Independent Auditor
To
the Members
CREW B.O.S. PRODUCTS LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of Crew B.O.S. Products
Limited (the Company), which comprise the Balance Sheet as at March 31, 2013, and 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
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 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
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. 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 which we have been provided are not sufficient and
appropriate to provide a basis for an audit opinion.
Basis for Disclaimer of Opinion
1. We have not been able to obtain sufficient appropriate audit evidence with regard to
the sales and purchases, particularly having regard to:
i) Sale in respect of export sales to its WOS-Alchemy Trade Post, Mauritius,
aggregating to Rs. 4,938.74 lacs made during the first three quarters of the financial
year, which was subsequently reversed in the last quarter of the year. (Refer No. 29(a)
of the Financial Statements)
ii) Sales in respect of domestic trading sales to various parties aggregating to Rs.
7075.23 lacs (net of sales return of Rs. 1376.00 Lacs out of sales made in previous
years)made during the year. (Refer No. 19(c) of the Financial Statements)
iii) Purchases in respect of domestic trading purchases from various parties
aggregating to Rs. 6145.16 lacs made during the year. (Refer No. 22 of the Financial
Statements)
2. We have not verified the inventory of the Company and relied upon the reports as
certified by the management and Chartered Engineer & Valuer:(Refer No. 14 of the
Financial Statements)
a. Inventory shown at end of the financial year amounting to Rs. 12,969.86 lacs.
b. Written-off / disposal of the obsolete and rejected WIP/Finished Goods worth Rs.
1,692.22 lacs during the year.
3. We have not been able to obtain sufficient appropriate audit evidence/Confirmations
with regard to the recoverability of Sundry Debtors and Creditors, particularly having
regard to merchant trading done in Dubai, though the company has written off the amount
receivable and payable amounting to Rs. 11,180.08 Lacs and Rs. 3,111.16 respectively. (Refer
No. 29(b) & (c) of the Financial Statements)
4. We have not been able to obtain sufficient appropriate audit evidence with regard to
the recoverability of Domestic Trading Debtors amounting to Rs. 10825.97 lacs Outstanding
at the year end, which is after making the provision for bad and doubtful debt of Rs. 3500
lacs. (Refer No. 29(d) of the Financial Statements)
5. We draw attention to Note No. 31 of the financial statements wherein the management
has explained its reasons for preparing the financial statements on a going concern basis.
The total outside liabilities of the company exceeds its total assets of the company by
Rs. 3732.40 lacs as such the entire net worth of the company is eroded. The company has
also given corporate guarantees to the bankers of the WOS in Mauritius which is in excess
of the Net Worth of the company. The I.Biz Trade Post, Mauritius has been put into
receivership by Standard Bank (Mauritus) Ltd. to recover their outstanding dues of USD
18.27 Million plus interest accrued till the date of settlement. In the case of another
WOS- I. Connect Trade Post in Mauritius, the lending bank namely Bank One Ltd., Mauritius
has appointed a Loss Adjustor to recover the insurance claim & outstanding dues of the
WOS. The various parties/ financial institutions have filed Winding-up cases against the
company in Delhi High Court which are still under sub-judice. These factors raise
substantial doubt as to the company’s ability to continue as going concern.
6. We draw attention to Note No. 29 of the financial statements wherein the management
has informed that the certain activities carried out by the Ex-CFO cum Director
International Sales and CEO-Leather Division-Mr. Sanjeev Sehgal were suspect to be
dishonest resulting into financial loss to the company. The company has filed a complaint
against the erred officer which is pending at the appropriate authority. The company has
made adjustments/ provsions in the accounts to the extent known and further adjustments,
if any, to be made post completion of the investigation.
In view of the above, we are unable to comment on the adjustments/disclosures which may
become necessary as a result of further findings on the ongoing investigations and the
consequential impact, if any, on these financial statements.
7. As per discussions with the management, we understand that the management is of the
opinion that there is no need of any provision to be made for impairment of its fixed
assets which are being carried in the books at a written down value of Rs. 10,002.91 lacs.
However, we are not in agreement with the management and are of the opinion that there may
be impairment in the company’s fixed assets and same needs to be ascertained and
accordingly dealt with in the books of accounts, if required. Accordingly we are unable to
comment on the necessity or otherwise to provide for an impairment loss in respect of
these assets. The effect of the non-provision of the impairment loss on assets, if any,
cannot be quantified.
8. We draw attention to Note No. 17 (a) of the financial statement, regarding no
provision for write off the Investments and loans & advance in non-operational WOS /
JVs of the company aggregating to Rs. 2,439.66 lacs even though auditors of these company
have commented in their audit report that about concern on the going concern of these
subsidiaries/JVS.
9. As stated in Note No. 6 of the financial statement, the company has not made any
provision for gratuity during the year.
Disclaimer of Opinion
Because of significance of the matters described in the Basis for Disclaimer of Opinion
paragraph, we have not been able to obtain sufficient appropriate audit evidence to
provide a basis for an audit opinion and the possible effects for not providing sufficient
appropriate audit evidence are deemed to be both material and pervasive to the financial
statements. Accordingly, we do not express an opinion on whether the financial statements
give a true and fair view in accordance with the applicable financial reporting framework
and 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, 2013; and
(b) in the case of the Statement of Profit and Loss, of the Loss for the year ended on
that date;
(c) in the case of the Cash Flow Statement, of the cash flows of the Company for the
year ended on that date.
Emphasis of Matter
We draw attention to Note No. 34 to the financial statements which describes the
uncertainty related to the outcome of the lawsuits and winding up petitions filed against
the Company by Financial Institutions, Banks and various parties.
Other Matter
We draw attention to Note No. 30 of the financial statement regarding attachment of
movable & immovable property by income tax department for non-payment of
self-assessment tax for various assessment years aggregating to Rs. 1,238.00 lacs. The
department has already initiated auction of the immovable property of the company located
at Jallandhar.
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 not been provided sufficient and appropriate audit evidence including
confirmation to provide a basis for an audit Operation.
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 except for the possible
effects of the matters described in the Basis for Disclaimer of Opinion;
c. the Balance Sheet and Statement of Profit and Loss dealt with by this Report are in
agreement with the books of account;
d. in our opinion, the Balance Sheet and Statement of Profit and Loss comply with the
Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act,
1956 except for the possible effects of the matters described in the Basis for Disclaimer
of Opinion;
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, none of the directors is disqualified
as on March 31, 2013, from being appointed as a director in terms of clause (g) of
sub-section (1) of section 274 of the Companies Act, 1956.
f. since the Central Government has not issued any notification as to the rate at which
the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any
Rules under the said section, prescribing the manner in which such cess is to be paid, no
cess is due and payable by the Company;
|
For Anil K. Goyal & Associates |
|
Chartered Accountants |
|
(Firm Regn. No.: 04558N) |
|
Sd/- |
|
V. P Sony |
| Place : New Delhi |
(Partner) |
| Date : 30/09/2013 |
M. No.: 86718 |
ANNEXURES REFERRED TO IN PARA 1 OF THE AUDITOR’S REPORT TO THE MEMBERS OF CREW
B.O.S. PRODUCTS LIMITED ACCOUNTS FOR THE YEAR ENDED 31st MARCH 2013
1) a) The Company has generally maintained proper records showing full particulars
including quantitative details and situation of Fixed Assets. As confirmed by the
Management the records are being compiled for all assets owned by the Company.
b) The Management has occasionally physically verified the fixed assets and no material
discrepancies are reported to have been observed on such verification as compared to book
records.
c) In our opinion, and according to the information and explanations given to us, the
company has not disposed off a substantial part of fixed assets during the year and
therefore paragraph 4(i) (c) of the Companies (Auditor’s Report) Order, 2003
(hereinafter referred to as the Order) is not applicable.
2) a) The Inventory has been occasionally physically verified during the year by the
Management and Auditors appointed by the bankers from whom the company is enjoying various
credit facilities.
In our opinion the frequency of verification needs to be increased in view of the size
and nature of its business. We have relied on the information provided and certified by
the management regarding the physical stock count and its value at the year end.
b) In our opinion, the procedures of physical verification of inventory followed by the
Management need better scientific method and more frequent in relation to the size of the
company and the nature of its business besides also involving Internal Auditors as part of
their scope.
c) On the basis of our examination of the inventory records, in our opinion, the
company needs to implement a proper ERP System for improvement of inventory records. As
confirmed by the Management the discrepancies noticed on physical verification of
inventory compared to book records have been dealt with.
3) The Company has granted interest free unsecured loans/advances to eight parties
covered in the register maintained under section 301 of the Act, maximum amount
outstanding during the year aggregating to Rs. 4466.72 Lakhs and aggregating amount
outstanding at the end of the year is Rs. 3187.08 Lakhs. The terms and conditions thereof
are prejudicial to the interest of the company to the extent of interest paid by the
company to its bankers for funds borrowed from them. The company has taken interest free
unsecured, loans/advances from seven parties covered in the register maintained under
section 301 of the Act, maximum amount outstanding during the year aggregating to Rs.
12290.69 Lakhs and aggregating amount outstanding at the end of the year is Rs. 9401.96
Lakhs. The terms and conditions thereof are generally not prima facie prejudicial to the
interest of the company
4) In our opinion, and according to information and explanations given to us and as
reported in Internal Audit Reports conducted by independent third party, the internal
control procedure is neither strong nor commensurate with the size of the Company and the
nature of its business for the purchase of stores & spare parts, fixed assets, and
with regard to purchase/sale of products and maintaining records in accounts thereof.
There are no policies or Governance for commercial dealings with associated companies vis
a vis commercial terms/ credit period which are inordinately higher and impractical
affecting company’s affairs badly
5) The transactions that need to be entered into a register in pursuance of section 301
of the Companies Act have been entered. Since the company does not have comparable data of
pricing in respect of purchase and sale of goods and services aggregating during the year
to Rs. 5,00,000/ - or more in respect of parties in pursuance of contracts or arrangements
entered into the register maintained under section 301 of the Companies Act, 1956, hence
we are unable to comment whether prices at which these transactions are made are
reasonable or not having regard to prevailing market prices / at arms’ length price.
6) In our opinion and according to information and explanations given to us the Company
has not accepted any deposits from the public.
7) In our opinion the Company has an internal audit system that is commensurate with
the size and nature of its business. The company needs to increase the scope of Internal
Auditor including physical stock verification, which will help to enhance the control.
8) The company has not maintained the cost records as per the requirement of clause (d)
of sub – section (1) of Section 209 of the Companies Act, 1956.
9) In our opinion and according to the information and explanations given to us, the
company is not regular in depositing undisputed statutory dues including Provident Fund,
employees’ state insurance, investor education and protection fund, income tax, sales
tax, wealth tax, service tax, custom duty, excise duty ,cess, and other statutory dues, as
applicable to its activities, with appropriate authorities. The arrears of outstanding
statutory dues as at 31st March, 2013 are as under:-
| S. No. |
Particulars |
Amount |
|
|
(Rs. in Lacs) |
| 1 |
ESI |
188.32 |
| 2 |
Provident Fund |
302.64 |
| 3 |
Welfare Fund |
16.58 |
| 4 |
Self-AssessmentIncome Tax |
1,481.42 |
| 5 |
Interest on Self Assessment Tax |
456.90 |
| 5 |
TDS |
206.49 |
| 6 |
Excise Duty Payable |
21.84 |
| 7 |
WCT |
2.17 |
| 8 |
Sales Tax Payable |
26.97 |
|
TOTAL |
2,703.33 |
As explained to us, the Company did not have any dues on account of investor education
and protection fund.
According to the records of the Company, following are the disputed liabilities of the
Company. The Company has not made the provision for the same in its books of accounts.
| Name of Statute |
Nature of Dues |
Amount (Rs.in Lakhs) |
Period to which the amount relates |
Forum where dispute is pending |
Amount paid against Demand (Rs. in Lakhs) |
| Income Tax Act, 1961 |
Income Tax |
34.49 |
AY 2005-06 |
ITAT (New Delhi)/CIT(A) (Gurgaon) |
34.49 |
| Income Tax Act, 1961 |
Income Tax |
33.13 |
AY 2006-07 |
ITAT (New Delhi)/CIT(A) (Gurgaon) |
33.13 |
| Income Tax Act, 1961 |
Income Tax |
337.53 |
AY 2007-08 |
CIT(A) (Gurgaon) |
- |
| Income Tax Act, 1961 |
Income Tax |
741.55 |
AY 2011-12 |
CIT(A) (Gurgaon) |
- |
10) The accumulated losses of the company at the end of the Rs. 9,030.06 lacs as at the
end of the financial year. The company has also incurred cash losses of Rs. 10,022.69 Lacs
in the current financial year. The company had not incurred cash loss in the immediately
preceding financial year.
11) Based on our audit procedures and as per the information and explanations given by
the management, the Company has defaulted in repayment of loans and interest to following
banks and financial institutions as at 31st March, 2013.
| Facility/ Bank |
Amount Sanctioned |
Amount Outstanding 31/03/2013 |
Overdue Position |
Status of Account |
|
|
|
Principal |
Interest |
|
| Working Capital Loan |
|
|
|
|
|
| Bank of Baroda |
1,250.00 |
1,710.55 |
249.92 |
210.63 |
NPA |
| IDBI |
2,000.00 |
2,599.27 |
- |
599.27 |
NPA |
| Axis Bank |
500.00 |
793.82 |
441.71 |
52.11 |
NPA |
| Allahabad Bank |
1,700.00 |
1,953.33 |
|
253.33 |
NPA |
| SBI |
2,300.00 |
2,862.46 |
108.15 |
454.31 |
NPA |
| ICICI Bank |
2,500.00 |
2,572.10 |
|
72.10 |
Standard, Restructured |
| Canara Bank |
2,400.00 |
2,364.69 |
|
|
Standard |
| Bank of India |
1,750.00 |
1,910.74 |
|
160.74 |
NPA |
| Citi Bank |
1,350.00 |
1,326.46 |
|
|
Standard |
| Standard Chartered Bank |
3,500.00 |
4,904.38 |
1,550.52 |
|
NPA |
| Term Loan |
|
|
|
|
|
| UCO Bank |
1,500.00 |
411.38 |
375.00 |
7.72 |
NPA |
| Bank of Baroda |
2,960.00 |
2,190.84 |
831.63 |
310.10 |
NPA |
| Allahabad Bank |
1,700.00 |
1,850.86 |
900.00 |
243.45 |
NPA |
| HSIIDC Limited |
2,405.00 |
1,218.73 |
- |
44.40 |
Standard |
| IFCI Venture Capital |
|
|
|
|
|
| Funds Limited NPA |
270.00 |
101.27 |
101.27 |
|
|
| IFCI Factors Limited |
950.00 |
729.74 |
634.74 |
|
NPA |
| Karvy Financials |
|
|
|
|
|
| Limited |
500.00 |
173.28 |
|
- |
Standard |
| TOTAL |
29,535.00 |
29,673.91 |
5192.94 |
2,408.16 |
|
Delays were noticed in payment of interest & principal on several occasions during
the year. Most of the above banks and financial Institutuions have already initiated legal
proceedings for recovery of their overdue loans and these legal cases are pending in
various courts and are sub-judice. The company has not issued any debentures.
12) In our opinion and according to the information and explanations given to us the
Company has not granted any loans or advances on the basis of security by way of pledge of
shares, debentures and other securities and therefore paragraph 4(xii)of the Order is not
applicable.
13) In our opinion and according to the information and explanations given to us, the
provisions of any special statute applicable to chit fund and nidhi/ mutual benefit
fund/society are not applicable to the company and therefore paragraph 4(xiii) of the
Order is not applicable.
14) The company is not dealing or trading in shares, securities and debentures,
therefore paragraph 4(xiv) of the Order is not applicable.
15) According to the records of the company and the information and explanations
provided by the management, the company has given guarantees aggregating to USD 33
Million, GBP 5 Million and INR 1300.00 Lacs to the bankers of its overseas and Indian WOS
respectively for loans taken by them from banks. The overseas WOS have made defaults in
payment their bank liabilities. One of the bank namely Bank One Ltd, Mauritius has
appointed Loss Adjuster to recover the outstanding amount from the WOS-I.Connect Trade
Post, Mauritius. The another bank namely Standard Bank, Mauritius Ltd., Mauritius has put
the WOS-I.Biz Trade Post into receivership to recover their outstanding dues and has also
invoked the corporate guarantee given by the Company. The company’s operations may
substantially be affected in case of encashment of guarantee by their bankers to recover
the outstanding amount by these overseas subsidiaries and the company’s going concern
status may not be a prudent assumption.
16) According to the information and explanations given, the company has not availed
any term loan from any bank/financial institutions during the year. However, certain
existing working capital loans were restructured/converted into working capital term
loans/demand loans. Since no fresh term loan taken by the company during the year
therefore paragraph 4(xvi) of the Order is not applicable.
17) According to the information & explanations given to us and based on
examination of documents & records made available, we are of the opinion that funds
raised on short term basis have prima facie not being used during the year for long term
investment.
18) According to the information and explanations given to us, the company has not made
any preferential allotment of shares during the year to parties and companies covered in
the Register maintained under section 301 of the Companies Act, 1956 and therefore
paragraph 4(xviii) of the Order is not applicable.
19) The company has not issued any debentures during the year and therefore paragraph
4(xix) of the Order is not applicable.
20) During the year under review, no money was raised by public issue and therefore
paragraph 4(xx) of the Order is not applicable.
21) The company management has informed that the certain activities carried out by the
Ex-CFO cum Director International Sales and CEO-Leather Division-Mr. Sanjeev Sehgal were
suspect to be dishonest resulting into financial loss to the company. The company has
filed complaint against the erred officer which is pending with the appropriate authority.
The company is still investing the matter and financial impact on the financial statements
is not yet fully quantified and as such we are not able to comment on the total quantum of
loss suffered by the company.
|
For Anil K. Goyal & Associates |
|
Chartered Accountants |
|
(Firm Regn. No.: 04558N) |
|
Sd/- |
|
V. P Sony |
| Place : New Delhi |
(Partner) |
| Date : 30/09/2013 |
M. No.: 86718 |
+91-9892691696
