To the Members of
ARSS Infrastructure Projects Limited
CIN : L14103OR2000PLC006230
Plot-no-38 Sector-A Zone-D
Mancheswar Industrial Estate
Bhubaneswar-751 010 Odisha
Report on the Audit of the Standalone Financial Statements Qualified Opinion
We have audited the accompanying standalone financial statements of ARSS InfrastructureProjects Limited ("the Company") which comprise the Balance Sheet as at March31st 2019 the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Changes in Equity and the Statement of Cash Flows for the yearended on that date and a summary of the significant accounting policies and otherexplanatory information (hereinafter referred to as "the standalone financialstatements").
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis for QualifiedOpinion section of our report the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under Section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31st2019 the profit and total comprehensive income changes in equity and its cash flows forthe year ended on that date.
Basis for Qualified Opinion
a) In absence of relevant records Contract-wise surplus/loss has neither beenascertained nor recognized in compliance with Ind AS-115 Revenue from contract withcustomers'.
b) The company has overdue accumulated secured debts amounting to '1629.46 Crores outof which '123.53 Crores subject to interest reconciliation from 01.10.2018 and '1505.93Crores subject to reconciliation of interest thereon from 01.04.2016. Banks haveclassified the accounts as NPA. No interest has been charged on these secured debts to theProfit & Loss account resulting in understatement of loss to that extent andunderstatement of liability. Secured lenders have served notices on various dates undersection 13(2) of Securitisation and Reconstruction of Financial Assets and Enforcement ofSecurity Interest Act 2002 for recovery of their dues.
c) Bank statement from State Bank of India and Export Import Bank of India (nowEdelweiss ARC Ltd) is not available. We are unable to ascertain balances and transactionwith these banks.
We conducted our audit in accordance with Standards on Auditing (SAs) specified undersection 143(10) of the Companies Act 2013. Our responsibilities under those Standards arefurther described in the Auditor's Responsibilities for the Audit of the FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules there under and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our qualified opinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Inaddition to the matter described in the Basis for Qualified Opinion section we havedetermined the matters described below to be the key audit matters to be communicated inour report.
|Key Audit Matter: ||How our audit addressed the key audit matter: |
|1. Claim receivable amounting to '133034Lakhs is under dispute/ arbitration. Same are subject to the outcome of arbitration and/or reconciliation proceedings arising out of various contractual obligations. Recognisition and measurement of the same is based on management evaluation. [Refer note to Note 9: Other Financial Assets] || Evaluate the reasonableness of management's assessment and judgment considering the relevant sector and industry specific phenomenon. |
| || Assessed the individual project wise and case wise outstanding claim receivables. |
| || Discussed the status of significant arbitration claims with the Company's in-house Legal Counsel and other senior management personnel and assessing their responses. |
| || Verified documentation of claim receivable under arbitration. |
| || Checked the arithmetical accuracy of the essential calculations of the management estimate and judgment. |
| || Reviewed the adequacy of disclosures made in the financial statements with this regards. |
| || Based on the above procedures performed by us we considered the management's assessment of recoverability of claim receivable to be reasonable. |
Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the Company'sAnnual Report but does not include the financial statements and our auditors' reportthereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information; we are required to report that fact. We havenothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the state of affairs (financial position) profit orloss (financial performance including other comprehensive income) changes in equity andcash flows of the Company in accordance with the accounting principles generally acceptedin India including the Ind AS specified under Section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.
As part of an audit in accordance with Standards on Auditing we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the Act we are also responsible for explaining our opinion on whether the Companyhas adequate internal financial controls system in place and the operating effectivenessof such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the Annexure-A 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 we report that:
(a) We have sought and obtained except for the matter described in the sub parab' of the Basis for Qualified Opinion' paragraph above all the informationand explanations which to the best of our knowledge and belief were necessary for thepurposes of our audit.
(b) Except for the possible effect 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 and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.
(d) Except for the possible effect of the matter described in the Basis forQualified Opinion' paragraph above in our opinion the aforesaid standalone financialstatements comply with the Indian Accounting Standards specified under Section 133 of theAct read with Rule 7 of the Companies (Accounts) Rules 2014.
(e) On the basis of the written representations received from the directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in terms of Section164 (2) of the Act.
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in Annexure-B'.'
(g) With respect to the other matters to be included in the Auditor's 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 9 and Note 57 to the financialstatements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
3. With respect to the matter to be included in the Auditors' Report under Section197(16) of the Act; in our opinion and according to the information and explanations givento us the remuneration paid by the Company to its directors during the current year is inaccordance with the provisions of Section 197 of the Act.
| ||For Ajay B Garg |
| ||Chartered Accountants |
| ||A Garg |
| ||Proprietor |
| ||Membership No.: 032538 |
|Place: Mumbai || |
|Date: 28th May 2019 || |
Annexure - A' to the Independent Auditors' Report
Referred to in paragraph 1 under the heading Report on Other Legal &Regulatory Requirement' of our report of even date to the standalone financial statementsof the Company for the year ended March 312019 we report that:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets;
(b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified in a phased manner over a period of three years. Inaccordance with this programme certain fixed assets were verified during the year and nomaterial discrepancies were noticed on such verification. In our opinion this periodicityof physical verification is reasonable having regard to the size of the Company and thenature of its assets.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the company.
(ii) (a) As explained to us the inventories have been physically verified during theyear by the management. In our opinion having regard to the nature and location ofstocks the frequency of the physical verification is reasonable.
(b) In our opinion the discrepancies noticed on physical verification of the inventorywere not material in relation to the operations of the Company and the same have beenproperly dealt with in the books of account.
(iii) The Company has granted loans amounting to '400Lakhs to one bodies corporatecovered in the register maintained under section 189 of the Companies Act 2013 (theAct').
(a) In our opinion the rate of interest and other terms and conditions on which theloans had been granted to the bodies corporate listed in the register maintained underSection 189 of the Act were not prima facie prejudicial to the interest of the Company.
(b) In the case of the loans granted to the bodies corporate listed in the registermaintained under section 189 of the Act the borrowers have been regular in the payment ofthe interest if any applicable; and repayment of principal on demand. The terms ofarrangements do not stipulate any repayment schedule and the loans are repayable ondemand.
(c) There are no overdue amount for more than 90days in respects of the loan granted tobody corporate listed in the register maintained under section 189 of the Act.
(iv) In our opinion and according to the information and explanations given to us thecompany has complied with the provisions of section 185 and 186 of the Companies Act 2013in respect of loans investments guarantees and security.
(v) The Company has not accepted any deposits from the public and hence the paragraph3(v) of the Order relating to directives issued by the Reserve Bank of India and theprovisions of Sections 73 to 76 or any other relevant provisions of the Act and theCompanies (Acceptance of Deposit) Rules 2015 or any rules framed there under with regardto the deposits accepted from the public are not applicable to the company. Accordingly wehave not commented upon the paragraph 3(v) of the Order.
(vi) We have broadly reviewed the books of accounts maintained by the Company pursuantto the Companies (Cost records and audit) Rules 2014 and as prescribed by the CentralGovernment under section 148(1) of the Act and are of the opinion that prima-facie theprescribed accounts and cost records have been made and maintained by the Company. We havenot however made a detailed examination of the cost records with a view to determiningwhether they are accurate or complete.
(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including provident fund income taxsales tax wealth tax duty of excise service tax duty of customs employees' stateinsurance value added tax goods and service tax cess and other material statutory dueshave been regularly deposited with few delay in some cases during the year by the Companywith the appropriate authorities.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund income tax sales tax wealth tax service tax dutyof excise duty of customs value added tax goods and service tax cess and othermaterial statutory dues were in arrears as at 31 March 2019 for a period of more than sixmonths from the date they became payable.
(c) According to the information and explanations given to us there are no materialdues of wealth tax duty of customs and cess which have not been deposited with theappropriate authorities on account of any dispute. However according to information andexplanations given to us the following dues of income tax sales tax service tax andvalue added tax have not been deposited by the Company on account of disputes:
|Name of the statute ||Nature of dues ||Amount (in Lakhs.) ||Forum where dispute is pending |
|Orissa sales Tax Act ||Sales Tax ||71.89 ||Commissioner of Commercial Tax |
|Orissa Entry Tax Act ||Entry Tax ||144.00 ||Commissioner of Commercial Tax |
|Central Sales Tax Act ||Sales Tax ||791.10 ||Commissioner of Commercial Tax |
|Income Tax Act ||Income Tax ||5469.84 ||ITAT (Cuttack) |
|Income Tax Act ||Income Tax ||2845.35 ||CIT(A) Bhubaneswar |
(viii) Based on our Audit procedures and according to information and explanation givento us the Company has defaulted in payment of bank dues over the year. The Company haveoverdue outstanding dues to financial institutions banks as at 31st March 2019 asfollows:
|Bank Name ||' In Crores |
|State Bank of India ||931.73 |
|Punjab National Bank ||326.91 |
|IDBI Bank Ltd. ||123.53 |
|Bank of India ||59.84 |
|EXIM Bank(Edelweiss ARC Ltd.) ||18744 |
|Kotak Mahindra Bank ||18.50 |
(ix) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not raised moneys by way of initial public offeror further public offer including debt instruments. The term loans have been applied forthe purpose for which they were obtained.
(x) Based upon the audit procedures performed and the information and explanationsgiven by the management we report that no fraud by the Company or on the company by itsofficers or employees has been noticed or reported during the year.
(xi) Based upon the audit procedures performed and the information and explanationsgiven by the management the managerial remuneration has been paid or provided inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Companies Act.
(xii) In our opinion the Company is not a Nidhi Company. Therefore the provisions ofclause 3 (xii) of the Order are not applicable to the Company.
(xiii) In our opinion all transactions with the related parties are in compliance withsection 177 and 188 of Companies Act 2013 and the details have been disclosed in thestandalone Financial Statements as required by the applicable accounting standards.
(xiv) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year underreview. Accordingly the provisions of clause 3 (xiv) of the Order are not applicable tothe Company and hence not commented upon.
(xv) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not entered into any non-cash transactions withdirectors or persons connected with him. Accordingly the provisions of clause 3 (xv) ofthe Order are not applicable to the Company and hence not commented upon.
(xvi) In our opinion the company is not required to be registered under section 45 IAof the Reserve Bank of India Act 1934 and accordingly the provisions of clause 3 (xvi)of the Order are not applicable to the Company and hence not commented upon.
| ||For Ajay B Garg |
| ||Chartered Accountant |
| ||A Garg |
| ||Proprietor |
| ||Membership No: 032538 |
|Place : Mumbai || |
|Dated : 28th May 2019. || |
Annexure - B' to the Independent Auditor's Report
[Referred to in paragraph 2(f) under the heading Report on Other Legal &Regulatory Requirement' of our report of even date to the standalone financial statementsof the Company for the year ended March 312019.]
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 M/s.ARSS Infrastructure Projects Limited (the Company') as of 31 March 2019 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
Management's 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 (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 company's policies the safeguarding ofits 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 issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.
We believe that the audit evidence we have obtained is sufficient and 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 standalone financial statements for external purposes in accordance withgenerally accepted accounting principles including Ind AS. A company's internal financialcontrol over financial reporting includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of standalonefinancial statements in accordance with generally accepted accounting principles includingInd AS and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorised acquisitionuse or disposition of the company's assets that could have a material effect on thestandalone 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 31st March 2019based on the internal control over financial reporting criteria established by the Companyconsidering 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.
| ||For Ajay B Garg |
| ||Chartered Accountant |
| ||A Garg |
| ||Proprietor |
| ||Membership No: 032538 |
|Place : Mumbai || |
|Dated : 28th May 2019. || |