| We have audited the accompanying financial statements of LUMAX
AUTOMOTIVE SYSTEMS LIMITED ("the Company"), which comprise the Balance
Sheet as at 31st March, 2015, 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.
Management's Responsibility for the Financial Statements The Company's
Board of Directors is responsible for the matters stated in Section
134(5) of the Companies Act, 2013 ("the Act") with respect to the
preparation 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 (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.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We have taken into account the
provisions of the Act, the accounting and auditing standards and
matters which are required to be included in the audit report under the
provisions of the Act and the Rules made there under. We conducted our
audit in accordance with the Standards on Auditing specified under
Section 143(10) of the Act. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and the disclosures in the financial statements. The
procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal financial control relevant
to the Company's preparation of the financial statements that give a
true and fair view in order to design audit procedures that are
appropriate in the circumstances 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 Company's 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.
Basis for qualified opinion
1. Inventories '29,01,31,912/-
a. The management has not valued the inventories at lower of cost and
net realizable value whichever is lower as required by accounting
standard to valuation of inventories but has stated them solely at cost
inclusive of taxes and duties. The inventory prepared by the company
shows a large amount of inventories very old which are un-useable for
manufacturing purposes and are in obsolete nature and have scrap value
only. The difference between the valuation of stock at cost and net
realizable value whichever is lower and as shown in the books of
accounts is substantial. On account of the above loss of the company
will be increased and inventories will be decreased. The management has
not quantified the difference. This matter was also qualified in audit
report of earlier years. b. Stock in transit '4,66,24,216/- :- The raw
material was imported in the earlier years and was not cleared from
custom authorities. The custom authorities have already issued notices
U/s 48 of the Custom Act, 1962 for auction of the above goods. The
company has not provided any evidence whether the material is lying with
custom authorities or auctioned by them. That in case the Govt.
authorities had made the auction of goods the company suffered a loss of
'4,66,24,216/-. The custom duty liability of the above goods is about
'1.36 crore which is also not provided in the financial statements. This
matter was also qualified in audit report of earlier year.
2. Trade receivable long term (due for more than twelve months-
unsecured consider doubtful- no provision for doubtful receivable)
'12,78,18,588/-:-That the debts were outstanding for a quite period of
long time and in our opinion the entire debts are bad and should be
w/off in the books of the company. Due to the above opinion the loss of
the company will be increased by '12, 78,18,588/- and the trade
receivable long term will be reduced by that amount. This matter was
also qualified in audit report of earlier year.
3. Short term loans and advances (unsecured consider good)
'9,84,72,987/ -('6,84,91,775/-):- The company has given advances
'85,76,645/- to five parties during the year for which satisfactory
explanation of giving the advances has not been provided. Further it is
noticed that the suppliers and tooling amounts recoverable from
customers amounting to '7.13 crores are not fulfilling their
obligations nor making the payments to the company. The company has not
taken proper steps for recovery of the above amounts. That in our
opinion the advances under report are doubtful for recovery for which
the company should have made the provision for the same. Due to above,
the losses of the company will be increased by substantial amount.
4. No Provision has been made in the financial statements for Interest
in respect of (i) delayed/ non- payment to suppliers/ service providers
which are registered under the provisions of The Micro, Small or Medium
Enterprises Development Act, 2006 (ii) delayed payments/outstanding
payments in respect various statutory dues such as provident fund,
employees' state insurance, income tax, wealth tax, sales tax, excise
duty, cess and other statutory dues and (iii) on enhanced cost not paid
'2,79,72,000/- to HSIIDC in respect of factory plot at Manesar. This
matter was also qualified in audit report of earlier year ;
5. As mentioned in note 11 of the notes to accounts no.29 regarding
confirmations of the balances of sundry creditors and debtors, loans
and advances, price variance claims and rebate claimed from suppliers
have not been obtained and they are subject to reconciliations and
subsequent adjustments if any. As such we are unable to express any
opinion as to the effect on the financial statements for the year.
6. Going concern concept:- The financial statements indicates that the
company has accumulated losses and its net worth has been fully eroded
( without considering the capital reserves and capital revaluation
reserve) and the company has incurred a net cash loss in the current as
well as in the preceding financial year. That keeping in view of our
audit observations 1 to 5 above, reporting under "Emphasis of matter" as
under, report made in (Auditor's report) order, 2015, defaults in
repayment of the loans to Banks and financial institutions and the
current liabilities exceeded its current assets as at the balance sheet
date, it indicates the existence of a material uncertainty that make
cast significant doubt about the company's ability to continue as a
going concern. However the financial statements of the company have been
prepared on a going concern basis.
Emphasis of matters
We draw attentions to the following matters given in the notes to the
financial statements (Note No.29) other than reported in "Basis for
qualified opinion" and report made in (Auditor's report) order, 2015,
our considered opinion in respect of the said notes are as under:-
1. Note No.29- 2(d):- The Company has evaluated the useful lives of
fixed assets on the basis of Internal Technical Assessment which are
based in accordance with the rates given in schedule-XIV of the
Companies Act, 1956. The company has not obtained a report from
Independent technical person that the internal assessment is justified.
2. Note No.29 - 2(p.) Impairment of assets:- As stipulated in AS-28,
the company assessed potential generation of economic benefits from its
business unit and is of the view that assets employed in continuing
business are capable of generating adequate returns over their useful
lives in the usual course of business. There is no indication to the
contrary and accordingly the management is of the view that no
impairment provision is called for in these accounts.
The company has already closed down its units at Faridabad, Aurangabad
and Pune. The Plant and machinery, Other Fixed assets excluding land
and building and stocks have been stated at cost less accumulated
depreciation/ at cost respectively, the management has no plans to
restart the above units in future. That as per accounting standard-10
"Accounting for fixed assets" such fixed assets is required to be
stated at the lower of net book value and net realizable value in the
financial statements. The opinion in respect of stocks has already been
given above in qualified opinion. The expected losses are to be
recognized in the profit and loss statement and such fixed assets
should be shown separately in the balance sheet as ' Assets retired
from active use and held for disposal. However the company has not
followed AS-10 and AS-2 and has not booked expected losses. Further the
carrying amount as shown in the financial statement is more than its
recoverable amount and the company has not booked impairment loss as
required by AS-28 'Impairment of assets'
3. Note No.29- 3(a)- "Contingent liabilities":- The company has
inadequate records of Sales tax assessments. The contingent liabilities
reported in respect of Sales tax are in respect of financial years for
which assessment orders are available with the company. That there can
be a possibility of contingent liabilities/ascertained liabilities in
respect of Sales tax for which the assessment orders are not with the
company. Further no evidences have been furnished in respect of filing
appeals with higher Sales Tax authorities.
4. Note No.29- 3(b)- "Capital Commitments":- The company has decided
to postpone its capital commitment expenditure in respect of capital
work in progress '2,46,22,558/- ('2,63,57,993/-) on account of
inadequacy of liquid funds. The company will have to suffer the loss in
case the company fails to fulfill its capital commitments program.
Qualified opinion
In our opinion and to the best of our information and according to the
explanations given to us except for the possible effects of the matters
described in the Basis of qualified opinion paragraph, Emphasis of
Matter paragraph and adverse remarks in CARO,2015, 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, 2015, and its Loss and its
cash flows for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2015 ("the
Order") issued by the Central Government of India in terms of
sub-section (11) of section 143 of the Act, we give in the Annexure a
statement on the matters specified in the paragraph 3 and 4 of the
Order, to the extent applicable.
2. As required by Section 143 (3) of the Act, we report that:
a) Subject to the matters described in the Basis for Qualified opinion
paragraph, Emphasis of matters paragraph and Auditor's report order,
2015, 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) Except for the possible effect of the matters described in the Basis
for Qualified opinion paragraph, Emphasis of matters paragraph and
Auditor's report order, 2015, 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, Statement of Profit and Loss and the Cash Flow
Statement dealt with by this Report are in agreement with the books of
account;
d) Except for the possible effect of the matter described in the Basis
for Qualified opinion paragraph, Emphasis of matter paragraph and
Auditor's report order, 2015, 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 matters described in the Basis for Qualified opinion paragraph,
Emphasis of matter paragraph and Auditor's report order, 2015, in our
opinion, may have an adverse effect on the functioning of the company.
f) On the basis of the written representations received from the
directors as on 31st March, 2015 and taken on record by the Board of
Directors, none of the directors is disqualified as on 31st March, 2015
from being appointed as a director in terms of Section 164 (2) of the
Act;
g) The qualifications relating to the maintenance of accounts and other
matters connected therewith are stated in the 'Basis for Qualified
opinion' paragraph, 'Emphasis of matter' paragraph and Auditor's report
order, 2015; and
h) With respect to the other matters to be included in the Auditor's
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 positions in its financial statements(See note no.3(a) of
Notes to accounts (Note No.29) of the financial statements).
II. The Company did not have any long-term contracts including
derivative contracts for which there were any material foreseeable
losses; and
III. There has been no delay in transferring amounts to the Investor
Education and Protection Fund by the Company.
Annexure to the Independent Auditors' Report
(The Annexure referred to in our Independent Auditors' Report to the
members of LUMAX AUTOMOTIVE SYSTEMS LIMITED ( 'the company') on the
financial statements for the year ended 31s1 March, 2015, we report
that:
i. (a) The company which is maintaining records showing full
particulars, including quantitative details and situation of fixed
assets have not been produced for our verification. Also the fixed
assets have not been physically verified by the management during the
year, hence we are unable to comment on the discrepancies, if any.
ii. (a) The Management has conducted physical verification of inventory
in respect of its working units at Manesar at reasonable intervals.
However no physical verification has been carried out in respect of the
closed units at Plot No. 78, Sector-6, Faridabad, Aurangabad unit and
12/2, Mathura Road, Faridabad and two Pune Units. The stock values in
respect of the closed units have been taken as per values declared in
the earlier financial statements.
(b) In our opinion and according to the information and explanation
given to us the procedures of physical verification of inventory
followed by the management at working unit referred to above is
reasonable and adequate in relation to the size of the Company and the
nature of its business.
(c) On the basis of our examination of the records of inventory and
subject to observation made in paras ii(a) and (b) above, we are of the
opinion that the Company is maintaining proper records. The
discrepancies noticed on verification between physical inventories and
book records were not material in relation to the operation of the
Company and the same have been properly dealt with in the books of
account.
iii. As informed, 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. Accordingly,
the provisions of clauses (iii)(a) and (iii) (b) of the Order, 2015 are
not applicable to the Company
iv. In our opinion and according to the information and explanations
given to us, there is an adequate internal control systems commensurate
with the size of the Company and the nature of its business, for sale
of goods/services and for the purchase fixed assets. However the
internal control system for purchase of inventory is inadequate since
the purchases are made without inviting quotations. In our opinion this
a continuing failure to correct major weakness in the internal control
system.
v. The Company has not accepted any deposits from the public.
vi. We have broadly reviewed the books of account maintained by the
Company pursuant to the Rules made by the Central Government for the
maintenance of cost records u/s 148(1) of the Companies Act, 2013
related to the manufacture of auto components and are of the opinion
that prima facie, the specified accounts and records have been made and
maintained. We have not however made detailed examination of the same.
vii. (a) (a) According to the information and explanations given to us
and on the basis of our examination of the records of the company,
amount deducted / accrued in the books of the company in respect of
undisputed statutory dues including provident fund, employees' state
insurance, income-tax, sales-tax, wealth tax, service tax, duty of
customs, duty of excise, value added tax, cess and other material
statutory dues have not been regularly deposited with the appropriate
authorities and there have been serious delays in large number of cases.
(b) According to the information and explanation given to us, the
undisputed amounts payable in respect of provident fund, employees'
state insurance, income-tax, sales-tax, wealth tax, service tax, duty
of customs, duty of excise, value added tax, cess and other undisputed
statutory dues were outstanding,, at the year end for a period of more
than six months from the date they became payable are Rs.
12,52,10,182/-(previous year Rs. 13,34,55,488/-)
(c) According to the records of the company and the information and
explanations given to us, the dues outstanding of Income tax, sales
tax, Wealth tax, service tax, custom duty, excise duty, Value added tax
and cess on account of any dispute are as follows :
S. Name of the Statute Nature of Amount Period to which
No Dues (In lacks) the amount
relates
1 Income Tax Act, 1961 Income Tax 1.89 F.Y 2006-07
2 Haryana Value added VAT 1935.68 F. Y. 2008-09
tax (Local) to 2011-12
3. Haryana Value added CST 488.09 F.Y. 2008-09
tax (Central) To F.Y.
2011-12
4 Maharashtra State 116.86 F.Y.2010-11
Value added tax
(Local) VAT
5 Maharashtra State 89.55 F.Y.2010-11
Value added tax
(Central) CST
S. Name of the Statute Forum where the dispute is pending
No
1 Income Tax Act, 1961 Review petition pending with A.O.
2 Haryana Value added Appeal is pending before Joint Excise
tax (Local)
& Taxation Commissioner (Appeals),
Faridabad
3. Haryana Value added Appeal is pending before Joint Excise
tax (Central)
& Taxation Commissioner (Appeals),
Faridabad
4 Maharashtra State Commissioner (Appeals), Pune
Value added tax
(Local)
5 Maharashtra State Commissioner (Appeals), Pune
Value added tax
(Central)
d. According to the information and explanations given to us, the
amount required to be transfer to investor education and protection fund
in accordance with relevant provisions of the Companies Act, and rules
made there under has been transferred to such fund within time.
viii. The company has accumulated losses and the company has incurred
cash losses in the current financial year as well as in the immediately
preceding financial year.
ix. Based on our audit procedures and as per the information and
explanations given by the management, we are of the opinion that the
Company has defaulted in repayment of dues to banks and financial
institution as here under:-
Particulars Overdue amount with interest
HSIIDC (Term Loan) 10,15,47,000
Axis Bank/ICICI Bank(Vehicle loans) 13,22,449
Electronics Finance Limited (Term Loan) 30,08,140
Syndicate Bank-working capital limit 8,25,36,129
The company did not have any debentures during the year.
x. According to the information and explanations given to us the
Company has not given guarantee for loans taken by others from bank or
financial institutions.
xi. According to the information and explanations given to us by the
management, the term loans were applied for the purpose for which the
loans were obtained.
xii. Based upon the audit procedures performed for the purpose of
reporting a true and fair view of the financial statements and as per
the information and explanations given by the management, we report
that no fraud on or by the Company has been noticed or reported during
the course of our audit nor we have been informed of such cases by the
management.
FOR R.JAIN & SANJAY ASSOCIATES,
ICAI FIRM REGISTRATION NO.012377N,
CHARTERED ACCOUNTANTS
PLACE: NEW DELHI CA-R.K. JAIN
DATE: 30/05/2015 (PARTNER)
MEMBERSHIP NO: - 9981
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