Independent Auditor
To
The Members of THE MYSORE PAPER MILLS LIMITED
Bengaluru-560052.
This report is supplementary to our earlier audit report dated 3rd September, 2014 in
light of the revision of financial statements consequent to the audit observations of the
Comptroller and Auditor General of India. This report supersedes our earlier audit report
dated 3rd September,2014.
Report on Financial Statements:
We have audited the accompanying financial statements of THE MYSORE PAPER MILLS
LIMITED, ("the Company") which comprise the Balance Sheet as at March 31, 2014
and the Statement of Profit and Loss and the Cash Flow Statement for the year then ended,
and a summary of 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 Flow of the
Company in accordance with the Accounting Standards referred to in sub-section (3C) of
section 211 of the Companies Act, 1956 ("the Act")read with 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
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 entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of the accounting
estimates made by 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 audit opinion.
Basis for Qualified Opinion
1. As stated in note 2.12(b) Company has not identified the non moving stores
& spares and has made the provision of Rs.640.86 lacs for the same on adhoc basis
instead of making provision on determined non moving stores and spares as stated in
significant accounting policy 1.02 (iv). In the absence of details, the impact of the same
on the financial statement of the company can not be quantified.
2. As stated in Note 3.03 Rs.201.47 lacs interest on purchase tax is not
provided in the books. Hence the loss for the year and other current liability is under
stated to that extent.
3. An alleged fraud on the company perpetrated by an employee reported during
the year vide office memo FPR/507/DSP/2013-14 dtd: 28/10/2013 and 5/ 2/2014 amounting to
Rs.48.05 lacs for the years 2008 to 2014. The alleged fraud is not reflected in the books
of the company pending finality of the enquiry. Hence we are unable to quantify the impact
of the same on the financial statements of the company for the year
4. Reference is drawn to Note 3.06, wherein no provision has been made towards
the disputed interest amounting to Rs.1042.86 Lacs. As a result Loss for the current year
is under stated to that extent and correspondingly the current liabilities is under stated
to that extent.
5. During the year the company has accounted and capitalized Interest and
Guarantee Commission amounting to Rs.287.35 Lacs on loan borrowed towards Rotary Lime Kiln
Project. As the said projects active development is interrupted the same should have been
charged to profit and Loss Account instead of debit to Capital Work in Progress. Due to
which Loss for the year is under stated to that extent and Capital work in progress is
overstated to that extent.
6. The Consequential effect of the above comments on financial Statements to the
extent ascertainable is understatement of loss by Rs.1531.68 Lacs, understatement of
Curent liabilities by Rs.1244.33 Lacs and overstatement of work in progress by Rs. 287.35
Lacs.
Qualified Opinion
Subject to observations stated above, in our opinion and to the best of our information
and according to the explanations given to us, the 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 March
31, 2014; and
b) In the case of the Statement of Profit and Loss of the Loss for the year ended on
that date and
c) In the case of Cash Flow Statement, of the cash flows for the year ended on that
date
Emphasis of Matter
1. Attention is drawn to Note 3.11 (Employee Benefits) wherein deficit between
plan assets and actuarial liabilities of employee benefit plans under gratuity and leave
encashment obligations are substantial. As the company is sick and referred to BIFR, the
company has not stated its plan to meet this deficit.
2. The company is incurring cash losses continuously and net worth of the
company is fully eroded. However in the opinion of the management the company is a going
concern as the Govt. of Karnataka (GOK), the main promoter, has been continuously
supporting by way of financial assistance. The company believes that Government of
Karnataka will extend financial support in the coming years also. The rehabilitation
proposal for revival of the company is under preparation.
3. The confirmations of Sundry Debtors, Creditors & Advances received are
yet to be reconciled (note 2.13 (a)). The company has not received confirmations from
majority of the parties, though confirmation letters have been sent by the company.
Our opinion is not qualified in respect of the above matters
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 of India in terms of sub-section (4A) of
section 227 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) we have obtained all the information and explanations which to the best of our
knowledge and belief were necessary for the purpose of our audit;
b) Subject to our observations stated in the Basis for Qualified Opinion, 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) Subject to our observations stated in the Basis for Qualified Opinion, in our
opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply
with the Accounting Standards referred to in subsection (3C) of section 211 of the
Companies Act, 1956 read with the General Circular 15/2013 dated 13 September, 2013 of the
Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013 and
e) On the basis of written representations received from the directors as on March 31,
2014, and taken on record by the Board of Directors, none of the directors is disqualified
as on March 31, 2014, from being appointed as a director in terms of clause (g) of
sub-section (1) of section 274 of the Companies Act, 1956.
|
For M/s MNS &Co. |
|
Chartered Accountants |
|
Firm Reg. No. 003968S |
|
Sd/- |
| Place: Bengaluru |
(CA NAGABHUSHAN K.S.) |
| Date: 25th November, 2014 |
Partner. |
|
Membership No. 025390 |
ANNEXURE
TO THE MEMBERS OF THE MYSORE PAPER MILLS LIMITED
Referred to in Paragraph 1 of our report of even date
i) The Company has maintained proper records showing full particulars of quantitative
details and situation in respect of fixed assets.
ii) The Company has a regular program of physical verification of plant and machinery
& vehicles only. In our opinion, the periodicity of physical verification is
reasonable for these assets having regard to the size of the Company and nature of its
assets. Accordingly, the fixed assets were verified by the Management during the year and
according to information and explanations given to us, no material discrepancies were
noticed on such verification.
iii) The Company has not disposed off substantial part of fixed assets during the year.
iv) According to the information and explanations given to us, the Management of the
Company has conducted physical verification of Inventory during the year except for
standing crops, which is estimated on yield-based formulae.
v) In our opinion the procedures of physical verification of inventory followed by
management is reasonable & adequate having regard to the size of the Company and
nature of its business.
vi) In our opinion, the Company is maintaining proper records of inventory and
according to the information and explanations given to us the discrepancies noticed,
during physical verification are not material in nature and the same have been properly
dealt with in the books of account of the Company.
vii) According to the information and explanations given to us the company has neither
granted nor taken any loans, secured or unsecured to/from Companies, firms or other
parties covered in the register maintained under section 301 of the Act.
viii) 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 and
for the sale of goods and services. We have not observed any major weakness in the
internal control system during the course of the audit except in the case of labour
payments made by cash towards captive forest plantation activities.
ix) According to the information and explanations given to us there are no transactions
that need to be entered in pursuance of section 301 of the Companies Act, 1956.
x) According to the information and explanations given to us, the Company has not
accepted any deposit from the public. Therefore, the provisions of clause (vi) of
paragraph 4 of the Order are not applicable to the Company.
xi) In our opinion and according to the explanations and information given to us, the
Company has an internal audit system commensurate with the size and nature of its
business.
However, timely compliance is not done and the monitoring has to be more effective.
xii) The maintenance of cost records has been prescribed by the Central Government
under section 209(1) (d) of the Companies Act, 1956. According to the information &
explanations given to us, such accounts and records have been made and maintained by the
Company.
xiii) According to the information and explanations given to us, the Company is
generally regular in depositing undisputed statutory dues including Provident Fund,
Investor Education & Protection Fund, Employees State Insurance, Income tax, VAT,
Service Tax, Custom Duty, Excise Duty, Cess, Wealth Tax, and any other statutory dues
applicable with the appropriate authorities except VAT & CST of Rs. 1355.19 lacs and
Purchase Tax on sugar cane amounting to Rs 498.50 lacs are outstanding for a period more
than six months from the date they became payable.
xiv) According to the information and explanations given to us there are no disputed
dues in respect of Income Tax, VAT, Wealth Tax, Customs Duty, Excise Duty, Cess, except
service Tax of Rs.49.00 lacs for which the appeal is pending before the Commissioner of
central Excise and Service Tax.
xv) The accumulated losses of the Company as at the end of financial year are more than
50% of its net worth and the company has incurred cash loss during the current financial
year and in the immediately preceding financial year.
xvi) On the basis of verification of relevant records and documents and according to
the explanations and information given to us, the Company has defaulted in repayment of
dues to financial institutions, Banks & Debenture Holders as below:
| Sl. No. |
NAME |
Defaulted Amount |
Default since |
|
|
Rs. In lacs |
|
| 1. |
Axis Bank Limited |
997.91 |
30-09-2010 |
| 2. |
SBM |
4765.53 |
01-07-2012 |
| 3. |
SBI |
3796.36 |
01-07-2012 |
| 4. |
Karnataka Bank |
130.72 |
01-07-2012 |
| 5. |
Indian Bank |
1944.30 |
01-07-2012 |
| 6. |
Vijaya Bank |
1120.77 |
01-07-2012 |
Note: Interest on all loans accounted up to 31-03-2014.
xvii) 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.
xviii) The Company is not a chit fund or nidhi or mutual benefit fund Company and hence
the provisions of the same are not applicable to the Company.
xix) The Company is not dealing or trading in shares, securities, debentures and other
investments.
xx) According to the information and explanations given to us, the Company has not
given any guarantee for loans taken by others from bank or financial institutions.
xxi) In our opinion and on the basis of information and explanations given to us, the
fund raised through Bonds of Rs. 50 crores in July 2010 out of which Rs. 42.92 crores has
not been applied for the purpose for which it has been obtained.
xxii) On the basis of review of utilization of funds, which is based on overall
examination of the Balance sheet and cash flows of the Company, related information as
made available to us and as represented to us by the Management, in our opinion, the
Company has not utilized the funds raised on the short-term basis for long-term
investments.
xxiii) The Company has not made any preferential allotments of shares to parties and
Companies covered in the Register maintained under section 301 of the Companies Act, 1956.
xxiv) According to the information & explanations given to us and the records
examined by us, the debentures/bonds have been issued against Govt. of Karnataka
guarantee. Hence no security or charge is created.
xxv) The Company has not raised any money from public issue and hence the disclosure of
the same is not applicable.
xxvi) According to the information and explanations given to us and on the basis of
examination of records, an alleged fraud perpetrated by an employee was reported during
the year vide office memo FPR/507/DSP/2013-14 dtd: 28/10/2013 and 5/2/2014 amounting to
Rs. 48.05 lacs for the years 2008 to 2014.
|
For M N S & CO. |
|
Chartered Accountants |
|
Firm Regn. No. 003968S |
|
Sd/- |
| Place: Bengaluru |
(CA. NAGABHUSHAN K.S.) |
| Date: 25th November, 2014 |
PARTNER |
|
Membership No: 025390 |
+91-9892691696
