Shipping Corporation of India Ltd Directors Report.

To the Members of

The Shipping Corporation of India Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of The Shipping Corporation of India Limited ("the Company"), which comprise the Balance Sheet as at March 31,2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as "the standalone financial statements").

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, the profit and total comprehensive income, changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those SAs are further described in the Auditors Responsibilities for the Audit of the Standalone Finan-cial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter

We draw attention to the following:

(i) We draw attention to Note No. 44 to the Financial Statements, C&AG has raised an observation relating to payment of Performance Related Pay (PRP) of Rs 11.03 crores for the FY 2014-15. Audit observed that the company did not follow the DPE guidelines for determining the PBT for the FY 2014-15.The Company has submitted its response and the matter is under the consideration of C&AG and final outcome is awaited.

(ii) We draw attention to Note No. 45 to the Financial Statements, the Company is in process of analyzing the probable impact of gratuity payable to its regular fleet officers who have opted for Contract wages. On prudent basis, gratuity liability has been adequately provided in books of accounts.

(iii) We draw attention to Note No. 47 to the Financial Statements, Trade Receivables including reimbursables, Trade Payables and Deposits are subject to the balance confirmations, subsequent reconciliation and consequential adjustments, if any, as on March 31,2019.

Our Opinion is not modified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

 

Key Audit Matter Auditors Response
1 Accuracy of recognition, measurement, presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 "Revenue from Contracts with Customers" (new revenue accounting standard) We assessed the Companys process to identify the impact of adoption of the new revenue accounting standard.
Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
The application of the new revenue accounting standard involves certain key judgments relating to identification of distinct performance obligations, determination of transaction price of the identified performance obligations, the appropriateness of the basis used to measure revenue recognized over a period. Additionally, new revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date. ( Refer Note No 33 to the Standalone Financial Statements )  

• Evaluated the design of internal controls relating to Implementation of the new revenue accounting standard.

• Selected a sample of continuing and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price.
• Selected a sample of continuing and new contracts and performed the following procedures:
 

Read, analyzed and identified the distinct performance obligations in these contracts.

  Compared these performance obligations with that identified and recorded by the Company.
  Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue.
  In respect of samples relating to fixed price contracts, progress towards satisfaction of performance obligation used to compute recorded revenue was verified
  Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts.
2 Impairment testing of Fleets in line with the Ind AS 36 We have obtained the managements view to gain an overview of the triggering events, market conditions (present & future) operational factors and other key assumptions supporting the impairment assessment.
We have performed the following procedures for verification of impairment testing of Fleets:
The company at every reporting period, assesses market conditions and other specific risks to determine if there are any triggering events that may be indicators of an impairment of the fleets. • Understanding the process for collecting the inputs into the valuation models to evaluate the design of the companys controls over its impairment assessment and challenged the appropriateness of the inputs and significant assumptions, including the cash flow projections, discount rate, costs and expenses.
The impairment loss, if any, is recognized in the Statement of Profit and Loss in the period in which impairment takes place. • Re-performed the valuation calculations; benchmarked the valuation model with generally accepted valuation techniques; compared historical estimates used by management to actual results.
We are able to conclude that the significant judgments are reasonable and free from bias as well as the appropriateness of the valuation models used and their consistent application.
3 The direct access of certain overseas foreian aaents to fund collected on account of freiaht and other charges. We assessed the Companys process to evaluate Agents on timely basis to identify the impact of on the revenue and collection of funds.
Liner division of SCI has been carrying out its vessels operations and container marketing activities at various ports in India and abroad through its agency network. Agents perform various activities such as marketing, booking, clearing of cargo, port calls of vessels & also collection of freight on behalf of SCI.

SCI depends on its agents for operation of Liner segment business.

• Company has conducted audit by external CA Firms of major overseas agents to whom direct access to collection of fund on account of freight & other charges have been given by the company in order to verify the performance and inspection of evidence in respect of operations.
Since all the activities are performed by the agents there is requirement of funds & also collection of incomes directly by agents & subsequent remittance to SCI which creates a risk on the part of the Company. • Company has also obtained bank guarantee from major agents & also reviewed the same periodically to confirm its validity and completeness with respect to risk exposure on revenue due to direct access to agents.
4 Evaluation of Dry Docking Cost & Repair Expenses of Vessels:- To assess the recognition of dry docking cost & repair cost, we performed the following process:
As per Ind AS 116 Subsequent costs like expenditure on major maintenance refits or repairs including planned dry-dock are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. • Evaluated the design of internal controls relating to the major cost like repairs & dry-docking which are of two types i.e. planned dry-dock & Emergency dry-dock.
• Selected a sample to verify the operating effectiveness of the internal control, relating to identification of the distinction between the two cost i.e. repair & dry-dock cost.
A shipping company on periodic basis is required to bring all ships into dry dock for major inspection and overhaul. Overhaul expenditure might at first sight seem to be a repair to the ships but it is actually a cost incurred in getting the ship back into seaworthy condition. • Tested the relevant information technology systems relating to the Dry-dock & Fleet related expenses.
 

We are able to conclude that the repairs & dry-dock are reasonable and free from bias as well as the appropriateness of the dry-dock cost capitalized in the books of accounts.

Information Other than the Standalone Financial Statements and Auditors Report Thereon

The Companys Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexures to Boards Report, Business Responsibility Report, Corporate Governance and Shareholders Information, but does not include the standalone financial statements and our auditors report thereon.

Our opinion on the standalone financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

Managements Responsibility for the Standalone Financial Statements

The Companys management and Board of Directors are responsible for the matters stated in section 134(5) of the Companies Act, 2013 with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs, profit / loss (including other comprehensive income), changes in equity 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. 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 statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls with reference to standalone financial statements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However,

future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

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

(a) We have sought and obtained all the information and explanations 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 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) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(e) As per Notification No. G.S.R. 463 (E) dated June 5th,2015 issued by Ministry of Corporate Affairs, Section 164 (2) as regards the ‘Disqualifications of Directors is not applicable to the Company, since it is a Government Company.

(f) 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-A".

(g) With respect to the other matters to be included in the Auditors 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:

1. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note No. 28 to the financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts.

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

2. As required by the Companies (Auditors Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure-B" a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.

3. As required under sub section (5) of Section 143 of the Act, in case of the Government Company, we give in the "Annexure-C" a statement on the matters specified in the directions and sub -directions issued by Office of the Comptroller and Auditor General of India.

 

For G. D. Apte & Co. For A. Bafna & Co.
Chartered Accountants Chartered Accountants
FRN: 100515W FRN.003660C
CA Chetan R. Sapre CA Mukesh Kumar Gupta
Partner Partner
ICAI Membership No. 116952 ICAI Membership No.073515
Place: Mumbai Place: Mumbai
Date: May 28, 2019 Date: May 28, 2019

"Annexure A" to Independent Auditors Report

(Referred to in paragraph II (f) under ‘Report on Other Legal and Regulatory Requirements section of our report)

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

The Shipping Corporation of India Limited

In conjunction with our audit of the standalone financial statements of The Shipping Corporation of India Limited ("the Company") as of and for the year ended March 31, 2019, we have audited the Internal Financial Controls over financial reporting of the Company as of that date.

Managements Responsibility for Internal Financial Controls

The Companys 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 companys 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 Act.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys 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, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of 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 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 auditors judgement, 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 audit opinion on the Companys internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A companys 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 companys internal financial control over financial reporting includes those policies and procedures that:

1) Pertains 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 companys 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 explanation given to us and based on our audit, the following material weaknesses have been identified in the operating effectiveness of the Companys internal financial control over financial reporting as at March 31,2019.

a) The timely updation and monitoring of the master data, with respect to Fleet Personnel needs to be strengthened.

b) The Control on the timely updation of telegram for booking of bunker consumption in correct voyage & recovery from charterer needs to be strengthened.

c) System for Monitoring and Clearing of Vendor Accounts (Including Agent Prefunding), GR/IR Accounts should be done on timely basis and Legacy Balances should be reconciled.

d) The system has to ensure that the TDS is deducted either at the time of booking of expenses or while making the provisions at cut-off date.

In our opinion, the Company has, in all material respects, maintained adequate internal financial controls over financial reporting as of March 31, 2019 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 and except for the possible effects of the material weaknesses described above on the achievement of objectives of the control criteria, the internal financial controls over financial reporting of the company were operating effectively as at March 31, 2019.

We have considered the material weaknesses identified and reported above in determining the nature, timing and extent of audit tests applied in our audit of the financial statements of the company as of March 31, 2019 and these material weaknesses do not affect our opinion on the Standalone Financial statements of the Company.

 

For G. D. Apte & Co. For A. Bafna & Co.
Chartered Accountants Chartered Accountants
FRN: 100515W FRN.003660C
CA Chetan R. Sapre CA Mukesh Kumar Gupta
Partner Partner
ICAI Membership No. 116952 ICAI Membership No.073515
Place: Mumbai Place: Mumbai
Date: May 28, 2019 Date: May 28, 2019

"Annexure B" to Independent Auditors Report

(Referred to in paragraph I under ‘Report on Other Legal and Regulatory Requirements section of our Independent Auditors Report to the members of the Company on the Financial Statements for the year ended March 31,2019)

(i) a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) As per the information and explanations given to us, the fixed assets have been physically verified by the management at reasonable intervals, which in our opinion is reasonable, having regard to the size of company and nature of its business.

c) According to the information and explanations given to us and on the basis of our examination of records of the company, the title deeds for all immovable properties are held in the name of the Company, except as mentioned in the Table No.1, for which no records were made available to us for verification.

(Amount in lakhs)

 

Apartment Name No Of Flats Gross Block Net Block as on 31.03.19 Title Deeds Share Certificates
GONDAVALI APTS 10 18.79 8.14 Not Available Available
CHITRAKOOT APTS 2 4.57 0.86 Not Available Available
KAVITA APTS 1 2.62 1.14 Not Available Available
LANDS END APTS 1 2.76 0.60 Not Available Available
AJANTA APTS 1 2.35 1.02 Not Available Not Available

(ii) The physical verification of inventories has been conducted at reasonable intervals by the management during the year. No material discrepancies were noticed on such verification.

(iii) The Company has granted loans to four Body Corporates covered in the register maintained under section 189 of the Act.

a) The terms and conditions of the grant of such loans are not prejudicial to the companys interest

b) In the case of loans granted, the terms of arrangement do not stipulate any repayment schedule and the loans are repayable on demand. Payment of interest has been stipulated, and the receipts thereof are regular, except, in case of loan granted to joint venture company India LNG Transport Company (No. 3) Limited, interest instalment amounting to Rs 280.32 Lakhs for the period December 29, 2018 to March 28th, 2019 due on March 29, 2019 has not been received by the company.

c) There are no overdue amounts for more than ninety days in respect of the loans granted.

(iv) According to information and explanation given to us and in our opinion, the Company has not advanced loans to the Directors/ to a Company in which the Directors are interested to which the provisions of section 185 of the Act apply. The Company has complied with the provision of Section 186 to the extent applicable.

(v) In respect of deposits accepted, in our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of section 73 to 76, of the Act, or any other relevant provisions of the Act, and the rules framed there under, are not applicable and hence not commented upon.

(vi) To the best of our knowledge and as explained, the Central Government has not specified the maintenance of cost records under clause 148(1) of the Companies Act, 2013, for the Company, and therefore the provisions of clause (vi) of the order are not applicable to the company.

(vii) a) According to the records of the Company verified by us, we report that the Company is generally regular in payment 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 statutory dues with the appropriate authorities, except,

According to the information and explanations given to us, following undisputed amounts of provident fund were in arrears as at March 31, 2019 for a period of more than six months from the date they became payable.

 

Nature of the Statute Nature of the Dues Amount (in Rs.) Period to which the amount relates Due Date Date of Payment
The Seamens Provident Fund Act, 1966 Employees Contribution 58,845 FY 2015-2019 Various Dates 22/05/2019
The Seamens Provident Fund Act, 1966 Employers Contribution 58,845 FY 2015-2019 Various Dates 22/05/2019
Employees Provident Fund Act, 1952 Employees Contribution 1,13,681 FY 2014-2019 Various Dates 22/05/2019
Employees Provident Fund Act, 1952 Employers Contribution 1,13,681 FY 2014-2019 Various Dates 22/05/2019
TOTAL 3,45,052

b) According to the information and explanations given to us, there are no dues, of duty, of Customs and Excise, which have not been deposited with the appropriate authorities on account of any dispute. However, according to information and explanation given to us, the following dues in respect of Income Tax, Sales Tax, Service Tax and Value Added Tax which have not been deposited on account of dispute:

Amount (Rs. in Lakhs

 

Sr  No Name Of The Statute Nature Of The Dues The Forum/Authority Where Dispute Is Pending Financial Year Sum of Amount Involved Sum of Amount Paid Under Protest Sum of Unpaid Amount
1 Finance Act, 1994 Service tax CESTAT April 09 to Sep 2015 86,350 3,099 83,251
2 Finance Act, 1994 Service tax Commissioner (A) July 12 to Sep 15 8 0 8
3 Finance Act, 1994 Service tax Commissioner, LTU Oct 09 to Sep 14 76,474 0 76,474
4 Finance Act, 1994 Service tax Joint Commissioner, LTU Oct 08 to Sep 12 134 1 133
5 Income Tax Act, 1961 Tax U/s 143(3) Bombay High Court 2004 to 2007 3,707 0 3,707
6 Income Tax Act, 1961 Tax U/s 143(3) CIT(A) Mumbai 2009-10, 2011-12, 2012-13 & 2014-15 5,800 851 4,949
7 Income Tax Act, 1961 Tax U/s 143(3) ITAT Mumbai 2007-08 1,013 0 1,013
8 Income Tax Act, 1961 Tax U/s 147 CIT(A) Mumbai 2010-11 38 14 24
9 Income Tax Act, 1961 Tax U/s 147 ITAT Mumbai 2004-05 & 2005-06 2,524 0 2,524
10 Income Tax Act, 1961 Tax U/s 201(1) 201(1A) CIT(A) Mumbai 2011-12 2,170 109 2,061
11 Income Tax Act, 1961 U/s 195 Bombay High Court 2003-04 & 2005-06 9,820 0 9,820
12 AP VAT Act, 2005 VAT CTO 2011-12 10 0 10
13 Sales Tax VAT Bombay High Court 1993-94,1994-95 & 2017-18 131 0 131
TOTAL 188,179 4,074 184,105

(viii) According to the information and explanations given to us, we are of the opinion that the company has not defaulted in repayment of loans or borrowings to financial institutions and banks. The company has not issued any debentures.

(ix) The Company has unutilized proceeds amounting to Rs. 13,385 Lakhs raised through Further Public Offer (FPO) in the earlier years. During the year the company has not utilized the same and the unutilized proceeds are kept in fixed deposits. In our opinion, the term loans have been applied for the purpose for which those have been raised.

(x) We report that certain complaints have been received by the vigilance division of the company for the reporting period for which the investigations are under process. We neither came across any instance of fraud by the company nor any fraud on the company by its officer or employees were noticed or reported during the year or have been informed of any such case by the management.

(xi) The Company is a Government Company, and the provisions of section 197 are not applicable to the company. Therefore, clause (xi) of the said order is not applicable to the company.

(xii) In our opinion the company is not a Nidhi Company. Therefore, clause (xii) of the said order is not applicable to the company.

(xiii) According to the information and explanations given by the management, transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the financial statements etc., as required by the applicable accounting standards.

(xiv) The company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and therefore clause (xiv) of the said order is not applicable to the company.

(xv) The company has not entered into any non-cash transactions with the directors or persons connected with him and therefore the clause (xv) of the said order is not applicable to the company.

(xvi) According to the information and explanation provided by the management, the company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For G. D. Apte & Co. For A. Bafna & Co.
Chartered Accountants Chartered Accountants
FRN: 100515W FRN.003660C
CA Chetan R. Sapre CA Mukesh Kumar Gupta
Partner Partner
ICAI Membership No. 116952 ICAI Membership No.073515
Place: Mumbai Place: Mumbai
Date: May 28, 2019 Date: May 28, 2019

"Annexure C" to Independent Auditors Report

Directions under Section 143(5) of the Companies Act, 2013

On the Accounts of The Shipping Corporation of India Ltd. for the year 2018-19

Directions Auditors comments including Action taken wherever required to be taken Impact on the Accounts and financial statements
1 Whether the company has system in place to process all the accounting transactions through IT system? If NO, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated. The company has One Accounting System i.e. SAP & other major operating softwares such as Danaos & Afsys etc. All these softwares are integrated with each other & there are no transactions which are accounted outside the IT System. No Impact
2 Whether there is any restructuring of an existing loan or cases of waiver/write off of debts /loans/ interest etc. made by a lender to the company due to the companys inability to repay the loan? If yes, the financial impact may be stated. As explained to us and observed during the course of audit, there is no restructuring of an existing loan or cases of waiver/write off of debts /loans/ interest etc. made by a lender to the company due to the companys inability to repay the loan. No Impact
3 Whether funds received/receivable for specific schemes from central/ state agencies were properly accounted for/ utilized as per its term and conditions? List the cases of deviation. As explained to us & observed during the course of audit the Company has received two subsidies in earlier years, status of the same is as follows:- No Impact
a) Related to Myanmar Service, Company has accounted and utilised the grant as per its term and conditions and amount spent exceeding the grant amounting to Rs. 4.67 Crores is shown as receivable and provision for doubtful advances is created on the same
b) Related to new service from India to Bangla- desh-Myanmar and Sri Lanka- Maldives. SCI has received the grant and is still awaiting directions from Ministry to start the service or refund the grant. Company has initiated the process of remitting the interest earned on the grant to the Ministry. (Refer Note No. 43 of Financial statements )

Sub-directions under Section 143(5) of the Companies Act, 2013 in respect of the Shipping Corporation of India Limited for the year 2018-19

 

Sub-directions Auditors comments including Action taken wherever required to be taken Impact on the Accounts and financial statements
1 Whether Substantial portion of Revenue Booked/ invoices raised are reversed or cancelled? As explained to us and observed during the course of audit, No substantial portion of revenue booked / invoices raised by company are reversed or cancelled except that in normal course of business and due to provision created at the cut-off date as per relevant Ind AS. No Impact
2 State the system for providing Impairment to vessels To determine Impairment of each vessel, carrying amount of the vessel is compared with its recoverable amount. Where the carrying amount of the vessel exceeds the recoverable amount, an impairment loss for the vessel is recognized. Recoverable amount of the vessel is higher of its Market Value & Value in use as on the balance sheet date. Market value of vessels at Balance Sheet date are based on valuation reports provided by reputed international Valuation firms. Value in use of vessels is based on projections of Future Cash inflows & Outflows generated from the use of the vessel and its subsequent sale. Cash inflows and outflows used in the calculation are based on market report of research and advisory firms like Drewry (where available) as well as best available management estimates. Cash Inflow on sale of vessels is considered as their Scrap Value at the end of their useful life. The Value in use of Vessels as on the reporting date is arrived at by discounting the Net Cash Inflows by using Weighted Average Cost of Capital (WACC). No Impact
3 State the system for bifurcating repairs and expense for capitalization and charging to revenue. Whether repairs and expenses which do not add to useful life of vessels are capitalized? As per the companys accounting policy, expenses incurred during the planned dry docking of vessels and other major repair expenses of vessels like replacement of auxiliary engine etc. are capitalised in the assets carrying amount if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably as per the recognition criteria of Ind AS 16. All other repairs and expenses that do not meet the recognition criteria of Ind AS 16 are charged to revenue. As observed during the course of audit, repairs and other expenses which do not add to useful life of vessels are not capitalised by the Company and the same are charged to revenue. No Impact
4 Whether Title to all investments /FD actually available with the Company? Title to all Investments including investments in shares & fixed deposits are available with the company. No Impact
5 Whether balance payable to Agents as at the yearend is correctly reflected under the "Liability" head in Balance Sheet? Yes, As explained & observed during the course of audit at the end of the year the company has a process to identify the Agent balances as receivable or payable. Agents having Credit balances i.e. where money is payable to the agent, such balances are disclosed under the "Liability" head in the balance sheet. No Impact
For G. D. Apte & Co. For A. Bafna & Co.
Chartered Accountants Chartered Accountants
FRN: 100515W FRN.003660C
CA Chetan R. Sapre CA Mukesh Kumar Gupta
Partner Partner
ICAI Membership No. 116952 ICAI Membership No.073515
Place: Mumbai Place: Mumbai
Date: May 28, 2019 Date: May 28, 2019