To the Members of
ECS BIZTECH LIMITED
Report on the Audit of the financial statements
We have audited the accompanying financial statements of ECS BIZTECH LIMITED ("theCompany) which comprise the balance sheet as at 31st March 2020 and thestatement of Profit and Loss (including other comprehensive income) statement of changesin equity and statement of cash flows for the year then ended and notes to the financialstatements including a summary of significant accounting policies and other explanatoryinformation (hereinafter referred to as 'financial statements').
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 theCompanies 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 2020 and loss and other comprehensive incomechanges in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of thefinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern.
The Company had losses during the previous year and has continued to incur lossesduring the current year primarily due to lower volumes impairment losses and financecosts which have resulted in negative net worth during the year and as at March 31 2020.The net current liabilities as at March 31 2020 were 9.44 Crore. Further the Company hasdefaulted in repayment of principal of Rs. 2.70 crore and interest payable to lenders inrespect of its term loans OTS as on March 31 2020 and has also defaulted in makingpayments to certain overdue creditors. The aforesaid conditions indicate liquidity stressand existence of a material uncertainty that may cast significant doubt about theCompany's ability to continue as a going concern.
The Board of directors has evaluated these conditions and has advised the management totake measures to improve liquidity condition of the Company. The Company is workingthereon. The Company's ability to continue as a going concern is solely dependent onsuccessful outcome of the Management's plans. The Management is confident of obtaining therequired approvals of the lenders and shareholders as stated above for raising adequateresources to meet its financial obligations and continuing business operations in theforeseeable future.
Accordingly these financial statements have been prepared on the basis that theCompany will continue as a going concern and no adjustments have been made to the carryingvalues (including adjustment on account of impairment)
Emphasis of Matter
(1) We draw attention to note No. 26(6) of the financial statement with that thecompany has not offered any formal plans or agreements with individual employees group ofemployees or their representatives for retirement benefits hence its recognitionmeasurement and disclosures are not made.
(2) We draw attention to note No. 26(9) Company has not provided the interest liabilityfor the outstanding Negotiated Settlement amount of Rs. 2.70 cores. Company is in processto settle the issue. Hence interest liability not provided. So its recognitionmeasurement and disclosures are not made.
(2) We draw attention to Note 26(13) of the financial statement which describes thatthe potential impact of COVID-19 pandemic on the financial results of the Company isdependent on future developments which remain uncertain.
Our opinion is not modified in respect of above matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. For each matter below our description of how our auditaddressed the matter is provided in that context.
|Company had losses during the previous year and has continued to incur losses during the year primarily due to lower volumes impairment losses which have resulted in negative net worth during the year and as at March 31 2020. We focused on this area due to the significance of management judgments adopted in assessing the material uncertainties related to going concern. ||We performed the- following principal audit procedures in relation to management's assessment of going concern: |
| ||a) Evaluation of design and implementation of the control relating to management's assessment of impairment of going concern. |
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| ||b) Tested the controls relating to management's assessment of going concern. |
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| ||c) Evaluation of the appropriateness of identification of material uncertainties. d) Analysed and discussed cash flow profits and other relevant forecasts with management. |
| ||e) Analysed impact of the default on the covenants and its impact on the company cash flow for the purpose of the going concern assessment. |
| ||f) Assessed the sensitivities and stress testing on the future cash flows that management has considered for the going concern assessment. |
| ||g) Evaluated disclosure in the financial statements of the Material Uncertainty Related to Going Concern and the related compliance with the requirements of the standard on auditing and applicable reporting |
|(2) Trade receivable Balances Written off of Rs.238976649 as on 31st March 2020. Management's judgment is involved in identifying impairment of the receivable which has an adverse impact on the profit of the company. ||a) Obtained an understanding the process adopted by the Company for calculation recording and monitoring of the impairment loss recognized for expected credit loss; |
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| ||b) We assessed and tested the design and operating effectiveness of key controls over completeness and accuracy of the key inputs and assumptions considered for calculation recording and monitoring of the impairment loss recognized. Also evaluated the controls over the modelling process validation of data and related approvals. |
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|1 ||c) We discussed with the management about the conditions leading to and their assessment of recoverability of dues from the parties and also referred to the available communication if any between them. |
| ||d)We referred to the aging of trade and other receivables and discussed the key balances to establish the management's assessment of recoverability of such dues. |
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Board's report including Annexure toBoard's Report but does not include the financial statements and our auditors' reportthereon.
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 financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information; weare required to report that fact. We have nothing 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 section 134(5) of the Companies Act 2013 ("the Act) with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the accounting Standardsspecified under section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statement that give a true and fair view andare free from material misstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable 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.
Those 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 scepticism throughout the audit. We also:
Identify and assess tin risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting 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. Ourconclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions 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 with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1) As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of Indian terms of sub-section (11) of section 143 of theCompanies Act 2013 we give in the Annexure - A a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
2) 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 Cash Flow Statement dealt with by thisReport are in agreement with the books of account.
(d) In our opinion the aforesaid financial statements comply with the Ind AS specifiedunder Section 133 of the Act.
(e) On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2020 from being appointed as a director in termsof Section 164 (2) of the Act.
(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"
(g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
(i) The Company has disclosed the impact if any of pending litigations as at March31 2020 on its financial position in its financial statements for the year ended March31 2020
(ii) The Company did not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses.
(iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company
For Purushottam Khandelwal & Co.
Firm Registration No. 123825W
CA Prahlad Jhanwar
M. No. 120920
September 3 2020
Annexure A to the Independent Auditors Report
Referred to in paragraph 1 of the Independent Auditors' Report of even date to themembers of ECS Biztech Limited on the financial statements for the year ended March31 2020
1. In respect of Fixed Assets:
(a) The Company is in the process of maintaining fixed asset register showing fullparticulars including quantitative details and situation of fixed assets.
(b) As explained to us physical verification of major fixed assets has been conductedby the management at appropriate intervals. In our opinion the programme is reasonablehaving regard to the size of the Company and the nature of the fixed assets. According toinformation and explanations given to us no material discrepancies have been reported onsuch verification.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.
2. In respect of Inventories:
In our opinion the inventories have been physically verified during the year by themanagement at reasonable intervals and as explained to us no material discrepancies werenoticed on physical verification.
3. In respect of Loan to parties covered in the register maintained under Sec.189:
The Company has not granted any unsecured loans to companies firms and other partiescovered in the Register maintained u/s 189 of the Act hence the provision of clause (iii)(a) (b) and (c) of paragraph 3 of the Order are not applicable.
4. In respect of Loans investments guarantees complied with section 185 & 186:
In our opinion and according to the information and explanations given to us theCompany does not have any transactions to which the provisions of Section 185 apply. TheCompany has compiled with the provisions of Section 186 of the Act with respect to theloans investments guarantees and security.
5. In respect of deposit from Public:
The Company has not accepted deposit from the public within the meaning of Sec.73 to 76and other relevant provisions of the Act and rules framed there under.
6. In respect of maintenance of cost records:
According to the information and explanations given to us the Central Government hasnot prescribed maintenance of cost records under sub-section (1) of Sec.148 of theCompanies Act 2013.
7. In respect of statutory dues:
(a) According to the records of the Company the Company is not regular in depositingwith appropriate authorities undisputed statutory dues including Provident Fund EmployeesState Insurance Income Tax Value Added Tax Service Tax Goods and Service Tax and othermaterial statutory dues applicable to it. According to the information and explanationsgiven to us the amounts of undisputed amounts payable in respect of the aforesaid dues asoutstanding as at 31st March 2020 for a period of more than six months fromthe date of becoming payable are as under:
|Nature of Statute ||Nature of Duty ||Period to which the amount relates ||Amount Rs. ||Due Date ||Date of Payment |
|TDS Defaults ||Income Tax ||Various Years ||1027900 ||Various Dates ||Not yet paid |
|Gujarat State Taxes on Profession Traders and Callings and Employments Act 1976 ||Professional Tax ||2018-19 and earlier years ||394099 ||Various Dates ||Not yet paid |
|Gujarat State Taxes on Profession Traders and Callings and Employments Act 1976 ||Professional Tax ||2019-20 ||52330 ||Various Dates ||Not yet paid |
|Other ||BSE Listing Fees ||2018-19 ||290000 ||30-04- 2018 ||Not yet paid |
|Other ||BSE Listing Fees ||2019-20 ||306850 ||30-04- 2019 ||Not yet paid |
(b) According to the records of the Company there were no disputed statutory dues inrespect of sales tax wealth tax customs duty and cess excise duty which have not beendeposited except the following particulars of income-tax dues not deposited by theCompany on account of dispute as at March 31 2020:-
|Nature of the statue ||Nature of the dues ||Amount in Rs. ||Period to which amount relates ||Forum Where dispute is pending/Status of Demand |
|Income-tax Act ||Income-tax u/s 220(2) ||94389 ||2012-13 ||CPC(Adjusted Against refund of A.Y 2013-14) |
|Income-tax Act ||Income-tax u/s 221(3) ||1393400 ||2012-13 ||CPC(Adjusted Against refund of A.Y. 2013-14) |
8. In respect of dues to financial institution/banks/debentures:
In our opinion and according to the information and explanations given to us theCompany has not defaulted in the repayment of loans or borrowings to financialinstitutions and banks except as under: Particulars Amount of default of repayment Periodof default
|Name of Lender ||Amount ||Period of Default up to 31st March 2020 |
|Edelweiss Assets Reconstruction Company Limited in its capacity as trustee of EARC Trust -SC156 ||270 Lakhs ||Rs. 28 Lakhs for 290 days. And Rs. 242 Lakhs for 198 Days. |
The Company does not have any borrowing from government nor has issued any debentures.
9. In respect of application of term loans:
The Company has not raised any moneys by way of initial public offer further publicoffer and term loans. Accordingly the provisions of Clause 3(ix) of the Order are notapplicable to the Company.
10. In respect of fraud:
Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and as per the information and explanations given bythe management we report that no fraud on or by the Company have been noticed or reportedduring the year.
11. In respect of Managerial Remuneration:
According to the information and explanation given to us and the books of accountsverified by us the managerial remuneration has been paid or provided in accordance withthe requisite approvals mandated by the provisions of Section 197 read with the Schedule Vto the Act.
12. In respect of Nidhi Company:
The company is not a Nidhi Company; hence the provisions of Clause 3(xii) are notapplicable to the Company.
13. In respect of Related Parties Transactions:
According to the information and explanations given to us and based on our examinationof the records of the Company transactions with the related parties are in compliancewith sections 177 and 188 of Companies Act 2013 where applicable and details of suchtransactions have been disclosed in the Financial Statements as required by the applicableaccounting standards.
14. In Respect of Preferential Allotment/ Private Placement:
According to the information given to us during the year the Company has not made anypreferential allotment as private placement of shares or fully or partly convertibledebentures hence the provisions of clause 3(xiv) are not applicable to the Company.
15. In respect of Non-cash Transaction:
According to the information and explanation given to us and the books of accountsverified by us the company has not entered into any non-cash transaction with directorsor person connected with him.
16 In respect of section 75-IA of RBI Act 1934;
The Company is not requiredto be registered under Section 45-IA of the Reserve Bankof India Act 1934
For Purushottam Khandelwal & Co.
Firm Registration No. 123825 W
CA Prahlad Jhanwar
September 03 2020
Annexure B to the Independent Auditors' Report:
Referred to in paragraph 2(f) of the Independent Auditors' Report of even date to themembers of ECS Biztech Limited on the financial statements for the year ended March31 2020
Report on the Internal Financial Controls under Clause fi) of Sub-section 3 of Section143 of the Act:
We have audited the internal financial controls over financial reporting of ECSBiztech Limited ("the Company") as of March 31 2020 in conjunction with ouraudit of the financial statements of the Company for the year ended on that 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 Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India(ICAI). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding 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 (the Act).
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 and the Standards on Auditing deemed to be prescribed under section143(10) of the Act to the extent applicable to an audit of internal financial controlsboth applicable to an audit of internal financial controls and both issued by the ICAI.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial control 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 auditors' 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 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 (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) 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 (3) 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.
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 may 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 control system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note issued by theInstitute of Chartered Accountants of India.
For Purushottam Khandelwal & Co.
Firm Registration No. 123825W
CA Prahlad Jhanwar
Partner M.No.- 120920
September 03 2020