To the members of SBEC Sugar Ltd. Report on the financial statements
We have audited the accompanying financial statements of SBEC Sugar Ltd("the Company"), which comprise the Balance Sheet as at March 31, 2013, and theStatement of Profit and Loss and Cash Flow Statement for the year then ended, and asummary of significant accounting policies and other explanatory information.
Managements responsibility for the financial statements
Management is responsible for the preparation of these financial statements that give atrue and fair view of the financial position, financial performance and cash flows of thecompany in accordance with the accounting principles generally accepted in India,including accounting standards referred to in sub-section (3C) of section 211 of theCompanies Act, 1956 ("the Act"). This responsibility includes the design,implementation and maintenance of internal control relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India. Those Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on theauditors judgment, including the assessment of the risks of material misstatement ofthe financial statements, whether due to fraud or error. In making those risk assessments,the auditor considers internal control relevant to the Companys preparation and fairpresentation of the financial statements in order to design audit procedures that areappropriate in the circumstances. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of the accounting estimates made bymanagement, as well as evaluating the overall presentation of the financial statements. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our qualified audit opinion.
Basis for Qualified Opinion
(i) These financial statements have been prepared on a going concern basis even thoughthe Company has incurred operating losses during the current year and also in the previousyear and the companys networth is fully eroded. As explained to us by themanagement, reference will be made to BIFR for measures to be adopted by the company. TheManagement has also initiated certain steps to improve the operational and financialposition of the company failing which, provision would then have to be made for any lossthat might arise when the companys assets are realised.
(ii) The companys has not made provision for interest, on late payment of canedues amounting to Rs. 346.52 Lacs. Accordingly manufacturing expenses and net losses wouldhave been higher by Rs. 346.52 lacs respectively & its consequential impact on EPS.
In our opinion and to the best of our information and according to the explanationsgiven to us, except for the effects of the matter described in the Basis for QualifiedOpinion paragraph, the financial statements give the information required by the Act inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the company as atMarch 31, 2013; (b) in the case of the Statement of Profit and Loss, of the loss for theyear ended on that date; and (c) in the case of the Cash Flow Statement, of the cash flowsfor the year ended on that date.
Emphasis of matter
Without qualifying our opinion, we draw attention to:
Note no 33 To these financial statements wherein company had executed a deed ofassignment with a subsidiary company "SBEC Bioenergy Limited" to transfer itsclaim and all securities and charges created by Modi Industries Limited in its favour fora consideration of Rs.12,500 lacs of which Rs. 8,300 lacs shall be received as per themutually agreed installments within a period of five years from the date of execution ofthe deed. The recoverability of the carrying value of the said amount due from by SBECBioenergy limited as at 31 March 2013 is dependent on its ability to generate positivecash flow from operations. The uncertainty mentioned above may affect the ultimaterecoverability of the carrying value of the said amount due from SBEC Bioenergy Limited.These financial statements do not include any adjustments that might result from theuncertainty mentioned above.
Report on other legal and regulatory requirements
1. As required by the Companies (Auditors Report) Order, 2003 ("theOrder") issued by the Central Government of India in terms of sub-section (4A) ofsection 227 of the Act, we give in the Annexure A a statement on the mattersspecified in paragraphs 4 and 5 of the Order.
2. As required by section 227(3) of the Act, we report that:
a. We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit;
b. In our opinion proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books;
c. The Balance Sheet, Statement of Profit and Loss, and Cash Flow statement dealt withby this report are in agreement with the books of account;
d. Except for the effects of the matter described in the Basis for Qualified Opinionparagraph, in our opinion, the Balance Sheet and Statement of Profit & LossAccount and Cash Flow Statement dealt with by this report comply with the AccountingStandards referred to in sub-section (3c) of section 211 of Companies Act, 1956, to theextent applicable.
e. On the basis of written representations received from the directors as on March 31,2013, and taken on record by the Board of Directors, we report that none of the directorsis disqualified as on March 31, 2013, from being appointed as a director in terms ofclause (g) of sub-section (1) of section 274 of the Companies Act, 1956.
| ||For Doogar & Associates |
| ||Chartered Accountants |
| ||Firm Regn. No. 000561N |
| ||Mukesh Goyal |
|Place: New Delhi ||Mg. Partner |
|Dated: 6th July, 2013 ||Membership No. 081810 |
ANNEXURE "A" TO AUDITORS REPORT
(Referred to in the Auditors Report of even date to the members of SBEC SugarLimited for the year ended 31st March, 2013)
1. (a) The Company has maintained proper records showing particulars, includingquantitative details and situation of fixed assets.
(b) Though the Company has a programme of physical verification of its fixed assets inphased manner which, in our opinion, is reasonable having regard to the size of theCompany and the nature of its assets, however the Fixed assets have not been physicallyverified by the management during the year therefore discrepancies, if any, could not bedetermined.
(c) Fixed assets disposed off during the year were insignificant and therefore do notaffect the going concern assumption.
2. (a) The inventory has not been physically verified by the management during theyear.
(b) Though the physical verification programme for inventory as envisaged by themanagement is, in our opinion, reasonable and adequate in relation to the size of theCompany and nature of its business. However no physical verification of inventories hasbeen done during the year.
(c) In our opinion, the Company is maintaining proper records of inventory. Thediscrepancies, if any, compared to book records could not be determined in absence ofphysical verification.
3. (a) The Company has not granted any loan, secured or unsecured to Companies, firmsand other parties covered in the register maintained under section 301 of the CompaniesAct, 1956. Accordingly, Paragraph 3 (b), 3 (c) & 3 (d) of the order are notapplicable.
(b) The company has taken loans from three companies & another party, covered undersection 301 of the Companies Act, 1956. The maximum amount involved during the year wasRs. 435.45 lacs, Rs. 543.78 lacs, Rs. 87.89 lacs & Rs. 85.00 lacs and the year endbalance of loans taken from such companies & another party were Rs. 435.45 lacs, Rs.480.82 lacs, Rs. 85.00 lacs & Rs. 74.70 lacs respectively.
(c) In our opinion and according to information and explanations given to us, the rateof interest and other term & conditions for such loans are not prima facie prejudicialto the interest of the Company.
(d) In respect of loans taken, as explained to us the same are re-payable on demand.
4. In our opinion, and according to the information and explanations given to us duringthe course of audit, there are adequate internal control procedures commensurate with thesize of the Company and the nature of its business with regard to purchase of inventoryand fixed assets and for the sale of goods. We did not observe any major weakness ininternal control during the course of our audit.
5. (a) Based upon the audit procedures applied by us and according to the informationand explanations given to us, we are of the opinion that the transactions required to beentered into the register maintained under section 301 of the Companies Act, 1956 havebeen entered.
b) In respect of certain transaction of the value of Rs. 12,500 lacs with subsidiarycompany, the management has informed us that the transaction dealt is of a special natureand therefore comparable prices are not available. In our opinion, and according to theinformation and explanation given to us, the transactions made in pursuance of contractsor arrangements entered in the register maintained under section 301 of the Companies Act,1956 and aggregating during the year to rupees five lacs or more in respect of each partyhave been made at prices which are reasonable having regard to market prices for suchtransactions, prevailing at the relevant time, where such market prices are available.
6. The Company has accepted deposits from public and in our opinion Company hascomplied with the provisions of section 58A and 58AA of the Companies Act, 1956 and theCompanies (Acceptance of Deposits) Rules, 1975.
7. In our opinion, the Company has an internal audit system, commensurate with the sizeand nature of its business.
8. We have broadly reviewed the Cost Accounting records, including the books ofaccounts maintained by the company pursuant to the rules prescribed by the CentralGovernment for the maintenance of cost records under section 209(1)(d) of the CompaniesAct 1956, and are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained. We, are however, not required to make a detailed examination ofsuch books and records.
9. (a) The company is regular in depositing with appropriate authorities undisputedstatutory dues including Provident Fund, Investor Education and Protection Fund,Income-Tax, Sales-Tax, Wealth-Tax, Service-Tax, Customs Duty, Excise Duty, Cess and othermaterial statutory dues applicable to it.
(b) According to the information & explanations given to us, no undisputed amountpayable in respect of Provident Fund, Investor Education and Protection Fund, Income Tax,Wealth Tax, Service Tax, Sales Tax, Custom Duty, Excise Duty, Cess and other undisputedStatutory dues were outstanding, at the year end, for a period more than six months fromthe date they become payable.
(c) According to the information and explanations given to us and the records of thecompany examined by us, the particulars of statutory dues of the specified status as atthe end of the year, which have not been deposited on account of a dispute are referred toin "Annexure B".
10. In our opinion, the accumulated losses of the Company are more than fiftypercent of its net worth. During the year company has incurred cash loss of Rs. 452.35lacs. In the immediately preceding financial year also, the company had incurred cashloss.
Thus as per the current financials the Company is a Sick Industrial Company within themeaning of Sick Industrial Companies (Special Provision) Act, 1985.
11. According to the information and explanations given to us and as per the books andrecords examined by us, the Company has not defaulted in repayment of dues to anyfinancial institution or bank.
12. According to the information and explanations given to us, the Company has notgranted any loans and advances on the basis of security by way of pledge of shares,debentures and other securities.
13. The Company does not fall within the category of chit fund/ Nidhi/ Mutual Benefit/Society and hence the related reporting requirements are not applicable.
14. According to the information and explanations given to us, the Company is notdealing or trading in shares, securities, debentures and other investments and hence therelated reporting requirements are not applicable.
15. The Company has provided guarantee to SREI and the Government of Jharkhand inrespect of loans taken by SBEC Bioenergy Limited (a subsidiary company) and Bihar SpongeIron Limited respectively. The terms and conditions of the guarantees are prima facie, notprejudicial to the interest of the Company.
16. In our opinion, and according to the information and explanations given to us, theterm loans raised during the year by the company have been applied for the purpose forwhich the said loans were obtained, where the lender has stipulated such end use.
17. According to the information and explanations given to us and as per the books andrecords examined by us, no funds raised on short-term basis have been used for long-terminvestment by the company.
18. The Company has not made any preferential allotment of shares to parties andCompanies covered in the register maintained under section 301 of the Companies Act, 1956.
19. The Company has not issued debentures of any type during the Year. 20. The Companyhas not raised any money by public issue during the Year.
21. Based on our examination of the books and records of the Company and according tothe information and explanations given to us, no fraud on or by the Company has beennoticed or reported during the Year.
| ||For & on behalf of |
| ||Doogar & Associates |
| ||Chartered Accountants |
| ||Firm Regn. No. 000561N |
| ||Mukesh Goyal |
|Place: New Delhi ||Mg. Partner |
|Dated: 6th July, 2013 ||Membership No. 081810 |
ANNEXURE "B" TO AUDITORS REPORT
Referred in Paragraph 9(b) of Annexure "A" a statement on the mattersspecified in the Companies (Auditors Report) Order, 2003 as amended by the CompaniesAuditors Report (Amendment) Order, 2004 for the Year ended 31st March2013.
|Name of the Statute ||Name of Dues ||Amount (Rs. Lacs) ||Period to which amount relates ||Forum where dispute is pending |
|UP VAT Act, 2008 ||VAT on Baggasse ||45.05 ||2008-09 ||Additional Commissioner, Grade 1, Meerut, 1st Appeals |
|UP VAT Act, 2008 ||Entry Tax on Sugar Sold in Local Area ||139.59 ||2010-11 ||Deputy Commissioner Assessment |
|Central Excise,1944 ||Cess on Sugar Cess ||4.35 ||01.01.2009 to 30.09.2009 ||Commission Appeals |
|Central Excise,1944 ||Penalty on Scrap Scale ||2.61 ||30.11.2004 to 31.03.2008 ||CESTAT, New Delhi |
|Finance Act, 1994 ||Service Tax on Commission ||16.83 ||01.04.2008 to 01.12.2010 ||CESTAT, New Delhi |
|Finance Act, 1994 ||Service Tax on Lease Rent ||1.81 ||2012-13 ||Commissioner Appeals |
|Finance Act, 1994 ||Service Tax on Commission ||150.88 ||2003-04 ||Commission Central Excise |