TO THE MEMBERS OF TECPRO SYSTEMS LIMITED
1. Report on the Financial Statements:
We have audited the accompanying financial statements of TECPRO SYSTEMS LIMITED
("the Company"), which comprise the Balance Sheet as at March 31,2015, and the
Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a
summary of significant accounting policies and other explanatory information.
2. Managements Responsibility for the Financial Statements:
The Companys Board of Directors is responsible for the matter stated in Section 134
(5) of the Companies Act, 2013 (the Act) with respect to the preparation and presentation
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 (Account) Rule, 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; selections and application of appropriate
accounting policies; making judgement and estimates that are reasonable and prudence; and
design, implementation and maintenance of 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 include in the audit report under the
provisions of the Act and the Rules made thereunder.
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
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, but not for the purpose of expressing an
opinion on whether the Company has in place an adequate internal financial controls system
over financial reporting and the operating effectiveness of such controls. 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 standalone financial statements.
Basis for Qualified opinion
1. Reference is invited to Note No. 29(i) of Notes to Accounts to Financial Statements
that the Company has incurred a loss during the earlier year and during the period ended
31st March, 2015 and as on the said date, the Companys Total Liabilities exceed its Total
Assets. Some of the companys lenders have transferred their loan amounts to Asset
Reconstruction companies during the year and consequently the CDR proposal of the company
became irrelevant. We are also informed that reference has been made to Board for
Industrial and Financial Reconstruction (BIFR) as mandated under Section 23 of the Sick
Industrial Companies (Special Provisions) Act, 1985 in view of the erosion of more than
fifty percent of the Net worth of the company as at March 31, 2014. All these factors
would indicate the existence of a material uncertainty that casts a significant doubt on
the Companys ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
In light of the fact that the events occurring after the Balance Sheet date as
highlighted by the management, the conditions exist which prove that the company can
sustain its business operations as a going concern.
2. The Company has not received the Statement of account/ Confirmation of balance in
respect of certain balances with banks aggregating to a net value of Rs,14,490.13 lakhs
(credit) as per books of account as at 31st March, 2015. Consequently the bank
reconciliation statements have not been drawn up in respect of these accounts and the
attached financial statements do not include any adjustments that might result had the
above been made available.
3. For the period under audit, provision for human resource costs (including salaries,
gratuity, superannuation, leave encashment and other employee benefits) have been accrued
on an estimated basis Rs.4,3921akhs, in view of the inaccessibility to records/lack of
information. The company has not provided for terminal benefits of employees who have left
the services of the company.
4. Results of physical verification of Fixed Assets carried out by the management
during the period have not been made available to us. Discrepancies, if any, noticed on
such verification as compared to books have not been given effect to in the attached
financial statements.
5. Quantity of Inventory as at 31st March, 2015 at various sites/ factories is based on
Management representation and is pending physical verification of such inventory and
reconciliation with books. We are also informed that value of inventory debit able to
Customers has been reviewed and the cost of inventory not considered recoverable has been
absorbed in the Statement of Profit and Loss for the period.
6. Reference is invited to Note No, 29 (ii)(a) that certain customers have encashed
Bank Guarantees of Rs.1,01,525 lakhs including performance guarantees up to 31st March,
2015 (including Rs.59,620.21 lakhs encashed during the financial year 2014-2015) for the
delays in execution of the projects. The same has been included in Other Receivables under
Trade Receivables and have been considered realizable by the management.
The financial statements do not include any adjustments that might result from the
outcome of uncertainties/ observations in clauses 1 to 6 supra
Qualified Opinion
In our opinion and to the best of our information and according to the explanations
given to us, except for the effect of the matters 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 principles generally accepted in India:
a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st
March, 2015;
b) in the case of the Statement of Profit and Loss, of the loss of the Company for the
year ended on that date; and
Emphasis of Matter
1. Trade Receivables and Unbilled Revenue (other than amounts reported in Para 6 above)
aggregating to Rs.2,19,588.19 lakhs includes balances outstanding for a period of more
than three years, debts for additional supplies/ work made upon request by customers
outside of the contract, interest levied on delayed payments of customers which have been
considered realizable based on management representation of their interactions with the
customers and negotiations/discussions. Further, certain circumstances necessitated some
of the customers to make direct payments to Companys vendors to avoid delays in
deliverables. The Company has initiated steps to obtain confirmation of payment from such
vendors for adjustment of payments made by customers, The balances of Customers/Vendors
are therefore subject to the result of such confirmation/reconciliation.
2. No provision for liability and consequential interest / penalty that may arise from
non-filing and noncompliance with statutory provisions relating to Service tax, VAT,
Provident Fund and Tax Deducted at Source have been made in the Financial Statements.
3. In respect of certain contracts, there have been significant delays in the
completion of the projects beyond the contracted dates. This could lead to levy of
liquidated damages by the customers as per the terms of contract entered with them
although the company has not been made aware of any such amount being levied by any of its
customers.
4. Reference is invited to Note no. 14 relating to the payment made to Director towards
managerial remuneration of Rs.51.94 lakhs, for the period 2013-2014, which was in excess
of limits specified in the companies Act, and was subject to the approval from the Central
Government. The company is yet to seek the approval of Central Government.
5. Balances in the account of Trade Receivables/ Trade Payables and Loans and Advances
including dues from associate entities are subject to confirmation of balance and
reconciliation.
6. Management has informed us that the recoverable amount of fixed assets within the
meaning of Accounting Standard 28 is more than their carrying value and as such no amount
needs to be recognized in the financial statements for impairment loss. We have not been
able to validate this assertion in the absence of bids from prospective buyers/valuation
report of an independent agency.
Report on Other Legal and Regulatory Requirements:
1. As required by the Companies (Auditors 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 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 all the information and explanations which to the best
of our knowledge and belief were necessary for the purpose of our audit;
b) in our opinion proper books of account as required by law have been kept by the
Company so far as it appears from our examination of those books [and proper returns
adequate for the purposes of our audit have been received from branches not visited by
us];
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 [and with the returns received
from branches not visited by us];
d) except for the effect of the matters described in the Basis for Qualified Opinion
paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss, and
Cash Flow Statement comply with the Accounting Standards specified under Section 133 of
the Act, read with Rule 7 of the Companies (Account) Rule, 2014;
e) On the basis of written representations received from the directors as on March
31,2015, and taken on record by the Board of Directors, none of the directors is
disqualified as on March 31, 2015, from being appointed as a director in terms of Section
164 (2) of the Act.
f) With respect to the other matters to be included in the auditors report in
accordance with the 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 various pending litigations and we are unable to ascertain its
impact on the financial statements and consequently no provisions were made.
ii. We are of the opinion that the company will have material foreseeable loss on its
long term contracts including derivative contracts.
iii. owever we are unable to quantify the same in the absence of adequate information.
iii. There were no amounts which were due to be transferred by the company to the Investor
education and protection fund,
|
For C.S. HARIHARAN & Co., |
|
Chartered Accountants |
|
Firm Registration N0. 001086S |
|
Sd/- |
|
C. H. Subramanian |
| Place: Chennai |
Partner |
| Date: October 27, 2015 |
Membership No. 007238 |
ANNEXURE TO THE INDEPENDENT AUDITORS REPORT
Re: TECPRO SYSTEMS LIMITED
Referred to in paragraph 7under Report on Other Legal and Regulatory Requirements
section of our report of even date
1. In respect of its fixed assets:
i. the Company is maintaining proper records showing full particulars including
quantitative details and situation of fixed asset..
ii. the fixed assets were not physically verified by the Management during the year and
hence we are unable to comment on the discrepancies, if any, noticed.
iii. substantial part of the fixed assets were not disposed off during the year, in our
opinion, and hence the going concern status of the Company is not affected.
2. In respect of its inventories:
i. As per the information and explanations given to us, the inventories have been
physically verified by the Management at the year end.
ii. We were unable to observe the physical verification of such inventory but based on
information and explanations given by Management, the procedures of physical verification
of the inventory followed appear reasonable and adequate in relation to the size of the
Company and the nature of its business.
iii. in our opinion and according to the information and explanations given to us, the
Company is generally maintaining proper records of its inventories and no material
discrepancies were noticed on physical verification.
3. (a) On the basis of our examination of the books of account and as per information
and explanations given to us, the Company has during the year given interest free
unsecured Trade Advance (not being a loan) to a party covered in the register Maintained
under section 189 of the Companies Act, 2013. The maximum amount outstanding during the
year was Rs.742.04 lakhs and the balance due from such party as at the end of the year was
Rs.742,04 lakhs. The said Trade Advance is being repaid regularly. There are no other
amounts granted as loans or advance to any other party covered in the register maintained
under section 189 of the Companies Act, 2013.
(b) In our opinion the other terms and conditions of such trade advances are not
prima-facie prejudicial to the interests of the Company.
4. In our opinion and according to the information and explanations given to us, that
some of the items purchased are of special nature and suitable alternative sources are not
readily availaible for obtaining comparable quotations, and that the invoices issued by
the company involve technical estimates and measurements which may not at times be readily
accepted by the customer, there is a reasonable internal control system commensurate with
the size of the Company and the nature of its business, for purchase of inventories at
factory and fixed assets, for payment of expenses and for sale of goods and services. With
regard to internal control system for accounting for purchase of inventories for delivery
at site and sales of inventory need to be further strengthened. During the course of our
audit, we have not observed any major weakness in such internal control system.
5. According to the information and explanations given to us, the company has not
accepted any deposits within the meaning of Section 73 to 76 of the Act, and the rules
framed thereunder and accordingly the provisions of clause (v) of paragraph 3 of the Order
are not applicable to the Company.
6. We have broadly reviewed the cost records maintained by the Company pursuant to the
Rules made by the Central Government under section 148(1) of the Companies Act, 2013 and
are of the opinion that prima facie, the prescribed accounts and records have been made
and maintained. We have, however, not made a detailed examination of these records with a
view to determining whether they are accurate or complete.
7. (a) According to the information and explanations given to us and records of the
Company examined by us, the Company has not been regular in depositing undisputed
statutory dues including Provident Fund, Employees StateInsurance, Income Tax, Wealth
Tax, service Tax, Value Added Tax, Customs Duty, Excise Duty, Cess and other material
statutory dues as applicable with the appropriate authorities. There have been significant
delays in a large number of cases in depositing these dues and even cases of non-payment
with the appropriate authorities. The undisputed statutory dues outstanding as at March
31, 2015 for a period of more than six months from the date they became payable is as
under:
|
(Rs. In Lakhs) |
| S.No Nature of Dues |
Amount |
| 1 Central Sales Tax |
24,10 |
| 2 Provident Fund |
199.60 |
| 3 Works Contract Tax |
377.19 |
| 4 Tax Deducted At Source / Tax Collected at Source |
1,153.35 |
| 5 Customs Duty |
3.54 |
| 6 Value Added Tax |
557.96 |
| 7 Service Tax and Excise Duty |
1,534,48 |
| 8 Entry Tax |
3.05 |
| 9 Wealth Tax |
11.55 |
(b) According to the information and explanations given to us and records of the
Company examined by us, Particulars of dues outstanding in respect of VAT/ Sales Tax,
Income Tax, Service Tax, Excise Duty and Cess, which have not been deposited as at March
31,2015 on account of dispute are as stated below:
| Name of the statute |
Nature of dues |
Amount (Rs. In Lakhs) |
Period to which amount relates. |
Forum where dispute is pending |
| Central Sales Tax Act, 1956 |
Sales Tax |
124.06 |
1 April 2001 to 31 March 2002 |
Joint Commissioner of Sales tax (Appeals), Pune |
|
|
49.51 |
1 April 2002 to 31 March 2003 |
|
| Central Sales Tax Act, 1956 |
Sales Tax |
5.81 |
1 April 2001 to 31 March 2002 |
Commercial Tax Officer, Lucknow |
|
|
20.25 |
1 April 2000 to 31 March 2001 |
|
| West Bengal Sales Tax Act, 1994 |
Sales Tax |
14.04 |
1 April 2005 to 31 March 2006 |
West Bengal Commercial Taxes Appellate and Revisional Board, Kolkata |
| Central Sales Tax Act, 1956 |
Sales Tax |
37.08 |
1 April 2005 to 31 March 2006 |
West Bengal Commercial Taxes Apellate and Revisional Board, Kolkata |
|
|
185.04 |
1 April 2006 to 31 March 2007 |
|
| West Bengal Sales Tax Act, 1994 |
Sales Tax |
13.37 |
1 April 2003 to 31 March 2004 |
Sales Tax Officer Commercial Taxes, West Bengal |
| Central Sales Tax Act, 1956 |
Sales Tax |
1.70 |
1 April 2003 to 31 March 2004 |
Sales Tax Officer Commercial Taxes, West Bengal |
| Central Sales Tax Act, 1956 |
Sales Tax |
27.21 |
1 April 2003 to 31 March 2004 |
Joint Commisioner,Sales Tax (Appeals) II, Mumbai |
| Chapter V of the Finance Act, 1994 |
Service Tax |
65.36 |
1 July 2003 to 31 May 2007 |
Additional Commissioner of Excise |
| Central Sales Tax Act, 1956 |
Sales Tax |
13.41 |
1 April 2004 to 31 March 2005 |
Joint Commisioner of Sales Tax, Pune |
| Central Sales Tax Act, 1956 |
Sales Tax |
4.54 |
1 April 2008 to 31 March 2009 |
Joint Commisioner Trade Tax, Bikaner |
| Central Sales Tax Act, 1956 |
Sales Tax |
5.48 |
1 April 2008 to 31 March 2009 |
West Bengal Commercial Taxes Apellate and Revisional Board |
| Central Sales Tax Act, 1956 |
Sales Tax |
1.14 |
1 April 2007 to 31 March 2008 |
Dy. Commissioner Commercial Tax Bhawanipore Charge, Kolkata |
| Central Sales Tax Act, 1956 |
Sales Tax |
189.92 |
1 April 2009 to 31 March 2010 |
Rajasthan Tax Board, Ajmer |
| Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 |
Entry Tax |
204.08 |
1 April 2006 to 31 March 20009 |
Rajasthan High Court |
| West Bengal Value Added Tax Act, 2003 |
Sales Tax |
48.92 |
1 April 2009 to 31 March 2010 |
West Bengal Commercial Taxes Appellate And Revisional Board |
| Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 |
Entry Tax |
116.59 |
1 April 2009 to 31 March 2010 |
Rajasthan High Court |
| Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 |
Entry Tax |
164.89 |
1 April 2010 to 31 March 2011 |
Rajasthan High Court |
| Income Tax Act, 1961 |
Income Tax |
2,642.77 |
Asst. Year 201112 |
Commissioner of Income Tax(Appeals) |
| Income Tax Act, 1961 |
Income Tax |
2,372.05 |
Asst. Year 201213 |
Commissioner of Income Tax(Appeals) |
c) There were no amounts which were due to be transferred by the Company to the
Investor Education and Protection Fund.
8. The accumulated losses of the company are more than fifty percent of its net worth.
The company has incurred cash losses during the financial year covered by our Audit and in
the immediately preceding financial year.
9. Inour opinion and according to the information and explanations given to us, the
Company has defaulted in the repayment of dues to financial institutions and banks as
under.
| S. No. Dues to |
Amount (Rs. In Lakhs) |
Nature of Dues |
Period of default upto March 31,2015 |
| 1 Edelweiss Asset Reconstruction Co. Ltd., (EARC) - Bill Discounting dues
of DBS Bank assigned to EARC |
277.00 |
Principal |
400 - 460 Days |
| 56.90 |
Interest |
400 - 460 Days |
| Edelweiss Asset Reconstruction Co. Ltd., (EARC) - Short Term Loan dues of
DBS Bank assigned to EARC |
37,873.90 |
Principal |
395 - 525 Days |
| 8,331.68 |
Interest |
395 - 525 Days |
| Edelweiss Asset Reconstruction Co. Ltd., (EARC) -Long Term Loan dues of
DBS Bank assigned to EARC |
8,357.50 |
Principal |
545 - 730 Days |
| 1,688.19 |
Interest |
545 - 730 Days |
| 2 DBS Bank - ECB Loan |
1,502.18 |
Principal |
470 Days |
| 140.27 |
Interest |
470 Days |
| DBS Bank -Corporate Guarantee |
6,123.17 |
Principal |
365 - 400 Days |
| 772.15 |
Interest |
365 - 400 Days |
| 3 Axis Bank (LC Devolved) |
97.16 |
Principal |
450 - 540 Days |
| 12.30 |
Interest |
450 - 540 Days |
| 4 ICICI Bank (BG Encashed) |
26,453.32 |
Principal |
195 Days |
| 547.51 |
Interest |
195 Days |
| 5 Standard Chartered Bank - Packing Credit |
14,725.00 |
Principal |
More than 540 Days |
| Standard Chartered Bank - Bill Discounting |
675.00 |
Principal |
More than 540 Days |
| Standard Chartered Bank - PCFC |
10,515.25 |
Principal |
More than 540 Days |
| 6 IDBI Bank - Short Term Loan |
7,683.57 |
Principal |
90 Days |
| 7 RIICO Ltd - Term Loan |
791.68 |
Principal |
320 - 450 Days |
| 867.40 |
Interest |
275 Days |
| 8 Kotak Mahindra Prime Ltd |
30.09 |
Principal |
395 - 425 Days |
| 2.18 |
Interest |
|
There are no Debenture holders in the company.
The companys CDR proposal has not materialized resulting in some of the lenders
transferring their loan amounts to Asset Reconstruction Companies during the year.
10. In our opinion and according to the explanations given to us, the terms and
conditions of the guarantees given by the company for loans taken by others from banks and
financial institutions are not prima facie prejudicial to the interests of the company.
11. In our opinion and according to the information and explanations given to us, the
term loans have been applied by the company during the year for the purposes for which
they have been obtained.
12. To the best of our knowledge and according to the information and explanations
given to us, no fraud by the Company and no material fraud on the Company has been noticed
or reported during the period.
|
For C.S. HARIHARAN & Co. |
|
Chartered Accountants |
|
Firm Registration N0. 001086S |
|
Sd/- |
|
C. H. Subramanian |
| Place: Chennai |
Partner |
| Date: October 27, 2015 |
Membership No. 007238 |
+91-9892691696
