reliance capital ltd share price Auditors report

<dhhead>Independent Auditors Report</dhhead>

To the Members of Reliance Capital Limited

Report on the audit of standalone financial statements Introduction

The Reserve Bank of India ("RBI") vide its letter and press release dated November 29, 2021 ("RBI Order") issued under Section 45-IE(1) of the Reserve Bank of India Act, 1934, superseded the Board of Directors of Reliance Capital Limited ("the Company") and appointed an Administrator to run the Company. Subsequently, in accordance with the order dated December 06, 2021 passed by the National Company Law Tribunal (Mumbai Bench) ("NCLT Order"), the application for commencement of Corporate Insolvency Resolution Process ("CIRP") of the Company under the Insolvency and Bankruptcy Code, 2016 ("IBC") was admitted.

 

Qualified opinion

We have audited the standalone financial statements of Reliance Capital Limited, which comprise the Standalone Balance Sheet as at March 31, 2023, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), the Standalone Statement of Changes in Equity and Standalone Statement of Cash Flows for the year then ended, and notes to the Standalone Financial Statements, including a summary of significant accounting policies and other explanatory information ("the financial statements").

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the "Basis for qualified opinion" paragraph of our report, the aforesaid financial statements give the information required by Companies Act, 2013 (the "Act") in the manner so required and give true and fair view in conformity with the accounting principle generally accepted in India, of the state of affairs of the Company as at March 31, 2023, and loss, other comprehensive loss, changes in equity and its cash flows for the year ended on that date.

Basis for qualified opinion a. We draw attention to Note no. 1 of the financial statements which explains that the Company is undergoing CIRP under the provisions of IBC. As per the provisions of IBC, the fair value and liquidation value of the assets of the Company as on the insolvency commencement date is required to be determined. As stated in Note no. 1, the valuation reports have been received. The Management and the Administrator have represented that the liquidation value of the assets is higher than the book values and therefore no impairment charge is called for as at March 31, 2023. However, on completion of the CIRP, the Company will consider carrying out a comprehensive review of all the assets including investments, other assets and intangible assets, liabilities and accordingly provide for impairment loss on assets and write back of liabilities, if any. Though these have been placed before the Committee of Creditors, these have not been provided for audit on grounds of confidentiality. Consequently, we are unable to comment on the impact thereof on the financial statements, if any. b. We draw attention to Note no. 1 to the financial statements which explains that the amount of the claims including claims on account of corporate guarantees invoked, admitted or to be admitted by the Administrator may differ from the amount reflecting in the books of account of the Company. The NCLT by its order dated April 12, 2023 has granted extension for completion of CIRP till July 16, 2023 and therefore pending final outcome of the CIRP, no adjustments have been made in the books for the differential amounts, if any, in the claims admitted as on the date of the financial statements as compared to the liabilities reflected in the books of account of the Company. c. We draw attention to Note no. 1 to the financial statements which explains that in view of the ongoing CIRP, the Company has provided for interest expense on financial liabilities which may be applicable on the financial debt only upto December 06, 2021. Accordingly, interest expense pertaining to the year ended March 31, 2023 amounting to 1,60,859 lakh has not been recognised. Had such interest been recognised, the loss before tax for the year ended March 31, 2023 would have been higher by 1,60,859 lakh. Further, the aggregate interest expense not recognized by the Company post December 06, 2021 is 2,09,949 lakh and had such interest been recognized, the net worth of the Company as at March 31, 2023 would have been lower by 2,09,949 lakh. d. We have been informed that certain information, including the minutes of meetings of the Committee of Creditors are confidential in nature and accordingly have not been shared with us. The Administrator and the management has confirmed that the CoC discussions held during the year do not have any implications on the financial statements since resolution plan is yet to be approved by the CoC as on the date of this report.

We conducted our audit in accordance with the Standards on Auditing ("the SAs") specified under section 143(10) of the Act. Our responsibilities under those SAs are further described in the Auditors Responsibilities for the Audit of the standalone financial statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ("the 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 our other ethical 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 opinion.

 

Material uncertainty related to going concern

We draw attention to Note no. 1 of the standalone financial statements which explains that the Company has been admitted under the CIRP effective December 06, 2021 and as stipulated under Section 20 of the IBC, it is incumbent upon the Administrator to manage the operations of the Company as a going concern. The last date for completion of CIRP process has been extended by the NCLT to July 16, 2023. Accordingly, the standalone financial statements for the year ended March 31, 2023 have been prepared on going concern basis. However, the Company has defaulted in repayment of the obligations to the lenders and debenture holders which are outstanding, has incurred losses during the period as well as during the previous periods, has reported negative net worth as at March 31, 2023 and previous periods and as described in Note no. 15 of the standalone financial statements, the asset cover for listed secured non-convertible debentures of the Company has fallen below one hundred percent, which indicates that material uncertainty exists, that may cast significant doubt on the Companys ability to continue as a going concern. Our opinion on the standalone financial statements is not modified in respect of the above matter.

 

Emphasis of Matter a. We draw attention to Note no. 40(e) of the standalone financial statements which refers to filling under Section 143(12) of the Act of Ministry of Corporate Affairs by one of the previous auditors for the financial year 2018-19. Based on the facts as described in the aforesaid, the Company has concluded that there were no matters attracting the said Section and the matter is under consideration with the Ministry of Corporate Affairs. b. We draw attention to Note no. 40(a) of the financial statements which refers to disposal of the Companys wholly owned subsidiary viz. Reliance Commercial Finance Limited on October 14, 2022 for a total consideration of 100 lakh.

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

 

Key audit matters

Key audit matters are those matters that, in our professional judgement, 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. For each matter below, our description of how our audit addressed the matter is provided in that context.

Key Audit Matter	How the matter was addressed in our audit
Impairment of loans and corporate guarantee issued (Expected Credit Losses)
Refer to the accounting policy and other information in Note No. 2.e Financial Instruments, Note No.2.h Financial Guarantee Contracts, Note No.3 Critical estimates and judgements, Note No. 7 Loans and Advances and Note No. 49 Financial Risk Management of the standalone financial statements.	• We read and assessed the Companys accounting policies for impairment of financial assets and their compliance with Ind AS 109.
The Company has maintained impairment loss allowance of 8,31,335 Lakh for loans and 38,058 lakh for financial guarantee obligation / corporate guarantee as at March 31, 2023. The ECL provisions held as at March 31, 2023 are 100% of gross Stage 3 loans.	• We tested the criteria for staging of loans/guarantees issued based on their past-due status to check compliance with requirements of Ind AS 109. All loans as at March 31, 2023 are classified under Stage 3.
Under Ind AS 109, Financial Instruments, allowance for losses on financial assets are determined using expected credit loss ("ECL") model. The estimation of impairment loss allowance on financial instruments involves significant judgement and estimates.	• We evaluated the reasonableness of the management estimates by understanding the process of ECL estimation and tested the controls around data extraction and validation.
The ECL Allowance is required to be measured considering the guiding principles of Ind AS 109 including:	• Tested the ECL model, including assumptions and underlying computation.
• unbiased, probability weighted outcome under various scenarios;	• We also considered management assumption that the underlying securities may not be readily realisable and therefore 100% ECL is required to be maintained on the gross Stage 3 loans.
• time value of money;	• The ECL provisions on corporate guarantees invoked amount to 38,058 lakh as at March 31, 2023 which is 13.33% of gross corporate guarantees invoked. No assessment of additional ECL provisions required has been made since the amount of the claims including claims on account of corporate guarantees invoked may differ from those reflected in the financial statements after these have been admitted by the Administrator under the CIRP, we have also modified our opinion on the financial statements.
• impact arising from forward looking macro-economic factors and;	• We have also obtained management representations wherever considered necessary.
• availability of reasonable and supportable information without undue costs.
Applying these principles involves significant estimation in various aspects, such as:
• grouping of borrowers based on homogeneity by using appropriate statistical techniques;
• staging of loans and estimation of behavioural life;
• determining macro-economic factors impacting credit quality of receivables;
• estimation of losses for loan products / corporate guarantee with no / minimal historical defaults.
Considering the significance of such allowance to the overall standalone financial statements, the level of managements judgement and the degree of estimation involved in computation of expected credit losses, this area is considered as a key audit matter.

 

Information other than the standalone financial statements and auditors report thereon

The Companys management and the Administrator are responsible for the preparation of the other information. The other information comprises the information included in the Annual Report but does not include the Standalone Financial Statements, Consolidated Financial Statements and our report thereon. The Annual Report is expected to be made available to us after the date of this auditors report.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

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.

 

Responsibilities of Management and Administrator for the standalone financial statements

The standalone financial statements of the Company for the year ended March 31, 2023 have been taken on record by the Administrator while discharging the powers of the Board of Directors of the Company which were conferred by the RBI Order and in accordance with the NCLT Order. For the said purpose, as explained in Note no. 1 of the standalone financials statements, the Administrator has relied upon the assistance provided by the existing staff and present key management personnel ("KMPs") and has assumed, without any further assessment, that information and data provided by the existing staff and present KMPs are in the conformity with the Act and other applicable laws and regulations with respect to the preparation of the standalone financial statements. The standalone financial statements are the responsibility of the Companys management and the Administrator under the provisions of Section 45-IE (4) of the Reserve Bank of India Act, 1934, and has been approved by them for issuance.

The Companys management and the Administrator are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these financial statements that give a true and fair view of the state of affairs, loss and other comprehensive loss, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards ("Ind AS") specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring 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 standalone financials statements, management and the Administrator, are responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Administrator either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Administrator is also responsible for overseeing the Companys financial reporting process.

 

Auditors responsibilities for the audit of the standalone financial statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financials statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: a. 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. b. 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 through a separate report on the complete set of financial statements on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls. c. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures in the standalone financial statements made by the management and the Administrator. d. Conclude on the appropriateness of the managements and Administrators 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 appropriateness of this assumption and 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 standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern. e. Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the financial year ended March 31, 2023 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 the Companies (Auditors Report) Order, 2020 ("the Order") issued by the Central Government 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 paragraphs 3 and 4 of the Order, to the extent applicable.

2. As required by Section 143(3) of the Act, we report that: a. 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, except wherever stated otherwise; b. In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; c. The standalone balance sheet, the standalone statement of profit and loss, (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of cash flow dealt with by this Report are in agreement with the books of account; d. Except for the effects of the matters described in the basis for qualified opinion section the standalone financial statements comply with the Ind AS specified under Section 133 of the Act; e. The matters described in the paragraph "a to d" under "Basis of Qualified Opinion" section and "Material Uncertainty related to Going Concern" section, in our opinion, may have an adverse effect on the functioning of the Company. f. As explained in the "Introduction" section of our report, the RBI vide its letter and press release dated November 29, 2021 issued under Section 45-IE(1) of the Reserve Bank of India Act, 1934, superseded the Board of Directors of the Company and appointed an Administrator to run the Company. Hence, we do not comment on whether any Director is disqualified from being appointed as a Director under Section 164(2). g. With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure B"; h. 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 no. 38 to the standalone financial statements. ii. The Company has made provisions, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts. Refer Note no. 47 to the standalone financial statements. iii. Other than for dividend amounting to 22 lakh pertaining to financial year 2010-11 to financial year 2013-14 which could not be transferred on account of pendency of various investor legal cases and 286 lakh which were due for transfer as on October 29, 2022 but were not transferred, there has been no delay in transferring amounts required to be transferred, to the Investor Education and Protection Fund by the Company.

iv. In respect of Rule 11(e) of the Companies (Audit and Auditors) Rules, 2014, a. The Administrator and management has represented that, to the best of its knowledge and belief, as disclosed in Note no. 52(a) of the standalone financial statements, no funds (which are material either individually or in the aggregate) 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 person or entity, including foreign entity ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in 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; b. Further, the Administrator and management has represented, that, to the best of its knowledge and belief, as disclosed in Note no. 52(b) of the standalone financial statements, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; c. Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under (a) and (b) above, contain any material misstatement. v. In respect of Rule 11(g) of the Companies (Audit and Auditors) Rule, 2014, since proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of accounts using accounting software which has a feature of recording audit trail (edit log) facility is applicable for the company only w.e.f April 01, 2023, reporting under this clause is not applicable for the year ended March 31, 2023. vi. In our opinion and according to the information and explanations given to us, the Company has not declared or paid dividend during the year.

3. The RBI vide its letter and press release dated November 29, 2021 issued under Section 45-IE(1) of the Reserve Bank of India Act, 1934, superseded the Board of Directors of the Company and appointed an Administrator to run the Company. Hence, section 197 of the Act is not applicable.

 

For Gokhale & Sathe

Chartered Accountants Firm Regn. No.103264W

 

Rahul Joglekar

Partner

Membership No.:129389 UDIN:

Place: Mumbai Date: May 29, 2023

 

Annexure A to Independent Auditors Report

(Referred to in the Independent Auditors Report of even date to the members of Reliance Capital Limited on the Standalone Financial Statements as of and for the year ended March 31, 2023)

To the best of our information and according to the explanations provided to us by the Company and the books of account and records examined by us in the normal course of audit, we state that: (i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of property plant and equipment including intangible assets.

(b) The property, plant and equipment of the Company have been physically verified by the management during the year 2022-2023.

(c) The title deeds (comprising of registered sale deeds/ transfer deeds/conveyance deeds) of all immovable properties (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee) provided to us, are held in the name of the Company as at the balance sheet date. (d) The Company has not revalued any of its property, plant and equipment and intangible assets during the year.

(e) No proceedings have been initiated during the year or are pending against the Company as at March 31, 2023 for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (as amended in 2016) and rules made thereunder. (ii) (a) The nature of the Companys business is such that it is not required to hold any inventories and, hence, reporting under clause 3(ii)(a) of the order is not applicable to the Company.

(b) As per the standalone financial statements and data made available to us, no new working capital limits have been sanctioned to the Company during the year and, hence, reporting under clause 3(ii)(b) of the order is not applicable to the Company. (iii) (a) Since the principal business of the Company is to give loans, reporting under clause 3(iii)(a) of the Order is not applicable to the Company.

(b) The Company during the year has not made investments in, provided any guarantee or security or granted any loans or advances in the nature of loans. Hence, reporting under clause 3(iii)(b) of the order is not applicable to the Company.

(c) In respect of loans and advances in the nature of loans, the schedule of repayment of principal and payment of interest has been stipulated. Note no. 49 of the standalone financial statements explains the Companys policy relating to expected credit loss measurement and impairment of financial assets. In accordance with that policy, loans as at the year-end aggregating to 8,31,335 lakh were categorized as credit impaired ("Stage 3") where the repayment of principal and payment of interest is not regular. Disclosures in respect of such loans have been provided in Note No. 7 to the standalone financial statements. Having regard to the nature of the Companys business and the volume of information involved, it is not practicable to provide an itemised list of loan assets where delinquencies in the repayment of principal and interest have been identified.

(d) The total overdue amount for more than 90 days as on March 31, 2023 are as below: ( In lakh)

No. of cases	Principal amount overdue	Interest overdue	Total overdue	Remarks (if any)
26	8,31,335	1,37,486	9,68,821	None

 

With effect from December 06, 2021, the Company has been admitted under CIRP and the Administrator has taken various steps for the recovery of the principal and interest which includes initiation of the process of inviting bids for the purpose of resolution process under CIRP. (e) Since the principal business of the Company is to give loans, reporting under clause 3(iii)(e) of the Order is not applicable to the Company.

(f) During the year 2022-2023, the Company has not granted any loans or advances in the nature of loans either repayable on demand or without specifying any terms or period of repayment.

(iv) There are no loans, investments, guarantees and securities granted in respect of which provisions of Section 185 and 186 of the Act are attracted. Accordingly, clause 3(iv) of the Order is not applicable to the Company.

(v) In our opinion and according to the information and explanation given to us, the Company has not accepted any deposits from the public within the meaning of directives issued by the Reserve Bank of India and sections 73 to 76 of the Act and the rules framed there under to the extent notified. Therefore, the provisions of clause 3(v) of the Order are not applicable to the Company.

(vi) In our opinion and according to the information and explanation given to us, the Central Government of India has not specified the maintenance of cost records under sub-section (1) of Section 148 of the Act for any of the products of the Company. Therefore, the provisions of clause 3(vi) of the said Order are not applicable to the Company. (vii) (a) In our opinion, the Company is generally regular in depositing with the appropriate authorities undisputed statutory dues including provident fund, employees state insurance, income tax, sales-tax, goods and service tax, cess and other material statutory dues applicable to it, except an amount of 308 lakh of unclaimed dividend not transferred to the Investor Education and Protection Fund. According to information and explanations given to us, no undisputed amounts payable were outstanding, at the year end, for a period of more than six months from the date they became payable, except 22 lakh of unclaimed dividend not transferred on account of various investor legal cases.

(b) Details of statutory dues referred to in sub-clause (a) above which have not been deposited as on March 31, 2023 on account of disputes are given below:

Name of the statute	Nature of dues	Amount ( in lakh)	Period to which the amount relates	Forum where the dispute is pending
CGST/ SGST Act, 2017	GST	36	F.Y. 2018-19	Office of Joint Commissioner of State Tax (Appeal-1), Mumbai
Income tax Act, 1961	Income Tax	2,919	F.Y. 2017-18	Commissioner of Income Tax (Appeals), Mumbai
Income tax Act, 1961	Income Tax	97	F.Y. 2017-18	Commissioner of Income Tax (Appeals), Mumbai
Income tax Act. 1961	Income Tax	1,216	F.Y. 2016-17	Commissioner of Income Tax (Appeals), Mumbai
Income tax Act, 1961	Income Tax	632	F.Y. 2015-16	Commissioner of Income Tax (Appeals), Mumbai
Income tax Act, 1961	Income Tax	4,743	F.Y. 2011-12	High Court, Mumbai
Income tax Act, 1961	Income Tax	775	F.Y. 2011-12	High Court, Mumbai
Income tax Act, 1961	Income Tax	59,943	F.Y. 2010-11	High Court, Mumbai
Income tax Act, 1961	Income Tax	433	F.Y. 2010-11	High Court, Mumbai
Income tax Act, 1961	Income Tax	942	F.Y. 2009-10	High Court, Mumbai
Income tax Act, 1961	Income Tax	553	F.Y. 2008-09	High Court, Mumbai
Income tax Act, 1961	Income Tax	275	F.Y. 2007-08	High Court, Mumbai

 

(viii) There were no transactions relating to previously unrecorded income that have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (43 of 1961).

(ix) (a) According to the information and explanation given to us, the Company has defaulted repayment of loans and other borrowings and in the payment of interest thereon to debenture holders, banks or financial institutions and other lenders. The amount and period of default is given below: ( in lakh)

	Name of lender	Amount not paid on due date	Whether principal or interest	No. of Days delay or unpaid	Remarks
A.	Non-Convertible Debentures and Market Linked Debentures
	Non-Convertible Debentures and Market Linked Debentures (Refer note below)	16,25,956	Principal	1278	None
	Non-Convertible Debentures and Market Linked Debentures (Refer note Below)	4,17,631	Interest	1278	None
B.	Loans from Banks / Financials Institutions
	Assets Care & Reconstruction Enterprise Limited-108-Trust	52,398	Principal	1186	None
	Assets Care & Reconstruction Enterprise Limited-108-Trust	11,792	Interest	1227	None
	Assets Care & Reconstruction Enterprise Limited-116-Trust	10,048	Principal	1223	None
	Assets Care & Reconstruction Enterprise Limited-116-Trust	1,823	Interest	1247	None
C.	Inter Corporate Deposits
	VSJ Investments Private Limited	12,385	Principal	1247	None
	VSJ Investments Private Limited	2,928	Interest	1247	None
	Mazson Builders and Developers	7,295	Principal	1237	None
	Mazson Builders and Developers	2,168	Interest	1237	None
	Shrikrishna Tradecom LLP	18,200	Principal	1297	None
	Shrikrishna Tradecom LLP	6,110	Interest	1297	None
	Guruvas Commercials LLP	17,400	Principal	1297	None
	Guruvas Commercials LLP	5,842	Interest	1297	None
	Shreeji Comtrade LLP	900	Principal	1297	None
	Shreeji Comtrade LLP	302	Interest	1297	None

 

Note: The Company has issued the Non-convertible Debentures and Market Linked Debentures on private placement basis which is being held by 1,227 debenture holders. Hence, it is not practical to provide detailed listing of individual holders of non-convertible debentures. Further the interest amount is considered for the period upto December 06, 2021, i.e. the date on which the Company has been admitted into CIRP, the period of default has been considered till March 31, 2023.

(b) The Company has not been declared a willful defaulter by any bank or financial institution or other lender.

(c) During the year, the Company has not raised term loans. Hence, reporting under clause 3(ix)(c) of the Order is not applicable to the Company.

(d) During the year, the Company has not raised funds on short term basis. Hence, reporting under clause 3(ix)(d) of the Order is not applicable to the Company.

(e) During the year, the Company has not taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries, associates or joint ventures.

(f) During the year, the Company has not raised loans on the pledge of securities held in its subsidiaries, joint ventures or associate companies. Hence, reporting under clause 3(ix)(f) of the order is not applicable to the Company.

(x) (a) The Company has not raised monies by way of initial public offer or further public offer (including debt instruments) during the year and hence reporting under clause 3(x)(a) of the Order is not applicable.

(b) During the year, the Company has not made any preferential allotment or private placement of shares or convertible debentures (fully or partly or optionally) and hence reporting under clause 3(x)(b) of the Order is not applicable.

(xi) (a) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have not come across any instance of material fraud by or on the Company, noticed or reported during the year, nor have we been informed of such case by management.

(b) No report under sub-section (12) of section 143 of the Companies Act has been filed in Form ADT-4 as prescribed under rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government, during the year and upto the date of this report. (c) No whistle blower complaints have been received by the Company during the year.

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

(xiii) The RBI vide its letter and press release dated November 29, 2021 issued under Section 45-IE(1) of the Reserve Bank of India Act, 1934, superseded the Board of Directors of the Company and appointed an Administrator to run the Company. Therefore provisions of Section 177 and 188 are not applicable. The details of related party transactions have been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) (a) In our opinion the Company has an adequate internal audit system commensurate with the size and the nature of its business.

(b) We have considered, the internal audit reports for the year under audit, issued to the Company during the year and till date, in determining the nature, timing and extent of our audit procedures.

(xv) RBI vide the RBI Order issued under Section 45-IE(1) of the Reserve Bank of India Act, 1934, superseded the Board of Directors of the Company and appointed an Administrator. Thus, reporting under clause (xv) of the order is not applicable.

(xvi) (a) The Company is required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934) and the said registration has been obtained. (b) The Company is not conducting any non-banking financial activity without a valid Certificate of Registration (CoR) from the Reserve Bank of India.

(c) The Company is a Core Investment Company as defined in the regulations of the RBI. The Company has obtained the required registration with Reserve Bank of India and continues to fulfil the criteria of a CIC. (d) According to the information and explanations given to us and on the basis of our examination of the records, there is no other Core Investment Company within the Group (as defined in the Core Investment Companies (Reserve Bank) Directions, 2016) and accordingly reporting under clause 3(xvi)(d) of the Order is not applicable.

(xvii) The Company has incurred cash loss of 2,64,746 lakh during the current financial year and of 1,12,457 lakh during the immediately preceding financial year.

(xviii) During the year, there is no resignation of the statutory auditors and accordingly reporting under clause 3(xviii) of the Order is not applicable.

(xix) The Company has defaulted in repayment of the obligations to the lenders and debenture holders which is outstanding, has incurred losses during the period as well as during the previous periods, has reported negative net worth as at March 31, 2023 and previous periods and the asset cover for listed secured non-convertible debentures of the Company has fallen below one hundred percent, which indicates that material uncertainty exists as on the date of the audit report. Pursuant to the admission and commencement of CIRP of the Company under Insolvency and Bankruptcy Code, 2016 (IBC) with effect from December 06, 2021, there are various claims submitted by the operational creditors, the financial creditors, employees and other creditors. The overall obligations and liabilities including obligation for interest on loans and the principal rupee amount in respect of loans shall be determined during the CIRP. Considering the uncertainty of the outcome of the CIRP process we are not in a position to comment whether the company would be capable of meeting its liabilities existing as at the date of the balance sheet as and when they fall due within a period of one year from the balance sheet date.

(xx) (a) The Company is not required to spend towards Corporate Social Responsibility (CSR) as per Section 135 of the Companies Act, 2013, since there is no profit in the last 3 years calculated as per the provisions of the Act. Hence reporting under clause 3(xx)(a) of the order is not required.

(b) There are no unspent amounts under sub-section (5) of Section 135 of the Act, pursuant to any ongoing project requiring transfer to special account in compliance with the provision of sub-section (6) of section 135 of the Act. Accordingly, reporting under clause 3(xx)(a) of the Order is not applicable for the year.

(xxi) Clause 3(xxi) of the Order is not applicable to the standalone financial statements.

 

For Gokhale & Sathe

Chartered Accountants Firm Regn. No.103264W

 

Rahul Joglekar

Partner

Membership No.:129389 UDIN:

Place: Mumbai Date: May 29, 2023

 

Annexure B to the Independent Auditors Report

(Referred to in paragraph 2(f) under "Report on Other Legal and Regulatory Requirements" section of our report to the members of Reliance Capital Limited of even date) Report on the Internal Financial Controls with reference to the Standalone Financial Statements under Clause (i) of Subsection 3 of Section 143 of the Companies Act, 2013 ("the Act") Introduction

The Reserve Bank of India ("RBI") vide its letter and press release dated November 29, 2021 ("RBI Order") issued under Section 45-IE(1) of the Reserve Bank of India Act, 1934, superseded the Board of Directors of Reliance Capital Ltd. ("the Company") and appointed an Administrator to run the Company. Subsequently, in accordance with the order dated December 06, 2021 passed by the National Company Law Tribunal (Mumbai Bench) ("NCLT Order"), the application for commencement of Corporate Insolvency Resolution Process ("CIRP") of the Company under the Insolvency and Bankruptcy Code, 2016 ("IBC") was admitted. We have audited the internal financial controls with reference to standalone financial statements of Reliance Capital Limited as of March 31, 2023 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

 

Managements responsibility for internal financial controls

The Companys management and the Administrator are 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 ("the ICAI"). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and effi-cient conduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

 

Auditors responsibility

Our responsibility is to express an opinion on the Companys internal financial controls with reference to standalone financial statements based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing prescribed under sub-section (10) of Section 143 of the Act, to the extent applicable to an audit of internal financial control, both issued by the 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 with reference to standalone financial statements was established and maintained and if such controls operated effectively in all material respects.

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Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls with reference to the standalone financial statements and their operating effectiveness. Our audit of internal financial controls with reference to standalone financial statements included obtaining an understanding of such internal financial controls, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the standalone financial statements, whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys internal financial controls system over financial reporting.

 

Meaning of internal financial controls with reference to stand-alone financial statements

A Companys internal financial controls with reference to financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone financial statements for external purposes in accordance with generally accepted accounting principles. A Companys internal financial controls with reference to financial statements include those policies and procedures that – a. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; b. 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 of the Company and the Administrator; and c. 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 with reference to standalone financial statements

Because of the inherent limitations of internal financial controls with reference to financial statements, 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 with reference to financial statements to future periods are subject to the risk that the internal financial controls with reference to financial statements 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 and to the best of information and according to explanations given to us, the Company has maintained adequate internal financial controls with reference to standalone financial statements as at March 31, 2023 based on the internal control with reference to standalone financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note and the Companys internal financial control with reference to standalone financial statements were operating effectively as at March 31, 2023.

 

For Gokhale & Sathe

Chartered Accountants Firm Regn. No.103264W

 

Rahul Joglekar

Partner

Membership No.:129389 UDIN:

Place: Mumbai Date: May 29, 2023