Report on the Financial Statements
1. We have audited the acCompanying standalone financial statements of
Euro Ceramics Limited ("the Company"), which comprise the Balance Sheet
as at March 31, 2015, the Statement of Profit and Loss, the Cash Flow
Statement for the year then ended, and a summary of the significant
accounting policies and other explanatory information.
Management's Responsibility for the standalone financial statements
2. The Company's Board of Directors is responsible for the matters
stated in section 134(5) of the Companies Act, 2013 ('the Act) with
respect to the preparation of these standalone financial statements to
give a true and fair view of the financial position, financial
performance and cash flows of the Company in accordance with the
accounting principles generally accepted in India, including the
Accounting Standards specified under section 133 of the Act, read with
rule 7 of the Companies (Accounts) Rules, 2014. This responsibility
also includes maintenance of adequate accounting records in accordance
with the provisions of the Act for safeguarding of the assets of the
Company and for preventing and detecting frauds and other
irregularities; selection and application of appropriate accounting
policies; making judgments and estimates that are reasonable and
prudent; and design, implementation and maintenance of adequate
internal financial controls, that were operating effectively for
ensuring the accuracy and completeness of the accounting records,
relevant to the preparation and presentation of the financial
statements that give a true and fair view and are free from material
misstatement, whether due to fraud or error.
Auditors' Responsibility
3. Our responsibility is to express an opinion on these standalone
financial statements based on our audit.
4. We have taken into account the provisions of the Act and the Rules
made there under including the Accounting Standards and matters which
are required to be included in the audit report.
5. We have conducted our audit in accordance with the Standards on
Auditing specified under section 143(10) of the Act and other
applicable authoritative pronouncements issued by the Institute of
Chartered Accountants of India. Those Standards and pronouncements
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 misstatement.
6. 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 the internal financial control
relevant to the Company's preparation of the financial statements that
give a true and fair view, in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing
an opinion on whether the Company has in place an adequate internal
financial controls system over the financial reporting and the
operating effectiveness of such controls. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of the accounting estimates made by the Company's
Directors, as well as evaluating the overall presentation of the
financial statements.
7. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Qualified Opinion
8. In our opinion and to the best of our information and according to
the explanations given to us, except for the matters illustrated and
described in the Basis for Qualified Opinion herein below, the
aforesaid standalone financial statements give the information required
by the Act in the manner so required and give a true and fair view in
conformity with the accounting principles generally accepted in India,
of the state of affairs of the Company as at March 31, 2015, and its
loss and its cash flows for the year ended on that date.
Basis for Qualified Opinion
1. The attention is invited to note no.33 to the financial statements,
towards the fact that the Company's financial facilities/arrangements
including Term Loans, Working Capital Facilities and Non Fund Based
Credit Facilities have expired and the accounts with the Banks have
turned into Non Performing Assets since more than 2 years.
The Company is unable to renegotiate, restructure or obtain replacement
of financing arrangements and the banks have initiated legal
proceedings for the recovery from the Company u/s. 19 of the Debt
Recovery Tribunal (DRT), u/s. 13(2) of the Securitization &
Reconstruction of Financial Assets & Enforcement of Security (Second)
Interest (SARFAESI) Act, 2002 and winding up petition at Mumbai High
Court. In addition to this, the Group has been continuously incurring
substantial losses since past few years and as on March 31, 2015, the
Company's current liabilities exceed its current assets by Rs.
43,777.81 lacs. Further, the networth of the Company has fully eroded
and the Company has filed for registration u/s. 15(1) of the Sick
Industrial Companies (Special Provisions) Act, 1985, before the Hon'ble
Board for Industrial & Financial Reconstruction.
All the above events indicate a material uncertainty that casts a
significant doubt on the Company's ability to continue as a going
concern and therefore it may be unable to realize its assets and
discharge its liabilities in the normal course of business. The
financial results do not disclose the fact that the fundamental
accounting assumption of going concern has not been followed.
2. Further attention is also invited to note no.34 to the financial
statements, the Company on the basis of registration filed u/s. 15(1)
of the Sick Industrial Companies (Special Provisions) Act, 1985, before
the Hon'ble Board for Industrial & Financial Reconstruction, and the
hearings for which are in process for determination of sickness; has
not provided for interest on financing facilities amounting to Rs.
8,758.47 lacs for the year ending March 31, 2015, subject to
reconciliation with banks. Had the same been provided, the loss for
the year ending March 31, 2015, would have increased by Rs. 8,758.47
lacs. The corresponding liabilities would also have increased by Rs.
8,758.47 lacs as at March 31, 2015.
3. The Company has not provided for impairment or diminishing value of
its assets/investment as per 'Accounting Standard 28 - Accounting for
Impairment of Assets' as notified under the Companies (Accounting
Standards) Rules, 2006 read with the General Circular 15/2013 dated
September 30, 2013 of the Ministry of Corporate Affairs in respect of
Section 133 of the Companies Act, 2013. The effect of such Impairment
or diminishing value has not been quantified by the management and
hence the same is not ascertainable.
Report on other legal and regulatory requirements
9. As required by 'the Companies (Auditor's Report) Order, 2015',
issued by the Central Government of India in terms of sub-section (11)
of section 143 of the Act (hereinafter referred to as 'the Order'), and
on the basis of such checks of the books and records of the Company as
we considered appropriate and according to the information and
explanations given to us, we give in the Annexure a statement on the
matters specified in paragraphs 3 and 4 of the Order.
10. As required by Section 143(3) of the Act, we report that:
a) We have sought and obtained all the information and explanations
which to the best of our knowledge and belief were necessary for the
purposes of our audit;
b) In our opinion, proper books of account as required by law have been
kept by the Company so far as it appears from our examination of those
books;
c) The Balance Sheet, Statement of Profit and Loss, and the Cash Flow
Statement dealt with by this Report are in agreement with the books of
account;
d) In our opinion, the aforesaid standalone financial statements comply
with the Accounting Standards specified under section 133 of the Act,
read with rule 7 of the Companies (Accounts) Rules, 2014, except for as
stated in basis for qualifications above.
e) On the basis of the written representations received from the
directors as on March 31, 2015 taken on record by the Board of
Directors, none of the directors is disqualified as on March 31, 2015
from being appointed as director in terms of section 164 (2) of the
Act.
f) With respect to the other matters to be included in the Auditor's
Report in accordance with rule 11 of the Companies (Audit and Auditors)
Rules, 2014, in our opinion and to the best of our knowledge and belief
and according to the information and explanations given to us:
i) The Company has disclosed the impact, if any, of pending litigations
as at March 31, 2015, on its financial position in its standalone
financial statements except as stated in basis for qualifications
above;
ii) The Company has made provision as at March 31, 2015 as required
under the applicable law or Accounting Standards for material
foreseeable losses, if any, on long-term contracts including derivative
contracts except as stated in basis for qualifications above;
iii) There has been delay in transferring unclaimed dividend amounting
to Rs. 25,303/- pertaining to financial year 2006-07 into the Investor
Education and Protection Fund, by the Company during the year ended
March 31, 2015.
(Referred to in paragraph 9 of the Independent Auditors' Report of even
date to the members of Euro Ceramics Limited on the standalone
financial statements as of and for the year ended March 31, 2015)
(1) In respect of Fixed Assets:
a) The Company has maintained proper records showing full particulars
including quantitative details and situation of its fixed assets.
b) As explained to us, all the fixed assets have been physically
verified by the management in a phased periodical manner, which in our
opinion is reasonable, having regards to the size of the Company and
nature of its assets. No material discrepancies were noticed on such
physical verification.
(2) In respect of its Inventories:
a) The inventories have been physically verified during the year by the
management. In our opinion, the frequency of such verification is
reasonable.
b) In our opinion and according to the information and explanations
given to us, the procedures of physical verification of inventories
followed by the Management are reasonable and adequate in relation to
the size of the respective entities and the nature of their businesses.
c) In our opinion and according to the information and explanations
given to us, the Company has maintained proper records of its
inventories. The discrepancies noticed on verification between the
physical stocks and the book records were not material.
(3) In respect of loans, secured or unsecured, granted by the Company
to companies, firms or other parties covered in the register maintained
under section 189 of the Act:
a) According to the information and explanation given to us, the
Company has granted loan to party covered in the register maintained
under section 189 of the Act.
b) In our opinion and according to the information and explanations
given to us, there are no stipulations made regarding repayment of
principal amount and interest. Hence we are unable to comment as to
regularity of repayments of principal and interest amount.
(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 respective entities and the nature of their
businesses with regards to purchases of inventory, fixed assets and
with regards to the sale of goods and services. Further, on the basis
of our examination of the books and records of the Company, and
according to the information and explanations given to us, we have
neither come across, nor have been informed of, any continuing failure
to correct major weakness in the aforesaid internal control system.
(5) In our opinion and according to the information and explanations
given to us, the Company during the year has not accepted any deposits
from the public within the meaning of section 73 & 76 of the Act and
the Rules framed there under to the extent notified. Further in respect
of deposits accepted by the Company before the commencement of this
Act, within the meaning of section 74 & 75 of the Act and the Rules
framed there under to the extent notified, the principal amount of such
deposits and interest due thereon remained unpaid even after expiry of
one year from such commencement. However, the Company duly filed an
application within the meaning of section 74(2) with the Company Law
Board requesting to allow further time for compliance. However the
final decision of the Tribunal as required under section 75 (1) of the
Act is still awaited.
(6) The Central Government of India has not specified the maintenance
of cost records under sub-section (1) of section 148 of the Act for any
of the products of the Company.
(7) In respect of Statutory Dues:
a) According to the information and explanation given to us and the
records of the Company examined by us, in our opinion the Company has
been facing liquidity stress since past few years due to which there
were delays in depositing various undisputed statutory dues with
appropriate authorities including provident fund, employee's state
insurance, income tax, sales tax, wealth tax, service tax, duty of
customs, duty of excise, value added tax, cess and other material
statutory dues, as applicable to it and there are no arrears of
outstanding statutory dues as at the yearend for a period of more than
six months from the date they became payable except service tax payable
amounting to Rs. 9.81 lacs.
b) According to the information and explanation given to us and the
records of the Company examined by us, there are no dues of sales tax,
wealth tax, service tax, duty of customs, duty of excise, value added
tax, as at March 31, 2015, which have not been deposited on account of
any dispute. However there are dues of income tax which have not been
deposited on account of a dispute which are as under:
Amount Period to Forum
Name of the Nature of Dues
Statute Rs. which the where the
amount dispute is
relates pending
Income Tax Demand arisen 207.76 Financial Assessing
pursuant to lacs Year officer
assessment 2011-12
c) There has been delay in transferring unclaimed dividend amounting to
Rs. 25,303/- pertaining to financial year 2006-07 into the Investor
Education and Protection Fund, by the Company during the year ended
March 31, 2015.
(8) The Company has accumulated losses at the end of financial year and
also had the same at the end of the immediately preceding financial
year. However the Company has not incurred cash loss during the
financial year covered by our audit but had incurred cash losses in the
immediately preceding financial year. The accumulated losses of the
Company have exceeded its net worth.
(9) In our opinion and according to the information and explanations
given to us the Company has defaulted in repayment of loans and
interests dues to the banks and financial institution. The principal
outstanding of Term Loans and Cash Credit facilities amounts to Rs.
45,453.37 lacs and overdue interest (not provided) calculated based on
last sanction letters amounts to Rs. 18,044.93 lacs as at March 31,
2015, subject to reconciliation with the banks. The period of default
is more than 2 years.
(10)According to the information and explanations given to us, the
Company has given the guarantee for loans taken by its subsidiary from
bank. The terms and conditions of the same are not prejudicial to the
interest of the Company. However in our opinion the said subsidiary has
been continuously incurring losses and its net worth has been fully
eroded and there is substantial doubt whether the said subsidiary would
be able to repay its liabilities or realize its assets.
(11)In our opinion, the term loans are being applied for the purpose
for which they were obtained.
(12)According to the information and explanations given to us, no
material fraud on or by the Company has been noticed or reported during
the course of our audit.
For Deepak Maru & Co.
Chartered Accountants
ICAI Firm Registration No. 115678W
Jaymin P. Shah
Place: Mumbai Membership No. 118113
Date: May 30, 2015 Partner |