TO,
THE MEMBERS OF ZENITH COMPUTERS LIMITED REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of ZENITH COMPUTERS 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 thereunder.
We conducted our audit in accordance with the Standards on Auditing issued by Institute
of Chartered Accountants of India, as 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, 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 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 matters in the Notes to the financial statements:
a) Note 26- Term Loan and Working Capital Borrowing (Cash Credit) from Indian Bank
(i) The Term Loan of Rs.2000.00 lakhs outstanding as on 31.3.2015 is reduced to
Rs.1608.12 lakhs as on 31.3.2016 (refer Note 3). This reduction of Rs.391.88 lakhs is on
account of adjustment by Indian Bank against:
|
Rs. In Lakhs |
| (a) Margin Money Fixed Deposits |
8.16 |
| (b) Fixed Deposits |
263.67 |
| (c) Sales proceeds from sale by Indian Bank of Building at SA-9, Sancoale Industrial
Estate, Goa |
120.05 |
| Total |
391.88 |
(ii) The interest accrued and due thereon upto 31.3.2014 and accounted for Rs.596.47 is
outstanding as on 31.3.2016 Refer Note no.9 and 34
(iii) The Companys Cash Credit outstanding amount as on 31.3.2016 of Rs.2119.54 lakhs
(comprised in the total short-term borrowing of Rs.3794.25 lakhs - Note 7) along with
interest thereon Rs.339.60 lakhs (Note 9) is payable to Indian Bank, Nariman Point,
Mumbai. Also, refer
Note 34 on Contingent Liabilities in relation to Interest payable.
(iv) The said bank, as part of recovery process, issued Demand Notice dated 4.12.2013
under SARFAESI Act, 2002 and has taken in April 2015 physical possession of the properties
and inventories of the running Unit at Goa including factory, resulting in cessation of
business and factory operations. The said bank has also taken in May 2015/ June 2015,
physical possession of the Companys properties and inventories at Mahape, Navi Mumbai.
Out of the said properties taken over, Building at SA-9, Sancoale Indl Estate, Goa of
book value Rs.207.51 lakhs has been sold by Indian Bank for Rs.120.05 lakhs resulting in a
heavy loss of Rs.87.46 lakhs. The sales proceeds of Rs.120.05 lakhs has been adjusted by
Indian Bank against the outstanding Term Loan of Rs.2000.00 lakhs as indicated in point
no. (i) above.
(v) The Company has filed a petition with the Debt Recovery Tribunal (DRT), Mumbai in
the matter of recovery by Indian Bank, which is pending for disposal. If the outcome of
the said litigation goes against the Company, it may adversely affect its financial
position.
b) Note 27 - FCCBs and Interest thereon
The 0.50% Foreign Currency Convertible Bonds (due 2011), appearing under Note 3, are
yet to be paid and the same is not restated as at the Balance Sheet date (AS11). The value
accreted thereon appearing under Note no.3 and 34 has not been restated as at the Balance
Sheet date (AS11) The interest payable on FCCB-coupon rate for the period 4.2.2011 to
4.8.2011 amounting to Rs.9.14 lakhs appearing under Note no.9 has not been restated as at
the Balance Sheet date (AS11). We are informed that, a petition has been filed in the
Bombay High Court by State Bank of India for recovery of their part of the alleged
investment in the said FCCB, which is disputed, as according to the Company, State Bank
of India is not the bondholder. The said petition is pending for admission. In case the
petitioner succeeds in the said litigation, it will affect adversely the financial
position and the Going Concern status of the Company.
c) Note 28 - Reference to BIFR
The financial statements indicate that the Company has accumulated losses of Rs.8933.17
lakhs as on 31.3.2016 (Rs.8013.37 lakhs as on 31.3.2015) and its net worth has been fully
eroded.
In view of acccumulated lossess including cash losses and erosion of networth of the
company during past several years, the Company filed an application in the year 2014-15
with the Board for Industrial and Financial Reconstruction (BIFR), New Delhi which was
registered at sr.no.44/2014 on 29.8.2014. We are informed that the said application has
been abated by the Board on 6.5.2016.
The Companys current liabilities exceeded its current assets as at the balance sheet
date. These conditions indicate the existence of a material uncertainty that may cast
significant doubt about the Companys ability to continue as a going concern. However, the
financial statements of the Company have been prepared on a going concern basis in view of
the continuance of the business operations of the Company in respect of Maintenance and
servicing of Computer systems
d) Note 10 - Depreciation and amortization on Fixed Assets
The Company has adopted the useful lives of the fixed assets as specified in Part C of
Schedule II to the Companies Act, 2013 effective 1st April, 2014 except in case of PCs and
Desktops (included in Computer Systems) and Office Equipment, where a longer useful life
is adopted on the basis of technical assessment by the management. The carrying amount as
of 1st April, 2014 is being amortised over the remaining useful lives of the assets except
in the case of Buildings, where the carrying amount on 1st April, 2014 as reduced by the
amount of revaluation in past years is amortised over the remaining useful lives. If the
useful lives and carrying cost of all the assets was adopted as prescribed in the said
Schedule II, the total depreciation for the year would have been higher by Rs.418.82
lakhs.
Our opinion is not modified in respect of these matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order, 2016 (“the Order”)
issued by the Central Government of India in terms of sub-section (11) of section 143 of
the Companies Act, 2013 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 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 and proper returns
adequate for the purposes of our audit have been received from the branches not visited by
us.
(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 and with the returns
received from the branches not visited by us.
(d) 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) Rules, 2014.
(e) The facts referred to in our observations and comments in sub-paragraph (a), (b)
and (c) under the Emphasis of Matters paragraph above, in our opinion, may have an
adverse effect on the functioning of the Company and its financial position.
(f) On the basis of the written representations received from the directors as on 31st
March, 2016 taken on record by the Board of Directors, three of the four directors are not
disqualified as on 31st March, 2016 from being appointed as a director in terms of Section
164 (2) of the Act, however, the other director, Shri R. K. Saraf has incurred
disqualification in terms of Section 164 (2) of the Act.
(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:
i. The Company has disclosed the impact of pending litigations on its financial
position in its financial statements - Refer Note 26 and 27 to the financial statements;
ii. The Company does not have any long-term contracts including derivative contracts,
hence no provision for foreseeable losses is required.
iii. There has been no delay in transferring amounts, required to be transferred, to
the Investor Education and Protection Fund by the Company.
(h) In our opinion, the Company has, in all material respects, an adequate internal
financial controls system over financial reporting and such internal financial controls
over financial reporting were operating effectively as on 31st March, 2016
based on the internal control over the financial reporting criteria established by the
Company.
For C. L. Khanna & Co
Chartered Accountants
(Firms Registration No. 1050764W)
C. L. Khanna
(Proprietor)
(Membership No. 004988)
Place of Signature : Mumbai
Date : 28th May, 2016
ANNEXURE TO THE INDEPENDENT AUDITORS REPORT
Re: Zenith Computers Limited
(Referred to in our report of even date)
(i) In respect of Fixed Assets:
(a) The Company has maintained proper records to show full particulars, including
quantitative details wherever feasible and situation of fixed assets.
(b) As a part of recovery process under the SARFAESI Act, 2002, Indian Bank has during
the current year taken physical possession of the Companys fixed assets located in its
units at Mahape, Navi Mumbai and factory, shed at Sancoale Industrial Estate, Goa [refer
Note 26 and Emphasis of Matter paragraph (a) (iv)].
In view of the above stated facts, the physical verification of the said Fixed Assets
could not be conducted by the Company.
(c) According to the information obtained, the title deeds of the immovable properties
of the Company viz. land and buildings held in the Companys name are under a Charge with
the Companys Bankers as security against Term loan and working capital borrowings. (refer
Notes 3, 7 and 26 to the Financial Statements).
(ii) In respect of Inventories:
As a part of recovery process under the SARFAESI Act, 2002, Indian Bank has during the
current year taken physical possession of the Companys Inventories located in its units
at Mahape, Navi Mumbai and factory, shed at Sancoale Industrial Estate, Goa [refer Note 26
and Emphasis of Matter paragraph (a) (iv)].
In view of the above stated facts, the physical verification of the said Inventories
could not be conducted by the Company.
(iii) According to information and explanations given to us, the Company has not
granted any loans, secured or unsecured, to companies, firms or other parties covered in
the register maintained under Section 189 of the Companies Act 2013.
(iv) The Company has not advanced any Loan, made any investment or given any guarantee/
security within the provisions of Section 185 and 186 of the Companies Act, 2013.
(v) The Company has not accepted any deposits from the public, consequently the
directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or
any other relevant provisions of the Companies Act, 2013 and the rules framed there under
are not applicable.
(vi) The provisions for maintenance of cost records as specified in Section 148(1) of
the Companies Act, 2013 read with the Companies (cost records and audit) Rules, 2014
notified vide G.S.R. 425(E) dated 30th June, 2014, are not applicable.
(vii) According to the information and explanations given to us in respect of Statutory
dues:
(a) The Company has been generally regular in depositing undisputed statutory dues,
including Provident Fund, Investor Education and Protection Fund, Employees State
Insurance, Income-tax, Sales-tax, VAT, Service Tax, Custom Duty, Excise Duty, Cess/LBT and
any other statutory dues with the appropriate authorities during the year.
(b) The disputed statutory dues that are pending before appropriate authorities are as
under:
| SR. NO. |
NAME OF THE STATUTE |
NATURE OF DUES |
AMOUNT (RS. IN LAKHS) |
FORUM WHERE DISPUTE IS PENDING |
| 1 |
Central Sales tax Act, 1956 and Sales tax & VAT Acts of various States |
Sales tax |
168.39 |
Appellate Authorities/ Tribunal |
| 2 |
Customs Act, 1962 |
Custom duty |
305.72 |
Dy Commissioner of Customs, Adjudication Cell, Mumbai |
| 3 |
Central Excise Act, 1944 |
Excise duty |
517.15 |
Appellate Authorities/ Tribunal |
| 4 |
Finance Act, 1994 |
Service tax |
150.24 |
Appellate Authorities/ Tribunal |
| 5 |
NMMC Act, 1992 |
Property tax |
0.63 |
Local Authority |
(viii) According to information obtained from the Company, there is a dispute with
Indian bank with regard to alleged recovery of borrowings from the said bank. Refer Note
26 and Emphasis of Matter paragraph (a).
(ix) During the current year, no monies were raised by way of Initial Public Offer or
further Public Offer The term loan taken in the earlier years was applied for the purposes
for which it was taken.
(x) To the best of our knowledge and belief and according to the information and
explanations given to us, no fraud on or by the Company was noticed or reported during the
year.
(xi) No managerial remuneration was paid or provided during the current year.
(xii) This company is not a Nidhi company.
(Xiii) The transactions with the related parties are in compliance with Section 177 and
188 of the Companies Act, 2013 and the details have been disclosed in the financial
statements.
(xiv) The Company did not make any preferential allotment or private placement of
shares or convertible debentures during the year under review.
(xv) The Company has not entered into any non-cash transactions with the directors or
with persons connected with them in compliance with provisions of Section 192 of the
Companies Act, 2013.
(xvi) The Company is not required to be registered under Section 45- IA of the Reserve
Bank of India Act, 1934.
For C. L. Khanna & Co
Chartered Accountants
(Firms Registration No. 1050764W)
C. L. Khanna
(Proprietor)
(Membership No. 004988)
Place of Signature : Mumbai
Date : 28th May, 2016
+91-9892691696
