Naraingarh Sugar Mills Ltd Directors Report.

The Members,

Naraingarh Sugar Mills Limited.

1. We have audited the accompanying financial statements of Naraingarh Sugar Mills Limited which comprise the Balance Sheet as at 31st March, 2018, the Statement of Profit & Loss (including other comprehensive income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended and a summary of significant accounting policies and other explanatory information.

2. The Companys Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 with respect to the preparation and presentation of these Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash ows and changes in equity 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 the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgement 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.

3. Our responsibility is to express an opinion on these Ind AS financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the rules made thereunder.

4. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Ind AS financial statements are free from material misstatement.

5. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the Ind AS financial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Companys preparation of the Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Companys Directors, as well as evaluating the overall presentation of the Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Ind AS financial statements.

6. Attention is invited to the following points of Note ‘4 of the financial statements.

i) Note 4.1 - regarding confirmation of attachment of Fixed Assets of the Company under the Prevention of Money Laundering Act, 2002 by the Adjudicating Authority.

ii) Note 4.3 - regarding calls in arrears and redeemable preference shares.

iii) Note 4.4 regarding advances and trade receivables written off.

7. Subject to paragraph 6 above, in our opinion and to the best of our information and according to the explanations given to us, the aforesaid Ind AS financial statements, give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the Ind AS, of the state of a airs of the Company as at 31st March, 2018 and its loss, total comprehensive income, its cash ows and the changes in equity for the year ended on that date.

8. Corresponding figures for the year ended 31st March, 2017 audited by another auditor, who expressed an unmodified opinion on financial statements of the Company for the year ended 31st March, 2017.

Hence, our opinion on financial statements is not modified.

9. As required by the Companies (Auditors Report) Order, 2016 issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Act, we give in the "Annexure A" a statement on the matters specified in the paragraph 3 and 4 of the Order.

10. 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 & Loss (including other comprehensive income), the Cash Flow Statement and Statement of Changes in Equity dealt with by this report are in agreement with the books of account;

(d) in our opinion, the aforesaid Ind AS financial statements, comply with the Indian Accounting Standards, specified under Section 133 of the Act;

(e) on the basis of the written representations received from the Directors as on 31st March, 2018 taken on record by the Board of Directors, none of the Directors is disquali ed as on 31st March, 2018 from being appointed as a Director in terms of Section 164(2) of the Act;

(f) with respect to the adequacy of internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure B"; and

(g) 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 financial statements (Refer note 4.1, 4.2 & 4.7).

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

iii. there were no amounts which were required to be transferred, to the Investor Education and Protection Fund by the Company.

For K D & ASSOCIATES
CHARTERED ACCOUNTANTS
Firm Registration No. - 024293N
(DEEPAK GARG)
Dated : 18th June, 2018. PARTNER
Place : Chandigarh Membership No. - 507959

"ANNEXURE A" TO THE INDEPENDENT AUDITORS REPORT

(Referred to in paragraph 9 of our report of even date on accounts of Naraingarh Sugar Mills Limited for the year ended 31st March, 2018).

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

b) The Company has a programme for phased physical verification of all its fixed assets which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed no material discrepancies were noticed on such verification.

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

ii. As explained to us, the inventories were physically verified during the year by the Management at reasonable intervals and no material discrepancies were noticed on physical verification.

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. According to the information and explanations given to us, the Company has not granted any loans or provided any guarantees or security to the parties covered under Section 185 of the Companies Act, 2013. Corporate Guarantee given by the Company to the Bank, for the loans given to the Cane Farmers & Investments made by the Company, are not in conformity with the provisions of Section 186 of the Companies Act, 2013.

v. The Company has not accepted any deposits from the public within the meaning of the directives issued by the Reserve Bank of India, provisions of Section 73 to 76 of the Act, any other relevant provisions of the Act and the relevant rules framed thereunder.

vi. We have broadly reviewed the books of account maintained by the Company pursuant to the Companies (Cost Records and Audit) Amendment Rules, 2014 made by the Central Government for the maintenance of cost records under Section 148 of the Companies Act, 2013 and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained.

However, we have not made a detailed examination of the records with a view to determine whether they are accurate & complete.

vii. a) According to the information & explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Income Tax, Sales Tax, Service Tax, Goods & Services Tax, Excise Duty, Value Added Tax, Cess and other material statutory dues, have been regularly deposited, during the year, by the Company with the appropriate authorities.

According to the information and explanations given to us, no undisputed amounts payable, in respect of Provident Fund, Income Tax, Sales Tax, Service Tax, Goods & Services Tax, Excise Duty, Value Added Tax, Cess and other material statutory dues (except cane purchase tax - Rs.1,532,062/- for the financial year 2016-2017 and Rs.857,728/- for the month of April, 2017), were in arrears as at 31st March, 2018 for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us, there are no dues of Income Tax, Sales Tax, Service Tax, Goods & Services Tax, Custom Duty, Excise Duty and Cess which have not been deposited with appropriate authorities on account of any dispute, except as mentioned below:

Name of the Statue Nature of dues Amount Involved Amount deposited under protest Financial Year/Period Forum where dispute is pending
i Income Tax Act, 1961 Penalty u/s 271(1)(c) 545,644 Nil 2007-2008 Income Tax Appellate Tribunal, New Delhi
ii Central Excise Act, 1944 Excise Duty (inc. Penalty) 3,726,986 248,500 March, 2015 to March,2016 CESTAT, New Delhi
iii Finance Act, 1994 Service Tax (inc. Penalty) 3,084,762 153,738 2010-2011 CESTAT, New Delhi
iv Punjab Sugarcane Act, 1953 Cane Purchase Tax 20,233,831 Nil 1996-2002 Punjab & Haryana High Court, Chandigarh

viii. According to the information & explanations given to us and on the basis of verification of records, the Company has defaulted in repayment of dues (i.e. Interest accrued & due aggregating to Rs. 60,891,257/- for the period from December, 2017 to March, 2018) to Financial Institution (IREDA) & Rs. 47,998,525/- for the period from June, 2017 to March, 2018 to The Ambala Central Cooperative Bank Ltd. and Interest accrued & due - Rs. 160,347/- & Principal Amount Rs. 6,666,667/- to Union Bank of India for the month of March, 2018.

The Company, during the year, has not borrowed from Government and has not issued any debentures.

ix. The Company has not raised any money by way of initial public o er or further public o er (including debt instruments) during the year. Term loans availed by the Company, were prima-facie, applied by the Company for the purposes for which loans were obtained.

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.

xi. According to the information and explanations give to us and based on our examination of the records of the Company, 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.

xii. The Company is not a Nidhi Company and hence reporting under clause 3(xii) of the Order is not applicable.

xiii. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with Sections 177 and 188 of the Act, where applicable, and details of such transactions have been disclosed in the Ind AS financial statements as required by the applicable Ind AS.

xiv. According to the information and explanations give to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

xv. According to the information and explanations given to us, during the year, the Company has not entered into any non-cash transactions with its Directors or persons connected to its Directors and hence provisions of Section 192 of the Companies Act, 2013 are not applicable. Accordingly, the provisions of clause 3(xv) of the Order are not applicable to the Company.

xvi. The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

For K D & ASSOCIATES
CHARTERED ACCOUNTANTS
Firm Registration No. - 024293N
(DEEPAK GARG)
Dated : 18th June, 2018 PARTNER
Place : Chandigarh Membership No. - 507959

"ANNEXURE B" TO THE INDEPENDENT AUDITORS REPORT

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

We have audited the internal financial controls over financial reporting of Naraingarh Sugar Mills Limited as of 31st March, 2018 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 issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting and the Standards on Auditing, issued by ICAI and deemed to be prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A Companys internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Companys internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly re ect 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 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 2018, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For K D & ASSOCIATES
CHARTERED ACCOUNTANTS
Firm Registration No. - 024293N
(DEEPAK GARG)
Dated : 18th June, 2018 PARTNER
Place : Chandigarh Membership No. - 507959