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« Mar 13
Auditor's Report (Coal India) Year End : Mar '14
We have audited the accompanying financial statements of COAL INDIA
 LIMITED, which comprise the Balance Sheet as at 31st March, 2014, and
 the Statement of Profit and Loss and Cash Flow Statement for the Year
 then ended, and a summary of significant accounting policies and other
 explanatory information. These financial statements include figures in
 respect of Head Quarter (HQ), Kolkata, North Eastern Coalfields (NEC)
 GM''s Office at New Delhi and Marketing Division.
 
 2.  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 fl ows of the Company in accordance with
 the Accounting Standards notified under the Companies Act, 1956 (the
 Act) read with the General circular15/2013 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.
 
 3.  Auditor''s 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.
 
 Opinion
 
 In our opinion and to the best of our information and according to the
 explanations given to us, the financial statements, read together with
 Significant Accounting Policies and Additional Notes to Accounts as
 referred in Note 33 and 34 respectively 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 Balance Sheet, the state of affairs of the Company as
 at 31st March, 2014;
 
 b) In the case of Statement of Profit and Loss Account, the profit/
 loss for the year ended on that date; and
 
 c) In the case of Cash Flow Statement, the cash fl ows for the year
 ended on that date.
 
 Emphasis of Matter
 
 Without qualifying our opinion, we draw your attention to:
 
 a) Notes No.11 (1), 12(2) and 18 dealing with investments in and loans
 & advances (Short term / Long term, Current Account debit balances) to
 sick subsidiary of the company, that is, Eastern Coalfields Limited
 (ECL) which is under the Board of Industrial & Financial Reconstruction
 (BIFR). Revival plans have been approved by BIFR and vetted by the
 concerned ministry. On implementation of revival schemes the subsidiary
 is turning around and has started earning profits. In view of the
 changing circumstances, the management is of the opinion that no
 writing down or provisioning is required.
 
 This is a statement of fact referring to the notes on accounts only.
 
 Eastern Coalfields Ltd is a 100% subsidiary of Coal India Limited. The
 revival scheme of BIFR is under implementation and ECL is earning
 substantial profit since 2009-10, by which its negative net worth is
 getting reduced. Hence, the diminution in value of investment is not
 considered as permanent in nature and therefore following the
 provisions of AS 13 ( Accounting Standard on Investments ), no writing
 down or provisions is required. The Loans & Advances and Current
 Account debit balances etc are also on the same analogy considered to
 be recoverable and hence no provision is required.
 
 b) Not e No. 10A(2) regarding non-provision against fixed assets in
 Dankuni Coal Complex leased to South Eastern Coalfields Limited (SECL)
 for lease rent of Re.1 per annum. In the opinion of the management the
 nominal income earning is a temporary policy matter and actual worth of
 the assets including land is much higher than the book value and as
 such no provision is called for.
 
 This is a statement of fact referring to the notes on accounts no 10A
 (2) only.
 
 As mentioned by the Audit, referring to the relevant Note, the
 recoverable value (actual worth), of the assets of Dankuni Coal Complex
 (given on operating lease to SECL, a 100% subsidiary of CIL on a
 nominal rent) is considered much higher than its WDV. Hence no
 provision as per AS-28 (Accounting Standard on Impairment) or otherwise
 is required.
 
 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.  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.  In our opinion, the Balance Sheet, Statement of Profit and Loss,
 and Cash Flow Statement comply with the Accounting Standards notified
 under the Companies Act, 1956 read with the General Circular 15/2013
 dated 13th September, 2013 of the Ministry of Corporate Affairs in
 respect of Section 133 of the Companies Act, 2013.
 
 e.  In terms of Notification No. GSR 829(E) Dated 21st October, 2003,
 of the Government of India, Department of Company Affairs, Government
 Companies are exempted from the applicability of provisions of clause
 (g) of sub-section (1) of Section 274 of the Companies Act, 1956.
 
 f.  Since the Central Government has not issued any notification as to
 the rate at which the cess is to be paid under section 441A of the
 Companies Act, 1956, nor had it issued any Rules under the said
 section, prescribing the manner in which such cess is to be paid, no
 cess is due and payable by the Company.
 
 Annexure to the Auditors'' Report (Referred to in paragraph 1 of our
 report on Other Legal and Regulatory Requirements of even date to the
 members of Coal India Limited on the financial statements ended on 31st
 March, 2014)
 
 On the basis of checks carried out during the course of audit and as
 per information and explanations furnished to us and to the best of our
 knowledge and belief we report that:
 
 i. (a) The company has maintained proper records showing full
 particulars including quantitative details and situation of Fixed
 Assets. However, certain details as regards purchase order reference;
 date of commissioning and locations; identification marks are absent in
 some cases of old items.
 
 Few old items of fixed assets mentioned by the audit are fully
 depreciated
 
 (b) The Fixed Assets located at Head Quarter, North eastern Coalfields,
 the production unit of the company and GM''s office at New Delhi, have
 been physically verified by the management periodically in a phased
 manner.  In respect of assets physically verified discrepancies noticed
 were not material and have been properly dealt with in the books of
 account.
 
 This being a statement of fact calls for no comments separately.
 
 (c) No substantial part of fixed assets has been disposed of during the
 year.
 
 This being a statement of fact calls for no comments separately.
 
 ii. (a) Physical verification of inventory at North Eastern Coalfields
 has been conducted at reasonable intervals during the year by the
 management.  However, identification of obsolete items of stores &
 spares were not carried out during the year.
 
 Efforts for identification of obsolete items of stores & spares, if
 any, as mentioned by the Audit will be done in 2014-15.
 
 However, inventory at stockyards of West Bengal Regional Sales Office
 has not been physically verified. The inventories being very old have
 been provided for.
 
 The said Stockyards of West Bengal Regional Sales Office are not
 operative since long. The book stock is not significant and their value
 has been fully provided for since long.
 
 The inventories have been measured on the basis of volumetric system.
 
 (b) In our opinion, the procedures of physical verification of
 inventory followed by the management are reasonable and adequate in
 relation to the size of the Company and the nature of its business.
 
 This being a statement of fact calls for no comments separately.
 
 (c) The Company has maintained proper records of inventory. No material
 discrepancies were noticed on physical verification.
 
 This being a statement of fact calls for no comments separately.
 
 iii. (a) According to the 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
 301 of The Companies Act, 1956. However, interest has been waived on
 loans and advances to its subsidiaries Bharat Coking Coal Limited
 (BCCL) and Eastern Coalfields limited (ECL). In other cases clauses
 4(iii)(b) to 4(iii) (d) of the Order are not applicable.
 
 These are 100% subsidiaries of CIL. ECL is sick and referred to BIFR.
 Out of certain loans to ECL and BCCL, interest on such loans to ECL
 were waived since 2003-04.
 
 During the year, CIL Board approved to make such loans interest free
 upto 31st March, 2013 i.e. the date upto which BCCL was under BIFR.
 
 Interest has been fully charged on such loans to BCCL for the year
 2013-14.
 
 (b) The Company has not taken any loans, secured or unsecured, from
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Companies Act, 1956 except some surplus funds
 of the subsidiaries parked with this holding company where reasonable
 interest has been paid except for a part of such fund parked by
 Northern Coalfields Limited and Mahanadi Coalfields Limited, where no
 interest has been paid as these funds were transferred to Eastern
 Coalfields Limited and Bharat Coking Coal Limited for specific purposes
 as interest free advance. In our opinion, on the basis of explanations
 provided to us, the terms and conditions of these advances are not
 prejudicial to the interest of the Company.
 
 BCCL has returned the non-interest bearing fund by
 31.12.2013,thereafter such surplus fund parked by NCL and MCL to the
 extent returned by BCCL were made interest bearing.
 
 iv. There is, in general, an 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. During the course of our audit no major
 weakness in internal control has been noticed except the following:
 
 (a) The control over activities within the processing of payroll and
 disbursement of salary and wages in some units needs to be
 strengthened.
 
 Noted, action is being taken to further strengthen the same in 2014-15.
 
 (b) The control over procurement of service related to travelling at
 New Delhi office needs to be strengthened.
 
 Noted, action is being taken to further strengthen the same in 2014-15.
 
 v. There are no contracts and arrangements as referred to in Section
 301 of the Companies Act, 1956, particulars of which needs to be
 entered into a register maintained under section 301 of the said Act.
 Accordingly, clause 4 (v) (b) of the Order is not applicable.
 
 This being a statement of fact calls for no comments separately.
 
 vi. The Company has not accepted any deposits from the public within
 the meaning of the provisions of Section 58A and 58AA or any other
 relevant provision of the Companies Act, 1956 and rules made
 there-under.
 
 This being a statement of fact calls for no comments separately.
 
 vii. The Company has an Internal Audit system commensurate with the
 size and nature of its business, but it requires continuing improvement
 in respect of timeliness of reporting together with risk based analysis
 of the inadequacies. Further, no Information System Audit has been
 carried out.
 
 Noted. Efforts will be taken to improve in the areas of inadequacies
 mentioned by the audit.
 
 viii. The maintenance of cost records has been prescribed by the
 Central Government under Section 209 (1) (d) of the Companies Act, 1956
 vide Notification dated 3rd June, 2011 in respect of mining activities
 of the company. We have checked the records and are prima facie of the
 opinion that the same are properly maintained.
 
 This being a statement of fact calls for no comments separately.
 
 ix. (a) The Company is regular in depositing undisputed statutory dues
 including Provident Fund, Investor''s Education and Protection Fund,
 Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise
 Duty, Cess and other statutory dues with the appropriate authorities.
 There were no undisputed arrears of statutory dues outstanding as on
 31.03.2014 for a period of more than six months from the date they
 became payable.
 
 This being a statement of fact calls for no comments separately.
 
 (b) There are no dues of Sales Tax, Income Tax, Custom Duty, Wealth
 Tax, Excise Duty, Cess and Other Statutory dues which have not been
 deposited on account of any dispute except the following:
 
 These cases are very old and pending before assessing Officer / Sales
 Tax Departmental Appellate Authority. Pending verdict of these appeal
 cases, no deposit has been made.  However, these have been shown as
 contingent liability.
 
                                              Period       Forum where 
 SL   Name of the    Nature of                to which     dispute is
 No   Statute        dues        Amount Rs.   relates      pending
 
 1.   Provincial     Sales Tax   3,86,243.13  F.Y.         Assessing
      Sales Tax Act                           1989-90      Officer
 
 2    Provincial     Sales Tax   1,79,762.00  F.Y.         Additional
      Sales Tax Act                           1990-91      Commissioner
                                                           (Appeals)- 3
 
 3    Provincial     Sales Tax     48,441.00  F.Y          Additional
      Sales Tax Act                           1990-91      Commissioner
                                                           (Appeals)- 3
 
 4    Provincial     Sales Tax   2,75,819.00  F.Y.         Additional
      Sales Tax Act                           1991-92      Commissioner
                                                           (Appeals)- 3
 
 5    Provincial     Trade Tax      9,040.00  F.Y.         Assessing
      Trade Tax Act.                          1993-94      Officer
 
 x. The Company does not have any accumulated losses at the end of
 financial year and has not incurred cash losses in the current
 financial year and in the immediately preceding financial year.
 
 This being a statement of fact calls for no comments separately.
 
 xi.  The Company has not defaulted in repayment of dues to Financial
 Institutions or Banks.
 
 This being a statement of fact calls for no comments separately.
 
 xii.  The Company has not granted any loans or advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 This being a statement of fact calls for no comments separately.
 
 xiii.  The Company is not a Chit Fund or a Nidhi / Mutual Benefit Fund
 / Society.
 
 This being a statement of fact calls for no comments separately.
 
 xiv. The Company is not in the business of dealing or trading in
 shares. The Company has investments in shares of its wholly owned
 subsidiaries, SPV Joint Venture and in Mutual Funds only and has
 maintained proper records of transactions and contracts in respect
 thereof and timely entries have been made therein. The company, in its
 own name, has held all these shares.
 
 This being a statement of fact calls for no comments separately.
 
 xv. The terms and conditions on which the Company has given guarantees
 for loans taken by its subsidiaries from banks and financial
 institutions are not prima facie prejudicial to the interest of the
 Company.
 
 This being a statement of fact calls for no comments separately.
 
 xvi. No term loan has been availed during the year. However, the term
 loans availed by the Company in earlier years had been utilized for the
 purposes for which the said loan had been taken.
 
 This being a statement of fact calls for no comments separately.
 
 xvii.  The funds raised on short-term basis have not been used for
 long-term investments.
 
 This being a statement of fact calls for no comments separately.
 
 xviii. During the year under audit, the Company has not made any
 preferential allotment of shares to parties and companies covered in
 the register maintained under Section 301 of the Act.
 
 This being a statement of fact calls for no comments separately.
 
 xxi.  The Company has not issued any debentures during current or
 earlier year.
 
 This being a statement of fact calls for no comments separately.
 
 xx.  The company, during the year, has not raised any money through
 Public Issue of shares.
 
 This being a statement of fact calls for no comments separately.
 
 xxi. No fraud, on or by the Company has been noticed by us during the
 year. However, according to the information and explanations given to
 us, a case of misappropriation of Company''s funds for personal gain has
 come to the notice of the management which is under investigation by
 different agencies, the impact of such misappropriation cannot be
 ascertained at this stage.
 
 As stated by the Audit, the matter is under intense investigation by
 different agencies.
 
                                          For De Chakraborty & Sen
 
                                             Chartered Accountants
 
                                                  F.R. No. 303029E
 
                                              (Srijit Chakraborty)
 
 Place: Camp New Delhi                                     Partner
 
 Date : 29th May, 2014                      Membership No.: 055317
 
 
 
 
Source : Dion Global Solutions Limited
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