IL&FS Engineering & Construction Co Ltd Directors Report.

To the Members of IL&FS Engineering and Construction Company Limited

Report on the Audit of the Standalone Financial Statements

Qualified Opinion:

We have audited the standalone financial statements of IL&FS Engineering and Construction Company Limited ("the Company"), which comprise the standalone balance sheet as at March 31, 2019, the standalone statement of profit and loss (including other comprehensive income), standalone statement of changes in equity and standalone statement of cash flows for the year then ended, and notes to the standalone financial statements, including a summary of the 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, except for the possible effects of the matters described in the ‘Basis for Qualified Opinion paragraph below, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 ("Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, and loss and other comprehensive income, changes in equity and its cash flows for the year ended on that date.

Basis for Qualified Opinion:

We draw attention to the following notes to the stand alone financial statements:

Note 13 (a) relating to deferred tax asset amounting to Rs. 242.99 Crores as at March 31, 2019, recognised by the Company in earlier years. Considering the material uncertainty related to going concern that exists in the Company, the threshold of reasonable certainty for recognising the deferred tax assets as per Ind AS 12- Income Taxes has not been met. Consequently, deferred tax asset is overstated and loss for the year and retained earnings (accumulated loss) are understated by Rs. 242.99 Crores.

Note 49 regarding Inter Corporate Deposits (ICDs) amounting to Rs. 323.78 Crores. These ICDs represents advances given by the Company to other entities, which as informed to us by the management, were ultimately given by these other entities to erstwhile Satyam Computer Services Ltd, which has since merged into Tech Mahindra Ltd. In the absence of adequate and sufficient audit evidence to establish the recoverability of said advances, we are unable to express an opinion on the recoverability of the said ICDs.

Note 51 relating to non-recognition of interest expense of Rs. 144.99 Crores for the year on the borrowings availed by the Company considering the process initiated for submission of a resolution proposal to lenders for restructuring of existing debt. Consequently, interest expense and loss for the year are understated by Rs. 144.99 Crores and retained earnings (accumulated loss) is understated by Rs. 144.99 Crores.

As stated in the Note 52, relating to the provision for advance aggregating to Rs. 65 Crores for purchase of cement paid during the period to a party, the Management is of the opinion that these transactions are suspicious in nature and the Board decided to initiate investigation by informing the Ministry of Corporate Affairs (MCA). In the absence of sufficient and appropriate audit evidence, we are unable to opine on the appropriateness of the recognition of the transaction, pending result of the outcome of the investigation

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those SAs 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 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 Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Material uncertainty related to going Concern:

Attention is invited to Note 30 in the standalone financial statements regarding a likely significant reduction in the Companys future income from operations, in the absence of new business orders, managements expectation of Companys inability to meet its obligations over the next 12 months out of its earnings and liquid assets. During the year ended March 31, 2019, the Company was unable to discharge its obligations for repayment of loans and settlement of other financial and non-financial liabilities including statutory liabilities. The Companys management represented to us that process has been initiated for submission of a resolution proposal to lenders for restructuring of existing debt. These events and conditions indicate a material uncertainty which cast a significant doubt on the Companys ability to continue as a going concern, and therefore it may be unable to realise its assets and discharge its liabilities including potential liabilities in the normal course of business. The ability of the Company to continue as a going concern is solely dependent on the acceptance of the debt restructuring proposal / finalisation and approval of the resolution plan, which is not wholly within the control of the Company.

The Management of the Company has accordingly prepared these Standalone Financial Statements on going concern basis based on their assessment of the successful outcome of the restructuring proposal / finalisation and approval of the resolution plan.

Our opinion is not modified in respect of this matter.

Emphasis of Matter:

We draw attention to the following notes to the standalone financial statements:

Note 31 (vii) regarding ongoing investigations by Serious Fraud Investigation Office of Ministry of Company Affairs (SFIO), Enforcement Directorate (ED) and other regulators / agencies against Infrastructure Leasing & Financial Services Limited (‘IL&FS or ‘the Holding Company), and its subsidiaries (including the Company).The National Company Law Tribunal (NCLT) has issued an Order to re-open books of accounts of IL&FS and its two subsidiaries (other than this Company) for the past financial years. The financial statements of the Company for the year do not include adjustments, if any, that may arise on account of the ongoing investigations by the investigating and other agencies and Regulatory Authorities, as the management, at this juncture, cannot foresee any adjustments to be made in these financial statements of the Company as a result of any such investigations.

Note: 48 (a) and Note 48 (b) regarding recoverability of Trade Receivables and Contract assets respectively from the terminated / foreclosed / revived projects aggregating to Rs. 475.26 Crores. Based on its internal assessment no adjustments have been made in the carrying value of the receivables / contract assets.

Note 8 and Note 9 which include carrying value of loans / advances / interest accrued on such loans or advances to the investee entities of aggregating to Rs. 146.19 Crores. Recoverability of these investments / receivables / loans and advances is dependent upon recovery of capacity charges and supplies, increase in traffic on road investments, final award of the claim and positive outcome of the litigations in the ultimate investee entities.

The ultimate outcome of the matters stated above cannot presently be determined, pending approvals, acceptances, legal interpretations, conclusion of legal proceedings, achievement of traffic projections, favourable settlement of claims and ultimate realisation etc., as referred to in the relevant notes to the accompanying standalone financial statements referred above, accordingly no adjustment has been made in the carrying value of the aforesaid assets.

Note 53 regarding exceptional items aggregating to Rs. 1,640.42 Crores comprising write off / provisions made and other adjustments made during the year based on comprehensive review / assessment carried out by the management during the year.

Our opinion is not modified in respect of the aforementioned matters.

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. In addition to the matter described in the ‘Basis for Qualified Opinion and Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. For each matter below, our description of how our audit addressed the matter is provided in that context.

Description of Key Audit Matter:

Key audit matter How the matter was addressed in our audit
Estimated Cost to complete the Project:
Refer note 3 (a) to the standalone financial statements
The Company recognises revenue under percentage fi of completion method as speci ed under Indian Accounting Standard (IND AS)-115 Revenue from contract with customers. Recognition of revenue requires estimation of total contract cost which comprises of the actual cost incurred till date and estimated cost further to be incurred to complete the projects. Estimation of the cost to complete involves exercise of significant judgement by management including assessment of technical data and hence identified as Key Audit Matter. Our audit approach was a combination of test of internal controls and substantive procedures which included the following:
1. Tested the design, implementation and operating effectiveness of the controls surrounding determination and approval of estimated cost.
2. Verified the contracts with customers on test check basis and the actual cost incurred and terms and condition related to the variation of the cost.
3. Obtained and relied on the internal assessments supporting the accuracy of the estimate of the total cost of the project for selected contracts on test check basis.

Trade receivables and Contract Assets

Refer Note: 7 and 12 to the standalone Financial statements

Trade receivables and contract assets amounting to Rs 256.09 Crores and Rs 1,314.65 Crores respectively, represents approximately 49.41% of the total assets of the Company as at March 31, 2019. In assessing the recoverability of the aforesaid balances, managements judgement involves consideration of aging status, evaluation of litigations and the likelihood of collection based on the terms of the contract. Management estimation is required in the measurement of work completed during the period for recognition of unbilled revenue. We considered this as key audit matter due to the materiality of the amounts and significant estimates and judgements as stated above. Our audit procedures amongst others included the following:
We understood and tested on a sample basis the design and operating effectiveness of management control over the recognition and the recoverability of the trade receivables and contract assets.
We performed test of details and tested relevant contracts, documents and subsequent settlements for material trade receivable balances and amounts included in contract assets that are due on performance of future obligations.
• We tested the aging of trade receivables at year end.
We performed test of details and tested relevant contracts and documents with specific focus on measurement of work completed during the period for material unbilled revenue balances included in contract asset.
We performed additional procedures, in respect of material over-due trade receivables and long outstanding contract assets, i.e. tested historical payment records, correspondence with customers.
We assessed the allowance for impairment made by management.

Advances to Subcontractors and Suppliers

Refer note 8 and 12 to the standalone financial statements

The Company has recoverable advances (in cash or in kind) of Rs. 128.08 Crores. Our audit procedures amongst others included the following:
Managements assessment of recoverable amounts, in cash or in kind has been identified as key audit matter due to the significance of the balances as at March 31, 2019. We understood and tested on a sample basis the design and operating effectiveness of management control over disbursing the advance and the recoverability of the advances to vendors – for supply of goods and services.
We performed test of details and tested relevant contracts, documents and subsequent settlements for material balances outstanding for recovery either in cash or kind as at March 31, 2019.
We tested the aging of these advances as at the year end.
We assessed the allowance for provisioning made by management.

Provisions and Contingent Liabilities:

Refer note 3 (p) to the standalone financial statements

The Company is involved in various taxes and other disputes for which final outcomes cannot be easily predicted and which could potentially result in significant liabilities. The assessment of the risks associated with the litigations is based on complex assumptions, which require the use of judgements and such judgements relates, primarily, to the assessment of the uncertainties connected to the prediction of the outcome of the proceedings and to the adequacy of the disclosures in the financial statements. Because of the judgement required, the materiality of such litigations and the complexity of the assessment process, the area is a key matter for our audit. Our audit approach was combination of test of internal controls and substantive procedures which included the following:
1. Assessing the appropriateness of the design and implementation of the Companys controls over the assessment of litigations and completeness of disclosures.
2. Testing the supporting documentation for the positions taken by the management, conducting meetings with in-house legal counsel and/or legal team and reviewing the minutes of Board and subcommittee, to confirm the operating effectiveness of these controls.
3. Review of assumptions used in the evaluation of potential risk and tax risks performed by the legal and tax department of the Company considering the legal precedence and other rulings in similar cases.
4. Consideration of recent judgements passed by the appropriate authorities in order to challenge the basis used for the accounting treatment and resulting disclosures.

Information Other than the standalone financial statements and Auditors Report Thereon:

The Companys management and Board of Directors are responsible for the other information. The other information comprises the information included in the Annual report, but does not include the standalone financial statements and our auditors report thereon. The Annual report is expected to be made available to us after the date of this auditors report.

Our opinion on the standalone financial statements does not cover the other information and we will 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 identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the Annual report, if we conclude that there is material misstatement therein, we are required to communicate the matter to those charged with governance.

Managements Responsibility for the standalone financial statements:

The Companys management and Board of Directors are 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 state of affairs, profit and other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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 financialstatements 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 and Board of Directors are 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.

Board of Directors is 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 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 control 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 with reference to standalone financial statements 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 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 a manner that achieves fair presentation.

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 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:

1. As required by the Companies (Auditors Report) Order, 2016 ("the Order") issued by the Central Government in terms of section 143 (11) of the Act, we give in the "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

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

a. Except for the matters stated in the "Basis for qualified opinion" paragraph hereinabove, we have obtained all the information and explanations which we had sought and to the best of our knowledge and belief were necessary for the purposes of our audit.

b. Except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph above, 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.

c. The standalone balance sheet, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of cash flows dealt with by this Report are in agreement with the books of account.

d. Except for the possible effect of the matters described in the Basis for Qualified Opinion paragraph above, in our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under section 133 of the Act.

e. The matter relating to going concern described under Material Uncertainty Related to Going Concern paragraph above, and the matters stated at paragraphs 1 to 3 under Emphasis of Matter paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

f. On the basis of the written representations received from the directors as on 31 March 2019 taken on record by the Board of Directors, none of the directors are disqualified as on 31 March 2019 from being appointed as a director in terms of Section 164(2) of the Act.

g. The qualifications relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above.

h. With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B".

i. With respect to the matter to be included in the Auditors Report under section 197 (16), according to the information and explanations given to us, the company has not paid any remuneration to its directors during the current year except sitting fee paid to the non- executive / independent directors. The same is in accordance with the applicable provisions of the Companies Act, 2013.

j. 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:

i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements (Refer Note – 31 to the Standalone Financial Statements);

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

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company;

For M. Bhaskara Rao & Co.
Chartered Accountants
ICAI Firm Registration Number: 000459S
V K Muralidhar
Partner
Membership Number: 201570
Mumbai, November 19, 2019 UDIN: 19201570AAAADX2083

"Annexure A" to the Independent Auditors report on the standalone financial statements

Annexure A referred to in paragraph (1) of Report on other Legal and regulatory requirements of our Report of even date to the members of IL&FS Engineering and Construction Company Limited on the standalone financial statements for the year ended March 31, 2019.

i. With respect to fixed assets:

a. According to the information and explanation given to us, the Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b. According to the information and explanation given to us, all fixed 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. Discrepancies noted on such verification were not material and have been properly dealt with in the books of account.

c. Based on our audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to information and explanations given by the management the title deeds of immovable properties included in fixed assets are held in the name of the Company. In this regard, we were informed that the title deeds have been lodged with bankers as Security. However, confirmation from the respective bankers was not furnished to us.

ii. The management has conducted physical verification of inventories at reasonable intervals during the year. Discrepancies noted on physical verification of inventories were not material and have been properly dealt with in the books of account.

iii. According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly, the provisions of clause 3(iii) (a), (b) and (c) of the Order are not applicable to the Company and hence not commented upon.

iv. In our opinion and according to the information and explanations given to us, there are no loans, investments, guarantees and securities granted in respect of which provisions of Section 185 and Section 186 of the Companies Act, 2013 are applicable and hence not commented upon

v. The Company has not accepted any deposits from the public.

vi. 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(1) of the Companies Act, 2013, related to the construction industry and construction of roads and other infrastructure projects, and are of the opinion that prima facie, the specified accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

vii. With respect to statutory dues:

a. According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has not regularly deposited undisputed statutory dues including Provident fund, Employees state insurance, Income-tax, Sales tax, Service tax, Duty of custom, Duty of excise, Value added tax, Goods and Service tax, Cess and other material statutory dues with the appropriate authorities.

b. There were arrears in respect of undisputed amounts payable in respect of Provident fund, Employees state insurance, Income-tax, Service tax, Sales-tax, Duty of custom, Duty of excise, Value added tax, Goods and Service tax, Cess and other material statutory dues as at March 31, 2019 for a period of more than six months from the date the same became payable are as follow:

Name of the Statute Nature of dues Amount (Rs in Crore) Period to which the amount relates Due Date Date of subsequent payment
Employees Provident Fund Act, 1952 Provident fund contribution 0.73 2018-19 Various dates Various dates
Employees State Insurance Act, 1948 ESI Contribution 0.42 2018-19 Various dates Various dates
Income Tax Act, 1961 Tax Deducted at Source 11.66 2018-19 Various dates Not Paid
GST Act GST 16.33 2017-18 Various dates Not Paid
GST Act GST 79.84 2018-19 Various dates Not Paid

c. According to the records of the Company, the amounts disputed by the Company and not deposited in respect of Income tax, Sales tax, Service tax, Duty of custom, Duty of excise, Value added tax and Cess , are as follows:

Name of the Statute Nature of dues Amount demanded Paid under protest Period to which the amount relates (Assessment years) Forum where dispute is pending
(Rs in Crore) (Rs in Crore)
AP Value Added Tax, 2005 Sales Tax and Penalty 1.13 0.32 2005-06, 2006-07 and 2007-08 Sales Tax Appellate Tribunal, Hyderabad
AP Value Added Tax, 2005 Penalty on Sales Tax 0.36 0.18 2007-08 Appellate Deputy Commissioner, Hyderabad
AP Value Added Tax, 2005 Sales Tax 27.06 - 2007-08 High Court of Judicature at Hyderabad for the states of Andhra Pradesh and Telangana
Central Sales Tax Act,1956 Penalty for Sales Tax 0.50 0.12 2002-03 and 2003-04 Sales Tax Appellate Tribunal, Hyderabad
Central Sales Tax Act,1956 Penalty on Sales Tax 0.70 0.20 2007-08 Appellate Deputy Commissioner, Chhattisgarh
Finance Act, 1994 Service Tax 9.70 - 2007-08 and 2008-09 Commissioner of Customs & Central Excise, Hyderabad
West Bengal Vat Act, 2003 Sales Tax 0.06 - 2009-10 Joint Commissioner of Commercial Taxes, Behrampore
West Bengal Vat Act, 2003 Sales Tax 1.52 - 2008-09 West Bengal Appellate & Revisional Board
AP Value Added Tax, 2005 Sales Tax 0.92 0.51 2008-09 Appellate Deputy Commissioner, Hyderabad
Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987 Professional Tax 0.06 - 2008-09 Commercial tax officer, Hyderabad
AP Value Added Tax, 2005 Sales Tax 1.85 - 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10 Commercial Tax Officer, Hyderabad
AP Value Added Tax, 2005 Sales Tax 4.12 - 2009-10, 2010-11, 2011-12 and 2012-13 Assistant Commissioner of Sales Tax (Enforcement), Hyderabad
AP Value Added Tax, 2005 Sales Tax 0.21 0.03 2014-15 Appellate Deputy Commissioner, Vishakapatnam
MP Entry Tax Act 1976 Entry Tax 0.27 0.03 2013-14 Asst. Commissioner commercial tax officer (Audit), Jabalpur, MP
Orissa Entry Tax Act, 1999 Entry Tax 0.21 0.07 April, 1 2010 to March 31, 2014 Joint Commissioner of Sales Tax, Cuttack
West Bengal Vat Act, 2003 Sales Tax 0.11 - 2011-12 Senior Joint Commissioner, West Bengal
West Bengal Vat Act, 2003 Sales Tax 1.36 0.20 2012-13 Senior Joint Commissioner, West Bengal
Finance Act, 1994 Service Tax 3.47 0.26 October 2010 to March 2015 Principal commissioner of service tax, Hyderabad
AP Value Added Tax, 2005 Sales Tax 0.11 - 2012-13 Commercial Tax Officer, Hyderabad
Central Excise Act, 1944 Excise Duty 12.04 0.50 February 2012 to February 2016 Commissioner of Central Excise, Gurgaon
Maharashtra Vat Act, 2002 Sales tax 0.35 0.02 2011-12 Sales Tax Appeals Kolhapur Maharashtra
Odisha Vat Act, 2004 Sales tax 0.14 - April 2014 to September 2015 Joint Commissioner of commercial tax, Cuttack
The Odisha Entry tax Act, 1999 Entry tax 0.03 - April 2014 to September 2015 Joint Commissioner of commercial tax, Cuttack
Maharashtra Vat Act, 2002 Sales Tax and interest 0.71 0.02 2013-14 Deputy Commissioner of sales tax (Appeals), Kolhapur
Central Sales Tax Act,1956 Interest on CST 1.28 - 2002-03 and 2003- 04 Sales Tax Appellate Tribunal, Hyderabad
U P VAT Act, 2008 VAT Assessment (Exparte) 44.31 - 2015-16
Income Tax Act, 1961 Income Tax 39.82 39.21 2007-08 to 2011-12 Commissioner of Income Tax (Appeals), Hyderabad

viii. In our opinion and according to the information and explanations given to us, the Company has defaulted in the repayment of loans or borrowings to banks as at March 31, 2019. The Company has not taken any loan from the Government and not issued any debentures during the year.

Details of default in repayment of borrowings from Banks as on March 31, 2019 are given below:

Particulars

Amount of Default

Period of Default (No of

(Rs. Crores)

days)

10.25 182
ICICI Bank 11.85 90
11.85 1
SBI (including SBH) 6.45 1
1.67 182
Bank of Maharashtra 1.67 90
1.67 1
1.49 182
IDBI Bank 1.73 90
1.73 1
Bank of India 0.39 90
0.39 1
0.80 182
Punjab National Bank 0.80 90
0.80 1
0.54 182
Vijaya Bank 1.03 90
1.03 1
1.09 182
Indian Overseas Bank 1.09 90
1.09 1
2.84 182
Allahabad Bank 2.84 90
2.84 1

Details of Interest Defaults to Banks as at March 31, 2019 are as follows:

Particulars Amount of Default Period of Default

(Rs. Crores)

(No of days)
ICICI Bank 5.45 Due date for interest is on various dates on monthly basis.
SBI (including SBH) 7.96
Bank of Maharashtra 1.74
Bank of India 0.83
IDBI Bank 1.66
Punjab National Bank 3.12
Vijaya Bank 1.98
Indian Overseas Bank 2.41
Allahabad Bank 4.20

Details of default in repayment of borrowings from Financial Institutions (Promoter Group entities) as on March 31, 2019 are given below:

Particulars Amount of Default Period of Default (No of days)

(Rs. Crores)

39.70 184
Infrastructure Leasing & Financial Services Ltd 30.00 157
84.00 39
IL&FS Financial Services Limited 80.40 195
25.00 54
IL&FS Transportation Networks India Limited 3.00 32
5.00 27
Tierra Enviro Limited 4.40 307
35.00 364
IL&FS Cluster Development Initiative Limited 15.00 1
Sabarmati Capital One Limited 4.60 216
7.00 212

Details of Interest Defaults to Financial Institutions (Promoter Group entities) as on March 31, 2019 are given below:

Particulars Amount of Default Period of Default

(Rs. Crores)

(No of days)
Infrastructure Leasing & Financial Services Ltd 41.34 Due date for interest is on various dates on monthly basis.
IL&FS Financial Services Limited 11.29
IL&FS Transportation Networks India Limited 2.98
Tierra Enviro Limited 1.62
IL&FS Cluster Development Initiative Limited 0.63
Sabarmati Capital One Limited 0.48
IL&FS Airports Ltd 1.58
Rohtas Bio Energy Limited 2.17
RIDCOR Infra Projects Limited 1.74

The above details of Interest Defaults to Banks and Financial Institutions is exclusive of Rs. 144.99 Crores.

ix. 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 instrument) during the year and term loans. Thus, paragraph 3 (ix) of the Order is not applicable to the Company.

x. According to the information and explanations given to us, no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit except in respect of transactions relating to advances paid to a supplier aggregating to Rs. 65 Crores, for which the reconstituted Board decided to initiate investigation by informing the Ministry of Corporate Affairs (MCA) (Refer Note 4 of Basis for Qualified Opinion Section of our report).

xi. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has neither paid nor provided for managerial remuneration. Thus paragraph 3 (xi) of the Order is not applicable to the Company.

xii. In our opinion and according to the information and explanations given to us, the Company is not a Nidhi Company as per the Act. Thus, paragraph 3 (xii) of the Order is not applicable to the Company.

xiii. According to the information and explanations given by the management, transactions with the related parties are in compliance with section 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the notes to the Standalone financial statements, as required by the applicable accounting standards.

xiv. According to the information and explanation given to us and based on our examination of the records of the Company, the Company has not made preferential allotment or private placement of shares or allotted fully or partly convertible debentures during the year. Thus, paragraph 3 (xiv) of the Order is not applicable to the Company.

xv. According to the information and explanation 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 person connected with him. Thus, paragraph 3 (xv) of the Order is not applicable to the Company.

xvi. According to the information and explanation given to us, the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934. Thus, paragraph 3 (xvi) of the Order is not applicable to the Company.

For M. Bhaskara Rao & Co.
Chartered Accountants
ICAI Firm Registration Number: 000459S
V K Muralidhar
Partner
Membership Number: 201570
Mumbai, November 19, 2019 UDIN: 19201570AAAADX2083

Annexure B referred to in paragraph 2 (h) of Report on other Legal and regulatory requirements of our Report of even date to the members of IL&FS Engineering and Construction Company 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 IL&FS Engineering and Construction Company Company) as of March 31, 2019 in conjunction with our audit of the Standalone financial 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 Act.

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 prescribed under Section 143(10) of the Act, 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 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 Standalone 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 qualified 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 Standalone 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.

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 financial the internal financial anyevaluationof the internal financial control over financialreporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Basis for Qualified Opinion

According to the information and explanations given to us and based on our audit, a material weakness has been identified in the Companys internal financial controls over financial reporting as at 31 March 2019 relating to certain operating effectiveness in some of controls in respect of assessment of deferred tax asset, assessment of realisable value of inventory, assessment of recovery of contract assets, inter corporate deposits and advances and procurement of materials,

A ‘material weakness is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such 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.

Qualified Opinion

In our opinion, to the best of our information and according to the explanations given to us, except for the possible effects of the material weakness described in Basis for Qualified Opinion paragraph 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 of 31 March 2019, 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.

We have considered the material weaknesses identifiedand reported above in determining the nature, timing, and extent of audit tests applied in our audit of the standalone financial tatements of the Company for the year ended March 31, 2019 and these material weaknesses have affected our opinion on the said standalone financial statements of the Company.

For M. Bhaskara Rao & Co.
Chartered Accountants
ICAI Firm Registration Number: 000459S
V K Muralidhar
Partner
Membership Number: 201570
Mumbai, November 19, 2019 UDIN: 19201570AAAADX2083