| Report on the Financial Statements
We have audited the accompanying financial statements of Frontline
Corporation Limited ("the Company"), which comprise the Balance Sheet
as at March 31,2014, the Statement of Profit and Loss and 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
Management is responsible for 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 Stan- dards notified under the Companies Act, 1956(the
Act) read with the General Circular 15/2013 dated 13th Septem- ber,2013
of Ministry of Corporate Affairs in respect of Section 133 of the
Companies Act,2013 and in accordance with the accounting principles
generally accepted in India. This responsibility includes the design,
implementation and maintenance of internal control 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.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Stan- dards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assur- ance about whether the financial statements are free
from material misstatements.
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 control relevant to the Company's preparation and
fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity's
internal control. An audit also includes evaluating the appro-
priateness of accounting policies used and the reasonableness of the
accounting estimates made by management, 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.
Opinion
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 confor- mity with the accounting principles
generally accepted in India:
(a) In the case of the Balance Sheet, of the state of affairs of the
Company as at March 31,2014;
(b) In the case of the Statement of Profit and Loss, of the Loss for
the year ended on that date; and
(c) In the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
Emphasis of Matter:
We draw attention to
1. Note no. 10.2 regarding properties given as collateral security to
UCO Bank to secure various credit facilities enjoyed by M/s Fairdeal
Supplies Limited (Group Company) and these properties have been
symbolically possessed by UCO Bank.
2. Note no. 10.3 regarding symbolic possession of leased property
situated at Gandhinagar taken by Punjab and Sind Bank toward recovery
of amount due.
3. Note No. 14.1 regarding physical possession of property situated at
Kolkata taken by Punjab and Sind Bank and the bank in the process of
auction of said property.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2003 ("the
Order") issued by the Central Government of India in terms of Section
227(4A) of the Act, we give in the Annexure a statement on the matters
specified in paragraphs 4 and 5 of the Order.
2. As required by Section 227(3) of the Act, we report that:
a We have 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 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 Balance Sheet, the Statement of Profit and
Loss, and the Cash Flow Statement comply with Accounting Standards
notified under the Act read with the General Circular 15/2013 dated
13th September, 2013 of the Ministry of Corporate Affairs in respect of
Section 133 of the Companies Act, 2013.
e. On the basis of the written representations received from the
directors as on March 31,2014, taken on record by the Board of
Directors, none of the directors is disqualified as on March 31,2014,
from being appointed as a director in terms of Section 274(1)(g) of the
Act.
Annexure to Independent Auditor's Report
(Referred to in paragraph 1 Under the Heading of "Report on other Legal
& Regulatory Requirements" of our report of even date)
(i) In respect of Fixed Assets:
(a) The Company is maintaining fixed assets register showing full
particulars including quantitative details and situation of its fixed
assets till 31st March 2014.
(b) Management of the company has carried physical verification of
assets during the financial year 2013-14 and no material discrepancies
were noticed on such verification.
(c) During the year, the Company has not disposed off major part of the
fixed assets hence the question of affecting the going concern status
of the Company does not arise.
(ii) In respect of Inventories:
(a) Inventories of Stock in trade have been physically verified during
the year by the management. In our opinion, the frequency of such
verification is reasonable. However the difference, if any, in actual
receipts and issues, is accounted for suitably.
(b) The procedures of physical verification of inventories followed by
the management are, in our opinion, reasonable and adequate in relation
to the size of the Company and the nature of its business.
(c) According to the records produced for our verification, there were
no material discrepancies noticed on physical verification of stocks in
terms of quantity referred to in Para (ii) (a) above as compared to
book records The shortages and excesses noticed on physical
verification as mentioned in Para (ii) (a) above are not abnormal and
material except as stated according to the nature of the business of
the company.
(iii) In respect of loans, secured or unsecured, granted or taken by
the Company to/from companies, firms or other parties covered in the
register maintained under Section 301 of the Companies Act, 1956:
(a) The Company had taken loans from Three Party. The Maximum amount
involved during the year was Rs. 82.03 Lacs and year-end balance of
loans taken from such parties was Rs. 60.21 Lacs.
(b) In our opinion, the rate of interest where ever applicable and
other terms and conditions, secured or unsecured on which loans have
been taken / given from / to such parties are not, prima facie,
prejudicial to the interest of the Company.
(c) In respect of loans taken by the Company, the principal amounts are
repayable on demand and the interest payments are regular. In respect
of loan given there is no stipulation as to the repayment and the
interest is received regularly where ever applicable.
(d) Since there is no stipulation as to repayment on loan given, the
question of over-due amounts does not arise.
(iv) In respect of Internal Controls:
In our opinion and according to the information and explanations given
to us, there are adequate internal control procedures commensurate with
the size of the Company and the nature of its business with regard to
purchase of inventory, fixed assets and with regard to the sale of
goods and services. During the course of our audit, we have not
observed any continuing failure in correcting major weakness in
internal controls systems. However the company needs to strengthen
internal controls over generation and disposal of scrap
(v) In respect of transactions covered under section 301 of the
Companies Act, 1956:
(a) According to the information and explanations given to us, we are
of the opinion that the particulars of contracts or arrangements
referred to in section 301 of the Companies Act, 1956 have been entered
in the register required to be maintained under that section. Total
income/expenses amounting to Rs. 777.35 Lac has been generated during
the year from these parties.
(b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of contracts or
arrangements entered in the register maintained under Section 301 of
the Companies Act, 1956 and exceeding the value of rupees five lacs in
respect of any party during the year have been made at prices which are
reasonable having regard to prevailing market prices at the relevant
time.
(vi) In our opinion and according to the information and explanation
provided to us during the year company has not accepted the public
deposit within the meaning of Section 58A of The Indian Companies Act,
1956.
(vii) In our opinion, the Company has an internal audit system
commensurate with the size and nature of its busi- ness.
(viii) According to the information and explanation provided to us, the
Central Government has not prescribed for the maintenance of cost
records under Section 209(1)(d) of the Companies Act, 1956 for any of
the products of the company.
(ix) In respect of statutory dues:
(a) The Company is generally regular in depositing with appropriate
authorities undisputed statutory dues including provident fund,
investor education and protection fund, income tax, sales tax, wealth
tax, customs duty, excise duty, service tax, cess and other material
statutory dues applicable to it though there was a slightly delay in
case of Service Tax, Professional Tax and Tax Deducted at Source except
service tax and tds were not deposited regularly. It is informed by the
company that the ESI is not applicable to the Com- pany. The company
has not provided and deposited vat on fixed assets sold during the
year.
(b) According to the information and explanations given to us, no
disputed amounts payable in respect of income tax, wealth tax, sales
tax, customs duty, excise duty, service tax and cess were in arrears as
at 31st March, 2014 for a period of more than six months from the date
they become payable except for the dues details given below which was
outstanding for a period of more than six months from the date they
became due for payment as at the last day of Financial Year:-
Particulars Amount
Service Tax 2,88,039/-
(c) According to the information and explanations given to us, the dues
of income tax and excise duty which have not been deposited on account
of disputes and the forum where dispute is pending are as under:
Name of Nature of Amount Period to which Forum
Where
the Statute Dues (Rs.) Amount Relates dispute
is
pending
Income Tax Act, Income Tax 10,38,853 A.Y. 2006-2007 ITAT
1961
Income Tax Act, Income Tax 5,03,879 A.Y. 2008-2009 ITAT
1961
Income Tax Act, Income Tax 42,10,480 A.Y. 2010-2011 CIT (A)
1961 (Section 156)
Guj. Value
Added Tax VAT / CST 1,12,186 F.Y. 2009-10 Commissioner
2003 of
Commercial
Tax
(x) The Company does not have accumulated losses and cash loss in the
current financial year covered by our audit however the company has
incurred cash loss of Rs. 1,97,63,119/- in immediately preceding
financial year.
(xi) The Company has defaulted in repayment of principal amounting to
Rs. 2939.85 Lacs and interest amounting to Rs 1054.06 Lacs in respect
of various loans taken from banks and financial institu- tions.
Particulars of amount and period of defaults are as under:
Lender Concerned Period of Default Amount of Default
(Rs. In Lac)
Shri Ram Finance Ltd
(Including Interest of) 48 Months 53.27
Rs 19.94 Lac
Punjab and Sind Bank
towards Principal 24months 2906.52
Punjab and Sind Bank
towards Interest 24Months 1034.12
Total 3993.91
(xii) During the year, the Company has not granted loans and advances
on the basis of security by way of pledge of shares, debentures and
other securities.
(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual
benefit fund/society. Therefore, the provisions of clause 4(xiii) of
the Companies (Auditor's Report) Order 2003, are not applicable to the
Company.
(xiv) According to the information and explanations given by the
management, the Company is not dealing in or trading in shares,
securities, debentures and other investments. However, the Company is
holding certain investments in equity shares of companies as long term
investments.
(xv) According to the information and explanation given to us, we are
of the opinion that the terms and conditions of the guarantees given by
the Company, during the year, for the loan taken by others from banks
or financial institutions are, prima facie, prejudicial to the interest
of the Company as the approval of Central government under section 295
of Companies Act, 1956 for Corporate Guarantee given to secure various
credit facilities amounting to Rs. 318 Crore to M/s Fairdeal Supplies
Limited Group Company not obtained.
(xvi) In our opinion, the term loans have been applied for the purpose
for which they were raised.
(xvii) According to the information and explanations given to us and on
overall examination of the Balance Sheet of the Company, we report that
no funds raised on short-term basis have been used for long-term
investment except loan given to Gateway Commodities Ltd. No long-term
funds have been used to finance short-term assets.
(xviii) The Company has not made preferential allotment of shares to
parties and Companies covered in the register maintained under Section
301 of the Companies Act, 1956 during the year.
(xix) During the financial year, the Company did not issue any
debentures. Hence, the provisions of clause 4(xix) of the Companies
(Auditor's Report) Order, 2003, regarding creation of security for
debentures are not presently applicable to the Company.
(xx) The Company has not raised any money by way of public issues
during the year. Accordingly, the provisions of Clause 4(xx) of the
Companies (Auditor's Report) Order, 2003, on the end use of money are
not presently applicable to the Company.
(xxi) According to the information and explanations given to us, no
fraud on or by the Company has been noticed or reported during the
course of our Audit.
For, Paresh Thothawala & Co.
Chartered Accountants
FRN: 114777W
Paresh K. Thothawala
Partner
Ahmedabad, May 30, 2014 MembershipNo.48435
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