Mar 31, 2018
Report on the Financial Statements
We have audited the accompanying standalone Ind AS financial statements of MODIPON LIMITED (âthe Companyâ), which comprise the Balance Sheet as at 31st March 2018, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash flows and the Statement of Changes in Equity for the year then ended and a summary of significant accounting policies and other explanatory information (herein after referred to as âStandalone Ind AS financial statementsâ).
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 (âthe Actâ) with respect to the preparation and presentation of these financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income and cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act, read with relevant rules issued thereunder.
This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditorâs Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit.
We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.
We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the 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 financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Companyâs directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone Ind AS financial statements.
Basis for Qualified Opinion
1. Balance confirmation certificates were not obtained by the Company from creditors, loans and advances given/received, house/shop security depositors, in-operative current accounts with banks and loan account with Punjab National Bank (PNB).
Consequent adjustments required, if any, has not been carried out in the financial results. [Refer Note No. 36]
2. (a) The Company has not provided interest of $ 1000.54 Lakhs up to March 31, 2008 on overdue amounts payable to a supplier resulting in understatement of liabilities and debit balance of reserve and surplus by $ 1000.54 Lakhs each; and
(b) The amount of interest to be provided for in the books of account for the period April 1, 2008 to March 31, 2018 has not been ascertained. [Refer Note No. 35(c)]
3. The amount of interest to be provided for in the books of account, if any, for the period April 1, 2007 to March 31, 2018 to Small and Micro Enterprise has not been ascertained. [Refer Note No. 40]
4. During the year ended March 31, 2009, the Company has sold 68,042 sq.yds. of its vacant land at Modinagar for $ 1021.15 Lakhs (original cost $ 1.95 Lakhs) for which the approval of bank is pending. [Refer Note No. 42(b)]
5. During the year 2011-12, the Company has given physical possession of its vacant 59 (46 as on March 31, 2015) houses located at Modinagar, Uttar Pradesh to a lender i.e. Ashoka Mercantile Limited (AML), a related party, (balance outstanding of loan taken from AML as on March 31, 2015 as per books of account: secured loan $ 882.29 Lakhs and unsecured loan $ 1125.57 Lakhs) for use without any charges/rent/security deposit and no lease rent agreement has been entered into with AML. The Company contends that the temporary possession of houses for use without charges was given to AML as security only as the Company was unable to repay the loans taken from AML. [Refer notes to Note No. 45]
6. (a) The Punjab National Bank (PNB) had approved one time settlement of its outstanding dues of Rs. 1900 lacs vide its approval letters dated April 02, 2014 and April 12, 2014 respectively. In terms of the settlement, OTS amount of $ 1710 lakhs (Net of upfront payment of $ 190 lakhs) was to be paid by the company in four quarterly installments with interest during financial year 2014-15. However, the company was able to manage the payment of $ 630 lakhs up to March 31, 2015 and at the request of the Company, PNB condone the delay and revived the OTS vide its letter dated July 02, 2015 requiring the Company to make payment of residual OTS amount of $ 1270 lakhs by March 31, 2016 and total interest on OTS payment @ 10.25% (simple) by June 30, 2016. The Company has paid $ 1205 lakhs upto March 31, 2018 and balance 65 lakhs along with outstanding interest remain to be paid. [Refer notes to Note No. 43(b)]
(b) The company has again requested vide letter dated 9th June 2017 to discharge its residual OTS liability of Rs. 65 lakhs and also requested for waiver of interest component on OTS settlements.
(c) The Company has also requested for assignment of the debt in favour of one of the NBFC company at the time of full and final settlement of outstanding residual amount and overdue interest (OTS of Rs 100 lakhs and interest of Rs 255 lakhs up to 31st May 2017) and Lender Punjab National Bank has requested to the company to convey the details of the NBFC company for assignment of debts so as to enable the bank to inform the same to its competent authority for the approval. Further, several letters regarding the approval of NBFC have been sent by the Company. PNB Bank vide its letter dated 01.02.2018 informed the company, that the request for revival of OTS was unacceptable and further asked to repay the bank dues.
(d) The outstanding liability in the books of the company is higher than the OTS amount by Rs. 183.90 lakhs. However, interest on OTS amount has been provided @ 10.25% p.a. amounting to $ 7.35 lakhs for the year ended on March 31st 2018.
(e) In the absence of any documentary evidences from the management as well as PNB, we are unable to quantify the amount of interest on the amount of $ 183.90lacs; the amount of $ 183.90lacs is over and above the loan amount on account of the sales tax liability on PNB on account of the auction held by the bank for old plant and machinery of the company.
7. (a). The amounts paid by the Ashoka Mercantile Limited (AML), a related party, to Abu Dhabi Commercial Bank (ADCB) on account of One Time Settlement (OTS) of dues of the bank was accounted for in the books of the Company to the extent of OTS amount paid to the ADCB by AML and the balance amount of $ 153.92 Lakhs is still lying unallocated under unsecured loans in view of pending successful implementation of OTS of the dues of PNB as the settlement of assigned dues with AML is linked to the OTS of dues with PNB. [Refer notes to Note No. 43(d)]
(b) The amount paid to Karnataka Bank by Ashoka Mercantile Limited (AML), a related party, during the year ended March 31, 2012, on account of OTS of dues of the bank was accounted for in the books of the Company to the extent of OTS amount paid to the Karnataka Bank by AML and the balance amount of $ 339.20 Lakhs is still lying unallocated under unsecured loans in view of pending successful implementation of OTS of the dues of PNB as the settlement of dues with AML is linked to the OTS of dues with PNB. [Refer notes to Note No. 43(c) (i)]
(c) The part payment made to Bank of Baroda by Ashoka Mercantile Limited (AML), a related party, during the year ended March 31, 2013 on account of OTS of dues of the bank was accounted for in the books of the company to the extent of OTS amount paid to the Bank of Baroda by AML and the Company and the balance amount of $ 232.04 Lakhs is still lying unallocated under unsecured loans in view of pending successful implementation of OTS of the dues of PNB as the settlement of dues with AML is linked to the OTS of dues with PNB. [Refer notes to Note No. 43(c) (ii)]
The effect if any, on the income/expenditure of the company on final OTS with PNB cannot be ascertained.
8. The company has 15% redeemable cumulative preference shares of Rs 100 each. Preference share due for redemption since 31st March 1996.â
Qualified Opinion
In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in paragraphs in the âBasis for Qualified Opinion,, 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 including the Ind AS.
Emphasis of Matter
The above financial results of the Company for the year ended March 31, 2018 has not been prepared on a going concern basis since the Company has closed its manufacturing operations since May 19, 2007 (closure of factory w.e.f. September 8, 2007) on account of huge losses incurred and sale of entire plant & machinery during the year ended March 31, 2010. [Refer Note No. 37]
Our opinion is not qualified in respect ofthis matter. Opinion
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the Ind AS,
a) In the case of the Balance Sheet ,of the state of affairs of the Company as at 31 March 2018;
b) In the case of the Statement of Profit & Loss including other comprehensive income, of the loss for the year ended on that date;
c) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date; and
d) In the case of the Statement of Changes in Equity, of the change in equity for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditorâs Report) Order, 2016 (âthe Orderâ) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure A, a statement on the matters specified in the paragraph 3 and 4 of the order.
2. As required by section 143(3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement and the Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;
(d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards speci-fled under Section 133 of the Act, read with rules issued thereunder;
(e) on the basis of the written representations received from the directors as on 31 March 2018 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2018 from being appointed as a director in terms of Section 164 (2) of the Act;
(f) with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in âAnnexure Bâ; and
(g) 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. On the basis of written representations received from the management of the Company, the Company has disclosed the impact of pending litigations on its financial position in its financial statements- Refer Note No.35 to the financial statements.
ii. The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company;
Annexure âAâ To the Independent Auditorsâ Report
The Annexure referred to in independent Auditorsâ Report to the members of the Company on the standalone Ind AS financial statements for the year ended March 31, 2018; we report that:
i) In respect of fixed assets:
a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
b) The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified at periodic intervals. In accordance with this programme for the year, no material discrepancies were noticed on such verification. In our opinion, such periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.
c) On the basis of written representation received from the management of the Company, the title deeds of immovable properties held in the name of the Company are mortgaged with the Banks for securing the long term borrowings and credit limits raised by the Company. Following title deeds have not been provided to us:
(Amount in $ Lakhs)
Net book value of immovable property as on March 31, 2018 (A) |
Title deeds available (B) |
Title deed not available (A-B) |
17.44 |
14.78 |
2.66 |
ii) On the basis of information and explanation provided by the management, the Company does not hold any inventory therefore the provisions of paragraph 3 (ii) (a) to (b) are not applicable to the Company.
iii) According to the information and explanation given to us, the Company had not granted loans, secured or unsecured, to any of the Companies, Arms or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Therefore, the provisions of paragraph 3(iii) (a) to (c) of the Companies (Auditorâs Report) Order, 2016 are not applicable to the Company.
iv) According to the information and explanation given to us, the Company has complied with the provisions of section 186 of the Companies Act, 2013 in respect of Investments made.
v) In our opinion, the Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of clause 3(v) of the Order are not applicable.
vi) On the basis of available information and explanation provided to us, the Central Government has not prescribed maintenance of cost records under sub-section (1) of section 148 of the Companies Act, 2013 read with Companies (Cost Records and Audit) Amendment Rules, 2014 dated December 31, 2014 to the current operations carried out by the Company. Accordingly, the provisions of paragraph 3(vi) of the Companies (Auditorâs Report) Order, 2016 are not applicable to the Company.
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 Income tax, Sales tax, Service tax, duty of Customs, duty of Excise, Value Added Tax, Cess and other material statutory dues have generally been regularly deposited during the year by the Company with the appropriate authorities, According to the information and explanations given to us following undisputed amounts payable in respect of Income tax, Sales tax, Service tax, duty of Customs, duty of Excise, Value Added Tax, Cess and other material statutory dues were in arrears as at 31st March, 2018 for a period of more than six months from the date they became payable:
Name of the Statute |
Nature of Dues |
Amount ($ in Lakhs) |
Sales Tax Laws |
Sales Tax Payable-Branch |
1.49 |
Sales Tax Laws |
1% State Development Tax |
.01 |
Sales Tax Laws |
12%U.P.Trade Tax |
2.83 |
Sales Tax Laws |
2.5%U.P.Trade Tax |
.01 |
Sales Tax Laws |
3% Central Sales Tax |
.06 |
Sales Tax Laws |
Sales Tax |
.01 |
Sales Tax Laws |
8% U.P.Trade Tax |
.01 |
Sales Tax Laws |
Turnover Tax |
.01 |
Sales Tax Laws |
Vat Collection 4% |
.02 |
Central Excise Laws |
Excise Duty From Amount Payable |
82.60 |
Income Tax Laws |
Income Tax Deducted At Source |
47.60 |
Total |
134.65 |
(b) According to the records of the Company examined by us and the information and explanations given to us, there were no dues of income tax or sales tax or service tax or duty of customs or duty of excise or value added tax, except the following, which have not been deposited on account of any dispute:
The Following are the particulars of above Dues on account of Sales Tax, duty of Excise, duty of Customs, Water Tax and Income Tax etc. as at March 31, 2018 that have been disputed by the Company in Appeals pending before the Appellate Authorities
Name of the Statute |
Nature of Dues |
Amount (In Lacs $) |
Period to which amount relates |
Forum where dispute is pending |
Sales Tax Laws |
Sales Tax |
94.22 1428.88 1010.75 |
2004-05 2005-06 2006-07 |
Commissioner (Appeal) |
Sales Tax Laws |
Sales Tax |
1.41 |
1991-92 |
High Court |
Sales Tax Laws |
Sales Tax |
12.43 |
2007-08 |
Addl. Commissioner |
Customs Law |
Custom Duty |
74.66 |
1982-83 |
Asst. Commissioner |
Custom Duty |
19.39 |
2002-03 |
Appellate Tribunal |
|
The Uttar Pradesh Water Supply and Sewerage (Amendment ) Act, 1999 |
Water Tax |
7.11 |
1997-98 & 1998-99 |
Additional Civil Judge |
Central Excise Law |
Excise Duty |
115.75 |
1983-84 |
High Court |
Income tax Act,1961 |
Non -Deduction of TDS |
107-71 109.84 |
2006-07 to 200809 |
High Court ITAT/ Commissioner(A) |
Civil Suit |
Trade payables |
95.08 |
2008-09 |
Delhi High Court |
Civil Suit |
Trade payables |
18.13 |
2009-10 |
District Court, Saket, Delhi |
viii) In our opinion and according to the information and explanation given to us, the details of default in respect of dues to a bank are as under:
(a) The Punjab National Bank (PNB) had approved one time settlement of its outstanding dues of $ 1900 lacs vide its approval letters dated April 02, 2014 and April 12, 2014 respectively. In terms of the settlement, OTS amount of $ 1710 lakhs (Net of upfront payment of $ 190 lakhs) was to be paid by the company in four quarterly installments with interest during financial year 2014-15. However, the company was able to manage the payment of $ 630 lakhs up to March 31, 2015 and at the request of the Company, PNB condone the delay and revived the OTS vide its letter dated July 02, 2015 requiring the Company to make payment of residual OTS amount of $ 1270 lakhs by March 31, 2016 and total interest on OTS payment @ 10.25% (simple) by June 30, 2016. The Company has paid $ 1205 lakhs upto March 31, 2018 and balance $ 65 lakhs along with outstanding interest remain to be paid.
(b). The company has again requested vide letter dated 9th June 2017 to discharge its residual OTS liability of $ 65 lakhs and also requested for waiver of interest component on OTS settlements.
(c) The Company has also requested for assignment of the debt in favour of one of the NBFC company at the time of full and final settlement of outstanding residual amount and overdue interest (OTS of $ 100 lakhs and interest of $ 255 lakhs up to 31st May 2017) and Lender Punjab National Bank has requested to the company to convey the details of the NBFC company for assignment of debts so as to enable the bank to inform the same to its competent authority for the approval. Further, several letters regarding the approval of NBFC have been sent by the Company. PNB Bank vide its letter dated 01.02.2018 informed the company, that the request for revival of OTS was unacceptable and further asked to repay the bank dues.
(d) The outstanding liability in the books of the company is higher than the OTS amount by $ 183.90 lakhs. However, interest on OTS amount has been provided @ 10.25% p.a. amounting to $ 7.35 lakhs for the year ended on March 31st 2018.
(e) In the absence of any documentary evidences from the management as well as PNB, we are unable to quantify the amount of interest on the amount of $ 183.90 lacs ; the amount of $183.90 lacs is over and above the loan amount on account of the sales tax liability on PNB on account of the auction held by the bank for old plant and machinery of the company.
Further, No Debentures have been issued by the company during the year, therefore provisions of this clause is not applicable to the company.
ix) The Company did not raise any money by the way of initial public or further public offer (including debt instruments) during the year. However, the term loans taken during the year were applied for the purpose for which the same has been raised.
x) According to the information and explanations given to us, no fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year.
xi) The Company has paid/provided managerial remuneration in accordance with provisions of section 197 read with Schedule V to the Companies Act, 2013 as applicable to the Company.
xii) The Company is not a Nidhi Company and hence, the provisions of paragraph 3(xii) of the Order are not applicable to the Company.
xiii) During the course of our examination of the books and records of the Company, all transactions entered with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 and the details have been disclosed in the financial statements etc, as required by the applicable accounting standards.
xiv) The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review. Accordingly, the provisions of paragraph 3(xiv) of the Order are not applicable to the Company.
xv) The Company has not entered into any non-cash transactions with directors or persons connected with him and hence provisions of section 192 of the Companies Act, 2013 are not applicable.
xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, the provisions of paragraph 3(xvi) of the Order are not applicable to the Company.
Annexure âBâ to the Independent Auditorsâ Report of even date on the financial statement of Modipon Limited
Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section 143 of the Companies Act, 2013 (âthe Actâ)
We have audited the internal financial controls over financial reporting of Modipon 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 Companies Act, 2013.
Auditorsâ Responsibility
Our responsibility is to express an opinion on the Companyâs internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the âGuidance Noteâ) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditorâs judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companyâs internal financial controls system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A companyâs internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companyâs internal financial control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with 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.
Opinion
According to the information and explanation given to us, the Company has not established its internal financial controls over financial reporting on criteria based on or considering the essential components of internal control stated in Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. Because of this reason, we are unable to obtain sufficient appropriate audit evidence to provide a basis for our opinion whether the Company has adequate internal financial controls over financial reporting and whether such internal financial controls were operating effectively as at March 31, 2018.
We have considered the disclaimer reported above in determining the nature, timing, and extent of audit tests applied in our audit of the financial statements of the Company, and disclaimer does not affect our opinion on the financial statements of the Company.
For B. M. Chatrath & Co. LLP
Chartered Accountants,
FRN: E300025
Sd/-
CA. Sunil Kumar Jha
Place : New Delhi Partner
Date : 28th May 2018 Membership No.543805
Mar 31, 2016
INDEPENDENT AUDITOR''S REPORT
To The Members of Modipon Limited Report on the Financial Statements
We have audited the accompanying financial statements of Modipon Limited (âthe Company"), which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.
Management''s Responsibility for the Financial Statements
The Company''s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies(Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor''s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit.
We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.
We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.
Basis for Qualified Opinion
1. Balance confirmation certificates were not obtained by the Company from creditors, loans and advances given/received, house/shop security depositors, in-operative current accounts with banks and loan account with Punjab National Bank (PNB). Consequent adjustments required, if any has not been carried out in the financial results. [Refer Note No. 24]
2. (a) The Company has not provided interest of Rs, 1000.54 Lakhs up to March 31, 2008 on overdue amounts payable to a supplier resulting in understatement of liabilities and debit balance of reserve and surplus by Rs, 1000.54 Lakhs each; and
(b) the amount of interest to be provided for in the books of account for the period April 1, 2008 to March 31, 2016 has not been ascertained. [Refer Note No. 23(d)]
3. The amount of interest to be provided for in the books of account, if any, for the period April 1, 2007 to March 31, 2016 to Small and Micro Enterprise has not been ascertained. [Refer Note No. 28]
4. During the year ended March 31, 2009, the Company has sold 68,042 sq.yds. of its vacant land at Modinagar for Rs, 1021.15 Lakhs (original cost Rs,1.95 Lakhs) for which the approval of bank is pending. [Refer Note No. 30(b)]
5. During the year 2011-12, the Company has given physical possession of its vacant 59 (46 as on March 31, 2015) houses located at Modinagar, Uttar Pradesh to a lender i.e. Ashoka Mercantile Limited (AML), a related party, (balance outstanding of loan taken from AML as on March 31,
2015 as per books of account: secured loan Rs, 882.29 Lakhs and unsecured loan Rs,1125.57 Lakhs) for use without any charges/rent/security deposit and no lease rent agreement has been entered into with AML. The Company contends that the temporary possession of houses for use without charges was given to AML as security only as the Company was unable to repay the loans taken from AML. [Refer note to Note No. 32(c)]
6. (a) In the earlier years, Punjab National Bank (PNB) had approved one time settlement of its outstanding dues of Rs, 1900 lacs vide its approval letters dated April 02,
2014 and April 12, 2014. The company had paid Rs, 930 lacs till June 30, 2015. However as the Company could not make payment as per agreed terms of OTS, hence application of revival of OTS was again approved by PNB vide its letter dated July 02, 2015. The agreed revise payments terms are as under:
- Rs, 200 lacs by September 30, 2015
- Rs, 200 lacs by December 31, 2015 and
- Rs, 570 lacs by March 31, 2016.
- The entire amount of interest @ 10.25% (Simple) along with expenses of Rs, 5.54 lacs are to be paid by June 30, 2016.
Further from July 01, 2015, the company has paid Rs, 870 lacs till March 31, 2016 and balance OTS amount of Rs, 100 lacs remain to be paid/cleared.
Since the Company is unable to fulfil the agreed terms of OTS, we are unable to comment on the implication of same on the financials of the Company.
(b) The outstanding liability in the books of the company is higher than the OTS amount by Rs,183.90 lacs. However, interest on OTS amount has been provided as per the agreement amounting to Rs, 91.89 lacs for the year ended March 31, 2016.
(c) Had the interest been provided as per original terms on the principal amount the interest for the year ended on March 31, 2016 would have been higher by Rs, 491.15 lacs (Rs, 1867.45. lacs for the period April 01, 2009 to March 31, 2016).(Refer Note 31(b)).
7. As stated in note [31(d)(i) and (ii)], the amounts paid by the assignee i.e. Ashoka Mercantile Limited (AML), a related party, to Abu Dhabi Commercial Bank (ADCB) on account of One Time Settlement (OTS) of dues of the bank was accounted for in the books of the Company to the extent of OTS amount paid to the ADCB by AML and the balance amount of Rs, 153.92 Lakhs is still lying unallocated under unsecured loans in view of pending successful implementation of OTS of the dues of PNB as the settlement of assigned dues with AML is linked to the OTS of dues with PNB.
8. As stated in note [31(c)(i)], the amount paid to Karnataka Bank by Ashoka Mercantile Limited (AML), a related party, during the year ended March 31, 2012, on account of OTS of dues of the bank was accounted for in the books of the Company to the extent of OTS amount paid to the Karnataka Bank by AML and the balance amount of Rs, 339.20 Lakhs is still lying unallocated under unsecured loans in view of pending successful implementation of OTS of the dues of PNB as the settlement of dues with AML is linked to the OTS of dues with PNB.
9. As stated in note [31(c)(ii)], the part payment made to Bank of Baroda by Ashoka Mercantile Limited (AML), a related party, during the year ended March 31, 2013 on account of OTS of dues of the bank was accounted for in the books of the company to the extent of OTS amount paid to the Bank of Baroda by AML and the Company and the balance amount of Rs, 232.04 Lakhs is still lying unallocated under unsecured loans in view of pending successful implementation of OTS of the dues of pNB as the settlement of dues with AML is linked to the OTS of dues with pNB.
Qualified Opinion
In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in paragraphs in the Basis for Qualified Opinion,, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2016, its profit and cash flows for the year ended on that date.
Emphasis of Matter
The above financial results of the Company for the year ended March 31, 2016 has not been prepared on a going concern basis since the Company has closed its manufacturing operations since May 19, 2007 (closure of factory w.e.f. September 8, 2007) on account of huge losses incurred and sale of entire plant & machinery during the year ended March 31, 2010. [Refer Note No. 25]
Our opinion is not qualified in respect of this matter.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2016, its profit and cash flows for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by section 143(3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.
(d) In our opinion, the aforesaid 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) In our opinion there are no financial transactions or matters that may have adverse effect on the functioning of the Company.
(f) On the basis of the written representations received from the directors as on March 31, 2016 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of Section 164(2) of the Act.
(g) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A".
(h) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i. On the basis of written representations received from the management of the Company, the Company has disclosed the impact of pending litigations on its financial position in its financial statements- Refer Note No. 23(vi) to the financial statements.
ii. The Company has made provisions, as required under the applicable law or accounting standards, for material foreseeable losses, if any on long-term contracts.
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and protection Fund by the Company.
2. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government of India in terms of Section 143 (11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order.
ANNEXURE ''A'' TO THE INDEPENDENT AUDITORS'' REPORT OF EVEN DATE ON THE FINANCIAL STATEMENT OF MODIPON LIMITED
Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section 143 of the Companies Act, 2013 ("the Act") We have audited the internal financial controls over financial reporting of Modipon Limited (âthe Company") as of March 31, 2016 in conjunction with our audit of the financial statements of the Company for the year ended on that date.
Management''s Responsibility for Internal Financial Controls
The Company''s Management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditors'' Responsibility
Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
Meaning of Internal Financial Controls Over Financial Reporting
A Company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
According to the information and explanation given to us, the Company has not established its internal financial controls over financial reporting on criteria based on or considering the essential components of internal control stated in Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. Because of this reason, we are unable to obtain sufficient appropriate audit evidence to provide a basis for our opinion whether the Company has adequate internal financial controls over financial reporting and whether such internal financial controls were operating effectively as at March 31, 2016.
We have considered the disclaimer reported above in determining the nature, timing, and extent of audit tests applied in our audit of the financial statements of the Company, and disclaimer does not affect our opinion on the financial statements of the Company.
ANNEXURE ''B'' TO THE INDEPENDENT AUDITORS'' REPORT
The Annexure referred to in independent Auditors'' Report to the members of the Company on the financial statements for the year ended March 31, 2016; we report that:
i) In respect of fixed assets:
a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
b) The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified at periodic intervals. In accordance with this programme for the year, no material discrepancies were noticed on such verification. In our opinion, such periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.
c) On the basis of written representation received from the management of the Company, the title deeds of immovable properties held in the name of the Company are mortgaged with the Banks for securing the long term borrowings and credit limits raised by the Company. Following title deeds have not been provided to us:
(Amount in Rs, Lakhs)
Net book value of |
Title deeds |
Title deed not |
immovable property as on March 31, 2016 (A) |
available (B) |
available (A-B) |
17.44 |
14.78 |
2.66 |
ii) On the basis of information and explanation provided by the management, the Company does not any inventory therefore the provisions of paragraph 3 (ii) (a) to (b) are not applicable to the Company.
iii) (a) to (c) According to the information and explanation given to us, the Company had not granted loans, secured or unsecured, to any of the Companies, firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Therefore, the provisions of paragraph 3(iii) (a) to (c) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the Company.
iv) According to the information and explanation given to us, the Company has complied with the provisions of section 186 of the Companies Act, 2013 in respect of Investments made.
v) The Company has not accepted any deposits from the public. Accordingly, the provisions of paragraph 3(v) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the Company.
vi) On the basis of available information and explanation provided to us, the Central Government has not prescribed maintenance of cost records under sub-section (1) of section 148 of the Companies Act, 2013 read with Companies (Cost Records and Audit) Amendment Rules, 2014 dated December 31, 2014 to the current operations carried out by the Company. Accordingly, the provisions of paragraph 3(vi) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the Company.
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 Income tax, Sales tax, Service tax, duty of Customs, duty of Excise, Value Added Tax, Cess and other material statutory dues have generally been regularly deposited during the year by the Company with the appropriate authorities, According to the information and explanations given to us following undisputed amounts payable in respect of Income tax, Sales tax, Service tax, duty of Customs, duty of Excise, Value Added Tax, Cess and other material statutory dues were in arrears as at 31st March, 2016 for a period of more than six months from the date they became payable:
Name of the Statute |
Nature of Dues |
Amount (Rs, in Lakhs) |
Sales Tax Laws |
Sales Tax Payable-Branch |
1.49 |
Sales Tax Laws |
1% State Development Tax |
.01 |
Sales Tax Laws |
12%U.P.Trade Tax |
2.83 |
Sales Tax Laws |
2.5%U.P.Trade Tax |
.01 |
Sales Tax Laws |
3% Central Sales Tax |
.06 |
Sales Tax Laws |
Sales Tax |
.01 |
Sales Tax Laws |
8% U.P. Trade Tax |
.01 |
Sales Tax Laws |
Turnover Tax |
.01 |
Sales Tax Laws |
Vat Collection 4% |
.02 |
Central Excise Laws |
Excise Duty From Amount payable |
82.60 |
Income Tax Laws |
Income Tax Deducted At Source |
47.60 |
Total |
134.65 |
(b) According to the records of the Company examined by us and the information and explanations given to us, there were no dues of income tax or sales tax or service tax or duty of customs or duty of excise or value added tax, except the following, which have not been deposited on account of any dispute:
The Following are the particulars of above Dues on account of Sales Tax, duty of Excise, duty of Customs, Water Tax and Income Tax as at March 31, 2016 that have been disputed by the Company in Appeals pending before the Appellate Authorities
Name of the Statute |
Nature of Dues |
Amount (In Lacs Rs,) |
Period to which amount relates |
Forum where dispute is pending |
Sales Tax Laws |
Sales Tax |
94.22 1428.88 1010.75 |
2004-05 2005-06 2006-07 |
Commissioner (Appeal) |
Sales Tax Laws |
Sales Tax |
1.41 |
1991-92 |
High Court |
Sales Tax Laws |
Sales Tax |
12.43 |
2007-08 |
Addl. Commissioner |
Customs Law |
Custom Duty |
74.66 |
1982-83 |
Asst. Commissioner |
Custom Duty |
19.39 |
2002-03 |
Appellate Tribunal |
|
The Uttar pradesh Water Supply and Sewerage (Amendment) Act, 1999 |
Water Tax |
7.11 |
1997-98 & 1998-99 |
Additional Civil Judge |
Central Excise Law |
Excise Duty |
115.75 |
1983-84 |
High Court |
Income tax Act,1961 |
Non -Deduction of TDS |
107-71 109.84 |
2006-07 to 2008-09 |
High Court ITAT/ Commissioner (A) |
Civil Suit |
Trade payables |
95.08 |
2008-09 |
Delhi High Court |
Civil Suit |
Trade payables |
18.13 |
2009-10 |
District Court, Saket, Delhi |
(c) On the basis of information and explanations given to us by the management, no amount was 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 there under.
viii) In our opinion and according to the information and explanation given to us, the details of default in respect of dues to a bank are as under:
(a) In the earlier years, punjab National Bank (pNB) had approved one time settlement of its outstanding dues of Rs, 1900 lacs vide its approval letters dated April 02, 2014 and April 12, 2014. The company had paid Rs, 930 lacs till June 30, 2015. However as the Company could not make payment as per agreed terms of OTS, hence application of revival of OTS was again approved by pNB vide its letter dated July 02, 2015. The agreed revise payments terms are as under:
- Rs, 200 lacs by September 30, 2015
- Rs, 200 lacs by December 31, 2015 and
- Rs, 570 lacs by March 31, 2016.
- The entire amount of interest @ 10.25% (Simple) along with expenses of Rs, 5.54 lacs are to be paid by June 30, 2016.
Further from July 01, 2015, the company has paid Rs, 870 lacs till March 31, 2016 and balance OTS amount of Rs, 100 lacs remain to be paid/cleared.
Since the Company is unable to fulfill the agreed terms of OTS, we are unable to comment on the implication of same on the financials of the Company.
(b) The outstanding liability in the books of the company is higher than the OTS amount by Rs, 183.90 lacs. However, interest on OTS amount has been provided as per the agreement amounting to Rs, 91.89 lacs for the year ended March 31, 2016
(c) Had the interest been provided as per original terms on the principal amount the interest for the year ended on March 31, 2016 would have been higher by Rs, 491.15 lacs (Rs, 1867.45 lacs for the period April 01, 2009 to March 31, 2016).
Further, No Debentures have been issued by the company during the year, therefore provisions of this clause is not applicable to the company.
ix) The Company did not raise any money by the way of initial public or further public offer (including debt instruments) during the year. However, the term loans taken during the year were applied for the purpose for which the same has been raised.
x) According to the information and explanations given to us, no fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year.
xi) The Company has paid/provided managerial remuneration in accordance with provisions of section 197 read with Schedule V to the Companies Act, 2013 as applicable to the Company.
xii) The Company is not a Nidhi Company and hence, the provisions of paragraph 3(xii) of the Order are not applicable to the Company.
xiii) During the course of our examination of the books and records of the Company, all transactions entered with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 and the details have been disclosed in the financial statements etc, as required by the applicable accounting standards.
xiv) The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review. Accordingly, the provisions of paragraph 3(xiv) of the Order are not applicable to the Company.
xv) The Company has not entered into any non-cash transactions with directors or persons connected with him and hence provisions of section 192 of the Companies Act, 2013 are not applicable.
xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, the provisions of paragraph 3(xvi) of the Order are not applicable to the Company.
For S.R. Dinodia & Co. LLP.
Chartered Accountants,
Regn. No. 001478N/N500005
Sd/-
(Sandeep Dinodia)
place : New Delhi Partner
Date: 28th May, 2016 M. No. 083689
Mar 31, 2014
We have audited the accompanying financial statements of Modipon
Limited ("the Company") which comprise the Balance Sheet as at March
31, 2014, and the Statement of Profit and Loss and Cash Flow Statement
for the year then ended, and a summary of significant accounting
policies and other explanatory information.
Management''s Responsibility for the Financial Statements
Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position,
financial performance and cash flows of the Company in accordance with
the Accounting Standards notified under the Companies Act, 1956 ("the
Act") read with the General Circular 15/2013 dated September 13, 2013
of the Ministry of Corporate Affairs in respect of Section 133 of the
Companies Act, 2013. This responsibility includes the design,
implementation and maintenance of internal control relevant to the
preparation and fair presentation of the financial statements that are
free from material misstatement, whether due to fraud or error.
Auditors'' Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
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 auditors'' judgment, including the assessment of
the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the 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 the management, as well as evaluating
the overall presentation of the financial statements.
Basis for Qualified Opinion
1. Balance confirmation certificates were not obtained by the Company
from creditors, house/shop security depositors and fixed deposits with
bank including interest accrued on these deposits and of inoperative
current accounts with banks etc. since September 30, 2007 and
consequently adjustments required, if any, has not been carried out in
the financialresults{Note no. 18(B)(2)}.
2. (a)The company has not provided interest of Rs. 1000.54 Lakhs upto
March 31, 2008 on overdue amounts payable to a supplier resulting in
understatement of liabilities and debit balance of reserve and surplus
by Rs. 1000.54 Lakhs each and (b) the amount of interest to be provided
for in the books of account for the period April 1, 2008 to March 31,
2014 has not been ascertained {Note no. 18(B)(4)}.
3. The amount of interest to be provided for in the books of account,
if any, for the period April 1, 2007 to March 31, 2014 to Small and
Micro enterprises has not been ascertained {Note no. 18(B)(7)}.
4. During the year ended March 31, 2009, the company has sold 68,042
sq. yds. of its vacant land at Modinagar for Rs. 1021.15 Lakhs
(original cost Rs. 1.95 Lakhs) for which the approval of bank is
pending {Note 18B(11b)}.
5. During the year 2011-12, the company has given physical possession
of its vacant 59 ( 53 as on March 31, 2014) houses located at
Modinagar, Uttar Pradesh to a lender i.e. Ashoka Mercantile Limited
(AML), a related party, (balance outstanding of loan taken from AML as
on March 31, 2014 as per books of account: Secured loan Rs. 157.13
Lakhs and Unsecured loan Rs. 1251.85 Lakhs) for use without any charges
/ rent / security deposit and no lease rent agreement has been entered
into with AML. The company contends that the temporary possession of
houses for use without charges was given to AML as the company was
unable to repay the loans taken from AML {Referfoot-note to note no.
18B(16)}.
6. We are informed by the Company that the factory buildings at
Modinagar mortgaged to banks have been demolished and disposed of
during the year 2011-12 by Ashoka Mercantile Limited (AML), a related
party, and the book value of factory buildings amounting to Rs. 50
Lakhs has been charged to Statement of Profit and Loss as an
exceptional item during the year 2011- 12. The management, based upon
its assessment and legal advice received, contends that the sale of
movable assets to AML approved by the Debt Recovery Tribunal (DRT) on
23.11.2009 also included factory buildings whereas the DRT vide its
order dated 23.11.2009 gave direction that AML shall be entitled to
possession of the movable assets, dismantling and removal thereof and
it is clarified that AML shall not be entitled to demolish the building
except to the extent of taking out the fixtures and structure.
In view of the above, we are of the opinion that the company should
obtain post-facto approval / clarification again from DRT and / or bank
in this matter.
Qualified Opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the effects of the matter
described in paragraphs 2a above and possible effects of the matters
described in paragraphs 1, 2b, 3 to 6 above in the ''Basis for Qualified
Opinion'' paragraph, the financial statements give the information
required by the Act in the manner so required and give a true and fair
view in conformity with the accounting principles generally accepted in
India:
(a) in the case of 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 profit for
the year ended on that date; and
(c) in the case of the cash flow statement, of the cash flows for the
year ended on that date.
Emphasis of Matter
1. The above financial results of the company for the year ended March
31, 2014 has not been prepared on a going concern basis since the
company has closed its manufacturing operations since May 19, 2007
(closure of factory w.e.f. September 8, 2007) on account of huge losses
incurred and sale of entire plant & machinery during the year ended
March 31, 2010. Adjustments relating to recoverability of most of the
recorded asset amounts have been made in the accounts. {Refer note no.
18(B)(3)}.
2. (i) As stated in note {18(B)(13e)}, the amounts paid by the
assignee i.e. Ashoka Mercantile Limited (AML), a related party, to Abu
Dhabi Commercial Bank (ADCB) on account of one time settlement (OTS) of
dues of the bank was accounted for in the books of the Company to the
extent of OTS amount paid to the ADCB by AML and the balance amount of
Rs. 153.92 Lakhs is still lying unallocated under unsecured loans in
view of pending successful implementation of OTS of the dues of Punjab
National Bank as the settlement of assigned dues with AML is linked to
the OTS of dues with PNB.
(ii) As stated in note no. 18(B)(13d)(i), the amounts paid to Karnataka
Bank by Ashoka Mercantile Limited (AML), a related party, during the
year ended March 31, 2012, on account of OTS of dues of the bank was
accounted for in the books of the Company to the extent of OTS amount
paid to the Karnataka Bank by AML and the balance amount of Rs. 339.20
Lakhs is still lying unallocated under unsecured loans in view of
pending successful implementation of OTS of the dues of Punjab National
Bank as the settlement of dues with AML is linked to the OTS of dues
with PNB.
(iii) As stated in note no. 18(B)(13d)(ii), the part payment made to
Bank of Baroda by Ashoka Mercantile Limited (AML), a related party,
during the year ended March 31, 2013 on account of OTS of dues of the
bank was accounted for in the books of the Company to the extent of OTS
amount paid to the Bank of Baroda by AML and the company and the
balance amount of Rs. 232.04 Lakhs is still lying unallocated under
unsecured loans in view of pending successful implementation of OTS of
the dues of Punjab National Bank as the settlement of dues with AML is
linked to the OTS of dues with PNB.
3. Punjab National Bank has approved the OTS of its dues on April 2,
2014 as stated in note 18(13)(b) and the OTS scheme is presently under
implementation and the last instalment as per OTS scheme falls due on
March 28, 2015. In view of the above, since the existing outstanding
amount in the books of account of the Company is more than the OTS
amount by Rs. 183.90 Lakhs, no provision has been made for interest in
the books of account for the year ended March 31,2014. Had the interest
been provided as per the original terms, there would be short provision
of interest on cash credit amounting to Rs. 304.93 Lakhs for the
current year (upto March 31,2014 Rs. 1004.95 Lakhs) {Note no.
18(B)(13c)}.
4. As mentioned in note no. 18(B)(14)ofannualaccounts, the sale of
agricultural land admeasuring 40,827 Sq. mtrs has been approved by the
Debt Recovery Tribunal in its order dated 19.05.2011 to M/S GDC
Buildcon (P) Ltd subject to receipt of payment of Rs. 425 Lakhs to be
deposited directly with the Tribunal. Balance sale consideration of Rs.
405 Lakhs was paid by the buyer directly towards OTS dues of Bank of
Baroda and physical possession of land has been given to the buyer and
the sale of above land has been accounted for by the Company during the
year ended March 31, 2013. The Company has filed an affidavit in DRT
stating the above facts.
Our opinion is not qualified in respect of matters mentioned at 1 to 4
above.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors'' 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 paragraph 4 and 5 of the Order.
2. As required by section 227(3) of the Act, we report that:
a. We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
audit;
b. In our opinion proper books of account as required by law have been
kept by the Company so far as appears from our examination of those
books;
c. The Balance Sheet, Statement of Profit and Loss and Cash Flow
Statement dealt with by this Report are in agreement with the books of
account;
d. In our opinion, the Balance Sheet, Statement of Profit and Loss and
Cash Flow Statement comply with the accounting standards notified under
the Companies Act, 1956 ("the Act") read with the General Circular
15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs
in respect of Section 133 of the Companies Act, 2013;
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, we
report that none of the Directors from whom written representations
were received,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.
f. Since the Central Government has not issued any notification as to
the rate at which the cess is to be paid under section 441Aof the
Companies Act, 1956 nor has it issued any Rules under the said section,
prescribing the manner in which such cess is to be paid, no cess is due
and payable by the Company.
ANNEXURE REFERRED TO IN PARAGRAPH 1 UNDER
"Report on Other Legal and Regulatory Requirements"
PARAGRAPH OF AUDITORS'' REPORT OF EVEN DATE
I. (a) The Company has not maintained proper records showing full
particulars including quantitative details and situation ofits Axed
assets.
(b) The Fixed Assets of the Company have not been physically verified
by the management during the previous seven years period ended March
31, 2014.
(c) Substantial part of the Fixed Assets of the Company were disposed
off during the year 2009-10 in view of closure of manufacturing
operations and the Company is not a going concern.
II. There is no inventory at the year end. Accordingly, the provisions
of clause 4(ii) of the Companies (Auditors'' Report) Order, 2003 are not
applicable to the Company.
III. In respect of Loan amounting to Rs. 70.31 Lakhs granted in earlier
year to a Company covered in the register maintained u/s 301 of the
Companies Act, 1956, our observations are as under:
Unsecured interest free loans amounting to Rs. 70.31 Lakhs, due from a
Company which has been declared a Sick Industrial Undertaking, is
receivable after the rehabilitation period. However, full provision for
doubtful amount has been made.
IV. There were no purchases and sale of inventory during the current
year. In regard to sale of land and buildings and connected expenses
incurred to promote sale of properties, internal control procedures,
including obtaining appropriate supporting evidences / approvals /
quotations / prevailing market prices etc., were not obtained /
adequate and, in our opinion, internal control procedures in respect of
these matters needs to be laid down and implemented to make them
commensurate with the nature and amount of transactions.
V. (a) According to the information and explanations given to us, we
are of the opinion that the particulars of contracts or arrangements
referred to in Section 301 of the Companies Act, 1956 have been entered
during the current year in the register required to be maintained under
that Section.
(b) In our opinion and according to the information and explanations
given to us, the transactions made during the current year in pursuance
of contracts or arrangements entered in the register maintained under
section 301 of the Companies Act, 1956 and exceeding the value of
rupees five lakhs in respect of any party during the year have been
made at prices which are reasonable having regard to prevailing market
prices at the relevant time.
VI. In our opinion and according to the information and explanations
given to us, the Company has not complied with the provision of section
58A, 58AA or any other relevant provisions of the Companies Act, 1956
and the Companies (Acceptance of Deposits) Rules,1975 since there were
defaults in the repayment of deposits on the due dates and we are
informed by the company that the existing deposits of Rs. 25.67 Lakhs
as on 31st March, 2014 are unclaimed by the depositors which we are
unable to verify. Further, the defaults in the repayment of deposits
received from depositors was not intimated to the Company Law Board as
required by section 58AA(1) of the Companies Act, 1956. We are informed
that the investments as required under Rule 3A of the Companies
(Acceptance of Deposits) Rules, 1975 have not been made in view of the
stay granted by the Hon''ble Allahabad High Court. As per information
and explanations given to us, no order has been passed by the Company
Law Board, Company Law Tribunal or Reserve Bank of India or any Court
or any other tribunal on the Company.
VII. The Company has no internal audit system and no internal audit has
been conducted since October 1, 2007.
VIII. No cost records are required to be maintained by the Company
since the manufacturing operations were closed in the year 2007.
IX. In respect of statutory dues:
(a) According to the information and explanations given to us and the
records of the Company examined by us, the Company was generally
regular in depositing with appropriate authorities undisputed statutory
dues including contribution for employees state insurance, income-tax
including tax deducted at source and cess applicable to it.
(b) According to the information and explanations given to us,
undisputed amounts payable in respect of trade tax / sales tax dues as
at March 31, 2014 for a period of 6 years from the date they became
payable are Rs. 4.45 Lakhs.
(c) According to the records of the Company and based on information
and explanations furnished to us, the following sales-tax, income-tax,
custom duty, excise duty and cess dues were not deposited on account of
disputes pending at various forums:
Nature of Forum where matter is Financial Year to Gross
Dues pending which the amount Amount
relates (Rs. in lakhs)
Sales Tax High Court 1991-92 1.41
Asst. Commissioner 2005-06& 1.35
2006-07
Addl. Commissioner 2005-06 to 27.43
2007-08
Dy. Commissioner (Asst) 2004-05 94.30
Custom Assistant Commissioner 1982-83 74.66
Duty
Appellate Tribunal 2002-03 19.39
Water tax Addl. Civil judge, 1997-98, 7.11
Ghaziabad 1998-99
Excise Law Commissioner Appeal, 1983-84 115.75
Ghaziabad
Income-tax High Court 2006-07 to 207.33
Act 2008-09
ITAT / Commissioner of 2006-07 to 609.60
Income -tax (Appeals) 2008-09
X In our opinion, as per the books of account, the accumulated losses
of the Company at the end of the current financial year are more than
100% of its net worth. The Company has earned cash proft in this
financial year as well as in the preceding financial year also.
XI. In our opinion, and according to the information and explanations
given to us, the details of defaults in repayment of dues to a bank are
as under:
Cash credit/working capital demand loan taken from Punjab National Bank
amounting to Rs. 1893.90 Lakhs as on March 31, 2014 as per books of
account i.e. excluding un-provided interest of Rs. 1004.95 Lakhs as on
March 31, 2014 are out of order. Loan was classified by the bank as
non-performing asset before March 31, 2009, already taken symbolic
possession of the assets of the company and also sold all movable
assets of the Company. The bank has now approved the OTS of its dues on
2nd April, 2014 as stated in note 18B(13)(b) and the OTS scheme is
presently under implementation and the last instalment as per oTs
scheme falls due on March 28, 2015.
XII. According to the information and explanations given to us, the
Company has not granted loans and advances on the basis of any security
by way of pledge of shares, debentures and other securities.
XIII. The provisions of any special statute as specified under Clause
4(xiii) of the Order are not applicable to the Company.
XIV. As the Company is not dealing in or trading in shares, securities,
debentures and other investment, the provision of clause 4(xiv) of the
Companies (Auditors'' Report) Order, 2003 are not applicable to the
Company.
XV. In our opinion, and according to the information and explanations
given to us, during the current year, the Company has not given any
guarantee for loans taken by others from Banks or Financial
Institutions which are prejudicial to the interest of the Company.
However, in the past, the Company had given guarantees/ undertakings as
mentioned in Note no. 18(B)(1c) of Annual Accounts in respect of
certain Companies (which presently have become Sick Industrial
Undertakings and are yet to be rehabilitated or are under liquidation)
to banks and government authorities.
XVI. In our opinion, and according to the information and explanations
given to us, no term loans were taken during the current year.
Accordingly, the provision of clause 4(xvi) of the Companies (Auditors''
Report) Order, 2003 are not applicable to the Company.
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 funds raised on short-term basis during the current year have been
used for long-term investment i.e. payment of OTS dues ofa bank.
XVIII. The Company has not made any preferential allotment of shares
during the year.
XIX. The Company has not issued any debentures during the year.
XX. During the period covered by our audit report, the Company has not
raised any money by way of public issues.
XXI. To the best of our knowledge and belief and according to the
information and explanation given to us, no fraud on or by the Company
has been noticed or reported during the course of audit.
For P.R.MEHRA& CO.,
Chartered Accountants
(Regn. No. 000051N)
Sd/-
(Ramesh Chand Goyal)
Place : New Delhi Partner
Dated: May 19, 2014 M.No.012628
Mar 31, 2012
(1) We have audited the attached Balance Sheet of Modipon Limited as at
31st March, 2012, the Statement of Profit and Loss and the Cash Flow
Statement of the Company for the year ended on that date annexed
thereto. These financial statements are the responsibility of the
Company's Management. Our responsibility is to express an opinion on
these financial statements based on our audit.
(2) We conducted our audit in accordance with auditing standards
generally accepted in India. Those Standards require that we plan 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
issued by Central Government of India in terms of Sub-Section (4A) of
Section 227 of the Companies Act, 1956, we enclose in the Annexure a
statement on the matters specified in paragraphs 4 & 5 of the said
Order.
(4) Further to our comments in the Annexure referred to in paragraph 3
above, we report that:
(i) 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.
(ii) On the basis of written representations received from the
Directors as on 31st March, 2012 and taken on record by the Board of
Directors, we report that none of the Directors from whom written
representations were received is disqualified as on 31st March, 2012
from being appointed as a Director in terms of clause (g) of
Sub-section (1) of Section 274 of the Companies Act, 1956.
(5) The above financial results of the company for the year ended 31st
March, 2012 has not been prepared on a going concern basis since the
company has closed its manufacturing operations since 19th May, 2007
(closure of factory w.e.f. 8th September, 2007) on account of huge
losses incurred and sale of entire plant & machinery during the year
ended 31st March, 2010. Adjustments relating to recoverability of most
of the recorded asset amounts have been made in the accounts. {Refer
note no. 18(B)(3)}.
(6) Balance confirmation certificates were not obtained by the company
from creditors, house/shop security depositors and banks (for cash
credit balance, interest accrued on cash credit, appropriation of
amount of sale consideration of movable assets received by banks
towards principal & interest on cash credit and fixed deposits with
banks including interest accrued on these deposits and of inoperative
current accounts with banks) etc. since 30th September, 2007 and
consequently adjustments required, if any, has not been carried out in
the financial results.{Note no. 18(B)(2)}. Further, amount received of
Rs. 361.86 Lakhs during the year ended 30th September, 2007 from Modipon
Welfare Trust (MWT) was treated as revenue during the year ended 31st
March, 2009 for which the confirmation of MWT regarding nature of
payments made to the company as well as balance confirmation letters as
on 31st March, 2009 and onwards have not been received till date. {Note
no. 18(B)(11c)}.
(7) Managing Director's remuneration paid of Rs. 2.71 Lakhs w.e.f. 12th
February, 2007 to 31st May, 2007 is subject to the approval of the
Central Government. {Note no. 18(B)17)}.
(8) (a)The company has not provided interest of Rs.1000.54 Lakhs upto
31st March, 2008 on overdue amounts payable to a supplier and (b) the
amount of unprovided interest for the period 1st April, 2008 to 31st
March, 2012 has not been ascertained. {Note no. 18(B (4)}.
(9) The amount of unprovided interest, if any, for the period 1st
April, 2007 to 31st March, 2012 to Small and Micro enterprises has not
been ascertained. {Note no. 18(B)(7)}.
(10) Non-provision of interest on cash credit from banks amounting to Rs.
286.15 Lakhs for the current year (upto 31st March, 2012 Rs. 702.53
Lakhs). {Note no. 18(B)(13d)(v)}.
(11) During the year ended 31st March, 2009, the company has sold
68,042 sq. yds. of its vacant land at Modinagar for Rs.1021.15 Lakhs
(original costRs. 1.95 Lakhs) for which the approval has not been
obtained from banks to whom immovable properties of the company,
including the above land, are charged.
(12) (i) As stated in note {18(B)(13e)}, the amounts paid by the
assignee i.e. Ashoka Mercantile Limited (AML), a related party, to Abu
Dhabi Commercial Bank (ADCB) on account of OTS of dues of the bank was
accounted for in the books of the company to the extent of OTS amount
paid to the ADCB by AML and the balance amount of Rs. 153.92 Lakhs is
still lying unallocated under unsecured loans in view of pending
settlement of the dues of Punjab National Bank as the settlement of
assigned dues with AML is linked to the OTS of dues with PNB.
(ii) As stated in note no. 18(B)(13d) (iii), the amounts paid to
Karnataka Bank by Ashoka Mercantile Limited (AML), a related party,
during the year ended 31st March, 2012, on account of OTS of dues of
the bank was accounted for in the books of the company to the extent of
OTS amount paid to the Karnataka Bank by AML and the balance amount of
Rs.339.20 Lakhs is still lying unallocated under unsecured loans in view
of pending settlement of the dues of Punjab National Bank as the
settlement of dues with AML is linked to the OTS of dues with PNB.
(13) The company gave an advance ofRs.100.00 Lakhs for purchase of
property costing Rs.103.95 Lakhs and the same has been wrongly shown as
unsecured loan to a corporate body instead of showing as capital
advance under 'Long- term loans & advances' in the balance sheet as
on 31st March, 2012.
(14) The company has given physical possession of its vacant 59 houses
located at Modinagar, Uttar Pradesh to a lender i.e. Ashoka Mercantile
Limited (AML), a related party, (balance outstanding of loan taken from
AML as on 31st March, 2012 as per books of account: Secured loan
Rs.157.13 Lakhs and Unsecured loan Rs.1070.04 Lakhs) for use without any
charges / rent / security deposit and no lease rent agreement has been
entered into with AML. The company contends that the temporary
possession of houses for use without charges was given to AML as the
company was unable to repay the loans taken from AML.
(15) We are informed by the company that the factory buildings at
Modinagar mortgaged to banks have been demolished and disposed of
during the current year by Ashoka Mercantile Limited (AML), a related
party, and the book value of factory buildings amounting to Rs. 50 Lakhs
has been charged to Statement of Profit and Loss as an exceptional item
during the current year. The management, based upon its assessment and
legal advice received, contends that the sale of movable assets to AML
approved by the Debt Recovery Tribunal (DRT) on 23.11.2009 also
included factory buildings whereas the DRT vide its order dated
23.11.2009 gave direction that AML shall be entitled to possession of
the movable assets, dismantling and removable thereof and it is
clarified that AML shall not be entitled to demolish the building
except to the extent of taking out the fixtures and structure.
In view of the above, we are of the opinion that the company should
obtain post-facto approval / clarification again from DRT and/ or banks
in this matter.
(16) As mentioned in note no. 18(B)(14) of annual accounts, the sale of
agricultural land admeasuring 40,827 Sq. mtrs has been approved by the
Debt Recovery Tribunal in its order dated 19.05.2011 to M/S GDC
Buildcon (P) Ltd subject to receipt of payment of Rs.425 Lakhs to be
deposited directly with the Tribunal. Balance sale consideration of
Rs.405 Lakhs is still awaited. Further, it is stated in the above
mentioned note that pending receipt of entire sale consideration by the
DRT, neither physical possession of land has been given to the buyer
nor the sale of above land has been accounted for by the company during
the year ended 31st March, 2012.
We are informed that some plots out of above land have been sold by the
company at the request of M/S GDC Buildcon (P) Ltd which as per the
legal opinion ( furnished by the company) is within the rights of the
company and accordingly sale consideration is not accounted for by the
company. We are of the opinion that the said sales are subject to the
approval of DRT.
17. We further report that without considering paragraphs 6,7, 8(b),9
,12,15 and 16 above, the effect of which could not be determined, had
the observations made by us at paragraphs 8(a), 10 & 13 above been
considered, the profit for the year of Rs.214.45 Lakhs would have
converted into loss ofRs.71.70 Lakhs, negative figure of reserves would
have been Rs.11,311.47 Lakhs as against the reported figure of Rs.9,608.40
Lakhs), long-term loans and advances would have been Rs.100.00 Lakhs (as
against reported NIL figure) and short-term loans and advances would
have been Rs.89.01 Lakhs (as against the reported figure of Rs.189.01
Lakhs) and trade payables would have been Rs.2,704.92 Lakhs (as against
the reported figure of Rs.1,704.38 Lakhs).
18. Subject to the foregoing:
(i) 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.
(ii) 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.
(iii) In our opinion, the Balance Sheet, the Statement of Profit & Loss
and Cash Flow Statement dealt with by this report comply with the
Accounting Standards referred in sub-section (3C) of section 211 of The
Companies Act, 1956 except for non-disclosure of deferred tax assets
and liabilities.
(iv) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read together with the
significant accounting policies and other notes thereon including note
no. 18(B)(1b) regarding disputed income-tax demands, give the
information required by the Companies Act, 1956, in the manner so
required except for non- disclosure of information relating to Micro,
Small and Medium enterprises as stated in note no. 18(B)(7) and give a
true and fair view in conformity with the accounting principles
generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March, 2012;
(b) in the case of Statement of Profit and Loss, of the profit of the
Company for the year ended on that date; and
(c) in the case of Cash Flow Statement, of the Cash Flows of the
Company for the year ended on that date.
ANNEXURE REFERRED TO IN PARAGRAPH (3) OF AUDITOR'S REPORT OF EVEN
DATE
I. (a) The Company has not maintained proper records showing full
particulars including quantitative details and situation of its fixed
assets.
(b) The Fixed Assets of the company have not been physically verified
by the management during the previous five years period ended 31st
March, 2012.
(c) Substantial pari of the Fixed Assets of the Company were disposed
off during the year 2009-10 in view of closure of manufacturing
operations and the company is not a going concern. (Refer paragraph 5
of our main audit report).
II. There is no inventory at the year end. Accordingly, the provision
of clause 4(ii) of the Companies (Auditors Report) Order, 2003 are not
applicable to the Company.
III. In respect of Loans amounting to Rs.84.81 Lakhs granted in earlier
years to two Companies, covered in the register maintained u/s 301 of
the Companies Act, 1956, our observations are as under:
(i) Unsecured interest free loans amounting to Rs.70.31 Lakhs, due from a
Company which has been declared a Sick Industrial Undertaking, is
receivable after the rehabilitation period. However, full provision for
doubtful amount has been made.
(ii) Unsecured, interest free loan amounting to Rs.14.50 Lakhs which was
overdue from an erstwhile wholly owned subsidiary of the Company
mentioned at (i) above, against which liquidation order has been
passed, has been written off during the current year.
IV. There are no purchases and sale of inventory and purchase of fixed
assets. Accordingly, the provision of clause 4(iv) of the Companies
(Auditors Report) Order, 2003 are not applicable to the Company.
V. (a) According to the information and explanations given to us, we
are of the opinion that the particulars of contracts or arrangements
referred to in Section 301 of the Companies Act, 1956 have been entered
during the current year in the register required to be maintained under
that Section.
(b) In our opinion and according to the information and explanations
given to us, the transactions made during the current year in pursuance
of contracts or arrangements entered in the register maintained under
section 301 of the Companies Act, 1956 and exceeding the value of
rupees five lakhs in respect of any party during the year have been
made at prices which are reasonable having regard to prevailing market
prices at the relevant time.
VI. In our opinion and according to the information and explanations
given to us, the Company has not complied with the provision of section
58A, 58AA or any other relevant provisions of the Companies Act, 1956
and the Companies (Acceptance of Deposits) Rules,1975 with regard to
the deposits accepted from the public since there were defaults in the
repayment of deposits on the due dates and the existing deposits are
overdue and are in excess of the limits prescribed under the Rules.
Further, the defaults in the repayment of deposits received from
depositors was not intimated to the Company Law Board as required by
section 58AA(1) of the Companies Act, 1956. The investments as required
under Rule 3A of the Companies (Acceptance of Deposits) Rules, 1975
have not been made in view of the stay granted by the Hon'ble Allahabad
High Court. As per information and explanations given to us, no order
has been passed by the Company Law Board, company law tribunal or
Reserve Bank Of India or any Court or any other tribunal on the
Company.
VII. The Company has no internal audit system and no internal audit has
been conducted since 1st October, 2007.
VIII. No cost records are required to be maintained by the Company.
IX. In respect of statutory dues:
(a) According to the information and explanations given to us and the
records of the company examined by us, the company was generally
regular in depositing with appropriate authorities undisputed statutory
dues including provident fund, employees' state insurance, income-tax
including tax deducted at source and cess applicable to it except for
few minor delays in deposit of TDS, PF and FPS dues.
(b) According to the information and explanations given to us,
undisputed amounts payable in respect of trade tax/sales tax dues as at
31st March, 2012 for a period of 5 years from the date they became
payable are Rs.4.45 Lakhs.
(c) According to the records of the company and based on information
and explanations furnished to us, the following sales-tax, income-tax,
custom duty, excise duty and cess dues were not deposited on account of
disputes pending at various forums:
Nature of Forum where matter is Financial Year to Gross
Dues pending which the amount Amount
relates (Rs. in
lakhs)
Sales Tax High Court 1991-92 1.41
Dy. Commissioner 2005-06 & 15.00
Additional Commissioner 2006-07 94.30
(Appeal) 2004-05
Custom Assistant Commissioner 1982-83 74.66
Duty
Appellate Tribunal 2002-03 19.39
Water tax Addl. Civil judge, 1997-98, 1998-99 7.11
Ghaziabad
Excise Law Commissioner Appeal, 1983-84 115.75
Ghaziabad
Income-tax High Court 2006-07 to 207.33
Act Commissioner of 2008-09 662.91
Income-tax (Appeals) 2006-07 to
2008-09
Grand Total 1197.86
X. In our opinion, as per the books of account, the accumulated losses
of the Company at the end of the current Financial Year are more than
100% of its net worth. The Company has incurred cash losses in this
financial year as well as in the preceding financial year. Our opinion
on the matters specified in this clause has been arrived at after
considering the effect of the qualifications on the figures of
accumulated losses, net-worth and cash losses except for those
qualifications the effect of which can't be ascertained/given.
XI. In our opinion, and according to the information and explanations
given to us, the details of defaults in repayment of dues to banks are
as under:
(i) Cash credit/working capital demand loans taken from Punjab National
Bank and Bank of Baroda amounting to Rs.2894.76 Lakhs as on 31st March,
2012 as per books of account i.e. excluding un-provided interest of Rs.
702.53 Lakhs as on 31st March, 2012 are out of order and were
classified by banks as non-performing assets before 31st March, 2009
and these banks have already issued notices to the company under
section 13(2) of the Securitisation & Reconstruction of Financial
Assets & Enforcement of Security interest Act, 2002 for the recovery of
their dues. Further, Punjab National Bank and Bank of Baroda have also
issued notice under-section 13(4) of the Securitisation &
Reconstruction of Financial Assets & Enforcement of Security interest
Act, 2002 to the company for taking possession of the secured assets of
the company, has also taken symbolic possession of the assets of the
company and also sold all movable assets of the company.
XII. According to the information and explanations given to us, the
company has not granted loans and advances on the basis of any security
by way of pledge of shares, debentures and other securities.
XIII. The provisions of any special statute as specified under Clause
4(xiii) of the Order are not applicable to the Company.
XIV. As the Company is not dealing in or trading in shares, securities,
debentures and other investment, the provision of clause 4(xiv) of the
Companies (Auditors Report) Order, 2003 are not applicable to the
Company.
XV. In our opinion, and according to the information and explanations
given to us, during the current year, the Company has not given any
guarantee for loans taken by others from Banks or Financial
Institutions which are prejudicial to the interest of the Company.
However, in the past, the Company had given guarantees/ undertakings as
mentioned in Note no. 18(B)(1c) of Annual Accounts in respect of
certain Companies (which presently have become Sick Industrial
Undertakings and are yet to be rehabilitated or are under liquidation)
to banks and government authorities.
XVI. In our opinion, and according to the information and explanations
given to us, term loans taken during the current year were applied for
the purposes for which these were taken.
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 funds raised on short-term basis during the current year have been
used for long-term investment i.e. OTS dues of a bank.
XVIII.The company has not made any preferential allotment of shares
during the year.
XIX. The company has not issued any debentures during the year.
XX. During the period covered by our audit report, the company has not
raised any money by way of public issues.
XXI. To the best of our knowledge and belief and according to the
information and explanation given to us, subject to our observations
given in paragraph 16 of our main audit report of even date, no other
fraud on or by the company has been noticed or reported during the
course of audit.
For P. R. MEHRA & CO.,
Chartered Accountants,
(Regn. No. 000051N)
Jai Prakash Agarwal
Place : New Delhi Partner
Dated: 16th August, 2012 M.No. 010270
Mar 31, 2010
1. We have audited the attached Balance Sheet of Modipon Limited as at
31st March, 2010, the Profit & Loss Account and the Cash Flow Statement
of the Company 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 issued
by Central Government of India in terms of Sub-Section (4A) of Section
227 of the Companies Act, 1956, we enclose in the Annexure a statement
on the matters specified in paragraphs 4 & 5 of the said Order.
4. Further to our comments in the Annexure referred to in paragraph 3
above, we report that:
(i) We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary for the purposes of our
audit.
(ii) The Balance Sheet, Profit & Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account.
(iii) On the basis of written representations received from the
Directors as on 31st March, 2010 and taken on record by the Board of
Directors, we report that none of the Directors from whom written
representations were received is disqualified as on 31st March, 2010
from being appointed as a Director in terms of clause (g) of
Sub-section (1) of Section 274 of the Companies Act, 1956.
5. The above financial results of the company for the year ended
31st March, 2010 has not been prepared on a going concern basis since
the company has closed its manufacturing operations since 19th May,
2007 (closure of factory w.e.f. 8th September, 2007) on account of huge
losses incurred. Adjustments relating to recoverability of most of the
recorded asset amounts have been made in the accounts for the 18 months
period each ended 30th September, 2007 & 31st March, 2009 and for the
year ended 31st March,2010 (Refer note 3 of Schedule 14).
6. (i) During the year ended 30th September, 2007, the company vide
agreement dated 28.10.2006 had sold its profit-making Chemical Division
along with certain other immovable properties and investment in shares
(ICC Division) on a going concern basis w.e.f. 01.10.2006 to Indofil
Organics Industries Ltd (IOIL) for Rs.124.66 Crores (sale consideration
arrived at by aggregating tax written down value in case of depreciable
assets and net book values for other assets/ liabilities) whereas the
fair market value, amount unascertained, of these assets, in our
opinion, was substantially higher than cost/book value. Sale
consideration of Rs.124.66 Crores has been discharged by IOIL by way
of: (a) payment of Rs.17.83 Crores by cheque ; (b) taking over the loan
liabilities of Fibres Division of Rs.57.84 Crores and
(c) issue of 1,17,57,086 fully paid up equity shares of Rs.10 each of
IOIL for Rs.48.99 Crores i.e. at a premium of Rs.37.23 Crores which
were distributed directly to the equity shareholders of the company. In
our opinion, the above transaction of transfer of Chemical Division of
the company as a going concern at or below cost/book values and
appropriation of part sale consideration of Rs.48.99 Crores towards
issue of fully paid-up shares of IOIL to the equity shareholders of the
company is an arrangement i.e. reconstruction by way of demerger of an
undertaking of the company which is covered under section 391 and 394
of the Companies Act, 1956 and required prior approval of the High
Court and all stakeholders whereas originally the company had approved
the above transaction under sections 293(1)(a) and 293(3) of the
Companies Act, 1956 and now, as stated in note 8 of schedule 14 of the
accompanying statement of financial results, has also sought approval
under section 391 of the Companies Act, 1956 of the Honble High Court
for treating Rs.48.99 Crores as Goodwill in the books of account. In
terms of the order of the Honble Company Judge, the meeting of the
shareholders of the company was held on 3rd May,2008 and the
shareholders approved the scheme. The minutes thereof were submitted to
Honble Allahabad High Court and further orders are awaited.
(ii) As the matter is still pending for final determination by the
Honble Allahabad High Court, the nature of payment and the final
accounting treatment that should be given in the books of account to
Rs.48.99 Crores (which is presently shown as "Equity shares of IOIL
issued to shareholders" on the face of the balance sheet under the head
"Miscellaneous Expenditure" (to the extent not written off or
adjusted)) as on 31.03.2010, even though IOIL has already discharged
the aforesaid part sale consideration by issue of its shares directly
to the equity shareholders of the company on 28.03.2007) will depend
upon the order of the Honble Allahabad high Court. In case the Honble
Allahabad High Court finally approves the above scheme of treating
Rs.48.99 Crores as Goodwill in the books of the company, the same, in
our opinion, will have to be charged to revenue as per Accounting
Standard 26 i.e. Intangible Assets.
7. Balance confirmation certificates were not obtained by the company
from debtors, creditors, house security depositors and banks ( for cash
credit, appropriation of amount of sale consideration received by banks
towards principal & interest on cash credit and fixed deposits with
banks) etc. since 30th September,2007 and consequently adjustments
required, if any, has not been carried out in the financial results
(Note.2). Further, amount received of Rs.361.86 Lakhs during the year
ended 30th September, 2007 from Modipon Welfare Trust (MWT) was treated
as revenue during the previous year for which the confirmation of MWT
regarding nature of payments made to the company as well as balance
confirmation letter as on 31st March,2009 & 31st March,2010 has not
been received {Note 14 (d)}.
8. Managing Directors remuneration of Rs.2.71 Lakhs w.e.f. 12th
February, 2007 to 31st May, 2007 is subject to the approval of the
Central Government (Note 20 of schedule 14 ).
9. (i) (a)The company has not provided interest of Rs.1000.54 Lakhs
upto 31st March, 2008 on overdue amounts payable to a supplier. (b)The
amount of unprovided interest for the period 1st April, 2008 to 31st
March, 2010 has not been ascertained (Note 4). (ii) The amount of
unprovided interest, if any, for the period 1st April, 2007 to 31st
March, 2010 to Small and Micro enterprises has not been ascertained &
provided for (Note 9).
(iii) Non-provision of interest on cash credit from banks amounting to
Rs.250.52 Lakhs for the current year {Note16(d)(iii)}.
10. During the previous year, the company has sold 68,042 sq. yds. of
its vacant land at Modinagar for Rs.1021.15 Lakhs (original cost
Rs.1.95 Lakhs) for which the approval has not been obtained from banks
to whom immovable properties of the company, including the above land,
are charged. However, as stated in note 14(b) of Schedule14, profit on
sale of the above land amounting to Rs.1019.20 Lakhs was accounted for
in the books of account during the previous year.
11. No internal audit was conducted for the 18 months period ended
31st March, 2009 and for the year ended 31st March,2010. Further,
internal controls needs to be improved adequately including in respect
of maintaining proper books of account in time, reconciliation of
accounts and balance confirmation of banks, debtors and creditors in
order to safeguard the interest of the company (Note 2).
12. As stated in note 16(e), amounts paid by the assignee i.e. Ashoka
Mercantile Limited (AML) to bank on account of OTS of dues of the bank
has been accounted for in the books of the company to the extent of OTS
amount paid to the bank by AML and the balance amount of Rs.153.92
Lakhs is lying unallocated under unsecured loans in view of pending
settlement of the dues of Punjab National Bank. Further, the amount of
interest, if any, payable to AML has not been ascertained and provided
for by the management in view of the above (Note 16(e) of schedule 14).
13. We further report that without considering item no.6(ii), 7, 8 ,
9(i)(b) & (ii) and 12 above, the effect of which could not be
determined, had the observations made by us at paragraphs 9(i)(a) &
(iii) above been considered, the loss for the year before tax would
have been Rs.282.41 Lakhs (as against the reported figure of Rs.31.89
Lakhs), debit balance of profit & loss would have been Rs.6444.26 Lakhs
(as against the reported figure of Rs.5193.20 Lakhs), loan funds would
have been Rs.4852.62 Lakhs (as against the reported figure of
Rs.4602.10 Lakhs) and sundry creditors would have been Rs.6243.26 Lakhs
(as against the reported figure of Rs.5242.72 Lakhs).
14. Subject to the foregoing:
(i) 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.
(ii) In our opinion, the Balance Sheet, Profit & Loss Account and Cash
Flow Statement dealt with by this report comply with the Accounting
Standards referred in Sub-section (3C) of Section 211 of the Companies
Act, 1956.
(iii) In our opinion and to the best of our information and according
to the explanations given to us, the said accounts read together with
the significant accounting policies and other Notes thereon mentioned
in Schedule 14 including note 21 regarding non-provision of income-tax
in view of the reasons stated therein, give the information required by
the Companies Act, 1956, in the manner so required except for
non-disclosure of information relating to Micro, Small and Medium
enterprises as stated in note 9 of schedule 14 and give a true and fair
view in conformity with the accounting principles generally accepted in
India:
(a) in the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March, 2010;
(b) in the case of the Profit & Loss Account, of the loss of the
Company for the year ended on that date; and
(c) in the case of Cash Flow Statement, of the Cash Flows of the
Company for the year ended on that date.
ANNEXURE REFERRED TO IN PARAGRAPH (3) OF AUDITORS REPORT OF EVEN DATE
In addition and subject to our observations mentioned in paragraph 6 in
our main audit report, we further report as under:
I. (a) The Company has maintained proper records showing full
particulars including quantitative details and situation of its fixed
assets.
(b) The Fixed Assets of the company were not physically verified during
the current year.
(c) Substantial part of Fixed Assets of the Company have been disposed
off during the current year in view of closure of manufacturing
operations and the company is not a going concern (Refer paragraph 5 of
our audit report and note 12 of schedule 14).
II. There is no inventory at the year end. Accordingly, the provision
of clause 4(ii) of the Companies (Auditors Report) order, 2003 are not
applicable to the Company.
III. In respect of Loans amounting to Rs.84.81 Lakhs granted in
earlier years to two Companies, covered in the register maintained u/s
301 of the Companies Act, 1956, our observations are as under:
(a) Unsecured interest free loans amounting to Rs.70.31 Lakhs, due from
a Company which has been declared a Sick Industrial Undertaking, is
receivable after the rehabilitation period.
(b) Unsecured, interest free loans amounting to Rs.14.50 Lakhs is
overdue from a wholly owned subsidiary of the Company mentioned at (i)
above against which liquidation order was passed.
However, full provision for doubtful amounts has been made in all the
above cases.
IV. In our opinion and according to the information and explanations
given to us, there is adequate internal control system commensurate
with the size of the company and the nature of the business with regard
to the sale of goods. There were no purchases of inventory and fixed
assets during the current year due to closure of manufacturing
operations. We have not observed any continuing failure to correct
major weaknesses in internal control system.
V. (a) According to the information and explanations given to
us, we are of the opinion that the particulars of contracts or
arrangements referred to in Section 301 of the Companies Act, 1956 have
been entered during the current year in the register required to be
maintained under that Section.
(b) In our opinion and according to the information and explanations
given to us, the transactions made during the current year in pursuance
of contracts or arrangements entered in the register maintained under
section 301 of the Companies Act, 1956 and exceeding the value of
rupees five lacs in respect of any party during the year have been made
at prices which are reasonable having regard to prevailing market
prices at the relevant time.
VI. In our opinion and according to the information and explanations
given to us, the Company has not complied with the provision of section
58A, 58AA or any other relevant provisions of the Companies Act, 1956
and the Companies (Acceptance of Deposits) Rules,1975 with regard to
the deposits accepted from the public since there were defaults in the
repayment of deposits on the due dates and the existing deposits are
overdue and are in excess of the limits prescribed under the Rules.
Further, the defaults in the repayment of deposits received from
depositors was not intimated to the Company Law Board as required by
section 58AA(1) of the Companies Act, 1956. The investments as required
under Rule 3A of the Companies (Acceptance of Deposits) Rules, 1975
have not been made in view of the stay granted by the Honble Allahabad
High Court. As per information and explanations given to us, no order
has been passed by the Company Law Board, company law tribunal or
Reserve Bank of India or any Court or any other Tribunal on the
Company.
VII. The Company has no internal audit system and no internal audit
has been conducted since 1st October, 2007.
VIII. In view of closure of manufacturing operations during the
previous year, no cost records were required to be maintained by the
Company .
IX. In respect of statutory dues:
(a) According to the information and explanations given to us and the
records of the company examined by us, the company was not regular in
depositing with appropriate authorities undisputed statutory dues
including provident fund, employees state insurance, income-tax
including tax deducted at source and cess applicable to it.
(b) According to the information and explanations given to us,
undisputed amounts payable in respect of aforesaid dues as at 31st
March, 2010 for a period of more than six months from the date they
became payable were Rs.19.15 Lakhs.
(c) According to the records of the company and based on information
and explanations furnished to us, the following sales-tax, income-tax,
custom duty, excise duty and cess dues were not deposited on account of
disputes pending at various forums:
Nature of Forum where Financial Year Gross
Dues matter to which the Amount
is pending amount relates (Rs.in
Lakhs)
Sales Tax High Court 1991-92 1.41
Custom Duty Assistant 1982 74.66
Commissioner
Appelate Tribunal 2002-03 19.29
Water tax Addl. Civil judge, 1997-98,1998-99 7.11
Ghaziabzad
Grand Total 102.47
X. In our opinion, as per the books of account, the accumulated losses
of the Company at the end of the current Financial Year are more than
100% of its net worth. The Company has incurred cash losses in this
Financial Year as well as in the preceding financial year. Our opinion
on the matters specified in this clause has been arrived at after
considering the effect of the qualifications on the figures of
accumulated losses, net-worth and cash losses except for those
qualifications the effect of which cant be ascertained/given.
XI. In our opinion, and according to the information and explanations
given to us, the details of defaults in repayment of dues to banks are
as under:
(i) Cash credit/working capital demand loans taken from 4 banks
amounting to Rs7229.34 Lakhs as on 31st March,2009 were out of order
and were classified by banks as non-performing assets
before 31st March,2009. (ii) Three member banks of the consortium i.e.
Punjab National Bank, Allahabad Bank & Bank of Baroda have already
issued notices to the company under section 13(2) of the Securitisation
& Reconstruction of Financial Assets & Enforcement of Security Interest
Act, 2002 for the recovery of their dues. Further, Punjab National Bank
has also issued notice under-section 13(4) of the Securitisation &
Reconstruction of Financial Assets & Enforcement of Security Interest
Act, 2002 on 12th February, 2008 to the company for taking possession
of the secured assets of the company, has also taken symbolic
possession of the assets of the company and also sold all movable
assets as stated in note 13(a)(i) of schedule 14. (iii) Fourth member
of the consortium i.e. Karnataka Bank Limited has also recalled its
loans Rs.965.30 Lakhs, (iv) Refer note 16(d)(ii) of schedule 14
regarding OTS of dues of Allahabad Bank (Refer note 16 of schedule 14).
XII. According to the information and explanations given to us, the
company has not granted loans and advances on the basis of any security
by way of pledge of shares, debentures and other securities.
XIII. The provisions of any special statute as specified under Clause
4(xiii) of the Order are not applicable to the Company.
XIV. As the Company is not dealing in or trading in shares,
securities, debentures and other investment, the provision of clause
4(xiv) of the Companies (Auditors Report) Order, 2003 are not
applicable to the Company.
XV. In our opinion, and according to the information and explanations
given to us, during the current year, the Company has not given any
guarantee for loans taken by others from Banks or Financial
Institutions which are prejudicial to the interest of the Company.
However, in the past, the Company had given guarantees/ undertakings as
mentioned in Note 1(b) of Schedule 14 of Annual Accounts in respect of
certain Companies (which presently have become Sick Industrial
Undertakings and are yet to be rehabilitated or are under liquidation)
to banks and government authorities.
XVI. In our opinion, and according to the information and explanations
given to us, no term loans were taken during the current year.
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 during the current year have
been used for long-term investment.
XVIII. The company has not made any preferential allotment of shares
during the year.
XIX. The company has not issued any debentures during the year.
XX. During the period covered by our audit report, the company has not
raised any money by way of public issues.
XXI. To the best of our knowledge and belief and according to the
information and explanation given to us, no fraud on or by the company
has been noticed or reported during the course of audit.
For P. R. MEHRA & CO.,
Chartered Accountants,
Regn. No. 000051N
Ramesh Chand Goyal
Place : New Delhi Partner
Dated: 13th August, 2010 M.No. 012628