LML Ltd Auditor Reports

TO THE MEMBERS OF LML LIMITED

1. Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of LML LIMITED ("the Company"), which comprise the Standalone Balance Sheet as at March 31, 2016, and the Standalone Statement of Profit and Loss and Standalone Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

2. 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.

3. Auditor’s Responsibility

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 there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. 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 the 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 of the financial statements that give a true and fair view that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, 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

4. Basis of Qualified Opinion

a) As mentioned in note no. 26 of standalone financial statements, balances of some of the trade receivable/ payable, lenders and loans and advances being subject to confirmation/ reconciliation and subsequent adjustments, if any. As such, we are unable to express any opinion as to the effect thereof on the financial statement for the year.

b) As mentioned in note no. 27 of standalone financial statements, the Company has valued the inventories except finished goods at cost instead of at cost or realizable value, whichever is lower which is not in compliance with the Accounting Standard 2 – Valuation of Inventories prescribed in under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. As explained to us the process of possible utilization of slow / non-moving items of inventory will be undertaken upon - finalization of the product plan and the restructuring/revival plan and its implementation. Since the realizable value as on 31st March, 2016 has not been determined, we are unable to express any opinion as to the effect thereof on the standalone financial statement for the year.

c) As mentioned in note 30 of standalone financial statements, the Company has become a Sick Industrial Company due to erosion of its net worth and it’s current liabilities have also exceeded its current assets by Rs. 70131.26 lakhs as at Balance Sheet date. These factors, along with other matters as set forth in the said note, raise doubt that the Company will be able to continue as a going concern. The Company is in the process of restructuring/revival of its business under the aegis of BIFR and had submitted the draft revival scheme and as directed by BIFR, the Company had also submitted the updated revival scheme, considering this the accounts have been prepared on a going concern basis. The Company’s ability to continue, as a going concern is dependent upon successful restructuring and revival of its business. In case the going concern concept is vitiated, necessary adjustments will be required on the carrying amount of Assets and Liabilities which are not ascertainable.

d) As mentioned in note no. 36 of standalone financial statements, regarding non compliance of requirements under Micro, Small and Medium Enterprises Development Act, 2006, in the absence of information available with the Company. As such, we are unable to express any opinion as to the effect thereof if any,n the standalone financial statements for the year.

• The consequential possible effects of sub Para (a), (b), (c) and (d) above on assets and liabilities as at 31st March, 2016 and loss for the year ended 31st March, 2016 are not ascertainable.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified the aforesaid standalone financial Opinioninparagraph4above, 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, of the state of affairs of the Company as at March 31, 2016 and its loss and its cash flows for the year ended on that date.

6. Report on Other Legal and Regulatory Requirements

A. 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 Companies Act 2013, we give in the Annexure-A a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.

B. As required by section 143(3) of the Act, we report that:

(a) We have sought and except for the matters described in the Basis of Qualified Opinion paragraph 4 above, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

(b) Except for the possible effects of the matter described in the Basis for Qualified Opinion in paragraph 4 above , in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

(c) the standalone Balance Sheet, standalone Statement of Profit and Loss, and standalone Cash Flow Statement dealt with by this Report are in agreement with the books of account;

(d) Except for the possible effects of the matter described in the Basis for Qualified Opinion in paragraph 4 above,in our opinion, the standalone Balance Sheet, standalone Statement of Profit and Loss, and standalone Cash Flow Statement comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

 

Opinion in paragraph 4 above, in our opinion, may have an adverse effect on (e) Thematter describedintheBasisforQualified the functioning of the Company.

(f) On the basis of the written representations received from the directors as on March 31, 2016, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016, from being appointed as a director in terms of Section 164(2) of the Act.

(g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion in paragraph 4 above.

(h) 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"; and

(i) 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 disclosed the impact of pending litigations on its financial position in its financial statements Refer Note 25 to the standalone financial statements.

ii. The Company has made provision, as required under any law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts Refer Note 25 to the standalone financial statements.

iii. There has been no any delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

	For Khandelwal Jain & Co.	For PARIKH & JAIN
	Chartered Accountants	Chartered Accountants
	Firm Regn. No. 105049W	Firm Regn. No. 001105C
	(Manish Singhal)	(Anurag Jain)
Place: Gurgaon	(Partner)	(Partner)
Date: 26th May, 2016	M. No. 502570	M. No. 076362

ANNEXURE - A TO THE AUDITORS’ REPORT

[Referred to in above the Auditors’ Report of even date to the LML LIMITED on the Standalone Financial Statements for the year ended 31st March 2016]

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situations of its Fixed Assets, however these records are in the process of updation.

(b) As per the information and explanations given to us, the Company has formulated a program of physical verification to cover all major categories of fixed assets over a period of three years. Accordingly some categories of the fixed assets have been physically verified during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and nature of its business.

(c) In our opinion and according to the information and explanation given to us, the title deeds of immovable properties are held in the name of the company.

2. As per the information furnished, the Inventories have been physically verified by the management at reasonable intervals during the period. In our opinion, having regard to the nature and location of stocks, the frequency of physical verification is reasonable. In case of materials lying with other parties, they are subject to confirmations.

3. As per the information furnished, the Company has not granted any secured or unsecured loans to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under Section 189 of the Act.

In view of the above, provisions of clause 3(iii)(b) and (c) of the Order are not applicable.

4. In our opinion and according to the information and explanations given to us, the company has, in respect of loans, investments, guarantees, and security provisions, complied with section 185 and 186 of the Companies Act, 2013.

5. According to the information and explanation given to us, The Company has not accepted any deposits, whether the directives issued by the Reserve Bank of India, and the provisions of Section 73 to 76 or any other relevant provisions of the Companies Act, 2013. Hence the provisions of clause 3(v) are not applicable to the Company.

6. According to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records under sub-section (1) of section 148 of the Companies Act, 2013 for any products of the company.

7. (a) According to the information and explanations given to us and the records examined by us, undisputed statutory dues including income tax, sales tax, employees state insurance, provident fund and other statutory dues applicable to it have not been regularly deposited with the appropriate authorities and there have been delays in a number of cases. According to information and explanations given to us, undisputed arrears of statutory dues outstanding as at 31st March, 2016 for a period of more than six months from the date they became payable, are as under: -

Sl.No.	Name of the Statute	Nature of Dues	Rs. In Lakhs
1)	Provident Fund	Employers Contribution	142.42
		Employee Contribution	42.24
2)	Sales Tax	Sales Tax Dues	1065.47
3)	Employee State Insurance	Employer and Employees Contribution	23.47
4)	Income Tax Act	Income Tax Deducted at Source	90.81
		Income Tax Collected at Source	1.29
		Fringe Benefit Tax	178.00

(b) According to the records of the Company, the dues of Sales Tax/VAT, Income Tax, Excise Duty and Service Tax which has not been deposited on account of disputes and the forum where the dispute is pending, are as under:

Name of the Statute	Nature of the dues	Amount in Rs./lakhs	Period to which the amount relates	Forum where dispute is pending
The Central Excise Act 1944	Modvat credit, duty on off cuts or inputs, valuation, classification & cenvat	469.14	1989-90 to 2006-07	Commissioner Appeal, Tribunal (CESTAT), Supreme Court
Central Sales Tax Act , Local Sales Tax Act & Local Entry Tax Act	Non- submission of declaration forms, entry tax, penalty, interest, stock transfer and other issues	12823.48	1989-90 to 2007-08	Appellate Authority, Tribunal, High Court
Customs Act, 1962	(i) Duty	12.16	2001-02	Reassessment of amount, pending with Customs – Mumbai
	(ii) Valuation & Concession	12.69	1986-87 & 1994-95	Assistant Commissioner
Income-Tax Act, 1961	Disputed Disallowances	2145.11	A.Y. 1997-98 to 2006-07	ITAT
	Disputed Disallowances	1028.14	A.Y. 1995-96 to 1999 – 2000	High Court
	Disallowances/Penalty	222.29	A.Y. 2007 – 08 & 2010 – 11	CIT (A)

8. The Company has executed a Multi-Partite Agreement with Banks and Financial Institutions (Secured Lenders) on March 28, 2005. Based on our audit procedures and the information and explanations given to us, the Company is in default in respect to the paymentsto the Secured Lenders as given below.

Nature of the Dues	Period of Default	Amount (Rs in lakhs)
Principal	More than 12 months	10,308.81
Interest	More than 12 months	16,038.56
Interest	Jun-15	821.10
Interest	Sep-15	855.99
Interest	Dec-15	882.96
Interest	Mar-16	900.88

 

The Company is in Default in the payments of Interest to Foreign Currency Convertible Bonds holders:

Period of Default	Amount (Rs in lakhs)
More than 12 months	205.56

9. As per information given to us, no money was raised by way of initial public offeror further public offer (including debt instruments) and also no Term Loans taken during the year by the Company.

10. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

11. According to the information and explanation given to us and the books of accounts verified by us, the Managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with the Schedule V to the Companies Act. However, Company’s application for re-appointment and payment of remuneration of one of the Director is pending with Ministry of Corporate Affairs; refer note no. 37 the standalone financial statement. of

12. The Company is not a Nidhi Company, hence the provisions of clause 3(xii) are not applicable to the Company.

13. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with Sections 177 and 188 of Companies Act 2013 where applicable and details of such transactions have been disclosed in the Financial Statements as required by the applicable accounting standards.

14. According to information and explanations given to us, the Company during the year, has not made any preferential allotment as private placement of shares or fully or partly convertible debentures, hence the provision of clause 3(xiv) are not applicable to the Company.

15. According to the information and explanation given to us and the books of accounts verifiedby us, the Company has not entered into any non-cash transaction 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 Khandelwal Jain & Co.	For PARIKH & JAIN
	Chartered Accountants	Chartered Accountants
	Firm Regn. No. 105049W	Firm Regn. No. 001105C
	(Manish Singhal)	(Anurag Jain)
Place: Gurgaon	(Partner)	(Partner)
Date: 26th May, 2016	M. No. 502570	M. No. 076362

ANNEXURE - B TO THE INDEPENDENT AUDITOR’S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF LML LIMITED AS ON 31ST MARCH 2016.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act") TO THE MEMBERS OF LML LIMITED

We have audited the internal financial controls over financialreporting of LML LIMITED ("the Company") as of March 31, 2016 in conjunction with our audit of the standalone 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 control over Financial Reporting issued by the Institute of Chartered Accountants of India. 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 the 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.

Auditor’s Responsibility

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") and the standards on auditing as specified under Section 143 (10) of the companies internal financial controls, both applicable to an audit of internal financial controls and, India. 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 were 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 control 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 judgment, including the assessmentof financialstatements, whether due to fraud or error risks of material misstatement of the statement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the 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, 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 the 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; (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 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 controlsoverfinancialreporting 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.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31, 2016, 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.

	For Khandelwal Jain & Co.	For PARIKH & JAIN
	Chartered Accountants	Chartered Accountants
	Firm Regn. No. 105049W	Firm Regn. No. 001105C
	(Manish Singhal)	(Anurag Jain)
Place: Gurgaon	(Partner)	(Partner)
Date: 26th May, 2016	M. No. 502570	M. No. 076362