| This report is supplementary to our earlier audit report dated 3rd
September, 2014 in light of the revision of financial statements
consequent to the audit observations of the Comptroller and Auditor
General of India. This report supersedes our earlier audit report dated
3rd September,2014.
Report on Financial Statements:
We have audited the accompanying financial statements of THE MYSORE
PAPER MILLS LIMITED, ("the Company") which comprise the Balance Sheet
as at March 31, 2014 and the Statement of Profit and Loss and the Cash
Flow Statement for the year then ended, and a summary of Significant
Accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements:
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 Flow of the Company in accordance with
the Accounting Standards referred to in sub-section (3C) of section 211
of the Companies Act, 1956 ("the Act")read with general circular
15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs
in respect of Section 133 of the Companies Act, 2013. 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 the Standards on Auditing issued by the Institute of Chartered
Accountants of India. 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'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 entity's internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness
of the accounting estimates made by 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.
Basis for Qualified Opinion
1. As stated in note 2.12(b) Company has not identified the non moving
stores & spares and has made the provision of Rs.640.86 lacs for the
same on adhoc basis instead of making provision on determined non
moving stores and spares as stated in significant accounting policy
1.02 (iv). In the absence of details, the impact of the same on the
financial statement of the company can not be quantified.
2. As stated in Note 3.03 Rs. 201.47 lacs interest on purchase tax is
not provided in the books. Hence the loss for the year and other
current liability is under stated to that extent.
3. An alleged fraud on the company perpetrated by an employee reported
during the year vide office memo FPR/507/DSP/2013-14 dtd: 28/10/2013
and 5/ 2/2014 amounting to Rs.48.05 lacs for the years 2008 to 2014.
The alleged fraud is not reflected in the books of the company pending
finality of the enquiry. Hence we are unable to quantify the impact of
the same on the financial statements of the company for the year
4. Reference is drawn to Note 3.06, wherein no provision has been made
towards the disputed interest amounting to Rs. 1042.86 Lacs. As a
result Loss for the current year is under stated to that extent and
correspondingly the current liabilities is under stated to that extent.
5. During the year the company has accounted and capitalized Interest
and Guarantee Commission amounting to Rs.287.35 Lacs on loan borrowed
towards Rotary Lime Kiln Project. As the said project's active
development is interrupted the same should have been charged to profit
and Loss Account instead of debit to Capital Work in Progress. Due to
which Loss for the year is under stated to that extent and Capital work
in progress is overstated to that extent.
6. The Consequential effect of the above comments on financial
Statements to the extent ascertainable is understatement of loss by Rs.
1531.68 Lacs, understatement of Current liabilities by Rs. 1244.33 Lacs
and overstatement of work in progress by Rs. 287.35 Lacs.
Qualified Opinion
Subject to observations stated above, in our opinion and to the best of
our information and according to the explanations given to us, the
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:
a) In the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2014; and
b) In the case of the Statement of Profit and Loss of the Loss for the
year ended on that date and
c) In the case of Cash Flow Statement, of the cash flows for the year
ended on that date
Emphasis of Matter
1. Attention is drawn to Note 3.11 (Employee Benefits) wherein deficit
between plan assets and actuarial liabilities of employee benefit plans
under gratuity and leave encashment obligations are substantial. As the
company is sick and referred to BIFR, the company has not stated its
plan to meet this deficit.
2. The company is incurring cash losses continuously and net worth of
the company is fully eroded. However in the opinion of the management
the company is a going concern as the Govt. of Karnataka (GOK), the
main promoter, has been continuously supporting by way of financial
assistance. The company believes that Government of Karnataka will
extend financial support in the coming years also. The rehabilitation
proposal for revival of the company is under preparation.
3. The confirmations of Sundry Debtors, Creditors & Advances received
are yet to be reconciled (note 2.13 (a)). The company has not received
confirmations from majority of the parties, though confirmation letters
have been sent by the company.
Our opinion is not qualified in respect of the above matters
Report on other legal and regulatory requirements
1. As required by the Companies (Auditor's Report) Order, 2003 ("the
Order") issued by the Central Government of India in terms of
sub-section (4A) of section 227 of the Act, we give in the Annexure, a
statement on the matters specified in paragraphs 4 and 5 of the 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 purpose of our
audit;
b) Subject to our observations stated in the Basis for Qualified
Opinion, in our opinion proper books of account as required by law have
been kept by the Company so far as appears from our examination of
those books
c) The Balance Sheet, Statement of Profit and Loss, and Cash Flow
Statement dealt with by this Report are in agreement with the books of
account.
d) Subject to our observations stated in the Basis for Qualified
Opinion, in our opinion, the Balance Sheet, Statement of Profit and
Loss, and Cash Flow Statement comply with the Accounting Standards
referred to in subsection (3C) of section 211 of the Companies Act,
1956 read with the General Circular 15/2013 dated 13 September, 2013 of
the Ministry of Corporate Affairs in respect of Section 133 of the
Companies Act, 2013 and
e) On the basis of written representations received from the directors
as on March 31, 2014, and taken on record by the Board of Directors,
none of the directors is disqualified as on March 31, 2014, from being
appointed as a director in terms of clause (g) of sub-section (1) of
section 274 of the Companies Act, 1956.
ANNEXURE
TO THE MEMBERS OF THE MYSORE PAPER MILLS LIMITED
Referred to in Paragraph 1 of our report of even date
i) The Company has maintained proper records showing full particulars
of quantitative details and situation in respect of fixed assets.
ii) The Company has a regular program of physical verification of plant
and machinery & vehicles only. In our opinion, the periodicity of
physical verification is reasonable for these assets having regard to
the size of the Company and nature of its assets. Accordingly, the
fixed assets were verified by the Management during the year and
according to information and explanations given to us, no material
discrepancies were noticed on such verification.
iii) The Company has not disposed off substantial part of fixed assets
during the year.
iv) According to the information and explanations given to us, the
Management of the Company has conducted physical verification of
Inventory during the year except for standing crops, which is estimated
on yield-based formulae.
v) In our opinion the procedures of physical verification of inventory
followed by management is reasonable & adequate having regard to the
size of the Company and nature of its business.
vi) In our opinion, the Company is maintaining proper records of
inventory and according to the information and explanations given to us
the discrepancies noticed, during physical verification are not
material in nature and the same have been properly dealt with in the
books of account of the Company.
vii) According to the information and explanations given to us the
company has neither granted nor taken any loans, secured or unsecured
to/from Companies, firms or other parties covered in the register
maintained under section 301 of the Act.
viii) In our opinion and according to the information and explanations
given to us, there is an adequate internal control system, commensurate
with the size of the Company and the nature of its business with regard
to purchase of inventories and fixed assets and for the sale of goods
and services. We have not observed any major weakness in the internal
control system during the course of the audit except in the case of
labour payments made by cash towards captive forest plantation
activities.
ix) According to the information and explanations given to us there are
no transactions that need to be entered in pursuance of section 301 of
the Companies Act, 1956.
x) According to the information and explanations given to us, the
Company has not accepted any deposit from the public. Therefore, the
provisions of clause (vi) of paragraph 4 of the Order are not
applicable to the Company.
xi) In our opinion and according to the explanations and information
given to us, the Company has an internal audit system commensurate with
the size and nature of its business. However, timely compliance is not
done and the monitoring has to be more effective.
xii) The maintenance of cost records has been prescribed by the Central
Government under section 209(1) (d) of the Companies Act, 1956.
According to the information & explanations given to us, such accounts
and records have been made and maintained by the Company.
xiii) According to the information and explanations given to us, the
Company is generally regular in depositing undisputed statutory dues
including Provident Fund, Investor Education & Protection Fund,
Employees State Insurance, Income tax, VAT, Service Tax, Custom Duty,
Excise Duty, Cess, Wealth Tax, and any other statutory dues applicable
with the appropriate authorities except VAT & CST of Rs. 1355.19 lacs
and Purchase Tax on sugar cane amounting to Rs 498.50 lacs are
outstanding for a period more than six months from the date they became
payable.
xiv) According to the information and explanations given to us there
are no disputed dues in respect of Income Tax, VAT, Wealth Tax, Customs
Duty, Excise Duty, Cess, except service Tax of Rs.49.00 lacs for which
the appeal is pending before the Commissioner of central Excise and
Service Tax.
xv) The accumulated losses of the Company as at the end of financial
year are more than 50% of its net worth and the company has incurred
cash loss during the current financial year and in the immediately
preceding financial year.
xvi) On the basis of verification of relevant records and documents and
according to the explanations and information given to us, the Company
has defaulted in repayment of dues to financial institutions, Banks &
Debenture Holders as below:
Sl. NAME Defaulted Default since
No. Amount
Rs. In lacs
1. Axis Bank Limited 997.91 30-09-2010
2. SBM 4765.53 01-07-2012
3. SBI 3796.36 01-07-2012
4. Karnataka Bank 130.72 01-07-2012
5. Indian Bank 1944.30 01-07-2012
6. Vijaya Bank 1120.77 01-07-2012
Note: Interest on all loans accounted up to 31-03-2014.
xvii) 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.
xviii) The Company is not a chit fund or nidhi or mutual benefit fund
Company and hence the provisions of the same are not applicable to the
Company.
xix) The Company is not dealing or trading in shares, securities,
debentures and other investments.
xx) According to the information and explanations given to us, the
Company has not given any guarantee for loans taken by others from bank
or financial institutions.
xxi) In our opinion and on the basis of information and explanations
given to us, the fund raised through Bonds of Rs. 50 crores in July
2010 out of which Rs. 42.92 crores has not been applied for the purpose
for which it has been obtained.
xxii) On the basis of review of utilization of funds, which is based on
overall examination of the Balance sheet and cash flows of the Company,
related information as made available to us and as represented to us by
the Management, in our opinion, the Company has not utilized the funds
raised on the short-term basis for long-term investments.
xxiii) The Company has not made any preferential allotments of shares
to parties and Companies covered in the Register maintained under
section 301 of the Companies Act, 1956.
xxiv) According to the information & explanations given to us and the
records examined by us, the debentures/bonds have been issued against
Govt. of Karnataka guarantee. Hence no security or charge is created.
xxv) The Company has not raised any money from public issue and hence
the disclosure of the same is not applicable.
xxvi) According to the information and explanations given to us and on
the basis of examination of records, an alleged fraud perpetrated by an
employee was reported during the year vide office memo
FPR/507/DSP/2013-14 dtd: 28/10/2013 and 5/2/2014 amounting to Rs. 48.05
lacs for the years 2008 to 2014.
For M N S & CO.
Chartered Accountants
Firm Regn. No. 003968S
Sd/-
Place: Bengaluru (CA. NAGABHUSHAN K.S.)
Date: 25th November, 2014 PARTNER
Membership No: 025390 |