PATEL ENGINEERING Auditors Report

TO THE MEMBERS OF PATEL ENGINEERING LIMITED


REPORT ON THE STANDALONE FINANCIAL STATEMENTS


We have audited the accompanying standalone financial statements of Patel Engineering Limited (“the Company"), which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss, 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 Standalone 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 standalone financial statements to 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 the 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; 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 standalone 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 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 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 standalone financial statements are free from material misstatement.


An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditors'''' judgment, including the assessment of the risks of material misstatement of the standalone 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 standalone financial statements that give a true and fair view, in order to design audit procedures that are appropriate in the circumstances. 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 standalone 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 standalone financial statements.


Opinion


In our opinion and to the best of our information and according to the explanations given to us, 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 March 31, 2016, and its loss and its cash flows for the year ended on that date.


Emphasis of Matter


We draw attention to:


(a) Note no 4.1 to the standalone financial statements, As per Section 71 of Companies Act, 2013 the Company has created adequate Debenture Redemption Reserve for the Secured Redeemable Non-Convertible Debenture issued by the Company. However, in terms of Section 71 read with Rule 18(7)(''''C) of Companies Share Capital and Debentures Rules, 2014, the Company has not made the required deposit/ investment to secure the repayment of debentures maturing during 2015-16. 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, 2016'''', issued by the Central Government of India in terms of subsection (11) of section 143 of the Act (hereinafter referred to as the “Order"), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure A, 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 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;


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;


d) in our opinion, the aforesaid standalone 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) on the basis of the written representations received from the directors as on March 31, 2016 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of Section 164 (2) of the Act;


f) with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure B"; and


g) with respect to the other matters to be included in the Auditors'''' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our knowledge and belief and according to the information and explanations given to us:


i. the Company has disclosed the impact of pending litigations as at March 31, 2016 on its financial position in its standalone financial statements to the extent determinable/ascertainable. - Refer


Note 41 to the standalone financial statements;


ii. the Company has made provision as at March,31,2016 as required under the applicable law or accounting standard, for material foreseeable losses, if any, on long term contract.


iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended March 31, 2016.


Referred to in paragraph 1 under "Report on Other Legal and Regulatory requirement" section of our report of even date to the members of Patel Engineering Limited on the Standalone Financial Statements for the year ended March 31, 2016.


i (a) The Company has maintained proper records showing full particulars, including quantitative details and situation, of fixed assets.


(b) During the year, fixed assets have been physically verified by the management at regular intervals and no material discrepancies were noticed on such verification.


(c ) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties recorded as fixed assets in the books of accounts of the Company as on March 31, 2016 are held in the name of the Company, except for the details given below:


In respect of Freehold lands with gross block and net block of Rs. 30.45 million and Building with gross block of Rs. 5.53 million and net block of Rs. 3.96 million.


ii The management has conducted physical verification of inventory at reasonable intervals during the year and no material discrepancies between physical inventory and book records were noticed on physical verification.


iii According to information and explanation given to us, the Company''''s has not granted any loan, secured or unsecured to companies, firms, Limited Liability Partnership firm or other parties, covered in the register maintained under section 189 of the Companies Act 2013 . Accordingly Paragraph 3 (iii)(a), 3 (iii)(b) and 3(iii)(c) of the Order are not applicable to the Company.


iv In our opinion, and according to the information and explanations given to us, the Company has complied with the provisions of Section 185 and 186 of the Companies Act, 2013, to the extent applicable, in respect of the loans, investments, guarantees and security.


v The Company has not accepted any deposits from the public within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly Paragraph 3(v) of the Order is not applicable to the Company.


vi We have broadly reviewed the books of accounts maintained by the company pursuant to the Rules made by the Central Government for the maintenance of cost record under sub section (1) of section 148 of the Companies Act in respect to company''''s products/services and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete


vii (a) According to the information and explanations given to us and the records of the Company examine by us, undisputed statutory dues including Provident Fund, Employees'''' State Insurance, Income Tax, Sales tax, Service Tax, Custom Duty, Excise Duty, Value Added Tax, Cess and other statutory dues, as applicable, have been generally regularly deposited with the appropriate authorities except for the Sales Tax, Entry Tax, Service Tax, Municipality Tax, Income Tax and Professional Tax amounting to '''' 280.17 million outstanding as on the last day of the financial year for a period of more than six months from the date they become payable.


(b) According to the information and explanations given to us and the records of the Company examine by us, the disputed statutory dues aggregating Rs. 3514.50 Million that have not been deposited on account of disputed matters pending before appropriate authorities are as under:













































































Particulars



Financial Year to which amount relates



Amounts in Million (Rs.)



Forum where dispute is pending



The Sales Tax Act



2001-2002 to 2003-2004



14.99



Appellate Tribunal



2005-2006



0.50



Joint Commissioner of Sales tax (A)-II, Mumbai



2005-2006, 2006-2007 and 20092010



32.78



Appellate Tribunal, Kolkata



2007-2008



10.74



Deputy Commissioner Appellate -III, Mumbai



2007-2008, 2008-2009 and 20102011



28.26



Senior Joint Commissioner , Siliguri



Entry Tax



2010-2011



7.57



High Court



The Finance Act, 1994



2007-2008 to 2012-2013



323.20



Custom , Excise and Service Tax Appellate Tribunal



April 2003 to July 2006



2.54



October 2009 to September 2010



108.31



June 2007 to September 2009



631.88



The Income Tax Act,1961



2007-2008 to 2009-2010 and 2011-2012 to 2012-2013



2353.73



Commissioner of Income Tax (Appeals)



3514.50




viii There are no loans or borrowings payable to government. The Company has defaulted in repayment of following dues to the financial institution, banks and debenture holders during the year, which were paid on before the balance sheet date.


Debenture Holders (Rs. in Millions)


















































Days



Principal



Interest



Axis Bank - Non-Convertible



1-30



-



22.90



31-60



-



13.10



61-90



500.00



54.91



GIC- Non-Convertible



90



-



0.03



LIC- Non-Convertible



1-30



-



6.74



61-90



-



44.22



90



-



37.19



Banks (Rs. in Millions)













































































































































































































Days



Principal



Letter of Credit



Interest



DBS Bank



1-30



-



-



48.96



31-60



1545.67



-



61.26



61-90



122.00



-



118.81



HDFC Bank



1-30



-



-



1.50



31-60



4.05



-



2.86



61-90



33.35



-



10.19



Canara Bank



1-30



8.99



-



75.67



31-60



0.25



-



12.92



Bank Of Baroda



1-30



-



882.39



98.46



31-60



-



131.20



26.07



Bank of India



1-30



48.95



398.52



124.92



31-60



7.82



1095.17



110.06



61-90



2.30



-



64.84



IDBI Bank



1-30



75.00



-



92.68



31-60



-



57.67



61-90



-



-



42.93



Bank of Maharashtra



1-30



1.20



278.28



344.35



31-60



-



51.55



176.52



Ratnakar Bank



1-30



-



-



2.74



31-60



-



-



5.51



Axis Bank



1-30



-



211.36



25.18



31-60



-



80.00



44.62



61-90



-



127.60



43.83



Dena Bank



1-30



250.00



149.91



154.44



31-60



-



-



146.52



61-90



569.21



-



190.01



Indusind bank



1-30



-



-



22.02



31-60



-



-



21.79



61-90



-



-



13.70



State Bank of Patiala



1-30



-



-



36.26





















































































ICICI Bank



1-30



-



1402.57



70.18



31-60



-



648.94



24.42



61-90



-



181.54



-



Society General Bank



1-30



-



-



54.83



31-60



-



-



5.03



61-90



-



-



41.60



Standard Chartered Bank



1-30



47.00



-



80.52



31-60



-



-



102.18



61-90



-



-



71.35



Exim Bank



1-30



-



-



83.75



Corporation Bank



1-30



-



-



51.53



31-60



-



-



16.13



Financial Institutions (Rs. in Millions)


















Days



Principal



Interest



Sicom India Ltd



1-30



-



18.57



The Company has defaulted in repayment of following dues to the financial institution, banks and debenture holders during the year, which were not paid as at the balance sheet date:


Debenture Holders (Rs. in Millions)



























Days



Principal



Interest



Total



GIC- Non-Convertible



1-30



100.00



43.66



143.66



Axis Bank



1-30



100.00



39.10



139.10



Banks (Rs. in Millions)

































































































































































Days



Principal



Letter of Credit



Interest



Total



DBS Bank



1-30



-



-



9.59



9.59



31-60



-



-



0.11



0.11



61-90



-



-



0.11



0.11



HDFC Bank



1-30



4.42



-



1.03



5.45



31-60



4.38



-



1.07



5.45



61-90



4.34



-



1.10



5.44



Canara Bank



1-30



-



-



7.72



7.72



Bank of Baroda



1-30



-



257.52



7.59



265.11



31-60



-



6.21



-



6.21



Bank of India



31-60



-



22.04



30.38



52.42



IDBI Bank



31-60



400.00



-



4.15



404.15



Bank of Maharashtra



1-30



-



-



0.46



0.46



31-60



-



-



11.16



11.16



Ratnakar Bank



31-60



-



-



2.43



2.43



Axis Bank



1-30



-



25.00



2.39



27.39



31-60



-



-



28.32



28.32



Dena Bank



1-30



-



-



0.02



0.02



Society General Bank



31-60



-



-



22.73



22.73














































Standard Chartered Bank



31-60



-



-



34.10



34.10



61-90



12.39



-



0.30



12.69



>90



82.62



-



2.82



85.44



ICICI Bank



1-30



22.50



73.39



-



95.89



Corporation


Bank



1-30



-



-



0.26



0.26



ix The Company did not raise any money by way of initial public offer or further public offer (including debt instruments). According to the information and explanations given to us, the term loans have been applied for the purposes for which they were obtained.


x During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practice in India, and according to information and explanation given to us, we have neither come across any instance of fraud on or by the Company, its officers or employees, noticed or reported during the period, nor have we been informed of such case by the management.


xi According to the information and explanations given to us, the Company has paid or provided for managerial remuneration in accordance with the requisite approvals mandated by


the provisions of Section 197 read with Schedule V to the Act.


xii In our opinion and according the information and explanation given to us, the Company is not a Nidhi Company.


Accordingly, paragraph 3(xii) of the Order is not applicable to the Company.


xiii According to the information and explanation given to us


and based on our verification of the records of the Company and on the basis of review and approval by the Board and Audit Committee, the transactions with related parties are in compliance with Section 177 and 188 of the Act where applicable and the details of such transactions have been disclosed in the standalone financial statements as required by the applicable accounting standards.


xiv According to the information and explanation given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the period under review. Accordingly, paragraph 3(xiv) of the Order is not applicable to the Company.


xv According to the information and explanation given to us and based on our examination of the records of the Company, the Company has not entered into any non-cash transactions with its directors or persons connected with them during the year. Accordingly, paragraph 3(xv) of the Order is not applicable to the Company.


xvi The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.


Referred to in paragraph 2(f) under "Report on Other Legal and Regulatory requirement" section of our report of even date to the members of Patel Engineering Limited on the Standalone Financial Statements for the year ended March 31, 2016. Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013


1. We have audited the internal financial controls over financial reporting of Patel Engineering Limited (“the Company") as of March 31, 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.


Management''''s Responsibility for Internal Financial Controls


2. The Company''''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.


Auditors'''' Responsibility


3. Our responsibility is to express an opinion on the Company''''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note") and the Standards on Auditing deemed to be prescribed under section 143(10) of the Act to the extent applicable to an audit of internal financial controls, both applicable to an audit of internal financial controls and both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.


4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''''s judgment, including the assessment of the risks of material misstatement of the standalone financial statements, whether due to fraud or error.


5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''''s internal financial controls system over financial reporting.


Meaning of Internal Financial Controls over Financial Reporting


6. A company''''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone financial statements for external purposes in accordance with generally accepted accounting principles. A company''''s internal financial control over financial reporting includes those policies and procedures that


i. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;


ii. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of standalone financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and


iii. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''''s assets that could have a material effect on the standalone financial statements.


Inherent Limitations of Internal Financial Controls over Financial


Reporting


7. Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Opinion


8. In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance


Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.


For Vatsaraj & Co.


Chartered Accountants


Firm Registration Number: 111327W


CA B. K. Vatsaraj


Partner


Membership Number: 39894


May 30, 2016


Mumbai

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.
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