dharani sugars chemicals ltd share price Auditors report

To The Members Of

Dharani Sugars and Chemicals Limited

Report on the audit of the Standalone financial statements

Qualified Opinion

We have audited the Standalone financial statements of Dharani Sugars and Chemicals Limited ("the Company"), which comprise the balance sheet as at March 31, 2022, and the statement of profit and loss (including other comprehensive income), the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the Standalone financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, subject to the effects of the matter described in the Basis for Qualified Opinion section of our report, the aforesaid Standalone financial statements give the information required by the Companies Act 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards, , except Ind AS 19 "Employee Benefits" as more fully described in paragraph (e) of Basis for Qualified Opinion section of the report, prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2022, and its loss, total comprehensive income, the changes in equity and its cash flows for the year ended as on that date.

Basis for Qualified Opinion

We draw attention to the following matters:

a) Note 46 to the Standalone Financial Statements regarding the fact that the all the banks and financial institutions have classified the borrowings of the Company as non-performing assets. All the banks and financial institutions have also issued notice calling back the loans. Considering the above, as in the previous periods, the Company has not (a) provided interest on the outstanding borrowings from banks and financial institutions; and (b) not restated the foreign currency loans. In the opinion of the management, in view of the One Time Settlement ("OTS") of the loans sought by the Company, there will be no further interest liability on the Company from the NPA date.

However, the Honble NCLT, Chennai Bench, admitted the CIRP application filed by a financial creditor of the Company and we were informed by the Interim Resolution Professional that the financial and operating creditors are lodging claims of principal and interest due till the date of admission of CIRP.

As morefully explained in Note 46 to the financial statements, we were informed by the management that

(i) the Promoter of the Company had organised and had deposited Rs. 6,453.30 lakhs (including of Rs.2,500 Lakhs in the earlier year) as on date in the office account of Indian Bank NO LIEN account as stipulated by the consortium of bankers/ financial institutions for the OTS settlement proposal;

(ii) as per the arrangement with the Promoter, the money deposited by the Promoter shall remain as the assets of the Promoter or his affiliates until the settlement proposal is duly sanctioned and approved by the lenders;

(iii) as per legal advice obtained by the promoters, the entire amount of Rs 6,453.30 lakhs kept in the office account of Indian Bank NO LIEN account will be recorded as loan from the promoters group after the withdrawal of CIRP;

(iv) in case no settlement proposal gets materialised, the said money is to be refunded to the promoter/ his affiliates by the banks;

(v) out of the said deposit, the amount of Rs.2,500.50 Lakhs recorded wrongly in the books of account of the earlier years, was reversed by the Company and necessary entries passed;

(vi) consequently, the interest accrued up to December 31,2021 aggregating to Rs 338.43 lakhs in respect of the above loans has also been reversed (which resulted in negative finance cost for the current quarter); and

(vii) as there was a delay in payment of the balance OTS amount by the Promoter, the Honble National Company Law Appellate Tribunal ("NCLAT") has vacated the interim stay for holding of meetings of Committee of Creditors and directed the IRP to commence the CIRP proceedings and the next hearing has been listed for December 22, 2022.

As morefully explained in Note 51 to the financial statements, we were also informed by the IRP that

(i) the IRP reconvened the 1st CoC meeting on May 2, 2022 and pursuant to the decision made in the 1st CoC meeting, IRP issued Form G - Public Announcement inviting Expression of Interest (EoI) to submit Resolution Plans. As on last date for receipt of EoI., i.e June 1, 2022, 7 EoIs were received. As per Regulation 35 of IBC, IRP has appointed two sets of IBBI Registered Valuers to estimate the fair value and the liquidation value, which shall be shared with the members of CoC on receipt of resolution plans. The physical verification of inventory and fixed assets were carried out by the Valuers;

(ii) in the 6th CoC meeting held on September 28, 2022, the last date for submission of the final revised resolution plan was decided as October 15, 2022 and 3 revised final resolution plans from the Resolution Applicants were received as on date;

(iii) further as per the e-voting results dated September 22, 2022 CoC approved the appointment of

Mr. Mahalingam Suresh Kumar, Insolvency Professional as Resolution Professional subject to approval by the Adjudicating Authority for which an application is being filed by the CoC members with NCLT; and

(iv) an application has been filed with NCLT Chennai by the IRP seeking directions to Indian Bank and Bank of India to refund to the Corporate debtor the initial OTS deposit of Rs. 25 Crores and Rs. 1.31 Crores respectively lying with them, as there was no OTS proposal pending with banks. The said Application is numbered as IA(IBC)/701/2022. The matter is pending adjudication by NCLT, Chennai. The next date of hearing is November 15, 2022.

We have not received neither direct nor indirect confirmation for the balances in the escrow account aggregating to INR 6,453.30 lakhs, except a reference made in the minutes of the consortium banks and we were informed by the management that they are in the process of getting specific confirmation for this. We were not provided the bank statement supporting the basis for reversal of INR 2,500.50 lakhs, which was previously recorded as bank balances in the books of account. The Company has also reversed the interest accrued up to December 31, 2021 aggregating to INR 338.43 lakhs in respect of the above loans. We are unable to comment on the appropriateness of the aforesaid reversal of the loans and the interest accrued, in the absence of sufficient appropriate audit evidence.

Several uncertainties exist due to non-confirmation from the banks/ financial institutions for the outstanding borrowings as on March 31,2022/ amount kept in escrow accounts as per OTS proposal, present developments in CIRP and the expected timing of withdrawal of CIRP by the financial creditors/ final approval of OTS proposal by the consortium banks.

Due to the aforesaid uncertainties, we are unable to comment on (a) the appropriateness of the non-accrual of interest on loans; (b) the impact of the non-confirmation of balances in escrow accounts in respect of amounts deposited towards OTS, balances in certain inoperative bank accounts and balances in interim finance provided by consortium bankers for CIRP expenses; (c) non recording of INR 6,453.30 lakhs deposited by the promoters in the books of the Company; (d) reversal of previously accounted loans from promoters and interest on borrowings; and (d) consequential adjustments, that may be required, in the carrying amount of the financial and non-financial assets/ liabilities of the Company.

b) Note 50 to the Standalone Financial Statements which explains that during June 2020 quarter, a CIRP was admitted and a resolution professional was appointed in the case of one of the major investees of the Company by the Honble NCLT, Chennai Bench vide its order dated May 5, 2020. The carrying amount of the investments as at March 31,2022 is INR 1,455.53 Lakhs.

The Honble NCLT has passed an order approving the resolution plan submitted by one of the resolution applicants. In accordance with the approved resolution plan, no payment will be made towards any amount due to the promoters and their related group companies by the successful resolution applicant. In our opinion, considering the present development, the entire outstanding due from the above investee is considered to be not recoverable as per the approved resolution.

In this regard we were informed by the management that

(i) aggrieved by the Order of the Honble NCLT, the investee has filed an application before the Honble National Company Law Appellate Tribunal ("NCLAT") praying for quashing the order of the Honble NCLT. The Honble NCLAT has set aside the resolution plan approved and ordered to recommence the CIRP process, including the consideration of 12A application filed by the promoters of the investee company. On an appeal against the order of the Honble NCLAT, the Honble Supreme Court has heard the arguments of both the sides and reserved the case for judgement as on date;

(ii) the Promoter has recently (on October 11, 2022) also given a proposal for settling the entire dues of the CoC members U/S 12A of the IBC code. Required funding has been arranged by way of deposits and Bank Guarantee. The proposal is under the consideration of the CoC members; and

(iii) a major part of the assets of the investee comprises of land and commercial buildings (including a well- known brand name in the hotel industry), whose liquidation value is much higher than the total dues to its financial and operating creditors (including that of the Company) and the resolution plan approved is not in line with the actual value of the assets. The management also confirmed that the resolution professional has not followed the due process of CIRP and accordingly, the resolution plan approved is not proper as per law.

Accordingly, in the opinion of the management, the Company will still be able to recover the entire carrying amount of the investments, even in the aforesaid CIRP conditions. Based on the above estimate made by the management, no adjustment has been made in the fair value of such investments.

Due to uncertainties involved in the CIRP process as detailed above, the impact, if any, on the Statement are not presently determinable in respect of the above matter.

c) As more fully described in the Material Uncertainty Relating to Going Concern section of this report, there is a significant doubt on the Companys ability to continue as a going concern. We are unable to comment on the appropriateness of preparing the Statement on a going concern assumption and the impact, if any, arising out of the above matter is not presently determinable.

d) The Company has provided for certain employee/ other claims relating to earlier years/ periods aggregating to INR 468.04 Lakhs during September 2021. In the absence of approval by the IRP, the financial creditors and other competent approving authorities as well as specific demand notices from the concerned departments/ employees/ others, we are unable to comment on the appropriateness of the aforesaid accounting treatment.

e) Ind AS 19 "Employee Benefits" requires provision towards gratuity and compensated absences should be made based on actuarial valuation. However, the Company has not obtained any actuarial report and made provision for the liability on an estimated basis. Accordingly, we are unable to comment on the adequacy of the provision made and the compliance with the related disclosure requirements of Ind AS 19.

f) We could not circulate for direct confirmation for bank balances, borrowings, trade receivables, trade payables, advances received/ paid and for deposits received/ paid, as the necessary information was not made available by the Company to us. Accordingly, we are unable to comment on adjustment, if any, that may be required had we circulated and received direct confirmation for the aforesaid balances.

g) The Company has a program of verification to cover all the items of property, plant and equipment in a phased manner over a period of three years. However, no physical verification has been carried on by the management during the year. Accordingly, we were unable to comment on whether any material discrepancies were noticed on such verification and whether they are properly dealt with in the financial statements.

h) The Company has not filed the quarterly/ annual financial results with the stock exchanges within the stipulated time for certain quarters of the last year and the current year. However, no provision has been made in the financial statements towards penalty payable for the aforesaid noncompliances.

i) Our audit report on the Standalone financial statements is qualified in respect of matters referred to clauses (a) to (h) above. The matters referred to in clauses (a) to (c) have been qualified in the earlier years as well.

We conducted our audit in accordance with the standards on auditing (SAs) specified under section 143 (10) of the Act. Our responsibilities under those standards are further described in the auditors responsibilities for the audit of the Standalone financial statements section of our report. We are independent of the Company in accordance with the code of ethics issued by the Institute of Chartered Accountants of India ("ICAI") together with the ethical requirements that are relevant to our audit of the Standalone financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs code of ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

The Company has no operations during the period from 1 October 2021 to March 31,2022 and has very minimal operations for the other two quarter of the year. The Company has incurred huge losses during the period under consideration and also during the earlier periods/ years, due to which the Companys net worth is negative. The Company has not met its operating liabilities, including employee dues aggregating to INR 1,741.70 Lakhs due to negative cashflows. The Companys ability to continue as a going concern depends on the possible decisions that may be taken on OTS/ CIRP [as morefully explained in the Para (a) and (b) of the basis for qualification section of this report] and further inflow of funds for the working capital requirements of the Company. All the above matters materially depend on future events.

The above factors cast a significant doubt on the Companys ability to continue as a going concern. However, pending resolution of the above uncertainties, the Company has prepared the aforesaid Statement on a going concern basis.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In our opinion and based on the information and explanations given to us, we have determined that matters described below, to be the key audit matters over and above those described in the Basis for Qualified Opinion and in the Material Uncertainty Related to Going Concern sections our report on the Standalone financial statements to be communicated in our report:

Presentation and disclosure of additional information pursuant to the amendments to Schedule III to the Companies Act, 2013

With a view to facilitate enhanced disclosures and transparency in operations by companies in India, the Ministry of Corporate Affairs (MCA) has issued a batch of amendments to the Schedule III to the Companies Act, 2013 relating to presentation and disclosures in the financial statements. The Company has evaluated the requirements and made the relevant disclosures, including restatement of the disclosures made in the comparative period.

Principal Audit Procedures

• We assessed the Companys process to identify, assess, and respond to risks of material misstatement in the disclosure requirements pursuant to the aforesaid amendments to Schedule III to the Companies Act, 2013.

• As part of the evaluation of whether sufficient appropriate audit evidence has been obtained, we have evaluated the appropriateness of our initial risk assessments and revised previous risk assessments in for certain financial statement areas like claims and final settlement of financial and operating creditors, carrying amount of property, plant and equipment, capital work in progress, intangible assets comprising of, including related disclosure requirements under the Act and respective Indian Accounting Standards.

• We have designed, performed additional procedures, including verification of the source and completeness of data used by the management for making proper disclosures as required by the Act.

• We have considered the basis of management judgment in making the disclosures taking into consideration the date of the financial statements, the facts and circumstances pertaining to the entity, and the conditions that existed at, or arose after, that date. We have considered all subsequent events and transactions to substantiate our conclusions on the appropriateness of managements disclosures in accordance with the requirements of the amendments.

• We have audited the managements estimates required in the standalone financial statements, including but not limited to estimates related to expected credit loss, fair value of various assets taken over and liabilities assumed, inventory obsolescence, impairment of non-financial assets etc. by checking the reasonableness of underlying assumptions in making those key estimates.

• We have carried out a detailed analysis of data and performed additional analytical procedures for validating the managements disclosures.

Information other than the financial statements and auditors report thereon

The Companys board of directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexures to Boards Report, Business Responsibility Report, Corporate Governance and Shareholders Information, but does not include the financial statements and our auditors report thereon.

Our opinion on the Standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard as the other information is not made available to us by the Company.

Managements responsibility for the financial statements

The Companys board of directors is responsible for the matters stated in section 134 (5) of the Act with respect to the preparation of these Standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Indian Accounting Standards (Ind AS), except Ind AS 19 "Employee Benefits" as more fully described in paragraph (e) of Basis for Qualified Opinion section of the report, prescribed under section 133,of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time, and other accounting principles generally accepted in India.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone financial statements, management is responsible for assessing the Companys 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 board of directors are also responsible for overseeing the Companys financial reporting process.

Auditors responsibilities for the audit of the standalone financial statements

Our objectives are to obtain reasonable assurance about whether the Standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the Standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

As required by the Companies (Auditors Report) Order, 2020 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in Annexure "A" a statement on the matters specified in paragraphs 3 and 4 of the Order.

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, except for the matters referred to in the basis for qualified opinion section of this report;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books, except for the matters referred to in the basis for qualified opinion section of this report;

(c) The balance sheet, the statement of profit and loss including other comprehensive income, statement of changes in equity and the statement of cash flow dealt with by this report are in agreement with the books of account, except for the matters referred to in the basis for qualified opinion section of this report;

(d) In our opinion, the aforesaid financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act, except for the matters referred to in the basis for qualified opinion section of this report;

(e) We have not received any written representations from the directors as on March 31, 2022 and minutes of the meeting in which it was taken on record by the Board of Directors. We have also observed that the Director Identification Number (DIN) of certain directors of the Company have been deactivated by the Ministry of Corporate Affairs as on the date of our report. We could not merely rely on the certificate issued by a practising company secretary in respect of the above compliance, in the absence sufficient appropriate audit evidence to corroborate with the aforesaid certificate. Accordingly, we could not comment on whether any of the directors of the Company is disqualified as on March 31, 2022 from being appointed as a director in terms of Section 164 (2) of the Act.;

(f) 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". Our report expresses a modified opinion on the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting;

(g) With respect to the other matters to be included in the Auditors Report in accordance with the requirements of section 197 (16) of the Act, as amended, in our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act, subject to matters given in para (d) of the basis for qualification section of this report; and

(h) With respect to the other matters to be included in the Auditors 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:

(a) The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 40 to the financial statements;

(b) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;

(c) There has been no delay in transferring amounts, required to be transferred, to the investor education and protection fund by the Company;

(d) The management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts;

i. no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person(s) or entity(ies), including foreign entities Intermediaries, with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company Ultimate Beneficiaries or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

ii. no funds have been received by the company from any person(s) or entity(ies), including foreign entities Funding Parties, with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party Ultimate Beneficiaries or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

iii. Based on audit procedures carried out by us, that we have considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us believe that the representations under sub-clause (i) and (ii) contain any material misstatement.

(e) The Company has not declared or paid any dividends during the year and accordingly reporting on the compliance with section 123 of the Companies Act, 2013 is not applicable for the year under consideration.

Annexure "A" to the Independent Auditors Report

(Referred to in paragraph 1 under Report on other legal and regulatory requirements section of our report to the members of Dharani Sugars and Chemicals Limited of even date)

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets and intangible assets.

(b) The Company has a program of verification to cover all the items of fixed assets in a phased manner over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. However, no physical verification has been carried on by the management during the year. Accordingly, we were unable to comment on whether any material discrepancies were noticed on such verification and whether they are properly dealt with in the financial statements.

(c) In our opinion and according to the information and explanations given to us and based on the examination of the conveyance deeds provided to us, we report that, the title deeds, comprising all the immovable properties of land and buildings which are freehold, are held in the name of the Company as at the balance sheet date.

In respect of immovable properties given as collateral for loans from banks and financial institutions, the title deeds were deposited with the said banks/ financial institutions and the Company is in the process of obtaining a confirmation from the said banks that the title deeds are in the name of the Company.

(d) The Company has not revalued its property, plant and equipment (including right of use asset) or intangible assets during the year. Accordingly, paragraph 3 (i) (d) of the Order is not applicable.

(e) In our opinion and according to the information and explanations given to us, there are no proceedings initiated or are pending against the Company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder. Accordingly, paragraph 3 (i) (e) of the Order is not applicable.

2. (a) Due to the CIRP proceedings, the Company could not carryout physical verification of inventory as at the reporting date. Since we could not observe the physical inventory verification of inventory, we were unable to comment on whether any material discrepancies were noticed on such verification and whether they are properly dealt with in the standalone financial statements. However, the impact, if any, is not considered to be material to the financial statements, since the Company has minimal operations due to Covid 19 during the year.

(b) The Company has been sanctioned working capital limit in excess of five crore rupees, in aggregate, from banks or financial institutions on the basis of security of current assets. However, the Company has not filed any quarterly returns or statements with such banks or financial institutions as all the facilities are declared as non-performing assets by the respective banks. Accordingly, we are unable to comment under this clause.

3. In our opinion and according to information and explanation given to us, during the year, the Company has not made investments in/ provided any guarantee or security/ granted any loans or advances in the nature of loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties. Accordingly, paragraph 3 (iii) of the Order is not applicable. Also refer the basis for qualification section of our report with respect to investments made in the previous years.

4. In our opinion and according to information and explanation given to us, during the year, the company has not granted any loans or provided any guarantees or given any security to which the provision of section 185 of the companies Act are applicable. In respect of loans and advances given pre-CIRP period, the same has been fully provided for.

In respect of investments made by the Company, the Company had complied with the provisions of section 186 of the Companies Act, 2013.

5. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits or amounts which are deemed to be deposits during the year. Accordingly, paragraph 3 (v) of the Order is not applicable.

6. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148 of the Act, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not carried out a detailed examination of the same.

7. According to the information and explanations given to us, in respect of statutory dues:

(a) Amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including goods and services tax, provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues have not been regularly deposited by the Company with the appropriate authorities.

(b) No undisputed amounts payable in respect of goods and services tax, provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues were in arrears as at March 31,2022 for a period of more than six months from the date they became payable, except the following:

Name of the statute	Nature of Dues	Amount (in lakhs)	Period for which amount relates to
Employees Provident Fund Scheme, 1952	Provident Fund	389.36	November 2019 till September 30, 2021
Employees State Insurance Act, 1948	ESI dues	0.36	April 30, 2021 till September 30, 2021
Income Tax Act, 1961	Tax deducted at Source	12.07	April 2020 till September 30, 2021
The Tamilnadu Sugarcane Cess (Validation) Act, 1963	Cane Cess payable	67.87	November 2018 till September 30, 2021
Tamilnadu Tax on Consumption or Sale of Electricity Act, 2003	Power Generation Tax	485.43	November 2018 till September 30, 2021
The Tamilnadu Profession Tax on Profession, Calling, Trade and Employment Act, 1992	Profession Tax	16.64	November 2018 till September 30, 2021

(c) Details of statutory dues referred to in sub-clause (a), which have not been deposited on account of dispute are given below:

Statute	Nature of Dues	Amount (in lakhs)	Period for which amount relates to	Forum where the dispute is pending
Finance Act, 1994	Service Tax on Goods Transport Agency	48.01	April 2008 to April 2013	CESTAT - Chennai
Central Excise Act, 1944	CENVAT credit on Capital goods	85.37*	Sep 2008 to Feb 2010	CESTAT - Chennai
Tamilnadu Tax on Consumption or Sale of Electricity Act, 2003	Tariff change claims by TANGEDCO under dispute	818.19	December 2017 to January 2020	Honble High Court of Madras
Tamilnadu Tax on Consumption or Sale of Electricity Act, 2003	TNEB Parallel charges	194.64	May 2014 to January 2020	Honble High Court of Madras
* Net of amount paid under protest

8. In our opinion and according to the information and explanations given to us, there are no transactions not recorded in the books of account that have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (43 of 1961). Accordingly, paragraph 3 (viii) of the Order is not applicable.

9. (a) According to the information and explanation given to us and records examined by us, the Company has defaulted in repayment of dues to banks and financial institutions and all the lenders have classified the loans as non-performing assets and also issued notices calling back the loans. The aggregate amount of overdue principal and interest, as recorded in the books of account are INR 51096.82 Lakhs and INR 2957.28 Lakhs respectively. The details of non-accrual of interest after the NPA date, non-restating of the foreign currency loans, the One Time Settlement proposal under negotiation and the CIRP proceedings are morefully explained in the basis for qualification section of our report on the standalone financial statements.

The Company does not have any outstanding loans to government and any dues to the debenture holders during the year

(b) In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of dues to banks and financial institutions and all the lenders have classified the loans as nonperforming assets and also issued notices calling back the loans. The Company is declared as a wilful defaulter by the one of the consortium banks as per the minutes of the consortium dated 25.6.2021. However, the company has objected vide its letter dated 27.9.2022, wherein it was mentioned that the said bank has not followed the guidelines specified in the RBI rules which are mandatory in nature before declaring the company / directors as wilful defaulters. We were informed that no reply has been received so far. In the absence of detailed information made available to us, we are unable to report on whether other consortium banks have declared the Company as a wilful defaulter and the date on which each of the banks have declared the Company as a wilful defaulter.

(c) In our opinion and according to the information and explanations given to us, no term loans have been obtained during the year. Also refer the basis for qualification section of our report on the standalone financial statements.

(d) In our opinion and according to the information and explanations given to us and subject to our comments in the basis for qualification section of our report on the standalone financial statements, funds raised on short term basis have not been utilised for long term purposes.

(e) The Company does not have any subsidiaries/ associates/ joint-ventures and accordingly, paragraphs 3 (ix) (e) and 3 (ix) (f) of the Order are not applicable.

10(a) In our opinion and according to the information and explanations given to us, the Company has not raised any money by way of initial public offer or further public offer (including debt instruments) during the year. Accordingly, paragraph 3 (x) (a) of the Order is not applicable.

(b) In our opinion and according to the information and explanations given to us, the Company has not made any preferential allotment or private placement of shares or convertible debentures (fully, partially or optionally convertible) during the year. Accordingly, paragraph 3 (x) (b) of the Order is not applicable.

11(a) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company or no material fraud on the Company by any person has been noticed or reported during the year. Accordingly, paragraphs 3 (xi) (a) and (b) of the Order are not applicable.

(b) To the best of our knowledge and according to the information and explanations given to us, no whistle-blower complaints, have been received by the Company during the year.

12. The Company is not a Nidhi Company and accordingly, Paragraph 3 (xii) of the Order is not applicable to the Company.

13. 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 section 177 and 188 of the Act. Where applicable, the details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

14 In our opinion and according to the information and explanations given to us, the Company had an internal audit system, commensurate with the size and nature of its business upto December 31, 2021. The internal auditors have resigned and no report has been obtained for the period from January 1,2022 to March 31,2022. We have considered the internal audit reports to the extent submitted by the said auditors.

15 In our opinion and according to the information and explanations given to us and subject to our comments in the basis for qualification section of our report on the standalone financial statements, the Company has not entered into non-cash transactions with directors or persons connected with them. Accordingly, paragraph 3 (xv) of the Order is not applicable.

16 (a) In our opinion and according to the information and explanations given to us, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

(b) In our opinion and according to the information and explanations given to us, the Company has not conducted any Non-Banking Financial or Housing Finance activities without a valid Certificate of Registration (CoR) from the Reserve Bank of India as per the Reserve Bank of India Act, 1934.

(c) In our opinion and according to the information and explanations given to us, the Company is not a Core Investment Company (CIC) as defined in the regulations made by the Reserve Bank of India. Accordingly, paragraph 3 (xvi) (c) of the Order is not applicable.

(d) In our opinion and according to the information and explanations given to us, the Company is not a Core Investment Company (CIC) and it does not have any other companies in the Group. Accordingly, paragraph 3 (xvi) (d) of the Order is not applicable.

17 The Company has incurred cash losses of Rs 1,682.63 lakhs in the financial year and Rs 1,463.86 lakhs in the immediately preceding financial year.

18 There has been no resignation of the statutory auditors during the year. Accordingly, paragraph 3 (xviii) of the Order is not applicable.

19 In our opinion and according to the information and explanations given to us, and on the basis of the financial ratios disclosed in Note 49 (vii) to the financial statements, ageing and expected dates of realisation of financial assets and payment of financial liabilities, other information accompanying the financial statements, our knowledge of the board of directors and management plans and based our comments in the basis for qualified opinion section of our report, there are material uncertainties exist as on the date of the audit report that the Company is capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date.

20 In our opinion and according to the information and explanations given to us, the provisions of section 135 of the Act are not applicable to the Company during the year and accordingly, paragraph 3 (xx) of the Order is not applicable.

21 In our opinion and according to the information and explanations given to us, the Company does not have investments in subsidiaries/ associates or joint venture companies. Accordingly, paragraph 3 (xxi) of the Order is not applicable.

Annexure "B" to the Independent Auditors Report

(Referred to in paragraph 2 (f) under Report on other legal and regulatory requirements section of our report to the Members of Dharani Sugars and Chemicals Limited of even date)

Report on the internal financial controls over financial reporting under clause (i) of sub - section 3 of section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls over financial reporting of Dharani Sugars and Chemicals Limited ( "the Company") as at March 31, 2022, in conjunction with our audit of the financial statements of the Company for the year ended on that date.

Managements responsibility for internal financial controls

The board of directors of the Company 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 issued by the Institute of Chartered Accountants of India. 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, 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 Companies Act, 2013.

Auditors responsibility

Our responsibility is to express an opinion on the internal financial controls over financial reporting of the Company based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") issued by the Institute of Chartered Accountants of India and the standards on auditing prescribed under Section 143 (10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. 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 were 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 auditors judgement, including the assessment of the risks of material misstatement in 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 Companys internal financial control system over financial reporting.

Meaning of internal financial controls over financial reporting

A companys 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 companys internal financial control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 authorisations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the companys 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 of 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.

Basis of qualified opinion

We observed significant deficiencies in the internal financial controls relating to maintenance of sufficient, appropriate audit trail/ documentation in respect of (a) physical verification of fixed assets/ related reconciliation with the books of account, (b) obtaining periodical confirmation and reconciliation balances with suppliers, customers, lenders, loans and advances and (c) passing of journal entries.

Qualified Opinion

In our opinion and according to the information and explanations given to us, the Company has to further strengthen in all material respects, the internal financial control system over financial reporting to make such internal financial controls over financial reporting to operate effectively as at March 31, 2022, 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 issued by the Institute of Chartered Accountants of India.

For CNGSN & ASSOCIATES LLP
Chartered Accountants
Firms Registration No. 004915S/ S200036
	(CHINNSAMY GANESAN)
Place : Chennai	Partner
Date : November 4, 2022	Membership No. 027501
UDIN : 22027501BCBCHM7244