| We have audited the accompanying standalone financial statements of JCT
Electronics Limited ("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 Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated
in section 134(5) of the Companies Act, 2013 ("the Act") with respect
to the preparation of these standalone financial statements that give a
true and fair view of the financial position, financial performance and
cash flows of the Company in accordance with the accounting principles
generally accepted in India, including the Accounting Standards
referred 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 controls
that were operating effectively for ensuring the accuracy and
completeness of the accounting records, relevant to the preparation and
presentation of the financial statements that give a true and fair view
and are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We have taken into account the
provisions of the Act, the accounting and auditing standards and
matters which are required to be included in the audit report under the
provisions of the Act and the Rules made there-under.
We conducted our audit in accordance with the Standards on Auditing
specified under section 143(10) of the Act. Those Standards require
that we comply with ethical requirements and plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor's judgment, including the assessment of
the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Company's preparation of the
financial statements that give a true and fair view in order to design
audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on whether the Company has in
place an adequate internal financial control system over financial
reporting and the operating effectiveness of such controls. An audit
also includes evaluating the appropriateness of accounting policies
used and the reasonableness of the accounting estimates made by the
Company's Directors, as well as evaluating the overall presentation of
the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our adverse audit opinion on the
standalone financial statements.
Basis for Adverse Opinion
(i) We have analyzed following factors :-
(a) The financial statements have been drawn and are based on the
successful implementation of rehabilitation scheme announced by Board
for Industrial and Financial Reconstruction (BIFR) for the company. As
per Sanctioned BIFR Scheme, the revival of the company is dependent on
sale of land and building at Mohali Unit. As envisaged in sanctioned
scheme in 2007, the company's net worth could not turn positive in the
4th year of its implementation due to delay in sale of land & building
which is still pending. The tenure of scheme is ending in the year
2017. The Company has defaulted in payment of principal amount of Loans
of Rs. 10,670.42 Lacs (previous year Rs 6,977.43 Lacs) to Banks /
Financial Institutions for sixteen quarters starting from 1st April,
2011 to 31st March, 2015. This is in contravention of rehabilitation
scheme announced by BIFR vide its order dated 12th March, 2007. The
Company was unable to meet its obligations towards repayment of
quarterly installments due in respect of term/working capital term
loans as per BIFR sanctioned scheme, due to non availability of working
capital limits as envisaged in the sanctioned scheme and sluggish
market conditions during the year. As per the BIFR scheme, if the
company commits default towards repayment of principal installments as
per the sanctioned scheme or any combination, FIs / Banks reserves the
right to charge interest on the defaulted amount at top of the band
together with liquidated damages of 2% p.a. thereon till the date of
clearance of default or FIs / Banks shall have the right to convert its
entire overdue into fully paid up equity shares of JCTEL during the
currency of the loans as per SEBI guidelines, or otherwise but with the
permission of Hon'ble BIFR also reserve the right to revoke the package
of rehabilitation. In case FIs / Banks exercise the right of
revocation, the financial rehabilitation sanctioned or granted to JCTEL
shall be treated as withdrawn and the terms and the conditions of the
original loan agreements or documents shall come into force as if no
such financial rehabilitation were ever granted to JCTEL.
Further, FIs / Banks shall have the right to adjust payment received
under the present package of financial rehabilitation against
outstanding dues in terms of the original loan agreements/documents.
However with the consent of secured creditors, a Modified Debt
Restructuring Scheme (MDRS) has been submitted to the Hon'ble BIFR in
the month of October, 2012 requesting for reschedulement of repayment
of principal amount of secured loans within the scheme period. The same
was under consideration of the Hon'ble BIFR as at 31st March, 2014.
During the year ended 31st March, 2015, the matter has been referred to
Larger Bench to be headed by Chairman, BIFR & is pending.
Considering the magnitude of default coupled with delay in sale of
assets raises a doubt on the chances of recovery.
(b) The Company incurred a net loss of Rs. 7,263.97 Lacs for the year
ended 31st March, 2015 (Previous year Rs. 6,248.19/ Lacs) and
accumulated loss as on 31st March, 2015 stands to Rs. 69,828.84 Lacs.
As on 31st March, 2015, the Company's current liabilities exceeded its
current assets by Rs. 42,463.96 Lacs (Previous year Rs. 32,644.78/
Lacs) and its total liabilities exceeded its total assets by Rs.
55,307.79 Lacs (Previous year Rs. 48,035.70/ Lacs). In view of these,
the Company had been reporting negative operating cash flows for few
years which have also contributed to constraints of working capital.
These conditions have resulted into acute working capital deficit &
have casted material uncertainty on functioning of Company.
(c) The Company had stopped production from August, 2013 onwards at its
only working plant at Vadodara, Gujarat and there has been no
production during the year ended 31st March, 2015, on account of non
availability of working capital for importing critical raw materials.
Considering aforesaid factors, the availability of requisite working
capital to commence its operations is doubtful.
(d) We understand that due to technological changes, there has been a
declining market for color picture tubes.
(e) Due to non release of need based working capital as envisaged in
the sanctioned scheme, the Company has not been able to settle dues of
running creditors.
(f) There has been constant reduction in the strength of staff.
The management of the company is however hopeful that its request for
Modified Debt Restructuring Scheme (MDRS) would be accepted by Hon'ble
BIFR and the Company would be able to arrange requisite working capital
for importing critical raw materials to start its production lines. The
management is confident that it would be able to dispose of its assets
as sanctioned in BIFR Scheme. The Accounts have been compiled by the
management on the basis of going concern. Please refer Note Number-29
to the financials.
Appropriateness of the "going concern basis" is dependent on the
ability of the company to generate adequate finances to meet its
obligations and to operate profitably which in our opinion after
considering aforesaid factors indicate material uncertainty which
further raises significant and substantial doubt on the ability of the
Company 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. If the Company is treated not to be a going
concern, then the valuation of assets has to be not merely on the basis
of historical cost less depreciation or impairment but at a value which
the assets would fetch, if the same are lower than the value presently
shown. The Company has not attempted to assess the realizable value of
the assets and therefore financial results for the year ended 31st
March, 2015 have been prepared on a going concern basis and do not
include any adjustments relating to the recoverability and
classification of recorded asset amounts or to amounts or
classification of liabilities that may be necessary if the Company is
unable to continue as a going concern.
(ii) In the opinion of the management, accounts receivable, loans and
advances have a value on realization in the ordinary course of
business, at least equal to the amount at which they are stated in the
Balance sheet unless specifically provided for. During the financial
year ended 31st March 2015, company has not sought confirmations on
margin money account, trade receivable, trade payable and other
receivables/ payables. Accordingly the balances appearing under margin
money account, trade payables, trade receivables and other receivables/
payables are subject to reconciliation & confirmation and are described
in Note 33(a) to the financial statements. The financial impact of same
is not ascertainable and to that extent we do not have any information
in respect of such balances.
(iii) The Company is engaged only in manufacture of Color Picture Tubes
and Deflection Yokes at Vadodara Unit, Gujarat. This is the only
Business Segment of the Company. As per Accounting Standard-28 on
Impairments of as prescribed under Section 133 of the Companies Act,
2013 ('Act') read with Rule 7 of the Companies (Accounts) Rules, 2014
and as prescribed in the Companies (Accounting Standards) Rules, 2006,
it is imperative to determine impairment in respect of cash generating
unit as per the methodology prescribed under the said Standard. However
the Management of the Company vide Note No- 30(d) states that there is
no impairment in respect of cash generating unit at Vadodara, Gujarat
since it has not completed its useful life and that the production will
be taken up when working capital is made available after the sale of
assets approved by BIFR. Further there is lot of appreciation in the
value of the land available at Vadodara. In light of the above we are
unable to ascertain financial impact of same.
Emphasis of Matter
The Company had received an unsecured loan from its holding company
namely Team Plus Securities Limited during the FY 2011-12 which is
outstanding as at 31st March, 2015. Section 185 of The Companies Act,
2013 stipulates that no company shall directly or indirectly advance
any loan to any person in whom the director is interested. Mr Arjun
Thapar is a director in both Team
Plus Securities Limited, the promoter and holding company, which has
advanced the loan and the Company (i.e. JCT Electronics Limited), its
subsidiary which had accepted the loan. The said loan of Rs 50 lacs is
still outstanding as at 31st March, 2015 and has not been returned by
the company. As explained by the Company, the amount was funded by the
promoter company to meet the shortfall in the resources of the company
for servicing the secured debts in terms of BIFR order which stipulates
that the promoters should meet any shortfall in the fund requirements
of the company for servicing the debts of the secured creditors. As
stated by Company, the said loan has not been returned by the company
as it cannot do so without the prior written approval of the lenders.
Further Team Plus Securities Limited is an NBFC and is authorized to
give loans as per its objects. However said NBFC is not charging any
interest at a rate not less than the bank declared by Reserve Bank of
India as stipulated by Section 186 of Companies Act, 2013. In our
opinion this is in contravention of the provisions of Section 185 of
Companies Act, 2013 which could attract penalties. Please refer Note -
38.
Our opinion is not modified in respect of this matter.
Adverse Opinion
In our opinion, because of the aforesaid factors mentioned in the Basis
for Adverse Opinion paragraph, the aforesaid standalone financial
statements do not give the information required by the Companies Act,
2013 in the manner so required and also do not 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,
its profit/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 (Auditor's Report) Order, 2015 ("the
Order") issued by the Central Government of India in terms of
sub-section (11) of section 143 of the Companies Act, 2013, we give in
the Annexure a statement on the matters specified in paragraphs 3 and 4
of the Order, to the extent applicable.
(2) As required by section 143 (3) of the Act, we report that:
a. We have sought and, except for the matters described in the Basis
for Adverse Opinion paragraph, obtained all the information and
explanations which to the best of our knowledge and belief were
necessary for the purpose of our audit;
b. Except for the possible effects of the matter described in the
Basis for Adverse 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, 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 impact of the matter described in the Basis for
Adverse Opinion paragraph above, in our opinion, the Balance Sheet,
Statement of Profit and Loss and Cash Flow Statement comply with the
Accounting Standards specified under section 133 of the Act, read with
Rule 7 of the Companies (Accounts) Rules, 2014;
e. The going concern matter described in sub-paragraph 1 (a) under the
Basis of Adverse Opinion paragraph above, in our opinion, may have an
adverse effect on the functioning of the Company.
g. On the basis of written representations received from the directors
as on March 31, 2015, and taken on record by the Board of Directors,
none of the directors is disqualified as on March 31, 2015, from being
appointed as a director in terms of section 164(2) of the Act.
h. The adverse remarks relating to the maintenance of accounts and
other matters connected therewith are as stated in the Basis for
Adverse Opinion paragraph above.
i. With respect to the other matters to be included in the Auditor's
Report in accordance with Rule 11 of the Companies (Audit and Auditors)
Rules, 2014, in our opinion and to the best of our information and
according to the explanations given to us
i. The Company has disclosed the impact of pending litigations on its
financial position in its financial statements -Refer Note 26 to the
financial statement.
ii. The Company did not have any long-term contracts including
derivative contracts for which there were any material foreseeable
losses.
iii. There were no amounts which were required to be transferred to the
Investor Education and Protection Fund by the Company.
ANNEXURE TO INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph (1) of our report on other legal and
regulatory requirements of even date)
Annexure referred to in paragraph (1) of our report on other legal and
regulatory requirements of Independent Auditor's Report to the members
of JCT Electronics Limited on the financial statements for the year
ended March 31, 2015
i) (a) The Company has maintained records showing full particulars
including quantitative details and situation of fixed assets of all its
units.
(b) The fixed assets have been physically verified by the management of
the Company at reasonable intervals. No material discrepancies were
noticed on such verification
(ii) (a) Inventories have been physically verified during the year by
the management and in our opinion, the frequency of
verification is reasonable.
(b) The procedures for physical verification of inventories followed by
the management are reasonable and adequate in relation to the size of
the company and the nature of its business.
(c) The company is maintaining proper records of its inventories. The
discrepancies noticed during the course of physical verification
between the physical stocks and the book records were not material.
However the same have been properly dealt with in the books of account
(iii) (a) 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 during the financial year
ended 31st March, 2015.
(b) Company had given two interest free unsecured loans of Rs 117.41
Lacs to two companies covered in the register maintained under section
189 of the Companies Act, 2013 in earlier years. The amount is overdue
for payment. During the year Rs 10 Lacs were recovered from one of such
Company. Company should take reasonable steps including legal recourse
to recover the outstanding balance. Being doubtful of recovery,
provision for doubtful debts has been created during the year ended
31st March, 2015.
(c) Accordingly the remaining clauses of the Order are not applicable
to the Company.
(iv) 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 fixed assets, purchase of Inventory & sale
of goods. The activities of the Company do not involve sale of
services. Further, on the basis of our examination of the books and the
records of the company, and according to the information and
explanations given to us, we have neither come across nor have been
informed about any continuing failure on the part of the management to
correct major weaknesses in the aforesaid internal control procedures.
(v) The Company has not accepted any deposits from the public and
consequently, the directives issued by Reserve Bank of India, the
provisions of sections 73 to 76 of the Companies Act, 2013 and rules
framed there under are not applicable during the year ended 31st March,
2015.
However Company did have credit balance of some customers which is
outstanding and pertain to the period prior to 1st April, 2014. Such
credit had arisen due to goods returned by customers for quality issues
and company has issued credit note in lieu of same till replacements
are made. Since there was no production, replacements have not been
made and such customers continued to have credit balances which the
company is holding in trust. In terms of Companies (Acceptance of
Deposits) Rules, 2014, pursuant to Section 73 & Section 74 of the
Companies Act, 2013, such balances are money received or held by the
Company in trust.
(vi) We have broadly reviewed the books of account relating to
materials, labour and other items of cost maintained by the company
pursuant to the rules made by the Central Government for the
maintenance of cost records under Section 148(1)(d) of the Companies
Act, 2013 and we are of the opinion that prima facie the prescribed
accounts and records have been kept and maintained.
(vii) (a) According to the information and explanations given to us, no
undisputed amounts payable in respect of Provident
Fund, Investor Education and Protection Fund, Employees' State
Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty,
Excise Duty, Cess and other undisputed statutory dues were outstanding
at the year end, for a period of more than six months from the date
they became payable.
(b) According to information and explanations given to us, the
following dues in respect of income tax, central sales tax, service
tax, wages under labour law, excise, PF & ESI have not been deposited
by the company on account of appeals pending for disposal at different
forums
Name of the Statute Nature of Dues Amount
(in Lacs.)
Central Excise Act, 1944 Excise duty & Penalty 12.30
Central Excise Act, 1944 Excise duty & Penalty 14.45
Central Excise Act, 1944 Excise duty & Penalty 21.16
Central Excise Act, 1944 Excise duty & Penalty 4.14
Central Excise Act, 1944 Excise duty & Penalty 1.50
Central Excise Act, 1944 Excise duty & Penalty 10.50
Central Excise Act, 1944 Excise duty & Penalty 340.76
Income Tax Act, 1961 Income Tax & FBT 52.65
Labour Law Act, 1970 Unpaid Wages 277.84
Labour Law Act, 1970 Unpaid Wages 28.00
Labour Law Act, 1970 Unpaid Wages 180.50
Labour Law Act, 1970 Unpaid Wages 822.00
'Provident Fund Act, 1925 Unpaid Provident Fund 748.50
Employee State Insurance Unpaid ESI 19.00
Act, 1948
Name of the Statute Forum where dispute is pending
Central Excise Act, 1944 Commissioner ( Appeals ), Mohali
Central Excise Act, 1944 Commissioner ( Appeals ), Vadodara
Central Excise Act, 1944 Assistant Commissioner, Mohali
Central Excise Act, 1944 CESTAT Ahmedabad
Central Excise Act, 1944 CESTAT Delhi
Central Excise Act, 1944 Allahabad High Court
Central Excise Act, 1944 Show Cause Notice Vadodara
Commissionerate-II
Income Tax Act, 1961 Commissioner ( Appeals )
Labour Law Act, 1970 Presiding Officer Labour Court, Vadodara
Labour Law Act, 1970 Labour Court Patiala
Labour Law Act, 1970 Industrial Tribunal Punjab At
Chandigarh/Labour Court
Labour Law Act, 1970 Punjab & Haryana High Court -
Chandigarh
'Provident Fund Act, 1925 PF Appellate Tribunal At New Delhi.
Employee State Insurance ESI Cases at Chandigarh And High
Act, 1948 Court
'In respect of the Provident fund dues, the Delhi High Court has
directed that BIFR shall utilize the sale proceeds of the Mohali Unit
at the first instance for clearing the Provident fund dues.
Name of the Statue Nature of Dues Amount Forum where dispute
(in Lacs) is pending
Punjab State
Electricity District Court,
Board Dues 40.00 Mohali
(c) There is no amount which is required to be transferred to investor
education and protection fund in accordance with relevant provisions of
the Companies Act, 1956 and rules there-under.
(viii) The accumulated losses at the end of the financial year are more
than hundred percent of its net worth and as stated earlier the Company
is in BIFR. The company has incurred cash losses in the current
financial year as well as in the financial year immediately preceding
the current financial year.
(ix) The Company has defaulted in payment of principal amount of Loans
of Rs 3,692.99 Lacs to Banks / Financial Institutions for the year
ended 31st March, 2015. The total amount of default for sixteen
quarters starting from 1st April, 2011 to 31st March, 2015 comes to Rs
10,670.42 Lacs (previous year Rs 6,977.43 Lacs).
In terms of the rehabilitation scheme approved by Board for Industrial
and Financial Reconstruction (BIFR) in March, 2007, the company had
made quarterly payments of principal amount of loans from January 2009
till March 2011.
The company with the consent of the secured lenders submitted a
Modified Debt Restructuring Scheme (MDRS) before Hon'ble BIFR in the
month of October, 2012 which envisages re-schedulement of repayment of
secured loan within the scheme period besides other requests and is
pending for approval before Larger Bench of BIFR as 31st March, 2015.
Please Refer Note-28A(b).
(x) The company has not given any guarantee for loans taken by others
from bank or financial institutions and therefore rest of the
sub-clause is inapplicable and has not been commented upon.
(xi) According to the information and explanations given to us and on
an overall examination of the books of accounts of the company, we
report that no term loan was taken during the year ended 31st March,
2015. However, the term loans taken by company in earlier years were
applied for the purpose for which such loans obtained.
(xii) According to the information and explanations given to us, no
fraud on or by the company has been noticed or reported during the
course of our audit.
for V. SAHAI TRIPATHI & Co.
Chartered Accountants
Firm's Registration Number : 000262N
Place : New Delhi Manish Mohan, Partner
Dated :30th May, 2015 Membership No. 091607
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