We have audited the accompanying financial statements of RESTILE
CERAMICS LIMITED (the Company), which comprise the Balance Sheet as
at March 31,2014, 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.
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 flows of the Company in accordance with
the Accounting Standards notified under the Companies Act, 1956 (the
Act) read with the General Circular 15/2013 dated 13 th 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.
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 Company''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
(a) The Company has generated negative operating cash flows, incurred
substantial operating losses, significant deterioration in value of
assets used to generate cash flows and its loans from bank have been
recalled by lender all of which indicate existence of material
uncertainty in the Company''s ability to continue as a going concern for
a reasonable period of time. The attached financial statements do not
include any adjustments that might result had the above uncertainties
(b) The Company''s building and plant and equipment are carried in the
Balance Sheet at Rs.967.18 lakhs and Rs.5951.24 lakhs respectively.
Management has not recognized estimated impairment in value of building
(Rs.522.17 lakhs) and in value of plant and equipment (Rs. 119.87
lakhs) in the Statement of Profit and Loss as required by Accounting
Standard 28 - Impairment of Assets referred to in subsec- tion (3C) of
Section 211 of the Act. The Company''s records indicate that had
management stated the value of building and plant and machinery after
considering the impairment loss mentioned above, the net loss would
have increased by Rs.642.04 lakhs and share holders fund would have
reduced by Rs.642.04 lakhs.
(c) The liability for employee gratuity as on March 31, 2014 has been
determined on the basis of Payment of gratuity Act, 1972 and the
liability for leave encashment has been provided on actual basis
instead of on actuarial basis as per mandatory Accounting standard 15
Employee Benefits. The effects of non compliance of the Accounting
standard 15 on the financial statement is not quantifiable
In our opinion and to the best of our information and according to the
explanations given to us, except for the effect of the matters
described in the Basis for qualified opinion paragraph, 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;
b) in the case of Statement of Profit and Loss, of the loss for the
year ended on that date; and
c) in the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor''s Report) Order, 2003 (the
Order) issued by the Central Gov- ernment of India in terms of
sub-section (4A) of section 227 of the Act, we give in the Annexure a
state-ment 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
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
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
d) except for the matters described in the Basis of Qualified Opinion
paragraph, in our opinion, the Bal-ance 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 13 September 2013 of the Ministry of Corporate affairs in
respect of section 133 of the Companies Act, 2013.
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 Act.
ANNEXURE TO THE INDEPENDENT AUDITORS'' REPORT
Re: Restile Ceramics Limited
Referred to in paragraph 8 under Report 0n Other Legal and Regulatory
Requirements section of our report of even date In our opinion and on
the basis of such checks as we considered appropriate, and according to
the infor- mation and explanations given to us, the nature of the
Company''s business/ activities/ results during the year are such that
clauses (vi), (xiii), (xiv), (xviii), and (xx) of paragraph 4 of the
Order are not applicable to the Company. Further, in respect of other
clauses, on the basis of such checks as we considered appropri- ate, we
1. (i) the Company is maintaining records showing particulars
including quantitative details and situation of fixed assets. The same,
however, needs to be updated.
(ii) the fixed assets are being physically verified under a phased
programme of verification, which, in our opinion, is reasonable having
regard to the nature and value of its assets, and no material
discrepancies have been noticed on such verification carried out during
the year in terms of the phased programme.
(iii) the Company has not disposed off any of its fixed assets during
the year and therefore our com- ment on whether the going concern has
been affected by such disposal does not arise.
2. (i) inventories have not been physically verified during the year
by the management.
(ii) the question of our commenting on procedures of the said physical
verification of the inventory fol- lowed by the management therefore
does not arise.
(iii) the Company is maintaining records of its inventories.
Inventories have not been physically verified during the year by the
management. The question of our commenting on the material
discrepancies noticed on physical verification and whether the same
have been properly dealt with the books of account does not arise.
3. (a) The Company has not granted any loans, secured or unsecured, to
companies, firms or other par- ties listed in the register maintained
under section 301 of the Act. Consequently, the provisions of Clauses
iii (b), iii(c) and iii (d) of the order are not applicable to the
(b) The Company has taken interest free, unsecured loans from two
companies listed in the register maintained under Sec.301 aggregating
to Rs.240.65 lakhs during the year and the year end balance of such
loans is Rs.238.15 lakhs. The other terms and conditions of the said
loan are not prejudicial to the interests of the Company.
4. 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 inventory and fixed assets, payments for expenses and for
sale of goods and services. On the basis of our examination of the
books and records of the company, we have neither come across nor have
been informed, of any continuing failure to correct major weaknesses in
the aforesaid internal control system.
5. In our opinion and to the best of our knowledge and belief the
contracts or arrangements referred to in section 301 of the Act which
need to be entered in the register maintained under the said section
have been so entered. The transactions made in pursuance of such
contracts or arrangements have been made at prices which are reasonable
having regard to the prevailing market prices at the relevant time.
6. The Company did not have an internal audit system during the
7. We have broadly reviewed the cost records maintained by the Company
pursuant to the Companies (Cost Accounting Records) Rules, 2011
prescribed by the Central Government under Section 209(1)
(d) of the Companies Act, 1956 and are of the opinion that prima facie
the prescribed records have been made and maintained. We have, however,
not made a detailed examination of the cost records with a view to
determine whether they are accurate or complete.
(i) The Company has not been regular in depositing undisputed provident
fund, employees'' state insurance, income tax, sales tax, service tax,
excise duty and cess with the appropriate authorities during the year.
The arrears of such dues outstanding as at March 31,2014 for a period
of more than six months from the date they became payable are -
Employees'' state insurance Rs.3.00 lakhs, Tax collected/deducted at
source Rs.3 lakhs, Sales Tax 20.88 lakhs, Property tax Rs.2.50 lakhs
and Professional tax Rs.2.95 lakhs. We are informed that the delays
were caused by unavoidable circumstances.
(ii) there are no dues of income tax, wealth-tax, service tax, customs
duty, excise duty and cess which have not been deposited on account of
any dispute. Sales Tax dues not deposited on account of disputes are as
Name of the Nature of Forum where Dispute Year to Amount of Tax
Statute the dues is Pending which the Demanded
demand (Rs. Lakhs)
Sales Tax APVAT Before High court 2009-10 12.74
9. The Company has accumulated losses as at March 31,2014 and has
incurred cash losses in the finan- cial year ended on that date and in
the immediately preceding financial year.
10. As per information and explanation given to us, the bank has
called upon the Company on February 28, 2014 to pay back the entire
working capital loan of Rs. 500 lakhs and close the account
11. The Company has not granted loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
12. The company does not given any guaranty for loan taken by others.
13. Based on our audit procedures and as per information and
explanations given to us we report that the Company has not raised any
term loans during the year.
14. In our opinion and according to the information and explanations
given to us and on an overall exami- nation of the financial statements
of the Company, funds raised on short-term basis have, prima facie, not
been used for long-term investment.
15. The Company has not issued any debentures during the year and
hence the question of creating a charge in respect thereof does not
arise. The creation of charge in respect of Deep Discount Bonds issued
in an earlier year and outstanding is in progress.
16. According to the information and explanation given to us and based
on the audit procedures per- formed, we report that no fraud of
material significance on or by the Company has been noticed or reported
during the year, nor we have been informed of such an occurrence by the
For M.S.Krishnaswami & Rajan
Firm Regn. No. 01554S
Place: Chennai M.S.Murali-Partner
Date: May 24, 2014 Membership No. : 26453