The Members of
BOTHRA METALS AND ALLOYS LIMITED
Report on the audit of the Standalone Financial Statements
Corporate insolvency Proceedings as per insolvency and Bankruptcy Code 2016 (IBC )
The Hon'ble National Company Law Tribunal Mumbai bench ("NCLT") vide orderdated 6th July 2020 ("Insolvency Commencement Order') had initiated the CorporateInsolvency Resolution Process ("CIRP") against the Bothra Metals And AlloysLimited based on petition filed by the Financial Creditor under Section 7 of theInsolvency and Bankruptcy Code 2016 ("the Code"). Mr. Harish Kant Kaushik hasbeen appointed as the Interim Resolution Professional under Insolvency and BankruptcyCode 2016 by the Hon'ble NCLT Mumbai Bench vides its Order dated 6th July 2020.Thereafter pursuant to the Insolvency Commencement Order the powers of the Board ofDirectors are stand suspended during the year under review and the same are exercised byInterim Resolution Professional.
2. Qualified Opinion
We have audited the standalone financial statements of Bothra Metals And Alloys Limited("the Company") which comprise the Balance Sheet as at 31st March 2021 theStatement of Profit and Loss and Statement of Cash Flows for the year ended as on 31stMarch 2021 and notes to the financial statements including summary of significantaccounting policies and other explanatory information (hereinafter referred to as"the financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us except for effects of matters described in para 3(a) 3(b) 3(c) 3(d) 3(e)3(f) and 3(g) in the basis for qualifying opinion the aforesaid financial statements givethe information required by the Companies Act 2013 (the "Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the company as at March 31 2021its Profit (or loss) and cash flows for the year ended on that date.
3. Basis for Qualifying Opinion
We conducted our audit of the standalone financial statement in accordance with theStandards on Auditing (SAs) specified under Section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (1CAI) together with the ethicalrequirements that are relevant to our audit of the Standalone financial statements underthe provisions of the Act and the Rules there under and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified opinion on the standalone financial statements. We referto the following notes to standalone financial statements; y
a. In view of the significant losses which have been incurred by the company duringthe previous financial years the carrying amount of fixed assets needs to be tested forimpairment. The management has not done impairment testing and in absence of anyinformation we are unable to comment as to whether any provision for impairment isrequired or not.
b. Note 13 to the standalone financial statements the inventory valuing Rs. 13.02 lacscomprises of raw material and finished goods. The quantity and valuation of the inventoryhas been accepted as provided by the management / Interim Resolution Professional on thebasis of management representation. Any deviation in the same may affect the financialposition and / or financial performance of the company to the extent.
c. Note 14 to the Standalone Financial Statements the trade receivables amounting toRs. 70.9 Crore which comprise the carried forward amount from the earlier year.Considering the age of receivable and non working of the company creates an uncertainty onthe realization on these debtors and in addition to that there is no balance confirmationof these debtors so this effects the true and fair view of the Financial Statements.
d. Notel2 to the Standalone Financial Statements represents GST Receivable of Rs.1.98crore out of which Rs. 1.91 crore belongs Bombay GST registration which is cancelledappeal is pending. Accordingly the loss is understated and assets are overstated to thatextent.
e. Note 16 to the Standalone Financial Statements in connection with the existence ofmaterial uncertainties over the reliability of the advances to supplier and advanvce forexpenses amounting to Rs. 22.6 lacs included in financial Statement which are subject toconfirmation and reconciliation. The Management is yet to assess the risk of default andresultant expected credit loss allowance on such asset.
f. Note 5 to 7 to the standalone financial statements in respect of various claimssubmitted by the financial creditors (including claims fund based and non-fund basedexposure and claims on behalf of subsidiary companies and other parties) operationalcreditors workmen or employees of the company to the Interim Resolution Professionalpursuant to the insolvency and bankruptcy board of India (Insolvency resolution processfor corporate persons ) Regulation 2016 that are currently under consideration /reconciliation. Pending reconciliation / admission of such of claims by the IRP we areunable to comment on consequential impact if any on the accompanying statements.
g. Note 5 to the Standalone Financial Statements in respect of loans taken wereunderstated by the interest and penalty amounting to RS.38.22 crore which has a materialeffect on the financial statement.
h. The accompanying statements are not in compliance with the Indian accountingstandards (Ind AS') specified under section 133 of the Companies Act 2013 readwith relevant Rules issued there under.
4. 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.
We have determined the matters described below to be the key audit matters to becommunicated in our audit;
|S.NO KEY AUDIT MATTER ||AUDITOR'S RESPONSE |
|1. Recoverability of Indirect tax receivables ||PRINCIPAL AUDIT PROCEDURES |
|As at March 31 2021 Non-current assets in respect of withholding tax and GST ITC which are subject to reconciliation. ||We have performed due diligence to review the nature of the amounts recoverable the sustainability and the likelihood of recoverability upon final resolution. The management is yet to assess the change in risk of default and resultant expected credit loss allowance on such assets. |
|Refer Note 12 to the standalone financial statements || |
|2. Accuracy evaluation of property plant and equipment ||PRINCIPAL AUDIT PROCEDURES |
|Refer Note 9 to the standalone financial statements ||Our audit approach was a combination of test of internal controls and substantive procedures which included the following: |
| ||i. We have evaluated the design of internal control relating to recording of efforts incurred and estimation of efforts required to complete the performance obligations. |
| ||ii. We have in respect of non availability of physical verification and market value of property plant and equipment and in the absence of corroborative evidence we unable to comment on the extent to which such balances recoverable. |
| ||iii. Valuation obtained by the IRP under T&BC is confidential and cannot be shared except as per the provisions of the I&BC 2016. |
|3. Accuracy evaluation of Trade Receivables ||PRINCIPAL AUDIT PROCEDURES |
|Refer Note 14 to the standalone financial statements ||We have evaluated the design of internal control relating to recording of efforts incurred and estimation of efforts required to complete the performance obligations. In respect of non availability of reconciliation and confirmation of balances from the trade receivables and in the absence of corroborative evidence we are unable to comment on the extent to which such balances are recoverable. |
5. Information Other than the Financial Statements and Audit Report Thereon
In the ongoing Corporate Insolvency Resolution Process (CIRP) The Interim ResolutionProfessional (IRP) is responsible for the preparation of the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisBoard's Report including Annexure to Board's Report and Shareholder's Information butdoes not include the standalone financial statements and our auditor's report thereon.These reports are expected to be made available to us after the date of this auditor'sreport.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance and conclusion thereon.
6. Responsibilities of management and those charged with governance for the Standalonefinancial statements
In the view of ongoing Corporate Insolvency Resolution Process (CIRP) The InterimResolution Professional (IRP) is responsible for the matters stated in Section 134(5) ofthe Act with respect to the preparation of these Standalone financial statements that givea true and fair view of the financial position financial performance changes in equityand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the accounting Standards specified under Section 133 of theAct.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities selection and application ofappropriate implementation and maintenance of accounting policies making judgments andestimates that are reasonable and prudent and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the Standalone financial statements that give a true and fair view and arefree from material misstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable matters relatedto going concern and using the going concern basis of accounting unless management eitherintends to liquidate the Company or to cease operations or has no realistic alternativebut to do so.
The respective Board of Directors/ Management under the direction of the InterimResolution Professional is resDonsible for overseeing the ComDanv's financial reDortineprocess.
7. Auditor's responsibilities for the audit of the Standalone financial statements
Our objectives are to obtain reasonable assurance about whether the Standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in the aggregatethey could reasonably be expected to influence the economic decisions of users taken onthe basis of these Standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the Standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
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 expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of use of the going concern basis of accountingand based on the audit evidence obtained whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Company's ability to continueas a going concern. If we conclude that a material uncertainty exists we are required todraw attention in our auditor's report to the related disclosures in the Standalonefinancial statements or if such disclosures are inadequate to modify our opinion. Ourconclusions 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 Standalonefinancial statements including the disclosures and whether the Standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
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 fin to evaluate the effect of anyidentified misstatements iru-the^
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 them allrelationships and other matters that may reasonably be thought to bear on our independenceand 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 be communicatedin our report because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.
8. Emphasis of Matters
Attention is invited to
a. As per the Insolvency and Bankruptcy Code 2016 ("insolvency code") theIRP receives collect and admit claims submitted by the Creditor (operational financialand other) employee and workmen of the company and Govt. Authorities. Such claims can besubmitted to IRP during C1RP till the approval of the Resolution Plan by COC. The impactof such admitted and rejected claims if any has not been considered in the preparationof the Financial Statements.
b. Information is not available regarding classification of Creditors into Micro Smalland Medium Enterprises as required under the Micro small and Medium Development Act2006 The Financial impact of this non-compliance if any could not be determined.
9. Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("theOrder")issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the "Annexure A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order.
2. As required by section 143(3) of the Act we report to the extent applicable that:
a. We have sought and except for the effects / possible effects of the mattersdescribed under "Basis for Qualified Opinion" paragraph obtained all theinformation and explanations which to the best of our knowledge and belief were necessaryfor the purposes of our audit.
b. Except for the effects / possible effects of matters described in the "Basisfor Qualified Opinion" paragraph in our opinion proper books of account as requiredby law have been
kept by the Company so far as appears from our examination of those books;
c. The Balance Sheet Statement of Profit and Loss including Other Comprehensive Incomeand the statement of Cash Flow Statement dealt with by this Report are in agreement withthe books of account;
d. In our opinion the aforesaid Standalone financial statements do not comply with theIndian Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended.
e. The Company has not appointed qualified Company Secretary as Compliance officerduring the year under review in violation of Regulation 6 of SEBI (LODR) Regulations 2015and Section 203 of the Companies Act 2013.
f. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B"; and
g. With respect to the other matters to be included in the 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. On the basis of the written representations received and taken on record by theInterim Resolution Professional the Company has not disclosed the impact of pendinglitigations on its financial position in its standalone financial statements.
ii. The Company did not have any long-term contracts including derivatives contractsfor which there were any material foreseeable losses;
iii. There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.
"ANNEXURE A" TO THE INDEPENDENT AUDITOR'S REPORT
The Annexure referred to in paragraph 1 under "Report on Other Legal andRegulatory Requirement" section of our Independent Auditor's Report to the members ofthe Company on the Standalone financial statements for the year ended 3 T!March 2021 we report that:
1. In respect of Company's Fixed Asset
a. As explained to us the Plant & Machinery have been physical verified by themanagement at reasonable intervals during the year with the help of outside agency.Thediscrepancies reported on such verification were not properly dealt with in the books ofaccount.
2. As confirmed by the management physical verification of the inventory has beenconducted at reasonable intervals by the management. No material discrepancies werenoticed.
3. According to the information and explanation given to us the Company has not grantedunsecured loans to bodies corporate covered in the register maintained under Section 189of Companies Act 2013
4. According to the information and explanations given to us the Company has notaccepted any deposits from the public as per the directives issued by the Reserve Bank ofIndia and as per the provisions of section 73 to 76 or any other relevant provisions ofthe Companies Act 2013 and the rules framed there under.
5. The maintenance of cost records has been prescribed by the Central Government undersub-section (1) of section 148 of the Companies Act 2013 for the business activitiescarried out by the company. According to the information and explanation given to us theprovisions of the paragraph 3(vi) of the Order are not applicable to the Company as theCompany is not covered by the Companies (Cost Records and Audit) Rules 2014.
6. According to the information and explanations given to us the company has defaultedin repayment of loans to the banks and to promoters. These dues are subject matter ofinsolvency proceedings; the Company is undergoing CIRP under IBC 2016. Pursuant to theapproval of the order by the Hon'ble NCLT.
7. The Company has not raised money by way of initial public offer or further publicoffer (including debt instruments) and term loan during the year. Accordingly clause (ix)of the paragraph 3 of the Order is not applicable.
8. According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reportedduringthe course of our audit.
9. In our opinion and according to the information and explanation given to us thecompany has paid/ provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with schedule V of the Act.
10. As the Company is not a Nidhi Company accordingly clause (xii) of paragraph 3 ofthe order is not applicable to the Company.
11. According to the information and explanation given to us we are unable to obtainsufficient and appropriate audit evidence to comment whether all transactions with in therelated parties as disclosed in Note 25 to the financial statements are in compliance withsection 177 & 188 of the Companies Act 2013. Further were applicable details have beendisclosed in the financial statements as required by the applicable accounting standard.
12. According to the information and explanation given to us the company has not madeany preferential allotment or private placement of shares or fully or partly convertibledebenture during the year and hence reporting under clause 3(xiv) of the order is notapplicable to the company.
13. In our opinion and according to the information and explanations given to us weare unable to obtain sufficient and appropriate audit evidence to comment whether duringthe year the company has entered into any non-cash transactions with its directors orpersons connected to its directors.
14. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
For and on behalf of
Rajeev Sood& Co.
Chaltered Accountants FRN:- 0I0478N
Partner Membership No. 552767
Dated :- 30th June 2021
TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTSOF BOTHRA METALS AND ALLOYS LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 ofSectionl43 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of BOTHRAMETALS AND ALLOYS LIMITED ("the Company") Limited as of 31sl March2021 in conjunction with our audit of the Standalone financial statements of the Companyfor the year ended on that date.
In our opinion and according to the information and explanation given to us and basedon our audit following material weaknesses have been identified as at March 31 2021:
The company did not have appropriate internal financial controls related to:-
a) Assessment of trade receivable and withheld amounts which are subject matters ofvarious disputes/arbitration proceedings/negotiations with the customers and otherdisputes.
b) Physical verification of fixed assets and inventories. Further the company did nothave any internal audit system during the year.
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). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired 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 deemed tobe prescribed under section 143(10) of the Companies Act 2013 to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols 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 theoperating 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 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.
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. Alsoprojections of any evaluation of the internal financial controls over financial reportingto future periods are subject to the risk that the internal financial control overfinancial reporting may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.