To the Members of Harrisons Malayalam Limited
Report on the Audit of the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of HarrisonsMalayalam Limited (the Company') which comprise the Balance Sheet as at 31 March2019 the Statement of Profit and Loss (including Other Comprehensive Loss) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofthe significant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 (Act') in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India includingIndian Accounting Standards
(Ind AS') specified under section 133 of the Act of the state of affairs(financial position) of the Company as at 31 March 2019 and its loss (financialperformance including other comprehensive loss) its cash flows and the changes in equityfor the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (ICAI') togetherwith the ethical requirements that are relevant to our audit of the financial statementsunder the provisions of the Act and the rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have . obtainedissufficient and appropriateto provide abasisfor our opinion
Key Audit Matters
4. 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 financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.
5. We have determined the matters described below to be the key audit matters to becommunicated in our report.
|Key audit matter ||How our audit addressed the key audit matter |
|(a) Land Litigations ||Our audit procedures included but were not limited to the following: |
|The Plantation Companies holds significant land for their operations as disclosed in note 3 to the standalone financial statements. The significant inherently prone to litigation risk. ||We obtained an understanding of the management process for ascertaining the outcome of landholdings are the land litigations and process performed by the management for its assessment. |
|As disclosed in Note No.43(A) of the Standalone financial statements the Company has pending land related litigations with various courtswhich is significant considering the total area of cultivable land. ||We obtained an understanding evaluated and tested controls around management's assessment of the outcome of the land litigations and the testing performed. |
|The land litigations involve interpretation of various land laws applicable in the State of Kerala and Tamil Nadu. ||Obtained an understanding of the nature of litigations pending against the company and discussed the key developments during the year for key litigations with the management and respective legal counsels handling such cases on behalf of the Company. Tested the independence objectivity and competence of such management experts involved. |
|We focused on this area as the eventual outcome of the litigations is uncertain and the positions taken by the management are based on the application of the material judgement and reliance on legal opinions obtained. Accordingly unexpected adverse outcomes may significantly impact the operations of the Company and hence it has been considered as a key audit matter. || |
| ||We also monitored and considered the external information sources to conform our understanding of litigations. |
| ||On a sample basis obtained and reviewed the necessary evidence which includes correspondence with the external legal counsels and where necessary inspected minutes of case proceedings available to support the decisions and rationale of such litigation selected for testing. |
| ||Reviewed each attorney response obtained as above to ensure that the conclusions reached our supported by sufficient legal rationale and adequate information is included for the management to determine the appropriate accounting treatment of such cases in the financial statements. |
| ||Evaluated the disclosures made relating to provisions and contingent liabilities for their appropriateness. |
|(b) Valuation of Finished goods ||Our audit procedures in relation to valuation of inventory included but were not limited to the following: |
|Refer to note 2(j) of Summary of significant accounting policies and other explanatory information for accounting policy for valuation of Inventory and significant assumptions related thereto and the note 8 of the standalone financial statements of the Company for the year ended 31 March 2019. ||We obtained an understanding of the management process for valuation of Finished goods and ensured that the same is consistently applied. accounting judgements estimates and |
| ||Tested the design and operating effectiveness of the internal controls relating to the valuation of Inventories. |
|At the balance sheet date 31 March 2019 the Company held Rs 2947.30 lacs of Inventories. Inventories mainly consists of finished goods which is valued at lower of cost or net realizable value. ||Obtained an understanding on the computation of the net realizable values of the finished goods and tested the reasonableness of the significant judgements applied by the management. |
|The Company values its Finished goods inventory of tea and rubber at lower of cost and net realizable value (estimated selling price less estimated cost to sell). ||Compared the estate wise actual realization subsequent to reporting date and assessed the reasonableness of the net realizable value that was estimated and considered by the management. |
|Considering that there is always a volatility in the selling price of tea and rubber which is dependent upon various market conditions determination of the net realizable value for these commodities involves significant management judgement. Moreover the selling price fetched by tea produced at different estates are different. ||Verified end and assessed the reasonableness of the cost to sell that was estimated and considered by the management. |
|Owing to the significance of the carrying value of inventories the complexities discussed above and the fact that any changes in the management's judgement or assumptions is likely to have a significant impact on the ascertainment of carrying values of inventories we have considered this area as a key audit matter. ||Compared the cost of the finished goods with the estimated net realizable value and checked if the finished goods were recorded at net realizable value where the cost was higher than the net realizable value. |
| ||Further we assessed whether the disclosures related to inventory were appropriate presented in accordance with the applicable accounting standards.. |
Information other than the Financial Statements and Auditor's Report thereon
6. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe financial statements and our auditor's report thereon. The Annual Report is expectedto be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified when it becomes available and in doing so considerwhether the other information is materially inconsistent with the financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated.
When we read the Annual Report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
7. 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 state of affairs (financial position) profit orloss (financial performance including other comprehensive income) changes in equity andcash flows of the Company in accordance with the accounting principles generally acceptedin India including the Ind AS specified under section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of 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 designimplementation and maintenanceofadequateinternalfinancialcontrols that were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the financial statements that give a true and fairview and are free from material misstatement whether due to fraud or error.
8. 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.
9. The Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
10. 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 withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.
11. As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain 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 one resulting from error as fraud may involve collusion forgery intentionalomissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances.Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls system in place and the operating effectiveness ofsuch 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 disclosures are inadequate to modify our opinion. Our conclusions are basedon the audit evidence obtained up to the date of our auditor's report. However futureevents or conditions may cause the Company to cease to continue as a 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.
12. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
13. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
14. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when 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
15. As required by section 197(16) of the Act we report that the Company has paidremuneration to its directors during the year in accordance with the provisions of andlimits laid down under section 197 read with Schedule V to the Act.
16. As required by the Companies (Auditor's Report) Order 2016 (the Order')issued by the Central Government of India in terms of section 143(11) of the Act we givein the Annexure I a statement on the matters specified in paragraphs 3 and 4 of theOrder.
17. Further to our comments in Annexure I as required by section 143(3) of the Act wereport that:
a) we have sought and 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 it appears from our examination of those books; c) the standalonefinancial statements dealt with by this report are in agreement with the books of account;d) in our opinion the aforesaid standalone financial statements comply with Ind ASspecified under section 133 of the Act; e) on the basis of the written representationsreceived from the directors and taken on record by the Board of Directors none of thedirectors is disqualified as on 31 March 2019 from being appointed as a director in termsof section 164(2) of the Act;
f) we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as on 31 March 2019 in conjunction with our audit of thestandalone financialstatements of the Company for the year ended on that date and ourreport dated 29 May 2019 as per Annexure II expressed an unmodified opinion; g) withrespect to the other matters to be included in the Auditor's Report in accordance withrule 11 of the Companies (Audit and Auditors) Rules 2014 (as amended) in our opinion andto the best of our information and according to the explanations given to us:
i. the Company as detailed in notes 34 and 43 to the standalone financial statementshas disclosed the impact of pending litigations on its financial position as at 31 March2019;
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at 31 March 2019;
iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended 31 March2019 and;
iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.
Annexure I to the Independent Auditor's Report of even date to the members of Harrisons
Malayalam Limited on the standalone financial statements for the year ended 31 March2019
Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:
i. (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 assetsunder which fixed assets are verified phased manner over a period of 3 years which inour opinion is reasonable having regard to the size of the Company and the nature of itsassets. In accordance with this program certain fixed assets were verified during theyear and no material discrepancies were noticed on such verification.
(c) According to the information and explanations provided by the Company and therecords of the Company produced to us the title deed of immovable properties asdisclosed in Note 3 on Property plant and equipment to the standalone financialstatements are held in the name of the Malayalam Plantations Limited/Harrisons &Crossfield than as set out below which are in the name of the Company:
| ||Gross Block ||Net Block |
|Land and Building ||Rs 136.72 Lakhs ||Rs 27.52 Lakhs |
ii. In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year and no material discrepancies between physicalinventory and book records were noticed on physical verification.
iii. The Company has not granted any loan secured or unsecured to companies firmsLimited Liability Partnerships (LLPs) or other parties covered in the register maintainedunder Section 189 of the Act. Accordingly the provisions of clauses 3(iii)(a) 3(iii)(b)and 3(iii)(c) of the Order are not applicable.
iv. In our opinion the Company has complied with the provisions of Sections 185 and186 of the Act in respect of loans investments guarantees and security.
v. In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.
vi. 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 undersub-section (1) of Section 148 of the Act in respect of Company's product and are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. However we have not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.
vii. a) Undisputed statutory dues including provident fund employees' state insuranceincome-tax duty of customs goods and service tax cess and other material statutorydues as applicable have generally been regularly deposited to the appropriateauthorities though there has been a slight delay in a few cases. Further no undisputedamounts payable in respect thereof were outstanding at the year-end for a period of morethan six months from the date they became payable (other than arrears of. Rs 259.46 Lakhsrelating to plantation tax (under the Kerala Plantations (Additional Tax) Act 1960)arrears of Rs 276.03 lakhs relating to land tax (under the Kerala Land Tax Act 1961)which are outstanding for a period of more than six months as on the Balance Sheet date).
b) There are no dues in respect of income-tax sales-tax service tax duty of customsduty of excise and value added tax that have not been deposited with the appropriateauthorities on account of any dispute other than those disclosed below:
Statement of Disputed Dues
|Name of the statute ||Nature of dues ||Amount in ||Period to which the amount relates ||Forum where the dispute is pending |
| || ||(Rs Lakhs) || || |
|Income tax Act 1961 ||Income tax and interest thereon ||63.02 ||Year 2006 to 2009 ||Income tax Appellate Tribunal |
| || ||1284.54 ||Year 2003 to 2015 ||AssessingOfficer Commissioner of Income Tax (Appeals) Assessing Officer |
|Kerala Agricultural Income Tax Act 1950/1991 ||Tax on Agricultural income interest and penalty thereon ||503.90 ||Year 1980 to 1999 ||Assessing Officer |
| || ||6.03 ||Year 1995 to 1996 ||Inspecting Assistant Commissioner Department of Commercial Taxes |
|Tamil Nadu Agricultural Income Tax Act 1955 ||Tax on agricultural income ||3.66 ||Year 1988 to 2000 ||Assessing Officer |
|Kerala Value Added Tax Act 2003 ||KVAT and interest thereon ||2963.05 ||Year 2012 to 2015 ||Assessing Officer/Assistant Commissioner (Assessment) VAT Special Circle(Produce) |
viii. The Company has not defaulted in repayment of loans or borrowings to any bank orfinancial institution during the year. The Company did not have any borrowings fromgovernment and did not have any outstanding debentures during the year.
ix. The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments). In our opinion the term loans were applied for thepurposes for which the loans were obtained.
x. No fraud by the Company or on the company by its officers or employees has beennoticed or reported during the period covered by our audit. xi. Managerial remunerationhas been paid / provided by the company in accordance with the requisite approvalsmandated by the provisions of Section 197 of the Act read with Schedule V to the Act.
xii. In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.
xiii. In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the standalone financial statements etc. as required by the applicable IndAS.
xiv. During the year the company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.
xv. In our opinion the company has not entered into any non-cash transactions with thedirectors or persons connected with them covered under Section 192 of the Act.
xvi. The company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
Annexure II to the Independent Auditor's Report of even date to the members ofHarrisons
Malayalam Limited on the standalone financial statements for the year ended 31 March2019
Independent Auditor's Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 (the Act')
1. In conjunction with our audit of the standalone financial statements of HarrisonsMalayalam Limited (the Company') as at and for the year ended 31 March 2019 we haveaudited the internal financial controls over financial the Company as at that date.
Management's Responsibility for Internal Financial Controls
2. The Company's Board of Directors 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 internalcontrols stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the Guidance Note') issued by the Institute of CharteredAccountants of India (ICAI') (the framework'). These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of the Company'sbusiness including adherence to the Company's policies the safeguarding of its assetsthe prevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.
3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India (ICAI') and deemed to be prescribedunder Section 143(10) of the Act to the extent applicable to an audit of IFCoFR and theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting (theGuidance Note') issued by the ICAI. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate IFCoFR were established and maintained and if suchcontrols operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's IFCoFR.
Meaning of Internal Financial Controls over Financial Reporting
6. A company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sIFCoFR include 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
7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that the IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.
8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such controls were operating effectivelyas at 31 March 2019 based on the framework.
| ||For Walker Chandiok & Co LLP |
| ||Chartered Accountants |
| ||Firm's Registration No.: 001076N/N500013 |
| ||Krishnakumar Ananthasivan |
|Place: Kolkata ||Partner |
|Date: 29 May 2019 ||Membership No: 206229 |