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DCM Financial

BSE: 511611|NSE: DCMFINSERV|ISIN: INE891B01012|SECTOR: Finance - Leasing & Hire Purchase
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« Mar 14
Auditor's Report (DCM Financial) Year End : Mar '15
We have audited the accompanying standalone financial statements of DCM
 Financial Services Limited (the Company), which comprise the Balance
 Sheet as at March 31,2015, and the Statement of Profit and Loss and
 Cash Flow Statement for the year ended, and a summary of 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 that 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
 referred 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 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 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 control system over financial
 reporting and the operating effectiveness of such controls. An audit
 also includes evaluating the appropriateness of 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 qualified audit opinion.
 
 Basis for Qualified Opinion
 
 (i) The accounts and financials of the company have been prepared on
 going concern on the assumption and premises made by the management of
 the Company that (a) The fresh restructuring scheme would be approved
 by the Hon''ble Delhi High Court in totality which is still pending for
 approval & acceptance (b) adequate finances and opportunities would be
 available in the foreseeable future to enable the company to start
 operating on a profitable basis and
 
 (c) injection of Rs.1,950.00 Lacs as promoters quota which has already
 been infused by the management group. The same has been explained in
 Note 30.
 
 (ii) No provision of Rs.823.24 Lacs (Rs.14,843.55 Lacs towards
 accumulated Interest as at 31st March, 2015) (Previous Year -
 Rs14,020.03 Lacs) which is simple interest calculated @10% per annum as
 stipulated in the Fresh Restructuring Scheme filed before Hon''ble Delhi
 High Court, towards Interest on Debentures, Term Loans & Bank, Fixed
 Deposits and Inter Corporate Deposits, have been provided in the
 financial statements. Had these been provided for in the financial
 statements, the net loss for the year ended 31st March, 2015 and
 cumulative net loss as well as Current / Non-Current Liabilities as at
 31st March, 2015 would have been overstated by Rs.823.23Lacs and
 Rs.14843.55Lacs respectively. This is a contravention of the Accounting
 Standard 1 on Disclosure of Accounting Policies issued by Ministry of
 Corporate Affairs, Government of India. The same has been explained in
 Note 4.1.g, Note 4.4(g) and Note 4.6.
 
 (iii) For redemption of debentures of Rs.8.75 Lacs, debenture
 redemption reserve is required to be created. Debenture redemption
 reserve of Rs.8.75 lacs has not been created due to insufficient
 profits. The same has been explained in Note 2.2.
 
 (iv) The value of assets charged as security in favor of banks,
 debenture-holders & financial institutions have been depleted over a
 period of time. The depletion has not yet been ascertained by the
 Company. To the extent of shortfall, if any, the liability is
 unsecured, whereas the same has been shown as secured. The same has
 been explained in Note 4.1.e and Note 4.2.b & 4.3.1.
 
 (v) Fixed Deposits and Bills Payable as per Fixed Deposit Register
 maintained by the Company are Rs.5627.29 lacs whereas the same as per
 financials books comes to Rs.5617.20 lacs. Their is a difference of
 Rs.10.69 lacs which is un-reconciled in the Fixed Deposit Register. The
 reason is either lack of identification of depositors or no claim or
 confirmation having been received by the company. The provision of such
 differential amount has not been made in the books of accounts. The
 provision of such differential amount has not been made. The same has
 been explained in Note 4.4.(e) & Note 4.4.(f).
 
 (vi) Balance confirmation of bills receivable and payable, advances
 recoverable in cash or in kind, receivables and payables relating to
 lease and hire purchase, lease security deposit of which party wise
 details are not available. Balance confirmation of inter-corporate
 deposits, balance of ex-employees, margin against L/C, loans from
 institutions, banks, and other receivables and payables have not been
 received from the parties/persons concerned. In the absence of balance
 confirmation the closing balances as per books of accounts have been
 incorporated in the final accounts and have been shown, unless
 otherwise stated by the management about its recoverability in the
 financials including considering the NPA Provisions, are good for
 recovery/ payment. Time barred debts under the Limitations Act have not
 been separately ascertained and written off or provided for. In the
 absence of such confirmation & corresponding reconciliation, it is not
 feasible for us to determine financial impact on the financials. Please
 refer Note No-31.
 
 (vii) Due to liquidity crisis in the past, minimum liquid assets @ 15%
 of Fixed Deposits as per directives of Reserve Bank of India under
 Non-Banking Company Prudential Norms, has not been maintained by the
 company. The company has applied to RBI and Company Law Board for
 exemption from maintaining minimum liquid assets and payment of penal
 interest but the disposal of the application is still pending. The same
 has been explained in Note 4.4.(h).
 
 (viii) Global IT Options Limited has till 31st March, 2015 incurred
 expenditure of Rs.20.47 lacs for & on behalf of its Holding Company
 (i.e. DCM Financial Services Limited). It comes under the category of
 short term funding. In case of Inter-Corporate Deposit, Section 186 of
 Companies Act, 2013 stipulates to charge interest at a rate not less
 than the bank declared by Reserve Bank of India. No Interest has not
 been provided on outstanding balance of Rs.20.47 lacs by Company to its
 subsidiary - Global IT Options Limited. It is non compliance of Section
 186 of Companies Act, 2013, which could attract penalties.
 
 (ix) Contingent liabilities and Other Commitments
 
 (a) Claims lodged and contingent liability arising out of suits and
 winding up petitions filed against the company not acknowledged as
 debts amounts to Rs.826.38 Lacs. There are also other cases filed in
 consumer, civil & criminal courts and other courts against the company
 for which the company is contingently liable but for which the amount
 is not quantifiable.
 
 (b) Punjab & Sind bank has filed a recovery suit before the Debt
 Recovery Tribunal (DRT) for recovery of Rs.1,217.52 Lacs against which
 the amount payable to them, as per books is Rs.803.40 Lacs. The company
 contends that the dues of the Bank will be settled as per the fresh
 restructuring scheme and consequently no provision for the difference
 of Rs.414.12 Lacs has been made. In the event of default in the payment
 of interest and principal or default as per Fresh Restructuring Scheme
 or Fresh Restructuring Scheme is rejected, the concessions made by PSB
 shall stand withdrawn and their claim settled before the Debt Recovery
 Tribunal of Rs.1,217.52 Lacs will become payable with immediate effect.
 
 (c.) IndusInd Bank has filed a recovery suit before the Debt Recovery
 Tribunal (DRT), of Rs.1,042.42 Lacs against which the amount payable to
 them as per books is Rs.577.00 Lacs. The company contends that the dues
 of the Bank will be settled as per the fresh restructuring scheme and
 consequently no provision for the difference of Rs.465.42 Lacs has
 been made. In the event that the company fails to pay the interest or
 principal or company default as per Fresh Restructuring Scheme or Fresh
 Restructuring Scheme is rejected, the concessions made by IndusInd Bank
 will be withdrawn and the amount claimed in the Debt Recovery Tribunal
 amounting to Rs.1,042.42 Lacs would be payable with immediate effect.
 
 (d) During the year 1999, the company had received Rs.100.00 Lacs from
 one of its debtors i.e.  Pure Drinks New Delhi Ltd. and reduced the
 same amount from his recoverable balance.  Subsequently the Hon''ble
 Punjab and Haryana Court deemed that payment is an out of turn payment
 and asked the company to deposit back the said amount. The company had
 filed a SLP with the Hon''ble Supreme Court of India which has been
 dismissed by them.  Therefore the company is liable to deposit the
 amount mentioned above which has yet to be deposited. And in view of
 restrictions imposed on operations of Bank A/c''s by Hon''ble Delhi High
 Court, the company has filed an application to release this money for
 depositing the same with Punjab & Haryana High Court.
 
 (e) During the year ended 30th June, 2011 the company''s tenant has
 filed a claim of Rs.100.00 Lacs against the company due to damages
 suffered by the tenant which is pending under arbitration proceedings
 as on 31st March, 2015.
 
 (f) There is a demand of Rs.141.75 Lacs raised by Income Tax Department
 for the Assessment Year 2010-11 for payment of income tax under the
 Income Tax Act, 1961, which is disputed by the company as brought
 forward losses under the Income Tax Act has not been allowed by the
 department and rectification application for deletion of above said
 demand has been filed by the company which is pending before the
 appropriate authorities.
 
 (g) There is an award passed by the arbitrator against the company in
 the matter of MS Shoes East Limited on May 28, 2012 for Rs.512.80 Lacs
 i.e. claim amount along with interest of Rs.307.00 Lacs for an
 underwriting given by the company in the year 1995 for the public issue
 of M/s MS Shoes East Ltd. The same has been contested by Company before
 Hon''ble Delhi High Court.
 
 (h) Due to dispute with the builder M/s NBCC Ltd. from which the
 company had purchased an office premises in the year 1995, regarding a
 claim for Rs.283.00 Lacs on account of increase in super area and
 certain other expenditure M/s NBCC Ltd. had incurred and the same is
 pending in arbitration.
 
 Qualified Opinion
 
 In our opinion and to the best of our information and according to the
 explanations given to us, except for the possible effects of the matter
 described in the Basis for Qualified Opinion paragraph, 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 31st March 2015, and its
 profit/loss and its cash flows for the year ended on that date
 
 Emphasis of Matter
 
 Till June, 2007, Group Companies funded expenditure or repayments made
 by the company worth Rs.549.71 Lacs. The same had been shown or
 credited to the Share Application Account in the financial statements
 of the Company. Company had already passed special resolution to allot
 appropriate shares, however the same is subject to sanction of Fresh
 Restructuring Scheme by the Hon''ble Delhi High Court. Such amounts were
 not received by the company under any invitation or subscription to any
 issue and the enabling resolutions passed in this regard have expired &
 shares cannot be issued as per SEBI Guidelines. Besides, such amount of
 share application money is covered under Private Placement Rules
 defined under Companies Act, 2013. Companies Act 2013 stipulates that
 if a company had received any amount by way of subscriptions to any
 shares, stock, bonds or debentures before the 1st April. 2014, such
 share application money should either be allotted till 1st June, 2015
 or be refunded. During the year ended 31-March-2015, the Company has
 transferred such amount of Rs.549.71 Lacs from Share Application to
 Long-Term Liabilities & shall seek permission for payment upon sanction
 of Fresh Restructuring Scheme by the Hon''ble Delhi High Court.
 
 Our opinion is not modified in the matter.
 
 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, except for the matters described in the Basis
 for Qualified Opinion paragraph, obtained all the information and
 explanations which to the best of our knowledge and belief were
 necessary for the purpose of our audit;
 
 b.  Except for the possible effects of the matter described in the
 Basis for Qualified Opinion paragraph above, 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.  Except for the impact of the matter described in the Basis for
 Qualified Opinion paragraph above, in our opinion, the Balance Sheet,
 Statement of Profit and Loss and Cash Flow Statement comply with the
 Accounting Standards specified under section 133 of the Act, read with
 Rule 7 of the Companies (Accounts) Rules, 2013;
 
 f.  The matter described in the Basis for Qualified Opinion paragraph
 above, in our opinion, may have an Qualified effect on the functioning
 of the Company.
 
 g.  On the basis of written representations received from the directors
 as on March 31,2015, and taken on record by the Board of Directors,
 none of the directors is disqualified as on March 31,2015, from being
 appointed as a director in terms of section 164(2) of the Act.
 
 h.  The Qualified remarks relating to the maintenance of accounts and
 other matters connected therewith are as stated in the Basis for
 Qualified Opinion paragraph above.  The qualification relating to the
 maintenance of accounts and other matters connected therewith are as
 stated in the Basis for Qualified Opinion paragraph above.
 
 i.  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
 
 a.  The Company has disclosed the impact of pending litigations on its
 financial position in its financial statements - Refer Note 24 to the
 financial statement.
 
 b.  The Company did not have any long-term contracts including
 derivative contracts for which there were any material foreseeable
 losses.
 
 c.  The company moved an application before the Hon''ble Company Law
 Board, New Delhi on 22nd July 2004 under Regulation 44 of the Company
 Law Regulations 1991 proposing a fresh repayment schedule to fixed
 depositors of the Company. The company filed a fresh Scheme of
 Arrangement for the reorganization of the share capital of the company
 and for compromise with the secured and unsecured creditors of the
 company, hereinafter referred to as the fresh restructuring scheme
 before the Hon''ble Delhi High Court, New Delhi on 24th September 2004
 mentioning therein repayment schedule. All the unpaid matured fixed
 deposits of Rs.5617.20 Lacs, Unpaid Matured Debentures of Rs.2552.29
 Lacs & Stale cheques in respect of balance of uncashed/unrealized in
 respect of Fixed Deposits and Non Convertible Debentures totaling
 Rs.14.73 Lacs issued prior to submission of restructuring scheme & as
 well as after the scheme which were not encashed by the FD and NCD
 Holders standing as at 31st March, 2015. All these matured fixed
 deposits, Unpaid Matured Debentures & Stale Cheques are more than seven
 year old. Out of Rs.14.73 Lacs of Stale Cheques, Rs.13.74 lacs were
 issued prior to submission of said fresh restructuring scheme & rest
 has been issued after the issuance of fresh restructuring scheme.
 During the year ended 31-March-2015, Rs.14.16 Lacs and Rs.0.57 Lacs has
 been transferred from the Stale Cheques Account to Fixed Deposits
 Account and Debentures Account respectively. Company represents that
 all the said amounts are payable as per the outcome of fresh
 restructuring scheme pending before Hon''ble Delhi High Court at New
 Delhi and Based on above, there were no amounts which were required to
 be transferred to the Investor Education and Protection Fund by the
 Company.
 
 ANNEXURE TO INDEPENDENT AUDITORS'' REPORT
 
 (Referred to in paragraph (1) of our report on other legal and
 regulatory requirements of even date)
 
 Annexure referred to in paragraph (1) of our report on other legal and
 regulatory requirements of Independent Auditor''s Report to the members
 of DCM Financials Services Limited on the financial statements for the
 year ended March 31, 2015
 
 i) (a) The company has maintained records showing full particulars
 including quantitative details and situation of fixed assets of all its
 units.
 
 (b) The fixed assets (other than the assets given on lease/hire
 purchase) have been physically verified by the management in a phased
 manner so that the entire assets lying at the Head Office and branches
 are covered within a period of three yeaRs. There is a program of
 verification of such fixed assets which, in our opinion, is reasonable
 having regards to the size of the Company in terms of number & nature
 of assets & manpower available. As explained to us by the management,
 no discrepancies were noticed on such verification.
 
 (ii) (a) Inventories of stock of shares and securities have been
 physically verified during the year by the management and in our
 opinion, the frequency of verification is reasonable.
 
 (b) The procedures for physical verification of inventories of stock of
 shares and securities followed by the management are reasonable and
 adequate in relation to the size of the company and the nature of its
 business, except matter stated at Point No-14 of this Annexure.
 
 (c) The company is maintaining proper records of its inventories of
 stock of shares and securities. The discrepancies noticed during the
 course of physical verification between the physical stocks and the
 book records were not material. However the same have been properly
 dealt with in the books of account, except matter stated at Point no.
 14 of this Annexure.
 
 (iii) The Company has not granted loans 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 procedures
 commensurate with the size of the company and the nature of its
 business for the purchase of fixed assets, purchase & sale of services.
 The activities of the Company do not involve purchase or sale of goods.
 Further, on the basis of our examination of the books and the records
 of the company, and according to the information and explanations given
 to us, we have neither come across nor have been informed about any
 continuing failure on the part of the management to correct major
 weaknesses in the aforesaid internal control procedures.
 
 (v) The company has not accepted deposits from the public during the
 year. The directives issued by the Reserve Bank of India and the
 provision of section 73 to 76 or any other relevant provision of the
 Companies Act 2013, the extent applicable, on deposits accepted in the
 earlier years and the outstanding deposits at the end of current year
 have not been complied with particularly relating to the register of
 depositors which does not agree with general ledger, general provisions
 regarding default in repayment of deposits, default in repayment of
 interest and maintenance of liquid asset assets. A notice has also been
 issued by the Reserve Bank of India for the company to show cause why
 penal action should not be taken against the company as prescribed
 under the RBI Act.
 
 (vi) As explained to us maintenance of cost records has not prescribed
 pursuant to the rules made by the Central Government under Section
 148(1) (d) of the Companies Act, 2013
 
 (vii) (a) According to the information and explanations given to us, no
 undisputed amounts payable in respect of Provident Fund, Investor
 Education and Protection Fund, Employees'' State Insurance, Income Tax,
 Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and
 other undisputed statutory dues were outstanding at the year end, for a
 period of more than six months from the date they became payable.
 
 (b) As explained by the management, there is a disputed demand of
 Rs.152.12 lakhs and Rs.141.74 lakhs for the Assessment Year 2009-10 and
 2010-11 respectively for the payment of Income tax Act,1961, which is
 disputed by the company as the brought forward losses under the Income
 tax Act has not been allowed by the department. The rectification
 application for deletion of above said two demands has been filed by
 the company which is pending before the appropriation authorities
 
 (c) There is no amount which is required to be transferred to investor
 education and protection fund in accordance with relevant provisions of
 the Companies act, 2013 and rules there- under.
 
 (viii) The accumulated losses at the end of the financial year exceed
 its net worth. The company has incurred cash losses in this financial
 year as against cash losses in the financial year immediately preceding
 the current financial year.
 
 (ix) The company had defaulted in the repayment of dues to financial
 institutions, banks and debenture holders as explained in Note Nos. 4.1
 to 4.3 and Note No. 4.5 of Notes to Accounts.
 
 The matter is sub-judice with Hon''ble Delhi High Court as the company
 had filed a fresh Scheme of Arrangement for the reorganization of the
 share capital of the company and for compromise with the secured and
 unsecured creditors of the company, hereinafter referred to as the
 fresh scheme before the Hon''ble Delhi High Court at New Delhi on 24th
 September 2004 and the same is pending as at 31st March, 2015.
 
 (x) The company has not given any guarantee for loans taken by others
 from bank or financial institutions and therefore rest of the
 sub-clause is inapplicable and has not been commented upon.
 
 (xi) According to the information and explanations given to us and on
 an overall examination of the books of accounts of the company, we
 report that no term loan was taken during the year ended 31st March,
 2015. However, the term loans taken by company in earlier years were
 applied for the purpose for which such loans obtained.
 
 (xi) According to the information and explanations given to us, no
 fraud on or by the company has been noticed or reported during the
 course of our audit
 
                                           For V Sahai Tripathi & Co.
                                              Chartered Accountants
                                      Firm''s Registration Number-000262N
 
 Place: New Delhi                                  MANISH MOHAN
 Date : 29th May, 2015                                Partner
                                                   M.N.- 091607
 
 
 
Source : Dion Global Solutions Limited
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