Mar 31, 2016
AUDITORSâ REPORT
To,
The Members of PSL Limited Report on the Financial Statements
We have audited the accompanying financial statements of PSL Limited (âthe Companyâ), which comprises of the Balance Sheet as at 31st March 2016, the Statement of Profit and Loss Account and the Cash Flow Statement for the year ended on the said date, and a summary of significant accounting policies and other explanatory information.
Managementâs Responsibility for the Financial Statements
The Companyâs Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (âthe Actâ) with respect to the preparation & presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules,
2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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 reporting control, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatements, whether due to fraud or error.
Auditorsâ Responsibility
Our responsibility is to express an opinion on these standalone financial statements based on our audit.
We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provision of the Act and 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 the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.
An audit involves performing procedures to obtain audit evidence about the amount and disclosures in the financial statements. The procedures selected depend on the auditorâs judgment, including the assessment of the risk 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 Companyâs 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 Companyâs internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion and to the best of the 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 true and fair view in conformity with the accounting principles generally accepted in India.
(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2016.
(ii) in the case of the Statement of Profit and Loss, of the Loss of the Company for the year ended on that date and
(iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.
Emphasis of Matter
We draw attention to:
1. Long Term Borrowings: Note No. 4 of Balance Sheet and Schedules.
Default In Payment to Banks
Based on our audit procedure and as per the information and explanation given to us, the company has defaulted in repayment of loans and interest to the banks and financial institutions as on 31st March 2016.
2. Consequent upon the financial stress that the company had to suffer, it filed an application before Corporate Debt Restructuring (CDR) Cell on 6th March, 2013 for restructuring of its entire debts as on 1st January, 2013. After detailed deliberations at various meeting of companyâs creditors at the CDR Cell a restructuring package for the Company was finally approved by CDR Empowered Group on 23rd September, 2013. Since then, different terms and conditions included in the subject package are being complied with.
In terms of the aforesaid Letter of Approval, for the CDR package:
a) The promoters of the Company were required to make a total contribution of Rs. 146.81 Crore by way of subscribing to the equity capital of the Company/ unsecured loan so that the said contribution constitutes 25% of the total sacrifice computed for the aforesaid restructuring.
b) Since a portion of outstanding debts of various lenders of the company was compulsorily required to be converted
into equity shares and assignment of the debt of one of the Lender of the Company namely Yes Bank Limited to Edelweiss Assets Reconstructions Company (EARC) had taken place, the said EARC had executed a Deed of Accession to Master Restructuring Agreement (MRA). Accordingly, for the debt amount of Rs.2.72 Crores, 1046150 equity shares were allotted by the company at the rate of Rs.26/- per share. However, since after recompilation of EARCs debt it was observed that even the remaining debt of Rs.2.28 Crores was also required to be converted into equity share of the company, the process of allotment of 876926 equity shares to the said EARCâs on preferential allotment basis was initiated by the company as a result of which the in-principle approval from Bombay Stock Exchange (BSE) has been procured.
c) The Board of the Directors has, in accordance with the SEBI (ICDR) Regulations, by passing a resolution in circulation on 5th February, 2015 also duly ratified on 10th February, 2015 considered and approved, subject to the approval of the members of the company, the proposal of issuance of a total of 4,97,42,306 Equity Shares of face value of Rs.10/- (Total Ten only) each at a total price of Rs.26/- (Rupees Twenty Six only) per equity share (including premium of Rs.16/-) to the Promoters/Promoters Group Entities of the promoters group hereinafter collectively referred to âProposed Allotteesâ of the Company as mentioned at Point a) and
b) above calculated in accordance with the Regulation 76 of Chapter VII of the SEBI (ICDR) Regulations for an aggregate value of Rs.129.33 Crores (Rupees One Hundred Twenty Nine Crores Thirty Three Lacs only).
i) The equity shares shall be subject to lock-in for a period in accordance with the provisions of the SEBI (ICDR) Regulations.
ii) The equity shares now to be issued shall rank pari passu with the existing equity shares of the Company in all respects.
d) The pre-preferential shareholding of Punj International (P) Ltd. and Punj Investment (P) Ltd. are pledged with ICICI Bank with effect from 18-2-2013.
e) The Company had allotted 1046150 equity shares to Edelweiss Assets Reconstruction Company Limited under CDR Scheme on 30.12.2014 which was locked in from 31-12-2014 to 5-2-2016. These shares are now further locked-in from 5-4-2016 to 31-12-2016.
f) For issuance of aggregate of 50619232 equity shares to the promoter group (as stated in C above) and to one of the creditors (as stated in b above), the company has procured an in-principle approval from Bombay Stock Exchange (BSE). However, the said shares are proposed to be allotted by the company in near future only after receipt of the similar approval from National Stock Exchange (NSE)
g) As some of the conditions of the CDR package could not be implemented in letter and spirit, various banks which had advanced its facilities to the company have chosen to treat their outstanding dues to the company as Non Performing Assets (NPA)
3. As the company has been continuously facing acute financial crunch, due to low turnover and profitability in the last few years, the Companyâs Net Worth got eroded and became negative as a result of high quantum of accumulated losses. Due to such prevalent situation the company had become a Sick Industrial Company in terms of Section 3 (1)(o) of Sick Industrial Company Act (SICA) and therefore on 19th June, 2015, a reference was made by it to the Board for Industrial and Financial Restructuring (BIFR). A said reference was admitted on 8th September, 2015 the company has been restrained from disposing off or eliminating in any manner the fixed asset of the company without the prior consent of BIFR.
4. The financial statements being prepared on a going concern basis, notwithstanding the fact that the Companyâs network is eroded a reference is made to the Board of Industrial and Financial Restructuring (BIFR), some of the conditions of the CDR package could not be implemented in letter and spirit, various banks which had advances its facilities to the company have chosen to treat their outstanding dues to the company as Non Performing Assets (NPA) and four lenders have declared the Companyâs account as fraud or Red Flag account (RFA) in their books. These events cast significant doubt on the ability of the Company to continue as a going concern. The appropriateness of the said basis is inter-alia dependent on the Companyâs ability to infuse requisite funds for meeting its obligations (including statutory liabilities and those in respect of contracts entered into for purchase of goods and assets), rescheduling of debt/other liabilities and resuming normal operations.
5. Lender Banksâ Balance Confirmation as on 31st March 2016:
We have been informed by the officials of the company that although the company has requested its various bankers to issue their confirmation letters confirming the balances with respect to various Bank Accounts/Bank Guarantee/Letter of Credit/Corporate Guarantee given by company for its subsidiaries company as on 31st March, 2016 but the same have not yet been issued. Pending balance confirmation, book balances as on 31st March, 2016 have been taken in the accounts of the Company.
6. Due to non-implementation of CDR package, there is a Cash and Capital Crunch and the Company is under stress due to reduction in turnover, slow-down in economic environment, increase in the cost of production, as well as due to idle labour, lack of sufficient orders and reduced net realization in comparison to the increase cost of sales.
7. It is noticed that the business of the Company is at stand still and not much production activity is carried out except negligible production which has been carried out in Vizag, Chennai and Jaipur factories. Hence the overall sales of the Company are also very low.
8. The Company has reported a Net Loss of Rs.46.85 Crores for the 3 months ended or 31st March, 2016 against preceding 3 months net loss of Rs. 84.4 Crores ended on 31st December, 2015.
9.1 The Company has not provided for the interest amounting to Rs.627.21 Crores for the period from 1st January, 2013 to 31st December, 2014 which was to be built up as funded interest term loan (FITL) on the Working Capital Term Loan and Cash Credit.
9.2 The Company has also not provided for the interest amounting to Rs.364.66 Crores for the year 1-4-2015 to 31-3
2016. This would also increase the loss of the year.
9.3 The financial performance had deteriorated substantially in last 12 months. The manufacturing cost has gone up. There is weakness in demand. The Company continue to deal with a range of uncertainties. The interest payments exceeded its operating income. The Company is not able to service its debts.
9.4 The loss of the year is Rs.1,355.98 Crores.
10. Outstanding loan of Aditya Birla Finance Limited (ABFL)
Although one of companyâs creditors namely ABFL has chosen for transaction specific membership of CDR Group, it has yet to execute the Master Restructuring Agreement already executed by super majority of CDR Lenders. Consequent upon ABFLâs complaint to Economic Offences Wing (EOW), the latter advised some of the bankers of the company for a debit freeze of the amount lying to companyâs credit in some such bank accounts. As a result approximately Rs. 100 million which could have been used by the company for its Operating Expense, Insurance Payment, and payment of Loan to Companyâs lenders got frozen. However, the Company has initiated legal steps for de-freezing the said amount.
11. Due to flood during the month of November, 2015, the Companyâs Chennai factory has incurred loss of materials and machinery worth Rs.4.32 Crores. The claim received from Insurance Co. amounting to Rs.2.15 Crores and balance amount Rs.2.17 Crores yet to be received by the Company.
12. Inventory, Current Assets:
a) The closing inventory as on 31st March, 2016 is Rs.156.38 Crores.
b) Closing inventory as on 31st March, 2016, includes CWIP of Rs.17.07 Crores and was valued at cost. The valuation of stock was not done as per Accounting Standard 2 âValuation of Inventoryâ issued by ICAI. It was explained that the items of stock on hand are of specific nature and tailor made for individual customer orders and accordingly valued at cost.
c) During the year some old and non-moving stock was sold as a distress sale and having realized Rs.25.78 Crores. The Company has provided for resultant loss on sale of old and non-moving stock and also made provision for remaining stock / non-moving stock totaling to Rs. 1006.48 Crores during the year. As certified by the management balance stock is Rs.156.38 Crores as of 31.03.2016 (valued at cost).
13. Depreciation:
The Company has not carried out detailed assessment of the useful life of Companyâs assets and hence depreciation charge has not been adjusted accordingly as per the notification to Schedule II of the Companies Act, 2013.
14. Operations Maintenance and Management Agreement with Jindal Tubular (India) Ltd.
a) As per the Operations, Maintenance and Management Agreement with Jindal Tubular (India) Limited, they have taken over operations of the following three units of the Company on the dates shown against them:-
b) It will not be out of place to mention that Jindal Tubular (India) Limited has shifted from Varsana. Complete Pipe Mill on line and complete Coating Plant on line together with sheds, Trailors, Cranes etc. to their unit, Ambapura, Madhya Pradesh for their manufacturing purpose. This is contrary to the Agreement. This matter is pending with the Excise Department.
c) The Company has handed over the Jaipur facility to Jindal Tubular (India) Limited (JTIL) under OMMA. JTIL had taken a provisional excise license. The Excise Department has informed that the land on which Jaipur facility has been located is given on lease by the Govt. of Rajasthan to the Company and as per lease agreement the company can neither sub-let/sale any part of land nor can make anyone financial and technical partner without prior permission of the State Government. On the basis of this, Excise authorities issued a show cause notice and informed that any entity seeking excise registration has to have land possession in any manner. Without possession of land by JTIL, the provisional excise registration shall stand cancelled/revoked. Currently, JTIL and the company are collectively representing the case before excise authorities. JTIL has informed that in case of non-confirmation or revocation of excise registration, they may not be able to operate and indicated their inability to continue at Jaipur facility under OMMA. The matter is under negotiation.
d) Jindal Tubular (India) Limited have submitted the provisional unaudited Balance Sheet and Profit & Loss Account for the year ended 31st March, 2016 and shown a loss of Rs.17.26 Crores. Besides this they have claimed legacy payment from PSL amounting to Rs.5.32 Crores. However the PSL Statements are showing outstanding of Rs.2.95 Crores including Rs.2.32 Crores on account of Legacy dues. The Company has not accepted their claim and the accounts are under reconciliations.
e) It appears that due to âNet Revenueâ being a loss PSL, will not be entitled for any revenues.
15. Debtors: Note No. 16 of Balance sheet and Schedules
i) The Company has Sundry Debtors of Rs.287.23 Crores as on March 31, 2016.
ii) During the year, practically no recovery has been made from the clients. There is no certainty of arbitration matters and disputes with the parties. The Company has not produced confirmation of balances from sundry debtors confirming the amount outstanding as on March 31, 2016. In the absence of adequate evidence and information made available to us supporting the recoverability of this amount, we are further unable to comment on the financial impact of this matter on the profit / loss for the year ended on 31st March 2016. We are of the opinion that, an amount of Rs.253.26 Crores being 100 percent provision need to be made towards bad and doubtful debts for sundry debtors outstanding for more than 3 years. Had this provision been made, the loss for the year would have been greater by Rs.253.26 Crores.
16. Sundry Creditors & Loans and Advances:
In the absence of pending confirmation of balances from Trade Payables, Other Loans & Advances as on 31.03.2016, provision for any adverse variation in the balances is not quantified.
17. Due to Micro and Small Supplies:
This information is not provided by the Company.
18. The management has decided not to provide for Gratuity, Leave Encashment for the period of 1st April, 2014 to 31st March 2016 because current provision is considered sufficient by the management for this purpose.
19. There is an existence of adequate internal financial controls and its operational effectiveness in the Company.
20. Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements that need to be entered into the register maintained under section 189 of the Companies Act, 2013 have so been entered.
21. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 189 of the Companies Act, 2013 have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.
22. The Estate Office Kandla Port Trust under Public Premises (Evacuation of unauthorized) passed order on 27/03/2014 for the evacuation of the Kandla PCD-I premises because lease period was over, the Estate Office has taken over the possession of the land. Since the lease amount is under dispute, the lease payments have not been made and not provided in the accounts.
23. Investment in Subsidiaries
A) Foreign Subsidiaries:
i) PSL FZE (Sharjah) (Step down Subsidiary) of Pipeline Systems Ltd. Mauritius
a) The Company had invested Rs. 141.63 Crores in a wholly owned ''subsidiary namely Pipeline Systems Ltd. Mauritius. Due to cumulative losses in the subsidiary the value of investment is eroded. The Company has not provided for the same.
b) The share certificate of PSL FZE, Sharjah held by PSL Ltd. indirectly through the above said Company, amounting to 100% of the Equity Share Capital of the Company have been pledged in favour of National Bank of Oman S.A.O.G. acting as Security Agent of ICICI Bank Limited, Bahrain.
c) During the year PSL FZE has incurred loss of AED 36.45 Mio. Based on the audit procedure and the information obtained, we have observed some of the loans were rolled over / rescheduled by the bank. Also in some cases company was not able to make the payment on due date of installment due to the banks and banks claim was settled by claiming against the Standby Letter of Credit arranged by Parent company, PSL Limited, India.
d) PSL FZE has executed a project received from SWLL. Bank of Baroda has given guarantee in favour of State Bank, Bahrain to issue performance guarantee in favour of the client to the extent of USD 4.5 million. This is contingent liability of PSL FZE as on 31-3-2016.
e) A creditor has filed a suit for his dues of USD 22,58,175. The matter is sub-judice.
ii) PSL has given Corporate Guarantee covering facilities sanctioned by lender bankers for working capital of 104.76 Million AED Mio against Plant & Machinery, assignment of receivable and inventory against the security of the subordination of unsecured loans advances by PSL fixed assets on pari passu basis.
iii) Term Loan Rs.121.61 AED
Term Loan was secured by ICICI SBLC of USD 34.50 Million. As on date Credit Suisse has claimed the SBLC and the Loan from Credit Suisse has been paid off by ICICI Bank and the term loan is now due to ICICI Bank, Bahrain.
iv) PSL USA INC (USA)
PSL NA LLC (USA) (Step down Subsidiary)
The Company had invested Rs. 130.34 Crores in a wholly owned subsidiary namely PSL USA Inc. Due to cumulative losses in the step down subsidiary the value of investment is eroded. The Company has not provided for the same.
Also the outstanding debtors includes receivable amounting to Rs. 22.30 Crores from the subsidiary which is not provided for.
v) Due to continuous losses suffered by the companyâs step down subsidiary namely PSL North America LLC, it was directly affecting the financial position of PSL/USA/Inc. (the holding Company of PSL North America LLC). The Company voluntary petitioned for relief under chapter XI of the Title 11 of United States code were filed in United States Bankruptcy court for the district of Delaware. All the assets of PSL North America LLC were put to sale/sold to a company for USD 100 Million. The impairment of loss/profit on sales of assets will be ascertained / recognized in the current year by the Company.
vi) The audited financial statements have not been received by the Company from foreign subsidiary companies and we have relied on the financial statements of the management. Based on our review conducted as above and subject to the possible effects of the matter described above, nothing has come to our attention that causes us to believe that the accompanying Statement, prepared in accordance with applicable accounting standards as specified u/s 133 of the Companies Act, 2013 reads with Rule 7 of the Companies (Account) Rules, 2014 and other recognized accounting practices and policies has not disclosed the information required to be disclosed in terms of regulation 63 of the SEBI (Listing Obligations and disclosure Requirements) Regulations, 2015 including the manner in which it is to be disclosed, or that it contains any material misstatement.
B) Indian Subsidiaries:
1) PSL Infrastructure & Ports Pvt. Ltd.
- Total investment in PSL Infrastructure and Ports Pvt. Limited is Rs.28.21 Crores.
- The company was awarded the construction of Jetty at Kandla Port. Till date the company has incurred construction Expenses of Rs 64.85 Crores.
- Due to restrictions imposed by CDR package of PSL Ltd, the parent company, could not inject/ contribute funds for the construction of the jetty.
- The Kandla Port authorities have given notice for the cancellation of the agreement. The matter is in dispute and under Arbitration. At present, project is incomplete.
2) PSL Corrosion Control Services Ltd.
- Due to high cost of working, the margins are going down.
- In our opinion and explanation given to us the Company has given Guarantees for loan taken by its subsidiaries from banks/financial institution the terms and conditions of such guarantees are not prejudicial to the interest of the Company.
3) PSL Gas Distribution (P) Ltd.
- The company was incorporated on 31st December 2010 and has not commenced any business activity.
24. Impairment of Assets:
The Management has not carried out any evaluation of impairment of these assets and no provision for impairment has been recorded, as required by Accounting Standard-28.
25. Due to this, provision for diminution / impairment in the value of its investments in the above subsidiary companies is not considered.
26. Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained. However there is no new loan availed by the company during the year.
27. According to the information and explanations given to us & based on the documents & records produced to us, the Company has not granted loans or advances on the basis of security by way of pledge of shares, debentures & other securities.
28. The bankers have appointed a firm of Chartered Accountants to check the books of accounts of the Company for the last four years. The audit is in progress. The Companyâs Management is of the view that the above investigations/ proceedings would not result in any additional material provisions / write-offs / adjustments (other than those already provided for / written-off or disclosed) in the financial statements of the Company. As per the Companyâs Management, any adjustments, if required, in the financial statements of the Company would be made as and when the outcomes of the above matters are concluded.
29. Corporate Social Responsibility
Since average net profits of the Company made during the three immediately preceding financial years is negative, therefore the Company has not earmarked specific funding for Corporate Social Responsibility and sustainable activities as required under the provision of section 135 of the Act.
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 I, a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by section 143(3) of the Act, we report that:
a) Except the matters described in Emphasis of Matter Paragraphs 1 to 12 and Annexure A Para Nos. 7 in our opinion, may have an adverse effect on the functioning of the Company, aforesaid standalone financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.
b) 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.
c) 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;
d) 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;
e) On the basis of written representations received from the directors as on 31st March, 2016 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2016 from being appointed as 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 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) the Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note Nos. 1 to 12 and Annexure A-7 to the financial statements;
ii) the Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses.
iii) there have been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
1. a) The Company has computerized Assets Register. It is to be updated. All the factory units have kept details of their fixed assets at their level.
b) During the year, physical verification was done by the management of all the factory units of the Company. As the computerized Asset Register is not updated, the full particulars including total quantitative details could not be ascertained. Pending completion of reconciliations which has not been completed discrepancies if any cannot be ascertainable. Pending updating of records and reconciliation books balances as at 31-3-2016 have been adopted.
c) In our opinion the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets.
d) The title deeds of the immovable properties are held in the name of the Company.
2. Subject to our remark in Item No. 1 in âEmphasis of Matterâ the physical verification of inventory has been conducted at reasonable intervals by the management; and the procedures of physical verification of inventory followed by the management is reasonable and adequate in relation to the size of the Company and nature of its business. The stock is maintained on Excel Sheets. On line package is not installed and not integrated with books of accounts. The Company is maintaining proper records of inventory and any material discrepancies noticed on physical verification have been properly dealt with in the books of account.
3. The Company has not granted loans, secured/unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013
4. The Company has complied in respect of loan, investments, guarantees and securities as required under provision of sections 185 and 186 of the Companies Act, 2013.
5. The Company has not accepted any deposits from the public within the meaning of Section 73 to 76 of the Act and the Rules framed there under. Therefore, the provisions of Section 73 and 74 of the Act and any other relevant provisions of the Companies Act, 2013 and the Rules framed there under with regard to deposits accepted from the public are not applicable to the Company.
6. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government of India, regarding the maintenance of cost records under sub-section (1) of Section 148 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been maintained. We have, however not made a detailed examination of the records with a view to determine whether they are accurate or complete. The cost audit is completed up to the year ended 31st March 2013. The Cost Audit Report is mandatory u/s 148(1) of the Companies Act 2013.
7. According to the records of the Company, the Company is not regular in depositing undisputed Statutory dues including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, Duty of Excise, valued added tax, Cess and any other statutory dues with the appropriate authorities, however there is some delay in depositing Govt. dues due to financial difficulties. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Sales Tax, Customs Duty, Service Tax, Excise Duty and Cess were outstanding, at the financial reporting period ending on 31st March 2016 for a period of more than six months from the date they became payable.
7. a) As on 31st March, 2016 according to the records of the Company the following are the particulars of disputed dues on account of Excise duty, Customs, Income Tax, Service Tax, Sales Tax & DGFT and have not been deposited.
SR. No. |
Amount under Dispute (Rs. In Lacs) |
Facts of the Case |
Period which the amount relates |
Forum where the dispute is pending |
EXCISE DUTY |
||||
1. |
3752 |
Demand of duty on exempted orders |
2006 |
CESTAT, Ahmadabad |
2. |
1467 |
Duty on Fusion Bonded Epoxy Coating |
2008 |
CESTAT, Mumbai |
3. |
8 |
Duty on Fusion Bonded Epoxy Coating |
2010 |
Commissioner (Appeals), Chennai |
4. |
3 |
Demand of differential Excise Duty |
2011 |
CESTAT, Chennai |
5. |
34 |
Demand of Cenvat Credit |
2010 |
CESTAT, Mumbai |
6. |
10 |
Relating to interest on incorrect Cenvat Credit |
2010 |
CESTAT, Bangalore |
7. |
0.45 |
Excess Cenvat Credit taken |
2012 |
CESTAT, Ahmadabad. |
8. |
9 |
Goods cleared without payment of Excise Duty |
2012 |
Addl. Commissioner of Central Excise, Jaipur |
9. |
9 |
Cenvat credit availed on capital goods |
2012 |
Transferred back to Tribunal Ahmadabad |
10. |
54 |
Demand of Central Excise Duty |
2012 |
Commissioner of Central Excise, Ahmadabad |
11. |
0.32 |
Demand of Central Excise Duty |
2013 |
Dy. Commissioner, Central Excise, Vizag |
12. |
181 |
Short paid Excise Duty on Transportation |
2013 |
Commissioner of Central Excise, Vizag |
13. |
202 |
None Payment of Excise Duty |
2013 |
Commissioner, Rajkot |
14. |
57 |
Short Reversal of Cenvat Credit |
2013 |
CESTAT, Ahmadabad |
15. |
29.85 |
Recovery of Refund erroneously paid to us by Ex. Deptt |
2014 |
Asstt. Commissioner Central Excise, Danghidham |
16. |
1.13 |
Demand of Excise Duty, interest and penalty |
2015 |
Asstt. Commissioner, Jaipur |
17. |
76 |
Wrong availement of cenvat credit |
2016 |
Commissioner Central Ex., Gandhidham |
18. |
76 |
Wrong utilization of cenvat credit |
2016 |
Commissioner Central Ex. Gandhidham |
CUSTOMS / DGFT |
||||
1. 871 |
Wrong a ailment of custom duty - HDPE |
2012 |
CESTAT, Ahmadabad |
|
SERVICE TAX |
||||
1. |
45 |
Tax on construction of Mall |
2008 |
CESTAT, Chennai |
2. |
209 |
BAS |
2009 |
Commissioner, Puducherry |
3. |
2 |
Demand for Interest Liability |
2009 |
Asst. Commissioner (Appeals), Service-tax, Vizag |
4 |
15 |
2009 |
Asstt. Commissioner, Service Tax, Vizag |
|
5. |
2 |
Demand of Service Tax BAS |
2010 |
CESTAT, Mumbai |
6. |
6 |
Service Tax on ECB Loan |
2011 |
Addl. Commissioner, Service Tax, Mumbai |
7. |
6 |
Cenvat credit availed on input services not covered |
2012 |
Add. Commissioner of C. Ex., Vizag-Commissionerate |
8. |
21 |
Wrong a ailment of Cenvat Credit |
2012 |
CESTAT, Ahmadabad |
9. |
30 |
Cenvat credit availed on service tax paid on agency commission |
2013 |
Joint Commissioner of C. Ex. Rajkot |
10. |
123 |
Short payment of Service-tax |
2016 |
Commissioner of Central Excise, Gandhidham |
11. |
11 |
Interest not paid on belated payment of service-tax |
2016 |
Commissioner of Central Excise, Puchcherry |
SALES TAX |
||||
1. 43 |
Composite tax payable on outward transport |
2004 |
High court of A.P |
|
2. 1200 |
Demand of duty |
2005 |
High Court of A.P. |
|
3. 681 |
Demand of duty |
2002-07 |
Asstt. Sales Tax Officer, Daman |
|
INCOME TAX |
||||
1. 136 |
Demand of Income-tax |
2011-12 |
CIT (Appeals) |
|
2. 21 |
Demand of Income-tax |
2005-06 |
CIT (Appeals) Sec. 143(3)/263 |
|
3. 25 |
Demand of Income-tax |
2012-13 |
CIT (Appeals) |
Sl. No. |
Financial Institution |
Purpose |
1. |
Syndicate Bank'' |
Notice u/s 138 of NI Act, 1881 regarding Dishonour of the Cheque No. 355113 for Rs.12,50,00,000/- drawn on State Bank of India |
2. |
Syndicate Bank |
Notice u/s 138 of NI Act, 1881 regarding Dishonour of the Cheque No. 355114 for Rs.12,50,00,000/- drawn on State Bank of India |
3. |
Kotak Mahindra Bank |
Notice u/s 138 ofNI Act, 1881 regarding Dishonour of two Cheques No. 753765 & 753766 for Rs.5,00,00,000/-each drawn on ICICI Bank |
4. |
Kotak Mahindra Bank |
Notice u/s 138 ofNI Act, 1881 regarding Dishonour of two Cheques No. 483804 & 539241 for Rs.5,00,00,000/-each drawn on ICICI Bank |
5. |
Kotak Mahindra Bank |
Notice u/s 138 ofNI Act, 1881 regarding Dishonour of two Cheques No. 483805 & 539242 for Rs.5,00,00,000/-each drawn on ICICI Bank |
6. |
Aditya Birla Finance Ltd. |
Notice regarding recall of outstanding credit facility extended vide sanctioned letter dated 30/05/2012. A case was registered by Economic offences wing (EOW) on the Company as well as the Directors under CrPC. The matter is under investigation. |
Kotak Mahindra Bank
The Bank has initiated action under SARFAESI Act, 2002 u/s 14 of the said Act praying possession of property at Mouje, Nanicherai, Distt. Kutch, which property had been earlier mortgaged in favour of Kotak Mahindra Bank to secure the repayment of certain loan amounts.
The District Magistrate passed the Order in favour of Bank. The Company is filing appeal.
Indian Bank, Nariman Point, Mumbai
Issued Notice to the Company and Directors to pay Rs.64,57,90,389/- and Bank Guarantee Rs.3,21,90,190/- due to them and threatened to initiate legal proceedings.
Federal Bank
The Federal Bank has given a show cause notice in pursuance of the proceedings for declaring the Company as Willful defaulter. This is objected by the Company as unwarranted and non-tenable. The matter is under dispute.
Standard Chartered Bank
Given Notice u/s 433 and 434 of the Companies Act to pay outstanding dues and to initiate winding up proceedings against the Company.
7. b) Legal Matters
a) Initially five complaints were filed by two banks under the relevant provisions of Negotiable Instruments Act but after the order of Addl. Sessions Court of Bombay, one has been scrapped and only four are now pending for disposal.
b) Winding up Petition filed by JSW:
The winding up petition filed by JSW was withdrawn on 29.6.2015 as on direction of Bombay High Court an aggregate amount of Rs.25 Crores was paid by the Company. The Bombay High court has also directed the parties to execute necessary security documents in High Court in favour of JSW along with other CDR Lenders of the Company with respect to creation of charge over the movable fixed assets of the company on 15.6.2015. Further charge has also been created over the immovable assets of the company at Vizag, Kakinada, Varsana and Daman on 17.8.2015 by executing necessary security documents in favour of CDR Lenders and JSW.
c) A Petition has been filed before the High Court of Gujarat at Ahmadabad challenging compensation Bill raised by Kandla Port Trust (KPT) in respect of five plots of land of PCD-I unit located in East of NH No. 08A, Kandla Road, Gandhidham and two plots of land of PCD-II in Plot No. 5&6 in Block D, Sector
12, Gandhidham. Stay has been granted in favour of Company with regard to 5 of the 7 plots.
d) Termination of concession agreement executed by Kandla Port Trust in respect of PSL Infrastructure and Ports Private Limited. The matter is pending before arbitration Tribunal.
e) FIRâs have been registered against the Company, Managing Director, Whole Time Directors and an official. This matter is pending before Delhi High Court for quashing of said FIR. Two separate writ petitions are pending before Delhi High Court for quashing of subject FIR registered against the directors. Interim orders passed earlier shall continue.
f) Aggrieved by the Order of Metropolitan Magistrate
- the Company had earlier filed a Revision Petition before the Court of Additional Sessions Judge, Patiala House, New Delhi which was dismissed vide orders dated 22nd July, 2015. Based on the advice of Advocate, the Company has now filed a Criminal Miscellaneous Petition being Cr. M.C. No. 5072 of 2015 under Section 482 of CRPC in the Delhi High Court challenging the order dated 22nd July, 2015 of ASJ.
g) Another supplier of company had on 10-3-2015 filed a company petition No. 434 of 2015 against the Company under Section 433(e) and (f) read with Section 434 and 439 of Companies Act, 1956 before the Bombay High Court. The matter is pending.
h) A Civil Suit was filed by Chaitanya Blasting Works against the Company before the court of Additional District Judge at Vishakhapatnam for recovery of Rs.1.25 Crores along with interest @ 24% per annum along with an application for attachment before judgment of companyâs stock lying at Gurrampalen, Vishakhapatnam which was dismissed by the Court of Addl.(ADJ) vide order dated 5-10-2015. The Chataniya Blasting Work has now challenged the order of ADJ by filing a petition under Article 227 of the Constitution of India in the High Court of Judicature at Hyderabad. This matter is pending.
8. The Company has defaulted in repayment of loan and borrowings to financial institution, bank and Govt. The lenders balance confirmations were not available.
9. The Company has not raised money by way of initial public offer (including debt instruments) and term loans were applied for the purposes for which those are raised.
10. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.
11. The Company is not a Nidhi Company and Nidhi Rules 2015 is not applicable.
12. The Company has disclosed all transaction with the related parties are in compliance with section 177 and 188 of Companies Act, 2013 were applicable and the details have been disclosed in the Financial Statements etc., as required by the applicable accounting standards.
13. The Company has not allotted any fully paid up shares to the Lenders / Creditors during the year. The proposed allotments are pending, awaiting approval of Stock Exchanges.
14. The Company has not entered into any non-cash transactions with directors or persons connected with him.
15. The Company is not required to be registered u/s 45-IA of the Reserve Bank of India Act, 1934. This is not applicable to the Company.
Reasons for Unfavorable Report
Due to non-implementation of CDR package, the financial position of the company has suffered a Setback. The production has fallen resulting in heavy losses. Due to financial crunch and non availability of funds, there are some delays in depositing the government dues. . There are defaults in repayment of bank loans. The debtors have stopped payment of their dues. The creditors have started filing legal suits for their recovery and winding up proceedings. The net worth has eroded. The BIFR application is pending. We have reported the matters in the Emphasis of matters in paragraph nos. 1 to 12 of our report of even date.
We have audited the internal financial controls over financial reporting of PSL Limited (âthe Companyâ) as of 31st March 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.
Managementâs Responsibility for Internal Financial Controls
The Companyâs management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (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 authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companyâs assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
For Suresh C. Mathur & Co.
Chartered Accountants,
(Firm Regn. No. 000891N)
Place: New Delhi (Suresh C. Mathur)
Dated: 24th May, 2016 PARTNER
M. No. 1276
Mar 31, 2015
We have audited the accompanying financial statements of PSL Limited
which comprise the Balance Sheet as at 31st March 2015, the Statement
of Profit and Loss Account and the Cash Flow Statement for the year
then ended and a summary of significant accounting policies and other
explanatory information.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matter stated
in Section 134(5) of the Companies Act, 2013 ("the Act") with respect
to the preparation & presentation of these standalone financial
statements that give a true and fair view of the financial position,
financial performance and cash flows of the Company in accordance with
the accounting principles generally accepted in India, including the
Accounting Standards specified under Section 133 of the Act, read with
Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility
also includes maintenance of adequate accounting records in accordance
with the provisions of the Act for safeguarding 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 control, that were operating effectively for
ensuring the accuracy and completeness of the accounting records,
relevant to the preparation and presentation of the financial
statements that give a true and fair view and are free from material
misstatements, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these standalone
financial statements based on our audit. We have taken into account the
provisions of the Act, the accounting and auditing standards and
matters which are required to be included in the audit report under the
provision of the Act and Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing
specified under Section 143(10) of the Act. Those Standards require
that we comply with the ethical requirements and plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free from material misstatements.
An audit involves performing procedures to obtain audit evidence about
the amount and disclosures in the financial statements. The procedures
selected depend on the auditor's judgment, including the assessment of
the risk of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Company's preparation and
fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company's
internal control. An audit also includes evaluating the
appropriateness of the accounting policies used and the reasonableness
of the accounting estimates made by the Management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion and to the best of the 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 true
and fair view in conformity with the accounting principles generally
accepted in India.
(i) in the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March 2015.
(ii) in the case of the Statement of Profit and Loss, of the loss of
the Company for the year ended on that date and
(iii) in the case of the Cash Flow Statement, of the cash flows of the
Company for the year ended on that date.
Emphasis of Matter
We draw attention to:
1. Long Term Borrowings: Note No. 4 of Balance Sheet and Schedules.
Default In Payment to Banks
Based on our audit procedure and as per the information and explanation
given to us, the company has defaulted in repayment of loan and
interest to the banks and financial institutions as on 31st March 2015.
The Company has sought a restructuring program from the bankers under
the guidelines issued by the Reserve Bank of India. The Company had
filed an application before the CDR Cell on March 06, 2013 (Cut Off
Date : 01.01.2013) along with the Flash Report. After considering the
proposal, the final restructuring package was approved by CDR Empowered
Group on 23rd August, 2013 which was duly communicated to the Company
by the CDR Cell vide its Letter of Approval dated 23rd September, 2013.
In terms of the aforesaid Letter of Approval, for the CDR package:
a) The promoters of the Company are required to make a total
contribution of Rs.146.81 Crore by way of subscribing to the equity
capital of the Company/ unsecured loan so that the said contribution
constitutes 25% of the total sacrifice computed for the aforesaid
restructuring.
b) A portion of outstanding debt of lenders of the Company is required
to be converted into Equity Shares. Yes Bank, being one of the lenders
of the Company, has assigned its debt to Edelweiss Asset Reconstruction
Company Ltd. through execution of Deed of Accession to Master
Restructuring Agreement. The outstanding portion of debt amounting to
Rs. 5 Crore (Rupees Five Crore only) of Edelweiss Asset Reconstruction
Company Ltd. was required to be converted into Equity Shares.However
the debt amounting to Rs.2.72 (Rupees Two Crore Seventy Two Lacs only)
aforesaid total debt amount has already been converted into Equity
Shares in accordance with the members' approval dated 4th July, 2014
obtained through Postal Ballot dated 20th May, 2014. Now the remaining
debt of Rs.2.28 Crore (Rupees Two Core Twenty Eight Lacs only) if
required to be converted into Equity Shares of the Company.
c) The Board of the Directors has, in accordance with the SEBI (ICDR)
Regulations by passing a resolution on 5th February, 2015 also duly
ratified on 10th February, 2015 considered and approved, subject to the
approval of the members of the company, the proposal of issuance of a
total of 50619232 Equity Shares of face value of Rs.10/- (Total Ten
only) each at a total price of Rs.26/- (Rupees Twenty Six only) per
equity share (including premium of Rs.16/- to the Promoter/Promoter
Group/Promoter's Group Entities and a CDR Lender namely Edelweiss Asset
Reconstruction Company Ltd. hereinafter collectively referred to
"Proposed Allottees" of the Company as mentioned at Point a) and b)
above calculated in accordance with the Regulation 76 of Chapter VII of
the SEBI (ICDR) Regulations for an aggregate value upto approx.
Rs.1,31,61,00,120/- (Rupees One Hundred Thirty One Crores Sixty One
Lacs and One Hundred Twenty only).
d) Other terms applicable to the proposed issue are as follows:
i) The equity shares shall be subject to lock-in for a period in
accordance with the provisions of the SEBI (ICDR) Regulations.
ii) The equity shares now to be issued shall rank passu with the
existing equity shares of the Company in all respects.
e) Further it was mentioned that the Promoters of the Company were
required to bring total contribution of Rs.146.9 Crores being 25% of
lenders sacrifice. It was stated that the Promoters have infused
Rs.38.60 Crores by way of cash, Rs.31.6 Crores by way of subscription
of equity, in lieu of sale of land belonging to promoter owned company,
Broken Hills International Pvt Ltd located in Tamil Nadu and Rs.57
Crores by mortgaging promoter owned land at Kalkaji, Delhi. The CDR EG
opined that CDR package is not being implemented as per CDR guidelines
as promoter's contribution is not infused in time but as lenders want
to continue under the aegis of CDR, the company can continue under CDR
though the package has not been implemented within the timelines.
2. Due to this there is a Cash and Capital crunch and the Company is
under stress due to reduction in turn over, slow down in economic
environment, increase in the cost of production as well as due to idle
labour, lack of sufficient orders and reduced net realization in
comparison to the increase cost of sales. There is shortage of working
capital.
3. The Company has not provided for the interest amounting to
Rs.627.21 Crores for the period from 1st January 2013 to 31st December
2014 which was to be built up as funded interest term loan (FITL) on
the Working Capital Term Loan and Cash Credit. The Company has also not
provided regular interest for the period of three months i.e. from
1.1.2015 to 31.03.2015 amounting to Rs. 88.58 Crores. The loss of the
Company in this financial year is understated to an extent of Rs. 88.58
Crores.
4. The Company has not carried out detailed assessment of the useful
life and hence not adjusted depreciation charge accordingly as per the
notification to Schedule II of the Companies Act 2013.
5. The Kandla Port Authorities cancelled Lease of certain leasehold
lands at Kandla. They have demanded damages and arrears. The ultimate
expected liability is not fully provided.
6. The Company has accumulated losses exceeding the entire "Net Worth'
and has incurred cash loss. More than 51% of the paid up capital is
held partly by one or more public financial institutions which includes
share of promoters pledged with the banks and institutions.
7. The Company's financial statements have been prepared under the
assumption considering the management assessment and plan to get
requisite funding from various other sources as contemplated.
8. Leasing of the Land/Plant & Machinery of Manufacturing Unit -
(Varsana, Vizag, Vaiyavoor & Jaipur)
Operations Maintenance and Management
Agreement with Jindal Tubular (India) Limited:
a) The company has negotiated with Jindal Tubular (I) Ltd., through the
Manager (Special Purpose Vehicle owned and controlled by Jindal Saw
Limited) with necessary assistance from ICICI Bank for handing over the
operations of manufacturing units of the company located at Varsana,
Vizag, Vaiyavoor and Jaipur on some broad terms and conditions as are
finalized between two companies consequent upon personal discussions
between the senior officials of the two companies and ICICI Bank.
b) The duration of the proposed transaction will be for a period of one
year from the date mentioned in the Definitive Agreements and shall be
renewable for an additional period of one year as may be mutually
agreed between the parties.
c) Subject to deduction of all costs and expenses incurred by the
Manager towards satisfaction of legacy dues, employee and utility dues/
other liability of PSL Limited, the Manager will pay to the company 70%
of the net revenue for identified facilities at Vaiyavoor, Jaipur and
Vizag and for facilities located at Varsana the Manager will pay 50% of
net revenue.
d) Upon satisfactory completion of legal and taxation due diligence /
identified facilities by the Manager the party shall decide the start
up date. (Since decided 15th April, 2015).
e) After completion of the proposed transaction period the parties may
agree for any sale of the identified facility, the Company and the
ICICI Bank shall provide the Manager a right of first refusal.
f) As per the OMMA the Company shall , as the case may be, comply in
full with the condition precedent by April 15, 2015 or within such
extended time line as mutually agreed between the parties.
g) An agreement dated March 4, 2015 giving such option to sale the
specific units by the Company to JTL has also been extended.
9. Lender Banks' Balance Confirmation as on 31st March 2015:
We are informed that the company has applied for their confirmation of
Bank certificate / Bank Guarantees / Letter of Credits / Corporate
Guarantees given on behalf of subsidiary companies and interest
certificates as on 31st March 2015 which are yet to be obtained and
supplied to us.
The loan figures were arrived in the ledger as per the MRA for both
categories (signed and not signed). We are informed that the figures in
the MRA a document has to be taken as confirmation of balance for the
loan account.
10. Investments in Subsidiaries: Note No. 11 Non Current Investments.
A) Foreign Subsidiaries:
i) PSL FZE (Sharjah) (Step down Subsidiary) Pipeline Systems Ltd.
Mauritius
The Company had invested Rs. 141.63 Crores in a wholly owned subsidiary
namely Pipeline Systems Mauritius . Due to cumulative losses in the
subsidiary the value of investment is eroded. The Company has not
provided for the same.
ii) PSL USA INC (USA) PSL NA LLC (USA) (Step down Subsidiary)
The Company had invested Rs. 130.34 Crores in a wholly owned subsidiary
namely PSL USA Inc. Due to cumulative losses in the subsidiary the
value of investment is eroded. The Company has not provided for the
same. Also the outstanding debtors includes receivable amounting to Rs.
22.30 Crores from the subsidiary which is not provided for.
We were informed that the financial statements for the period ending on
31st March 2015 audited by other auditors of the above subsidiary
companies are yet to be supplied to us. Due to this, provision for
diminution / impairment in the value of its investments in the above
subsidiary companies is yet to be considered.
B) Indian Subsidiaries:
PSL Infrastructure & Ports Pvt. Ltd.
* Total investment in PSL Port & Infrastructure Limited is Rs.28.21
Crores.
* The company was awarded the construction of Jetty at Kandla Port.
Till date the company has incurred construction Expenses of Rs 65.39
Crores.
* Due to restrictions imposed by CDR package of PSL Ltd, the parent
company, could not inject/ contribute funds for the construction of the
jetty.
* The Kandla Port authorities have given notice for the cancellation of
the agreement. The matter is in dispute and under Arbitration. At
present, project is incomplete.
11. Loan & Advances : Note No. 12 of Balance Sheet & Schedules
i) The company has given Bank Guarantees on behalf of subsidiary
companies.
ii) During the year, Bank Guarantees of Rs 171.72 Crores have been
encashed relating to the subsidiaries and debited to the Profit and
Loss account.
12. Inventory, Current Assets: Note No. 15 of Balance Sheet and
Schedules
The closing inventory as on 31st March, 2015 is Rs. 1391.25 Crores
which includes non moving stock of Rs. 1101.71 Crores (includes
Rs.1078.38 Crores as reported earlier). In view of company's production
activities having come down and slow movement in the inventory, there
is a need for systematic age wise segregation and analysis of the items
comprised in the inventory to assess their usefulness/ usability in the
production and servicing activities, period over which they could be
used also whether the inventory items are capable of being
sold/disposed off as standalone items. Pending such an exercise, we are
unable to express an opinion towards non moving and obsolete
inventories and the eventual realizable amount in respect of the
inventories, as also the possible effect on the financial statements.
13. Debtors: Note No. 16 of Balance sheet and Schedules
i) The Company has Sundry Debtors of Rs 311.94 Crores as on March 31,
2015
Less than Six Months Rs. 85.57 Crores
More than Six Months. Rs.227.36 Crores
(-) Provision for NIL
doubtful debts
Total Rs. 311.94 Crores
ii) The debtors of more than 6 months of Rs.227.36 Crores includes the
following amount:-
1. Lanco (IOCL Project) Rs. 14.42 Crores
The Company is in the process of filing
winding up a petition towards recovery
2. Electro Steel Rs. 0.63 Crores
3. IOCL (SMPL Project) has recovered L/D and separately for risk and
cost charges amounting to Rs. 21.27 Crores.
The Company has objected to this arbitrary charge and appointed a
lawyer to deal the matter.
The Company has not produced confirmation of balances from sundry
debtors confirming the amount outstanding as on March 31, 2015. In the
absence of adequate evidence and information made available to us
supporting the recoverability of this amount, we are further unable to
comment on the financial impact of this matter on the profit / loss for
the year ended on 31st March 2015.
14. Sundry Creditors & Loans and Advances:
In the absence of pending confirmation of balances from Trade Payables,
Other Loans & Advances as on 31st March, 2015, provision for any
adverse variation in the balances is not quantified.
15. The management has decided not to provide for Gratuity, Leave
Encashment & Superannuation for the period of 1st April, 2014 to 31st
March 2015 because current provision is considered sufficient by the
management for this purpose.
16. The Company has incurred losses during the extended financial year
2013 and paid excess remuneration aggregating to Rs.5.91.crores to
Seven whole time directors. Since the remuneration was in excess to the
limits specified in relevant Sections of the Companies Act, 1956 read
with Schedule XIII of The Companies Act, 1956 the company has filed an
application to Ministry of Corporate Affairs, Govt. of India to permit
waiver of recovery of the aforesaid excess remuneration from each of
the 7 Whole Time Directors. Subsequently Permission for six directors
received by the Company , permission for one director is still pending.
17. The Estate Office Kandla Port Trust under Public Premises
(Evacuation of unauthorized) passed order on 27th March, 2014 for the
evacuation of the Kandla PCD-I premises because lease period was over
The Estate Office has taken over the possession of the land. Since the
lease amount is under dispute, the lease payments have not been made
and not provided in the accounts.
18. Some of Creditors have filed winding up petition u/s 433(e) and
434 of The Companies Act, 1956. The matter is sub juidice.
19. A petition under Article 14, 21, 28 and 226 of the Constitution of
India has been filed against the company. Our opinion is not qualified
in respect of these matters.
20. As required by the Companies (Auditor's Report) Order 2015 issued
by the Central Government Ministry of Corporate Affairs in terms of
Sub-section (11) of Section 143 of the Companies Act, 2015, we enclose
Annexure - A, attached to our report.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2015 ("the
Order") issued by the Central Government in terms of Section 143(11) of
the Act, we give in the Annexure a statement on the matters specified
in paragraphs 3 and 4 of the Order.
2. As required by Section 143 of the Act, we report that:
a) We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
audit.
b) In our opinion, proper books of account as required by law have been
kept by the Company so far as it appears from our examination of those
books.
c) The Balance Sheet, the statement of Profit & 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, the statement of Profit & Loss
and the Cash Flow Statement comply with the Accounting Standards
notified under the Act read with the General Circular 15/2013 dated
13th September, 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 31st March, 2015 taken on record by the Board of Directors, none
of the directors is disqualified as on 31st March, 2015 from being
appointed as a director in terms of Section 164 of the Act.
ANNEXURE - A TO THE AUDITORS' REPORT
Referred to in paragraph 1 under the heading 'Report on Other Legal and
Regulatory Requirements' of our Report of even date on the financial
statements for the year ended on 31st March 2015 of PSL Limited
1. a) The company has maintained proper records showing full
particulars including quantitative details and situation of the Fixed
Assets. These fixed assets have been physically verified by the
management at reasonable intervals and no material discrepancies were
noticed on such verification.
b) In our opinion the frequency of verification is reasonable having
regard to the size of the Company and the nature of its assets.
2. Subject to our remark in Item No. 12 in "Emphasis of Matter" the
physical verification of inventory has been conducted at reasonable
intervals by the management; and the procedures of physical
verification of inventory followed by the management is reasonable and
adequate in relation to the size of the Company and nature of its
business.
The Company is maintaining proper records of inventory and any material
discrepancies noticed on physical verification have been properly dealt
with in the books of account.
3. The Company has not granted loans, secured/unsecured to companies,
firms or other parties covered in the register maintained under section
189 of the Companies Act.
4. There is an adequate internal control system commensurate with the
size of the Company and the nature of its business, for the purchase of
inventory and fixed assets and for the sale of goods and services.
There is no failure to correct major weaknesses in internal control
system. However the internal controls over accounting of consumption,
wastages, material reconciliation, need further strengthening.
a) Based on the audit procedures applied by us and according to the
information and explanations provided by the management, we are of the
opinion that the particulars of contracts or arrangements that need to
be entered into the register maintained under section 189 of the
Companies Act, 2013 have so been entered.
b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts or
arrangements entered in the register maintained under Section 189 of
the Companies Act, 2013 have been made at prices which are reasonable
having regard to prevailing market prices at the relevant time.
6. The Company has not accepted any deposits from the public within
the meaning of Section 73 to 76 of the Act and the rules framed there
under. Therefore, the provisions of Section 73 and 74 of the Act and
any other relevant provisions of the Companies Act, 2013 and the rules
framed there under with regard to deposits accepted from the public are
not applicable to the Company.
7. We have broadly reviewed the books of account maintained by the
Company pursuant to the rules made by the Central Government of India,
regarding the maintenance of cost records under sub-section (1) of
Section 148 of the Act and are of the opinion that prima facie, the
prescribed accounts and records have been maintained. We have, however
not made a detailed examination of the records with a view to determine
whether they are accurate or complete. The cost audit is completed up
to the year ended 31st March 2012.
The Cost Audit Report is mandatory u/s. 233B of the Companies Act 1956.
8. According to the records of the Company, the Company is not regular
in depositing undisputed Statutory dues including Provident Fund,
Employees State Insurance, Income Tax, Sales Tax, Service Tax, Duty of
Excise, valued added tax cess and any other statutory dues with the
appropriate authorities, however there is some delay in depositing
Govt. dues due to financial difficulties. According to the information
and explanations given to us, no undisputed amounts payable in respect
of Income Tax, Sales Tax, Customs Duty, Service Tax, Excise Duty and
Cess were outstanding, at the financial reporting period ending on 31st
March 2015 for a period of more than six months from the date they
became payable.
As on 31st March, 2015 according to the records of the Company the
following are the particulars of disputed dues on account of Excise
duty, Customs, Income Tax, Service Tax, Sales Tax & DGFT and have not
been deposited.
SR. Amount under Facts of the Case
No. Dispute (Rs.In
Lacs)
EXCISE DUTY
1 3752 Demand of duty on exempted orders
2. 1467 Duty on Fusion Bonded Epoxy
3. 8 Duty on Fusion Bonded Epoxy Coating
4. 3 Demand of differential Excise Duty
5. 34 Demand of Cenvat Credit
6. 10 Relating to interest on incorrect Cenvat
Credit
7. 0.45 Excess Cenvat Credit taken
8. 9 Goods cleared without payment of Excise Duty
9. 18 Cenvat Credit availed on Capital Goods
10. 54 Demand of Central Excise Duty
11. 181 Demand for non payment of duty on
transportation charges
12. 202 Demand of Central Excise Duty
13. 57 Demand of Central Excise Duty
CUSTOMS / DGFT
1. 871 Demand for differential custom duty
2. 18900 Demand for duty
SERVICE TAX
1. 45 Tax on construction of Mall
2. 209 BAS
3. 2 Demand for Interest Liability
4. 32 Service Tax on ECB Loan
5.. 31 Denial of Credit of Service Tax on Outward
Transport
6.. 6 Cenvat Credit availed on input services not
covered
7. 21 Wrong availment of Cenvat Credit
8. 30 Wrong availment of Cenvat Credit
SALES TAX
1 43 Non payment of composition tax
2 1200 Demand of duty
INCOME TAX
1 136 Demand of Income Tax
2 21 Demand of Income Tax
3 25 Demand of Income Tax
SR. Amount under Period which Forum where the dispute is
No. Dispute (Rs.In the amount pending
Lacs) relates
EXCISE DUTY
1 3752 2006 CESTAT, Ahmedabad
2. 1467 2008 CESTAT, Mumbai
3. 8 2010 Commissioner (Appeals),
Chennai
4. 3 2009 CESTAT, Chennai
5. 34 2010 CESTAT, Ahmedabad
6. 10 2010 CESTAT, Bangalore
7. 0.45 2012 CESTAT, Ahmedabad.
8. 9 2012 CESTAT, New Delhi
9. 18 2012 CESTAT, Ahmedabad
10. 54 2012 CESTAT, Ahmedabad
11. 181 2013 CESTAT, Bangalore
12. 202 2013 Commissioner, Rajkot
13. 57 2013 CESTAT, Ahmedabad
CUSTOMS / DGFT
1. 871 2012 CESTAT, Ahmedabad
2. 18900 2013 DGFT, New Delhi
SERVICE TAX
1. 45 2008 CESTAT, Chennai
2. 209 2009 Commissioner, Chennai
3. 2 2009 Commissioner (Appeals),Vizag
4. 32 2011 Addl. Commissioner,Mumbai.
5.. 31 2011 Addl..Commissioner, Jaipur
6.. 6 2012 Commissioner (Appeals),Vizag
7. 21 2012 CESTAT,Ahmedabad
8. 30 2013 Commissioner (Appeals),
SALES TAX
1 43 2004 High court of A.P.
2 1200 2005 High Court of A.P.
INCOME TAX
1 136 2011-2012 CIT (Appeals)
2 21 2005-2006 CIT (Appeals)
Sec 143(3)/263
3 25 2012-2013 CIT (Appeals)
CASES FILED AGAINST THE COMPANY
Financial Institution Purpose
Syndicate Bank Notice u/s 138 of NI Act, 1881 regarding
Dishonour of the cheque No 355113 for
Rs. 12,50,00,000/- drawn on State Bank Of
India
Syndicate Bank Notice u/s 138 of NI Act, 1881 regarding
Dishonour of the cheque No 355114 for
Rs. 12,50,00,000/- drawn on State Bank Of
India
Kotak Mahindra Bank Notice u/s 138 of NI Act, 1881 regarding
Dishonour of two cheques No 753765 & 753766
for Rs. 5,00,00,000/- each drawn on ICICI
Bank
Kotak Mahindra Bank Notice u/s 138 of NI Act, 1881 regarding
Dishonour of two cheques No 483804 & 539241
for Rs. 5,00,00,000/- each drawn on ICICI
Bank
Kotak Mahindra Bank Notice u/s 138 of NI Act, 1881 regarding
Dishonour of two cheques No 483805 & 539242
for Rs. 5,00,00,000/- each drawn on ICICI
Bank
DBS Bank Limited Legal Notice Regarding recall of credit
facility for Rs. 2000 Million. However the
Bank has agreed for the restructuring of
the loan and signed the MRA.
Aditya Birla Finance Notice regarding recall of outstanding
Limited credit facility extended vide sanctioned
letter dated 30/05/2012. A case was
registered by Economic offences wing (EOW)
on the Company as well as the Directors
under CrPC. The matter is under
investigation.
9. The Company has transferred to investor education and protection
fund in accordance with the relevant provisions of the Companies Act,
1956 (1 of 1956) and rules made thereunder has been transferred to such
fund within time.
10. Based on our audit procedures and on the information and
explanations given by the management, the Company has defaulted in
repayment of dues as per CDR package amounting to Rs. 273.11 Crore
towards principal and Rs. 88.58 Crores towards Interest during the year
to financial institution, and banks due to financial difficulty. The
Company operates in a multiple banking system availing facility for
various coated pipe supply projects from respective bankers. In this
circumstances amount of overdue principal and overdue interest as on a
particular date and corresponding period of delay is not quantifiable.
11. In our opinion and explanation given to us the Company has given
Guarantees for loan taken by its subsidiaries from banks/financial
institutions, but terms and conditions of such guarantees are not
prejudicial to the interest of the Company. However company has not
given any guarantee during the year.
12. Based on information and explanations given to us by the
management, term loans were applied for the purpose for which the loans
were obtained. However there is no new loan availed by the company
during the year.
13. According to the information and explanations given to us & based
on the documents & records produced to us, the Company has not granted
loans or advances on the basis of security by way of pledge of shares,
debentures & other securities.
14. According to the information and explanations given to us and on
an overall examination of the Balance Sheet and Cash flow statement of
the Company, the Company has not availed any new loan.
15. Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and as per
the information and explanations given by the management, we report
that no fraud on or by the Company has been noticed or reported during
the course of our audit.
Reasons for unfavourable /Qualified answers
1. Paragraph No. 7 - Cost Audit - We were given to understand that
report for the period ended September 2013, March 2013, March 2014 and
March 2015 are under progress.
2. Paragraph No. 8 - Statutory dues Due to Financial crunch non
availability of funds there is irregularity in depositing statutory
dues. However the management is taking all the necessary steps to be in
line.
3. Paragraph No. 10- - Default in repayment of bank loan -
Due to Financial crunch the repayments were not made. The company is
in the process of entering into a Contract (OMMA) with another company
in order to revive the operation and generate revenue towards repayment
of loan. In the absence of bank confirmation banks loans were taken as
per books.
For Suresh C. Mathur & Co.
Chartered Accountants,
(Firm Regn. No. 000891N)
Place: New Delhi (Suresh C. Mathur)
Dated: 13th May, 2015 PARTNER
M. No. 1276
Mar 31, 2014
We have audited the accompanying financial statements of PSL Limited
which comprise the Balance Sheet as at 31st March 2014, the Statement
of Profit and Loss Account and the Cash Flow Statement for the period
of Six Months then ended and a summary of significant accounting
policies and other explanatory information.
Management''s Responsibility for the Financial Statements
The Company''s Management is responsible for the preparation of these
financial statements that give a true and fair view of the financial
position, financial performance and cash flows of the Company in
accordance with the Accounting Standards notified under The Companies
Act, 1956 (the Act) read with the General Circular 15/2013 dated 13th
September, 2013 of the Ministry of Corporate Affairs in respect of
Section 133 of the Companies Act, 2013 and in accordance with the
accounting principles generally accepted in India. This responsibility
includes the design, implementation and maintenance of internal control
relevant to the preparation and presentation of the financial
statements that give a true and fair view and are free from material
misstatements, whether due to fraud or error.
Auditors'' Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the ICAI. Those Standards
require that we comply with the ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatements.
An audit involves performing procedures to obtain audit evidence about
the amount and disclosures in the financial statements. The procedures
selected depend on the auditor''s judgment, including the assessment of
the risk of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Company''s preparation and
fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company''s
internal control. An audit also includes evaluating the appropriateness
of the accounting policies used and the reasonableness of the
accounting estimates made by the Management, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion and to the best of the 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 true
and fair view in conformity with the accounting principles generally
accepted in India.
(i) in the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March 2014.
(ii) in the case of the Statement of Profit and Loss, of the loss of
the Company for the six months period ended on that date and
(iii) in the case of the Cash Flow Statement, of the cash flows of the
Company for the six months period ended on that date.
Emphasis of Matter
We draw attention to:
1) Long Term Borrowings: Note No. 4 of Balance Sheet and Schedules.
Default In Payment to Banks
Based on our audit procedure and as per the information and explanation
given to us, the company has defaulted in repayment of loan and
interest to the banks and financial institutions as on 31st March 2014.
The Company has sought a restructuring program from the bankers. The
Company had filed an application before the CDR Cell on March 06, 2013
(Cut Off Date : 01.01.2013) along with the Flash Report. The
outstanding amount as on 01.01.2013 of both CDR member banks and NON
CDR banks is proposed to be restructured through this restructuring
package. The Company has received letter of approval on 23rd September,
2013 conveying the Approval of CDR Empowered Group letter dated 23rd
August, 2013 on the restructuring package of the Company.
14 out of 16 CDR lenders (including transaction specific lenders)
constituting 75.61% of the CDR debt by value and 87.50% by number have
executed MRA as on date. Further, a non CDR lender, DBS Bank Limited
has also executed the MRA. The execution of MRA by the balance banks (7
Nos) is under progress. Amongst CDR members barring two banks namely
SBI & Syndicate Bank all other banks have executed the Master
Restructuring Agreement dated 19th November 2013 thereby accelerating
the progress of implementation of CDR Package.
In pursuance to Corporate Restructuring Package approved by CDR
Empowered group, company has to issue 5.65 crore equity shares to
Promoters / Promoter Group''s Entities for an aggregate consideration
not exceeding Rs. 146.90 crores and 5.95 crore equity shares to CDR
Lenders for an aggregate consideration not exceeding Rs. 154.70 crore
on preferential basis having face value of Rs. 10/- each.
For this purpose, the company is in process of increasing the
Authorised Share Capital.
The company''s financial statements have been prepared under the
assumption considering the management assessment and plan to get
requisite funding from various other sources as contemplated.
2) Finance Cost: Note No. 26 of Balance Sheet and Schedules
In terms of the approval (LOA) interest on the loans of CDR member
banks and non CDR Banks shall be funded for a period of two years i.e.
01.01.2013 to 31.12.2014 as a fresh Term Loan namely FITL.
As per the general Accounting Standards, the company is required to
account for the interest on the loans on accrual basis. However, the
company has not provided for interest on the loans of the banks for the
period from 01.10.2013 to 31.03.2014 amounting to Rs. 161.30 crores
(Previous Year Rs. 224.69 crores). The loss to the accounting period is
understated to that extent. After accounting for the above, the loss
for the accounting period from 1st Oct, 2013 to 31st March 2014 will
increase from Rs. 141.99 crores to Rs. 303.29 crores. Such accumulated
Funded interest of Rs. 385.99 crore is yet to be accounted for as FITL.
3) Lender Banks'' Balance Confirmation as on 31st March 2014 :
We are informed that the company has applied for their confirmation of
Bank certificate / Bank Guarantees / Letter of Credits / Corporate
Guarantees given on behalf of subsidiary companies and interest
certificates as on 31st March 2014 which are yet to be obtained and
supplied to us.
The loan figures were arrived in the ledger as per the MRA for both
categories (signed and not signed). The MRA which is prepared by ICICI
Bank and vetted by the legal advisor of ICICI Bank (i.e.) Amarchand. We
are informed that the figures in the MRA documents has to be taken as
confirmation of balance for the loan account.
Interest is not provided for the loans outstanding as on 31st March,
2014 for the six months period. The interest is released by banks as
another loan called funded interest term loan. FITL interest @ 10.25%
has been provided.
4) Investments in Subsidiaries. Note No. 11 Non Current Investments.
A) Foreign Subsidiaries:
i) Pipeline Systems Mauritius
PSL FZE (Sharjah) (Stepdown Subsidiary)
ii) PSL USA INC (USA)
PSL North America LLC (Stepdown Subsidiary)
Investment in PSL USA INC is Rs. 130.34 Crores & in Pipeline Systems
Mauritius is Rs. 141.63 Crores. These companies are running in a loss.
The accumulated losses are more than the paid up capital. The market
value of their assets will be lower than the estimated realizable
value.
We were informed that the Financial statements for the period ending on
31st March 2014 audited by other auditors of the above subsidiary
companies are yet to be supplied to us. Due to this, provision for
diminution / impairment in the value of its investments in the above
subsidiary companies is yet to be considered.
We were informed by the management that the economy of the country will
improve in the current year and they shall come out from the woods.
B) Indian Subsidiaries:
PSL Infrastructure & Ports Pvt. Ltd.
* Total investment in PSL Port & Infrastructure Limited is Rs. 28.21
crores.
* The company was awarded the construction of Jetty at Kandla Port.
Till date the company has incurred construction Expenses of Rs. 64.88
crores.
* Due to restrictions imposed by CDR package of PSL Ltd, the parent
company, could not inject/ contribute funds for the construction of the
jetty.
* The Kandla Port authorities have given notice for the cancellation of
the agreement. The matter is in dispute. At present, project is
incomplete.
5) Refer to Note No. 12 (Loans & Advances)
i) The company has given Bank Guarantees on behalf of subsidiary
companies.
ii) During the period, Bank Guarantees of Rs. 58.18 Crores have been
encashed relating to the subsidiaries and is shown in the other
advances.
6) Inventory, Current Asssets : Note No. 15
The closing inventory as on 31.03.2014 is Rs. 1444.04 crores which
includes non moving old stock of Rs. 1047.63 crores (as reported by the
stock auditor last year). However the present market value of the old
stock is not be ascertainable.
7) Fixed Assets : The company has capitalized the capital WIP to the
extent of Rs. 52.15 Crore towards Plant & Machinery. We were informed
that the Plant & Machinery which has repaired and had outlived its
utility and expenses were incurred for replacing vital parts in order
to make the same functional and the expenditure was of such nature that
it bought in to existence a new machinery altogether and consequently,
there was benefit of enduring nature to the company even though
technically no new asset come into existence.
8) Debtors: Note No. 16
i) The Company has Sundry Debtors of Rs. 349.85 Crores as on March 31,
2014:-
Less than Six Months 229.87 Crores
More than Six Months. 122.19
(-) Provision for doubtful (2.21) 119.98 crores
debts
Total 349.85 crores
The advances of more than 6 months of Rs. 119.98 crores
includes the following amount:-
1. Lanco (IOCL Project) 14.42 Crores
2. Electro Steel 0.63 Crores
3. IOCL (SMPL Project) has recovered L/D and separately for risk and
cost charges amounting to Rs. 21.27 Crores. The Company has objected to
this arbitrary charge and appointed a lawyer to deal the matter.
ii) The Company has not produced confirmation of balances from sundry
debtors confirming the amount outstanding as on March 31, 2014. In the
absence of adequate evidence and information made available to us
supporting the recoverability of this amount, we are further unable to
comment on the financial impact of this matter on the profit / loss for
the period ended on 31st March 2014.
9) Sundry Creditors & Loans and Advances:
In the absence of pending confirmation of balances from Trade Payables,
Other Loans & Advances as on 31.03.2014, provision for any adverse
variation in the balances is not quantified.
10) The management has decided not to provide for Gratuity, Leave
Encashment & Superannuation for the period of 1st October 2013 to 31st
March 2014 because current provision is considered sufficient by the
management for this purpose.
11) Due to financial crunch, the company could not execute the supply
of orders to the tune of 1.90 lakh meters. The parties gave notices of
defaults and subsequently terminated the contracts and levied
liquidated damages of Rs. 10.34 Crores during the period.
12) The Company has incurred losses during the extended financial year
2013 and paid excess remuneration aggregating to 5.91 crores to Seven
whole time directors. Since the remuneration was in excess to the
limits specified in relevant Sections of the Companies Act, 1956 read
with Schedule XIII of The Companies Act, 1956 the company is in the
process to file an application to Ministry of Corporate Affairs, Govt.
Of India to permit waiver of recovery of the aforesaid excess
remuneration from each of the 7 Whole Time Directors.
For the period 1st October 2013 to 31st March 2014, the company has
fixed the managerial remuneration for each of the seven directors for
Rs. 4 lakh per director per month which is under the limits specified
by the Companies Act, 1956.
13) The Estate Office Kandla Port Trust under Public Premises
(Evacuation of unauthorized) passed order on 27th1 March, 2014 for the
evacuation of the Kandla PCD-I premises because lease period was over.
The company is taking suitable legal action against above order. Since
the lease amount is under dispute, the lease payments have not been
made and not provided in the accounts.
14) A Creditor has filed winding up petition u/s 433(e) & 434 of the
Companies Act, 1956. The matter is subjudice.
15) A petition under Article 14,21,28 and 226 of the Constitution of
India has been filed against the company.
Our opinion is not qualified in respect of these matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor''s Report) Order, 2003 ("the
Order") issued by the Central Government in terms of Section 227(4A) of
the Act, we give in the Annexure a statement on the matters specified
in paragraphs 4 and 5 of the Order.
2. As required by Section 227 (3) of the Act , we report that:
a) We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
audit.
b) In our opinion, proper books of account as required by law have been
kept by the Company so far as it appears from our examination of those
books.
c) The Balance Sheet, the statement of Profit & 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, the statement of Profit & Loss
and the Cash Flow Statement comply with the Accounting Standards
notified under the Act read with the General Circular 15/2013 dated
13th September, 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 31st March, 2014 taken on record by the Board of Directors, none
of the directors is disqualified as on 31st March, 2014 from being
appointed as a director in terms of Section 274(1) (g) of the Act.
ANNEXURE TO THE AUDITOR''S REPORT
Referred to in paragraph 1 under the heading ''Report on Other Legal and
Regulatory Requirements'' of our Report of even date on the financial
statements for the year ended on 31st March 2014 of PSL Limited
1. a) The Company has maintained proper records showing full
particulars including quantitative details and situation of the Fixed
Assets.
b) A substantial portion of the fixed assets have been physically
verified by the management during the period. In our opinion the
frequency of verification is reasonable having regard to the size of
the Company and the nature of its assets.
c) Fixed assets were disposed off during the period were not
substantial. According to the information and explanation given to us,
we are of the opinion that the disposal of the fixed assets has not
affected the going concern status of the Company.
2. a) Subject to our remark in item no 1 in "Emphasis of Matter" the
inventory has been physically verified by the management and the stock
auditor during the period by the management at reasonable intervals.
In our opinion, the frequency of verification is reasonable.
b) The procedure of physical verification of inventories followed by
the management is reasonable and adequate in relation to the size of
the Company and the nature of its business.
c) In our opinion and according to the information and explanation
given to us, the Company is maintaining proper records of inventory and
the same is certified by the management. The discrepancies noticed on
verification between physical stocks and the book records have been
properly dealt with in the books of account.
3. a) Company has not granted unsecured loans and Inter Corporate
Deposits to companies covered in the Register maintained under Section
301 of the Act. Hence the provisions of clause (iii)(a), (b), (c), (d)
of paragraph 4 are not applicable to the Company.
b) The Company has taken the unsecured loan from companies under the
same management covered in the Register maintained under Section 301 of
the Companies Act, 1956. The maximum amount involved in the current
year amounted to Rs. 17.48 Crore and the period-end balance of loans
taken from such parties is Rs. 17.48 Crore.
c) Based on the information and explanations given to us, we are of the
opinion that the rate of interest and other terms and conditions of
loans taken from such parties covered in the Register maintained under
Section 301 are not prima facie prejudicial to the interests of the
Company.
d) According to the information and explanation given to us, the
repayment of principal and interest has not been paid.
4. In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business for
purchase of inventory and fixed assets and for the Work Done. However
the internal controls over accounting of consumption, wastages,
material reconciliation, need further strengthening.
5. a) Based on the audit procedures applied by us and according to the
information and explanations provided by the management, we are of the
opinion that the particulars of contracts or arrangements that need to
be entered into the register maintained under Section 301 of the
Companies Act, 1956 have so been entered.
b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts or
arrangements entered in the register maintained under Section 301 of
the Companies Act, 1956 have been made at prices which are reasonable
having regard to prevailing market prices at the relevant time.
6. The Company has not accepted any deposits from the public within
the meaning of Section 58A and 58AA of the Act and the rules framed
there under. Therefore, the provisions of Section 58A, 58AA and any
other relevant provisions of the Companies Act, 1956 and the rules
framed there under with regard to deposits accepted from the public are
not applicable to the Company.
7. In our opinion, the Company has an internal audit system,
commensurate with the size and nature of its business. However the
scope needs to be enlarged to cover project related cost-to-complete
workings and certain areas of head office accounting.
8. We have broadly reviewed the books of account maintained by the
Company pursuant to the rules made by the Central Government of India,
regarding the maintenance of cost records under clause (d) of the
sub-section (1) of Section 209 of the Act and are of the opinion that
prima facie, the prescribed accounts and records have been maintained.
We have, however not made a detailed examination of the records with a
view to determine whether they are accurate or complete. The cost audit
is completed up to the period ended 31st March 2012.
9. According to the records of the Company, the Company is generally
regular in depositing undisputed Statutory dues including with-holding
of taxes, Provident Fund, Employees State Insurance, Income Tax, Sales
Tax, Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess and other
Statutory dues applicable to it with the appropriate authorities,
however there is some delay in depositing Government dues due to
financial difficulties. According to the information and explanations
given to us, no undisputed amounts payable in respect of Income Tax,
Wealth Tax, Sales Tax, Customs Duty, Service Tax, Excise Duty and Cess
were outstanding, at the financial reporting period ending on 31st
March 2014 for a period of more than six months from the date they
became payable.
As on 31st March, 2014 according to the records of the Company the
following are the particulars of disputed dues on account of Excise
duty, Customs, Income Tax, Service Tax, Sales Tax and DGFT and have not
been deposited.
Sl. Amount under Facts of the Case Period which
No. Dispute (Rs. In the amount
Lacs) relates
EXCISE DUTY
1. 25 Payment of Cenvat credit on 2004-05-06
coating of inputs
2. 3752 Demand of duty on exempted 2006
orders
3. 1467 Duty on Fusion Bonded Epoxy 2008
4. 8 Duty on Fusion Bonded Epoxy 2010
Coating
5. 3 Demand of differential Excise
Duty
6. 34 Demand of Cenvat Credit 2010
7. 10 Relating to interest on 2010
incorrect Cenvat
8. 0.45 Excess Cenvat Credit taken 2012
9. 9 Goods cleared without 2012
payment of Excise
10. 18 Cenvat Credit availed on 2012
Capital Goods
11. 54 Demand of Central 2012
Excise Duty
12. 0.32 Demand of Central 2013
Excise Duty
13. 181 Demand for non payment 2013
of duty on
transportation charges
14. 202 Demand of Central 2013
Excise Duty
15. 57 Demand of Central 2013
Excise Duty
CUSTOMS / DGFT
1. 871 Demand for differential 2012
custom duty
2. 18900 Demand of duty & penalty 2012
3. 18900 Demand for duty 2013
SERVICE TAX
1. 45 Tax on construction of Mall 2008
2. 209 BAS 2009
3. 2 Demand for Interest Liability 2009
4. 15 Refund of excess amount paid 2009
5. 2 Demand of Service Tax BAS 2010
6. 32 Service Tax on ECB Loan 2011
7. 31 Denial of Credit of Service 2011
Tax on Outward Transport
8. 6 Cenvat Credit availed on 2012
input services not
covered
9. 21 Wrong availment of 2012
Cenvat Credit
10. 30 Wrong availment of 2013
Cenvat Credit
SALES TAX
1 43 Non payment of 2004
composition tax
2 1200 Demand of duty 2005
INCOME TAX
1 136 Demand of Income Tax 2010-2011
2 44 Demand of Income Tax 2005-2006
Sl. Amount under Forum where the dispute is pending
No. Dispute (Rs. In
Lacs)
EXCISE DUTY
1. 25 Tribunal, Ahmedabad - Obtained Stay
2. 3752 Remanded back by Tribunal Ahmedabad,
Received
3. 1467 Transferred to Tribunal, Mumbai on Nov 12
4. 8 Commissioner (Appeals), Chennai
5. 3 Appellate Tribunal, Chennai-Obtained Stay
Order
6. 34 Transferred to Tribunal, Mumbai on Nov 12
7. 10 Appellate Tribunal, Bangalore
Credit
8. 0.45 Asstt. Commissioner, Vapi, Daman
9. 9 Addl. Commissioner of Central Excise,
Duty Jaipur
10. 18 Addl. Commissioner, Daman
11. 54 Commissioner, Central Excise, Ahmedabad
12. 0.32 Dy. Commissioner, Central Excise, Vizag
13. 181 Dy. Commissioner, Central Excise, Vizag
14. 202 Commissioner, Central Excise, Rajkot
15. 57 Commissioner, Central Excise, Rajkot
CUSTOMS / DGFT
1. 871 Appeal with CESTAT, Mumbai is pending
2. 18900 Appeal with CESTAT, Mumbai is pending
3. 18900 Add. DGFT
SERVICE TAX
1. 45 Tribunal, Chennai
2. 209 Commissioner of Central Excise,
pondicherry
3. 2 Asstt. Commissioner, Service Tax, Vizag
4. 15 Asstt. Commissioner, Service Tax, Vizag
5. 2 Transferred to Tribunal, Mumbai on Nov 12
6. 32 Addl. Commissioner of Service Tax,
Churchgate
7. 31 Commissioner, Jaipur
8. 6 Addl. Commissioner of Central Excise,
Vizag-I, Commissionerate
9. 21 Commissioner of Central Excise & Customs,
Rajkot
10. 30 Jt. Commissioner
SALES TAX
1 43 High court of A.P.
2 1200 Supreme Court
INCOME TAX
1 136 CIT (Appeals)
2 44 CIT (Appeals) Sec 143(3)/263
CASES FILED AGAINST THE COMPANY
Financial Purpose
Institution
Syndicate Notice u/s 138 of NI Act, 1881 regarding
Bank Dishonour of the cheque No 355113 for
Rs. 12,50,00,000/- drawn on State Bank of India
Syndicate Notice u/s 138 of NI Act, 1881 regarding
Bank Dishonour of the cheque No 355114 for
Rs. 12,50,00,000/- drawn on State Bank of India
Kotak Notice u/s 138 of NI Act, 1881 regarding
Mahindtra Dishonour of two cheques No 753765 & 753766
Bank for Rs. 5,00,00,000/- each drawn on ICICI Bank
Kotak Notice u/s 138 of NI Act, 1881 regarding
Mahindtra Dishonour of two cheques No 483804 & 539241
Bank for Rs. 5,00,00,000/- each drawn on ICICI Bank
Kotak Notice u/s 138 of NI Act, 1881 regarding
Mahindtra Dishonour of two cheques No 483805 & 539242
Bank for Rs. 5,00,00,000/- each drawn on ICICI Bank
DBS Bank Legal Notice Regarding recall of credit facility
Limited for Rs. 2000 Million
Aditya Birla Notice regarding recall of outstanding credit
Finance facility extended vide sanctioned letter dated
Limited 30/05/2012
10. The Company has no accumulated losses at the beginning of the
financial reporting period ending on 31st March 2014. It has incurred
cash losses during the current and financial reporting period.
11. Based on our audit procedures and on the information and
explanations given by the management, the Company has defaulted in
repayment of dues to financial institution, and banks due to financial
difficulty. The Company operates in a multiple banking system availing
facility for various coated pipe supply projects from respective
bankers. In this circumstances amount of overdue principal and overdue
interest as on a particular date and corresponding period of delay is
not quantifiable.
12. According to the information and explanations given to us & based
on the documents & records produced to us, the Company has not granted
loans or advances on the basis of security by way of pledge of shares,
debentures & other securities.
13. In our opinion, the Company is not a chit fund or a nidhi/ mutual
benefit fund/society. Therefore, the provisions of clause 4(xiii) of
the Companies (Auditor''s Report) Order, 2003 are not applicable to the
Company.
14. In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order,
2003 are not applicable to the Company.
15. In our opinion and explanation given to us the Company has given
Guarantees for loan taken by its subsidiaries from banks/financial
institutions, but terms and conditions of such guarantees are not
prejudicial to the interest of the Company.
16. Based on information and explanations given to us by the
management, term loans were applied for the purpose for which the loans
were obtained.
17. According to the information and explanations given to us and on
an overall examination of the Balance Sheet and Cash flow statement of
the Company, we report that funds raised on short-term basis have been
used for short-term investment.
18. As per the Information & Explanation given to us, the Company has
not made any preferential allotment of shares to parties and companies
covered in the Register maintained under Section 301 of the Companies
Act, 1956 during the period.
19. The Company has not raised any money by way of issue of
Debentures, so no question arises of security or charges created in
respect of Debentures.
20. The Company has not raised any money during the period by way of
Share Capital. However, the Company has received share application of
Rs. 18.00 crores which is pending allotment.
21. Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and as per
the information and explanations given by the management, we report
that no fraud on or by the Company has been noticed or reported during
the course of our audit.
For Suresh C. Mathur & Co.,
Chartered Accountants, (Firm Regn. No.
000891N)
Sd/-
Place: Mumbai (Suresh C. Mathur)
Dated: 30th May, 2014 PARTNER
M. No. 1276
Sep 30, 2013
Report on the Financial Statements
We have audited the accompanying Financial Statements of PSL Limited
(''the Company'') which comprise the Balance Sheet as at 30th
September, 2013, the Statement of Profit and Loss Account and the Cash
Flow Statement for the period then ended and a summary of significant
accounting policies and other explanatory information.
The Financial Year of PSL Limited has been extended by 6 months so as
to comprise of 18 months, i.e. from 1st April 2012 to 30th September
2013. An application was filed by the company with Registrar of
companies, Goa on 24th May, 2013 and the approval was given on 3rd
June, 2013 for the extension of six months in the financial year
2012-13 to prepare its accounts as at 30th September 2013.
Management''s Responsibility for the Financial Statements
The Company''s Management is responsible for the preparation of these
Financial Statements that give a true and fair view of the financial
position, financial performance and cash flows of the Company in
accordance with the Accounting Standards referred to in Section 211(3C)
of the Companies Act, 1956 (''the Act''). This responsibility
includes the design, implementation and maintenance of internal control
relevant to the preparation and presentation of the Financial
Statements that give a true and fair view and are free from material
misstatements, whether due to fraud or error.
Auditors'' Responsibility
Our responsibility is to express an opinion on these Financial
Statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the ICAI. Those Standards
require that we comply with the ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the
Financial Statements are free from material misstatements.
An audit involves performing procedures to obtain audit evidence about
the amount and disclosures in the Financial Statements. The procedures
selected depend on the auditor''s judgement, including the assessment
of the risk of material misstatement of the Financial Statements,
whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the Company''s
preparation and fair presentation of the Financial Statements in order
to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness
of the Company''s internal control. An audit also includes evaluating
the appropriateness of the accounting policies used and the
reasonableness of the accounting estimates made by the Management, as
well as evaluating the overall presentation of the Financial
Statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion and to the best of the 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 true
and fair view in conformity with the accounting principles generally
accepted in India.
(i) in the case of the Balance Sheet, of the state of affairs of the
Company as at 30th September, 2013.
(ii) in the case of the Statement of Profit and Loss, of the loss of
the Company for the period ended on that date and
(iii) in the case of the Cash Flow Statement, of the Cash Flows of the
Company for the period ended on that date.
Emphasis of Matter
1. We draw attention to:
Long Term Borrowings: Note No. 4 of Balance Sheet and Schedules.
a) Default In Payment to Banks
Due to financial difficulty the Company has defaulted payments to the
bank during this period towards interest as well as principal amount
effective September 2012. Subsequently the Company has sought a
restructuring program from the bankers. The Company had filed an
application before the CDR Cell on 6th March, 2013 along with the Flash
Report. The CDR Cell has approved the restructuring package in its
meeting held on August 2013, the effective date being August 24, 2013.
The outstanding amount as on 01.01.2013 of both CDR member banks and
non CDR banks were restructured through this restructuring package.
The Company has received letter of approval on 23rd September, 2013
conveying the Approval of CDR Empowered Group letter dated 23rd August,
2013 on the restructuring package of the Company. The details of
proposed CDR scheme are given in Annexure "I" of Notes to Accounts.
The Master Restructuring Agreement (MRA) is being drafted by Amarchand
& Mangaldas & Suresh A. Shroff & Co. (AMSS) (Legal Counsel to the
bankers) and is in the process of signing by the CDR member bankers as
on this date of Balance Sheet. Non CDR member banks are yet to give
their approval for this restructuring package and subsequent signature
on the MRA.
Finance Cost: Note No. 26 of Balance Sheet and Schedules.
In terms of the approval (LOA) interest on the loans of CDR member
banks and non CDR Banks shall be funded for a period of two years i.e.
01.01.2013 to 31.12.2014 as a fresh Term Loan namely FITL.
However, the Company has calculated interest @ 10.25% based on
restructuring package and charged interest on the Loan outstanding of
non CDR member banks as on January 01, 2013 for the period 9 months
ending September 30, 2013. The Company has not accounted the interest
payable as above for the loan outstanding of CDR member banks.
As per the general Accounting Standards, the company is required to
account for the interest on the loans on accrual basis. However, the
company has not provided for interest on the loans of the CDR member
banks for the period from 01.01.2013 to 30.09.2013 amounting to ''163.36
crores.
The loss to the accounting period is understated to that extent. After
accounting for the above, the loss for the accounting period will
increase from ''595.25 crores to ''758.61 crores.
b) Employee Benefits and Expenses (Managerial Remuneration): Note No.
25
Pursuant to the provisions of Sections 198 and 309 of the Companies Act
due to loss in the financial reporting period ending 30th September,
2013 the remuneration shall payable to the Directors should not exceed
''0.48 crores per annum each director to be calculated based on the
effective capital. The excess remuneration paid to Directors for this
period of 18 months is ''5.91 crores.
c) Investments in Subsidiaries. Note No.11 Non Current Investments.
Company''s exposure in the nature of long-term investments of ''301.76
Crores in its subsidiaries namely
i) PSL USA INC
ii) Pipeline Systems Mauritius
iii) PSL Corrosion Control Services Limited
iv) PSL Infrastructure and Ports Private Limited,
v) PSL Gas Distribution Private Limited.
On the basis of the book value of these companies, there is a
diminution in the value of these investments, which in the opinion of
the management is of temporary in nature.
d) Inventory, Current Assets : Note No. 15 to be read with Note No. 24
The closing inventory as on 30th September 2013 is ''1497.03 crores
which includes non moving old stock of ''1047.63 crores. ICICI Bank
Limited, the Monitoring Institution (MI) has appointed a CA firm as a
stock auditor to verify and value the non moving old stock. The firm
has submitted their draft report which was taken by the Company on
records. As per this Audit Report the break-up is as under:
Particulars Amount in Crores
a) Old Coated Pipes at various Rs. 428.01
locations
b) Other very old coating Rs. 619.62
materials, sand, iron ore etc.
Total Amount Rs. 1047.63
The stock auditor has certified the value for item ''a'' above as
''400.33 crores and regarding item ''b'' valuation is not quantified
by the stock auditor with a remark that the stocks were very old and
proper records were not produced by the Company.
However the company has valued the total stock as ''1497.03 including
the old non moving stock as ''1047.03 crores.
The Company has therefore revalued its opening inventory being
diminution as on 01.04.2012 by an amount of ''514.00 Crores. This amount
was reduced from the opening Reserves and Surplus of the Company.
e) Debtors: Note No. 16 of Current Assets.
i) The Company has Sundry Debtors of ''338.76 Crores as on 30th
September, 2013.
ii) Less than Six Months 253.84 crores More than Six Months and 84.92
crores above.
iii) The Company has not produced confirmation of balances confirming
the amount outstanding as on September 30, 2013. In the absence of
adequate evidence and information made available to us supporting the
recoverability of this amount, we are further unable to comment on the
financial impact of this matter on the profit / loss for the period
ended on 30th September, 2013.
f) Fixed Assets: Note No. 10 Tangible Assets.
The Company has capitalized the capital WIP to an extent of '' 318.88
crores towards Plant & Machinery and Buildings in all units. We were
informed that the Plant and Machinery which has repaired & had outlived
its utility and expenses were incurred for replacing vital parts in
order to make the same functional and the expenditure was of such
nature that it bought in to existence a new machinery altogether and
consequently, there was benefit of enduring nature to the company even
though technically no new asset come into existence.
Due to CDR, the depreciation for the last quarter has been calculated
on the basis of the working of all units instead of the full quarter.
The company has revalued the factory lands. As per valuation report
submitted by a valuer appointed by ICICI Bank Limited (MI) revaluation
has been done by ''514.00 crores against the previous book value of ''
59.78 crores.
Our opinion is not qualified in respect of these matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor''s Report) Order, 2003
("the Order") issued by the Central Government in terms of Section
227(4A) of the Act, we give in the Annexure a statement on the matters
specified in paragraphs 4 and 5 of the Order.
2. As required by Section 227 (3) of the Act, we report that:
a) We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
audit.
b) In our opinion, proper books of account as required by law have been
kept by the Company so far as it appears from our examination of those
books.
c) The Balance Sheet, the statement of Profit & 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, the statement of Profit & Loss
and the Cash Flow Statement comply with the Accounting Standards
referred to in Section 211(3C) of the Act.
e) On the basis of written representations received from the directors
as on 30th September, 2013 taken on record by the Board of Directors,
none of the directors is disqualified as on 30th September, 2013 from
being appointed as a director in terms of Section 274(1) (g) of the
Act.
Referred to in paragraph 1 under the heading ''Report on Other Legal
and Regulatory Requirements'' of our Report of even date on the
financial statements for the year ended on 30th September, 2013 of PSL
Limited
1. a) The company has maintained proper records showing full
particulars including quantitative details and situation of the Fixed
Assets.
b) A substantial portion of the fixed assets have been physically
verified by the management during the period. In our opinion the
frequency of verification is reasonable having regard to the size of
the Company and the nature of its assets.
c) Fixed assets were disposed off during the period were not
substantial. According to the information and explanation given to us,
we are of the opinion that the disposal of the fixed assets has not
affected the going concern status of the Company.
2. a) Subject to our remark in item no 1 in "Emphasis of Matter"
the inventory has been physically verified by the management and the
stock auditor during the period by the management at reasonable
intervals. In our opinion, the frequency of verification is
reasonable.
b) The procedure of physical verification of inventories followed by
the management is reasonable and adequate in relation to the size of
the Company and the nature of its business.
c) In our opinion and according to the information and explanation
given to us, the Company is maintaining proper records of inventory and
the same is certified by the management. The discrepancies noticed on
verification between physical stocks and the book records have been
properly dealt with in the books of account.
3. a) Company has not granted unsecured loans and Inter Corporate
Deposits to companies covered in the Register maintained under Section
301 of the Act. Hence the provisions of clause (iii)(a), (b),
(c), (d) of paragraph 4 are not applicable to the Company.
b) The company has taken the unsecured loan from companies under the
same management covered in the Register maintained under Section 301 of
the Companies Act, 1956. The maximum amount involved in the current
year amounted to '' 17.48 Crore and the period-end balance of loans
taken from such parties is ''17.48 Crore.
c) Based on the information and explanations given to us, we are of the
opinion that the rate of interest and other terms and conditions of
loans taken from such parties covered in the Register maintained under
Section 301 are not prima facie prejudicial to the interests of the
Company.
d) According to the information and explanation given to us, the
repayment of principal and interest has not been paid.
4. In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business for
purchase of inventory and fixed assets and for the work done. However,
the internal controls over accounting of consumption, wastages,
material reconciliation, need further strengthening.
5. a) Based on the audit procedures applied by us and according to the
information and explanations provided by the management, we are of the
opinion that the particulars of contracts or arrangements that need to
be entered into the register maintained under section 301 of the
Companies Act, 1956 have so been entered.
b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts or
arrangements entered in the register maintained under Section 301 of
the Companies Act, 1956 have been made at prices which are reasonable
having regard to prevailing market prices at the relevant time.
6. The Company has not accepted any deposits from the public within
the meaning of Section 58A and 58AA of the Act and the rules framed
there under. Therefore, the provisions of Section 58A, 58AA and any
other relevant provisions of the Companies Act, 1956 and the rules
framed there under with regard to deposits accepted from the public are
not applicable to the Company.
7. In our opinion, the Company has an internal audit system,
commensurate with the size and nature of its business. However, the
scope needs to be enlarged to cover project related cost-to-complete
workings and certain areas of head office accounting.
8. We have broadly reviewed the books of account maintained by the
Company pursuant to the rules made by the Central Government of India,
regarding the maintenance of cost records under clause (d) of the
sub-section (1) of Section 209 of the Act and are of the opinion
that''s prima facie, the prescribed accounts and records have been
maintained. We have, however not made a detailed examination of the
records with a view to determine whether they are accurate or complete.
The Cost Audit is completed up to the period ended 31st March 2012.
9. According to the records of the Company, the Company is regular in
depositing undisputed Statutory dues including with-holding of taxes,
Provident Fund, Employees State Insurance, Income Tax, Sales Tax,
Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess and other
Statutory dues applicable to it with the appropriate authorities,
however, there is some delay in depositing Govt. dues due to financial
difficulties. According to the information and explanations given to
us, no undisputed amounts payable in respect of Income Tax, Wealth Tax,
Sales Tax, Customs Duty, Service Tax, Excise Duty and Cess were
outstanding, at the financial reporting period ending on 30th September
2013 for a period of more than six months from the date they became
payable.
As on 30th September, 2013 according to the records of the Company the
following are the particulars of disputed dues on account of Excise
duty, Customs, Income Tax, Service Tax, Sales Tax & DGFT and have not
been deposited.
Sl. Amount Facts of the Period Forum where
No. under case which the the dispute is
Dipute amount pending
(Rs.Lacs) relates
EXCISE DOTY
1. 25 Payment of 2004-05- Tribunal,
Cenvat credit 06 Ahmedabad -
on coating of Obtained Stay
inputs
2. 3752 Demand 2006 Remanded back
of duty on by Tribunal
exempted Admedabad,
orders Received
3. 1467 Duty on Fusion 2008 Transferred to
Bonded Epoxy Tribunal, Mumbai
on Nov 12
4. 8 Duty on Fusion 2010 Commissioner
Bonded Epoxy (Appeals),
Coating Chennai
5. 3 Demand of Appellate
differential Tribunal,
Excise Duty Chennai-
Obtained Stay
Order
6. 34 Demand of 2010 Transferred to
Cenvat Credit Tribunal, Mumbai
on Nov 12
7. 10 Relating to 2010 Appellate
interest on Tribunal,
incorrect Bangalore
Cenvat Credit
8. 0.45 Excess Cenvat 2012 Asstt.
Credit taken Commissioner,
Vapi, Daman
9. 9 Goods cleared 2012 Addl.
without Commissioner of
payment of Central Excise,
Excise Duty Jaipur
10. 18 Cenvat Credit 2012 Addl.
availed on Commissioner,
Capital Goods Daman
11. 2 Wrong 2012 Asstt.
availment of Commissioner of
Cenvat Credit Central Excise,
Daman
12. 54 Demand of 2012 Commissioner,
Central Excise Central Excise,
Duty Ahmedabad
13. 0.32 Demand of 2013 Dy.
Central Excise Commissioner,
Duty Central Excise,
Vizag
14. 181 Demand for 2013 Dy.
non payment Commissioner,
of duty on Central Excise,
transportation Vizag charges
15. 202 Demand of 2013 Commissioner,
Central Excise Central Excise,
Duty Rajkot
16. 57 Demand of 2013 Commissioner,
Central Excise Central Excise,
Duty Rajkot
CUSTOMS / DGFT
1. 871 Demand for 2012 Appeal with
differential CESTAT, Mumbai
custom duty is pending
2. 18900 Demand of 2012 Appeal with
duty & penalty CESTAT, Mumbai
is pending
3. 18900 Demand for 2013 Add. DGFT
duty
SERVICE TAX
1. 45 Tax on 2008 Tribunal, Chennai
construction of
Mall
2. 209 BAS 2009 Commissioner of
Central Excise,
Puducherry
3. 2 Demand 2009 Asstt.
for Interest Commissioner,
Liability Service Tax,
Vizag
4. 15 Refund of 2009 Asstt.
excess amount Commissioner,
paid Service Tax,
Vizag
5. 2 Demand of 2010 Transferred to
Service Tax Tribunal, Mumbai
BAS on Nov 12
6. 153 Service Tax 2010 Commissioner
on GTA not of Customs &
considered Central Excise,
Rajkot
7. 32 Service Tax on 2011 Addl.
ECB Loan Commissioner of
Service Tax,
Churchgate
8. 31 Denial of 2011 Commissioner,
Credit of Jaipur
Service Tax on
Outward
Transport
9. 6 Cenvat Credit 2012 Addl.
availed on Commissioner
input services of Central
not covered Excise, Vizag-I,
Commissioner
10. 21 Wrong 2012 Commissioner of
availment of Central Excise &
Cenvat Credit Customs, Rajkot
11. 30 Wrong 2013 Jt. Commissioner
availment of
Cenvat Credit
SALES TAX
1. 43 Non payment 2004 High court of A.P.
of composition
tax
2 1200 Demand of 2005 High court of A.P.
duty
CASES FILED AGAINST THE COMPANY
Financial
Institution Purpose
Syndicate Notice u/s 138 of NI Act, 1881 regarding
Bank Dishonour of the cheque No 355113 for
'' 12,50,00,000/- drawn on State Bank Of India
Syndicate Notice u/s 138 of NI Act, 1881 regarding
Bank Dishonour of the cheque No 355114 for
'' 12,50,00,000/- drawn on State Bank of India
Kotak Notice u/s 138 of NI Act, 1881 regarding
Mahindtra Dishonour of two cheques No 753765 & 753766
Bank for '' 5,00,00,000/- each drawn on ICICI Bank
Kotak Notice u/s 138 of NI Act, 1881 regarding
Mahindtra Dishonour of two cheques No 483804 & 539241 Bank for ''
5,00,00,000/- each drawn on ICICI Bank
Kotak Notice u/s 138 of NI Act, 1881 regarding
Mahindtra Dishonour of two cheques No 483805 & 539242 Bank for ''
5,00,00,000/- each drawn on ICICI Bank
DBS Bank Legal Notice Regarding recall of credit facility
Limited for ''2000 Million
Aditya Birla Notice regarding recall of outstanding credit
Finance facility extended vide sanctioned letter dated
Limited 30/05/2012
10. The Company has no accumulated losses at the beginning of the
financial reporting period ending on 30th September 2013. However, it
has incurred cash losses during the current and financial reporting
period.
11. Based on our audit procedures and on the information and
explanations given by the management, The Company has defaulted in
repayment of dues to financial institution, and banks due to financial
difficulty. The Company operates in a multiple banking system availing
facility for various coated pipe supply projects from respective
bankers. In this circumstances amount of overdue principal and overdue
interest as on a particular date and corresponding period of delay is
not quantifiable.
12. According to the information and explanations given to us & based
on the documents & records produced to us, the Company has not granted
loans or advances on the basis of security by way of pledge of shares,
debentures & other securities.
13. In our opinion, the Company is not a chit fund or a nidhi/ mutual
benefit fund/society. Therefore, the provisions of clause 4(xiii) of
the Companies (Auditor''s Report) Order, 2003 are not applicable to
the Company.
14. In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Companies (Auditor''s Report)
Order, 2003 are not applicable to the Company.
15. In our opinion and explanations given to us the Company has given
Guarantees for loan taken by its subsidiaries from banks/financial
institutions, but terms and conditions of such guarantees are not
prejudicial to the interest of the Company.
16. Based on information and explanations given to us by the
management, term loans were applied for the purpose for which the loans
were obtained.
17. According to the information and explanations given to us and on
an overall examination of the Balance Sheet and Cash Flow Statement of
the Company, we report that funds raised on short-term basis have been
used for long- term investment due to financial crunch.
18. As per the Information & Explanations given to us, the Company has
not made any preferential allotment of shares to parties and companies
covered in the Register maintained under Section 301 of the Companies
Act, 1956 during the year.
19. The Company has not raised any money by way of issue of
Debentures, so no question arises of security or charges created in
respect of Debentures.
20. The Company has not raised any money during the period by way of
Share Capital. However, the Company has received share application of
''11.12 crores which is pending allotment.
21. Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the Financial Statements and as per
the information and explanations given by the management, we report
that no fraud on or by the Company has been noticed or reported during
the course of our audit.
For Suresh C. Mathur & Co.,
Chartered Accountants,
(Firm Regn. No. 000891N)
Sd/-
(Suresh C. Mathur)
Place: Mumbai Partner
Dated: 28th November, 2013 M. No. 1276
Mar 31, 2012
1. We have audited the attached Balance Sheet as at March 31, 2012 and
also the Profit and Loss account and the Cash Flow statement for the
year ended on that date annexed thereto. These Financial Statements are
the responsibility of the 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. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
Financial Statements are free of material mis-statement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Financial Statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
3. As required by the Companies (Auditor's Report) Order, 2003 issued
by the Central Government of India in terms of sub-section (4A) of
section 227 of the Companies Act, 1956, we enclose in the Annexure a
statement on the matters specified in paragraphs 4 & 5 of the said
Order.
4. Further to our comments in the annexure referred to above, we
report that:
I. We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary for the purpose of our
audit.
II. In our opinion, proper books of account as required by law have
been kept by the Company so far as appears from our examination of
those books.
III. The Balance Sheet, Profit and Loss account and Cash Flow statement
dealt with by this report are in agreement with the books of account.
IV. In our opinion, the Balance Sheet, Profit and Loss account and
Cash Flow Statement dealt with by this report comply with the
accounting standards referred to in sub-section (3C) of section 211 of
the Companies Act, 1956.
V. On the basis of the written representations received from the
Directors, as on March 31, 2012 and taken on record by the Board of
Directors, we report that none of the Directors is disqualified as on
March 31, 2012 from being appointed as a Director in terms of clause
(g) of sub-section (1) of section 274 of the Companies Act, 1956.
VI. In our opinion and to the best of our information and according to
the explanations given to us, they said accounts read together with the
significant accounting policies in notes appearing thereon give the
information required by the Companies Act, 1956, in the manner so
required and give a true and fair view in conformity with the
accounting principles generally accepted in India;
(a) In the case of the Balance Sheet, of the state of affairs of the
company as at March 31, 2012;
(b) In the case of the Profit and Loss account, of the profit for the
year ended on that date; and
(c) In the case of Cash Flow Statement, of the cash flows for the year
ended on that date.
1. The Company has maintained proper records showing full particulars,
including quantitative details at factory level. Consolidation of the
Assets including quantity & value is under progress at the Corporate
Office. In accordance with the phased programme for verification of
fixed Assets, certain items of fixed Assets were physically verified by
the management during the year and no material discrepancies were
noticed on such verification.
2. The inventory of the Company has been physically verified by the
management during the year. In our opinion, the frequency of
verification is reasonable. In our opinion and according to the
information and explanations given to us, the procedures of physical
verification of inventory followed by the management were found
reasonable and adequate in relation to the size of the Company and the
nature of its business. On the basis of our examination of records of
inventory, in our opinion, the Company has maintained proper records of
inventory and the discrepancies noticed on physical verification
between the physical stocks and the book records were not material in
relation to the operations of the Company.
3. According to information and explanation given to us the company
has not granted any loans secured or unsecured to Companies, Firms or
other parties which are of the nature required to be covered under
Section 301 of the Companies Act 1956. However the company has given Rs.
Nil (Previous Year Rs. 813.60 lacs) as interest free advance to wholly
owned subsidiaries during the year, which is repayable on demand.
4. In our opinion and according to the information and explanations
given to us, there are adequate internal control procedures
commensurate with the size of the Company and the nature of its
business for the purchase of inventory, fixed Assets and for the sale
of goods. Further, on the basis of our examination and according to
the information and explanations given to us, we have neither come
across nor have we been informed of any instance of major weaknesses in
the aforesaid internal control procedures.
5. In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts of
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
6. The Company has not accepted any deposits from the public.
7. In our opinion, the Company has an internal audit system,
commensurate with the size of the Company and the nature of its
business.
8. We have broadly reviewed the books of account maintained by the
Company in respect of products where, pursuant to the Rules made by the
Central Government, the maintenance of cost records has been prescribed
under Section 209 (1)(d) of the Companies Act, 1956. We are of the
opinion that prima facie the prescribed accounts and records have been
maintained. We have not, however made a detailed examination of the
records with a view to determining whether they are accurate or
complete.
9. According to the records of the Company, the Company is regular in
depositing undisputed Statutory dues including with-holding of taxes,
Provident Fund, Employees State Insurance, Income Tax, Sales Tax,
Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess and other
Statutory dues applicable to it with the appropriate authorities.
According to the information and explanations given to us, no
undisputed amounts payable in respect of Income Tax, Fringe Benefit
Tax, Wealth Tax, Sales Tax, Customs Duty, Service Tax, Excise Duty and
Cess were outstanding, at the yearend for a period of more than six
months from the date they became payable.
As on March 31, 2012 according to the records of the Company the
following are the particulars of disputed dues on account of Excise
duty , Customs, Income Tax, Service Tax and Sales Tax that have not
been deposited.
Sr. Nature of Amount Period to Forum where
No Dues Under Which the the dispute is
Dispute Amount pending
(Rs. in
Lacs) Relates
1. Central 25 2004-05-06 Tribunal,
Excise Ahmadabad
2 -- do -- 38 2006 Remanded back
by Tribunal,
Ahmadabad and
pending with
Central Excise
Commissioner,
Rajkot
3. -- do -- 1467 2008 Tribunal,
Ahmadabad
4. -- do -- 1452 2008 Commissioner
Rajkot
5. -- do -- 8 2010 Jt.Commissioner
C.Ex.Puducherry
6. -- do -- 3 2011 Commissioner
Central Excise,
Puducherry
7. -- do -- 34 2010 Appellate
Tribunal
Ahmadabad
8. -- do -- 10 2010 Appellate
Tribunal
Ahmadabad
9. -- do -- 35 2011 Addl.Comm.
C.Ex. Rajkot
10. Customs 179 2011 Commissioner
of Customs Kandla
11. -- do -- 127 2011 Commissioner
of Customs Kandla
12. -- do -- 309 2011 Commissioner
of Customs Kandla
13. -- do -- 131 2011 Commissioner
of Customs,
Appeal
Ahmadabad
14. -- do -- 13 2011 Commissioner
of Customs,
Appeal
Ahmadabad
15. Service Tax 45 2008 Tribunal
Chennai
16. -- do -- 209 2009 Commissioner
C.Ex.
Puducherry
17. -- do -- 2 2009 Asst.
Commissioner
Service Tax,
Vizag
18. -- do -- 15 2009 Asst.
Commissioner
Service Tax,
Vizag
19. -- do -- 2 2010 Asst.
Commissioner
S.Tax , Rajkot
20. -- do -- 155 2010 Commissioner
of Customs &
C.Ex Rajkot
21. -- do -- 32 2011 Addl.
Commissioner of
S.Tax,
Churchgate
22. -- do -- 31 2011 Commissioner
Jaipur
23. -- do -- 6 2012 Addl.
Commissioner of
C.Ex.Vizag
24. -- do -- 21 2012 Commissioner
of C.Ex &
Customs. Rajkot
25. Sales Tax 43 2000-01-02 Pending in AP
High Court
26. -- do -- 1400 1999-2000 Tribunal
Ahmadabad
27. -- do -- 1200 2003-04-05 AP High Court
28. Income Tax 503.90 2005- 2006 Commissioner
of Income Tax
(Appeal) & ITAT
29. -- do -- 257.35 2009-2010 Commissioner
of Income Tax
(Appeal)
10. The Company has no accumulated losses at the end of the financial
year and it has not incurred any cash losses in the current and
immediately preceding financial year.
Based on our audit procedures and on the information and explanations
given by the management, we are of the opinion that the Company has not
defaulted in repayment of dues to financial institution, and banks.
11. The Company does not have any outstanding Debentures.
12. According to the information and explanations given to us and
based on the documents and records produced to us, the Company has not
granted loans or advances on the basis of security by way of pledge of
shares, debentures and other securities.
13. In our opinion, the Company is not a chit fund or a nidhi/ mutual
benefit fund/society. Therefore, the provisions of clause 4(xiii) of
the Companies (Auditor's Report) Order, 2003 are not applicable to the
Company.
14. In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Companies (Auditor's Report) Order,
2003 are not applicable to the Company.
15. In our opinion and explanation given to us the Company has given
Guarantees for loan taken by its subsidiaries from banks/financial
institutions.
16. Based on information and explanations given to us by the
management, term loans were applied for the purpose for which the loans
were obtained.
17. According to the information and explanations given to us and on
an overall examination of the Balance Sheet and Cash flow statement of
the Company, we report that no funds raised on short-term basis have
been used for long-term investment and no long-term funds have been
used to finance short-term Assets (excludes Long Term working capital).
18. The Company has not made any preferential allotment of shares to
parties and companies covered in the Register maintained under Section
301 of the Companies Act, 1956 during the year.
19. The Company has not raised any money by way of issue of
Debentures.
20. The Company has not raised any money during the year by way of
Share Capital.
21. Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the Financial Statements and as per
the information and explanations given by the management, we report
that no fraud on or by the Company has been noticed or reported during
the course of our audit.
For & on behalf of
Suresh C. Mathur & Company
Chartered Accountants
Firm Registration No. 000891N
Sd/-
Suresh C. Mathur
Place : Mumbai Partner
Date : 29th May, 2012 Membership No.: 1276
Mar 31, 2011
1. We have audited the attached Balance Sheet as at March 31, 2011 and
also the Profit and Loss account and the Cash Flow Statement for the
year ended on that date annexed thereto. These financial statements are
the responsibility of the 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. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material mis-statement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Financial Statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
3. As required by the Companies (Auditor's Report) Order, 2003 issued
by the Central Government of India in terms of sub-section (4A) of
section 227 of the Companies Act, 1956, we enclose in the Annexure a
statement on the matters specified in paragraphs 4 & 5 of the said
Order.
4. Further to our comments in the annexure referred to above, we
report that:
I. We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary for the purpose of our
audit.
II. In our opinion, proper books of account as required by law have
been kept by the Company so far as appears from our examination of
those books.
III. The Balance Sheet, Profit and Loss Account and Cash Flow
Statement dealt with by this report are in agreement with the books of
account.
IV. In our opinion, the Balance Sheet, Profit and Loss Account and
Cash Flow Statement dealt with by this report comply with the
accounting standards referred to in sub-section (3C) of section 211 of
the Companies Act, 1956.
V. On the basis of the written representations received from the
Directors, as on March 31, 2011 and taken on record by the Board of
Directors, we report that none of the Directors is disqualified as on
March 31, 2011 from being appointed as a Director in terms of clause
(g) of sub-section (1) of section 274 of the Companies Act, 1956.
VI. In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read together with the
significant accounting policies in schedule "Q" and notes appearing
thereon give the information required by the Companies Act, 1956, in
the manner so required and give a true and fair view in conformity with
the accounting principles generally accepted in India;
(a) In the case of the Balance Sheet, of the state of affairs of the
company as at March 31, 2011;
(b) In the case of the Profit and Loss account, of the profit for the
year ended on that date; and
(c) In the case of Cash Flow Statement of the cash flows for the year
ended on that date.
ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE
1. The Company has maintained proper records showing full particulars,
including quantitative details at factory level. Consolidation of the
Assets including quantity & value is under progress at the Corporate
Office. In accordance with the phased programme for verification of
fixed assets, certain items of fixed assets were physically verified by
the management during the year and no material discrepancies were
noticed on such verification.
2. The inventory of the Company has been physically verified by the
management during the year. In our opinion, the frequency of
verification is reasonable. In our opinion and according to the
information and explanations given to us, the procedures of physical
verification of inventory followed by the management were found
reasonable and adequate in relation to the size of the Company and the
nature of its business. On the basis of our examination of records of
inventory, in our opinion, the Company has maintained proper records of
inventory and the discrepancies noticed on physical verification
between the physical stocks and the book records were not material in
relation to the operations of the Company.
3. According to information and explanation given to us the company
has not granted any loans secured or unsecured to Companies, Firms or
other parties which are of the nature required to be covered under
Section 301 of the Companies Act, 1956. However the company has given
Rs. 813.60 lacs as interest free advance to wholly owned subsidiary
during the year, which is repayable on demand.
4. In our opinion and according to the information and explanations
given to us, there are adequate internal control procedures
commensurate with the size of the Company and the nature of its
business for the purchase of inventory, Fixed Assets and for the sale
of goods. Further, on the basis of our examination and according to
the information and explanations given to us, we have neither come
across nor have we been informed of any instance of major weaknesses in
the aforesaid internal control procedures.
5. In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts of
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.
6. The Company has not accepted any deposits from the public.
7. In our opinion, the Company has an internal audit system,
commensurate with the size of the Company and the nature of its
business.
8. We have broadly reviewed the books of account maintained by the
Company in respect of products where, pursuant to the Rules made by the
Central Government, the maintenance of cost records has been prescribed
under Section 209 (1)(d) of the Companies Act, 1956. We are of the
opinion that prima facie the prescribed accounts and records have been
maintained. We have not, however made a detailed examination of the
records with a view to determining whether they are accurate or
complete.
9. According to the records of the Company, the Company is regular in
depositing undisputed statutory dues including With-holding of Taxes,
Provident Fund, Employees State Insurance, Income Tax, Sales Tax,
Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess and other
statutory dues applicable to it with the appropriate authorities.
According to the information and explanations given to us, no
undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales
Tax, Customs Duty, Service Tax, Excise Duty and Cess were outstanding,
at the year end for a period of more than six months from the date they
became payable.
As on March 31, 2011 according to the records of the Company the
following are the particulars of disputed dues on account of Excise
duty, Customs, Income Tax, Service Tax and Sales Tax that have not been
deposited.
Sr. Nature of Amount Period to Forum where
No. Dues Under Which the the dispute is
Dispute Amount pending
(Rs. in Lacs) Relates
1. Central 25 2004-05-06 Tribunal,
Excise Ahmedabad
2. - do - 3752 2006 Remanded back
by Tribunal,
Ahmedabad and
pending with
Central Excise
Commissioner,
Rajkot
3. - do - 1467 2008 Tribunal,
Ahmedabad
4. - do - 1452 2008 Commissioner,
Rajkot
5. - do - 8 2010 Commissioner
(Appeals),
Pondicherry
6. - do - 34 2010 Addl.
Commissioner
Central Excise,
Rajkot
7. - do - 9 2010 Commissioner
Appeals, Vizag
8. - do - 3 2011 Commissioner
Central Excise,
Vizag
9. Customs 9 2010 Dy.
Commissioner
of Customs,
Kandla
10. - do - 4 2010 Dy.
Commissioner
of Customs,
Kandla
11. Service Tax 45 2008 Tribunal,
Chennai
12. - do - 10 2009 Jt.Commisioner
Central Excise
Puducherry
13. - do - 209 2009 Commissioner
Central Excise
Puducherry
14. - do - 2 2009 Commissioner
Appeals, Vizag
15. - do - 15 2009 Commissioner
Appeals, Vizag
16. - do - 2 2010 Asst.
Commissioner
Service Tax,
Rajkot
17. - do - 155 2010 Commissioner,
Rajkot
18. - do - 49 2010 Addl.
Commssioner
Central Excise,
Service Tax
Commissioner,
Rajkot
19. Sales Tax 43 2000-01 Pending in AP
High Court
20. - do - 14 1999-2000 Tribunal,
Ahmedabad
21. - do - 1200 2003-04-05 AP High Court
22. Income Tax 700 2005- 2006 Commissioner
of Income Tax
(Appeal ) &
ITAT
23. Income Tax 74.91 2008-2009 Commissioner
of Income Tax
(Appeal)
10. The Company has no accumulated losses at the end of the Financial
Year and it has not incurred any cash losses in the current and
immediately preceding Financial Year.
Based on our audit procedures and on the information and explanations
given by the management, we are of the opinion that the Company has not
defaulted in repayment of dues to financial institution and Banks.
11. The Company does not have any outstanding Debentures.
12. According to the information and explanations given to us and
based on the documents and records produced to us, the Company has not
granted loans or advances on the basis of security by way of pledge of
shares, debentures and other securities.
13. In our opinion, the Company is not a chit fund or a nidhi/ mutual
benefit fund/society. Therefore, the provisions of clause 4(xiii) of
the Companies (Auditor's Report) Order, 2003 are not applicable to the
Company.
14. In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Companies (Auditor's Report) Order,
2003 are not applicable to the Company.
15. In our opinion and explanation given to us the Company has given
Guarantees for loan taken by its subsidiaries from Banks/Financial
Institutions.
16. Based on information and explanations given to us by the
management, term loans were applied for the purpose for which the loans
were obtained.
17. According to the information and explanations given to us and on
an overall examination of the Balance Sheet and Cash flow statement of
the Company, we report that no funds raised on short-term basis have
been used for long-term investment and no long-term funds have been
used to finance short-term assets (excludes Long Term working capital).
18. The Company has not made any preferential allotment of shares to
parties and companies covered in the Register maintained under Section
301 of the Companies Act, 1956 during the year.
19. The Company has not raised any money by way of issue of
Debentures.
20. The Company has not raised any money during the year by way of
Share Capital.
21. Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and as per
the information and explanations given by the management, we report
that no fraud on or by the Company has been noticed or reported during
the course of our audit.
For & on behalf of
Suresh C. Mathur & Company
Chartered Accountants
Sd/-
SURESH C. MATHUR
Place: Mumbai Partner
Date : 24th June, 2011 Membership No.1276
Mar 31, 2010
1. We have audited the attached Balance Sheet as at March 31, 2010 and
also the Profit and Loss account and the Cash Flow statement for the
year ended on that date annexed thereto. These financial statements are
the responsibility of the companys management. Our responsibility is
to express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards
generally accepted in India. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material mis-statement. 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 the Central Government of India in terms of sub-section (4A) of
Section 227 of the Companies Act, 1956, we enclose in the Annexure a
statement on the matters specified in paragraphs 4 & 5 of the said
Order.
4. Further to our comments in the annexure referred to above, we
report that:
(i) We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary for the purposes of our
audit.
(ii) In our opinion, proper books of account as required by law have
been kept by the Company so far as appears from our examination of
those books.
(iii) The Balance Sheet, Profit and Loss account and Cash Flow
statement dealt with by this report are in agreement with the books of
account.
(iv) In our opinion, the Balance Sheet, Profit and Loss account and
Cash Flow statement dealt with by this report comply with the
accounting standards referred to in sub-section (3C) of Section 211 of
the Companies Act, 1956.
(v) On the basis of the written representations received from the
Directors, as on March 31, 2010 and taken on record by the Board of
Directors, we report that none of the Directors is disqualified as on
March 31, 2010 from being appointed as a Director in terms of clause
(g) of sub-section (1) of Section 274 of the Companies Act, 1956.
(vi) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read together with the
significant accounting policies in schedule "Q" and notes appearing
thereon give the information required by the Companies Act, 1956, in
the manner so required and give a true and fair view in conformity with
the accounting principles generally accepted in India;
(a) In the case of the Balance Sheet, of the state of affairs of the
company as at March 31, 2010;
(b) In the case of the Profit and Loss account, of the profit for the
year ended on that date; and
(c) In the case of Cash Flow Statement, of the cash flows for the year
ended on that date.
ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE
1. The Company has maintained proper records showing full particulars,
including quantitative details at factory level. Consolidation of the
Assets including quantity & value is under progress at the Corporate
Office. In accordance with the phased programme for verification of
fixed assets, certain items of fixed assets were physically verified by
the management during the year and no material discrepancies were
noticed on such verification.
2. The inventory of the Company has been physically verified by the
management during the year. In our opinion, the frequency of
verification is reasonable. In our opinion and according to the
information and explanations given to us, the procedures of physical
verification of inventory followed by the management were found
reasonable and adequate in relation to the size of the Company and the
nature of its business. On the basis of our examination of records of
inventory, in our opinion, the Company has maintained proper records of
inventory and the discrepancies noticed on physical verification
between the physical stocks and the book records were not material in
relation to the operations of the Company.
3. According to information and explanation given to us the company
has not granted any loans secured or unsecured to Companies, Firms or
other parties which are of the nature required to be covered under
Section 301 of the Companies Act 1956. However the company has given
Rs. 605.25 lacs as interest free advance to a wholly owned subsidiary
during the year, which is repayable on demand.
4. In our opinion and according to the information and explanations
given to us, there are adequate internal control procedures
commensurate with the size of the Company and the nature of its
business for the purchase of inventory, fixed assets and for the sale
of goods. Further, on the basis of our examination and according to the
information and explanations given to us, we have neither come across
nor have we been informed of any instance of major weaknesses in the
aforesaid internal control procedures.
5. In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts of
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.
6. The Company has not accepted any deposits from the public.
7. In our opinion, the Company has an internal audit system,
commensurate with the size of the Company and the nature of its
business.
8. We have broadly reviewed the books of account maintained by the
Company in respect of products where, pursuant to the Rules made by the
Central Government, the maintenance of cost records has been prescribed
under Section 209 (1)(d) of the Companies Act, 1956. We are of the
opinion that prima facie the prescribed accounts and records have been
maintained. We have not, however made a detailed examination of the
records with a view to determining whether they are accurate or
complete.
9. According to the records of the Company, the Company is regular in
depositing undisputed statutory dues including with-holding of taxes,
Provident Fund, Employees State Insurance, Income Tax, Sales Tax,
Wealth Tax, Custom Duty, Excise Duty, Service Tax, Cess and other
Statutory Dues applicable to it with the appropriate authorities.
According to the information and explanations given to us, no
undisputed amounts payable in respect of Income Tax,
Fringe Benefit Tax, Wealth Tax, Sales Tax, Customs Duty, Service Tax,
Excise Duty and Cess were outstanding, at the year end for a period of
more than six months from the date they became payable.
As on March 31,2010, according to the records of the Company the
following are the particulars of disputed dues on account of Excise
Duty, Customs, Income Tax, Service Tax and Sales Tax that have not been
deposited.
Sr. Nature of Amount Period to Forum where the dispute
No. Dues Under Which the pending
Dispute Amount
(Rs. in
Lacs) Relates
1 Central Excise 25 2004-2005-2006 Tribunal, Ahmedabad
2 - do - 3752 2006 Tribunal, Ahmedabad
3 - do - 1467 2008 Commissioner Rajkot
4 - do - 1452 2006 Commissioner Rajkot
5 - do - 8 2010 Jt. Commissioner
C.Ex.Puducherry
6 Customs 179 2009 DRI
7 - do - 127 2009 Commissioner of
Customs, Kandla
8 Service Tax 45 2008 Tribunal, Chennai
9 - do - 10 2009 Jt.Commissioner C.Ex.
Puducherry
10 - do - 209 2009 Commissioner C.Ex.
Puducherry
11 - do - 66 2009 Asst. Commissioner,
Service Tax, Rajkot
12 - do - 2 2009 Asst. Commissioner,
Service Tax, Vizag
13 - do - 15 2009 Asst. Commissioner,
Service Tax, Vizag
14 Sales Tax 43 2000-01 Pending in AP High
Court
15 - do - 14 1999-2000 Tribunal, Ahmedabad
16 - do - 1200 2003-04-05 AP High Court
17 Income Tax 723 2005-2006 Commissioner of
Income Tax (Appeal)
18 - do - 154 2006-2007 Commissioner of
Income Tax (Appeal) &
ITAT
19 - do - 478 2007-2008 Commissioner of
Income Tax (Appeal)
10. The Company has no accumulated losses at the end of the financial
year and it has not incurred any cash losses in the current and
immediately preceding financial year.
11. Based on our audit procedures and on the information and
explanations given by the management, we are of the opinion that the
Company has not defaulted in repayment of dues to financial
institution, and banks.
12. According to the information and explanations given to us and
based on the documents and records produced to us, the Company has not
granted loans or advances on the basis of security by way of pledge of
shares, debentures and other securities.
13. In our opinion, the Company is not a chit fund or a nidhi/mutual
benefit fund/society. Therefore, the provisions of clause 4(xiii) of
the Companies (Auditors Report) Order, 2003 are not applicable to the
Company.
14. In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Companies (Auditors Report) Order,
2003 are not applicable to the Company.
15. Based on information and explanations given to us by the
management, term loans were applied for the purpose for which the loans
were obtained.
16. According to the information and explanations given to us and on
an overall examination of the Balance Sheet and Cash Flow statement of
the Company, we report that no funds raised on short-term basis have
been used for long-term investment and no long-term funds have been
used to finance short-term assets (excludes Long Term working capital).
17. The Company has not made any preferential allotment of shares to
parties and Companies covered in the Register maintained under Section
301 of the Companies Act, 1956 during the year.
18. The Company has raised Rs. 10,75,00,000/- (Rupees Ten Crore
Seventy Five Lakhs only) as share capital during the year by way of
preferential allotment to private investors.
19. Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and as per
the information and explanations given by the management, we report
that no fraud on or by the Company has been noticed or reported during
the course of our audit.
For & on behalf of
Suresh C. Mathur & Company
Chartered Accountants
Sd/-
Suresh C. Mathur
Place : Mumbai Partner
Date : 29th May, 2010 Membership No.: 1276
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