| We have audited the accompanying financial statements of CLASSIC
DIAMONDS (INDIA) LIMITED ("the Company"), which comprise the Balance
Sheet as at 31st March, 2014, the Statement of Profit and Loss and the
Cash Flow Statement for the year then ended, and a summary of the
significant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
The 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 fair presentation of the financial statements that
are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit in accordance with the Standards on
Auditing issued by the Institute of Chartered Accountants of India.
However, because of the matters described in the Basis for Disclaimer
of Opinion paragraph below, we were not able to obtain sufficient
appropriate audit evidence to provide a basis for an audit opinion.
Basis for Disclaimer of Opinion
1. We could not observe the counting of physical inventories in the
absence of information available and restriction placed by the
Management Accordingly, we were unable to satisfy ourselves by
alternative means concerning the inventory quantities held at 31st
March, 2013 and 31st March, 2014 which are stated in the Balance Sheet
at Rs.44,11,593and Rs.44,11,593 respectively.
2. In addition, we were unable to confirm or verify by alternative
means balance of accounts receivableRs.2,957,822,918 and balance of
accounts payable Rs.244,505,890 and corresponding translation gain or
loss, if any on theses balance is not recorded for the year ended 31st
March, 2014 and same matters was reported in previous year.
3. We are also unable to confirm the bank balance (including working
capital facility and overdraft) and interest payable thereon since the
accounts are freezed by the consortium of banks and by income tax
authorities and as a result facility has been ceased to be operational
and same matter was reported in previous year,.
4. The Company has been unable to renegotiate its borrowings from its
bankers and also incurred loss in current year and previous year.
Wthout such financial support there is substantial doubt that it will
be able to continue as a going concern. Consequently, adjustments may
be required to the recorded asset amounts and classification of
liabilities. The financial statements (and notes thereto) do not
disclose this fact.
As a result of these matters, we were unable to determine whether any
adjustments might have been found necessary in respect of recorded or
unrecorded inventories, bank balance (including overdraft facilities)
and interest payable thereon and accounts receivable/payable and the
elements making up the Statement of Profit and Loss and the Cash Flow
Statement.
Disclaimer of Opinion
Because of the significance of the matters described in the Basis for
Disclaimer of Opinion paragraph above, we have not been able to obtain
sufficient appropriate audit evidence to provide a basis for an audit
opinion. Accordingly, we do not express an opinion on the aforesaid
financial statements.
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) As described in the Basis for Disclaimer of Opinion paragraph
above, we were unable to obtain all the information and explanations
which to the best of our knowledge and belief were necessary for the
purposes of our audit.
(b) Due to the possible effects of the matters described in the Basis
for Disclaimer of Opinion paragraph above, we are unable to state
whether proper books of account as required by law have been kept by
the Company so far as it appears from our examination of those books
(c) The Balance Sheet, the Statement of Profit and Loss and the Cash
Flow Statement dealt with by this Report are in agreement with the
books of account except for fixed assets register and other matter as
referred in Basis for Disclaimer of Opinion
(d) Due to the possible effects of the matters described in the Basis
for Disclaimer of Opinion paragraph above, we are unable to state
whether the Balance Sheet, the Statement of Profit and Loss and the
Cash Flow Statement comply with the Accounting Standards referred to in
Section 211(3C) of the Act.
(e) We are unable to comment on compliance of Section 274(1)(g) of the
Act since none of the directors has submitted written representations
with regards to being appointed as a director in terms of Section
274(1)(g) of the Act and consequently the same not been taken on record
by the Board of Directors.
Annexure to Independent Auditors' Report Referred to in paragraph under
the heading of "Report on Other Legal and Regulatory Requirements" of
our Report of even date
i. In respect of its fixed assets:
a) The company has not maintained proper records showing full
particulars including quantitative details and situation of its fixed
assets.
b) As explained to us, the fixed assets have not been physically
verified by the management during the year. Hence, we are unable to
comment on discrepancies between book record and physical assets.
c) In the absence of fixed assets register and physical verification
report of fixed assets we are unable to comment on disposal of fixed
assets
ii. In respect of its inventories:
a) As explained to us, the inventories other than those lying with
outside parties were physically verified during the year by the
management at reasonable intervals. However, records of such physical
verification were not made available to us for verification.
b) In our opinion and according to the information and explanations
given to us, we are unable to comment on the procedures of physical
verification in the absence of appropriate audit evidence.
c) In our opinion and on the basis of our examination of the records,
in the absence of appropriate audit evidence, we are unable to comment
on discrepancy on physical verification of stocks by the management if
any.
iii.
d) According to information and explanations given to us, the Company
has not granted any loans, secured or unsecured to companies, firms or
other parties covered in the register maintained under section 301 of
the Act. As the Company has not granted any loans, the clause
4(iii)(b), 4(iii)(c) and 4(iii)(d) of the Order are not applicable.
e) According to the information and explanations given to us, the
Company has not taken any loans, secured or unsecured, to / from
companies, firms or other parties listed in the Register maintained
under Section 301 of the Companies Act, 1956 except for interest free
loan from the Director and relative of director. The maximum amount
involved during the year was Rs. 2,49,409 and Rs. 89,313 respectively and
year-end balance is Rs.7,494 and Nil respectively.
f) In our opinion and according to information and explanations given
to us, in respect of such interest free unsecured loans taken by the
Company, the other terms and conditions are prima facie, not
prejudicial to the interest of the Company.
g) In respect of such loans taken by the Company, the principal amounts
were repayable on demand.
iv. In our opinion, and according to the information and explanations
given to us, there is an inadequate internal control system
commensurate with the size of the Company and there are no sale of
goods and services during the year. There are no purchases of
inventory and fixed assets during the year.
v. In respect of contracts or arrangements entered in the Register
maintained in pursuance of Section 301 of the Companies Act, 1956, to
the best of our knowledge and belief and according to the information
and explanations given to us:
a) The particulars of contracts or arrangements referred to in Section
301 that needed to be entered in the Register maintained under the said
Section have been so entered.
b) Where each of such transaction is in excess of Rs. 5 lakh in respect
of any party, having regard to the explanation that some of the items
sold during the year where the suitable alternative sources are not
readily available for obtaining comparable quotations. Hence, we are
unable to comment on transactions have been made at prices which are
prima facie reasonable having regard to prevailing market prices at the
relevant time.
vi. According to the information and explanations given to us, the
Company has not accepted any deposit from the public during the year.
In respect of unclaimed deposits, the Company has complied with the
provisions of Sections 58A, 58AA or any other relevant provisions of
the Companies Act, 1956.
vii. According to the information and explanations given to us the
Company does not have internal audit system.
viii. The Central Government has not prescribed maintenance of cost
records under clause (d) of sub-section (1) of Section 209 of the
Companies Act, 1956 for trading activities. Accordingly, this para is
not applicable to the Company.
ix. According to the information and explanations given to us in
respect of statutory dues:
a) The Company has not deposited undisputed statutory dues, including
Provident Fund, Investor Education & Protection Fund, and Employees'
State Insurance, Income-tax, Sales-tax, Wealth-tax, Custom Duty, Excise
Duty, Cess and other material statutory dues applicable to it with
appropriate authorities.
b) There are undisputed amounts payable in respect of certain statutory
dues for a period of more than six months from the date they became
payable as given below:
Name of the statutory dues For the financial Amount (Rs.)
Year
Profession tax 2012-13 43,200
Employees contribution to ESIC Earlier years* 31,779
Employers contribution to ESIC Earlier years* 58,825
Income tax 2010-11 39,596,893
Wealth tax 2010-11 14,000
Property Tax 2011-12 132,270
Employees contribution to MLWF 2011-12 14,191
Value Added Tax 2012-13 309,693
Value Added Tax - Surat 2011-12 117,107
Value Added Tax - Maharashtra 2005-06 59,377,769
Value Added Tax - Maharashtra 2008-09 12,466,008
Value Added Tax - Maharashtra 2013-14 82,193
Value Added Tax - Maharashtra 2012-13 93,572
Value Added Tax - Maharashtra Earlier years* 216,806
Investor Education Protection Fund Earlier years* 10,385
year wise break up not available
c) Details of dues of Income-tax, Sales Tax, Wealth Tax, Service Tax,
Customs Duty, Excise Duty and Cess which have not been deposited as on
31March 2014 on account of disputes are given below:
Name of statute Nature of dues Forum Period to which
where the amount
dispute is relates pending
Income tax act, Disallowances CIT(A) F.Y. 2007-08
1961 of expenses
Income tax act, Disallowances CIT(A) F.Y. 2008-09
1961 of expenses
and deductions
Income tax act, Disallowances ITAT F.Y. 2009-10
1961 of expenses
and deductions
Name of Statute Amount involved (Rs.)
Income tax act, 1961 53,75,640
Income tax act, 1961 24,72,17,205
Income tax act, 1961 2,05,61,740
xi. Accumulated losses of the Company at the end of the financial year
are more than hundred percent of its net worth.
The Company has incurred cash losses during the current financial year
and in the immediately preceding financial year.
xii. In our opinion and according to the information and explanations
given to us, the company has defaulted in repayment of dues to banks
amounting to Rs.3,00,64,46,069/- in respect of loans repayable on
demand. Also, the Company has failed to repay the overdraft balance in
Current Accounts with the banks amounting to Rs.13,83,08,413/-.The
Company has not defaulted in repayment of dues to financial
institution. The Company has not issued any debentures and hence,
clause
(xi) so far as it related to debenture holders does not apply in the
case of the Company.
xiii. In our opinion and according to the information and explanations
given to us, the Company has not granted any loans and advances on the
basis of security by way of pledge of shares, debentures and other
securities.
xiv. In our opinion, and according to the information and explanations
given to us, the nature of activities of the Company does not attract
any special statue applicable to chit fund and nidhi / mutual benefit
fund / societies. Accordingly, clause 4
(xiii) of the Order is not applicable to the Company. xv. In our
opinion, the Company is not dealing in or trading in shares,
securities, debentures or other investments. Accordingly, the
provisions of paragraph 4
(xiv) of the Order are not applicable to the Company.
xvi. In our opinion and according to the information and explanations
given to us, the terms and conditions on which the Company has given
corporate guarantees to banks or financial institutions on behalf of
associated concerns are prejudicial to the interests of the Company.
xvii. In our opinion and according to the information and explanations
given to us, the Company has not raised any term loan during the
current period consequently the para of the order is not applicable.
xviii. In our opinion and according to the information and
explanations given to us and on an overall examination of the Balance
Sheet, we are unable report on utilisation of short term fund for long
term purpose as referred in basis of disclaimer of opinion since we do
not have appropriate audit evidence for classification and
recoverability of certain amounts.
xix. The Company has not made any preferential allotment of shares to
parties or companies covered in the Register maintained under Section
301 of the Companies Act, 1956, during the year.
xx. The Company has not issued any debentures. Accordingly, clause
(xix) of paragraph 4 of the Order is not applicable in the case of the
Company.
xxi. The Company has not raised any money by public issue during the
year.
xxii. To the best of our knowledge and according to the information
and explanations given to us, no fraud by the Company and no material
fraud on the Company has been noticed or reported during the year.
For JMR & Associates
Chartered Accountants
Firm Reg. No. 106912W
Place: Mumbai (CA. Nikesh Jain)
Date : 30th May, 2014 Partner
Membership No: 114003
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