THE STATE TRADING CORPORATION OF INDIA LIMITED
ANNUAL REPORT 2011-2012
THE MEMBERS OF
THE STATE TRADING CORPORATION OF INDIA LTD.
1. We have audited the attached Balance Sheet of THE STATE TRADING
CORPORATION OF INDIA LIMITED as at 31st March, 2012, the Statement of
Profit and Loss and the Cash Flow Statement for the year ended on that
date, annexed thereto in which are incorporated the accounts of the
corporate office audited by us and the accounts of 7 independent branches
audited by the other Auditors. These financial statements are the
responsibility of the Company`s management. Our responsibility is to
express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing standards
generally accepted in India. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
3. As required by the Companies (Auditors` Report) Order, 2003 as amended
by Companies (Auditors` Report) (Amendment) Order, 2004 issued by the
Central Government of India in terms of sub-section (4A) of Section 227 of
the Companies Act, 1956, we enclose in the Annexure hereto, a statement on
the matters specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure to in paragraph 3 above, we
report as follows:
a) Reference is invited to note no.18.2, relating to contracts of scraps,
where transactions of purchases and sales and recoveries had not taken
place in terms of contracts on behalf of Metro Machinery Traders, New Delhi
(the business associates). The company has alleged fraud by the business
associates and matter has been referred to CBI. It was informed that two
ex-Directors and a General Manager have been charge sheeted by the
Vigilance Department and files are in the custody of Ministry/Corporation
which are of confidential in nature. Thus, in absence of details of the
charge sheets and the inquiries, we are unable to opine if there was a
fraud or a suspected management fraud and comment on any misstatements made
in these accounts in respect of the above transactions. Pending out come of
legal steps initiated for recovery/CBI probe, full provision of Rs.87.39
Crore was made in earlier year. However, the company is successful in
getting Arbitration Award of Rs.110.00 Crore in its favour along with 12%
interest per annum from 1st May 2006 till realization of award.
b) Reference is invited to note no.18.3, relating to Wheat transactions
undertaken on behalf of Business associates, disposal of goods and recovery
had not taken place as per contract due to quality problems and there was
stock of wheat and unrecovered amounts outstanding from the business
associates and suppliers. Also case of theft and misappropriation of
uplifted stocks exported to Bangladesh have come to notice for which legal
action has been initiated. Entire dues including recoverable from FCI
aggregating to Rs.58.41 Crore has been provided/written off. Further as the
matter is not yet resolved, additional amount of Central Sales tax
liability for non-export of 30392.010 MT of wheat procured from FCI is not
ascertainable. The impact on profit & loss account thus is not known.
c) Reference is invited to note no.19.4, amounting to Rs.3.20 Crore
recoverable from one of the associates towards import of pet bottle
material, which are pledged with the Company. Though the company is
confident of full recovery and no provision has been considered necessary,
final disposal of pledged stocks may have financial impact which can not be
ascertainable at this stage.
d) Reference is invited to note no.22.2, relating to Rs.121.99 Crore due
from Jhagadia Copper Limited, the Company under liquidation and in the
process of reconstruction by Asset Reconstruction Company (India) Limited.
Financial impact of the same cannot be ascertained at this stage.
e) Reference is invited to note no. 22.3 & 24.3, relating to Sundry Debtor
of Rs.1300.15 Crore due from Global Steel Philipines Inc. who have stopped
operation of their plant due to extreme volatility of prices and loan and
advances of Rs.174.35 Crore from Ispat Industries Limited. The liability in
respect of balance amount paybale by Ispat Industries Limited to STC has
been taken over by Global Steel Holding Limited. Accordingly the amount
recoverable was included in Conciliation Agreement signed by GSHL/GSPI with
STC. Consequent upon Conciliation Award dated 15.11.2011 and further
settlement agreement dated 17.05.2012 the entire dues are payable to STC by
10.11.2012. Pending final realization, impact on Financial Statements can
not be ascertained at this stage.
f) Reference is invited to note no.22.4, relating to unsecured overdue of
Rs.395.49 Crore against export affected under the EXIM bank Insurance
linked post shipment credit facility, company is confident of full recovery
of amount due to them. However a provision of Rs.38.45 Crore being amount
paid to EXIM Bank during the year and not supported with equivalent
recoveries from the associates has been made during the year.
g) Reference is invited to note no.25.1, regarding claims recoverable
amounting to Rs.158.93 Crore towards the imports of pulses under Government
account since the year 2006-07 onwards. The claim for the same has been
lodged with Government which is under active consideration of Government
for re-imbursement of actual loss as informed by Ministry of Consumer
Affairs. Final settlement of the claim may impact financial statements,
which at this stage can not be ascertained.
h) Note No. 47 and 48 relating to pending reconciliation/confirmation of
balances in parties accounts and current liabilities and consequential
adjustment that may arise on reconciliation.
5) We further 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
except for information pertaining to charges levied on two ex-Directors and
a General Manager and details of inquiries in respect of transaction
referred to in Para 4(a) above, and further except as otherwise stated in
the report, and the record of the cases being handled by the vigilance
department of the company and the accounting of the consequential financial
effect thereof on the matters under its security in such cases.
b) In our opinion, proper books of accounts as required by law have been
kept by the Company so far as appears from our examination of such books
and proper returns adequate for the purpose of our audit have been received
from the branches not audited by us. Reports of the Branch auditors and
management replies to the observations of the Branch Auditors have been
considered while preparing our report.
c) The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement
referred to in this report are in agreement with the books of accounts;
d) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash
Flow Statement dealt with by this report comply with the Accounting
Standards referred to in sub-section (3C) of section 211 of the Companies
e) In terms of Notification No. GSR 829(E) dated 21.10.2003 issued by the
Department of the Company Affairs, Government of India, the provisions of
Section 274(1)(g) of the Companies Act,1956, are not applicable to the
f) In our opinion and to the best of our information and according to the
explanations given to us, the said accounts, subject to our observations in
Paragraph 4 (a) to (h) above, provisions and write offs in respect of which
have been made in the accounts based on the existing and known
circumstances as reported in the said paragraphs and read together with
Significant Accounting Policies and Notes to the financial statements and
other Notes, give the information required by the Companies Act, 1956, in
the manner so required and also give a true and fair view in conformity
with accounting principles generally accepted in India:
(a) In the case of Balance Sheet, of the state of affairs of the Company
as at 31st March, 2012;
b) In the case of Statement of Profit and Loss, of the profit for the year
ended on that date; and
c) In the case of Cash Flow Statement, of the cash flows for the year ended
on that date.
For Chandiok & Guliani
Place: New Delhi
Date : 30.05.2012
ANNEXURE TO AUDITORS` REPORT
(Annexure referred to in Paragraph 3 of our report of even date on the
financial statements for the financial year ended 31st March, 2012 of the
State Trading Corporation of India Ltd.)
1. In respect of its fixed assets:
a) The Company has maintained proper records showing full particulars
including quantitative details and situation of fixed assets except at
Ahmedabad Branch where Fixed Asset Register was not updated.
b) The fixed assets were physically verified by the management during the
year. We have been informed that no material discrepancies were noticed on
such physical verification.
c) In our opinion, substantial part of the fixed assets has not been
disposed off during the year and going concern status of the company is not
2. In respect of its inventories:
a) As explained to us, verification of inventories undertaken by the
company through surveyor from time to time. In respect of the goods in the
custody of third parties, certificate is obtained from the Clearing &
Handling Agents or the warehousing corporation or from the related parties.
In our opinion, the verification of goods like coal, wheat, etc is not by
actual weighment, but by actual receipt and dispatch without accounting for
handling losses. In respect of stock of Wheat 1925.78 MTs at Kandla Port
lying since the year 2004-05 as there was no confirmation of the Quality
and quantity is available the value of the same is being taken as NIL.
b) In our Opinion, though the procedures for physical verification is in
place and instruction & guidelines are issued from time to time for
verification of stock/inventories but the same is not being followed
strictly for all materials which are handled by and are in custody of third
c) The company is not maintaining any separate stock register. However,
transaction-wise stock details are compiled for control over the stock and
necessary details are obtained from the custodian of stock viz., Port
Authorities, Warehouse or Business Associates. Discrepancies, wherever
noticed on verification have been properly dealt with, except in case of
stock of wheat at Kandla as mentioned in Para 2(a) above in our report.
3. In respect of Loans availed/granted:
(a) As informed, the Company has not granted any loans, secured or
unsecured, from Companies, firms and other parties, covered in the register
maintained under section 301 of the Companies Act, 1956. Accordingly,
clauses (iii) (b), (iii) (c) and (iii) (d) of paragraph 4 of the order are
not applicable to the company. (e) As informed, the Company has not taken
any loans, secured or unsecured from companies, firms or other Parties
covered in register maintained under section 301 of the Companies Act,
1956. Accordingly, clauses (iii) (f), and (iii) (g) of paragraph 4 of the
order are not applicable to the company.
4. 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 purchases
of inventory, fixed assets and also the sale of goods. Further on the basis
of our examination and according to the information and explanation given
to us, we have not observed any instance of continuous failure to correct
major weaknesses in internal control procedures. However, internal control
procedure regarding review, realization of advances and other claims and
reconciliation of balances of sundry debtors and creditors require
5. In respect of contracts/arrangements under Section 301 of the Companies
(a) According to the information and explanations provided by the
management, we are of the opinion that there are no particulars of
contracts or arrangements that need to be entered in the register
maintained under section 301 of the Companies Act, 1956.
(b) There was no transaction hence clause 5 (b) of paragraph 4 of the order
is not applicable.
6. In our opinion and as per the explanation provided to us, the provisions
of Section 58A & 58AA of the Companies Act, 1956 and the rules framed there
under are not applicable, as the Company has not accepted any deposit from
7. The internal audit is conducted by outside firms of Chartered
Accountants and in our opinion is commensurate with the size and nature of
8. As informed by the management, the Central Government has not prescribed
maintenance of cost records under section 209 (1) (d) of the Companies Act,
1956 for any of its product of the company.
9. In respect of statutory dues:
(a) According to the records of the Company, undisputed statutory dues
including provident fund, investor education and protection fund, Employee
State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom
duty, Excise duty, Cess and other statutory dues have been generally
regularly deposited with the appropriate authorities. There were no
undisputed amounts payables in respect of the aforesaid dues were
outstanding as at March 31, 2012 for a period of over 6 Months from the
date they became payable.
(b) Disputed Statutory dues are aggregating to Rs.16.01 Crore on account of
Income Tax and Rs.441.21 Crore on account of Sales Tax. The details are as
Amount Period to which
Name of the Nature of the [in Rs. the amount relates
Statute Dues Crore]
DELHI HIGH COURT INCOME TAX 0.09 1981-82
DELHI HIGH COURT INCOME TAX 0.30 1983-84
ITAT, DELHI INCOME TAX 0.30 2001-02
CIT(A), NEW DELHI INCOME TAX 15.32 2009-10
Amount Period to which the
FORUM Nature of the Dues [in Rs. amount relates
MADRAS HIGH COURT Sales Tax 0.84 1974-75 to 1989-90
(Chennai Branch) Sales Tax 0.01 1987-88
TAX TRIBUNAL Sales Tax 14.02 1992-93 to 2000-01
OF SALES TAX
(Maharashtra) Sales Tax 423.24 1990-91 to 2004-05
(Kolkata) Sales Tax 0.02 1981-82
ODISHA HIGH COURT Central Sales Tax 0.07 1981-82
PENDING WITH SOD
& BOARD (Kolkata) Sales Tax 0.01 1983-84
TAXES APPELLATE Sales Tax 0.07 1985-86
BST ORDER NOT
(Kolkata) Sales Tax 0.01 1988-89
PENDING IN APPEAL
88-89 (Kolkata) Sales Tax 0.02 1988-89
HIGH COURT Central Sales Tax 0.01 1993-94 to 1995-96
JOINT COMMISIONER Central Sales Tax 0.22 2003-04
(PENDING IN APPEAL (West Bengal)
to set aside order Sales Tax 0.34 2007-08
PENDING WITH FIRST
DELHI Sales Tax 2.33 2008-09
10. The Company does not have accumulated losses at the end of the
financial year. The Company has not incurred any cash losses in the current
financial year and in the immediately preceding financial year.
11. Based on our audit procedure and the information and explanations given
by the management, the company has not defaulted in repayment of dues to
any Financial Institution or Banks or Debenture holders.
12. According to the information and explanations given to us, the Company
has not granted any loans and advances on the basis of security by way of
pledge of shares, debentures and other securities.
13. In our Opinion, the Company is not a Chit Fund company or a
Nidhi/Mutual benefit fund/society. Therefore, the provisions of clause 13
of paragraph 4 of the order are not applicable to the Company.
14. The company is not dealing in or trading in securities, debentures and
other investments and therefore clause regarding of maintaining proper
records of transactions in respect of trading and timely entries is not
applicable. All shares have been held by the company in its own name.
15. In our opinion and according to the information and explanations given
to us, the Company has not given any guarantees for loans taken by others
from banks or Financial Institutions.
16. The Company has not raised any new term loans during the year.
17. According to information and explanations given to us and on an 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.
18. The company has not made preferential allotment of shares during the
year, to parties and companies covered in the register maintained under
section 301 of the Companies Act 1956.
19. The Company has not issued any debentures during the year.
20. The Company has not raised any money by way of public issue during the
21. Based upon the audit procedures performed and the information and
explanations given by the management, we report that no material fraud on
or by the company has been noticed or reported during the course of our
audit except a case of theft/ misappropriation/ fraud of pledged stock of
pulses amounting to Rs.36.01 Crore by one of its associates at one of the
branch of STC and net dues from associates of Rs.33.67 Crore has been fully
written - off during the year. (Refer Note No.22.5)
For Chandiok & Guliani
FRN. No. 001199N
M. No. 080847
Place: New Delhi
Date : 30.05.2012