TO THE MEMBERS OF MCS LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of MCS Limited ("the
Company"), which comprise the Balance Sheet as at March 31, 2015, and the Statement
of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of
significant accounting policies and other explanatory information.
ManagementRs s Responsibility for the Financial Statements
The CompanyRs 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 financial statements to 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 of 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.
AuditorRs s Responsibility
Our responsibility is to express an opinion on these financial statements based on our
audit in accordance with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Because of the matter described in the Basis for Disclaimer of
Opinion paragraph, we were not able to obtain sufficient appropriate audit evidence to
provide a basis for an audit opinion.
Basis for disclaimer of Opinion :
1. a) As discussed in notes 13 (i to iii) and 14 of notes to financial statements,
investments of Rs 2589.44 lacs and advances of Rs 233.81 lacs made in a foreign company,
could not be verified in the absence of adequate information and related documents made
available to us. Consequently, the requisite disclosure and provision for diminution in
the value of investments and advances have not been made. Pending availability of
information and related documents and confirmation, we are unable to opine on the
recoverability/ adjustment of these amounts and thus its consequent impact on the
companyRs s net worth and disclosure in term of AS 13 and AS 21. This had also caused us
to qualify our audit opinion on the financial statements relating to preceding years.
2. b) As discussed in note 25 (a) of notes to financial statements, due to
discrepancies in process of applications of some public issues handled by the company in
earlier years and rectification of the errors by way of settlement of investorRs s claims
are continuing in process. In the absence of adequate information and pending completion
of investigations/claims, the liability on account of claims and its effect on
profitability is not ascertainable. However, the investorsRs claims to the extent admitted
by the Company are accounted for in the year of settlement. During the year, the company
has settled and charged to profit and loss a/c the investorRs s claims amounting to Rs
25.24 lacs (P.Y Rs 67.35 lacs).
3. No provision of interest on unsecured loans has been made. The Management claims no
interest is payable thereon. In the absence of adequate information, confirmation and
related documents, interest provision, if any, could not be assessed and provided for and
consequent impact on financial statements could not be determined. This had also caused us
to qualify our audit opinion on the financial statements relating to preceding year.
4. As discussed in note 12 of notes to financial statements, Building & Electrical
fittings and Equipment having carrying value Rs NIL previous year Rs 8.71 lacs on the land
not belonging to the company is doubtful of recovery in view of the Land in question, was
mortgaged to banks, and taken in possession by these banks in term of securitization and
Reconstruction of Financial Assets and Enforcement of security Interest Act, 2002 for
which no provision has been made. This had also caused us to qualify our audit opinion on
the financial statements relating to preceding year.
5. e) As discussed in note 35 of notes to financial statements, The Company had
received show cause notice for evasion of Service-tax for the period from 10.09.2004 to
31.3.2009. The company had filed an appeal before the Commissioner of Central Excise
Delhi-III, Commissionerate, Gurgaon which was disposed off imposing a tax liability of Rs
498.85 lacs penalty of Rs 498.85 lacs and interest u/s 75 of the Finance Act, 1994. The
company filed an appeal before Custom, Excise and Service-tax Appellate Tribunal, New
Delhi (CESAT) on 10.12.2013. The CESAT passed order No. SO/ST/54748/2014-CU(DB) dated
04.12.2014 directing the company to pre-deposit 25% of the adjudicated service-tax
liability alongwith proportionate interest within 6 months. The company was unable to make
the payment as directed by CESAT and filed a petition before the High Court of Punjab
& Haryana, Chandigarh. The HonRs ble High Court directed the company to deposit Rs
50.00 lacs within 15 days vide its order dated 10.02.2015. The company failed to comply
with the order of the HonRs ble High Court also. The company has not made any provision
for the aforesaid liability. The interest liability for the period from 01.04.2009 to
31.03.2015 works to Rs 638.52 lacs. The interest for the period 01.09.2004 to 31.03.2009
is not ascertainable. Had the provisions be made the loss for the year would have been
higher by Rs 1636.22 lacs.
6. As discussed in note 32 of notes to financial statements, The Company has received
winding up order dated 28.01.2015 from the HonRs ble High Court of Mumbai and also
directed to appoint official liquidator forthwith.
7. As discussed in note 33 of notes to financial statements, The Company has filed a
reference u/s 15(1) of the sick Industrial Companies (Special Provisions) Act, 1985
(BIFR). The registration was declined by the Registrar, BIFR. The company preferred an
appeal before the BIFR against the Order of the Registrar declining the Registration which
was heard on 06.05.2015 and pending for final decision of BIFR.
8. As discussed in note 34 of notes to financial statements, The Company has given a
Corporate Guarantee of Rs 2565.50 lacs (Rupees twenty five crore sixty five lacs fifty
thousand only) jointly in favour of Punjab National Bank and Dena Bank on behalf of
Computech International Ltd., a company in which promoters have substantial interest. The
banks have taken the possession of the assets in terms of Securitisation &
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
9. In the absence of adequate informations made available, we are unable to verify. (a)
Employees Benefit Expenses amounting to Rs 34.31 lacs. ( b) Postage & Telegram
amounting to Rs 44.18 lacs. But the company claims that the following expenditure have
been incurred for the purpose of business of the company in the normal course of its
business.
10. The above factors create multiple uncertainties and we are unable to determine
their possible effects on the financial statements. We are also unable to conclude on the
ability of the company to carry on as a going concern. The Management however believes
that is an appropriate to prepare financial statements on the going concern basis and
accordingly these financial statements do not include any adjustments that might result
from the outcome of uncertainties explained above.
Disclaimer of Opinion
Because of the significance of the matters described in above paragraphs specially
relating to the multiple uncertainties created due to various factors such as winding-up
order from the Mumbai High Court, the service- tax liability, non-realization of
investments and advances made by the company and enforcement of Securitisation &
Reconstruction of Financial Assets & enforcement of Securitisation Act, 2002 by the
Banks. We have not been able to obtain appropriate audit evidence to provide a basis for
an audit opinion.
Report on Other Legal and Regulatory Requirements
1. As required by Rs the Companies (AuditorRs s Report) Order, 2015Rs , issued by the
Central Government of India in terms of sub-section (11) of section 143 of the Act
(hereinafter referred to as the "Order"), 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, we give in the Annexure a statement on the
matters specified in paragraphs 3 and 4 of the Order.
2. As required by section 143(3) of the Act, we report that:
a) as described in the Basis for Disclaimer of Opinion paragraph, we were unable to
obtain 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 it appears from our examination of those books;
c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement
dealt with by this Report are in agreement with the books of account;
d) due to the possible effects of the matter described in the Basis for Disclaimer of
Opinion paragraph, we are unable to state whether the Balance Sheet, Statement of Profit
and Loss and 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;
e) On the basis of the written representations received from the directors as on March
31, 2015 taken on record by the Board of Directors, none of the directors is disqualified
as on March 31, 2015 from being appointed as a director in terms of Section 164 (2) of the
Act;
f) With respect to the other matters to be included in the AuditorRs s Report in
accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion
and to the best of our knowledge and belief and according to the information and
explanations given to us:
i) The Company has disclosed the impact, of pending litigations as at March 31, 2015,
on its financial position in its financial statements - Refer note 25(b),32,33 and 35;
ii) The Company has not made provision as at March 31,2015, as required under the
applicable law or accounting standards, for material foreseeable losses, if any, on
long-term contracts including derivative contracts- Refer note 13 (i to iii) and 14;
iii) There has been no delay in transferring amounts, required to be transferred, to
the Investor Education and Protection Fund by the Company.
|
For Amod Agrawal & Associates |
|
Firm Registration No. 005780N |
|
Chartered Accountants |
|
Virendra Kumar |
| Place : New Delhi |
Partner |
| Date : 30-05-2014 |
M.No.085380 |
ANNEXURE TO INDEPENDENT AUDITORSRs REPORT
Referred to in paragraph 6 of the Independent AuditorsRs Report of even date to the
members of MCS LTD on the financial statements as of and for the year ended March 31,
2015, we report that:
On the basis of such checks as we considered appropriate and according to the
information and explanation given to us during the course of our audit, we report that:
I. (a) The Company has maintained proper records showing full particulars including
quantitative details and situation of fixed assets except for furniture & fixtures
and electrical fitting and intangible assets. In respect of furniture & fixtures and
electrical fitting and intangible assets quantitative details are not maintained. No
identification mark is placed on fixed assets.
(b) The company has designed a programme for physical verification of assets to cover
all the items over a period of three years which in our opinion is reasonable having
regard to the size of the company and nature of its assets. The Company has written off
/discarded the tangible assets having value of Rs 272.04 lacs based on physical
verification carried out by the management. However in the absence of the relevant
documents made available to us, we are unable to comment on the discrepancies in physical
verification and books records and adjustment thereof.
II. The Company does not carry any stock of raw material, spare parts, finished goods,
stores maintenance and components. As per the practice consistently followed by the
company purchases of stationary and spare parts are charged to the revenue directly and no
stock is carrying by the company. In view of the above no comments are offered on (i)
procedure of physical verification (ii) discrepancies on physical verification if any.
III. The Company has not granted any loans, secured or unsecured, to companies, firms
or other parties covered in the register maintained under Section 189 of the Companies
Act, 2013. Therefore, the provisions of Clause 3(iii), (iii)(a) and (iii)(b) of the said
Order are not applicable to the Company.
IV. In our opinion, and according to the information and explanations given to us,
there is an adequate internal control system commensurate with the size of the Company and
the nature of its business for the purchase of fixed assets and for the sale of goods and
services. Further, on the basis of our examination of the books and records of the
Company, and according to the information and explanations given to us, we have neither
come across, nor have been informed of, any continuing failure to correct major weaknesses
in the aforesaid internal control system.
V. The Company has not accepted any deposits from the public within 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 and the rules framed there under.
VI. The Company has not maintained any Cost Records under sub section 1 of section
148 of the Companies Act, 2013.
VII. a) According to the information and explanations given to us and the records of
the Company examined by us, in our opinion, the Company is regular in depositing the
undisputed statutory dues, including provident fund, employeesRs state insurance, income
tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax,
cess and other material statutory dues, as applicable, with the appropriate authorities.
However there has been delay in some cases in depositing service-tax and income-tax
deducted at source (TDS). There is an undisputed amount payable in respect of service-tax
- Rs 498.85 lacs, penalty thereon Rs 498.85 lacs and interest u/s 75 of Finance Act, 1994
(the amount not ascertained) at the end of the year for a period of more than 6 months
from the date they became payable since the Company did not comply with the order of the
Honourable High Court of Punjab & Haryana Chandigarh.
(b) According to the information and explanations given to us and the records of the
Company examined by us, there are no dues outstanding of income-tax, wealth-tax, sales
tax, service-tax, duty of customs, duty of excise, value added tax and cess which have not
been deposited on account of any dispute as at March 31, 2015.
(c) According to the information and explanations given to us the amounts which were
required to be transferred to Investor Education and Protection Fund in accordance with
the relevant provisions of the Companies Act, 1956 and the rules made thereunder has been
transferred to such fund within time.
VIII. The Company has no accumulated losses at the end of the financial year. It has
not incurred cash losses in the current year and immediately preceding financial year. However
the accumulated losses at the end of the financial year will not be less than 50% of its
net worth, had the provision for diminution in the value of investment to the tune of Rs
2589.44 lac and provision for doubtful advance of Rs 233.81 lacs and also the provisions
for Service Tax Rs 977.7 lacs (without considering interest on Service Tax Demand) been
made in the financial statements.
IX. According to the records of the Company examined by us and the information and
explanation given to us, the Company has not defaulted in repayment of dues to any
financial institution or bank or debenture holders as at the balance sheet date.
X. In the absence of requisite information made available to us, the terms &
conditions of the guarantee given by the company of Rs 2565.50 lacs, detailed examination
could not be made with regards to its terms & Conditions. Therefore no comments are
offered whether the terms & Conditions are prejudicial to interest of Company.
XI. The company has not taken any term loans during the year.
XII. During the course of our examination of the books and records of the Company,
carried out in accordance with the generally accepted auditing practices in India, and
according to the information and explanations given to us, we have neither come across any
instance of material fraud on or by the Company, noticed or reported during the year, nor
have we been informed of any such case by the Management.
|
For AMOD AGRAWAL & ASSOCIATES |
|
CHARTERED ACCOUNTANTS |
| Date: 30-05-2015 |
FRN NO. 005780N |
| Place : New Delhi |
VIRENDER KUMAR |
|
(Partner) |
|
M No. 85350 |
+91-9892691696
