Empee Sugars & Chemicals Ltd Auditors Report.
The Members of
M/s. EMPEE SUGARS & CHEMICALS LIMITED.
Report on Financial Statements
We have audited the accompanying Standalone financial statements of M/s. EM PEE SUGARS & CHEMICALS LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2017, the Statement of Profit and Loss for the year ended on that date along with the cash flow statement annexed thereto, and a summary of the significant accounting policies and other explanatory information for the year then ended.
Managements Responsibility for the Financial Statements
The Companys Board of Directors are 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.
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 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 auditors judgment, including the assessment of the risks of materia! 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 Companys 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.
Basis for Qualified Opinion
a) The accumulated losses of the company have exceeded the net worth of the company. Hence the company has made a reference to BIFR under the sick industrial companies Act and the Company has been registered under BIFR vide case no:69/2014. However, effective from December 2016 BIFR proceedings have been abated. The Company is to make an application under Insolvency and Bankruptcy Code, 2016 before NCLT, Hyderabad. However, the accounts have been prepared on a going concern basis.
b) The company has received amount of Rs. 140.37 crores from 7th July 2008 to 30th September 2012 (refer note no 4) towards share application money from holding company Empee Distilleries Ltd. These shares could not be allotted to the applicant company in view of the non-receipt of approval from the SEBI and stock Exchange. By virtue of the Rules of the Companies Acceptance and Deposit Rules, these are public deposits to be repaid. However the Company is of Opinion that this issue will have to be decided by NCLT, Hyderabad as the proceedings under BIFR have since been abated.
c) Confirmation of Sundry debtors, Trade payables. Advance to suppliers, Cane advances, Harvester Advances and other deposit is subject to confirmation and reconciliation. (refer note no 8,16,18 & 38)
d) The Sugar Unit at Ambasamudram has not been functioning for the last 4 years, However no impairment of assets in accordance with AS 28 (Impairment of Assets) at the sugar unit at Ambasamudram has been considered in accounts and the financial impact of the same is not presently ascertainable. /
e) Interest has not been provided on loans amounting in all to Rs.486 Crores availed from banks and including Loans assigned by the banks in favor of Edelweiss Asset Reconstruction Company Ltd.
f) Bank Balances amounting to Rs.35.63 lakhs included in Note. 17 is subject to Confirmation. 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: i
a) in the case of the Balance Sheet, of the state of affairs of the Company as at Ma.rch 31, 2017;
b) in the case of the Profit and Loss Account, of the Loss for the year ended on that date;
c) in case of cash flow statement, of the cash flows for the year ended on the date;
Report on Other Legal and Regulatory Requirements:-
1. As required by the Companies (Auditors 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 is 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 Interna! 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 companys financial controls over financial reporting.
g) With respect to the other matters to be included in the Auditors 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 does not have any pending litigations which would impact its financial position except the cases listed below;
|S.No||Case No||Court||Details of the case|
|1 .||OP by way of Appeal against Arbitration award by three member arbitral tribunal||Before High Court of Madras||M/s ISGEC raised disputes against M/s ES.CL regarding settlement of dues in the supply and erection of boilers/turbines for our Ambasamudram and Naidupet projects. In the Arbitration, Rs 13 crores with future interest @24% awarded by the tribunal to ISGEC and the Company has filed an appeal, in the High Court of Madras.|
|2||Writ Petition no 244944 of 2011||Before High Court of Madras||A writ was filed by the Company against payment due of Rs 10,00,00,000/- from TNEB for ESCL Ambasamudram unit (Electricity purchase charges issue). Writ is pending.|
|3||WP No. 211147of 2014||High court of Madras||A writ was filed by the Company against TNEBs demand of E-Tax for Rs.4,56,21,938/- for Ambasamudram unit.|
|4||O.S. 18/2007||Before Principal District Court at Pondicherry||A Claim of loss and interest of Rs 40,00,288/ due by the Company towards purchase of Molasses from Pondichery Co-Op Sugar Mills Ltd against ESCL is pending for trial.|
|5||Civil suit No.39 of 2006||Before High Court of Madras||For recovery of claim against M/s Oriental insurance Co.Ltd under fire policy towards flood happened by act of God taken place during 2001 at Nayudupettah factory site is pending.|
|6||Wp No.23748 of 2014||High Court of AP||A writ against Demand of Value Added Tax for Rs. 1,19,36,620/- by Sales tax against ESCL is pending.|
|7||Appeal before CE||Customs and Excise Tribunal- SZ Bench at Chennai||Appeal filed against the Order dt. 12-03-2014 the commissioner of Customs, Tuticorin directed to pay differential duty in the purchase of coal amounting to Rs.6,11,51,119/- with penalty of Rs. 8,50,00,000/- and penalty of Rs. 1,00,000/- against individual name of GM of ESCL company is pending.|
|8||Appeal No C/41475/2014- DB||Before , Customs, Excise & Service Tax Appellate Tribunal, Chennai||The Commissioner of customs, Tuticorin has filed an appeal against CEs order granting exemption for customs duty to the tune of Rs.2,89,24,422/- under notification 46/2011 for import of coal from Asian Countries against ESCL. Appeal preferred by C E is pending.|
II. The company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;
III. There were no amounts which were required to be transferred to the Investor Education and Protection fund by the company.
IV. The company has provided requisite disclosures in the 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: 37)
Annexure Ato 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)
As required by the Companies (Auditors 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 the 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 given interest free loan to Empee Power Company India Limited of Rs. 49.89 crores and EDL Marketing Private Limited of Rs. 5.45 crores without stipulation as to the repayment of principal.
a) The terms and conditions of the loan are not prejudicial to the interests of the Company.
b) The schedule of repayment of principal has not been stipulated.
4. According to information and explanations given to us, the company has complied with Sections 185 and 186 of the Companies Act 2013.
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.
a) According to the records of the company, there have been delays in depositing undisputed statutory dues including Provident Fund, Income Tax, Service Tax, Duty of Excise, Value Added Tax, Cess and other statutory dues to the appropriate authorities. The details of the same as on the last day of the financial year concerned for a period of more than six months from the date they became payable are as follows:
|Name of the State Act||Nature of Dues||Amount involved Rs. in Lacs||Period to which the case related||Status|
|A.P. Sugar Cane regulation of Sugar Cane Act||Andhra Pradesh Purchase tax payable||522.66||1994 - 2001||Paid Rs. 133.49 Lakhs towards said dues|
|Finance Act, 1994||Service Tax under Reverse Charge Mechanism - GTA||25.85||2014-2015|
|Income Tax Act, 1961||Tax Deducted at Source||6.6||2015-2016|
|Central Excise Act, 1944||Excise Duty||31.00||2015-2016|
|Finance Act, 1994||Service Tax Reverse Under Charge Mechanism||1.99||2016-2017|
|Income Tax Act, 1961||Tax Deducted at Source||5.77||2016-2017|
|Central Excise Act, 1944||Excise Duty||5.98||2016-2017|
b) According to the information and explanations given to us and the records of the company examined by us, there are no dues of Income Tax, Sales Tax, Service Tax, Duties of Customs, Duties of Excise, Value Added Tax which have not been deposited on account of any dispute, except the following.
|Name of the State Act||Nature of Dues||Amount involved Rs. in Lacs||Period to which the case related||Dispute is pending before|
|A.P. Sugar Cane regulation of Sugar Cane Act||Andhra Pradesh Purchase tax payable||729.59||1994 - 2001||Asst Cane Commissioner|
|AP Value Added Tax Act, 2005||Value Added Tax||119.37||2012||High Court of Ap|
|Customs Act,1962||Duty of Customs||1462.51||2014||Customs and Excise Tribunal -SZ Bench at Chennai|
|Customs Act, 1962||Duty of Customs||289.24||2014||Customs, Excise & Service Tax Appellate Tribunal, Chennai|
8. Based on our audit procedures and according to the information and explanations given to us, the entire borrowings of company over due. The companys application at BIFR has been abated. The company is to make an application under Insolvency and Bankruptcy Code, 2016
9. According to the records of the company, the company has not raised moneys by way of initial public offer or further public offer and has not obtained any term loans during the financial year. Hence, comments under the clause are not called for.
10. According to information and explanations furnished to us, no fraud by or on the company by its officers or employees has been noticed or reported during the year.
11. In view of Default in repayment of Loans, the Managerial remuneration of Rs.57.04 Lakhs provided during the year is in excess of the Limits provided under section 197 read with schedule V of Companies Act 2013.
12. As the Company is not a Nidhi Company we do not comment on Net Owned Funds to Deposit ratio and unencumbered term deposits a specified in Nidhi Rules 2014.
13. All transactions with the related parties are in compliance with Sections 177 and 188 of Companies Act, 2013 where applicable and details have been disclosed in the Financial Statements etc., as required by the applicable accounting standards.
14. The Company has not made any Preferential Allotment or Private placement of shares or fully or partly convertible debentures during the year. Hence we do not comment on Compliance of section 42 of Companies Act 2013.
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.
16. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.
|For Venkatesh& Co.,|
|CA Dasaraty V|
|Date: 29/05/2017 /||Partner|
ANNEXURE B TO THE INDEPENDENT AUDITORS REPORT
(Referred to in paragraph (f) 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 SUGARS AND CHEMICALS 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.
Managements Responsibility for Internal Financial Controls
The Companys 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 companys 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 Companys 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 auditors 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 Companys internal financial controls system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A companys 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 companys 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 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 companys 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.
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 ICAL
|For Venkatesh& Co.,|
|CA Dasaraty V|
|Place: Chennai||M. No.026336|