To the members of Dharani Sugars and Chemicals Limited
Report on the audit of the Standalone financial statements
We have audited the Standalone financial statements of Dharani Sugars and ChemicalsLimited ("the Company") which comprise the balance sheet as at March 31 2021and the statement of profit and loss (including other comprehensive income) the statementof changes in equity and the statement of cash flows for the year then ended and notes tothe Standalone financial statements including a summary of significant accountingpolicies and other explanatory information. In our opinion and to the best of ourinformation and according to the explanations given to us subject to the effects of thematter described in the Basis for Qualified Opinion section of our report the aforesaidStandalone financial statements give the information required by the Companies Act 2013("the Act") in the manner so required and give a true and fair view inconformity with the Indian Accounting Standards prescribed under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended ("IndAS") and other accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2021 and its loss total comprehensive income thechanges in equity and its cash flows for the year ended as on that date.
Basis for Qualified Opinion
We draw attention to the following matters:
a) Note 48 to the Standalone financial statements regarding the fact that the all thebanks and financial institutions have classified the borrowings of the Company asnon-performing assets. All the banks and financial institutions have also issued noticecalling back the loans. Considering the above the Company (a) stopped providing intereston the outstanding borrowings from banks and financial institutions and (b) not restatedthe foreign currency loans during the year. In the opinion of the management in view ofthe one-time settlement of the loans sought by the Company there will be no furtherinterest liability on the Company from the NPA date. The application filed for CorporateInsolvency Resolution Process (CIRP) of the company by a financial creditor was admittedon July 29 2021 by the Honourable National Company Law Tribunal ("NCLT") and aninterim resolution professional was also appointed. However we were informed that noofficial communication has been received as on date from the Hon'ble NCLT and the Companywill respond appropriately considering the One Time Settlement (OTS) under negotiationtowards which the Company has already deposited Rs.2631 Lakhs as stipulated by theconsortium of bankers/ financial institutions.
In the absence any specific confirmation of balances received from the banks/ financialinstitutions we are unable to comment on the appropriateness of the aforesaid reversal ofinterest and its impact on the Standalone financial statements is not presentlydeterminable.
b) Note 50 to the Standalone financial statements which explains that subsequent to thereporting date the Hon'ble National Company Law Tribunal Chennai Bench vide its orderdated May 5 2020 admitted a corporate insolvency resolution process (CIRP) and approvedthe appointment of a resolution professional in one of the investee companies. Thecarrying amount of investments as at March 31 2021 is Rs. 1455.53 Lakhs. Subsequent tothe balance sheet date the Hon'ble NCLT has passed an order approving the resolution plansubmitted by one of the resolution applicants. In accordance with the approved resolutionplan no payment will be made towards any amount due to the promoters and their relatedgroup companies by the successful resolution applicant. In our opinion considering thepresent development the entire investments held by the Company in the aforesaid investeeis considered to be not recoverable as per the approved resolution plan. However we wereinformed by the management that a major part of the assets of the investee comprises ofland and commercial buildings (including a well-known brand name in the hotel industry)whose liquidation value is much higher than the total dues to its financial and operatingcreditors (including that of the Company) and the resolution plan approved is not in linewith the actual value of the assets. The management also confirmed that the resolutionprofessional has not followed the due process of CIRP and accordingly the resolution planapproved is not proper as per law. It was also informed to us that the investee has filedan application before the Hon'ble National Company Law Appellate Tribunal praying forquashing the order of the Hon'ble NCLT and a decision is yet to be made by the Hon'bleNational Company Law Appellate Tribunal. Accordingly in the opinion of the managementthe Company will still able to recover the entire carrying amount of the investee even inthe aforesaid CIRP conditions. Based on the above estimate made by the management noadjustment has been made in the fair value of such investment.
Due to uncertainties involved in the CIRP process as detailed above the impact ifany on the Statement are not presently determinable in respect of the above matter.
c) As more fully described in the Material Uncertainty Relating to Going Concernsection of our opinion on the Standalone financial statements there is significant doubtabout the Company's ability to continue as going concern and the consequential impairmenton the carrying value of the financial and non-financial assets of the Company. We areunable to comment on the appropriateness of preparing the Statement on a going concernassumption and the impact if any arising out of the above matter is not presentlydeterminable.
d) Our audit report on the Standalone financial statements is qualified in respect ofmatters referred to clauses (a) to (c) above. The above matters have been qualified in theearlier years as well.
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 Standalone financialstatements section of our report. We are independent of the Company in accordance with thecode of ethics issued by the Institute of Chartered Accountants of India("ICAI") together with the ethical requirements that are relevant to our auditof the Standalone financial statements under the provisions of the Act and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the ICAI's code of ethics. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to the following
(a) The Company's net worth is negative and it continue to incur huge losses in itsoperations. We understand from the management that the poor performance of the Company ismainly due to low availability of sugarcane for crushing as planting areas are beingcontinuously reduced due to continuous draught and the general slowdown in sugar industrydue to factors like failure of monsoon varietal degeneration reduced recovery declinein area under cultivation and the resultant reduction in capacity utilisation of sugarmills. This being a general industry issue a formal representation was made by the SouthIndian Sugar Mills Association (SISMA) in which the Company is a member to the Hon'blePrime Minister and the Chief Minister of Tamil Nadu for announcing revival packages forthe sugar industry. SISMA expects that its demands will be considered by the Central andState Governments favourably.
(b) We were informed that
(1) in the meeting with the Hon'ble Union Finance Minister SISMA has submitted arequest for restructuring of loans to sugar mills considering the status of Sugar industryin Tamilnadu. Pursuant to the directions of the Hon'ble Union Finance Minister theMinistry of Finance had organised a joint meeting of the senior officers of Reserve Bankof India (RBI) Ministry of Finance Food Ministry Tamilnadu State Government Farmers'Associations and SISMA. The meeting was held on September 24 2019 and deliberated on thesupportive measures including restructuring of accounts required for the revival of sugarunits in Tamilnadu;
(2) SISMA has also sent a letter to the State Level Bankers Committee (SLBC) andrequested to keep in abeyance the recovery proceedings initiated against sugar units inTamilnadu including proceeding before the SARFAESI Hon'ble National Company Law Tribunal(NCLT) and Debt Recovery Tribunal (DRT) considering the discussions arising out of theabove meeting;
(3) the Hon'ble Chief Minister of Tamilnadu has also sent a communication to theHon'ble Union Finance Minister requesting to direct the bankers to restructure of loansgiven to the sugar industry and not to take any harsh measures under SARFAESI Insolvencyand Bankruptcy Code and DRT vide D.O letter dated October 24 2019 and press releaseNo.725 dated October 26 2019 until the sugar sector is revived;
(4) SISMA has written on January 28 2020 to The Joint Secretary - Sugar Departmentof Food and PD seeking rescheduling of SDF loans availed by TN Sugar Mills;
(5) on a petition filed by the Company and others the Hon'ble Supreme Court of Indiaon April 2 2019 declared the RBI circular dated February 12 2018 as "ultra-viresSection 35AA of the Banking Regulation Act". Further the Company has submitted aresolution plan to the consortium of banks for restructuring the loans. The resolutionplan was rejected by the consortium of banks in the Joint Lender's Meeting held on May 222019;
(6) SISMA representatives against met the Hon'ble Chief Minister of Tamil Nadu toexpress the further distress faced by the sugar industry coupled with Covid'19 andaccumulating dues from TANGEDCO. Based on the representations the Government of Tamilnaduordered for release of outstanding TANGEDCO dues to the sugar mills by granting subsidyand advance subsidy for 2020-21 to TANGEDCO. This is expected to give a reasonable reliefto the sugar mills to manage the working capital requirements;
(7) SISMA has made another representation to the Hon'ble Union Finance Minister videits letter No.GS7/ 43/ 2020 dated July 21 2020 highlighting the fact that out of 25private sugar mills in the State of Tamil Nadu 12 mills remain closed during the currentseason leading to widespread job losses while the banks have initiated aggressive recoverymeasures by referring the accounts of the above mills to Hon'ble NCLT/ DRT. SISMArequested to implement support measures like restructuring of debts availed from banks/financial institutions/ sugar development funds keeping in abeyance the recoveryproceedings initiated against financially stressed mills before NCLT/ DRT till such arevival package is implemented extending soft loans under credit guarantee scheme directsubsidy to cane farmers towards FRP payment for the portion of FRP which has becomeunaffordable to the mills due to low sugar recovery advising banks to liberally disbursecrop loans to farmers etc. SISMA expects that considering the possibility of ruralcommunity job losses loss of livelihood of the rural population and the massive adverseimpact on the rural economy the Union Finance Ministry will implement the revivalpackages as requested in the immediate near future;
(8) Despite the above matters relating to industry issues requiring policy decisions atvarious levels and submissions being under consideration by the Central and StateGovernments to revive the sugar units in Tamilnadu one of the bankers has filed aninsolvency petition with Hon'ble NCLT for corporate insolvency resolution process onAugust 14 2019. The Company has replied stating that the entire sugar Industry inTamilnadu is passing through a distressing period and that the Bank has failed to adhereto the Prudential Framework for Resolution of Stressed Assets and that the bank hasignored the consortium arrangement and independently proceeded for recovery of its portionof debt. The said Bank has also sent in parallel an intimation letter for scheme of OneTime Settlement (BOI OTS 2019) dated October 31 2019 received by the Company on November8 2019. The Company replied to the Bank offering an OTS proposal vide letter datedDecember 17 2019 and January 21 2020 and the same is under negotiation. During thehearings held on February 10 2020 and March 3 2020 the said bank informed the Hon'bleNCLT about the OTS proposal submitted by the Company along with the initial deposit as perthe OTS proposal and sought time for its decision to review the OTS proposal. Accordinglythe Hon'ble NCLT posted the case for further hearing. The next hearing is postponed toFebruary 15 2021.On the hearing held on February 15 2021 the Hon'ble NCLT posted thecase for further hearing on July 20 2021. On the hearing held on July 20 2021 theCompany was asked to submit a written summary of the hearings held so far regarding theCase.
(9) In the interim in the meeting of the Consortium of Banks was held on May 5 2021the Consortium of Banks have agreed for the OTS proposal of the Company to settle 55% ofthe total amount of borrowings outstanding with certain conditions. The company hasdeposited Rs.2631 Lakhs as per the terms of the OTS and is in the process of complyingwith the other conditions of the OTS; and
(10) However the CIRP filed by the said bank was admitted by the Hon'ble NCLT and aninterim resolution professional was appointed on July 29 2021 the official communicationfrom the Hon'ble NCLT is yet to be received by the Company. The above factors cast asignificant doubt on the Company's ability to continue as a going concern. Pendingresolution of the above uncertainties the Company has prepared the Standalone financialstatements on a going concern basis. This is qualified by us in the Basis forqualification section of our report on the Standalone financial statements.
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 no other key audit matters to report other than those described in the Basisfor Qualified Opinion and in the Material Uncertainty Related to Going Concern sectionsour report on the Standalone financial statements.
Emphasis of Matters
We draw attention to Estimation of uncertainties relating to the global health pandemicfrom COVID-19 section of Note 2 to the standalone financial statements which describes theuncertainties and the impact of Covid-19 pandemic on the Company's operations and resultsas assessed by the management. Our opinion is not modified in respect of the abovematters.
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 ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the financial statements and our auditor's report thereon.
Our opinion on the Standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon. In connection with ouraudit of the Standalone financial statements our responsibility is to read the otherinformation and in doing so consider whether the other information is materiallyinconsistent with the Standalone financial statements or our knowledge obtained during thecourse 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 is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these Standalone financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act readwith the Companies (Indian Accounting Standards) Rules 2015 as amended from time totime and other accounting principles generally accepted in India.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe Standalone financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
In preparing the Standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The board of directors are also responsible for overseeing the Company's financialreporting process.
Auditors' responsibilities for the audit of the standalone financial statements
Our objectives are to obtain reasonable assurance about whether the Standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these Standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal controls 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 used and the reasonableness ofaccounting 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 asa going 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.
Materiality is the magnitude of misstatements in the Standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in
(i) planning the scope of our audit work and in evaluating the results of our work; and
(ii) to evaluate the effect of any identified misstatements in the financialstatements.
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 alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships 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 Annexure "A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order.
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 our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
(c) The balance sheet the statement of profit and loss including other comprehensiveincome statement of changes in equity and the statement of cash flow dealt with by thisreport are in agreement with the books of account;
(d) In our opinion the aforesaid financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act subject to our comments inthe Basis of Qualified Opinion Paragraph of our report;
(e) On the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2021 from being appointed as a director in terms of Section 164 (2) of theAct;
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting;
(g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended in our opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of section 197 of the Act; and
(h) 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. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements Refer Note 40 to the financial statements;
b. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long- term contracts includingderivative contracts; and
c. There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.
Annexure "A" to the Independent Auditor's Report
(Referred to in paragraph 1 under Report on other legal and regulatoryrequirements' section of our report to the members of Dharani Sugars and Chemicals Limitedof even date)
1. In respect of the Company's fixed assets:
(a) The Company has maintained proper records showing full particulars includingquantitative 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.
Pursuant to the program certain fixed assets were physically verified by themanagement during the year. According to the information and explanations given to us nomaterial discrepancies were noticed on such verification.
(c) According to the information and explanations given to us the records examined byus and based on the examination of the conveyance deeds provided to us we report thatthe title deeds comprising all the immovable properties of land and buildings which arefreehold are held in the name of the Company as at the balance sheet date. In respect oftitle deeds for properties given as security for the loans taken the Company is in theprocess of getting the confirmation from the respective banks/ financial institutions.
2. The inventory has been physically verified by the management during the year. In ouropinion the frequency of such verification is reasonable. However due to the lockdownrestrictions imposed by the Central and State Government following the Covid'19 pandemicthe Company could not carryout physical verification of inventory as at the reportingdate. Since we could not observe the physical inventory verification because of the travelrestrictions imposed due to Covid'19 we were unable to comment on whether any materialdiscrepancies were noticed on such verification and whether they are properly dealt within the standalone financial statements. However the impact if any is not considered tobe material to the financial statements since the Company has minimal operations due toCovid 19 during the year.
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 granted any loans or provided any guarantees or given any security to which theprovision of section 185 of the companies Act are applicable.
In respect of investments made by the Company the Company had complied with theprovisions of section 186 of the Companies Act 2013.
5. In our opinion and according to the information and explanations given to us thecompany has not accepted any public deposits and accordingly paragraph 3 (v) of the orderis not applicable.
6. We have broadly reviewed the books of account maintained by the Company pursuant tothe rules made by the Central Government for the maintenance of cost records under section148 of the Act and are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained. However we have not carried out a detailedexamination of the same.
7. According to the information and explanations given to us in respect of statutorydues:
(a) The Company has not been regular in depositing undisputed statutory dues includingprovident fund employees' state insurance income tax sales tax service tax valueadded tax goods and services tax customs duty excise duty cess and other materialstatutory dues applicable to it with the appropriate authorities taking into account theextended due dates notified by the respective authorities pursuant to Covid'19.
(b) There were no undisputed amounts payable in respect of employees' state Insurancesales tax service tax value added tax goods and services tax customs duty exciseduty cess and other material statutory dues in arrears as at March 31 2021 for a periodof more than six months from the date they became payable except the dues of providentfund and income tax as detailed below:
|Name of the Statute ||Nature of dues ||Amount (Rs.in lakhs) ||Period to which the amount relates |
|Employees Provident Fund Scheme 1952 ||Provident Fund ||303.48 ||November 2019 till March 2021 |
|Income Tax Act 1961 ||Tax deducted at Source ||7.52 ||April 2020 till March 2021 |
Tax which have not been deposited as at March 31 2021 on account of dispute are
|Statute ||Nature of dues ||Amount (Rs. in lakhs) ||Period to which the amount relates ||Forum where the dispute is pending |
|Finance Act 1994 ||Service Tax on Goods Transport Agency ||48.01 ||April 2008 to April 2013 ||CESTAT - Chennai |
|Central Excise Act 1944 ||CENVAT credit on Capital goods ||85.37* ||Sep 2008 to Feb 2010 ||CESTAT- Chennai |
*Net of Amount paid under protest
8. According to the information and explanation given to us and records examined by usthe Company has defaulted in repayment of dues to banks and financial institutions and allthe lenders have classified the loans as non-performing assets and also issued noticescalling back the loans. We were informed that the Company has submitted One TimeSettlement proposal which is under negotiation.The Consortium of banks in their meetingheld on May 05 2021 have agreed for the proposal of settling 55% of the total loansoutstanding. Subsequent to the balance sheet the Company has deposited Rs 2631 Lakhs asstipulated in the OTS.
The CIRP filed by the banks was admitted by the Hon'ble NCLT and an interim resolutionprofessional was appointed on July 29 2021 the official communication from the Hon'bleNCLT is yet to be received by the Company.
The Company does not have any outstanding loans to government and any dues to thedebenture holders during the year.
9. In our opinion and according to the information and explanations given to us theCompany has not taken any terms loans during the year. The Company has not raised anymoney by way of initial public offer or further public offer (including debt instruments)during the year.
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 incompliance 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.
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 Dharani Sugars and Chemicals 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 DharaniSugars and Chemicals 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.
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 of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(ii) 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
(iii) 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 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.
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 wereoperating 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 CNGSN & ASSOCIATES LLP |
| ||Chartered Accountants |
|Firm's Registration No. 004915S/ S200036 || |
| ||(CHINNSAMY GANESAN) |
| ||Partner |
|Place : Chennai ||Membership No. 027501 |
|Date: July 302021 ||UDIN : 21027501AAAACW8974 |