INDEPENDENT AUDITORS
To
The Members of VBC Industries Limited,
Hyderabad.
Report on the Financial Statements:
01. We have audited the accompanying financial statements of VBC Industries
Limited, Hyderabad ("the Company"), which comprise the Balance Sheet as
at March 31, 2014, 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:
02. Management is responsible for the preparation of these financial statements that
give a true and fair view of the financial position and financial performance 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"). 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.
Auditor’s Responsibility:
03. 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.
04. 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.
05. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
Basis of Qualification:
06. Non-provision of FSA charges for the years 2010-11 to 2012-13 totaling to Rs.
8,11,14,714/- pending resolution of the appeals pending before various judicial
authorities as stated in Note no 2.30(1 )(a) to Financial Statements, has resulted in
understatement of the loss for the year.
Qualified Opinion:
07. In our opinion and to the best of our information and according to the explanations
given to us and subject to our remarks under paragraph (06) above dealing with the
Basis of Qualified Opinion 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 31st
March, 2014;
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 Matters
08. We draw attention to note no 02.31 to the financial statements relating to the writ
petition filed by the company allowed by the Andhra Pradesh High Court by its order dated
29"’ April 2014 against the levy of Load factor short fall charges for the
period from September, 2005 to August, 2006 during which the Ferro Alloys Unit of the
Company was closed, and for the years from 2008-09 to 2011-12 during Load Reliefs (Power
Cut Period) together with Surcharge thereon totaling to Rs. 52,80,34,663/- levied by the
Central Power Distribution Company of AP Limited (CPDCL) and ordering CPDCL to pass a
detailed order after considering the company’s explanations/ pleas. Our opinion is
not qualified in respect of this matter.
09. We draw attention to note no 2.32 to the financial statements relating the
maintenance of books of account on "Going Concern Concept" though the Ferro
Alloys plant of the company did not carry any production activities during the year under
report, due to non-supply of power by CPDCL, as described more elaborately, in paragraph
(08)of the independent audit report. Our opinion is not qualified in respect of this
matter.
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. 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, 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. in our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash
Flow Statement, comply with the Accounting Standards referred to in subsection (3C) of
section 211 of the Companies Act, 1956;
e. on the basis of the written representations received from the directors as on 31st
March, 2014, taken on record by the Board of Directors, none of the directors is
disqualified as on 31st March, 2014, from being appointed as a director in terms of
section 274 (1) (g) of the Act.
|
For Brahmayya & Co., |
|
Chartered Accountants |
|
(Firm Regd. No. 000513S) |
|
Sd/- |
|
C.V. RAMANA RAO |
| Camp: Hyderabad |
Partner |
| Date : 29-05-2014 |
Membership No. 018545 |
Annexure to the Auditors Report referred to in Paragraph 9 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) The fixed assets could not be physically verified by the management during the year
in accordance with a phased programme of verification, due to closure of its plant for the
entire year. Accordingly, we are unable to report on any material discrepancies between
the fixed assets register and the assets physically available.
c) No Fixed Assets have been disposed off by the Company during the year.
ii) a) Physical verification of inventory could not be conducted during the year by the
management due to closure of the plant for the entire year.
b) As no physical verification has been conducted during the year, we are unable to
report on the adequacy of the procedures of physical verification of inventory followed by
the management.
c) On the basis of our examination of the records of inventory, we are of the opinion
that the Company is maintaining proper records of inventory. As no physical verification
of inventories has been carried out during the year under report, we are unable to report
regarding the discrepancies between the physical stocks and the book records.
iii) a) The Company has not granted any loans, secured or unsecured to companies,
firms, or other parties covered in the register maintained under section 301 of the
Companies Act, 1966. Consequently, clauses 4(iii) (b) to (d) of the Order are not
applicable.
b) The Company has taken an unsecured loan of Rs. 66.88 Lakhs from a party during the
year. Besides it had taken unsecured loans of Rs. 1182.59 Lakhs from 2 parties of which Rs
670 Lakhs is interest free to whom the provisions of section 301 of the Companies Act.
1956 apply.
c) In our opinion and according to the information and explanations given to us , the
rate of interest and other terms & conditions in respect of the loans are not prima
facie prejudicial to the to the interest of the company.
d) The company in arrears of payment of interest of Rs.76.23 Lakhs as on the date of
Balance Sheet. However, the date of repayment of principal amount has not been stipulated.
iv) In our opinion and according to the information and explanations given to us, there
is adequate internal control system commensurate with the size of the Company and the
nature of its business with regard to purchase of inventory, fixed assets and sale of
goods and services. We have not observed any major weakness in the internal control system
during the course of the audit.
v) i. According to the information and explanations given to us, we are of the opinion
that the particulars of contracts and arrangements that need to be entered into the
register maintained under section 301 of the Companies Act, 1956 have been so entered.
ii. In our opinion and according to the information and explanations given to us, the
contracts and arrangements made in pursuance of contracts or arrangements entered in the
register maintained under section 301 of the Companies Act, 1956 have been made at prices
which are reasonable having regard to prevailing market prices at the relevant time.
vi) The Company has not accepted any deposits from public. Consequently the clause
4(vl) of the order is not applicable.
vii) In our opinion, the Company has an internal audit system commensurate with its
size and nature of its business.
viii) We have broadly reviewed the books of account relating to materials, labour and
other Items of cost maintained by the Company pursuant to the Rules made by the Central
Government for the maintenance of cost records under section 209(1) (d) of the Companies
Act, 1956 and we 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.
ix) a) According to the information and explanations given to us and on the basis of
examination of the records of the Company, there are delays in deposit/ remittances of
amounts deducted/ accrued in the books of account in respect of undisputed statutory dues
including provident fund, income-tax, sales-tax, wealth-tax, custom duty, excise duty,
service-tax, cess and other material statutory dues during the year by the Company with
the appropriate authorities.
b) According to the information and explanations given to us, the details of undisputed
amounts payable in respect of income tax, sales tax, wealth tax, service tax, customs
duty, excise duty, cess and other material statutory dues which were in arrears as at 31st
March 2014 for a period of more than six months from the date they became payable are as
under:
| Nature of Statute |
Nature of Dues |
Period for which the amount relates |
Amount(Rs.) |
| Employee Provident Fund Act, 1952 |
Employer contribution |
From 01.03.2012 to 31.08.2013 |
20,19,434 |
| Employee Provident Fund Act, 1952 |
Employee contribution |
From 01.03.2012 to 31.08.2013 |
20,20,245 |
| Employee state Insurance Corporation Act 1948 |
Employer contribution |
From 01.06.2012 to 31.08.2013 |
7,66,581 |
| Employee state Insurance Corporation Act 1948 |
Employee contribution |
From 01.06.2012 to 31.08.2013 |
2,81,871 |
| Professional Tax 1975 |
Employee contribution |
From 01.10.2012 to 31.08.2013 |
1,35,790 |
| Income Tax Act |
Regular assessment tax |
For the financial year 2011-12 |
1,11,03,600 (excluding interest) |
| Service Tax Act, |
Service tax on man power services, works contracts & rent a cab |
From 01.07.2012 to 31.08.2013 |
3,36,161 |
| Service Tax Act, |
Service tax on rental Income |
From 01.04.2012 to 31.08.2013 |
10,91,616 |
c) As at 31st March 2013, there have been no disputed dues, which have not
been deposited with the respective authorities in respect of Income tax, Sales tax,
Wealth-tax, Service tax, Customs duty, Excise Duty and Cess except the following:
| Name of the Statute |
Nature of the dues |
*Amount (Rs. in Lakhs) |
Period of which the amount relates |
Forum where dispute is pending |
| Central excise Act |
Demand for Differential duty on finalization |
40.68 |
01-03-1994 to 31-08-1997 |
CESTAT, Bangalore Bench |
| Central excise Act |
Demand for interest & penalty |
0.86 |
1997-98 |
CESTAT, Bangalore Bench |
| AP General Sales Tax Act |
Demand for Sales tax on lease rentals of bottles & crates. |
18.93 |
Assessment years- 1996-97 & 1997-98 |
Sales Tax Appellate tribunal, Hyderabad. |
| AP General Sales Tax Act |
Non-submission of "C" and "H" forms |
18.48 |
2008-09 |
Commercial Tax Officer, Khairatabad Circle, Hyderabad |
| Income Tax Act |
Income tax |
74.41 |
2008-09 and 2009-10 |
Commissioner of Income Tax (Appeals), Hyderabad |
* Net of pre-deposits made.
x) The Company has no accumulated losses. It has incurred cash losses in the financial
year covered by our audit and also in the immediately preceding financial year.
xi) The Company during the year has defaulted in payment of loan installments and the
interest thereon in respect of a term loan obtained from a bank. The overdue loan
installments and interest arrears up to 31st March 2014 amount to Rs. 162 Lakhs
and Rs. 455.46 Lakhs respectively.
xii) The Company has not granted any loans or advances on the basis of security by way
of pledge of shares, debentures and other securities. Consequently the clause 4(xii) of
the order is not applicable.
xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit
fund/society. Consequently the clause 4(xiii) of the order is not applicable.
xiv) In our opinion, the Company is not dealing in or trading in shares, securities,
debentures and other instruments. Consequently the clause 4(xiv) of the order is not
applicable.
xv) According to,the information and explanation given to us, the company has given two
guarantees for loans taken by others from financial institutions. The guarantees given by
the company along with other co-promoters to financial institutions on behalf of these two
companies promoted by them are with the approval of shareholders in a general meeting and
in accordance with the promoters’ agreements. Having regard to the information and
explanations given to us the said guarantees are not prejudicial to the interest of the
company.
xvi) In our opinion, the company has utilized fully the term loan obtained from a bank
for the purpose for which the same has been obtained.
xvii) According to the information and explanations given to us and on overall
examination of the Balance Sheet of the Company, we report that no funds raised during the
year on short term basis have been used for long term investment.
xviii) During the year, the Company has not made any preferential allotment of shares.
Consequently the clause 4(xviii) of the order is not applicable.
xix) The Company has not issued any debentures so far. Consequently clause 4(xix) of
the order is not applicable.
xx) During the year, the Company has not raised money by Public issue. Consequently the
clause 4(xx) of the order is not applicable.
xxi) According to the information and explanations given to us, no fraud on or by the
Company has been noticed or reported during the course of our audit.
|
For Brahmayya & Co., |
|
Chartered Accountants |
|
(Firm Regd. No. 000513S) |
|
Sd/- |
|
(CA. C.V. Ramana Rao) |
| Camp: Hyderabad |
Partner |
| Date : 29-05-2014 |
Membership No. 018545 |
+91-9892691696
