To the Members of D B Realty Limited
Report on the Audit of Standalone Ind AS Financial Statements
We have audited the accompanying Standalone Ind AS Financial Statements of D B RealtyLimited ("the Company") which comprise the Balance Sheet as at March 31 2019the Statement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year then ended and notes to theStandalone Ind AS Financial Statements including significant accounting policiesand other explanatory information (hereinafter summary of referred to as "StandaloneInd AS Financial Statements").
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matters described in the Basis forQualified Opinion section of our report the aforesaid Standalone Ind AS FinancialStatements give the information required by the Companies Act 2013 ("the Act")in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India including the Indian Accounting Standards("Ind AS") of the state of affairs of the Company as at March 31 2019 itsloss (including other comprehensive income) changes in equity and its cash flows for theyear ended on that date.
Basis for Qualified Opinion
a. As stated in Note 57 to the Standalone Ind AS Financial Statements regarding nonrecognition/ re-measurement of financial guarantees aggregating Rs. 293552.00 lacs issuedto banks/ financial institutions on behalf of various entities at fair value as requiredunder Ind AS 109 Financial Instruments. In absence of measurement of financialguarantees at fair value we are unable to comment on the effects on the loss for the yearended March 31 2019.
b. As stated in Note 51 to the Standalone Ind AS Financial Statements regardingnon-evaluation of impairment provision for expected credit losses in accordance with IndAS 109 Financial Instruments for loans and receivables aggregating Rs.50886.65 lacs and investments aggregating Rs. 87368.26 lacs respectively as on March 312019 to certain subsidiaries and or have negative net worth relatedpartieswhichhaveincurredsignificant as on that date. We are unable to comment on the effects onthe loss for the year ended March 31 2019.
c. As stated in Note 2(B)(i)(d) to the Standalone Ind AS Financial Statementsregarding measurement of its investments in equity instruments of one of its subsidiarycompany at fair value through other comprehensive income which the Management has notconsidered as a subsidiary. Had it been treated as a subsidiary then as per accountingpolicy it should be measured at cost. Consequently investments in these instruments andother comprehensive income are higher by Rs. 15228.96 lacs and Rs. 12061.34 lacs (net oftax) respectively as on March 31 2019.
We conducted our audit in accordancespecifiedunder Section 143(10) of the Act. Our rewith Standards onAuditing (SAs) -sponsibilities under those Standards are furtherdescribed in the Auditors Responsibilities for the Audit of the Standalone Ind ASFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia ("ICAI") together with the ethical requirements that are relevant to ouraudit of the Standalone Ind AS Financial Statements under the provisions of the Act andRules thereunder and we have fulfilled our other ethical responsibilities in accordancewith these requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a 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 Standalone Ind AS Financial Statements of the currentyear. This matter was addressed in the context of our audit of the Standalone Ind ASFinancial Statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. In addition to the matters described in the Basis forQualified Opinion section we have determined the matter described below to be the keyaudit matter to be communicated in our report.
Key Audit Matter How the matter was addressed in the audit
|Valuation of Inventory || |
|(Refer Note 2.10 and 13 to the Standalone Ind AS Financial Statements Significant Accounting Policies) ||Our audit procedures in respect of this area includes: |
|Inventory consisting of projects under development have an aggregate value of Rs. 28228.16 lacs as on March 31 2019. ||Obtained an understanding of managements process and evaluated design and tested operating effectiveness of controls for valuation of inventories. |
|These projects are under initial stages of development and the management estimates that net realizable value of these projects will be greater than the carrying cost based on the approved initial plans future projections and future prospects of these projects. As on March 31 2019 there is no much progress in development activities of these projects. ||Obtained valuation reports from independent valuer engaged by the management for projects Work-in-progress and evaluated the appropriateness of the underlying data methodology applied by independent valuer and assumption given by the management for inventory valuation. |
| ||Carried out sensitivity analysis of projected cost and revenue expected from key projects. |
|Considering the materiality of the amount involved and degree of management judgment in valuation we have identified valuation of inventory as a key audit matter for the current year audit. ||Verified on test check basis the project related expenditure incurred during the year and analysed the movement of project work-in-progress during the year. |
Emphasis of Matter
We draw attention to the following matters in the notes to the Standalone Ind ASFinancial Statements:
a. As stated in Note 9.2 to the Standalone Ind AS Financial Statements regardingsecurity deposits aggregating Rs. 4653.74 lacs as on March 31 2019 given to variousparties for acquisition of development rights as explained by the Management the Companyis in process of obtaining necessary approvals with regard to these properties and thattheir current market values are significantly in excess of their carrying values and areexpected to achieve adequate profitability on substantial completion of such projects.
b. As stated in Note 7.3 to the Standalone Ind AS Financial Statements regardingreturn on investments of Rs. 79790.67 lacs in preference shares in a subsidiary companyas on March 31 2019. As explained by the Management such investments are consideredstrategic and long term in nature and the current market value and future prospects ofsuch investments are significantly in excess of Companys investment in the investeecompany.
c. As stated in Note 13.1 to the Standalone Ind AS Financial Statements regardingstatus of inventory consisting of projects having aggregate value of Rs. 28228.16 lacs ason March 31 2019 and the opinion framed by the Management about net realizable value ofthe cost incurred being a technical matter has been relied upon by us.
d. As stated in Note 49 to the Standalone Ind AS Financial Statements regarding loansand advances aggregating Rs. 4000.00 lacs as on March 31 2019 which are under litigationand are sub-judice. Based on the Managements assessment of the outcome noadjustments are considered necessary in respect of recoverability of balances. The impactif any of the outcome is unascertainable.
e. As stated in Note 52 to the Standalone Ind AS Financial Statements regardingcertain allegations made by the Enforcement Directorate against the Company and its twoKey Managerial Persons in a matter relating to Prevention of Money Laundering Act 2002this matter is sub-judice and the impact if any of the outcome is unascertainable.
f. As stated in Note 54 to the Standalone Ind AS Financial Statements regardingattachment order issued by adjudicating authority under Prevention of Money LaunderingAct 2002 by which the Companys assets aggregating Rs. 2450.40 lacs have beenattached on August 30 2011. Consequently the adjudicating authority has taken over thebank balance of Rs. 68.93 lacs and Investment in Redeemable Optionally ConvertibleCumulative Preference Shares Series A and Series C of a subsidiary company of Rs. 2288.81lacs in earlier years. The impact of the matter if any of its outcome is currentlyunascertainable.
g. As stated in Note 46(A)(i)(ii) and (iii) to the Standalone Ind AS FinancialStatements regarding the Audited Financial Statements of a Firm where the Company is oneof the partners has following disclosures:
i. As regards recoverability of Trade Receivables of Rs. 2722.98 lacs the Partners ofthe Firm had taken effective steps for recovery and are not expecting any shortrealisation. In the event of shortfall in realisation the same shall increase the debitbalance of the Partners.
ii. Allegations made by the Central Bureau of Investigation (CBI) relating to the 2Gspectrum case and regarding attachment order issued by adjudicating authority underPrevention of Money Laundering Act 2002. These matters are sub-judice and the impact ifany of its outcome is currently unascertainable.
iii. As regards pending dispute towards liability of property tax of the Firm withMunicipal Corporation of Greater Mumbai / Slum Rehabilitation Authority.
iv. As regards non-provision of disputed income tax liability of Rs. 2911.63 lacs.
h. As stated in Note 47(ii) to the Standalone Ind AS Financial Statements regardingorder passed by Honble Delhi High Court in one of the Partnership Firm where theCompany is a partner directing the Airport Authority of India (AAI) to conductAeronautical Studies without demolishing the structure of SRA buildings. In the opinion ofthe Management the firm is hopeful for favorable outcome and hence it does not expect anyfinancial outflow in this matter.
i. As stated in Note 47(ii) to the Standalone Ind AS Financial Statements regardingsignificant uncertainty relating to completion of the Project in one of the partnershipfirm based on its management and accordingly the firm has not recognised revenue tillsuch significant uncertainty exists.
Our opinion is not modified in respect of these matters.
The Companys Board of Directors is responsible for the other information. Theother information comprises the information included in the Management Discussion andAnalysis Corporate Governance and Directors Report but does not include theStandalone Ind AS Financial Statements and our auditors report thereon.
Our opinion on the Standalone Ind AS Financial Statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the Standalone Ind AS Financial Statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the Standalone Ind AS FinancialStatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. 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 Standalone IndAS Financial Statements
The Companys Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these Standalone Ind AS FinancialStatements that give a true and fair view of the financial position financial performance(including other comprehensive income) changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including Ind ASspecified under Section 133 of the Act thereunder. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; 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 Standalone Ind AS Financial Statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
In preparing the Standalone Ind AS Financial Statements the Management is responsiblefor assessing the Companys ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless the Management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Companysfinancial reporting process.
Auditors Responsibilities for the Audit of the Standalone Ind AS FinancialStatements
Our objectives are to obtain reasonable assurance about whether the Standalone IndAS Financial Statements as a whole are free from material misstatement whether due tofraud or error and to issue an auditors report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate theycouldreasonablybeexpectedtoinfluencethe economicdecisions of users taken on the basis of this Standalone Ind AS FinancialStatements. As part of an audit in accordance with SAs we exercise professional judgmentand maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the Standalone IndAS Financial Statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence sufficientand that isappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof 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 expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of 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 Managements use of the going concernbasis of accounting and based on the audit evidence obtained whether a materialuncertainty exists relatedtoeventsorconditionsthatmaycastsignificantdoubt on theCompanys ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditors report to therelated disclosures in the Standalone Ind AS Financial Statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditors report. However future events orconditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the Standalone IndAS Financial Statements including the disclosures and whether the Standalone IndAS Financial Statements represent the underlying transactions and events in a manner thatachieves fair presentation.
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 Standalone Ind ASFinancial Statements of the current year and are therefore the key audit matters. Wedescribe these matters in our auditors report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.
As stated in Note 46 to the Standalone Ind AS Financial Statements regarding share ofloss (net) from investment in three partnership firms one Limited Liability Partnershipand one Joint Venture aggregating Rs. 1072.50 lacs for the year ended March 31 2019included in the Standalone Ind AS Financial Statements is based on the Ind AS FinancialStatements of such entities. These Ind AS Financial Statements have been audited by theauditors of these entities whose reports have been furnished to us by the Management andour audit report on the Standalone Ind AS Financial Statements is based solely on suchaudit reports of the other auditors.
The Standalone Ind AS Financial Statements also includes share of loss from investmentin one Limited Liability Partnership aggregating Rs. 0.03 lacs which is based on the IndAS Financial Statements of such entity. This Ind AS Financial Statements is unaudited andhave been furnished to us by the Management and our audit report on the Standalone Ind ASFinancial Statements is based solely on such unaudited Ind AS Financial Statements.According to the information and explanations given to us by the Management this Ind ASFinancial Statements is not material to the Company.
Our opinion is not modified in respect of these matters.
Report on Other Legal and Regulatory Requirements
(1) As required by the Companies (Auditors Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of Section 143(11) of theAct we give in "Annexure 1" a statement on the matters specified in paragraphs3 and 4 of the Order to the extent applicable.
(2) As required by Section 143(3) of the Act we report as under to the extentapplicable:
a. We have sought and except for the matters described in the Basis for QualifiedOpinion section of our report obtained all the information and explanations which to thebest of our knowledge and belief were necessary for the purposes of our audit;
b. Except for the possible effects of the matters described in the Basis for QualifiedOpinion section of our opinion proper books of account as required by law have been keptby the Company so far as it appears from our examination of those books;
c. The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) the Statement of Changes in Equity and the Statement of Cash Flows dealt with bythis report are in agreement with the books of account;
d. Except for the possible effects of the matters described in the Basis for QualifiedOpinion section of our report in our opinion the aforesaid Standalone Ind AS FinancialStatements comply with the Indian Accounting Standards specified under Section 133 of theAct read with relevant rules issued there under;
e. The matters described under the Basis for Qualified Opinion and Emphasis of Mattersection of our report above in our opinion may have an adverse effect on the functioningof the Company;
f. On the basis of the written representations received from the directors as on March31 2019 and taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2019 from being appointed as a director in terms of Section164 (2) of the Act;
g. With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controls wegive our separate report in "Annexure 2";
h. With respect to the other matters to be included in the Auditors Report inaccordance with the requirements of section 197(16) of the Act;
In our opinion and to the best of our information and according to the explanationsgiven to us the Company has not paid any remuneration to its directors during the year;
i. With respect to the other matters to be included in the Auditors Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
(i) The Company has disclosed the impact of pending litigations on its financialposition in its Standalone Ind AS Financial Statements Refer Note 45 on ContingentLiabilities and Note 46A to 49 52 and 54 on litigations to the Standalone Ind ASFinancial Statements;
(ii) The Company did not have any long-term contracts including derivative contracts.Hence the question of any material foreseeable losses does not arise;
(iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
For Haribhakti & Co. LLP
ICAI Firm Registration No.103523W /W100048
Membership No. 048539
Mumbai: May 30 2019
ANNEXURE 1 TO THE INDEPENDENT AUDITORS REPORT
[Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements in the Independent Auditors Report of even date to the members ofD B Realty Limited (the Company") on the Standalone Ind AS FinancialStatements for the year ended March 31 2019]
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets. In case of identification andsituation of fixed assets the Company is in process of tagging individual assets based ontheir specific location.
(b) During the year fixed assets have been physically verified by the Management asper the regular programme of veri -fication which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets. As informed no materialdiscrepancies were noticed on such verification.
(c) The title deeds of immovable properties recorded as fixed assets in the books ofaccount of the Company are held in the name of the Company except for the details givenbelow:
(Rs. in lacs)
|Land/ Building ||Total number of cases ||Leasehold/ Freehold ||Gross Block as on March 31 2019 ||Net Block as on March 31 2019 ||Remarks |
|Sale Office - Pune ||1 ||Freehold ||139.45 ||- ||Company has acquired Development Rights on the said property. |
(ii) Inventories comprise of payments for acquisition of lands tenancy rights relatedcompensation contract payments and other expenditure on construction and development ofthe project of the Company. As informed to us site visits were carried out during theyear by the Management at reasonable intervals. In our opinion the frequency ofverification is reasonable. As informed no material discrepancies were noticed onphysical verification carried out during the year.
(iii) The Company has granted loans secured or unsecured to companies firms LimitedLiability Partnerships and Joint ventures covered in the register maintained under section189 of the Act.
(a) According to the information and explanations given to us and based on the auditprocedures conducted by us we are of the opinion that the terms and conditions of theloans granted by the Company to seven parties covered in the register maintained undersection 189 of the Act (total loan amount granted Rs. 6557.22 lacs and balanceoutstanding as on March 31 2019 is Rs. 6527.81 lacs are prejudicial to theCompanys interest as they are interest-free loans.
(b) The schedule of repayment of principal and payment of interest in respect of suchloans has not been stipulated. These loans are repayable on demand and principal andinterest thereon have been received whenever demanded by the Company. Thus we are unableto comment whether the repayments or receipts are regular and report amounts overdue formore than ninety days if any as required under clause 3(iii)(c) of the Order.
(iv) Based on information and explanation given to us in respect of loans investmentsguarantees and securities the Company has complied with the provisions of section 185 ofthe Act. Further the provisions of section 186 the Act are not applicable to the Companyas it is engaged in the business of Real Estate Development.
(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public within the provisions of sections 73to 76 of the Act and the rules framed there under.
(vi) The Central Government has prescribed the maintenance of cost records for theproducts of the Company under sub-section (1) of section 148 of the Act and the rulesframed there under. However at present the Company does not fall under the criteria forwhich such records are required to be maintained. Hence the said rules are not applicableto the Company.
(a) The Company is not regular in depositing with appropriate authorities undisputedstatutory dues including provident fund employees state insurance income taxgoods and service tax cess and any other material statutory dues applicable to it andthere have been serious delays in large number of cases.
According to the information and explanations given to us no undisputed amountspayable in respect of provident fund income tax sales tax value added tax goods andservice tax customs duty excise duty cess and any other material statutory duesapplicable to it were outstanding at the year end for a period of more than six monthsfrom the date they became payable.
However undisputed amounts payable in respect of employees state insuranceservice tax wealth tax and property tax outstanding at the year end for a period ofmore than six months from the date they became payable are as follows:
|Name of the statute ||Nature of the dues ||Amount (Rs. in lacs) ||Period to which the amount relates ||Due Date ||Date of Payment |
|Finance Act 1994 ||Service Tax Liability and interest thereon ||4.55 ||April 2010 to March 2012 ||Various Dates ||Not Paid |
|Finance Act 1994 ||Krishi Kalyan Cess ||0.05 ||August 2016 to June 2017 ||Various Dates ||Not paid |
|Finance Act 1994 ||Swachh Bharat Cess ||0.04 ||August 2016 to June 2017 ||Various Dates ||Not paid |
|Employee's State Insurance Act 1948 ||Employee ESIC ||0.00 ||March and June 2018 ||Various Dates ||Not paid |
|Mumbai Municipal Corporation Act 1888 ||Property Tax ||581.72 ||April 2010 to September 2018 ||Various Dates ||Not paid |
|Wealth Tax Act 1957 ||Wealth Tax ||9.38 ||April 2013 to March 2015 ||Various Dates ||Not paid |
(b) According to the information and explanation given to us there are no disputeddues of value added tax goods and service tax customs duty and excise duty as at March31 2019. The particulars of dues outstanding with respect to income tax and service taxwhich have not been deposited on account of disputes are as follows:
|Name of the statute ||Nature of dues ||Amount (Rs. in lacs) ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income Tax ||64.02 ||A.Y. 2010-11 ||Income Tax Appellate Tribunal Mumbai |
|Income Tax Act 1961 ||Income Tax ||908.54 ||A.Y. 2012-13 ||Income Tax Appellate Tribunal Mumbai |
|Income Tax Act 1961 ||Income Tax ||92.25 ||A.Y. 2013-14 ||Commission of Income Tax (Ap- peals) |
|Income Tax Act 1961 ||Income Tax ||170.55 ||A.Y. 2014-15 ||Income Tax Appellate Tribunal Mumbai |
|Income Tax Act 1961 ||Income Tax ||1210.54 ||A.Y. 2015-16 ||Commission of Income Tax (Ap- peals) |
|Income Tax Act 1961 ||Income Tax ||39.97 ||A.Y. 2016-17 ||Demand under Section 154 |
|Finance Act 1994 ||Service Tax ||5419.40* ||F.Y. 2011-12 to F.Y. ||Commission of Service Tax |
(*Excluding interest and penalty as the case may be)
(viii) According to the information and explanations given to us the Company has notdefaulted in repayment of loans or borrowings to financial institutions banks except forthe details given below:
|Sr. No Particulars ||Amount of default as at March 31 2019 (Rs. in lacs) ||Period of Default |
|1 ICICI Bank Limited || || |
|Principal ||1645.92 ||Since January 2018 |
|Interest ||499.96 ||Since July 2017 Onwards |
|2 Reliance Home Finance Limited || || |
|Principal ||6670.00 ||Since March 2019 |
|Interest ||2753.13 ||Since December 2017 Onwards |
|Reliance Commercial Finance || || |
|3 Limited || || |
|Principal ||200.00 ||Since December 2018 |
|Interest ||96.86 ||Since December 2017 Onwards |
|4 Yes Bank Limited || || |
|Interest ||223.79 ||Since December 2018 onwards |
|Facility Fees ||1600.00 ||Since June 2018 Onwards |
|5 LIC Housing Finance Limited || || |
|Principal ||218.69 ||Since December 2018 Onwards |
|Interest ||29.67 ||Since December 2018 Onwards |
|6 Bank of India || || |
|Interest ||0.30 ||Since February 2019 Onwards |
|7 HDFC Bank || || |
|Interest ||235.19 ||Since March 2019 |
Note: Interest includes penal interest.
(ix) In our opinion and according to the information and explanation given to us theCompany has not raised money by way of initial public issue offer / further public offer(including debt instruments) during the year. However the Company has obtained term loansand utilized the same for the purposes for which they were raised.
(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of fraud by the Company or any fraud on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such instance by theManagement. However we are informed that during the financialyear 2010-2011 the CBI inits charge sheet filed in connection with irregularities in the allotment of 2G telecomlicense has accused certain Directors of the Company (in their capacity as promoters of atelecom licensee Company). Two other Management Personnel of the Company have also beencharge sheeted in their capacity as Directors of another Company (Refer Note 54) which isalleged to have paid an amount of Rs. 20000 lacs as illegal gratification in the sameconnection. As explained to us the Company is not directly a party to the allegations andSpecial Court has passed the order acquitting all the accused via order dated 21.12.2017.However the matter is sub-judice in the Delhi High Court as on reporting date due toappeal filed by CBI against the order of Special court.The matter is listed for October24 2019.
Also the Company is in receipt of summons from Special Court for Prevention of MoneyLaundering Act (PMLA) Mumbai as one of the accused in connection with a complaint filedby Enforcement Directorate under ECIR No. ECIR/MBZO/07/2015 and ECIR/MBZO/08/2015. TheHonble Court has also now summoned two of the Key Managerial Personnels (KMP)of the Company as accused as per the said complaint. The matter in relation to the Companyand the KMPs involves certain advances given by the Company in the ordinary course of itsbusiness to another company which was subsequently refunded fully upon cancellation ofthe understanding (Refer Note 52).
(xi) According to the information and explanations given to us the Company has notpaid / provided the managerial remuneration. Accordingly clause 3(xi) of the Order is notapplicable to the Company.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Therefore clause 3(xii) of the Order is not applicable tothe Company.
(xiii) According to the information and explanation given to us all transactionsentered into by the Company with the related parties are in compliance with sections 177and 188 of Act where applicable and the details have been disclosed in the Standalone IndAS Financial Statements etc. as required by the applicable accounting standards.
(xiv) The Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under audit. Thereforeclause 3(xiv) of the Order is not applicable to the Company.
(xv) According to the information and explanations given to us the Company has notentered into any non-cash transactions with directors or persons connected with him duringthe year.
(xvi) According to the information and explanation given to us and based on legalopinion obtained the Company is not required to be registered under Section 45-IA ofReserve Bank of India Act 1934.
For Haribhakti & Co. LLP
ICAI Firm Registration No. 103523W / W100048
Membership No. 048539
Date: May 30 2019
ANNEXURE 2 TO THE INDEPENDENT AUDITORS REPORT
[Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements in the Independent Auditors Report of even date to the members ofD B Realty Limited on the Standalone Ind AS Financial Statements for the year endedMarch 31 2019]
Report on the Internal Financial Controls with reference to Financial Statements underclause (i) of sub-section 3 of section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls with referencetofinancialstatementsof DB Realty Limited ("the Company") as of March 31 2019 in conjunction withour audit of the Standalone Ind AS Financial Statements of the Company for the year endedon that date.
Managements Responsibility for Internal Financial Controls
The Companys management is responsible for establishing and maintaining internalfinancial controls based on the internal control with reference to financial statementscriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India ("ICAI"). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient including adherence to companys policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.
Our responsibility is to express an opinion on the Companys internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing specified under section143(10) of the Act to the extent applicable to an audit of internal financial controlsboth issued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements 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 with reference to financial statements and their operatingeffectiveness.
Our audit of internal financial controls with reference to financial statementsincluded obtaining an understanding of internal financial controls with reference tofinancial statements assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal controls based on theassessed risk. The procedures selected depend on the auditors judgement includingthe assessment of the risks of material misstatement of the financial statements whetherdue to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Companys internal financial controlswith reference to financial statements.
Meaning of Internal Financial Controls with reference to Financial Statements
A companys internal financial control with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A companys internal financial controlwith reference to financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the companys assets that could have a material effect on thefinancial statements.
Inherent Limitations of Internal Financial Controls with reference to FinancialStatements
Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financialcontrols withreferencetofinancialstatements were operating effectively as at March 31 2019 based onthe internal control with reference to financial statements criteria established by theCompany considering the essential components of internal controls stated in the GuidanceNote issued by the ICAI.
For Haribhakti & Co. LLP
ICAI Firm Registration No.103523W / W100048
Membership No. 048539
Mumbai: May 30 2019