Indage Restaurants & Leisure Ltd Auditor Reports

INDAGE RESTAURANTS AND LEISURE LIMITED ANNUAL REPORT 2010-2011 AUDITORS REPORT TO THE MEMBERS OF INDAGE RESTAURANTS AND LEISURE LIMITED 1. We have audited the attached Balance Sheet of INDAGE RESTAURANTS AND LEISURE LIMITED (the Company), as at 31st March 2011, and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date both annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the standards of audit generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditors Report) order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 & 5 of the said Order. 4. Further to our comments in the Annexure referred to in Paragraph 3 above, we report that: a) We have obtained all the information and explanation, which to the best of our knowledge and belief were necessary for the purposes 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 and proper returns adequate for the purposes of our audit have been received from the branches not visited by us; c) The Balance Sheet, Profit and Loss Accounts and Cash Flow Statement dealt with by this report are in agreement with the books of accounts; d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in subsection (3C) of Section 211 of the Companies Act, 1956, except for AS-2 Valuation of Inventories, As-13 Accounting for Investments, AS-15 Employee Benefits and AS-28 Impairment of Assets. e) On the basis of written representations received from the Directors, as on 31st March 2011 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. f) Attention is invited to the following : i. Capital Work in Progress of Rs. 36,138,350 represents amounts paid for incomplete projects of the Company carried forward since last several years. We are unable to opine on the viability or recoverability of the same as an amount of Rs. 33,186,800 is on account of Advances given for Projects which are no longer in existence. ii. During the year, an amount of Rs. 74,217,758 on account of Investment in Subsidiary Company has been written off. However, we are unable to ascertain the basis on which this write off was done. In the absence of any information, we are unable to opine on the fall in the value of Investments in subsidiary / associate companies costing Rs. 34,281,242 (AS-13) Certificates of Investments costing Rs. 34,389,442 were unavailable for our verification. iii. In the absence of any information / records, we are unable to opine on the realisability of Stock valued in the books at Rs. 24,808,334. (AS-2) iv. Sundry Debtors considered good includes Rs. 4,240,947 over 6 months which are subject to reconciliations/confirmations. We are unable to opine on the recoverability of the same. v. Deposits- Long Term to companies under the same group amounting to Rs. 82,500,000, other deposits (Long Term) amounting to Rs. 6,500,000, and other deposits (Short Term) amounting to Rs. 390,915, advances to Companies under the same group amounting to Rs. 78,857,090 and other advances amounting to Rs. 1,581,429 are all subject to reconciliation and confirmation. We are unable to opine on the recoverablility of the said amounts. vi. The balances lying with banks in Current and Deposit Accounts amounting to Rs. 694,393 under Cash and Bank have not been confirmed by the respective Banks. Consequently, although the above amounts shown under clauses i to vi have been shown as good and recoverable by the Management, no provision has been made for the same. vii. Secured Loans from Banks amounting to Rs. 339,760,894 have not been confirmed by the Respective Banks. Hence we are unable to ascertain the exact liability due to these Banks. viii. Unsecured Loans from Companies under the same Group and from Directors amounting to Rs. 114,216,543 is subject to reconciliation and confirmation. Hence we are unable to ascertain the exact liability which may arise on this account. ix. The Company has not obtained Actuarial Valuation for the gratuity and leave encashment liability as required under AS-15 Employee Benefit. No liability for Gratuity and Leave encashment has been provided. x. The Company has repaid to certain Existing Employees the P.F. contribution of 2008-2009 for Employer as well as Employee amounting to Rs. 116,288 (Rs. 59,442 Employer Contribution and Rs. 56,846 Employee Contribution) which is in Contravention of the Provident Fund Rules and Act. xi. In the absence of any supporting documents / vouchers we are unable to ascertain whether expenses aggregating to Rs. 1,001,387 incurred by the Directors/ Employees on travel etc. and debited to the Profit and Loss Account are in the nature of Personal Expenses. xii. Saraswat Bank has served upon the Company a Notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Act, 2002 for repayment of its dues as well as those of UCO Bank. xiii. Legal Action has been initiated against the Company under Sec. 138 of the Negotiable Instruments Act and other Acts by various parties, the outcome of which cannot be currently ascertained. xiv. During the year certain Fixed Assets of one unit at Written Down Value have been transferred to a Partnership Firm. However, in absence of any details, the basis on which these Assets have been transferred could not be verified by us. Consequently, no entry for Profit/Loss on transfer of these Assets has been booked in the Accounts. We are unable to express any opinion on this transaction. We are informed that the books of account of this Partnership Firm have not been finalized to date and consequently, the companys share of profits or losses from the partnership firm have not been accounted for while finalizing the accounts. xv. In the absence of any valuation reports for Fixed Assets and records to show the Cash Generating capacity of the Companys Fixed Assets, we are unable to opine whether there is any impairment of the Fixed Assets of the Company (AS-28) In view of the above weare unable to express an opinion on the recoverability / realisability of the above mentioned items, the impact of the same on the Loss for the year as well as the future viability of the Company as a going concern. g) On the basis of what has been mentioned in Paragraph (f) above and also our comments in the Annexure referred to in Paragraph 3, we are unable to express an opinion whether the said accounts read together with the notes thereon give the information required by the Companies Act, 1956, in the manner so required and also give a true and fair view in conformity with the accounting principles generally accepted in India. i. In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2011. ii. In the case of the Profit & Loss Account, of the Loss of the Company for the year ended on that date. iii. In the case of the Cash Flow Statement, of the Cash Flows for the year ended on that date. For SORAB S. ENGINEER & CO. Chartered Accountants Firm Regn. No. 110417W Sd/- M.P. ANTIA Partner Membership No. 7825 PLACE : Mumbai DATE : 11th April, 2012 ANNEXURE TO THE AUDITORS REPORT Referred to in paragraph 3 of our Report of even date i. a. The Company has not maintained proper records showing full particulars including quantitative details and situation of its fixed assets. b. The Fixed Assets have not been physically verified by the management during the year. Under these circumstances, we are unable to opine whether there are any material discrepancies. c. According to the information and explanations give to us, the Company has not disposed off a substantial part of its fixed assets during the year. ii. a. The inventory has been physically verified during the year by the management. b. In our opinion and according to the informations given to us, the procedures of physical verification of inventories followed by the management needs improvement in relation to the size of the Company and the nature of its business. c. In absence of detailed stock records we are unable to ascertain whether there were any material discrepanies between stock records and physical inventories. iii. In absence of proper records we are unable to ascertain whether, the Company has granted/ taken any loans, secured or unsecured to / from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 and hence no disclosure is being made. iv. In our opinion and according to the information and explanations given to us, the internal control system is not adequate in relation to the size of the Company and the nature of its business for the purchases of inventory and fixed assets and for the sale of goods and services and other transactions. v. The Company has not maintained the Register required to be mainted in pursuance of Sec. 301 of the Companies Act, 1956. Hence, we are unable to ascertain whether there were any transations entered into by the Company as specified in clause v of the Order and if so whether the same have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time. vi. In our opinion and according to the information and explanations given to us, the Company has not accepted deposits from the public. vii. In our opinion and according to the information and explanation given to us, the Company does not have any internal audit system. vii. We are infored that the maintenance of cost records has not been prescribed by the Central Government under Section 209 (1) (d) of the Companies Act, 1956, for any of the Companys Products. ix.a. According to the information and explanations given to us and on the basis of our examination of the records of the Company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Sales Tax, Income Tax,Custom Duty, Excise Duty, Wealth Tax, Service Tax and other statutory dues have not been regularly deposited with the appropriate authorities. The undisputed amounts outstanding as on 31st March 2011 for a period of more than six months from the date they became payable as given by the Management are as under : Statutory Dues Amount in Rs. Provident Fund 962,625 ESIC 1,047,526 Professional Tax 723,025 VAT 24,408,288 FBT 722,409 Luxury Tax 111,265 TDS 973,249 b. According to the information and explanations given to us and on the basis of our examination of the records of the Company, as at 31st March 2011, the following are the particulars of disputed dues as given by the Management on account of Income Tax matters which have not been deposited by the Company : Name of the Name of Amount Period to Forum where Statute Dues (Rs.) which the dispute is amount relates pending Income Tax Income Tax 8,529,928 A.Y. 2006-2007 ITAT Act, 1961 x. The accumulated losses of the Company at the end of the financial year are more than fifty percent of its net worth. The Company has incurred cash losses, both in the present financial year, and in the immediately preceding financial year. xi. Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has defaulted in repayment of its dues to banks during the year. Total amount of dues to Banks amounting to Rs. 339,760,894/- have been recalled by the Banks, Refer Note 2.11 in Schedule 18. xii. Based on our examination of the records and the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, Debentures or any other securities. xiii In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/ society. Therefore, the provisions of clause (xiii) of Paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable to the company. xiv. In our opinion and according to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and any other investments, Accordingly, the provisions of clause (xiv) of Paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable to the Company. xv. In our opinion and according to the information and explanations given by the management, the Company has not given any guarantee for loans taken by others from banks or financial institutions. xvi. During the year no fresh term loans have been taken by the Company. On the basis of the records examined by us, and relying on the information compiled by the Company for corelating the funds raised to the end use of term loans, we state that the Company has, prima facie, applied the term loans for the purpose for which they were obtained. xvii. We are unable to opine whether funds raised on short term basis have been used for long term investment. xviii. According to the information and explanations given to tus, the Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under section 301 of the Companies Act, 1956. xix. The Company has not issued any debentures during the year. Accordingly, the provisions of clause (xix) of paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable to the Company. xx. According to the information and explanations given to us, the Company has not made any public issues during the year. xxi. Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year. For SORAB S. ENGINEER & CO. Chartered Accountants Firm Regn. No. 110417W Sd/- M.P. ANTIA Partner Membership No. 7825 PLACE : Mumbai DATE : 11th April, 2012