THE MEMBERS OF ZENITH COMPUTERS LIMITED REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of ZENITH COMPUTERS LIMITED(the Company) which comprise the Balance Sheet as at 31st March 2016 theStatement of Profit and Loss the Cash Flow Statement for the year then ended and asummary 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 Section134(5) of the Companies Act 2013 (the Act) with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing issued by Instituteof Chartered Accountants of India as specified under Section 143(10) of the Act. ThoseStandards require that we comply with ethical requirements and plan and perform the auditto obtain reasonable assurance about whether the financial statements are free frommaterial misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances but not for the purpose of expressing anopinion on whether the Company has in place an adequate internal financial controls systemover financial reporting and the operating effectiveness of such controls. An audit alsoincludes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at 31stMarch 2016 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
(i) The Term Loan of Rs.2000.00 lakhs outstanding as on 31.3.2015 is reduced toRs.1608.12 lakhs as on 31.3.2016 (refer Note 3). This reduction of Rs.391.88 lakhs is onaccount of adjustment by Indian Bank against:
| ||Rs. In Lakhs |
|(a) Margin Money Fixed Deposits ||8.16 |
|(b) Fixed Deposits ||263.67 |
|(c) Sales proceeds from sale by Indian Bank of Building at SA-9 Sancoale Industrial Estate Goa ||120.05 |
|Total ||391.88 |
(ii) The interest accrued and due thereon upto 31.3.2014 and accounted for Rs.596.47 isoutstanding as on 31.3.2016 Refer Note no.9 and 34
(iii) The Company's Cash Credit outstanding amount as on 31.3.2016 of Rs.2119.54 lakhs(comprised in the total short-term borrowing of Rs.3794.25 lakhs - Note 7) along withinterest thereon Rs.339.60 lakhs (Note 9) is payable to Indian Bank Nariman PointMumbai. Also refer
Note 34 on Contingent Liabilities in relation to Interest payable.
(iv) The said bank as part of recovery process issued Demand Notice dated 4.12.2013under SARFAESI Act 2002 and has taken in April 2015 physical possession of the propertiesand inventories of the running Unit at Goa including factory resulting in cessation ofbusiness and factory operations. The said bank has also taken in May 2015/ June 2015physical possession of the Company's properties and inventories at Mahape Navi Mumbai.
Out of the said properties taken over Building at SA-9 Sancoale Indl Estate Goa ofbook value Rs.207.51 lakhs has been sold by Indian Bank for Rs.120.05 lakhs resulting in aheavy loss of Rs.87.46 lakhs. The sales proceeds of Rs.120.05 lakhs has been adjusted byIndian Bank against the outstanding Term Loan of Rs.2000.00 lakhs as indicated in pointno. (i) above.
(v) The Company has filed a petition with the Debt Recovery Tribunal (DRT) Mumbai inthe matter of recovery by Indian Bank which is pending for disposal. If the outcome ofthe said litigation goes against the Company it may adversely affect its financialposition.
b) Note 27 - FCCBs and Interest thereon
The 0.50% Foreign Currency Convertible Bonds (due 2011) appearing under Note 3 areyet to be paid and the same is not restated as at the Balance Sheet date (AS11). The valueaccreted thereon appearing under Note no.3 and 34 has not been restated as at the BalanceSheet date (AS11) The interest payable on FCCB-coupon rate for the period 4.2.2011 to4.8.2011 amounting to Rs.9.14 lakhs appearing under Note no.9 has not been restated as atthe Balance Sheet date (AS11). We are informed that a petition has been filed in theBombay High Court by State Bank of India for recovery of their part of the alleged
investment in the said FCCB which is disputed as according to the Company State Bankof India is not the bondholder. The said petition is pending for admission. In case thepetitioner succeeds in the said litigation it will affect adversely the financialposition and the Going Concern status of the Company.
c) Note 28 - Reference to BIFR
The financial statements indicate that the Company has accumulated losses of Rs.8933.17lakhs as on 31.3.2016 (Rs.8013.37 lakhs as on 31.3.2015) and its net worth has been fullyeroded.
In view of acccumulated lossess including cash losses and erosion of networth of thecompany during past several years the Company filed an application in the year 2014-15with the Board for Industrial and Financial Reconstruction (BIFR) New Delhi which wasregistered at sr.no.44/2014 on 29.8.2014. We are informed that the said application hasbeen abated by the Board on 6.5.2016.
The Company's current liabilities exceeded its current assets as at the balance sheetdate. These conditions indicate the existence of a material uncertainty that may castsignificant doubt about the Company's ability to continue as a going concern. However thefinancial statements of the Company have been prepared on a going concern basis in view ofthe continuance of the business operations of the Company in respect of Maintenance andservicing of Computer systems
d) Note 10 - Depreciation and amortization on Fixed Assets
The Company has adopted the useful lives of the fixed assets as specified in Part C ofSchedule II to the Companies Act 2013 effective 1st April 2014 except in case of PCs andDesktops (included in Computer Systems) and Office Equipment where a longer useful lifeis adopted on the basis of technical assessment by the management. The carrying amount asof 1st April 2014 is being amortised over the remaining useful lives of the assets exceptin the case of Buildings where the carrying amount on 1st April 2014 as reduced by theamount of revaluation in past years is amortised over the remaining useful lives. If theuseful lives and carrying cost of all the assets was adopted as prescribed in the saidSchedule II the total depreciation for the year would have been higher by Rs.418.82lakhs.
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 2016 (the Order)issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the Annexure a statement on the matters specified inparagraphs 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 bestof 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 theCompany so far as it appears from our examination of those books and proper returnsadequate for the purposes of our audit have been received from the branches not visited byus.
(c) The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account and with the returnsreceived from the branches not visited by us.
(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014.
(e) The facts referred to in our observations and comments in sub-paragraph (a) (b)and (c) under the Emphasis of Matters paragraph above in our opinion may have anadverse effect on the functioning of the Company and its financial position.
(f) On the basis of the written representations received from the directors as on 31stMarch 2016 taken on record by the Board of Directors three of the four directors are notdisqualified as on 31st March 2016 from being appointed as a director in terms of Section164 (2) of the Act however the other director Shri R. K. Saraf has incurreddisqualification in terms of Section 164 (2) of the Act.
(g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand 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 financialposition 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 contractshence no provision for foreseeable losses is required.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
(h) In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as on 31st March 2016based on the internal control over the financial reporting criteria established by theCompany.
For C. L. Khanna & Co
(Firm's Registration No. 1050764W)
C. L. Khanna
(Membership No. 004988)
Place of Signature : Mumbai
Date : 28th May 2016
ANNEXURE TO THE INDEPENDENT AUDITORS REPORT
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 includingquantitative details wherever feasible and situation of fixed assets.
(b) As a part of recovery process under the SARFAESI Act 2002 Indian Bank has duringthe current year taken physical possession of the Company's fixed assets located in itsunits at Mahape Navi Mumbai and factory shed at Sancoale Industrial Estate Goa [referNote 26 and Emphasis of Matter paragraph (a) (iv)].
In view of the above stated facts the physical verification of the said Fixed Assetscould not be conducted by the Company.
(c) According to the information obtained the title deeds of the immovable propertiesof the Company viz. land and buildings held in the Company's name are under a Charge withthe Company's Bankers as security against Term loan and working capital borrowings. (referNotes 3 7 and 26 to the Financial Statements).
(ii) In respect of Inventories:
As a part of recovery process under the SARFAESI Act 2002 Indian Bank has during thecurrent year taken physical possession of the Company's Inventories located in its unitsat Mahape Navi Mumbai and factory shed at Sancoale Industrial Estate Goa [refer Note 26and Emphasis of Matter paragraph (a) (iv)].
In view of the above stated facts the physical verification of the said Inventoriescould not be conducted by the Company.
(iii) According to information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms or other parties covered inthe register maintained under Section 189 of the Companies Act 2013.
(iv) The Company has not advanced any Loan made any investment or given any guarantee/security within the provisions of Section 185 and 186 of the Companies Act 2013.
(v) The Company has not accepted any deposits from the public consequently thedirectives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 orany other relevant provisions of the Companies Act 2013 and the rules framed there underare not applicable.
(vi) The provisions for maintenance of cost records as specified in Section 148(1) ofthe Companies Act 2013 read with the Companies (cost records and audit) Rules 2014notified 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 Statutorydues:
(a) The Company has been generally regular in depositing undisputed statutory duesincluding Provident Fund Investor Education and Protection Fund Employees StateInsurance Income-tax Sales-tax VAT Service Tax Custom Duty Excise Duty Cess/LBT andany other statutory dues with the appropriate authorities during the year.
(b) The disputed statutory dues that are pending before appropriate authorities are asunder:
|SR. NO. ||NAME OF THE STATUTE ||NATURE OF DUES ||AMOUNT (RS. IN LAKHS) ||FORUM WHERE DISPUTE IS PENDING |
|1 ||Central Sales tax Act 1956 and Sales tax & VAT Acts of various States ||Sales tax ||168.39 ||Appellate Authorities/ Tribunal |
|2 ||Customs Act 1962 ||Custom duty ||305.72 ||Dy Commissioner of Customs Adjudication Cell Mumbai |
|3 ||Central Excise Act 1944 ||Excise duty ||517.15 ||Appellate Authorities/ Tribunal |
|4 ||Finance Act 1994 ||Service tax ||150.24 ||Appellate Authorities/ Tribunal |
|5 ||NMMC Act 1992 ||Property tax ||0.63 ||Local Authority |
(viii) According to information obtained from the Company there is a dispute withIndian bank with regard to alleged recovery of borrowings from the said bank. Refer Note26 and Emphasis of Matter paragraph (a).
(ix) During the current year no monies were raised by way of Initial Public Offer orfurther Public Offer The term loan taken in the earlier years was applied for the purposesfor which it was taken.
(x) To the best of our knowledge and belief and according to the information andexplanations given to us no fraud on or by the Company was noticed or reported during theyear.
(xi) No managerial remuneration was paid or provided during the current year.
(xii) This company is not a Nidhi company.
(Xiii) The transactions with the related parties are in compliance with Section 177 and188 of the Companies Act 2013 and the details have been disclosed in the financialstatements.
(xiv) The Company did not make any preferential allotment or private placement ofshares or convertible debentures during the year under review.
(xv) The Company has not entered into any non-cash transactions with the directors orwith persons connected with them in compliance with provisions of Section 192 of theCompanies Act 2013.
(xvi) The Company is not required to be registered under Section 45- IA of the ReserveBank of India Act 1934.
For C. L. Khanna & Co
(Firm's Registration No. 1050764W)
C. L. Khanna
(Membership No. 004988)
Place of Signature : Mumbai
Date : 28th May 2016