AIESL
AIR INDIA ENGINEERING SERVICES LIMITED AIESL
CONTENTS
Page No.
1. Board of Directors 1
2. Chairman’s Message 2
3. Directors’ Report 4
4. Comments of the Comptroller & Auditor General of India 44
5. Independent Auditors’ Report 48
6. Balance Sheet as at 31 March 2017 64
7. Statement of Prot & Loss for the year ended 31 March 2017 65
8. Cash Flow Statement 66
9. Notes forming part of the Financial Statements for the year ended 31 March 2017 67 AIESL
BOARD OF DIRECTORS (as on 20 SEPTEMBER 2017)
Shri Rajiv Bansal Chairman
Shri Vinod Hejmadi Director
Smt. Gargi Kaul Director
Shri Satyendra Kumar Mishra Director
Chief Executive Ofcer
Shri H.R. Jagannath
Chief Financial Ofcer
Smt. C.N. Hemalatha
Company Secretary
Shri Gagan Batra
Auditors
M/s. D.B Ketkar & Co.
Chartered Accountants
Registered Ofce
Airlines House
113 Gurudwara Rakabganj Road
New Delhi 110 001
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CHAIRMAN'S SPEECH
Dear Shareholders,
It gives me great pleasure to present to you the thirteenth Annual Report of the Company for the year 2016-17.
Air India Engineering Services Ltd. is leading MRO (Maintenance, Repair and Overhaul) service provider in the country providing both Line Maintenance and Major Maintenance for various type of aircraft in AI's eet, Third party Airlines as well as to the Defense forces.
The engineering activities of Air India (AI) were hived off to the company following the implementation of a Turnaround / Financial Restructuring Plan of AI. In terms of the MoU, the parent company viz. AI transferred the movable assets (Workshop, Plant & Machinery and Tools etc.) to the company at its written down value (WDV) on the transfer date formed the equity investment made by AI. As per MoU, the Company was also expected to receive Equity from AI to the extent of Rs 375 Crs. in the rst three years of its operations in order to support its Capital acquisition program.
The MRO industry is a Capital Intensive industry with high competitive environment with low returns and there is a long payback / cost absorption period in view of the xed overheads on infrastructure facilities and high wage costs due to licensed manpower. Besides this, the Company has to depend on internally generated AI's business for substantial portion of its Revenue. However, with the expected growth in third party business and the incentives expected from GOI for the MRO industry, it is anticipated that AIESL will be operationally protable in next few years.
CIVIL AVIATION SCENARIO
The Government of India had announced National Civil Aviation Policy in June 2016 and it is expected that this would have an impact on the size and structure of India's MRO sector which is expected to be transformed signicantly, increasing the requirement of third party operators for MRO services. This is the rst time that India has a single document vision for the aviation sector as a whole including MRO sector which is a welcome development.
MRO SCENARIO
India, with its growing aircraft eet size, strategic location advantage, rich pool of engineering expertise, and lower labour costs has huge potential to be a global MRO hub.
At present, Airlines operating in India get nearly 90% of their MRO work done from abroad, mainly due to cost advantages resulting from the comparatively high tax burden in India, cumbersome operating procedures and the inadequate MRO service facilities available in India.
India's MRO market size has been estimated to be around USD 750 million. As per Boeing, the market is expected to grow at 7% CAGR to reach USD 1.2 billion by 2020. With the eet size likely to double by 2020, the need for a strong domestic MRO industry is critical. CAPA (Centre for Asia Pacic Aviation) had projected Indian MRO market to reach USD 2 billion by 2020.
PERFORMANCE OF THE COMPANY DURING THE YEAR
During 2016-17, total revenue of the Company was Rs. 740.48 crores as against total revenue of Rs. 620.27 crores during 2015-16. The total expenditure after prior period adjustments were Rs. 1245.64 crores as against Rs. 1178.89 crores during 2015-16.
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The net loss during the year ended 31 March 2017 was Rs. 505.16 Crores as against Rs. 558.62 Crores during 2015-16.
CORPORATE GOVERNANCE
The company was in compliance with the guidelines on Corporate Governance issued by Department of Public Enterprises (DPE), wherever applicable during the year. The evaluation of various parameters viz. Financial as well Technical was also done in terms of targets set in the Memorandum of Understanding entered into by the company. The aforesaid evaluation as well as report on Corporate Governance was led with the authorities concerned.
ACKNOWLEDGEMENT
I take this opportunity to thank Air India Limited, Airline Allied Services Ltd., Air India Express Limited, Ministry of Civil Aviation, Director General of Civil Aviation and vendors for their unstinted support. I also acknowledge the support extended by all other authorities including Banks and regulatory agencies. I would like to thank my colleagues on the Board for their valuable guidance.
I would like to thank all employees of the company for their support in making this Company operationalise and for their efforts and team spirit towards making the company protable in the near future.
On behalf of the Board, I seek your continued support, as always.
Sd/- (Pradeep Singh Kharola) Chairman
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VISION
To provide best in class and timely quality services to the customers by maintaining highest standards of regulatory and safety compliance.
Mission
Customer l Maintaining all aircraft of the captive work load of the eet of Air India in a continuous state of airworthiness by the system of preventive and corrective maintenance to secure a high level of safety. l Provide a “One Stop” solution to the customer. l Faster Turn Around Time. l To capture maximum Third Party work from in and around India.
Process l To get DGCA approval under CAR 147 approval. l To obtain FAA and EASA approval for all its establishment and facilities. l Aggressive Marketing policy for more and more third party work. l It needs to Department centric so, every Departmental Heads need to be responsible for the deliverables so as to fulll the overall vision. l Continuous monitoring of Quality through quality audit etc. l Constant endeavor to upgrade the services, delivering highest customer satisfaction in terms of Quality, Service and Cost effective and ensuring long term strategic relationship. l All-out effort to be the world class MRO without compromising the quality standard. l Updating and enhancing the capability through training of the personnel and equipment of latest technology. l Multiskilling of the personnel through cross training to enhance the productivity. l Optimising operational cost.
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DIRECTORS’ REPORT
The Directors have pleasure in presenting the Thirteenth Annual Report on the business and operations of the Company together with the Audited accounts, Auditors' Report and comments by the Comptroller and Auditor General of India, for the Financial Year ended March 31, 2017.
1.1. Financial summary and highlights
The Company's nancial performance is given hereunder:
(Rs. in crore)
Particulars Financial Year Financial Year ended 31.03.2016 ended 31.03.2017
Total Revenue 620.27 740.48
Total Expenses 1178.89 1245.64
Prot (Loss) before tax (558.62) (505.16)
Less Provision of Tax Nil Nil
Prot after tax (558.62) (505.16)
Balance of prot brought forward from previous year (242.67) (801.29)
Balance carried to Balance Sheet (801.29) (1306.45)
1.2. Details of revision of Financial Statements or Board's Report
The Company has not revised its Financial Statements or Board's Report in respect of any of the three preceding nancial years as mentioned in Section 131 (1) of the Companies Act, 2013.
1.3. Dividend
The directors are not recommending any dividend as the company has not earned any prots.
1.4. Transfer of unclaimed dividend to investor education and protection fund
Since there was no unpaid / unclaimed dividend for the past years, the provisions of Section 125 of the Companies Act, 2013 did not apply.
1.5. Amount which the Board proposes to carry to reserves
The Board of the company has decided/proposed to carry NIL amounts to its reserves.
1.6. State of the company's affairs:
1.6.1 The operations of the company have been divided into separate prot centers. The status of affairs at these prot centers is as given below:
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I. NAGPUR MRO:
The Time Line & Capability addition at Nagpur MRO is as given below:
1. 26th Oct. 2016 Addition of Capability:
4A-Check, Airbus A319/320/321 series tted with CFM56- B/V2500 A1 series engines, for Base & Line (Ratings A1- Aeroplanes)
2. 09th May 2017 Addition of Capability:
Upto 15000FH/10000FC/60months for B737-700/800/900 aircraft tted with CFM56 series Engines, for Base & Line (Ratings A1-Aereoplanes)
3. November 2017 Proposed Enhancement of Capability of B737 to MPD Full Task Cards.
4. January 2018 Proposed enhancement of Airbus A320 series aircraft to C- Check.
The achievement of the Nagpur MRO is highlighted below:
1 As on (12TH OCT. 2017) Certied 21 B777 aircrafts
2 As on Date Certied one A320 aircraft
3 As on Date Certied one Spice Jet B737 aircraft
4 FY 2016-2017 Earned USD 9.61 millon.
II. CHENNAI :
A) The Signicant Achievements of Chennai center during the year April, 2016 to March 2017 were as below:
1) Technical Certication provided to Client Airlines and revenue earned:
Ø Engineering Certication of Client Airlines Aircraft (A320 family A/c) of M/s Silk Air, M/s Qatar Airways, M/s Kuwait Airways, M/s Etihad Airways, M/s Air Vistara, M/s Nepal Airways and A330 A/c M/s Qatar Airways & M/s Kuwait Airways are provided at various Stations in Southern Region as given under :
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Client APRIL 2016 to MARCH 2017 (No. of Flights) Airlines MAA HYD BLR CCJ CJB COK TRV VTZ Total
Silk Air 159 135 256 – 187 74 234 147 1192
Etihad Airways 1091 942 730 – – – 668 62 3493
Qatar Airways 365 365 – 365 – – 365 – 1460
Kuwait Airways 205 21 235 – – – 288 – 749
Air Vistara – 868 1329 – – 570 26 – 2793
Nepal Airlines – – 49 – – – – – 49
Air Asia — – – – – – – 86 86
TOTAL 1820 2331 2599 365 187 644 1581 295 9736
Note : @ INR 66 per USD is considered for revenue calculations.
Ø At the above stations, company has provided Engineering Certication for approximately 9736 Flights during from April 2016 to March 2017, earning a revenue of approximately Rs.1261.07 Lacs.
Ø By way of providing Engineering Hangar facilities for Aircrafts of outside parties at Chennai, company has earned a revenue of Rs.198.86 Lacs during April, 2016 to March 2017.
Ø The company has earned a revenue of approx. Rs.15.49 Lacs during April, 2016 to Mach 2017 through aircraft component servicing of outside parties at Hyderabad.
2) Major Check activity at MRO Complex, RGIA, Shamshabad :
At MRO, RGIA, Shamshabad “29” A-Checks & ”1” B-Check were carried out during the period from April 2016 to March 2017.
3) Engineering Training School, CTE, Hyderabad :
The company earned revenue of approx. Rs.23.83 Lacs during the period April 2016 to March 2017 by providing training facilities to outside agencies at ETS, Hyderabad.
4) Revenue from AME Trainees/Inplant Trainees/Project Work :
During the April, 2016 to March 2017, the company earned a revenue of Rs.14.66 Lacs by intake of AME trainees/On Job Trainees (6 months & 1 month On Job Training).
B) FUTURE PLANS AND NEW CAPABILITY ADDITION:
1) Details of FAA/EASA approval: Presently, company does not have FAA/EASA (Federal Aviation Administration / European Aviation Safety Agency) approval for any shop/Hangar at
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Hyderabad. The process has been initiated for the same. The approval of Regulatory Authority will enable the company, to service foreign airlines aircraft and its components at own premises.
2) ATR-72 Project: Hyderabad Base got approved to c/out Maintenance upto and including “1” “C” Check of ATR-72 from DAW, DGCA. Accordingly, we are in the process of undertaking major checks of ATR-72.
3) Vaccum Generator: Facility to Service Vacuum Generator at Hyderabad is in progress.
4) Embraer Project: It is proposed to have Embraer authorised Service Center at Hyerabad. A project committee to plan the Embraer facility at Hyderabad has been constituted. The team is working on tools requirement, reviving of old Begumpet Hangar, Training requirements etc. Once the facility gets established, the Maintenance Checks would be undertaken at own premises after obtaining requisite Regulatory Authority approval and establishing the infrastructure facilities.
5) OJT Training in collaboration with M/s Air Tech Institute: Preliminary discussions carried out to carry out OJT training in AIESL for M/s Air Tech. The project is under process.
III. MUMBAI: The details of Mumbai base like achievements, capacity addition, and future plans are highlighted below in brief :
A) ACHIEVEMENTS:
l Avg. OTP, Ex-BOM maintained 97-98% with number of constraints such as shortage of manpower, nonavailability of trestles, spares, frequent changes in allotted bays, congestion at airport etc.
l Indigenous purchase of noncritical aircraft components such as cabin, galley and toilet spares etc., resulted in saving of INR 3 cr. (approx.) and substantial foreign currency.
l TAT of aircraft from Base Maintenance is improved due to reduced lead time in the procurement of such spares.
l WQAR (Wireless Quick Access Recorder) modication of all 321 aircraft carried out to comply with the regulatory requirements which also resulted into the saving of Man hours efforts for Data Milking process.
l 115v, 400HZ power extended from SFC (static frequency converter) in base maintenance to all Avionics overhaul shops.
l Automatic EPSU (Emergency power supply unit) battery charger fabricated in-house.
l Additional charger outlet for EPSU battery also fabricated in-house.
B) CAPACITY ADDITION:
Approval has been granted by the regulatory authority for the followings:
l A-330 Major check capability: - A-330 'C' checks capability up to C6 package.
l Thrust reverser: - Ten year MPD task for CFM56-5B Engine.
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l Testing and repair facility for MMR Rx (Receiver) P/N TLS755-01 has been enhanced from Maintenance Level 1 to Maintenance Level 2.
l Testing and repair facility Pitot Tube Part No. 0851 HL, has been developed upto Maintenance level-1.
l Testing and repair facility for SSFDR (Solid State Flight Data Recorder) Part No, 2100- xxx series, has been enhanced from Maintenance level 1 to Maintenance level-2.
l Testing and repair facility for PBE Part No. E28180 serieshas been enhanced from Maintenance level 1 to Maintenance level-2.
C) THIRD PARTY WORK LOAD:
l Total revenue earned during FY-2016-17 is INR 85 crores.
l In addition to this, Heavy Maintenance checks were successfully carried out to full satisfaction of Jet Airways on four of the A330 aircraft.
l Maintenance of following aircraft components of Go-Air are being carried out on regular basis.
1) Digital Voltmeter & Ammeter
2) Pressure gauges
3) QDMs (Quick Donning Masks)
l Maintenance of FDAU (Flight Data Acquisition unit) for Air force carried out.
l Calibration of Radio Navigator Transmitters for Ahmedabad Aviation carried out.
D) FUTURE PLANS
l More third party workload is being planned in Base Maintenance and Overhaul shops through dedicated team consisting of subject experts and professionals, for the optimum utilization of existing capacity of respective work centers/activity centers.
l The next check agreed to compiled on A330 aircraft is C6 on NOV-2017.
l Discussion and details are being framed with Jet Airways for compliance of landing gear change on A330 aircraft starting from Nov/Dec 2017 till Aug/Sept 2018 on four of A330 aircraft.
l Energy Audit will be planned on regular basis to check power consumption. Energy conservation are being planned to reduce power consumption under the scheme of green initiation to save environment.
l Revival and up gradation of avionics shop for 150 components allocated to WR. This will cater to Air India and other airlines component servicing.
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Name of Capability addition Capability addition Expected Probable Revenue Prot done in F16/F17 that could not be Capability constraints earned Center achieved as addition (issues that planned in in the might affect F16/F17, & the Year achieving reason behind it. F17/F18 these capabilities)
Mumbai 1) GE90-100 series 1) GE90-100 Series 1) GE90-100 1) Awaited INRs (OAP)-II Engines- Special Engines Testing at Series GE90-100 1,17,12,2 WB Eng Inspections including Nagpur -awaiting Engines engines 21 (2016-17) O/H, APU Check-C /Service DGCA Audit for Testing at from GE for 3rd Party IN O/H bulletins/Airworthiness shop approval. Nagpur. test purpose. Rs.11,85, directives compliance. 27,750 2) Genx-1B Series 2) Genx-1B 2) Approval (2016-17) 2) GEnx-1B Series engines QT- Tools Series not got for AI April 17 Engines- Check C at Nagpur, awaiting engines tools trans- Nil AI Exp. Inspection, TGB DGCA Audit for QT in Nagpur portation from removal, Inspection shop approval. DC, SEZ, & installation, 3) APS 5000 Nagpur. AGB removal, APU inspection & Overhaul 3) No res- installation. ponse from 4) Ge90 tool suppliers 3) NDT-FPI & FMPI engine despite 3 for HSPS as per Modular times exten- ASTM E 1417 & 1444. removal / sion of due installation date of tender. 4) Some consumables tooling Tender to be for painting capability. ordered. reoated.
5) Genx 4) Awaiting Series training from Engines OEM GE and Testing OEM P&W at Nagpur.
Mumbai April 2017 to (OAP)-II Sep. 2017 WB Eng. Rs.13,38,800 O/H, total earning APU Chromalloy O/H engine disassembly USD 64,000 Jet Airways engine TGB stud replace- ment job USD 14500.
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IV KOLKATA:
The achievements, future plans, new capability addition and third party work to be undertaken at Kolkata base are furnished below:
(A) EFD
Achievement: Improvisation of landing gear handling system at Major Maintenance Hangar, NSCBI Airport.
Capability addition done: Commissioning of new Booster Air Compressors, Air Dryer and Air Heater completed for augmenting capability of Pneumatic Complex (Hi Flow), NTA.
Third Party work done : Aircraft jack testing done for M/s. Thriveni Earth Movers.
(B) A/F ACCY.O/H SHOP
Future Capability Addition:
l With the ongoing high ow project nearing completion, various ATA 21, ATA 36 and ATA 49 Pneumatic Valves servicing and testing can be done....that would reduce foreign exchange drain.
l EASA approval seeking process is under way. With EASA approval accorded to shop and the various licensing process with OEMs settled, we foresee ourselves to be one of the leading MROs in Eastern Region to service most ATA 21, 36, 49 and 80 components of various kinds of aircraft and engines.
l With A320 Fmly heat exchangers already being cleaned, tested and repaired, capability enhancement process of
o servicing of heat exchangers and ACM (Level 1 ) of all types of aircraft
o APU BLEED VALVE of 131-9A APUs,
o PNEUMATIC STARTERs of CFM56 engines, is ongoing.
(C) APU CENTRE, MODULE-I
Upgradation of GTCP 36-300A APU Test Cell for testing of 131-9A APU is being completed, awaiting Correlation Run and DGCA approval within 3-4 months.
(D) APU CENTRE, MODULE-II
Test Rig and Special Tools for serving of various Fuel components and Fuel pressure controlled Pneumatic Components are under process.
The status of different Test Rigs are as follows:
1. Universal Fuel Nozzle Test Rig: Final negotiation with Test Rig manufacturer M/S Bauer for supply of Test Rig and Special Tools to service Fuel Nozzles (Main Engine and APU) of all the aircraft in our eet has been concluded. PO will be released soon.
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2. Universal Fuel and Pneumatic Test Rig: Budgetary Quote for Test Rig and Special Tools has been received. Note sheet for approval of Financial sanction is being prepared. This Test Rig will take care of HPTCC , LPTCC,Transient Bleed Valve and Surge Control Valves tted on Main Engines and APU of A320 family and B737-800 a/c.
3. Universal Fuel and Accessory Test Rig: This project is under process. Request for Budgetary Quote for Test Rig and Special Tools has been requested. This test Rig will cater VSV act, VBV act, Main Engine Fuel Pumps (A320 Family , B737-800, B-777 and B787), IGV actuator (A320 Family and B737-800 a/c), {Gear Motor, Ball Screw and Master Ball screw actuator of A320 Family A/c}.
4. Universal HMU & FCU Test Rig: Under Project. Woodward is ready to provide Tools, Training and spares support but Honeywell has declined to give such support. Honeywell must be pursued. This test Rig will cater HMU and APU FCU for A320 Family a/c, B737-800 and even A320 with Neo engine.
(E) ELECTRICAL OVERHAUL SHOP
New infrastructure for development and Enhancement of capabilities
Electrical shop has successfully commissioned Starter Motor Test Rig (Dynamometer Type) from Vendor M/s.Magtrollncorp., Buffalo, USA which is being used for testing & certication of APU Starter Motor pertaining to A320 & A320 Family Aircraft.
The Shop has obtained new capability of carrying out level three maintenance on galley equipment such as A320 Family Convection Oven, Hot Jug & Hot Cup.
Future Project
Electrical Overhaul Shop, Kolkata is in the process of obtaining approval and subsequently Capability Enhancement for the components like :
A320 Family APU Harness Purchase Order for special tools initiated.
A320 Family Starter Control Valve Purchase Order for special tools initiated.
A320 Family Skin Air Valve Purchase Order for special tools initiated.
A320 Family Anti Ice Valve Price Quote received from Vendor on 22/09/2017. PPC INFORMED.
Third Party Jobs serviced
(April, 2016 to March, 2017)
Completed Twenty One work orders to service Air Force components such as A. I. Valve, Centrifugal Switch, Ign. Exciter, Ign. Lead, Igniter Plug, Start Valve, Hot Food Oven etc.
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(April, 2017 to September, 2017)
Completed Twenty ve work orders to service Air Force components such as Centrifugal Switch, Ign. Exciter, Ign. Lead, Igniter Plug, N. C. Solenoid Valve, 3 Way Solenoid Valve, APU main wiring harness etc.
(F) MAJOR MAINTENANCE DIVISION
Achievements :
Base maintenance, Kolkata, with the help of Engineering Facility Division could devise a chain pulley system with indigenous method for speedy execution of Landing Gears of A320 family aircraft. In addition, it could fabricate movable lighting system for providing sufcient light during execution of various aircraft related jobs.
Capability enhancements:
A). Capability addition to carry out 12 yearly check of Airbus A-319-112 aircraft tted with CFM 56-5B engines
B). Capability addition to carry out checks of ATR-42-320 aircraft tted with PW 121 Engines and HS 14SF propellers up to 36000 cycles.
C). Capability addition to carry out checks of ATR-72-212A (600 version) aircraft tted with PW127 Engines HS568F-1 Propellers up to 9A checks & 2 yearly checks.
Third Party Jobs:
A). Base Maintenance, Kolkata has carried out structural repair job of Dove Airlines Pvt. Ltd.
B). Base Maintenance has also started to provide its hangars on temporary hires for better utilization of its resources.
Future Plans:
Base Maintenance Kolkata is putting its endeavours to enhance its capability further to take outside party jobs in areas of specialized inspections such as non destructive testing and heavy maintenance packages of A320 family aircraft in addition to present A319 aircraft capability. In fact , it intends to get EASA approval on A319 aircraft and feasibility study has been initiated provided nancial constraints are mitigated.
V. DELHI JEOC:
One of the achievements of the company during the year was the in-house fault isolation and repair of ATEC 6000 at A.T.E.C., AIESL, NR. It helped to refurbish 6 ECUs in less than 6 weeks (including one with FAA certication). This resulted in saving of approx. USD 90000.
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The details of No of engines (Type Wise) produced in JEOC from April 2016 to March 2017, April 2017 to till date is as follows:
Month / Year JT8D V2500 CFM Total
Apr – 16 to Mar-17 2 10 24 36
Apr – 17 to Jan – 18 1 03 21 25
Total 3 13 45 61
Future Plans
The future plans / capability augmentation are as under:
Ø Up-gradation of Aircraft Accessory Overhaul Shop: - To service chairs of ATR 42/72, EASA / FAA certication for wheel and brake assembly; In house servicing of rotary components which are presently sent out of India and costing more than Rs. 40 lacs on an average; Facility for Power Transfer Unit (costing around Rs.60 lakhs per component) to obtain EASA / FAA approval.
Ø Capability Enhancement at ATEC shop to service 45 components of newly inducted A320 NEO eet.
Ø Capability Enhancement of Avionics Shops for enhanced CALC & NEO aircrafts for fast moving components.
Ø Upgradation of A320 Major Maintenance in regards to development of Aircraft Painting booth, enhancing Capability to undertake composite repair and commissioning of Fuel & Oil Laboratory.
1.6.2 IMPLEMENTATION OF OFFICIAL LANGUAGE
As AIESL does not have a dened structure for Implementation of Ofcial Language Policy of its own, the same is done in AIESL in consultation with the Rajbhasha Section of Air India.
1.6.3 INDUSTRIAL RELATIONS
There were a total of 4755 (Other than deputations) employees on rolls of the company during the year 2016-17, consisting of:
1) Executives - 465
2) FTEs - 632
3) Technical - 4583 (4107-Permanent & 476 -FTEs)
4) Non Technical - 172 (19- Permanent & 153-FTEs)
In addition, there were 939 employees on deputations (all Non-Technical) as on 31.03.2017.
Relations with the work force remained cordial during the year 2016-17.
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1.6.4 IMPLEMENTATION OF RESERVATION POLICY
Reservation of posts for SC/ST/OBC etc. in AIESL is done as per the Government Directives on the subject.
2. GENERAL INFORMATION
The Board of Directors of Air India Limited, the parent company, at its meeting held on 7th August, 2010 approved the hiving off of Air India Engineering Services Limited (AIESL) as wholly owned subsidiary of Air India and a separate Prot Centre to cater the service towards Maintenance, Repair and Overhaul (MRO) activities of the captive load of Air India and it's other subsidiaries besides the workload from 3rd Party Customer of domestic and international market.
Accordingly Cabinet Approval was obtained on 6th September, 2012 for operationalization of AIESL. After complying, the requirements of the various Statutory and Regulatory Authorities, nal approval was obtained from DGCA to operate as an independent MRO under CAR 145, on January, 2015.
3. CAPITAL STRUCTURE
The authorised Share Capital of the company during the year was Rs. 1000 crores (Rupees One Thousand Crores) divided in to 100 (One Hundred) crore equity shares of Rs. 10 each.
The Paid-Up Share Capital of the company during the year was 166,61,65,000 divided in to 166,61,65,00 equity shares of Rs. 10 each held by Air India Ltd. through its nominees.
4. MANAGEMENT
4.1 Directors and Key Managerial Personnel
The following changes have occurred in the constitution of Board of the company during the FY 2016-17.
S.No Name Designation Date of appointment Date of cessation
1. Shri B.S. Bhullar Director 03.02.2015 02.02.2017
2. Shri Satyendra Director 02.02.2017 - Kumar Mishra
4.2 Number of Meetings of the Board Of Directors
During the Financial Year 2016-17, the Company held four meetings of the Board of Directors as required under Section 173 of Companies Act, 2013 which are detailed below.
S No. Date of Meeting Board Strength No. of Directors Present
1 28.06.2016 4 4
2 16.09.2016 4 3
3 30.12.2016 4 3
4 16.03.2017 4 4
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4.3 Composition of Committees and details of changes, if any
AUDIT COMMITTEE
The constitution of Audit Committee as required under the Companies Act, 2013 was approved by the Board of Directors in its 42nd Meeting held on 31st March 2016 and following were its members as on 31st March, 2017, in ex-ofcio capacity:
Ms.Gargi Kaul - Chairperson Govt Nominee Director
Shri Satyendra Kumar Mishra - Member Govt. Nominee Director
Sh. Vinod S. Hejmadi - Member Nominee of Holding company
Sh. Ashwani Lohani - Permanent Invitee Chairman
The recommendations of the committee during the year were endorsed by the Board.
NOMINATION, REMUNERATION AND STAKEHOLDERS RELATIONSHIP COMMITTEE
As required under Section 178 of the Companies Act, 2013 the Nomination & Remuneration Committee should consist of 3 or more Non-Executive Directors out of which not less than one half should be Independent Directors.
As there was no Independent Director on the Board of AIESL, the matter was taken up with the Ministry of Civil Aviation by Air India Limited.
The Constitution of Nomination and Remuneration Committee was to be taken up after the appointment of Independent Directors by Holding company/Administrative Ministry.
Further, AIESL is a Government Company and as per Ministry of Corporate Affairs Circular dated 5 June 2015, exemption has been given to Government Companies from the applicability of Section 178 (2) (3) (4) pertaining to Directors.
4.4 Company's Policy on Director's appointment and remuneration
4.4.1 Appointment Policy
AIESL is a wholly owned Subsidiary of Air India Limited. As per the provisions of 97 Article of the Articles of Association of the Company, the number of Directors of the Company shall not be less than three and not more than fteen all of whom shall be appointed by Air India Limited, who will prescribe the period for which they will hold ofce as director and may remove them and appoint others in their places and ll in any vacancy that may occur.
4.4.2 Remuneration Policy
Section 197 in respect of remuneration to directors of the Company is not applicable to AIESL being a Government Company in terms of Notication No. G.S.R.463(E) Dated 5th June, 2015 of Ministry of Corporate Affairs.
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4.5 Board Evaluation
It is not applicable to AIESL being a Government Company in terms of Notication No.G.S.R.463(E) dated 5th June, 2015 of Ministry of Corporate Affairs.
4.6 Remuneration received by Managing / Whole time Director from holding or subsidiary company
There was no whole time director on the Board of the company during FY 2016-17.
4.7 Directors' Responsibility Statement
The Board of Directors of the Company conrms that:-
(a) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;
(b) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the nancial year and of the prot and loss of the company for that period;
(c) The Directors have taken proper and sufcient care for the 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 fraud and other irregularities;
(d) The Directors have prepared the Annual Accounts on a going concern basis;
(e) Company being unlisted, sub clause (e) of section 134(3) is not applicable.
(f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
4.8 Internal nancial controls
The Company has adequate internal nancial controls for ensuring the orderly and efcient conduct of its business, including adherence to the Company's policies; the safeguarding of its assets; the prevention and detection of frauds and errors; the accuracy and completeness of the accounting records; and the timely preparation of reliable nancial information, which is commensurate with the operations of the Company.
The Company has appointed M/S Sanjay Gupta & Associates as Internal Auditors for the nancial year 2016-17. The Internal Auditor has carried out an extensive audit, including internal nancial controls.
The Company has also appointed M/s S. Vaidyanath Iyer & Co to carry out the evaluation of the adequacy of the existing Internal Financial Control Over Financial Reporting (IFC-FR) for the nancial year 2016- 17.
4.9 Disclosure regarding frauds
There are no frauds reported by the Auditor to the Audit Committee or to the Board.
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5. DISCLOSURES RELATING TO SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
Company does not have any Subsidiary, Joint venture or Associate Company.
6. DETAILS OF DEPOSITS
The Company has not accepted any public deposit during the year ended 31st March, 2017 as covered under the provisions of Section 76 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014.
7. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS
Particulars of loans, guarantees and investment have been disclosed in the nancial statement.
8. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
The Company, during the Financial Year, entered into contracts or arrangements with related parties, which were in the ordinary course of business and on an arm's length basis. These transactions were not falling under the provisions of Section 188(1) of the Act.
Exemption from the rst and second proviso to sub-Section (1) of Section 188 with regard to obtaining approval of the Company in General Meeting, has been provided to a Government Company in respect of contracts or arrangements entered into by it with any other Government Company in terms of notication dated 05-06-2015 of the Ministry of Corporate Affairs.
The Board in its 49th Meeting held on 27 November 2017 was informed that the company had entered into related party transactions for approximately Rs. 525.83 Crores during the year 2016-17. Further, the approval of Board was taken to enter into contracts / arrangements with Air India Limited and its subsidiary companies (Government Companies) for an estimated amount of approximately Rs. 680 crores during FY 2017-18 on such terms and conditions as may be recommended by the Audit Committee.
9. DISCLOSURES PERTAINING TO CORPORATE SOCIAL RESPONSIBILITY
Provisions of Section 135 of Companies Act, 2013 relating to Corporate Social Responsibility were not applicable to the Company as the company has not earned any prots during the year.
10. DETAILS OF REMUNERATION OF EMPLOYEES
Section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company was not applicable to AIESL, being a Government Company and in terms of the Notication No. G.S.R.463(E) dated 05 June 2015 of Ministry of Corporate Affairs.
11. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
(A) The company has made all efforts wherever possible for conservation of non renewable sources of energy and utilizing the alternative sources of energy.
With regards to Conservation of Energy, a 50 KW Solar Plant was commissioned in June 2016 at A320 New Avionics Complex. This has resulted in average reduction of 200 units per day and a saving of Rs. 8.10 lacs per annum towards electricity expenditure.
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(B) Foreign exchange earnings and Outgo
(Rs. in Crores)
Earnings NIL
Outgo NIL
12. RISK MANAGEMENT
The Company did not have any Risk Management Policy during the period, as the element of risk threatening the Company's existence is very minimal.
13. MATERIAL ORDERS OF REGULATORS
No signicant and material orders have been passed by the regulators or courts or Tribunals impacting the going concern status and company's operation in future during the year.
14. DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM
Provisions of Section 177(9) relating to establishment of Vigil Mechanism for directors and employees, to report a genuine concern, are not applicable to the Company.
However, the holding company i.e. Air India Ltd has a separate Vigilance department which covers AIESL also.
15. STATUTORY AUDITOR
The Comptroller & Auditor General of India (CAG) has appointed M/s D B KETKAR & Co, Chartered Accountants as Statutory Auditors of the Company for FY 2016-17.
The clarications / explanations of management on the Qualications or adverse remarks in the Auditors' Report are attached.
The Notes on nancial statements are self-explanatory, and needs no further explanation.
Comments of Comptroller and Auditor General of India
The comments dated 13.02.2018 of the Comptroller and Auditor General of India (C&AG) under Section 143(6)(b) of the Companies Act, 2013 on the accounts of the Company for the year ended 31st March 2017 along with reply of management thereto is attached.
16. SECRETARIAL AUDIT REPORT
The company had appointed Mr. Jiwan Prakash Saini, Practicing Company Secretary as Secretarial Auditor to conduct the Secretarial Audit for FY 2016-17. Secretarial Audit Report in prescribed form is attached .
The explanations or comments by the Board on every qualication, reservation or adverse remark or disclaimer made by the auditor in his report is attached.
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17. COMPLIANCE WITH SECRETARIAL STANDARDS
The Secretarial Standards issued by ICSI under Section 118(10) of Companies Act, 2013 have been compiled with by the company.
18. EXTRACT OF ANNUAL RETURN
In compliance with the provisions of Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, extract of Annual Return is attached.
19. MANAGEMENT DISCUSSION & ANALYSIS REPORT
A detailed Management Discussion & Analysis Report is attached.
20. COMPLIANCE WITH THE RTI ACT, 2005
Air India Engineering Services Limited has successfully ensured compliance with the provisions of Right to Information Act for providing information to the citizens.
The company has decentralized its structure to deal with the applications / appeals received under RTI Act.
During 2016-17, 30 applications & NIL Appeals were received under RTI Act and 30 applications were disposed off.
21. DISCLOSURES UNDER THE SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013
The Committee for Prevention of Sexual Harassment of women at workplace was constituted in Northern Region on 10.03.2017, while in Southern Region a joint committee for Air India Ltd, AIATSL and AIESL was constituted on 02.03.2016.
No complaints of sexual harassment were received from any women employee of AIESL during the year 2016-17.
22. ACKNOWLEDGEMENTS
The Board sincerely acknowledges the support and guidance received from the, Ministry of Civil Aviation, Comptroller and Auditor General of India, Ministry of Corporate Affairs and other agencies.
For and on behalf of the Board of Directors
Chairman Place: New Delhi
Date: 14-03-2018
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REPORT ON CORPORATE GOVERNANCE
BOARD OF DIRECTORS
As per Articles of Association of the Company, the number of Directors shall not be less than three and not more than fteen. All of whom shall be appointed by Air India Ltd.
BOARD OF DIRECTORS AS ON 31 MARCH 2017
I) Shri Ashwani Lohani Chairman CMD, Air India Ltd.
ii) Shri Vinod Hejmadi, Nominee of Holding Co. Nominee Director Director Finance, Air India Ltd.
iii) Ms Gargi Kaul, Nominee of Govt. Govt. Director (Admin Ministry)
iv) Shri Satyendra Kumar Mishra, Nominee of Govt. Govt. Director (Admin Ministry)
Shri Satyendra Kumar Mishra was appointed as Govt. Nominee Director on the Board of the Company w.e.f. 02.02.2017 vice Shri B S Bhullar who ceased to be Director w.e.f. 02.02.2017.
Shri Rajiv Bansal, CMD, AI was appointed as Chairman on the Board of AIESL, w.e.f. 23-08-2017 in place of Shri Ashwani Lohani.
Shri Pradeep Singh Kharola, CMD, AI was appointed as Chairman on the Board of AIESL, w.e.f. 12.12.2017 in place of Shri Rajiv Bansal who ceased to be Chairman w.e.f. 12.12.2017.
The Board placed on record its appreciation of the valuable services rendered by Shri B S Bhullar , Shri Ashwani Lohani and Shri Rajiv Bansal.
During the year, all Meetings of the Board and the Annual General Meeting were chaired by the CMD, Air India.
Details regarding the Board Meetings, Annual General Meeting, Directors' Attendance thereat, Directorships and Committee positions held by the Directors are as under:
BOARD MEETINGS
During the Financial Year 2016-17, four meetings of the Board of Directors were held in terms of requirement of Section 173 of Companies Act, 2013 the details of which are as below.
S No. Date of Meeting Board Strength No. of Directors Present
1 28.06.2016 4 4
2 16.09.2016 4 3
3 30.12.2016 4 3
4 16.03.2017 4 4
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Particulars of Directors including their attendance at the Board/Shareholders’ Meetings during the nancial year 2016-17:
Name of the Academic Attendance Details of Memberships held in Director Qualications out of 4 Directorships Committees Board held in other Meetings Companies held during the year
Shri Ashwani Mechanical 4 Chairman Chairman Lohani Engineer & Air India Limited Finance Committee, AIL Chairman Fellow of Air India Charters HR Committee, AIL Chartered Limited Strategic Committee, AIL Institute of Air India Air Transport Permanent Invitee Logistic & Services Limited Audit Committee, AIL Transport Airlines Allied Audit Committee-AIESL Services Limited Hotel Corporation of Audit Committee-AASL India Limited Member Director Corporate Social Respon- Air India SATS sibility and Sustanability Airport Services Pvt Committee, AIL Ltd Nomination & Remunera- Air Mauritius Ltd tion Committee, AIL Air Mauritius Audit Committee – HCI Holdings Ltd Audit Committee – AIXL Corporate Social Responsi- bility Committee-AIATSL Audit Committee-AIATSL Ms Gargi Kaul M.Phil 4 Government Member Jt Secretary & Director Audit Committee, AIL Financial Advisor, Air India Limited Strategic Committee, AIL Ministry of Civil Air India Air Transport Finance Committee, AIL Aviation Services Limited CSR Committee, AIATSL Hotel Corporation of Chairperson India Limited Audit Committee-AIATSL Audit Committee - AIESL Audit Committee-HCI
Shri Balwinder Post Graduation 1 Government Director Member Singh Bhullar in Business Air India Limited Nomination & Jt Secretary, Administration Air India Air Transport Remuneration Committee, Ministry of Civil Services Ltd. AIL Aviation Hotel Corporation of HR Committee, AIL (upto 2 February India Ltd. Strategic Committee, AIL 2017) CSR Committee, AIATSL Audit Committee-AIESL Audit Committee-HCI
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Name of the Academic Attendance Details of Memberships held in Director Qualications out of 4 Directorships Committees Board held in other Meetings Companies held during the year
Shri Vinod B.Com., ACA 4 Director Member Hejmadi Air India Ltd Finance Committee, AIL Air India Charters Ltd Special Invitee Airline Allied Audit Committee, AIL Services Ltd Co-opted Member Hotel Corporation of Strategic Committee, AIL India Ltd Member Air India Air Audit Committee-HCI Transport Services Audit Committee-AIXL Ltd Audit Committee-AIESL Audit Committee-AASL Air India SATS Airport Services Pvt
Shri Satyendra M.Tech. 1 Government Director Member Kumar Mishra, (Applied Air India Limited Audit Committee-AIESL Jt Secretary, Geology), Air India Air Transport Audit Committee-HCI Ministry of Civil MA Services Ltd CSR Committee, AIATSL Aviation (effective (Public Policy) Hotel Corporation of NRC-AIL 2 February 2017) India Ltd HR Committee-AIL Strategic Committee - AIL
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BOARD COMMITTEES
Audit Committee
As part of the Corporate Governance and in compliance with the provisions of the Companies Act, 2013 and DPE Guidelines, the company constituted the Audit Committee of the Board in its 42nd Board Meeting held on 31st March 2016 and following were its members as on 31st March, 2017, in their ex-ofcio capacity:
Ms.Gargi Kaul - Chairperson Govt Nominee Director
Shri Satyendra Kumar Mishra - Member Govt. Nominee Director
Sh. Vinod S. Hejmadi - Member Nominee of Holding company
Sh. Ashwani Lohani - Permanent Invitee Chairman
The terms of reference of this Committee are as under:
I. To recommend for appointment, remuneration and terms of appointment of auditors of the company; ii. To review and monitor the auditor's independence and performance, and effectiveness of audit process; iii. To examine the nancial statement and the auditors' report thereon; iv. To approve or any subsequent modication of transactions of the company with related parties; v. To scrutiny of inter-corporate loans and investments; vi. Valuation of undertakings or assets of the company, wherever it is necessary; vii. To evaluate of internal nancial controls and risk management systems; viii. To monitor the end use of funds raised through public offers and related matters.
Audit Committee Meeting during the FY 2016-17
S No. Meeting Number Date and time of the Meeting No. of Member Present
1 1st 30.12.2016 2
2 2nd 16.03.2017 3
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Annual General Meetings (AGM) /Extraordinary General Meeting (EGM) during the last three years:
AGM/EGM Number Date and time of the Meeting Venue
12th AGM 20.09.2017 at 1600 Hrs Airlines House, 113 Gurudwara Rakabganj Road, New Delhi 110 001
EGM 04.07.2017 at 11.15 Hrs Airlines House, 113 Gurudwara Rakabganj Road, New Delhi 110 001
11thAdjourned 04.07.2017 at 11.00 Hrs Airlines House, AGM 113 Gurudwara Rakabganj Road, New Delhi 110 001
11th AGM 30.12.2016 at 1700 Hrs Airlines House, 113 Gurudwara Rakabganj Road, New Delhi 110 001
EGM 28.06.2016 at 15.45 Hrs Airlines House, 113 Gurudwara Rakabganj Road, New Delhi 110 001
10thAdjourned 28.06.2016 at 15.30 Hrs Airlines House, AGM 113 Gurudwara Rakabganj Road, New Delhi 110 001
10th AGM 28.12.2015 at 1630 Hrs Airlines House, 113 Gurudwara Rakabganj Road, New Delhi 110 001
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MANAGEMENT DISCUSSION & ANALYSIS REPORT (2016-17)
1. ANALYSIS OF FINANCIAL PERFORMANCE
Revenue
Total revenue earned during 2016-17 was approx Rs 740.48 crores as against Rs. 620.27 crores during 2015-16.
Third party revenue increased from approx Rs 59 crores in 2015-16 to approx Rs 85 crores in 2016-17.
Expenditure
The total expenditure incurred during the year 2016-17 was Rs. 1245.64 crores as compared to the previous year's gure of Rs 1178.89 crores.
2. BUSINESS ANALYSIS
In the absence of a well-developed MRO base in India, there are currently around 40 overseas MRO service providers approved by the Directorate General of Civil Aviation (DGCA) to conduct work on Indian-registered aircrafts, in locations such as the UK, Germany, France, Romania, Jordan, Israel, the UAE, Sri Lanka, China, Singapore, Malaysia and Australia, while the plans by some of the large global MRO players to set up base in India are yet to materialize.
In the FY 2016-17, AIESL entered into Agreements with domestic & international Airlines/ operators for Transit certication of third Party Aircrafts across India. Domestic Airlines includes VISTARA, AIR ASIA INDIA, GO AIR & Jet Airways. The International Airlines having SGHA with AIESL are Sri Lankan, Qatar Airways, Silk Air, Nepal Airlines Co., Kuwait Airways, Asiana Airlines, Singapore Airlines, SIA Cargo, Etihad Airways and Scoot PTE Ltd.
In order to further increase its client base, marketing team was recruited in the company in the beginning of 2017 and new airlines both in Domestic and International operations were approached for MRO business for which there was positive response.
Also, AIESL Training facilities were marketed among the Indian and International operators and the company got favorable response from them. Company has successfully provided training to M/s Spice Jet, Indigo and Vistara Airlines at Delhi & Mumbai.
AIESL was successful in renewal of most of the SGHA (Standard Ground Handling Agreement) with Domestic airlines and the list of International operators has also doubled in FY 2017-18, as compared to FY 2016-17. Negotiations & nalization of terms and conditions for some Airlines are also under process.
The present scenario of Aircraft Maintenance Training all around the world is heavily dominated by EASA147 MTOs. Most of the domestic and international Airline Operators have to conduct their mandatory regulation and safety training from foreign EASA approved MTOs at a heavy cost. With EASA 147 approval added to our world-class training quality, Air India can sweep the entire domestic and part of the international market of these training.
We conduct 6 license courses by both MTO Group A and MTO group B, which can easily be increased to 7 or 8 courses by aggressive marketing. Total revenue that can be earned for license and non-license courses to the tune of approximately $ 22,00,000 per year (approximately 14 Crores).
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3. MEASURES TO IMPROVE THIRD PARTY REVENUE
In order to enhance 3rd Party revenue i.e other than Air India group companies, AIESL is enhancing its capability list at various facilities across India. Also, AIESL has started the process for MoU with SIAEC, to work closely on Line Maintenance; Cabin Maintenance and EASA approved Training facilities in India.
AIESL also signed an MOU with Embraer to establish an Authorized service centre facility at HYD MRO.
An Email database of existing customers and Airlines operating into India was created, and Emails were sent on regular intervals about AIESL capabilities.
Twitter account of AIESL has also been activated, so that international airlines and MROs can get in touch with us for their requirements for maintenance & repair in India.
A lot of low cost international airlines are coming to Tier “B” cities in India and are looking at cost effective Transit certication handling in India. AIESL has conducted Training approved by DGCA for CAT –A approved LSAs (limited scope approval) certifying Engineers to cater to such requirements in FY 2017- 18.
4. FUTURE OUTLOOK
The company is planning to establish its footprints overseas also. In a rst step towards that AIESL is in the process of establishing the rst overseas branch at Sharjah, UAE. Based on the experience and backed by cost benet analysis, the opportunity to expand to other international stations will also be explored.
At present, the report for Abu Dhabi, Ras Al Khaimah , Muscat has been prepared to start AIESL line maintenance operations and achieve protability.
AIESL Marketing team is already in touch with various Airlines for FY 2017-2018, and we are hopeful to sign up with new operators like Air Asia Berhad; Air Asia Thailand , Unitop China, Viet Jet of Vietnam, Kalita Air, Thai Smile , CEBU Pacic Manila, Oman Air and Srilankan Airlines for additional stations in India.
In addition to this, AIESL has also entered into Agreements with Domestic operators like Jet Airways; Go Air , Air Asia India and SpiceJet to carry out their base maintenance work at MRO facilities of AIESL in India.
5. GOING CONCERN
With the National Civil Aviation Policy-2016 coming into effect, it is expected that MRO sector will develop signicantly increasing the size of the third party services.
As per Boeing, the market is expected to grow at 7% CAGR to reach USD 1.2 billion by 2020.
As per the new Civil Aviation Policy, the MRO business of Indian Carriers was around Rs. 5000 crore.
6. RISK MITIGATION STRATEGIES
The Company continuously monitors the risk perceptions and takes preventive action for mitigation of risks on various fronts.
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7. INTERNAL CONTROL SYSTEMS
The Company has appointed M/s Sanjay Gupta & Associates as Internal Auditors for the nancial year 2016-17. The Internal Auditor has carried out an extensive audit, including internal nancial controls.
The Company has also appointed M/S S Vaidyanath Aiyar & Co. to carry out the evaluation of the adequacy of the existing Internal Financial Control Over Financial Reporting (IFC-FR) for the nancial year 2016-17.
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SECRETARIAL AUDIT REPORT FOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2017 (Pursuant to Section 204 (1) of the Companies Act, 2013 and rule No.9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014)
To, The Members, Air India Engineering Services Limited Airlines House, 113, Gurudwara Rakabganj Road, New Delhi – 110001.
I have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by Air India Engineering Services Limited (CIN:U74210DL2004GOI125114) (hereinafter called the Company or AIESL). Secretarial Audit was conducted in a manner that provided me a reasonable basis for evaluating the corporate conducts / statutory compliances and expressing my opinion thereon.
Based on my verication of the Air India Engineering Services Limited's books, papers, minute books, forms and returns led and other records maintained by the company and also the information provided by the company, its ofcers, agents and authorised representatives during the conduct of secretarial audit and as per the explanations given to me and the representations made by the Management, I hereby report that in my opinion, the Company has, during the audit period covering the nancial year ended on 31st March, 2017 generally complied with the statutory provisions listed hereunder and also that the Company has proper Board processes and compliance mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:
A. I have examined the books, papers, minute books, forms and returns led and other records made available to me and maintained by the company for the nancial year ended on 31st March, 2017 according to the applicable provisions of:
i. The Companies Act, 2013 ('the Act') and the rules made there under;
During the period under review the Company has complied with the provisions of Companies Act, 2013, ('the Act') and the rules made there under, as applicable, subject to the following observations:
a) There were few instance of delay in ling of e-forms under the Act and the rules made there under, but they were regularised by payment of additional fees under the Act.
b) Company has not appointed Independent directors pursuant to sub-section 4& 5 of section 149 of Companies Act, 2013 , hence no meeting of independent directors could be held during the period under audit. Since, the company has not appointed independent directors, the company has not complied with the provisions of section 177(2) and 178 of Companies Act, 2013 read with Rule 6 of Companies( Meetings of Board and its Power) Rules, 2014 as regard the appointment of Independent directors in composition of the Audit Committee.
c) Company has not constituted Remuneration and Nomination Committee of the Board pursuant to 178of Companies Act, 2013 read with Rule 6 of Companies( Meetings of Board and its Power) Rules, 2014 as it meets the prescribe criteria as mentioned in Rule 6.
29 AIESL
However, appointment of independent directors in public companies which are wholly- owned subsidiaries of unlisted public companies are not require to appoint independent directors, vide notication of MCA , Companies (Appointment and Qualication of Directors) Amendment Rules, 2017 dated July 5, 2017 .
Queries raised by Statutory auditors of the company in Audit Observations in relation to compliance of Companies Act, 2013 which has been replied by the Management in Directors Report have not been reproduced here.
(ii) The Securities Contracts (Regulation) Act, 1956 ('SCRA') and the rules made thereunder;( Not applicable to the company)
(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder; ( Not applicable to the company)
(iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings; ( Not applicable to the company)
(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 ('SEBI Act'):
(a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulation, 2011; ( Not applicable to the company)
(b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992;
(c) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009; ( Not applicable to the company)
(d) The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999; ( Not applicable to the company)
(e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008; ( Not applicable to the company)
(f) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client; (Not applicable to the company)
(g) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; (Not applicable to the company) and
(h) The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998; (Not applicable to the company)
(vi) In aviation sector, following laws are specically applicable to the Company:
l Aircraft Act, 1934
l Civil Aviation Requirements issued by DGCA
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AIESL is approved by the DGCA under CAR 145, and CAR 147, both issued by the DGCA. Both these regulations have been issued under Rule 133B of Indian Aircraft Rule 1937. Besides that, any person certifying the aircraft needs to hold a license issued under the provision of CAR 66, which is a regulation under Rule 61.
For the compliance of the mentioned Regulations, a) AIESL had made the policy documents called "Maintenance Organisation Exposition (MOE)" and "Maintenance Training Organisation Exposition (MTOE)". These Documents are approved by the DGCA. Any amendment also needs to be approved by the DGCA. b) AIESL Quality system needs to carry out frequent internal audits to ensure that each of the sections is in compliance of the regulations and the provision of MOE/MTOE. c) DGCA conducts yearly scheduled audits. DGCA also carries out spot-checks, and other surprise audits. d) AIESL is audited by agencies getting work done by AIESL, like the Air India and a number of other airlines. e) AIESL is also subject to audits by foreign regulators, where AIESL is certifying the aircraft registered in their respective countries. f) AIESL is also approved by many foreign regulators like EASA and FAA, who carry out surveillance audits.
DGCA has issued Civil Aviation Requirements ( CAR ) under section 4 of Aircraft Act, 1934 read with Rule 133A of Aircraft Rules, 1937 and the company is required to comply such requirements under DGCA check systems. While the broad principles of law are contained in the Aircraft Rules, 1937, Civil Aviation Requirements are issued to specify the detailed requirements and compliance procedures.
I further report, that the company is generally regular in compliance of aforesaid CAR under aviation laws and the compliance by the Company of such aviation laws have not been reviewed in this Audit which have been subject to review by DGCA and other designated professionals/authorities.
I have also examined compliance with the applicable clauses of the following:
(i) Secretarial Standards issued by The Institute of Company Secretaries of India. and
I have examined the framework, processes and procedures of compliance with respect to following laws applicable to the company on test basis.
Apprentices Act, 1961; Payment of Wages Act,1948; Minimum Wages Act, 1948; Industrial Disputes Act, 1947; Payment of Bonus Act, 1965; Payment of Gratuity Act, 1972; Contract Labour (Regulation and Abolition) Act, 1970; Maternity Benet Act, 1961; The Child Labour (Prohibition & Regulation) Act, 1986; Equal RemunerationAct,1976; The Employment Exchange (Compulsory Notication of Vacancies) Act,1956,
The Company contributes to Air India and its subsidiary airlines Employees Provident Fund Trusts under the Provident Fund Act, which governs the Provident Fund Plans for eligible employees.
Sexual Harassment of Women at Workplace( Prevention, Prohibition and Regulation ) Act, 2013: The Company has in place an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal
31 AIESL
Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment.
Following observation were found regarding compliance of labour laws :
1. Work Committee and Grievance Redressal Committee was not constituted under Industrial Disputes Act, 1947 .
2. No register and records have been maintained under Minimum Wages Act, 1948
3. No registers and records have been maintained by the company as prescribed under The Maternity Benet Act, 1961and also No Annual Return has been submitted by the company under this Act.
4. No compliance is made under The Employment Exchange(Compulsory Notication of Vacancies)Act, 1947
In connection with aforesaid laws, adequate systems and processes are in place to monitor and ensure compliance with such laws .
During the audit , it is observed that the Compliance Management System needs to be further strengthen by taking the following actions:
a) To establish Corporate Compliance Committee and designate a Chief Compliance ofcer and maintain centralised mechanism to ensure compliance with all applicable laws;
b) To establish and maintain effective co-ordination of functional units and the compliance department under the overall supervision of the Board;
c) To establish mechanisms to prevent, detect, report and to respond to non-compliances;
d) To present Quarterly compliance Report to the Board;
e) Identication and classication of various compliance risks;
f) Organisation of compliance Check list, Audit, feed back, remedies.
I further report, that the compliance by the Company of applicable nancial laws, like direct and indirect tax laws, has not been reviewed in this Audit since the same have been subject to review by statutory nancial audit and other designated professionals.
During the period under review and as per the explanations and clarications given to me and there presentations made by the Management, the Company has generally complied with the provisions of the Act, Rules, Regulations, Guidelines, etc. mentioned above subject to the observation made therein.
I further report that:
Subject to observation made above, the Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Nominee Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.
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Adequate notice is given to all directors to schedule the Board Meetings at least seven days in advance and where the Board meetings are called at shorter notice ,presence of at least one Nominee director is ensured, agenda and detailed notes on agenda were sent and a system exists for seeking and obtaining further information and clarications on the agenda items before the meeting and for meaningful participation at the meeting
Decisions at the Board Meetings, as represented by the management, were taken unanimously.
I further report that as per the explanations given to me and the representations made by the Management and relied upon by me there are adequate systems and processes in the Company commensurate with the size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines. It is informed that the Company has responded to notices for demands, claims, penalties etc. levied by various statutory / regulatory authorities and initiated actions for corrective measures, wherever necessary.
I further report that during the audit period the company has: i) During the nancial year, there are no specic event shaving a major bearing on the company's affairs in pursuance of the above referred laws, rules, regulations, guidelines, standards, etc. referred to above.
Sd/- (Jiwan Parkash Saini) Company Secretary in practice March 06, 2018 FCS No: 3671 CP No: 2100
Note 1 : Specic non compliances / observations / audit qualication, reservation or adverse remarks has been reported in respect of the above at appropriate place .
Note 2 : This Report is to be read with my letter of even date which is annexed as Annexure A and forms an integral part of this report.
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'Annexure A'
To, The Members, Air India Engineering Services Limited Airlines House, 113, Gurudwara Rakabganj Road, New Delhi – 110001
My report of even date is to be read along with this letter.
1. Maintenance of Secretarial record is the responsibility of the management of the Company. My responsibility is to express an opinion on these secretarial records based on my audit.
2. I have followed the audit practices and process as were appropriate to obtain reasonable assurance about the correctness of the contents of the Secretarial records. The verication was done on test basis to ensure that correct facts are reected in Secretarial records. I believe that the process and practices, we followed provide a reasonable basis for my opinion.
3. I have not veried the correctness and appropriateness of nancial records and Books of Accounts of the Company.
4. Where ever required, I have obtained the Management representation about the Compliance of laws, rules and regulations and happening of events etc.
5. The Compliance of the provisions of Corporate and other applicable laws, rules, regulations, standards is the responsibility of management. My examination was limited to the verication of procedure on test basis.
6. The Secretarial Audit report is neither an assurance as to the future viability of the Company nor of the efcacy or effectiveness with which the management has conducted the affairs of the Company.
Sd/- (Jiwan Parkash Saini) Company Secretary in practice March 06, 2018 FCS No: 3671 CP No: 2100
34 AIESL
REPLY TO SECRETARIAL AUDITOR REPORT FOR FY 2016-17
Observations Management’s Replay a) There were few instance of delay in ling of e- This is Statement of Fact. forms under the Act and the rules made there under, but they were regularised by payment Some of the forms got delayed for ling, which were of additional fees under the Act. led with additional / late ling fee. The provisions of Act were thus complied with. b) Company has not appointed Independent Audit Committee was constituted by the Board in its directors pursuant to sub-section 4 & 5 of meeting held on 31-03-2016 comprising of three section 149 of Companies Act, 2013, hence members, with Govt Nominee Directors forming a no meeting of independent directors could be majority, pending the appointment of Independent held during the period under audit. Since, the Directors. company has not appointed independent directors, the company has not complied with In terms of provisions of Article of Association, the the provisions of section 177(2) and 178 of appointment of Independent Directors will be done by Companies Act, 2013 read with Rule 6 of Holding Company / Administrative Ministry. Companies (Meetings of Board and its Power) Rules, 2014 as regard the appoint- As there was no Independent Director on the Board of ment of Independent Director in composition AIESL, the matter was taken up with the Ministry of of the Audit Committee. Civil Aviation by Air India Limited ,Holding Company.
It was proposed that Audit Committee shall be reconstituted upon appointment of Independent Directors.
However, Public Companies which are Wholly-owned Subsidiaries of Unlisted Public Companies, are not required to appoint Independent Directors vide notication of MCA for Companies (Appointment and Qualication of Directors) Amendment Rules, 2017 dated 5th July 2017. c) Company has not constituted Remuneration In terms of provisions of Article of Association, the and Nomination Committee of the Board appointment of Independent Directors will be done by pursuant to Section 178 of Companies Act, Holding Company / Administrative Ministry. 2013 read with Rule 6 of Companies (Meetings of Board and its Power) Rules, As there were no Independent Directors on the Board 2014 as it meets the prescribed criteria as of AIESL, the matter was taken up with the Ministry of mentioned in such Rule 6. Civil Aviation by Air India Limited, Holding Company.
It was proposed that the Nomination and Remuneration Committee shall be constituted upon appointment of Independent Directors.
35 AIESL
Observations Management’s Replay
However, Public Companies which are Wholly- owned Subsidiaries of Unlisted Public Companies, are not required to appoint Independent Directors vide notication of MCA for companies (Appointment and Qualication of Directors) Amendment Rules, 2017 dated 5th July 2017.
Further, as per MCA notication dated 5th June 2015, exemption has been given to Government Companies from the applicability of Section 178 (2) (3) (4) of Companies Act 2013, pertaining to Directors.
Compliance of Labour Laws
1) Work Committee and Grievance Redressa Works Committee were existing in Air India Limited committee was not constituted under which also covered employees of Engineering Industrial Disputes Act, 1947. Department. However, after hiving off AIESL, steps have been initiated to form / transfer the works committee in AIESL across the regions / MRO. Discussions with Dy. CLC (C) / R.L. C (C) about modalities to be followed /worked out are in progress.
Necessary action is proposed to be taken to form the Works Committee in line with the advice of Dy. CLC (C) / R.L. C (C).
2) No register and records have been Issue of maintenance of registers and records maintained under Minimum Wages Act, under minimum wages act 1948 is being taken up 1948. with Dy. CLC (C) / R.L. C (C) and action will be taken as per their advice.
3) No register and records have been In erstwhile AIL, no registers and records were maintained by the company as prescribed being maintained and no return was sent. No under The Maternity Benet Act, 1961 and instruction/notice was received from Labour also No Annual Return has been submitted Enforcement Authorities in this regard. Issues by the company under this Act. being taken up with Dy. CLC (C) / R.L. C © to nd out modailies for compliance.
4) No compliance is made under the Need to see its applicability at present. Employment Exchange (Compulsory Notication of Vacancies ) Act, 1947.
36 AIESL
Annexure to Directors' Report for the year 2016-17 Annexur e
FORM NO. MGT 9 EXTRACT OF ANNUAL RETURN As on nancial year ended on 31.03.2017 Pursuant to Section 92 (3) of the Companies Act, 2013 and rule 1 2(1) of the Companies (Management & Administration) Rules, 2014.
I. REGISTRATION & OTHER DETAILS:
1. CIN U74210DL2004GOI125114
2. Registration Date 11/03/2004
3. Name of the Company AIR-INDIA ENGINEERING SERVICES LIMITED (AIESL)
Category/Sub category of the 4. Company Limited by shares/Union Government Compan y Company
Address of the Registered ofce & AIRLINES HOUSE, 113 GURUDWARA RAKABGANJ 5. contact details ROAD, NEW DELHI –110001 , Ph.No : 011-.2342210 9
6 Whether listed company No Name, Address & contact details of 7. the Registrar & Transfer Ag ent, if N.A. any.
II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY (All the business activities contributing 10 % or more of the total turnover of the company shall be stated) -
NIC Code % to tot al Sr Name and Description of main products / services of turnover of No the Produc t/ the servic e compan y
1 Technical Handling, MRO and other Services 9987 100%
III. PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANY:
Holding / Sr. Name and Address of the % of Applicable Subsidiary / No. Company CIN/GIN Shares Section Associate
1 Air India Limited 113, Airlines House, U62200DL2007GOI161431 Holding 100% 2 (46) Gurudwara Rakabganj Road, New Delhi, 110 001.
37 AIESL
IV. SHARE HOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity) : Category-wise Share Holdin g
No. of Shares held at the No. of Shares held at the end of the % Category of beginning of the year year [As on 31-03-201 7] Change
Shareholders [As on 01-04-2016 ] during the
During % of % of ye ar Demat Physica l the Total Demat Physic al To tal Total yea r Share s Share s
A. Promoters
(1) Indian a) Individual/ HUF ------b) Central Govt ------c) State Govt(s) ------d) Bodies Corp. - 166,666,500 166,666,500 100 - 166,666,500 166,666,500 100 0.00 e) Banks / FI ------f) Any other ------
Total shareholding of 166,666,500 166,666,500 100 - 166,666,500 166,666,500 100 0.00 Promoter (A)
B. Public Shareholding Not Applicable
1. Institutions a) Mutual Funds/UTI ------b) Banks / FI ------c) Central Govt. ------d) State Govt.(s) ------
e) Ventur e Capital ------Funds f) Insurance ------Com panies g) FIIs ------
h) Foreign Ventu re ------Capital Funds
i) Others (specif y) ------Foreign Banks
Sub-to tal (B)(1):------
38 AIESL
No. of Shares held at the beginning of No. of Shares held at the end of the % the year [As on 01-04-2016] year [As on 31-03-2017] Change Category of during Shareholders % of % of Demat Physical T otal Total Demat Physical Total Total the Shares Shares year
2. Non-Institutions Not Applicable a) Bodies Corp. (Market Maker + LLP) i) I Indian ii) Overseas b) Individuals i) Individual
shareholders
holding nominal share capital upto Rs. 1 lakh ii) Individual shareholders holding nominal share capital in excess of Rs. 1 lakh c) Others (specify) i) Non Resident Indians ii) Non Resident Indians - Non Repatriabl e iii) Ofce Bearers iv) Directors v) HUF vi) Overs eas Corporate Bodies v i) Foreign Nationals vii) Clearing Members v iii) Trusts ix) Foreign Bodies - D R
Sub-to tal (B)(2):------Total Public Shareholding (B) = ------(B)(1)+ (B)(2)
C. Shares he ld by Custodian for ------GDRs & ADRs G rand Total (A+B+C) 166,666,500 166,666,500 100 - 166,666,500 166,666,500 100 0.00
39 AIESL
B) Shareholding of Promoter -
Shareholding at the beginnin g Shareholding at the e nd
of the year of the year % chan ge % of % of In
Share s Share s Share- Sr. Shareholder's % of tota l % of to tal Pledged / Pledge d / holding No. Name No. of Share s No. of Shar es Encum - Encum- during Shares of the Shar es of t he bered to ber ed the compan y compa ny total to total year shares shares
Air India Li m ited 1 166,666,500 100 NIL 166,666,500 100 NIL 0.00 along with its nominees
C) Change in Promoters' Shareholding (please specify, if there is no change)
Sr Particulars Shareholding at th e Cumulative Shareh olding No. beginning of the year at end of the year % of total % of total No. of No. of shares of the shares of the shares shares company company
At the beginnin g of the year Air India Limited 166,666,500 100% At the end of the year Air India Limited 166,666,500 100%
D) Shareholding Pattern of top ten Shareholders: (Other than Directors, Promoters and Holders of GDRs and ADRs):
Shareholding at the Cumulative Shareholding beginning of the year at end of the year Sr For Each of the Top 10 Shareholders % of total % of total No No. of shares of No. of shares of
shares the shares the company company 1 NOT APPLICABLE 2 3 4 5 6 7 8 9 10
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E) Shareholding of Directors and Key Managerial Personnel:
Shareholding at the Cumulative Shareholding beginning of the year at end of the year S. Shareholding of each Directors and % of total % of total No. each Key Managerial Personnel No. of shares of No. of shares of shares the shares the company company
NIL
(Shares Held by Nominees of Air India only)
Total
V. INDEBTEDNESS -Indebtedness of the Company including interest outstanding/accrued but not due for payment. (In Rs Crore)
Secured Loans Unsecured Total excluding Deposits Loans Indebtedness deposits Indebtedness at the beginning of the nancial year
i) Principal Amount - 2,212,044,757 - 2,212,044,757
ii) Interest due but not paid - - - -
iii) Interest accrued but not due - - - -
Total (i+ii+iii) - 2,212,044,757 - 2,212,044,757
Change in Indebtedness during the nancial year
* Addition - 4,431,097,433 - 4,431,097,433
* Reduction - - - -
Net Change - 4,431,097,433 - 4,431,097,433
Indebtedness at the end of the nancial year
i) Principal Amount - 6,643,142,190 - 6,643,142,190
ii) Interest due but not paid - - - -
iii) Interest accrued but not due - - - -
Total (i+ii+iii) - 6,643,142,190 - 6,643,142,190
41 AIESL
VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL
A. Remuneration to Managing Director, Whole-time Directors and/or Manager:
(In gures)
Name of MD/WTD/ Manager Total Sr Particulars of Remuneration Amount No 1 Gross salary ------(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961 (b)Value of perquisites u/s 17(2) Income- tax Act, 1961 (c)Prots in lieu of salary under section 17(3) Income- tax Act, 1961
2 Stock Option 3 Sweat Equity 4 Commission as % of prot others, specify . 5 Others : (PF, DCS, House Perks tax etc) Total (A) ------Ceiling as per the Act ------*There are no Managing, Whole Time Directors in the Company.
B. Remuneration to other directors Sr Total Particulars of Remuneration Name of Directors No. Amount 1 Independent Directors ------Fee for attending board committee ------meetings Commission ------Others, please specify (Fees for attending Board Sub Committee ------Meetings) Total(1) ------2 Other Non-Executive Directors ------Fee for attending board committee ------meetings Commission ------Others, please specify ------Total (2) - - - - - Total (B)=(1+2) ------Total Managerial Remuneration ------Overall Ceiling as per the Act ------
42 AIESL
C. REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MD/MANAGER/WTD ( gures in Rs )
Sr. Key Managerial Personnel Particulars of Remuneration No. CEO CS CFO Tota l
1 Gross salary - (a) Salary as per provisions contained in section 17(1) of the Income-tax 30,27,600 - - - Act, 1961 (b) Value of perquisites u/s 17(2) Income-tax Act, 1961 - - - -
(c) Prots in lieu of salary under section 17(3) Income-tax Act, 1961 - - - -
2 Stock Option - - - - 3 Sweat Equity - - - -
4 Commission - - - -
- as % of prot - - - - Others, specify. - - - - 5 Others: (PF, DCS, House Perks tax etc) - - - -
Total - - - 30,27,600
VII. PENALTIES / PUNISHMENT/ COMPOUNDING OF OFFENCES:
Details of Section of Appeal Penalty / Authority the Brief made, if Type Punishment/ [RD / NCLT/ Companies Description any (give Compounding COURT] Act Details) fees imposed
A. COMPANY NIL
Penalty - - - - -
Punishment - - - - -
Compounding - - - - -
B. DIRECTORS NIL Penalty - - - - -
Punishment - - - - -
Compounding - - - - -
C. OTHER O FFICERS IN DEFAULT NIL Penalty - - - - - Punishment - - - - - Compounding - - - - -
43 AIESL
COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) OF THE COMPANIES ACT, 2013 ON THE FINANCIAL STATEMENTS OF AIR INDIA ENGINEERING SERVICES LIMITED FOR THE YEAR ENDED 31 MARCH 2017.
The preparation of nancial statement of AIR INDIA ENGINEERING SERVICES LIMITED for the ended 31 March 2017 in accordance with the nancial reporting framework prescribed under the Companies Act, 2013 (Act) is the responsibility of the Management of the Company. The statutory auditor appointed by the Comptroller and Auditor General of India under section 139(5) of the Act is responsible for expressing opinion on the nancial statements under Section 143 of the Act based on independent audit in accordance with the Standards on auditing prescribed under section 143(10) of the Act. This is stated to have been done by them vide their Audit Report dated 27 November 2017.
I, on the behalf of the Comptroller and Auditor General of India, have conducted a supplementary audit under section 143(6)(a) of the Act of the nancial statements of AIR INDIA ENGINEERING SERVICES LIMITED for the year ended 31 March 2017. This supplementary audit has been carried out independently without access to the working papers of the statutory auditor and is limited primarily to inquiries of the statutory auditor and company personnel and a selective examination of some of the accounting records. Based on my supplementary audit. I would like to highlight the following signicant matters under section 143(6)(b) of the Act which have come to my attention and which in my view are necessary for enabling a better understanding of the nancial statements and the related audit report.
A. Comment on Protability Statement of Prot and Loss Revenue from Operation (Note No.15) (Rs. 740.45 crores
This included an amount of Rs.37.53 crore (Rs.22.12 crore for the year 2016-17 and Rs.15.41 crore for the year 2015-16 invoice raised during the year 2016-17) towards the charges for Technical Services provided by the Company to Airline Allied Services Limited (AASL) at the rate of Rs.9212 per block hour (PBH) basis, for which no formal agreement has been signed by the Company with AASL.
Initially, considering the base rate of per block hour (PBH) as Rs.16750/- arrived for Wide Body (WB) eet of Air India Ltd., the Air India Ltd. and the Company (AIESL), agreed for charging 55 per cent of WB eet rate by the Company from the AASL eet i.e. Rs.9212 per block hour (i.e. 55% of Rs.16750). Subsequently, to make the operations of AASL viable, the Chief Operating Ofcer of AASL moved (October 2015) a proposal for reducing the rate from Rs.9212 PBH to Rs.1200 PBH, which was agreed to by the Chairman, AASL (i.e. the Chairman of the Holding Company, Air India Ltd.). The Company, however, continued raising the invoices on AASL at the rate of Rs.9212 PBH unilaterally, which was not being paid by AASL.
The above accounting treatment was in contravention to the provisions of Accounting Standard 9 ‘Revenue Recognition’ and the Signicant Accounting Policy 3(a) of the Company, stipulating that the revenue is recognized only when it can be reliably measured and it is reasonable to expect ultimate collection thereof.
In view of the above position, the Audit was unable to comment on the correctness of the amount of revenue recognized in the accounts of the Company for the year, towards technical services rendered to AASL.
44 AIESL
B. General
As per ‘Related Party Disclosure’ given in Note 23(8)(b) of the Notes to Accounts of AIESL, a net amount of Rs.8.86 crore was payable to Airline Allied Services Limited (i.e. Amount payable Rs.40.42 crore - Amount receivable Rs.31.56 crore). However, in the accounts of Airline Allied Services Limited for the year 2016-17, an amount of Rs.58.09 crore has been shown as receivable from AIESL.
The difference requires to be reconciled between AASL and AIESL, both subsidiary companies of Air India Limited.
For and on behalf of the Comptroller and Auditor General of India
Sd/- (Neelesh Kumar Sah) Principal Director of Commercial Audit & Ex-ofcio Member, Audit Board-I, New Delhi.
Place : New Delhi Date : 13.02.2018
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COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) OF THE COMPANIES ACT, 2013 ON THE FINANCIAL STATEMENTS OF AIR INDIA ENGINEERING SERVICES LIMITED FOR THE YEAR ENDED 31 MARCH 2017.
Observations Management’s Reply A. Comment on Protability Statement of Prot and Loss Revenue from Operation (Note No.15) (Rs. 740.45 crores
This included an amount of Rs. 37.53 crore The company has been in discussions with AASL (Rs.22.12 crore for the year 2016-17 and regarding the rate to be charged for the maintenance Rs.15.41 crore for the year 2015-16 invoice of the AASL aircraft which could not be concluded. raised during the year 2016-17) towards the charges for Technical Services provided by the However, the matter shall be sorted out by raising the Company to Airline Allied Services Limited issue with the higher authority during the forthcoming (AASL) at the rate of Rs.9212 per block hour nancial year and suitable action shall be taken (PBH) basis, for which no formal agreement accordingly. has been signed by the Company with AASL.
Initially, considering the base rate of per block hour (PBH) as Rs.16750/- arrived for Wide Body (WB) eet of Air India Ltd., the Air India Ltd. and the Company (AIESL), agreed for charging 55 per cent of WB eet rate by the Company from the AASL eet i.e. Rs.9212 per b l o c k h o u r ( i . e . 5 5 % o f R s . 1 6 7 5 0 ) . Subsequently, to make the operations of AASL viable, the Chief Operating Ofcer of AASL moved (October 2015) a proposal for reducing the rate from Rs.9212 PBH to Rs.1200 PBH, which was agreed to by the Chairman, AASL (i.e. the Chairman of the Holding Company, Air India Ltd.). The Company, however, continued raising the invoices on AASL at the rate of Rs.9212 PBH unilaterally, which was not being paid by AASL.
The above accounting treatment was in contravention to the provisions of Accounting Standard 9 ‘Revenue Recognition’ and the Signicant Accounting Policy 3(a) of the Company, stipulating that the revenue is recognized only when it can be reliably measured and it is reasonable to expect ultimate collection thereof.
In view of the above position, the Audit was unable to comment on the correctness of the
46 AIESL
Observations Management’s Reply
amount of revenue recognized in the accounts of the Company for the year, towards technical services rendered to AASL.
B. General
As per ‘Related Party Disclosure’ given in Note The difference in intercompany Account is mainly 23(8)(b) of the Notes to Accounts of AIESL, a due to the rate applied for raising invoice on AASL, net amount of Rs.8.86 crore was payable to which is based on the rate agreed between the Airline Allied Services Limited (i.e. Amount Company and Holding Company. payable Rs.40.42 crore - Amount receivable Rs.31.56 crore). However, in the accounts of However, the matter shall be sorted out by raising the Airline Allied Services Limited for the year 2016- issue with the higher authority during the forthcoming 17, an amount of Rs.58.09 crore has been nancial year and suitable action shall be taken shown as receivable from AIESL. accordingly. The difference requires to be reconciled between AASL and AIESL, both subsidiary companies of Air India Limited.
47 AIESL
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF AIR INDIA ENGINEERING SERVICES LIMITED
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying nancial statements of Air India Engineering Services Limited (“the Company”), which comprise the Balance Sheet as at 31st March, 2017, the Statement of Prot and Loss, the Statement of Cash Flows for the year then ended and a summary of signicant 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 nancial statements that give a true and fair view of the nancial position and nancial performance of the Company in accordance with accounting principles generally accepted in India including the Accounting Standards specied 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 judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal nancial controls, that were operating effectively for ensuring the accuracy and completeness of accounting records, relevant to the preparation and presentation of the nancial 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 nancial 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 Rules made there under.
We have conducted our audit in accordance with the Standards on Auditing specied 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 nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the nancial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal nancial controls relevant to the Company's preparation of the nancial 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 nancial control system over nancial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of 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 nancial statements.
We believe that the audit evidence we have obtained is sufcient and appropriate to provide a basis for our modied audit opinion on the nancial statements.
48 AIESL
BASIS FOR QUALIFIED OPINION
Attention is drawn to Annexure A where we have discussed the basis of our qualied opinion
OPINION
In our opinion and to the best of our information and according to the explanations given to us, except for the matters discussed in Annexure A to this report the nancial 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, 2017, and their loss and their cash ows for the year ended on that date.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by the Companies (Auditor's Report) Order, 2016 (“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 B” a statement on the matters specied in paragraphs 3 and 4 of the Order to the extent applicable.
2. 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 not been kept by the Company so far as it appears from our examination of those books.
c) The Balance Sheet, the Statement of Prot and Loss and the Statement of Cash Flows dealt with by this Report are in agreement with the books of account.
d) In our opinion, the Balance Sheet, the Statement of Prot and Loss and the Statement of Cash Flows comply with the Accounting Standards specied under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 except to the extent explained by our qualied opinion.
e) On the basis of written representations received from the Directors as on 31st March, 2017, and taken on record by the Board of Directors, none of the Directors are disqualied as on 31st March, 2017, from being appointed as a Director in terms of Section 164(2) of the Act.
f) Having regard for adverse remarks on unreconciled balances in Annexure A, which in our opinion are pervasive to individual accounting balances and overall presentation of the nancial statement, the company does not have an effectively operating internal nancial control system in place.
g) 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 litigation in Note 23 point 1 on its nancial position in its nancial statements.
(ii) The Company has made a provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, and as required on long term contracts including derivative contracts.
49 AIESL
(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund.
(iv) The Company has provided requisite disclosures, in the nancial statements as to holdings as well as dealings in specied bank notes during the period from 8th November, 2016 to 30th December, 2016 based on audit procedures and relying on the management representation we report that the disclosures are in accordance with the books of accounts maintained by the Company and as produced to us by the management. Refer to Note 24.
For D. B. Ketkar & Co. Chartered Accountants FRN: 105007W
N. S.Ketkar (Partner) Place: New Delhi Membership No.: 040521 Date: 27th November 2017
50 AIESL
“ANNEXURE A” TO THE INDEPENDENT AUDITOR'S REPORT
1. OTHER INTANGIBLE ASSETS
In earlier year the Company has capitalized assets under the head “Other Intangible Assets” for an amount of `271,38,28,069/- (Rupees Two hundred seventy one crores thirty eight lacs twenty eight thousand sixty nine only) which is made up of entire Payroll Expenses, Staff Expenses, Gratuity & Leave Salary expenses and other general expenses (e.g. Rent, Repair & Maintenances, Electricity & Heating Charges etc) incurred during the period from October 2014 to December 2014 towards obtaining CAR – 145 (License from DGCA for carrying out MRO services).
As per the opinion as set out in the audit report of nancial year 2014-15 by the then auditor, capitalisation of “Other Intangible Assets” was not in accordance with the accounting standards, basic accounting assumptions and principles.
Consequently, expenses and losses were understated in Prot & Loss Account and Fixed Assets are overstated to the extent of amount of Rs 271,38,28,069/- (Rupees Two hundred seventy-one crores thirty- eight lacs twenty thousand sixty-nine only) in the Balance Sheet in that year.
Consequential effect in current year of the same is that Fixed Assets are overstated to the extent of amount of `271,38,28,069/- (Rupees Two hundred seventy-one crores thirty-eight lacs twenty thousand sixty-nine only) and reserve and surplus being accumulated losses understated to that extent.
Further as per accounting policy adopted for depreciation/amortisation “Intangible assets which have a useful economic life are amortised over the estimated useful life”. However, the company has not amortised any amount during current year as well as previous year out of such intangible assets created, which clearly indicates departure from the signicant accounting policies as adopted by the company as well as provision of Accounting Standard 26 of “Intangible Assets”.
Provision of Para 63 of Accounting Standard 26 of “Intangible Assets” requires “The depreciable amount of an intangible asset should be allocated on a systematic basis over the best estimate of its useful life. There is a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. Amortisation should commence when the asset is available for use.”
2. PROVISION FOR POST EMPLOYMENT LIABILITIES
We nd that the Company has not correctly stated its liability towards Air India Limited on account of Employee Benets transferred at time of hiving off. There is no formal agreement for transfer of employees or quantication of retirement benets attributable to their service with the Holding Company. We are of the opinion, that the actual quantum of benet payable on the date of transfer of individual employee should be worked out to nd out exact sum due from the Holding Company. Also, the Gratuity and Leave Encashment Liability accruing to the Holding Company will have to be recorded as receivable at full value as would have the employees received if employment had been terminated on the date of transfer.
51 AIESL
ANNEXURE – B TO THE AUDITOR'S REPORT
The Annexure referred to in paragraph 1 of the Auditor's Report on Other Legal and Regulatory Requirements of even date to the members of the Company on the nancial statements for the year ended 31st March, 2017.
I. a. The Company has not maintained proper records showing full particulars, including quantitative details and situation of xed assets. The assets were transferred on block basis on demerger and no records are available for the transferred assets.
b. As explained to us, the Company has a policy of verication of xed assets on bi-annual basis. However, though due, physical verication of xed assets was not carried by the management during the year.
c. According to the information and explanations given to us and on the basis of our examination of the records, the Company does not own any immovable property. ii. The Company is a service company, primarily rendering repair services on aircrafts. Accordingly, it does not hold any physical inventories. Thus, paragraph 3(ii) of the Order is not applicable to the Company. iii. The Company has not granted any loans, secured or unsecured, to companies, rms, Limited Liability Partnership or other parties covered in the register maintained under section 189 of the Act. iv. The Company has not granted any loans or provided any guarantees or security to the parties covered under Section 185 of the Act. The Company has complied with provisions of Section 186 of the Act in respect of investments made or loans or guarantee or security provided to the parties covered under Section 186. v. The Company has not accepted any deposits from the public. vi. The Central Government has not prescribed the maintenance of cost records under Section 148(1) of the Act, for any of the services rendered by the Company. vii. a. According to the information and explanation given to us and based on the records of the Company examined by us, the Company is not regular in depositing the undisputed statutory dues, including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Value Added Tax, Custom Duty, Excise Duty and other material statutory dues, as applicable, with the appropriate authorities in India. The extent of arrears of outstanding dues are -
Nature of Statutory Dues Amount Outstanding for more than 6 months as on 31 March 2017
Income Tax Act (TDS) 192B 51,06,06,553
Finance Act 1994 (Service Tax) 3,01,38,198
b. According to the information and explanation given to us and based on the records of the Company examined by us, there are no dues of Income Tax, Wealth Tax, Service Tax, Value Added Tax, Custom Duty and Excise Duty which have not been deposited on account of any dispute.
52 AIESL viii. The Company does not have any loans or borrowings from any nancial institution, banks, government or debenture holders during the year. Accordingly, paragraph 3(viii) of the Order is not applicable. ix. The Company did not raise any money by way of initial public offer or further public offer (including debt instruments) and term loans during the year. Accordingly, paragraph 3 (ix) of the Order is not applicable. x. According to the information and explanations given to us, no material fraud by the Company or on the Company by its ofcers or employees has been noticed or reported during the course of our audit. xi. The provisions of Section 197 are not applicable to the Company. Accordingly, paragraph 3(xi) of the Order is not applicable. xii. In our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable. xiii. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the nancial statements as required by the applicable accounting standards. xiv. According to the information and explanations give to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. xv. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable. xvi. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934. Accordingly, paragraph 3(xvi) of the Order is not applicable.
For D. B. Ketkar & Co. Chartered Accountants FRN: 105007W
N. S. Ketkar (Partner)
Place: New Delhi Membership No.: 040521
Date: 27th November 2017
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“ANNEXURE C” TO THE AUDITORS' REPORT
Report on the Directions under Sub-section 5 of Section 143 of the Companies Act, 2013 (“the Act”)
According to the information and explanations given to us and on the basis of our examination of the records of the Company we give our comments as below:
Sr. Directions Auditor Comment Impact on No. Financial Statements 1. Whether the company has clear title/ Air India Ltd, the parent at Point 5(b) of Nil lease deeds for freehold and leasehold the MOU dated 5th April, 2013 has respectively? If not please state the area permitted the company to use of freehold or leasehold land for which title buildings, hangers, workshops etc. deed in not available? The underlying title is held by Air India.
2. Whether there was any case of waiver/ No such case. Nil write off of debts/loans/interests etc. if yes, the reasons there for and the amount involved
3. Whether proper records are maintained The company does not have inven- Nil for inventories lying with third parties & tories. Further no assets were received assets received as gifts/grants from the as grants from the Government or other Government or other Authorities. Authorities.
For D. B. Ketkar & Co. Chartered Accountants FRN: 105007W
N. S. Ketkar (Partner) Place: New Delhi Membership No.: 040521
Date: 27th November 2017
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MANAGEMENT REPLIES TO THE INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENT OF AIR INDIA ENGINEERING SERVICES LIMITED FOR THE FINANCIAL YEAR 2016-17 Audit Observations Management’s Comment
Report on the Financial Statements
We have audited the accompanying nancial This is a Statement of Fact. statements of Air India Engineering Services Limited (“the Company”), which comprise the Balance Sheet as at 31st March, 2017, the Statement of Prot and Loss, the Statement of Cash Flows for the year then ended and a summary of signicant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for This is a Statement of Fact. the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these nancial statements that give a true and fair view of the nancial position and nancial performance of the Company in accordance with accounting principles generally accepted in India including the Accounting Standards specied 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 judgements and estimates that are reasonable and prudent; and design, implement- ation and maintenance of adequate internal nancial controls, that were operating effectively for ensuring the accuracy and completeness of accounting records, relevant to the preparation and presentation of the nancial 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 This is a Statement of Fact. nancial 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
55 AIESL
Audit Observations Management’s Comment under the provisions of the Act and Rules made there under.
We have conducted our audit in accordance with the Standards on Auditing specied 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 nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the nancial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal nancial controls relevant to the Company's preparation of the nancial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumst- ances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal nancial control system over nancial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of 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 nancial statements.
We believe that the audit evidence we have obtained is sufcient and appropriate to provide a basis for our modied audit opinion on the nancial statements
Basis for Qualied Opinion
Attention is drawn to Annexure A where we have The comments are mentioned at Annexure A discussed the basis of our qualied opinion
Opinion
In our opinion and to the best of our information and Audit Comments are noted. according to the explanations given to us, except for the matters discussed in Annexure A to this report the nancial 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
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Audit Observations Management’s Comment the Company as at 31st March, 2017, and their loss and their cash ows for the year ended on that date.
Report on Other Legal and Regulatory Require- ments
1. As required by the Companies (Auditor's This is a Statement of Fact. Report) Order, 2016 (“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 B” a statement on the matters specied in paragraphs 3 and 4 of the Order to the extent applicable.
2. As required by Section 143(3) of the Act, we report that:
a) We have sought and obtained all the This is a Statement of Fact. 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 This is a Statement of Fact. required by law have not been kept by the Company so far as it appears from our examination of those books.
c) The Balance Sheet, the Statement of This is a Statement of Fact. Prot and Loss and the Statement of Cash Flows dealt with by this Report are in agreement with the books of account.
d) In our opinion, the Balance Sheet, the This is a Statement of Fact. Statement of Prot and Loss and the Statement of Cash Flows comply with the Accounting Standards specied under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 except to the extent explained by our qualied opinion.
e) On the basis of written representations This is a Statement of Fact. received from the Directors as on 31st March, 2017, and taken on record by the Board of Directors, none of the Directors are disqualied as on 31st March, 2017, from being appointed as a Director in terms of Section 164(2) of the Act.
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Audit Observations Management’s Comment f) Having regard for adverse remarks on Majority of the balances have been reconciled as on unreconciled balances in Annexure A, date and the efforts are on to complete the which in our opinion are pervasive to reconciliation of the remaining balances also during individual accounting balances and the forthcoming nancial year. overall presentation of the nancial statement, the company does not have an effectively operating internal nancial control system in place. g) 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 This is a Statement of Fact. impact of pending litigation in Note 23 point 1 on its nancial position in its nancial statements.
(ii) The Company has made a provision, as required under the applicable law This is a Statement of Fact. or accounting standards, for material foreseeable losses, if any, and as required on long term contracts including derivative contracts.
(iii) There has been no delay in transferring amounts, required to be This is a Statement of Fact. t r a n s f e r r e d , t o t h e I n v e s t o r Education and Protection Fund.
(iv) The Company has provided requisite This is a Statement of Fact. disclosures, in the nancial statements as to holdings as well as dealings in specied bank notes during the period from 8th November, 2016 to 30th December, 2016 based on audit procedures and relying on the management representation we report that the disclosures are in accordance with the books of accounts maintained by the Company and as produced to us by the management. Refer to Note 24.
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“ANNEXURE A” TO THE INDEPENDENT AUDITOR'S REPORT Audit Observations Management’s Comment
OTHER INTANGIBLE ASSETS
In earlier year the Company has capitalized assets DGCA Licence for CAR-145 certication for the under the head “Other Intangible Assets” for an MRO was received on 1st Jan 2015. The expenditure amount of `271,38,28,069/- (Rupees Two hundred incurred in creating this asset was capitalised in the seventy one crores thirty eight lacs twenty eight books of the Company as of 31st March 2015, based thousand sixty nine only) which is made up ofentire on this license, the Company has also applied for Payroll Expenses, Staff Expenses, Gratuity & Leave other certications like FAA, EASA approval for its Salary expenses and other general expenses (e.g. facilities. The Company therefore believes that Rent, Repair & Maintenances, Electricity & Heating there has been no diminution in the value of the Charges etc) incurred during the period from asset as of date. Since the license was issued by October 2014 to December 2014 towards obtaining DGCA for an indenite period of time, and has not CAR – 145 (License from DGCA for carrying out been suspended at any point of time since its issue, MRO services). no impairment loss has been recognised by the Company for the year under review. As per the opinion as set out in the audit report of nancial year 2014-15 by the then auditor, capitalisation of “Other Intangible Assets” was not in accordance with the accounting standards, basic accounting assumptions and principles.
Consequently, expenses and losses were understated in Prot & Loss Account and Fixed Assets are overstated to the extent of amount of`271,38,28,069/- (Rupees Two hundred seventy- one crores thirty-eight lacs twenty thousand sixty- nine only) in the Balance Sheet in that year.
Consequential effect in current year of the same is that Fixed Assets are overstated to the extent of amount of `271,38,28,069/- (Rupees Two hundred seventy-one crores thirty-eight lacs twenty thousand sixty-nine only) and reserve and surplus being accumulated losses understated to that extent.
Further as per accounting policy adopted for depreciation/amortisation “Intangible assets which have a useful economic life are amortised over the estimated useful life”. However, the company has not amortised any amount during current year as well as previous year out of such intangible assets created, which clearly indicates departure from the signicant accounting policies as adopted by the company as well as provision of Accounting Standard 26 of “Intangible Assets”.
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Audit Observations Management’s Comment
Provision of Para 63 of Accounting Standard 26 of “Intangible Assets” requires “The depreciable amount of an intangible asset should be allocated on a systematic basis over the best estimate of its useful life. There is a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. Amortisation should commence when the asset is available for use.”
PROVISION FOR POST EMPLOYMENT LIABILITIES
We nd that the Company has not correctly stated The liability as on 31.3.2015 was worked out based its liability towards Air India Limited on account of Employee Benets transferred at time of hiving off. on the actuarial valuation and the liability had been There is no formal agreement for transfer of transferred by the Holding company to AIESL. The employees or quantication of retirement benets liability in respect of engineering personnel attributable to their service with the Holding transferred from AASL and AIX would be transferred Company. We are of the opinion, that the actual by the respective companies in 2017-18. quantum of benet payable on the date of transfer of individual employee should be worked out to nd out exact sum due from the Holding Company. Also, the Gratuity and Leave Encashment Liability accruing to the Holding Company will have to be recorded as receivable at full value as would have the employees received if employment had been terminated on the date of transfer.
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“ANNEXURE B” TO THE INDEPENDENT AUDITOR'S REPORT Audit Observations Management’s Comment
The Annexure referred to in paragraph 1 of the Auditor's Report on Other Legal and Regulatory Requirements of even date to the members of the Company on the nancial statements for the year ended 31st March, 2017.
I. a. The Company has not maintained proper This is a Statement of Fact. records showing full particulars, includ- ing quantitative details and situation of xed assets. The assets were transferred on block basis on demerger and no itemised records are available for the transferred assets.
b. As explained to us, the Company has a This is a Statement of Fact. policy of verication of xed assets on bi- annual basis. However, though due, physical verication of xed assets was not carried by the management during the year.
c. According to the information and This is a Statement of Fact. explanations given to us and on the basis of our examination of the records, the Company does not own any immovable property. ii. The Company is a service company, primarily This is a Statement of Fact. rendering repair services on aircrafts. Accordingly, it does not hold any physical inventories. Thus, paragraph 3(ii) of the Order is not applicable to the Company. iii. The Company has not granted any loans, This is a Statement of Fact. secured or unsecured, to companies, rms, Limited Liability Partnership or other parties covered in the register maintained under section 189 of the Act. iv. The Company has not granted any loans or This is a Statement of Fact. provided any guarantees or security to the parties covered under Section 185 of the Act. The Company has complied with provisions of Section 186 of the Act in respect of investments made or loans or guarantee or security provided to the parties covered under Section 186.
61 AIESL
Audit Observations Management’s Comment v. The Company has not accepted any deposits This is a Statement of Fact. from the public. vi. The Central Government has not prescribed This is a Statement of Fact. the maintenance of cost records under Section 148(1) of the Act, for any of the services rendered by the Company. vii. a. According to the information and This is a Statement of Fact. explanation given to us and based on the records of the Company examined by us, the Company is not regular in depositing the undisputed statutory dues, including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Value Added Tax, Custom Duty, Excise Duty and other material statutory dues, as applicable, with the appropriate authorities in India. The extent of arrears of outstanding dues are -
Nature of Amount Out- Statutory Dues standing for more than 6 months as on 31 March 2017
Income Tax Act (TDS) 192B 51,06,06,553
Finance Act 1994 (Service Tax) 3,01,38,198
b. According to the information and This is a Statement of Fact. explanation given to us and based on the records of the Company examined by us, there are no dues of Income Tax, Wealth Tax, Service Tax, Value Added Tax, Custom Duty and Excise Duty which have not been deposited on account of any dispute. viii. The Company does not have any loans or This is a Statement of Fact. borrowings from any nancial institution, banks, government or debenture holders during the year. Accordingly, paragraph 3(viii) of the Order is not applicable.
62 AIESL
Audit Observations Management’s Comment ix. The Company did not raise any money by way This is a Statement of Fact. of initial public offer or further public offer (including debt instruments) and term loans during the year. Accordingly, paragraph 3 (ix) of the Order is not applicable. x. According to the information and explanations This is a Statement of Fact. given to us, no material fraud by the Company or on the Company by its ofcer so remployees has been notice do reported during the course of our audit. xi. The provisions of Section 197 are not This is a Statement of Fact. applicable to the Company. Accordingly, paragraph 3(xi) of the Order is not applicable. xii. In our opinion and according to the information This is a Statement of Fact. and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable. xiii. According to the information and explanations This is a Statement of Fact. given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the nancial statements as required by the applicable accounting standards. xiv. According to the information and explanations This is a Statement of Fact. give to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. xv. According to the information and explanations This is a Statement of Fact. given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable. xvi. The Company is not required to be registered This is a Statement of Fact. under section45-IA of the Reserve Bank of India Act1934. Accordingly, paragraph 3(xvi) of the Order is not applicable.
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BALANCE SHEET AS AT 31ST MARCH 2017 (Amount in Rupees) Particulars Note No. As at March 31, 2017 As at March 31, 2016 EQUITY AND LIABILITIES : Shareholders' Funds a) Share Capital 2 1,666,665,000 1,666,665,000 b) Reserves and Surplus 3 (13,064,519,304) (8,012,918,413) (11,397,854,304) (6,346,253,413) Share Application Money Pending Allotment 4 - -
Non-current Liabilities a) Long Term Borrowings 5 6,643,142,190 2,212,044,757 b) Deferred Tax Liabilities (Net) c) Other Long Term Liabilities d) Long Term Provisions 6 4,492,618,667 4,347,167,881 11,135,760,857 6,559,212,638 Current Liabilities a) Short Term Borrowings - - b) Trade Payables 7 983,028,335 56,881,302 c) Other Current Liabilities 8 4,407,669,993 3,985,996,115 d) Short Term Provisions 9 928,867,800 931,493,477 6,319,566,128 4,974,370,894
TOTAL 6,057,472,681 5,187,330,120 ASSETS : Non-current Assets a) Fixed Assets (i) Tangible Assets 10 975,699,677 1,221,621,683 (ii) Intangible Assets 10 2,713,828,069 2,713,828,069 (iii) Capital Work-in-Progress - - (iv) Intangible Assets under development - -
3,689,527,745 3,935,449,752 b) Non-Current Investments - - c) Deferred Tax Assets (net) - - d) Long Term Loans and Advances 11 91,599,901 20,428,566 e) Other Non-Current Assets 14 -
91,599,901 20,428,566 Current Assets a) Current Investments - - b) Inventories - - c) Trade Receivables 12 2,019,866,471 779,706,883 d) Cash and Bank Balances 13 117,735,729 440,591,603 e) Short Term Loans and Advances - - f) Other Current Assets 14 138,742,834 11,153,316 2,276,345,034 1,231,451,802
TOTAL 6,057,472,681 5,187,330,120 Signicant Accounting Policies 1 Notes forming part of the Financial Statement 2-24 As per our report of even date attached For and on Behalf of For and on behalf of the Board Sd/- Sd/- Sd/- D.B. Ketkar & Co. Rajiv Bansal V.S. Hejmadi Chartered Accountants Chairman Director-Finance FRN : 105007W Sd/- Sd/- Sd/- Sd/- N.S. Ketkar Gagan Batra C.N. Hemalatha H.R. Jagannath Partner Company Secretary Chief of Finance Chief Executive Ofcer M.No. 40521 Place : New Delhi Date : 27 November 2017 64 AIESL
STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH 2017 (Amount in Rupees) Particulars Note No. 2016-17 2015-16 Revenue I Revenue from Operation 15 7,404,502,467 6,202,713,779 II Other Income 16 338,663 4,544 III Total Reveune (I+II) 7,404,841,130 6,202,718,323 IV Expenses Cost of Material Consumed - - Purchase of Stock in trade - - Change in inventories - - Employee Benet Expenses 17 10,190,601,641 10,309,267,545 Finance Costs 18 181,836,002 56,390,370 Depreciation and Amortization Expense 19 411,003,133 372,305,985 Other Expenses 20 1,595,554,746 1,062,118,933 Total Expenditure 12,378,995,522 11,800,082,834 Prior Period Adjustments (Net) 21 77,446,499 (11,155,179) Total Expenditure After Prior Period Adj 12,456,442,022 11,788,927,655 V Prot/ (Loss) before Exceptional and Extraordinary (5,051,600,891) (5,586,209,333) Items and Tax (III-IV) VI Exceptional Items - - VII Prot/ (Loss) before Extraordinary Items and Tax (V+VI) (5,051,600,891) (5,586,209,333) VIII Extra Ordinary Items (Net) - - IX Prot/ (Loss) before Tax (VII+VIII) (5,051,600,891) (5,586,209,333) X Tax Expenses : - - i) Current Tax ii) Tax Adjustment relating to earlier year - - iii) Deferred Tax - - XI Prot/ (Loss) after Tax for the period (IX-X) (5,051,600,891) (5,586,209,333) XII Earning per Share of Rs. 10 each Basic 22 (30.31) (11,056.63) Diluted 22 (30.31) (11,056.63) Signicant Accounting Policies 1
Notes forming part of the Financial Statement 2-24 As per our report of even date attached
For and on Behalf of For and on behalf of the Board
Sd/- Sd/- Sd/- D.B. Ketkar & Co. Rajiv Bansal V.S. Hejmadi Chartered Accountants Chairman Director-Finance FRN : 105007W
Sd/- Sd/- Sd/- Sd/- N.S. Ketkar Gagan Batra C.N. Hemalatha H.R. Jagannath Partner Company Secretary Chief of Finance Chief Executive Ofcer M.No. 40521
Place : New Delhi Date : 27 November 2017
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CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2017 (Amount in Rupees) Particulars As at March 31, 2017 As at March 31, 2016 A. CASH FLOW FROM OPERATING ACTIVITIES Net (Loss) / Prot Before Taxes: (5,051,600,891) (5,586,209,333) Adjustment for : Exceptional Items - - Extraordinary Items - - Depreciation and amortisation 411,003,133 372,305,985 Provision for Bad & Doubtful Receivables and Advances Provision for Employee Benets 145,450,786 1,047,909,059 Provision for Wealth Tax - (Prot)/Loss on sale of xed assets 241,973 Interest and Finance Charges 556,695,892 1,420,215,044 Operating (Loss) / Prot Before Working Capital Changes (4,494,904,999) (4,165,994,288) Adjustments for : (Increase) / Decrease in Trade and Other Receivables (1,438,920,442) (133,059,329) Increase / (Decrease) in Trade and Other Payables 5,776,292,667 4,441,103,531 4,337,372,225 4,308,044,202 Net Cash Flow (used in)/ from Operating Activities (157,532,774) 142,049,914 B. CASH FLOW FROM INVESTING ACTIVITIES Acquisition of xed assets (165,323,100) (108,587,828) Acquisition of other non current assets - Net Cash Flow used in Investing Activities (165,323,100) (108,587,828) C. CASH FLOW FROM FINANCING ACTIVITIES Issue of Shares, incl Share application money pending allotment - - Interest Paid Net Cash Flow from/(used in) Financing Activities - - Net increase/ (Decrease) in Cash and Cash equivalents (322,855,874) 33,462,086 Cash and Cash equivalents (Opening balance) 440,591,603 407,129,517 Cash and Cash equivalents (Closing balance) 117,735,729 440,591,603
Notes 1. The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Standard 3 (AS-3) on “Cash Flow Statements” and present cash ows by operating, investing and nancing activities.
As per our report of even date attached
For and on Behalf of For and on behalf of the Board
Sd/- Sd/- Sd/- D.B. Ketkar & Co. Rajiv Bansal V.S. Hejmadi Chartered Accountants Chairman Director-Finance FRN : 105007W
Sd/- Sd/- Sd/- Sd/- N.S. Ketkar Gagan Batra C.N. Hemalatha H.R. Jagannath Partner Company Secretary Chief of Finance Chief Executive Ofcer M.No. 40521
Place : New Delhi Date : 27 November 2017
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NOTES FORMING PART OF THE FINANCIAL STATEMENT FOR THE YEAR ENDED MARCH 31, 2017
NOTE “1”
A. CORPORATE INFORMATION
The company secured DGCA approval for providing MRO services effective 01 January 2015. The MOUs entered into by the Company with its parent company, Air India Ltd and subsidiary companies of Air India Ltd, viz. 'Air India Charters Ltd' and 'Airline Allied Services Ltd' for rendering their aircraft engineering related services.
B. ACCOUNTING CONVENTION
i. These nancial statements are prepared under historical cost convention on going concern concept on accrual basis and in accordance with the mandatory accounting standards prescribed under Section 133 of the Companies Act, 2013 ('Act') read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notied) and guidelines issued by the Institute of Chartered Accountants of India to the extent applicable.
ii. The preparation of nancial statements in conformity with generally accepted accounting principles in India requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the nancial statements and the reported amounts of revenue and expenses during the reporting period. Differences between the actual results and estimates are recognized in the period in which results are known / materialized.
iii. The Company being in service sector, there is no specic operating cycle; 12 months period has been adopted as “the Operating Cycle” in-terms of the provisions of Schedule III to the Companies Act 2013.
C. SIGNIFICANT ACCOUNTING POLICIES
1. FIXED ASSETS
A) TANGIBLE ASSETS: Fixed Assets are stated at cost including incidental costs incurred pertaining to the acquisition and bringing them to the location for use and interest on loans borrowed where applicable, upto the date of putting the concerned asset to use.
B) INTANGIBLE ASSETS: DGCA License – all expenses incurred including man power cost prior to three months from the date of obtaining the License and directly attributable to DGCA License for CAR-145 MRO with certication has been capitalized.
2. DEPRECIATION / AMORTIZATION
a) Depreciation is provided on all assets on straight-line method over the useful life of assets as provided in Part C of Schedule II of the Companies Act 2013, keeping a residual value of 5% of the original cost.
b) Depreciation on additions to “Other Fixed Assets” is provided for the full year in the year of acquisition and no depreciation is provided in the year of disposal.
c) Intangible asset which have a useful economic life are amortized over the estimated useful life.
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3. REVENUE RECOGNITION
a) Revenue is recognized only when it can be reliably measured and it is reasonable to expect ultimate collection. Revenue from operations includes technical handling revenue, MRO services revenue, & other servicing revenue.
b) Other servicing revenue is recognized on the basis of budgeted rate per block hours multiplied by actual block hours for AIL & AASL. Billing of engineering services rendered to AICL is based on the agreed rates with them. MRO services revenue & Technical Handling Revenue are recognized as shared by Holding company & other group companies and in some of the cases bills are raised directly by AIESL after completion of services as agreed.
c) Other operating revenue is related to training charges recovered from trainees and recognized as and when right to receive arises.
d) Income from Interest is recognized on a time proportion basis.
e) Gain or loss arising out of sale/scrap of Fixed Assets over the net depreciated value is taken to Statement of Prot & Loss as Non-Operating Revenue or Other Expenses.
4. EMPLOYEE BENEFITS
a) Short term employee benets: All employee benets falling due wholly within twelve months of rendering the services are classied as short term employee benets. The benets like salaries, wages, and short term compensated absences etc. and the expected cost of bonus, ex-gratia are recognized in the period in which the employee renders the related services.
b) Post-employment benets:
Dened Contribution Plans consist of contributions to Employees Provident Fund and Employees State Insurance Scheme. The Parent Company, viz Air India Ltd, and subsidiary airlines of Air India Ltd, viz. 'Air India Charters Ltd' and 'Airline Allied Services Ltd' have created separate Trusts to administer Provident Fund contributions to which contributions are made regularly. Air India Charters Ltd' another subsidiary of AIL is remitting to General Provident Fund (GPF). ESI dues are regularly deposited with government authorities.
Dened Benet Plans, which are not funded, consist of Gratuity, Leave Encashment including Sick Leave and other benets.
The liability for Gratuity and Leave Encashment is actuarially determined under the Projected Unit Credit Method at the end of the nancial year.
5. IMPAIRMENT OF ASSETS
At each Balance Sheet date, the carrying amount of assets is tested for impairment in terms of AS-28 so as to determine:
a) the provision for impairment loss, if any; and
b) the reversal of impairment loss recognized in previous periods, if any,
Impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount.
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6. TAXES ON INCOME Provision for current tax, if any, is made in accordance with the provisions of Income Tax Act, 1961. Deferred tax is recognised on timing differences between book and taxable prot using the tax rates and laws that have been enacted or substantively enacted as on the Balance Sheet date. The Deferred tax assets are recognised and carried forward to the extent that there is a virtual certainty that the assets will be realised in the future. 7. PROVISIONS, CONTINGENT LIABILITIES & CONTINGENT ASSETS a) Provisions involving a substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outow of resources. b) Contingent liabilities exceeding Rs.1,00,000.00 in each case are disclosed in respect of possible obligations that may arise from past events but their existence is conrmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. c) Contingent Assets are neither recognized nor disclosed in the nancial statements. 8. PREPAID EXPENSES/LIABILITY FOR EXPENSES Pre-paid expenses / Liabilities for expenses recognized – Rs10,000.00 and above in each case. 9. INVESTMENTS Current investments are carried at lower of cost and quoted/fair value, computed category wise. Long Term Investments are stated at cost. Provision for diminution in the value of long-term investments is made only if such a decline is other than temporary.
NOTE "2" : SHARE CAPITAL (Amount in Rupees) Particulars As at March 31, 2017 As at March 31, 2016 a) AUTHORISED 1000,000,000 Equity Shares (Previous Year : 100,00,000) of Rs.10 each 10,000,000,000.00 100,000,000.00
10,000,000,000.00 100,000,000.00 b) ISSUED, SUBSCRIBED AND FULLY PAID-UP SHARES 1666,66,500 Equity Shares of Rs. 10 each 1,666,665,000.00 1,666,665,000.00
1,666,665,000.00 1,666,665,000.00 c) Reconciliation of number of shares : (Number of Shares) (Share Value Rupees) As at March As at March As at March As at March Particulars 31, 2017 31, 2016 31, 2017 31, 2016 Equity Shares at the beginning of the year 166,666,500 50,000 1,666,665,000 500,000 Add : Equity Shares Allotted during the year 166,616,500 - 1,666,165,000 Equity Shares at the end of the year 166,666,500 166,666,500 1,666,665,000 1,666,665,000
d) Rights Preferences and restriction attached to equity shares The company has single class of shares i.e. Equity Shares having a par value of Rs. 10 per share as per. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders. 69 AIESL e) Details of Shares held by the Holding Company, Subsidiary & Associates (Number of Shares) ( % of Share Holding) As at March As at March As at March As at March Particulars 31, 2017 31, 2016 31, 2017 31, 2016
Shares held by Holding Company Air India Limited 166,666,500 166,666,500 100% 100% f) Details of Shareholders holding more than 5% (Number of Shares) ( % of Share Holding) As at March As at March As at March As at March Particulars 31, 2017 31, 2016 31, 2017 31, 2016
Air India Limited 166,666,500 166,666,500 100% 100% g) Details of Shares Issued & Allotted as fully paid up pursuant to contract without payment being received in cash (Number of Shares) Particulars As at March 31, 2017 As at March 31, 2016 1666,16,500 Equity Shares of Rs. 10 each were allotted 166,616,500 166,616,500 towards the WDV of engineering assets transferred by the Holding Company Air India Limited as on 1st April 2014 towards capital infusion in terms of clause 5 (a) MoU entered between Air India Limited & Air India Engineering Services Limited dated 05th April, 2013) NOTE "3" : RESERVES AND SURPLUS (Amount in Rupees) Particulars As at March 31, 2017 As at March 31, 2016 Surplus / (Decit) as per Statement of Prot & Loss Opening Balance (8,012,918,413) (2,426,709,080) Prot / (Loss) for the year (5,051,600,891) (5,586,209,333) Closing Balance (13,064,519,304) (8,012,918,413) TOTAL (13,064,519,304) (8,012,918,413)
NOTE "4" : SHARE APPLICATION MONEY PENDING ALLOTMENT (Amount in Rupees) Particulars As at March 31, 2017 As at March 31, 2016
Share Application Money Pending Allotment NIL NIL (Share application money amount represents WDV of engineering assets transferred by the Holding Company Air India Limited as on 1st April 2014 towards capital infusion in terms of MoU entered between Air India Limited & Air India Engineering Services Limited dated 05th April, 2013)
(Also refer point no. 10(a) of Note 21)
Company will issue 16,66,16,500 equity shares of having face value of Rs. 10/- each at par.
Shares to be alloted tentatively by The company has increased its authorised capital from Rs.10 crore to Rs.1,000 crore subsequent to balance sheet date towards allotment of shares against application money received as above.
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NOTE "5" : LONG TERM BORROWINGS (Amount in Rupees) Particulars As at March 31, 2017 As at March 31, 2016 Loans & advances from related parties Unsecured
From Holding Company - Air India Limited 6,158,048,704 1,979,482,863
From Group Companies:
Air India Air Transport Services Limited 80,916,138 80,916,138
Alliance Air Services Limited 404,177,348 151,645,756
TOTAL 6,643,142,190 2,212,044,757
NOTE "6" : LONG TERM PROVISIONS (Amount in Rupees) Particulars As at March 31, 2017 As at March 31, 2016 Provision for Employee Benets a) Gratuity 2,507,727,854 2,491,103,638 b) Leave Encashment 1,984,890,813 1,856,064,243
TOTAL 4,492,618,667 4,347,167,881
NOTE "7" : TRADE PAYABLES (Amount in Rupees) Particulars As at March 31, 2017 As at March 31, 2016 Due to Micro and Small Enterprises - - Others 983,028,335 56,881,302 (Refer Point no. '13' of Note No. 21) TOTAL 983,028,335 56,881,302
NOTE "8" : OTHER CURRENT LIABILITIES (A mou nt in Rupees) Particulars As at March 31, 2017 As at March 31, 2016 Advance towards EMD 4,200,000 3,300,000 Advance from Customers 23,218,195 2,184,518 Statutory Dues 2,406,424,272 1,859,816,047 Other Payables 1,973,827,526 2,120,695,550
TOTAL 4,407,669,993 3,985,996,115
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NOTE "9" : SHORT TERM PROVISIONS (A mou nt in Rupees) Particulars As at March 31, 2017 As at March 31, 2016 Provision for Employee Benets a) Gratuity 458,799,175 422,630,996 b) Leave Encashment 465,378,420 506,747,984 c) Other Benets 4,690,205 2,114,497 TOTAL 928,867,800 931,493,477
NOTE "10" : FIXED ASSETS (Amount in Rupees) Sr. Particulars GROSS BLOCK DEPRECIATION NET BLOCK No. As at Additions Deductions / As at As at For Deductions/ Total Upto As at As at April 01, 2016 Adjustments March 31, 2017 April 01, 2016 the year Adjustments March 31, 2017 March 31, 2017 March 31, 2016
TANGIBLE ASSETS : a) Land ------b) Buildings ------c) Plant & Equipment Workshop Equipment, Instruments, 1,688,482,271 143,761,371 13,005,088 1,845,248,730 552,972,645 392,733,304 17,878,976 963,584,925 881,663,805 1,135,509,626 Machinery and Plants 109,887,739 - 109,887,739 23,775,681 10,070,456 - 33,846,137 76,041,602 86,112,057 d) Furniture & Fixtures - 6,996,978 6,996,978 - 664,713 - 664,713 6,332,265 - e) Electrical Fittings - 5,250 - 5,250 - 499 - 499 4,751 - f) Computer System - 2,059,865 - 2,059,865 - 652,359 - 652,359 1,407,506 - g) Vehicles - 5,754,936 5,754,936 - 186,632 - 186,632 5,568,304 - h) Ofce Equipment - 5,804,011 5,804,011 - 1,104,093 18,475 1,122,568 4,681,443 - TOTAL FOR TANGIBLE ASSETS 1,798,370,010 164,382,411 13,005,088 1,975,757,509 576,748,326 405,412,055 17,897,451 1,000,057,832 975,699,677 1,221,621,683 INTANGIBLE ASSETS : a) Goodwill ------b) Brands/trademarks ------c) Computer Software ------d) Licenses & Franchise 2,713,828,069 - - 2,713,828,069 - - - - 2,713,828,069 2,713,828,069
TOTAL FOR INTANGIBLE ASSETS 2,713,828,069 - - 2,713,828,069 - - - - 2,713,828,069 2,713,828,069
TOTAL ASSETS 4,512,198,079 164,382,411 13,005,088 4,689,585,578 576,748,326 405,412,055 17,897,451 1,000,057,832 3,689,527,745 3,935,449,752
PREVIOUS YEAR 4,408,656,953 112,996,385 9,455,259 4,512,198,079 209,489,043 372,305,985 (5,046,702) 576,748,326 3,935,449,752
Note:1. As per MOU entered between Air India Limited (AIL) & Air India Engineering Services Limited (AIESL) dated 5th April, 2013 Air India Limited shall transfer all its movable assets such as machinery, equipment etc. pertaining to MRO unit of AIL to AIESL at a written down value of such moveable assets as on 01-04-2014. It was claried by MOU that written down value of movable assets transferred from AIL to AIESL shall be the cost of these assets transferred and shall form part of initial equity contribution. NOTE "11" : LONG TERM LOANS AND ADVANCES (Amount in Rupees) Particulars As at March 31, 2017 As at March 31, 2016 Loans & advance to related parties Secured Considered Good - Unsecured Considered Good Doubtful (A) - - Loans and Advances to Employees Secured Considered Good - 912 Unsecured Considered Good 72,949,156 14,428,680 Doubtful - - (B) 72,949,156 14,429,592 Advance Recoverable in Cash or Kind Secured Considered Good Unsecured Considered Good 18,450,746 5,798,975 Doubtful - - (C) 18,450,746 5,798,975 Security Deposits with DGCA 200,000 200,000 (D) 200,000 200,000 TOTAL (A+B+C+D) 91,599,901 20,428,566 72 AIESL
NOTE "12" : TRADE RECEIVABLES (Amount in Rupees) Particulars As at March 31, 2017 As at March 31, 2016
Due for more than six months Secured, Considered Good - - Unsecured, Considered Good 756,324,437 159,946,115 Doubtful - (A) 756,324,437 159,946,115 Other Receivables Secured, Considered Good - - Unsecured, Considered Good 1,263,542,034 619,760,768 Doubtful - - (B) 1,263,542,034 619,760,768
Total (A + B) 2,019,866,471 779,706,883
NOTE : "13" : CASH AND BANK BALANCES (Amount in Rupees) Particulars As at March 31, 2017 As at March 31, 2016
Balances with Banks a) In Current Accounts 117,674,205 440,028,060 b) In Deposit Accounts (Maturity less than12 months) - -
Cheques, Drafts on Hand - 500,000 Cash on Hand (as certied by the Management) - 7,020 Margin Money/Security Deposit 61,524 56,523
TOTAL 117,735,729 440,591,603
NOTE : "14" : OTHER CURRENT ASSETS (Amount in Rupees)
Particulars As at March 31, 2017 As at March 31, 2016 TDS Receivable 138,742,834 10,883,566
Prepaid Expenses - 269,750
TOTAL 138,742,834 11,153,316
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NOTE "15" : REVENUE FROM OPERATION (Amount in Rupees) Sr. No. Particulars 2016-17 2015-16 1 Sales of Services Technical Handling Services Reveune 575,914,432 34,570,653 MRO Services Revenue Other Servicing Revenue 6,762,925,436 6,146,649,216 7,338,839,868 6,181,219,869 2 Other Operating Revenue Engineering Training Reveune 33,772,048 21,493,909 33,772,048 21,493,909 3 Incidental Revenue 31,890,552 - 31,890,552 - Total reveune from operation 7,404,502,467 6,202,713,779
NOTE "16" : OTHER INCOME (Amount in Rupees) Sr. No. Particulars 2016-17 2015-16
1 Interest Income 338,663 4,544 2 Dividend Income - - 3 Prot on Sale of Assets/Scrap TOTAL 338,663 4,544
NOTE "17" : EMPLOYEE BENEFIT EXPENSES (Amount in Rupees) Sr. No. Particulars 2016-17 2015-16
1 Salaries and Wages 8,495,402,819 7,793,815,412 2 Contribution to Provident and Other Funds 343,537,018 348,649,757 3 Staff Welfare Expenses 524,453,485 442,104,339 4 Provision for Gratuity 397,630,810 940,399,631 5 Provision for Leave Encashment 429,577,508 784,298,406
TOTAL 10,190,601,641 10,309,267,545
NOTE "18" : FINANCE COST (Amount in Rupees) Sr. No. Particulars 2016-17 2015-16
1 Interest Expenses 181,836,002 56,390,370
TOTAL 181,836,002 56,390,370
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NOTE "19" : DEPRECIATION AND AMORTIZATION EXPENSE (Amount in Rupees) Sr. No. Particulars 2016-17 2015-16
1 Depreciation of Tangible Assets 411,003,133 372,305,985 2 Amortization of Intangible Assets - -
TOTAL 411,003,133 372,305,985
NOTE "20" : OTHER EXPENSES (Amount in Rupees) Sr. No. Particulars 2016-17 2015-16 1 Insurance Expenses 2,536 104,716 2 Material Consumed-Aircraft 13,301,841 - 3 Outside Repairs-Aircraft 1,839,643 516,967 4 Handling Charges 147,626,788 - 5 Communication Charges 5,292,965 1,717,766 6 Travelling Expenses 320,146,863 180,733,425 7 Rent 239,018,420 213,231,680 8 Rates and Taxes 6,264,991 34,009,299 9 Conveyance Expenses 1,836,631 797,008 10 Repair Maintenance: i) Buildings 73,481,654 28,002,742 ii) Others 85,324,150 62,460,961 11 Hire of Transport 51,135,402 25,105,271 12 Hire of Manpower 131,188,396 43,763,548 13 Fees to DGCA 8,338,399 4,301,165 14 Electricity & Heating Charges 401,155,962 375,203,036 15 Consumption of Gas & Fuel 12,798,593 12,901,350 16 Water Charges 13,315,343 7,331,289 17 Publicity & Sales Promotion 33,480 - 18 Printing and Stationery 2,919,675 360,245 19 Professional & Legal Charges 6,925,411 7,679,713 20 Auditors' Remuneration and Expenses i) Audit Fees 200,000 200,000 ii) Other Expenses 50,000 50,000 21 Bank Charges 828,132 38,168 22 Other Expenses 72,478,532 62,988,573 23 Exchange Variation (191,032) 316,155 24 Loss on Sale of Assets/Scrap 241,972 305,855 TOTAL 1,595,554,746 1,062,118,933
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NOTE "21" : PRIOR PERIOD ADJUSTMENTS (NET) (Amount in Rupees)
Sr. No. Particulars 2016-17 2015-16 Prior Period Expenses 80,036,861 (1,258,608.88) Prior Period Revenue (2,590,362) (9,896,570)
TOTAL 77,446,499 (11,155,179)
NOTE "22" : EARNING PER SHARE Disclosure of Earnings Per Share (EPS) computation as per Accounting Standard -20 of the Institute of Chartered Accountants of India:
2016-17 2015-16 Prot available for appropriation as per Prot & Loss Account (5,051,600,891) (5,586,209,333)
Weighted average No. of equity shares outstanding during the year 166,666,500 505,236
Basic and Diluted EPS (30.31) (11,056.63)
Face value per equity share 10 10
NOTE 23 : NOTES TO ACCOUNTS
1. Contingent Liabilities not provided for: Claims against the Company not acknowledged as debts (excluding interest and penalty wherever likely to be applicable) and being contested to the extent ascertainable and quantiable.
Estimated Claim of Employees: Based on the Justice Dharamadhikari Committee recommendations, the Revised Basic Pay (RBP) has been implemented for all the categories of employees, however the total amount payable, to all categories of employee cannot be worked out.
Capital Commitments are in respect of estimated amount of contracts remaining to be executed on Capital Account: Nil
2. Fixed Assets
a) In terms of MoU, the moveable engineering assets pertaining to 'Workshop Equipment' and 'Plant & Machinery' have been transferred from Air India at Written Down Value (WDV) of Rs 166,61,65,000.00 as on 01 April, 2014 i.e. Gross block along with accumulated depreciation. The assets with WDV of Rs. 2,86,63,884.00 during 2014-15 and Rs.5,88,73,802.00 during 2015-16 have also been identied & transferred subsequently from AI which does not form part of the share capital.
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b) The Fixed Assets detail (quantity / location / date of original purchase) available as per AI records have been transferred to AIESL Fixed Assets record in SAP-ERP.
3. Accounting Practices Followed
a) In line with the consistent practice being followed by the Parent Company, the claims for reimbursements from employees availing medical, educational and other leave without pay, claims of interest from suppliers / other parties, if any, are accounted for on cash basis due to uncertainties involved. Other staff claims are recognized on cash basis.
b) Liability for amounts payable towards expenses are recognized to the extent of claims/ invoices received.
4. Conrmations/Reconciliations
a) The process of identication of unmatched receivables and payables is under the process of matching/reconciliation. Impact, if any, of consequential adjustment arising out of reconciliation will be dealt with in the year of completion of reconciliation.
b) The company has not sought the conrmation of balances receivables and payables as majority of the same was owed by/for AIL.
c) The Service Tax including Input credit to be availed, Tax Deducted at source (TDS), Refunds to be received in respect of Income Tax, VAT, Employee Provident Fund (EPF), Employee State Insurance Scheme (ESIS), Profession Tax, Airport Tax and Revenue Related taxes are being in reconciliation process in line with the Returns led/ statutory records maintained.
5. Internal Control
The Company is in the process of strengthening the internal control process in the company so as to ensure the coverage of all the areas as envisaged and ensure effective internal controls at stations, regional ofces, user departments.
6. Revenue Related Matters:
Third party revenue includes revenue invoiced and collected by Air India and its associated companies and transferred to the Company during the year.
7. Segment Reporting :
The company is engaged in MRO (Maintenance, Repair & Overhaul of aircraft, engines & components) related business, which is its primary business segment.
8. Related Party Transactions:
“Related Party Disclosures” as required by Accounting Standard (AS-18) are given below:
77 AIESL
Key Management Personnel & Relatives: (From 1st April 2016 to 11th November 2017)
Sr. Name Position on Board Designation No.
1 Shri Rajiv Bansal Chairman CMD of Air India Limited from 23.08.2017 till date
2 Mr. Ashwani Lohani Chairman CMD Air India Limited (Ceased to be CMD w.e.f. 22.08.2017)
3 Ms. Gargi Kaul Director JS & FA, Ministry of Civil Aviation (Appointed w.e.f. 06.05.2015)
4 Mr. S K Mishra Director JS Ministry of Civil Aviation (Appointed w.e.f. 02.02.2017)
5 Mr. Vinod Hejmadi Director Director Finance Air India Ltd. (Appointed w.e.f. 07.12.2015)
No loans or credit transactions were outstanding with Directors or Ofcers of the Company or their relatives at the end of the year which is required to be disclosed in accounts under the Companies Act, 2013.
The parent company and its subsidiaries are State Controlled enterprise as dened under AS-18 and hence transactions undertaken by the company with the parent company and its subsidiaries do not fall within the denition of related party transactions.
(a) AIESL was able to commence its commercial operations w.e.f. 1st Jan'15 since the DGCA certication was issued only effective on this day. Air India has entered into separate agreements dening the service level quality (SLA) and the rates to be paid for the services to be rendered by the Company. These rates have been determined taking into account the market rates as well as the cost of rendering these services. The principle of arms length transactions has been reckoned by determining these rates. These rates will be reviewed on a yearly basis in order to align them with the market rates.
(b) Third party revenue includes revenue invoiced and collected by Air India and its associated companies and transferred to the Company during the year and the applicable taxes have also been invoiced on third party by them.
Parent and its Subsidiary Companies a) Air India Ltd
During the year 2013-14, the company entered into a Memorandum of Understanding (MoU) with its
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parent company viz. Air India Ltd. (AI) regarding the services to be provided on maintenance and repair and overhaul facilities to Air India. The MoU inter-alia also includes the following:-
1. AI has decided to transfer its MRO business (including infrastructure) to AIESL.
2. AIESL shall obtain all necessary approvals / licenses etc. from all concerned statutory and regulatory authorities / agencies including DGCA of India to carry out & perform MRO activities.
3. AI shall provide AIESL a total equity of Rs. 375 Cr. during rst three years and support required for Capital expenditure to the extent of Rs.974 crores till FY 2017.
4. AI shall transfer all its movable assets pertaining to MRO and the value of movable assets to be transferred by AI to AIESL to constitute & form part of the initial equity / investment in AIESL, which will be over and above the cash infusion of Rs 375 Cr. as above.
5. AIESL to share 20% of its labour revenue from third parties from the fourth year of operations or as mutually agreed.
Following transactions relating to the company have been transferred by Parent Company, Air India Limited as follows:
i) Staff Welfare Expenses and majority of other expenses have been accounted as transferred by Parent Company Air India Limited.
ii) Total addition to xed assets of Rs. 16,43,82,411.00, was transferred by AIL during the FY 2016-17 as the procurement and accounting action was done in AIL books and the same does not form part of equity contribution as set out in MOU.
iii) Servicing Revenue of Rs 5,25,83,10,294.00 (Previous Year Rs 4,77,80,88,439.00).
iv) An amount of Payable Rs. 615,80,48,703.84 (Previous Year : Rs 197,94,82,862.59 Receivable) is due by the company to AIL as on 31st March 2017. b) Airline Allied Services Limited (AASL)
An MoU has also been entered into with Airline Allied Services Ltd. (AASL), a wholly owned subsidiary of Air India Ltd during 2013-14, wherein AASL has d ecided to transfer its MRO activities (including infrastructure) to AIESL and AASL agreed to commit its eet in entirety for all MRO work to AIESL.
As per this MOU, AASL shall transfer its MRO business to AIESL besides transfer of engineering related assets & manpower and other supports etc. However, assets & employees continued in AASL books of accounts. AASL has billed / debited the company for its engineering manpower for the year 2016-17 pending transfer of its engineering personnel to the company, besides other expenditure.
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Servicing Revenue of Rs. 22,11,89,332.00 (Previous Year 15,40,72,819.00)
An amount of Rs 40,41,77,348.40 (Previous Year : Rs. 15,16,45,756.00) is payable by the company to AASL as on 31st March 2017.
The amount due from AASL for the bills raised for Engineering services provided up to 2016-17 is Rs 31,55,61,874.30.
c) Air India Charter Ltd (AICL)
MoU has also been entered into during 2014-15 with Air India Charters Ltd. (AICL), a wholly owned subsidiary of Air India Ltd, wherein AICL has decided to transfer its MRO activities (including infrastructure) to AIESL and AICL agrees to commit its eet in entirety for all MRO work to AIESL.
Consequent to the cabinet approval to operationalize AIESL as independent entity for MRO services, an MOU has been signed between AICL and AIESL on 07.08.2014 to formalize the relationship. As per this MOU, AICL shall transfer its MRO business to AIESL besides transfer of engineering related assets & manpower and other supports etc. However, assets & employees continued in AICL books of accounts. AICL has billed / debited the company for its engineering manpower for the year 2016-17 pending transfer of its engineering personnel to the company, besides other expenditure.
Servicing Revenue of Rs. 69,12,03,504.00 (Previous Year 46,17,63,892.00)
d) Air India Air Transport Services Ltd (AIATSL)
An amount of Rs 8,09,16,137.96 Payable (Previous Year : Rs.8,09,16,137.96 Payable) is due by the company to AIATSL as on 31st March 2017.
A net amount of Rs 16,36,25,493.00 is payable to AIATSL towards the Services rendered by them to AIESL from December 2016 to March 2017.
9. Employee Benets
(A) General description of Dened Benet Plan
a) Gratuity: Gratuity is payable to all eligible employees of the Company on superannuation, death, or permanent disablement, in terms of the provisions of the Payment of Gratuity Act.
b) Privilege Leave Encashment: Privilege Leave Encashment is payable to all eligible employees at the time of retirement upto a maximum of 300 days and can en-cash every year up to 30 days.
c) Sick Leave Encashment: Sick Leave encashment is payable to all eligible employees at the time of retirement upto a maximum of 120 days subject to the condition that the employee
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should have at least 60 days of Sick Leave to his credit. It was also decided by the parent company that sick leave standing to the credit of all existing employees as on 01.07.2012 shall stand frozen and the employee would be allowed to encash the same only at the time of retirement provided that he/she has not exhausted that leave by the time of retirement. Further, it was decided by AI that encashment of sick leave which has accrued beyond 01.07.12 will not be allowed and the employee has to avail the same or the same will lapse.
(B) Dened Contribution Plan
Employee's Provident Fund: The Company contributes to Air India and its subsidiary airlines Employees (excluding AICL, which was contributing to GPF under the PF Act for the Engineering personnel in their Pay Rolls) Provident Fund Trusts under the Provident Fund Act, which governs the Provident Fund Plans for eligible employees. The Company as well as the employees contributes 10% of the PF Pay to the Fund out of which Provident Fund is paid to the employees.
10. Deferred Tax Assets
In view of the recent losses of the Company and no virtual certainty that sufcient future taxable income will be available against which the deferred tax assets can be realized, the same have not been accounted for in the books.
11. The Micro, Small and Medium Enterprises Development Act
The data related to Micro Small and Medium Enterprises is not available and is in process of compilation/ updating masters in SAP. However payments (due, if any) to such undertakings covered under the Micro, Small and Medium Enterprises Development Act (to the extent identied) have been made within the prescribed time limit/date agreed upon with the supplier and hence no interest is payable for delayed payments. In other cases, necessary compliance/disclosure will be ensured in due course.
12. The parent company has implemented ERP-SAP in AIESL and the regular A MC expenses have been prorated to AIESL.
13. Previous Year gures have been re-grouped/re-arranged wherever considered necessary to be compatible with the Schedule III of the Companies Act 2013, to the extent of information being available and practicable of compilation.
Note 24
DISCLOSURE ON SPECIFIED BANK NOTES (SBNS)
During the year, the Company had specied Bank Notes or Other Denomination note as dened in the MCA notication GSR 308 (E), dated March 31, 2017, on the details of Specied Bank Notes (SBNs) held and transacted during the period from 08th November 2016 to 30th December 2016. The denomination wise SBNs and other notes as per the said notication is given below:
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Particulars SBNs Other Total (in INR) Denomination
Closing cash in hand as on 08.11.2016 NIL 15,072.00 15,072.00
Add: Permitted Receipts 01.12.2016 NIL 25,000.00 25,000.00
Less: Permitted Payments NIL 26,486.00 26,486.00
Less: Amount Deposited in Banks NIL - -
Closing cash in hand as on 30.12.2016 13,586.00 13,586.00
Signature to the schedules forming part of the Balance Sheet and Statement of Prot and Loss and to the above notes.
For and on Behalf of For and on behalf of the Board
Sd/- Sd/- Sd/- D.B. Ketkar & Co. Rajiv Bansal V.S. Hejmadi Chartered Accountants Chairman Director-Finance FRN : 105007W
Sd/- Sd/- Sd/- Sd/- N.S. Ketkar Gagan Batra C.N. Hemalatha H.R. Jagannath Partner Company Secretary Chief of Finance Chief Executive Ofcer M.No. 40521
Place : New Delhi Date : 27 November 2017
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