To the Members of DB Realty Limited
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of D B RealtyLimited ("the Company") which comprise the Balance Sheet as at March 312016 the Statement of Profit and Loss the Cash Flow Statement for the year then endedand a summary of significant accounting policies and other explanatory information.
Managements Responsibility for the Standalone 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 preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting 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 also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent and design implementation and maintenance of adequate internalfinancial controls and ensuring their operating effectiveness and the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.
We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.
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 standalone financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the standalone financial statements. The procedures selected depend on theauditors judgment including the assessment of the risks of material misstatement ofthe standalone financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal financial control relevant to theCompanys preparation of the standalone financial statements that give a true andfair view in order to design audit procedures that are appropriate in the circumstances.An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of the accounting estimates made by the Companys Directors as wellas evaluating the overall presentation of the standalone financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the standalone financial statements.
Basis for Qualified Opinion
Share of profit of Rs. 191688 from an investment in a Limited Liability Partnership(LLP) included in the standalone financial statements is based on theunaudited financial statements of such LLP which are approved by only three partnersrepresenting the Company out of the total six partners of the LLP.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the Basis forQualified Opinion paragraph the aforesaid standalone financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2016 its profit and its cash flows for the yearended on that date.
Emphasis of Matter
We draw attention to the following matters in the notes to the standalone financialstatements:
(i) Note No. 11.3 regarding the carrying value of beautification of Bandra Worli SeaLink project aggregating Rs. 199058211. The Management is of the opinion that the futurerevenue from this project would be higher than the cost.
(ii) Note No. 12.4 regarding return on investments of Rs. 14276960804 in preferenceshares of a Company as on March 31 2016. As explained by the management this investmentis considered strategic and long term in nature and the current market value and futureprospects of such investments are significantly in excess of the Companys investmentin the investee Company.
(iii) Note No. 14.2 regarding security deposits aggregating Rs. 3575515954 as onMarch 31 2016 given to various parties for acquisition of development rights. Asexplained by management the Company is in process of obtaining necessary approvals withregard to these properties and that their current market values are significantly inexcess of their carrying values and are expected to achieve adequate profitability onsubstantial completion of such projects.
(iv) Note No. 17(i) regarding the status of the projects of the Company havingaggregate value of Rs. 2786245906 as on March 31 2016 and the opinion framed by theCompanys Management regarding realizable value of the cost incurred being atechnical matter has been relied upon by us.
(v) Note No. 30(B) regarding guarantees and securities provided for amounts aggregatingRs. 38944340200 to banks and financial institutions on behalf of various entities as onMarch 31 2016 which are significant in relation to the net-worth of the Company. In theopinion of the Management these are not expected to result into any financial liabilityon the Company.
(vi) Note No. 31(A)(iii)(1) & (2) regarding following disclosures in the auditedfinancial statements of a partnership firm where the Company is one of the partners:
(a) Allegations made by the Central Bureau of Investigation (CBI) relating to the 2Gspectrum case and regarding attachment order issued by adjudicating authority underPrevention of Money Laundering Act 2002. This matter is sub-judice and the impact ifany of its outcome is currently unascertainable.
(b) Recoverability of trade receivables of Rs. 556277256 outstanding for more thansix months. These amounts are considered as good and recoverable.
(vii) Note No. 32 to 36(a) regarding the matters which are sub-judice. Based on theassessment of the Companys Management of the outcome no adjustments are considerednecessary in respect of recoverability of balances as at March 31 2016 for loans andadvances aggregating Rs. 2281828725 (including amount inventorised Rs. 30050000) andthe investments aggregating Rs. 384078720. The impact if any of the outcome isunascertainable at present.
(viii) Note No. 36(b) regarding no adjustment having been made in the value ofinventory pending outcome of the matter referred by the Company to the Supreme Court.
(ix) Note No. 38 regarding MAT Credit Entitlement aggregating Rs. 35800000 as onMarch 31 2016 which is based on the judgment of management.
(x) Note No. 39 regarding the Companys investments aggregating Rs. 2311887120and loans and advances aggregating Rs. 3857937831 as on March 31 2016 in/to certainsubsidiaries associates and jointly controlled entities which have incurred losses andhave negative net worth. As explained to us these entities are in early stages of realestate development and the investments/ loans and advances are considered good andrecoverable based on managements assessment of the projects under execution.
(xi) Note No. 40 regarding certain allegations made by the Enforcement Directorateagainst the Company and one of its Key Managerial Persons in a matter relating toPrevention of Money Laundering Act 2002. This matter is sub-judice and the impact ifany of the outcome is unascertainable at this stage.
(xii) Note No. 43 regarding attachment order issued by adjudicating authority underPrevention of Money Laundering Act 2002 by which the Companys assets amounting toRs. 521621696 have been attached on August 30 2011. Consequently the adjudicatingauthority has taken over the bank balance of Rs. 6892967 and Investment in RedeemableOptionally Convertible Cumulative Preference Shares Series A of an entity of Rs.504002400 in earlier years. This matter is sub-judice and the impact if any of itsoutcome is currently unascertainable.
(xiii) Note No. 49 regarding the manner of recognition of the Companys share inAssociation of Persons.
(xiv) Note No. 56 regarding the status of various ongoing projects recognition ofexpense and income and the realizable value of the costs incurred are as per the judgmentof management of the entity and certified by their technical personnel and being oftechnical nature have been relied upon by us.
Our opinion is not modified in respect of these matters.
Note no. 23 & 31 regarding share of loss (net) from investment in three partnershipfirms seven Limited Liability Partnership ("LLPs") (out of these the Companyhas ceased to be a partner in six LLPs from July 1 2015) and one joint ventureaggregating Rs. 203209157 included in the financial statements is based on the auditedfinancial statements of such entities. These financial statements have been reviewed bythe auditors of these entities whose reports have been furnished to us by the managementand our audit report on the financial statement is based solely on such audit reports ofthe other auditors.
Our opinion is not modified in respect of this matter.
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 "Annexure 1" a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
(2) As required by Section 143(3) of the Act except for the matter described in theBasis for Qualified Opinion paragraph above we report as under to the extent applicablethat:
a. We have sought and obtained all the information and explanations which to the bestof 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 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 Statementdealt with by this Report are in agreement with the books of account;
d. In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014;
e. The matter described in sub-paragraph (v) (xi) & (xii) under the Emphasis ofMatter paragraph above in our opinion may have an adverse effect on the functioning ofthe Company;
f. 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 Section 164 (2) of theAct;
g. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls we give ourseparate Report in "Annexure 2".
i. 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 our opinionand 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 financialposition in its standalone financial statements Refer Note No. 30 on ContingentLiabilities and Note No. 32 to 36 Note No. 40 and Note No. 43 on litigations to thestandalone financial statements;
(ii) The Company did not have any long term contracts including derivative contractsfor which there could be any material foreseeable losses;
(iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
For Haribhakti & Co. LLP
ICAI Firm Registration No.103523W
Membership No. 017000
Mumbai: May 27 2016
ANNEXURE 1 TO THE INDEPENDENT AUDITORS REPORT
Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements in the Independent Auditors Report of even date to the members ofD B Realty Limited on the standalone financial statements for the year ended March31 2016.
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details of fixed assets. In case of identification and situation of fixedassets the Company is in the process of tagging individual assets based on their specificlocation.
(b) During the year fixed assets have been physically verified by the management asper the regular programme of verification which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets. As informed no materialdiscrepancies were noticed on such verification.
(c) The title deeds of immovable properties recorded as fixed assets in the books ofaccount of the Company are held in the name of the Company except for the details givenbelow:
|Particulars ||Total Number of cases ||Leasehold/ Freehold ||Gross Block as on March 31 2016 (Rs.) ||Net Block as on March 31 2016 (Rs.) ||Remarks |
|Sales Office Pune ||1 ||Freehold ||31812134 ||6879851 ||Company has acquired Development Rights on the said property. |
(ii) The Inventories comprising of expenditure incurred on acquisition of lands &tenancy rights development rights material at site Transferrable Development Rights andother expenditure on construction and development thereof have been physically verified bythe management during the year. In our opinion the frequency of verification isreasonable. As informed no material discrepancies were noticed on physical verificationcarried out during the year.
(iii) The Company has granted loans secured or unsecured to companies firms LimitedLiability Partnerships or other parties covered in the register maintained under Section189 of the Act.
(a) According to the information and explanations given to us and based on the auditprocedures conducted by us we are of the opinion that the terms and conditions of theinterest free unsecured loans granted by the Company to two parties covered in theregister maintained under Section 189 of the Act (Total loan amount granted and balanceoutstanding as on March 31 2016 is Rs. 577561594) are prejudicial to the Companysinterest on account of the fact that the loans have been granted interest free.
(b) The schedule of repayment of principal and payment of interest in respect of suchloans has not been stipulated. These loans are repayable on demand and principal andinterest thereon have been received whenever demanded by the Company. Thus we are unableto comment on whether the repayments or receipts are regular and report amounts overduefor more than ninety days if any as required under paragraph 3(iii)(c) of the Order.
(iv) Based on information and explanation given to us in respect of loans investmentsguarantees and securities the Company has complied with the provisions of Section 185 ofthe Act. Further the provisions of Section 186 of the Act are not applicable to theCompany as it is engaged in the business of Real estate development.
(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public within the provisions of Sections 73to 76 of the Act and the rules framed there under.
(vi) We have broadly reviewed the books of account maintained by the Company in respectof products where the maintenance of cost records has been specified by the CentralGovernment under sub-section (1) of Section 148 of the Act and the rules framed thereunder and we are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained.
(vii) (a) The Company is not regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund employees state insuranceincome tax service tax value added tax cess and any other material statutory duesapplicable to it and there have been serious delays in a few cases. As explained to usthe provisions regarding sales tax customs duty and excise duty are presently notapplicable to the Company.
According to the information and explanations given to us undisputed dues in respectof provident fund employees state insurance income tax service tax value addedtax cess and any other material statutory dues applicable to it which were outstandingat the year end for a period of more than six months from the date they became payable areas follows:
|Name of the statute ||Nature of the dues ||Amount (Rs.) ||Period to which the amount relates ||Due Date ||Date of Payment |
|Finance Act 1994 ||Service Tax Liability and interest thereon ||455163 ||April 2010 to March 2012 ||Various Dates ||Not paid |
|Wealth Tax Act 1957 ||Wealth Tax ||937610 ||April 2013 to March 2015 ||Various Dates ||Not paid |
|Mumbai Municipal Corporation Act 1888 ||Property Tax ||77171528 ||April 2010 to September 2015 ||Various Dates ||Not paid |
(b) According to the information and explanation given to us the dues outstanding withrespect to income tax service tax and value added tax on account of any dispute are asfollows:
|Name of the statute ||Nature of dues ||Amount (Rs.) ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income Tax ||27548990 ||A.Y. 2012-13 ||ITAT Mumbai |
|Income Tax Act 1961 ||Income Tax ||21752440 ||A.Y. 2013-14 ||CIT (Appeals) |
(viii) According to the information and explanations given to us the Company has notdefaulted in repayment of loans or borrowings to financial institutions banksgovernments or dues to debenture holders except for details given below:
|Sr No ||Particulars ||Amount of Default as at March 31 2016 (Rs.) ||Period of Default |
|1 ||Reliance Capital Limited || || |
| ||Interest ||10504688 ||Since January 2016 |
| ||Interest ||10504681 ||Since February 2016 |
|2 ||STCI Finance Limited || || |
| ||Principal ||61165488 ||From February 29 2016 to March 31 2016 |
| ||Interest ||8102543 || |
|3 ||LIC Housing Finance Limited || || |
| ||Principal ||306303767 ||Since January 2016 |
| ||Interest ||3823726 ||Since January 2016 |
| ||Interest ||3817382 ||Since February 2016 |
| ||Interest ||4003926 ||Since March 2016 |
|4 ||ICICI Bank Limited || || |
| ||Interest ||3315025 ||Since February 29 2016 |
| ||Interest ||3572796 ||Since March 31 2016 |
|5 ||IL&FS Financial Services Ltd || || |
| ||Interest ||148441 ||Since December 2015 |
|6 ||Indiabulls Housing Finance Ltd. || || |
| ||Principal ||8649907 ||Since March 2016 |
| ||Interest ||2095969 ||Since March 2016 |
(ix) The Company has not raised money by way of initial public offer / further publicoffer (including debt instruments) during the year. However the Company has obtained termloans and in our opinion and according to the information and explanations given to usutilized the same for the purposes for which they were raised.
(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of fraud by the Company or any fraud on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such instance by themanagement. However we are informed that during the financial year 2010-11 the CBI inits charge sheet filed in connection with irregularities in the allotment of 2G telecomlicense has accused certain Directors of the Company (in their capacity as promoters of atelecom licensee Company). Two other Management Personnel of the Company have also beencharge sheeted in their capacity as Directors of another Company (Refer Note 43) which isalleged to have paid an amount of Rs. 2000000000 as illegal gratification in the sameconnection. As explained to us the Company is not directly a party to the allegations andthe matter is sub-judice in the Court of Special Judge (CBI) New Delhi. Also the Companyis in receipt of Summons from Special Court for Prevention of Money Laundering Act (PMLA)Mumbai as one of the accused in connection with a complaint filed by EnforcementDirectorate under ECIR No. ECIR/MBZO/07/2015 & ECIR/MBZO/08/2015. The HonbleCourt has also now summoned one of the KMP's of the Company as one of the accused as perthe said complaint. The matter in relation to the Company and the KMP involves certainadvances given by the Company in the ordinary course of its business to another companywhich were subsequently refunded fully upon cancellation of the understanding (Refer Note40).
(xi) According to the information and explanations given to us the Company has notpaid/provided for managerial remuneration. Accordingly paragraph 3(xi) of the Order isnot applicable to the Company.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Therefore paragraph 3(xii) of the Order is not applicableto the Company.
(xiii) According to the information and explanation given to us all transactionsentered into by the Company with the related parties are in compliance with Sections 177and 188 of the Act where applicable and the details have been disclosed in the FinancialStatements etc. as required by the applicable accounting standards.
(xiv) The Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under review. Thereforeparagraph 3(xiv) of the Order is not applicable to the Company.
(xv) According to the information and explanations given to us the Company has enteredinto non-cash transactions with two persons connected with the director during the yearby issue of 5740 8% Redeemable Preference Shares of Rs. 10 each as a part of purchaseconsideration for amalgamation of Gokuldham Real Estate Development Co. Pvt Ltd. which inour opinion is covered under the provisions of Section 192 of the Act and has compliedwith the provisions of Section 192 of the Act and for which approval has been obtained ina general meeting of the Company
(xvi) According to the information and explanation given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.
For Haribhakti & Co. LLP
ICAI Firm Registration No.103523W
Membership No. 017000
Mumbai: May 27 2016
ANNEXURE 2 TO THE INDEPENDENT AUDITORS REPORT
Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements in the Independent Auditors Report of even date to the members ofD B Realty Limited on the standalone financial statements for the year ended March31 2016. We have audited the internal financial controls over financial reporting of DB Realty Limited ("the Company") as of March 31 2016 in conjunction withour audit of the standalone financial statements of the Company for the year ended on thatdate.
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 Company's 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 specified under section143(10) of the Act to the extent applicable to an audit of internal financial controlsboth issued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate 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 included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditors judgement including the assessment of the risks of materialmisstatement 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 March 31 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 ICAI.
For Haribhakti & Co. LLP
ICAI Firm Registration No.103523W
Membership No. 017000
Mumbai: May 27 2016