To the Members of D B Realty Limited
Report on the Standalone Ind AS Financial Statements
We have audited the accompanying Standalone Ind AS Financial Statements of D B RealtyLimited ("the Company") which comprise the Balance Sheet as at March 31 2017the Statement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofsignificant accounting policies and other explanatory information (hereinafter referred toas "Ind AS Financial Statements").
Management's Responsibility for the Standalone Ind AS Financial Statements
The Company's 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 Ind AS Financial Statements that give a true and fair view of thefinancial position (state of affairs) profit or loss (financial performance includingother comprehensive income) cash flows equity of the Company in accordance with theaccounting principles generally accepted in India including the Indian Accounting
Standards specified under Section 133 of the Act read with relevant Rules framed thereunder. This responsibility also includes maintenance of adequate accounting records inaccordance 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 Ind AS financial fair view and are free from material misstatementwhether due to fraud or error.
Our responsibility is to express an opinion on these Standalone Ind AS FinancialStatements based 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 there under.
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 Ind AS Financial Statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the Standalone Ind AS Financial Statements. The procedures selected dependon the auditors' judgment including the assessment of the risks of material misstatementof the Standalone Ind AS Financial Statements whether due to fraud or error. In makingthose risk assessments the auditor considers internal financial control relevant to theCompany's preparation of the Standalone Ind AS 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 Company's Directors as well asevaluating the overall presentation of the Standalone Ind AS Financial Statements.
We believe that the audit evidence we have obtained is sufficientandappropriatetoprovide qualifiedaudit opinion basisforour on the Standalone Ind ASFinancial Statements.
Basis for Qualified Opinion a. As stated in Note 62 regarding non recognition/re-measurement of financial guarantees aggregatingRs. 43238126800/- issued to banks/financial institutions on behalf of various entities at fair value as required under IndAS 109 Financial Instruments. In absence of measurement of financial guarantees at fairvalue we are unable to comment on the effects on the loss for the reported periods. b. Asstated in Note 54 the Company has not evaluated whether any impairment provision isrequired for expected credit losses in accordance with Ind AS 109 FinancialInstruments' for loans and advances amounting to Rs. 6252598617/- as on March31 2017to certain subsidiaries and an associate which have incurred losses and have negative networth.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matters described in the Basis forQualified Opinion paragraph the aforesaid Standalone Ind AS 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 including the IndAS of the state of affairs (financial position) of the Company as at 31st March 2017its loss (financial performance including other comprehensive income) its cash flows andchanges in equity for the year ended on that date.
Emphasis of Matter
We draw attention to the following matter in the notes to the Standalone Ind ASFinancial Statements: a. Note 53(b) regarding no adjustment having been made in the valueof inventory pending outcome of the matter referred by the Company to the Supreme Court.b. Note 7.2 regarding return on investments of Rs. 5613858167/- in preference shares ina subsidiary company as on March 31 2017 as explained by the Management such investmentsare considered strategic and long term in nature and the current market value and futureprospects of such investments are significantly in excess of Company's investment in theinvestee company. c. Note 9.2 regarding security deposits aggregating Rs. 1138170442/-as on March 31 2017 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. d. Note 13(i) regarding status of inventoryconsisting of projects having aggregate value of Rs. 2861992735/- as on March 31 2017and the opinion framed by the Management about realizable value of the cost incurredbeing a technical matter has been relied upon by us. e. Notes 49 50 51 52 and 53(a)regarding loans and advances aggregating Rs. 577205925/- (including amountinventorisedRs. 36100000) granted by the Company and the investments aggregating Rs.384078720/- as on March 31 2017 which are under litigation and are sub-judice. Based onManagement's assessment of the outcome no adjustments are considered necessary in respectof recoverability of these balances. The impact if any of the outcome is unascertainableat present. f. Note 54 regarding Company's investments aggregating Rs. 2585050052/- ason March 31 2017 in certain subsidiaries associates and jointly controlled entitieswhich have incurred losses and have negative net worth. As explained to us these entitiesare in early stages of real estate development and the investments are considered good andrecoverable based on Management's assessment of the projects under execution. g. Note 55as regards certain allegations made by the Enforcement Directorate against the Company andone of its Key Managerial Persons in a matter relating to Prevention of Money LaunderingAct 2002 this matter is sub-judice and the impact if any of the outcome isunascertainable at this stage. h. Note 63 as regards the status of various ongoingprojects recognition of expense and income and the realizable value of the costs incurredare as per the judgment of Management of the Company and certified by their technicalpersonnel and being of technical nature have been relied upon by us. i. Note 57 asregards attachment order issued by adjudicating authority under Prevention of MoneyLaundering Act 2002 by which the Company's assets amounting to Rs. 753220671/- havebeen attached on August 30 2011. Consequently the adjudicating authority has taken overthe bank balance of Rs. 6892967/- and Investment in Redeemable Optionally ConvertibleCumulative Preference Shares Series A & Series C of an entity of Rs. 736705009/- inearlier years. This matter is sub-judice and the impact if any of its outcome iscurrently unascertainable. j. Note 58 regarding the manner of recognition of the Company'sshare in Association of Persons (AOPs') such share of loss as the case may be arebeing recognized only when the AOP debits/credits the Company's account in its books. k.Note 48(A)(iii)(1) & (2) as regards the Audited Financial Statements of a Firm wherethe Company is one of the partners has following disclosures: i. Allegations made by theCentral Bureau of Investigation (CBI) relating to the 2G spectrum case and regardingattachment order issued by adjudicating authority under Prevention of Money LaunderingAct 2002. ii. As regards recoverability of trade receivables of Rs. 366404105/- thepartners of the Firm had taken effective steps for recovery and are not expecting anyshort realisation. In the event of shortfall in realisation the same shall increase thedebit balance of the Partners.
These matters are sub-judice and the impact if any of its outcome is currentlyunascertainable. l. Note 48(B)(ii) as regards order passed by Appellate Committee ofMinistry of Civil Aviation in one of the Partnership Firm where the Company is a partnerfor demolition of thefloorsbeyondthepermissibleheight.Thefirmis in appeal before theHonourable Delhi High Court against the said order. In the opinion of the Management thefirm is hopeful for favourable outcome and hence it does not expect any financial outflowin this matter.
Our opinion is not modified in respect of these matters.
Notes 48 regarding share of loss (net) from investment in three partnership firms oneLimited Liability Partnerships and one joint venture aggregating Rs. 29424159/-included in the statement is based on the financial statements of such entities. Thesefinan -cial Statements have been audited by the auditors of these entities whose reportshave been furnished to us by the management and our audit report on the Statement is basedsolely on such audit reports of the 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 ("the Order")issued by the Central Government of India in terms of sub-section (11) of Section 143 ofthe Act we give in "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
(2) As required by Section 143(3) of the Act we report as under to the extentapplicable: a. We have sought and obtained all the information and explanations which tothe best of our knowledge and belief were necessary for the purposes of our audit exceptfor matters described in the Basis for Qualification and matter stated in sub paragraphsh(iv) below; b. Except for possible effects of the matter described in the Basis forQualified Opinion paragraph above in our opinion proper books of account as required bylaw have been kept by the Company so far as it appears from our examination of thosebooks; c. The Balance Sheet the Statement of Profit and Loss Cash Flow Statement and theStatement of Changes in Equity dealt with by this Report are in agreement with the booksof account; d. Except for possible effects of the matter described in the Basis forQualifiedOpinion paragraph above in our opinion the aforesaid Standalone Ind ASFinancial Statements comply with the Indian Accounting Standards specified under Section133 of the Act read with relevant Rules framed there under; e. The matters described underthe Basis of Qualification and under the Emphasis of Matter above in our opinion mayhave an adverse effect on the functioning of the Company; f. On the basis of writtenrepresentations received from the directors as on March 31 2017 and taken on record bythe Board of Directors none of the directors is disqualified as on March 31 2017 frombeing appointed as a director in terms of Section 164 (2) of the Act; g. With respect tothe adequacy of the internal financial controls over financial reporting of the Companyand the operating effectiveness of such controls we give our separate Report in"Annexure 2"; h. With respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules2014 in our opinion and to the best of our information and according to the explanationsgiven to us:
(i) The Company has disclosed the impact of pending litigations on its financialposition in its Standalone Ind AS Financial Statements Refer Note 47 on ContingentLiabilities and Notes 49 to 53 55 and 57 on litigations to the Standalone Ind ASFinancial Statements;
(ii) The Company did not have any long-term contracts including derivative contracts.Hence the question of any material foreseeable losses does not arise; (iii) There hasbeen no delays in transferring amounts required to be transferred to the InvestorEducation and Protection Fund by the Company; (iv) The Company has provided requisitedisclosures in its Standalone Ind AS Financial Statements as to holdings as well asdealings in Specified Bank Notes during the period from 8th November 2016 to 30thDecember 2016. However we are unable to obtain sufficient and appropriate audit evidenceto report on whether the disclosures are in accordance with books of account maintained bythe Company and as produced to us by the Management. (Refer Note 41 to the Standalone IndAS Financial Statements)
For Haribhakti & Co. LLP
ICAI Firm Registration No.103523W /W100048
Snehal Shah Partner
Membership No. 48539
Mumbai: June 9 2017
ANNEXURE 1 TO THE INDEPENDENT AUDITOR'S REPORT
[Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements' in the Independent Auditor's Report of even date to the members of D BRealty Limited ("the Company") on the Standalone Ind AS Financial Statements forthe year ended March 31 2017.]
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets. In case of identification andsituation of fixed assets the Company is in the process of tagging individual assetsbased on their specific location. (b) During the year fixedassets have been physicallyverified by the Management as per the regular programme of verification which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. As informed no material discrepancies 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 2017 ||Net Block as on March 31 2017 ||Remarks || |
|Sales Office Pune ||1 ||Freehold ||31812134 ||1590607 ||Company Development Rights the said property. ||has acquired on |
(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 tocompanies firms Limited Liability Partnerships and Joint Ventures covered in theregister maintained under Section 189 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 ofaforesaid loans granted by the Company to five parties covered in the register maintainedunder Section 189 of the Act (Total loan amount granted of Rs. 1671974903/- andbalance outstanding as on
March 31 2017 is Rs. 358650635/-) are prejudicial to the Company's interest onaccount 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 whether the repayments or receipts are regular and report on 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 opinionand according to the information and explanations given to us the Company has notaccepted any deposits from the public within the provisions of Sections 73 to 76 of theAct 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) The Company is not regular in depositing with appropriateauthorities undisputed statutory dues including provident fund employees' stateinsurance income tax service tax value added tax cess and other material statutorydues applicable to it and there have been serious delays in a few cases. As explained tous the provisions regarding sales tax customs duty and excise duty are presently notapplicable to the Company.
(a) According to the information and explanations given to us undisputed dues inrespect of provident fund employees' state insurance income tax service tax valueadded tax cess and any other material statutory dues applicable to it which wereoutstanding at the year end for a period of more than six months from the date theybecame payable are as follows:
|Name of the statute ||Nature of the dues ||Amount ||Period to which the amount relates ||Due Date ||Date of Payment |
| || ||Rs. || || || |
|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 ||56567197 ||April 2010 to September 2016 ||Various Dates ||Not paid |
|The Maharashtra Value Added Tax Act 2002 ||Value Added Tax ||1006642 ||March 2016 ||21st April 2016 ||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 ||Commission of Income Tax (Appeals) |
|Income Tax Act 1961 ||Income Tax ||17055160 ||A.Y. 2014-15 ||Commission of Income Tax (Appeals) |
(viii) According to the information and explanations given to us the Company has notdefaulted in repayment of loans or borrowings to financial institutions and banks exceptfor details given below:
|Sr No ||Particulars ||Amount of Default as at 31st March 2017 (Rs.) ||Period of Default |
|1 ||Reliance Capital Limited || || |
| ||Interest ||134745484 ||Since January 2017 |
|2 ||LIC Housing Finance Limited || || |
| ||Principal ||306303767 ||Since January 2016 |
| ||Interest ||64177300 ||Since January 2016 |
|3 ||ICICI Bank Limited || || |
| ||Principal ||22327330 ||Since January 2017 |
| ||Interest ||2633975 ||Since January 2017 |
| ||Interest ||2411176 ||Since February 2017 |
| ||Interest ||2701770 ||Since March 2017 |
|4 ||Indiabulls Housing Finance Ltd. || || |
| ||Interest ||3228012 ||Since March 2017 |
(ix) In our opinion and according to the information and explanation given to us theCompany has not raised money by way of initial public issue offer/further public offer(including debt instruments) during the year. However the Company has obtained term loansand utilized the same for the purposes for which they were raised. (x) During the courseof our examination of the books and records of the Company carried out in accordance withthe generally accepted auditing practices in India and according to the information andexplanations given to us we have neither come across any instance of fraud by the Companyor any fraud on the Company by its officers or employees noticed or reported during theyear nor have we been informed of any such instance by the management. However we areinformed that during the financial year 2010-11 the CBI in its charge sheet filed inconnection with irregularities in the allotment of 2G telecom license has accused certainDirectors of the Company (in their capacity as promoters of a telecom licensee Company).Two other Management Personnel of the Company have also been charge sheeted in theircapacity as Directors of another Company (Refer Note 57) which is alleged to have paid anamount of Rs. 2000000000 as illegal gratification in the same connection. As explainedto us the Company is not directly a party to the allegations and the matter is sub-judicein the Court of Special Judge (CBI) New Delhi. Also the Company is in receipt of Summonsfrom Special Court for Prevention of Money
Laundering Act (PMLA) Mumbai as one of the accused in connection with a complaintfiled by Enforcement Directorate under ECIR No. ECIR/MBZO/07/2015 & ECIR/MBZO/08/2015.The Hon'ble Court has also now summoned one of the KMP's of the Company as one of theaccused as per the said complaint. The matter in relation to the Company and the KMPinvolves certain advances given by the Company in the ordinary course of its business toanother company which was subsequently refunded fully upon cancellation of theunderstanding (Refer Note 55).
(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 is not 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 notentered into any non-cash transactions with directors or persons connected with him duringthe year. (xvi) According to the information and explanation given to us the Company isnot required to be registered under Section 45-IA of the Reserve Bank of India Act 1934.
For Haribhakti & Co. LLP
ICAI Firm Registration No. 103523W/W100048
Snehal Shah Partner
Membership No. 48539
Mumbai: June 9 2017
ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT
[Referred to in paragraph 2(g) under Report on Other Legal and RegulatoryRequirements' in the Independent Auditor's Report of even date to the members of D BRealty Limited on the standalone IndAS financial statements for the year ended March31 2017]
Report on the Internal Financial Controls over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting ofD BRealty Limited ("the Company") as of March 31 2017 in conjunction with ouraudit of the standalone IndAS financial statements of the Company for the year ended onthat date.
Management's Responsibility for Internal Financial Controls
The Company's Management is responsible for establishing and maintaining internalfinancialcontrols 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 Reporting issued by theInstitute of Chartered Accountants of India ("ICAI").
These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under theAct.
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 financialcontrols over exists and testing and evaluating thedesign and operating effectiveness financial of internal control based on the assessedrisk. The procedures selected depend on the auditor's judgement including the assessmentof the risks of material misstatement of the financial statements whether due to fraud orerror.
We believe that the audit evidence we have obtained is sufficientand appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover 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 financial overfinancial reporting may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects anadequateinternalfinancialcontrols system over financial reporting and such internalfinancial controlsoverfinancialreporting were operating effectively as at March 31 2017based on the internal control over criteria established by the Company considering theessential components of internal control stated in the Guidance financial Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the ICAI.
For Haribhakti & Co. LLP
ICAI Firm Registration No.103523W/W100048
Membership No. 48539
Mumbai : June 09 2017