To
The Members of
Trend Electronics Limited
Report on the Audit of the Financial Statements Disclaimer of Opinion
We were engaged to audit the financial statements of Trend Electronics Limited
("the Company"), which comprise the Balance Sheet as at March 31, 2020, the
Statement of Profit and Loss, the Statement of Changes in Equity and the Statement of Cash
Flows for the year ended on that date, and notes to the financial statements, including a
summary of the significant accounting policies and other explanatory information
(hereinafter referred to as "the financial statements").
We do not express an opinion on the accompanying financial statements of the entity.
Because of the significance of the matters described in the Basis for Disclaimer of
Opinion section of our report, we have not been able to obtain sufficient appropriate
audit evidence to provide a basis for an audit opinion on these financial statements.
Basis for Disclaimer of Opinion
a) We are unable to comment on necessary adjustments / disclosures in these financial
statements in relation to following items in view of non-availability of necessary
information / documentations / satisfactory explanations relevant to the audit for the
current year :-
(i) As mentioned in Note No. 45 of the financial statements, the Company has carrying
value of investments of 52.68 million, has given advances of 2,659.70 million and has
trade receivables of 215.80 million aggregating to 2,928.18 Million in group/affiliate
companies, which have been also admitted to Corporate Insolvency Resolution Process
(CIRP).
In view of the referral of these group/affiliate companies to National Company Law
Tribunal and consequent admission thereof under the Insolvency and Bankruptcy Code, 2016,
we are unable to obtain sufficient and appropriate evidence to express an opinion on the
extent of realisability of aforesaid investments, advances and trade receivables from
these group / affiliate companies pending the completion of resolution process of these
entities. Further we are unable to determine the consequential effect of the above, on the
Company’s Statement of Profit and Loss for the year ended March 31, 2020 and Equity.
(ii) As mentioned in Note No 46 to the financial statements, the Company has not
assessed impairment of fixed assets, not ascertained net realisable value of inventory,
and not ascertained the realisable value of investments; though as explained to us,
valuers have been appointed for valuation of assets including inventory and investments.
As inform to us, the valuation reports are confidential as per Insolvency and Bankruptcy
Code, 2016. In the absence of management evaluation, we are unable to determine the
consequential impact of the same on the financial statements.
(iii) As mentioned in Note No. 47 to the financial statements, the balance
confirmations have not been received in respect of secured and unsecured loans, balances
with banks, trade receivables, trade and other payables and loans and advances. The
Company continues the process of obtaining confirmations and reconciliation of the
balances of trade receivables, trade and other payables and loans and advances. In the
absence of sufficient and appropriate evidence in relation to unconfirmed balances, we are
unable to determine whether any adjustments are required to the said balances as on March
31, 2020 and the consequential impact of the same on the financial statements.
(iv) As mentioned in Note No. 48 to the financial statements, pursuant to commencement
of Corporate Insolvency Resolution Process (CIRP) of the Company under Insolvency and
Bankruptcy Code, 2016, there are various claims submitted by the financial creditors,
operational creditors, and employees to the Resolution Professional (RP). Such claims can
be submitted to the RP till the approval of the resolution plan by Committee of Creditors
(COC). The overall obligations and liabilities including interest on loans and the
principal amount of loans shall be determined during the CIRP. Pending final outcome of
the CIRP, no accounting impact in the books of account has been made in respect of excess,
short, or non-receipts of claims for operational and financial creditors. Accordingly, we
are unable to obtain sufficient and appropriate evidence with respect to completeness of
the amount of liabilities in the financial statements.
b) Material uncertainty relating to Going Concern:
As mentioned in Note No. 44 to the financial statements, the Company has been referred
to National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016, and there
is considerable decline in level of operations of the Company and net worth of the Company
as on the reporting date is negative and it continues to incur losses. The Company is a
co-obligor and has received demand notices in respect of borrowings of other
obligors/borrowers. Since Corporate Insolvency Resolution Process (CIRP) is currently in
progress, as per the Code, it is required that the Company be managed as going concern
during CIRP. Accordingly, the financial statements are continued to be prepared on going
concern basis. However, there exists a material uncertainty about the ability of the
Company to continue as a "Going Concern’’. The same is dependent upon the
resolution plan to be approved by NCLT. The appropriateness of the preparation of
financial statements on going concern basis is critically dependent upon CIRP as specified
in the Code. Necessary adjustments required on the carrying amount of assets and
liabilities are not ascertainable at this stage.
c) The Company has not recognised the impact and has not complied with the disclosure
requirements of Indian Accounting Standards (Ind-AS) including Ind AS 109- "Financial
Instruments", Ind AS 36 - Impairment of Assets, Ind AS - 2 Inventories, Ind AS - 16
Property, Plant and Equipment.
d) The Company has not charged the depreciation on Property Plant and Equipment (PPE)
for the year, due to non availability of information. we are unable to determine the
impact on the Loss of the Company for the year and the completeness of the disclosures in
the notes to the financial statements of the Company.
e) As mentioned in Note No 7 to the financial statements, the Company has carried
forward the Deferred Tax Asset of 134.62 million even though there is no reasonable
certainty of its realisation.
f) As mentioned in Note No 49 to the financial statements, the Company has not
submitted its financial results for the quarter/period ended March 31, 2018, and
subsequent periods till date as required under regulation 33 of SEBI (Listing Obligations
and Disclosure Requirements) Regulations, 2015.
Consequently, we are unable to comment on the monetary impact, if any of these
non-compliances on the financial statements in additional to the fact that the equity
shares of the Company are suspended from trading on the BSE Limited.
In view of our observations at para (a) to (f) above, we are unable to determine the
adjustments that are necessary in respect of Company’s assets, liabilities as on
Balance sheet date, income and expenses for the year, the elements making up the statement
of changes in equity, cash flow statement and related presentation and disclosures in
financial statements.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
The Company has been under the Corporate Insolvency Resolution Process CCIRP) under
the provisions of the Insolvency and Bankruptcy Code, 2016 (‘the Code) vide order
dated 25th September, 2018 passed by the National Company Law Tribunal (‘NCLT’).
The powers of the Board of Directors stand suspended as per Section 17 of the Code and
such powers are being exercised by the Resolution Professional (RP) appointed by the NCLT
by the said order under the provisions of the Code. As per Section 20 of the Code, the
management and operations of the Company were being managed by Resolution Professional Mr.
Dushyant C. Dave.
Subsequently, NCLT Principal Bench on October 24, 2018 directed to transfer all
insolvency petitions related to certain Videocon group/ affiliate entities to one bench at
NCLT, Mumbai and left open the matter of substantive consolidation to be decided by NCLT,
Mumbai bench. Further, State Bank of India had filed a petition at NCLT, Mumbai bench for
substantive consolidation of CIRP of group/ affiliate entities.
The NCLT, Mumbai Bench has passed an Order on August 8, 2019 approving Consolidation of
CIRP of 13 Videocon Group/ affiliate entities ("Consolidation Order"). Trend
Electronics Limited, ("Trend"), is kept out of consolidation considering that
Trend business of manufacturing set top boxes, is independent of other Videocon
group/affiliate entities businesses. The Hon’ble Bench appointed Mr. Divyesh Desai
Interim Resolution Professional (IRP) of Trend effective from the date of Consolidation
Order. NCLT, Mumbai has granted a time of 180 days, from Order dated August 8, 2019, to
the IRP to complete CIRP of Trend.
Committee of Creditors (CoC) in its meeting held on September 6, 2019 approved
appointment of IRP as Resolution Professional ("RP") of Trend. Therefore, the
management and operations of the Company are being managed by Resolution Professional Mr.
Divyesh Desai.
The Company’s management / RP is responsible for the matters stated in Section
134(5) of the Act with respect to the preparation of these financial statements that give
a true and fair view of the state of affairs, profit and other comprehensive income,
changes in equity and cash flows of the Company in accordance with the accounting
principles generally accepted in India, including the Indian Accounting Standards (Ind AS)
specified under Section 133 of the Act. 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
judgments and estimates that are reasonable and prudent; and design, implementation and
maintenance of adequate internal financial controls that were operating effectively for
ensuring the accuracy and completeness of the accounting records, relevant to the
preparation and presentation of the financial statements that give a true and fair view
and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless management
either intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
The management / RP is also responsible for overseeing the Company’s financial
reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our responsibility is to conduct an audit of the entity’s financial statements in
accordance with Standards on Auditing and to issue an auditor’s report. However,
because of the matters described in the Basis for Disclaimer of Opinion section of our
report, we were not able to obtain sufficient appropriate audit evidence to provide a
basis for an audit opinion on these financial statements.
We are independent of the entity in accordance with the ethical requirements in
accordance with the requirements of the Code of Ethics issued by ICAI and the ethical
requirements as prescribed under the laws and regulations applicable to the entity.
Report on Other Legal and Regulatory Requirements
A. 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 ‘A’, a statement on the matters
specified in paragraphs 3 and 4 of the Order, to the extent applicable.
B. As required by Section 143(3) of the Act, we report that:
a) As described in the Basis for Disclaimer of Opinion paragraph, we sought but were
unable to obtain all the information and explanations which to the best of our knowledge
and belief were necessary for the purpose of our audit.
b) Due to the possible effects of the matter described in the Basis for Disclaimer of
Opinion paragraph, we are unable to state whether proper books of account as required by
law have been kept by the Company so far as appears from our examination of those books.
c) Due to the possible effects of the matter described in the Basis for Disclaimer of
Opinion paragraph, we are unable to state whether the Balance Sheet, Statement of Profit
and Loss, Statement of Changes in Equity and Cash Flow Statement dealt with by this Report
are in agreement with the books of account.
d) Due to the possible effects of the matter described in the Basis for Disclaimer of
Opinion paragraph, we are unable to state whether the aforesaid financial statements
comply with the Indian Accounting Standards specified under Section 133 of the Act.
e) The matter described in the Basis for Disclaimer of Opinion paragraph above, in our
opinion, may have an adverse effect on the functioning of the Company.
f) We have not received any written representations from the directors as on March
31,2020 with regard to disqualification from being appointed as a director in terms of
Section 164(2) of the Act. Accordingly, we are unable to comment as to whether any of the
directors is disqualified as on 31st March, 2020 from being appointed as a director in
terms of Section 164 (2) of the Act.;
g) With respect to the adequacy of the internal financial controls over financial
reporting of the Company and the operating effectiveness of such controls, refer to our
separate Report in Annexure ‘B’, and
h) With respect to the other matters to be included in the Auditor’s Report in
accordance with the requirements of Section 197(16) of the Act, as amended:
In our opinion and according to the information and explanations given to us, the
Company has not paid any remuneration to its directors during the year. The remuneration
paid to any director is not in excess of the limit laid down under Section 197 of the Act.
i) 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. Due to the possible effects of the matter described in the Basis for Disclaimer of
Opinion paragraph, we are unable to state whether the Company has disclosed the complete
impact of pending litigations on its financial position in the financial statements;
ii. As per the information and explanation given to us, the Company did not have any
long term contracts including derivatives contracts for which there were any material
foreseeable losses. (refer note no.50)
iii. As mentioned in note no 51, the company has defaulted in transferring amounts of
0.43 Million, required to be transferred to the Investor Education and Protection Fund
during the year ended March 31,2020.
|
For S Z DESHMUKH & CO. |
|
Chartered Accountants |
|
(Firm Registration No. 102380W) |
|
D. U. KADAM |
|
Partner |
| Place: Aurangabad |
Membership No. 125886 |
| Date: 14th January, 2021 |
UDIN : 21125886AAAABJ6572 |
ANNEXURE A TO THE INDEPENDENT AUDITOR’S REPORT
The Annexure ‘A’ referred to in Independent Auditors Report to the Members
of the Trend Electronics Limited (the Company) on the financial statements for the year
ended March 31,2020, we report the following:
(i) In respect of fixed assets:
(a) The Company has maintained proper records showing full particulars, including
quantitative details and situation of fixed assets, except that, as mentioned in the Basis
for Disclaimer of Opinion paragraph in the main report, the Company has not provided for
depreciation for the year ended 31st March, 2020 as required under the Act and to that
extent the details were not maintained.
(b) We have been informed that the physical verification and valuation of fixed assets
has been carried out by external agencies. However, we have not been given any such
report. Hence, we are unable to comment as to whether there is any material discrepancies
on physical verification. In our opinion, the frequency of verification is not
satisfactory, having regard to the size of the Company and nature of its business.
(c) According to the information and explanation given to us and on the basis of our
examination of the records of the Company, the title deeds of immovable properties are
held in the name of the Company.
(ii) (a) We have not been given the details of physical verification of the inventories
carried out during the period by the management and hence we are unable to comment as to
whether the frequency of the physical verification is reasonable.
(b) As per information and explanation given to us, the Company has appointed Valuers
for verification of inventory and its valuation. However, no report of valuer has been
made available to us, due to confidentiality. Hence, we are unable to comment as to
whether there is any material discrepancy noticed on physical verification and the same
has been adjusted in the books of accounts.
(iii) As per the information and explanation given to us, the Company during the year
has not granted any loans, secured or unsecured, to companies, firms, limited liability
partnerships or other parties covered in the register maintained under Section 189 of the
Act.
(iv) In our opinion and according to the information and explanation given to us, the
Company has complied with the provisions of Section 185 and 186 of the Act, in respect of
loans, investments, guarantees and security.
(v) According to the information and explanations given to us, the Company has not
accepted any deposit during the period. Therefore, the provisions of clause (v) of the
Order is not applicable.
(vi) According to the information and explanations given to us, in our opinion, the
Company has not made and maintained the prescribed cost records pursuant to the Companies
(Cost Records and Audit) Rules, 2014, as amended and prescribed by the Central Government
under section 148(1) of the Companies Act, 2013.
(vii) (a) According to the information and explanations given to us and the records
examined by us, the Company is regular in depositing undisputed statutory dues including
provident fund, employees’ state insurance, income tax, goods and service tax, sales
tax, service tax, duty of customs, duty of excise, value added tax, cess and other
statutory dues with appropriate authorities except that, undisputed arrears of following
statutory dues were outstanding as on March 31,2020 for a period of more than six months
from the date they became payable and not paid till date (including dues in respect of
pre-CIRP period):
| Nature of the Dues |
in Million |
| 1. Central Sales Tax |
0.03 |
| 2. Value Added Tax |
35.45 |
| 3. Excise Duty |
8.06 |
| 4. Custom Duty |
151.58 |
| 5. Entry Tax |
2.14 |
| 6. Profession Tax |
0.20 |
| 7. Provident Fund |
3.25 |
| 8. ESIC Fund |
0.37 |
| 9. LIC Fund |
0.05 |
| 10. Income Tax (TDS) |
0.76 |
(b) Except for the effects of the matters described in the basis for disclaimer of
opinion paragraph in main report and according to the information and explanation given to
us and on the basis of our examination of the records of the Company, details of dues of
income tax, goods and service tax, sales tax, service tax, custom duty, excise duty, value
added tax, cess which have not been deposited as on March 31, 2020 on account of disputes
are given below:
| Name of Statute |
Nature of the Dues |
in Million |
Forum where dispute is pending |
| 1. Sales Tax Acts of various States |
Sales Tax |
0.02 0.28 |
Appellate Tribunal Additional Commissioner |
| 2. Income Tax Act, 1961 |
Income Tax |
1.95 |
DCIT (Appeals) |
(viii) According to the information and explanation given to us and on the basis of our
examination of the records of the Company, we observed that, the Company has defaulted in
repayment of interest and principal amount of all loans to financial institutions and
banks. The default runs into more than 365 days.
The Company has not borrowed from government and has not issued any debentures.
(ix) According to the information and explanations given to us, the Company has not
raised money by way of initial public offer or further public offer (including debt
instruments) or term loans during the year.
(x) According to the information and explanations given to us, no material fraud by the
Company or any fraud on the Company by its officers or employees has been noticed or
reported during the period.
(xi) The Company has not paid or provided the managerial remuneration to any of its
Director.
(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of the
Order is not applicable.
(xiii) Except for the effects of the matters described in the basis for disclaimer of
opinion paragraph in main report and according to the information and explanation given to
us and on the basis of our examination of the records of the Company, we observed that,
transactions with the related parties are in compliance with Section 177 and 188 of the
Companies Act, 2013 where applicable and the details have been disclosed in the financial
statements, etc., as required by the applicable accounting standards.
(xiv) According to the information and explanation given to us and on the basis of our
examination of the records of the Company, we observed that, the Company has not made any
preferential allotment or private placement of shares or fully or partly convertible
debentures during the period.
(xv) Except for the effects of the matters described in the basis for disclaimer of
opinion paragraph in main report and according to the information and explanation given to
us and on the basis of our examination of the records of the Company, we observed that,
the Company has not entered into any non-cash transactions with its directors or persons
connected with him and hence provisions of section 192 of the Companies Act, 2013 are not
applicable.
(xvi) In our opinion, the Company is not required to be registered under Section 45-IA
of the Reserve Bank of India Act, 1934. Therefore, the Clause (xvi) of paragraph 3 of the
Order is not applicable to the Company.
For S Z DESHMUKH & CO.
Chartered Accountants
(Firm Registration No. 102380W)
D. U. KADAM
Partner
Membership No. 125886
UDIN : 21125886AAAABJ6572
Place: Aurangabad
Date: 14th January, 2021
ANNEXURE B TO THE INDEPENDENT AUDITOR’S REPORT
Report on the Internal Financial Controls Over under Clause (i) of Sub-section 3 of
Section 143 of the Companies Act, 2013 ("the Act")
We were engaged to audit the internal financial controls over financial reporting of
Trend Electronics Limited (‘the Company) as of March 31, 2020 in conjunction with
our audit of the financial statements of the Company for the year ended on that date.
Management’s Responsibility for Internal Financial Controls
The Company’s management is responsible for establishing and maintaining internal
financial controls based on the internal control over financial reporting criteria
established by the Company considering the essential components of internal control stated
in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the
Guidance Note) issued by the Institute of Chartered Accountants of India (ICAI). These
responsibilities include the design, implementation and maintenance of adequate internal
financial controls that were operating effectively for ensuring the orderly and efficient
conduct of its business, including adherence to 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 financial
information, as required under the Act.
Auditors’ Responsibility
Our responsibility is to express an opinion on the Company’s internal financial
controls over financial reporting based on our audit. We conducted our audit in accordance
with the Guidance Note and the Standards on Auditing prescribed under Section 143(10) of
the Act, to the extent applicable to an audit of internal financial controls, both
applicable to an audit of Internal Financial Controls and both issued by the ICAI. Those
Standards and the Guidance Note require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance about whether adequate internal
financial controls over financial reporting was established and maintained and if such
controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of
the internal financial controls system over financial reporting and their operating
effectiveness. Our audit of internal financial controls over financial reporting included
obtaining an understanding of internal financial controls over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion on the Company’s internal financial controls
system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company’s internal financial control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s
internal financial control over financial reporting includes those policies and procedures
that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company’s assets that could have
a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial
reporting, including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may occur and not be detected.
Also, projections of any evaluation of the internal financial controls over financial
reporting to future periods are subject to the risk that the internal financial control
over financial reporting may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Disclaimer of Opinion
Because of the matters described in the basis of Disclaimer of Opinion paragraph in our
main report, and in view of possible effects of the material weaknesses described above on
the achievement of the objectives of the control criteria, we are unable to obtain
sufficient appropriate audit evidence to provide a basis for our opinion on whether the
Company had maintained adequate internal financial controls over financial reporting with
reference to these financial statements and whether such internal financial controls over
financial reporting were operating effectively as of March 31, 2020. Accordingly, we do
not express an opinion on internal controls over financial reporting with reference to
these financial statements, considering the essential components of internal control
stated in the Guidance Note.
We have considered the disclaimer of opinion and the material weaknesses identified and
reported above in determining the nature, timing, and extent of audit tests applied in our
audit of the March 31, 2020 financial statements of the Company, and these material
weaknesses have inter-alia affected our opinion on the financial statements of the Company
and we have issued a disclaimer of opinion on the financial statements.
|
For S Z DESHMUKH & CO. |
|
Chartered Accountants |
|
(Firm Registration No. 102380W) |
|
D. U. KADAM |
|
Partner |
| Place: Aurangabad |
Membership No. 125886 |
| Date: 14th January, 2021 |
UDIN : 21125886AAAABJ6572 |
+91-9892691696
