| We have audited the accompanying financial statements of Labh
Construction and Industries Limited, Ahmedabad, which comprise the
Balance Sheet as at March 31, 2014, and the Statement of Profit and
Loss for the year then ended, and a summary of significant accounting
policies and other explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position,
financial performance of the Company in accordance with the Accounting
Standards referred to in sub-section (3C) of section 211 of the
Companies Act, 1956. This responsibility includes the design,
implementation and maintenance of internal control 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 conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. 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 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 control relevant to the
Company's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in
the circumstances. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of
the accounting estimates made by management, 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.
Opinion
We report that the company has not complied with the following
Accounting Standards :
i. Non- provision for depletion in value of Investments of Rs 64.99
lacs (PY Rs 64.99 lacs), held in the companies whose net worth has
eroded, in terms of requirement of AS 13. In view of this loss for the
year is understated and investments are overstated by that amount
(refer note 13A).
ii. No provision being made for Retirement benefits payable to
employees including Gratuity and leave encashment in terms of
requirement of AS 15 resulting into overstatement of profit for the
year and understatement of current liabilities to that extent. In view
of non-availability of the relevant information, quantification of
impact thereof could not be ascertained (refer note 2.XI).
iii. The company has neither identified nor provided for loss on
impairment of assets as per the requirement of AS 28, resulting into
overstatement of fixed assets and under statement of profit for the
year. However due to non availability of required information, impact
of same could not be quantified (refer note 2.IV).
We further invite attention to the following :
i. Note S.I.b, regarding the balances of Secured loans being subject
to confirmation and reconciliation. In view of the non-availability of
the relevant information, consequential impact thereof, on the state
of affairs of the company remains to be ascertained,
ii. Note 5.II.b, regarding the balances stated under unsecured loans
being subject to confirmation and reconciliation. In view of the
non-availability of the relevant information, consequential impact
thereof, on the state of affairs of the company remains to be
ascertained,
iii. Note 6 & 9, regarding various long term liabilities to refund
booking advances paid by members who cancelled their bookings as well
as those in the nature of payable in respect of supplies, expenses
being subject to confirmation and reconciliation. In view of the
non-availability of the relevant information, consequential impact
thereof, on the state of affairs of the company remains to be
ascertained,
iv. Note 14, regarding non provision of doubtful advances and deposits
out of long outstanding advances and deposits of Rs 620.24 lacs (PY Rs
620.52 lacs). However in view of non-availability of complete
information in that respect, we are neither able to express our
opinion on realisability thereof nor able to quantify its impact on
the affairs of the company,
v. Note 15.a, regarding non-provision for doubtful debts out of long
outstanding debtors of Rs 57.87 lacs (PY 54.21 lacs), in respect of
the projects already completed. However in view of non-availability of
complete information in that respect, we are neither able to express
our opinion on realisability thereof nor able to quantify its impact
on the affairs of the company,
vi. Note 15,b, regarding non-provision of Rs.6.50 lacs (PY Rs 6.50
lacs) out of Cash balance looted in the year 1995-96 and not recovered
so far, due to which profit for the year and other non- current assets
both are overstated by that amount,
vii. Note 25, regarding non provision of certain liabilities in the
accounts. In view of the non-availability of the relevant information,
consequential impact thereof, on the state of affairs of the company
remains to be ascertained,
viii. Note 25, regarding financial as well as other impact on the
state of affairs of the company due to delayed/ defective execution of
contractual assignment as well as consequences of delayed payment of
statutory dues and those to Secured lenders. In view of the
non-availability of the relevant information, consequential impact
thereof, on the state of affairs of the company remains to be
ascertained, Subject to above,
In our opinion and to the best of our information and according to the
explanations given to us, the 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 March 31, 2014;
b) in the case of the Statement of Profit and Loss, of the Loss for
the year ended on that date; and
c) in the case of the Cash Flow Statement, of the 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, 2003 ("the
Order") issued by the Central Government of India in terms of
sub-section (4A) of section 227 of the Act, we give in the Annexure a
statement on the matters specified in paragraphs 4 and 5 of the Order.
2. As required by section 227(3) of the Act, we report that:
a) We have 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 appears from our examination of those
books except the Statutory registers required to be maintained as per
the relevant provisions of the Companies Act 1956 and certain items of
income and expenditure not accounted on accrual basis as required by
section 209 of the Companies Act 1956.
c) The Balance Sheet and Statement of Profit and Loss and Cash How
statement dealt with by this Report are in agreement with the books of
account.
d) In our opinion, the Balance Sheet and Statement of Profit and Loss
and Cash Flow statement comply with the Accounting Standards referred
to in subsection (3C) of section 211 of the Companies Act, 1956 except
those specifically disclosed in the relevant notes to the Balance
Sheet.
e) On the basis of written representations received from the directors
as on March 31, 2014, and taken on record by the Board of Directors,
none of the directors is disqualified as on March 31, 2014, from being
appointed as a director in terms of clause (g) of sub-section (1) of
section 274 of the Companies Act, 1956.
f) Since the Central Government has not issued any notification as to
the rate at which the cess is to be paid under section 441A of the
Companies Act, 1956 nor has it issued any Rules under the said
section, prescribing the manner in which such cess is to be paid, no
cess is due and payable by the Company.
We further draw specific attention to violations of the following:
a) Proceedings under Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act 2002 being initiated
against the company by its secured creditors, the liability under
which may exceed the amount provided by the company .
b) Various Recovery and other suits filed by secured and unsecured
creditors, pending against the company in various courts, the
liability under which may exceed the amount provided by the company on
that account.
c) Violation of provisions of section 58-A of Companies Act, 1956, in
respect of Public Deposits accepted by the Company,
d) Violation of section 370 of Companies Act, 1956 regarding advances
made to associate companies and other entities
The Annexure referred to in paragraph 1 of the Our Report of even date
to the members of Labh Construction and Industries Limited. on the
accounts of the company for the year ended 31st March, 2014.
On the basis of such checks as we considered appropriate and according
to the information and explanations given to us during the course of
our audit, we report that:
1. (a) The company has not maintained proper records showing full
particulars including quantitative details and situation of its fixed
assets.
(b) As explained to us, fixed assets have not been physically verified
by the management at reasonable intervals having regard to the size of
the company and nature of its assets.
(c) In our opinion and according to the information and explanations
given to us, the company has not conducted any business since last
three years.
2. The company did not hold any inventory, therefore clauses
4(ii)(a),(ii)(b) and (ii)(c) of the Companies (auditor's Report)
Order,2003, are not applicable.
3. (a) According to the information and explanations given to us and
on the basis of our examination of the books of account, The company
has taken loan from one party being company,firm and other persons
covered in the register required to be maintained under section 301 of
the Companies Act 1956. The maximum balance involved during the year
was Rs 113.53 lacs (PY Rs 40.15 lacs) and the year- end balance of
such loans was Rs 113.53 lacs (Rs 34.71 lacs). The loan being interest
free is in our opinion prima facie not prejudicial to the interests of
the company.
(b) The Company has granted loan to five parties being company, firm
and other persons covered in the register required to be maintained
under Section 301 of The Companies Act, 1956. The maximum amount
involved during the year was Rs. 157.35 lacs (PY RS 157.35 lacs) and
the year end balance of such loans was Rs. 157.35 lacs (PY Rs 157.35
lacs). The loans being interest free are in our opinion prima facie
prejudicial to the interests of the company.
(c) We are informed that such loans granted by the company, are
repayable on demand and repayment thereof has not yet been demanded.
However such loans granted are long outstanding.
4 As the company has not undertaken any transaction of purchase of
assets or inventories we are unable to comment on adequacy of internal
control procedure in that respect.
5 (a) Based on the audit procedures applied by us and according to the
information and explanations provided by the management, the
particulars of contracts or arrangements referred to in section 301 of
the Act have not been updated to include the transactions that needed
in the register required to be maintained under that section.
(b) As per information & explanations given to us and in our opinion,
the company has not undertaken any transaction made in pursuance of
contracts or arrangements required to be entered in the register
maintained under Section 301 of the Companies Act, 1956 and exceeding
the value of Rupee Five Lacs in respect of any party during the year.
6 According to the information and explanations given to us the
Company had accepted deposits from the Public hence provisions of
Section 58A and 58AA of the Companies Act, 1956 and the Companies
(Acceptance of Deposits) Rules 1975 with regard to the deposits
accepted from the public are applicable to it. However the company has
contravened the said provisions.
7 As per information & explanations given by the management, the
Company does not have an internal audit system.
8 As per information & explanation given by the management,
maintenance of cost records has not been prescribed by the Central
Government under clause (d) of sub-section (1) of section 209 of the
Act.
9 (a) According to the records of the company, undisputed statutory
dues including Provident Fund, Investor Education and Protection Fund,
Employees' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service
Tax, Custom Duty, Excise Duty, cess to the extent applicable and any
other statutory dues have not been regularly deposited with the
appropriate authorities. According to the information and explanations
given to us there were Rs 11.86 lacs outstanding statutory dues as on
31st of March, 2014 for a period of more than six months from the date
they became payable.
(b) According to the information and explanations given to us, the
dues of sale tax, income tax, customs duty, wealth tax, excise duty
and cess not deposited on account of any dispute are as detailed here
in below:
10 The Company has balance of accumulated losses of Rs.2099.18 lacs as
at end of the year and it has incurred loss and cash loss of Rs 25.96
lacs and Rs 20.58 lacs respectively during the financial year covered
by our audit while it had earned profit of Rs 5.81 lacs and cash
profit Rs 12.35 lacs in the immediate preceding financial year.
Accordingly the entire net worth of the company has been eroded.
11 Based on our audit procedures and on the information and
explanations given by the management, we are of the opinion that, the
Company has defaulted in repayment of dues to a financial institutions
and banks and the lenders have already initiated various actions
against the company as disclosed in the Notes to the Audited Balance
Sheet. Further that the company does not have any outstanding towards
the debenture holders.
12 According to the information and explanations given to us, the
Company has not granted loans and advances on the basis of security by
way of pledge of shares, debentures and other securities.
13 The Company is not a chit fund or a nidhi /mutual benefit
fund/society. Therefore, the provision of this clause of the Companies
(Auditor's Report) Order, 2003 (as amended) is not applicable to the
Company.
14 According to information and explanations given to us, the Company
is not dealing in or trading in Shares, Mutual funds & accepts the
shareholders investments accordingly; the provisions of clause 4(xiv)
of the Companies (Auditor's Report) Order, 2003 are not applicable to
the company.
15 According to the information and explanations given to us, the
Company has not given any guarantees for loan taken by others from a
bank or financial institution.
16 Based on our audit procedures and on the information given by the
management, we report that the company has not raised fresh term loans
during the year.
17 Based on the information and explanations given to us and on an
overall examination of the Balance Sheet of the Company as at 31st
March, 2014, we report that no funds raised on short-term basis have
been used for long-term except that to finance loss.
18 Based on the audit procedures performed and the information and
explanations given to us by the management, we report that the Company
has not made any preferential allotment of shares during the year.
19 The Company has no outstanding debentures during the period under
audit.
20 The Company has not raised any money by public issue during the
year.
21 Based on the audit procedures performed and the information and
explanations given to us, we report that no fraud on or by the Company
has been noticed or reported during the year, nor have we been
informed of such case by the management.
For GATTANI & ASSOCIATES
CHARTERED ACCOUNTANTS
FRN:103097W
SHARAD GATTANI
Place: Ahmedabad PARTNER
Date : 30th May, 2014 Membership No.: 37999 | 