To the Members of Hotel Leelaventure Limited Report on the StandaloneFinancial Statements Opinion
We have audited the accompanying standalone financial statements of HotelLeelaventure Limited ("the Company") which comprise the Balance Sheet as at31st March 2019 the Statement of Profit and Loss (including other comprehensive Income)the Statement of Changes in equity and the Statement of cash flows for the year ended onthat date and notes to the financial statements including a summary of significantaccounting policies and other explanatory information (hereinafter referred to as"the standalone financial statements").
In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standards(Ind AS) specified under section 133 of the Act and other accounting principles generallyaccepted in India of the state of affairs of the Company as at 31st March 2019 and Lossincluding Other comprehensive income changes in equity and its cash flows for the yearended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditingspecified under section 143(10) of the Act. Our responsibilities under those standards arefurther described in the Auditor's responsibilities for the audit of the financialstatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India (ICAI) 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 obtained is sufficient and appropriate to providea basis for our opinion.
Emphasis of Matter
We draw attention to the following matters in notes to the standalonefinancial statements:-
Note 34.1 (b) relating to non-provision of interest payable to AssetReconstruction Companies (ARCs) amounting to Rs.87321 lakhs for the year (previous yearRs.78873 lakhs). If the interest and other finance cost as notified by the ARCs wereprovided in the books of accounts the loss for the year would have been higher byRs.87321 lakhs (previous year Rs.78873 lakhs) and the interest liability till 31stMarch 2019 would have been higher by Rs.390466 lakhs (previous year Rs.303145 lakhs).Further the Other Equity would have been negative to the extent of Rs.376509 lakhs(previous year Rs.277320 lakhs).
Note 34.1(c) relating to a binding Agreement with BSREP III INDIABALLET PTE. LTD. (Brookfield) on 18th March 2019 to sell its hotel business undertakingat New Delhi Udaipur Bengaluru and Chennai Hospitality and hotel operations businessand its 100% shareholding in its subsidiary Company which owns property at Agra and allintellectual property owned by the company used in and held for use in the hotels ownedand managed by it for an amount of Rs. 395000 lakhs and one-time settlement with lendersout of the said proceeds subject to their approval.
Note 34.1(d) & 34.1(e) relating to petition / complainants made bythe minority shareholder/s to Securities & Exchange Board of India (SEBI) and NationalCompany Law Tribunal (NCLT) alleging oppression and mismanagement by the majorityshareholders against minority shareholders and restraining the company from completing orattempting to complete the transaction referred herein Note 34.1(c).
Note 34.2(a) relating to enhancement in lease rentals unilateraltermination of lease agreement of 18000 sq. mtrs. of land by Airports Authority of India(AAI) relating to Mumbai hotel and eviction proceedings initiated by them which theCompany is legally contesting. Disputed amount not provided in the Books for the period upto 31st March 2019 cumulatively amounts to Rs. 5184 lakhs (previous year Rs.3877lakhs).
Note 34.2(b) relating to the demands made by AAI relating to RoyaltyMinimum Guarantee Fees in respect of 11000 sq. mtrs. of land in Mumbai cumulativelyamounting to Rs.80705 lakhs up to 31st January 2019 (Previous Year Rs.28537 lakhs up to31st January 2017) not provided in the Books as the liability is disputed and notcrystalized as per the legal opinion and the additional cost the company may have to incurtowards restoration of FSI which is not ascertainable.
Material uncertainty related to Going Concern
We draw attention to Note no.34.4 in the Standalone FinancialStatements regarding the preparation of financial statements on going concern basis forthe reasons stated therein. However matters stated in Emphasis of Matter above indicatethat a material uncertainty exists that may cast significant doubt on company'sability to continue as a going concern. As stated in Note no. 34.4 the appropriateness ofassumption of going concern is dependent upon the conclusion of the transaction withBrookfield one-time settlement of dues with the lenders and getting favorable judgment /orders in respect of disputes with Airports Authority of India and continuing the MumbaiHotel operations.
Our conclusion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the 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 be the key auditmatter to be communicated in our Report:
|Key audit matter ||How our audit addressed the key audit matter |
|Assets included in disposal group(s) held for sale and liabilities included in disposal group(s) held for sale (Ref. Note No.34.3) ||Obtained from the Management the Framework Agreement with proposed buyer Board Resolution approving the proposed transaction a special Resolution passed by shareholders though Postal Ballet. |
| ||Assessed the methodology used by the Management in identifying the Assets and Liabilities held for sale. |
|Contingent Liabilities in respect of claim made by Airport Authority of India (AAI) (Ref. Note No.34.2) ||Obtained Lease Agreements and supplementary Agreement with Airport Authority of India (AAI). Correspondence from and with AAI eviction orders judgment of Arbitrator Judgment of Delhi High court. Petition filed before Supreme Court and their judgment. Petition filed before Eviction officer and their revised claim various Legal opinions case filed before Bombay City Civil Court. |
Information other than the Standalone Financial Statements andAuditor's Report thereon
The Company's Board of Directors is responsible for thepreparation of the other information. The other information comprises the informationincluded in the Annual Report but does not include the standalone financial statementsand our auditor's report thereon.
Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained during the course of our audit or otherwise appears to bematerially misstated.
If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.
Responsibilities of Management for the Standalone Financial Statements
The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Act with respect to the preparation of these standalonefinancial statements 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 accounting principles generally accepted in India including theInd AS specified under section 133 of the Act. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; 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 standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing thecompany's financial reporting process.
Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements
Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with Standards on Auditing will always detect a materialmisstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if individually or in the aggregate they could reasonably beexpected to influence the economic decisions of users taken on the basis of thesestandalone financial statements.
As part of an audit in accordance with Standards on Auditing weexercise professional judgment and maintain professional skepticism throughout the audit.We also:
Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal financial controls relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls system in place and theoperating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause theCompany to cease to continue as a going concern.
Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.
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 in terms of Section 143(11) ofthe Act we give in "Annexure A" a statement on the matters specified inparagraph 3 and 4 of the Order.
2. As required by Section 143 (3) of the Act based on our audit wereport that :
a. We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.
b. In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books.
c. The standalone financial statements dealt with by this report are inagreement with the books of accounts.
d. In our opinion the aforesaid standalone financial statements complywith the Ind AS specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014.
e. The matter described in paragraph relating to Emphasis of Matter mayhave an adverse effect on the functioning of the company.
f. On the basis of the written representations received from thedirectors as on 31st March 2019 taken on record by the Board of Directors all thedirectors are disqualified as on 31st March 2019 from being appointed as a director interms of Section 164 (2) of the Act.
g. With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls referto our separate Report in "Annexure B".
h. As required by section 197(16) of the Act we report that theCompany has not paid/provided remuneration to its Director during the year.
i. With respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 in our opinion and to the best of our information and according to theexplanations given to us:
i. The Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements (Refer Note 34.5 to thestandalone financial statements);
ii. The Company has made provision as required under the applicablelaw or accounting standards for material foreseeable losses if any on long-termcontracts. We are informed that the company did not have any pending derivative contracts.
iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.
|For N S Shetty & Co. |
|Chartered Accountants |
|FRNo. : 0110101W |
|N. S. Shetty |
|M. No. 035083 |
|Place : Mumbai |
|Date : 27th May 2019 |