TO THE MEMBERS OF UNITECH LIMITED
REPORT ON THE STANDALONE FINANCIAL STATEMENTS
We have audited the accompanying standalone financial statements of UNITECH LIMITED("the Company") which comprise the Balance Sheet as at 31st March 2016 theStatement of Profit and Loss and the Cash Flow Statement for the year then ended and asummary of the significant accounting policies and other explanatory information for theyear then ended in which are incorporated the Returns for the year ended on that dateaudited by the branch auditor of the Company's branch at Libya.
MANAGEMENT'S 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 preparationand presentation of these standalone financial statements that give a true and fair viewof the financial position financial performance and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theAccounting Standards prescribed under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material 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 accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made thereunder and the order under section143(11) of the Act. We conducted our audit of the standalone financial statements inaccordance with the Standards on Auditing specified under Section 143(10) of the Act.Those Standards require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free frommaterial misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditors judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the Company's preparation ofthe financial statements that give a true and fair view in order to design auditprocedures that are appropriate in the circumstances. An audit also includes evaluatingthe appropriateness of the accounting policies used and the reasonableness of theaccounting estimates made by the Company's Directors as well as evaluating the overallpresentation of the 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
1. Reference is invited to Note 17 to the standalone financial statementsaccording to which an amount of Rs. 11343059293 as at 31 March 2016 (previousyear Rs. 11498650604) is outstanding on account of trade receivables from saleof land properties trading goods finished goods commercial plots/ properties ofvarious kinds. Significant balances amounting to Rs. 2257811164 are outstandingfor very long periods of time viz. upto five years. The management has explained that suchlong overdue outstanding's have arisen in the normal course of business from transactionswith customers in contravention of the contractual terms. Management had undertaken aprocess to obtain balance confirmation in respect of significant portion of theoutstanding amounts as at 31st March 2016. Further management has also undertaken adetailed exercise to evaluate the reasons of such long outstanding's as well aspossibility of recoveries. The management based on internal assessments and evaluationspossible recoveries from securities (registered or unregistered) have represented thatsignificant portion of such trade receivables balance outstanding are still recoverable /adjustable and that no accrual for diminution in value of trade receivables is thereforenecessary as at 31st March 2016. They are confident of appropriately adjusting /recovering significant portions of the remaining outstanding balance of such amounts inthe foreseeable future.
However we are unable to ascertain whether such long overdue outstanding tradereceivables are fully recoverable / adjustable since the outstanding balances as atbalance sheet date are outstanding / have remained unadjusted for a reasonably long periodof time. Based on our assessment from audit procedures performed as well as cumulativeaudit knowledge in respect of the Company and past experience in our opinion tradereceivables amounting to Rs. 2257811164 are doubtful of recovery andconsequently management ought to provide / accrue for the diminution for these balancesor write off bad receivables as the case may be. Had the management provided / accrued forthe diminution in value of the said trade receivables the carrying value of the tradereceivables as well as the net worth of the Company would have been lower by Rs. 2257811164.Further the loss for the year ended 31st March 2016 would have been higher by Rs. 2257811164and the reserves and surplus would have been lower by Rs. 2257811164.
2. Reference is invited to note 46 to the standalone financial statements withrespect to deposits from public. The Company has failed to repay deposits accepted by itincluding interest thereon in respect of the following deposits:
|S.No ||Particulars ||Amount outstanding as of 31st March 2015 ||Amount paid till 31st March 2016 ||Unpaid matured deposits as on 31st March 2016 |
| || ||(Rs.) ||(Rs.) ||(Rs.) |
|A) ||Deposits that have matured on or before 31 March 2015 ||1715215000 ||181920000 ||1533295000 |
|B) ||Deposits that were due to mature on or after 1 April 2015 ||4071071000 ||55021000 ||4016050000 |
Pursuant to sub section (2) of Section 74 of the Act the Company had made anapplication to the Hon'ble Company Law Board (CLB or the Board) seeking extension of timefor repayment of the outstanding public deposits (including interest thereon) as isconsidered reasonable by CLB. The Company has also identified and earmarked 6 (six)unencumbered land parcels owned by it and/or its subsidiaries for sale and utilization ofthe sale proceeds for repayment of the aforesaid outstanding deposits.
The Hon'ble CLB vide various orders have directed the Company to make certain paymentsas enumerated in para (v) of CARO below. The Hon'ble CLB vide its order dated 11 March2016 has directed the company to deposit certain sums of money by 30 June 2016 and certainsums of towards Hardship cases in coming six months. It was also clarified that the saleproceeds of any properties already mentioned/proposed by the Company shall not be utilizedfor procuring the above mentioned sums so directed to pay. The next date of hearing hasbeen scheduled for 4 July 2016 and the said order has stated that in case of any defaultin making repayment as per undertakings given on scheduled dates the petition undersection 74(2) shall stand dismissed.
As explained and represented by management the Company along with 3-members SaleCommittee constituted by the Hon'ble CLB is making best possible efforts for sale of theland parcels earmarked for repayment of the deposits but such sale process is taking timedue to global economic recession and liquidity crisis particularly in the real estatesector of India. However regardless of these adverse circumstances and difficulties themanagement has represented that they are committed to comply with the orders passed by theHon'ble CLB and to repay all the public deposits along with interest thereon withinpermissible extended time period.
Considering that the management has not fully complied with the interim directionsgiven by the Hon'ble CLB within prescribed time-period to repay certain amounts asreferred above we are unable to evaluate the probable next course of action by theHon'ble CLB in this regard on the next hearing date or thereafter if applicable and thelikelihood of penalties/ strictures or further liabilities if any on the Company.Further considering the uncertainties involved in the sale of properties as mentionedabove we are not in a position to perform any assessment of the unencumbered propertiesthat the Company has earmarked for repayment of the outstanding deposits with respect tothe status of these properties and their related disclosure in the standalone financialstatements. Accordingly impact if any of the above on the stand alone financials iscurrently not ascertainable.
3. Reference is invited to Note 48 to the standalone financial statements.According to information available and explanations obtained in respect of non-currentinvestments (long term investments) in and loans and advances given to somesubsidiaries it has been observed from the perusal of financial statements of thesesubsidiaries that the subsidiaries have accumulated losses and their net worth have beenfully / substantially eroded. Further that these subsidiaries have incurred net lossduring the current and previous year(s) and current liabilities of these subsidiariesexceeded their current assets as at the respective balance sheet dates. These conditionsalong with absence of clear indications or plans for revival in our opinion indicatethat there is significant uncertainty and doubt about the recovery of the loans andadvances from these subsidiaries. Further that there is a clear indication that there isa decline in the carrying amount of these investments which is other than temporary.
Consequently in terms of stated accounting policies and applicable accountingstandards diminution in the value of investment which is other than temporary amountingto Rs. 4402510584 (previous year
Rs. 1002590750) and an accrual for diminution of doubtful debts and advancesamounting to Rs. 6904591276 (previous year Rs. 21279415) need beaccounted for in the standalone financial statements for the year ended 31st March 2016.Management is however of the firm view that the diminution is only temporary and thatsufficient efforts are being undertaken to revive the said subsidiaries. However in theabsence of significant movement in the operations of the investee companies and anyadjustment for diminution of expenses in this regard in our opinion management has notadequately accounted for the imminent diminution. Consequently the loss for the yearended 31st March 2016 is understated and reserves as at 31st March 2016 are overstated tothe extent of Rs. 11307101860 (previous year Rs. 1023870165). Thismatter was also qualified in our report on the standalone financial statements for theyear ended 31st March 2015.
4. Reference is invited to Note 49 to the standalone financial statementsaccording to which an amount of Rs. 6945264168 (previous year Rs. 7242711244)is outstanding which is comprised of advances towards purchase of land projects pendingcommencement advances paid to joint ventures entities and collaborators. The managementhas explained that such advances have been given in the normal course of business to landowning companies collaborators projects and for purchase of land. As per informationmade available to us and explanation given Rs. 297447076 (previous year Rs. 476179157)have been recovered / adjusted during the current financial year. Further during thefirst quarter of the current financial year the Company had entered into MOU with oneparty with respect to outstanding advances of Rs. 2160000000 which wasscheduled to be recovered at periodic rests by approximately June 2016. However only Rs.50000000 has been received out of the above scheduled amounts proposed. The managementbased on internal assessments and evaluations have represented that the balanceoutstanding advances are still recoverable/ adjustable and that no accrual for diminutionof advances is necessary as at balance sheet date. The management has further representedthat as significant amounts have been recovered / adjusted during the previous and currentfinancial year and since constructive and sincere efforts are being put in for recovery ofthe said advances they are confident of appropriately adjusting / recovering significantportions of the remaining outstanding balance of such amounts in the foreseeable future.However we are unable to ascertain whether all the remaining outstanding advances asabove are fully recoverable / adjustable since the outstanding balances as at balancesheet date are outstanding / remained unadjusted for a long period of time and furtherthat neither the amount recovered nor rate of recovery of such long outstanding amountsin the current year despite confirmations from some parties clearly indicate in ouropinion that all of the remaining outstanding amounts may be fully recoverableconsequently we are unable to ascertain whether all of the remaining balances as atbalance sheet date are fully recoverable. Accordingly we are unable to ascertain theimpact if any that may arise in case any of these remaining advances are subsequentlydetermined to be doubtful of recovery. This matter was also qualified in our report on thestandalone financial statements for the year ended 31st March 2015.
5. Reference is invited to Note 50 to the standalone financial statements. TheCompany has received a cancellation of lease deed notice from Greater NoidaIndustrial Development Authority (or GNIDA) dated 18 November 2015. As per the NoticeGNIDA has cancelled the lease deed in respect of Residential/ Group Housing plots asmentioned in the aforementioned note on account of non-implementation of the project andnon-payment of various dues amounting to Rs. 10548326223. As per the notice andas per the relevant clause of the bye laws/ contractual arrangement with the Company 25%of the total dues amounting to Rs. 1389342488 has been forfeited of the totalamount paid till date. As mentioned in the note the Company has incurred totalexpenditure of Rs. 21389370703 comprising the amounts paid under the contract /by laws of Rs. 3422189575 the balance portions of the total amounts payablecontractual interest accrued till balance sheet date of Rs. 9909190197 and otherconstruction costs amounting toRs. 8057990931. The Company is also carrying acorresponding liability of Rs. 9909190197 representing the total amounts payableto GNIDA including interest accrued and due of Rs. 6669204822. The said land isalso mortgaged and the Company has registered such mortgage to a third party on behalf oflender for the Non- Convertible Debenture (NCD) facility extended to the Company and dueto default in repayment of these NCDs the debenture holders have served a notice to theCompany under section 13(4) of the SARFEASI Act and have also taken notional possession ofthis land. Further the Company has contractually entered into agreements to sell with 397buyers and has also received advances from such buyers amounting to Rs. 929268373.No contract revenue has been recognized on this project.
Management has written a letter to GNIDA dated 1 December 2015 wherein management hasstated that the cancellation of the lease deed is wrong unjust and arbitrary. Furthermanagement has also described steps taken for implementation of the project validbusiness reasons due to delays till date. Further Management had also proposed that inview of the fact that third party interests have been created by the Company in theallotted land by allotting plots to different allottees in the interest of suchallottees GNIDA may allow the Company to retain an area of approximately 25 acres out ofthe total allotted land of approximately 100 acres and that the amount paid by the Companytill date may be adjusted against the price of the land of 25 acres and remaining surplusamount may be adjusted towards dues of other projects of the Company under GNIDA. Asinformed and represented to us the discussions/ negotiations and the legal recourseprocess is currently underway and no solution/direction is ascertainable until the date ofthis report.
In view of the materiality of the transaction/circumstances and uncertainties thatexist we are unable to ascertain the overall impact of the eventual outcome of theaforementioned notice/ circumstance. Consequently we are unable to ascertain the impactif any inter alia on carrying value of the project under projects in progressand the statement of profit and loss in the standalone financial statements of theCompany.
6. Refer Note No. XII on Revenue recognition under Significant Accountingpolicies. The Company recognizes revenue in respect of its real estate projects onpercentage of completion method (POCM). POCM is measured on basis of percentage thatactual costs incurred on such projects including construction and development cost andland cost bears to the total estimated costs of the project. During the current year underreview it has been observed that management has significantly revised total cost tocomplete the various projects and consequently the total estimated costs on theseprojects leading to a corresponding significant reduction in POC owing to the basisexplained above. This has resulted in significant reversal of revenue already recognizedon a cumulative basis as required by the Guidance Note on accounting for real estatetransactions read with AS 7 Construction contracts.
Management has represented that the significant change in estimates of total contractcosts has arisen due to significant delay in projects as well as due to revision inestimates by management based on technical and commercial market considerations.
Considering the significance of the amounts involved resulting in significant downwardrevision of revenue recognized including reversal of revenue already recognized we areunable to verify the veracity of the basis of such change in respect of relevant projectsand have relied on management estimates in this regard. Accordingly we are unable toascertain the resulting impact if any on the carrying value of Projects in Progress(PIP) revenue recognized and loss for the year and consequent net worth and relateddisclosures of the Company.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the various matters described in theBasis for Qualified Opinion paragraph above the aforesaid standalonefinancial statements give the information required by the Act in the manner so requiredand give a true and fair view in conformity with the accounting principles generallyaccepted in India of the state of affairs of the Company as at 31st March 2016 and itsloss and its cash flows for the year ended on that date.
EMPHASIS OF MATTERS
1. Reference is invited to note 47(c) to the standalone financial statements whereinno adjustments have been considered necessary by management for non-recoverability ofinvestments in company's project aggregating to Rs. 278172452 (Previous year Rs.277257892) as the matters are sub-judice and the impact if any is not ascertainable atthis stage. Our opinion is not qualified in respect of this matter.
2. Reference is invited to Note 38(III)(e) to the stand alone financial statements ofthe Company. The Company had received an arbitral award dated 6th July 2012 passed by theLondon Court of International Arbitration (LCIA) wherein the arbitration tribunal hasdirected the Company to invest USD 298382949.34 (Previous year USD 298382949.34)equivalent to Rs. 19792606340 (Previous year Rs. 18702285205) in Kerrush InvestmentsLtd (Mauritius). The High Court of Justice Queen's Bench Division Commercial CourtLondon has confirmed the said award.
The Company believes that the said award is not enforceable in India on various groundsincluding but not limited to lack of jurisdiction by the LCIA appointed arbitral tribunalto pass the said award. Further the Company believes that nevertheless in case theCompany is required to make the aforesaid investment into Kerrush Investments Ltd(Mauritius) its economic interest in the underlying SRA project in Santacruz Mumbaishall stand increased proportionately thereby creating a substantial asset for the Companywith an immense development potential.
Based on the information obtained and audit procedures performed we are unable toassess the impact of the above whether the Company will be required to make the investmentin terms of the aforesaid award or not and if the said award is held to be enforceable inIndia then whether the underlying asset of in Santacruz Mumbai would be substantial tojustify the carrying value of these potential investments. Our opinion is not qualified inrespect of this matter.
We did not audit the financial statements/information of Libya branch included in thestandalone financial statements of the Company whose financial statements / informationreflect total assets of Rs. 397642887 (Previous year Rs. 379227721) as at 31st March2016 and total revenues of Rs. NIL (Previous year Rs.NIL) for the year ended on that dateas considered in the standalone financial statements and described above. The financialstatements/information of this branch has been audited by the branch auditor whose reportshave been furnished to us and our opinion in so far as it relates to the amounts anddisclosures included in respect of this branch is based solely on the report of suchbranch auditor.
Our opinion is not qualified in respect of this matter.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by Section 143 (3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the 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 and proper returnsadequate for the purposes of our audit have been received from the branch not visited byus.
(c) The reports on the accounts of the branch office of the Company audited underSection 143 (8) of the Act by branch auditor have been sent to us and have been properlydealt with by us in preparing this report.
(d) 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 and with the returnsreceived from the branch not visited by us.
(e) Except for the matters described in basis for qualified opinion paragraph abovein our opinion the aforesaid standalone financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014.
(f) The matters described in the basis for qualified opinion paragraph above in ouropinion may have an adverse effect on the functioning of the company.
(g) Reference is drawn to note 45 and 46 to the standalone financial statements withrespect to matured unpaid non-convertible debentures and unpaid matured public depositsoutstanding as at balance sheet date and our qualification in paragraph 2 above in respectof these matters and ensuing uncertainties.
The Company has failed to repay the deposits accepted by it including interest thereon.The Company Law board has acknowledged and noted the default in various orders passed byit till date in this regard. Further the Company has also failed to redeemNon-Convertible Debentures including interest thereon. The above mentioned failure to paydeposits or redeem debentures in our opinion has continued for one year or more.
Considering the fact that application of the Company under Section 74(2) of theCompanies Act 2013 (or Act) seeking extension of time for repayment of the deposits ispending before the Hon'ble Company Law Board and the debentures have been issued onprivate placement basis to lender and not to investors the board of the Company is of theview that the above delays in repayment/ redemption as the case maybe do not fall underthe purview of sub-section (2) of Section 164 of the Act. Accordingly in the opinion ofmanagement as also discussed and taken on record in the board meeting held to adopt thefinancial statements of the Company and further as represented by each of the Directorsnone of the Directors of the Company are disqualified as on 31 March 2016 in terms ofsub-section (2) of the Section 164 of the Act.
In view of the above mentioned circumstances and the legal interpretation taken/considered by the Board of Directors and the resulting uncertainties we are unable tocomment on whether the Directors of the Company are disqualified under sub-section (2) ofSection 164 of the Act as required by us to state so.
(h) The qualifications relating to the maintenance of accounts and other mattersconnected therewith are as stated in the basis for qualified opinion paragraph above.
(i) 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 A". Our report expresses a disclaimer of opinionon the adequacy and operating effectiveness of the Company's internal financial controlsover financial reporting.
(j) 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 financial statements Refer Note 38 (I) to the standalone financialstatements;
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses except for potential losses if any thatmay arise owing to matter enumerated above in para 6 under basis for qualifiedopinion on long-term contracts. As per information provided and explanationsgive the company has not entered into any derivative contract;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
| ||For Goel Garg & Co. |
| ||Chartered Accountants |
| ||(Firm's Registration No. 000397N) |
|Place of Signature: Gurgaon ||(Ashok Kumar Agarwal) |
|Date: 30th May 2016 ||Partner (Membership No. 084600) |
"ANNEXURE A" TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THESTANDALONE FINANCIAL STATEMENTS OF UNITECH LIMITED
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 UnitechLimited ("the Company") as of 31st March 2016 in conjunction with our audit ofthe standalone financial statements of the Company for the year ended on that date.
MANAGEMENTS RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS
The Company's 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe 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 to the extent applicable toan audit of internal financial controls both issued by the Institute of CharteredAccountants of India. 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 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 auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
Because of the matter described in disclaimer of opinion paragraph below wewere not able to obtain sufficient appropriate audit evidence to provide a basis for anaudit opinion on internal financial control system over financial reporting of theCompany.
REPORTING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING
A companys internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures 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 controls over financial reporting tofuture periods are subject to the risk that the internal financial control over financialreporting may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.
DISCLAIMER OF OPINION
1. According to the information and explanation given to us the Company has notestablished its internal financial control over financial reporting over :
a. customer acceptance credit evaluation and establishing customer credit limits forsales and customers resulting in the Company recognising revenue without establishingreasonable certainty of ultimate collection on criteria based on or considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
b. advances towards purchase of land projects pending commencement advances paid tojoint ventures entities and collaborators resulting in the Company accounting for/carrying such loans and advances without establishing reasonable certainty of ultimatecollection/ recoverability on criteria based on or considering the essential componentsof internal control stated in the Guidance Note on Audit of Internal Financial ControlsOver Financial Reporting issued by the Institute of Chartered Accountants of India.
c. non-current investments (long term investments) in and loans and advances given tosome subsidiaries resulting in the Company accounting for/ carrying such non currentinvestments / loans without establishing/ evaluating reasonable certainty of ultimaterecoverability and whether the carrying value of the said investments has diminished andsuch diminution is other than temporary on criteria based on or considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia Because of this reason we are unable to obtain sufficient appropriate auditevidence to provide a basis for our opinion whether the Company had adequate internalfinancial controls over financial reporting in respect of matters stated above and whethersuch internal financial controls were operating effectively as at March 31 2016.
2. According to the information and explanation given to us the Company is inthe process of establishing/strengthening its internal financial control over financialreporting with respect to evaluating Entity level controls inter alia controls overmanagement override the Company's risk assessment process policies that addresssignificant business control and risk management practices etc. on criteria based on orconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.
Because of this reason we are unable to obtain sufficient appropriate audit evidenceto provide a basis for our opinion whether the Company had adequate internal financialcontrols over financial reporting in respect of matters stated above and whether suchinternal financial controls were operating effectively as at March 31 2016.
3. The system of internal financial controls over financial reporting withregard the significant processes namely Project management and project revenue; other lawsand compliances; litigation and claims receivables management and land management are inthe process of being enhanced/ strengthened. As represented by management the Company hasidentified the processes to be improved and the necessary action plan has been put inplace. Pending the above we are unable to evaluate if the Company has established adequateinternal financial control over financial reporting and whether such internal financialcontrols were operating effectively as at March 31 2016.
We have considered the disclaimers reported above in determining the nature timingand extent of audit tests applied in our audit of the standalone financial statements ofthe Company and the disclaimers in paragraph 1and some components in paragraph 3 abovelike project management and project revenue above has affected our opinion on thefinancial statements of the standalone Company and we have issued a qualified opinion onthe standalone financial statements whereas the disclaimers in paragraphs 2 and remainingcomponents of paragraph 3 above do not affect our opinion on the standalone financialstatements of the Company.
| ||For Goel Garg & Co. |
| ||Chartered Accountants |
| ||(Firm's Registration No. 000397N) |
| ||(Ashok Kumar Agarwal) |
|Place of Signature: Gurgaon ||Partner |
|Date: 30th May 2016 ||(Membership No. 084600) |
"ANNEXURE B" TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THESTANDALONE FINANCIAL STATEMENTS OF UNITECH LIMITED
(REFERRED TO IN PARAGRAPH 2 OF REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS OF THEAUDITORS REPORT OF EVEN DATE TO THE MEMBERS OF UNITECH LIMITED ON THE FINANCIALSTATEMENTS FOR THE YEAR ENDED 31ST MARCH 2016)
In terms of information and explanations given to us and the books and records examinedby us we report that:
(i) In respect of its fixed assets:
(a) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets are physically verified by the management according to a phasedprogramme designed to cover all the items over a period of three years which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. Pursuant to this programme certain fixed assets were physically verified by themanagement during the year and as informed. No Material discrepancies were noticed on suchverification.
(c) According to the information and explanations given to us and the records examinedby us and based on the examination of the registered sale deed provided to us we reportthat the title deeds comprising all the immovable properties of land and buildings whichare freehold are held in the name of the Company as at the balance sheet date.
(ii) As explained to us the inventories as at balance sheet date were physicallyverified during the year by the Management and no material discrepancies were noticed onsuch physical verification.
(iii) According to the information and explanations given to us the Company hasgranted unsecured loans to fifty five subsidiaries companies covered in the registermaintained under section 189 of the Companies Act 2013 in respect of which:
(a) The loans given to thirty seven subsidiaries being short term loans repayable ondemand are interest free and the terms and conditions of the grant of such loans are notprima facie prejudicial to the interest of the company considering Companys economicinterest in such entities as well as business exigency. The loans given to twosubsidiaries being short term loans payable on demand are interest bearing and the termsand conditions of the grant of such loans are not prima facie prejudicial to the interestof the company considering Companys economic interest in such entities as well asbusiness exigency. However in respect of such interest free loans given to fifteensubsidiaries amounting to Rs. 4565999276 we have qualified our main reportabove under para 3 of basis for qualified opinion on the potential nonrecovery of such loans and accordingly the terms and conditions of the grant of suchloans as at the balance sheet date are prejudicial to the Company's interest. Similarlyin respect of such interest bearing loans given to one subsidiary amounting to Rs. 139472764we have qualified our main report above under para 3 of basis for qualifiedopinion on the potential non recovery of such loans and interest accrued there onand accordingly the terms and conditions of the grant as at the balance sheet date ofsuch loans are prejudicial to the Company's interest.
(b) The loans granted are repayable on demand and accordingly there is no specificstipulation of the schedule of repayment of principal and interest. We are informed thatthe company has not demanded repayment of any such loan during the year and thus therehas been no default on the part of the parties to whom the money has been lent.
(c) The said loans being repayable on demand and no demand for repayment being madetill date there is no overdue amount of loans granted to such parties.
(iv) According to the information and explanations given to us the Company has notgranted any loans to any of its directors or to any other person in whom the director isinterested under section 185 of the Companies Act 2013. Further the Company being aCompany providing infrastructural facilities the Provisions of subsections (2) to (10) ofSection 186 does not apply to the Company. The Company is not an investment company asdefined in Explanation to section 186.
(v) The Company has not accepted any deposits under the provisions of sections 73 to 76or any other relevant provisions of the Companies Act 2013 and the rules framedthereunder. Further the Company had accepted deposits under Section 58 A of the erstwhileCompanies Act 1956. In our opinion and according to the information and explanationsgiven to us the Company has not complied with requirement of section 74(1)(b) read withRule 19 of the Companies (Acceptance of deposits) Rules 2014 with regard to the depositsaccepted from the public. The nature of contraventions are that the Company has totaloutstanding dues of Rs. 7237888676 (Previous year Rs. 6890561594)towards matured unpaid deposits as of 31 March 2016.
Reference is drawn to note 46 with respect to unpaid matured deposits. Further asalready highlighted in paragraph 2 under basis for qualified opinion in ourmain report above Pursuant to sub section (2) of Section 74 of the Act the Companyhad made an application to the Hon'ble Company law Board (CLB or the Board) to allow theCompany further time to repay the outstanding public deposits or part thereof andinterest payable thereon as is considered reasonable by CLB.
The following Orders have been passed in this regard by:
|S.No ||Order passed by ||Particulars of relevant order(s) ||Whether order(s) complied with |
|1 ||Company Law Board ||As described in detail under para 2 of our qualifications and various orders of the Honble CLB the following directions w.r.t significant matters were given namely: || |
| || ||a) That the Company shall pay an amount of Rs. 130000000. ||The Company has paid an amount or Rs. 104500000. |
| || ||b) deposit Rs. thirty crores in three equal instalments on or before 30 April 2016 31 May 2016 and 30 June 2016. ||The Company has not deposited any amounts in this regard. |
| || ||c) Further the bench directed the Company to pay Rs. fifty lacs on first of every month towards Hardship cases in coming six months. ||The Company has not paid any amounts in this regard. |
| || ||d) that the Company shall deposit all amounts pertaining to TDS on such amounts payable to depositors. ||The Company has not deposited any TDS in this regard. |
| || ||e) It was also clarified that the sale proceeds of any properties already mentioned shall not be utilized for procuring the above mentioned Rs. Thirty Crores. ||As explained the Company is in the process of liquidating such properties. |
| || ||f) That the company pay interest as directed and agreed. Total interest amount payable during the year ended on 31 March 2016 is Rs. 560419069. ||The amount of interest paid as represented by management is Rs. 62168092. |
|2 ||Reserve Bank of India ||Not Applicable ||Not Applicable |
|3 ||Any Court or any other tribunal ||Various courts/consumer courts have directed the Company to pay cumulatively Rs. 8430000. ||The Company has paid 2200000 against the said orders till date. |
As explained and represented by management the Company has earmarked six unencumberedland parcels including those in subsidiary Companies for sale and utilization of saleproceeds thereof for repayment of deposits. Further that management is committed to repayall the deposits along with interest thereon within permissible time period and making allefforts to arrange the necessary resources required for this purpose.
(vi) We have broadly reviewed the books of account maintained by the company pursuantto the rules made by the central government for the maintenance of cost records undersection 148(1) of the Act and are of the opinion that prima facie the prescribed accountsand records have been made and maintained. We have however not made a detailedexamination of the records with a view to determine whether they are accurate or complete.
(vii) In our opinion and according to the information and explanations given to us inrespect of statutory dues:
(a) Undisputed statutory dues including employee's state insurance sales tax duty ofcustoms duty of excise value added tax cess and other statutory dues have generallybeen regularly deposited with the appropriate authorities. However income tax servicetax and provident fund dues have not been regularly deposited with the appropriateauthorities.
According to the information and explanations given to us no undisputed amountspayable in respect of employees' state insurance sales-tax duty of customs duty ofexcise cess and other undisputed statutory dues were outstanding at the year end for aperiod of more than six months from the date they became payable except for Income taxservice tax and provident fund dues which are given below:
|Name of the Statute ||Nature of Dues ||Amount (Rs.) ||Period to which the amount relates ||Due date |
|Income Tax Act 1961 ||Tax deducted at Source and interest ||521527028 ||1/04/2014 to 31/03/2015 ||Various as per respective Act. |
|Income Tax Act 1961 ||Tax deducted at Source and interest ||176423560 ||01.04.2015 to 30.09.2015 ||Various as per respective Act. |
|VAT Act 2003 ||WCT ||1421420 ||01.04.2015 to 30.09.2015 ||Various as per respective Act. |
|Service Tax ||Service Tax ||67526093 ||01.04.2015 to 30.09.2015 ||Various as per respective Act. |
|Employees Provident Funds & Miscellaneous Provisions Act 1952 ||Employers Contribution to Provident Fund ||59718338 ||01.04.2015 to 30.09.2015 ||Various as per respective Act. |
(b) The following dues have not been deposited by the company on account of disputessince the appeals are pending before the relevant authorities.
|Name of the Statute ||Nature of Dues under dispute ||Financial Year ||Amount(Rs.) ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income tax on regular assessment ||2004-05 ||7363246 ||Commissioner of income Tax (Appeals) New Delhi |
|Income tax Act1961 ||Income tax on regular assessment ||2006-07 ||222484964 ||Commissioner of income Tax (Appeals) New Delhi |
|Income tax Act1961 ||Tax deducted at Source on regular assessment ||2007-08 ||16219162 ||Commissioner of income Tax (Appeals) New Delhi |
|Income tax Act1961 ||Income tax on regular assessment ||2008-09 ||8729809740 ||Income Tax Appellate Tribunal New Delhi (Rs.237.500.000 deposited by Company under protest)# |
|Income tax Act1961 ||Income tax on regular assessment ||2009-10 ||3025191760 ||Income Tax Appellate Tribunal New Delhi |
|Income tax Act1961 ||Income tax on regular assessment ||2010-11 ||1188242280 ||Commissioner of income Tax (Appeals) New Delhi |
|Income tax Act1961 ||Tax deducted at Source on regular assessment ||2011-12 ||116196935 ||Commissioner of income Tax (Appeals) New Delhi |
|Income tax Act1961 ||Income tax on regular assessment ||2011-12 ||824043190 ||Commissioner of income Tax (Appeals) New Delhi |
|Income tax Act1961 ||Tax deducted at Source on regular assessment ||2012-13 ||168599180 ||Commissioner of income Tax (Appeals) New Delhi |
|Income tax Act1961 ||Income tax on regular assessment ||2012-13 ||1137095370 ||Commissioner of income Tax (Appeals) New Delhi |
|Service Tax ||Service tax ||01-12-2005 to 31-07-2007 ||7260129 ||SLP pending with Honble Supreme Court |
|Service Tax ||Service tax ||2012-13 ||93494668 ||CESTAT New Delhi |
|Haryana VAT Act 2003 ||VAT ||2011-12 ||281988670 ||Jt. Excise & Taxation Commissioner (Appeals) Faridabad Haryana |
|Haryana VAT Act 2003 ||VAT ||2012-13 ||163802119 ||Jt. Excise & Taxation Commissioner (Appeals) Faridabad Haryana |
(also refer note 38(I)(c) (d) & (e) to the standalone financial statements)
# Income tax matter under dispute for financial year 2008-09 was decided in favour ofthe Company subsequent to balance sheet date.
(viii) In our opinion and according to the information and explanations given tous the Company has not defaulted in the repayment of loans or borrowings to Government.Further the Company has not generally defaulted to a financial institution bank or todebenture holders except as enumerated below:
a) In case of defaults in the repayment of loans or borrowings to financialinstitutions and banks:
|Particulars ||Amount of default of repayment as at Balance sheet date (Rs.) ||Period of default |
| ||Principal ||Interest || |
|Due to Financial Institutions: || || || |
|HDFC Limited ||247500000 ||231807350 ||Principal and Interest: 1 to 61 days |
|Indiabulls Housing Finance Limited ||9591666 ||25459262 ||Principal and Interest: 22 to 174 days |
|IFCI limited # ||119906450 ||Nil ||Principal: 46 to 108 days |
| || || ||Interest: NIL Days |
|LIC of India* ||1308000000 ||510103599 ||Principal: 299 to 1852 days |
| || || ||Interest :1 to 853 days |
|SREI Infrastructure finance Limited* ||1580000000 ||411353997 ||Principal: 1 to 442 days |
| || || ||Interest: 17 to 656 |
|IDFC Limited ||435140009 ||227070451 ||Principal: 77 to 169 days |
| || || ||Interest: 1 to 169 |
|Globe Fincap Limited # || ||150359 ||Principal: Nil days |
| || || ||Interest : 1 day |
|Dues to Banks: || || || |
|HDFC Bank Limited ||437000000 ||184823834 ||Principal: 110 to 241 days |
| || || ||Interest: 1 to 153 |
|Central Bank of India* ||361429773 ||43852716 ||Principal: 193 to 285 days |
| || || ||Interest: 1 to 245 |
|Axis Bank ||- ||1514101 ||Principal: Nil days |
| || || ||Interest:1 day |
|Bank of Maharashtra ||77947033 ||8132563 ||Principal: 184 to 276 days |
| || || ||Interest: 1 to 245 days |
|Oriental Bank of Commerce ||9722220 ||11843123 ||Principal: 25 to 85 days |
| || || ||Interest: 1 to 61 days |
b) In case of defaults in the repayment of dues to the debenture holders:
|Particulars || |
Amount of default of repayment as at Balance sheet date (Rs.)
|Period of default |
| ||Principal ||Interest || |
|Due to Debenture-holders (issued to Public Financial Institution on Private placement basis) * ||1585000000 ||932845492 ||Principal: 17 to 1052 days |
| || || ||Interest: 1 to 1067 days |
* There are some disputes with these financial institutions/ bank which are pendingbefore various courts/ tribunals/forums for final adjudication.
# Repaid subsequent to balance sheet date.
(ix) In our opinion and according to the information and explanations given to us theCompany has not raised any monies by way of initial public offer/ further public offer(including debt instruments). Further as per information and explanations provided theCompany has generally applied term loans for the purposes for which they were raised inaccordance with terms agreed with respective lenders.
(x) To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company and no fraud on the Company by its officers oremployees has been noticed or reported during the year.
(xi) To the best of our knowledge and according to the information and explanationsgiven to us the Company has neither paid nor provided for any managerial remunerationduring the year and hence reporting under clause (xi) of the CARO 2016 Order is notapplicable.
(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of theCARO 2016 Order is not applicable.
(xiii) In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 188 and 177 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the financial statements etc. as required by theapplicable accounting standards.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause (xiv) of CARO 2016 is not applicable to the Company.
(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or persons connected with him and hence provisions of section 192 of theCompanies Act 2013 are not applicable.
(xvi) The Company is not required to be registered under section 45-I of the ReserveBank of India Act 1934.
| ||For Goel Garg & Co. |
| ||Chartered Accountants |
| ||(Firm's Registration No. 000397N) |
| ||(Ashok Kumar Agarwal) |
|Place of Signature: Gurgaon ||Partner |
|Date: 30th May 2016 ||(Membership No. 084600) |