Stewarts & Lloyds of India Ltd Auditor Reports

TO THE MEMBERS OF STEWARTS & LLOYDS OF INDIA LIMITED

Report on the Financial Statements

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

Managements Responsibility for the Financial Statements

The Companys 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 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.

Auditors 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 auditors 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 Companys 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 Companys 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 on the financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, 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 principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2016 and its loss and its cash flows for the year ended on that date.

Emphasis of Matters

We draw attention to the following matter in the Other Notes to the financial statements:

Note no 23.14 to the financial statement regarding the same being prepared on a going concern basis, notwithstanding the fact that the Company has accumulated losses of Rs. 78.50 crores as on 31st March, 2016 resulting in negative net worth of Rs. 66.52 crores which cast significant doubt about the Company’s ability to continue as a going concern. The appropriateness of the going concern assumption is subject to the Company’s ability to generate positive cash flows, infusion of funds, discharge of its liabilities and the outcome of the decisions of BIFR.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors Report) Order, 20l6 ("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 statement on the matters specified in paragraphs 3 and 4 of the said Order, to the extent applicable.

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

i) We have sought and obtained all the information and explanations, which, to the best of knowledge and belief, were necessary for the purpose of our audit;

ii) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examinations of those books;

iii) 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;

iv) In our opinion the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rule 2014.

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

vi) With respect to the adequacy of internal financial controls, over financial reporting of the company and operating effectiveness of such controls, refer to our separate report in ANNEXURE-I.

vii) 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 23.3(a), 23.3(b), 23.3(c) and 23.3.(d) of the Other Notes to the financial statements;

2. The Company does not have any long-term contracts including derivative contract for which there are any material foreseeable losses;

3. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

	For RAY & RAY
	Chartered Accountants
	Firms Registration No. 301072E
	Abhijit Neogi
Place : Kolkata	Partner
Date: 22nd April, 2016	Membership No. 61380

ANNEXURE TO AUDITORS’ REPORT

Referred to in paragraph 1 of the Auditors Report on "Other Legal and Regulatory Requirements" of even date to the members of STEWARTS & LLOYDS OF INDIA LIMITED on the financial statements for the year ended 31st March, 2016.

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

b) The fixed assets have been physically verified by the management at reasonable intervals during the year. The discrepancies noticed on such verifications are stated to be not material and are yet to adjusted in the books of account.

c) The company does not hold any freehold property in its name. Therefore, in our opinion, clause (i) (c) of the aforesaid order in not applicable to the Company.

ii) The inventory has been physically verified and certified by the management at the year-end. In our opinion, the frequency of verification is reasonable. The discrepancies noticed on such verification, which were not material have been properly dealt with in the books of account.

iii) On the basis of examination of books of account and based on information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Act. Therefore, clauses (iii)(a), (b) and (c) of the aforesaid order are not applicable to the Company.

iv) The company has not given loans, made investments, given guarantees and provided securities covered by provisions of section 185 and 186 of the Act. Therefore clause (iv) of the aforesaid order is not applicable to the company.

v) The Company has not accepted any deposits from public during the year, within the meaning of the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Act and the rules framed there under. Moreover, no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any other court or tribunal.

vi) The Central Government has not specified maintenance of cost records under sub-section (l) of section 148 of the Act for the company. Therefore, clause (vi) of the aforesaid order is not applicable for the company.

vii) a) On the basis of checking of records of the Company and according to the information and explanations given to us, we are of the opinion that the Company is not regular in depositing undisputed statutory dues including provident fund, employees state insurance, income tax, sales-tax, service tax, value added tax, professional tax, Employee Guarantee Tax or cess and any other statutory dues with the appropriate authorities. The extent of arrears of outstanding statutory dues as on the last day of the financial year concerned for a period of more than six months from the date they became payable are stated below :-

Nature of Dues	Amount outstanding more than 6 months as on 31.03.2016 (Rs.)	Remarks
Service Tax	3,777,952	Not yet paid
Value Added Tax	2,515,915	Not yet paid
Works Contract Tax	1,090,414	Not yet paid
Entry Tax	458	Not yet paid

b) On the basis of checking of records of the Company and on the basis of information and explanations given to us, the particulars of dues of income tax or sales tax or service tax or value added tax as at Balance Sheet date which have not been deposited on account of any dispute are given in ANNEXURE-II.

viii) On the basis of records of the Company examined by us, there is no loan outstanding to financial institution, bank, government or debenture holders. Hence the clause (viii) of the aforesaid order is not applicable to the Company.

ix) On the basis of records of the Company examined by us, the Company has not raised money by way of initial public offer or further public offer including debt instruments and term loan during the year. Hence the clause (ix) of the aforesaid order is not applicable to the Company.

x) During the course of our examination of the records of the Company and according to the information and explanations given to us, we have neither come across any instances of fraud by the Company or any fraud on the Company by its officers or employees noticed or reported during the year nor we have been informed of any such case by the management.

(xi) On the basis of examination of the records of the Company, the managerial remuneration has been paid / provided in accordance with the requisite approvals mandated by the provision of Section 197 read with Schedule V to the Companies Act.

(xii) The Company is not an Nidhi Company. Hence the clause (xii) of the aforesaid order is not applicable to the Company.

(xiii) On the basis of examination of the books of the account of the Company and on the basis of information and explanations given to us, the Company has entered into all transactions with related parties in compliance with Section 177 and 188 of the Companies Act 2013 and the same is disclosed in the financial statement as required by the applicable Accounting Standards.

(xiv) The Company has not made any preferential allotment or private placement of shares fully paid or fully or partly convertible debentures during the year under review. Therefore, clause (xiv) of the aforesaid order is not applicable to the Company.

(xv) On the basis of examination of records of the Company and according to the information and explanations given to us, we are of the opinion that the Company has not entered into any non-cash transactions with directors or persons connected with him.

(xvi) The Company is not required to be registered under Section 45 -IA of the Reserve Bank of India Act, 1934. Hence the clause (xvi) of the aforesaid order is not applicable to the Company.

	For RAY & RAY
	Chartered Accountants
	Firms Registration No. 301072E
	Abhijit Neogi
Place : Kolkata	Partner
Date: 22nd April, 2016	Membership No. 61380

ANNEXURE I

We have audited the internal financial controls over financial reporting of STEWARTS & LLOYDS OF INDIA LIMITED ("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.

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 Control 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 the 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 Companies Act,2013.

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 Companies Act, 2013, 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 procedure 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 judgments, 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 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 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 procedure 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 the generally accepted accounting principles, and that receipts and expenditure 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 misstatement 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 controls 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 weaknesses have been identified as at March, 31st , 2016.

a) The Company did not have an appropriate internal control system for review of its performance pertaining to execution of contracts resulting in customer dissatisfaction and dispute leading to recognition of revenue without establishing reasonable certainty of ultimate collection in earlier years from sundry debtors affecting cash flows adversely.

b) The Internal auditor of the Company has also pointed out in their report material weakness in internal financial controls stating that the Company is not having any ERP system to manage the different operational activities. Due to its present condition, it is also functioning with some minimum staff strength. Accordingly, many of the operations which would have been taken care of by a computer system and controls and are being managed manually. Hence, there is some limitation in control system and processes which have been mentioned in a separate annexure.

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 Companys annual or interim financial statement will not be prevented or detected on a timely basis. In our opinion, except for the possible effects of the material weaknesses described above 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 controls over financial reporting were operating effectively as of March 31 st, 2016 based on the internal control over financial reporting criteria established by the Company considering the essential components of internal financial control stated in the Guidance Notes on audit of internal financial controls over financial reporting issued by the Institute of Chartered Accountants of India.

We have considered material weakness as identified and reported above in determining the nature, timing and extent of audit test applied in our audit of March, 31, 2016 financial statements of the Company and these material weaknesses do not affect our opinion on the financial statements of the Company.

	For RAY & RAY
	Chartered Accountants
	Firms Registration No. 301072E
	Abhijit Neogi
Place : Kolkata	Partner
Date: 22nd April, 2016	Membership No. 61380

ANNEXURE II TO THE AUDITORS’ REPORT

Name of the Statute	Nature of the Dues	Period	Amount (Rs.)	Forum where the dispute is pending
A - DISPUTED SALES TAX MATTERS
1 West Bengal Sales Tax Act, 1994	Non receipt of Declarations Forms, disallowance of Erection, Freight and other charges	1996-97	5,284,552	West Bengal Commercial Taxes Apellate and Revision Board
2 Central Sales Tax Act, 1956	Non receipt of Declarations Forms, disallowance of Erection, Freight and other charges	1996-97	2,614,705	West Bengal Commercial Taxes Apellate and Revision Board
3 Orissa Sales Tax Act,	Disallowance of exemptions towards labour services	2002-03	33,140	Assistant Commissioner of Commercial Taxes (Appeal)
4 West Bengal VAT Act, 2003	Enhancement of gross turnover, disallowance of Erection, Freight and other charges	2007-08	6,535,664	West Bengal Commercial Taxes Apellate and Revision Board
5 Central Sales Tax Act, 1956	Non receipt of Declarations Forms, disallowance of Erection, Freight and other charges	2007-08	317,084	West Bengal Commercial Taxes Apellate and Revision Board
6 West Bengal VAT Act, 2003	Enhancement of gross turnover, disallowance of Erection, Freight and other charges	2008-09	5,725,827	West Bengal Commercial Taxes Apellate and Revision Board
7 Central Sales Tax Act, 1956	Non receipt of Declarations Forms, disallowance of Erection, Freight and other charges	2008-09	29,100,529	West Bengal Commercial Taxes Apellate and Revision Board
8 West Bengal VAT Act, 2003	Enhancement of gross turnover, disallowance of Erection, Freight and other charges	2009-10	2,922,569	West Bengal Commercial Taxes Apellate and Revision Board
9 Central Sales Tax Act, 1956	Non receipt of Declarations Forms, disallowance of Erection, Freight and other charges	2009-10	157,231	West Bengal Commercial Taxes Apellate and Revision Board
10 U.P. VAT Act, 2008	Enhancement of gross turnover, disallowance of Erection, Freight and other charges	2007-08	2,029,388	Deputy Commissioner of Commercial Taxes (Admn) Noida
11 U.P. VAT Act, 2008	Enhancement of gross turnover, disallowance of Erection, Freight and other charges	2008-09	3,233,000	Deputy Commissioner of Commercial Taxes (Admn) Noida
12 U.P. VAT Act, 2008	Enhancement of gross turnover, disallowance of Erection, Freight and other charges	2009-10	1,879,665	Deputy Commissioner of Commercial Taxes (Admn) Noida
13 MVAT Act, 2002	Disallowance of labour charges and imposition of interest and penalty	2007-08	19,126,755	Sales Tax Officer, Business Audit, Thane Division, Thane
TOTAL			78,960,109
14 Income Tax Act, 1961	Disallowance of certain deductions claimed - Order dated 24.12.2009	A.Y.2007-08	10,295,851	Commissioner of Income Tax(Appeals)
15 Income Tax Act, 1961	Disallowance of certain deductions claimed - Order dated 21.07.2010	A.Y.2005-06	2,073,370	Commissioner of Income Tax(Appeals)
16 Income Tax Act, 1961	Disallowance of certain deductions claimed - Order dated 24.12.2010	A.Y.2008-09	12,125,010	Commissioner of Income Tax(Appeals)
17 Income Tax Act, 1961	Disallowance of deduction claimed in respect of retention money included in sales	A.Y.2009-10	19,812,950	Commissioner of Income Tax(Appeals)
18 Income Tax Act, 1961	Disallowance of deduction claimed in respect of retention money included in sales	A.Y.2010-11	9,510	Commissioner of Income Tax(Appeals)
19 Income Tax Act, 1961	Disallowance of deduction claimed in respect of retention money included in sales	A.Y.2011-12	188,330	Commissioner of Income Tax(Appeals)
20 Income Tax Act, 1961	Disallowance of deduction claimed in respect of retention money included in sales- Order dated 28.03.2015	A.Y.2012-13	5,162,070	Commissioner of Income Tax(Appeals)
TOTAL			49,667,091
C - DISPUTED SERVICE TAX MATTERS
21 Finance Act, 1994 - Service Tax	Service Tax on Erection, Commissioning & Installation Services	2003-04 & 2004-05	10,112,083	Customs, Excise & Service Tax Appellate Tribunal
22 Finance Act, 1994 - Service Tax	do	2005-06	5,181,598	Commissioner, Central Excise
23 Finance Act, 1994 - Service Tax	Service Tax on Business Auxiliary Services	2008-09	3,513,226	Commissioner, Central Excise
24 Finance Act, 1994 - Service Tax	Service tax short paid on Erection sales from 2006-07 to 2009-10 Tisco Yard Piping	2006-07 to 2009-10	1,076,364	Commissioner, Central Excise
25 Finance Act, 1994	Service tax short paid on	2007-08 to	11,256,744	Commissioner, Service
- Service Tax	Erection sales from 2007-08 to 2011-12 Associated Party	2011-12		Tax - II
26 Finance Act, 1994 - Service Tax	Service tax short paid on Erection sales for April & May 2007	2007-08	716,689	Commissioner, Central Excise (Appeal - II)
TOTAL			31,856,704