To The Members of REI AGRO LIMITED
REPORT ON THE STANDALONE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of REI AGRO LIMITED, which
comprise the Balance Sheet as at March 31, 2016, 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.
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 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 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.
AUDITOR’S RESPONSIBILITY
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 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 in order to design
audit procedures 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 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 on the financial statements.
BASIS FOR QUALIFIED OPINION:-
1) During the year due to sudden death of one of the Independent Director Mr. Asoke
Chatterjee on 04.08.2015 and subsequently due to resignation of Dr Ing Narpinder Kumar
Gupta on 23.11.2015, Number of Directors on the Board of the Company has reduced to Two
{2}only which is not a Competent Board. However, the Board have finalized and approved the
3rd Quarterly Results with the existing two directors and now submitting the yearly
results which is again subject to final approval by the duly constituted Board. Meanwhile
the company has communicated and appraised the facts to the Regulatory Authority and also
sought certain waivers and reliefs from the Hon’ble BIFR. Company being a Net Worth
eroded Company, is registered under Sick Industrial Companies (Special Provisions) Act,
1985.
2) The Company’s Fixed Assets have been hypothecated / pledged with the Banks /
Financial Institutions etc against various credit facilities availed by the Company and
due to the accounts being classified as NPA, the Bankers / FIs have taken legal actions
for recovery. Fixed Assets / Inventories are not insured.
3) The Company has not provided Interest on loans availed from Banks and Financial
Institutions which has been classified as NPA. The Amount not so provided amounts to
1127.42 Crore {including 426.07 Crore for previous year} up to 31st March 2016.
4) Provision for Gratuity and Leave Encashment has been made on the basis of estimate
and not as per the Actuarial Valuation, which is not in consonance with AS -15.
5) The Company had provided Corporate Guarantee to overseas lenders for the borrowings
by its Subsidiary Company namely Ammalay Commodities JLT. The said subsidiary company
defaulted in the repayment of the facilities provided by the lenders and the lenders to
the subsidiary company had invoked the Corporate Guarantee of the Company provided to them
amounting to 3105.93 Crore against which no provision has been made till the year ended
31st March 2016.
6) No balance confirmation and / or Bank Statement of the outstanding loan could be
obtained, in absence of which, we are unable to confirm the correctness of the balances
appearing in the financial statement.
7) The Net Worth of the company has fully eroded and the company’s reference filed
before the Hon’ble BIFR was registered. The Company’s ability to continue the
business as going concern is significantly dependent upon the viability of the
restructuring plan as may be approved by the Hon’ble BIFR.
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 opinion" paragraph, 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 principle generally accepted in
India;
a. in the case of the Balance Sheet, of the state of affairs of the Company as at March
31,2016
b. in the case of the Statement of Profit and Loss, of the loss for the year ended on
that date; and
c. in the case of the Cash Flow Statement, of the cash flows for the year ended on that
date.
EMPHASIS OF MATTER:
We draw attention to the following matters in the Notes to the financial Statements:
1. Note 29.1 to the financial statements that describe that due to liquidity crunch
being faced by the Company, it was not able to procure adequate quantum of Raw Material
for last two years, which has resulted in partly operational of one its unit only at the
end of the year.
2. Note 29.2 to the financial statement that the Company has defaulted in payment of
obligations in respect of all the Banks/ Financial Institutions / Non Convertible
Debentures holders together with interest thereon on due dates. As a result thereof all
the Working Capital Banks , Term Lenders and NCD Holders had initiated the Corrective
Action Plan (CAP) through the Joint Lenders Forum (JLF) in accordance with the RBI’s
SMA Guidelines dated February 26,2014. But the same could not be approved. Some of the
lender banks have initiated winding up proceedings against the Company for recovery of
dues. Notices have been issued by the lenders U/s 13(4) of Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.This
have adverse effect on the functioning of the Company on going forward basis.
3. Note No 29.5 to the financial statement indicates that the company has accumulated
losses and its net worth is fully eroded. The Company has incurred net loss during the
current year and previous years and Company’s current liabilities exceeded its
current assets as at the balance sheet date.
These Conditions along with other matters set out above indicates the existence of
uncertainty that may cast doubt about the Company’s ability to continue as Going
Concern. However the financial statements of the company have been prepared by the
management on Going Concern Basis.
Our opinion is not modified in respect of these matters.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by the Companies (Auditor’s Report) Order, 2015 ("the
Order") issued by the Central Government of India in terms of sub-section (11) of
section 143 of the Act, we give in the "Annexure A", a statement on the matters
specified in paragraphs 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 sought and obtained and except for the matters described in the basis for
Qualified Opinion paragraph, all the information and explanations which to the best of our
knowledge and belief were necessary for the purpose of our audit;
b) Except for the possible effects of the matter described in the basis for Qualified
Opinion Paragraph above, 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) Except for the possible effects of the matter described in the basis for Qualified
Opinion Paragraph, in our opinion, the aforesaid standalone financial statement comply
with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of
the Companies (Accounts) Rules,2014;
e) The matter described in the basis for Qualified Opinion paragraph above, in our
opinion, may have an adverse effect on the functioning of the Company.
f) The Company has defaulted in redemption of Non Convertible Debenture
{"NCD"} on due date and payment of interest due thereon and dividend on
preference share and such default has continued for more the one year. In terms of Section
164 (2) of the Companies Act,2013 the Directors of the Company are not eligible to be
re-appointed as directors of the Company. As per the legal opinion obtained by the
company, the existing directors of the company may
continue to hold their position as Directors till their reappointment date
g) With respect to the adequacy of Internal Financial Controls over Financial Reporting
of the Company, and the operating effectiveness of such controls, refer to our separate
report in "Annexure B".
h) With respect to other matters to be included in the Auditor’s Report in
accordance with Rule 11 of the Companies (Audit and Auditors) Rule 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 No. 28 & 29 to the financial
statements.
ii) The Company did not have long-term contracts including derivative contracts for
which there were any material foreseeable losses.
iii) There has been some delay in transferring amounts required to be transferred to
the Investor Education & Protection Fund by the Company.
|
For P. K. LILHA & CO. |
|
Chartered Accountants |
|
Firm Reg. No.: 307008E |
|
Sd/- |
|
(CA. P. K. LILHA) |
| Place: Kolkata |
Partner |
| Date: 31.05.2016 |
M. No. 011092 |
"ANNEXURE a"
to the auditors report
The Annexure referred to in our Independent Auditors’ Report to the members of the
Company on the financial statements for the year ended 31st March 2016, We report that:
i. In respect of its Fixed Assets:
a) The Company has maintained proper records showing full particulars including
quantitative details and situation of fixed assets.
b) It has been confirmed by the Management that three Title Deeds in respect free hold
land are not in the name of the company. The Gross Block / Net Block of these Freehold
Land amounts to 177.01 Crore as on 31.03.2016.
c) All the fixed assets have not been physically verified by the management during the
year but there is a regular programme of verification 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 verification.
ii. In respect of its Inventories:
a) As explained to us the Inventories have been physically
verified by the management at reasonable intervals. In our opinion the frequency of
verification is reasonable.
b) The procedure of physical verification of inventories followed by the management is
reasonable and adequate in relation to the size of the Company and the nature of its
business.
iii) As informed to us, the Company during the year has not granted any loan, secured
or unsecured to companies, firms, Limited Liability Partnership or other parties covered
in register maintained under section 189 of the Companies Act, 2013. Accordingly, the
provisions of sub clause (iii) (b) & (c) of the Companies (Auditors Report) order,
2013 (as amended) are not applicable.
iv) In respect of loans, investments, guarantees and security, provisions of section
185 and 186 of the Companies Act 2013 have been complied with. However, the company during
the year, has not given loan or provided guarantee or security to any person or other body
corporate and not made any investment.
v) The Company has not accepted any deposit from the public; therefore the provisions
of clause (v) of the order are not applicable to the company
vi) We have broadly reviewed the Books of Accounts maintained by the company in respect
of generation of
electricity where pursuant to the rules made by the Central Government of India, the
maintenance of Cost Records have been prescribed U/s 148(1) of the Act and are of the
opinion that prima facie, the prescribed accounts and records have been made and
maintained. We have not, however, made a detailed examination of the records with a view
to determine whether they are accurate or complete.
vii) In respect of Statutory Dues:-
a) According to the information and explanations given to us and on the basis of
examination of records of the Company, amount deducted / accrued in the books of accounts
in respect of undisputed statutory dues including Provident Fund, Employees State
Insurance, Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value
Added Tax, Cess and other material statutory dues have been regularly deposited with
appropriate authorities during the year except Dividend Distribution Tax Payable as set
out below. As explained to us the Company did not have any dues on account of Duty of
Custom and Duty of Excise as they were not applicable.
| Particulars |
Amount (Rs) |
| Dividend Distribution Tax Payable |
|
| (DDT) (Inclusive of Interest ) |
|
| F.Y 2011-12 |
114,026,220/- |
| F.Y 2012-13 |
104,390,201/- |
|
218,416,421/- |
b) According to information and explanation given to us and records of the Company
examined by us, the following disputed amount of statutory dues which have not been
deposited.
| Name of the Statute |
Nature of Dues |
Amount (Rs in Lacs) |
Period to which it relates |
Forum where Dispute is Pending |
| PDIF |
Local |
119.00 |
2008-09 |
Punjab & Haryana |
| Act |
Tax |
|
|
High Court |
| Sales Tax |
Local |
144.00 |
2008-09 |
Punjab & Haryana |
|
Tax |
|
|
High Court |
| Sales Tax |
Local |
36.53 |
2011-12 |
*** |
|
Tax |
|
|
|
| Sales Tax |
HVAT |
118.33 |
2012-13 |
*** |
| Sales Tax |
CST |
1462.01 |
2012-13 |
*** |
*** The Company is in process of filing Appeal before the Competent Authority.
viii) The company has defaulted in repayment of loans or borrowing to the financial
institutions/ bank / Government and Debenture holder in respect of secured / unsecured
loans. There loan have been classified as NPA, and therefore no statement of Accounts or
Balance confirmation could be made available. The company has therefore not provided
Interest of 1127.42 Crore, computed on the basis of last available rates. The applicable
details of defaults as at 31.03.2016 are as under, exclusive of interest thereon, as
stated above:
| a) To Banks |
Rs. 4745.24 Crores |
| Bank Names (Lender wise details) |
Principal Outstanding |
|
(in Cr.) |
| Andhra Bank |
84.34 |
| Axis Bank |
165.54 |
| Bank of Baroda |
321.40 |
| Bank of Maharashtra |
74.95 |
| Central Bank of India |
227.76 |
| Corporation Bank |
535.18 |
| Dena Bank |
114.00 |
| Dhanlaxmi Bank |
69.67 |
| IDBI Bank |
39.13 |
| IFCI Ltd. |
40.53 |
| Indian Overseas Bank |
426.30 |
| Indusind Bank |
132.92 |
| ING Vysya Bank |
80.14 |
| Jammu & Kashmir Bank |
237.68 |
| Karur Vysya Bank |
110.50 |
| Lakshmi Vilas Bank |
52.59 |
| State Bank of Bikaner & Jaipur |
337.08 |
| State Bank of Patiala |
283.17 |
| State Bank of Travancore |
75.29 |
| UCO Bank |
903.95 |
| Union Bank of India |
209.28 |
| United Bank of India |
223.84 |
| TOTAL |
4,745.24 |
| b) To Debenture Holders |
Rs. 524.35 Crores |
| c) To FCCB Holders |
Rs. 667.20 Crores |
ix) The Company did not raise any money by way of Initial Public Offer or Further
Public Offer (including debt instruments) and term loans during the year. Accordingly,
Paragraph 3(ix) of the order is not applicable.
x) According to the information and explanations given to us, no material fraud on or
by the company by its officers or employees has been noticed or reported during the course
of our audit.
xi) According to the information and explanations given to us and based on our
examination of the records of the Company, the company has paid / provided for managerial
remuneration in accordance with the requisite approvals mandated by the provisions of
Section 197 read with Schedule V to the Act.
xii) According to the information and explanations given to us, the Company is not a
Nidhi Company.Accordingly; paragraph 3(xii) of the order is not applicable.
xiii) According to the information and explanations given to us and based on our
examination of the records of the Company transactions with related parties are in
compliance with sections 177 and 188 of the Act where applicable and details of such
transactions have been disclosed in the financial statements as required by the applicable
Accounting Standards.
xiv) According to the information and explanations given to us and based on our
examination of the records of the Company the company has not made any preferential
allotment or private placement of shares or fully or partly convertible debentures during
the year.
xv) As per information and explanations given to us and based on our examination of the
records of the Company, the company has not entered into any non cash transactions with
the Directors or persons connected with him. Accordingly, Paragraph 3 (xv) of the order is
not applicable.
xvi) The Company is not required to be registered U/s 45-IA of the Reserve Bank of
India Act, 1934.
|
For P. K. LILHA & CO. |
|
Chartered Accountants |
|
Firm Reg. No.: 307008E |
|
Sd/- |
|
(CA. P. K. LILHA) |
| Place : Kolkata |
Partner |
| Date : 31.05.2016 |
M. No. 011092 |
"ANNEXURE B"
to the independent auditors report
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 REI Agro
Ltd. ("the Company’) as of March 31, 2016 in conjunction with our audit of the
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 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 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") issued by the Institute of Chartered Accountants of India
(ICAI) 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 auditor’s 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 qualified audit opinion on the Company’s 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 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 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 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.
QUALIFIED OPINION
According to the information and explanations given to us and based on our audit, the
following material weakness has been identified in the Company’s internal financial
controls over financial reporting as at March 31st, 2016:
i) As required u/s 138 of the Companies Act, 2013, Internal Audit has not been
conducted by the Company
A "material weakness" is a deficiency, or a combination of deficiencies, in
Internal Financial Control over Financial Reporting, such that there is a reasonable
possibility that a material misstatement of the Company’s Annual or Interim Financial
Statements will not be prevented or detected on a timely basis.
OPINION
In our opinion, except for the possible effects of the material we akne s s de s crib e
d as ab ove on the achievement of the objectives of the control criteria, the Company has
maintained, in all material respects, adequate Internal Financial Controls over Financial
Reporting and such Internal Financial control over financial reporting were operating
effectively as of 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"(ICAI).
We have considered the material weakness identified and reported above in determining
the nature, timing and extent of Audit tests applied in our Audit of the March 31, 2016
financial statements of the Company and the material weakness does not affect our opinion
on the financial statements of the Company.
|
For P. K. LILHA & CO. |
|
Chartered Accountants |
|
Firm Reg. No.: 307008E |
|
Sd/- |
|
(CA. P. K. LILHA) |
| Place : Kolkata |
Partner |
| Date : 31.05.2016 |
M. No. 011092 |
+91-9892691696
