To the Members of Comfort Intech Limited.
Report on the Financial Statements
We have audited the accompanying financial statements of Comfort Intech Limited ("theCompany") which comprise the Balance Sheet as at March 31 2016 the Statement ofProfit and Loss and the Cash Flow Statement for the year then ended and a summary ofsignificant accounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
The Companys Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparationand presentation of these financial statements that give a true and fair view of thefinancial position financial performance and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility includes the design implementation and maintenance ofinternal control relevant to the preparation and presentation of the financial statementsthat give a true and fair view and are free from material misstatement whether due tofraud or error.
Our responsibility is to express an opinion on these financial statements based on ouraudit. We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatements.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on theauditors judgement including the assessment of the risks of material misstatementof the financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal control relevant to the Companyspreparation and fair presentation of the financial statements in order to design auditprocedures that are appropriate in the circumstances. An audit also includes evaluatingthe appropriateness of accounting policies used and the reasonableness of the accountingestimates made by management as well as evaluating the overall presentation of thefinancial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion. Emphasis of Matter We draw vour attention to:
1) There was a violation of RBI guidelines on exposure norms in the case of oneborrower where the exposure was Rs. 38.36 crore as on 31st March 2016. Theowned funds of the company as on 31st March 2015 stood at Rs. 91.72 crore.Therefore the single and group exposure limits of 15% and 25% worked out to Rs. 13.76crore and Rs. 22.93 crore.
2) As stated in Note 1 (I) of Significant Accounting Policies followed by the Companythe Company is not making any provision for Gratuity as the same is accounted for onpayment basis. This is in Contravention of Accounting Standard 15 on Accounting forretirement benefits of employees.
3) Reserve Bank of India vide its order dated 24th September 2014 hascancelled certificate of registration issued to the company to carry on the business of aNon Banking Financial Institution. Thereafter the Company had challenged the order in theAppellate Authority Ministry of Finance. However the Appellate has upheld the order ofthe RBI vide its order dated 30th November 2015. Hence the Company has fileda writ petition challenging the orders of RBI and Union of India in the Delhi High Court.The same is sub judice before the Court.
Our opinion is not qualified in respect of these matters.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:
a) in the case of the Balance Sheet of the state of affairs of the Company as at March312016; and
b) in the case of the Profit and Loss Account of the Profit for the year ended on thatdate.
c) in the case of the Cash Flow Statement of the cash flows for the year ended on thatdate.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of Sub-Section (11) ofSection 143 of the Act we give in the "Annexure A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order.
2. As required by section 143(3) of the Act we report that:
a) We have obtained all the information and explanations which to the best of ourknowledge 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 theCompany 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 dealt with bythis Report are in agreement with the books of account; -
d) In our opinion the Balance Sheet the Statement of Profit and Loss comply with theAccounting Standards Section 133 of the Companies Act 2013 With Rule 7 of Companies(Accounts) Rules 2014;
e) On the basis of written representations received from the directors as on March 312016 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2016 from being appointed as a director in terms of clause of Section164(2) of the Companies Act 2013;
f) with respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B"; and
g) With respect to the other matters to be included in the Auditors Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in ouropinion and to the best of our information and according to the explanations given to us:
i. There are pending litigations against the company but the impact of such litigationon the financial position of the company is undetermined.
ii. The company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
For Bansal Bansal & Co.
Date :30'h May 2016
Annexure to Independent Auditors Report
The annexure referred to in our report to the members of Comfort Intech Limited forthe year ended 31st March 2016 we report that:
1. In respect of its Fixed Assets :
(a) The company has maintained proper records showing full particulars includingquantitative details and situation of its fixed assets.
(b) As explained to us fixed assets have been physically verified by the management atreasonable intervals; no material discrepancies were noticed on such verification.
(c) In our opinion and according to the information and explanations given to us nofixed asset has been disposed during the year and therefore does not affect the goingconcern assumption.
2. In respect of its inventories:
(a) The stock in trade of shares and securities held in the physical format has beenphysically verified and those held in dematerialized format have been verified from therelevant statements received from the depositories during the year by the management.
(b) In our opinion and according to the information and explanations given to us theprocedures of physical verification of shares and securities followed by the managementare reasonable and adequate in relation to the size of the company and the nature of itsbusiness.
(c) In our opinion and on the basis of our examination of the records the Company isgenerally maintaining proper records of its inventories. No material discrepancy wasnoticed on physical verification of stock of shares and securities by the management ascompared to book records.
3. According to information and explanation given to us the company has grantedunsecured loan to one company covered in the register maintained under section 189 of theCompanies Act.
(a) In the case of the loan granted to the body corporate listed in the registermaintained under section 189 of the Act the borrower has been regular in the payment ofthe interest as stipulated. The terms of arrangement do not stipulate any repaymentschedule and the loan is repayable on demand. Accordingly paragraph 3(iii)(b) of theorder is not applicable to the company in respect of repayment of the principle amount.
(b) The total amount outstanding at year end is Rs. 3.96cr in respect of the loangranted to the body corporate listed in the register maintained under section 189 of theAct.
4. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act with respectto the loans and investments made.
5. The company has not accepted any deposits from the public.
6. The Central Government has not prescribed the maintenance of cost records undersection 148(1) of the Act for any of the services rendered by the company.
7. (a) According to the information and explanations given to us and according to thebooks and records as produced and examined by us in our opinion the company is regularin depositing the undisputed statutory dues including investor education & protectionfund Income Tax Value added tax cess and any other statutory dues as applicable withthe appropriate authorities. According to the information and explanations given to us noundisputed amounts payable in respect of provident fund Income Tax Sales Tax Servicetax value added tax cess and other material statutory dues were in arrears as at 31March 2016 for a period of more than six months from the date they became payable.
(b) According to the information and explanations given to us there are no duespayable in respect of income tax service tax and cess which have not been deposited withthe appropriate authorities on account of any dispute.
(c) As explain to us the company does not any have dues on account of investoreducation and protection fund
8. The Company does not have any loans or borrowings from any financial institutionbanks government or debenture holders during the year. Accordingly paragraph 3(viii) ofthe Order is not applicable.
9. The Company did not raise any money by way of initial public offer or further publicoffer (including debt instruments) and term loans during the year. Accordingly paragraph3 (ix) of the Order is not applicable.
10. According to the information and explanations given to us no material fraud by theCompany or on the company by its officers or employees has been noticed or reported duringthe course of our audit.
11. According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Act.
12. In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.
13. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.
14. According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
15. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable
16. The Company was registered under section 45-IA of the Reserve Bank of India Act1934. Reserve Bank of India vide its order dated 24th September 2014 hascancelled certificate of registration issued to the company. Thereafter the Company hadchallenged the order in the Appellate Authority Ministry of Finance. However theAppellate has upheld the order of the RBI vide its order dated 30!h November2015. Hence the Company has filed a writ petition challenging the orders of RBI and Unionof India in the Delhi High Court. The same is sub judice before the Court
For Bansal Bansal & Co.
Membership No.: 135399
Place : Mumbai
Date : 30th May 2016
Annexure - B to the Auditors Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of ComfortIntech Limited ("the Company") as of 31 March 2016 in conjunction with our auditof the financial statements of the Company for the year ended on that date.
Managements Responsibility for Internal Financial Controls
The Companys management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI).Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to companys policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Companys internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Companys internal financial controlssystem over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's 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 financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2016 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
For Bansal Bansal & Co.
Date :30th May 2016