Goenka Diamond & Jewels Ltd Directors Report.

To,

To the Members of

Goenka Diamond and Jewels Limited

Report on the Standalone Ind AS Financial Statements Disclaimer of Opinion

We were engaged to audit the accompanying standalone Ind AS Financial statements of Goenka Diamond and Jewels Limited

("the Company"), which comprise the Balance Sheet as at 31st March, 2020 and the Statement of Profit and Loss (including other comprehensive Income), Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and notes to financial statements, including a summary of the significant accounting policies and other explanatory information. We do not express an opinion on the accompanying standalone Ind AS financial statements of the Company. Because of the significance of the matter 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 this standalone Ind AS Financial Statements

Basis for Disclaimer of Opinion

(a) Refer Note 9(b), 19(b), 5(a) and 12(a) of the standalone Ind AS financial statements wherein, the company has not translated following monetary items denominated in foreign currency as at the year ended closing rate and has been carried forward at the rate as at 31st March 2015, 31st March 2016, and / or 31st March 2017, which is not in accordance with Ind-AS -21 "The Effect of changes in Foreign Exchange Rates" and accounting policy followed by the Company.

i. Trade receivable amounting to Rs. 69,806.99 lacs

ii. Trade payables and other payable amounting to Rs. 29,717.66 lacs

iii. Loans and Advances to subsidiaries (including accrued interest) amounting to Rs. 1,943.49 lacs

The company has not provided for cumulative exchange gain (net) on the above items amounting to Rs. 8108.12 lacs including exchange gain amounting to Rs. 4100.49 Lacs pertaining to year ended March 31, 2020. Accordingly, exchange gain for the year is understated by Rs. 4100.49 Lacs.

(b) The Company has defaulted in repayment of loans taken from the banks due to which the banks have recalled their loans and have initiated legal actions. Refer Note 20(D)(2) of standalone Ind AS financial statement wherein its stated that the management has decided not to provide interest on such loans and consequently based on the calculation done by the management total interest amounting to Rs. 13311.46 Lacs determined at estimated rates, has not been provided for in the books of accounts including interest amounting to Rs. 2911.29 Lacs pertaining to the year ended March 31, 2020. Accordingly, finance cost for the year is understated by Rs. 2911.29 Lacs.

Had the exchange difference as stated in para (a) above and deferred tax thereon and interest on loans as stated in para (b) above been provided, the loss before tax for the year would have been decreased by Rs. 1189.20 Lacs. Consequently, the overstatement and understatement of assets and liabilities are as under: -

Head of Assets/ Liabilities Assets Liabilities

Understatement

Overstatement

Understatement

Overstatement
Trade Receivables

12,123.53

-

-

-
Trade Payables

-

-

4,307.83

-
Non-Current financial assets

201.83

-

-

-
Current Financial Assets

91.52

-

-

-
Current financial liabilities

-

-

13,312.38

-
Deferred Tax Liability

-

-

429.36

-
Other Equity

-

-

-

5,632.69
Total

12,416.87

-

18,049.57

5,632.69

 

Due to uncertainties with respect to settlement of bank dues and interest, adjustments of trade receivables and payables and its consequential impact on taxation thereof, we are unable to ascertain the tax impact and liability, on the financial results.

(c) We draw attention to Note No. 20(D)(2) and 20(D)(3) of standalone Ind-AS financial statements regarding default in repayment of loans and interest to banks (including ARC) owing to which the banks has classified the account as NPA and recalled its loans and had initiated various legal actions for recovery of its dues including legal actions initiated under SARFESI Act, The recovery of Debts due to Banks and Financial Institution Act, 1993 and Insolvency and Bankruptcy Code, 2016 which are still pending for hearing. The outstanding loan balances due to banks (including ARC) amounting to Rs. 15688.07 Lacs shown under Current Financial Liabilities and deposit/advance to an asset reconstruction company amounting to Rs. 1005.98 lacs for which no confirmation/ statements have been obtained and are subject to reconciliation and subsequent adjustments.

(d) Refer Note No. 9(a) of standalone Ind AS financial statements regarding non-provision of the expected credit loss/ impairment relating to overdue Trade Receivables of Rs. 69,806.99 Lacs as per the requirement of Ind- AS 109 "Financial Instruments". In view of defaults in payment obligations by the Trade Receivables on due date, non-recoveries from Trade Receivables, non-confirmations/ reconciliation from Trade receivables, initiation of legal action/ suits against Trade Receivables by the company, notices/ summon to the Company from Enforcement Directorate, Reserve Bank of India, Development Commissioner of Surat SEZ and in absence of clear forward looking information regarding outcome of pending legal actions initiated and time frame and quantum of realisability of these Trade receivables, we are unable to determine the amount of expected credit loss/ impairment based on provision matrix as per the requirements of Ind-AS 109 "Financial Instruments" and its consequential impact, on the financial statements.

(e) Refer Note No. 5(b) and 40(c) of standalone Ind AS financial statements regarding non-provision of the expected credit loss/ impairment on loan to a subsidiary amounting to Rs. 1943.49 Lacs (including accrued interest) and investment in an entity by way of Optionally Convertible Debentures amounting to Rs. 621.91 Lacs (including accrued interest) as per the requirement of Ind- AS 109 "Financial Instruments". The net worth of above subsidiary and entity is negative and based on reasonable and supportable information regarding the current financial status and business condition of these entities, there has been significant increase in credit risk and there could be delay/default in recovery of these amounts. Considering the above, we are unable to comment on the amount of expected credit loss/ impairment and its consequential impact, on the financial statements.

(f) The Inventory has been taken on the basis of physical verification carried out by the management as at the year-end and its valuation is based on determination of estimated net realizable value and specific identification which involves technical judgment of management. We have relied upon by the physical verification and valuation of the Inventory as certified and determined by the management.

(g) Refer Note No. 40(b) regarding investment of Rs. 2.03 lacs and advance of Rs. 59.78 lacs to subsidiary namely M.B. Diamonds LLC and investment of Rs. 7.44 lacs in its subsidiary namely Goenka Diamond and Jewels DMCC, the net-worth of these subsidiaries as at the year end is negative. The Company has not made any provision for Impairment against these investments and advance.

(h) Balances with Banks amounting to Rs 39.14 lacs (debit balances) and Rs. 2471.64 lacs (credit balance) at the year end, Trade Payables and Other Current Assets and Liabilities are subject to confirmations and consequential adjustment thereof.

(i) Refer Note No. 43 of standalone Ind AS financial statements, which describes managements assessment of the impact of the COVID-19 pandemic on the standalone financial statements of the Company. However, in view of highly uncertain economic environment, a definitive assessment of the impact on the subsequent periods is highly dependent upon the circumstances as they evolve.

(j) Material Uncertainty related to going concern

The Companys operating results have been materially affected due to various factors including non-realization of Trade receivables, defaults in repayment of loans and interest to banks, non-availability of finance due to recall of loans by banks in consortium, legal actions/ insolvency proceedings initiated by banks against company for recovery of its dues, notices/ summon from Enforcement Directorate, Reserve Bank of India, Development Commissioner of Surat SEZ and from other regulatory authorities, pending proceeding with National Company Law Tribunal, Debt Recovery Tribunals and other courts for recovery of banks dues and possession/attachment/sale of companys properties, assignment and transfer of dues of banks in favor of an asset reconstruction company (ARC), pending income tax demands and consequent attachment of bank accounts by Income tax department, reliance on cash sales for meeting out expenses, overall substantial decrease in volume of business and sales, non-payment of statutory dues and taxes, overdue creditors, non realization of loan and interest thereon from a subsidiary etc.. We are also unable to determine the impact of actions and forthcoming actions that may be taken by various legal and statutory authorities due to various factors mentioned herein above. These events cause significant doubts on the ability of the company to continue as a going concern. The appropriateness of the going concern assumption is dependent on the companys ability to raise adequate finance from alternative means, settlement of its dues to banks and ARC and recoveries from overseas Trade Receivables to meet its short term and long term obligations as well as to establish consistent business operation. The above situation indicates that material uncertainty exist that cast significant doubt on companys ability to continue as a going concern.

significance Because of the of the matters described above in the "Basis of Disclaimer of Opinion" section of our report, absence of sufficient appropriate audit evidences and Material uncertainty related to Going Concern paragraph above, it is not possible to form an opinion on the financial statements due to the potential interaction of the multiple uncertainties and their possible cumulative effect on the financial statements. Accordingly, we do not express an opinion on the financial statements.

Responsibilities of Management for the Standalone Ind AS Financial Statements

The Companys Board of Directors is responsible for the matters stated in Section 134 (5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these Standalone Ind AS Financial Statements that give a true and fair view of the financial position, financial performance, cash flows and changes in equity of the Company accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed 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 the 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 Ind AS 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 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.

Those Board of Directors are also responsible for overseeing the financial reporting process of the Company.

Auditors Responsibilities for the Audit of the Standalone Ind AS Financial Statements

Our responsibility is to conduct an audit of the Companys financial statements in accordance with Standards on Auditing and to issue an auditors report. However, because of the matter 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 standalone Ind-AS financial statements.

We are independent of the Company in accordance with the Code of Ethics and provisions of the Companies Act, 2013 that are relevant to our audit of the standalone Ind-AS financial statements in India under the Companies Act, 2013, and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics and the requirements under the Companies act, 2013

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors 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 1 a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

a. As described in Basis of Disclaimer of Opinion paragraph, we are 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 possible effects of the matters as described in the Basis of 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 it appears from our examination of those books;

c. The Balance Sheet, Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;

d. Due to effects/ possible effects of the matters described in Basis for Disclaimer of Opinion paragraph, we are unable to state whether the aforesaid standalone Ind-AS financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014, Companies (Indian Accounting Standards) Rules, 2015, as amended;

e. On the basis of written representations received from the directors as on March 31, 2020, and 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 the Act;

f. The matters described in Basis of Disclaimer of opinion paragraph and other observations made in statement on of the Order above, may have an adverse effect on the functioning of the mattersspecified the Company.

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 2" to this report;

h. 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 explanation 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;.

i. 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 position in its Ind AS financial statements Refer Note 38 to the Ind AS financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

iii. There were no amounts which were required to be transferred to the Investor Education and Protection

Fund by the Company

For Ummed Jain & Co.

Chartered Accountants

ICAI Firm Reg. No.119250W

Akhil Jain

Partner

Membership No.137970 Mumbai: June 30, 2020 UDIN No. 20137970AAAABB1813

ANNEXURE "A" TO THE INDEPENDENT AUDITORS REPORT

(Referred to in paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our Report of even date)

(i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) During the year, the fixed assets of the Company have been physically verified by the management. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and 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 are held in the name of the Company except building at Jaipur having value of Rs.10.24 lakhs (Net block as at year-end Rs. 3.37 lakhs) is yet to be registered in the name of Company.

(ii) The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been properly dealt with in the books of account;

(iii) The Company has granted unsecured loans to one of its subsidiary company covered in the register maintained under section 189 of the Companies Act, 2013 (‘the Act).

(a) In our opinion, the rate of interest and other terms and conditions on which the loans had been granted to subsidiary listed in the register maintained under Section 189 of the Act are not, prima facie, prejudicial to the interest of the Company.

(b) In the case of the loans granted to the subsidiary listed in the register maintained under section 189 of the Act, the company has not stipulated schedule of repayment of principal and payment of interest and therefore we are not in position to make specific comment as regard to repayment of the principal or receipts are regular.

(c) Since there is no stipulation regarding repayment of principal and payment of interest, we are unable to comments on the overdue amount for more than ninety days.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Act, with respect to the loans and investments made.

(v) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public within the provisions of Sections 73 to 76 of the Act and the rules framed there under.

(vi) As explained to us, the maintenance of cost records under sub section (i) of Section 148 of the Companies Act, 2013 has not been prescribed by the Central Government for the Company.

(vii) (a) The Company is not regular in depositing with appropriate authorities, undisputed statutory dues including provident fund, employees state insurance, income tax, sales tax, service tax, value added tax, customs duty, excise duty, cess and any other material statutory dues applicable to it.

(b) According to the information and explanations given to us, undisputed amounts payable in respect of provident fund, employees state insurance, income tax, service tax, and any other material statutory dues applicable to it, were outstanding, at the year end, for a period of more than six months are as under: -

Nature of Statute Nature of Dues Amount ( In Lakhs ) Period to which the amount relates Due Date Date of Payment
Income Tax Act 1961 TDS 2.14 01/04/2019 to 31/08/2019 07th of Next Month Not Yet paid
Employee Provident Fund Organization Provident Fund 1.22 01/04/2019 to 31/08/2019 15th day of next month Not Yet paid
Maharashtra/ Surat Labour welfare Fund MLWF/ GLWF 0.01 01/04/2019 to 31/08/2019 05th of Next Month Not Yet paid
Employee State Insurance Corporation E.S.I.C. 0.14 01/04/2019 to 31/08/2019 15th day of next month Not Yet paid
Department of Sales Tax, Maharashtra Profession Tax 0.14 01/04/2019 to 31/08/2019 21st day of next month Not Yet paid
Maharashtra Value Added Tax Act, 2002 VAT 4.25 01/04/2019 to 31/08/2019 21st day of next month Not Yet paid
Goods & Services Tax Act, 2017 GST 7.33 01/07/2018 to 31/03/2018 20th day of next month Not Yet paid
Income Tax Act 1961 Income Tax 203.07 (excluding Interest) Financial Year 2012-13 March 31, 2013 Not Yet paid
53.87 (excluding Interest) Financial Year 2012-2013 14th Oct 2013 Not Yet paid
Central Excise and Service Tax 1.40 FY 2008-2009 Commissioner of Not Yet paid
Customs Act FY 2011-2012 Central Excise has decided appeal in favour of the Company, interest amount due

(c) According to the information and explanation given to us, the dues outstanding with respect to, income tax, sales tax, wealth tax, service tax, value added tax, customs duty, excise duty, cess and any other material statutory dues applicable to it, on account of any dispute, are as follows:

Nature of Statute Nature of Dues Amount ( In lakhs) Period to which the amount relates Forum where dispute is pending
Income Tax Act, 1961 Income Tax 0.98 AY 2004-2005 CIT Appeal - Mumbai
834.19 AY 2008-2009 ITAT Appeal, Mumbai
528.29 AY 2009-2010 ITAT Appeal - Mumbai
40.46 AY 2010-2011 ITAT Appeal – Mumbai
1893.70 AY 2010-2011 ITAT Appeal – Mumbai
40.65 AY 2011-2012 ITAT Appeal – Mumbai
1503.55 AY 2012-2013 ITAT Appeal – Mumbai
60.49 AY 2013-2014 ITAT Appeal – Mumbai
86.84 AY 2014-2015 ITAT Appeal – Mumbai
1.21 AY 2018-2019 CIT Appeal - Mumbai
Punjab Value Added Tax VAT 31.83 FY 2012-13 In the office of Dy. Excise & Taxation Ludhiana
Commissioner (Admn). Division, Ludhiana

(viii) The Company has defaulted to various banks in re-payment of working capital - export credit facilities and Corporate Loan which have been crystallized and/or became overdue or recalled at various dates, the summarized position of such defaults at the balance sheet date is as under: -

Details of continuing defaults

Name of Bank Facility Date of Default Amount Date of default ended
Central Bank of India Post & Pre Shipment Loans Jan 2014 1,032.78 Continuing
Corporation Bank Post & Pre Shipment Loans and Term Loan April 21, 2016 2,284.80 Continuing
Punjab National Bank Post & Pre Shipment Loans and Term Loan March 31, 2016 4,493.31 Continuing
Punjab & Sind Bank Post & Pre Shipment Loans June 30, 2014 3,141.25 Continuing
State Bank of India Post Shipment Loans March 21, 2016 884.85 Continuing
AXIS Bank / Alchemist ARC Ltd Post & Pre Shipment Loans and Term Loan July 31, 2016 2,089.86 Continuing
UCO Bank/ Alchemist ARC Ltd Post & Pre Shipment Loans April 4, 2016 1,002.40 Continuing
Karnataka Bank/ Alchemist ARC Ltd Post & Pre Shipment Loans June 29, 2016 758.82 Continuing
Axis Bank Ltd/ Alchemist ARC Ltd Overdrawn Balances in Bank Current Account July 31, 2016 1,362.64 Continuing
Corporation Bank Overdrawn Balances in Bank Current Account April 21, 2016 15.31 Continuing
Punjab National Bank Overdrawn Balances in Bank Current Account March 31, 2016 2.84 Continuing
Punjab and Sindh Bank Overdrawn Balances in Bank Current Account June 30, 2014 1,090.84 Continuing

Default shown is the date of NPA default shown includes total outstanding of loans of respective banks .The above defaults are the amounts as on the date of the defaults and do not include any levies of interest and penal interest charged by the banks / provided by the company after the date of the defaults or its subsequent reversals by some banks. The above defaults does not includes defaults of payment of interests amounting to Rs.13311.46 lakhs as calculated by the management @17 % (approx) on working capital borrowing/Term Loan availed by the Company, as the company is not accounting for any interest from April 1, 2016 even though the banks have either charged interest but subsequently reversed or have not charged interest. Consequently, we are unable to quantify and give period wise details of the defaults in interest. However, under the head "Other Current Financial Liabilities" (Note No. 20) amounts of Rs. 530.79 lakhs and Rs. 2471.64 lakhs being the "Interest Accrued and due" and "Overdrawn Current Account Bank Balances" respectively are the amounts of interest charged or provided for, the period of which is unascertainable.

Loan facilities recalled by banks include Rs.15688.07 lakhs being outstanding of few banks and ARC for which neither bank statement nor confirmations received, of balance were (ix) The Company during the year did not raise any money by way of initial public offer or further public offer (including debt instruments). In our opinion and according to information and explanations given to us, the term loans raised during the year were applied for the purpose for which those are raised.

(x) According to the information and explanations given to us, no fraud by the Company or on the Company by its officers employees has been noticed or reported during the course of our audit.

(xi) In our opinion, the managerial remuneration paid or provided for is in accordance with the requisite approvals by the provisions of section 197 read with Schedule V to the Companies Act, 2013.

(xii) In our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable

(xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards (xiv) According to the information and explanations given to us and based on our examination of the records of the Company, the

Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable (xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934

For Ummed Jain & Co.

Chartered Accountants

ICAI Firm Reg. No.119250W

Akhil Jain

Partner

Membership No.137970 Mumbai: June 30, 2020 UDIN No. 20137970AAAABB1813

Annexure - B to the Auditors Report

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 GOENKA DIAMOND AND JEWELS LIMITED ("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 Companys 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 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 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 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 appropriatetoprovide qualifiedaudit basisforour 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 un-authorised 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 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

According to information and explanations given to us and based on our audit, the following significantdeficiency/material weakness has been identified as at March 31, 2020: -a. The company did not have an appropriate internal control system for customer acceptance, customer credit evaluation and establishing customer credit limits based on the economic, industry and customers financial considerations. This has resulted in huge old outstanding dues from customers and insignificant recoveries there-against owing to which the Company has defaulted in its obligations for repayment of its dues to banks and creditors. Further, internal control procedures are not operating for periodic review of age-wise analysis of trade receivables, procedure and manner for timely action against defaulting debtors and establishing methodology, underlying assumptions and policies for provision for doubtful debts and its appropriateness on periodic basis. These material weakness/ significant deficiency could potentially result in Company recognizing revenue without establishing reasonable certainty of ultimate collection and could lead to accounting of uncollectible trade receivables. b. The Companys internal financial control is not operating effectively with regard to legal and regulatory compliances mainly on account of payment of statutory dues/ taxes and also in timely payment of interest and repayment of its loan from banks. Certain defaults/ non-compliances could be result of the liquidity crunch faced by the Company due to material weakness as mentioned in para (a) above. This ineffective internal control over legal and regulatory compliance and timely payments of interest and repayment of loans could have material effect on the financial statements of the Company and its ability to continue as going concern.

A ‘material weakness is a deficiency, or a combination of deficiencies, that there is a reasonable possibility that a material misstatement of the companys annual or interim financial statements will not be prevented or detected on a timely basis.

Opinion

In our opinion, except for the effects/possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate internal financial controls 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 ICAI.

For Ummed Jain & Co.

Chartered Accountants

ICAI Firm Reg. No.119250W

Akhil Jain

Partner

Membership No.137970 Mumbai: June 30, 2020 UDIN No. 20137970AAAABB1813