richa industries ltd Auditors report

To the Members of Richa Industries Limited

Report on the Standalone Financial Statements

1. We have audited the accompanying standalone financial statements of Richa Industries Limited ("the Company"), which comprise the Balance Sheet as at 31 March 2018, the Statements of Profit and Loss, the Cash Flow Statement and the Statement of Changes in Equity for the year the ended, and a summary of the significant accounting policies and other explanatory information [hereinafter referred to as "standalone financial statements".

Managements Responsibility for the Standalone Financial Statements

2. The Companys 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 of these standalone financial statements that give a true and fair view of the state of affairs (financial position), Profit or loss ( financial performance), cash flows 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 judgements 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 standalone financial statements the give a true and fair view and are free from material misstatement, whether due to fraud and error. In preparing the financial statements, management is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or cease operations, or has no realistic alternative but to do so.

Auditors Responsibility

3.Our responsibility is to express an opinion on these standalone financial statements based on our audit.

4. We have taken into account the provision 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.

5. We conducted our audit in accordance with the Standards on Auditing specified require 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 these standalone financial statements are free from material misstatement.

6. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditors judgement, including the assessments 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 controls relevant to the Companys preparation of the 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 standalone financial statements.

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

Opinion

8. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone 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 [however, it does not comply to the Ind As requirements as specified under Section 133 of the Act], of the state of affairs (financial position) of the company as at 31 March 2018, and its profit (financial performance), its cash flows and the changes in equity for the year ended on that date.

Report on Other Legal and Regulatory Requirements

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

Further to our comments in "Annexure A", as required by Section 143(3) of the Act and comments / exceptions / disclaimers provided in significant accounting policies and notes to accounts, which should be read along with this report, 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 purpose 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 these books, however, it does not comply to the Ind As requirements as specified under Section 133 of the Act;

c. The standalone financial statements dealt with by this report are in agreement with the books of account;

d. In our opinion, the aforesaid standalone financial statements do not comply with Ind AS specified under Section 133 of the Act;

e. On the basis of the written, representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2018 from being appointed as director in terms of Section 164(2) of the Act.

f. With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure B".

g. with respect to the other matter to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014 (as amended), in our opinion and to the best of our information and according to the explanation given to us:

i the company has disclosed the impact of pending litigation on its financial position in the standalone financial statements.

ii the company has made provision, as required under the applicable law, for material foreseeable losses, if any, on long-term contracts including derivative contracts (if any);

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

iv  the disclosure requirements relating to holding as well as dealing in specified bank notes were applicable for the period from 8 November 2016 to 30 December 2016 which are not relevant to these standalone financial statements. Hence, reporting under this clause is not applicable.

‘ANNEXURE-A TO INDEPENDENT AUDITORS REPORT

Referred to paragraph 9 of the Independent Auditors Report of even date to the members of Richa Industries Limited on the standalone financial statement as of and for the year ended March 31, 2018.

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

[b] As per information and explanation given to us, the Company has a regular program of physical verification of its fixed assets under which fixed assets are verified by the Management in a phased manner over a period of three years, which, in our opinion, is reasonable having regard to the size of Company and the nature of assets. In accordance with this program, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. However, no such verification has been undertaken by us. The information and explanation given by the management is relied upon.

[c] The title deeds of the immoveable properties are held in the name of the Company, but the beneficiary interest lies with the bankers / lenders, with whom the same are mortgaged as security.

(ii) The inventory, including stocks with certain third parties, has been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable. The discrepancies noticed on physical verification of inventory as compared to book records were not material and have been appropriately dealt with in the books of accounts. However, no physical verification of stocks has been undertaken by us due to technical inability and lying of stocks on multiple locations. Further the valuation of the stocks is undertaken by the Management at its own, which has been accepted as such, without further verification. Any variation may affect the financial position and financial performance to the extent.

(iii) The Company has granted interest free unsecured loans to companies covered in the register maintained under Section 189 of the Act; and with respect the same:

(a) the unsecured loan has been given without specifying any terms and conditions and hence further comments cant be given

(b) the schedule of repayment of principal and payment of interest has not been specified, hence further comments cant be given.

(c) No comment can be given due to the para (iii)(c) above.

Further the Company has not granted any secured loans to Companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under Section 189 of the Companies Act, 2013. Hence the clauses (a), (b) and (c) of Para 3(iii) of the order are not applicable.

(iv)The Company granted interest free unsecured loans to Companies covered in the register maintained under Section 189 of the Act; and the provisions of Sec 185 and Sec 186 of the Companies Act, 2013, have been complied with.

Further the Company has not made investments, given guarantees, or any other security during the year under consideration. Hence the Para 3(iv) of the order is not applicable.

(v)The Company has not accepted any Deposits from the public within the meaning of Sections 73 and 74 of the Act and the rules framed there under to the extent notified. Hence the Para 3(v) of the order is not applicable.

(vi) We have broadly reviewed the books of account maintained by the Company in respect of products where pursuant to the rules made by the Central Government of India, the maintenance of cost records has been specified under sub-section (1) of Section 148 of the Act. And are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

(vii) [a] According to the information and examination provided to us and records of the Company examined by us, in our opinion, the Company is not regular in depositing the undisputed statutory dues of income tax, sales tax / value added tax with the appropriate authorities. The outstanding statutory dues as on the last day of the financial year concerned from the date they become payable are as follows:

Name of the statute	Nature of dues	Amount (Rs)	Period to which the amount relates
Income Tax Act1961 and rules made thereunder	TDS Payable U/s 192,194C, 194I, 194J and TCS on scarp sold	1,04,39,383.42	01-04-2017 to 31-03-2018
Uttrakhand Sales Tax	Uttrakhand Sales Tax	14,37,619.90	01-04-2017 to 30-06-2017

Note : the amount stated above is gross payable amount without any interest on late deposit of TDS. No provision for interest payable on late deposit of TDS is made as on 31-March-2018.

[b] According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income tax, or sales tax, or service tax or duty of customs or duty or duty of excise or value added tax as at 31st March 2018 which have not been deposited on account of a dispute, are as follows:

Name of the statute	Nature of dues	Amount (Rs)	Period to which the amount relates	Forum where the dispute is pending
Income Tax Act 1961 and rules made there under	Income Tax and other dues u/s 143(3) and 271(1)(C)	5,71,530.00	AY 2014-15	CIT (A), Faridabad
		22,16,086.00	AY 2008-09	Punjab & Haryana High Court, Chandigarh
		26,56,796.00	AY 2009-10	ITAT New Delhi
		8,61,515.00	AY 2005-06	ITAT New Delhi
Finance Act 1994 (Service Tax) and rules made there under	Under Sec 77, 78 and Rule 15(3)	1,32,01,385.00	FY 2008-12	CESTAT, New Delhi
Punjab Sales Tax	Dispute of taxation on material seized on Shambu Check Post at Punjab Border	1,87,500.00	2016-17	Appellate Authority, Patiala Punjab

Further, the company has not reversed the Input Credit on invoices issued by suppliers, to whom the payment has not been made in 6 months from the date of issuance. Hence the Company has availed input credit to the extent of such reversal and violated the provisions of GST Act, and rules / regulations made thereunder.

(viii) According to the records of the Company examined by us and the information and explanations given to us, the Company has defaulted in repayment of loans or borrowing from bank, the details are as under

Particulars	Amount of default as at the Balance Sheet Date Rs	Period of delay	Remarks, if any
Indian Overseas Bank
Term Loan	3,10,61,458.00	Since Jan 2018	Non-payment of Interest and installment
Working Capital Loan			Due to non-payment of interest and non-adjustment of overdrafts.
Textiles-Division	6,73,09,145.54	Since Oct 2017
PEB-Division	33,87,81,505.55	Since Dec 2017	Due to non-adjustment of interchangeability of Fund Based to Non Fund Based of Rs 23.00 Crore, and balance of devolvement of Letter of Credit and interest on the WCL including above
Corporation Bank
Working Capital Loan	17,71,35,986.35	Since Dec 2017	Due to non-payment of adhoc WCL of Rs 3.00 Crore, and balance of devolvement of Letter of Credit and interest on the WCL including above
Term Loan	6,92,692.00	Since Jan-2018	Non-payment of Interest and
			instalment

Both of the above banks has classified the funding facilities as on 31-March-2018 as sub-standard and declared the account to be Non-Performing Asset (NPA).

Further the default in case of other lenders, is as follows:

Particulars	Amount of default as at the Balance Sheet Date Rs	Period of delay	Remarks, if any
Reliance Commercial Finance Ltd
Working Capital Demand Loan	27,33,069.00	Since Oct 2017	Non Repayment of interest and installment
Jainsons Finlease Limited
Term Loan	68,85,995.00	Since Dec 2017	Non-payment of Interest

During the year under consideration, the Company has issued debentures, the default of interest payable as on 31-03-2018, is as follows:

Particulars	Amount of default as at the Balance Sheet Date Rs	Period of delay	Remarks, if any
AAVSARL(Luxembourg), through its Indian Custodian Deutsche Bank AG, Mumbai Branch
NCD	54,44,753.00	Since Dec 2017	Non-payment of Interest

The Company has not availed any financial facilities from any financial institution during the year under consideration.

(ix) a) The Company has raised money by way of debt instruments namely Non-Convertible Debentures during the year under consideration and has been applied for the purpose for which those were raised. The Company has defaulted in interest / other payment of Rs.54,44,753.00on the same since dec-2017. Further the Company has not made any debentures redemption reserve, as per the provisions of law / rules for the time being in force, during the year under consideration.

b) The Company has raised money by term loans (from banks) during the year under review and the funds raised are applied for the purpose for which those were raised. The Company has defaulted in interest payment of Rs.29,78,152.00 on the same since February 2018.

c) The Company has not raised any money by way of initial public offer or further public offer. Hence the Para 3(ix) of the order is not applicable to the extent.

(x) During the course of our examination of the books and records of the Company, carried on in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud on or by the Company, or by its officers or employees, or has been noticed or reported during the year, nor have we been informed of any such case by the Management.

(xi)The Company has paid managerial remuneration during the year under consideration and is in accordance with the requisite approvals mandated by the provisions of Section 197 read with the Schedule V of 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 the order are not applicable to the Company.

(xiii) The Company has entered into transaction with the related parties in Compliance with the provisions of Section 177 and 188 of the Act. The details of such related party transaction have been disclosed in the financial statements as required under Accounting Standard (AS) 18, Related Party Disclosures specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(xiv)The Company has not made any preferential allotment during the year under review, accordingly, the provisions of Clause 3(xiv) of the Order are not applicable to the Company.

(xv) The Company has not entered into any non-cash transactions with its directors or persons connected with him. 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, Accordingly, the provisions of Clause 3(xvi) of the Order are not applicable to the Company.

‘ANNEXURE - B TO INDEPENDENT AUDITORS REPORT 31-March-2018 on the Standalone Financial Statements (referred in our audit report of even date and subject to comments in notes to accounts and summery of accounting policies)

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 Richa Industries Limited (‘the Company) as of 31 March 2018 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 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 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 of the 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 (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 were established and the 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 control 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 judgment, including the assessment of the risk 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 the financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial control over the financial reporting includes those policies and procedures that

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transaction 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 the 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 Control Over Financial Reporting

Because of the inherent limitation of internal financial control 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 change the conditions, or that the degree of compliance with the policies or procedure may deteriorate.

Opinion

In our opinion and subject to

(i) the notes to accounts and summery of significant accounting policies;

(ii) and non- appointment of any of the internal auditor, as mandated by the Companies Act, 2013,the Company has,in all material respects, an adequate internal financial controls system over financial reporting and such internal financial control over financial reporting were operating effectively as at 31 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 Control Over Financial Reporting issued by the Institute Chartered Accountants of India.