To the members Entegra Limited
Report on the Audit of the Standalone Financial Statements
Disclaimer of Opinion
We were engaged to audit the Ind AS Standalone Financial Statements of Entegra Limited("the Company") which comprise the Balance Sheet as at 31st March 2019 theStatement of Profit and Loss (including other Comprehensive Income) the Statement ofChanges in Equity) and the Statement of Cash Flows for the year ended on that date andnotes to the Ind AS Standalone Financial Statements including a summary of significantaccounting policies and other explanatory information (hereinafter referred to as"Standalone Financial Statements").
We do not express an opinion on the accompanying Standalone Financial Statements of theentity. Because of the significance of the matters described in the Basis for Disclaimerof Opinion section of our report we have not been able to obtain sufficient appropriateaudit evidence particularly to ascertain the impact on the financial statements of theCompany of the final outcome of the matters described in the Basis for Disclaimer ofOpinion section mentioned herewith to provide a basis for an audit opinion on theseStandalone Financial Statements.
Basis for Disclaimer of Opinion
1) Refer Note No. 36 to the financial statement which states that we were unable toComment on the investment The Company has an investment in its subsidiary company viz.Shree Maheshwar Hydel Power Corporation Limited (SMHPCL). The shares of the said step downsubsidiary Company were pledged with Power Finance Corporation (PFC) against the loanavailed by SMHPCL. PFC illegally invoked these pledged shares on 2nd December 2016.Against this illegal invocation Entegra approached Ministry of Corporate Affairs forjustice under section 206 of the Companies Act. Apprehending the adverse report PFC movedNational Company Law Tribunal (NCLT) making false allegations against the promoters. NCLTon 15th June 2017 ruled in favor of the Company and further declared among others thatthe invocation of the pledged shares was illegal. Against this judgment PFC appealed toNational Company Law Appellate Tribunal (NCALT) and lost there too. NCLAT in theirjudgment dated 12th March 2018 upheld the NCLT order and made further observations.Against this NCLAT judgment PFC preferred an appeal to the Supreme Court where it wasdismissed in the very first hearing on 18th May 2018. In view of the above the Companycontinues to show the said assets in its books at Cost Rs 61529.90 as the same are Longterm Strategic Investment. In respect of Other Subsidiary amounting to Rs 101.00 theCompany's is of the Opinion that there is no Diminution in value of investment and hencecontinues to carry at cost. Neither valuation of shares was carried out nor shares ofSMHPCL are share still transferred in the name of the Company. In view of the above wewere unable to determine whether any adjustments might have been found necessary inrespect of investment in the Balance Sheet and the corresponding elements making up theStatement of Profit and Loss and Cash Flow Statement.
2) As stated in Note No 37 of the financial statement regarding non-provision ofinterest liability amounting to Rs. 13702.59 Lakhs for the current financial year and nonreceipt of Confirmation of M/s. Edelweiss Asset Reconstruction Company Ltd. (EARCL) whohave been absolutely assigned all rights and interests in the financial assistance of theCompany vide Assignment Agreement dated 28.03.2014 in respect of the Loan which was takenin the earlier years by the Company from Central Bank of India based on managementestimates the liability that exists in the books of accounts would be sufficient to meetthe proposed One Time Settlement (OTS) which will be negotiated with EARCL. The Companyhas not booked total interest on the said loan till 31st March 2019 amounting to Rs.53677.66 Lakhs. On account of the aforesaid non-provision towards interest loss for theyear and borrowing have been has been understated by Rs. 13702.59 Lakhs.
3) As stated in note No 34 of the financial statement regarding non-provision inrespect of Deposit given to one of the party which is shown under the head Long term loansand advances amounting to Rs 200000000. The said deposit is given for occupying rentfree area in the proposed newly constructed building. However the said project is still onhold by the developer but the management is hopeful of its performance in near future. Onaccount of the aforesaid non-provision loss for the year has been understated and depositshown under the head other financial asset have been has been overstated byRs200000000.
4) Note no. 38 regarding balances under the heads heads borrowings Other FinancialLiabilities Trade Payable Loans Other Financial Asset Trade receivable OtherFinancial Assets and Fixed Deposit and three Bank Account being dormant are subject toconfirmation and reconciliation if any from the respective parties and consequentialreconciliation - Amount presently unascertainable.
5) Note No. 39 of the financial statement regarding non-provision Loans Non-currentOther Financial Asset comprising of receivable from holding company and Trade Receivablesamounting to Rs 80.98 Lakhs Rs 6779.55 Lakhs and Rs 423.78 Lakhs respectively againstwhich no recovery has been done. Consequently Loans Non-current Other Financial Assetcomprising of receivable from holding company and Trade Receivables have been overstatedand loss for the year has been understated by Rs. 7284.31 Lakhs.
6) Note No. 40 of the financial statement regarding the fact that the Company has beenincurring constant losses further the Company is a Holding Company of Shree MaheshwarHydel Power Corporation Limited the said has limited development due to various reasonsfurther there are legal cases going on by and against the Company further the Company hasalso been discontinued its business operation it has also been facing cash-flowmismatches if the said project is not revived than the going concern assumption might getimpacted.
7) Refer Note No. 33 to the financial statement the Company which states that theCompany during the year under review has identified and written back Trade Payable andother Payables which are pending for more than 3 years amounting to Rs 198.09 Lakhs as theCompany is of the opinion that the said balance are no longer payable. However there areno documentation or confirmation from the said party for waiver of their amount therebyoverstating loss of the Company and understating Trade payable and Other FinancialLiability to the above extent.
Emphasis of Matter
1) Refer Note No. 3 to the financial statement the Company has filed an applicationwith MPSIDC for agreeing the terms of closure of an outstanding loan against which theCompany made payments aggregating Rs. 220976000 till 11 July 2006. The application isunder evaluation and the Company expects that on finalization of the terms it would notbe required to repay amount exceeding the amount of liability of Rs.522753000 alreadyrecognized in the books. As on the date of the approval of these financial statements aformal decision in respect of the Company's above proposal is yet to be taken by theMPSIDC. On 25 April 2011 the Company has also made a payment of Rs.300 Lakh as partsettlement of this loan liability.
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 year.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. We have determined the following matters to be the Keyaudit matters to be communicated in our Report apart from two matters stated above underthe heading "Basis for Disclaimer of Opinion".
|Key Audit Matter ||Auditor's Response |
|1) The Company was not in the position to pay listing fees hence the exchange has suspended its share trading. Further the Company has also received notices from both the exchanges for non-compliance with the listing terms and for non-payment of listing fees. The Company approached SAT against the delisting order of NSE and presented all the factual positions pertaining to the matter. SAT upheld the Appeal and directed NSE to reconsider their delisting order. ||We have verified all the documents in the said regards. |
|2) The Company which states that the company does not have Company Secretary as well as CFO which is not in line with Section 203 of the Act. ||The said is still pending compliance. |
|3) The Company which states that the Company has not carried out Internal Audit as well as Secretarial Audit as required under the Audit further the Company has also not strictly not complied with Provisions of Companies Act. ||The said is still pending compliance |
|The Company has not carried out Internal The said is still pending compliance Audit as well as Secretarial Audit as required under the Audit further the Company has also not strictly not complied with Provisions of Companies Act. ||The said is still pending compliance |
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial 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 FinancialStatements that give a true and fair view of the financial position financialperformance total Comprehensive Income changes in equity and cash flows of the Companyin accordance with the Ind AS and other accounting principles generally accepted in India.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue 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 as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so. The Board of Directors are also responsible foroverseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our responsibility is to conduct an audit of the entity's Standalone FinancialStatements in accordance with Standards on Auditing and to issue an auditor's report.However because of the matters described in the Basis for Disclaimer of Opinion sectionof our report we were not able to obtain sufficient appropriate audit evidence to providea basis for an audit opinion on these Standalone Financial Statements. We are independentof the entity in accordance with the ethical requirements of the Code of Ethics issued byICAI and as prescribed under the laws and regulations applicable to the entity. We havefulfilled our other ethical responsibilities in accordance with these requirements.
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 India in terms of sub-section (11) of section 143 of the Companies Act2013 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) As described in the Basis for Disclaimer of Opinion paragraph we have sought butwe are unable to obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit;
(b) As described in the Basis for Disclaimer of Opinion paragraph we are unable tostate whether proper books of account as required by law have been kept by the Company sofar as appears from our examination of those books;
(c) Due to the possible effects of the matter described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether The Balance Sheet the Statement ofProfit and Loss including Other Comprehensive Income the Statement of Changes in Equityand the Cash Flow Statement dealt with by this report are in agreement with the books ofaccount;
(d) Due to the possible effects of the matter described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether the Balance Sheet Statement of Profitand Loss including Other Comprehensive Income the Statement of Changes in Equity and theCash Flow Statement dealt with by this report comply with the Indian Accounting Standards(Ind AS) referred to in Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014;
(e) The matter described in the Basis for Disclaimer of Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company;
(f) With Respect to the adequacy of the internal financial control over financialreporting of the Company and the operating effectiveness of such controls we report thatthe Company is exempt from such reporting vide MCA circular No. GSR 583(E) dated13.06.2017 read with General Circular No. 08/2017 dated 25.07.2017;
(g) On the basis of the written representations received from the Directors as on 31stMarch 2019 taken on record by the Board of Directors none of the Directors isdisqualified as on 31st March 2019 from being appointed as a director in terms of Section164 (2) of the Act.
(h) The reservation relating to the maintenance of accounts and other matters connectedtherewith are as stated in the Basis for Disclaimer of Opinion paragraph above;
(i) In our opinion and to the best of our information and according to the explanationsgiven to us no remuneration is paid by the Company to its directors during the year andhence the provisions of section 197 (16) of the Act are not applicable.
(j) 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. Due to the possible effects of the matter described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether the Company has disclosed the impact ofpending litigations on its financial position in its financial statements II. Due to thepossible effects of the matter described in the Basis for Disclaimer of Opinion paragraphwe are unable to state whether the Company has made provision as required under theapplicable law or accounting standards for material foreseeable losses if any onlong-term contracts including derivative contract III. There were no amounts which wererequired to be transferred to the Investor Education and Protection Fund by the Company.
For S K H D& Associates
Firm Registration No. 105929W
Membership No. 151805
Mumbai dated 30th May 2019
Annexure A to Auditors' Report In terms of the information and explanations given to usand the books and records examined by us and on the basis of such checks as we consideredappropriate we further report as under:
1. Fixed Assets
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of its fixed assets bywhich all fixed assets are verified in a phased manner over a period of three years. Nomaterial discrepancies were noticed on such verification.
(c) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company the Company does not have any immovableproperties.
The Company does not have any inventory during the year under review.
3. Loans to parties of Directors' interest
During the year under review Company has not granted any loans/ advances to a bodycorporate representing a party covered in the register maintained under section 189 of theAct. However the Company in its earlier years have given advance to a body corporatebeing parties covered under register maintained under section 189 of the Act. As there isno written documentation made available for the same we cannot comment whether the termsand conditions of the said loans are prima facie prejudicial to the Company's interests.The maximum and closing balances of the said loan are given as under:
|Nature and number of the Parties ||Maximum balance during the year (Rs. In Lacs) ||Closing balance (Rs in Lacs.) |
|Body Corporate - 1 ||8097720 ||8097720 |
As per the records verified by us and based on the explanations given to us theCompany has not given guarantee for loans taken by others from bank.
5. Acceptance of Deposits
The Company has not accepted deposits as per the directives issued by Reserve Bank ofIndia and the provisions of Sections 73 to 76 or any other relevant provisions of the Actand the rules framed there under.
6. Maintenance of Cost Records
As explained to us the Central Government has prescribed during the year under reviewfor the maintenance of cost records under of section 148(1) of the Act. However; theCompany has got the same verified by a Cost Accountant as required.
7. Undisputed & Disputed Statutory Dues
As per the records verified by us the Company is not regular in depositing theundisputed statutory dues involving Provident Fund Customs Duty Value Added Tax IncomeTax Investors Education and Protection Fund Wealth Tax Excise Duty and Service Tax withthe appropriate authorities and there are amount remaining outstanding for more than sixmonths as at the Balance Sheet date in respect of TDS amounting to Rs 15.03 Lacs ServiceTax amounting to Rs. 81.54 Lacs Profession Tax amounting to Rs. 0.08Lacs and Income Taxamounting to Rs.22.26 Lacs the liability in respect of Income tax has not been providedin books.
As per the records verified by us and based on the explanations given to us there wasdisputed Income Tax liability amounting to Rs.198.98 Lacs pertaining to A.Y. 2000-2001with Commissioner of Income Tax(Appeals) with the Company which is lying at any timeduring the year under review.
8. Loans from Banks/Financial Institutions/ Government/Debentures
As stated in basis of qualified opinion of our audit report we are unable to commenton the extent of default in respect of period and amount payable to M/s. Edelweiss AssetReconstruction Company Ltd. (EARCL) in respect of the principal dues aggregating Rs.2750000000 read together with VI.1 of Independent Auditors report for a periodexceeding 1 year.
Further as explained in Note 3 (c) to the financial statements the Company has filedan application with MPSIDC for agreeing the terms of closure against an outstanding loanwhich is currently under evaluation and the Company expects that it would not be requiredto repay an amount exceeding the liability of Rs. 522753000 which is already providedin the books of account.
9. Proceeds of Public issue (including debt instruments) /Term Loans
The Company has not raised any money during the year through initial / further publicoffer. The Company has not raised any new terms loans during the year.
10. Frauds on or by the Company
During the course of our examination of the books and records of the Company carriedout in accordance with the generally accepted auditing practices in India and accordingto the information and explanations given to us we have neither come across any instanceof fraud on or by the Company or its officers/employees noticed or reported during theyear nor have we been informed of such case by the management.
11. Managerial Remuneration
According to the information and explanations give to us and based on our examinationof the records of the Company the Company has paid / provided for managerial remunerationthe same is within the limits prescribed under section 197 read with Schedule V to theAct.
12. Nidhi Companies
The Company is not a Nidhi company during the year under review and hence the criteriaas stipulated under Nidhi Rules 2014 are not applicable to the Company.
13. Related Party Transactions
As per the information and explanations given during the course of our verification inour opinion all transactions with the related parties made by the Company were for thereason sated in paragraph VI.1 of the Independent Auditors report are pending complianceswith Section 188 and Section 177 of the Act to the extent applicable to the Companyduring the year. However the relevant details in respect of the same have beenappropriately disclosed as per the requirements of the Accounting Standard- 18. 14.Preferential Issue
During the year the Company has not made any preferential allotment or privateplacement of shares or convertible debentures and hence the requirements of Section 42 oftheAct are not applicable. 15. Non-cash Transactions with Directors etc.
As per the information and explanations provided to us during the year the Companyhas not entered into any non-cash transactions with directors or persons connected withthe directors within the purview of Section 192 of the Act.
16. Provisions of 45-IAof the Reserve Bank of India Act1934
As per the information and explanations provided to us and based on the overalloperations of the Company during the year the Company is not required to be registeredunder Section 45-IA of the Reserve Bank of India Act 1934.
| ||For S K H D& Associates |
| ||Chartered Accountants |
| ||Firm Registration No. 105929W |
| ||Krunal Furia |
| ||Partner |
|Mumbai dated 30th May 2019 || |
| ||Membership No. 151805 |