
required to start repaying the loans sanctioned by banks/institutions
and debenture holders from June 2011 onwards, however the company has
made default in repaying the dues as per the terms stipulated in the
CDR rework proposal. The Amount and the period of default in respect of
Term Loan, WCTL and Non convertible Debentures are as under:
Particulars Period to which
the Default Period for which the
default relates (Amount inRs.) default subsists
Term Loan 2011-12 17,37,96,290 91-731 days
2012-13 19,60,41,787 1-270 days
Working
Capital Term
Loan 2011-12 18,64,03,089 91-731 days
2012-13 22,36,83,707 1-270 days
Non Convertible
Debenture 2011-12 10,41,66,667 91-731 days
2012-13 12,50,00,000 1-270 days
As per the CDR Terms, Interest on Term Loan, Working capital term loan
(WCTL) and Non convertible debentures (NCD) had to be parked up to May
2011 into a separate account called Funded Interest Term loan (FITL).
However, from June 2011 onwards, the interest on Term Loan, Working
capital term loan (WCTL) and Non convertible debentures(NCD) has to be
serviced as and when due.
However, the company has defaulted in payment of interest on Term Loan,
Working capital term loan (WCTL) and Non convertible debentures (NCD).
The Amount and the period of default are as listed under:
Particulars Period to which
the Default Period for which the
default relates (Amount inRs.) default subsists
Interest on
Term Loan 2011-12 12,04,69,127 91-731 days
2012-13 15,73,65,814 1-335 days
Interest on
Working Capital 2011-12 14,95,31,027 91-731 days
Term Loan 2012-13 17,89,46,966 1-335 days
Interest on
Non Convertible 2011-12 8,18,90,411 91-731 days
Debenture 2012-13 9,80,00,000 91-365 days
As per the terms of the CDR, Interest on funded interest term loan
(FITL) was required to be paid as and when it was due. The company has
made the default in payment of interest on FITL. The amount and the
period of default are as mentioned below:
Particulars Period to which the Default Period for which the
default relates (Amount in Rs.) default subsists
Interest on
Funded Interest 2010-11 4,31,63,185 91-1065 days
Term Loan(FITL) 2011-12 7,98,16,025 91-731 days
2012-13 8,25,18,348 1-335 days
As per the terms of the CDR, Interest on working capital facilities was
required to be paid as and when it was due. The company has made the
default in payment of interest on the working capital facilities. The
amount and the period of default are as mentioned below:
Particulars Period to which the Default Period for which the
default relates (Amount inRs.) default subsists
Interest on
working 2010-11 22,69,93,827 1-1064 days
capital
facilities 2011-12 37,17,47,750 1-701 days
2012-13 39,44,65,648 1-335 days
Moreover, the Company, in September 2006, has raised US $ 10 million
through Unsecured Zero Coupon Foreign Currency Convertible Bonds
(FCCB), due on 22nd September, 2011. On full conversion of FCCB, the
FCCB will be converted in to 26,41,143 Equity shares of Rs. 10 each at a
premium of Rs. 165 per share, at the option of the Bondholders at any
time before the maturity of the bonds. On Conversion, Capital will
increase by Rs. 2,64,11,430 and Share Premium by Rs. 43,57,88,570/-. If
Bonds are not converted, the company will have to repay the bonds at a
premium & in US Dollars. The company has provided the premium till
22nd September, 2011 which has been adjusted against Security Premium
in accordance with Section 78 of the Companies Act, 1956.
However, the company has defaulted in repayment of the foreign currency
convertible bond (FCCB) dues on its maturity. The default is
subsisting since 556 days.
xii. In our opinion & according to the information & explanation given
to us, no loans & advances have been granted by the company on the
basis of security by way of pledge of shares, debentures & other
securities.
xiii. In our opinion, the company is not a chit fund or a nidhi /
mutual benefit fund/ society, etc. Therefore, the provisions of Clause
(xiii) of paragraph 4 of the Companies (Auditors Report) Order, 2003
are not applicable to the Company.
xiv. According to the information & explanations given to us, the
company is not dealing or trading in shares, securities debentures &
other investments. Therefore, the provisions of Clause (xiv) of
paragraph 4 of the Companies (Auditors Report) Order, 2003 are not
applicable to the Company
xv. In our opinion, the terms & conditions on which the company has
given guarantee for loans taken by others from Banks or financial
institutions are not prejudicial to the interest of the company.
xvi. According to the information & explanations given to us, the
Company has not raised any term loan during the year under audit.
xvii. According to the information and explanations given to us and on
an overall examination of the financial statements and other records of
the company and after placing reliance on the reasonable assumptions
made by the company, we are of the opinion that funds raised on short
term basis have not been used for long term investment.
xviii. During the period covered under audit report, the company has
not made any preferential allotment of shares to the parties and
Companies covered in the register maintained under section 301 of the
Act.
xix. During the period covered under audit report, the company has not
issued any debentures accordingly the provisions of clause (xix) of the
Companies (Auditors Report) Order, 2003 are not applicable to the
company.
xx. During the period covered under audit report, the company has not
raised any money by way of public issue during the year.
xxi. In our opinion and according to the information and explanations
given to us and based on the management representation, no material
fraud on or by the company has been noticed or reported during the
financial year covered by the audit.
For, Talati & Talati
Chartered Accountants
(Firm Reg. No : 110758W)
Sd/-
Umesh Talati
Place: Ahmedabad Partner
Date: May 28, 2013 Membership No: 034834
Mar 31, 2012
1) We have audited the attached Balance Sheet of M/s SHAH ALLOYS
LIMITED as at March 31, 2012, the Statement of Profit and Loss and the
Cash-flow Statement for the year ended on that date annexed thereto.
These financial statements are the responsibility of the Company's
Management. Our responsibility is to express an opinion on these
financial statements based on our audit.
2) We conducted our audit in accordance with auditing standards
generally accepted in India. Those standards require that we plan &
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 &
disclosures in the financial statements. An audit also includes
assessing the accounting principles used & 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 (Auditors Report) (Amendment) Order, 2004
issued by the Central Government of India in terms of sub-section(4A)
of Section 227 of the companies Act 1956, we enclose in the Annexure a
statement on the matters specified in paragraphs 4 & 5 of the said
order to the extent applicable.
4) Further to our comments in the Annexure referred to in paragraph-3
above, we report as under:-
(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 the
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 are in compliance with
the Accounting Standards referred to in sub section (3C) of Section 211
of the Companies Act, 1956.
We report that:
No foreign exchange loss has been provided in the financial statements
on the Principal amount of 1,00,00,000 USD and on the Premium amount of
48,25,500 USD of the Foreign Currency Convertible Bonds (FCCB) which
had become due for payment on September 22, 2011 and remain unpaid as
at March 31, 2012. Non provision of the foreign exchange loss on the
aforesaid Foreign Currency Convertible Bonds (FCCB) and the Premium
amount relates to the period from September 23, 2011 to March 31, 2012.
This is contrary to Accounting Standard (AS) 11, "The Effects of
Changes in Foreign Exchange Rates", issued by the Institute of
Chartered Accountants of India which requires that each foreign
currency monetary items should be reported using the closing rate as at
the balance sheet date. Had this Accounting Standard been followed, the
Exchange loss for the financial year would have been more by Rs.
3,46,32,368/-. Accordingly, loss for the current financial year 2011-12
has been under-stated and reserves and surplus has been overstated to
that extent.
Without qualifying our opinion, we would like to draw your attention to
Note No. 40, regarding expense on account of purchase of Power due to
which the results of the company are not comparable to the extent of
Rs. 31,09,85,750/- (e) On the basis of the written representations
received from the 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 March 31, 2012 from being appointed as
director in terms of clause (g) of sub-section (1) of section 274 of
the Companies Act, 1956.
(f) In our opinion and to the best of our information and according to
the explanations given to us, the said financial statements read
together with the significant accounting policies and notes thereon
give the information required by the Companies Act, 1956 , in the
manner so required and give a true and fair view in conformity with the
accounting principles generally accepted in India.
i. In the case of the Balance Sheet , of the State of affairs of the
Company as at March 31, 2012 and
ii. In the case of the Statement of Profit and loss, of the Loss of
the company for the year ended on that date and
iii. In the case of Cash Flow Statement, of the Cash flows for the
year ended on that date.
Annexure to Auditor's Report Referred to in Paragraph 3 of our report
of even date
i. In respect of its Fixed Assets
(a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of the fixed assets on the
basis of available information.
(b) As explained to us, a major portion of the fixed assets has been
physically verified by the management during the year in accordance
with a phased program of verification adopted by the company. In our
opinion, the frequency of verification is reasonable having regard to
the size of the company & nature of its assets. As informed to us, no
material discrepancies were noticed on such physical verification.
(c) According to the information and explanations given to us, the
Company has not disposed off a substantial part of its fixed assets
during the year and the going concern status of the Company is not
affected.
ii. In respect of its inventories:
(a) As explained to us, inventories (excluding goods in transit) were
physically verified by the management at reasonable intervals during
the year.
(b) In our opinion & according to the information & explanations given
to us, the procedures of physical verification of inventories followed
by the management were reasonable & adequate in relation to the size of
the company & nature of its business.
(c) In our opinion and according to the information and explanations
given to us, the company is maintaining proper records of inventory.
The discrepancies, noticed on verification, between the physical stocks
and the book records were not material.
iii. In respect of Loans secured or unsecured , granted or taken by the
company to/from companies, firm or other parties covered in the
register maintained under section 301 of the Companies Act, 1956:
(a) According to the information & explanations given to us and on the
basis of records produced before us, the company has granted a loan to
a company in earlier years, covered in the register maintained under
section 301 of the Companies Act, 1956. The maximum amount involved
during the year was Rs. 80,00,00,000/- and the year-end balance of loan
granted to such party is Rs. 80,00,00,000/-.
(b) In our opinion, the rate of interest and other terms and conditions
on which loan has been granted to the company listed in the register
maintained under section 301 of the Act are not prejudicial to the
interest of the company.
(c) On the basis of information and explanation given to us and on the
basis of records produced before us in respect of loans granted by the
company in the earlier years to a party covered under the register
maintained under section 301 of the Companies Act, 1956, recovery of
the said loan has been fixed by the Corporate Debt Restructuring (CDR)
Cell. As per the terms of CDR, the company has to recover Rs.
10,00,00,000/- in the financial year 2011-12. However, the company has
not recovered the same.
(d) Based on our audit procedures and the information and explanation
made available to us, reasonable steps have been taken by the
Management of the company for recovery of the principal amount.
(e) According to information and explanation given to us and on the
basis of records produced before us during the Year 2011- 12, the
company has taken loan from a party covered in the register maintained
under section 301 of the Companies Act, 1956 amounting to Rs.
3,25,00,000/- . The Maximum amount involved during the year and the
year-end balance of loans taken from such parties is Rs. 4,86,21,787/-
(f) In our opinion, the rate of interest and other terms and conditions
on which loan has been taken from the parties listed in the register
maintained under section 301 of the Act are not prejudicial to the
interest of the company
(g) On the basis of records produced before us and on the basis of
information and explanation given to us and as per the schedule
stipulated for the terms and condition in respect of loans taken by the
company, the repayment of the said loan is not due for repayment during
2011-12.
iv. In our opinion & according to the information & explanations given
to us, there are adequate internal control systems commensurate with
the size of the company & nature of its business for the purchase of
inventory, fixed assets and also for the sales of goods and services.
During the course of our audit, we have not observed any continuing
failure to correct major weaknesses in internal controls systems.
v. In respect of the contracts or arrangements referred to in section
301 of the Companies Act, 1956:
(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 Companies Act, 1956 have been entered in the
register required to be maintained under section 301 of the Companies
Act, 1956.
(b) In our opinion, and according to information and explanation given
to us, the transactions of Purchase of goods and materials, sale of
goods and materials and services made in pursuance of contracts or
arrangements entered in the register maintained under section 301 of
the Companies Act, 1956 and aggregating during the year to Rs.
5,00,000/- or more in respect of each party, have been made at prices
which are reasonable, having regard to the prevailing market prices for
such goods, materials & services or the prices at which the
transactions for similar goods, materials & services have been made
with other parties.
vi. According to information and explanation given to us, the Company
has not accepted any deposit from the public during the year.
Therefore, the provisions of Clause (vi) of paragraph 4 of the
Companies (Auditors Report) Order, 2003 are not applicable to the
Company.
vii. The Company has appointed internal auditors and has carried out
internal audit during the year. In our opinion , based on the size,
nature and extent of the business, the internal audit system of the
company is commensurate with the size and nature of the business.
viii. We have broadly reviewed the cost records maintained by the
Company pursuant to the Companies (Cost Accounting Records) Rules, 2011
prescribed by the Central Government under Section 209(1)(d) of the
Companies Act, 1956 and are of the opinion that the prescribed cost
records have been maintained. We have, however, not made a detailed
examination of the cost records with a view to determine whether they
are accurate or complete.
ix. In respect of the Statutory dues:
(a) According to the records of the company, undisputed Statutory dues
including provident fund, employees State Insurance, Investors
Education & Protection Fund, Income-tax, Wealth-tax, Service Tax,
Sales-tax, Customs duties, excise duty, Cess and other statutory dues
have not been generally regularly deposited during the year with the
appropriate authorities. On the basis of records produced before us for
our verification and according to the information & explanation given
to us, no undisputed amounts payable in respect of the aforesaid dues
were outstanding as at 31st March, 2012 for a period of more than six
months from the date of becoming payable.
(b) On the basis of records produced before us for our verification and
according to the information and explanations given to us, the details
of disputed Income Tax, Sales Tax, Excise and Service Tax dues
aggregating to Rs. 39,37,62,797/- (Net of Payments) that have not been
deposited as on 31st March, 2012 on account of matters pending before
appropriate authorities, are as under.
Sl. Name of the Statute Nature of Period to which
No. the Dues the amount relates
1 Income Tax Act, 1961 Income Tax 1997-98
2 Sales Tax Act Sales Tax 1995-96
3 Gujarat Value Added Value Added Tax 2006-07
Tax Act, 2003
4 Gujarat Value Added Value Added Tax 2007-08
Tax Act, 2003
5 Central Excise Act, Excise Duty 2004-05 to
1944 and Service Tax 2011-12
Sl. Name of the Statute Forum where the Amount
No. dispute is pending involved
(in Rs. )
1 Income Tax Act, 1961 Gujarat High court 1,30,000/-
2 Sales Tax Act Deputy commissioner of 6,99,000/-
Sales Tax (Tribunal)
Ahmedabad
3 Gujarat Value Added Deputy Commissioner, 4,06,27,791/-
VAT Ahmedabad
Tax Act, 2003
4 Gujarat Value Added Deputy Commissioner, 33,91,08,911/-
VAT Ahmedabad
Tax Act, 2003
5 Central Excise Act, Central Excise & 1,31,97,095/-
1944 Service tax Appellate
Tribunal/Joint/
Deputy Commissioner
of Central Excise
x. The company's accumulated losses at the end of financial year are
more than fifty percent of its net worth. It has incurred cash losses
amounting to Rs. 207,77,08,543/- during the current year and the
company has incurred Rs. 152,46,80,000/- cash losses in the immediately
preceding previous year.
xi. Consequent upon the sanction of the restructuring package given
under CDR mechanism by banks & financial institution, the company was
required to start repaying the loans sanctioned by banks/institutions
and debenture holders from June 2011 onwards, however the company has
made default in repaying the dues as per the terms stipulated in the
CDR rework proposal. The Amount and the period of default in respect of
Term Loan, WCTL and Non convertible Debentures are as under:
Particulars Default Period for which
(Amount the default subsists
in Rs.)
Term Loan 17,37,96,290 91-366 days
Working Capital
Term Loan 18,64,03,089 91-366 days
Non Convertible
Debenture 10,41,66,667 91-366 days
Total 46,43,66,046
As per the CDR Terms, Interest on Term Loan, Working capital term loan
(WCTL) and Non convertible debentures (NCD) had to be parked up to May
2011 into a separate account called Funded Interest Term loan (FITL).
However, from June 2011 onwards , the interest on Term Loan, Working
capital term loan (WCTL) and Non convertible debentures(NCD) has to be
serviced as and when due.
However, the company has defaulted in payment of interest on Term Loan,
Working capital term loan (WCTL) and Non convertible debentures (NCD)
during the year 2011-12. The Amount and the period of default are as
listed under:
Particulars Default Period for which
(Amount the default
in Rs.) subsists
Interest on Term Loan 12,04,69,127 91-366 days
Interest on Working
Capital Term Loan 14,95,31,027 91-366 days
Interest on Non
Convertible Debenture 8,18,90,411 91-366 days
Total 35,18,90,565
As per the terms of the CDR, Interest on funded interest term loan
(FITL) was required to be paid as and when it was due. The company has
made the default in payment of interest on FITL. The amount and the
period of default are as mentioned below:
Particulars Period to Default Period for which
which the (Amount the default
default in Rs.) subsists
relates
Interest on Funded
Interest Term
Loan (FITL) 2010-11 4,31,63,185 457-700 days
Interest on Funded
Interest Term
Loan (FITL) 2011-12 7,98,16,025 91-427 days
Total 12,29,79,210
As per the terms of the CDR, Interest on working capital facilities was
required to be paid as and when it was due. The company has made the
default in payment of interest on the working capital facilities. The
amount and the period of default are as mentioned below:
Particulars Period to Default Period for which
which the (Amount the default
default in Rs.) subsists
relates
Interest on working
capital facilities 2010-11 22,69,93,827 457-792 days
Interest on working
capital facilities 2011-12 37,17,47,750 91-427 days
Total 59,87,41,577
Moreover, the Company, in September 2006, has raised US $ 10 million
through Unsecured Zero Coupon Foreign Currency Convertible Bonds
(FCCB), due on 22nd September, 2011. On full conversion of FCCB, the
FCCB will be converted in to 26,41,143 Equity shares of Rs. 10 each at
a premium of Rs. 165 per share, at the option of the Bondholders at
any time before the maturity of the bonds. On Conversion, Capital will
increase by Rs. 2,64,11,430 and Share Premium by Rs. 43,57,88,570/-.
If Bonds are not converted, the company will have to repay the bonds at
a premium & in US Dollars. The company has provided the premium till
22nd September, 2011 which has been adjusted against Security Premium
in accordance with Section 78 of the Companies Act, 1956.
However, the company has defaulted in repayment of the foreign currency
convertible bond (FCCB) dues on its maturity. The default is subsisting
since 282 days .
xii. In our opinion & according to the information & explanation given
to us, no loans & advances have been granted by the company on the
basis of security by way of pledge of shares, debentures & other
securities.
xiii. In our opinion, the company is not a chit fund or a nidhi/mutual
benefit fund/society, etc. Therefore, the provisions of Clause (xiii)
of paragraph 4 of the Companies (Auditors Report) Order, 2003 are not
applicable to the Company.
xiv. According to the information & explanations given to us, the
company is not dealing or trading in shares, securities debentures &
other investments. Therefore, the provisions of Clause (xiv) of
paragraph 4 of the Companies (Auditors Report) Order, 2003 are not
applicable to the Company
xv. In our opinion, the terms & conditions on which the company has
given guarantee for loans taken by others from Banks or financial
institutions are not prejudicial to the interest of the company.
xvi. According to the information & explanations given to us, the
Company has not raised any term loan during the year under audit.
xvii. According to the information and explanations given to us and on
an overall examination of the financial statements and other records of
the company and after placing reliance on the reasonable assumptions
made by the company, we are of the opinion that funds raised on short
term basis have not been used for long term investment.
xviii. During the period covered under audit report, the company has
not made any preferential allotment of shares to the parties and
Companies covered in the register maintained under section 301 of the
Act.
xix. During the period covered under audit report, the company has not
issued any debentures accordingly the provisions of clause (xix) of the
Companies (Auditors Report) Order, 2003 are not applicable to the
company.
xx. During the period covered under audit report, the company has not
raised any money by way of public issue during the year.
xxi. In our opinion and according to the information and explanations
given to us and based on the management representation, no material
fraud on or by the company has been noticed or reported during the
financial year covered by the audit.
For Talati & Talati
Chartered Accountants
(Firm Reg. No. : 110758W)
Umesh Talati
Partner
Membership No: 034834
Place : Ahmedabad
Date : June 30, 2012
Mar 31, 2010
1) We have audited the attached Balance Sheet of M/s SHAH ALLOYS
LIMITED as at 31st March 2010, and the Profit and Loss A/c and also the
Cash-flow Statement for the year ended on that date annexed thereto.
These financial statements are the responsibility of the Companys
Management. Our responsibility is to express an opinion on these
financial statements based on our audit.
2) We conducted our audit in accordance with auditing standards
generally accepted in India. Those standards require that we plan &
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 &
disclosures in the financial statements. An audit also includes
assessing the accounting principles used & significant esti- mates 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 and the
Companies (Auditors Report) (Amendment) Order,2004 issued by the
Central Government of India in terms of sub- section(4A) of Section 227
of the companies Act 1956, we annex here to a statement on the matters
specified in paragraphs 4 &5 of the said order to the extent
applicable.
4) Further to our comments in the Annexure referred to in paragraph-3
above, we report as under:
(a) We have obtained all the information and explanations, which to the
best of our knowl- edge 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 the
books.
(c) The Balance Sheet and the Profit and Loss Account & Cash flow
statement dealt with by this report are in agreement with the books of
account.
(d) In our opinion the Balance Sheet, Profit & Loss Account & Cash Flow
Statement comply with Accounting Standards referred to in section
211(3C) of the Companies Act, 1956
(e) On the basis of the written representations received from the
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 March, 31 2010 from being appointed as director in
terms of clause (g) of sub-section (1) of section 274 of the Companies
Act, 1956.
(f) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts give the information
required by the Companies Act, 1956 in the manner so required and give
a true and fair view in conformity with the account- ing 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 and
ii) In the case of the profit and loss account, of the Loss of the
company for the year ended on that date and
iii) In the case of Cash Flow Statement, of the cash flows for the year
ended on that date.
ANNEXURE TO THE AUDITORSREPORT Referred to in Paragraph 3 of our
report of even date
i) a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of the fixed
assets.
b) As explained to us, a major portion of the fixed assets has been
physically verified by the management during the year in accordance
with a phased program of verification adopted by the company. In our
opinion, the frequency of verification is reasonable having regard to
the size of the company & nature of its assets. As informed to us, no
material discrepancies were noticed on such physical verification.
c) According to the information and explanations given to us, No Fixed
Assets were disposed off during the year.
ii) a) As explained to us, inventories were physically verified by the
management at reasonable intervals during the year.
b) In our opinion & according to the information & explanations given
to us, the procedures of physical verification of inventories followed
by the management were reasonable & adequate in relation to the size of
the company & nature of its business.
c) In our opinion and according to the information and explanations
given to us, the com- pany is maintaining proper records of inventory.
The discrepancies, noticed on verifica- tion, between the Physical
stocks and the book records were not material.
iii) In respect of Loans secured or unsecured , granted or taken by
company to/from compa nies, firm or other parties covered in the
register maintained under section 301 of the Companies Act, 1956:
a) According to the information & explanations given to us and on the
basis of records produced before us, during the year Company has not
granted or taken any loans from or to any parties covered under the
register maintained under section 301 of the companies Act, 1956 and
hence sub clause b, c, d, e, f & g of clause 4(iii) are not applicable.
On the basis of information and explanation given to us and on the
basis of records produced in respect of loans given by the company in
the year 2008 to SAL Steel Ltd , the repayment of the loan given to the
said party has been fixed by the Corporate Debt Restructuring (CDR)
cell and thus principal amount of Rs 80.00 Crores is not due for
repayment as at 31st March, 2010.
iv) In our opinion & according to the information & explanations given
to us, there are adequate internal control systems commensurate with
the size of the company & nature of its business for the purchase of
inventory, fixed assets & also for the sales of goods and services.
During the course of our audit, we have not observed any continuing
failure to correct major weak- nesses in internal controls systems.
v) a) In our opinion and according to the information & explanations
given to us, the particulars of contracts or arrangements referred to
in section 301 of the Companies Act, 1956 have been entered in the
register required to be maintained under section 301 of the Compa- nies
Act, 1956.
b) In our opinion, and according to information and explanation given
to us, the transac- tions of Purchase of goods and materials, Sale of
goods and materials and Services made in pursuance of contracts or
arrangements entered in the register maintained under section 301 of
the Companies Act, 1956 and aggregating during the year to Rupees Five
lacs or more in respect of each party, have been made at prices which
are reasonable, having regard to the prevailing market prices for such
Goods ,Materials &Services or the prices at which the transactions for
similar Goods ,Materials & Services have been made with other parties.
vi) In our opinion and according to information & explanation given to
us, company has complied with the provisions of Section 58A, 58AA of
the Companies Act, 1956 and the rules framed there under.
vii) During the year the company has appointed a firm of Chartered
Accountants as internal auditor and in our opinion, the internal audit
system of the company is commensurate with its size & nature of its
business.
viii) The Central Government has prescribed maintenance of Cost records
under Section 209 (I) (d) of the Companies Act, 1956. On the basis of
report received from the practicing cost accoun- tant, appointed by the
Company we are of the opinion that the Company has prima facie
maintained prescribed records & accounts. We have however not made a
detailed examination of the same.
ix) a) According to the records of undisputed Statutory dues including
provident fund, In- come-tax, Wealth-tax, Service Tax, Sales-tax
Customs duties, excise duty, cess and other statutory dues have not
been regularly deposited during the year with the appropriate
authorities. On the basis of records produced before us for our
verification and according to the information & explanation given to
us, no undisputed amounts payable in respect of the aforesaid dues were
outstanding as at 31st March, 2010 for a period of more than six months
from the date of becoming payable.
b) On the basis of records produced before us for our verification and
according to the information and explanations given to us, the details
of disputed Income Tax, Sales Tax, Customs and Service Tax dues
aggregating to Rs 354.99 lakhs (Net of Payments) that have not been
deposited as on 31st March, 2010 on account of matters pending before
appropriate authorities, the details of which are as under.
Sr. No Nature of the Financial Year to Forum where Amount
Dues Which the the Matter (Rs. in Lacs)
matter relates is pending (Net of
Payments)
1 Income Tax 1996-97 ITAT, A bad 30.40
2 Income Tax 2002-03 ITAT, Abad 57.15
3 Income Tax 2003-04 ITAT, Abad 217.52
4 Income Tax 1997-98 Gujarat High Court 1.30
5 Sales Tax 1995-96 DC of Sales Tax
(Tribunal) 6.99
Ahmedabad
6 Service Tax 2006-07&
2007-08 CESTAT,Ahmedabad 41.63
x) The companys accumulated losses at the end of financial year are
more than fifty percent of its net worth. It has incurred cash losses
amounting to Rs. 5104.36 lacs during the current year and the company
has incurred Rs. 12169.88 lacs cash losses in the immediately preceding
previous year.
xi) During the period under review, the company is not required to make
any payment of install- ment and interest on its term loan and non
convertible debenture as per restructuring package given under CDR
Mechanism by the banks & financial Institution.
On the basis of information and explanation given to us and on the
basis of records produced, consequent upon the sanction of
restructuring package, there are no defaults in respect of loan
sanctioned by banks / institutions and debenture holders as at
31.3.2010.
xii) In our opinion & according to the information & explanation given
to us, no loans & advances have been granted by the company on the
basis of security by way of pledge of shares, debentures & other
securities.
xiii) In our opinion, the company is not a chit fund or a nidhi /
mutual benefit fund/ society.
xiv) According to the information & explanations given to us, the
company is not dealing or trading in shares, securities debentures &
other investments.
xv) In our opinion, the terms & conditions on which the company has
given guarantee for loans taken by others from Banks or financial
institutions are prima facie, not prejudicial to the interest of the
company.
xvi) The company has not raised any term loan during the year.
xvii) According to the information and explanations given to us and on
an overall examination of the Balance sheet of the Company and after
placing reliance on the reasonable assumptions made by the company,
fund raised on short term basis to the extent of Rs. 1.26 Crores have
been used for long term purpose.
xviii) During the period covered under audit report, the company has
not made any preferential allotment of shares to the parities and
Companies covered in the register maintained under section 301 of the
Act.
xix) During the period covered under audit report, the company has not
issued any debentures accordingly the provisions of clause (xix) of the
Companies (Auditors Report) Order, 2003 are not applicable to the
company.
xx) During the period covered under audit report, the company has not
raised any money by way of public issue during the year.
xxi) According to the information & explanations given to us, no fraud
on or by the company has been noticed or reported during the course of
our Audit.
FOR TALATI & TALATI
CHARTEREDACCOUNTANTS
FRNo:110758W
UMESH TALATI
PARTNER
M.No 34834
PLACE: AHMEDABAD
DATE: - 15.04.2010