INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF NRC LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of NRC Limited ("the
Company"), which comprise the Balance Sheet as at 31st March, 2018, the Statement of
Profit and Loss (including other comprehensive income), Statement of Changes in Equity and
the Cash Flow Statement for accounting policies and other the year then ended, and explanatory
summaryof the significant information for the year then ended.
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 including other comprehensive income, changes in equity and cash
flows of the Company in accordance with the accounting principles generally accepted in
India, including the Accounting Standards (Ind AS) 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 appropriate accounting policies;
making judgments and estimates that are reasonable and prudent; and design, implementation
and maintenance of adequate 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.
Auditor’s 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 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 financial control relevant to the
Company’s preparation of the financial statements that give a true and fair view in
order to design audit procedures that are appropriate in the circumstances. 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
qualified audit opinion on the financial statements.
Basis for Qualified Opinion
(a) Material Uncertainty Relating to Going Concern
The Company has incurred loss in the current year as well as in the preceding year and
the accumulated losses has exceeded its entire net worth and the Company’s plant are
under lockout since 15th November, 2009. Besides, certain financial/operational creditors
Code 2016 (IBC 2016) The havefiled financial statements have, however, been prepared by
the management on a going concern basis as explained in note 28(a). This being a technical
matter and in view of uncertainty, we are unable to express an opinion as to whether the
Company can operate as a going concern and also as to the extent of the effect of the
resultant adjustments to the accumulated losses, assets and liabilities as at the year-end
and losses for the year which is presently not ascertainable.
(b) The Company has not carried out impairment test as required by Indian Accounting
Standard (Ind AS) 36 ‘Impairment of Assets’, particularly in respect of Plant
and Equipment as explained in note 28(b).We are unable to express an opinion as to when
and to what extent the carrying value of Plant & Equipment (WDV as on 31st March, 2018
is Rs. 1,398.06 Lakhs) would be recovered, particularly because of lock-out at the plant
since 15th November, 2009 and continuing theft of certain machinery parts. The
impact of the same on the loss for the year, accumulated losses, assets and liabilities as
at the year-end is presently not ascertainable.
(c) The accounts of certain Banks, Loans & Advances given, Other non- current
assets, Lenders’ liability, Trade payables and Other liabilities are subject to
confirmations, reconciliations and adjustments, if any, having consequential impact on the
loss for the year, accumulated losses, assets and liabilities as at the year-end, the
amounts whereof are presently not ascertainable
(Refer note no. 29 (b) of the financial statements).
(d) i) Liability as may arise towards interest/compound interest/penalty on
delayed/non- payment to certain trade payables /statutory dues/ Promoter Contribution/
Lenders is presently not ascertainable. so the Company is expecting relief and concession
and therefore, not provided for. (Refer note no. 29(c) of the financial statements) ii)
Bonus liability as is payable to workers/staff members has not been ascertained and
provided for. (Refer note no. 29(d) of the financial statements)
(e) The remuneration payable to the Managing Director for the period December, 2008
to January, 2011 amounting to Rs. 224.27 Lakhs was subject to Central Government approval
out of which approval for only Rs. 82.15 Lakhs was granted. For the balance amount paid,
of Rs. 142.10 Lakhs, the Company is proposing to apply to Central Government for waiver of
its recovery and is hopeful of receiving the same in due course. (Refer Note no. 29(a) of
the financial statements)
(f) Non provisioning of Liability towards Mesne profit aggregating to Rs. 529.36
Lakhs in respect of premises taken on lease and vacated in terms of the Supreme Court
order received during the financial year 2013-14. (Refer note no. 25 (a) of the financial
statements)
(g) We further report that without considering the matter referred in para (a) to (d)
above, the effect of which could not be determined, had the observation made by us in para
(e) and para (f) above been considered, the loss before tax for the current year would
have been Rs. 1,059.96 Lakhs; previous year ended Rs.1829.31 Lakhs (as against reported
loss of Rs. 672.70 Lakhs; previous year ended Rs. 1442.05 Lakhs), Reserves and Surplus
(accumulated losses) would have been Rs. 64,874.48 Lakhs; As at 31st March, 2017
Rs.64,471.80;As at 1st April, 2016 Rs.63,730.99 Lakhs(as against reported
losses of Rs.64,487.22 Lakhs; As at 31st March 2017 Rs.64,084.54 Lakhs.; As at 1st April,
2016 Rs.63,343.73 Lakhs) and trade payables would have been Rs. 19,308.48 Lakhs; As at
31st March, 2017 Rs.18,858.54 Lakhs; of Rs. As at 18,921 st April,2016Rs.17,892.69 Lakhs
(as against reported figure .22 Lakhs; As at 31st March 2017 Rs.18,471.28 Lakhs.; As at
1st April, 2016 Rs.17,505.43 Lakhs)
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 above, 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 of the state of affairs of the
Company as at 31st March, 2018 and its loss including other comprehensive
income, changes in equity and its cash flows for the year ended on that date.
Emphasis of matter:
We draw attention regarding Managerial Remuneration of Rs.214.55 Lakhs provided based
on recommendation by Nomination and Remuneration Committee and approved by Board of
directors for the period January 25, 2017 to March 31, 2018 and subject to secured lenders
approval. Our report on the statement is not modified in respect of this matter.
Opening Balances have been considered based on the audited financial statements
prepared under previous Generally Accepted Accounting Practices(Previous GAAP), as per
Companies (Accounting Standards) Rules, 2006 issued by the other auditor whose qualified
audit report dated 30th May, 2017 have been furnished to us. The Differences arises from
transition from previous GAAP to Ind AS have been derived from such audited financial
statement.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor’s Report) Order, 2016 ("the
Order"), issued by the Central Government of India in terms of sub-section (11) of
section 143 of the Act, we give in the "Annexure A" attached hereto our comments
on the matters specified in paragraphs 3 and 4 of the said Order, to the extent
applicable.
As required by Section 143 (3) of the Act, we report that:
(a) Subject to what is stated in the Basis of Qualified Opinion para (c) and (d)
above, we have sought and obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purposes of our audit.
(b) Subject to what is stated in the Basis of Qualified Opinion para (b) to (f)
above and para 1 (a) and 2 and 6 of the Order, 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, Statement of Changes in Equity
and the Cash Flow Statement dealt with by this Report are in agreement with the books of
account.
(d) In our opinion, the aforesaid financial statements comply with the Accounting
Standards specified under Section 133 of the Act, read with Rule 7 of the Companies
(Accounts) Rules, 2014 except for the effects of the matter described in the Basis for
Qualified Opinion paragraph (b), (d) and (f) above;
(e) The matter described in the Basis for Qualified Opinion paragraph above, in our
opinion, may have an adverse effect on the functioning of the Company.
(f) Considering the re-schedulement of redemption of Zero Percent Secured Redeemable
non- convertible Debentures approved in CDR package in January, 2008 and on the basis of
the written representations received from the Directors as on 31st March, 2018
taken on record by the Board of Directors. We report that none of the directors is
disqualified as on 31st March, 2018 from being appointed as a director in terms
of Section 164 (2) of the Act.
(g) With respect to the adequacy of the internal financial controls over financial
reporting of the Company and the operating effectiveness of such controls, refer to our
separate Report in "Annexure B".
(h) With respect to other matter to be included in the Auditor’s Report in
accordance with the 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 financialposition in
its financial statements- Refer Note 23(a) to the financial statements. ii) The Company
did not have any long-term contracts including derivative contracts for which there were
any material foreseeable losses. iii) There is has been no delay in transferring amount
required to be transferred to the Investor Education and Protection Fund by the Company.
|
For BAGARIA & CO.LLP |
|
Chartered Accountants |
|
ICAI Firm Registration No: |
|
113447W/W-100019 |
|
Vinay Somani |
| Place: Mumbai |
Partner |
| Date: 24th May, 2018 |
Membership No. 143503 |
Annexure A ANNEXURE REFERRED TO IN PARAGRAPH "REPORT ON OTHER LEGAL AND REGUALTORY
REQUIREMENTS" OF OUR REPORT TO THE MEMBERS OF "THE COMPANY"FOR THE YEAR
ENDED 31ST MARCH, 2018
On the basis of such checks as we considered appropriate and according to the
information and explanations given to us during the course of our audit, we state that:
1. a) The Company’s fixed assets records need to be updated to show full
particulars, including quantitative details and situation of fixed assets.
b) The Company has not carried out physical verification of its fixed assets during the
year. As explained, discrepancies as may be noticed on physical verification will be
dealt with in the books of account as and when the assets will be physically verified .
c) Updated title deeds of immovable properties have not been made available for us for
verification. Accordingly we are unable to comment whether the same held in the name of
Company. Also, refer Note No. 26(b)(c)(d) of the financial statements.
2. No physical verification of the inventory has been carried out during the year or in
the recent past. As explained, discrepancies as may be noticed on physical verification
will be dealt with in the books of account as and when the inventory will be physically
verified.
3. The Company has not granted any loans, secured or unsecured to companies, firms,
limited liability partnerships or other parties covered in the register maintained under
section 189 of the Act. Accordingly, the provisions of clause (iii) of the Order are not
applicable to the Company.
4. The Company has not granted any loans or made investments or given security/
guarantees during the year. Accordingly, the provisions of clause (iv) of the Order are
not applicable to the Company.
5. No deposits within the meaning of directives issued by RBI (Reserve Bank of India)
and Sections 73 to 76 or any other relevant provisions of the Act and rules framed there
under have been accepted by the Company.
6. As explained to us, due to lock out and stoppage of production in the plant, the
cost records have not been maintained.
7. a) The Company is not regular in depositing the undisputed
statutory dues including provident fund, employees’ state insurance, income-tax,
sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other
statutory dues applicable to it with the appropriate authorities. According to the
information and explanations given to us, following are the undisputed statutory dues
outstanding as at 31st March, 2018 for a period of more than six months from
the date they became payable:
| Particulars |
Rs. In Lakhs |
| Tax Deducted at Source (TDS) |
113.49 |
| Professional Tax |
81.75 |
| Employees State Insurance (ESI) |
95.43 |
| Provident Fund |
41.35 |
| Sales tax |
41.25 |
| Work Contract Tax |
2.00 |
| Service tax |
72.53 |
Also, refer point (d) of Basis of Qualified opinion reported above b) According to
the records of the Company and information and explanations given to us by the management,
the details of disputed duty of excise, duty of customs, Service Tax, Income Tax, Wealth
Tax and Cess which have not been deposited are as under:
| Name of the Statute |
Nature of Dues |
Forum where dispute is pending |
Rs. In Lakhs |
Period to which it relates |
| The Central |
Excise |
Supreme Court |
2,174.30 |
1986 to 2009 |
| Excise Act, 1944 |
duty |
High Court, Mumbai |
11.47 |
|
|
|
Customs, Excise, |
384.96 |
|
|
|
Service Tax Appellate |
|
|
|
|
Tribunal, Mumbai |
|
|
|
|
Commissioner |
28.07 |
|
|
|
(Appeals) |
|
|
|
|
Asst. Commissioner |
274.43 |
|
| The Central |
Service |
Customs, Excise, |
105.02 |
2005 to 2009 |
| Excise Act, 1944 |
Tax |
Service Tax Appellate |
|
|
|
|
Tribunal, Mumbai |
|
|
| The Maharashtra |
Water |
Assessing authority, |
17471.24 |
2005 to 2013 |
| Irrigation Act,1976 |
Cess |
-MPCB, Mumbai |
|
|
| The Income tax |
Income |
Income Tax |
1861.39 |
Assessment Year |
| Act, 1961 |
Tax |
Commissioner |
|
2008-09 to 2018-19 |
|
|
(Appeals)-Thane |
|
|
8. After considering what was approved in the Corporate Debt Restructuring package
in the year January, 2008 and considering that loans from banks have already been assigned
to body corporate, the Company has defaulted in repayment of dues to banks and the details
are as under :
| Nature of Dues |
Name of the bank/lender |
Period of Default |
Rs. In Lakhs |
| Principal amount |
Punjab National bank |
12-108 months |
5155.38 |
| Principal amount |
Dena Bank |
12-108 months |
3,148.00 |
| Total |
|
|
8,303.38 |
| Principle amount |
Debenture holder |
12-108 months |
316.80 |
| Interest thereon |
Lender wise details not available |
12-108 months |
10,120.46 |
9. The Company has not raised any money by way of public issue or further public offer
(including debt instruments) during the year. Based on the information and explanations
given to us by the management, term loans were applied for the purpose for which the loans
were obtained.
10. 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, no material fraud on or by the
Company by its officers or employees has been noticed or reported during the course of our
audit except continuing theft of certain parts of Plant & Machinery in the factory,
the amount whereof has not been ascertained, for which the Company has lodged FIRs with
relevant authorities and also filed the claims with insurance company.
11. Managerial Remuneration of Rs. 181.73 Lakhs has been provided for the year and
subject to shareholders’/lenders approval and is not in accordance with the
provisions of Section 197 read with Schedule V of the Act. Also refer para (e) of Basis
for Qualified Opinion paragraph and Note no.29(a) of the financial statements in respect
of remuneration paid in respect of an earlier period.
12. In our opinion, the Company is not a Nidhi Company. Therefore, the provisions of
clause 4(xii) of the Order are not applicable to the Company.
13. 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, all transactions with the
related party are in compliance with section 177 and 188 of the Act and the details have
been disclosed as required by the applicable Indian Accounting Standard in Note no. 33 to
the Financial Statements.
14. The Company has not made any preferential allotment or private placement of shares
or fully or partly convertible debentures during the year. Therefore, the provisions of
clause 4(xiv) of the Order are not applicable to the Company.
15. Based on the information and explanations given to us, Company has not entered into
any non-cash transactions with directors or persons connected with them during the year
Therefore, the provisions of clause 4(xv) of the Order are not applicable to the Company.
16. In our opinion, the Company is not required to be registered under Section 45-IA of
the Reserve Bank of India Act, 1934. Therefore, the provisions of clause 4(xvi) of the
Order are not applicable to the Company.
|
For BAGARIA & CO.LLP |
|
Chartered Accountants |
|
ICAI Firm Registration No: |
|
113447W/W-100019 |
|
Vinay Somani |
| Place : Mumbai |
Partner |
| Date : 24th May, 2018 |
Membership No. 143503 |
Annexure B ANNEXURE TO THE INDEPENDENT AUDITOR’S REPORT OF EVEN DATE ON THE
FINANCIAL STATEMENTS OF NRC LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section
143 of the Companies Act, 2013 ("the Act") We have audited the internal
financial controls over financial reporting of NRC Limited ("the Company") as of
March 31, 2018 in conjunction with our audit of the financial statements of the Company
for the year ended on that date.
Management’s Responsibility for Internal Financial Controls.
The Company’s management is responsible for establishing and maintaining internal
financial controls based on "the internal control over financial reporting criteria
established by the Company considering the essential components of internal control stated
in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting
issued by the Institute of Chartered Accountants of India". These responsibilities
include the design, implementation and maintenance of adequate internal financial controls
that were operating effectively for ensuring the orderly and efficient conduct of its
business, including adherence to company’s policies, the safeguarding of its assets,
the prevention and detection of frauds and errors, the accuracy and completeness of the
accounting records, and the timely preparation of reliable financial information, as
required under the Companies Act, 2013.
Auditors’ Responsibility
Our responsibility is to express an opinion on the Company’s internal financial
controls over financial reporting based on our audit. We conducted our audit in accordance
with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting
(the "Guidance Note") and the Standards on Auditing, to the extent applicable to
an audit of internal financial controls, both issued by the Institute of Chartered
Accountants of India. Those Standards and the Guidance Note require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether adequate internal financial controls over financial reporting was established and
maintained and if such controls operated effectively in all material respects. Our audit
involves performing procedures to obtain audit evidence about the adequacy of the internal
financial controls system over financial reporting and their operating effectiveness. Our
audit of internal financial controls over financial reporting included obtaining an
understanding of internal financial controls over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. The procedures selected
depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our qualified audit opinion on the Company’s internal financial controls system over
financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company’s internal financial control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal financial control over
financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorisations of
management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorised acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial
reporting, including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may occur and not be detected.
Also, projections of any evaluation of the internal financial controls over financial
reporting to future periods are subject to the risk that the internal financial control
over financial reporting may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Qualified opinion
According to the information and explanations given to us and based on our audit, the
following material weaknesses have been identified as at March 31, 2018:
a) The Company did not have an appropriate internal control system for fixed assets
and inventories with regard to updating of records, impairment and physical verification.
These could potentially result in material misstatements in the Company’s fixed
assets, and expense account balances.
b) The Company did not have an appropriate internal control system for Banks, Loans
& Advances, Other non- current assets, Trade payables, Other liabilities and lenders
with regard to confirmation of balances. These could potentially result in material
misstatements in the Company’s assets liabilities & expense account balances.
c) The Company did not have an appropriate internal control system for customer
acceptance, credit evaluation and establishing customer credit limits for scrap sales,
which could potentially result in the Company recognising revenue without establishing
reasonable certainty of ultimate collection.
d) The Company did not have an appropriate internal control system for borrowings
with regard to interest provisioning. These could potentially result in material
misstatements in the Company’s accrued interest (liability) and expense account
balances.
e) The Company did not have an appropriate internal control for execution of maker
/checker process, segregation of duties, statutory compliance. These could potentially
result in material misstatements in the Company’s financial position.
A ‘material weakness’ is a deficiency, or a combination of deficiencies, in
internal financial control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis.
In our opinion, considering what is stated above, the Company has not maintained, in
all material respects, adequate internal financial controls over financial reporting and
such internal financial controls over financial reporting were not operating effectively
as of March 31, 2018, based on the internal control over financial reporting criteria
established by the Company considering the essential components of internal control stated
in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting
issued by the Institute of Chartered Accountants of India.
|
For BAGARIA & CO.LLP |
|
Chartered Accountants |
|
ICAI Firm Registration No: |
|
113447W/W-100019 |
|
Vinay Somani |
| Place: Mumbai |
Partner |
| Date: May 24, 2018 |
Membership No. 143503 |
+91-9892691696
