The Members of
GARG FURNACE LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Garg FurnaceLimited ("the Company") which comprise the Balance Sheet as at March 31 2019the Pro t and Loss Statement (including Other Comprehensive Income) the Statement ofchanges in Equity and Cash Flow Statement for the year ended on that date and a summaryof significant accounting policies and other explanatory information(hereinafter referredto as "the standalone financial statements").
In our opinion and to the best of our information and according to explanations givento us subject to our comments in below paragraph the aforesaid standalone financialstatements give the information required by the companies Act2013("the act") inthe manner so required and give a true and fair view in conformity with the Indianaccounting standards prescribed under section 133 of the Act read with the companies(Indian Accounting Standards) Rules2015 as amended ("ind AS") and otheraccounting principles generally accepted in India of the state of affairs of the Companyas at March 312019 the profit and total comprehensive income changes in equity and itscash flows for the year ended on that date.
Basis for Qualified Opinion
We conducted our audit of the standalone financial statements in accordance with thestandards on auditing specified under section 143(10) of the Act(SAs). Ourresponsibilities under those standards are further described in the Auditor'sResponsibilities for the Audit of the standalone financial statements section of ourreport. We are independent of the company in accordance with the code of ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the independencerequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Act and Rules made thereunder and we have ful lled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the standalone financial statements.
(i) The Company has not appointed Internal Auditor as required by sec. 138 of theCompanies Act 2013 read with rule 13 and has not appointed the Company Secretary asrequired by sec 203 of the companies Act 2013 read Companies (Appointment andremuneration of managerial personnel) rules 2014.
(ii) The management of the company has represented us that the recoverable amount ofassets within the meaning of IND AS 36 'Impairment of Assets' is more than their carryingvalue and as such no amount needs to be recognized in the financial statements forimpairment loss. In the absence of the workings of impairment having been prepared andmade available to us for our review we are unable to comment on whether the company needsto make a provision in respect of impairment loss on such assets and the amount of suchprovision.
(iii) The company has not arranged to make available the confirmations and/orreconciliations to verify the balances stated in the financial statements in respect ofTrade Receivables Loans & Advances & Trade payables.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsigni cance 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. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Key Audit Matter ||Auditor's Response |
|1. The Company has done major transactions with related party under section 188 of Companies Act 2013. However we are unable to comment whether these transactions are at arm length basis ||We have obtained and relied upon: |
| ||??Approval of Shareholders obtained under section 188 of the Companies Act 2013. |
| ||??Quarterly Corporate Governance Report led by the Company. |
| ||??The Company has represented to us that the transactions were done at Arm's length basis. |
| ||??Board Resolution led for the same. |
|2. The One Time Settlement Scheme of Company was sanctioned as a result the Company has recognized amount of ` 1137 lacs in Exceptional items against the waiver of loan. ||??The OTS for `4500 lacs of the Company was sanctioned on 13/08/2018 and as a result the Company got a waiver of loan of `2250 lacs if it pays the OTS amount as per the repayment schedule approved. Accordingly the Company has paid around `2275 lacs till 31.03.2019 which is approximately 50 per cent of the total dues settled. Therefore the Company has recognized proportionate amount of `1137 lacs in Exceptional items against the waiver of loan. |
| ||??We have obtained the copy of approval letter of OTS Management Representation Letter and Board Resolution passed to recognize the above said amount. |
| ||??Further as per Ind AS 109 "Financial Instruments" the difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid including any non- cash assets transferred or liabilities assumed shall be recognized in profit or loss. |
Emphasis of Matter
We draw attention to the following:
a) The company has not provided for the interest on borrowings amounting to ` 4929 lacspertaining to year ended 31st March 2019 as the account has become NPA in FY 2015-16 andaction u/s 13(4) of SARFAESI Act 2002 has been taken. However the OTS of the Company wassanctioned on 13/08/2018.
b) Note 37 related to appeal lled by the Company against demand of Punjab PowerCorporation Ltd. is decided against the Company and it has paid the demand raised byPunjab Power Corporation Ltd.
However our opinion is not modi ed in respect of these matters.
Information other than the Standalone Financial Statements and Auditor's Report Thereon
The company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information include 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 standalone 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 our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during 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 Standalone Ind AS 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 totalComprehensive Income changes in equity and cash flows of the Company in accordance withInd AS and other accounting principles generally accepted in India. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding the assets of the company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the designimplementation 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 Standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
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 SA's 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 standalone 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 asbasis 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 financial controls relevant to the audit in orderto design audit procedures that are appropriate in the circumstances. Under section143(3)(I) of the act 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 ofthe 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 audit evidence obtained whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the company's abilityto continue as going concern if we conclude that a material uncertainty exists we arerequired to draw attention in our auditor's report to the related disclosures in thestandalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the company to cease tocontinue as a going concern.
? Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in manner that achieves fairpresentation.
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 in uenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit ndings 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 signi cance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablebe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by section 143(3) of the Act we report that:
a) We have sought & obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit.
b) In our opinion proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books.
c) The Balance Sheet the Statement of Pro t and Loss including other comprehensiveincome Cash Flow Statement and statement of changes in equity dealt with by this Reportare in agreement with the books of account.
d) In our opinion the aforesaid Standalone financial statements comply with the Ind ASspecified under Section 133 of the Act read with rule 7 of the Companies (Accounts)Rules 2014.
e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disquali edas on March 31 2019 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 A". Our report expresses an unmodi ed opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
g) With respect to other matters to be included in the Auditor's Report in accordancewith requirements of section 197(16) as amended;
In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the company to its directors during the year is inaccordance with the provisions of section 197 of the Act.
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 as amended inour opinion and to the best of our information and according to the explanations given tous:
i) The Company has disclosed the impact of pending litigations on its financialpositions in its financial statements.
ii) The Company does not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses.
iii) There were no amount which were required to be transferred to Investor Educationand Protection Fund by the company.
2. As required by the Companies (Auditor's Report) Order2016("the order) issuedby the Central Government in the terms of Section 143(11) of the Act we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the order.
For R.K Chadha & Co.
M. No. 518195
Date : 30-05-2019
"ANNEXURE A" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1(f) under 'Report on other legal and regulatoryrequirements' section of our report to members of Garg Furnace Limited
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of GargFurnace Limited ("the Company") as of March 31 2019 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.
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 including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls 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 of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) 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
(3) 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.
Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
For R.K Chadha & Co.
M. No. 51895
Date : 30-05-2019
ANNEXURE B TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in Paragraph 2 under the Heading of "Report on Other Legal andRegulatory Requirements' of our Audit Report of Even Date)
(i) a). The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b). All the assets have not been physically verified by the management during the yearbut there is a regular programme of verification which in our opinion is reasonablehaving regard to the size of the company and the nature of its assets. No materialdiscrepancies were noticed on such verification.
c). The title deeds of immovable properties are held in the name of the company.
(ii) a) The management has conducted the physical verification of inventory atreasonable intervals.
b) The discrepancies noticed on physical verification of the inventory as compared tobooks records which has been properly dealt with in the books of account were notmaterial.
(iii) According to the information and explanations given to us and on the basis of ourexamination of the books of accounts the company has not granted any loans secured orunsecured to companies firms or other parties listed in the register maintained undersection 189 of the companies Act 2013. Consequently the provisions of clauses iii (a) to(C) of the order are not applicable to the company.
(iv) In our opinion and according to the information and explanations given to us thecompany has not given any loans investments guarantees and security under theprovisions of section 185 and 186 of the Companies Act 2013. Accordingly the provisionsof clause 3 (iv) of the Order are not applicable to the Company.
(v) According to the information and explanations given to us the Company has notaccepted any deposits from the public and hence the directives issued by the Reserve Bankof India and the provisions of Sections 73 to 76 or any other relevant provisions of theAct and the Companies (Acceptance of Deposit) Rules 2015 with regard to the depositsaccepted from the public are not applicable.
(vi) We have broadly reviewed the books of account relating to materials labour andother items of cost maintained by the company pursuant to the Rules made by the CentralGovernment for the maintenance of cost records under section 148(1) of the Companies Act2013 and we are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained. We have however not made a detailed examination of the recordwith a view to determine whether they are accurate or complete.
(vii) a). The Company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund employees' state insurance income tax salestax custom duty excise duty cess service tax and other material statutory duesapplicable to it with appropriate authorities.
b). There were no undisputed amounts payable in respect of provident fund Employees'State insurance Income Tax Goods and Service Tax Customs duty cess and other materialstatutory dues in arrears as at March312019 for a period of more than six month fro thedate they become payable.
c). According to the information and explanation given to us there are no dues of salestax income tax Goods and Service Tax excise duty and value added tax which have notbeen deposited on account of any dispute.
(viii) According to the information and explanation given to us the company hasdefault in repayment of dues to banks and financial institutions. The detail of defaultare as under:
|Particulars ||Amount (` in lacs) ||Nature of dues ||Date since overdue |
|1. Indian Bank - MTL1 ||164.60 ||Principal ||01.09.2015 |
| ||71.00 ||Interest (Term Loan) || |
|2. Indian Bank - MTL2 ||393.29 ||Principal ||01.09.2015 |
| ||197.00 ||Interest (Term Loan) || |
|3. Indian Bank - MTL3 ||199.09 ||Principal ||01.10.2015 |
| ||99.00 ||Interest (Term Loan) || |
|4. Indian Bank - OCC ||3350.00 ||Amount Overdue ||01.12.2015 |
| ||2319.00 ||Interest (Working Capital) || |
|5. Indian Bank - OCC Adhoc ||350.00 ||Amount Overdue ||01.09.2015 |
| ||238.00 ||Interest (Working Capital) || |
|6. Indian Bank - LC/BC ||2327.00 ||Amount Overdue ||01.01.2016 |
| ||2005.00 ||Interest (Working Capital) || |
(ix) The Company has not raised moneys by way of initial public offer or further publicoffer(including debt instruments) or term loans and hence reporting under clause 3(ix) ofthe order is not applicable to the company.
(x) Based upon the audit procedures performed and the information and explanationsgiven by the management we report that no fraud by the Company or on the company by itsofficers or employees has been noticed or reported during the year.
(xi) Based upon the audit procedures performed and the information and explanationsgiven by the management the managerial remuneration has been paid or provided inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Companies Act;
(xii) In our opinion the Company is not a Nidhi Company. Therefore the provisions ofclause 4 (xii) of the Order are not applicable to the Company.
(xiii) In our opinion all transactions with the related parties are in compliance withsection 177 and 188 of Companies Act 2013 and the details have been disclosed in theStandalone Ind AS Financial Statements as required by the Ind AS
24 but we are not able to comment up on Arm length price of these transactions.Howeverthe company has complied all the procedures prescribed under section 188 for obtainingshareholder's approval.
(xiv) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year underreview. Accordingly the provisions of clause 3 (xiv) of the Order are not applicable tothe Company.
(xv) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not entered into any non-cash transactions withdirectors or persons connected with him and hence provisions of section 192 of thecompanies Act2013 are not applicable to the Company.
(xvi) In our opinion the company is not required to be registered under section 45 IAof the Reserve Bank of India Act 1934 and accordingly the provisions of clause 3 (xvi)of the Order are not applicable to the Company.
| || ||Sd/- |
| ||For R.K Chadha & Co. ||Paresh Chadha |
|Place: LUDHIANA ||Chartered Accountants ||Partner |
|Date : 30-05-2019 ||FRN. 003513N ||M. No. 51895 |