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Modern Dairies | Auditor's Report > Food Processing > Auditor's Report from Modern Dairies - BSE: 519287, NSE: N.A
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Modern Dairies

BSE: 519287|ISIN: INE617B01011|SECTOR: Food Processing
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Mar 14
Auditor's Report (Modern Dairies) Year End : Mar '15
1.  We have audited the accompanying financial statements of Modern
 Dairies 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.
 
 Management''s Responsibility for the Financial Statements
 
 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 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 (as amended). This responsibility also
 includes maintenance of adequate accounting records in accordance with
 the provisions of the Act; safeguarding the assets of the Company;
 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
 
 3.  Our responsibility is to express an opinion on these financial
 statements based on our audit.
 
 4.  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.
 
 5.  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.
 
 6.  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 controls 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 controls 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.
 
 7.  We believe that the audit evidence we have obtained is sufficient
 and appropriate to provide a basis for our audit opinion on the
 financial statements.
 
 Opinion
 
 8.  In our opinion and to the best of our information and according to
 the explanations given to us, 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, its loss and its cash fows for the year ended on
 that date.
 
 Emphasis of Matter
 
 9.  W e draw attention to Note xxix (b) and xxx to the accompanying
 financial statements, which describes the uncertainty related to the
 outcome of the pending litigation in connection with the levy of Milk
 Cess and interest thereon under the provisions of ''The Haryana Murrah
 Buffalo and Other Milch Animal Breed (Preservation and Development of
 Animal Husbandry and Dairy Development Sector) Act, 2001, and indicates
 that as at 31st March, 2015 the net worth of the Company is fully
 eroded. These conditions, along with other matters as set forth in Note
 xxIx (b) and xxx, indicate the existence of a material uncertainty that
 may cast significant doubt about the Company''s ability to continue as a
 going concern. Our opinion is not qualified is respect of this matter.
 
 Report on Other Legal and Regulatory Requirements
 
 10. As required by the Companies (Auditor''s Report) Order, 2015 (the
 Order) issued by the Central Government of India in terms of Section
 143(11) of the Act, we give in the Annexure a statement on the matters
 specified in paragraphs 3 and 4 of the Order.
 
 11. As required by Section143(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 books;
 
 c.  the financial statements dealt with by this report are in agreement
 with the books of account;
 
 d.  in our opinion, the aforesaid financial statements comply with the
 Accounting Standards specified under Section 133 of the Act, read with
 Rule 7 of the Companies (Accounts) Rules, 2014 (as amended);
 
 e.  on the basis of the written representations received from the
 directors as on 31st March, 2015 and 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 Section164(2) of the
 Act;
 
 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:
 
 i. as detailed in Note xxIx (a), xxIx (b) and xxIx (c) to the financial
 statements, the Company has disclosed the impact of pending litigations
 on its financial position;
 
 ii. 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.
 
 Annexure to the Independent Auditor''s Report of even date to the
 members of Modern Dairies Limited, on the financial statements for the
 year ended 31st March, 2015
 
 Based on the audit procedures performed for the purpose of reporting a
 true and fair view on the financial statements of the Company and taking
 into consideration the information and explanations given to us and the
 books of account and other records examined by us in the normal course
 of audit, 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 program of physical verification of its
 fixed assets under which fixed assets are verified in a phased manner 
 over a period of three years, which, in our opinion, is reasonable having
 regard to the size of the Company and the nature of its assets. No
 material discrepancies were noticed on such verification.
 
 (ii) (a) The management has conducted physical verification of inventory
 at reasonable intervals during the year, except for goods-in-transit and
 stocks lying with third parties. For stocks lying with third parties at
 the year-end, written confirmations have been obtained by the
 management.
 
 (b) 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.
 
 (c) The Company is maintaining proper records of inventory and no
 material discrepancies between physical inventory and book records were
 noticed on physical verification.
 
 (iii) The Company has not granted any loan, secured or unsecured to
 companies, firms or other parties covered in the register maintained
 under Section 189 of the Act. Accordingly, the provisions of clauses
 3(iii)
 
 (a) and 3(iii)(b) of the Order are not applicable.
 
 (iv) In our opinion, there is an adequate internal control system
 commensurate with the size of the Company and the nature of its
 business for the purchase of inventory and fxed assets and for the sale
 of goods and services. During the course of our audit, no major
 weakness has been noticed in the internal control system in respect of
 these areas.  (v) The Company has not accepted any deposits within the
 meaning of Sections 73 to 76 of the Act and the Companies (Acceptance
 of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of
 clause 3(v) of the Order are not applicable.  (vi) We have broadly
 reviewed the books of account maintained by the Company pursuant to the
 Rules made by the Central Government for the maintenance of cost
 records under sub-section (1) of Section 148 of the Act in respect of
 Company''s products/services and are of the opinion that, prima facie,
 the prescribed accounts and records have been made and maintained.
 However, we have not made a detailed examination of the cost records
 with a view to determine whether they are accurate or complete.  (vii)
 (a) Undisputed statutory dues including provident fund, employees''
 state insurance, income- tax, sales-tax, wealth tax, service tax, duty
 of customs, duty of excise, value added tax, cess and other material
 statutory dues, as applicable, have generally been regularly deposited
 with the appropriate authorities, though there has been a slight delay
 in a few cases.  Further, no undisputed amounts payable in respect
 thereof were outstanding at the year-end for a period of more than six
 months from the date they became payable.
 
 (b) The dues outstanding in respect of income-tax, sales-tax, wealth
 tax, service tax, duty of customs, duty of excise, value added tax and
 cess on account of any dispute, are as follows:
 
 Name of the                    Nature        Amount    Amount 
 statute                        of            A in      Paid
                                dues          lacs      Under
                                                        Protest 
                                                        (A in lacs)
 
 The Haryana                    Milk cess   15,02.99     5,91.00
 Murrah
 Buffalo and
 Other Milch
 Animal Breed
 (Preservation
 and
 Development
 of Animal
 Husbandry
 and Dairy
 Development
 Sector) Act,
 2001
 
 The Haryana                    Interest on 14,95.87           -
 Murrah milk cess
 Buffalo and
 Other Milch
 Animal Breed
 (Preservation
 and
 Development
 of Animal
 Husbandry
 and Dairy
 Development
 Sector) Act,
 2001
 
 Central                        CENVAT        82.40        82.40
 Excise Tax,                    credit,
 1944                           interest
 
 Central                        CENVAT      1,78.85        15.00
 Excise Tax,                    credit,
 1944                           interest
 
 Customs Act,                   Penalty and   10.60        10.60 
 1962                           redemption
                                fine
 
 Haryana Tax                    Entry tax   1,16.50            -
 on Entry of 
 Goods into 
 Local Areas 
 Act, 2003
 
 Income Tax                     Income tax    11.41         6.06
 Act, 1961
 
 Name of the                    Period to     Forum where
 statute                        which the     dispute is
                                amount        pending
                                relates
 
 The Hariyana Murrah            2001-02 to    Hon''ble
 Buffalo and Other              2014-15       Supreme Court 
 Milch Animal Breed                           of India
 (Preservation and
 Development of
 Amimal Husbandry
 and Dairy Development
 Sector)Act,2001
 
 The Hariyana Murrah            2001-02 to    Hon''ble
 Buffalo and Other              2014-15       Supreme Court 
 Milch Animal Breed                           of India
 (Preservation and
 Development of
 Animal Husbandry
 and Dairy Development
 Sector)Act 2001
 
 Central Excise Tax             2005-06       Custom Excise
 1944                                         and Service
                                              Tax Appellate
                                              Tribunal, New
                                              Delhi
 
 Central Excise Tax             2007-08 to    Custom Excise 
                                2009-10       and Service 
                                              Tax Appellate 
                                              Tribunal,
                                              New Delhi
 
 Customs Act,1962               2011-12       Custom Excise
                                              and Service
                                              Tax Appellate
                                              Tribunal, New
                                              Delhi
 
 Haryana Tax on Entry           2007-08 to    Hon''ble
 of Goods into Local            2014-15       Supreme Court 
 Areas Act,2003                               of India
 
 Income Tax Act,1961            AY 2006-07,   Income Tax 
                                2008-09       Appellant
                                and           Tribunal, New
                                2009-10       Delhi and
                                              Commissioner
                                              of Income Tax
                                              (CIT), Gurgaon
 
 (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 Companies Act, 1956 (1 of 1956) and
 rules made there under. Accordingly, the provisions of clause 3(vii)
 (c) of the Order are not applicable.
 
 (viii) In our opinion, the Company''s accumulated losses at the end of
 the financial year are more than fifty percent of its net worth. The
 company has incurred cash losses in the current financial year; however,
 in the immediately preceding financial year the company had not incurred
 cash losses.
 
 (ix) There are no dues payable to financial institutions or
 debenture-holders. During the year ended 31st March, 2015, the Company
 has defaulted on timely repayment of principal and payment of interest
 on term loans and corporate loans to banks. The delay with respect to
 interest and principal on term loans, upto 30 days amounted to M
 95,09,695 and M 26,00,000, respectively; the delay between 31 to 90
 days amounted to M 1,16,15,089 and M 1,12,99,614 respectively. The
 delay with respect to interest and principal on corporate loans, upto
 30 days amounted to M 56,04,090 and Nil, respectively; the delay
 between 31 to 90 days amounted to M 27,61,592 and M 44,77,073
 respectively.
 
 Apart from above, as at the year end, the interest outstanding on term
 loans amounting to M 97,96,745 and on corporate loans amounted to M
 36,70,170 has not been paid till 31st March 2015. As at the balance
 sheet date, the periods of delay in these cases were upto 60 days.
 
 (x) The Company has not given any guarantees for loans taken by others
 from banks or financial institutions.  Accordingly, the provisions of
 clause 3(x) of the Order are not applicable.
 
 (xi) In our opinion, the Company has applied the term loans for the
 purpose for which these loans were obtained.
 
 (xii) According to the information & explanations given to us, no fraud
 on or by the Company has been noticed or reported during the period
 covered by our audit except for an instance as detailed in note xxxVII
 to the financial statements, identified by the management, wherein an
 employee of the Company was found to be involved in preparing
 inappropriate report on the quality test carried out by him on raw milk
 purchased from a vendor. The management is in the process of
 quantifying its impact, however, as per the information and
 explanations given to us, such amount is not expected to be material.
 Further, the management has fled a first information report with Police
 department against the employee and the vendor, has terminated the
 services of such employee, discontinued business with such vendor and
 is in the process of taking necessary steps for ensuring appropriate
 recoveries.
 
                                       For Walker Chandiok & Co LLP
 
                                   (Formerly Walker, Chandiok & Co)
 
                                              Chartered Accountants
 
                           Firm''s Registration No.: 001076N/N500013
 
                                                  per Sumit Mahajan 
 Place : Chandigarh Partner
 
 Date  : 29th May, 2015                              M. No.: 504822
Source : Dion Global Solutions Limited
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