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Auditor Report of Sunflag Iron & Steel Company Ltd.

Mar 31, 2018

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Sunflag Iron & Steel Company Limited (“the Company”), which comprise the balance sheet as at 31st March 2018, the statement of profit and loss (including other comprehensive income), the cash flows statement and the statement of changes in equity for the year then ended and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the standalone Ind AS financial statements”).

Management’s Responsibility for the Standalone Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134 (5) of the CompaniesAct, 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 the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act, read with relevant Rules issued thereunder.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making 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 and opinion on these standalone Ind AS financial statements based on our audit.

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

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.

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

Opinion

In ouropinion and to the best ofour information and according to the explanations given to us, 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, its profit including other comprehensive income, and its cash flows and the changes in equity for the year ended on that date.

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 the paragraph 3 and 4 of the Order.

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 ofour knowledge and belief were necessary for the purposes of ouraudit.

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

c) The balance sheet, the statement of profit and loss (including other comprehensive income) the statement of cash flows and the statement of changes in equity dealt with by this Report are in agreement with the books of account;

d) In our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act, read with relevant Rules issued thereunder;

e) 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.

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) 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 standalone Ind AS financial statements -Refer Note 33 to the standalone Ind AS financial statements;

ii. Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses;

iii. There has been no delay in transferring amounts, required to be transferred, to the investor Education and Protection Fund by the Company.

“ANNEXURE - A” TO INDEPENDENT AUDITOR’SREPORT

“Annexure -A” to the Independent Auditor’s Report to the Members on standalone Ind As financial statements of Sunflag Iron & Steel Company Limited dated 28th May, 2018.

Report on the matters specified In paragraph 3 of the Companies (Auditor’s Report) Order, 2016 (“the Order”) Issued by the Central Government of India In terms of section 143(11) of the Companies Act, 2013 (“the Act”) as referred to In paragraph 1 of’ Report on

Other Legal and Regulatory Requirements’ section.

i) a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) The fixed assets have been physically verified by the management during the year, the frequency of which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No discrepancies were noticed on such verification.

c) According to the information and explanations given to us and on the basis of the documents verified by us, we report that the title deeds of all immovable properties are held in the name of the Company.

ii) The Management has conducted physical verification of inventory at reasonable intervals during the year and no material discrepancies were noticed on such physical verification.

iii) a) The Company has granted unsecured loans to its subsidiaries Sunflag Power Limited and Khappa Coal Company Private Ltd., covered in the register maintained under Section 189 of the Act;

b) The above loan is re-payable on demand as agreed. In respect of this loan, we are informed that the company has not demanded repayment of such loan, thus there is no default on repayment of such loan. In respect of interest on such loan from Khapa Coal Company Private Limited, the company has charged interest for the period 1st April 2017 to 31st March 2018 and waived off as approved in its Board Meeting.

c) The loan given is repayable on demand and hence there is no overdue amount as on the date and the relevant reporting is not applicable.

iv) In our opinion and according to the information and explanations given to us, provisions of section 185 and 186 of the Act, as applicable, in respect of loans to directors including entities in which they are interested and in respect of loans and advances given, investments made and, guarantees, and securities given have been complied with by the Company.

v) The Company has not accepted any deposits from the public with the meaning of directives issued by the Reserve Bank of India and provisions of sections 73 to 76 or any other relevant provisions of the Act, and the Rules framed thereunder.

vi) We have broadly reviewed the Cost Accounting records maintained by the Company pursuant to the rules prescribed by the Central Government for the maintenance of cost records under subsection (1) of section 148 of the Act and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We are, however, not required to make a detailed examination of such books and records.

vii. a) According to the records of the Company examined by us and the information and explanations given to us, the Company is generally regular in depositing its undisputed statutory dues including Employees’s Provident Fund, Employees, State Insurance, Investor Education and Protection Fund, Income Tax, Wealth Tax, Service Tax, Custom Duty, Excise duty, Cess and any other material statutory dues, as applicable, with the appropriate authorities during the year and there are no such undisputed amounts payable which have remained outstanding as at March 31,2018 for a period of more than six months from the date they became payable.

b) According to the records of the Company, the details of dues of Income Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty and Value added Tax which have not been deposited on account of any dispute and the forum where the dispute is pending are as follows:

Name of Statue

Nature of dues

Forum where the dispute is pending

Period to which the amount relates

Amount (Rs. in Lakh)

Central Excise Act,1944

Demand of excise duty

CESTAT, Mumbai

2013-2014

38

Central Excise Act,1944

Input tax on railway freight

CESTAT, Mumbai

2012 - 2013 & 2013 - 2014

242

Central Excise Act,1944

Demand of differential duty of Iron ore

Commissioner,

Central Excise, Nagpur

2013-2014

159

Income Tax Act,1961

Income tax assessment

Commissioner of Income Tax (Appeals)

Assessment year2010 - 2011, 2011-2012 & 2016-2017

162

Income Tax Act, 1961

Income tax assessment

High Court, Nagpur bench, Hon’ble Mumbai High Court

Assessment year 2011-2012 & 2010-2011

4,300

viii) In our opinion and according to the information and explanations given to us, we are of the opinion that the Company has not defaulted in repayment of dues to financial institution, bank or debenture holders. The Company does not have any debentures.

ix) In our opinion, and according to the information and explanations given to us, the Company has not raised any money way of initial public offer/further public offer, further term loans taken during the year were applied for the purpose for which the loan were obtained.

x) In our opinion, and according to the information and explanations given to us, we report that no fraud by the company or on the company by the officers and employees of the Company has been noticed reported during the year.

xi) In our opinion, and according to the information and explanations given to us, the managerial remuneration has been paid / provided in accordance with the requisite approvals mandated by the provisions of section 197 with Schedule V to the Act.

xii) The Company is not a Nidhi Company. Therefore, the provisions of clause 3 (xii) of the Order are not applicable to the Company.

xiii) In our opinion, and according to the information and explanations given to us during the course of audit, transactions with the related parties are in compliance with section 177 and section 188 of the Act and the details have been disclosed in the notes to the standalone Ind AS financial statements, as required by the applicable Indian accounting standards.

xiv) According to the information and explanations given to us and on an overall examination of the books of account, the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year and hence not commented upon.

xv) In our opinion, and according to the information and explanations given to us, the Company has not entered into any non-cash transactions with directors or persons connected with him.

xvi) According to the information and explanations given to us, the provisions of section 45-IAof the Reserve Bank of India Act, 1934 are not applicable to the Company.

“Annexure - B” to the Independent Auditor’s Report to the Members on standalone Ind AS financial statements of Sunflag Iron & Steel Company Limited dated 28th May, 2018.

Report on the Internal Financial Controls under Clause (l)of Sub-section 3 of Section 143 of the CompaniesAct, 2013 (“the Act”) as referred to in paragraph 2(f) of ‘Report on Other Legal and Regulatory Requirements’section.

We have audited the internal financial controls over financial reporting of Sunflag Iron & Steel Company Limited (“the Company”) as of 31st,March 2018 in conjunction with our audit of the standalone Ind AS 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 the respective 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 Act.

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 theAct, 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 Standalone Ind AS financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

Acompany’s internal financial control overfinancial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone Ind AS financial statements for external purposes in accordance with generally accepted accounting principles. ACompany’s internal financial control overfinancial reporting includes those policies and procedures that:

a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of standalone Ind AS financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and

c) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the standalone Ind AS financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls overfinancial 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 overfinancial reporting and such internal financial controls overfinancial reporting were operating effectively as at 3151 March, 2018, based on the internal control overfinancial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Overfinancial Reporting issued by the institute of Chartered Accountants of India.

For S.S. Kothari Mehta & Co.

Chartered Accountants

Firm Regn. No. 000756N

C A SunilWahal

Nagpur Partner

28 May, 2018 Membership Number-087294


Mar 31, 2017

INDEPENDENT AUDITORS’ REPORT ON FINANCIAL STATEMENTS

To

The Members

Sunflag Iron and Steel Company Limited C I N - L 27100 MH 1984 PLC 034003 33, Mount Road, Sadar, Nagpur - 440001 Report on Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Sunflag Iron and Steel Company Limited (“the Company”), which comprise the balance sheet as at March 31, 2017, the statement of profit and loss, including the statement of other comprehensive income, the cash flow statement and the statement of changes in equity for the year then ended, and a summary of significant accounting policies.

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 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 Rule 7 of the Companies (Accounts) Rules, 2014 and the Companies (Indian Accounting Standards) Rules, 2015, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial control 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 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, issued by the Institute of Chartered Accountants of India, 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 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 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 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 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 Ind AS 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 Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2017, its profit including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Other Matters

The financial information of the Company for the year ended March 31, 2016 and the transition date opening balance sheet as at April 01, 2015 included in these standalone Ind AS financial statements, are based on the previously issued statutory financial statements for the years ended March 31, 2016 and March 31, 2015 prepared in accordance with the Companies (Accounting Standards) Rules,2006 (as amended) which were audited by predecessor auditors whose report for the year ended March 31, 2016 & March 31, 2015 dated May 26, 2016 & May 30, 2015 respectively expressed an unmodified opinion on those standalone financial statements. The adjustments to those standalone financial statements for the differences in accounting principles adopted by the Company on transition to the Ind AS have been audited by us.

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 sub-section (11) of section 143 of the Act, we give in the “Annexure -1” 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 obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

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

c) The balance sheet, statement of profit and loss including the statement of other comprehensive income, the cash flow statement and statement of changes in equity dealt with by this Report are in agreement with the books of account;

d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and Companies (Indian Accounting Standards) Rules, 2015, as amended;

e) On the basis of written representations received from the directors as on March 31, 2017, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2017, from being appointed as a director in terms of section 164 (2) of the Act;

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure 2” to this report;

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 standalone Ind AS financial statements - Refer Note 32 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 has been no delay in transferring amounts required to be transferred, to the Investor Education and Protection Fund by the Company.

iv. The Company has provided requisite disclosures in Note 9 to these standalone Ind AS financial statements as to the holding of Specified Bank Notes on November 8, 2016 and December 30, 2016 as well as dealings in Specified Bank Notes during the period from November 8, 2016 to December 30, 2016. Based on our audit procedures and relying on the management representation regarding the holding and nature of cash transactions, including Specified Bank Notes, we report that these disclosures are in accordance with the books of accounts maintained by the Company and as produced to us by the Management.

“Annexure - 1” to the Independent Auditor’s Report to the members of Sunflag Iron & Steel Company Limited dated May 26, 2017 on standalone financial statements.

On the basis of sample checks and according to the information and explanations given to us during the course of our audit, we report that;

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

b) All fixed assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

c) According to the information and explanations given by the management, the title deeds of immovable properties included in property, plant and equipment are held in the name of the company.

ii) The Management has conducted physical verification of inventory at reasonable intervals during the year and no material discrepancies were noticed on such physical verification

iii) a) The Company has granted unsecured loans to its subsidiaries Sunflag Power Limited and Khappa Coal Co. Pvt. Ltd., covered in the register maintained under Section 189 of the Act;

b) The terms and conditions of the grant of such loans are not prejudicial to the Company’s interest;

c) The loan given is repayable on demand and hence there is no overdue amount as on the date and the relevant reporting is not applicable.

iv) In our opinion and according to the information and explanations given to us, provisions of section 185 and 186 of the Act, as applicable, in respect of loans to directors including entities in which they are interested and in respect of loans and advances given, investments made and, guarantees, and securities given have been complied with by the Company.

v) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public within the meaning of directives issued by the Reserve Bank of India and provisions of sections 73 to 76 or any other relevant provisions of the Act and the Rules framed there under.

vi) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 148(1) of the Act, regarding activities of the Company and are of the opinion that prima facie, the specified accounts and records have been made and maintained. However, we are not required to carry out detailed examination of the same.

vii) a) In our opinion and according to the information and explanations given to us, according to the records of the Company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Sales tax, Wealth-tax, Custom Duty, Excise Duty, Cess and other material statutory dues, wherever applicable, have been generally regularly deposited with the appropriate authorities during the year. However, there are no such undisputed statutory dues payable for a period of more than six months from the date they became payable as at March 31, 2017.

b) According to the information and explanations given to us and as per the books and records examined by us, details of dues of Income Tax, Excise duty and Sales tax which have not been deposited on account of any dispute and the forum where the dispute is pending is as follows:

Statement of unpaid disputed statutory dues and annexure to report as at 31st March, 2017

Particulars of Statutory Dues

Amount (Rs, in Lakhs)

Period to which the amount related

Forum where dispute is pending

Whether paid or unpaid

Excise Duty

Deptt.''s show cause

27

2009

- 2010

Commissioner, Central Excise

Not Deposited

Departmental appeal (penalty)

38

2013

- 2014

Tax Appellate Tribunal

Deposited

Total

65

Income Tax

Company''s appeals

211

2006

- 2007

Income Tax Appellate Tribunal

Deposited

103

2007

- 2008

Income Tax Appellate Tribunal

Deposited

240

2009

- 2010

Income Tax Appellate Tribunal

Deposited

12

2010

- 2011

Commissioner of Income Tax (Appeal)

Deposited

47

2015

- 2016

Commissioner of Income Tax (Appeal)

Deposited

Total

613

viii) In our opinion and according to the information and explanations given by the management, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

ix) In our opinion, and according to the information and explanations given to us, the Company has not raised any money by way of initial public offer / further public offer. Further, term loans taken during the year were applied for the purpose for which the loans were obtained.

x) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to the information and explanations given by the management, we report that no fraud by the Company or no fraud on the Company by the officers and employees of the Company has been noticed or reported during the year.

xi) According to the information and explanations given by the management, the managerial remuneration has been paid / provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

xii) In our opinion, the Company is not a Nidhi Company. Therefore, the provisions of clause 3(xii) of the Order are not applicable to the Company and hence not commented upon.

xiii) According to the information and explanations given by the management, transactions with the related parties are in compliance with section 177 and 188 of the Act, where applicable and the details have been disclosed in the notes to the financial statements, as required by the applicable accounting standards.

xiv) According to the information and explanations given to us and on an overall examination of the balance sheet, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under audit and hence not commented upon.

xv) According to the information and explanations given by the management, the Company has not entered into any non-cash transactions with directors or persons connected with him as referred to in section 192 of the Act.

xvi) According to the information and explanations given to us, the provisions of section 45-IA of the Reserve Bank of India Act, 1934 are not applicable to the Company.

“Annexure -2” to the Independent Auditor’s Report of even date on the standalone Financial Statements of Sunflag Iron & Steel Company 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 Sunflag Iron & Steel Company Limited (“the Company”) as of March 31, 2017 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 the 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 Act.

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 as specified under section 143(10) of the Act to the extent 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 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, 2017, 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 S.S. Kothari Mehta & Co. For Patel, Shah & Joshi

Chartered Accountants Chartered Accountants

Firm Regn. No. 000756N Firm Regn. No. 107768W

CA Sunil Wahal CA Jayant I. Mehta

Nagpur Partner Partner

26th May, 2017

Membership Number - 087294 Membership Number - 042630


Mar 31, 2016

To

The Members

Sunflag Iron and Steel Company Limited C I N - L 27100 MH 1984 PLC 034003

33, Mount Road, Sadar, Nagpur - 440001

Report on Standalone Financial Statements

We have audited the accompanying Standalone Financial Statements of SUNFLAG IRON AND STEEL COMPANY LIMITED (“the Company”) which comprise of Balance Sheet as at 31st March 2016, Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

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 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 controls 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 standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and 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, 2016 and its profit and its cash-flows for the year ended on that date.

Report On Other Legal and Regulatory Requirements

As required by the Companies (Auditor’s Report) Order, 2016 (‘the order’) issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Companies Act, 2013, we give in the Annexure-A, a statement on the matters specified in paragraphs 3 and 4 of the order, to the extent applicable.

As required by Section 143(3) of the Act, we report that ;

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

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

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

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

e) on the basis of the written representations received from the directors as on 31st March, 2016, taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2016 from being appointed as a director in terms of Section 164 (2) of the Act;

f) with respect to the adequacy of the Internal Financial Controls over the financial reporting of the company and the operating effectiveness of such controls, refer to our separate report in "Annexure - B" 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 Annexure - C of our Report and note 27.3(i) to the financial statements.

ii) The Company does not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii) The Company does not have any pending amount, required to be transferred, to the Investor Education and Protection Fund.

Referred to in paragraph under "Report on the other legal and regulatory requirements" section of our report of even date on the accounts of the Company for the year ended 31st March 2016 :

On the basis of sample checks and according to the information and explanations given to us during the course of our audit, we report that;

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

b) The fixed assets have been physically verified by the management at reasonable intervals, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

c) i) According to the information and explanations given to us and the records examined by us and based on the

examination of the registered sale deed / transfer deed / conveyance deed provided to us, we report that, the title deeds, comprising the immovable properties of land acquired and buildings which are freehold, are held in the name of the Company as at the balance sheet date.

ii) In respect of immovable properties of land that have been taken on lease and disclosed as fixed asset in the financial statements, the lease agreements are in the name of the Company, where the Company is the lessee in the agreement.

ii) We are informed that the physical verification of inventory has been conducted during the year by the management at reasonable intervals. As explained to us, no material discrepancies were noticed on such verification.

iii) a) According to the information and explanations given to us, the Company has, during the year, granted loan and advance to a Body Corporate covered in the register maintained under Section 189 of the Companies Act, 2013.

b) In the case of loan and advance granted to the Body Corporate listed in the register maintained under Section 189 of the Act. the terms of arrangements do not stipulate any repayment schedule and the loans are repayable on demand. Accordingly, the paragraph 3(iii)(b) of the Order is not applicable to the Company in respect of repayment of the principal amount.

c) There are no overdue amounts of more than rupees one lakh in respect of the loan and advance granted to the body corporate listed in the register maintained under Section 189 of the Act.

iv) According to the information and explanations given to us, the Company has complied with the provisions of Section 185 and 186 of the Companies Act, 2013 in respect of loans, investment, guarantees and security.

v) We are informed that the Company has not accepted any deposit during the year under Section 73 to 76 of the Companies Act, 2013 and rules made there under.

vi) According to the information and explanations given to us, Central Government has prescribed the maintenance of cost records under section (1) of the Section 148 of the Companies Act, 2013. We have broadly reviewed the cost records maintained by the Company and are of the opinion that prima facie the Company has maintained the prescribed cost records pursuant to the Companies (Cost Records and Audit) Rules 2014.

vii) a) The Company is regular in depositing undisputed statutory dues including Provident Fund, Employees’ State Insurance,

Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess and other statutory dues to the appropriate authorities.

b) No disputed amounts payable, other than those mentioned in the attached Annexure - C, in respect of Income Tax, Service Tax, Sales Tax or Duty of Customs or Duty of Excise or Value Added Tax were outstanding as at 31st March, 2016.

viii) The Company has not defaulted in repayment of any loans or borrowings from financial institutions, banks, Government or dues to debenture holders during the year. Accordingly, clause (viii) of the Order is not applicable and hence not commented upon.

ix) The Company has not raised money by way of initial public offer or further public offer (including debt instruments) and term loans during the year. Accordingly, clause (ix) of the Order is not applicable and hence not commented upon.

x) According to the information and explanations given to us, no material fraud by the Company or any fraud on the Company by its officers or employees has been noticed or reported during the year.

xi) According to the information and explanations given to us, the managerial remuneration has been paid or provided for, in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to 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, clause (xii) of the order is not applicable and hence not commented upon.

xiii) According to the information and explanations given to us, all transactions with related parties are in compliance with Section 177 and 188 of the Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements as required by the applicable accounting standards.

xiv) The Company has not made any preferential allotment or private placement of shares or full or partly convertible debentures during the year under review.

xv) According to the information and explanations given to us and based on our examination of the record of the Company, the Company has not entered into any non-cash transactions with directors or persons connected with them. Accordingly, clause

(xv) of the Order is not applicable and hence not commented upon.

xvi) The Company is not required to be registered under Section 45-1A of the Reserve Bank of India Act, 1934. Accordingly, the clause

(xvi) of the Order is not applicable to the Company and hence not commented upon.

"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 Sunflag Iron and Steel Company Limited ("the Company) as of 31st March, 2016 in conjunction with our audit of the financial statements of the Company for the period 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 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 on 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, 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, 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.

Statement of unpaid disputed statutory dues and annexure to report as at 31st March, 2016

Particulars of Statutory Dues

Amount (Rs, in Lacs)

Period to which the amount related

Forum where dispute is pending

Whether paid or unpaid

Excise Duty

Deptt.''s show cause

Departmental appeal (penalty)

Total

27

38

65

2009 - 2010 2013 - 2014

Commissioner, Central Excise Tax Appellate Tribunal

Not Deposited

Sales Tax

Company''s appeal

Total

2.659

2.659

2005 - 2006 to

2009 - 2010

High Court / Supreme Court (Although the Company has filed Writ Petition but has paid this amount under protest)

Deposited under protest

Income Tax

Company''s appeals

Total

353 100 235 214 581 54 14 160 1 2 1,723

2005 - 2006

2007 - 2008

2008 - 2009

2009 - 2010

2005 - 2006

2006 - 2007

2008 - 2009

2009 - 2010

2010 - 2011

Income Tax Appellate Tribunal Income Tax Appellate Tribunal Income Tax Appellate Tribunal Commissioner of Income Tax (Appeal) Commissioner of Income Tax (Appeal) Commissioner of Income Tax (Appeal) Commissioner of Income Tax (Appeal) Commissioner of Income Tax (Appeal) Commissioner of Income Tax (Appeal)

Deposited

Deposited

Deposited

Deposited Not Deposited Not Deposited Not Deposited Not Deposited Not Deposited

For Patel, Shah & Joshi

Chartered Accountants

Firm Regn. No. 107768W

CA Jayant I. Mehta

Nagpur partner

28th May 2016 Membership Number - 42630


Mar 31, 2015

We have audited the accompanying Standalone Financial Statements of SUNFLAG IRON AND STEEL COMPANY LIMITED ("the Company") which comprises Balance Sheet as at 31st March 2015, Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Financial Statements

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

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made 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 judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial controls 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 standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements gives the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the State of affairs of the Company as at 31st March, 2015 and its profit and its cash flows for the year ended on that date.

Report On Other Legal and Regulatory Requirements

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 Companies Act, 2013, we give in an Annexure a statement on the matters specified in para 3 and 4 of the order, to the extent applicable.

As required by Section 143 (3) of the Act, we report that ;

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

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

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

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

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

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

i) The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Annexure-A of our Report and note 27.3 to the financial statements.

ii) The Company has made necessary provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivatives contracts.

iii) There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Company.

ANNEXURE TO INDEPENDENT AUDITOR'S REPORT

The Annexure referred to in our Independent Auditors' Report to the members of the Company on the Standalone financial statements for the year ended 31st March 2015, we report that

i) In respect of Fixed assets;

a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b) The fixed assets are physically verified by the management at reasonable intervals, which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

ii) In respect of Inventories;

a) We are informed that during the year, the management has physically verified the inventories. In case of material lying with third parties, certificates confirming stock have been received in respect of a substantial portion of stock held. In our opinion, the frequency of verification is reasonable.

b) According to the information and explanations given to us, the procedure of physical verification of inventories followed by the management is reasonable and adequate in relation to the size of the Company and the nature of its business.

c) The Company has maintained proper records of inventories. As explained to us, there were no material discrepancies noticed on physical verification of inventories as compared to the book records.

iii) a) According to the information and explanations given to us, the Company has, during the year, granted loan and advance to a body corporate covered in the register maintained under Section 189 of the Companies Act, 2013.

b) In the case of loan and advance granted to the body corporate listed in the register maintained under section 189 of the Act. The terms of arrangements do not stipulate any repayment schedule and the loans are repayable on demand. Accordingly, the paragraph 3(iii)(b) of the Order is not applicable to the Company in respect of repayment of the principal amount.

c) There are no overdue amounts of more than rupees one lakh in respect of the loan and advance granted to the body corporate listed in the register maintained under section 189 of the Act.

iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchases of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weaknesses in internal control system.

v) According to the information and explanations given to us, the Company has not accepted any deposit from the public.

vi) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2014 prescribed by the Central Government under Sub Section 1 of Section 148 of the Companies Act, 2013 and are of the opinion that prima facie 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) a) According to the information and explanations given to us and the records of the Company examined by us, the Company has been generally depositing undisputed statutory dues including Provident Fund, Employees' State Insurance dues, Income Tax, Investor Education and Protection Fund, Sales Tax, Wealth Tax, Customs Duty, Service Tax, Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities and no undisputed amount payable in respect of the above mentioned statutory dues are in arrears for a period exceeding six months from the date of their becoming payable.

b) According to the records of the Company, the details of disputed dues of Income Tax, Wealth Tax, Duty of Custom, Sales Tax and Excise Duty & Cess are enclosed in Annexure A.

c) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

viii) The Company does not have any accumulated losses at the end of the financial year 31st March, 2015. Further, the Company has not incurred cash losses during the financial year ended 31st March, 2015 and in the immediately preceding financial year ended 31st March, 2014.

ix) Based on our audit procedures and according to the information and explanations given to us, we are of the opinion that the Company has not defaulted in repayment of dues to financial institutions, banks and debenture holders.

x) According to the information and explanations given to us, the Company has not given any guarantee during the year for loans taken by others from banks or financial institutions.

xi) In our opinion, the term loans have been applied for the purpose for which they were raised.

xii) On the basis of our examination and according to the information and explanation given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit.

Annexure - A

Statement of disputed statutory dues and annexure to report as at 31st March 2015

Particulars of Amount Period to which Forum where dispute Statutory Dues (Rs. in Lacs) amount related is pending

Excise Duty

Deptt.'s show cause 27 2009 - 2010 Commissioner, Central Excise

Departmental appeal 38 2013 - 2014 Tax Appellate Tribunal (penalty)

Total 65

Sales Tax

2005 - 2006 High Court / Supreme Company's appeal 2,659 to Court (Although the Company has filed Writ Petition but has Total 2 659 2009 - 2010 paid this amount under protest)

Income Tax

Company's appeals 379 2005 - 2006 Income Tax Appellate Tribunal

188 2006 - 2007 Income Tax Appellate Tribunal

309 2007 - 2008 Income Tax Appellate Tribunal

235 2008 - 2009 Income Tax Appellate Tribunal

214 2009 - 2010 Commissioner of Income Tax (Appeal)

Total 1,325

Particulars of Statutory Dues Whether paid or unpaid

Excise Duty

Deptt.'s show cause Not Deposited

Departmental appeal (penalty) Deposited

Total

Sales Tax

Company's appeal Deposited under protest

Total

Company's appeals Deposited

Deposited

Deposited

Deposited

Deposited

For PATEL, SHAH & JOSHI CHARTERED ACCOUNTANTS Firm Regn. No. 107768W

CA JAYANT I. MEHTA Nagpur PARTNER 30th May 2015 Membership Number - 42630


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of SUNFLAG IRON AND STEEL COMPANY LIMITED (the "Company"), which comprise the Balance Sheet as at 31st March 2013, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956 (the "Act") and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal controls relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatements, 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 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 control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the 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:

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

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

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

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said 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 it appears from our examination of those books.

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

d) In our opinion, the 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 31st March 2013 taken on record by the Board of Directors, none of the Directors is disqualified as on 31st March 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

"Report on Other Legal and Regulatory Requirements" of our report of even date]

i. In respect of Company''s 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) A major proportion of the assets have been physically verified by the management 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 the nature of its assets. As informed to us, no material discrepancy has been noticed on such verification.

c) In our opinion, 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) We are informed that during the year, the management has physically verified the inventories. In case of material lying with third parties, certificates confirming stock have been received in respect of a substantial portion of stock held. In our opinion, the frequency of verification is reasonable.

b) According to the information and explanations given to us, the procedure of physical verification of inventories followed by the management is reasonable and adequate in relation to the size of the Company and the nature of its business.

c) The Company has maintained proper records of inventories. As explained to us, there were no material discrepancies noticed on physical verification of inventories as compared to the book records.

iii. a) According to the information and explanations given to us, the Company has, during the year, granted loans and advances to the Companies covered in the register maintained under Section 301 of the Companies Act 1956, as per details hereunder:

b) There is no stipulation for the repayment of principal and the interest.

c) According to the information and explanations given to us, the Company has, during the year, not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4 (iii) (e) (f) (g) of the Order is not applicable.

iv. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchases of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system.

v. According to the information and explanation given to us, during the year, there were no transactions that need to be entered into the register maintained under Section 301 of the Companies Act, 1956.

vi. According to the information and explanations given to us, the Company has not accepted any deposit from the public. Therefore, the provisions of Clause (vi) of paragraph 4 of the Order are not applicable to the Company. vii. In our opinion, the Company has an internal audit division, which is commensurate with size and 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 prima facie 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. a) According to the information and explanations given to us and the records of the Company examined by us, the Company has been generally depositing undisputed statutory dues including Provident Fund, Employees'' State Insurance dues, Income Tax, Investor Education and Protection Fund, Sales Tax, Wealth Tax, Customs Duty, Service Tax, Excise Duty, Cess and other statutory dues applicable to it with the appropriate authorities. b) We are informed that there are no undisputed statutory dues as at the year end, outstanding for a period of more than six months from the date they became payable.

c) According to the records of the Company, the details of disputed dues of Income Tax, Sales Tax and Excise Duty & Cess are enclosed in Annexure A. x. The Company does not have accumulated losses at the end of the financial year 31st March 2013. Further, the Company has not incurred cash losses during the financial year ended 31st March 2013 and in the immediately preceding financial year ended 31st March 2012. xi. Based on our audit procedures and according to the information and explanations given to us, we are of the opinion that the Company has not defaulted in repayment of dues to financial institutions, banks and debenture holders. xii. In our opinion and according to the explanations given to us and based on the information available, no loans and advances have been granted by the Company on the basis of security by way of pledge of shares, debentures and other securities.

xiii. The Company is not a Chit Fund / Nidhi / Mutual Benefit Fund / Society to which the provisions of special statute relating to Chit Fund are applicable.

xiv. As the Company is not dealing or trading in shares, securities, debentures and other investments, paragraph 4(xiv) of the Order is not applicable.

xv. According to the information and explanations given to us, the Company has not given any guarantee during the year for loans taken by others from banks or financial institutions.

xvi. In our opinion, the term loans have been applied for the purpose for which they were raised.

xvii. According to the information and explanations given to us and on an overall examination the Balance Sheet of the Company, we are of the opinion that during the year short-term funds have not been used to finance long-term investments.

xviii. The Company has not made preferential allotment of shares during the year.

xix The Company has not issued debentures during the year.

xx. The Company has not raised money by way public issue during the year.

xxi. On the basis of our examination and according to the information and explanation given to us, no material fraud on or by the Company has been noticed or reported.

For PATEL, SHAH & JOSHI

CHARTERED ACCOUNTANTS

Firm Regn. No. 107768W

CA JAYANT I. MEHTA

Nagpur PARTNER

30th May 2013 Membership Number - 42630


Mar 31, 2012

1. We have audited the attached Balance Sheet of SUNFLAG IRON AND STEEL COMPANY LIMITED as at 31st March 2012, Statement of Profit and Loss for the year ended on that date and Cash Flow Statement for the year ended on that date, both annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies' (Auditor's Report) Order, 2003 ("CARO") issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 and according to the information and explanation given to us during the course of the audit and on the basis of such checks as we consider appropriate, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order, to the extent applicable.

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

i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii. In our opinion, proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books;

iii. The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of accounts;

iv. In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

v. On the basis of written representations received from the directors as on 31st March 2012 and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 31st March 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

vi. 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 accounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2012;

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

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

ANNEXURE TO THE AUDITOR'S REPORT

Referred to in paragraph (3) of our Report of even date on the accounts of SUNFLAG IRON AND STEEL COMPANY LIMITED for the financial year ended 31st March 2012

i. a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) A major proportion of the assets have been physically verified by the management in accordance with a phased programme of verification adopted by the Company. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and the nature of its assets. As informed to us, no material discrepancy has been noticed on such verification.

c) According to the information and explanations given to us, the Company has not disposed off substantial part of its fixed assets during the year.

ii. a) We are informed that during the year, the management has physically verified the inventories. In case of material lying with third parties, certificates confirming stock have been received in respect of a substantial portion of stock held. In our opinion, the frequency of verification is reasonable.

b) According to the information and explanations given to us, the procedure of physical verification of inventories followed by the management is reasonable and adequate in relation to the size of the Company and the nature of its business.

c) According to the information and explanations given to us, the Company has maintained proper records of inventories. Discrepancies noticed on verification between physical stocks and the book records were not material.

iii. a) According to the information and explanations given to us, the Company has, during the year, granted loans and advances to the Companies covered in the register maintained under Section 301 of the Companies Act 1956, as per details hereunder :

Amount in Rs.

Nature of Loans and During Maximum / Year Name of Company Advances the Year end Balance

Sunflag Power Limited Interest free Unsecured Loan (transferred (Subsidiary Company) to Advance Share Application Money) 7,349,386 91,528,292

KhappaCoal Company Private Limited Interest free Unsecured Loan 4,112,550 73,709,550 (Subsidiary / Joint Venture Company)

Gujarat State Mining and Resources Corpn. Ltd. (Joint Venture Company) Interest free Unsecured Loan 100,000 246,820

b) There is no stipulation for the repayment of Principal and the Interest.

c) According to the information and explanations given to us, the Company has, during the year, not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraph 4 (iii) (e) (f) (g) of the Order is not applicable.

iv. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with size of the Company and the nature of its business with regards to the purchase of inventory, fixed assets and sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control.

v. According to the information and explanation given to us, during the year, there were no transactions that need to be entered into the register maintained under Section 301 of the Companies Act, 1956.

vi. According to the information and explanations given to us, the Company has not accepted any deposits from the public during the year; hence paragraph 4 (vi) of the Order is not applicable.

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

viii. We have broadly reviewed the records maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records.

ix. a) According to the information and explanations given to us and the records of the Company examined by us, the Company has been generally depositing undisputed statutory dues including Provident Fund, Employees' State Insurance dues, Income Tax, Investor Education and Protection Fund, Sales Tax, Wealth Tax, Customs Duty, Service Tax, Excise Duty, Cess and other statutory dues applicable to it with the appropriate authorities.

b) We are informed that there are no undisputed statutory dues as at the year end, outstanding for a period of more than six months from the date they became payable.

c) According to the records of the Company, the details of disputed dues of Income Tax, Sales Tax and Excise Duty & Cess are enclosed in Annexure A.

x. The Company does not have accumulated losses at the end of the financial year 31st March 2012. Further, the Company has not incurred cash losses during the financial year ended 31st March 2012 and in the immediately preceding financial year ended 31st March 2011.

xi. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to banks.

xii. According to information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii. The Company is not a Chit Fund / Nidhi / Mutual Benefit Fund / Society to which the provisions of special statute relating to Chit Fund are applicable.

xiv. As the Company is not dealing or trading in shares, securities, debentures and other investments, paragraph 4(xiv) of the Order is not applicable.

xv. According to the information and explanations given to us, the Company has not given any guarantee during the year for loans taken by others from banks or financial institutions.

xvi. In our opinion, the term loans have been applied for the purpose for which they were raised.

xvii. According to the information and explanations given to us and on an overall examination the Balance Sheet of the Company, we report that during the year short-term funds have not been used to finance long-term investments.

xviii. The Company has not made preferential allotment of shares during the year.

xix. The Company has not issued debentures during the year.

xx. The Company has not raised money by way public issue during the year.

xxi. On the basis of our examination and according to the information and explanation given to us, no material fraud on or by the Company has been noticed or reported.

Annexure - A

Statement of disputed statutory dues and annexure to report as at 31st March 2012

Particulars of Amount Period to which the Forum where Whether Statutory Dues (Rs. in Lacs) amount related dispute is pending paid or unpaid Excise Duty

Deptt.'s show cause 55 2008 - 2009 Commissioner, Central Excise

29 2009 - 2010 Commissioner, Central Excise Not

Departmental appeal* 2 1994 - 1996 Tax Appellate Tribunal Deposited

Deptt.'s show cause 14 1994 - 1995 Commissioner of Customs

Total 100

Sales Tax 2005 - 2006 High Court (Although the Company has Deposi tied Company's appeal 2,659 to filed writ petition but has paid this amount Under protest 2009 - 2010 under protest)

Total 2,659

Income Tax

Company's appeals 592 2005 - 2006 Commissioner of Income Tax (Appeal) Deposited

134 2006 - 2007 Commissioner of Income Tax (Appeal) Deposited

55 2006 - 2007 Commissioner of Income Tax (Appeal) Deposited

309 2007 - 2008 Commissioner of Income Tax (Appeal) Deposited

235 2008 - 2009 Commissioner of Income Tax (Appeal) Deposited Total 1,325

* Pertains to MODVAT Credit

For PATEL, SHAH & JOSHI

CHARTERED ACCOUNTANTS

Firm Regn. No. 107768W

CA JAYANT I. MEHTA

Nagpur PARTNER

29th May 2012 Membership Number - 42630


Mar 31, 2011

1. We have audited the attached Balance Sheet of SUNFLAG IRON AND STEEL COMPANY LIMITED as at 31st March 2011, Profit and Loss Account for the year ended on that date and Cash Flow Statement for the year ended on that date, both annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies' (Auditor's Report) Order, 2003 ("CARO") issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, and according to the information and explanation given to us during the course of the audit and on the basis of such checks as we consider appropriate, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order, to the extent applicable.

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

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

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

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

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(v) On the basis of written representations received from the directors, as on 31st March 2011 and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 31st March 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the State of affairs of the Company as at 31st March 2011;

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

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

ANNEXURE TO THE AUDITOR'S REPORT

Referred to in paragraph (3) of our Report of even date on the accounts of SUNFLAG IRON AND STEEL COMPANY LIMITED for the year ended 31st March 2011

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

(b) A major proportion of the assets have been physically verified by the management in accordance with a phased programme of verification adopted by the Company. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and the nature of its assets. As informed to us, no material discrepancy has been noticed on such verification.

(c) According to the information and explanations given to us, the Company has not disposed off substantial part of its fixed assets during the year.

ii. (a) We are informed that during the year the management has physically verified the inventories. In case of material lying with third parties, certificates confirming stock have been received in respect of a substantial portion of stock held. In our opinion, the frequency of verification is reasonable.

(b) According to the information and explanations given to us, the procedure of physical verification of inventories followed by the management is reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) According to the information and explanations given to us, the Company has maintained proper records of inventories. Discrepancies noticed on verification between physical stocks and the book records were not material.

iii. (a) According to the information and explanations given to us, the Company has, during the year, granted loans and advances to the companies covered in the register maintained under Section 301 of the companies Act 1956, as per details hereunder :

Amount in Rs. Name of Nature of Company Loans & During the Year Maximum / Year Advances end Balance

Sunflag Power Interest free Limited (Subsidiary unsecured Company) loan 4,707,986 84,178,906

Khappa Coal Company Interest free Private Limited unsecured (Subsidiary / loan Nil 69,597,000 Joint Venture Company)

Gujarat State Interest free Mining and unsecured Resources loan 146,820 146,820 Corporation Limited (Joint Venture Company)

(b) There is no stipulation for the repayment of Principal and the Interest.

(c) According to the information and explanations given to us, the Company has, during the year, not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraph 4 (iii) (e) (f) (g) of the Order is not applicable.

iv. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with size of the Company and the nature of its business with regards to the purchase of inventory, fixed assets and sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control.

v. According to the information and explanation given to us, during the year, there were no transactions that need to be entered into the register maintained under Section 301 of the Companies Act, 1956.

vi.According to the information and explanations given to us, the Company has not accepted any deposits from the public during the year; hence paragraph 4 (vi) of the Order is not applicable.

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

viii. We have broadly reviewed the records maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records.

ix. (a) According to the information and explanations given to us and the records of the Company examined by us, the Company has been generally depositing undisputed statutory dues including Provident Fund, Employees’ State Insurance dues, Income Tax, Investor Education and Protection Fund, Sales Tax, Wealth Tax, Customs Duty, Service Tax, Excise Duty, Cess and other statutory dues applicable to it with the appropriate authorities.

(b) We are informed that there are no undisputed statutory dues as at the year end, outstanding for a period of more than six months from the date they became payable.

(c) According to the records of the company, the details of disputed dues of Income Tax, Sales Tax and Excise duty & Cess are enclosed in Annexure A.

x. The Company does not have accumulated losses at the end of the financial year 31st March 2011. Further, the Company has not incurred cash losses during the financial year ended 31st March 2011 and in the immediately preceding financial year ended 31st March 2010.

xi. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions and banks.

xii. According to information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii. The Company is not a Chit Fund / Nidhi / Mutual Benefit Fund / Society to which the provisions of special statute relating to Chit Fund are applicable.

xiv. As the Company is not dealing or trading in shares, securities, debentures and other investments, paragraph 4(xiv) of the Order is not applicable.

xv. According to the information and explanations given to us, the Company has not given any guarantee during the year for loans taken by others from banks or financial institutions.

xvi. In our opinion, the term loans have been applied for the purpose for which they were raised.

xvii. According to the information and explanations given to us and on an overall examination the Balance Sheet of the Company, we report that during the year short-term funds have not been used to finance long-term investments.

xviii. The Company has not made preferential allotment of shares during the year.

xix. The Company has not issued debentures during the year.

xx. The Company has not raised money by public issue during the year.

xxi. On the basis of our examination and according to the information and explanation given to us, no material fraud on or by the Company has been noticed or reported.

For PATEL, SHAH & JOSHI CHARTERED ACCOUNTANTS Firm Regn. No. 107768W

CA JAYANT I. MEHTA PARTNER Membership Number - 42630

Nagpur 27th May 2011


Mar 31, 2010

1. We have audited the attached Balance Sheet of SUNFLAG IRON AND STEEL COMPANY LIMITED as at 31st March 2010, the Profit and Loss account for the year ended on that date and the Cash Flow Statement for the year ended on that date both annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditors Report) Order, 2003 ("CARO") issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, and according to the information and explanation given to us during the course of the audit and on the basis of such checks as we consider appropriate, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order, to the extent applicable.

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

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

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

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

(iv) In our opinion, the Balance Sheet, the Profit and Loss account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(v) On the basis of written representations received from the directors as on 31st March 2010 and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 31st March 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance sheet, of the state of affairs of the Company as at 31st March 2010;

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

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

ANNEXURE TO THE AUDITORS REPORT

Referred to in paragraph (3) of our Report of even date on the accounts of SUNFLAG IRON AND STEEL COMPANY LIMITED for the year ended 31st March 2010

i. (a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) A major proportion of the assets have been physically verified by the management in accordance with a phased programme of verification adopted by the Company. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and the nature of its assets. As informed to us, no material discrepancy has been noticed on such verification.

(c) During the year Company has not disposed of any substantial part of fixed asset which affect going concern assumption.

ii. (a) We are informed that during the year the management has physically verified the inventories. In case of material lying with third parties, certificates confirming stock have been received in respect of a substantial portion of stock held. In our opinion, the frequency of verification is reasonable.

(b) According to the information and explanations given to us, the procedures of physical verification of inventories followed by the management is reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) According to the information and explanations given to us the Company has maintained proper records of inventories. Discrepancies noticed on verification between physical stocks and the book records were not material.

iii. (a) According to the information and explanations given to us, the Company has, during the year, granted a further unsecured loan to its subsidiary Khapa Coal Company Private Limited of Rs. 6,95,97,000/- covered in the register maintained under Section 301 of the Companies Act, 1956.

(i) The maximum amount involved during the year and the year-end balance of such loan was Rs. 6,95,97,000/-

(ii) There is no stipulation as to the rate of interest, repayment or other terms and conditions of the loan given by the Company to its subsidiary company. Hence we cannot express our opinion as to the regularity of payment of the principal amount/interest is regular nor can the loan be said to be overdue.

(b) According to the information and explanations given to us the Company has, during the year, not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, paragraphs 4 (iii) (e), (f) and (g) of the Order are not applicable.

iv. In our opinion, and according to the information and explanations given to us, having regards to the explanations that some of the items purchased are of a special nature and suitable alternative sources do not exist for obtaining comparable quotations, there are adequate internal control procedures commensurate with size of the Company and the nature of its business with regards to the purchase of inventory, fixed assets and with regards to the sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control.

v. (a) To the best of our knowledge and belief and according to the information and explanation given to us, we are of the opinion that the transactions that need to be entered into the register maintained under Section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and having regards to our comment in paragraph (iv) above and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of Rupees five lacs in respect of any party during the year have been made at prices which are reasonable, having regard to the prevailing market price at the relevant time where such market prices are available.

vi. The Company has not accepted any deposit from the Public.

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

viii. We have broadly reviewed the records maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determining whether they are accurate or complete.

ix. (a) According to the information and explanations given to us and the records of the Company examined by us, the Company has been regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance dues, Income Tax, Investor Education and Protection Fund, Sales Tax, Wealth Tax, Customs Duty, Service Tax, Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities. We are informed that there are no undisputed statutory dues as at the year end outstanding for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no disputed dues of Income Tax, Service Tax, Wealth Tax and Cess, which have not been deposited.

(c) The amount of disputed dues as at 31st March 2010 in respect of Sales Tax and Excise Duty aggregated to Rs. 280.33 lacs and Rs. 39.96 lacs respectively and these amounts have not been deposited by the Company, since these matters are pending with the respective Authorities as per Annexure A.

x. The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the financial year and in the immediately preceding financial year.

xi. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions and banks.

xii. According to information and explanations given to us and based on the documents and records produced to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities, accordingly paragraph 4 (xii) of the Order is not applicable.

xiii. In our opinion and according to the information and explanation given to us, the Company is not a Chit Fund/ Nidhi/ Mutual Benefit Fund/ Society to which the provision of special statute relating to Chit Fund is applicable. Accordingly, paragraph 4 (xiii) of the Order is not applicable.

xiv. As the Company is not dealing or trading in shares, securities, debentures and other investments, paragraph 4(xiv) of the Order is not applicable.

xv. According to the information and explanations given to us, the company has given corporate guarantee during the year to Messrs Khappa Coal Company Private Limited for Bank guarantee. No guarantee given for any loan taken by others from banks or financial institutions.

xvi. In our opinion, the term loans have been applied for the purpose for which they were raised.

xvii. According to the information and explanations given to us and on an overall examination the Balance sheet of the Company, we report that during the year short-term funds have not been used to finance long-term investments and vise-versa.

xviii. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956 during the year.

xix. The Company has not issued any debentures during the year.

xx. The Company has not raised any money by way public issue during the year.

xxi. On the basis of our examination and according to the information and explanation given to us, no fraud, on or by the Company, has been noticed or reported during the course of our audit. Annexure - A

Statement of unpaid disputed statutory dues and annexure to report as at 31st March 2010

Period to which the Amount Particulars amount related (various (Rs. in 000) years covering the period) A. Excise Duty

Deptt.s show causes Excise duty 29,217 2000 - 2003

Excise duty 5,531 2008 - 2009 Excise duty 2,903 2009 - 2010

Departmental appeals Excise duty (Modvat Credit) 187 1994 - 1996

Deptt.s show cause Excise duty (Modvat Credit) 707 2008 - 2009

Deptt.s show cause Excise duty 1,418 1994 - 1995

39,963

B. Sales Tax

Companys appeals Sales tax 280,336

280,336

Particulars Forum where dispulte is pending

A. Excise Duty Commissioner, Central Excise

Deptts show Causes Commissioner, Central Excise Commissioner, Central Excise Departmental appeals Tax Appellate Tribunal

Deptts show cause Tax Appellate Tribunal

Deptts show caise Commissioner of Customs

B. Sales Tax Companys appeals High Court

For PATEL, SHAH & JOSHI

CHARTERED ACCOUNTANTS

CA JAYANT I. MEHTA

Mumbai PARTNER

31st May 2010 Membership Number - 42630

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