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M/s. Empee Distilleries Limited.
Report on Financial Statements
We have audited the accompanying Standalone financial statements of M/s. Empee Distilleries Limited (the Company), which comprise the Balance Sheet as at 31st March, 2017and the Statement of Profit and Loss, the Cash Flow statement for the year ended from 01/04/2016 to 31/03/2017, and a summary of the significant accounting policies and other explanatory information for the year 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 standalone 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.
Our responsibility is to express an opinion on these standalone 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 companies Act 2013. 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 financial 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 we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.
Basis for Qualified Opinion
a. The company has made an investment of Rs.1.59 Crores as Equity Shares and further investment by way of share application money of Rs.140.36 Crores to its subsidiary Empee Sugars and Chemicals Limited and Rs.20.68 Crores as investment in Equity Shares of Empee Hotels Limited. The Companies Empee Sugars and Chemicals Limited & Empee Hotels Limited have been incurring losses. No Provision for diminution in the value of investment in respect of these companies have been considered in the accounts.
b. Other Loans & Advances amounting to Rs.40.35 Crores out of 40.98 Crores under the head other Current Assets, Sundry Debtors to Rs.65.08 Crores and Loan and advances to related parties Rs.41.88 Crores, Other Long Term Liabilities Rs.38.92 Crores and Trade Payable of Rs.79.34 Crores are subject to confirmation and reconciliation. The impact on profitability is not ascertainable.
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, the Standalone 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 for as at March 31, 2017;
b) in the case of the Profit and Loss Account, of the Loss for the year ended on that date; and
c) in the case of the Cash Flow Statement, of the 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 Annexure A a statement on the matters specified in the paragraph 3 and 4 of the Order, to the extent applicable.
2. As required by section 143(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, 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, aforesaid standalone financial statements comply with the Accounting Standards referred to in Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014.
e) On the basis of written representations received from the directors as on March 31, 2017, and taken on record by the Board of Directors, none of the directors are disqualified as on March 31, 2017, from being appointed as a director in terms of sub-section (2) of section 164 of the Companies Act, 2013.
f) 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 . Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the company s Internal financial controls over financial reporting.
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. The company has the following pending litigations which would impact its financial position.
|S No||Case No||Amount||Status|
|1.||Appeal filed by EDL and others before CE, Tribunal, Chennai.||Customs and Excise Tribunal-SZ Bench at Chennai||The order dt.12-3-2014, of the Commissioner of customs, Tuticorin directed to pay differential duty in the purchase of coal amounting to Rs.28,60,189/- with penalty of Rs 30,00,000/- and penalty of Rs 1,00,000/- against individual name of GM of EDL. Appeal with CE, Tribunal is pending.|
|2.||Appeal C/41496/ 2014-DB||Before Customs Excise & Service Tax Appellate Tribunal, Chennai||The commissioner of customs, Tuticorin filed an appeal against its orders granting exemption for customs duty to the tune of Rs. 35,23,458/- under notification 46/2011 for coal import from Asian countries against EDL.|
|3.||RFA No 119/2015 filed by us against judgment in OS 537/2008 dt.29-8-2014 filed by M/s Vintage Marketing||Before High Court of Kerala||Case relates to marketing services - Judgment and Decree for Rs 18,01418 with costs and interest @18% per annum passed by Sub Judge Palakkad against EDL, but EDL has filed an appeal before the High Court. Appeal is pending.|
|4.||OP732of 2015 before High Court of Madras against Arbitration Award passed by Retd. Justice J.Kanakaraj||Before High Court of Madras||OP filed against the award of payment of 15,00,000/- with 12 % interest from the year 2005 against the Arbitration raised by Mrs.Indumathi of RVS Enterprises, Pondicherry against EDL and others. Counter Claim by EDL was also filed. OP is pending.|
|5.||CP No.4/2015||Before High Court of Madras||Winding up petition filed by M/s Hambuja Road- ways for the alleged recovery of debt of principal, cost and interest of Rs.15,20,729/-against EDL. Under the orders of the Madras High Court, Hambuja Roadways transferred the case to NCLT and is pending.|
|6.||First appeal 264 of 2013 Filed by EDL||Before Dist Court at Nashik, Maharastra||Appeal filed against the judgment in Suit 11/2002 by M/s Dolphin Impressions P Ltd, Nashik for the claim of Rs 5,43,661/- with interest @24% p.a.|
|7.||Arbitration||Before Retd. Justice K.P. Sivasubramaniam||Initiated by M/s Khoday India Ltd against EDL for dispute and claim of Rs. 22,45,11,819/- with interest.Counter claim was filed by the company for Rs.22,69,65,608/-.Arbitration is in progress.|
|8.||MACT OP No.1375 of 2014||Small causes Court Motor accident Claims Tribunal, Chennai||Accident -Compensation of Rs 4,00,000/- against involvement of vehicle TN01AC 2460 TATA ACE of Empee Distilleries Ltd by Miss. Abinaya D/o Karunakaran. Pending for disposal.|
|9.||OA 87/2017||Before DRT II Chennai||UBI filed an original application against the EDL for a claim of Rs.12.45 Crores. The Company is in discussion with UBI for restructuring the loan.|
II. The company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;
III. A Sum of Rs.3,54,760/- has been transferred on 28.09.2016 to Investor Education and Protection fund by the company during this year.
IV. The company has provided requisite disclosures in the Standalone financial statements as to holdings as well as dealings in specified Bank Notes during the period from 8th November 2016 to 30th December 2016. Based on the audit procedures and relying on the management representation, we report that the disclosures are in accordance with books of account maintained by the Company and as produced to us by the Management (Refer Note No: 4.9)
|For Venkatesh & Co.,|
|Place : Chennai||CA Dasaraty V|
|Date : 29/05/2017||M.No.026336|
ANNEXURE A TO INDEPENDENT AUDITORS REPORT
(Referred to in paragraph 1 under the heading of Report on other Legal and Regulatory Requirements of our Report of even date)
1. As required by the Companies (Auditor s Report) Order, 2016 issued by the Central Government in terms of section 143 (11) of the Companies Act, 2013 and on the basis of such checks of the books and records of the Company, as we considered appropriate and according to the information and explanations given to us during the course of the audit, we report that,
a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets on the basis of available information.
b) As explained to us, all the fixed assets have been physically verified by the management in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such physical verification.
c) As per information provided to us, the title deeds of immovable properties are held in the name of the company.
2. In our opinion and according to the information and explanations given to us, the inventories have been physically verified during the year by the management and no material discrepancies were noticed during the physical verification.
3. The company has outstanding loans amounting to Rs.41.88 crores granted to its related parties without stipulation as to the repayment of principal and interest.
a) In the light of above, we do not comment on terms and conditions of grant of such loans.
b) In the light of above, we do not comment on repayment of the principal amount and interest and other conditions.
c) In the light of above, we do not comment on the reasonable steps have been taken by the company for recovery of the principal and interest.
4. According to the information and explanations given to us, in respect of Loans, investments, guarantees and security the provisions of sections 185 and 186 of Companies Act 2013 were complied with :
5. According to the information and explanations given to us, the Company has not accepted any deposits from the public. Therefore the provisions of section 73 to section 76 the Companies Act 2013 and rules framed there under are not applicable.
6. In our opinion and according to the explanations given to us, maintenance of cost records has been specified by the Central Government under sub-section (1) of section 148 of the companies Act,2013. We are not made available with the cost records with a view to determine whether they are accurate or complete.
7. a) According to the information and explanation given to us and according to the books and records as produced and examined by us, in our opinion, the Company has been depositing undisputed statutory dues such as Provident fund, sales tax, customs duty, cess and other statutory dues with some delay, except for the FY 2016-17 TDS amounting to Rs.14.37 lakhs, for the FY 2011-12 Income tax of Rs. 8.28 Crores, for the FY 2012-13 Income tax of Rs.1.77 Crore and for the FY 2015-16 Income tax of Rs.66.83 Lakhs has not been paid as on date.
b) According to the records of the Company and according to the information and explanations given to us, there are no dues of Income tax, Wealth tax, Sales tax, Excise duty and cess which have not been deposited on account of any dispute except as stated here under :-
|Sl No||Name of the statue||Nature of Dues||Amount In Lacs||Period to which the amount relates||Forum where dispute is pending|
|1||Income Tax Act, 1961||Income Tax||190.00||2005-06||Income Tax Appellate Tribunal|
|2||Income Tax Act, 1961||Income Tax||24.49||2008-09||Commissioner of Income Tax (Appeals)|
|3||Income Tax Act, 1961||Income Tax||346.09||2009-10||Commissioner of Income Tax (Appeals)|
|4||Income Tax Act, 1961||Income Tax||154.10||2010-11||Commissioner of Income Tax (Appeals)|
|5||Income Tax Act, 1961||Income Tax||496.25||2012-13||Commissioner of Income Tax (Appeals)|
|6||Income Tax Act, 1961||Income Tax||53.92||2013-14||Commissioner of Income Tax (Appeals)|
|7||Income Tax Act, 1961||Income Tax||594.65||2014-15||Commissioner of Income Tax (Appeals)|
|8||Central Excise Act, 1944||Customs and Excises||59.60||2013-14||The order dt.12-3-2014, of the Commissioner of customs, Tuticorin directed to pay differential duty in the purchase of coal amounting to Rs. 28,60,189/-with penalty of Rs 30,00,000/ and penalty of Rs.1,00,000/-against individual name of GM of EDL|
8. Based on our audit procedures and according to the information and explanations given to us, except in the following case the company has not defaulted in repayment of dues to financial institutions and banks after
|(Amount in Lacs)|
|Name of the Bank||Principal Over Due||Interest Over Due||Total Over Due||Total Liability as on 31.03.2016|
|Union Bank of India||521.14||290.41||811.50||1272.82|
9. In our Opinion and according to the information and explanations given to us,the company has not issued shares to the public during the year. The Company has raised Rs.47.50 Crores by issue of 14% Redeemable Non-Convertible debentures during the year. The proceeds from this issue are utilised for the stated purposes.
10. In our Opinion and according to information and explanations furnished to us no fraud on or by the Company has been noticed or reported during the year.
11. In view of the default in repayment of Term Loan to M/s. Union Bank of India, the Managerial Remuneration of Rs.85.04 Lakhs paid during the year is in excess of the Limits provided under section 197 read with schedule V of Companies Act 2013.
12. The company is not a Nidhi company, we do not comment on Net Owned Funds to Deposits ratio and unencumbered term deposits as specified in Nidhi Rules 2014.
13. In our opinion, the Company has complied with the provisions of sections 177 and 188 of the Companies Act 2013 for all the transactions with related parties and the details have been disclosed as required by the applicable accounting standards.
14. The Company has made preferential allotment of shares and has complied with the provisions of the Companies Act, 2013 and the SEBI regulation in this regard.
15. 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 him. Hence we do not comment on Compliance of Section 192 of Companies Act 2013.
16. The Company is not required to be registered under 45-IA of the Reserve bank of India Act, 1934.
|For Venkatesh& Co.,|
|CA Dasaraty V|
|Place : Chennai||M.No.026336|
|Date : 29.05.2017||Partner|
ANNEXURE B TO INDEPENDENT AUDITORS REPORT
(Referred to in paragraph (e) under Report on Other Legal and Regulatory Requirements section of our report of even date)
Report on the Internal Financial Controls Over Financial Reporting 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 EMPEE DISTILLERIES LIMITED (the Company) as of March 31, 2017 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 (ICAI). 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 (The Act).
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) issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. 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 bsaudit 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) 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 in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company s assets that could have a material effect on the Standalone 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.
In our opinion, the Company has, in all material respects, an adequate internal financial control system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March, 2017, based on the internal controls over financial reporting criteria established by the Company considering the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by ICAI.
|For Venkatesh& Co.,|
|CA Dasaraty V|
|Place : Chennai||M.No.026336|
|Date : 29.05.2017||Partner|