| We have audited the accompanying financial statements of ZENITH
COMPUTERS 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 signifi cant
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 of these financial statements that give a true and
fair view of the financial position, financial performance and cash fl
ows 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.
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, 2015, 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
As per the Financial Statements, Rs.20 crores towards Term Loan (Note
3) along with interest accrued and due thereon Rs.5.96 crores (Note 9)
and Rs.21.19 crores towards Cash Credit (comprised in total short- term
borrowing of Rs.37.35 crores - Note 7) along with interest thereon
Rs.3.39 crores (Note 9) are payable to Indian Bank Nariman Point,
Mumbai. Also, refer Note 34 on Contingent Liabilities in relation to
Interest payable.
We understand from the Management, that the said bank has, as part of
recovery process, 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 Company's properties and inventories at Mahape, Navi Mumbai. As
informed by the management, valuation of the said properties and
inventories are yet to be determined by the said Bank.
The Company has fi led an Appeal with the Debt Recovery Appellate
Tribunal (DRAT), Mumbai, which is pending for disposal.
As disclosed in Note 26, 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). A petition
has been fi led 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 State Bank of India is not the bondholder. The
said petition is pending for admission.
c) 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 amortized 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 mortised 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.287.63 lakhs.
d) Note 28 - Reference to BIFR
The financial statements indicate that the Company has accumulated
losses of Rs.80.13 crores as on 31.3.2015 and its net worth has been
fully eroded.
The Company has incurred a net loss of (-)Rs.31.91 crores and net cash
loss of (-)Rs.30.49 crores during the current year (previous year's net
loss (-) Rs.42.94 crores and net cash loss of (-) Rs.41.91 crores,
respectively).
The Company has filed an application with the Board for Industrial and
Financial Reconstruction (BIFR), New Delhi registered at sr.no.44/2014.
The Company's 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
Company's 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
Our opinion is not modified in respect of these matters.
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 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 going concern matter described in sub- paragraph (d) under the
Emphasis of Matters paragraph above, 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 taken on record by the Board of
Directors, two of the three directors are not disqualified as on 31st
March, 2015 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 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 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.
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) The fixed assets have been physically verified by the Management
periodically and the frequency of verification of fixed assets is
reasonable having regard to the size of the Company and the nature of
its assets.
(ii) In respect of Inventories:
(a) The stocks of finished goods, stores, spare parts and raw materials
have been physically verified during the year by the management. In our
opinion, the frequency of verification is reasonable.
(b) 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) In our opinion and according to the information and explanations
given to us, the Company has maintained proper records of its
inventories and no material discrepancies were noticed on physical
verification.
(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) In our opinion and according to the information and explanations
given to us, there are adequate internal control system commensurate
with the size of the company and the nature of its business for the
purchase of inventory and fixed assets and for the sale of goods and
services.
(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,
Wealth Tax, 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. NAME OF THE NATURE AMOUNT FORUM WHERE
NO. STATUTE OF DUES (RS. IN DISPUTE IS
LAKHS) PENDING
1 Central Sales Sales tax 168.39 Appellate
tax Act, 1956 Authorities/
and Sales tax Tribunal
& VAT Acts of
various States
2 Customs Act, Custom 305.72 Dy
1962 duty Commissioner
of Customs,
Adjudication
Cell, Mumbai
3 Central Excise Excise duty 517.15 Appellate
Act, 1944 Authorities/
Tribunal
4 Finance Act, Service tax 109.63 Appellate
1994 Authorities/
Tribunal
5 NMMC Act, Property 0.63 Local Authority
1992 tax
(c) There has been no delay in transferring amounts, required to be
transferred, to the Investor Education and Protection Fund by the
Company.
(viii) The Company has accumulated losses as at 31.3.2015 which has
fully eroded its net worth. The company incurred cash losses during the
current year, and, had also incurred cash losses in the immediately
preceding financial year.
(ix) Based on the Audit procedures and the information and explanations
given by the Management, we understand that the company has defaulted
in the repayment of Term Loan, Working Capital Borrowing (cash credit)
and interest accrued and due thereon to Indian Bank. With regard to the
period and amount of default, refer Note 7 and Note 26 to the Financial
Statements.
(x) In our opinion and according to the information and explanations
given to us, the Company has not given any guarantee for loans taken by
others from banks and financial institutions.
(xi) The term loan taken was applied for the purposes for which it was
taken.
(xii) 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.
For C. L. Khanna & Co
Chartered Accountants
(Firm's Registration No. 1050764W)
C. L. Khanna
Place of Signature : Mumbai (Proprietor)
Date : 13th June, 2015 (Membership No. 004988) |