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Debock Industries Ltd.

BSE: 535086 Sector: Engineering
NSE: DIL ISIN Code: INE411Y01011
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Debock Industries Ltd. (DIL) - Auditors Report

Company auditors report

To

The Members of Debock Sales & Marketing Limited

Report on the audit of the financial statements Qualified Opinion

We have audited the accompanying financial statements of Debock Sales & MarketingLimited ("the Company") which comprise the balance sheet as at March 31 2021and the Statement of Profit and Loss and statement of cash flows for the year then endedand notes to the financial statements including a summary of significant accountingpolicies and other explanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the CompaniesAct 2013 (‘Act') in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2021 its profit and cash flows for the year endedon that date except for the effects/possible effects of the matters described in Basis forQualified Opinion paragraph below.

Basis for Qualified Opinion

1. As stated in Note 4 to the accompanying Financial Statements the Company haddefaulted in repayment of loans in respect of term loans from banks and financialinstitutions and cash credit from United Bank of India the accounts are considered asNon-Performing Asset (NPA) by all the Banks and Financial Institutions.

Further as the borrowings is considered as NPA from June 2018 no interest has beencharged by the bank and financial institutions since then however the Company hasprovided for interest for the Financial Year 2020-21 on these borrowings. The managementhas approached all banks and financial institutions for considering the proposal ofrestructuring.

Pending Approval/sanction of debt restructuring scheme by lenders and balanceconfirmation from lenders the Company has not provided the overdue/penal interest if anyfor the reason stated in Note no. 4 to the statement. The quantum and its impact if anyon the net profit for the year ended March 31 2021 carrying value of the Borrowings andReserve & Surplus as at March 31 2021 unascertainable.

2. The Company has not provided depreciation on its fixed assets as per Schedule II ofthe Companies Act 2013 read with rule thereunder. The quantum ant its impact if any onthe net profit for the year ended March 31 2021 carrying value of the Borrowings andReserve & Surplus as at March 31 2021 unascertainable.

3. As stated in Note no. 5 to the Statement non-reconciliation / non-confirmation ofcertain receivable accounts. The impact of the same on the Financial Statements if anyis not ascertainable.

4. As on 31.03.2021 the Company shown Capital WIP of Rs. 255.79 Lakhs for which nocapitalization certificates or work completion certificates has been provided and in theabsence of proper audit trail we are unable to quantify the impact arising on account ofnon-capitalization resultant depreciation and consequential impact if any on thefinancial statements for the year under audit.

5. The Company has not provided for doubtful debts for debtors have outstanding formore than 365 days and no transactions during the year. In the absence of properexplanation and audit trail in respect of outstanding we are not in a position to commenton consequential impact of the same on the Financial Statement of the Company for the yearunder audit.

We conducted our audit in accordance with the Standards on Auditing (SAs') specifiedunder section 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Statement section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India ('the ICAl') together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence obtained by us is sufficient and appropriate to provide a basisfor our qualified opinion.

Emphasis of Matters

a. The Company has not provided the supporting documents for sales made during the yearand hence we are unable to comments on the delivery of the goods to the buyer.

b. As explained to us the Company does not have any employees working for more than 5years and hence Provision for Gratuity and Leave Benefits as per AS-15 was not provided inthe books.

c. We draw your attention to these financial statement which describe the Management'sassessment of the impact of COVID-19 pandemic and the resultant lockdowns on thesignificant uncertainties involved in developing some of the estimates involved inpreparation of the financial statements including but not limited to its assessment ofliquidity and going concern recoverable value of its fixed asset and the net realizablevalue of other assets. Based on the information available as of the date Managementbelieves that no further adjustments are required to the financial statements. However inview of the highly uncertain economic impacting the industry a definitive assessment ofthe impact is highly dependent upon circumstances as they evolve in future and the actualresult may differ from those estimated as at the date of approval of these financialstatements.

Our opinion is not modified in respect of these matters.

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 report.

Sr. No. Key Audit Matter
1 Revenue Recognition
(refer Note. 1 related to Revenue)
We focused on this area as a key audit matter due to the risk of incorrect timing of revenue recognition and estimation related to recording the discount and rebates. According to the financial statement' accounting principles revenue is recognized at a point in time when the control of the goods is transferred to the customer according to delivery terms. Due to variation of contractual sales terms and practices across the market and the pressure the management may feel to achieve performance targets there is a risk of material error.
Auditor's Response
To address this risk of material misstatement relating to revenue recognition our audit procedures included:
- Assessing the compliance of company's revenue recognition policies with applicable accounting standards including those related to discounts and rebates.
- Assessing the revenue recognition processes on showroom and online sales.
- Assessing the adequacy of relevant disclosures.
2 Inventory valuation
(refer Note. 1 related to inventories)
Inventory were considered as a Key audit matter due to the size of the balance and because inventory valuation involves management judgement. According to company's accounting policies inventories are measured at the lower of cost or net realizable value.
Auditor's Response
To address the risk for material error on inventories our audit procedures included amongst other:
- Assessing the compliance of company's accounting policies over inventory with applicable accounting standards.
- Assessing the Inventory valuation processes on showroom.
- Assessing the analyses and assessment made by management with respect to slow moving stock.

Information other than the financial statements and auditors' report thereon

The Company's board of directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the Board'sReport including Annexures to Board's Report Business Responsibility Report but does notinclude the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the standalone financial statements or our knowledge obtainedduring the course of our audit or otherwise appears to be materially misstated.

If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Management's responsibility for the financial statements

The Company's board of directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these financial statements that give atrue and fair view of the financial position financial performance and cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the accounting standards specified under section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statement that givea true and fair view and are free from material misstatement whether due to fraud orerror.

In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.

The board of directors are also responsible for overseeing the Company's financialreporting process.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these 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 therisks of material misstatement of the financial statements whether due to fraud or errordesign and perform audit procedures responsive to those risks and obtain audit evidencethat is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher thanfor one resulting from error as fraud may involve collusion forgery intentionalomissions misrepresentations or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theCompanies Act 2013 we are also responsible for expressing our opinion on whether thecompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls Evaluate the appropriateness of accounting policies usedand the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport.

However future events or conditions may cause the Company to cease to continue as agoing concern.

Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves 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 withthose charged with governance we determine those matters that were of most significancein the audit of the financial statements of the current period and are therefore the keyaudit matters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.

Report on other legal and regulatory requirements

As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies

Act 2013 we give in the Annexure "A" a statement on the matters specifiedin paragraphs 3 and 4 of the Order to the extent applicable.

As required by Section 143(3) of the Act we report that:

(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit; (b) In ouropinion proper books of account as required by law have been kept by the Company so faras it appears from our examination of those books; (c) The balance sheet the statement ofprofit and loss and the cash flow statement dealt with by this report are in agreementwith the books of account; (d) In our opinion the aforesaid financial statements complywith the accounting standards specified under section 133 of the Act read with rule 7 ofthe Companies (Accounts) Rules 2014; (e) On the basis of the writtenrepresentations received from the directors as on March 31 2021 taken on record by theboard of directors none of the directors is disqualified as on March 31 2021 from beingappointed as a director in terms of Section 164 (2) of the Act; (f) With respect to theadequacy of the internal financial controls over financial reporting of the Company andthe operating effectiveness of such controls refer to our separate report in"Annexure B". Our report expresses an unmodified opinion on the adequacy andoperating effectiveness of the Company's internal financial controls over financialreporting; (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; a. TheCompany has disclosed the impact of pending litigations on its financial position in itsfinancial statements Refer Note 25 to the financial statements; b. The Company did nothave any long-term contracts including derivative contracts for which there were anymaterial foreseeable losses; and c. There has been no delay in transferring amountsrequired to be transferred to the Investor Education and Protection Fund by the Company

For Mittal & Associates
Chartered Accountants
Firm Registration No. 106456W
SD/-
Hemant R Bohra
Partner
Membership No.: 165667
UDIN: 21165667AAAAEY3101
Place: Mumbai
Date: August 02 2021

Annexure "A" to the Independent Auditor's Report*

(Referred to in paragraph 1 under ‘Report on other legal and regulatoryrequirements' section of our report to the members of Debock Sales & Marketing Limitedof even date)

1. In respect of the Company's fixed assets:

(a) The Company has does not maintained proper records showing full particularsincluding quantitative details and situation of fixed assets.

(b) The Company has a program of verification to cover all the items of fixed assets ina phased manner over a period of three years which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets. However no physicalverification has been carried on by the management during the year due to Lockdown imposedin the Country due COVID-19. Accordingly we were unable to comment on whether anymaterial discrepancies were noticed on such verification and whether they are properlydealt with in the financial statements.

(c) The conveyance and registered deeds were not made available to us for verificationand therefore we are unable to comment on the same.

2. No physical verification of inventories has been carried on by the management duringthe year due to Lockdown imposed in the Country due COVID-19. Accordingly we were unableto comment on whether any material discrepancies were noticed on such verification andwhether they are properly dealt with in the financial statements. physical verificationhas been carried on by the management during the year due to Lockdown imposed in theCountry due COVID-19. Accordingly we were unable to comment on whether any materialdiscrepancies were noticed on such verification and whether they are properly dealt within the financial statements.

3. According to information and explanation given to us the company has not grantedany loan secured or unsecured to companies firms limited liability partnerships orother parties covered in the register required under section 189 of the Companies Act2013. Accordingly paragraph 3 (iii) of the order is not applicable.

4. In our opinion and according to information and explanation given to us the companyhas not complied with the provision of section 185 and 186 of the Companies Act 2013 inrespect of grant of loans making investments and providing guarantees and securities asapplicable.

5. In our opinion and according to the information and explanations given to us thecompany has not accepted any deposits and does not have any unclaimed deposits as at March31 2021 accordingly paragraph 3 (v) of the order is not applicable.

6. The Central Government of India has not prescribed the maintenance of cost recordsunder sub-section (1) of section 148 of the Act for any of the activities of the companyand accordingly paragraph 3 (vi) of the order is not applicable.

7. In respect of statutory dues:

(a) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including provident fund employees' stateinsurance income-tax sales- tax goods and service tax duty of customs duty of excisevalue added tax cess and other material statutory dues have been not regularly depositedduring the year by the company with the appropriate authorities.

According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax sales- taxservice tax goods and service tax duty of customs duty of excise value added tax cessand other material statutory dues were in arrears as at March 31 2021 for a period ofmore than six months from the date they became payable except the following:

Statute Nature of Dues Period to which the amount relates Period of delay Amount Involved (Rs.)#
Income Tax Act 1961 Income Tax AY 2020-21 Approx. 7 months 3249941
(b) # As computed by us and not included any penalty to be levied by the tax authorities. According to the information and explanations given to us and the records of the company examined by us there are no dues of income-tax sales- tax service tax goods and service tax duty of customs duty of excise and value added tax which have not been deposited on account of any dispute except the following:
Statute Nature of dues Amount (Rs.in lakhs) Period to which the amount relates Forum where the dispute is pending
229.66 A.Y. 2015-16 CIT(A)
620.99 A.Y. 2017-18 CIT(A)
Income Tax Act 1961 Income Tax CPC/A.O.
3945.47 A.Y. 2018-19
8.06 A.Y. 2019-20 CPC/A.O.

8 According to the information and explanation given to us and records examined by usthe Company has defaulted in repayment of dues to banks financial institutions andgovernment as detailed in Appendix I to this report. The Company does not have any dues todebenture holders during the year.

9. The Company has not raised any money by way of initial public offer or furtherpublic offer (including debt instruments) and has not taken any term loans during theyear. Accordingly paragraph 3 (ix) of the order is not applicable.

10. To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company or no material fraud on the Company by its officersor employees has been noticed or reported during the year.

11. In our opinion and according to the information and explanations 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 to the Act.

12. The Company is not a Nidhi Company and accordingly paragraph 3 (xii) of the orderis not applicable to the Company.

13. According to the information and explanations given to us and based on ourexamination of the records of the company transactions with the related parties are notin compliance with section 177 and 188 of the Act. Where applicable the details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.

14 According to the information and explanations given to us and based on ourexamination of the records of the company the company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly paragraph 3(xiv) of the order is not applicable.

15 According to the information and explanations given to us and based on ourexamination of the records of the company the company has not entered into non-cashtransactions with directors or persons connected with them. Accordingly paragraph 3(xv)of the order is not applicable.

16 According to the information and explanations given to us and based on ourexamination of the records of the company the company is not required to be registeredunder section 45-IA of the Reserve Bank of India Act 1934.

For Mittal & Associates
Chartered Accountants
Firm Registration No. 106456W
SD/-
Hemant R Bohra
Partner
Membership No.: 165667
Place: Mumbai
Date: August 02 2021

Appendix I

Details of default in payment of dues to banks financial institutions and government

Name of the bank/ Financial Institution Nature of default Amount of default (Rs. In Lakhs) Period of default Present status
United Bank of India (Term Loan and Cash Credit Facility) Principal 559.88 More than 24 months Non- performing Asset
HDFC Bank Principal & Interest 3.72 More than 24 months Non- performing Asset
IDFC First Bank Principal & Interest 21.21 More than 36 Months Non- performing Asset
HDB Financial Services Limited Principal 60.24 More than 24 Months Non- performing Asset
Hinduja Leyland Finance Limited Principal 123.53 More than 24 months Non- performing Asset
Total 768.58

Annexure "B" to the Independent Auditor's Report

(Referred to in paragraph 2 (f) under ‘Report on other legal and regulatoryrequirements' section of our report to the Members of Debock Sales & Marketing Limitedof even date)

Report on the internal financial controls over financial reporting under clause (i) ofsub section 3 of section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of DebockSales & Marketing Limited ("the Company") as at March 31 2021 inconjunction with our audit of the financial statements of the Company for the year endedon that date.

Management's responsibility for internal financial controls

The board of directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013.

Auditors' responsibility

Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the standards on auditing prescribed under Section 143 (10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. 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 were 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 the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement in 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 control 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 (i) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (ii) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (iii) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

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 of 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.

Opinion

In our opinion and according to the information and explanations given to us theCompany has in all material respects an adequate internal financial control system overfinancial reporting and such internal financial controls over financial reporting were notoperating effectively as at March 31 2021 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India.

For Mittal & Associates
Chartered Accountants
Firm Registration No. 106456W
SD/-
Hemant R Bohra
Partner
Membership No.: 165667
Place: Mumbai
Date: August 02 2021

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