D S Kulkarni Developers Ltd.
|BSE: 523890||Sector: Infrastructure|
|NSE: DSKULKARNI||ISIN Code: INE891A01014|
|BSE 16:01 | 20 Mar||D S Kulkarni Developers Ltd|
|NSE 05:30 | 01 Jan||D S Kulkarni Developers Ltd|
|BSE: 523890||Sector: Infrastructure|
|NSE: DSKULKARNI||ISIN Code: INE891A01014|
|BSE 16:01 | 20 Mar||D S Kulkarni Developers Ltd|
|NSE 05:30 | 01 Jan||D S Kulkarni Developers Ltd|
To the members of D. S. Kulkarni Developers Limited
1. Report on the audit of standalone Ind AS financial statements
We were engaged to audit the accompanying standalone Ind AS financial statements of D.S. Kulkarni Developers Limited (the Company) which comprise the balance sheet as at 31March 2020 the statement of profit and loss the statement of changes in equity and thestatement of cash flows for the year then ended and summary of the significant accountingpolicies and other explanatory information.
2. Management's responsibility for the standalone Ind AS financial statements
D. S. Kulkarni Developers Limited is under Corporate Insolvency Resolution Processunder Insolvency and Bankruptcy Code (the Code). Its affairs business and assets arebeing managed by the Resolution Professional appointed by the Hon'ble NCLT Mumbai vide itsOrder dated 26th September 2019 under the provisions of the Code as Interim ResolutionProfessional and subsequendy as per section 22 of the Code as Resolution Professional ofD. S. Kulkarni Developers Limited. The matter against the Corporate Insolvency ResolutionProcess is pending for admission before the Hon'ble NCLT vide CP 1633/2019. Underprovisions of section 17 of the Code the powers of Board of Directors of D. S. KulkarniDevelopers Limited are currently under suspension and the same are being exercised by theResolution Professional of D. S. Kulkarni Developers Limited.
In view of ongoing Corporate Insolvency Resolution Process the Resolution Professionalis responsible for the matters stated in Section 134(5) of the Companies Act 2013 (theAct) with respect to the preparation of these standalone Ind AS financial statements thatgive a true and fair view of the state of affairs profit/loss and other comprehensiveincome changes in equity and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Indian Accounting Standards (Ind AS)prescribed under section 133 of the Act.
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 accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the standalone Ind ASfinancial statements that give a true and fair view and are free from materialmisstatement 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 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 realistic alternative but to do so. Under section 20 of Code itis incumbent upon Resolution Professional to manage the operations of the Company as agoing concern and the financial statements have been prepared on going concern basis.
The written representations with regard to these financial statements provided to usduring the course of our audit have been signed by the Resolution Professional appointedby the Hon'ble NCLT Mumbai vide its Order dated 26th September 2019.
3. Auditor's responsibility
Our responsibility is to express an opinion on these standalone Ind AS financialstatements based on our audit. We have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions of the Act and the Rules made thereunder.
The Financial Statements provided to us for review have been signed only by the RP.Section 134(1) of the Companies Act 2013 requires such signature to be undertaken by(a)the chairperson of the company where he is authorized by the board or by two directorsout of which one shall be managing director; and (b) the chief executive officer theChief Financial officer and the. Company Secretary wherever they are appointed. Since theCIRP has been initiated the RP pursuant to his appointment has been vested with themanagement of the Company and the powers of the board of directors of the Company standsuspended. Therefore the Financial Statements have been signed by the RP alone. Thoughthe powers of the Board of directors are Suspended none of such directors of the Companywere available/ agreeable to sign the said Financial Statements.
The positions of Chief Financial Officer and Company Secretary of the Company as onthe date of Signing of the Financial Statements were vacant. We understand that theoffice of the Chief Finance Officer and the Company Secretary of the Company is vacantbefore the start of the year under audit. The Company has not appointed such keymanagerial personnel as required under section 203 of the Companies Act 2013 read withRule 8 of the Companies (Appointments and Remuneration of Managerial Personnel) Rules2014. As such the Financial Statements may suffer from issues of accuracy veracitysufficiency completeness and reliability as none of the key managerial personnel of theCompany other than RP has signed the Financial Statements.
For the purpose of this audit review we have relied upon the Financial Statementsprovided to us by the RP. It is observed that the RP has inserted a note as part of notesto accounts set out in Note 2.32 of financial statements as per which he has assumedthat the data/information provided by the officials of the Company and the records of theCompany made available to him are in conformity with the applicable laws and present atrue and fair view of the position of the Company and has not personally verified suchinformation; and that he should be absolved from the accuracy veracity and sufficiency orcompleteness of information provided to him by the officials of the Company based on whichthe Financial Statements of the Company have been prepared. As per the said note the RPhas signed the financial statements only to facilitate the CIRP process without anyliability of the same. To the extent to which the RP has disclaimed his liability withrespect to accuracy veracity and sufficiency or
completeness of information provided to him by the officials of the Company theFinancial Statements may suffer from issues of accuracy veracity sufficiencycompleteness or reliability. Relevant observations upon the extent of veracity of theFinancial Statements have been made in the below paragraphs.
Our objectives are:
a. to obtain reasonable assurance about whether the financial statements as a whole arefree from material misstatement whether due to fraud or error
b. 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 the 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 they could reasonably be expected to influence theeconomic decisions of the users taken on the basis of these financial statements.
As part of the audit in accordance with SAs we exercised professional judgment andmaintained professional skepticism throughout the audit. We also:
a. identified and assessed the risks of material misstatement of the financialstatements whether due to fraud or error designed and performed audit proceduresresponsive to those risks and obtained audit evidence that is sufficient and appropriateto provide 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.
b. obtained 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 Companies Act 2013 we are also responsible for expressing our opinion onwhether the company has adequate internal financial controls system in plakhe and theoperating effectiveness of such controls
c. evaluated the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
d. considered the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained we concluded that a materialuncertainty does exist related to events or conditions that may cast significant doubt onthe entity's ability to continue as a going concern. Hence we drew attention in ourauditor's report to the related disclosures in the financial statements. Our conclusionsare based on the audit evidence obtained up to the date of our auditor's report. Howeverfuture events or conditions may cause the entity to cease to continue as a going concernor vice versa.
e. evaluated 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.
f. communicated 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 identified during our audit.
Because of the matters described in the Basis for disclaimer of opinion paragraph wewere not able to obtain sufficient appropriate audit evidence to provide a basis for anaudit opinion. Accordingly we do not express an opinion on the financial statements.
4. Basis for disclaimer of opinion
(i) In view of irregularities and suspected fraudulent transactions and defaults underInsolvency Bankruptcy Code 2016' the Company is under Corporate InsolvencyResolution Process'. As at the date of this report we are not in receipt of anylitigation/investigation reports conducted by investigative authorities.
(ii) In view of the fact that matters relating to abovementioned financialirregularities are sub-judice and litigations/investigations by respective authorities areyet to be completed we are unable comment on the consequential impact if any on thefinancial statements of the outcome of such litigations/investigations / enquiry by lawenforcement agencies and outcome of related litigation and claims.
(iii) In view of the ongoing Corporate Insolvency Resolution Process the outcome ofwhich cannot be presently ascertained on the matters listed below we are unable tocomment whether the Company will be able to continue as a going concern. Consequently weare unable to comment as to whether the going concern basis for preparation of thesefinancial statements taken by the Company is appropriate.
(iv) There are proceedings going on against the company under various laws such as TheMaharashtra Protection of Interest of Depositors Act (MPID) Economic Offences Wing (EOW) Pune Insolvency and Bankruptcy Code 2016 and other economic laws. Variousagencies have moved against the Assessee Company and its directors viz. Directorate ofEnforcement (ED) Serious Fraud Investigation Office (SFIO) and other agencies. Theoriginal documents/agreements has been seized by ED and are not available for carrying outnecessary audit.
(v) Other matters [including those listed in paragraph 4(iv) above] limitations withregard to availability of necessary audit evidences including original documents andinformation satisfactory explanations and justifications required for audit for the yearsended 31 March 2020. In view of the limitations and uncertainties involved we hadexpressed our inability to express an opinion on the financial statements for the auditedperiod. Our disclaimer of opinion on the financial statements is also because of thepossible effects of the above matters on the figures for the current year and on thecorresponding figures for the year ended 31 March 2019.
(vi) We are unable to comment on the necessary adjustments / disclosures in thesefinancial statements in relation to the following items in view of non-availability ofcertain necessary information / documentation / satisfactory explanations relevant to thecurrent year audit - (a) Lack of reconciliation of consumables and spares consumed(included under purchases of stock in trade) with related sales; and
(b) Sale of few finished flats but not recognized due to non-availability of agreementsfor which the closing stock shall show and inflated cost value;
(c) Lease rental agreements for various land given on lease on which rental expensesare recognized for the current year are not provided and hence without sufficientappropriate audit evidence we are unable to comment on accuracy of rental expenses sorecognized;
(d) Employee details / Salary register on which salary expenses are recognized for thecurrent year are not provided and hence without sufficient appropriate audit evidence weare unable to comment on accuracy of employee cost so recognized;
(e) Bank statement/Interest statements of few Banks accounts/Fixed deposits taken fromthe banks that were made available by the banking authorities have been accounted forthe rest were not completely made available by the banking authorities inspite of manyrepresentations;
(f) Debenture statements and Loan statements from few banks based on which interestexpenses have been recognized were not made available for which we have taken the base ofprevious year in case of Non- Convertible debentures.
(g) Statutory liabilities due as at 31st Mar' 2020 are verified based on thetally data maintained and provided by the management. Various representations toGovernment authorities for the login credentials or data available of the said companyhave been made based on which the said recognition shall be verified for its accuracy butthe same was not available;
(h) Ledger confirmations from various parties which were available has been verifiedand accounted for; the rest including related parties had not been made available based onwhich inter balances shall be verified;
(i) Original documents / agreements were not made available in most cases and hence wehad to carry out our audit procedures on the tally data provided and managementrepresentations. As explained to us by the management all the original documents had beenseized by Directorate of Enforcement (ED).
(j) Report from EOW for its investigation done and report of forensic audit conductedhave not been provided to us based on which our opinion shall have a material impact.
(vii) Attention is drawn to Note 7 of the financial statements i.e. unsecured loans torelated parties where provision has been made for bad and doubtful debts of Rs. 4173.84Lakhs out of Rs. 6959 Lakhs which are loans given to subsidiary company M/s. DSKDevelopers Corporation. Out of total 4173.84 lakhs Rs. 229 Lakhs is doubtful Interestcomponent. The basis of the provision of doubtful debts is not provided to us.
(viii)As part of the Corporate Insolvency Resolution Process the Company has receivedcertain claims aggregating to Rs. 279561 lakhs till 27th March 2020 fromcertain vendors and customers. As informed to us by the management the Company hasterminated most of the contracts with the said customers / vendors.
(ix) Attention is invited to note 9 of the financial statements wherein it is statedthat Inventory is not physically verified. We have relied on management for the figuresprovided in respect of inventory. Current year changes in Work in Progress are notsupported by any evidences except the data entered by the management. Accordingly we areunable to comment on the impact of the above on the financial statements.
(x) Trade receivables include receivables of Rs. 83 lakhs in respect of related party(Nikhil Kulkarni & Co.) for the purpose of sale of assets which is outstanding sinceMarch 2016. It also includes Vat receivable from Flat holders of Rs. 219 Lakhs since longwhich is not backed by any evidences.
(xi) Attention is invited to note 6 of financial statements wherein Long-terminvestment in equity instruments of subsidiaries amounts to Rs. 200 lakhs. The totalamount of investment in subsidiary companies amounting to Rs. 1909.73 lakhs has beenprovided for diminution of investments in previous years itself which has not been backedby the explanation and hence we are unable to comment on the completeness existence andaccuracy of this amount.
(xii) The Company needs to strengthen its internal control systems in particular itsIT controls and those relating to existence of contract work-in-progress; reconciliationof consumables and spares consumed with related sales; accounts receivables includingperiodic reconciliations with customers age wise analysis and application of receiptsfrom customers; physical verification of inventories; accounts payables including vendorselection process and periodic reconciliations with vendors; classification of costsrelating to items of purchase of traded goods including costs incurred towards warrantyand certain contract expenses; and disposal of property plant and equipment. We areunable to determine consequential impact if any of these aforesaid weaknesses on thesefinancial statements.
(xiii)Attention is drawn to the Note 12 of the Financial Statements wherein theadvances made to the relatives and third parties are doubtful in nature. The same has beenrecorded based on the accounting and books maintained by the management.
(xiv)Attention is invited to Note 15 of financial statements wherein various ProjectLoans Corporate Loans Vehicle Loans and other loans have been verified by the statementsas much were provided to us by the management. Since the statements for Debentures loanswere not available or provided to us the amount outstanding has been derived by recordingthe similar amount of accrued interest expense as that of previous year.
(xv) As per the provisions of Sec 124 of the Companies Act 2013 post the transfer ofdividend declared to an unpaid dividend account if still remains unpaid for a period of 7years from the date of such transfer shall then be transferred to Investor Education andProtection Fund and the company shall send a statement of the details of such transfer tothe authority which administers the said Fund. Attention is invited to Note 23 offinancial statement wherein the unclaimed dividend outstanding in the books of companycomprises from the FY 2009-10 till FY 2014-15.
(xvi)Various representations and reminders have been made to government authorities forthe login credentials or the data available with themselves pertaining to the Company.Since the required data was not available to us the statutory compliances and duesoutstanding have not been verified to its accuracy. We are unable to determineconsequential impact if any of these aforesaid weaknesses on these financial statements.Whereas the dues accounted for the period from 1st April 2019 to 31stMarch' 2020 has been duly verified. The dues recorded were fully paid to the governmentupto the date of Financials except the following:
(xvii) Contingent Liabilities disclosed under Note 23 have been continued to be similaras that of previous year. In addidon to the same Cenvat Credit availed in non-currentassets and income tax dues as extracted from the claims made by the authority has beendisclosed as a contingent liability as there is a contingency and estimated value needs tobe recorded.
(xviii) The Company has not complied with the requirements of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 that are as follows:
(a) Failed to file its financial results for the periods ended 30 September 2017 andsubsequent periods till date.
(b) Governance report have been submitted latest till Dec' 17.
(c) Annual reports have been timely submitted only upto FY 2015-16.
Consequently we are unable to comment on the impact if any of this non-compliance onthe financial statements.
In view of our observations in paras 4(i) to 4(xv) above we are unable to determinethe adjustments that are necessary in respect of the Company's assets liabilities as onbalance sheet date income and expenses for the year the elements making up the statementof changes in equity and cash flow statement and related presentation and disclosures inthe financial statements.
5. Disclaimer of opinion
Because of the significance of the matters described in the Basis for disclaimer ofopinion paragraph we have not been able to obtain sufficient appropriate audit evidenceto provide a basis for an audit opinion. Accordingly we do not express an opinion on thestandalone financial statements.
Material uncertainty related to "going concern"
We invite attention to Annexure A' to our report which expatiates the facts andcircumstances that indicate that a material uncertainty exists that may cast significantdoubt on the Company's ability to continue as a going concern. Having regard to thetotality of the facts and circumstances stated in the said Annexure it is our consideredopinion that the Company will be able to continue as a going concern only if it is able toraise funds for payment of staff salaries payment of statutory liabilities and forservicing its debts on the due date and if it is able to comply with the provisions of theReal Estate Regulation Act 2016. Our opinion about the financial statements for the yearunder review is not modified in respect of this matter.
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 year. 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.The key audit matters listed in Annexure B' to this report have been communicated tothe management and discussed with the management.
6. Report on other legal and regulatory requirements
(i) As required by the Companies (Auditor s Report) Order 2016 (the Order) issued bythe Central Government of India in terms of sub- secdon (11) of Section 143 of the Act andexcept for the effects if any of the matters described in the basis for disclaimer ofopinion paragraph we enclose in the "Annexure C" a statement on the mattersspecified in paragraphs 3 and 4 of the Order.
(ii) As required by Section 143(3) of the Act we report that:
(a) described in the basis for disclaimer of opinion paragraph we were unable toobtain all the information and explanations which to the best of our knowledge and beliefwere necessary for the purpose of our audit;
(b) due to the possible effects of the matters described in the basis for disclaimer ofopinion paragraph we are unable to state whether proper books of account as required bylaw have been kept by the Company so far as appears from our examination of those books;
(c) the balance sheet the statement of profit and loss the cash flow statement andthe statement of changes in equity dealt with by this Report are in agreement with thebooks of account as maintained;
(d) due to the effect of the related matters described in the basis for disclaimer ofopinion paragraph we state as below-
(i) the financial statements do not comply with IND AS 8 IND AS 16 IND AS 17 and INDAS 113 as specified under Section 133 of the Act;
(ii) we are unable to state whether the financial statements comply with the IndianAccounting Standards (other than those referred to in paragraph 6(ii)(d)(i) above)specified under Section 133 of the Act;
(e) the matters described in the basis for disclaimer of opinion paragraph above mayhave an adverse effect on the functioning of the Company;
(f) the basis of written representations to be received from the directors as on 31March 2020 and taken on record by the Board of Directors that none of the directors isdisqualified as on 31 March 2020 from being appointed as a director in terms of Section164 (2) of the Act except that the then Managing Director (no longer with the Company)has not provided such representation to the Company. Accordingly we are unable to commentas to whether the aforesaid individual was disqualified as on 31 March 2020 from beingappointed as a director in terms of Section 164 (2) of the Act;
(g) the reservation relating to the maintenance of accounts and other matters connectedtherewith are as stated in the basis for disclaimer of opinion paragraph above;
(h) 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 D' and
(i) 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. view of the related matters described in paragraph 4 basis for disclaimer ofopinion we are unable to state whether note 23 to the standalone financial statementsdiscloses the complete impact of pending litigations on the financial position in thestandalone financial statements of the Company;
ii. view of the related matters described in paragraph 4 basis for disclaimer ofopinion we are unable to state whether the Company has made provision as required underthe applicable law or accounting standards for material foreseeable losses if any onlong term contracts (the Company does not have any derivative contracts); and
iii. there has been delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.
Independent Auditors' Report of Even Date To the Members of D. S. Kulkami DevelopersLtd.
On standalone Ind AS financial statements
Annexure A - Material uncertainty related to "going concern"
The Directors' Responsibility Statement in the Board's Report states that the accountshave been prepared on a "going concern" basis. However whether the Company is a"going concern" as at the balance sheet date is a question of opinion which mustbe answered having regard to the totality of the facts and circumstances of the case.Accordingly we state below the facts and circumstances which may have a material impacton this issue.
A. Financial facts & circumstances
1. Default in repayment of instalments of loans obtained from banks & financialinstitutions and in payment of interest on such loans:
During the year under review the Company has been generally unable to service theloans obtained from banks & financial institutions in accordance with the contractualterms contained in the sanction letters issued by such banks & financial institutionsi.e. the Company has been generally unable to repay instalments and pay interest on thedue date. We wrote a letter to each bank / financial institution in order to obtaininformation about delay in payment of interest & repayment of loan instalment statusof the account as at the balance sheet date & the overdue instalments / interest as atthe balance sheet date. The amount of overdue instalments / interest as stated in theAnnexure C to the statutory audit report is derived from the replies we received from thebanks / financial institutions if any or in the absence of such replies from theinformation available in the Company's records.
2. Default in repayment of fixed deposits obtained from the public and in payment ofinterest thereon:
The Company has defaulted in repayment of fixed deposits and in payment of interestthereon. Please refer Para (v) of Annexure C to our statutory audit report for details.
3. Default in payment of statutory dues on account of tax deducted at sourceself-assessment tax Maharashtra Value-added tax service tax employees' provident funddues etc.:
The Company filed its return of income under the Income Tax Act for Assessment Year2016-17 (FY 2015-16) on 30/11/2016. As per the said return an amount of Rs.1251.68 lacsare payable by the Company on account of self-assessment tax and interest. However tillthe date of this report the Company has paid Rs. 45 lacs only and the balance Rs.1206.68lacs are still unpaid. The Income Tax Department has treated the said return as invalidu/s 139(9) of the Income-tax Act 1961 on the ground that self-assessment tax has notbeen paid and has asked the Company to show cause why prosecution should not be initiatedfor such default.
The Company has not paid as required by law the tax deducted at source for the previousyears except for the year under review under various sections of the Income Tax Act 1961.
The Company has also not paid as required by law the amounts payable on account ofservice tax employees' provident fund dues ESIC dues employees' profession taxMaharashtra Value added tax and contribuUon to gratuity fund managed by LIC.
The details of these statutory liabilities are stated in Annexure C to our statutoryaudit report.
4. Dishonour of cheques issued by the Company and consequent criminal cases against theCompany under Section 138 of the Negotiable Instruments Act
Based on the information available from previous year we are informed that during theprevious year under review 1220 cheques issued by the Company were returned unpaid forwant of adequate balance in the Company's accounts. The aggregate amount of such chequesis Rs.70.14 crores. Out of the 1220 cases of dishonour complaints u/s 138 NLA. 1938 werefiled in 51 cases of which the aggregate amount is Rs.11.41 crores. The Companysubsequently paid Rs. 21.04 crores against some dishonoured cheques before or after filingof complaints.
5. Rejection of dividend proposed by the Board of Directors for FY 2015-16 at theCompany's Annual General Meeting:
When the Company's financial statements for FY 2015-16 were finalized in May 2016 theBoard of Directors recommended to the Annual General Meeting to be held in September 2016that a dividend of Re. 1.25 per share be paid to the holders of the Company's equityshares. The total outflow on account of dividend and additional tax thereon would havebeen Rs. 388.17 lakhs. However the resolution at the Company's Annual General Meetingheld on 29/09/2016 was not passed and the proposed dividend was not declared.
6. Delay in payment of salaries to staff:
As at the date of this report the Company has been unable to pay some of its staff forfull year in addition to four months of previous year. The unpaid employee remuneration asat the balance sheet date is Rs. 557.67 lakhs.
B. Other facts & circumstances
7. Resignation of staff and delay in appointment of replacements:
According to the statistics provided by the HR Department for previous year theCompany had 514 employees on 01/04/2016. During the FY 2016-17 259 employees resignedwhereas only 54 new employees joined the Company. Consequently the Company had 309employees as at 31/03/2017. No new data of the current employees available to us.
8. Progress of incomplete construction projects
Relying on the management representations the construction activity in all the majorconstruction sites in and around Pune had slowed down considerably.
9. Rating by credit rating agency
The credit rating of the Company has been down-graded by CARE from BBB+ to D in respectof longterm bank facilities and to C Negative in respect of Fixed Deposit Programme and toC Negative in respect of non-convertible debentures as per their communications dated22/03/2017.
10. Pending litigations
The Company and its promoters face and are likely to face litigations on account ofdishonour of cheques and defaults in payment of statutory dues fixed deposits bank loansand generally dues payable to suppliers.
11. Non Maintenance of Records
The company has not maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
12. No Documentary Evidence
No documentary evidence was provided as to the details of the periodicity and extent ofphysical verification of Fixed Assets carried out by the management. Accordingly we areunable to comment whether there are any material discrepancies and on the manner in whichthey have been dealt with in the books of account.
13. No Evidence for Physical Verification
There is no evidence of physical verification by management of inventories available onrecord. Hence we are unable to comment on the reasonability of verification process andalso on the discrepancies if any. The land valuation report provided to us is for theyear 2016 and it does not match with the workings provided to us regarding the area andvalue of land held as inventory.
Independent Auditors' Report of Even Date
To the Members of D. S. Kulkarni Developers Ltd.
On standalone Ind AS financial statements
Annexure B - Key Audit Matters
The following key audit matters are emphasized in order to interpret these financialstatements
1. Compliance with the provisions of the Real Estate Regulation Act 2016
Government of India has enacted the Real Estate (Regulation and Development) Act 2016and all the sections of the Act came into force with effect from May 1 2017. Under thisAct Government of Maharashtra has established Maharashtra Real Estate RegulatoryAuthority (Maha RERA) vide Notification No. 23 dated 8th March 2017 for regulation andpromotion of real estate sector in the State of Maharashtra. Consequently Government ofMaharashtra also promulgated the Maharashtra Real Estate (Regulation and Development)(Registration of Real Estate Projects Registration of Real Estate Agents Rates ofInterest and Disclosures on Website) Rules 2017 and other Rules. The last date forregistration of on-going projects under Real Estate Regulation Act was 31st July 2017.These changes in the regulatory environment applicable to real estate developmentcompanies are so radical that no such company can continue in business without complyingwith the new regulations.
2. Commitments for DSK Dream City Project & Other Projects
The Company has made commitments in respect of its on-going projects. The Company'ssuccess will depend upon its ability to raise funds for meeting these commitments.
3. Requirements of Consolidated Financial Statements
The Company has been facing capacity issues due to loss of key employees while meetingthe need for servicing information requirements and providing clarifications to multipleinvestigating agencies providing information to enable the ongoing asset monetization andrestructuring activities and meeting going concern' requirements. Furtherfinancials statements from the respective subsidiaries have not been available to us. Onfurther investigation it was found that out of 4 subsidiaries being DSK DevelopersCorporation DSK Woods LLC DSK Southern Projects Pvt Ltd & DSK Infra Pvt Ltd 2domestic subsidiaries have complied with annual fillings with Registrar of Companies upto31st March 2016. In view of the above the Financial Statements of thesubsidiaries have not been available or shall not be available before the Annual Generalmeeting of the Company. Accordingly the Company is unable to provide its ConsolidatedFinancial Statement and salient features of the Financial Statements of the Company'sSubsidiaries and Joint Ventures in Form AOC-1 as required under Section 129(3) of theCompanies Act 2013 read with Companies (Accounts) Rules 2014.
4. Advances given to unrelated parties
During the year the Company has given advances aggregating to Rs. 0.38 lakhs tounrelated parties for the purpose of construction & development of real estateprojects. However by the balance sheet date the said parties had not raised invoices forthe work performed by them.
5. Default committed by DSK Global Education & Research Ltd. (DSKGER)
The Company is surety for the loan advanced by Central Bank of India (CBI) to DSKGER.The said guarantee was given when DSKGER was a subsidiary of the Company and it continuedeven after DSKGER ceased to be a subsidiary. The said contingent liability appears in Note23 to the financial statements. On 12/04/2017 CBI has issued a notice to DSKGER u/s 13(2)of the Securitisation & Reconstruction of Financial Assets & Enforcement ofSecurity Interest Act 2002 for payment of the amount outstanding on 11/04/2017 i.e Rs.8200.39 lacs within 60 days from the date of receipt of notice which remains unpaid tilldate.
6. Possible contractual liability
The Company is unable to reasonably quantify the possible liability that may arise dueto nonperformance of the terms of contracts between the Company and its customers &suppliers.
Independent Auditors' Report
To the Members of D. S. Kulkami Developers Ltd.
On standalone Ind AS financial statements
Annexure C Referred to in Paragraph (i) under the heading "Report on other legaland regulatory requirements" of Our Report of Even Date
As required by the Companies (Auditor's Report) Order 2016 issued by the CentralGovernment of India in terms of section 143(11) of Companies Act 2013 we enclose on thebasis of our opinion our examination on the relevant records and according to theinformation and explanation given to us in the "Annexure C" a statement on thematters specified in Paragraph 3 & 4 of the said Order.
(i) Property Plant and Equipment
a) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets during the financial year under review.
b) The Resolution Professional has physically verified all the fixed assets during thefinancial year 2019-20 for the Valuation of Assets under the Insolvency and BankruptcyCode 2016. As informed to us material discrepancies were noticed on such verificationand the same have been dealt with in the books of account.
c) As per the information and explanations given to us the title deeds of immovableproperties owned by the Company whether held in the name of the company or not isuncertain since the same has been sealed by the ED.
The Resolution Professional appointed by the NCLT order has done Physical Verificationof
inventory during Corporate Insolvency Resolution Process. The projects for which theyare
not aware about its presence are being carried forward in the books as Work inProgress.
(iii) Loan granted to related parties
a) Except for the effects of the matters described in the basis of disclaimer ofopinion paragraph 4 of our main report the Company has not granted any fresh loanssecured or unsecured to companies firms or other parties covered in the registermaintained u/s 189 of the Act. The amount of loan granted in previous stand to beoutstanding till the balance sheet date as follows:
b) The rate of interest and other terms and conditions of loans secured or unsecuredgranted by the Company are not prima facie prejudicial to the interest of the Company;
c) In respect of the loans secured or unsecured given by the Company the terms ofrepayments of the principal amount and the payments of the interest have not beenstipulated. Hence whether the repayment is overdue or not cannot be decided. However theCompany had made provision of Rs. 4713.84 Lacs in the previous years for loans whoserecovery may be doubtful.
(iv) Compliance with section 185 & 186
a) The Company has not made investments granted loans offered guarantee and securityin compliance with the provisions of Section 185 & Section 186 of CA 2013. The limitprescribed under the Companies Act 2013 for granting loans has been exceeded therebyviolating the provisions of the Act.
b) The Company has obtained an opinion from a professional stating that provisions ofSection 185 of the Companies Act 2013 are not attracted in the matter of giving aguarantee to the bank which has advanced a loan to one of the related parties viz. D.S.Kulkarni & Co.
As at 31st March 2019 the Company had outstanding deposits of Rs. 27.37 crores. Duringthe FY 2019-20 and up to the date of this report no. of depositors have not beenincreased also the amount of deposit accepted have remained unchanged. However no Orderhas been passed by the Company Law Board or National Company Law Tribunal or Reserve Bankof India or any court or any other tribunal in this regard.
(vi) Cost Records
The company has not maintained the cost as required by the Companies (Cost Record &Audit) Rules 2014 prescribed by the Central Government u/s 148(1) of the Act. The Companyhas also appointed a cost auditor. The last date for completion of cost audit is28/09/2017.
(vii) Payment of statutory dues
a) There have been instances of delay in depositing with the appropriate authoritiesundisputed statutory dues including Provident Fund Employees' State Insurance TDSIncome-tax Sales-tax Wealth Tax Service tax Customs Duty Excise Duty cess and othermaterial statutory dues applicable to it.
b) There are no disputed amounts outstanding in respect of Provident Fund InvestorEducation and Protection Fund Employees' State Insurance Sales-tax Wealth Tax Servicetax Customs Duty Excise Duty cess and other material statutory dues applicable to it asat the last day of the Financial year. The disputed amounts in respect of income tax areas follows:
The ITAT Pune decided the Company's appeals for AY 2004-05 2005-06 2006-07 2007- OS2008-09 2009-10 2010-11 2011-12 & 2012-13 in favour of the Company. However theDept has filed a reference with the High Court of Judicature at Mumbai.
c) During the year under review the Company has not transferred any to the InvestorEducation and Protection Fund in accordance with the provisions of section 124(5) theCompanies Act 2013 and Rule 4 of the Companies (Declaration & Payment of Dividend)Rules 2014 made thereunder. The unpaid dividend remains outstanding in the books from FY2009-10.
(viii) Default in repayment of bank loan
a) The Company has defaulted in repayment of dues to debenture holders as on thebalance sheet date and as on the date of this report. The Company has also delayedrepayment of dues to financial institutions and banks during the year. The details ofoverdue interest and overdue principal of the Company's borrowings are as follows:
(ix) Application of proceeds of term loans / public offer
The company has applied the term loans obtained during the year towards the purpose forwhich the loans were obtained. During the year under review the Company has not raisedmoneys by way of initial public offer or further public offer (including debtinstruments).
No material fraud on or by the Company has been noticed or reported during thefinancial year under review.
(xi) Managerial remuneration
The Company has not paid or provided managerial remuneration during the year. Hence thecontents of paragraph 3(xi) of CARO 2016 are not applicable to the Company.
(xii) Nidhi Company
The contents of Paragraph 3(xii) of CARO 2016 are not applicable since the Company isnot a Nidhi Company.
(xiii) Related party transactions & compliance with S.177 & 188
For want of complete records we are unable to comment about the transactions withrelated parties and to express our opinion whether these transactions are in compliancewith Sections 177 & 188 of the Companies Act 2013 and the available details thereofhave been disclosed in the financial statements as required by the applicable accountingstandards.
(xiv) Preferential allotment / private placement of shares or convertible debentures& compliance with S 42
According to the information and explanations given to us the Company has not made anypreferential allotment/private placement of shares or fully or partly convertibledebentures during the year.
(xv) Non-cash transactions with directors etc. & compliance with S.192
Except for the effects of the matters described in the basis of the disclaimer ofopinion paragraph of the main report according to the information available as at presentand explanations given to us and based on our examination of the records of the Company the Company has not entered into non-cash transactions with directors or persons connectedwith him.
(xvi) Compliance with S.45IA of RBI Act
The contents of paragraph 3(xvi) of CARO 2016 are not applicable since the company isnot required to register itself with RBI under section 45IA of the RBI Act.
Independent Auditors' Report
To the Members of D. S. Kulkami Developers Ltd.
On standalone Ind AS financial statements
Annexure D Referred to in Paragraph (b)(vi) under the heading "Report on otherlegal and regulatory requirements" of Our Report of Even Date
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 D. S.Kulkarni Developers Ltd. ("the Company") as of 31st March 2020 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining 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 responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under 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 ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether adequateinternal financial controls over
financial reporting were established and maintained and if such controls operatedeffectively 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 its 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 financial statements whether due 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 Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that
a) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
b) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and
c) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over 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 generally operating effectively as at 31 March 2020 basedon 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. However by the end of the year the efficacy of the IFCsystem was adversely affected because of resignation of staff responsible for operatingthe system and delay in appointment of suitable replacements.