Modern Denim Ltd Auditor Reports

To,

The Members

Modern Denim Limited

Report on the Audit of the Standalone Financial Statements

Qualified Opinion

1. We have audited the standalone financial statements of Modern Denim Limited ("the Company"), which comprise the Balance Sheet as at 31st March 2023, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flow and the Statement of Changes in Equity for the year then ended and a summary of the significant accounting policies and other explanatory information.

2. In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion section of our report, the aforesaid financial statements 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, 2023 and its loss (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Basis for Qualified Opinion

3. The Company has not recognised Dividend on cumulative redeemable preference share on effective interest method as required by Ind AS 109 "Financial Instruments". Dividend on cumulative redeemable preference shares amounting to Rs 110.75 lacs for the year (Previous year Rs 110.75 lacs) has not been provided (Note No. 27.3). The total amount of Dividend on cumulative redeemable preference shares not provided till 31st March 2023 amounts to Rs 3559.36 lacs (upto previous Balance Sheet date Rs 3448.61 lacs) including Dividend Distribution Tax Payable thereon of Rs 569.12 lacs (Note No. 13.2). Had the Company provided interest on financial liabilities in current year, Finance Cost & Loss for the year would have been higher by Rs 110.75 lacs and Other Current Financial Liabilities & debit balance of Retained Earning under the head Other Equity would have been higher by Rs 3559.36 lacs (upto previous Balance Sheet date Rs 3448.61 lacs). A similar qualification had been given in the previous year?s Auditor?s Report.

4. The company has not recognised interest in respect of certain Secured and Unsecured Borrowings on effective interest method as required by Ind AS 109 "Financial Instruments". Interest on certain Secured and Unsecured Borrowings amounting to Rs 136.60 lacs for the year (Previous year Rs 97.45 lacs) (Note No. 27.1, & 27.2) has not been provided. The total amount of Interest not provided till 31st March 2023 amounts to Rs 2176.86 lacs (upto previous Balance Sheet date Rs 2040.26 lacs) (Note No. 18.2 & 18.3). Had the Company provided interest on certain Secured and Unsecured Borrowings in current year, Finance Cost & Loss for the year would have been higher by Rs 136.60 lacs (previous year Rs 97.45 lacs) and Other Current Financial Liabilities & debit balance of Retained Earning under the head Other Equity would have been higher by Rs 2176.86 lacs (upto previous Balance Sheet date Rs 2040.26 lacs). A similar qualification had been given in the previous year?s Auditor?s Report.

5. The Company has not measured Non-Current Borrowing of Rs 5939 lacs (P.Y. Rs 5524 lacs) initially at fair value as required by Ind AS 109 "Financial Instruments". Had the Company fair valued the same; Interest Income, Finance Cost & Non-current Borrowings would have been higher and Other Current Finance Liabilities would have been lower by Rs 378.86 lacs (Previous year Rs 323.95 lacs). However there is no effect in Statement of Profit & Loss for the year as well as Debit balance of Other Equity (Refer Note no. 13.5, 22.1 & 27.4). A similar qualification had been given in the previous year?s Auditor?s Report.

6. As a Consequence of the matters reported at para 3 to 5 above, non compliance the explicit and unreserved statement of the compliance with Ind AS as stated in note no.1A(a) is not in accordance with Ind AS-1"Presentation of "Financial Statements".

7. We conducted our audit in accordance with Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor?s 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 together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI?s 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

8. We draw attention to Note 42 of the standalone financial statements disclosing the material uncertainties that may affect the company from being able to continue as a going concern which are as under.

a. BIFR had declared the company as a sick company and after abatement of BIFR, Scheme of Compromise, Arrangement and Amalgamation u/s 230-232 of the Companies Act, 2013 is under process of approvals from concerned authorities.

b. Company?s net worth is fully eroded and has a negative net worth of Rs 5535.81 Lacs (Previous year Rs 5480.38 Lacs). The company has neither the intention to liquidate nor the intention to cease its operation nor is compelled to do so. The financial statements have, therefore, been prepared on going concern basis. Our opinion is not qualified in respect of this matter.

Emphasis of Matters

9. Emphasis of Matters are as under

(a) As described in Note 12.1, 13.1, 16.2 & 18.2 to the Standalone Financial Statement, on the basis of Expert opinion obtained by the company, the amounts of Equity Share application money pending for allotment, Cumulative Redeemable Preference share, Non-Convertible Debenture (NCD) and interest accrued on NCD, are not required to be transferred to Investor Education Protection Fund (IEPF).

Our opinion is not qualified in respect of this matter.

(b) As described in Note 16.4 & 18.3 to the Standalone Financial Statement, the company has filed Scheme of Compromise, Arrangement and Amalgamation u/s 230-232 of the Companies Act, 2013 seeking the waiver/relief for repayment of public fixed deposit and interest accrued thereon. Based on the expected relief from NCLT and Expert opinion taken by the company, the company considers no amount as due to be transferred to IEPF.

Our opinion is not qualified in respect of this matter.

Key Audit Matters

10. 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.

a. Key audit matter identified in our audit is on recoverability assessment of trade receivables as follows:

Key audit matter	How our audit addressed the key audit matter
Measurement of Expected Credit Loss on Trade Receivables	Our audit procedures included the following:
Trade receivables amount to Rs.768.20 Lacs after providing for impairment based on expected credit loss method is of Rs. 192.25 Lacs.	• Reviewing the accounting policy with respect to recognition of revenue & its appropriateness in accordance with Ind AS 115: Revenue from Contract with Customers;
This represents 19.55 % of the total assets of the company.	Appropriateness of Recognition, Measurement and Impairment of Trade Receivables in accordance with Ind AS 109: Financial Instruments.
These balances are receivable in relation to the revenue recognized in accordance with the requirements of Ind AS 115 "Revenue from Contracts with Customers".	• Evaluating the design & implementation of internal controls in relation to recovery of Trade receivables, calculation of allowance for impaired trade receivable along with testing its operating effectiveness on sample basis.
The recoverability of trade receivables is a key element of the company?s working capital management, which is managed on an ongoing basis by its management. Due to the nature of the business, the requirements of customers and various contract terms that are in place, there is a risk that the carrying values may not reflect the recoverable amounts as at the reporting date.	• Obtaining the external balance confirmations on samples basis to ascertain the existence & completeness of trade receivables.
Therefore, the assessment of existence & recoverability of trade receivables is a key audit matters due to its size, and inherent uncertainty involved in the Management judgement.	• Evaluating the reconciliations prepared by the management with respect to the balance confirmations received.
Refer note A (z) to accounting policies and note 6 and 39 to the standalone Financial statements.	• Verified the subsequent receipts of trade receivables for selected samples to ascertain its existence as on balance sheet date.
	• Obtaining an understanding of the processes for evaluating the recoverability of the trade receivables including the collection process & allowances for impaired trade receivables.
	• Evaluating management?s assumptions in determining the provision for impairment
	of trade receivables, by analysing the ageing of receivables, assessing significant overdue Individual trade receivables and specific local risks, historical trends & patterns, combined with the legal documentations, where applicable.
	• Verifying the ageing analysis of Trade receivables, long outstanding & overdue balances, latest correspondences with customers for recovery of dues & evaluating its impact on provisioning & impairment.
	• Assessing the adequacy of the disclosures as required by the statute.

Information other than the Financial Statements and Auditor?s Report thereon

11. The Company?s 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 financial statements and our auditor?s report thereon. The Annual Report is expected to be made available to us after the date of this auditors report.

Our opinion on the 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 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 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 a material misstatement therein, we are required to communicate the matter to those charged with governance and as may be legally advised.

Responsibilities of Management for the Financial Statements

12. The Company?s Board of Directors are responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, (changes in equity) and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Ind AS specified under Section 133 of the Act read with the Companies (Indian Accounting Standard) Rules 2015, as amended. 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 implementation and maintenance of 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 statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.

13. In preparing the financial statements, management is responsible for assessing the Company?s 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.

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

Auditor?s Responsibilities for the Audit of the Financial Statements

15. 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 auditor?s 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.

16. 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 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 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 management?s use of the going concern basis of accounting, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company?s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor?s 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 auditor?s 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.

17. 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.

18. 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.

19. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor?s 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

20. As required by the Companies (Auditor?s Report) Order,2020 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order.

21. 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) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, 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, the Statement of Cash Flow and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.

d) Except for the matters stated in paragraph 3 to 6 of the Report under basis for qualified opinion, in our opinion, the aforesaid standalone financial statements comply with the Ind AS Specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

e) The matters described in the Basis for Qualified Opinion 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, 2023 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2023 from being appointed as a director in terms of Section 164(2) of the Act.

g) The Qualification 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 over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B".

i) The company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.

j) With respect to the other matters to be included in the Auditor?s 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 Ind AS financial statements. (Refer Note 35 to the 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 is no default in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the company during the year ended on 31st March, 2023. (Refer Notes 12.1, 13.1, 13.2, 16.2, 16.4, 18.2 & 18.3 to the financial statements).

iv. (i) The management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts , no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other persons or entities , including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediaries shall, whether, directly or indirectly lend or invest in the other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(ii) The management has represented, that to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been received by the Company from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the company shall, whether directly or indirectly lend or invest in the other persons or entities identified in any manner whatsoever by or on behalf of the Funding Parties ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(iii) Based on such audit procedures applied by us, nothing has come to our notice that has caused them to believe that the representations made under sub clause (i) and (ii) contain any material misstatement.

v. The company has not declared any dividend during the year as prescribed under Section 123 of the Act.

vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company with effect from April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023.

Annexure "A" to Independent Auditors? Report

Referred to in paragraph 20 of "Report on Other Legal and Regulatory Requirements" of our Report of even date to the Members of MODERN DENIM LIMITED for the year ended 31st March, 2023.

In terms of the information and explanations sought by us and given by the Company and the books of account and records examined by us in the normal course of audit and to the best of our knowledge and belief, we state that:

1. In respect of Property, Plant and Equipment :

(a) (i) The Company has maintained proper records showing full particulars including quantitative details and situation of Property, Plant & Equipments other than Furniture and Fixtures and Office Equipment for which detailed records are not maintained.

(ii) The Company has maintained proper records showing full particulars of intangible assets on the basis of available information.

(b) The property, plant and equipments were physically verified by the Management according to a phased programme at regular interval which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. Pursuant to the programme, property, plant and equipments have been physically verified by the management during the year and no material discrepancies have been noticed on such verification.

(c) The title deeds of all the immovable properties disclosed in the financial statements are held in the name of the company.

(d) The company has not revalued its Property, Plant & Equipments or intangible assets during the year.

(e) No proceedings have been initiated or pending against the company for holding any Benami property under the Benami Transaction (Prohibition) Act, 1988 and rules made there under.

2. In respect of its Inventories :

(a) The physical verification of inventories has been conducted at reasonable intervals by the management. In our opinion, the coverage and procedure of such verification by management is appropriate and no material discrepancies of

10% or more in aggregate for each class of inventory were noticed on such physical verification.

(b) Company has not been sanctioned any working capital facility from banks or financial institutions at any point of time during the year and hence the clauses 3(ii) (b) of the Companies (Auditor?s Report) Order,2020 ("the Order") is not applicable to the company.

3. In respect of Loans and Advances granted during the year:

The division has not made any investments in, provided any guarantee or security or granted any loans or advances in the nature of loans, secured or unsecured, to companies, firms, Limited Liability Partnerships or any other parties during the year. Accordingly, the clauses 3(iii) (a) to (f) of the Order are not applicable to the company.

4. Loans, Investments and Gurantees:

The Company has complied with the provisions of Section 185 & 186 of the Act, with to respect of loan given, investments made and guarantee and securities given.

5. In respect of Deposits:

During the year, the company has not accepted any deposits or amount which are deemed to be deposits and hence the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under are not applicable to the company. Accordingly, clause 3(v) of Order is not applicable.

6. In Respect of Cost Records:

The company is not required to maintain cost records as required by the Central Government under sub-section (1) section 148 of the Act. Accordingly, clause 3(vi) of Order is not applicable.

7. In respect of Statutory Dues :

(a) The Company is by and large regular in depositing with appropriate authorities undisputed statutory dues including Goods and Service Tax, Provident Fund, Employees State Insurance, Income Tax, Duty of Customs, cess and any other material statutory dues with the appropriate authorities.

According to the information and explanations given to us, no undisputed amounts payable in respect statutory dues were outstanding as at 31st March, 2023 for a period of more than six months from the date they became payable .

(b) There were no dues of Goods and Service Tax, Provident Fund,

Employees State Insurance, Income Tax, Duty of Customs, cess which have not been deposited on account of any dispute except following

Act	Nature of Dues	F.Y.	Amounts	Forum
Gujarat Value Added Tax Act	GST & Interest	July?2017- March18	Rs 32.92 Lacs	Commissioner (Appeal), CGST & Central Excise

8. In Respect of Undisclosed Income Discovered in Income tax

Assessment:

There were no transactions that were not recorded in books of accounts and have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961. Hence, clause 3 (viii) of Order is not applicable to the company.

9. In respect of Repayment of Loans:

(a) The Company has defaulted in repayment of installments of dues to Debenture holders amounting to Rs 321.88 Lacs since 1997 and interest thereon Rs 291.46 Lacs up to March-2002.

(b) The company is not been declared as willful defaulter by any bank or financial institution or other lenders.

(c) In our opinion, the term loans taken during the year were applied for the purpose for which they were obtained.

(d) The company has not utilized any funds raised on short term basis for long term purpose. Hence, clause 3 (ix)(d) of the Order is not applicable to the Company.

(e) The company has not taken any funds from any entity or person to meet obligations of its subsidiaries, associates or joint ventures. Hence reporting under clause 3 (ix) (e) of the Order is not applicable to the Company.

(f) The company has not raised any loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies. Hence, clause 3 (ix)(f) of the Order is not applicable to the Company.

10. In Respect of Public Offerings:

(a) The company has not accepted any fresh deposits during the year as per the information and explanation given to us, in respect of deposits accepted in earlier years, the compliance with the provisions of section 73 to 76 or any other relevant provisions of the Act and rules framed there under are subject to the order passed by the Company law Board on 21.12.2001 whereby the Company is required to make repayment of deposits and payment of interest thereon in accordance with the revival scheme approval by the BIFR under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 and after abatement of BIFR, Scheme of Compromise, Arrangement and Amalgamation u/s 230-232 of the Act is under process of approvals from concerned authorities.

(b) The company has not made any preferential allotment or private placement of shares or convertible debentures during the year. Accordingly, clause 3(x)(b) of the Order is not applicable to the Company.

11. (a) To the best of our knowledge, No fraud by the Company or no material fraud on the company has been noticed or reported during the year.

(b) The records of the company examined by us, no report under sub-Section (12) of Section 143 of the Act has been filed by the auditors in Form ADT-4 as prescribed under rule 13 of Companies (Audit and Auditor) Rules 2014 with the Central Government.

(c) As represented to us by the management, there are no whistle blower complaints received by the Company during the year.

12. As the company is not a Nidhi Company, the Nidhi Rules, 2014 are not applicable to it. Accordingly, provisions of clause (xii) (a) to (c) of the Order are not applicable to the Company.

13. The Company has entered into transactions with related parties in compliance with the provisions of Section 188 of the Act. The details of such related party transactions have been disclosed in the standalone financial statements as required under Indian Accounting Standard 24 "Related Party Disclosures" specified under Section 133 of the Act. Further, the Company is not required to constitute an Audit Committee under Section 177 of the Act and, accordingly, to this extent, the reporting under clause 3(xiii) of the Order is not applicable to the Company.

14. In Respect of Internal Audit:

(a) The company has an internal audit system commensurate with the size and nature of its business of the company.

(b) We have considered, during the course of our audit, the reports of Internal Audit for the period under audit, issued to the Company during the year till date, in determining the nature, timing and extent of our audit procedures in accordance with the guidance provided in SA 610 "Using the work of Internal Auditors".

15. In our opinion, the Company has not entered in to any non-cash transactions with its directors or persons connected with him. Accordingly, clause 3(xv) of the Order is not applicable to the Company.

16. In Respect to the Provisions of Reserve Bank Of India Act 1934:

(a) The company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, clause (xvi)(a) of the Order is not applicable to the company.

(b) The company has not conducted any Non-Banking Financial or Housing Finance activities. Accordingly, clause (xvi)(b) of the Order is not applicable to the company.

(c) The company is not a Core Investment Company (CIC) as defined in the regulations made by the Reserve Bank of India. Hence, clause (xvi)(c) & (d) of the Order are not applicable to the company.

17. The Company has not incurred cash losses in the financial year under review and also incurred cash loss in the immediately preceding financial year of Rs 109.63. Lacs

18. During the year, M/s. Samir M Shah & Associates, the erstwhile statutory auditors of the Company have resigned with effect from 30th September?2022 consequent to the amended rules/regulations applicable to the Company. As informed, there have been no issues, objections or concerns raised by the said outgoing auditors.

19. According to the information and explanations given to us and on the basis of the financial ratios, ageing and expected dates of realisation of financial assets and payment of financial liabilities, other information accompanying the financial statements, our knowledge of the Board of Directors and management plans and based on our examination of the evidence supporting the assumptions, nothing has come to our attention, which causes us to believe that any material uncertainty exists as on the date of the audit report that the Company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date. We, however, state that this is not an assurance as to the future viability of the Company. We further state that our reporting is based on the facts up to the date of the audit report and we neither give any guarantee nor any assurance that all liabilities falling due within a period of one year from the balance sheet date, will get discharged by the Company as and when they fall due.

20. According to the information and explanation given to us and the records of the company examined by us, there were no unspent amounts required to be transferred to special account as required by Section 135 of the Act. Accordingly, provisions of sub clause

(a) and (b) of clause (xx) of the Order are not applicable to the company.

Annexure "B" to Independent Auditors Report

Referred to in paragraph 21 (h) of "Report on Other Legal and Regulatory Requirements" of our Report of even date to the Members of MODERN DENIM LIMITED for the year ended 31st March, 2023.

Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls over financial reporting of MODERN DENIM LIMITED as of 31st March 2023, in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Management?s Responsibility for Internal Financial Controls

The Company?s 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. 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 company?s 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 Institute of Chartered Accountants of India ("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 ICAI. 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 auditor?s judgment, including the assessment of the risks of material misstatement of the Standalone Financial Statement, 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 Company?s 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 Statement 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 Standalone Financial Statement in accordance with generally accepted accounting 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 Standalone Financial Statement.

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.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March 2023, 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.