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Hindustan Organic Chemicals Ltd.

BSE: 500449 | NSE: HOCL | Series: NA | ISIN: INE048A01011 | SECTOR: Chemicals

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Hindustan Organic Chemicals is not traded on NSE in the last 30 days

Annual Report

For Year :
2018 2016 2015 2014 2013 2012 2011 2010 2009

Auditor's Report

We have audited the accompanying standalone financial statements of Hindustan Organic Chemicals Limited (''the Company''), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of the significant accounting policies and other explanatory information, in which are incorporated the Returns for the year ended on that date audited by the branch auditors of the Company''s Unit at Kochi. 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 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 standalone financial statements based on our audit. We have taken in to 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 thereunder. 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 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 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 on the standalone financial statements. Basis for Qualified Opinion A) No provisions have been made in the standalone financial statements for the following amounts (refer respective notes in the notes to the financial statements); i) Penal interest of Rs. 1268.87 lakhs (Previous year ended 31st March 2014: Rs. 1062.51 lakhs) on overdue loan from Government of India (note no. 5A(vi)), ii) Loss on account of misappropriation of Company''s fund amounting to Rs. 64.81 lakhs (Previous year ended 31st March 2014: Rs. 64.81 lakhs), pending final report from CBI and outcome of the civil suit (note no. 37), iii) Liability of wage revision for the period 1.1.1997 to 31.12.2000 Rs.1887.79 lakhs (Previous year ended 31st March 2014: Rs. 1887.79 lakhs) at Rasayani unit (note no. 33A), iv) Liability of wage revision for the period 1.1.2007 to 31.3.2008 Rs.161.55 lakhs (Previous year ended 31st March 2014: Rs. 161.55 lakhs) to Officers and Rs. 148.26 lakhs (Previous year ended 31st March 2014: Rs. 148.26 lakhs) to Staff at Rasayani unit (note no. 33B and 33C). The above four matters were also qualified in our report on the financial statements for the year ended 31st March, 2014. Had the effects of the items mentioned in the paragraphs A) i) to A) iv) above been considered, the loss for the year would have been higher by Rs. 3531.28 lakhs (Previous year ended 31st March 2014: Rs. 3324.92 lakhs). B) The balances of trade receivables, trade payables, loans and advances and other current assets and other debit / credit balances are pending for confirmations and reconciliation (note no. 42). The effect of the same on the loss for the year is not ascertainable. This matter was also qualified in our report on the financial statements for the year ended 31st March, 2014. Qualified Opinion In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for Qualified Opinion paragraph above, 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 loss and its cash flows for the year ended on that date. Emphasis of Matter Attention is drawn to note 47 to the standalone financial statements which states that the company has made an application for reference to Board for Industrial and Financial Reconstruction (BIFR). The net worth of the Company is fully eroded. The Company has incurred a cash loss in the current and in previous years. The Company''s current liabilities exceeds its current assets as at the balance sheet date. These conditions indicate the existence of a material uncertainty that may cast significant doubt on the Company''s ability to continue as a going concern. However, the financial statements of the Company have been prepared on a going concern basis for the reasons stated in the said note. Our opinion is not modified in respect of this matter. Other Matter We did not audit the financial statements/information of Kochi Unit included in the standalone financial statements of the Company whose financial statements / financial information reflect total assets of Rs. 78675.65 lakhs as at 31st March, 2015 and total revenues of Rs. 13880.84 lakhs for the year ended on that date, as considered in the standalone financial statements. The financial statements/ information of this unit has been audited by the branch auditors whose report has been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of this unit, is based solely on the report of such branch auditors. Our opinion is not modified in respect of this matter. Report on Other Legal and Regulatory Requirements 1. As required by the Companies (Auditor''s Report) Order, 2015 issued by the Central Government of India in terms of sub section (11) of section 143 of the Act, we give in Annexure I, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable. 2. As required by the directions and sub-directions issued by the Office of the Comptroller and Auditor General of India under Section 143(5) of the Act, we give in Annexure II, a statement on the matters referred to in those directions. 3. 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 report on the accounts of the branch office of the Company audited under section 143(8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report. d) 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. e) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards referred to in section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. f) The matters described in the Basis for Qualified Opinion paragraph above, and the going concern matter described in the Emphasis of Matter paragraph above, in our opinion, may have an adverse effect on the functioning of the Company. g) The conditions specified in section 164(2) of the Act in respect of qualifications of directors is not applicable to the Company being a government company. 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 43 to the financial statements). ii. The Kochi Unit of the Company has entered into long term supply contract with Gas Authority of India (GAIL) for supply of Liquefied Natural Gas in 2011 for a period of 15 years ending in 2026. Material foreseeable losses on this contract is not quantifiable in the current scenario. Other than this, the Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses. iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year. Annexure I to the Independent Auditor''s Report To the Members of Hindustan Organic Chemicals Limited As referred to in Paragraph 1 under ''Report on Other Legal and Regulatory Requirements'' in our Auditors'' report of even date and as required by the Companies (Auditor''s Report) Order, 2015, issued by the Central Government in terms of sub section (11) of section 143 of the Companies Act, 2013 (''the Act'') and on the basis of such checks as we considered appropriate and according to the information and explanations given to us, we further report that: - 1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets. (b) The fixed assets have been physically verified by the management at reasonable intervals except at Kochi unit where the frequency of verification needs to be improved. As explained to us, no material discrepancies were noticed on such verification. 2. (a) The inventory has been physically verified by the management at reasonable intervals during the year. (b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business, except for inventory in storage tanks at Kochi unit which does not have a system of taking dip measurements. Instead, reliance is placed on the electronic reading reported by the Distribution Control System. (c) The Company has maintained proper records of inventory. As explained to us, the discrepancies between the physical inventory and the book records noticed on physical verification were not material. 3. As explained to us, the Company has granted secured loan to its subsidiary - Hindustan Flurocarbons Ltd. and unsecured advance in the nature of loan to its joint venture subsidiary company - HOC-Chematur Ltd. covered in the register maintained under section 189 of the Act. The advance to HOC - Chematur Ltd. of Rs. 1067.46 lakhs is interest free and there is no stipulation as to the repayment of the principal. The advance has been fully provided for as it is doubtful of recovery. The loan to Hindustan Flourocarbon Ltd. is interest free to the extent of Rs.2744.06 lakhs and has varying interest rates of 10.25% to 14.5% on amount of Rs. 453.01 lakhs. Both the principal amount and interest on this loan has not been received by the Company as per stipulation. In both the above cases, besides writing follow-up letters, the Company has not taken any other steps for recovery of the dues. 4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. During the course of our audit, we have neither been informed nor have we observed any continuing failure to correct major weaknesses in internal control system. 5. The Company has not accepted any deposits from the public within the meaning of the provisions of Sections 73 to 76 or any other relevant provisions of the Act and Rules framed thereunder. 6. We have broadly reviewed the books of accounts maintained by the Company in pursuance to the rules made by the Central Government for the maintenance of cost records under sub section (1) of section 148 of the Act, for certain products of the Company and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete. 7. a) According to the information and explanations given to us by the management and on the basis of examination of the books of accounts carried out by us, the Company has been regular in depositing undisputed statutory dues including Employees'' State Insurance, Sales-tax, Wealth-Tax, Service Tax, Custom Duty, Excise Duty, Value Added Tax, Cess and other statutory dues, as applicable, with the appropriate authorities. The Company has not been regular in depositing Provident Fund dues and tax deducted at source with the appropriate authorities during the year. There were no undisputed arrears of statutory dues outstanding as at 31st March, 2015 for a period of more than six months from the date they became payable except for as stated below: Rasayani Unit : Sr. Name of Statute Nature of Dues Outstanding No. Amount (Rs. in lakhs) 1 The Employees'' Provident Funds Employees 1467.67 And Miscellaneous Provisions Provident Fund Act, 1952 contribution 2 The Employees'' Provident Funds Employees Pension 26.18 And Miscellaneous Provisions Fund contribution Act, 1952 3 MVAT Act, 2002 w.e.f 2005 Works Contract Tax 0.48 4 Income Tax Act, 1961 Tax deducted at 67.94 source 5 Gram Panchayat Gram Panchayat 42.49 Tax Total 1604.76 Kochi Unit: Sr. Name of Statute Nature of Dues Outstanding No. Amount (Rs. in lakhs) 1 The Employees'' Provident Funds Employees 221.67 And Miscellaneous Provisions Provident Fund Act, 1952 contribution 2 Income Tax Act, 1961 TDS - Salary 16.76 b) According to the information and explanations given to us by management and the records of the Company examined by us, there were no disputed dues in respect of Income-tax, Sales-tax, Wealth-tax, Service Tax, Custom Duty, Excise Duty, Value Added Tax and Cess which have not been deposited as at 31st March, 2015 other than those shown below : Rasayani Unit: Sr. Name of Statute Nature of Dues Period to No. which the dispute relates 1 Central Excise Act, Molten Sulphur Feb-97 to 1944 Classification Jun-98 2 Central Excise Act, Molten Sulphur Sept-94 to 1944 Classification Jan-97 3 Central Excise Act, Molten Sulphur 1999-00 1944 Classification 4 Central Excise Act, Shortage of 1944 Inputs 5 Central Excise Act, Shortage of 1998-01 1944 Inputs 6 Central Excise Act, Shortage of Jul-01 to 1944 Inputs Sept-02 7 Central Excise Act, ARO Case Jul-03 to 1944 (Aniline Valuation) May-06 8 Central Excise Clearance of Sept-96 to Act, 1944 SSA to fertilizer Mar-00 manufacturing units 9 Central Excise Reversal of 2006-07 Act, 1944 Cenvat Credit availed on inputs lost in flood 10 Central Excise N2O4 Jan-06 to Act, 1944 Exemptiom Feb-08 11 Central Excise Duty on Nov-98 to Act, 1944 Clearance of Dec-98 Molten Sulphur 12 Central Excise Duty on Jan-99 Act, 1944 Clearance of Molten Sulphur 13 Finance Act, 1994 Wrong credit May-07 to availed on Jul-10 Angels, bars and HR coils and plates 14 Finance Act, 1994 Cleaning, Oct-09 to gardening and Nov-11 Rent-a-cab services 15 Finance Act, 1994 Service Tax on Feb-07 to canteen services Mar-11 16 Finance Act, 1994 Capital Goods 27/11/2013 Bill of Entry to wrong address 18/12/2014 17 Finance Act, 1994 Flood Case Jan 07 18 Finance Act, 1994 Reversal Penalty Oct 13 to and Interest Mar 15 payment 19 Income Tax Act, Penalty u/s A.Y 1999- 1961 271(1)(c) 00 20 Income Tax Act, Penalty u/s A.Y 1999- 1961 271(1)(c) 00 21 Income Tax Act, Penalty u/s A.Y 2003- 1961 271(1)(c) 04 22 Income Tax Act, Penalty u/s A.Y 2004- 1961 271(1)(c) 05 Sr. Name of Statute Amount of Forum where No. Dispute dispute is pending (Rs. in lakhs) 1 Central Excise Act, 15.53 Customs, Excise and 1944 Service Tax Appellate Tribunal 2 Central Excise Act, 22.76 Customs, Excise and 1944 Service Tax Appellate Tribunal 7.62 Commissionerate 3 Central Excise Act, 1944 13.64 Commissionerate 4 Central Excise Act, 1944 18.66 High Court 5 Central Excise Act, 1944 5.85 High Court 6 Central Excise Act, 1944 19.29 Customs, Excise and 7 Central Excise Act, Service Tax Appellate 1944 Tribunal 112.78 High Court 8 Central Excise Act, 1944 18.66 Commissionerate 9 Central Excise Act, 1944 104.63 Customs, Excise and 10 Central Excise Service Tax Appellate Act, 1944 Tribunal 5.05 Deputy 11 Central Excise Commissioner Act, 1944 Central Excise 12 Central Excise 2.59 Deputy Act, 1944 Commissioner Central Excise 13 Finance Act, 1994 1.44 Assistant Commissioner Central Excise 14 Finance Act, 1994 8.88 Deputy Commissioner Central Excise 15 Finance Act, 1994 66.96 Commissioner of Central Excise, Custom and Service Tax 16 Finance Act, 1994 17.58 Commissioner of Central Excise Appeals, Mumbai - II 17 Finance Act, 1994 9.34 Appeal to be filed in CESTAT 18 Finance Act, 1994 10.95 Assistant Commissioner of Central Excise and Superintendent Service tax of central Excise Total 462.21 19 Income Tax Act, 91.07 Bombay High Court 1961 20 Income Tax Act, 57.55 Bombay High Court 1961 21 Income Tax Act, 607.25 Bombay High Court 1961 22 Income Tax Act, 63.23 Bombay High Court 1961 Total 819.10 Kochi Unit: Sr. Name of Statute Nature of Dues Period to No. which the dispute relates 1 ESI Corporation ESI contribution 1.04.92 to of employees 31.10.92 2 Finance Act 1994 Availing of 04/03 to CEVAT credit on 12/06 service tax on transportation of final products to Rasayani Depot 3 Finance Act 1994 Insurance 07/11 to renewal/Tyre 05/12 retrading charge 4 Finance Act 1994 Bus, Car 11/11 to transportation to 06/12 employees 5 Finance Act 1994 Insurance 04/11 to renewal/Tyre 03/13 retrading charge 6 Finance Act 1994 Outdoor Catering/ 04/06 to Insurance 01/13 renewal & Tyre retrading charge 7 Employees Employees 1995 to 1997 Provident Fund Family Pension Scheme- Damage for default payment 8 Central Sales Tax Trade Discount 2005-06 Act, 1956 given through credit notes disallowed- CST 9 Central Sales Tax Turnover 2005-06 Act, 1956 assessed @ 12.50% against 4%- CST 10 KVAT Act, 2003 Turnover 2005-06 assessed at higher rate and miscellaneous income assessed to tax - KVAT 11 Central Sales Tax Turnover 2005-06 Act, 1956 assessed @ 12.50% against 10%- CST 12 Central Sales Tax Levy of interest- 2005-06 Act, 1956 CST 13 KVAT Act, 2003 Levy of interest- 2005-06 KVAT 14 Central Sales Tax Trade Discount 2006-07 Act, 1956 given through credit notes disallowed- CST 15 Central Sales Tax Levy of interest- 2006-07 Act, 1956 CST 16 Central Sales Tax Trade Discount 2007-08 Act, 1956 given through credit notes disallowed- CST 17 KVAT Act, 2003 Disallowance of 2008-09 input tax credit 18 KVAT Act, 2003 Disallowance of 2009-10 input tax credit 19 KVAT Act, 2003 Input Tax Refund 2011-12 due from October, 11 to March, 12 20 Central Sales Tax Input Tax due 2012-13 Act, 1956 from April, 12 to March, 13 Sr. Name of Statute Amount of Forum where No. Dispute dispute is (Rs. in lakhs) pending 1 ESI Corporation 2.17 Employees Insurance Court (Industrial) Total 2.17 2 Finance Act 1994 39.57 CESTAT, Bangalore 3 Finance Act 1994 3.17 CESTAT, Bangalore 4 Finance Act 1994 1.10 Commissioner of Central Excise Appeals, Ernakulam 5 Finance Act 1994 10.96 Commissioner of Central Excise Appeals, Ernakulam 6 Finance Act 1994 77.06 Department filed appeal to CESTAT, Bangalore Total 131.86 7 Employees 18.05 Appeal filed Provident Fund before High Court, Kerala Total 18.05 8 Central Sales Tax 53.71 D.C (Appeals), Act, 1956 Dept. of Commercial Taxes,Ernakulam 9 Central Sales Tax 0.33 D.C (Appeals), Act, 1956 Dept. of Commercial Taxes, Ernakulam 10 KVAT Act, 2003 2.06 D.C (Appeals), Dept. of Commercial Taxes, Ernakulam 11 Central Sales Tax 0.07 D.C (Appeals), Act, 1956 Dept. of Commercial Taxes, Ernakulam 12 Central Sales Tax 155.23 Tribunal Dept. Act, 1956 of Commercial Taxes, Ernakulam 13 KVAT Act, 2003 152.63 Tribunal Dept. of Commercial Taxes, Ernakulam 14 Central Sales Tax 79.68 D.C (Appeals), Act, 1956 Dept. of Commercial Taxes, Ernakulam 15 Central Sales Tax 11.87 D.C (Appeals), Act, 1956 Dept. of Commercial Taxes, Ernakulam 16 Central Sales Tax 6.70 D.C (Appeals), Act, 1956 Dept. of Commercial Taxes, Ernakulam 17 KVAT Act, 2003 1.28 D.C (Appeals), Dept. of Commercial Taxes, Ernakulam 18 KVAT Act, 2003 0.90 D.C (Appeals), Dept. of Commercial Taxes, Ernakulam 19 KVAT Act, 2003 104.66 D.C (Appeals), Dept. of Commercial Taxes, Ernakulam 20 Central Sales Tax 73.36 D.C (Appeals), Act, 1956 Dept. of Commercial Taxes, Ernakulam Total 642.48 (c) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company in accordance with the relevant provisions of the Act and the rules made thereunder 8. The accumulated losses of the Company at the year-ended exceed its paid-up capital and reserves and its net worth is fully eroded. The Company has incurred cash losses during the year and also in the immediately preceding financial year. 9. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to banks and financial institutions and debenture holders (bond holders) during the year. 10. According to the information and explanations given to us, the Company has given guarantee of Rs. 1103 lakhs for loan taken by subsidiary - Hindustan Flurocarbons Ltd., from bank. Based on the explanations given to us, in our opinion, the terms and conditions of this guarantee are not prejudicial to the interest of the Company. 11. In our opinion, the term loans have been generally applied for the purposes for which they were obtained by the Company. However, we have noticed deviations in the amounts applied for individual purposes. 12. According to the information and explanations given to us, no material fraud on or by the Company has been noticed during the course of our audit or reported during the year. For Ford, Rhodes, Parks & Co. Chartered Accountants Firm''s Registration No. 102860W Sd/- Shrikant Prabhu Place : Mumbai Partner Date : 28th May, 2015 Membership No. 35296