| We have audited the accompanying financial statements of REGENCY
CERAMICS LIMITED, HYDERABAD, ("the Company"), which comprise the
Balance Sheet as at March 31,2015, and the Statement of Profit and Loss
and Cash Flow Statement for the year then ended, and a summary of
significant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated
in Section 134(5) of the Companies Act, 2013 ("the Act") with respect
to the preparation of these financial statements that give a true and
fair view of the financial position, financial performance and cash
flows of the Company in accordance with the accounting principles
generally accepted in India, including the Accounting Standards
specified under Section 133 of the Act, read with Rule 7 of the
Companies (Accounts) Rules, 2014. This responsibility also includes
maintenance adequate accounting records in accordance with the
provisions of the Act for safeguarding of the assets of the Company and
for preventing and detecting frauds and other irregularities; selection
and application of appropriate accounting policies; making judgments
and estimates that are reasonable and prudent; and design,
implementation and maintenance of adequate internal financial controls.
That were operating effectively for ensuring the accuracy and
completeness of the accounting records, relevant to the preparation and
presentation of the financial statements that give a true and fair view
and are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility:
Our responsibility is to express an opinion on these financial
statements based on our audit. We have taken into account the provision
of the Act, the accounting and auditing standards and matter which are
required to be included in the audit report under the provisions of the
Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing
secified under Section 143(10) of the Act. Those standard require that
we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and the disclosures in the financial statements. The
procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal financial control relevant
to the Company's preparation of the financial statements that give a
true and fair view in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing
and openion on whether the Company has in place and adequate internal
financial control system over financial reporting and the operating
effectiveness of such controls.
An audit also includes evaluating the appropriateness of accounting
polices used and the reasonableness of the accounting estimates made by
management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion on the financial
statements.
Basis for qualified opinion:
1. Manufacturing operations of the company were stopped due to riots,
strike and malicious damage at factory since 27.01.2012. The company
declared lock out of the plant on 31.01.2012 and the condition of the
fixed assets & its realizable value could not be estimated. The
machinery and building were not insured during the year and disclosed
at book value after providing depreciation on account of efflux of
time.
2. The condition of the raw materials, stores and spares and its
realizable value could not be estimated by the company. The stocks were
not insured during the year and disclosed at book value.
3. During the year, the company has not provided the provisional
liability towards salary, wages and other benefits to its factory
employees pending orders / judgement of the industrial Tribunal.
Further, the company has not provided for its liability towards
Gratuity and leave encashment in accordance to AS-15 "Employee
Benefits". Since the company could not compute the liability in the
absence of complete records, we are unable to comment upon the impact
of non-provision of additional loss of the company for the year and on
the current liabilities as at 31.03.2015.
4. Confirmation of balances was not obtained from Debtors, Creditors,
loans and advances and other current assets.
5. The company paid 28.93% of loan Outstanding as One Time Settlement
(OTS) to the lenders and requested for extension of time for balance
payment. However, the lenders issued a Demand Notice under section
13(2) of SARFAESI Act. State Bank of India on behalf of its bank,
Corporation Bank and State Bank of Travancore issued a Possession
Notice (Symbolic) under Rule 8(1) of Security Interest (Enforcement)
Rules, 2002 stating that they have taken possession of the properties
in exercise of powers conferred on him under section 13(4) of the
SARFAESI Act on 04.03.2015 State Bank of Bikaner & Jaipur assigned and
transferred the facilities sanctioned by them together with all
underlying securities in interests thereto to Phoenix ARC Private
Limited (Trustee of Phoenix Trust - FY15-5). The lenders filed an
application under section 19 of the Recovery of Debts due to Banks and
Financial Institutions Act, 1993 in the Debts Recovery Tribunal,
Hyderabad for recovery of their dues. In view of the above, the Long
Term Borrowings are considered as current maturities of long term
borrowings and shown under Other Current Liabilities. Hypothecation /
Hire purchase loans are repayable within one year and shown under Other
Current Liabilities.
6. The company has not provided the liability towards interest and
penalties payable on account of statutory dues. The Company is of
opinion that the statutory authorities shall waive the same in view of
the unprecedented incident.
7. The company filed a reference under section 15(1) of Sick
Industrial Companies (Special Provisions) Act, 1985 with the Board for
Industrial and Financial Reconstruction (BIFR) and same has been
registered.
8. In view of the above, the Net Loss would increase and the
shareholders funds would reduce to this extent.
Opinion
In our opinion and to the best of our information and according to the
explanations given to us, except for the effects of the matters
described in the basis for qualified opinion paragraph, the aforesaid
financial statements give the information required by the Act in the
manner so required and give a true and fair view in conformity with the
accounting principles generally accepted in India of the state of
affairs of the Company as at 31st March 2015, and its loss and its cash
flows for the year ended on that date.
Report on Other Legal and Regulatory Requirements:
1. As required by the Companies (Auditors' Report) Order, 2015, ("the
order") issued by the Central Government of India in terms of
Sub-Section (11) of section 143 of the Act, we give in the Annexure a
statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by section 143 (3) of the Act, we report that:
a) We have sought and, except for the matters described in the Basis
for qualified opinion paragraph, obtained all the information and
explanations which to the best of our knowledge and belief were
necessary for the purpose of our audit.
b) Except for the effects of the matter described in the Basis for
qualified opinion paragraph above, in our opinion proper books of
account as required by law have been kept by the Company so far as
appears from our examination of those books.
c) The Balance Sheet, the Statement of Profit and Loss and Cash Flow
statement dealt with by this Report are in agreement with the books of
account.
d) Except for the effects of the matter described in the basis for
qualified Opinion paragraph, in our opinion, the aforesaid financial
statements comply with the Accounting Standards specified under section
133 of the Act, read with Rule 7 of the Companies (Accounts) Rules,
2014.
e) The matter described in the Basis for qualified opinion paragraph
above, in our opinion, may have an adverse effect on the functioning of
the Company.
f) On the basis of written representations received from the Directors
as on 31st March, 2015 taken on record by the Board of Directors, none
of the Directors is disqualified as on 31st March, 2015, from being
appointed as a director in terms of Section 164(2) of the Companies
Act.
g) With respect to the other matter to be included in the Auditor's
Report in accordance with Rule 11 of the Companies (Audit and Auditors)
Rule 2014, in our opinion and to the best of our information and
according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its
financial position in its financial statements - Refer Note 25 (2),
(3), (8), (9) to financial statements.
ii. The Company did not have any long-term contracts including
derivative contracts for which there were material foreseeable losses.
iii. According to the information and explanations given to us, there
were no amounts which were required to be transferred to the investor
Education and Protection Fund by the Company.
ANNEXURE TO AUDITOR'S REPORT
The Annexure referred to in Para 1 under the heading of "Report on
Other Legal and Regulatory Requirements" of our report of even date, to
the members of REGENCY CERAMICS LIMITED, Hyderabad, for the year ended
March 31, 2015.
1) a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of
fixed assets.
b) As explained to us, the management could not verify physically the
fixed assets situated at Yanam, due to riots, strike and malicious
damage.
c) During the year the Company has not disposed off any of the fixed
assets.
2) No Physical verification of inventory has been conducted during
year.
3) a) During the year the Company has not granted any loans, secured or
unsecured to Companies, firms or other parties covered in the register
maintained under Section 189 of the Companies Act, 2013.
b) In view of our comment in paragraph (a) above, clause (lll) (a) and
(b) of paragraph 3 of the aforesaid order are not applicable to the
Company.
4) In our opinion and according to the information and explanations
given to us, there are adequate internal control systems commensurate
with the size of the Company and the nature of its business with regard
to purchase of inventory and fixed assets and for the sale of goods and
services. During the course of our audit, we have not observed any
continuing failure to correct major weaknesses in the internal control
system.
5) The Company has not accepted any deposits from the public. Hence,
the provisions of Sections 73 to 76 or any other relevant provisions of
the Companies Act, 2013 and the rules framed there under, do not apply
to this Company.
6) During the year, there is no production and its related activity in
the factory and as such, cost records pursuant to sub-section (1) of
section 148 of the companies Act, 2013 have not been maintained.
7) a) 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, Wealth Tax,
Service Tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess and
any other statutory dues with the appropriate authorities.
b) According to information and explanations given to us, the Company
is not regular in depositing with appropriate authorities, the
following undisputed dues outstanding as at 31st March, 2015 for a
period of more than six months from the date they became payble.
Nature of the dues Amount Rs. Period to
(in lakhs) which relates
CST 56.65 2011-12
VAT 360.89 2011-12
Service Tax 44.75 2012-14
Provident Fund 0.95 2014.15
Employees State Insurance 8.64 2012-15
Tax Deducted at Source 0.05 2014-15
Income Tax 58.19 2003-04
c) According to the records of the Company and the information and
explanations given to us, the dues of Service Tax / Income Tax /
Municipal Taxes which have not been deposited on account of any dispute
are as follows.
Nature of the Amount Period to which Forum where
dues (Rs. in lakhs) the amount is dispute pending
related
Service Tax 35.04 2006-2007 CESTAT, Banglore
Income Tax 90.98 2004-2005 Income Tax
Appellate Tribunal
Municipal Tax 32.35 1998-2007 Yanam Municipality
d) According to the records of the Company, there were no amounts which
were required to be transferred to Investor Education and Protection
Fund. Therefore, the provisions of clause 3 (vii) (c) of the Companies
(Auditor's Report) Order, 2015 are not applicable to the Company.
8) The accumulated losses of the Company at the end of the financial
year ended 31.03.2015 are in excess of 50% of its net worth. The
Company has incurred cash losses during the year covered by our audit
and also in the immediately preceding financial year.
9) In our opinion and according to the information and explanations
given to us, the Company has defaulted in repayment of Rs.9857.30 lakhs
dues to any financial institutions and Banks.
10) The company has not given any guarantee for the loans taken by
others from bank or financial institutions.
11) In our opinion and according to the information and explanations
given to us, the Company has not availed any term loans during the
year.
12) Based upon the audit procedures performed and according to the
information and explanations given to us, we report that no fraud on or
by the Company has been noticed or reported during the year.
For BRAHMAYYA & CO.,
Chartered Accountants.
Firm Registration No. 000513S
(K.S.RAO)
Place: Hyderabad Partner
Date : 29.05.2015 Membership No.015850
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