We have audited the accompanying financial statements of Dredging
Corporation of India Limited (''the Company'') which comprise the Balance
Sheet as at March 31, 2015, the Statement of Profit and Loss and the
Cash Flow statement for the year then ended and a summary of
significant accounting policies and other explanatory information.
2. Management''s Responsibility for the 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 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 specified under
the 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
the appropriate accounting policies; making judgments and estimates
that are reasonable and prudent; design implementation and maintenance
of adequate internal financial controls that were operating effectively
for ensuring the accuracy and completeness of the accenting 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. 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
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 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 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 the accounting policies used and the reasonableness
of the accounting estimates made by 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
I. Basis for Qualified Opinion:
The Company had not complied with the provisions of Section 135, 149
(1),149(4) 177 and 178 of the Companies Act, 2013. At this stage, we
are unable to comment on the consequential impact of non-compliance of
these provisions, if any.
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
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 and its
cash flows for the year ended on that date.
EMPHASIS OF MATTERS:
We draw attention to the following matters in the Notes to the
a) We draw attention to the Note No. VI of the financial statements,
where in the Company has made investments in Equity shares amounting to
Rs.3,000 lakhs in Sethusamudram Corporation Limited (SCL), a special
purpose vehicle was incorporated on 06.1.2004 for developing the
Sethusamudram Channel Project. The dredging work at Palk Strait was
suspended from 16- 07-2009. The management does not consider any
diminution in the value of the investment and the same has been carried
at cost. With regard to the previous statutory auditors qualification
in this respect on the accounts for the financial year 2012-13,
National Stock Exchange of India Ltd. (NSE) vide its letter No.
NSE/LIST/8500 dated 26/12/2014 advised the Company to restate the
financial statements for FY 2012-13. In response Company has filed
review petition dated 21/01/ 2015 to the NSE to review its decision.
We were informed that, SEBI has given personal hearing on the review
petition filed by the DCI and decision from the SEBI is awaited, hence
the provision for diminution on investment is not made.
b) Trade Receivables includes, Rs.11,433.18 lakhs receivable from M/s.
Sethusamudram Corporation Ltd. (SCL) which is pending for more than 3
years. Out of the above, Company has provided for doubtful debts to the
extent of Rs.3019.27 lakhs. The Company is of the view that an amount of
Rs.30897.00 lakhs will be reimbursed by GOI (at whose behest the contract
with SCL was entered) to DCI to compensate the actual expenditure
incurred on this project. In view of this, a provision for doubtful
debts is not made in respect of receivables in this regard amounting to
c) DCI acquired Dredge XVIII from Mazagon Dock Limited, Mumbai (MDL) in
Jan 2011 with performance Bank Guarantee of Rs.27 cr. Since there were
major guarantee defects and MDL was failed to attend the performance
defects, BG of Rs.27 cr. has been invoked by the DCI. DCI had entered
into new agreement with L&T for Rs.30 cr. to remedy the manufacturing
defects and Rs.20 cr. has been capitalized during the current financial
d) The balance of sundry debtors, creditors, loans and advances, other
receivables and other payables being subject to confirmation and
reconciliation resulting in the balances as per books of account not
verified by us.
5. Report on Other Legal and Regulatory Requirements
i) As required by the Companies (Auditor''s Report) Order, 2015 (the
Order), issued by the Central Government in terms 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.
ii) 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
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 it 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. In our opinion, the afore said 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. On the basis of the written representation received from the
directors as on 31 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
f. 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:
* The company has disclosed the impact of pending litigations on its
financial position in its financial statements- refer note XVI 5b-5e to
the financial statements;
* The company did not have any long term contracts including derivative
contracts for which there were any material foreseeable losses.
* There are no amounts which are required to be transferred to the
Investor Education and Protection Fund by the company.
ANNEXURE TO THE AUDITORS'' REPORT
(Referred to in Paragraph 1under Report on other Legal and Regulatory
requirements section of our report of even date) (i) In respect of its
(a) The company has maintained proper records showing full particulars
including quantitative details and situation of fixed assets.
(b) The fixed assets were physically verified during the year by the
management in accordance with a regular program of verification which
in our opinion, provides for physical verification of all the fixed
assets at reasonable intervals. According to the information and
explanations given to us, no material discrepancies were noticed on
(ii) In respect of its inventory:
(a) Records evidencing the physical verification of inventories are not
provided to us, hence, we are not able to comment on physical
verification of inventories.
(iii) The company has not granted any loans, secured or unsecured to
companies, firms or other parties covered in the register maintained
u/s 189 of the Act. Accordingly, the provisions of Clause 3
(iii) of the Order are not applicable to the Company.
(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. During the course of our audit, we
have not observed any major weakness in such internal control system.
(v) The Company has not accepted any deposits from the public.
(vi) To the best of our knowledge, the Central Government has not
prescribed maintenance of the cost records under Section 148 (1) of the
Act in respect of the nature of business carried on by the Company.
(vii) According to the information and explanations given to us, in
respect of Statutory Dues,
(a) The Company has generally been regular in depositing undisputed
statutory dues including Provident Fund, Income Tax, Service Tax, Duty
of Customs,Value Added Tax, Cess and other material statutory dues
applicable to it with the appropriate authorities.
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of Provident Fund, Income Tax,
Service Tax, Duty of Customs,Value Added Tax, Cess and other material
statutory dues in arrear, as at March 31, 2015 for a period of more than
six months from the date they became payable.
(c) According to the information and explanations provided by the
management, there are dues in respect of Service Tax given below, which
have not been deposited on account of dispute :
Name of the Nature of Amount Period to which
statute dues (Rs,in lakhs) relates to
Finance Act,1994 Service Tax 728.66 2010-2011
Name of the Pending before Remarks
CESTAT, Bangalore Non-eligibility of Cenvat
Service Tax CESTAT, Bangalore Credit in respect of Dredger
CESTAT, Bangalore and spare parts but disputed
CESTAT, Bangalore by Company
CESTAT, Bangalore Penalty on account of delay in
payment of service tax but
disputed by Company
(d) We are informed that there are no amounts which are required to be
transferred to Investor Education and Protection Fund in accordance
with the relevant provisions of the Companies Act 1956. Accordingly,
the provisions of Clause 3 (vii) (c) of the Order are not applicable to
(viii) The Company has no accumulated losses at the end of the
financial year and it has not incurred cash losses in the current and
immediately preceding financial year.
(ix) In our opinion, and according to the information and explanations
given to us, the company has not defaulted in the repayment of dues to
Banks, debenture holders and financial institutions.
(x) According to the information and explanations given to us, the
company has not given guarantees for loans taken by others from Banks
and financial institutions.
(xi) In our opinion, and according to the information and explanations
given to us, no fresh term loans have been obtained by the Company,
accordingly, the provisions of Clause 3 (xi) of the Order are not
applicable to the Company.
(xii) To the best of our knowledge and according to the information and
explanations given to us, no fraud by the Company and no material fraud
on the company has been noticed or reported during the year.
For Tukaram & Co
[Firm Regn No. 004436S]
Place : Hyderabad (P.MURALI )
Date : 26.05.2015 Partner : Membership No. 221625