Garg Furnace Ltd Directors Report.

To

The Members of GARG FURNACE LIMITED

Report on the Audit of the Standalone Financial Statements

Qualified Opinion

We have audited the accompanying standalone financial statements of Garg Furnace Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2020, Statement of Profit and Loss (including Other Comprehensive Income), the Statement of changes in Equity and Cash Flow Statement for the year ended on that date, and a summary of significant accounting policies and other explanatory information (hereinafter referred to as "the standalone financial statements").

In our opinion and to the best of our information and according to explanations given to us subject to our comments in below paragraph, the aforesaid standalone financial statements give the information required by the companys Act,2013("the act") in the manner so required and give a true and fair view in conformity with the Indian accounting standards 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 31,2020, the profit and total comprehensive income, changes in equity and its cash flows for the year ended on that date.

Basis for Qualified Opinion

We conducted our audit of the standalone financial statements in accordance with the standards on auditing specified under section 143(10) of the Act(SAs). 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 independence requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and Rules made 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 audit opinion on the standalone financial statements.

(i) The Company has not appointed Internal Auditor as required by sec. 138 of the Companies Act, 2013 read with rule 13 of the Companies (Accounts) Rules, 2014.

(ii) The management of the company has represented us that the recoverable amount of assets within the meaning of IND AS 36 ‘Impairment of Assets is more than their carrying value and as such no amount needs to be recognized in the financial statements for impairment loss. In the absence of the workings of impairment having been prepared and made available to us for our review and considering the possiblefuture uncertainties in the global economic conditions because of this pandemicrelating to COVID-19, we are unable to comment on whether the company needs to make a provision in respect of impairment loss on such assets and the amount of such provision.

(iii) The company has not arranged to make available the confirmations and/or reconciliations to verify the balances stated in the financial statements in respect of Trade Receivables Rs. 1132.86 lacs, Loans given Rs. 154.70 lacs, Advances to Suppliers Rs. 229.48 lacs and Trade payables Rs. 676.20 lacs.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Sr. Key Audit Matter Auditors Response
1. The One Time Settlement Scheme of Company was sanctioned and full & final payment has been done as a result of which the Company hasrecognized amount of 1091 lacs in Exceptional items against the waiver of loan. • The OTS for 4500 lacs of the Company was sanctioned on 13/08/2018 and the Company had recognized proportionate amount of 1137 lacs in Exceptional items against the waiver of loan in FY 2018-19. Consequently, on the full payment of pending dues in the FY 2019-20 the Company has recognized Rs. 1091 lacs in Exceptional items against the waiver of loan.
We consider this as Key audit Matter because of the significant amount which effect the results of the company.The company is having loss of 733.33 Lacs and after taking effect of the above transaction in Exceptional Item and the Company is having profit of 358.28 Lacs. • We have obtained the copy of approval letter of OTS, and no dues Certificate given by Indian Bank, Management Representation Letter and Board Resolution passed to recognize the abovesaid amount.
• Further as per Ind AS 109 "Financial Instruments",the difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, shall be recognized in profit or loss.
2. Related Party Transactions: In view of the significance of the matter we applied thefollowing audit procedures in this area, among others to obtainsufficient appropriate audit evidence:
The Company has entered into several transactions with related parties during the year 2019-20. We identified related party transactions as a key audit matter because of risks with respect to completeness of disclosures made in the financial statements; non-compliance with statutory regulations governing related party relationships such as the Companies Act 2013 and SEBI Regulations and the judgment involved in assessing whether transactions with related parties are undertaken at arms length.
1. We carried out an assessment of the key controls to identifyand disclose related party relationships and transactions inaccordance with the relevant accounting standard.
2. We carried out an assessment of compliance with thelistingregulations and the regulations under the Companies Act, 2013, including checking of approvals/ scrutiny as specified in Sections177 and 188 of the Companies Act, 2013 with respect to therelated party transactions. In cases where the matter was subject to interpretation, we exercised judgement to rely on opinions provided by legal practitioners.
See note 37 to the standalone financial statements 3. We considered the adequacy and appropriateness of the disclosures in the financial statements, relating to the relatedparty transactions.
4. For transactions with related parties, we inspected relevantledgers, other information that may indicatethe existence of related party relationships or transactions. Wealso tested completeness of related parties with reference tothe various registers maintained by the Company statutorily.
5. We have tested on a sample basis, Managementsassessmentof related party transactions for arms length pricing.

Emphasis of Matter

We draw attention to the following:

a) Note 36 regarding the company is not complying with the requirement of disclosure under the Micro, Small and Medium Enterprises Development Act, 2006.

However, our opinion is not modified in respect of these matters.

Information other than the Standalone 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 include 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 standalone 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.

Managements Responsibility for the Standalone Ind AS 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, total Comprehensive Income,changes in equity and cash flows of the Company in accordance with Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of theAct for safeguarding the assets of the company and for preventingand detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that are reasonable and prudent;and the design, implementation and maintenance of adequateinternal financial controls, that were operating effectively forensuring the accuracy and completeness of the accountingrecords, relevant to the preparation and presentation of theStandalone Ind ASfinancial statements that give a true and fair viewand are free from material misstatement, whether due to fraudor error.

In preparing the 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 standalone 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 financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the act, 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 the 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 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 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 standalone 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 standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in 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 standalone 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 reasonable be expected to outweigh the public interest benefits of such communication.

Other Matter

• The amount of GST availed, utilized, deposited & balance is considered as provided by the Company which is apparently matched with the books of account on test check basis. The data given is subject to GST Audit, the difference if any arises at the time of GST Audit will be considered by the Company in the period/ year in which the audit is conducted. Further the various reconciliation related to GST are under process with the Company as on date of this audit, the difference if any arises will be considered by the Company in the period/year when these are finally reconciled.

Report on Other Legal and Regulatory Requirements

1. As required by section 143(3) of the Act, we report that:

a) We have sought & obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss, including other comprehensive income, Cash Flow Statement and statement of changes in equity dealt with by this Report are inagreement with the books of account.

d) In our opinion, the aforesaid Standalonefinancial statements comply with the Ind ASspecified under Section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014.

e) On the basis of the written representations received from the directors as on March 31, 2020,taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2020,from being appointed as a director in terms of Section 164(2) of theAct.

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 A". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting.

g) With respect to other matters to be included in the Auditors Report in accordance with requirements of section 197(16), 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.

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, as amended 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 litigations on its financial positions in its financial statements.

ii) The Company does not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii) There were no amount which were required to be transferred to Investor Education and Protection Fund by the company.

2. As required by the Companies (Auditors Report) Order,2016("the order) issued by the Central Government in the terms of Section 143(11) of the Act, we give in " Annexure B" a statement on the matters specified in paragraphs 3 and 4of the order.

For R.K Chadha & Co.
Chartered Accountants
FRN. 003513N
Paresh Chadha
Partner
Place: LUDHIANA M. No.518195
Date: 30/06/2020

Annexure A" to the Independent Auditors Report

(Referred to in paragraph 1(f) under ‘Report on other legal and regulatory requirements section of our report to members of Garg Furnace Limited

Report on the Internal Financial Controls 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 Garg Furnace Limited ("the Company") as of March 31, 2020 in conjunction with our audit of the standalone 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, including adherence to companys 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 Companies Act, 2013.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls over financial reporting 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") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, 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 Institute of Chartered Accountants of India. 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 auditors judgement, 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 Companys internal financial controls 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

(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 authorisations of management and directors of the company; and

(3) 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.

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.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2020, 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 R.K Chadha & Co.
Chartered Accountants
FRN. 003513N
Paresh Chadha
Place: LUDHIANA Partner
Date :30/06/2020 M. No.518195

ANNEXURE B TO THE INDEPENDENT AUDITORS REPORT

(Referred to in Paragraph 2 under the Heading of "Report on Other Legal and Regulatory Requirements of our Audit Report of Even Date)

(i) a). The company has not maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b). All the assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

c). According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties included in property, plant and equipment are held in the name of the Company.

(ii) a) The management has conducted the physical verification of inventory at reasonable intervals. The frequency of such verifications are reasonable.

b) The discrepancies noticed on physical verification of the inventory as compared to books records which has been properly dealt with in the books of account were not material.

(iii) According to the information and explanations given to us and on the basis of our examination of the books of accounts, the company has not granted any loans during the year, secured or unsecured, to companies, firms or other parties listed in the register maintained under section 189 of the companies Act, 2013. Consequently, the provisions of clauses iii (a) to (C) of the order are not applicable to the company.

(iv) In our opinion and according to the information and explanations given to us, the company has not given any loans, investments, guarantees, and security during the year under the provisions of section 185 and 186 of the Companies Act, 2013. Accordingly, the provisions of clause 3 (iv) of the Order are not applicable to the Company.

(v) According to the information and explanations given to us, the Company has not accepted any deposits from the public and hence the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the Companies (Acceptance of Deposit) Rules, 2015 with regard to the deposits accepted from the public are not applicable.However, the Company was availing exemption under sub clause (c) of clause xiv of Rule 2(1)(c) of Companies (Acceptance of Deposit) Rules, 2014 which is not available to the Company after 31.12.2019, the date on which the Loans from Indian Bank has been repaid fully. No fresh loans have been taken from Promoters and directors relatives after 31.12.2019.

(vi) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 148(1) of the Companies Act, 2013 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have however not made a detailed examination of the record with a view to determine whether they are accurate or complete.

(vii) a). The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees state insurance, income tax, sales tax, custom duty, excise duty, cess, service tax and other material statutory dues applicable to it with appropriate authorities.

b). There were no undisputed amounts payable in respect of provident fund, Employees State insurance, Income Tax, Goods and Service Tax, Customs duty, cess and other material statutory dues in arrears as at March31,2020 for a period of more than six month for the date they become payable.

c). According to the information and explanations given to us, there are no dues of sales tax, income tax, custom duty, excise duty, cess and service tax which have not been deposited on account of any dispute except mentioned below:

Nature of the Statue Nature of dues Forum where dispute is pending Period to which amount relate Amount (Loss reduced by)
The Income Tax Act, 1961 Income Tax CIT (Appeals) A.Y. 17-18 3416610
The Income Tax Act, 1961 Income Tax CIT (Appeals) A.Y. 18-19 2603166

(viii) In our opinion and according to the information and explanations given to us, the Company hadcontinuing default in the repayment of loans or borrowings to IndianBank which was however settled through One Time Settlement Scheme sanctioned by Bank.

(ix) The Company has not raised moneys by way of initial public offer or further public offer(including debt instruments) or term loans and hence reporting under clause 3(ix) of the order is not applicable to the company.

(x) Based upon the audit procedures performed and the information and explanations given by the management, we report that no fraud by the Company or on the company by its officers or employees has been noticed or reported during the year.

(xi) Based upon the audit procedures performed and the information and explanations given by the management, the managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act;

(xii) In our opinion, the Company is not a Nidhi Company. Therefore, the provisions of clause 4 (xii) of the Order are not applicable to the Company. According to the information and explanations given to us and on the basis of our examination of the records of the

(xiii) company, all the transaction with the related parties are compliance with section 177 and 188 of Companies Act, 2013 where applicable and details of the transactions have been disclosed in Financial Statements as required by applicable accounting standards. [Refer Note No. 2 of Key Audit Matter of Independent Auditors Report]

(xiv) Based upon the audit procedures performed and the information and explanations given by the management, the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review. Accordingly, the provisions of clause 3 (xiv) of the Order are not applicable to the Company

(xv) Based upon the audit procedures performed and the information and explanations given by the management, the company has not entered into any non-cash transactions with directors or persons connected with him and hence provisions of section 192 of the companies Act,2013 are not applicable to the Company.

(xvi) In our opinion, the company is not required to be registered under section 45 IA of the Reserve Bank of India Act, 1934 and accordingly, the provisions of clause 3 (xvi) of the Order are not applicable to the Company.

For R.K Chadha & Co.
Chartered Accountants
FRN. 003513N
Paresh Chadha
Place: LUDHIANA. Partner
Date : 30/06/2020 M. No.518195