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Rainbow Papers Ltd Auditor Reports

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Rainbow Papers Ltd Share Price Auditors Report

TO

THE MEMBERS OF

RAINBOW PAPERS LIMITED.

Report on theInd AS Financial Statements

We have audited the accompanying Ind AS financial statements of RAINBOW PAPERS LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2018 the Statement of Profit and Loss, Statement of Changes in Equity and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information (hereinafter referred to as "Ind AS financial statements")

Management’s Responsibility for the Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation and presentation of these Ind AS Financial Statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and 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 Ind AS Financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on theseInd 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 there under.

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 financial statements are free from material misstatement. 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 auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls.

An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the financial statements.

We broadly believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Qualification

1. We draw attention to Note No. 46 of the accompanying financial statements in respect of non-provision of interest on NPA accounts of banks of Rs.280.17Crore. The exact amounts of the said non provisions are not determined and accounted by the company.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaidInd-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, of the state of affairs of the Company as at March 31 2018,its loss , changes in equity and cash flows for the year ended on that date.

Matter of Emphasis:

1. We draw attention to Note No. 45(a)&(e) of the accompanying Financial Statement in respect of Winding up Notices and Notices under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act 2002).

2. We draw attention to Note No. 51(a)&(f) of the accompanying Financial Statement in respect of the accounts of Loan Liabilities & borrowings, Current liabilities, Trade receivables, Loans and advances given (Including Advance for Land), Balance with Revenue Authority, Statutory Dues Long outstanding advances for Capital Goods and Various other Advances are subject to confirmation.

3. We draw attention to Note No. 48 of the accompanying Financial Statement in respect of assignment/treatment of Debts by Axis Bank.

4. We draw attention to Note No. 40 of the accompanying Financial Statement in respect of cessation of production on account of Non-Supply of Electricity and further in view of various points under the Head "Matter of Emphasis" the going concern of the company is seriously affected.

5. We draw attention to Note 44 to the standalone financial statements which describes the status of Corporate Insolvency Resolution Process that the Company underwent with the Hon’ble National Company Law Tribunal (NCLT), the matter is yet to be decided on the date of signing the Financial statements.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2016 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, on the basis of information given to us, we give in the Annexure A statement on the matters specified in the paragraph 3 and 4 of the Order, to the extent applicable for the year under consideration.

2. As required by Section 143 (3) of the Act, we broadly report (except otherwise stated) 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 and the cash flow statement dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

(e) On the basis of the written representations received from the directors as on 31 March 2017 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2017 from being appointed as a director in terms of Section 164 (2) of the Act;

(f) With respect to adequacy of the internal financial controls over the 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 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 financial statements; ii. there are no long term contracts including derivative contracts and accordingly no provision is required to be made for any loss from the same; iii. There is no fund which is pending to be transferred to the Investor Education and Protection Fund by the Company;

FOR, MEHTA LODHA & CO.
(FIRM REGD.NO: 106250W)
CHARTERED ACCOUNTANTS
PLACE: - AHMEDABAD PRAKASH D SHAH
DATE:- 30th May 2018. PARTNER
M.No. 34363

ANNEXURE A TO THE INDEPENDENT AUDITOR’S REPORT

[ANNEXURE A REFERRED TO IN PARAGRAPH 1 OF REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENT OF OUR REPORT OF EVEN DATE FOR THE YEAR ENDED ON 31ST MARCH, 2018] i. (a) The Company has maintainedproper records showing full particulars, including quantitative details and situation, of fixed assets.

(b) As informed to us, the fixed assets arephysically verified by the Management at regular intervals, however during the year no physical verification is undertaken by the company and therefore we are unable to comment on any discrepancies between the records and physical verification.

(c) As informed to us and on the basis of the records of the company, the title deeds of immovable properties, as disclosed in Note 4on fixed assets to the financial statements, are held in the name of the Company.

ii. The physical verification of inventory hasbeen conducted at reasonable intervals by theManagement during the year. In our opinion, the frequency of verification is reasonable. As informed to us the discrepancies noticed on physical verification of inventory as compared to book records were not material and have been properly dealt with in the books of accounts.

iii. The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013 (‘the Act’) and accordingly the para iii (a), (b) and (c) of the Order are not applicable.

iv. In our opinion, and according to the information and explanations given to us, the Company has complied with the provisionsof Section 185 and 186 of the Companies Act, 2013 in respect of the loans and investments made, and guarantees and securityprovided by it.

v. The Company has not accepted any deposits from the public (Other than exempted deposit) within the meaning of Sections 73, 74, 75 and 76 of the Act andthe Rules framed there under to the extent notified. vi. Pursuant to the rules made by the Central Government of India, the Company is required to maintain cost records as specifiedunder Section 148(1) of the Act in respect of its products. We have broadly reviewed the same, and are of the opinion that,prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailedexamination of the records with a view to determine whether they are accurate or complete.

vii. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion,the Company is not regular in depositing undisputed statutory duesincludingprovident fund, employees’ state insurance, Pension Fund, income tax, service tax, duty of customs, duty of excise, cess and other materialstatutory dues, as applicable, with the appropriate authorities.

There are undisputed amounts payable in respect of above dues which were in arrears as at 31st March 2018 for a period of more than six months from the date they became payable.

Name of the Statues Nature of Dues Rs. In Lakhs* Period to which amount relates
Employees’Provident Fund and Miscellaneous Provisions Act, 1952. Provident Fund Rs. 178.09 From October 2014 to May 2016
Professional Tax Professional Tax Rs. 26.53 From March-2015 to September 2018
Employee State Insurance Commission ESIC Rs. 0.19 From April-2017 to September-2018
Finance Act 1994. Service Tax Rs50.37 From May 2015 to March 2016
Central Sales Tax Act,1956 Central Sales Tax Rs 82.33 From May 2015 to March 2016
Commission of Electricity Board Electricity Duty Payable Rs 417.69 From April 2012 to August 2016
Income Tax Act, 1961 Tax Deducted as Source Rs 167.72 From March 2015 to September 2018
Dividend Distribution Tax Rs. 72.21 F.Y. 2013-14

*In absence of evidence, if any, Payment made during the year are apportioned on FIFO basis to determine the outstanding liabilities. Further the amount of interest on the above outstanding amount and the penalty thereon are not included in the above amounts.

(b) According to the information and explanations given to us and the records of the Company examined by us, following are the details of outstanding dues which have not been deposited on account of any dispute:-

Name of the Statues Nature of Dues Rs. (In Lacs) Period to which amount relates From where dispute is pending
Income Tax Act, 1961 Income Tax 1.10 A.Y. 2001-02 Based on Form B dated 04-10-2017*
Income Tax Act, 1961 Income Tax 55.51 A.Y. 2003-04 Based on Form B dated 04-10-2017*
Income Tax Act, 1961 Income Tax 128.23 A.Y. 2004-05 Based on Form B dated 04-10-2017*
Income Tax Act, 1961 Income Tax 59.93 A.Y. 2005-06 Based on Form B dated 04-10-2017*
Income Tax Act, 1961 Income Tax 50.71 A.Y. 2002-03 Based on Form B dated 04-10-2017*
Income Tax Act, 1961 Income Tax 36.29 A.Y. 2009-10 Based on Form B dated 04-10-2017*
Income Tax Act, 1961 Income Tax 595.76 A.Y. 2011-12 Hon’ble Income
Tax Appellate Tribunal
Income Tax Act, 1961 Income Tax 383.20 A.Y. 2012-13 Hon’ble Income
Tax Appellate Tribunal
Income Tax Act, 1961 Income Tax 987.53 A.Y. 2013-14 Hon’ble Income
Tax Appellate
Tribunal
Value Added VAT **120.45 FY2011-12 Hon’ble Sales Tax
Tax Act, Gujarat Appellate Tribunal
Value Added VAT 4.00 FY 2013-14 Hon’ble Sales Tax
Tax Act, Gujarat Appellate Tribunal
Value Added Tax Act, Gujarat VAT 109.08 FY 2015-16 Hon’ble Sales Tax Appellate Tribunal
Custom Act, 1975 Custom Duty 238.96 FY 2007-08, FY 2008-09 and FY2012-13 Office of the Commissioner of Customs

* Taken based on the claims submitted by the respective departments under CIRP Process. **Net of Rs 6.50 Lacs paid under protest. viii. According to the records of the Company examined by us and the information and explanation given to us by the management, the Companyhas defaulted in repayment of loans or borrowings to financial institution and bank as at the balance sheet date. Details of which are as below:

Particulars Name of Lender Amount of Default as on Period of
31/03/2018*(Rs in Lacs) Default*
Total Amount(Including
Principal and Interest)*
Financial IFCI Limited 10,576.49 October 2015
Institutions
Tourism Finance 1,572.99 March 2016
Corporation of
India Limited
ACRE 14,646.14 April 2016
Banks Union Bank of 12,169.27 November
India 2015
Indian Overseas 18,496.37 March 2016
Bank
Axis Bank 16,292.85 January 2016
Allahabad Bank 16,056.96 October 2015
Bank of India 18,938.87 March 2015
Dena Bank 10,212.76 October 2015
Punjab National 4,819.89 December 2015
Bank
Corporation 6,879.87 November
Bank 2015

*The above table does not include the interest which bank has not provided after the account has been classified Non Performing Assets. ix. In our opinion, and according to the information and explanations given to us during the year, company has not raised money by way of initial public offer/ further public offer/ debt instruments and term loan. Accordingly the provisions of Clause 3(ix) of the Order are not applicable to the Company.

x. During the course of our examination of the books and records of the Company, carried out in accordance with the generallyaccepted auditing practices in India, and according to the information and explanations given to us, we have neither comeacross any instance of material fraud by the Company or on the Company by its officers or employees, noticed or reportedduring the year, nor have we been informed of any such case by the Management. xi. According to the information and explanations given by the management, the managerial remuneration has been paid/provided in accordance with provisions of section 197 read with Schedule V to the Companies Act, 2013.

xii. As the Company is not a Nidhi Company and the Nidhi Rules, 2014 are not applicable to it, the provisions of Clause 3(xii) of theOrder are not applicable to the Company.

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

xiv. According to the information and explanations given by the managementand on overall examination of the balance sheet, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debenturesduring the year under review. Accordingly, the provisions of Clause 3(xiv) of the Order are not applicable to the Company and not commented upon.

xv. According to the information and explanations given by the management,the Company has not entered into any non-cash transactions with its directors or persons connected with him. Accordingly, theprovisions of Clause 3(xv) of the Order are not applicable to the Company.

xvi. According to the information and explanations given by the management, the provision ofSection 45-IA of the Reserve Bank of India Act, 1934 are not applicable to the Company.

FOR, MEHTA LODHA & CO.
(FIRM REGD.NO: 106250W)
CHARTERED ACCOUNTANTS
PLACE: - AHMEDABAD PRAKASH D SHAH
DATE:- 30th May 2018. PARTNER
M.No. 34363

ANNEXURE - B TO THE INDEPENDENT AUDITOR’S REPORT

[ANNEXURE B REFERRED TO IN PARAGRAPH 2 OF REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENT OF OUR REPORT OF EVEN DATE FOR THE YEAR ENDED ON 31ST MARCH, 2017]

REPORT ON THE INTERNAL FINANCIAL CONTROLS UNDER CLAUSE (i) OF SUB-SECTION 3 OF SECTION 143 OF THE COMPANIES ACT, 2013 ("the Act")

We have audited the internal financial controls over financial reporting of Rainbow Papers Limited ("the Company") as of 31 March, 2017 in conjunction with our audit of the 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 (‘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 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 Companies Act, 2013.

Auditors’ Responsibility

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

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s 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 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 financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with 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.

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 31 March 2017, 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, MEHTA LODHA & CO.
(FIRM REGD.NO: 106250W)
CHARTERED ACCOUNTANTS
PLACE: - AHMEDABAD PRAKASH D SHAH
DATE:- 30th May 2018. PARTNER
M.No. 34363

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