Indage Vintners Ltd Auditor Reports

INDAGE VINTNERS LIMITED ANNUAL REPORT 2009-2010 AUDITORS REPORT TO THE MEMBERS OF INDAGE VINTNERS LIMITED 1. We have audited the attached Balance Sheet of INDAGE VINTNERS LIMITED (The Company) formerly known as CHAMPAGNE INDAGE LIMITED, as at 31st March 2010, 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 auditing standards 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 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 and 5 of the said Order. 4. Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows: i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; ii) 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; iii) The accounts of the various branches of the Company have been audited by other firms of Chartered Accountants appointed by the Company under Sec. 228 of the Companies Act, 1956, and their reports have been considered and appropriately dealt with while preparing our report. iv) The Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; v) In our opinion, the Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the applicable accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; except AS-2 Valuation of Inventories, AS-11 The Effects of Changes in Foreign Exchange Rates, AS- 13 Accounting for Investments and AS- 15 Employee Benefits and. vi) Attention is invited to the following: a. Note no 2.14 of Schedule 18 explaining the amount written off as Exceptional items in respect of Advances against Retail Initiative amounting to Rs. 1,369,932,889. b. We are unable to opine on the fall in the value of Investments in subsidiary companies costing Rs. 94,48,03,718 as the necessary information was not available for our audit. (AS - 13) c. Note no. 1.6 of Schedule 18 - Accounting Policy on Foreign Currency Transactions according to which the Exchange Difference pertaining to Investments in International Operations is transferred to a Foreign Currency Translation Reserve, which is not in accordance with AS-11. d. Loans and Advances of Rs. 33,46,32,330 considered good by the Management includes Rs. 1,30,73,067 old deposits given to certain parties. In the absence of confirmations for the same, we are unable to opine on the recoverability of these deposits. The balance amount of Rs.32,15,59,263 includes advances made to employees, subsidiary companies and sister concerns. We are unable to opine on the recoverability of the said entire amount. e. No confirmation of balances have been received for Secured Loans amounting to Rs. 2,66,30,72,663 and Unsecured Loans amounting to Rs. 1,21,48,18,895 taken from Banks, Financial institutions and others. Under the circumstances we are unable to ascertain the correctness of the balances shown. f. The Company has not obtained acturial valuation for the gratuity liability as required under AS - 15 Employee Benefits. The liability for Gratuity is provided on adhoc basis amounting to Rs. 32,00,000 for the year ended 31st March, 2010. g. Sundry Debtors (Unsecured) considered good by the Management includes old outstandings over 6 months aggregating to Rs.66,94,48,625. In the absence of bill wise details we are unable to comment on the recoverability of the said amount. h. We are unable to opine on the recoverability of dues from certain subsidiary Companies on account of Interest Receivable from them amounting to Rs. 4,19,83,794 which is included in Loans and Advances. i. We are unable to opine on the recoverability of Stocks lying with third parties as confirmations for the same have not been received. j. Bank statements and confirmations from certain banks have not been received by the Company. Under the circumstances we are unable to ascertain the correctness of the balances shown under Cash and Bank balances. Due to uncertainties involved we are unable to quantify the effect of these observations on the accounts. vii) Without qualifying our opinion we draw attention to: a. Note 2.17 of Schedule 18 of the financial statements, wherein as explained, the Companys outstanding liabilities are being restructured under the aegis of Corporate Debt Restructuring Scheme (CDR) with effect from 1st October, 2009 and as required by the Scheme, the Master Restructuring Agreement (MRA) has been executed. Other necessary documents including security documents are in the process of being executed. b. Note 2.21 of Schedule 18 of the financial statements, wherein as explained, winding up order against the Company has been passed by the Honble High Court of Bombay. However a stay has been granted to the company by the Honble High Court. The matter is sub judice and outcome of the same cannot be currently ascertained. The Companys ability to continue as a going concern is dependent on the Company being able to successfully implement the actions proposed in the CDR Scheme and outcome of winding up petitions in favour of the Company. viii) On the basis of written representations received from the Directors, as on 31st March 2010 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; 5. Subject to our observations in Para (v) and (vi) above, in our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with notes thereon give the information required by the Companies Act, 1956 in the manner so required and 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 2010; ii. In the case of the Profit & Loss account, of the Loss of the Company for the year ended on that date and iii. In the case of the Cash Flow Statement, of the Cash Flows of the Company for the year ended on that date. For Sorab S. Engineer and Co. Chartered Accountants Firm Regn. No.: 110417W Sd/- CA. M.P. ANTIA Partner Membership Number: 7825 Place : Mumbai Date : 7th October, 2010 ANNEXURE TO AUDITORS REPORT TO THE MEMBERS OF INDAGE VINTERS LIMITED Referred to in paragraph 3 of our Report of even date. i. (a) The Company is maintaining proper records of its fixed assets. (b) Physical verification of all fixed assets has not been conducted during the year. (c) In our opinion and according to the information and explanations given to us, the Company has not disposed off substantial part of its fixed assets during the year. ii. (a) The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable. (b) In our opinion and according to the information and explanations given to us, the procedure of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business. (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. During the year certain material discrepancies were noticed on verification between the physical stocks and the book records. The same have been properly dealt with in the books of accounts. iii. (a) The Company has not granted any loans, secured or unsecured to companies, firm or other parties during the year covered in Register maintained under Section 301 of the Companies Act, 1956. Hence clauses (b) to (d) are not applicable. (b) The Company has taken unsecured loans from five companies and two firms, covered in Register maintained under Section 301 of the Companies Act, 1956, amounting to Rs.3,90,62,625. The year end balance of loans taken from parties was Rs. 4,53,85,631. (c) In our opinion, the terms and conditions on which loans has been taken from Companies and Firms covered in the Register maintained under Section 301 of the Companies Act, 1956 are not prima facie, prejudicial to the interest of the Company. (d) The payment of Principal and Interest on the Loans taken by the Company are as per the agreed terms. iv. In our opinion and according to the information and explanations given to us, the Company requires strengthing of its internal control procedures to make it commensurate with the size of the Company and the nature of its business, with regard to purchases of inventory and fixed assets and for the sale of goods and services. Attention is invited to the matters stated in Note 2.15 of Schedule 18. v. (a) The company has not entered particulars of some of the contracts and arrangements referred to in Section 301 of the Act. (b) In our opinion and according to the information and explanation given to us, the transactions made in pursuance of such contracts or arrangements have been made at prices which are prima facie reasonable having regard to prevailing market price of similar goods and services at the relevant time. vi. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Section 58A, 58AA and other relevant provisions of Companies Act 1956 and the rules framed there under. No order regarding public deposit has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal. Public deposits amounting to Rs. 390,000 are matured but not claimed. vii. Internal audit has not been conducted during the year. viii. According to the information and explanations given to us, 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 as per the records of the Company, undisputed statutory dues including Income Tax, Provident Fund, Employees State Insurance, Sales Tax, Wealth Tax, Service Tax and Customs Duty have not been regularly deposited with the appropriate authorities. The undisputed amounts outstanding as on 31st March 2010 for a period of more than six months from the date they became payable, are: Particulars Amount (Rs.) Provident Fund 21,14,799 ESIC 81,923 Wealth Tax 1,53,298 Central Sales Tax 12,71,252 Value Added Tax 1,68,73,803 Maharashtra Value Added Tax 34,23,742 Service Tax 1,94,576 Professional Tax 7,84,570 Works Contract Tax 41,252 Cess Payable 1,51,750 Maharashtra Labour Welfare Fund 7,606 Dividend Distribution Tax 5,452,296 (b) According to the information and explanation given to us and as per the records of the Company as at 31st March 2010, the following are the particulars of disputed dues on account of Sales Tax and Income Tax matters, which have not been deposited by the Company: Name of the Nature of Period to which Amount Forum where Statute Dues the amount (Rs.) dispute is relates Pending Income Tax Income Tax 1998-99; 2004-2005; 27,91,895 ITAT Act, 1961 2005-06 x. In our opinion, the accumulated losses at the end of the financial year are more than 50% of its net worth. The Company has incurred cash losses both in the present financial year, and in the immediately preceding financial year. xi. In our opinion and according to the information and explanations given to us, during the year the Company has defaulted in the repayment of its dues to financial institutions and banks. The period and the amounts could not be ascertained due to lack of data availability. xii. In our opinion and according to 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. The Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Order are not applicable. xiv. In our opinion the Company is not dealing in or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Order are not applicable. xv. In our opinion and according to the information and explanations given by the Management, the Company has given corporate guarantees for loans taken by others from banks and financial institutions. We are unable to ascertain whether the terms and conditions on which these guarantees have been given are prejudicial to the interest of the company. xvi. On the basis of the records examined by us, and relying on the information compiled by the Company for co-relating the funds raised to the end use of term loans, we state that the Company has, prima facie, applied the term loans for the purposes for which they were obtained. xvii. According to the information and explanations given to us, and on an overall examination of the financial statements and after placing reliance on the reasonable assumptions made by the Company for classification of short term and long term usage of the funds, we are of the opinion that, prima facie, no funds raised on short term basis have been utilized for long term investment. xviii. According to information and explanations given to us, 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. However the Company has allotted 1,000,000 equity share warrants to Arsh Advisors & Owners Ltd. xix. According to information and explanations given to us the Company has not issued any secured debentures during the year. xx. The Company has not raised any money by way of public issue during the year. xxi. Based upon the audit procedures performed and the 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 and Co. Chartered Accountants Firm Regn. No.: 110417W Sd/- CA. M.P. ANTIA Partner Membership Number: 7825 Place : Mumbai Date : 7th October, 2010