Jayaswal Neco Industries Ltd Auditors Report.
THE MEMBERS OF JAYASWAL NECO INDUSTRIES LIMITED
Report on the Audit of the Financial Statements Qualified
We have audited the accompanying Financial Statements of JAYASWAL NECO INDUSTRIES LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and statement of Cash Flows for the year then ended and notes to the financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as "the Financial Statements").
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 matter described in the Basis for Qualified Opinion para below, the aforesaid Financial Statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2019 and its loss including other comprehensive income, changes in equity and its cash flows for the year ended on that date.
Basis for Qualified Opinion
As mentioned in Note No.18.10 to the Financial Statements, Non Current Borrowings include an amount of Rs. 230,954.89 Lakhs due to certain banks and Assets Reconstruction Company. During the year, banks holding 94.20% (by value) of the total principal debt, equivalent to Rs. 339353.50 Lakhs, assigned all their rights, title and interests in financial assistances granted by them to the Company in favour of Assets Care & Reconstruction Enterprise Limited, acting in its capacity as Trustee of eight different Trusts (ACRE). Until the revised terms and condition will be agreed between the Company and ACRE, the arrangement with those banks are valid and as per the arrangements with those banks, the Company is required to comply with certain covenants as referred in the said note and non-compliance with these covenants may give rights to the banks/ACRE to demand repayment of the loans. As at 31st March, 2019, the Company has not complied with certain covenants and they have not been provided with any confirmation from those lenders for extension of time to comply with these covenants. The Company has not classified these liabilities as current liabilities as required by Indian Accounting Standards (Ind AS) 1 -"Presentation of Financial Statements".
We conducted our audit in accordance with Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the Financial Statements under the provisions of the Act and the rules thereunder and we have fulfilled 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 qualified opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note No. 36 to the Financial Statements regarding preparation of Financial Statements of the Company on going concern basis, notwithstanding the fact that the Company continue to incurred cash losses, its net worth has been eroded as on 31st March, 2019, loans have been called back by few of the secured lenders, application has been made to National Company Law Tribunal (NCLT), Mumbai, under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by State Bank of India, the erstwhile lead secured lender, which has been contested by the Company, for the reasons stated in the said note. These conditions indicate the existence of a material uncertainty that may cast significant doubt on the Companys ability to continue as going concern. During the year, Banks holding 94.20% (by value) of the total principal debt, equivalent to Rs. 339353.50 Lakhs, assigned all their rights, title and interests granted by them to the Company in favour of Assets Care & Reconstruction Enterprise Limited acting in its capacity as Trustee of eight different Trusts (ACRE). The appropriateness of assumption of going concern is critically dependent upon the Companys ability to raise requisite finances and generate cash flows in future to meet its obligations and to restructure its borrowing with the lenders.
Our opinion is not modified in respect of this matter.
Emphasis of Matter
We draw your attention to the:
Note No. 2.08 to the Financial Statements regarding the attachment of the properties of the Company to the extent of Rs. 30,758.39 lakhs by the Directorate of Enforcement, which has been contested by the Company.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
Financial Statements of the current year. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
|Key Audit Matter||How our audit addressed the key audit matter|
|1) Carrying value of property, plant and equipment (PPE), Capital Work in Progress (CWIP), Intangible Assets under development|
|As at 31st March, 2019 carrying value of PPE, CWIP and Intangible Assets under development is Rs. 511,828.61 lakhs which constitutes 76.22% of the total assets of the Company.||Our audit procedure included, among others:|
|Updating our understanding of managements annual impairment testing process.|
|As per Ind AS 36 "Impairment of Assets", in assessing whether there is any indication that assets may be impaired, an entity shall consider as a minimum, the external and internal sources of information, any other indication or evidences from internal reporting that indicates that the assets may be impaired.||Assessing internal controls designed for identification of impairment indicators.|
|The existence of an impairment indicator is significantly influenced, the Company has been incurring cash losses, its net worth has been eroded as on 31st March, 2019, loans have been called back by few of the secured lenders, and an application has been made to National Company Law Tribunal (NCLT).||Ensuring that the methodology of the impairment exercise continues to comply with the requirements of Ind AS, as adopted, including evaluating managements assessment of indicators of impairment against indicators of impairment specified within Ind AS 36.|
|Management concluded that the recoverable amount of PPE, CWIP and Intangible assets under development were higher than their carrying values such that no impairment provision was required. These conclusions are dependent upon significant management judgement, including in respect of:||Assessing the appropriateness of the Companys valuation methodology applied in determining the recoverable amount. In making this assessment, it took into consideration the valuation report of the specialist involved by the Company. It also required evaluating the objectivity, independence and competency of specialists involved in the valuation process.|
|Assessing the assumptions around the key drivers of the cash flow forecasts including growth rate and discount rate.|
| Estimated utilisation, disposal values, and discount rates applied to future cash flows; and||Testing the arithmetical accuracy of the impairment model prepared by the management.|
| Estimated resale values, provided by an independent external valuer. We considered this matter as key audit matter due to the significance of the carrying value of the assets being assessed and due to the level of management judgement required in the assumptions impacting the impairment assessment and the sensitivity of the impairment model.||Verifying the completeness of disclosure in the financial statements as per Ind AS 36.|
|The main assumptions impacting the assessment and sensitivity of the model are future cash flows, growth rates applied to cash flows and discount rates. These assumptions are subjective and subject to management judgement about the future results of the business. Refer Note no. 2 and 3 to the Financial Statements.|
|As of 31st March, 2019, inventories appear in the Financial Statements for an amount of Rs. 83,417.42 lakhs constitutes 12.42% of the total assets of the Company. Inventories are valued at the lower of cost and net realizable value (Refer note no. 1(C)(VI) and 7 to the Financial Statements).||Our audit procedure included, among others:|
|Reviewing the Companys process and procedure for physical verification of the Inventories at the year end and accounting for the same.|
|The Company may recognize an inventory allowance if inventory items are damaged, if the selling price has declined, or if the estimated costs to completion or to be incurred to make the sale have increased.||Obtaining the physical inventory count reports of the Management, which were conducted in the presence of internal auditors of the Company and discussing with the internal auditors about the Control checks performed by the internal auditors.|
|We considered this matter as key audit matter due to the:||Assessing the methods used to value inventories and ensuring the consistency of accounting methods.|
|Significance of the inventories balance.|
|Complexities involve in determining inventory quantities on hand due to the number, location and diversity of inventory storage locations.||Testing, by sampling, the effectiveness of the controls set up by Management to prevent or detect possible errors in valuation of inventories.|
|Valuation procedure including of obsolete inventories.||Reviewing the reported acquisition cost on a sample basis.|
|Analyzing the companys assessment of net realizable value, as well as reviewing the assumptions and calculations for stock obsolescence.|
|Verifying the completeness of disclosure in the Financial Statements as per Ind AS 2.|
|3) Revenue Recognition|
|Revenue is recognized net of discounts & rebates earned by the customers on the Companys sales. The estimation of discounts & rebates recognized based on sales made during the year is considered to be complex and judgmental.||Our audit procedure included, among others:|
|Assessing the Companys processes and controls for recognizing revenue as part of our audit. Our audit approach included testing of the controls and substantive audit procedures, including:|
|Revenue is recognized when control of the underlying products has been transferred along with satisfaction of performance obligation.||- Performing detailed transaction testing by agreeing a sample of individual revenue items from order to sales invoices, evidence of delivery and subsequent cash receipt;|
|The application of the new revenue accounting standard involves certain key judgments relating to identification of distinct performance obligations and determination of transaction price of the identifiedperformance obligations.||- Performing sales cut-off testing immediately before and after the year end by testing sales invoices to evidence of delivery to ensure that revenue had been recognised in the correct accounting period;|
|Further customers incentive, rebate / discounts represent a material reduction in sales and process for calculating and recording the above involves significant manual process.||With regard to the expected impact of the initial application of Ind AS 115 from the financial year 2018 onward, our audit approach included, among other items:|
|Additionally, new revenue accounting standard contains disclosures which involve collection of information in respect of disaggregated revenue.||Assessing the process to identify the impact of adoption of the new revenue accounting standards.|
|Accordingly, it has been determined as a key audit matter.||Verifying the completeness of disclosure in the Financial Statements as per Ind AS 115.|
|Refer Note no. 1(C)(XV) and 27 to the Financial Statements.|
|4) Provision of Finance Costs on Borrowings from Banks and Financial Institutions (FIs) and receipt of loan recall notice from secured lenders.|
|The Company has recognised the interest expenses on borrowings from the secured lenders amounts to Rs. 68,417.64 lakhs control about recognition of based on the interest rates provided in the agreements between the secured lenders and the Company.||Our audit procedure included, among others:|
|Updating our understanding of Companys procedure and financial finance costs.|
|Due to various reasons mentioned in note no. 18.01, 18.10 & 36 to the Financial Statements the secured lenders have classified the Companys accounts as Non-performing||Verifying, on test check basis, the computation of interest with reference to principal amount, rate of interest, additional or penal interest as per the agreements, as applicable.|
|Asset (NPA) for nonpayment of monthly installments and stopped recognizing the interest income in their books of account, hence accordingly not confirmed the amount of interest due from the Company. The Company has received the loan recall notice from few secured lenders.||Verifying the monthly bank statements on test check basis.|
|We considered this matter as key audit matter due to significant amount of finance costs incurred, which comprises 15.18% of the total expenditure of the Company.||Obtaining direct balance confirmation of principal amount due from the selected lenders as at March 31, 2019.|
|Ensuring the completeness of disclosure and presentation of borrowings and borrowing costs as per applicable Ind AS.|
|5) Litigation and Regulatory Claims|
|The Company is subject to number of significant litigations.||Our audit procedure included the following :|
|Major risks identified by the Company in that area related to||Assessing the procedures implemented by the Company to identify and gather the risks it is exposed to.|
|Energy Development Cess, Attachment of the Companys|
|property by the Directorate of Enforcement, Application|
|filedby a lender to NCLT under IBC for the recovery of loan,|
|Arbitration with the vendors / suppliers, etc. The amount of litigation may be significant and estimates of the amounts of provisions or contingent liabilities are subject to significant Management judgment. (Refer Note No. 2.06, 2.07, 2.08, 22.04, 26.01, 35 and 36 to the Financial Statements)||Discussion with the management on the development in these litigations during the year. Enquiring from the companys legal counsel (internal/external) and study the responses as received from them.|
|Due to complexity involved in these litigation and regulatory claims, managements judgment regarding recognition and measurement of provisions for these legal proceedings is inherently uncertain and might change over time as the outcomes of the legal cases are determined. Accordingly, it has been considered as a key matter.||Verifying that the accounting and / or disclosure as the case may be in the financial statements made by the Company is in accordance with the assessment of legal counsel / management, based on the information currently available to the Company.|
|Obtaining representation letter from the management on the assessment of these matters as per SA 580 (revised) Written representations.|
The Companys Board of Directors is responsible for the other information. The other information comprises the Management Discussion & Analysis and Directors Report included in the Annual Report but does not include the Financial Statements and our Auditors Report thereon.
Our opinion on the 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 Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the 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 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 Financial Statements that give a true and fair view of the state of affairs (financial position), loss (financial performance including other comprehensive income), cash flows and the statement of changes in equity of the Company in accordance with the accounting principles generally accepted in India, including Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act read with relevant rules issued thereunder.
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 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 Companys financial reporting process.
Auditors Responsibility for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the 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 Financial Statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal 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 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 ability of the Company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our Auditors Report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our Auditors Report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current year and are therefore the key audit matters. We describe these matters in our Auditors Report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143 (3) of the Act, we report that:
a. We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
b. In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
c. The Balance Sheet, the Statement of Profit and Loss (Including other comprehensive income), the Cash Flow Statement and the Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;
d. In our opinion, except the matter described in the "Basis for Qualified Opinion" paragraph above, the aforesaid Financial Statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act read with relevant rules thereunder;
e. The going concern matter described in "Material Uncertainty Related to Going Concern" 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 31st March, 2019 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2019 from being appointed as a director in terms of Section 164 (2) of the Act.
g. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A". 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 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.
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 Financial Statements as referred to in Note No. 2.06, 2.07, 2.08, 22.04, 26.01, 35 and 36 to the Financial Statements;
ii. The Company has made provisions, as required under the applicable law or Ind AS, 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.
2. As required by the Companies (Auditors Report) Order, 2016 (the Order) issued by the Central Government of India, in terms of Section 143(11) of the Act, we give in "Annexure B" hereto, a statement on the matters specified in paragraphs 3 and 4 of the Order.
ANNEXURE "A" TO THE INDEPENDENT AUDITORS REPORT (Referred to in paragraph 1 (g) under Report on Other Legal and Regulatory Requirements of our report of even date to the members of Jayaswal Neco Industries Limited on the financial statements for the year ended 31st March, 2019) Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")
We have audited the internal financial controls over financial reporting of JAYASWAL NECO INDUSTRIES LIMITED (the Company) as of 31st March, 2019 in conjunction with our audit of the financial statements of the Company for the year ended on that date.
Managements Responsibility for Internal Financial Controls
The 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 (the Guidance Note) issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to 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.
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 issued by the ICAI and the Standards of Auditing prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial 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 reporting included obtaining an understanding of internal financial controls over financial reporting, assessing 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 appropriate to provide a basis for our audit opinion on the Companys internal financialcontrolssystem . reporting overfinancial
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 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 principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the 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.
In our opinion, to the best of our information and according to the explanations given to us, the Company has, in all material financial reporting and such internal financial controls over respects,anadequateinternalfinancial financial reporting were operating effectively as at 31st 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 issued by the ICAI.
ANNEXURE "B" TO INDEPENDENT AUDITORS REPORT (Referred to in paragraph 2 under the heading "Report on Other Legal and Regulatory Requirements" of our report of even date to the members of Jayaswal Neco Industries Limited on the Financial Statements for the year ended 31st March, 2019)
i. In respect of its fixed assets:
a. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets on the basis of available information.
b. As explained to us, the Company has physically verified certain assets, in accordance with a phased program 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 physical verification as compared with the available records.
c. According to the information and explanations given to us, the title deeds of immovable properties are generally in the name of the Company except in respect of 5 immovable properties at Raipur having the aggregate value of Rs. 31 lakhs in respect of which the documents are not registered in the name of the company with the concerned Government Authority and also in case of properties acquired by the entities or unit that have since been amalgamated/merged with the Company in pursuance to the scheme of amalgamation / demerger / arrangement approved by Honble High Court and details of which are as under.:
|(Rs. in lakhs)|
|Sr. No.||Particulars of the Land and Building||Leasehold/ Freehold Land /Building||Net Block as at 31st March, 2019||Remarks (give reasons for the exception)|
|1||4 immovable properties land at Raipur (1 agreement pledged with the lender)||Leasehold Land||1,820.26||2 title deeds are in the name of Corporate Ispat Alloys Limited, from where the unit demerged and acquired by the Company and 2 title deeds are in the name of Nagpur Alloy Castings Limited erstwhile Company that was amalgamated with the Company under the Companies Act, 1956|
|2||7 immovable properties (land / building) at Raipur / Nagpur / Kolkata (4 agreements equitable mortgage with the lenders)||Free hold land / building||66.06||The title deeds are in the name of Jayaswals Neco Limited (earlier known as Jayaswal Chemical Private limited) erstwhile Company that was amalgamated with the Company under the Companies Act, 1956|
As informed to us, in respect of 59 immovable properties having the aggregate value of Rs. 682.64 Lakhs the original title deeds have been deposited with the lenders as security, we have been produced photocopies of documents for those immovable properties and based on such documents, the title deeds are held in the name of the Company except 5 immovable properties as disclosed above. ii. In respect of its inventories:
As explained to us, inventories have been physically verified during the year by the management, except for inventories in transit / with job worker for which management confirmation has been received. In our opinion the frequency of verification is reasonable. Discrepancies noticed on physical verification of the inventories between the physical inventories and book records were not material, having regard to the size of the operations of the Company, and the same have been properly dealt with. iii. In respect of loans, secured or unsecured, granted by the Company to companies, firms, Limited liability partnerships or other parties covered in the register maintained under section 189 of the Act:
a. In the earlier years the Company had granted unsecured loan to one such Company and the terms and conditions on which the loan had been granted were not, prima facie, prejudicial to the interest of the Company.
b. The terms of repayment of principal and payment of interest have been stipulated and during the year, the principal and interest were due for payment but due to the financial crisis the party has not paid the same.
c. The amount is overdue and the Company has considered the said loan and interest receivables as doubtful and has been fully provided for. 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, in respect of grant of loans, making investments and providing securities.
v. According to the information and explanations given to us, the Company has not accepted any deposits from the public. Therefore, the provisions of clause (v) of paragraph 3 of the Order are not applicable to the Company.
vi. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014 prescribed by the Central Government under Section 148(1) (d) of the Act, as applicable and are of the opinion that, prima facie, the prescribed accounts and records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.
vii. According to the information and explanations given to us in respect of statutory dues:
a. The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, Employees State Insurance, Customs Duty, Cess and any other statutory dues with the appropriate authorities during the year however delays have been noticed in respect of Income Tax and Goods and Service Tax. According to the information and explanations given to us, no undisputed amounts payable in respect of such statutory dues were outstanding as at 31st March, 2019 for a period of more than six months from the date they became payable.
b. Details of dues of Duty of Custom, Duty of Excise, Service Tax, Sales Tax and Value Added Tax aggregating to Rs. 1,923.38 Lakhs that have not been deposited on account of disputed matters pending before appropriate authorities are as under:
|(Rs. in Lakhs)|
|Name of the Statutes||Nature of the Dues||Period to which it relates||Amounts (Rs. in lakhs) (*)||Forum where the dispute is pending|
|The Customs Act, 1962||Custom Duty||2014-16||78.56||CESTAT|
|The Central Excise Act, 1944||Excise Duty||2009-16||132.83||CESTAT|
|Finance Act, 1994||Service Tax||2005-09, 2015-18 & 2010-11||312.53||CESTAT|
|2009-10 & 2015-18||72.78||Commissioner|
|The Central Sales Tax Act, 1956 and Sales Tax Acts of various states||Sales Tax /||2008-09||9.40||High Court|
|2011-12 and 2013-15|
|2011-12,2012-14 and||803.40||Additional Commissioner|
|2002-03 and 2013-14|
(*) Net of amount deposited under protest viii. Based on our audit procedures and according to the information and explanations given by the management, we are of the opinion that as on 31st March, 2019 the Company has defaulted in repayment of dues to banks aggregating to Rs. 194,164.40 Lakhs. Lender wise details of such default is as under
|(Rs. in Lakhs)|
|Banks||Total Default||Below 90 days||Above 90 days|
|ACRE-54-Trust (State Bank of India||58,205.79||4,471.53||53,734.26|
|ACRE-59-Trust (Union Bank of India )||27,334.95||2,158.64||25,176.31|
|ACRE-63-Trust (Indian Overseas Bank )||8,525.87||591.45||7,934.42|
|ACRE-64-Trust (Punjab National Bank )||47,528.00||3,170.67||44,357.33|
|ACRE-68-Trust (IDBI Bank)||14,317.46||1,023.92||13,293.54|
|ACRE-69-Trust ( Central Bank of India )||14,656.78||1,697.73||12,959.05|
|ACRE-70-Trust (Oriental Bank of Commerce )||8,325.49||216.17||8,109.32|
|ACRE-76-Trust (Bank of India)||4,948.24||145.70||4,802.54|
|Bank of Maharashtra||6,127.06||474.17||5,652.89|
According to the information and explanations given to us, the following banks have classified the credit facilities given to the Company as Non Performing Asset (NPA) as on 31st March, 2019 in their Books of Account.
|(Rs. in lakhs)|
|Sr. No.||Bank||Term Loan Principal||Fund Based Working Capital||Total|
|1||Bank of Maharashtra||9,266.94||-||9,266.94|
ix. According to the information and explanations given to us, during the year the Company has not raised any money by way of initial public offer or further public offer (including debt instruments). The term loans raised by the Company have, prima facie, been applied for the purpose for which they are raised.
x. Based on our audit procedures performed for the purpose of reporting the true and fair view of the Financial Statements and on the basis of information and explanations given by the management, no fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year.
xi. In our opinion, according to the information and explanations given to us, the Company has paid or provided managerial remuneration in accordance with the provisions of requisite approvals mandated by the provision of section 197 read with Schedule V to the Act.
xii. In our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Therefore, the provisions of clause (xii) of paragraph 3 of the Order are not applicable to the Company.
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 Indian 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 debentures during the year. Therefore, the provisions of clause (xiv) of paragraph 3 of the order are not applicable to the Company.
xv. According to the information and explanations given to us, during the year the Company has not entered into non-cash transactions with directors or persons connected with him. Therefore, the provisions of clause (xv) of paragraph 3 of the Order are not applicable to the Company.
xvi. In our opinion and according to information and explanations provided to us, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.
|For Pathak H. D. & Associates||For Naresh Patadia & Co.|
|Chartered Accountants||Chartered Accountants|
|Firm Reg. No. 107783W||Firm Reg. No. 106936W|
|Mukesh Mehta||Naresh Patadia|
|Membership No. 43495||Membership No. 35620|
|Date: 22nd May, 2019||Date: 22nd May, 2019|