shree bhawani paper mills ltd Auditors report

TO THE MEMBERS OF

SHREE BHAWANI PAPER MILLS LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of Shree Bhawani Paper Mills Ltd. ("The Company"), which comprise the Balance sheet as at 31st March, 2016, the statement of Profit and Loss and 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

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 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 thereunder.

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, were 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 true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of 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 of Qualified Opinion

(a) As mentioned in Note No 40 of financial statements, the balances of some of the trade receivables, trade payables, lenders, and loans and advances are subject to confirmation/reconciliation and subsequent adjustments, if any. As such, we are unable to express any opinion as to the effect thereof on the financial statements for the year.

(b) As mentioned in Note No.42 of financial statements, the Company became a sick industrial company within the meaning of Section 3 (1) (O) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) due to erosion of its entire net worth and the Company was declared a sick industrial company by BIFR on 26th September 2013. These factors, along with other matters as set forth in the said note, raise doubt that the Company will be able to continue as a going concern. The Company has provided interest on Term Loan and other Bank Loans of Indian Bank and Bank of Baroda @10.50% with effect from 1st January 2013. Had the liability of interest been considered at the rate as sanctioned by the Banks the Loss for the year would have been Rs. 65,38,63,348/- as against the reported loss of Rs.51,37,95,177/-

(c) As mentioned in Note No.29 of financial statements, the Company has not recognized additional net Deferred Tax Asset during the year. Net Deferred Tax Assets of Rs. 14 crores was recognized for the year ended 31.03.2012 based on the future profitability projections by the management. In the context of uncertainty of generation of profits in near future, Deferred Tax Assets has not been recognized.

(d) As mentioned in Note No.33 of financial statements, the Company has provided gratuity liability on estimated basis amounting to Rs.11,13,962/- (Previous Year Rs.14,22,439/-). which is not in compliance with "Accounting Standard 15 - Employee Benefits" issued by The Institute of Chartered Accountants of India.

Opinion

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, of the state of affairs of the Company as at March 31, 2016, and its Loss and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. 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, 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. We have sought and obtained all the information and explanations which to the best of our knowledge 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 the Company so far as it 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. 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;

e. On the basis of written representations received from the directors as at 31st March 2016, and taken on record by the Board of Directors, none of the Directors is disqualified as at 31st March, 2016, from being appointed as a Director in terms of Section 164 (2) of the Act;

f. With respect to the adequacy of internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure-B".

g. With respect to the other matters to be included in the Auditor’s 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) Tthe Company has disclosed the impact of pending litigations on its financial position in its financial statements-Refer Note no.23 .to the financial statements;

(ii) The Company has no long-term contracts as at 31st March, 2016.

(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

	FOR P.L. GUPTA & CO.
	CHARTERED ACCOUNTANTS
	FIRM REGISTRATION NO. -011575C
PLACE: ALLAHABAD	(P.L GUPTA)
DATE: 24TH MAY, 2016	PARTNER
	MEMBERSHIP NO. 009444

ANNEXURE-A

TO THE INDEPENDENT AUDITORS’ REPORT OF EVEN DATE ON FINANCIAL STATEMENT OF SHREE BHAWANI PAPER MILLS LIMITED

Referred to in paragraph 1 under the heading "Report on other Legal and Regulatory Requirements" of our report of even date .

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) Some of the Fixed Assets were physically verified during the year by the management in accordance with a program of verification, which in our opinion provides for physical verification of all fixed assets at reasonable intervals. According to information and explanations given to us, no material discrepancies were noticed on such verification.

(c) The title deeds of immovable properties are held in the name of the Company.

(ii) The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.We are informed that the discrepancies indentified on physical verification of inventories as compared to book records were not material and have been properly dealt with in the books of account.

(iii) As informed to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Act. Consequently, the requirements of clauses (iii) (a) and (b) of paragraph 3 of the Order are not applicable for the current year.

(iv) As informed to us, the Company has not given any loans, made investments, given guarantees and security to any person or party covered under section 185 and 186 of the Companies Act, 2013.

(v) The Company has not accepted any deposits from the public during the year under the provisions of Companies Act 2013. As informed no order has been passed by the Company law board or National Company Law Tribunal or Reserve Bank of India or any court or any other Tribunal.

(vi) Pursuant to the rules made by the Central Government of India, the Company is required to maintain cost records as specified under Section 148 (1) of the Companies Act, 2013 in respect of the products of the Company. We have broadly reviewed the books of account and records maintained by the company in this connection and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records with a view to determine whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us and records of the Company examined by us, undisputed statutory dues including provident fund, employees’ state insurance, Income tax, Sales Tax, Service Tax, duty of custom, duty of excise, value added tax, Cess and any other statutory dues have not been regularly deposited with the appropriate authorities. Further details of such dues which were outstanding for a period of more than six months from the date they became payable are as follows.

Name. of Statute	Period to which amount relates	Due Date	Amount (Rupees)	Date of payment
Employees State Insurance	June 2013 to Sept. 2015	July 2013 to Oct. 2015	4873573	Not yet deposited
Employees Provident Fund	Aug. 2012 to Sept. 2015	Sept. 2012 to Oct. 2015	22579526	Not yet deposited
Finance Act, 1994 Service Tax	Oct. 2013 to Sept. 2015	Nov. 2013 to Oct. 2015	541052	Not yet deposited
Income Tax Act, 1961 TDS	March 2014 to Sept. 2015	April 2014 to Oct. 2015	669737	Not yet deposited
		Total	28663888

(b) According to the information and explanations given to us and records of the Company, the dues outstanding in respect of income tax, Sales Tax, Service Tax, duty of custom, duty of excise and value added tax on account of any dispute are as follows:

Name of Status	Nature of the dues	Amount Rs.	Period to which amount relates	Forum where dispute is pending	Remarks, if any
Commercial Tax Uttar Pradesh	Penalty	28,000/-	2012-13	Addl.Comm. Tax, Allahabad	Deposit under Protest
Commercial Tax Uttar Pradesh	Penalty	88,000/-	2012-13	Addl.Comm. Tax, Allahabad	Deposit under Protest
Commercial Tax Uttar Pradesh	Penalty	53,400/-	2012-13	Tribunal Comm. Tax, Allahabad	Deposit under Protest
Commercial Tax Uttar Pradesh	Penalty	50,000/-	2011-12	Tribunal Comm. Tax, Allahabad	Deposit under Protest
Commercial Tax Uttar Pradesh	Central Sales Tax	6,48,582/-	2009-10	Tribunal Comm. Tax, Allahabad	2nd Appeal
Commercial Tax Uttar Pradesh	Central Sales Tax	4,98,560/-	2010-11	Tribunal Comm. Tax, Allahabad	2nd Appeal
Commercial Tax Uttar Pradesh	Central Sales Tax	21,99,000/-	2011-12	Addl. Comm. Tax, Allahabad	1st Appeal
Commercial Tax Uttar Pradesh	Central Sales Tax	7,19,213/-	2012-13	Addl. Comm. Tax, Allahabad	1st Appeal
Commercial Tax Uttar Pradesh	Central Sales Tax	2,19,371/-	2013-14	Addl. Comm. Tax, Allahabad	1st Appeal
Commercial Tax Uttar Pradesh	Value Added Tax	5,95,235/-	2013-14	Addl. Comm. Tax, Allahabad	1st Appeal
UP Tax on Entry of Good into Local Area Act, 2007	Entry Tax	1,26,473/-	2013-14	Addl. Comm. Tax, Allahabad	1st Appeal
Total		52,25,834/-

(viii) According to the information and explanations given to us, the Company has defaulted in repayment of loans or borrowings to banks. Details of such defaults are as follows:

Name of Bank	Period	Installment Amount	Period	Interest Amount	Total overdues as on 31st March 2016
Bank of Baroda T/L-III-	July 2012 to March 2016	11,25,00,000/-	August 2012 to March 2016	8,54,83,992/-	19,79,83,992/-
Bank of Baroda T/L-IV	July 2012 to March 2016	1,17,18,750/-	August 2012 to March 2016	89,49,865/-	2,06,68,615/-
Bank of Baroda T/L-V	April 2013 to March 2016	3,18,75,000/-	August 2012 to March 2016	4,22,25,597/-	7,41,00,597/-
Bank of Baroda WCTL	April 2015 to March 2016	2,71,42,856/-	August 2012 to March 2016	9,37,94,127/-	12,09,36,983/-
Bank of Baroda Corporate Loan	April 2013 to March 2015	10,00,00,000/-	August 2012 to March 2016	4,93,59,707/-	14,93,59,707/-
Indian Bank /T/L-III	July 2012 to March 2016	11,25,00,000/-	August 2012 to March 2016	8,09,53,750/-	19,34,53,750/-
Indian Bank T/L-IV	July 2012 to March 2016	1,17,18,750/-	August 2012 to March 2016	82,99,351/-	2,00,18,101/-
Indian Bank T/L-V	April 2013 to March 2016	3,18,75,000/-	August 2012 to March 2016	4,30,69,086/-	7,49,44,086/-
Indian Bank T/L-VI	April 2014 to March 2016	4,00,00,000/-	August 2012 to March 2016	7,81,17,963/-	11,81,17,963/-
Bank of Baroda (CC A/c)					17,90,98,257/-
Bank of Baroda Devolved LC					4,40,76,843/-
Indian Bank (CC A/c)					56,87,45,387/-
Indian Bank Guarantee					58,19,311/-
TOTAL		47,93,30,356/-		49,02,53,438/-	1,76,73,23,592/-

(ix) The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments) or term loans during the year. Accordingly, the provisions of clause 3 (ix) of the Companies (Auditor’s Report) Order 2016 are not applicable.

(x) 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 material fraud by the Company or on the Company by its officers or employees, noticed or reported during the year. Nor have we been informed of any such case by the Management.

(xi) According to the information and explanations given to us, managerial remuneration has not been paid or provided during the year since remuneration has been foregone by Directors.

(xii) The Company is not the Nidhi Company. Accordingly, the clause 3 (xii) of the Companies (Auditor’s Report) Order, 2016 is not applicable.

(xiii) According to the information and explanations given to us, all transactions with related parties are in compliance with Section 177 and 188 of the Companies Act, 2013 and the details have been disclosed in the Financial Statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us, the Company has not entered into any non cash transactions with directors or persons connected with them during the year.

(xvi) According to the information and explanations given to us, the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

	FOR P.L. GUPTA & CO.,
	CHARTERED ACCOUNTANTS
	FIRM REGISTRATION NO. 011575C
PLACE: ALLAHABAD	(P.L. GUPTA)
DATE : 24TH MAY, 2016	PARTNER
	Membership No. 009444

ANNEXURE- B

TO THE INDEPENDENT AUDITORS’ REPORT OF EVEN DATE ON FINANCIAL STATEMENTS OF SHREE BHAWANI PAPER MILLS 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 SHREE BHAWANI PAPER MILLS LIMITED ("the Company") as at 31st March, 2016 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.

Auditor’s 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, issued by Institute of Chartered Accountants of India (ICAI) and deemed to be prescribed under section 143 (10) of the Companies Act, 2013 to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and 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 judgment, 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 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) Pertains 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 unauthorized acquisitions, 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 the compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, and adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March 2016, based on 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 P.L. GUPTA & CO.,
	CHARTERED ACCOUNTANTS
	FIRM REGISTRATION NO. 011575C
PLACE: ALLAHABAD	(P.L. GUPTA)
DATE : 24TH MAY, 2016	PARTNER
	MEMBERSHIP NO. 009444