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Hotel Leela Venture

BSE: 500193|NSE: HOTELEELA|ISIN: INE102A01024|SECTOR: Hotels
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Mar 15
Auditor's Report (Hotel Leela Venture) Year End : Mar '16

To the Members of Hotel Leelaventure Limited Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Hotel Leelaventure Limited (the Company”), which comprise the Balance Sheet as at 31 March 2016, the Statement of Profit and Loss and 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 that shall 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 provisions of the Act for safeguarding of the assets of the Company and preventing and detecting frauds and other irregularities; the selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and the 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 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 requirement 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 the 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 financial 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. 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 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 31st March 2016 and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to the following matters in the Notes to the financial statements:

Note 32.1 regarding the Company''s liabilities, net worth and interest provision. The negative net worth as on 31st March 2016 was Rs. 27338 lakhs. The loss for the year would have been higher by Rs. 72704 lakhs (Previous year Rs. 78241 lakhs) and negative net worth would have been higher by another Rs. 150945 lakhs, if interest and other finance cost as notified by the Asset Reconstruction Companies were provided for in the books. This raises question on whether the Company can be considered as a Going Concern”. However, as the Company is hopeful of a viable restructuring package as explained by them in the note, it has prepared the financial statements on a going concern basis.

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, (herein after 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 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 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) The going concern matter described under the Emphasis of Matters paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

(f) On the basis of the written representations received from the directors as on March 31st, 2016, taken on record by the Board of Directors, none of the directors is disqualified as on March 31st, 2016 from being appointed as a director in terms of Section 164(2) of the Act.

(g) With respect to the adequacy of the internal finance controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in Annexure B” and

(h) 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:

(I) The Company has disclosed the impact of pending litigations on its financial position in its financial statements- Refer Note 32.2 to the financial statements;

(II) The Company has made provisions, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contacts. We have been informed that the Company did not have any pending derivative contacts.

(III) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

ANNEXURE - A TO THE AUDITORS'' REPORT

The Annexure referred to in Independent Auditors'' Report to the members of the Company on the standalone financial statements for the year ended 31 March 2016, we report that:

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

(b) The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner over a period of three years. In accordance with this programme, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.

(c) Except disputes relating to the title deeds /renewal of lease agreement as detailed hereunder, 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 disclosed in Note 12 to the standalone financial statements are held in the name of the Company.

Particulars

Number of cases

Gross value as on 31st March 2016. (Rs. in Lakhs)

Written down value as on 31st March 2016.

(Rs. in Lakhs)

Remarks

Land -Freehold

Five

1,269.01

1,269.01

Title deeds are under dispute.

Building Constructed on leasehold land

One

30,054.76

23,968.61

Lease agreement not renewed since 11th January, 2016 (Refer Note 32.2(f) to the standalone financial statements

(ii) As explained to us, inventories were physically verified during the year by the Management at reasonable intervals. In our opinion the frequency of such verification is reasonable. We have been informed that discrepancies noticed on such verification between the physical stock and book records are not material and have been properly dealt in the books of account.

(iii) In our opinion and according to the information and explanations given to us, the Company has not granted secured/unsecured loans to Companies, firms, Limited Liability Partnerships, or parties covered in the register maintained under Section 189 of the Companies Act, 2013 (''the Act''). Accordingly, paragraph 3(iii) of the Order is not applicable to the Company.

(iv) Attention is drawn to Note 32.9 to the standalone financial statements relating to overdue receivables from two private limited Companies amounting Rs. 171.72 lakhs in which directors are interested. Other than these two receivables, the Company has not granted any loans or provided any guarantees or security to the parties covered in Section 185 of the Act. The Company has complied with the provisions of Section 186 of the Act in respect of investments.

(v) The Company has not accepted any deposits from the public in accordance with the provisions of Section 73 to 76 of the Act and the rules framed there under.

(vi) The Central Government has not prescribed the maintenance of cost records under Section 148(1) of the Act, for any of the services rendered by the Company.

(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted / accrued

in the books of account in respect of undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales tax, value added tax, duty of customs, excise duty, service tax, cess and other material statutory dues have been regularly deposited during the year by the Company with the appropriate authorities except certain delays in depositing value added tax, luxury tax and service tax.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees state insurance, income tax, sales tax, value added tax, duty of customs, duty of excise, service tax, cess and other material statutory dues were in arrears as at 31 March 2016 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, details of disputed sales tax, income tax, customs duty, wealth tax, service tax, excise duty and cess which have not been deposited with the appropriate authorities as on 31st March 2016 on account of any dispute are given below:

Name of the Statute

Nature of Dues

Amount Rs. in Lakhs*

Period to which the amount relates

Forum where dispute is pending

Karnataka VAT Act 2003

VAT with interest and penalty

133.92

Financial Year 2005-06 to 2009-10

Matter remanded to Joint Commissioner of Commercial Taxes (Appeals) Bangalore by High Court of Karnataka.

Customs Act

Customs Duty and penalty

75.09

1989-90 and 2000-01

CESTAT Mumbai

Customs Act

Customs Duty and penalty

2.00

1990-91

Commissioner of Customs, Mumbai.

Goa Tax on Luxuries Act

Luxury Tax

5.65

2005-06

Additional Commissioner of Commercial Taxes (Appeals), Margao

Goa Tax on Luxuries Act

Luxury Tax

33.93

2007-08

Matter remanded back to the Assessing Officer by Additional Commissioner of Commercial Taxes (Appeals) Margao for fresh assessment

Finance Act, 1994

Service Tax, interest and penalty

2490.56

2007-12

CESTAT, Bangalore

Kerala Government Sales Tax Act.

Sales Tax, interest and penalty

27.57

2011-12

Deputy Commissioner of (Appeals), Thiruvananthapuram

Kerala Agricultural Income Tax

Agricultural Income Tax and interest

17.30

2004-09

Tribunal, Kerala Agricultural and Commercial Tax

Kerala Tax on Luxury 1976

Luxury Tax, interest and penalty

81.12

2010-11, 2011-12

Deputy Commissioner of (Appeals), Thiruvananthapuram

Maharashtra VAT 2002

VAT with interest and penalty.

300.70

2009-10 & 2010-11

Jt. Commissioner of Appeals -VAT, Mumbai

Maharashtra VAT 2002

VAT with interest and penalty.

234.62

2011-12

** Jt. Commissioner of Appeals -VAT, Mumbai

Central Excise Act,1944

Penalty

3.12

2003-05

CESTAT -Mumbai

* Net of amounts paid under protest.

** The Company is in the process of filing an appeal before the Joint Commissioner of Appeals-VAT, Mumbai.

(viii) According to the explanations and information given to us, the Company has defaulted in repayment of dues to banks/financial institutions/debenture holders during the year under review, the period and amount of defaults are as under.

a. There are delays in repayment of principal and payment of interest to the sole debenture holder during the year under review. Interest due on 19th March 2016 amounting Rs. 143.73 lakhs was not paid as on 31st March 2016.

b. The Company has defaulted in repayment of principal and interest to other banks and financial institutions. The details are as under:

Name of the Lender

Amount of default as at the Balance Sheet date (Rs. in Lakhs)

Period of Default

Bank of Baroda

722.05

Principal due since February 2016 and interest since February 2014

State Bank of India

131.90

Interest for the month of March 2016

HDFC Limited

927.42

Interest for the month of February and March 2016 and Principal due as on 31st March 2016

c. As per the information furnished to us, the Company has not taken any loan from the Government.

d. With reference to the debts assigned to Asset Restructuring Companies (ARC) refer note 32.1 to the standalone financial statements relating to debt restructuring, wherein it is stated that the Company is pursuing with ARCs for certain concessions in interest and repayment terms. Total amount outstanding to ARC including finance cost not recognized in the accounts as at 31st March 2016 is Rs. 4,60,696 lakhs.

(ix) The Company did not raise any money by way of initial public offer or further public offer (including debt instruments) and term loans during the year. Accordingly, paragraph 3 (ix) of the Order is not applicable.

(x) According to the information and explanations given to us, no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit.

(xi) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has paid/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 to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable.

(xiii) As per the information furnished to us, two transactions entered by the Company during the year under review amounting Rs. 96.60 lakhs with the related parties were ratified subsequently by the Board of Directors under Section 188(3) of the Act. Based on our examination of the records of the Company, other transactions with the related parties are in compliance with Section 177 and 188 of the Act. The details of related party transactions have been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations give 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 year.

(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into noncash transactions with directors or persons connected with them. Accordingly, paragraph 3(xv) of the Order is not applicable.

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

Annexure - B TO THE AUDITORS'' REPORT

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (the Act)

We have audited the internal financial controls over financial reporting of Hotel Leelaventure Limited (the Company”) as of 31 March 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

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

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, issued by ICAI and deemed to be prescribed under Section 143(10) of the Companies Act, 2013, 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 Institute of Chartered Accountants of India. 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.

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 financial statements, whether due to fraud or error

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

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 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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of 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 (3) 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 financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

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

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 31 March 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 PICARDO & CO.

Chartered Accountants

Registration No: 107917W

K.V. Gopalakrishnayya

Partner

Membership No. 21748

Mumbai, 26th May, 2016

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