Mar 31, 2021
Report on the Audit of the Standalone Financial
Statements
1. We have audited the standalone financial statements of IL&FS Engineering and Construction Company Limited (âthe Companyâ), which comprise the standalone balance sheet as at March 31, 2021, the standalone statement of profit and loss (including other comprehensive income), standalone statement of changes in equity and standalone statement of cash flows for the year then ended, and notes to the standalone financial statements, including a summary of the significant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the âBasis for Qualified Opinion'' paragraph below, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (âActâ) 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, 2021, loss and other comprehensive income, changes in equity and its cash flows for the year then ended.
3. We draw attention to the following notes to the standalone financial statements:
a) . Note 52 relating to non-recognition of interest expense
for the period amounting to Rs. 428.17 Crores (excluding penal interest) on the borrowings availed by the Company considering the process initiated for submission of a resolution proposal to lenders for restructuring of existing debt.
i. Consequently, interest expense, loss for the year are understated by Rs. 428.17 Crores approximately;
ii. Retained earnings (accumulated loss) and Interest Payable is understated by Rs. 862.67 Crores approximately.
b) . Note 56: Deferred tax asset classified as part of non
current assets and forming part of stand alone finance statements amounting to Rs. 242.99 Crores as at March 31, 2021 represents amounts recognised by the Company in earlier years. Considering the material uncertainty related to going concern that exists in the Company, the threshold of reasonable certainty for recognising the deferred tax assets as per Ind AS 12- Income Taxes has not been met. Consequently, deferred tax assets are overstated and loss for the year and retained earnings (accumulated losses) are under stated by Rs. 242.99 Crores.
4. We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section
143(10) of the Act. Our responsibilities under those SAs are further described in the Auditor''s Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.
Material uncertainty related to going Concern:
5. Attention is invited to Note 30 regarding a likely significant reduction in the Company''s future income from operations in the absence of new business orders and the other matters stated in the said Note. The events and conditions as stated in the said Note 30, indicate a material uncertainty which cast a significant doubt on the Company''s ability to continue as a going concern, and therefore it may be unable to realise its assets and discharge its liabilities including potential liabilities in the normal course of business. The ability of the Company to continue as a going concern is solely dependent on the finalisation and approval of the resolution plan, which is not wholly within the control of the Company.
The Management of the Company has prepared these financial results on going concern basis based on their assessment of the successful outcome of the finalisation and approval of the resolution process.
Our opinion is not modified in respect of this matter. Emphasis of Matter:
6. We draw attention to the following notes to the standalone financial statements:
a. Note 31 (v) regarding ongoing investigations by Serious Fraud Investigation Office of Ministry of Company Affairs (SFIO), Enforcement Directorate (ED) and other regulators / agencies against Infrastructure Leasing & Financial Services Limited (âIL&FS'' or âthe Holding Company'') and some of its subsidiaries (including the Company). The financial statements of the Company for the year ended on March 31, 2021 do not include adjustments, if any, that may arise on account of the ongoing investigations by the investigating and other agencies and Regulatory Authorities. The management, at this juncture, cannot foresee any adjustments to be made in these financial statements of the Company as a result of any such investigations.
b. Note 48 (a) regarding long pending trade receivables, retention money and contract assets (Project work in progress) from the completed projects aggregating to Rs 54.13 Crores, Rs 26.90 Crores and Rs 33.62 Crores respectively for the reasons stated in the relevant notes to the accompanying standalone finance statements.
For the reasons stated in the relevant notes to the accompanying standalone financial statement management, based on internal assessment, is of the opinion that the amounts carrying value of these balances are fully recoverable.
c. Note 51 regarding non receipt of confirmation of balances for outstanding borrowings to the extent of Rs 387.89 Crores and for the carrying value of advances to and payable to vendors for supply of materials or services.
d. Note 53 regarding Compliant lodged by the management with the Economic Offence Wing, Hyderabad in connection with certain alleged irregularities etc as reported in special audit report issued by internal auditor of the company.
Amounts stated in Note 31 (v), Note 48 (a) Note 51 and Note 53 cannot be presently determined and for the reasons stated in the relevant notes to the accompanying standalone financial statements. Accordingly, no adjustment has been made in the carrying value of the aforesaid assets.
Our opinion is not modified in respect of the aforementioned matters.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the âBasis for Qualified Opinion'' and Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. For each matter below, our description of how our audit addressed the matter is provided in that context.
Description of Key Audit Matter:
Key audit matter |
How the matter was addressed in our audit |
Estimated Cost to complete the Project: |
|
Refer note 3 (a) to the standalone financial statements |
|
The Company recognises revenue under percentage of completion method as specified under Indian Accounting Standard (IND AS)-115 - Revenue from contract with customers. Recognition of revenue requires estimation of total contract cost which comprises of the actual cost incurred till date and estimated cost further to be incurred to complete the projects. Estimation of the cost to complete involves exercise of significant judgement by management including assessment of technical data and hence identified as Key Audit Matter. |
Our audit approach was a combination of test of compliance of company''s internal controls and substantive procedures which included the following: ⢠Tested the design, implementation and operating effectiveness of the controls surrounding determination and approval of estimated cost. ⢠Verified the contracts with customers on test check basis and the actual cost incurred and terms and condition related to the variation of the cost. ⢠Obtained and relied on the internal assessments supporting the accuracy of the estimate of the total cost of the project for selected contracts on test check basis. |
Trade receivables and Contract Assets |
|
Refer Note: 7 and 12 to the standalone financial statements |
|
Trade receivables, retention money and contract assets amounting to Rs 161.42 Crores Rs. 433.86 Crores and Rs 583.09 Crores respectively, represents approximately 48.36 % of the total assets of the Company as at March 31, 2021. In assessing the recoverability of the aforesaid balances, management''s judgement involves consideration of aging status, evaluation of litigations and the likelihood of collection based on the terms of the contract. Management estimation is required in the measurement of work completed during the period for recognition of unbilled revenue. We considered this as key audit matter due to the materiality of the amounts and significant estimates and judgements as stated above. |
Our audit procedures amongst others included the following: ⢠We understood and tested on a sample basis the design and operating effectiveness of management control over the recognition of the trade receivables, retention money and contract assets. ⢠We performed test of details and tested relevant contracts, for the provisions made by the management towards doubtful and credit loss. ⢠We tested the aging of trade receivables at year end. ⢠We performed test of details and tested relevant contracts and documents with specific focus on measurement of work completed during the period for material unbilled revenue balances included in contract asset. ⢠We performed additional procedures, in respect of material over-due trade receivables and long outstanding contract assets, i.e. tested historical payment records. ⢠We assessed the allowance for impairment made by management. |
Provisions and Contingent Liabilities: |
|
Refer note 3 (p) to the standalone financial statements |
|
The Company is involved in various taxes and other disputes for which final outcomes cannot be easily predicted and which could potentially result in significant liabilities. The assessment of the risks associated with the litigations is based on complex assumptions, which require the use of judgements and such judgements relates, primarily, to the assessment of the uncertainties connected to the prediction of the outcome of the proceedings and to the adequacy of the disclosures in the financial statements. Because of the judgement required, the materiality of such litigations and the complexity of the assessment process, the area is a key matter for our audit. |
Our audit approach was combination of test of compliance of company''s internal controls and substantive procedures which included the following: ⢠Assessing the appropriateness of the design and implementation of the Company''s controls over the assessment of litigations and completeness of disclosures. ⢠Testing the supporting documentation for the positions taken by the management, conducting meetings with in-house legal counsel and/or legal team and reviewing the minutes of Board and subcommittee, to confirm the operating effectiveness of these controls. ⢠Review of assumptions used in the evaluation of potential risk and tax risks performed by the legal and tax department of the Company considering the legal precedence and other rulings in similar cases. ⢠Consideration of recent judgements passed by the appropriate authorities in order to challenge the basis used for the accounting treatment and resulting disclosures. |
Information Other than the standalone financial statements and Auditorsâ Report Thereon:
The Company''s management and Board of Directors are responsible for the other information. The other information comprises the information included in the Director''s Report, Management Discussion and Analysis and Corporate Governance Report but does not include the standalone and consolidated financial statements and our auditor''s reports there on.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
When we read the annual report, if we conclude that there is material misstatement therein, we are required to communicate the matter to those charged with governance.
Managementâs Responsibility for the standalone financial statements:
The Company''s Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs, profit and other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, management and Board of Directors are responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Board of Directors is also responsible for overseeing the Company''s financial reporting process.
Auditorâs Responsibilities for the Audit of the standalone financial statements:
Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
⢠Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
⢠Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls with reference to standalone financial statements in place and the operating effectiveness of such controls.
⢠Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
⢠Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
⢠Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors'' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other Legal and regulatory requirements:
1. As required by the Companies (Auditors'' Report) Order, 2016 (âthe Orderâ) issued by the Central Government in terms of section 143 (11) of the Act, we give in the âAnnexure Aâ a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
2. As required by Section 143(3) of the Act, we report that:
a. Except for the matters stated in the âBasis for qualified opinionâ paragraph hereinabove, we have obtained all the information and explanations which we had sought and to the best of our knowledge and belief were necessary for the purposes of our audit.
b. Except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph above, in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
c. The standalone balance sheet, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of cash flows dealt with by this Report are in agreement with the books of account.
d. Except for the possible effect of the matters described in the Basis for Qualified Opinion paragraph above, in our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards specified under section 133 of the Act.
e. The matter relating to going concern described under Material Uncertainty Related to Going Concern paragraph above, and the matters stated at paragraphs 6 (a) to (d) under Emphasis of Matter paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.
f. On the basis of the written representations received from the directors as on 31 March 2021 taken on record by
the Board of Directors, none of the directors are disqualified as on 31 March 2021 from being appointed as a director in terms of Section 164(2) of the Act.
g. The qualifications relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above.
h. With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in âAnnexure Bâ.
i. With respect to the matter to be included in the Auditors'' Report under section 197 (16), according to the information and explanations given to us, the company has not paid any remuneration to its directors during the current year except sitting fee paid to the non- executive / independent directors. The same is in accordance with the applicable provisions of the Companies Act, 2013.
j. With respect to the other matters to be included in the Auditors'' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements (Refer Note - 31 to the Standalone 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;
Chartered Accountants ICAI Firm Registration Number: 000459S
Partner
Membership Number: 201570
Place: Hyderabad UDIN: 21201570AAAAFS7050
Date: September 02, 2021
Mar 31, 2018
Report on the Audit of Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of IL&FS Engineering and Construction Company Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss, the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and summary of the significant accounting policies and other explanatory information (hereinafter referred to as standalone Ind AS financial statements).
Managementâs Responsibility for the Standalone Ind AS Financial Statements
The Companyâs Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Actâ) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the state of affairs, profit (including other comprehensive income), changes in equity and cash flows 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.
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.
In preparing the standalone Ind AS financial statements, management is responsible for assessing the Companyâs ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Auditorsâ Responsibility
Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit.
We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.
We conducted our audit of the standalone Ind AS financial statements 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 auditorâs 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 Companyâs 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 Companyâs Board of Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.
We are also responsible to conclude on the appropriateness of managementâs use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entityâs ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditorâs report to the related disclosures in the standalone Ind AS financial statements or, if such disclosures are inadequate, to modify the opinion. Our conclusions are based on the audit evidence obtained up to the date of the auditorâs report. However, future events or conditions may cause an entity to cease to continue as a going concern. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone Ind AS financial statements.
Basis for Qualified opinion
As more fully explained in Note 51 of the accompanying standalone Ind AS financial statements, as at March 31, 2018, the Company has investment (including advance of Rs. 2.58 Crores) amounting to Rs. 35.77 Crores made in an overseas subsidiary. Based on the latest available unaudited financial statements of the aforesaid subsidiary as at March 31, 2018, the net worth of the subsidiary is fully eroded and the Company may have potential obligation to share further liabilities of the said subsidiary, which is presently under negotiation and hence undeterminable. Based on the reasons fully explained in the aforesaid note, the management is of the view that no provision is required for diminution in the value of such investment/ potential obligation, as the Company is evaluating options to restore the carrying value of the investment. However, in the absence of sufficient and appropriate audit evidence, we are unable to comment on the carrying value of such investment, potential obligation and any other consequential impacts, if any, that may be required in this regard in the standalone Ind AS financial statements.
Qualified opinion
In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above, the aforesaid standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Company as at March 31, 2018, its profit (including other comprehensive income), changes in equity and its cash flows for the year ended on that date.
Emphasis of matter
We draw attention to:
a. Note 47 of the accompanying standalone Ind AS financial statement regarding Rs. 259.67 Crores investment of the Company in Pass Through Certificates ("PTCâ) issued by the Maytas Investment Trust ("the Trustâ) and receivables, loans and advances and investments aggregating to Rs. 146.19 Crores which are dependent upon recovery of capacity charges and supplies/availability of natural gas to a gas based power generating plant, increase in traffic on road investments, final award of the claim and positive outcome of the litigations in the investee companies, etc. Based on internal assessment, legal advice and fair valuation, management does not currently envisage any diminution in the carrying value of aforesaid assets.
b. Note 50 of the accompanying standalone Ind AS financial statement regarding amount due from customers (project work-in-progress). The Company had recognised claims in case of various projects of which balance as at March 31, 2018 aggregates to Rs. 404.77 Crores (including claims of Rs. 112.53 Crores accounted during the year ended March 31, 2018) and interest of Rs. 393.76 Crores (including interest of Rs. 205.29 Crores recognised during the year ended March 31, 2018) for non-payment of project dues, delays due to handing over of the land, drawings, etc. for project execution which are in various stages of arbitration/ appeal with Honourable High Court of New Delhi/advanced stages of negotiations with customer and have been recognised based on Honourable Supreme Court order/ arbitration award/completion of arbitration proceedings/ provisions in agreement and supported by the Extension of Time recommended by the Independent Engineers.
c. Note 53 of the accompanying standalone Ind AS financial statements regarding Inter Corporate Deposits (ICDs) amounting to Rs. 343.78 Crores which is under litigation. Based on internal evaluation and legal opinion, management is of the opinion that the Company has the ability to ultimately recover the aforesaid ICDs.
d. Note 52 of the accompanying standalone Ind AS financial statements. During the year, a project was terminated due to dispute with customer against which the Company has initiated legal proceedings. The Company has net carrying value of project assets pertaining to this project amounting to Rs. 99.34 Crores (including Bank Guarantees encashed by the customer amounting to Rs. 39.97 Crores) which are under arbitration. Based on legal opinion and internal assessment, management is of the view that the aforesaid assets are fully recoverable, thus no provision considered necessary for the same.
The ultimate outcome of the above matters cannot presently be determined, pending approvals, acceptances, legal interpretations, conclusion of legal proceedings, resolution of uncertainty around availability of gas, achievement of traffic projections, favourable settlement of claims and ultimate realisation etc., as referred to in the relevant notes to the accompanying standalone Ind AS financial statements referred above, accordingly no adjustment has been made in the carrying value of the aforesaid assets. Our opinion is not modified in respect of the aforementioned matters.
Other matters
The comparative financial information of the Company for the year ended March 31, 2017 and the transition date opening balance sheet as at April 1, 2016 included in these standalone Ind AS financial statements, are based on the previously issued statutory financial statements prepared in accordance with the Companies (Accounting Standards) Rules, 2006 audited by the predecessor auditor whose report for the year ended March 31, 2017 and March 31, 2016 dated May 29, 2017 and May 30, 2016 respectively expressed a modified opinion on those standalone financial statements, as adjusted for the differences in the accounting principles adopted by the Company on transition to the Ind AS, which have been audited by us.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditorâs Report) Order, 2016 ("the Order"), issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act, we report that:
a) We have sought and except for the matter described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;
b) Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, 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 Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;
d) Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards specified under section 133 of the Act, read with relevant rules issued thereunder;
e) The matter described in the Basis for Qualified Opinion paragraph and Emphasis of matter paragraph above, in our opinion, may have an adverse effect on the functioning of the Company;
f) On the basis of the written representations received from the directors as on March 31, 2018 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2018 from being appointed as a director in terms of Section 164(2) of the Act;
g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above;
h) With respect to the adequacy of the internal financial controls over financial reporting with reference to Ind AS financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure Bâ to this report; and
i) With respect to the other matters to be included in the Auditorsâ 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 31(a) to the standalone Ind AS financial statements;
ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses on long-term contracts - Refer Note 20 to the standalone Ind AS financial statements. The Company has no derivative contracts;
iii. There were no amounts which were required to be transferred to Investor Education and Protection Fund by the Company; and
iv. The disclosures in the standalone Ind AS financial statements regarding holdings as well as dealings in specified bank notes during the period from November 8, 2016 to December 30, 2016 have not been made since they do not pertain to the financial year ended March 31, 2018. However amounts as appearing in the audited Standalone financial statements for the year ended March 31, 2017 have been disclosed - Refer Note 10 to the standalone Ind AS financial statements.
Annexure A to the Independent Auditorsâ Report on the Standalone Ind AS Financial Statements
With reference to Annexure A referred to in the Independent Auditorsâ Report of even date to the members of IL&FS Engineering and Construction Company Limited (âthe Companyâ) on the Standalone Ind AS financial statements for the year ended March 31, 2018, 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. Discrepancies noted on such verification were not material and have been properly dealt with in the books of account.
(c) Based on our audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to information and explanations given by the management, the title deeds of immovable properties included in fixed assets are held in the name of the Company,
ii. The management has conducted physical verification of inventories at reasonable intervals during the year. Discrepancies noted on physical verification of inventories were not material and have been properly dealt with in the books of account.
iii. According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly, the provisions of clause 3(iii) (a), (b) and (c) of the Order are not applicable to the Company and hence not commented upon.
iv. In our opinion and according to the information and explanations given to us, there are no loans, investments, guarantees and securities granted in respect of which provisions of Section 185 and Section 186 of the Companies Act, 2013 are applicable and hence not commented upon.
v. The Company has not accepted any deposits from the public.
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 Companies Act, 2013, related to the construction industry and construction of roads and other infrastructure projects, and are of the opinion that prima facie, the specified accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.
vii. (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident fund, Employeesâ state insurance, Income-tax, Sales tax, Service tax, Duty of custom, Duty of excise, Value added tax, Goods and Service tax, Cess and other material statutory dues have generally been regularly deposited during the year by the Company with the appropriate authorities, though there are slight delays in depositing Provident fund, Employeesâ state insurance and Income-tax and there are serious delays in depositing Goods and Service tax.
(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident fund, Employeesâ state insurance, Income-tax, Service tax, Sales-tax, Duty of custom, Duty of excise, Value added tax, Goods and Service tax, Cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.
(c) According to the records of the Company, the dues outstanding of Income tax, Sales tax, Service tax, Duty of custom, Duty of excise, Value added tax and Cess on account of any dispute, are as follows:
Name of the Statute |
Nature of dues |
Amount demanded (Rs. in Crore) |
Paid under protest (Rs. in Crore) |
Period to which the amount relates (Assessment years) |
Forum where dispute is pending |
AP Value Added Tax, 2005 |
Sales Tax and Penalty |
0.86 |
0.05 |
2005-06, 2006-07 and 2007-08 |
Sales Tax Appellate Tribunal, Hyderabad |
AP Value Added Tax, 2005 |
Penalty on Sales Tax |
0.36 |
0.18 |
2007-08 |
Appellate Deputy Commissioner, Hyderabad |
AP Value Added Tax, 2005 |
Sales Tax |
27.06 |
- |
2007-08 |
High Court of Judicature at Hyderabad for the states of Andhra Pradesh and Telangana |
Central Sales Tax Act,1956 |
Penalty for Sales Tax |
0.50 |
0.12 |
2002-03 and 2003-04 |
Sales Tax Appellate Tribunal, Hyderabad |
Central Sales Tax Act,1956 |
Penalty on Sales Tax |
0.70 |
0.20 |
2007-08 |
Appellate Deputy Commissioner, Chhattisgarh |
Finance Act, 1994 |
Service Tax |
9.70 |
- |
2007-08 and 2008-09 |
Commissioner of Customs & Central Excise, Hyderabad |
West Bengal Vat Act, 2003 |
Sales Tax |
0.06 |
- |
2009-10 |
Joint Commissioner of Commercial Taxes, Behrampore |
West Bengal Vat Act, 2003 |
Sales Tax |
1.52 |
- |
2008-09 |
West Bengal Appellate & Revisional Board |
AP Value Added Tax, 2005 |
Sales Tax |
0.92 |
0.51 |
2008-09 |
Appellate Deputy Commissioner, Hyderabad |
Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987 |
Professional Tax |
0.06 |
2008-09 |
Commercial tax officer, Hyderabad |
Name of the Statute |
Nature of dues |
Amount demanded (Rs. in Crore) |
Paid under protest (Rs. in Crore) |
Period to which the amount relates (Assessment years) |
Forum where dispute is pending |
AP Value Added Tax, 2005 |
Sales Tax |
1.85 |
- |
2005-06, 2006-07, 2007-08, 2008-09 and 2009-10 |
Commercial Tax Officer, Hyderabad |
AP Value Added Tax, 2005 |
Sales Tax |
4.12 |
- |
2009-10, 2010-11, 2011-12 and 2012-13 |
Assistant Commissioner of Sales Tax (Enforcement), Hyderabad |
AP Value Added Tax, 2005 |
Sales Tax |
0.21 |
0.03 |
2014-15 |
Appellate Deputy Commissioner, Vishakapatnam |
MP Entry Tax Act, 1976 |
Entry Tax |
0.27 |
0.03 |
2013-14 |
Asst. Commissioner commercial tax officer (Audit), Jabalpur, MP |
Orissa Entry Tax Act, 1999 |
Entry Tax |
0.21 |
0.07 |
April 1, 2010 to March 31, 2014 |
Joint Commissioner of Sales Tax, Cuttack |
West Bengal Vat Act, 2003 |
Sales Tax |
0.11 |
- |
2011-12 |
Senior Joint Commissioner, West Bengal |
West Bengal Vat Act, 2003 |
Sales Tax |
1.36 |
0.20 |
2012-13 |
Senior Joint Commissioner, West Bengal |
Finance Act, 1994 |
Service Tax |
3.47 |
0.26 |
October 2010 to March 2015 |
Principal commissioner of service tax, Hyderabad |
AP Value Added Tax, 2005 |
Sales Tax |
0.11 |
- |
2012-13 |
Commercial Tax Officer, Hyderabad |
Central Excise Act, 1944 |
Excise Duty |
12.04 |
0.50 |
February 2012 to February 2016 |
Commissioner of Central Excise, Gurgaon |
Maharashtra Vat Act, 2002 |
Sales tax |
0.35 |
0.01 |
2011-12 |
Sales Tax Appeals Kolhapur Maharashtra |
Odisha Vat Act, 2004 |
Sales tax |
0.14 |
- |
April 2014 to September 2015 |
Joint Commissioner of commercial tax, Cuttack |
The Odisha Entry tax Act, 1999 |
Entry tax |
0.03 |
- |
April 2014 to September 2015 |
Joint Commissioner of commercial tax, Cuttack |
Maharashtra Vat Act, 2002 |
Sales Tax and interest |
0.71 |
0.01 |
2013-14 |
Deputy Commissioner of sales tax (Appeals), Kolhapur |
Income Tax Act, 1961 |
Income Tax |
39.82 |
39.21 |
2007-08 to 2011-12 |
Commissioner of Income Tax (Appeals), Hyderabad |
viii. According to the information and explanations given by the management, the Company has not defaulted in repayment of loans or borrowings to financial institutions and banks. The Company did not have any dues to Government, nor has it issued any debentures as at the balance sheet date.
ix. According to information and explanations given by the management and on an overall examination of the balance sheet, we report that, monies raised by the Company by way of term loans were applied for the purposes for which those were raised.
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 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 Company has not paid / provided managerial remuneration to which requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013 and hence not commented upon.
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 Companies Act, 2013 where applicable and the details have been disclosed in the notes to the Standalone Ind AS financial statements, as required by the applicable accounting standards.
xiv. During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures. Therefore, the provisions of clause 3(xiv) of the order are not applicable to the Company 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 them as referred to in section 192 of Companies Act, 2013.
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 B TO THE INDEPENDENT AUDITORSâ REPORT ON THE STANDALONE IND AS FINANCIAL STATEMENTS
Annexure B referred to in paragraph 2 (h) of our Report of even date to the members of IL&FS Engineering and Construction Company Limited on the standalone Ind AS financial statements for the year ended March 31, 2018.
Report on the Internal Financial Controls under Clause (i) of sub-section 3 of Section 143 of the Companies Act, 2013 (âthe Actâ)
We have audited the internal financial controls over financial reporting of IL&FS Engineering and Construction Company Limited (âthe Companyâ) as of March 31, 2018 in conjunction with our audit of the Standalone Ind AS financial statements of the Company for the year ended on that date.
Managementâs Responsibility for Internal Financial Controls
The Companyâs 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 (âICAIâ). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Companyâs policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.
Auditorâs Responsibility
Our responsibility is to express an opinion on the Companyâs internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the âGuidance Noteâ) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under Section 143(10) of the Act, 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 ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditorâs judgement, including the assessment of the risks of material misstatement of the Standalone Ind AS financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the Companyâs internal financial controls system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A companyâs internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Standalone Ind AS financial statements for external purposes in accordance with generally accepted accounting principles. A companyâs internal financial control over financial reporting includes those policies and procedures that:
1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of Management and directors of the company; and
3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the companyâs assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Qualified Opinion
According to the information and explanations given to us and based on our audit, the following material weakness has been identified in the operating effectiveness of the Companyâs internal financial controls over financial reporting as at March 31, 2018:
a) The Companyâs internal financial controls system over estimation of diminution in the carrying value of investments and accrual of potential obligation in case of an overseas subsidiary was not operating effectively which could potentially result in misstatement in the financial statements by way of Company not providing for adjustments/ provisions, if any, that may be required.
A âmaterial weaknessâ is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Companyâs annual or interim financial statements will not be prevented or detected on a timely basis.
In our opinion, the Company has, in all material respects, maintained adequate internal financial controls over financial reporting as of March 31, 2018, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India, and except for the possible effects of the material weakness described above on the achievement of the objectives of the control criteria, the Companyâs internal financial controls over financial reporting were operating effectively as of March 31, 2018.
Explanatory paragraph
We also have audited, 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, the standalone Ind AS financial statements of the Company, which comprise the Balance Sheet as at March 31, 2018, and the related Statement of Profit and Loss, the Statement of Changes in Equity and the Statement of Cash Flows Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2018 standalone Ind AS financial statements of the Company and this report affects our report dated May 30, 2018, on which we have expressed a qualified opinion on those standalone Ind AS financial statements.
For B S R & Associates LLP For M. Bhaskara Rao & Co.
Chartered Accountants Chartered Accountants
ICAI Firm Registration Number: ICAI Firm Registration Number:
116231W/ W-100024 000459S
Amit Kumar Agarwal V K Muralidhar
Partner Partner
Membership Number: 214198 Membership Number: 201570
Date: May 30, 2018 Date: May 30, 2018
Place: Mumbai Place: Mumbai
Mar 31, 2017
To the Members of
IL&FS Engineering and Construction Company Limited
Report on the Financial Statements
We have audited the accompanying standalone financial statements of IL&FS Engineering and Construction Company Limited ("the Companyâ), which comprise the Balance Sheet as at March 31, 2017, the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information
Managementâs Responsibility for the Financial Statements
The Companyâs Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Actâ) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act, and Companies (Accounting Standards) Amendment Rules, 2016. 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditorâs Responsibility
Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under. We conducted our audit in accordance with the Standards on Auditing, issued by the Institute of Chartered Accountants of India, 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 auditorâs judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Companyâs preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Companyâs Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone financial statements.
Basis for qualified opinion
As more fully explained in Note 49 of the accompanying standalone financial statements, as at March 31, 2017, the Company has investment amounting to Rs. 33.19 Crores made in an overseas subsidiary. Based on the latest available unaudited financial statements of the aforesaid subsidiary as on March 31, 2017, the net worth of the subsidiary is fully eroded and the Company may have potential obligation to share further liabilities of the said subsidiary, which is presently under negotiation and hence undeterminable. Based on the reasons fully explained in the aforesaid note, the management is of the view that no provision is required for diminution in the value of such investment/potential obligation, as the Company is evaluating options to restore the carrying value of the investment. However, in the absence of sufficient and appropriate audit evidence, we are unable to comment on the carrying value of such investment, potential obligation and any other consequential impacts, if any, that may be required in this regard in the standalone financial statements.
Qualified opinion
In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2017, of its profit and its cash flows for the year ended on that date.
Emphasis of matter We draw attention to:
a. Note 47 of the accompanying standalone financial statement regarding Rs. 259.67 Crores investment of the Company in Pass Through Certificates ("PTCâ) issued by the Maytas Investment Trust ("the Trustâ) and receivables, loans and advances and investments aggregating to Rs. 199.83 Crores which are dependent upon recovery of capacity charges and supplies/ availability of natural gas to a gas based power generating plant, increase in traffic on road investments, final award of the claim and positive outcome of the litigations in the investee companies, etc. Based on internal assessment, legal advice and fair valuation, management does not currently envisage any diminution in the carrying value of aforesaid assets.
b. Note 48 of the accompanying standalone financial statement regarding amount due from customers (project work-in-progress). The Company had recognized claims in case of various projects of which balance as at March 31, 2017 aggregates to Rs. 292.24 Crores (including claims accounted during the year amounting to Rs. 109.44 Crores) and interest of Rs. 188.58 Crores (including interest of Rs. 88.13 Crores recognized during the year ended March 31, 2017) for non-payment of project dues, delays due to handing over of the land, drawings, etc. for project execution which are in various stages of arbitration/ appeal with Honourable High Court of New Delhi/ advanced stages of negotiations with customer and have been recognized based on Honourable Supreme Court order/ arbitration award/ completion of arbitration proceedings/ provisions in agreement and supported by the Extension of Time recommended by the Independent Engineers. Further, in one of the aforesaid projects, the customer has withheld an amount of Rs. 17.30 Crores as liquidated damages for delays in project completion which is also dependent on the aforesaid judicial proceedings. Based on expert opinion and internal assessment, the management is of the view that the claims including interest are tenable and there exist no uncertainty as to ultimate collection.
c. Note 29 of the accompanying standalone financial statements regarding Inter Corporate Deposits (ICDs) amounting to Rs. 343.78 Crores which is under litigation. Based on internal evaluation, other developments and expert advice, management is of the opinion that the Company has the ability to ultimately recover the aforesaid ICDs.
The ultimate outcome of the above matters cannot presently be determined, pending approvals, acceptances, legal interpretations, conclusion of legal proceedings, resolution of uncertainty around availability of gas, achievement of traffic projections, favourable settlement of claims and ultimate realization etc., as referred to in the relevant notes to the accompanying standalone financial statements referred above, accordingly no adjustment has been made in the carrying value of the aforesaid assets. Our opinion is not qualified in respect of the aforementioned matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditorâs 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 except for the matter described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;
(b) Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;
(c) The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;
(d) Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under section 133 of the Act and the Companies (Accounting Standards) Amendment Rules, 2016;
(e) The matter described in the Basis for Qualified Opinion paragraph and Emphasis of matter paragraph above, in our opinion, may have an adverse effect on the functioning of the Company;
(f) 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 Companies Act, 2013;
(g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above;
(h) 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 2â to this report; and
(i) With respect to the other matters to be included in the Auditorâs Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 27 (a) to the standalone financial statements;
ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses on long-term contracts
- Refer Notes 32 and 33 to the standalone financial statements. The Company has no derivative contract;
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company; and
iv. The Company has provided requisite disclosures in Note 17 to these standalone financial statements as to the holdings of Specified Bank Notes on November 08, 2016 and December 30, 2016 as well as dealings in Specified Bank Notes during the period from November 08, 2016 to December 30, 2016. However, as stated in Note 17 to these standalone financial statements amounts aggregating to Rs. 0.18 Crores as represented to us by the Management have been utilized for other than permitted transactions
Re: IL&FS Engineering and Construction Company Limited (âthe Companyâ)
(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. Discrepancies identified on such verification which were not material have been properly dealt within the books of account.
(c) Based on our audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to information and explanations given by the management, the title deeds of immovable properties included in fixed assets are held in the name of the Company.
(ii) The management has conducted physical verification of inventory at reasonable intervals during the year. Discrepancies noted on physical verification of inventories which were not material have been properly dealt with in the books of account.
(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly, the provisions of clause 3(iii)(a), (b) and (c) of the Order are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to us, there are no loans, investments, guarantees, and securities granted in respect of which provisions of section 185 and 186 of the Companies Act, 2013 are applicable and hence not commented upon.
(v) The Company has not accepted any deposits from the public.
(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 Companies Act, 2013, related to the construction industry and construction of roads and other infrastructure projects, and are of the opinion that prima facie, the specified accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.
(vii) (a) Undisputed statutory dues including provident
fund, employeesâ state insurance, income-tax, sales-tax, service tax, duty of custom, duty of excise, value added tax, cess and other material statutory dues have generally been regularly deposited with the appropriate authorities though there has been a slight delay in a few cases.
(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employeesâ state insurance, income-tax, service tax, sales-tax, duty of custom, duty of excise, value added tax, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.
Annexure 1 to the Independent Auditorsâ Report
(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, service tax, duty of custom, duty of excise, value added tax and cess on account of any dispute, are as follows::
Name of the statute |
Nature of dues |
Amount demanded (Rs. In Crores) |
Paid Under Protest (Rs. In Crores) |
Period to which the amount relates (Assessment Years) |
Forum where dispute is pending |
AP Value Added Tax, 2005 |
Sales Tax and Penalty |
0.86 |
0.05 |
2005-06, 2006-07 and 2007-08 |
Sales Tax Appellate Tribunal, Hyderabad |
AP Value Added Tax, 2005 |
Penalty on Sales Tax |
0.36 |
0.18 |
2007-08 |
Appellate Deputy Commissioner, Hyderabad |
AP Value Added Tax, 2005 |
Sales Tax |
27.06 |
2007-08 |
High Court of Judicature at Hyderabad for the states of Andhra Pradesh and Telangana |
|
Central Sales Tax Act,1956 |
Penalty on Sales Tax |
0.50 |
0.12 |
2002-03 and 2003-04 |
Sales Tax Appellate Tribunal, Hyderabad |
Central Sales Tax Act,1956 |
Penalty on Sales Tax |
0.70 |
0.20 |
2007-08 |
Appellate Deputy Commissioner, Chhattisgarh |
Finance Act 1994 |
Service Tax |
9.70 |
- |
2007-08 and 2008-09 |
Commissioner of Customs & Central Excise, Hyderabad |
Finance Act 1994 |
Penalty on Service Tax |
0.28 |
- |
2006-07 and 2007-08 |
The Customs, Excise and Service Tax Appellate Tribunal, Bengaluru |
West Bengal Vat Act, 2003 |
Sales Tax |
0.06 |
- |
2009-10 |
Joint Commissioner of Commercial Taxes, Behrampore |
West Bengal Vat Act, 2003 |
Sales Tax |
1.52 |
- |
2008-09 |
West Bengal Appellate & Revisional Board |
AP Value Added Tax, 2005 |
Sales Tax |
0.92 |
0.51 |
2008-09 |
Appellate Deputy Commissioner, Hyderabad |
Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987 |
Professional Tax |
0.06 |
2008-09 |
Commercial Tax Officer, Hyderabad |
|
Finance Act 1994 |
Service Tax |
0.12 |
- |
2010-11 to 2011-12 |
Superintendent of Service Tax, Hyderabad |
AP Value Added Tax, 2005 |
Sales Tax |
1.85 |
2005-06 2006-07 2007-08 2008-09 and 2009-10 |
Commercial Tax Officer, Hyderabad |
|
AP Value Added Tax, 2005 |
Sales Tax |
4.12 |
2009-10 2010-11 2011-12 and 2012-13 |
Assistant Commissioner of Sales Tax (Enforcement), Hyderabad |
|
AP Value Added Tax, 2005 |
Sales Tax |
0.21 |
0.03 |
2014-15 |
Appellate Deputy Commissioner, Vishakapatnam |
MP Entry Tax Act, 1976 |
Entry Tax |
0.27 |
0.03 |
2013-14 |
Asst. Commissioner commercial tax officer (Audit), Jabalpur, MP |
Orissa Entry Tax Act, 1999 |
Entry Tax |
0.21 |
0.07 |
April 01, 2010 to March 31, 2014 |
Joint Commissioner of Sales Tax, Cuttack |
West Bengal Vat Act, 2003 |
Sales Tax |
0.11 |
- |
2011-12 |
Senior Joint Commissioner, West Bengal |
West Bengal Vat Act, 2003 |
Sales Tax |
1.36 |
0.20 |
2012-13 |
Senior Joint Commissioner, West Bengal |
Finance Act, 1994 |
Service Tax |
3.47 |
0.26 |
October 2010 to March 15 |
Principal commissioner of service tax, Hyderabad |
AP Value Added Tax, 2005 |
Sales Tax |
0.11 |
- |
2012-13 |
Commercial Tax Officer, Hyderabad |
Central Excise Act, 1944 |
Excise Duty |
12.04 |
0.50 |
February 2012 to February 2016 |
Commissioner of central excise, Gurgaon |
Income Tax Act, 1961 |
Income Tax |
1.23 |
0.62 |
2007-08 |
Commissioner of Income Tax (Appeals), Hyderabad |
Income Tax Act, 1961 |
Income Tax |
12.95 |
12.95 |
2008-09 |
|
Income Tax Act, 1961 |
Income Tax |
14.26 |
10.79 |
2009-10 |
|
Income Tax Act, 1961 |
Income Tax |
6.62 |
4.66 |
2010-11 |
|
Income Tax Act, 1961 |
Income Tax |
2.31 |
1.04 |
2011-12 |
(viii) According to information and explanations given by the management, the company did not have any outstanding loans or borrowings to financial institutions, Government and dues to Debenture holders as at the balance sheet date and there were no defaults as at the balance sheet date.
(ix) According to information and explanations given by the management and on an overall examination of the balance sheet, we report that, monies raised by the Company by way of term loans were applied for the purposes for which those were raised.
(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 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, we report that 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 Companies Act, 2013.
(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 Companies Act, 2013 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 by the management, the Company has complied with provisions of section 42 of the Companies Act, 2013 in respect of the preferential allotment of shares during the year. Based on our 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 the amounts raised, have been used for the purposes for which the funds were raised.
(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 Companies Act, 2013.
(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 AUDITORâS REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF IL&FS ENGINEERING AND CONSTRUCTION COMPANY LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (âthe Actâ)
We have audited the internal financial controls over financial reporting of IL&FS Engineering and Construction Company Limited ("the Companyâ) 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.
Managementâs Responsibility for Internal Financial Controls
The Companyâs 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 Companyâs policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditorâs Responsibility
Our responsibility is to express an opinion on the Companyâs internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Noteâ) and the Standards on Auditing as specified under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
An audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditorâs judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the internal financial controls over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A companyâs internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companyâs internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companyâs assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Qualified Opinion
According to the information and explanations given to us and based on our audit, the following material weakness have been identified in the operating effectiveness of the Companyâs internal financial controls over financial reporting as at March 31, 2017:
a. The Companyâs internal financial controls system over estimation of diminution in the carrying value of investments and accrual of potential obligation in case of an overseas subsidiary was not operating effectively which could potentially result in misstatement in the financial statements by way of Company not providing for adjustments/ provisions, if any, that may be required.
A âmaterial weaknessâ is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the companyâs annual or interim financial statements will not be prevented or detected on a timely basis.
In our opinion, the Company has, in all material respects, maintained adequate internal financial controls over financial reporting as of 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, and except for the possible effects of the material weakness described above on the achievement of the objectives of the control criteria, the Companyâs internal financial controls over financial reporting were operating effectively as of March 31, 2017.
Explanatory paragraph
We also have audited, 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, the standalone financial statements of the Company, which comprise the Balance Sheet as at March 31, 2017, and the related Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2017 standalone financial statements of the Company and this report affects our report dated May 29, 2017, on which we have expressed a qualified opinion on those standalone financial statements.
For S.R. BATLIBOI & ASSOCIATES LLP
Chartered Accountants
ICAI Firm Registration Number: 101049W/E300004
per Vikas Kumar Pansari
Partner
Membership Number: 093649
Place: Mumbai
Date: May 29, 2017
Mar 31, 2016
To the Members of IL&FS Engineering and Construction Company Limited
Report on the Financial Statements
We have audited the accompanying standalone financial statements of IL&FS Engineering and Construction Company Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.
Managementâs Responsibility for the Financial Statements
The Companyâs 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 accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditorâs Responsibility
Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under. We conducted our audit in accordance with the Standards on Auditing, issued by the Institute of Chartered Accountants of India, specif i ed 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 auditorâs judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Companyâs preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Companyâs Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone financial statements.
Basis for qualified opinion
As more fully explained in Note 50 of the accompanying standalone financial statements, as at March 31, 2016, the Company has investment amounting to Rs. 33.19 Crores made in an overseas subsidiary. Based on the unaudited financial statements of the aforesaid subsidiary as on March 31, 2016, the net worth of the subsidiary is fully eroded and the Company may have potential obligation to share further liabilities of the said subsidiary, which is presently under negotiation and hence undeterminable. Based on the reasons fully explained in the aforesaid note, the management is of the view that no provision is required for diminution in the value of such investment/ potential obligation, as the Company is evaluating options to restore the carrying value of the investment. However, in the absence of sufficient and appropriate audit evidence, we are unable to comment on the carrying value of such investment, potential obligation and any other consequential impacts, if any that may be required in this regard in the standalone financial statements.
Qualified opinion
In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2016, of its loss and its cash f i ows for the year ended on that date.
Emphasis of matter We draw attention to:
a. Note 47 of the accompanying standalone financial statements regarding Rs. 259.67 Crores investment of the Company in Pass Through Certificates ("PTC") issued by the Maytas Investment Trust ("the Trust") and receivables, loans and advances and investments aggregating to Rs. 196.73 Crores which are dependent upon recovery of capacity charges and supplies/ availability of natural gas to a gas based power generating plant, increase in traffic on road investments, final award of the claim and positive outcome of the litigations in the investee companies, etc. Based on internal assessment, legal advice and fair valuation, management does not currently envisage any diminution in the carrying value of aforesaid assets.
b. Note 49 of the accompanying standalone financial statement regarding amount due from customer (project work-in-progress). Based on an Arbitration award, the Company had recognized claims in case of a road project of which balance as at March 31, 2016 amounts to Rs. 97.29 Crores and interest of Rs. 57.29 Crores (including interest of Rs. 24.39 Crores recognized during the year) against which the customer had filed an appeal with Honorable High Court of New Delhi.
Also, in the case of another road project, during the year, the Company has recognized claims amounting to Rs. 85.51 Crores and interest of Rs. 43.16 Crores for delays due to handing over of the land, drawings, etc. for project execution which is based on the provisions in the agreements, completion of arbitration proceedings and is supported by the Extension of Time recommended by the Independent Engineers. Hitherto, the same was accounted based on favorable arbitration award received by the Company and which has now been accrued based on expert opinion and internal assessment and the management is of the view that the claims are tenable and there exist no uncertainty as to ultimate collection.
c. Note 29 of the accompanying standalone financial statements regarding Inter Corporate Deposits (ICDs) amounting to Rs. 343.78 Crores which is under litigation. Based on internal evaluation, other developments and expert advice, management is of the opinion that the Company would ultimately recover the aforesaid ICDs.
The ultimate outcome of the above matters cannot presently be determined, pending approvals, acceptances, legal interpretations and resolution of uncertainty around availability of gas, achievement of traffic projections, favorable settlement of claims and ultimate realization etc., as referred to in the relevant notes to the accompanying standalone financial statements referred above, accordingly no adjustment has been made in the carrying value of the aforesaid assets. Our opinion is not Qualified in respect of the aforementioned matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditorâs 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 except for the matter described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;
b) Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;
c) The Balance Sheet, Statement of Prof it and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;
d) Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specif i ed under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;
e) The matter described in the Basis for Qualified Opinion paragraph and Emphasis of matter paragraph above, in our opinion, may have an adverse effect on the functioning of the Company;
f) On the basis of written representations received from the directors as on March 31, 2016, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016, from being appointed as a director in terms of section 164 (2) of the Companies Act, 2013;
g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above; and
h) 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 2â to this report;
i) With respect to the other matters to be included in the Auditorâs Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i) The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 27 (a) to the standalone financial statements;
ii) The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses on long-term contracts
- Refer Notes 32 and 33 to the standalone financial statements. The Company has no derivative contract; and
iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
Re: IL&FS Engineering and Construction Company Limited (âthe Companyâ)
(i) (a) The Company has maintained proper records
showing full particulars, including quantitative details and situation of fixed assets.
(b) All f ixed 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. Discrepancies identified on such verification which were not material have been properly dealt within the books of account.
(c) Based on our audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to information and explanations given by the management, the title deeds of immovable properties included in fixed assets are held in the name of the Company,
(ii) The management has conducted physical verification of inventory at reasonable intervals during the year. Discrepancies noted on physical verification of inventories which were not material have been properly dealt with in the books of account.
(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly, the provisions of clause 3(iii)(a), (b) and (c) of the Order are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to us, there are no loans, investments, guarantees, and securities granted in respect of which provisions of section 185 and 186 of the Companies Act, 2013 are applicable and hence not commented upon.
(v) The Company has not accepted any deposits from the public.
(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 Companies Act, 2013, related to the construction industry and construction of roads and other infrastructure projects and are of the opinion that prima facie, the specified accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.
(vii) (a) Undisputed statutory dues including provident fund, employeesâ state insurance, income-tax, sales-tax, service tax, duty of custom, duty of excise, value added tax, cess and other material statutory dues have generally been regularly deposited with the appropriate authorities though there has been a slight delay in a few cases.
(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employeesâ state insurance, income-tax, service tax, sales-tax, duty of custom, duty of excise, value added tax, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.
(c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, service tax, duty of custom, duty of excise value added tax and cess on account of any dispute, are as follows:
Name of the statute |
Nature of dues |
Amount demanded (Rs. In Crores) |
Paid Under Protest (Rs. In Crores) |
Period to which the amount relates (Assessment Years) |
Forum where dispute is pending |
AP Value Added Tax, 2005 |
Sales Tax and Penalty |
0.86 |
0.05 |
2005-06, 2006-07 and 2007-08 |
Sales Tax Appellate Tribunal, Hyderabad |
AP Value Added Tax, 2005 |
Penalty on Sales Tax |
0.36 |
0.18 |
2007-08 |
Appellate Deputy Commissioner, Hyderabad |
AP Value Added Tax, 2005 |
Sales Tax |
27.06 |
- |
2007-08 |
High Court of Judicature at Hyderabad for the states of Andhra Pradesh and Telangana |
Central Sales Tax Act,1956 |
Penalty on Sales Tax |
0.50 |
0.12 |
2002-03 and 2003-04 |
Sales Tax Appellate Tribunal, Hyderabad |
Central Sales Tax Act,1956 |
Penalty on Sales Tax |
0.70 |
0.20 |
2007-08 |
Appellate Deputy Commissioner, Chhattisgarh |
Finance Act, 1994 |
Service Tax |
9.70 |
- |
2007-08 and 2008-09 |
Commissioner of Customs & Central Excise, Hyderabad |
Finance Act, 1994 |
Penalty on Service Tax |
0.28 |
- |
2006-07 and 2007-08 |
The Customs, Excise and Service Tax Appellate Tribunal, Bengaluru |
West Bengal Vat Act, 2003 |
Sales Tax |
0.06 |
- |
2009-10 |
Joint Commissioner of Commercial Taxes, Behrampore |
West Bengal Vat Act, 2003 |
Sales Tax |
1.52 |
- |
2008-09 |
West Bengal Appellate & Revisional Board |
AP Value Added Tax, 2005 |
Sales Tax |
0.92 |
0.51 |
2008-09 |
Appellate Deputy Commissioner, Hyderabad |
Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987 |
Professional Tax |
0.06 |
- |
2008-09 |
Commercial Tax Officer, Hyderabad |
Finance Act, 1994 |
Service Tax |
15.45 |
- |
2007-08 2008-09 and 2009-10 |
Commissioner of Customs & Central Excise, Hyderabad |
Orissa Entry Tax Act, 1999 |
Entry Tax |
0.02 |
- |
January 01, 2007 to March 31, 2010 |
Joint Commissioner of Sales Tax, Cuttack |
Orissa Value Added Tax Act, 2004 |
Sales Tax |
3.37 |
- |
January 01, 2007 to March 31, 2010 |
Joint Commissioner of Sales Tax, Cuttack |
Finance Act, 1994 |
Service Tax |
0.12 |
- |
2010-11 to 2011-12 |
Superintendent of Service Tax, Hyderabad |
AP Value Added Tax, 2005 |
Sales Tax |
1.85 |
2005-06 2006-07 2007-08 2008-09 and 2009-10 |
Commercial Tax Officer, Hyderabad |
|
Maharashtra Value Added Tax Act, |
Sales Tax |
1.37 |
0.15 |
2010-11 |
Deputy Commissioner of Sales Tax, Satara, Maharashtra |
AP Value Added Tax, 2005 |
Sales Tax |
4.12 |
- |
2009-10 2010-11 2011-12 and 2012-13 |
Assistant Commissioner of Sales Tax (Enforcement), Hyderabad |
AP Value Added Tax, 2005 |
Sales Tax |
0.21 |
0.03 |
2014-15 |
Appellate Deputy Commissioner, Vishakapatnam |
MP Entry Tax Act, 1976 |
Entry Tax |
0.27 |
0.03 |
2013-14 |
Asst. Commissioner commercial tax officer (Audit), Jabalpur, MP |
Name of the statute |
Nature of dues |
Amount demanded (Rs. In Crores) |
Paid Under Protest (Rs. In Crores) |
Period to which the amount relates (Assessment Years) |
Forum where dispute is pending |
Orissa Entry Tax Act, 1999 |
Entry Tax |
0.21 |
0.01 |
April 01, 2010 to March 31,2014 |
Joint Commissioner of Sales Tax, Cuttack |
West Bengal Vat Act, 2003 |
Sales Tax |
0.11 |
- |
2011-12 |
Senior Joint Commissioner, West Bengal |
West Bengal Vat Act, 2003 |
Sales Tax |
1.36 |
0.20 |
2012-13 |
Senior Joint Commissioner, West Bengal |
Finance Act, 1994 |
Service Tax |
3.47 |
- |
October 2010 to March 15 |
Principal commissioner of service tax, Hyderabad |
AP Value Added Tax, 2005 |
Sales Tax |
0.11 |
- |
2012-13 |
Commercial Tax Officer, Hyderabad |
Income Tax Act, 1961 |
Income Tax |
12.95 |
12.95 |
2008-09 |
Commissioner of Income Tax (Appeals), Hyderabad |
Income Tax Act, 1961 |
Income Tax |
8.78 |
8.78 |
2009-10 |
|
Income Tax Act, 1961 |
Income Tax |
4.27 |
4.27 |
2010-11 |
|
Income Tax Act, 1961 |
Income Tax |
0.75 |
0.75 |
2011-12 |
(viii) According to information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to banks. The Company did not have any outstanding dues in respect of a financial institution or to government or debenture holders during the year,
(ix) According to information and explanations given by the management and on an overall examination of the balance sheet, we report that, monies raised by the Company by way of term loans were applied for the purposes for which those were raised.
(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 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, we report that 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 Companies Act, 2013.
(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 Companies Act, 2013 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 by the management, the Company has complied with provisions of section 42 of the Companies Act, 2013 in respect of the preferential allotment of shares during the year. Based on our 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 the amounts raised, have been used for the purposes for which the funds were raised.
(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 Companies Act, 2013.
(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.
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (âthe Actâ)
We have audited the internal financial controls over financial reporting of IL&FS Engineering and Construction Company Limited ("the Company") as of March 31, 2016, in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.
Managementâs Responsibility for Internal Financial Controls
The Companyâs 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 Companyâs policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditorâs Responsibility
Our responsibility is to express an opinion on the Companyâs internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Noteâ) and the Standards on Auditing as specified under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
An audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditorâs judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the internal financial controls over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A companyâs internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companyâs internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companyâs assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Qualified Opinion
According to the information and explanations given to us and based on our audit, the following material weakness have been identified in the operating effectiveness of the Companyâs internal financial controls over financial reporting as at March
31, 2016:
a. The Companyâs internal financial controls system over estimation of diminution in the carrying value of investments and accrual of potential obligation in case of an overseas subsidiary was not operating effectively which could potentially result in misstatement in the financial statements by way of Company not providing for adjustments/ provisions, if any, that may be required.
A âmaterial weaknessâ is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the companyâs annual or interim financial statements will not be prevented or detected on a timely basis.
In our opinion, the Company has, in all material respects, maintained adequate internal financial controls over financial reporting as of March 31, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India, and except for the possible effects of the material weakness described above on the achievement of the objectives of the control criteria, the Companyâs internal financial controls over financial reporting were operating effectively as of March 31, 2016.
Explanatory paragraph
We also have audited, 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, the standalone financial statements of the Company, which comprise the Balance Sheet as at March 31, 2016, and the related Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2016 standalone financial statements of the Company and this report affects our report dated May 30, 2016, on which we have expressed a Qualified opinion on those standalone financial statements.
For S.R. BATLIBOI & ASSOCIATES LLP
Chartered Accountants
ICAI Firm Registration Number: 101049W/E300004
per Vikas Kumar Pansari
Partner
Membership Number: 093649
Place: New Delhi
Date: May 30, 2016
Mar 31, 2015
Report on the Financial Statements
We have audited the accompanying standalone financial statements of
IL&FS Engineering and Construction Company Limited ("the Company"),
which comprise the Balance Sheet as at March 31, 2015, the Statement of
Profit and Loss and Cash Flow Statement for the year then ended, and a
summary of significant accounting policies and other explanatory
information.
Management''s Responsibility for the Financial Statements
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 accounting principles
generally accepted in India, including the Accounting Standards
specified under section 133 of the Act, read with Rule 7 of the
Companies (Accounts) Rules, 2014. This responsibility also includes
maintenance of adequate accounting records in accordance with the
provisions of the Act for safeguarding of the assets of the Company and
for preventing and detecting frauds and other irregularities; selection
and application of appropriate accounting policies; making judgments
and estimates that are reasonable and prudent; and the 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, 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 financial statements, whether
due to fraud or error. In making those risk assessments, the auditor
considers internal financial control relevant to the Company''s
preparation of the financial statements that give a true and fair view
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
whether the Company has in place an adequate internal financial control
system over financial reporting and the operating effectiveness of such
controls. An audit also includes evaluating the appropriateness of
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 standalone financial statements give the
information required by the Act in the manner so required and give a
true and fair view in conformity with the accounting principles
generally accepted in India, of the state of affairs of the Company as
at March 31, 2015,its profit and its cash flows for the year ended on
that date.
Emphasis of Matter
a. We draw attention to note 47 of the accompanying standalone
financial statements regarding Rs. 259.67 Crores investment of the
Company in Pass Through Certificates ("PTC") issued by the Maytas
Investment Trust ("the Trust"). As more fully described in the
aforesaid note, the portfolio held by the Trust includes an investment
where the investee company has gas based power plant wherein
uncertainties towards availability of gas has been considered as
temporary in nature. Based on the fair valuation of underlying
investments held by the Trust, the Company does not currently envisage
any diminution in the value of PTCs on this account.
b. We draw attention to note 49 of the accompanying
standalonefinancial statements regarding accrual of proportionate
revenue to the extent of percentage completion in case of a road
project amounting to Rs. 137.54 Crores (including interest of Rs. 36.30
Crores) based on an arbitration award, against which the customer has
filed an appeal in the Honourable High Court of New Delhi.
c. We draw attention to note 28 of the accompanying standalone
financial statements regarding Inter Corporate Deposits (ICDs)
amounting to Rs. 343.78 Crores which is under litigation. Based on
internal evaluation of recent developments after considering expert
advice, Management is of the opinion that the Company has the ability
to ultimately recover the aforesaid ICDs.
We have not qualified our opinion in respect of the matters referred in
the above paragraphs.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor''s report) Order, 2015 ("the
Order") issued by the Central Government of India in terms of
sub-section (11) of section 143 of the Act, we give in the Annexure 1 a
statement on the matters specified in paragraphs 3 and 4 of the Order,
to the extent applicable.
2. As required by section 143 (3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations
which to the best of our knowledge and belief were necessary for the
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, and 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) The matters described in the Emphasis of Matters paragraph above,
in our opinion, may have an adverse effect on the functioning of the
Company;
(f) On the basis of written representations received from the directors
as on March 31, 2015, and taken on record by the Board of Directors,
none of the directors is disqualified as on March 31, 2015, from being
appointed as a director in terms of section 164 (2) of the Act;
(g) With respect to the other matters to be included in the Auditor''s
Report in accordance withRule 11 of the Companies (Audit and Auditors)
Rules, 2014, in our opinion and to the best of our information and
according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its
financial position in its financial statements  Refer note 26 (a) to
the financial statements;
ii. The Company has made provision, as required under the applicable
law or accounting standards, for material foreseeable losses on
long-term contracts  Refer note 31 and 32 to the financial statements.
The Company has no derivative 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 -1 referred to in our report of even date
Re: IL&FS Engineering and Construction Company Limited ("the Company")
(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 and discrepancies
identified on such verification have been properly dealt with in the
books of account.
(ii) (a) The Management has conducted physical verification of
inventory at reasonable intervals during the year.
(b) The procedures of physical verification of inventory followed by
the Management are reasonable and adequate in relation to the size of
the Company and the nature of its business.
(c) The Company is maintaining proper records of inventory.
Discrepancies noted on physical verification of inventories were not
material, and have been properly dealt with in the books of account.
(iii) According to the information and explanations given to us, the
Company has not granted any loans, secured or unsecured to companies,
firms or other parties covered in the register maintained under section
189 of the Companies Act, 2013. Accordingly, the provisions of clause
3(iii)(a) and (b) of the Order are not applicable to the Company and
hence not commented upon.
(iv) In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business, for the
purchase of inventory and fixed assets and for the sale of goods and
services. During the course of our audit, we have not observed any
major weakness or continuing failure to correct any major weakness in
the internal control system of the Company in respect of these areas.
(v) The Company has not accepted any deposits from the public.
(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 Companies Act,
2013, related to the construction industry and construction of roads
and other infrastructure projects and are of the opinion that prima
facie, the specified accounts and records have been made and
maintained. We have not, however, made a detailed examination of the
same.
(vii) (a) Undisputed statutory dues including provident fund,
employees'' state insurance, income-tax, sales-tax, wealth-tax, service
tax, customs duty, excise duty, value added tax, cess and other
material statutory dues have generally been regularly deposited with
the appropriate authorities though there has been slight delays in few
cases.
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of provident fund, employees''
state insurance, income-tax, wealth- tax, service tax, sales-tax,
customs duty, excise duty, value added tax, cess and other material
statutory dues were outstanding, at the year end, for a period of more
than six months from the date they became payable.
(c) According to the records of the Company, the dues outstanding of
income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
duty, value added tax and cess on account of any dispute, are as
follows:
Name of the Nature of Amount Paid under
Statute the dues Demanded protest
(Rs. In
Crores) (Rs. In
Crores)
AP Value Added Sales Tax 0.86 0.05
Ta x Act, 2005 & Penalty
AP Value Added Penalty on 0.36 0.18
Ta x Act, 2005 Sales Tax
AP Value Added Sales Tax 27.06 -
Tax Act, 2005
Central Sales Penalty on 0.50 0.12
Tax Act, 1956 Sales Tax
Central Sales Penalty on 0.70 0.20
Tax Act, 1956 Sales Tax
Finance Act,
1994 Service tax 9.70 -
Finance Act,
1994 Penalty on 0.28 -
Service Tax
West Bengal Vat Sales Tax 0.06 -
Act, 2003
West Bengal Sales Tax 1.52 -
Vat Act, 2003
AP Value Added Sales Tax 0.92 0.51
Tax, 2005
Andhra Pradesh
Tax on Professional 0.06 -
Professions,
Trades, Tax
Callings and
Employments
Act, 1987
Finance Act,
1994 Service tax 15.45 -
Orissa Entry Tax Entry tax 0.02 -
Act, 1999
Orissa Value
Added Sales tax 3.37 -
Tax Act, 2004
Finance Act 1994 Service tax 0.12 -
AP Value Added Sales Tax 1.85 -
Tax, 2005
Maharashtra
Value Sales Tax 1.37 0.15
Added Tax Act
Name of the Period to which Forum where dispute
Statute the amount is pending
relates (Assess-
ment Years)
AP Value Added 2005-06 Sales Tax Appellate
Tax Act, 2005 2006-07
and Tribunal, Hyderabad
2007-08
AP Value Added 2007-08 Appellate Deputy
Tax Act, 2005 Commissioner, Hyderabad
AP Value Added 2007-08 High Court of
Tax Act, 2005 judicature
at Hyderabad for
the states
of Andhra Pradesh and
Telangana
Central Sales 2002-03 Sales Tax Appellate
Tax Act, 1956 and 2003-04 Tribunal, Hyderabad
Central Sales 2007-08 Appellate Deputy
Tax Act, 1956 Commissioner,
Chattisgarh
Finance Act, 1994 2007-08
and Commissioner of
Customs
2008-09 & Central Excise,
Hyderabad
Finance Act, 1994 2006-07 The Customs,
Excise and
and 2007-08 Service Tax
Appellate
Tribunal, Bangalore
West Bengal Vat Act, 2003 2009-10 Joint Commissioner of
Commercial Taxes,
Berhampore
West Bengal Vat Act, 2003 2008-09 West Bengal Appellate
& Revisional Board
AP Value Added Tax, 2005 2008-09 Appellate Deputy
Commissioner,
Hyderabad
Andhra Pradesh Tax on 2008-09 Commercial Tax
Professions, Trades, Officer,
Callings and Employments
Act, 1987 Hyderabad
Finance Act, 1994 2007-08 2008-09 Commissioner of
Customs
and 2009-10 & Central Excise,
Hyderabad
Orissa Entry Tax
Act, 1999 January 1, 2007 Joint Commissioner
to March 31, 2010 of Sales Tax,
Cuttack
Orissa Value Added January 1, 2007 Joint Commissioner
Tax Act, 2004 to March 31, 2010 of Sales Tax,
Cuttack
Finance Act 1994 2010-11 Superintendent of
Service
and 2011-12 Tax, Hyderabad
AP Value Added Tax, 2005 2005-06 2006-07 Commercial Tax
2007-08 2008-09 Officer, Hyderabad
and 2009-10
Maharashtra Value Added
Tax Act 2010-11 Deputy Commissioner of
Sales Tax, Satara,
Maharashtra
Name of the Nature of Amount Paid under
Statute the dues Demanded protest
(Rs. In
Crores) (Rs. In
Crores)
AP Value Added Sales Tax 4.12 -
Tax, 2005
AP Value Added Sales Tax 0.34 -
Tax, 2005
Income Tax Act,
1961 Income tax 4.46 4.46
Income Tax Act,
1961 Income tax 1.97 1.97
Income Tax Act,
1961 Income tax 11.90 11.90
Income Tax Act,
1961 Income tax 10.55 10.55
Income Tax Act,
1961 Income tax 3.46 3.46
Income Tax Act,
1961 Income tax 12.95 12.95
Income Tax Act,
1961 Income tax 8.78 8.78
Income Tax Act,
1961 Income tax 4.27 3.09
Income Tax Act,
1961 Income tax 0.75 -
Period to which Forum where dispute
the amount is pending
relates
(Assess- ment
Years)
AP Value Added Tax, 2005 2009-10 Assistant
Commissioner
2010-11 2011-12 Sales Tax
and 2012-13 of (Enforcement),
Hyderabad
AP Value Added Tax, 2005 2008-09 Additional
Commissioner
Tax (Legal),
Hyderabad
Income Tax Act, 1961 2003-04
Income Tax Act, 1961 2004-05
Income Tax Act, 1961 2005-06
Commissioner of
Income
Income Tax Act, 1961 2006-07 Tax (Appeals),
Hyderabad
Income Tax Act, 1961 2007-08
Income Tax Act, 1961 2008-09
Income Tax Act, 1961 2009-10
Income Tax Act, 1961 2010-11
Income Tax Act, 1961 2011-12
(d) According to the information and explanations given to us, the
amount required to be transferred to investor education and protection
fund in accordance with the relevant provisions of the Companies Act,
1956 (1 of 1956) and rules made thereunder has been transferred to such
fund within time.
(viii) The Company''s accumulated losses at the end of the financial
year are less than fifty per cent of its net worth. The Company has not
incurred cash loss during the year. In the immediately preceding
financial year, the Company had incurred cash loss.
(ix) Based on our audit procedures and as per the information and
explanations given by the Management, we are of the opinion that the
Company has not defaulted in repayment of dues to banks. The Company
did not have any outstanding dues in respect of a financial institution
or debenture holders during the year.
(x) According to the information and explanations given to us, the
Company has given guarantee for loans taken by a subsidiary from banks,
the terms and conditions whereof, in our opinion, are not prima-facie
prejudicial to the interest of the Company. According to the
information and explanations given to us, the Company has not given any
guarantee for loans taken by others from financial institutions.
(xi) Based on the information and explanations given to us by the
Management, term loans were applied for the purpose for which the loans
were obtained.
(xii) Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and as per
the information and explanations given by the Management, we report
that no fraud on or by the Company has been noticed or reported during
the year.
For S.R. BATLIBOI & ASSOCIATES LLP
ICAI Firm Registration Number: 101049W
Chartered Accountants
per Vikas Kumar Pansari
Partner
Membership Number: 093649
Place of Signature: New Delhi
Date: May 29, 2015
Mar 31, 2014
We have audited the accompanying financial statements of IL&FS
Engineering and Construction Company Limited and reduced ("the
Company"), which comprise the Balance Sheet as at March 31. 2014, and
the Statement of Profit and Loss and the Cash Flow Statement for the 18
months then ended, and a summary of significant accounting policies and
other explanatory information.
Management''s Responsibility for the Financial Statements
Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position,
financial performance and cash flows of the Company in accordance with
accounting principles generally accepted in India, including the
Accounting Standards notified under the Companies Act, 1956, read with
General Circular 8/2014 dated 4 April 2014 issued by the Ministry of
Corporate Affairs. This responsibility includes the design,
implementation and maintenance of internal control relevant to the
preparation and presentation of the financial statements that give a
true and fair view and are free from material misstatement, whether due
to fraud or error.
Auditor''s Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor''s judgment. including the
assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
Company''s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances but not for the purpose of expressing an opinion on the
effectiveness of the entity''s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of the accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Basis for Qualified Opinion
a. As at March 31, 2014, the Company had certain Inter Corporate
Deposits (ICDs) outstanding ofRs. 343.78 Crores (September 30, 2012:
Rs. 343.78 Crores). Management has represented that the Company has
taken steps to recover the amounts and is of the opinion that all ICDs
are fully recoverable. Accordingly no adjustments have been made to the
accompanying financial statements in respect of the same. Pending final
outcome of the recovery process, we are unable to comment on the extent
of recoverability of the aforesaid amounts. Our audit report on the
financial statements for the eighteen months ended September 30, 2012
was also qualified in respect of the aforesaid matter.
b. As detailed in note 40 to the financial statements, the accompanying
financial statements include Company''s share of profit to the extent of
Rs.2.20 Crores (September 30, 2012: share of profit Rs 2.50 Crores)
from Integrated Joint Ventures, in which the Company is a co-venturer,
based on their unaudited financial statements. The accompanying
financial statements do not include the consequential impacts that may
have been required had the audited financial statements of the joint
ventures been made available. Our audit report on the financial
statements for the 18 months ended September 30, 2012 was also
qualified in respect of the aforesaid matter.
Qualified opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the possible effects, if any, of
the matters described in the Basis for Qualified Opinion paragraph, the
financial statements give the information required by the Companies
Act, 1956 ("the Act") in the manner so required and give a true and
fair view in conformity with the accounting principles generally
accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2014;
(b) in the case of the Statement of Profit and Loss, of the loss for
the 18 months ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows for the
18 months ended on that date.
Emphasis of Matter
We draw attention to note 50 of the accompanying financial statements
regarding Rs. 259.67 Crores investment of the Company in Pass Through
Certificate ("PTCs") issued by the Maytas Investment Trust ("the
Trust"). As more fully described in the aforesaid note, the portfolio
held by the Trust includes an investment where the investee company has
gas based power plant wherein uncertainties towards availability of gas
has been considered as temporary in nature. Based on the fair valuation
of underlying investments held by the Trust, the Company does not
currently envisage any diminution in the value of PTCs on this account.
Our opinion is not qualified in respect of this matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor''s Report) Order, 2003 ("the
Order") issued by the Central Government of India in terms of
sub-section (4A) of section 227 of the Act, we give in the Annexure a
statement on the matters specified in paragraphs 4 and 5 of the Order.
2. As required by section 227(3) of the Act, we report that:
(a) Except for the matters described in the Basis for Qualified Opinion
paragraph, 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) Except for the matters described in the Basis for Qualified Opinion
paragraph, in our opinion proper books of account as required by law
have been kept by the Company so far as appears from our examination of
those books;
(c) The Balance Sheet, Statement of Profit and Loss, and Cash Flow
Statement dealt with by this Report are in agreement with the books of
account;
(d) Except for the matters described in the Basis for Qualified Opinion
paragraph, in our opinion, the Balance Sheet, the Statement of Profit
and Loss, and the Cash Flow Statement comply with the Accounting
Standards notified under the Companies Act, 1956, read with General
Circular 8/2014 dated 4 April 2014 issued by the Ministry of Corporate
Affairs;
(e) On the basis of written representations received from the directors
as on March 31,2014, and taken on record by the Board of Directors,
none of the directors is disqualified as on March 31, 2014, from being
appointed as a director in terms of clause (g) of sub- section (1) of
section 274 of the Companies Act, 1956.
Annexure referred to in our report of even date
Re: IL&FS Engineering and Construction Company Limited and reduced
(''the Company'')
(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) There was no disposal of substantial part of fixed assets during
the year.
(ii) (a) The management has conducted physical verification of
inventory at reasonable intervals during the year.
(b) The procedures of physical verification of inventory followed by
the management are reasonable and adequate in relation to the size of
the Company and the nature of its business.
(c) The Company is maintaining proper records of inventory and no
material discrepancies were noticed on physical verification.
(iii) (a) The Company had granted unsecured loans to a company covered
in the register maintained under section 301 of the Companies Act, 1956
during earlier year. The maximum amount involved during the 18 months
was Rs 47.87 Crores, which was outstanding since previous year and the
aggregate balance of the loans as at March 31, 2014 was Rs 47.87
Crores. However as at March 31, 2014, the company is not covered in
the register maintained under section 301 of the Companies Act, 1956.
During the 18 months. the Company has converted the interest accrued
into principal and the total receivable as at March 31, 2014 amounts to
Rs.95.92 Crores.
(b) In our opinion and according to the information and explanations
given to us, the rate of interest and other terms and conditions for
such loans are not prima facie prejudicial to the interest of the
Company.
(c) In respect of loans granted, the repayment of principal amount was
not stipulated and also payment of interest had not been regular During
the 18 months, the terms of the loans granted have been restructured,
as per which, principal amount and interest is not due as at March 31,
2014.
(d) Based on our audit procedures and the information and explanations
made available to us, in case where overdue amount is more than rupees
one lakh, reasonable steps have been taken by the Company for recovery
of the principal and interest.
(e) According to information and explanations given to us. the Company
has not taken any loans, secured or unsecured, from companies, firms or
other parties covered in the register maintained under section 301 of
the Companies Act, 1956. Accordingly, the provisions of clause
4(iii)(e) to (g) of the Order are not applicable to the Company and
hence not commented upon.
(iv) In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business, for the
purchase of inventory and fixed assets and for the sale of goods and
services. During the course of our audit, we have not observed any
major weakness or continuing failure to correct major weakness in
internal control system of the company in respect of these areas.
(v) (a) In our opinion, there are no contracts or arrangements that
need to be entered in the register maintained under Section 301 of the
Companies Act, 1956. Accordingly the provisions of clause 4(v)(b) of
the Order is not applicable to the Company and hence not commented
upon.
(vi) The Company has not accepted any deposits from the public.
(vii) In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
(viii) 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 209(1 )(d) of the Companies
Act, 1956, and are of the opinion that prima facie, the prescribed
accounts and records have been made and maintained.
(ix) (a) Undisputed statutory dues including provident fund. investor
education and protection fund, or employees'' state insurance,
income-tax, sales-tax, wealth-tax. service tax, customs duty, excise
duty, cess and other material statutory dues have not generally been
regularly deposited with the appropriate authorities though the delays
in deposit have not been serious.
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of provident fund, investor
education and protection fund. employees'' state insurance, income-tax,
wealth-tax. service tax, sales-tax, customs duty, excise duty, cess
and other undisputed statutory dues were outstanding, at the year end,
for a period of more than six months from the date they became payable.
(c) According to the records of the Company, the dues outstanding of
income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
duty and cess on account of any dispute, are as follows:
Name of the Nature of Amount Paid under
Statute the dues Demanded protest
(Rs. In Crores) (Rs. In Crores)
AP Value Added Sales Tax 0.85 0.05
Tax Act, 2005 and Penalty
AP Value Added Penalty on 0.36 0.18
Tax Act, 2005 Sales Tax
AP Value Added Sales Tax 27.06 -
Tax Act, 2005
Central Sales Penalty on 0.50 -
Tax Act, 1956 Sales Tax
Central Sales Penalty on 0.70 0.17
Tax Act, 1956 Sales Tax
Finance Act, 1994 Service tax 0.70 -
Finance Act, 1994 Penalty on 0.28 -
Service Tax
West Bengal Sales Tax 0.06 -
Vat Act, 2003
West Bengal Sales Tax 1.52 -
Vat Act, 2003
AP Value Added Sales Tax 0.92 -
Tax, 2005
Andhra Pradesh Professional 0.06 -
Tax on Tax
Professions,
Trades, Callings
and Employments
Act, 1987
Finance Act, 1994 Service tax 13.75 -
Income
Tax Act, 1961 Income tax 4.46 4.46
Income
Tax Act, 1961 Income tax 1.97 1.97
Income
Tax Act, 1961 Income tax 11.90 11.90
Income
Tax Act, 1961 Income tax 10.55 10.55
Income
Tax Act, 1961 Income tax 3.46 3.46
Income
Tax Act, 1961 Income tax 12.95 12.95
Income
Tax Act, 1961 Income tax 8.78 8.78
Income
Tax Act, 1961 Income tax 5.51 -
Income
Tax Act, 1961 Income tax 2.12 -
Name of the Period to which Forum where dispute
Statute the amount is pending
relates
AP Value Added 2005-06, Sales Tax Appellate
Tax Act, 2005 2006-07 and Tribunal, Hyderabad
2007-08
AP Value Added
Tax Act, 2005 2007-08 Appellate Deputy
Commissioner,
Hyderabad
AP Value Added
Tax Act, 2005 2007-08 High Court of
Andhra Pradesh
Central Sales
Tax Act, 1956 2002-03 Sales Tax Appellate
and 2003-04 Tribunal, Hyderabad
2007-08 Appellate Deputy
Central Sales
Tax Act, 1956 Commissioner,
Chattisgarh
Finance Act, 1994 2007-08 Commissioner of
and 2008-09 Customs & Central
Excise, Hyderabad
Finance Act, 1994 2006-07 The Customs, Excise
and 2007-08 and Service Tax
Appellate Tribunal,
Bangalore
West Bengal
Vat Act, 2003 2009-10 Joint Commissioner
of Commercial Taxes,
Berhampore
West Bengal
Vat Act, 2003 2008-09 Joint Commissioner
of Commercial Taxes,
Berhampore
AP Value Added Tax,
2005 2008-09 Appellate Deputy
Commissioner,
Hyderabad
Andhra Pradesh 2008-09 Commercial Tax
Tax on Officer,
Professions. Hyderabad
Trades, Callings
and Employments
Act, 1987
Finance Act, 1994 2007-08 Commissioner of
2008-09 and Customs & Central
2009-10 Excise, Hyderabad
Income Tax Act, 1961 2003-04
Income Tax Act, 1961 2004-05
Income Tax Act, 1961 2005-06 Commissioner of
Income Tax Act, 1961 2006-07 Income Tax (Appeals),
Income Tax Act, 1961 2007-08 Hyderabad
Income Tax Act, 1961 2008-09
Income Tax Act, 1961 2009-10
Income Tax Act, 1961 2010-11
Income Tax Act, 1961 2011-12
(x) Without considering the consequential effects, if any, of the
matters stated in basis of qualified opinion paragraph of our auditors''
report, the Company''s accumulated losses at the end of the financial
year are less than fifty per cent of its net worthTte Company has
incurred cash losses in the current and immediately preceding financial
year
(xi) Based on our audit procedures and as per the information and
explanations given by the management, we are of the opinion that the
Company has not defaulted in repayment of dues to a financial
institution or banks. There are no dues to debenture holders.
(xii) Based on our examination of documents and records, we are of the
opinion that the Company has maintained adequate records where the
Company has granted loans and advances on the basis of security by way
of pledge of shares, debentures and other securities.
(xiii) In our opinion, the Company is not a chit fund or a nidhi /
mutual benefit fund / society. Therefore, the provisions of clause
4(xiii) of the Companies (Auditor''s Report) Order, 2003 (as amended)
are not applicable to the Company.
(xiv) In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly the
provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order,
2003 (as amended) are not applicable to the Company.
(xv) According to the information and explanations given to us, the
Company has not given any guarantee for loans taken by others from bank
or financial institutions.
(xvi) Based on information and explanations given to us by the
management, term loans were applied for the purpose for which the loans
were obtained.
(xvii) According to the information and explanations given to us and on
an overall examination of the balance sheet of the Company we report
that no funds raised on short-term basis have been used for long-term
investment.
(xviii) The Company has not made any preferential allotment of shares
to parties or companies covered in the register maintained under
section 301 of the Companies Act, 1956.
(xix) The Company did not have any outstanding debentures during the
year
(xx) The Company has not raised any money by way of public issue during
the year.
(xxi) Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and as per
the information and explanations given by the Management, we report
that no fraud on or by the Company has been noticed or reported during
the year.
For S.R. BATLIBOI & ASSOCIATES LLP
Chartered Accountants
ICAI Firm Registration Number: 101049W
per Vikas Kumar Pansari
Partner
Membership Number: 093649
Place of Signature: New Delhi
Date: May 19, 2014
Sep 30, 2012
1. We have audited the attached balance sheet of IL&FS Engineering and
Construction Company Limited and reduced (''the Company'') as at
September 30, 2012 and also the statement of profit and loss and the
cash flow statement for the 18 months ended on that date annexed
thereto. These financial statements are the responsibility of the
Company''s management. Our responsibility is to express an opinion on
these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards
generally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
3. As required by the Companies (Auditor''s Report) Order, 2003 (as
amended) issued by the Central Government of India in terms of
sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose
in the Annexure a statement on the matters specified in paragraphs 4
and 5 of the said Order.
4. Without qualifying our opinion, we draw attention to note 52 of the
accompanying financial statements regarding eventual settlement of the
Pass Through Certificate holders by the Maytas Investment Trust
(Trust). The portfolio held by the Trust includes an investment where
the investee company has gas based power plant wherein uncertainties
towards availability of gas has been considered as a temporary in
nature. Based on fair valuation of underlying investments held by the
Trust, the Company does not currently envisage any shortfall on this
account.
5. As detailed in note 43 to the financial statements:
a) One of the Integrated Joint Ventures, where the Company is a
co-venturer, namely Maytas-SNC JV has not prepared its financial
statements for the 18 months ended September 30, 2012.
b) The accompanying financial statements include the Company''s share of
profit of Rs. 2.50 Crores (March 31,2011: share ofloss Rs. 0.11 Crore)
from Integrated Joint Ventures, in which the Company is a co-venturer,
based on their unaudited financial statements.
The accompanying financial statements do not include the consequential
impacts that may have been required had the audited financial
statements of thejoint ventures been made available. Our audit report
on the financial statements for theyear ended March 31,2011 was also
qualifed in respect of the aforesaid matters.
6. As at September 30, 2012, the Company had certain Inter Corporate
Deposits (ICDs) outstanding ofRs. 343.78 Crores (March 31, 2011: Rs.
343.78 Crores), management has represented that the Company has taken
steps to recover the amounts and is of the opinion that all ICDs are
fully recoverable. Accordingly no adjustments have been made to the
accompanying financial statements in respect ofthe same. Pending final
outcome of the recovery process, we are unable to comment on the extent
ofrecoverability ofthe aforesaid amounts. Our audit report on the
financial statements for the year ended March 31, 2011 was also
qualifed in respect ofthe aforesaid matter.
7. Further to our comments in the Annexure referred to above, we
report that:
i. Except as discussed in paragraphs 5 and 6 above, 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, statement of profit and loss and cash flow
statement dealt with by this report are in agreement with the books of
account;
iv. Except as discussed in paragraphs 5 and 6 above,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 ofthe Companies Act, 1956;
v. On the basis of the written representations received from the
directors, as on September 30, 2012, and taken on record by the Board
of Directors, we report that none of the directors is disqualified as
on September 30, 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
except for the possible effects ofthe matters stated in paragraphs 5
and 6 above, the said accounts gives 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 ofthe
Company as at September 30,2012;
b) in the case of the statement of profit and loss, of the loss for the
18 months ended on that date; and
c) in the case of cash flow statement, of the cash flows for the 18
months ended on that date.
Annexure to the Auditors'' Report
Annexure referred to in paragraph [3] of our report of even date
Re: IL&FS Engineering and Construction Company Limited and reduced
(''the Company'')
(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) There was no disposal of a substantial part of fixed assets during
the year.
(ii) (a) The management has conducted physical verification of
inventory at reasonable intervals during the year.
(b) The procedures of physical verification of inventory followed by
the management are reasonable and adequate in relation to the size of
the Company and the nature of its business.
(c) The Company is maintaining proper records of inventory and no
material discrepancies were noticed on physical verification.
(iii) (a) The Company had granted unsecured loans to a company covered
in the register maintained under section 301 of the Companies Act, 1956
during earlier year. The maximum amount involved during the 18 months
was Rs. 47.87 Crores, which was outstanding since previous year and the
aggregate balance of the loans as at September 30, 2012 was Rs. 47.87
Crores. However as at September 30, 2012, the company is not covered
in the register maintained under section 301 of the Companies Act,
1956.
(b) In our opinion and according to the information and explanations
given to us, the rate of interest and other terms and conditions for
such loans are not prima facie prejudicial to the interest of the
Company.
(c) In respect ofloans granted, repayment of the principal amount is
not stipulated and also payment ofinterest has not been regular.
(d) Based on our audit procedures and the information and explanations
made available to us, in case where overdue amount is more than rupees
one lakh, reasonable steps have been taken by the Company for recovery
of the principal and interest.
(e) According to information and explanations given to us, the Company
has not taken any loans, secured or unsecured, from companies, firms or
other parties covered in the register maintained under section 301 of
the Companies Act, 1956. Accordingly, the provisions of clause
4(iii)(e) to (g) of the Order are not applicable to the Company and
hence not commented upon.
(iv) In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business, for the
purchase of inventory and fixed assets and for the sale of goods and
services. During the course of our audit, we have not observed any
major weakness or continuing failure to correct any major weakness in
the internal control system of the Company in respect of these areas.
(v) In our opinion, there are no contracts or arrangements that need to
be entered in the register maintained under Section 301 of the
Companies Act, 1956. Accordingly, the provisions of clause 4(v)(b) of
the Order is not applicable to the Company and hence not commented
upon.
(vi) The Company has not accepted any deposits from the public.
(vii) In our opinion, the Company has an internal audit system
commensurate with the size of the Company and nature of its business.
(viii) 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 209(1)(d) of the Companies
Act, 1956, and are of the opinion that prima facie, the prescribed
accounts and records have been made and maintained.
(ix) (a) Undisputed statutory dues including provident fund, investor
education and protection fund, employees'' state insurance, income-tax,
sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and
other material statutory dues have not generally been regularly
deposited with the appropriate authorities though the delays in deposit
have not been serious.
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of provident fund, investor
education and protection fund, employees'' state insurance, income-tax,
wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and
other material statutory dues were outstanding, at the year end, for a
period of more than six months from the date they became payable.
(c) According to the records of the Company, the dues outstanding of
income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
duty and cess on account of any dispute, are as follows:
Nature of Amount Paid under
Name of the Statute dues demanded protest
(Rs. in
Crores) (Rs. in
Crores)
AP Value Added Sales Tax 0.85 0.05
Tax Act, 2005 & Penalty
AP Value Added Penalty 0.36 0.18
Tax Act, 2005
AP Value Added Tax Sales Tax 27.06 -
Act, 2005
Central Sales Tax Act, 1956 Penalty 0.50 -
Central Sales Tax Act, 1956 Penalty 0.70 0.17
Finance Act, 1994 Service tax 9.70 -
Finance Act, 1994 Penalty 0.28 -
West Bengal Vat Act, 2003 Sales Tax 0.06 -
West Bengal Vat Act, 2003 Sales Tax 1.52 -
AP Value Added Tax, 2005 Sales Tax 0.92 -
Andhra Pradesh Tax on Professional 0.06 -
Professions, Trades,
Callings Tax
and Employments Act, 1987
Finance Act, 1994 Service tax 13.75 -
Income Tax Act, 1961 Income tax 4.46 4.46
Income Tax Act, 1961 Income tax 1.97 1.97
Income Tax Act, 1961 Income tax 11.90 11.90
Income Tax Act, 1961 Income tax 2.05 2.05
Income Tax Act, 1961 Income tax 12.95 12.95
Income Tax Act, 1961 Income tax 8.78 8.78
Name of the Statute Period to which Forum where dispute
the amount is pending
relates
AP Value Added Tax Act, 2005 2005-06, 2006-07 Sales Tax Appellate
and 2007-08 Tribunal, Hyderabad
AP Value Added Tax Act, 2005 2007-08 Appellate Deputy
Commissioner, Hyderabad
AP Value Added Tax Act, 2005 2007-08 High Court of Andhra
Pradesh
Central Sales Tax Act,1956 2002-03 and Sales Tax Appellate
2003-04 Tribunal, Hyderabad
Central Sales Tax Act,1956 2007-08 Appellate Deputy
Commissioner, Chattisgarh
Finance Act, 1994 2007-08 and Commissioner of
2008-09 Customs & Central
Excise, Hyderabad
Finance Act, 1994 2006-07 and The Customs, Excise
2007-08 and Service Tax Appellate
Tribunal, Bangalore
West Bengal Vat Act, 2003 2009-10 Joint Commissioner of
Commercial Taxes,
Berhampore
West Bengal Vat Act, 2003 2008-09 Joint Commissioner of
Commercial Taxes,
Berhampore
AP Value Added Tax, 2005 2008-09 Appellate Deputy
Commissioner, Hyderabad
Andhra Pradesh Tax On
Professions, Trades,
Callings and Employments
Act, 1987 2008-09 Commercial Tax Officer,
Hyderabad
Finance Act, 1994 2007-08 Commissioner of
2008-09 Customs & Central
and 2009-10 Excise, Hyderabad
Income Tax Act, 1961 2003-04
Income Tax Act, 1961 2004-05 Commissioner of
Income Tax Act, 1961 2005-06 Income Tax (Appeals),
Income Tax Act, 1961 2007-08 Hyderabad
Income Tax Act, 1961 2008-09
Income Tax Act, 1961 2009-10
(x) Without considering the consequential effects, if any, of the
matters stated in paragraphs 5 and 6 of our auditors'' report, the
Company has no accumulated losses at the end of the financial year. The
Company has incurred cash losses in the current and immediately
preceding financial year
(xi) Based on our audit procedures and as per the information and
explanations given by the management, we are of the opinion that the
Company has not defaulted in repayment of dues to a financial
institution or banks. There are no dues to debenture holders.
(xii) Based on our examination of documents and records, we are of the
opinion that the Company has maintained adequate records where the
Company has granted loans and advances on the basis of security by way
of pledge of shares, debentures and other securities.
(xiii) In our opinion, the Company is not a chit fund or a nidhi /
mutual benefit fund / society. Therefore, the provisions of clause
4(xiii) of the Companies (Auditor''s Report) Order, 2003 (as amended)
are not applicable to the Company.
(xiv) In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order,
2003 (as amended) are not applicable to the Company.
(xv) According to the information and explanations given to us, the
Company has not given any guarantee for loans taken by others from
banks or financial institutions.
(xvi) Based on the information and explanations given to us by the
management, term loans were applied for the purpose for which the loans
were obtained.
(xvii) According to the information and explanations given to us and on
an overall examination of the balance sheet of the Company, we report
that no funds raised on short-term basis have been used for long-term
investment.
(xviii) The Company has not made any preferential allotment of shares
to parties or companies covered in the register maintained under
section 301 of the Companies Act, 1956.
(xix) The Company did not have any outstanding debentures during the
year.
(xx) The Company has not raised any money by way of public issue during
the year.
(xxi) Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and as per
the information and explanations given by the management, we report
that no fraud on or by the Company has been noticed or reported during
the year.
For S.R. BATLIBOI & ASSOCIATES
Firm registration number: 101049W
Chartered Accountants
per Vikas Kumar Pansari
Partner
Membership No.:093649
Place: New Delhi
Date: November 25, 2012
Mar 31, 2011
1. We have audited the attached Balance Sheet of IL&FS Engineering and
Construction Company Limited (Ãthe CompanyÃ) as at March 31, 2011 and
also the Profit and Loss Account and the Cash Flow Statement for the
year ended on that date annexed thereto. These financial statements are
the responsibility of the CompanyÃs Management. Our responsibility is
to express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards
generally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by Management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
3. As required by the Companies (AuditorÃs Report) Order, 2003 (as
amended) issued by the Central Government of India in terms of
sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose
in the Annexure a statement on the matters specified in paragraphs 4
and 5 of the said Order.
4. The accompanying financial statements include the CompanyÃs share
of profit (net) aggregating to Rs. 2.18 Crores (Losses for the year
ended March 31, 2010 Ã Rs. 1.80 Crores) from Integrated Joint Ventures
in which the Company is a co- venturer. The financial statements of
these Joint Venture entities as at and for the year ended March 31,
2011 were audited by other auditors whose reports have been furnished
to us. We have relied solely on the audit reports of other auditors in
this regard.
5. Without qualifying our opinion, we invite your attention to Note
no. 24 of Schedule 25 to the financial statements pertaining to
remuneration paid by the Company to its directors, which was in excess
of the limits specified under Schedule XIII of the Companies Act, 1956
by Rs. 1.87 Crores, Rs. 0.16 Crore and Rs. 0.48 Crore for the year
ended March 31, 2009, March 31, 2010 and March 31, 2011 respectively.
The approval in respect of the aforesaid is awaited from the central
government.
6. As detailed in Note nos. 30(a)(i) and 30(a)(iii) of Schedule 25 to
the financial statements:
a) One of the Integrated Joint Ventures, where the Company is a
co-venturer, namely Maytas SNC (JV), has not prepared its financial
statements for the year ended March 31, 2011.
b) The accompanying financial statements include the CompanyÃs share of
loss of Rs. 0.11 Crore from an Integrated Joint Venture, in which the
Company is a co- venturer based on its unaudited financial statements.
The accompanying financial statements do not include the consequential
impacts that may have been required had the audited financial
statements of the joint ventures been made available.
7. As at March 31, 2011, the Company had certain Inter Corporate
Deposits (ICDs) outstanding of Rs. 343.78 Crores (March 31, 2010 Ã Rs.
391.64 Crores). Management has represented that the Company has taken
steps to recover the amounts and is of the opinion that all deposits
are fully recoverable. Accordingly no adjustments have been made to the
accompanying financial statements in respect of the same. Pending
final outcome of the recovery process, we are unable to comment on the
extent of recoverability of the aforesaid amounts. Our audit report on
the financial statements for the year ended March 31, 2010 was also
qualified in respect of the aforesaid matter.
8. Further to our comments in the Annexure referred to in paragraph 3
above, we report that:
i. Except as discussed in paragraph 6 and 7 above, 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, Profit and Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account;
iv. Except as discussed in paragraph 6 and 7 above, 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 the written representations received from the
directors, as on March 31, 2011, and taken on record by the Board of
Directors, we report that none of the directors is disqualified as on
March 31, 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
except to the extent of adjustments, if any, that may have been
required on account of matters discussed in paragraphs 6 and 7 above,
the cumulative effect of which on the financial statements is currently
not ascertainable, the said accounts give a true and fair view in
conformity with the accounting principles generally accepted in India:
a. in the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2011;
b. in the case of the Profit and Loss Account, of the profit for the
year ended on that date; and
c. in the case of Cash Flow Statement, of the cash flows for the year
ended on that date.
Annexure to the Auditors' Report
Annexure referred to in paragraph 3 of our report of even date
Re: IL&FS Engineering and Construction Company Limited ('the Company')
(i) (a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets.
(b) The Company has conducted physical verification of assets as per
the regular programme of verification, which in our opinion, is
reasonable having regard to the size of the Company and nature of its
assets. Asinformed, no material discrepancies were noticed on such
verification.
(c) There was no substantial disposal of fixed assets during the year.
(ii) (a) Management has conducted physical verification of inventory at
reasonable intervals during the year.
(b) The procedures of physical verification of inventory followed by
Management are reasonable and adequate in relation to the size of the
Company and the nature of its business.
(c) The Company is maintaining proper records of inventory in so far as
such records were examined by us and no material discrepancies were
noticed on physical verification which has been properly dealt with in
the books of account.
(iii) (a) The Company has granted unsecured loans to a company covered
in the register maintained under section 301 of the Companies Act,
1956. The maximum amount involved during the year was Rs. 47.87 Crores,
which was outstanding since previous year and the aggregate balance of
loans as at March 31,2011 was Rs. 47.87 Crores. However as at March 31,
2011, the company is not covered inthe register maintained under
section 301 of the Companies Act, 1956.
(b) In our opinion and according to the information and explanations
given to us, the rate of interest and other terms and conditions for
such loans are not prima facie prejudicial to the interest of the
Company.
(c) In respect of loans granted, repayment of the principal amount was
not as stipulated and payment of interest has also not been regular.
(d) Based on our audit procedures and the information and explanation
made available to us, in case where overdue amount is more than rupees
one lakh, reasonable steps have been taken by the Company for recovery
of the principal and interest.
(e) As informed, the Company has not taken any loans, secured or
unsecured from companies, firms or other
parties covered in the register maintained under section 301 of the
Companies Act, 1956. Accordingly, the provisions of clauses (iii)(f)
and (iii)(g) of the Companies (Auditor's Report) Order, 2003 (as
amended) are not applicable to the Company.
(iv) In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business, for the
purchase of inventory, fixed assets and for the sale of goods and
services. During the course of our audit, we have not observed any
major weakness or continuing failure to correct any majorweakness in
internal control system of the company in respect of these areas.
(v) According to the information and explanations given to us, we are
of the opinion that there are no contracts or arrangements entered
during the year which are referred to in section 301 of the Companies
Act, 1956 that need to be entered in the register maintained under
Section 301 of the Companies Act, 1956. Accordingly, the provisions of
clause (v) (b) of the Companies (Auditor's Report) Order, 2003 (as
amended) are not applicable to the Company.
(vi) The Company has not accepted any deposits from the public.
(vii) In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
(viii) To the best of our knowledge and as explained, the Central
Government has not prescribed maintenance of cost records under clause
(d) of sub-section (1) of section 209 of the Companies Act, 1956 for
the products of the Company.
(ix) (a) Undisputed statutory dues including provident fund,
investoreducationand protection fund, employees' state insurance,
income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
duty, cess and other material statutory dues have not been regularly
deposited with the appropriate authorities though the delays in deposit
have notbeen serious.
Further, since the Central Government has till date not prescribed the
amount of cess payable under section 441 A of the Companies Act, 1956,
we are not in a position to comment upon the regularity or otherwise of
the Company in depositing the same.
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of provident fund, investor
education and protection fund, employees' state insurance, income-tax,
wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and
other material statutory dues were outstanding, at the year end, for a
period of more than six months from the date they became payable.
(c) According to the records of the Company, the dues outstanding of
income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
duty and cess on account of any dispute, are as follows:
Name of the Statute Nature of Amount
dues (Rs.crores)
AP Valued Added Tax, 2005 Sales Tax and 0.65
Penalty
AP Valued Added Tax, 2005 Penalty 1.44
AP Valued Added Tax, 2005 Sales Tax 27.06
Assam Value Added Tax, 2003 Sales Tax 0.05
UP Trade Tax Act, 1948 Sales Tax 6.37
Central SalesTaxAct, 1956 Penalty for 0.50
Sales Tax
Central Sales Tax Act, 1956 Penalty for 0.70
Sales Tax
Finance Act, 1994 Service Tax 9.70
Finance Act, 1994 Penalty on 0.28
Service Tax
Name of the Statute Period to which Forum where dispute
the amount is pending
relates
AP Valued Added
Tax, 2005 2005-06, Sales Tax Appellate
2006-07 and 2007-08 Tribunal, Hyderabad
AP Valued Added
Tax, 2005 2007-08 Appellate Deputy
Commissioner,
Hyderabad
AP Valued Added
Tax, 2005 2007-08 High Court of
Andhra Pradesh
Assam Value Added
Tax, 2003 2006-07 Deputy Commissioner
of Taxes and Appeals,
Guwahati
UP Trade Tax Act, 1948 2007-08 Joint Commissioner of
Commercial Taxes,
Lucknow
Central Sales
Tax Act, 1956 2002-03 Sales Tax Appellate
2003-04 Tribunal, Hyderabad
Central Sales
Tax Act, 1956 2007-08 Apellate Deputy
Commissioner,
Chattisgarh
Finance Act, 1994 2007-08 and 2008-09 Office of Commissioner
of Customs &
Central Excise,
Hyderabad
Finance Act, 1994 2006-07 and The Customs, Excise
2007-08 and Service Tax
Appellate Tribunal,
Bangalore
(x) Without considering the impact of our observations in paragraphs 6
and 7 of the main Audit Report, the effects of which are presently
unascertainable, the Company's accumulated losses at the end of the
financial year are less than fifty percent of its net vom. The Company
has incurred cash loss during the year and in the immediately preceding
financial year.
(xi) Based on our audit procedures and as per the information and
explanations given by the management, there are no dues to debenture
holders. There have been defaults in repayment ofdues to the financial
institutions and banks during the year, which have been subsequently
settled by way of One time settlement (OTS) execute dupto March31, 2011
as disclosed in the note no. 9 of Schedule 25 to the financial
statements.
The defaults for banks which are not part of OTS discussed above are:
Name of the Bank Nature of dues Amount Due Date Date of Payment
(Rs.Crores)
Allahabad Bank Interest 1.28 Various
dates 27-Jul-2010 and
2-Apr-2011
Bank of
Maharashtra Interest 0.61 Various
dates 27-Jul-2010 and
2-Apr-2011
Punjab
National Bank Interest 0.95 Various
dates 27-Jul-2010 and
2-Apr-2011
State Bank
of India Interest 1.90 Various
dates 27-Jul-2010 and
6-Apr-2011
Vijaya Bank Interest 0.52 Various
dates 27-Jul-2010 and
1-Apr-2011
Bank of India Interest 0.23 Various
dates 27-M-2010
ICICI Bank Interest 2.41 Various
dates 27-M-2010
IDBI Bank Interest 0.93 Various
dates 27-M-2010
Indian Overseas
Bank Interest 0.75 Various
dates 27-M-2010
State Bank
of Hyderabad Interest 1.10 Various
dates 27-M-2010
(xii) According to the information and explanations given to us and
based on the documents and records produced to us, the Company has not
granted loans and advances on the basis of security by way of pledge of
shares, debentures and other securities.
(xiii) In our opinion, the Company is not a chit fund or a nidhi /
mutual benefit fund / society. Therefore, the provisions of clause
4(xiii) of the Companies (Auditor's Report) Order, 2003 (as amended)
are not applicable to the Company.
(xiv) In our opinion, the Company is not dealing in ortrading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Companies (Auditor's Report) Order,
2003 (as amended) are not applicable to the Company.
(xv) According to the information and explanations given to us, the
Company has not given guarantee for loans taken by others from bank
orfinancial institutions.
(xvi) Based on information and explanations given to us by Management,
term loans were applied for the purpose for which the loans were
obtained.
(xvii) According to the information and explanations given to us and on
overall examination of the balance sheet of the Company, we report that
no funds raised on short-term basis have been used for long-term
investment.
(xviii) The Company has not made any preferential allotment of shares
to parties or companies covered in the register maintained under
section 301 ofthe Companies Act, 1956.
(xix) The Company did not have any outstanding debentures during the
year.
(xx) The Company has not raised any money by public issue during the
year.
(xxi) Based upon the audit procedures performed for the purpose of
reporting the true and fair view ofthe financial statements and as
perthe information and explanations given by the management, we report
that no fraud on or by the Company has been noticed or reported during
the year.
For S.R. BATLIBOI & ASSOCIATES
Firm registration number: 101049W Chartered Accountants
per Vikas Kumar Pansari
Partner
Membership No.:93649
Place :Mumbai
Date : May 25,2011
Mar 31, 2010
1. We have audited the attached Balance Sheet of Maytas Infra Limited
(the Company) as at March 31, 2010 and also the Profit and Loss
Account and the Cash Flow Statement for the year ended on that date
annexed thereto. These financial statements are the responsibility of
the Companys Management. Our responsibility is to express an opinion
on these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards
generally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by Management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
3. As required by the Companies (Auditors Report) Order, 2003 (as
amended) issued by the Central Government of India in terms of
sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose
in the Annexure a statement on the matters specified in paragraphs 4
and 5 of the said Order.
4. The accompanying financial statements include the Companys share
of losses (net) aggregating to Rs.1.80 Crores (Losses for the year
ended March 31, 2009 Ã Rs.18.29 Crores) from Integrated Joint Ventures
in which the Company is a co-venturer. The financial statements of
these Joint Venture entities as at and for the year ended March 31,
2010 were audited by other auditors whose reports have been furnished
to us. We have relied solely on the audit reports of other auditors in
this regard.
5. We invite your attention to the following:
a) Note no. 6 of Schedule 25 to the financial statements. The
accompanying financial statements has been prepared on a going concern
basis after giving effect to the corporate debt restructuring (CDR)
package including accounting for the disposal of certain investments to
an Independent Trust, as approved by the CDR cell in their meeting held
on March 30, 2010 and vide letter of approval dated June 26, 2010.
b) Note no. 9 of Schedule 25 to the financial statements regarding
recoverability of certain current and fixed assets aggregating to Rs.
218.27 Crores qualified in our previous years audit report. During the
current year, an amount of Rs.85.21 Crores has been charged off to the
Profit and Loss Account considered as irrecoverable/ doubtful of
recovery.
As at March 31, 2010, a sum of Rs. 63.70 Crores is recoverable against
current and fixed assets. Based on internal assessment and/or legal
opinion, the same has been considered good of recovery and
consequently, no further adjustments have been made in this regard.
c) Note no.10 of Schedule 25 to the financial statements regarding
interest on Inter Corporate Deposits amounting to Rs. 48.52 Crores up
to March 31, 2009 qualified in our previous years audit report, out of
which Rs.48.10 Crores has been charged off during the year and no
further interest accrued thereon.
d) With regard to note 21 of Schedule 25 to the financial statements
pertaining to remuneration paid by the Company to its directors, which
was in excess of the limits specified under Schedule XIII of the
Companies Act, 1956 by Rs. 1.87 Crores and Rs. 0.16 Crore for
the year ended March 31, 2009 and March 31, 2010 respectively. The
approval in respect of the aforesaid is awaited from the Central
Government. The ultimate outcome of the matter cannot be presently
determined. Pending, the final outcome, no adjustments have been made
in this regard in the financial statements.
We have not qualified our opinion in respect of the matters referred in
the Paragraphs 5(a) to 5(d) above
6. As at March 31, 2010, the Company had Inter Corporate Deposits
(ICDs) outstanding of Rs. 391.64 Crores. Management has represented
that the Company has taken steps to recover the amounts and is of the
opinion that all deposits are fully recoverable. Accordingly no
adjustments have been made to the accompanying financial statements in
respect of the same. Pending final outcome of the recovery process, we
are unable to comment on the extent of recoverability of the aforesaid
amounts. Our audit report on the financial statements for the year
ended March 31, 2009 was also qualified in respect of the aforesaid
matter.
7. Further to our comments in the Annexure referred to in paragraph 3
above, we report that:
i. we have obtained all the information and explana- tions, 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, Profit and Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account;
iv Except as discussed in paragraph 6 above, 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 the written representations received from the
directors, as on March 31, 2010, and taken on record by the Board of
Directors, we report that none of the directors is disqualified as on
March 31, 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
except to the extent of impact, if any, on account of matters discussed
in paragraph 6 above, give a true and fair view in conformity with the
accounting principles generally accepted in India:
a. In the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2010;
b. In the case of the Profit and Loss Account, of the Loss for the
year ended on that date; and
c. In the case of Cash Flow Statement, of the cash flows for the year
ended on that date.
Annexure to the Auditors Report
Annexure referred to in paragraph 3 of our report of even date
Re: Maytas Infra Limited (Ãthe Company)
(i) (a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets.
(b) The Company has conducted physical verification of assets as per
the regular programme of verification, which in our opinion, is
reasonable having regard to the size of the Company and nature of its
assets. The reconciliation between book balances and physical balances
is under progress. As informed, no material discrepancies were noticed
on such verification and there will not be any material impact on
account of differences between physical and book balances.
(c) There was no substantial disposal of fixed assets during the year.
(ii) (a) Management has conducted physical verification of inventory at
reasonable intervals during the year.
(b) The procedures of physical verification of inventory followed by
Management are reasonable and adequate in relation to the size of the
Company and the nature of its business.
(c) The Company is maintaining proper records of inventory in so far as
such records were examined by us and no material discrepancies were
noticed on physical verification except for shortage of Rs.9.67 Crores
which has been properly dealt with in the books of account.
(iii) (a) The Company has granted unsecured loans to a company covered
in the register maintained under Section 301 of the Companies Act,
1956. The maximum amount involved during the year was Rs. 47.87 Crores,
which was outstanding since previous year and the aggregate balance of
loans as at March 31, 2010 was Rs. 47.87 Crores. However as at March
31, 2010, the company is not covered in the register maintained under
Section 301 of the Companies Act, 1956.
(b) In our opinion and according to the information and explanations
given to us, the rate of interest and other terms and conditions for
such loans are not prima facie prejudicial to the interest of the
Company.
(c) In respect of loans granted, repayment of the principal amount was
not as stipulated and payment of interest has also not been regular.
(d) Based on our audit procedures and the information and explanation
made available to us, in case where overdue amount is more than rupees
one lakh, reasonable steps have been taken by the Company for recovery
of the principal and interest.
(e) As informed, the Company has not taken any loans, secured or
unsecured from companies, firms or other parties covered in the
register maintained under Section 301 of the Companies Act, 1956.
Accordingly, the provisions of Clauses (iii)(f) and (iii)(g) of the
Companies (Auditors Report) Order, 2003 (as amended) are not
applicable to the Company.
(iv) In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business, for the
purchase of inventory, fixed assets and for the sale of goods and
services. However, in few cases, documentation in relation to revenue
and expenditure at few project sites was weak, which has been addressed
during the year and the management is in the process of further
strengthening the internal controls over the same. During the course of
our audit, we have not observed any continuing failure to correct major
weakness in internal control system of the company.
(v) (a) According to the information and explanations given to us, we
are of the opinion that the Company has entered particulars of all
contracts or arrangements referred to in Section 301 that are required
to be entered in the register maintained under Section 301 of the
Companies Act, 1956.
(b) In respect of transactions made in pursuance of such contracts or
arrangements exceeding value of Rupees five lakhs entered into during
the financial year, because of the unique and specialized nature of the
contracts involved and absence of any comparable prices, we are unable
to comment whether the transactions were made at prevailing market
prices at the relevant time.
(vi) The Company has not accepted any deposits from the public.
(vii) In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
(viii) To the best of our knowledge and as explained, the Central
Government has not prescribed maintenance of cost records under Clause
(d) of sub-section (1) of Section 209 of the Companies Act, 1956 for
the products of the Company.
(ix) (a) Undisputed statutory dues including provident fund, investor
education and protection fund, employees state insurance, income-tax,
sales-tax, wealth-tax, service tax, customs duty, excise duty, cess
have not been regularly deposited with the appropriate authorities and
there have been serious delays in large number of cases in the earlier
part of the year. However, in the later part of the year, there have
been slight delays in few cases in the deposit of statutory dues.
Further, since the Central Government has till date not prescribed the
amount of cess payable under Section 441 A of the Companies Act, 1956,
we are not in a position to comment upon the regularity or otherwise of
the Company in depositing the same.
(b) According to the information and explanations given to us,
undisputed dues in respect of provident fund, investor education and
protection fund, employees state insurance, income-tax, wealth-tax,
service tax, sales-tax, customs duty, excise duty, cess and other
statutory dues which were outstanding, at the year end for a period of
more than six months from the date they became payable are as follows:
Period to which
Name of the Statute Nature of the Amount
dues (Rs. Crores) the amount
relates
AP VAT Act, 2005 Sales Tax 1.22
2008-09
Tax Deducted at April09 and
Income Tax Act, 1961 0.05
Source May 09
Employees
Provident
Fund and
Miscellaneous Provident Fund 0.37 Various dates
Act, 1952
Name of the Statute
AP VAT Act, 2005 April 15, 09 Not paid
Income Tax Act, 1961 May 07, 09 and Paid on May 24,
June 07, 09 2010
Employees
Provident Paid on June
Various dates
Fund and
Miscellaneous
Act, 1952 28, 2010
(c) According to the records of the Company, the dues outstanding of
income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
duty and cess on account of any dispute, are as follows:
Nature of Amount Period to Forum where
Name of the dues (Rs.
Crores) the amount dispute is
pending
Statute relates
AP Value Added
Tax, 2005 Sales Tax
and 0.65 2005-06, Sales Tax Appellate
Tribunal,
Penalty 2006-07 and
2007- Hyderabad
08
AP Value Added
Tax, 2005 Penalty 1.44 2007-08 Appellate Deputy
Commissioner,
Hyderabad
AP Value Added
Tax, 2005 Sales Tax 27.06 2007-08 High Court of
Andhra
Pradesh
Karnataka Value
Added Tax, 2003 Sales Tax 13.84 2007-08 Assistant
Commissioner
of Commercial
Taxes,
Bangalore
Assam Value
Added Tax,
2003 Sales Tax 0.05 2006-07 Deputy
Commissioner
of Taxes and
Appeals,
Guwahati
UP Trade Tax
Act, 1948 Sales Tax 6.37 2007-08 Joint Commissi-
oner of
Commercial Taxes,
Lucknow
Central Sales
Tax Act, 1956 Penalty for 0.50 2002-03 Sales Tax Appellate
Tribunal,
Sales Tax 2003-04 Hyderabad
Central Excise
Act, 1944 Excise Duty 8.32 2006-07 to Directorate General
of
2008-09 Central Excise
Intelligence
Finance Act,
1994 Service Tax 9.70 2007-08 and
2008- Office of Commissio
ner of
09 Customs & Central
Excise,
Hyderabad
Finance Act,
1994 Penalty on 0.28 2006-07 and
2007- Additional
Commissioner
Service Tax 08 Customs, Central
Excise &
Service Tax,
Hyderabad
Income Tax
Act, 1961 Income Tax 0.24 2004-05 Appellate Tribunal
and
CIT(A)
(x) The Companys accumulated losses at the end of the financial year
are more than fifty percent of its net worth. The Company has incurred
cash loss during the year and in the immediately preceding financial
year.
(xi) Based on our audit procedures and as per the information and
explanations given by the management, there are no dues to debenture
holders. There have been defaults in repayment of dues to the financial
institutions and banks during the year, which have been subsequently
rescheduled by way of Corporate debt restructuring package (CDR) as
disclosed in the Note No. 6(e) of Schedule 25 to financial statements
and One Time Settlement (OTS) executed up to March 31, 2010 as
disclosed in the Note No. 7 of Schedule 25 to financial statements.
The defaults for banks which are not part of CDR and OTS discussed
above are:
Name of the Bank Nature of dues Amount Due Date Date of Payment
Kotak Mahindra
Bank Limited Principal and 36.74 various
dates Not Paid
interest
Standard Chart-
ered Bank-Buyers Principal and 19.92 Various
dates Converted into
term
credit interest Loan
BNP Paribas Principal and 47.75 various
dates Not Paid
interest
Axis Bank
Limited * Interest 3.39 various
dates Not Paid
ING vysya Bank * Principal and 10.14 various
dates Not Paid
interest
- Subsequently One Time Settlement has been done.
(xii) According to the information and explanations given to us and
based on the documents and records produced to us, the Company has not
granted loans and advances on the basis of security by way of pledge of
shares, debentures and other securities.
(xiii) In our opinion, the Company is not a chit fund or a nidhi /
mutual benefit fund / society. Therefore, the provisions of Clause
4(xiii) of the Companies (Auditors Report) Order, 2003 (as amended)
are not applicable to the Company.
(xiv) In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of Clause 4(xiv) of the Companies (Auditors Report) Order,
2003 (as amended) are not applicable to the Company.
(xv) According to the information and explanations given to us, the
Company has given guarantee for loans taken by others from bank or
financial institutions, the terms and conditions whereof in our opinion
are not prima-facie prejudicial to the interest of the Company. The
guarantee is no longer outstanding as at the balance sheet date.
(xvi) Based on information and explanations given to us by Management,
term loans were applied for the purpose for which the loans were
obtained.
(xvii) According to the information and explanations given to us and on
overall examination of the balance sheet of the Company, we report that
no funds raised on short-term basis have been used for long-term
investment.
(xviii) The Company has not made any preferential allotment of shares
to parties or companies covered in the register maintained under
Section 301 of the Companies Act, 1956.
(xix) The Company did not have any outstanding debentures during the
year.
(xx) We have verified that the end use of money raised by public issue
is as disclosed in the Note No. 16(a) of Schedule 25 to the financial
statements.
(xxi) Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and as per
the information and explanations given by the management, we report
that no fraud on or by the Company has been noticed or reported during
the course of our audit.
For S R BATLIBOI & ASSOCIATES
Firm Registration Number: 101049W
Chartered Accountants
perVikas Kumar Pansari
Partner
Membership No.: 93649
Place : New Delhi
Date : June 28, 2010
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