| Report on the Financial Statements
We have audited the accompanying financial statements of M/s Southern
Ispat & Energy Limited, which comprise the Balance Sheet as at 31 March
2014, Statement of Profit and Loss and 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 Management is responsible for the preparation of these
financial statements that give a true and fair view of the financial
position, financial performance and cash flows of the Group in
accordance with the accounting principles generally accepted in India.
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 auditing standards generally accepted in India. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of 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 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, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control. An audit also includes
evaluating the appropriateness of the accounting policies used and the
reasonableness of the accounting estimates made by the 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
In our opinion and to the best of our information and according to the
explanations given to us and subject to the comments given in
Annexure-I and Annexure-II, the said Balance Sheet and Profit and Loss
Account read together with the notes and accounting policy annexed,
give the information required by the Companies Act, 1956 in the manner
so required and give a true & fair view in conformity with the
accounting principles generally accepted in India:
1. In the case of balance sheet, of the state of affairs of the
company as at 31st March 2014.
II. In the case of profit & loss account, of the Profit for the period
ended on that date; and
III. In the case of cash flow statement, of the cash flow for the
period ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2003
including Companies (Auditor's Report) (Amendment) Order' 2004 issued
by the Central Government of India in terms of Sub-section (4A) of
section 227 of the companies Act, 1956, we enclose in the Annexure-II,
a Statement on the matters specified in paragraphs 4 & 5 of the said
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 purposes of our
audit.
b) In our opinion, proper books of account as required by law have been
kept by the company as far as appears from our examination of those
books.
c) The Balance sheet and profit & loss account and cash flow statement
dealt with this report are in agreement with the books of account.
d) In our opinion the Balance Sheet and Profit & Loss account dealt
with by this report comply with the accounting standards referred to in
sub-section (3C) of section 211 of the companies Act, 1956.
e) On the basis of written representation received from the Directors,
as on 31st March 2014, and taken on record by the Board of Directors,
we report that none of the Directors are disqualified as on 31st March
2014 from being appointed as Directors in terms of Clause (g) of
sub-section (1) of section 274 of the companies Act, 1956.
f) We further report that without considering Item No. 1 and 2 in
Annexure -I mentioned above the effect of which could not be
determined.
ANNEXURE I TO INDEPENDENT AUDITOR'S REPORT
[Referred to in Paragraph 1 under the heading "Opinion" of our report
of even date]
1. Non provision of terminal Benefits to Employees as detailed in
Accounting Policy No.5 in preference to the Accounting Standard No.
AS-15.
2. Note No.5, 7, 12 & 14 regarding confirmation of Sundry Creditors,
Long term Advances, Sundry Debtors and short term Advances and other
personal accounts and consequential adjustments thereof if any.
3. Company is yet to file e-forms 5 & 2 related to capital increase
and share allotment to members respectively as required under Companies
Act, 1956
4. During the year, State Bank of India has assigned Advances to ARCIL
under section 5 of SARFAESI Act, Vide Assignation Agreement Dated
26.03.2014 together with all underlying securities, rights, title and
interest in respect there of. However Balances Shown under Secured
Loans are subject to confirmation from ARCIL.
5. No provision has been made for Advances grouped in Capital Advance
shown under Note 7. Long Term Loans & Advances amounting to Rs. 1482.36
lacs, which are prima facie doubtful of recovery and in our opinion
current year's profit and accumulated profit of the company, are over
stated by provision of such doubtful advances.
ANNEXURE II TO INDEPENDENT AUDITOR'S REPORT [Referred to in Paragraph 1
under the heading "Report on Other Legal and Regulatory Requirements"
of our report of even date]
1. a. In respect of fixed assets, the company has maintained records
showing full particulars including quantitative details and situation
in most cases of such assets.
b. As explained to us, the assets have been physically verified by the
management, in accordance with the established system of periodical
verification of fixed assets once in 2/3 months. In our opinion, the
frequency of verification is reasonable, considering the size of the
operations of the company. No material discrepancies between the book
records and the physical records were noticed in respect of the assets
physically verified.
c. In our opinion and according to the information and explanations
given to us, a substantial part of fixed assets has not been disposed
of by the company during the year.
2. a. As explained to us, the inventory of the company has been
physically verified during the financial year by the management. In our
opinion the frequency of verification is reasonable.
b. According to the information and explanations given to us, in our
opinion, the procedures of physical verification of stocks followed by
the management are 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 records of inventory, in our
opinion, the Company has maintained proper records of inventory and the
discrepancies noted on physical verification between the physical
stocks and book records were not material, having regard to the size of
the operations of the company .
3. a. According to the information and explanations given to us,
during the period covered by audit report the Company has not given any
unsecured loans to / from the Company covered in the register
maintained under section 301 of the Company Act, 1956. Accordingly, the
provisions of clause 4(iii) (b) to (d) of the Companies (Auditor's
Report) Order, 2003 (as amended) are not applicable to the Company.
e. The Company had taken loan from one party covered in the register
maintained under section 301 of the Companies Act, 1956. The maximum
amount involved during the year was Rs.35.00 Lacs and the year-end
balance of loans taken from such party was Rs. 5.00 Lacs.
f. fn our opinion, the rate of interest and other terms and conditions
for such loans are not, prima facie, prejudicial to the interest of the
Company.
g. In respect of the aforesaid loans, the company is regular in
repaying the principal amounts as stipulated and has been regular in
payment of interest.
4. In our opinion and according to the information and explanations
given to us, there exists an adequate internal control system
commensurate with the size of the Company and the nature of its
business with regard to purchase of inventory, fixed assets and with
regard to the sale of goods and services. During the course of our
audit, we have not observed any continuing failure to correct weakness
in internal control system of the company.
5. In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of such contracts or
arrangements exceeding value of Rupees five lakhs have been entered
into during the financial year at prices which are reasonable having
regard to the prevailing market prices at the relevant time.
6. In our opinion and according to the information and explanations
given to us the Company has not accepted any deposits during the year
from the Public within the meaning of Section 58A and 58AA of the
Companies Act and the rules framed there under.
7. In our opinion, the Company does not have a formal internal audit
system.
8. Maintenance of Cost records under Section 209(1) (d) of the Act and
Cost Accounting Rules 2011 has been complied with.
9. a. According to the information and explanations given to us and
according to the books and records as produced and examined by us, in
our opinion, undisputed statutory dues including provident fund,
investor education and protection fund, employee's state insurance,
income tax, sales tax, wealth tax, service tax, customs duty, excise
duty, cess and other material statutory dues applicable to the Company
have generally been regularly deposited with the appropriate
authorities. According to the information and explanations given to us,
no undisputed amounts payable in respect of income tax, wealth tax,
sales tax, customs duty, excise duty and cess were in arrears, as at
31st March 2014 for a period of more than six months from the date they
became payable except TDS Rs 18.92 Lacs, VAT Rs 0.02 Lacs, Listing Fees
Rs 8.51 Lacs & MCA Filing Fee Rs 143.20 Lacs.
b. As at 31st March 2014, according to the records of the Company and
the information and explanations given to us, the following are the
particulars of disputed dues on account of excise duty and cess
matters, commercial tax and income tax that have not been deposited:-
Name of the Nature of the Amount Period to
Statute Dues (Rs. In which the
Lakhs) amounts Forum where pending
relates
30.74 2005-06
120.45 2006-07 Sales Tax Appellate
Tribunal, Additional
Kerala Commercial 2.80 2006-07 Bench, Palakkad
Commercial Taxes, Value
Taxes Added Tax Assistant
105.06 2007-08 Commissioner
(Assessment),
Commercial Taxes,
Palakkad
10. The Company does not have accumulated losses as at the end of the
financial year. There are no cash losses during the financial year
under report and in the immediately preceding financial year.
11. In our opinion and according to the information and explanations
given to us, during the year the Company has defaulted in repayment of
dues to State Bank of India amounting to Rs.319.57 Lacs. Further,
State Bank of India has assigned Advances to ARCIL under section 5 of
SARFAESI Act, Vide Assignation Agreement Dated 26.03.2014 together with
all underlying securities, rights, title and interest in respect there
of.
12. In our opinion and according to the information and explanations
given to us, the Company has not granted any loans and advances on the
basis of security by way of pledge of shares, debentures and other
securities.
13. The Company does not fall within the category of Chit fund / Nidhi
/ Mutual Benefit fund / Society and hence the related reporting
requirements of the Order are not applicable.
14. According to the information and explanations given to us, the
Company is not dealing or trading in shares, securities, debentures and
other investments and hence the related reporting requirements of the
Order are not applicable.
15. In our opinion and according to the information and explanations
given to us, the Company has not given guarantees for loans taken by
others from bank or financial institutions.
16. The Company has not obtained any term loans from any banks or
Financial Institutions.
17. According to the information and explanations given to us and on
an overall examination of the balance sheet of the company, we report
that the Company has used no funds raised on short-term basis for
long-term investment.
18. The Company has not made preferential allotment of shares to
parties covered in the Register maintained under Section 301 of the
Companies Act, 1956 during the financial year,
19. The company has not issued debentures; hence question of creation
of securities does not arise.
20. According to the information and explanations given to us, during
the period covered by audit report the company has not raised any money
by public issue. Accordingly, the provisions of clause 4(xx) of the
Companies (Auditor's Report) Order, 2003 (as amended) are not
applicable to the Company.
21. During the course of our examination of the books and records of
the Company carried out in accordance with the generally accepted
auditing practices in India, we have neither come across any instance
of fraud on or by the Company, noticed and reported during the year,
nor have we been in formed of such case by the management.
For SUNIL JOHRI & ASSOCIATES
CHARTERED ACCOUNTANTS
FRN 005960 C
Sd/-
(SUNIL JOHRI)
PARTNER
M. No. 074654
PLACE: RAIPUR
DATE: MAY 31.2014
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