| We have audited the accompanying financial statements of VARUN SHIPPING
COMPANY 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 period of 18 months then ended, and a summary of the
significant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
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 notified under the Companies Act, 1956 ('the
Act') read with the General Circular 15/2013 dated 13th September, 2013
of the Ministry of Corporate Affairs in respect of Section 133 of the
Companies Act, 2013. This responsibility includes the design,
implementation and maintenance of internal control 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 conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. 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 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 control relevant to the
Company's preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control. An audit also includes
evaluating the appropriateness of the accounting policies used and the
reasonableness of the accounting estimates made by the 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 qualified audit opinion.
Basis for Qualified Opinion
Attention is invited to the following:
I. Note No. 31 regarding Long Term strategic investments made by the
Company which are carried at cost and also other exposures of the
Company in its various subsidiaries and associates in which there has
been a significant erosion in the net worth on account of temporary
reduction in revenues due to lack of working capital that has affected
operations of the vessels. The management is in the process of raising
resources to streamline the operations of the vessels in the future.
The Company regards the diminution in the value of its investments and
the recoverability of the receivables from its subsidiaries and
associates to be temporary in nature considering the Company's
strategic and long term commitment to these investments. The Company
has made a provision of Rs. 14,000 Lacs as on 31st March 2014 against
the Receivables from Varun Cyprus Ltd. Consequently Management is of
the view that the outstandings are good and recoverable and that no
further provision is required for the reasons stated in the note.
We are unable to express an opinion on the recoverability /
realizability of the above mentioned items and the impact of the same
on the Loss for the year.
II. Note No. 40 regarding non payment of Dividend of Rs. 750.03 Lacs
and Dividend Distribution Tax of Rs. 121.67 Lacs for the period ended
30th September 2012.
Qualified 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 matter 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:
(a) in the case of the Balance Sheet, of the state of affairs of the
Company as at 31st March, 2014;
(b) in the case of the Statement of Profit and Loss, of the loss of the
Company for the period ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows of the
Company for the period ended on that date.
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.
a. We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purposes of our
audit.
b. Except for the effects of the matter described in the Basis for
Qualified Opinion paragraph, 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, 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. Except for the effects of the matter described in the Basis for
Qualified Opinion paragraph, in our opinion, the Balance Sheet,
Statement of Profit and Loss, and Cash Flow Statement comply with the
Accounting Standards notified under the Companies Act, 1956 ('the Act')
read with the General Circular 15/2013 dated 13th September, 2013 of
the Ministry of Corporate Affairs in respect of Section 133 of the
Companies Act, 2013.
e. As the Company has failed to pay the Dividend for the period ended
30th September, 2012 which had been approved by the Shareholders of the
Company at the Annual General Meeting held on 4th February, 2013, and
such failure has continued for a period of over one year, all the
directors are disqualified as on March 31, 2014 from being appointed as
directors in any other public company, under clause (g) of sub-section
(1) of Section 274 of the Companies Act, 1956. Refer Note No. 40.
Annexure to the Auditor's Report
Annexure referred to in Para 1 of our report of even date to the members
of Varun Shipping Company Limited
a) The Company is maintaining proper records of its fixed assets except
Furniture and Fixtures.
b) The fixed assets have been physically verified by the Management
during the period under review at reasonable intervals and no material
discrepancies were noticed.
c) According to the information and explanations given to us, the
Company has not disposed off substantial part of its fixed assets
during the period under review.
ii The Company owns and operates ships and hence a comment on inventory
does not apply in this case. The Company does purchase stores and spare
parts for its ships, which are directly treated as consumed as and when
supplied to its ships. Stocks of bunkers have been physically verified
by the Management.
iii In respect of loans, secured or unsecured, granted or taken by the
Company to / from Companies, Firms or other parties covered in the
register maintained under Section 301 of the Companies Act, 1956:
a. The Company has granted unsecured loans to 2 companies covered in
the register maintained under Section 301 of the Companies Act, 1956.
In respect of the said loans, the maximum balance outstanding at any
time during the period under review is Rs. 6396.39 Lacs and the year
end balance is also Rs. 6396.39 Lacs.
b. In our opinion and according to the information and explanations
given to us, the rate of interest and other terms and conditions of
such loans, are not, prima facie, prejudicial to the interest of the
company.
c. In respect of the said loans no amounts on account of interest or
principal have been received from the borrowers. The interest accrued
on these Loans is Rs. 4,289.06 Lacs as on 31st March 2014. The terms of
arrangement do not stipulate any repayment schedule on account of
principal and the loans are repayable on demand.
d. There is no overdue amount of more than Rupees one lakh in respect
of the loans granted to companies listed in the register maintained
under Section 301 of the Companies Act, 1956 as the terms of
arrangement do not stipulate any repayment schedule and the same are
repayable on demand.
e. The Company has taken an interest free unsecured loan from a party
covered in the register maintained under Section 301 of the Companies
Act, 1956. In respect of the said loan, the maximum balance outstanding
at any time during the period under review is Rs. 352.00 Lacs and the
year end balance is also Rs. 352.00 Lacs.
f. In our opinion and according to the information and explanations
given to us, the loan is interest free and the other terms and
conditions of the loan are not, prima facie, prejudicial to the
interest of the company.
g. The terms of arrangement do not stipulate any repayment schedule on
account of principal and the loan is repayable on demand.
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 with regard to purchases of stores, spare parts and fixed
assets. During the course of our audit, we have not observed any major
weaknesses in internal control system of the Company. However,
attention is invited to the matters stated in Note No. 42
v
a) According to the information and explanations given to us, we are of
the opinion that the particulars of all contracts or arrangements that
need to be entered into the register maintained under Section 301 of
the Companies Act, 1956 have been so entered.
b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of such contracts or
arrangements entered in the register maintained under Section 301 of
the Companies Act, 1956 and exceeding the value of rupees five lakhs in
respect of any party during the period under review have been made at
prices which are 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 fixed deposits from public and hence,
provisions of sections 58A and 58AA and other relevant provisions of the
Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules,
1975 with regard to the deposits accepted from the public are not
applicable.
vii In our opinion and according to the information and explanations
given to us, the Company has an internal audit system commensurate with
the size and nature of its business.
viii Maintenance of cost records has not been prescribed by the Central
Government under clause (d) of sub section (i) of section 209 of the
Companies Act, 1956.
ix
a. According to the records of the Company, undisputed statutory dues
including Provident Fund, Investor Education Fund, Employees' State
Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty,
Excise Duty and other statutory dues have not generally been regularly
deposited with the appropriate authorities. The following are the
outstanding statutory dues as at the last date of the financial year
which were outstanding for a period of more than six months from the
date they became payable:
Name of the Statute Nature of the Amount Period to
Dues in Lacs) which the
amount
relates
Income tax Act, 1961 Income Tax 1,597.93 July 2012 to
August 2013
Finance Act, 1994 Service Tax 1,228.10 May 2008 to
August 2013
Employees Provident Fund Employees 424.23 November 2012
to August 2013
Act, 1952 Provident Fund
Companies Act, 1956 Payment of 750.04 February 2013
Dividend
Companies Act, 1956 Dividend 121.68 February 2013
Distribution Tax
a. According to the records of the Company as at 31st March 2014, the
following are the particulars of disputed dues on account of various
matters which have not been deposited:
Name of the Nature of Amount(Rs. in Period to Forum where
Statute demand Lacs) which the dispute is
amount pending
relates
Tamil Nadu Commercial 832.84 2007-2008 Madras High
General Sales Tax Court
Tax Act, 1959
x In our opinion, the accumulated losses at the end of the financial
year are more than fifty percent of its net worth.
The Company has incurred cash losses in the current period under
review; however the Company has not incurred cash loss in the
immediately preceding financial year.
xi The Company is in arrears in the repayment of its dues to various
Banks/Financial Institutions. An amount of Rs. 6,818.89 Lacs on account
of Principal and Rs. 5,550.74 Lacs on account of Interest aggregating to
Rs. 12,369.63 Lacs are overdue to various Banks/Financial Institutions
as on 31st March 2014. Subsequent to the date of the Balance Sheet, the
Company has paid an aggregate amount of Rs. 1,166.63 Lacs.
xii In our opinion and according to the information and explanations
given by the Management, the Company has not granted any loans and
advances on the basis of security by way of pledge of shares,
debentures or any other securities.
xiii In our opinion the Company is not a chit fund or a nidhi /mutual
benefit fund/society. Therefore, the provisions of clause 4(xiii) of the
Order are not applicable.
xiv In our opinion, the Company is not dealing in or trading in shares,
securities, debentures and any other investments. Therefore, the
provisions of clause 4(xiv) of the Order are not applicable.
xv In our opinion and according to the information and explanations
given to us, the terms and conditions on which guarantees have been
given by the Company for loans taken by others from banks / financial
institutions are not prima facie prejudicial to the interest of the
Company.
xvi On the basis of the records examined by us and relying on the
information compiled by the Company for co-relating the funds raised to
the end-use of term loans, we state that the Company has, primo facie,
applied the term loans for the purpose for which they were obtained.
xvii According to the information and explanations given to us and on
an overall examination of the financial statements and after placing
reliance on the reasonable assumptions made by the Company for
classification of Short-term and Long-term usage of the funds, we are
of the opinion that, prima facie, no funds raised on short-term basis
have been utilized for long-term investment.
xviii According to the information and explanations given to us, 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. Accordingly paragraph 4(xviii) of the Order is not
applicable.
xix According to the information and explanations given to us, the
Company has not issued any debentures during the period under review.
Accordingly paragraph 4(xix) of the Order is not applicable.
xx The Company has not raised any money by public issues during the
period under review. Accordingly paragraph 4(xx) of the Order is not
applicable.
xxi Based upon the audit procedures performed and information and
explanations given by the Management, we report that no fraud on or by
the Company has been noticed or reported during the period under
review.
For SORAB S. ENGINEER & CO.
CHARTERED ACCOUNTANTS
Firm Registration No.: 110417W
CA N.D. Anklesaria
PARTNER
MEMB. NO. 10250
Mumbai: May 30, 2014.
|