| We have audited the accompanying standalone financial statements of
NET4 INDIA LIMITED, ("the Company"), which comprise the Balance Sheet
as at March 31,2015, the Statement of Profit and Loss and Cash Flow
Statement for the year then ended, and a summary of significant
accounting policies and other explanatory information.
MANAGEMENT'S RESPONSIBILITY FOR THE STANDALONE FINANCIAL STATEMENTS
The Company's Board of Directors isresponsible for the matters stated
in Section 134(5) of the Companies Act, 2013 ('the act') with respect
to the preparation of these standalone 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 Companies
(Accounts) Rules, 2014. This responsibility also includes maintenance
of adequate accounting records in accordance with the provisions of the
Act for safeguarding of the assets of the Company and for preventing
and detecting frauds and other irregularities' selection and
application of appropriate accounting policies; makingudgements and
estimates that are reasonable and prudent; and design, implementation
and maintenance of adequate internal financial controls, that are
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 standalone
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
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 auditor'sudgment, 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 control
system over financial reporting and the operating effectiveness of such
controls. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of the accounting
estimates made by 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
andappropriate to provide a basis for our audit opinion on the
standalone financial statements.
BASIS FOR QUALIFIED OPINION
j. ) During the financial year 2013-14 the Company had defaulted in
repayment of principle and interest thereon of Term Loan from State Bank
of India. Working Capital Loans taken from . State Bank of India. State
Bank of Travancore and Loan against FDR from Canara Bank. All the loans
had been classified as Non-Performing Assets(NPA) by these banks. The
status of these loans & credit facilities have remained the same during
the current financial year.
k. ) Income Tax demand of Rs.132.78Lacs (Approx.) from AY 2004-05 to AY
2011-12 not deposited and appeals have been filed or in the process of
filing.
l. ) Service Tax Amounting to Rs.8.33Crores (net) (Approx.) upto 31st
March 2015 not deposited.
m. ) Provident Fund and ESI amounting to Rs.59.13Lacs (Approx.) upto
31st March, 2015 not deposited.
n. ) TDS amounting to Rs.68.59 Lacs(Approx.) as on 31st March 2015 not
deposited.
o. ) VAT liability for certain branches still to be deposited.
p. ) Fixed Deposit amounting to Rs. 13.77 crore (approx.) were due for
repayment as on 31st March, 2015.
The company has written off bad debts amounting to Rs. 13.78Crores
(Approx.) The company has no security for these debts. On the basis
that no security has been obtained and no cash has been received on
these debts, the company has written off bad debts thereby reducing the
profit for the year (if any) and net assets at 31st March by that
amount.
QUALIFIED OPINION
In our opinion and to the best of our information and according to the
explanations given to us, except for the effects of the matter
described in the Basis for Qualified Opinion paragraph above, the
aforesaid standalone 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, its
profit/loss and its cash flows for the year ended on that date.
OTHER MATTER
As per statutory records produced before us and explanations given to
us, our comment as follows:
(x) There were no Independent Directors in the company leading to
non-compliance of the provisions of the listing Agreement as well as
the Companies Act 2013.
(xi) There was no Woman Director in the Board of Directors of the
company, leading to non- compliance of the applicable provision.
(xii) There was no Audit Committee for the year.
(xiii) There was no Nomination and Remuneration Committee for the year.
(xiv) There was no Risk Management Committee for the year.
(xv) There was no Shareholder's & Investor Grievance Committee for the
year.
(xvi) There was no Internal Auditor for the year.
(xvii) Non-Compliance of provisions relating to public deposit i.e.as
per the requirements of Company (Acceptance of Deposit) Rules, 1975 a
company has to deposit or invest at least 15% of its deposits maturing
during the financial year latest by 30th April 2014. This requirement
has not been complied by the company.
(xviii) The company has not provided service tax liability under
reverse charge mechanism for the year.
(xix) The company has litigations filed against it under various counts
like under section 138 of Negotiable Instrument Act, Arbitration,
petition filed by ex-employee for recovery of dues, winding up
petition, etc. The number of cases is large although the exact number
of cases was not made available to us. As per available information &
explanation provided by the management, the quantum of amount on these
cases cannot be ascertained.
(xx) The company had received winding up order from the Court on the
basis of a petition filed by 2 companies due to non-repayment of loans.
However, the company has obtained stay order from the court on the
basis of repayment schedule submitted before it. The Court has stayed
this order subject to payment of Rs. 25 Lacs in 4 weeks out of which
Rs. 10 Lacs was paid immediately and for the balance, the company has
time till 17thune, 2015.
(xxi) The company has written off bad debts amounting to Rs. 13.78
Crore (Approx). Our Opinion is not qualified in respect of this matter.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by the Companies (Auditor's Report) Order, 2015
("theOrder") 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.
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 ofour knowledge and belief were necessary for the
purpose of our audit;
b) Except for the effects of the matter described in the Basis for
Qualified Opinion paragraph above, in our opinion, proper books of
account as required by law have been keptby the Company so far as
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, and Statement of Profit and Loss, and Cash Flow
Statement dealt with by this Report are in agreement with the books of
account.
d) Except for the effects of the matter described in the Basis for
qualified Opinion paragraph above, in our opinion, the aforesaid
financial statements comply with the applicable Accounting Standards
specified under Section 133 of the Act, read with Rule 7 of the
Companies (Account) Rules 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) The qualification relating to the maintenance of accounts and other
matters connected therewith are as stated in the Basis for Qualified
Opinion paragraph above.
9) 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 explanation given to us:
(i) The Company does have pending litigations which may have impact on
its financial position. Refer Note no.40 of the "Notes to Accounts" of
Balance Sheet.
(ii) The Company did not have any long term contracts including
derivative contracts: as such the question of commenting on any
material foreseeable losses thereon does not arise.
(iii) There has not been an occasion in case of the company during the
year under report to transfer any sums to the Investor Education and
Protection Fund. The question of delay in transferring such sums does
not arise.
The Annexure referred to in paragraph 1 of the Our Report of even date
to the members of NET4 INDIA LIMITED on the accounts of the company for
the year ended 31st March 2015.
On the basis of such checks as we considered appropriate and according
to the information and explanation given to us during the course of our
audit, we report that:
4. (a) The company has maintained proper records showing full
particulars quantitative details. However, situation of its fixed assets
have not been mentioned.
(b) As explained to us, fixed assets have been physically verified by
the management at reasonable intervals; no material discrepancies were
noticed on such verification.
(a) The physical verification of inventories was carried out by the
management from time to time.
(b) The procedures of physical verification of inventory followed by the
management are reasonable and adequate in relation to the size of the
company and the nature of its business.
(c) The company is maintaining proper records of inventory and no
material discrepancies were noticed on physical verification and the
same have been properly dealt with in the books of account.
6. (a) According to the information and explanations given to us and on
the basis of our exmination of the books of account, the Company has not
granted any loans, secured or unsecured, to companies, firms or other
parties listed in the register maintained under Section 189 of the
Companies Act. Consequently, the provisions of clauses iii (a) and iii
(b) of the order are not applicable to the Company.
In case of loans taken from other parties in earlier years, repayment
of principle as well as interest has been irregular.
7 In our opinion and according to the information and explanations
given to us, there is generally an adequate internal control procedure
commensurate with the size of the company and the nature of its
business, for the purchase of inventories & fixed assets and payment
for expenses & for sale of goods& services except mentioned in Other
Matter paragraph of Independent Auditor's Report. During the course of
our audit, no major instance of continuing failure to correct
anyweaknesses in the internal controls has been noticed.
8. The Company has not accepted any deposits from the public covered
under section 73to 76 of the Companies Act, 2013 during the year.
However, public deposits were accepted in earlier years. Earlier,
deposits were governed by the provisions of Sections 58A of the
Companies Act, 1956 and the rules framed thereunder relating to the
deposits accepted, same were, wherever applicable, have not been
complied with. The company has defaulted in repayment of principal and
interest thereon w.e.f. August 2013.
During the financial year 2014-15, the company has paid amount of
principle & interest of Rs. 25.34 Lac (approx.). Total amount payable
(due plus overdue amount) as on 31.03.2015 was Rs. 13.77 Crore
(approx.). During the year, the company had received 423 approx,
complaints, out of which 84 approx, complaints were resolved.
As per explanation and records produced, the reason for default has
been due to heavy losses resulting to cash crunch in the company
leading to bouncing of cheques issued towards repayment of deposits
(principal and interest). This has also lead to closure of the bank
account from where cheques had been issued.
It has also come to our notice that due to default in repayment of
deposits by the company some of the investors have issued notices to
the company in order to instigate proceedings against the company
before the Court or Company Law Board or National Company Law Tribunal
under relevant sections of The Companies Act and Negotiable Instruments
Act (against cheque bouncing) for repayment or winding up.
Further, as per the requirements of Company (Acceptance of Deposit)
Rules, 1975 a company has to deposit or invest at least 15% of its
deposits maturing during the financial year latest by 30th April 2014
i.e. in the beginning of the year in any of the specified assets which
could be utilised for repayment of deposits maturing during the year
but at no time the amount shall fall below 10% of the amount maturing
before 31st of that year. However, the company has not complied with
this provision of the clause.
As per further information & explanation provided to us, the company
has filed a repayment scheme with the Company Law Board for
rescheduling payments to FD Holders. In the interim, the company has
paid interest and principal to a number of FD holders who demonstrated
genuine hardship cases. The company has also forwarded their revival
plan, which include paying FD holders as per the scheme, settling all
statutory dues and also setting all overdue debts.
9 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 148 of the Act and hence this
clause is not applicable to the company.
10. (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 outstanding statutory dues as on 31st of March,
2015 for a period of more than six months from the date they became
payable, which are as follows:
Particulars Amount (Rs. In lacs)
Tax Deducted at source 49.20
Service Tax 591 22
Professional Tax : o.05
PF and ESI 48.48
(b) According to the information and explanations given to us, there
were amount payable in respect of income tax, service tax, sales tax,
which have not been deposited on account ofdisputes.
INCOME TAX
Income Tax for the following years has not been deposited with the
appropriate authorities on account of dispute. The company has filed
the appeal before the Commissioner of Income Tax (Appeals)/ITAT/High
court/other forums/in the process of filing the appeal. The details are
as under:
Assessment Year Amount (Rs. In lacs)
2004-05 2.59*
2005-06 6.20*
2006-07 1.50*
2008-09 30.28*
2009-10 285.53*
2010-11 723.67*
2011-12 271.43
* Source - As per information available at Income Tax website and
appeals filed by the company at various forums.
SERVICE TAX
Matter relating to Amount Involved
Taxability on SSL Certificate - 91.84 (Approx.)
whether VAT applicable or Service (excluding Interest &
tax applicable Penalty)
Taxability of Domain prior touly 1141.64(Approx.)
2012. (period from 2008-09 to 2011- (excluding Interest &
12) penalty)
Matter relating to (Rs. In Forum Lacs)
Taxability on SSL Certificate - The company has filed an
whether VAT applicable or Service appeal before the Mumbai
tax applicable High Court and
Commissioner Appeals.
Taxability of Domain prior touly Service Tax Department,
2012. (period from 2008-09 to 2011- Indraprastha, New Delhi
12)
SALES TAX
Matter description Amount Involved (Rs. In Lacs)
Dispute regarding entitlement of 15.05 (Approx.)
Input Vat Credit (2010-11) (excluding Interest &
Penalty)
Liability created by Department 4.75 (Approx.) (excluding
Interest & penalty)Mumbai
Matter description Forum
Dispute regarding entitlement of MVAT Department,
Input Vat Credit (2010-11) Mumbai '
Liability created by Department MVAT Department,
Interest & penalty)Mumbai
(c) There was no amount required to be transferred to investor
education and protection fund in accordance with the relevant
provisions of the Companies Act, 1956 (1 of 1956) and rules made
thereunder.
11 The accumulated losses of the companyat the end of the financial
year are more than the net worth andalso it has incurred cash loss
during the financial year covered by our audit and in the immediately
preceding financial year.
12 Based on our audit procedures and on the information and
explanations given by the management, we are of the opinion that, the
Company has been in default in repayment of dues to a financial
institution, bank or other lenders.
13. 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. Terms loans, other credit limits and loan from
financial institutions were unpaid and the dues have been classified as
Non-Performing Assets (NPA) by the banks.
14. During the year, no fresh term loans taken by the company.
However, term loans taken in earlier years, were in unpaid and
classified as Non-Performing Assets (NPA) by the bank.
15. 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 Sandy Associates
Chartered Accountants
FRN: 007337N
Sd /-
(FCA SANDEEP GUPTA)
Date: 02.06.2015 Proprietor
Membership No.: 086069
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