We have audited the accompanying financial statements of C Mahendra
Exports Limited ("the Company") which comprise the Balance Sheet as at
March 31, 2015, the Statement of Profit and Loss and the Cash Flow
Statement for the year ended on that date, and a summary of the
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 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 the
appropriate accounting policies, making judgements and estimates that
are reasonable and prudent; and design, implementation and maintenance
of 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
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 financials control relevant to the Company's
preparation of the financial statements and 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 financial reporting and the operating
effectiveness of such controls. An audit also includes evaluating the
appropriateness of the 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 audit opinion on the financial
statements.
Basis for qualified opinion Basis for Disclaimer of Opinion
1. Reference is invited to note no. 1 regarding preparation of accounts
on a Going Concern basis and the reasons stated therein, the Company's
operating results have been materially affected due to various factors
including non availability of finance in view of the consortium bankers
recalling the financial facilities granted, symbolic possession of
premises taken by the Bankers, Factory has ceased to carry on
manufacturing activity. These events cast significant doubts on the
ability of the Company to continue as a going concern since the volumes
of business have also drastically dropped in the last 12 months. The
appropriateness of the going concern assumption is dependent on the
Company's ability to raise adequate finance from alternate means and/ or
recoveries from overseas debtors to meet its short term and long term
obligations as well as to establish consistent business operations. In
absence of any convincing audit evidences, no positive steps taken by
the management, non recovery of trade receivables on due dates, non
payment of liabilities including Income Tax dues and in view of multiple
uncertainties stated above, we are unable to determine the possible
effects on the financial statements. We are also unable to conclude on
the ability of the company to carry on as a going concern.
2. Reference is invited to note no.42 most banks have not provided
balance confirmations, hence we 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
as a result facility has been ceased to be operational. and notice
under section 13(2) of The Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act,2002 is
received by the Company.
No provision for interest is made amounting to Rs 915,371,518/- since
all the bank accounts have become non performing assets (NPA)
3. Reference is invited to note no. 43 regarding Trade Receivables
amounting to Rs. 11,949,340,981/-which are outstanding for more than 1
year from invoice date. As explained therein, the recoveries from these
trade receivables have been almost negligible. There have been defaults
on the payment obligations by the debtors on the due dates. As informed
by the management no reply is received from any parties to whom legal
notices were sent. No confirmations are obtained. In view of the above
we are unable to comment on the realisability of the debts and any
provision to be made for unrealisability in the carrying amounts of
these balances and the consequential impact, on the financial
statements.
4. In absence of audited / unaudited results of subsidiaries and step
down subsidiaries, we were unable to obtain sufficient appropriate
audit evidence about the carrying amount of Company's investment in
various subsidiaries as at March 31, 2015. Consequently, we were unable
to determine whether any adjustments to these amounts were necessary.
The said investments continue to be valued at cost.
5. No valuation has been carried out by an independent valuer as done in
earlier years accordingly, the determination of estimated net realizable
value is made by management, hence we were unable to satisfy ourselves
by alternative means concerning the inventory held at 31st March, 2015
which are stated in the Balance Sheet at Rs.163,01,90,777/-
6. The factory has ceased to carry on manufacturing activity since
October, 2014. The Management has not carried out impairment of assets
test as required by Accounting Standard (AS) 28 regarding Impairment of
Assets. Hence we are unable to comment upon the impact in the financial
statements.
Disclaimer of Opinion
Because of the significance of the matters described in the Basis for
Disclaimer of Opinion paragraph specifically relating to the multiple
uncertainties created 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.
Emphasis of Matters
We draw attention to the following matters in the Notes to the
financial statements:
1. Reference is invited to note no.43 of the financial statements, the
Company's advances to the extent of Rs. 11,706,797/- we are unable to
ascertain whether such balances are fully recoverable. Accordingly, we
are unable to ascertain the impact, if any, that may arise in case any
of these advances are subsequently determined to be doubtful of
recovery. Had the Company provided for the same, the loss for the
period would have been higher by the said amount.
2. Reference is invited to note no. 47 to the Companies Act, 2013
("the Act") coming in to effect from April 1, 2014, the Company has not
realigned the remaining useful life of fixed assets in accordance with
the provisions prescribed under Schedule II to the Act and has
continued to provide depreciation as per old Companies Act, 1956 hence
we are unable to comment upon the impact in the financial statements.
3. Reference is invited to note no.48 the management has confirmed
that no financial adjustment is required to be made in the financial
statements on account of various allegations, amongst promoters and
defamation notice received by the Managing Director of the company.
4. Reference is invited to note no.50 regarding absence of any
intimation received from vendors regarding the status of their
registration under "Micro, Small and Medium Enterprises Development Act,
2006", the company is unable to comply with the disclosures required to
be made under the said Act.
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 exercise of powers
conferred by Section 143 (11) of the Act, we enclose 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) As described in the basis of Disclaimer of opinion paragraph, we
sought but were unable to obtain all the information and explanations
which to the best of our knowledge and belief were necessary for the
purpose of our audit;
b) Due to possible effects of the matter described in the basis for
Disclaimer of opinion paragraph, we are unable to state whether 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) Due to possible effects of the matter described in the basis for
Disclaimer of opinion paragraph, we are unable to state whether 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.
d) Due to possible effects of the matter described in the basis for
Disclaimer of opinion paragraph, we are unable to state whether the
aforesaid financial statements comply with the Accounting Standards
specified under Section 133 of the Act, read with Rule 7 Companies
(Accounts) Rules, 2014.
e) On the basis of written representations received from the Directors
as on March 31, 2015 taken on record by the Board of Directors, none of
the Directors are disqualified as on March 31, 2015 from being
appointed as a Director in terms of Section 164(2) of the Act.
f) The reservation relating to the maintenance of accounts and other
matters connected therewith are as stated in the Basis for Disclaimer
of Opinion paragraph above.
g) With respect to the other matters to be included in the Auditors'
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 34 to the
financial statements;
ii. The Company did not have any long term contracts including
derivative contracts for which there were any materials 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 THE INDEPENDENT AUDITOR' REPORT
(Referred to in paragraph 1 under 'Report on Other Legal and Regulatory
Requirements' section of our report of even date)
i. In respect of its fixed assets:
(a) The Company has not satisfactorily maintained records showing
particulars including quantitative details and situation of fixed
assets. In the absence of on updated fixed asset register and due to
non-availability of records of physical verification we are unable to
ascertain the appropriateness of the same.
(b) As explained to us most of the assets have been physically verified
by the Management during the year in accordance with a phased programme
of verification adopted by the company and no material discrepancies
were noticed on such verification. However we are unable to verify the
reasonableness of the same, as necessary documentary evidences were not
made available for our verification
ii. In respect of its inventories:
(a) As explained to us the company has conducted physical verification
at reasonable intervals in respect of inventory. However we have not
received any documentary evidence to verify the same.
(b) In the absence of documentary evidence we are unable to ascertain
whether the procedures of physical verification of stock followed by
the Management are reasonable and adequate or in relation to the size
of the company and the nature of its business.
(c) In our Opinion the company is not maintaining proper records of
inventory. In the absence of records we are unable to ascertain whether
discrepancies if any were noticed on physical verification of stocks.
iii. The Company has granted unsecured loan to 3 Companies covered in
the register maintained under section 189 of the Act, which is
repayable on demand. The maximum amount outstanding during the year
Rs.2,67,150/- and the year end balance of such loan is Rs.NIL. There is
no interest charged and other terms and conditions of the loan granted
are prime facie, not prejudicial to the interest of the Company.
iv. 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 with regard
to purchase of inventories and fixed assets except in case of sale of
goods and services. In our opinion and according to the information and
explanations given to us, there is no continuing failure to correct
major weakness in internal control system.
v. In our opinion and according to the information and explanations
given to us, the Company has not accepted any deposits from the public
in accordance with the provisions of sections 73 to 76 of the Act and
the rules framed there under
vi. According to the information and explanations given to us, the
Central Government of India has not prescribed the maintenances of cost
records under Section 148(1) of the Companies Act, 2013 in respect of
the operations of the Company during the year. Accordingly clause (vi)
of the Order in not applicable to the Company.
vii. According to the information and explanations given to us in
respect of statutory dues:
(a) The Company is not regular in depositing undisputed statutory dues
including Provident Fund, Employees State Insurance, Sales-tax / Value
Added Tax, Service tax, Customs duty, Excise Duty, Cess, and other
applicable statutory dues with the appropriate authorities except for
following dues which are undisputed and outstanding for the period
exceeding 6 months
Particulars Amount (Rs).
Income Tax AY 2013-14 41,743,490
Income Tax AY 2014-15 15,382,910
Wealth Tax AY 2014-15 200,555
Dividend Distribution Tax AY 2012-13 10,236,842 Dividend Distribution
Tax AY 2013-14 3,650,783 Dividend Distribution Tax AY 2014-15 1,529,550
Interest on Dividend Distribution Tax 1,854,411 AY 2012-13
Interest on Dividend Distribution Tax 235,250 AY 2013-14
Vat Payable 25,771 ~
(b) According to the records of the Company, there are no dues of
Income Tax, Sales Tax, Service tax, Custom Duty, Wealth Tax, Excise
Duty, Value added tax or Cess which have not been deposited as on 31st
March, 2015 on account of any dispute except the following
Name of the statue Nature of dues Amount Period to which
Rs. it relates
Custom Act,1962 Penalty 11,000,000 2007-2008
Finance Act, 1994 Service Tax 15,494,737 2006-2011
(Service Tax
Provisions)
Income Tax Act,1961 Income Tax 220,910 2007-2008
Income Tax Act,1961 Income Tax 98,612,870 2008-2009
Income Tax Act,1961 Income Tax 12,716,980 2009-2010
Income Tax Act,1961 Income Tax 63,652,219 2007-2008
Income Tax Act,1961 Income Tax 42,635,270 2011-2012
Name of the statue Forum where dispute is pending
Custom Act,1962 Appellate Tribunal
Finance Act, 1994 High Court
(Service Tax
Provisions)
Income Tax Act,1961 Income Tax Appellate Tribunal
Income Tax Act,1961 Commissioner of Income Tax -
Appeals
Income Tax Act,1961 Commissioner of Income Tax -
Appeals
Income Tax Act,1961 Commissioner of Income Tax -
Appeals
Income Tax Act,1961 Commissioner of Income Tax -
Appeals
(c) There was no amount which was required to be transferred to the
Investor Education and Protection Fund by the Company.
viii The Company has no accumulated losses as at the end of the year.
However, it has incurred cash loss in the current financial year but it
did not incur cash losses in the immediately preceding financial year,
ix. The company has defaulted in payment of loans to banks as under.
As per notice under section 13(2) of The Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act dated 30.12.2014, 07.02.2015 and 03.03.2015 received from various
bank.
BANK NAME TOTAL AMOUNT DATE OF DEFAULT
DEFAULTED STARTED
Bank of Baroda 1,93,12,83,319.09 25/08/2014
Bank of India 1,49,53,64,938.93 30/06/2014
Canara Bank 47,86,13,419.98 23/07/2014
Central Bank of India 1,26,16,79,158.50 05/08/2014
Corporation Bank 1,01,75,18,507.37 31/12/2014
H.D.F.C Bank Ltd 27,52,74,428.34 18/06/2014
Indian Bank 39,36,34,704.00 06/02/2014
Punjab National Bank 69,79,43,405.71 31/03/2014
State Bank of Bikaner & Jaipur 41,33,81,224.13 12/10/2014
State Bank of India 55,61,07,944.00 08/10/2014
State Bank of Mysore 46,93,53,902.56 17/06/2014
State Bank of Patiala 36,62,86,324.20 21/06/2014
State Bank of Travancore 36,64,53,625.33 26/11/2014
Union Bank of India 1,43,92,57,047.89 26/11/2014
TOTAL 11,16,21,51,947.00
The said defaults do not consider any levies of interest and penal
interest charged by the banks / provided by the company after the date
of the defaults or its subsequent reversals by some banks. Some of the
Banks have not confirmed the balances outstanding to them even after
writing to them.
The Company does not have any outstanding due from financial
institutions and/or by way of debentures.
x. As informed to us, the Company had given guarantees of Rs.
689,048,800/- for credit facilities availed by its overseas subsidiary
namely, C Mahendra NV (Formerly known as C Mahendra BVBA) from bank.
The overseas subsidiary has defaulted in its dues to bank and bank has
issued demand notice calling for payment.
xi. In our opinion and according to the information and explanations
given to us, the term loans have been applied by the Company during the
year for the purposes for which they were obtained.
xii. The management has stated that no financial adjustment is required
on various allegations among promoters, defamation notice received by
the Managing Director of the Company. Subject to the this, during the
course of our examination of the books and records of the company,
carried out in accordance with the generally accepted auditing
practices in India, and according to the information and explanations
given to us, we have neither come across any instance of fraud by the
company, noticed or reported during the year, nor have we been informed
of such case by the management.
For R. H. Modi & Co.
Chartered Accountants
(Firm Reg. No. 106486W)
Sd/-
R. H. Modi
Proprietor
Membership No. : 037643
Place : Mumbai
Date : 26.08.2015
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