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INDEPENDENT AUDITORS' REPORT
THE MEMBERS OF
NATIONAL ALUMINIUM COMPANY LIMITED,
Report on the Financial Statements
We have audited the accompanying financial statements of National Aluminium Company Limited, ("the Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit & Loss and the 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
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. 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 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.
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 there under.
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 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. 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.
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, and its profit/loss and its 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, 2015 ("the Order") issued by the Central Government of India in terms of sub–section 11 of section 143 of the Act, we give in the 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 Companies Act'2013 under Section 143(5), we give in the Annexure–II a statement on the matters directed by C&AG.
3. As required by Section 143 (3) of the Act, we report, to the extent applicable, 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 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, 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.
(e) On the basis of the written representations received from the management, 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 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. The Company has disclosed the impact of pending litigations on its financial position in its financial statements – Refer Note 20 to the financial statements;
ii. The Company did not have any long–term contracts including derivative contracts for which there were any material foreseeable losses;
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
ANNEXURE – I TO THE INDEPENDENT AUDITORS' REPORT (Referred to in paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our Report of even date)
i) In respect of Fixed Assets:
(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets:
(b) All the movable assets have been physically verified by a Firm of Chartered Accountants during the year. No material discrepancies were noticed on such verification;
Non–movable assets have been physically verified by the Management at an interval of three years, which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets; As informed to us, no material discrepancies between book records and physical assets have been noticed;
ii) In respect of Inventories:
(a) As explained to us, all inventories, except stocks relating to expansion project, stocks lying with third parties and stocks in–transit have been physically verified by a Firm of Chartered Accountants at reasonable intervals during the year;
(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed are reasonable and adequate in relation to the size of the Company and the nature of its business;
(c ) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of inventory. The discrepancies noticed on physical verification between physical stocks and book records relating to shortage have been dealt in the books of Accounts while excess have been ignored;
iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to Companies, firms or other parties listed in the register maintained under Section 189 of the Companies Act, 2013. Consequently, clauses (iii) (a) & (b) of paragraph 3 of the Order are not applicable;
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, for the purchase of inventory, fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system;
v) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public.
vi) We have broadly reviewed the books of account maintained by the Company, as specified by the Central Government for the maintenance of cost records under Section 148 (1) of the Companies Act, 2013 in respect of manufacturing activities and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determine whether they are accurate and complete;
vii) (a) According to the information and explanations given to us and on the basis of our examination of the records in our
opinion, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, VAT, Cess, Electricity Duty and any other material statutory dues with the appropriate authorities;
According to the information and explanations given to us, no undisputed amounts are payable in respect of Provident Fund, Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, VAT, Cess, Electricity Duty and any other material statutory dues as at 31st March, 2015 for a period of more than six months from the date they became payable;
(c) According to the information and explanations given to us, the amounts which were required to be transferred to the Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act and rules there under has been transferred to such fund within time;
viii) The Company does not have accumulated losses at the end of the financial year. The Company has not incurred cash losses during the financial year and in the immediately preceding financial year;
ix) The company does not have any outstanding dues to any Financial Institution, banks or debenture holders during the year;
x) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions;
xi) According to the information and explanations given to us, the Company has not raised any term loan during the year;
xii) As intimated by the management there was no noticeable fraud on or by the Company has been reported during the year.
ANNEXURE – II TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 2 under the heading of "Report on Other Legal and Regulatory
Requirements" of our Report of even date)
1. If the Company has been selected for disinvestment, a complete status report in terms of valuation of Assets (including intangible assets and land) and Liabilities (including Committed & General Reserve) may be examined including the mode and present stage of disinvestment process.
As informed to us, the Company has received a letter from Department of Disinvestment dated 25.02.2015 addressed to the legal firm M/s. Crawford Bayley & Co. about their appointment as Legal Advisor for disinvestment of 10% paid up equity of Nalco. However, the Company does not have any further information regarding valuation, mode and the timeline of such disinvestment process.
2. Please report whether there are any cases of waiver/write off of debts/loan/interest etc., if yes, the reason there for and the amount involved.
As informed by the management and based on records examined, there are ten (10) cases of write off of Trade Receivables total amounting to Rs. 1.84 Crores.These are old cases of debtors against sale of Aluminium metal outstanding prior to 1993–94. Even though the company has got the decrees from the courts/ award by arbitrators, execution of the decree could not be materialized due to non existence of said debtors. The Board in 278th meeting held on 12.11.2014 has approved the proposal for write off of these bad debts.
3. Whether proper records are maintained for inventories lying with third parties & assets received as gift from Government or other authorities.
As informed by the management and based on records examined, proper records are maintained for the inventories lying with third parties.
As informed by the management and based on records examined, the Company has not received any gift from Govt. or Other authorities.
4. A report on age wise analysis of pending legal/ arbitration cases including the reason of pendency and existence/ effectiveness of a monitoring mechanism for expenditure on all legal cases (foreign & local) may be given .
As informed by the management and based on records examined, the company has 86 nos of pending legal/arbitration cases against the Company pending in various courts/ arbitration (except disputes related to Govt. demands and statutory dues) amounting to Rs. 154.58 Crore. Out of these, there are 23 cases above Rs. 50.00 lakhs amounting to Rs. 146.72 crore. (A statement of major legal/ arbitration cases above Rs. 50.00 lakhs against the Company with age wise analysis and pending in various courts/ arbitration is provided at Appendix–A)
These cases pending with courts/ arbitration have arisen in the ordinary course of business. Based on our examination and as reported by Company's management, it is reasonably estimated that these legal actions when ultimately concluded and determined will not have material adverse effect on the company's results of operation or financial condition.
In the matter of existence/effectiveness of a monitoring mechanism for expenditure on all legal cases (foreign and local) in the company, as informed by the management and on the basis of record examined by us the legal department headed by Executive Director–Company Secretary is regularly monitoring all those pending cases. In general the company fixes rate contracts with advocates for appearance and filling of regular cases. Wherever there is no rate contract, expenditure is incurred with approval of the competent authority on case to case basis. During the year the company has spent Rs. 3.72 crore on various legal matters including tax and allied appearance.
For Agasti & Associates
Firm Registration No. 313043E
CA. Raj Kumar Agasti
Membership No. 304920
For ABP & Associates
Firm Registration No. 315104E
CA. Bimal K. Chanduka
Membership No. 053714
Place : New Delhi
Dated : 30th May, 2015