1. We have audited the accompanying standalone financial statements of
Cranes Software International Limited (the Company), which comprise
the Balance Sheet as at 31st March, 2015, the Statement of Profit and
Loss, the Cash Flow Statement for the year then ended, and a summary of
the significant accounting policies and other explanatory information.
2. 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 Ac-
counting 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 the provisions of the Act for safeguarding of 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 main- tenance 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.
3. 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.
4. We conducted our audit in accordance with the Standards on Auditing
specified under Section 143(10) of the Act and other applicable
authoritative pronouncements issued by the Institute of Chartered
Accountants of India. Those Standards and pronouncement 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.
5. An audit involves performing procedures to obtain audit evidence
about the amounts and the disclosures in the standalone financial
statements. The procedures selected depend on the auditor''s judg- ment,
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, but not for the purpose of expressing
an opinion on whether the company has in place adequate internal
financial controls system over financial reporting and the operating
effectiveness of such controls. An audit also includes evaluating the
appropri- ateness 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
6. 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.
Basis for Qualified Opinion
7. The attached Balance Sheet as at 31st March, 2015 is drawn on the
basis of the Principle of ''Going Concern''. We opine as follows in this
7.1 An advance of Rs. 23,958.53 lakhs is due from a party for an
inordinate period and in our opinion recovery of the same is doubtful.
However, the company continues to classify such amounts as ''Good''.
However, no evidence has been given to us to consider those amounts as
recoverable as on the date of Balance Sheet.
7.2 Attention of the members is invited to note 3.11 of the Notes
regarding recognition of deferred tax credit on account of unabsorbed
losses and allowances aggregating to Rs.26,965.82 lakhs (year ended
March 31, 2014 Rs. 22,559.89 lakhs). This does not satisfy the virtual
certainty test for recognition of deferred tax credit as laid down in
Accounting Standard 22.
7.3 Reference is drawn to note no. 3.33 of the Notes regarding the
amounts classified under Fixed As- sets including Intangible Assets
Under Development amounting to Rs. 32,252.28 lakhs. No evi- dence has
been produced before us for testing its impairment and in the absence
of the same, we are unable to express any opinion on the impairment to
such asset. In our opinion, such test of impairment as on the date of
Balance Sheet is mandatory, especially in view of the higher degree of
the obsoles- cence of software which is stated to be under various
stages of development, though no further devel- opments have been
carried out during the recent years.
7.4 The appropriateness of the ''Going Concern'' concept based on which
the accounts have been prepared is interalia dependent on the Company''s
ability to infuse requisite funds for meeting its obligations,
rescheduling of debt and resuming normal operations.
8 We further report that, except for the effect, if any, of the matters
stated in paragraphs 7.3 above, whose effect are not ascertainable, had
the observations made in paragraphs 7.1 and 7.2 above been considered,
the loss after tax for the year ended March 31, 2015 would have been
higher by Rs. 50,924.36 lakhs.
In our opinion and to the best of our information and according to the
explanations given to us, except for the matters expressed in Basis for
Qualified opinion and Emphasis of matter 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, its loss
and its cash flows for the year ended on that date.
Emphasis of Matter
1. Redemption of Foreign currency convertible bond amounting to Rs.
28,354.20 lakhs (42 million Euros) to the holders of the bonds have
fallen due during April 2011 and is yet to be redeemed as on the date
of Balance Sheet. A winding up petition has been filed by the trustees
of the Foreign Currency Convertible Bond holders against the Company,
before the Hon''ble High Court of Karnataka for non-payment of principal
and the accrued interest thereon.
2. Term loans and working capital loans availed by the company from
various banks amounting to Rs. 58,550.95 lakhs, which includes an
amount of Rs. 4,425.04 lakhs taken over by an Asset Reconstruction
Company, remain unpaid and are overdue since 2009. The lenders have
filed cases before the Debt Recovery Tribunal (DRT) / Hon''ble Courts,
etc for recovery of dues. These proceedings are in various stages of
disposal before the DRT and respective Hon''ble Courts. Winding up
petitions have been filed by Canara Bank and Bank of India against the
company, before the Hon''ble High Court of Karnataka for non-payment of
principal and the accrued interest thereon.
3. SBI Capital, a Creditor, has initiated a winding up petition
against the company, before the Hon''ble High Court of Karnataka for
non-payment of its dues.
4. In our opinion the securities provided to Banks are not adequate to
cover the amounts outstanding to them as on the date of Balance Sheet.
5. We would like to draw the attention of the members to note no. 3.27
of the financial statements regarding default of payments to various
6. We further draw attention on the following non compliances under
the Companies Act, 2013 and rules thereon
a. Non-appointment of Woman Director as required under the second
proviso to Section 149(1) of the said Act.
b. Non-appointment of Chief Financial Officer as required under
section 203 of the said Act.
c. The Company has drawn and utilised an amount Rs. 43.77 lakhs from
the ''CSIL Employees Comprehensive Gratuity Trust'' fund for the purpose
not intended in terms of ''The Payment of Gratuity Act, 1972''.(See note
No. 3.05 of the Financial Statements)
Our Report is not qualified in respect of the above 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 Govern- ment of India in terms of
sub-section (11) of section 143 of the Act, 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 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
(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash
Flow Statement dealt with by this Report are in agreement with the
books of account.
(d) In our opinion, except for the matters expressed in paras 7.2 and
7.3 of the Basis for Qualified 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) In our opinion, the qualifications and matters specified in the
Emphasis of Matter paragraph, 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 31 st March, 2015 taken on record by the Board of
Directors, none of the directors is disqualified as on 31st March, 2015
from being appointed as a director in terms of Section 164 (2) of the
(g) 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 finan- cial statements - Refer Note No. 3.27
to the financial statements;
ii. The Company did not have any long-term contracts including
derivative contracts for which there were any material foreseeable
iii. The Company has not transferred an amount of Rs. 3.93 Lakhs,
which is required to be trans- ferred to the Investor Education and
ANNEXURE TO THE INDEPENDENT AUDITORS'' REPORT
The Annexure referred to in our Independent Auditor''s re port to the
members of Cranes Software International Limited (''the Company'') on the
standalone financial statements for the year ended on 31st March 2015.
We report that:
i) (a) The company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
(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.
ii) (a) In our opinion and according to the information and
explanations given to us, the management has conducted the physical
verification of inventory at reasonable intervals during the year under
(b) In our opinion and according to the information and explanations
given to us, the procedures of physical verification of inventory
followed by the management are reasonable and adequate in relation to
the size of the Company and nature of its business.
(c) According to the information and explanations given to us, we are
of the opinion that the Company is maintaining proper records of
inventory and no material discrepancies were noticed on their physical
iii) (a) The Company has in the past granted interest free loans to its
subsidiary companies covered in the register maintained under section
189 of the Companies Act, 2013. However, the Company has not granted
any loan, secured or unsecured, to firms or other parties covered in
the register maintained under section 189 of the Companies Act, 2013.
(b) In the case of the loans granted to the bodies corporate listed in
the register maintained under section 189 of the Act, the terms of
arrangements do not stipulate any repayment schedule and the loans are
repayable on demand. Accordingly, paragraph 3(iii)(b) of the Order is
not applicable to the Company in respect of repayment of the principal
(c) There are no overdue amounts of more than rupees one lakh in
respect of the loans granted to the bodies corporate listed in the
register maintained under section 189 of the Act.
iv) 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 the purchase of inventory 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.
v) The company has not raised any deposits from public as covered by
provisions of Sections 73 to 76 or any other relevant provisions of the
Companies Act and the rules framed thereunder.
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) On Examination of the books of accounts and other records of
the Company we report that the company has defaulted in depositing its
undisputed statutory dues including Provident Fund, Investors Education
and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax,
Service Tax, Wealth Tax, Customs duty, and Cess with the appropriate
authorities. The following statutory liabilities are pending for
payment for a period of more than six months from the date they became
(Rs. In Lakhs)
Name of the Statute Nature of dues Amount to
Fund & Miscellaneous
Provision Act Provident Fund 12.19
Insurance Act ESI 3.85
Income Tax Act Withholding Taxes 271.27
Finance Act Service Tax 184.49
Commercial Taxes Act Sales Tax/Value Added Tax 71.26
Income Tax Act Self Assessment Tax 89.02
Wealth Tax Act Wealth Tax 0.88
Income Tax Act Dividend Distribution Tax 273.88
Income Tax Act Fringe Benefit Tax 0.41
Protection Fund Unclaimed Dividend 0.97
(b) According to the information and explanations given to us, there
are no disputed amounts as at 31st March 2015 in respect of Provcident
Fund, Employees'' State Insurance, Income Tax, Sales Tax, Service Tax,
Wealth Tax, Customs duty and Cess and other applicable statutory dues
with the exception of the following:
(Rs. In Lakhs)
Name of the statute Nature of dues Amount which amount
Income Tax Act, 1961 Income Tax 6728.44 2009-10
Chapter V of the 2004-05 to
Finance Act, 1994 Service Tax 756.02 2007-08
Chapter V of the 2008-09 to
Finance Act, 1994 Service Tax 630.45 2012-13
Provident Employer and 51.87 1996-1997 to
Fund and Miscellaneous Employee 2013-14
Provisions Act, 1972 Provident Fund
The Foreign Exchange Penalty for 50.00 2006
Regulation Act, 1999 Contravention of
Section 42(1) of
the FEMA, 1999
Name of the Statute Forum where dispute is pending
Income Tax Act, 1961 Income Tax Appellate Tribunal
Chapter V of the Finance Act, 1994 Customs, Excise and Service Tax
Chapter V of the Finance Act, 1994 Commissioner, Service Tax, Bangalore
The Employees Provident Fund Assistant / Regional Provident Fund
The Foreign Exchange Regulation
Act, 1999 Director, Directorate of Enforcement.
(c) According to the information and explanations given to us, an
amount of Rs. 3.93 Lakhs required to be transferred to investor
education and protection fund in accordance with the relevant
provisions of the Companies Act, 1956 (1 of 1956) and rules made
thereunder has not been transferred to such fund within time.
viii) The Company has accumulated losses amounting to Rs. 12,600 lakhs
as at March 31, 2015 which is more than 50% if its Net worth. The
Company has also incurred cash losses of Rs. 3,733.89 lakhs in the
current financial year ended on that date and incurred cash loss of Rs.
16,142.52 lakhs in the immediate preceeding financial year.
ix) There are defaults in repayment of dues to various financial
institutions and banks as at the balance sheet date. The amount of
defaults and the period are tabulated below
(Rs. In Lakhs)
Name of the Banks & Amount of
default Period of
financial institutions (including
Bank of India 25,555.83 From 2009 to Till
Canara Bank 8,050.43 From 2009 to Till
Industrial Development Bank of India 4,871.58 From 2009 to Till
State Bank of Mysore 4,186.97 From 2009 to Till
Bank of India 5,994.76 From 2009 to Till
State Bank of Travancore 5,466.33 From 2009 to Till
Jammu and Kashmir Bank Limited 1,951.06 From July 2013 to
x) In our opinion and according to the information and the explanations
given to us, the Company has not given any guarantee for loans taken by
others from banks or financial institutions.
xi) Based on information and explanations given to us by the
management, term loans were applied for the purpose for which the loans
xii) During the course of our examination of the books of accounts
carried on in accordance with the generally accepted auditing practices
in India and according to the information and explanations given to us,
we have neither come across any instance of fraud on or by the company,
noticed or reported during the year nor have been informed of such case
by the management.
For S.JANARDHAN & ASSOCIATES
Firm Registration No. 005310S
Bengaluru Vijay Bhatia
May 29, 2015 Partner