IL&FS Engineering and Construction Company Limited
Your Directors take pleasure in presenting the Thirtieth Annual Report along with theAudited Financial Statements for the Financial Year Ended March 31 2019
(I) STANDALONE FINANCIAL RESULTS :
Your Company has adopted Indian Accounting Standards (Ind AS) notified under the Rules2015 with effect from April 1 2017. Accordingly the Standalone and ConsolidatedFinancial Statements along with the comparatives for the year ended March 31 2019 havebeen prepared in accordance with Ind AS prescribed under Section 133 of the Companies Act2013 read with Rules made thereunder.
|I. FINANCIAL RESULTS : || |
(Rs in Crore)
| || |
|Particulars || |
|Revenue from Operations ||1239.14 ||1868.76 |
|Other Income ||22.08 ||250.86 |
|Company's share of profit from integrated joint ventures ||1.01 ||32.00 |
|Total Income ||1262.23 ||2151.62 |
|Profit before Interest Depreciation Exceptional Items and Tax ||(58.67) ||443.78 |
|Less: Finance Cost ||290.18 ||396.03 |
|Profit before Depreciation Exceptional Items and Tax ||(348.84) ||47.75 |
|Less: Depreciation and Amortization Expenses ||36.75 ||44.54 |
|Profit before Exceptional Items & Tax ||(385.59) ||3.21 |
|Exceptional Item (Net) ||1640.42 ||0.00 |
|Profit Before Tax ||(2026.01) ||3.21 |
|Provision for Tax ||10.44 ||(3.71) |
|Profit After Tax ||(2036.45) ||6.92 |
|Other comprehensive income/(loss) for the year ||1.14 ||1.04 |
|Total Comprehensive Income for the year ||(2035.31) ||7.96 |
|Paid up Equity Capital ||131.12 ||131.12 |
|Earnings per share (in Rupees) || || |
|- Basic ||(155.31) ||0.53 |
|- Diluted ||(155.31) ||0.53 |
II. FINANCIAL PERFORMANCE REVIEW :
During the year ended March 31 2019 your Company achieved a turnover of Rs 1239.14crore on standalone basis as against Rs 1868.76 crore in FY 2018.The Net Profit/(Loss)for the year amounted to Rs. (2036.45) crore as against net profit of Rs 6.92 crore in FY2018.
III. DIVIDEND :
Due to accumulated losses of the Company from the previous years your Directorsexpress their inability to recommend any dividend for the year on Preference as well as onEquity Shares
IV. RESERVES :
No amount is recommended for transfer to Reserves of the Company for FY 2019
V. THE STATE OF AFFAIRS OF THE COMPANY :
The detailed position on the order book and financial performance of the Company wasprovided under Management Discussions & Analysis Report
IL&FS Engineering & Construction Co. Ltd. (IECCL) is part of the InfrastructureLeasing and Financial Services Limited ("IL&FS") group. The board ofdirectors of IL&FS has been reconstituted pursuant to the orders passed by theNational Company Law Tribunal Mumbai Bench ("NCLT") in Company Petition No.3638 of 2018 filed by the Union of India of Corporate Affairs under Sections 241 and 242of the Companies Act 2013 as amended ("Companies Act") on the grounds ofmismanagement of public funds by the erstwhile board of IL&FS and the affairs ofIL&FS being conducted in a manner prejudicial to the public interest.
Further the National Company Law Appellate Tribunal ("NCLAT") by way of itsorder on October 15 2018 ("Interim Order") in the Company Appeal (AT) 346 of2018 by way of which the NCLAT after taking into consideration the nature of the caselarger public interest and economy of the nation and interest of IL&FS and its groupcompanies (including IECCL) has stayed certain coercive and precipitate actions againstIL&FS and its group companies including IECCL. IL&FS and its group companies arecurrently undergoing resolution process under the aegis of the NCLAT and NCLT.
The developments at the IL&FS Group has had negative impact on IECCL and its brandequity. These developments severely impacted the ongoing projects and order book.
Your Company having overseas Subsidiary Maytas Infra Saudi Arabia (MISA) there beingno employees at Saudi Arabia and the other partner being in the process of Governmenttakeover the accounts could not be finalized for the last 2 years.
The Board of Directors is hopeful of securing sizeable orders in the future and isconfident of effective execution of the existing works in the order book subject toapproval of the Resolution Plan by all the stakeholders
VI. SHARE CAPITAL :
During the year under review there were no change in the share capital of the Company
Shares held by Directors :
None of the Directors of the Company holds any Shares or convertible instruments of theCompany except Mr. Karunakaran Ramchand who was a Director of the Company until October29 2018 and who is holding 40000 equity shares of the Company.
VII. DEPOSITS :
During the year under review your Company had not accepted any deposit from publicunder Chapter V of the Companies Act 2013
VIII. DIRECTORS :
During the year the following Directors have resigned/ceased from the Board ofDirectors of the Company and the details of the same are as follows:
|Sl.No. ||Name of the Director ||Date of Cessation |
|1. ||Mr Karunakaran Ramchand ||October 29 2018 |
|2. ||Mr Mukund Sapre ||November 2 2018 |
|3. ||Mr Saleh Mohammed A Binladen ||May 29 2018 |
|4. ||Mr Akberali Mohemedali Moawalla ||May 29 2018 |
|5. ||Mr Debabrata Sarkar ||September 26 2018 |
|6. ||Ms Sutapa Banerjee ||October 12 2018 |
|7. ||Mr Bhaskar Chatterjee ||December 6 2018 |
|8. ||Mr. Ganapathi Ramachandran ||December 7 2018 |
The new Board of promoter of the Company (IECCL) Infrastructure Leasing and FinancialServices Limited (IL&FS) with the powers to supersede the nominated board of IECCLnominated the following as Directors on the Board of IECCL
|Sl.No. ||Name of the Director ||Date of Appointment |
|1. ||Mr Chandra Shekhar Rajan ||October 25 2018 |
|2. ||Mr Bijay Kumar ||April 4 2019 |
|3. ||Mr Dilip Lalchand Bhatia ||December 24 2018 |
None of the Directors of the Company are inter-se related to each other
Status on compliance of having Independent Directors and Women Directors on the Boardof Directors of the Company
The newly appointed directors of IL&FS who exercise control directly orindirectly over the Company have been appointed by the National Company Law Tribunal("NCLT") on the recommendation of Central Government and are performingfunction similar to that of the independent directors by discharging an important publicduty of resolving the financial problems and other issues. Further NCLT via order datedApril 26 2019 ("April Order") has granted dispensation in relation to therequirement for appointment ofindependentdirectorsandwomendirectorsinlightofthedifficultiesfaced by the new board ofIL&FS. Further in April Order NCLT has observed that the new directors nominated bythe Central Government/Tribunal are independent directors and there is no requirement toappoint independent director during the pendency of stay order granted on October 15 2018by National Company Law Appellate Tribunal ("NCLAT) on the institution orcontinuation of suits or any other proceedings by any party/person/bank/company etc.against IL&FS' and its group companies in any Court of Law/Tribunal/ArbitrationPanel or Arbitration Authority ("October Order").
Accordingly furnishing the details of declarations by the Independent Directors andFamiliarization programme of Independent Directors does not arise
Non-Executive Directors :
The Non-Executive Directors are entitled for sitting fee and the details of the sameare as follows;
|(i) Board Meeting ||: Rs 15000/- per meeting |
|(ii) Audit Committee Meeting ||: Rs 10000/- per meeting |
|(iii) Other Committees of the Board ||: Rs 5000/- per meeting |
Additionally the actual out of pocket expenses incurred by the Non-Executive Directorsfor attending the meetings are also borne by the Company. Except as mentioned above noother payments were made by the Company to Non-Executive Directors and the Company doesnot have any pecuniary relationship or transactions with the Non-Executive Directors. Thedetails of amount paid to the Directors of the Company towards Sitting Fee are mentionedin the Form MGT-9 annexed to the Directors' Report as well as the Corporate GovernanceSection of this Annual Report
Performance Evaluation :
In terms of the provisions of the Companies Act 2013 and Listing Regulations theBoard of Directors of the Company had in its Meeting held on November 10 2014 approvedthe policy on Performance Evaluation of the Board of Directors which laid down thecriteria for performance evaluation of Board of Directors its Committees ExecutiveDirectors Independent Directors and Non-Executive Directors. Further in terms of theprovisions of Section 178 of the Companies Act 2013 read with Companies Amendment Act2017 the Nomination and Remuneration Committee of the Board had decided that theevaluation of performance of the Board its Committees individual directors and theChairman will be carried out by the Board of Directors as per the parameters evolved fromthe policy on Performance Evaluation of the Board of Directors. The Board of Directorsthereafter in its Meeting held on July 31 2018 evaluated the performance of its ownall its Committees and Individual Directors (excluding the Director being evaluated) assatisfactory. The policy on performance evaluation is available on the website of theCompany at http://www.ilfsengg.com/html/policies/PerformanceEvaluationPolicy.pdf
Managerial Remuneration Policy :
In terms of the provisions of Section 178 of the Companies Act 2013 read with Rulesmade thereunder and Regulation 19 of Listing Regulations the Board of Directors of theCompany had framed Managerial Remuneration Policy which includes the criteria fordetermining qualifications positive attributes independence of directors and othermatters as specified under Section 178(3) of the Companies Act 2013 and Regulation 19read with Part D of Schedule II of Listing Regulations. The policy is available on thewebsite of the Company at http://www.ilfsengg.com/html/policies.php
IX. KEY MANAGERIAL PERSONNEL :
In terms of the provisions of Section 203 of the Companies Act 2013 the Board ofDirectors have designated Mr Kazim Raza Khan Chief Executive Officer Mr Naveen KumarAgrawal Chief Financial Officer and Mr Jampana Secretary as the Key Managerial Personnelof the Company
During the year/period the following Key Managerial Personnel have resigned from theCompany and the details of the same are as follows;
|Sl.No. ||Name of the Key Managerial Personnel ||Effective Date of Resignation |
|1. ||Dr Sambhu Nath Mukherjee CFO ||December 31 2018 |
|2. ||Mr Sushil Dudeja CS ||January 31 2019 |
|3. ||Ms Saheli Banerjee CS ||August 16 2019 |
During the year/period the following Key Managerial Personnel were appointed and thedetails of the same are as follows;
|Sl.No. ||Name of the Key Managerial Personnel ||Date of Appointment |
|1. ||Mr Kazim Raza Khan Manager ||December 24 2018 |
|2. ||Mr Kazim Raza Khan CEO ||May 16 2019* |
|3. ||Mr Naveen Kumar Agrawal CFO ||January 1 2019 |
|4. ||Mr J Veerraju CS ||September 5 2019 |
* Mr. Kazim Raza Khan who was initially appointed as Manager on December 24 2018 wasre-designated as CEO of the Company w.e.f. May 16 2019.
(X) DIRECTORS RESPONSIBILITY STATEMENT :
In terms of Section 134 (5) of the Companies Act 2013 the Board of Directors wish tostate that:
(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis howeverIL&FS and its group companies are currently undergoing resolution process under theaegis of the NCLAT and NCLT which will impact the going concern status of the Company;
(e) the directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively
(XI) DETAILS OF CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGEEARNINGS AND OUTGO:
|A) Conservation of energy || |
|i) The steps taken or impact on conservation of energy; ||The conservation of energy in all the possible areas is undertaken by the Company as an important means of achieving cost reduction. Savings in electricity fuel and power consumption receive due attention of the management on a continuous basis |
|ii) The steps taken by the Company for utilizing alternate sources of energy; ||NIL |
|iii) The capital investment on energy conservation equipments; ||NIL |
|B) Technology absorption || |
|i) the efforts made towards technology absorption; ||Timely completion of the projects as well as meeting the budgetary requirements are the two critical areas where different techniques help to a great extent. Many innovative techniques have been developed and put to effective use in the past and the efforts to develop new techniques continue unabated. |
|ii) the benefits derived like product improvement cost reduction product development or import substitution; ||NIL |
|iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year) - ||NIL |
|a) the details of technology imported; || |
|b) the year of import; || |
|c) whether the technology been fully absorbed || |
|d) if not fully absorbed areas where absorption has not taken place and the reasons thereof; ||NA |
|(iv) The expenditure incurred on Research and Development ||Nil |
|(C) FOREIGN EXCHANGE || |
|Foreign Exchange earned in terms of actual inflows during the year ||Nil |
|Foreign Exchange Outgo during the year in terms of actual outflows ||Rs 2.60 crore |
(XII) BOARD AND ITS COMMITTEES :
(a) Board of Directors :
During the year under review the Board of Directors of the Company met 6 (six) times onMay 30 2018 July 31 2018 August 12 2018 October 25 2018 December 24 2018 andMarch 11 2019. The attendance along with such other details as required of each of theDirectors is mentioned in the Corporate Governance Report section of this Annual Report
(b) Audit Committee :
The Audit Committee of the Board of Directors of the Company currently consists ofthree Members. During the year under review there were changes in the composition of theCommittee. The dates of meetings of Audit Committee held during FY 2019 attendance ofMembers in the Meetings and other details are mentioned in the Corporate Governance Reportsection of this Annual Report
During the year under review all the recommendations of the Audit Committee wereaccepted by the Board of Directors. Further the Committee comprises of Non-ExecutiveDirectors only (the nominees of the new Board of Promoter) all of whom have the abilityto read and understand the Financial Statements
(c) Corporate Social Responsibility Committee :
The Board of Directors of the Company constituted Corporate Social Responsibility (CSR)Committee on March 18 2014 and formulated a policy on CSR which is available on thewebsite of the Company athttp://www.ilfsengg.com/html/ policies/CSR_Policy.pdf.
For details relating to composition of CSR Committee number of meetings held duringthe year under review and other details the Members are requested to refer the CorporateGovernance Report which forms part of this Annual Report
As per Section 135(5) of the Companies Act 2013 the Company was required to spend twopercent of the average net profits calculated on the basis of preceding three financialduring the year due to negative average net profits of the Company for the preceding threefinancial CSR policy and other details as per Rule 9 of Companies (Corporate SocialResponsibility) Rules 2014 are enclosed as Annexure1 to this Report
(d) Other Committees :
The details of composition number of Meetings and such other information as requiredregarding Nomination and Remuneration Committee Stakeholders Relationship Committee andother Committees are mentioned in the Corporate Governance section of this Annual Report
(XIII) RISK MANAGEMENT :
The Board of Directors in its Meeting held on February 11 2015 formulated a RiskManagement Policy consisting of various elements of risk and mitigation measures
The Board of Directors/Audit Committee reviews the risk assessment and mitigationprocedures across the entity from time to time. The critical enterprise level risks of theCompany and the mitigation measures being taken are provided in the Management Discussionand Analysis Report.
(XIV) SUBSIDIARIES JOINT VENTURES AND ASSOCIATES :
As per Section 129 (3) of the Companies Act 2013 and Regulation 34 of the ListingRegulations the Consolidated Financial Statements of the Company forms part of thisReport. The copies of Audited Financial Statements of the Subsidiaries are available onthe website of the Company at www.ilfsengg.com and a copy of the same will be providedupon written request to the Company Secretary
SUBSIDIARY ENTITIES :
Following are the Subsidiaries of your Company:
Angeerasa Greenfields Private Limited
Ekadanta Greenfields Private Limited
Saptaswara Agro-farms Private Limited
Maytas Infra Assets Limited
Maytas Metro Limited
Maytas Vasishta Varadhi Limited; and
Maytas Infra Saudi Arabia Company (Foreign Subsidiary)
ASSOCIATES & JOINT VENTURES :
During the year under review the following entities have been Associates and JointVentures of your Company:
Hill County Properties Limited
Joint Ventures (Association of Persons) :
NCC-Maytas (JV) (Singapore Classtownship)
Joint Ventures (Jointly Controlled Operations) :
Maytas- KBL (JV)
Maytas KCCPL Flow More (JV)
Maytas MEIL KBL (JV)
Maytas MEIL ABB AAG (JV)
MEIL Maytas ABB AAG (JV)
MEIL Maytas KBL (JV)
MEIL Maytas WPIL (JV)
MEIL Maytas AAG (JV)
L&T KBL Maytas (JV)
Maytas Ritwik (JV)
Maytas Sushee (JV)
Maytas Gayatri (JV)
IL&FS Engg-Kalindee (JV)
IL&FS GPT JV
ITNL IECCL JV
Further none of the entities have been associated / disassociated as Joint Ventures ofyour Company during the year under review
The performance and financial position of the Subsidiaries Joint Venture and AssociateCompanies Annexure 2 to this Report
(XV) AUDITORS AND AUDITORS' REPORT :
(a) Statutory Auditors :
In terms of the provisions of the Companies Act 2013 read with Rules made thereunderthe Members of the Company at their Annual General Meeting (AGM) held on August 28 2017appointed BSR & Associates LLP and M Bhaskara Rao & Co. Chartered Accountants asJoint Statutory Auditors of the Company to hold office for a period of 5 years
The Company had received resignation letter from the one of its Joint StatutoryAuditors on July 15 2019 letter dated July 14 2019 viz. M/s. BSR & Associates LLPChartered Accountants (Firm Registration Number: 116231W/W-100024) stating their intent tonot continue as the Statutory Auditors of the Company and tendering their resignation withimmediate effect.
Accordingly on recommendation of the Audit Committee and Board the members accordedtheir approval for the appointment of M Bhaskara Rao & Co. Chartered Accountants(Firm Registration Number 000459S) in the ExtraOrdinary General Meeting of the Companyheld on Monday September 9 2019 one of the Joint Statutory Auditors of the Company asSole Statutory Auditor of the Company pursuant to the resignation of the other JointStatutory Auditor M/s. BSR & Associates LLP Chartered Accountants (Firm RegistrationNumber: 116231W/W-100024).
The Board noted that there were following qualifications in the Auditor's Report forthe Standalone and Consolidated Financial Statements for the Year Ended March 31 2019:
Standalone Financial Statements :
1. Note 13 (a) relating to deferred tax asset amounting to Rs. 242.99 Crores as atMarch 31 2019 recognised by the Company in earlier years. Considering the materialuncertainty related to going concern that exists in the Company the threshold ofreasonable certainty for recognising the deferred tax assets as per Ind AS 12- IncomeTaxes has not been met. Consequently deferred tax asset is overstated and loss for theyear and retained earnings (accumulated loss) are understated by Rs. 242.99 Crores.
2. Note 51 relating to non-recognition of interest expense of Rs. 144.99 Crores for theyear on the borrowings availed by the Company considering the process initiated forsubmission of a resolution proposal to lenders for restructuring of existing debt.Consequently interest expense and loss for the year are understated by Rs. 144.99 Croresand retained earnings (accumulated loss) is understated by Rs. 144.99 Crores.
3. Note 49 regarding Inter Corporate Deposits (ICDs) amounting to Rs. 323.78 Crores.These ICDs represents advances given by the Company to other entities which as informedto us by the management were ultimately given by these other entities to erstwhile SatyamComputer Services Ltd which has since merged into Tech Mahindra Ltd. In the absence ofadequate and sufficient audit evidence to establish the recoverability of said advanceswe are unable to express an opinion on the recoverability of the said ICDs.
4. As stated in the Note 52 relating to the provision for advance aggregating to Rs.65Crores for purchase of cement paid during the period to a party the Management is of theopinion that these transactions are suspicious in nature and the Board decided to initiateinvestigation by informing the Ministry of Corporate Affairs (MCA). In the absence ofsufficient and appropriate audit evidence we are unable to opine on the appropriatenessof the recognition of the transaction pending result of the outcome of the investigation
Consolidated Financial Statements :
1. Note 13 relating to deferred tax asset amounting to Rs. 242.99 Crores as at March31 2019 recognised by the Company in earlier years. Considering the material uncertaintyrelated to going concern that exists in the Company the threshold of reasonable certaintyfor recognising the deferred tax assets as per Ind AS 12- Income Taxes has not been met.Consequently deferred tax asset is overstated and loss for the year and retained earnings(accumulated loss) are understated by Rs. 242.99 Crores.
2. Note 50 relating to non-recognition of interest expense of Rs. 144.99 Crores for theyear on the borrowings availed by the Company considering the process initiated forsubmission of a resolution proposal to lenders for restructuring of existing debt.Consequently interest expense and loss for the year are understated by Rs. 144.99 Croresand retained earnings (accumulated loss) is understated by Rs. 144.99 Crores.
3. Note 48 regarding Inter Corporate Deposits (ICDs) amounting to Rs. 323.78 Crores.These ICDs represents advances given by the Company to other entities which as informedto us by the management were ultimately given by these other entities to erstwhile SatyamComputer Services Ltd which has since merged into Tech Mahindra Ltd. In the absence ofadequate and sufficient audit evidence to establish the recoverability of said advanceswe are unable to express an opinion on the recoverability of the said ICDs.
4. As stated in the Note 51 relating to the provision for advance aggregating to Rs.65Crores for purchase of cement paid during the period to a party the Management is of theopinion that these transactions are suspicious in nature and the Board decided to initiateinvestigation by informing the Ministry of Corporate Affairs. In the absence of sufficientand appropriate audit evidence we are unable to opine on the appropriateness of therecognition of the transaction pending result of the outcome of the investigation
Internal Financial Controls :
The following material weaknesses has been identified in the operating effectiveness ofthe Company's internal financial reporting as at March 31 2019:
A material weakness has been identified in the Company's internal financial March 2019relating to certain operating effectiveness in some of controls in respect of assessmentof deferred tax asset assessment of realisable value of inventory assessment of recoveryof contract assets inter corporate deposits and advances and procurement of materials
A material weakness' is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the Company's annual or interim financialstatements will not be prevented or detected on a timely basis.
The Board of Directors explanations on the aforementioned qualification are givenbelow:
Qualification on Standalone Financial Statements :
1. Note 13 (a) relating to deferred tax asset amounting to Rs. 242.99 Crores as atMarch 31 2019 recognised by the Company in earlier years. The same is being retained asthe Company is in the process of finalising resolution plan which if approved andimplemented is likely to generate enough profits in subsequent years which can set-offdeferred tax asset
2. The Company is in discussion with the lendors for the restructuring plan Interesthas been recognized only upto 15th October 2018 in anticipation of the approval oflenders of concession/waivers being sought by company in the resolution plan
3. Based on the forensic report by Independent agency which has been able to trace thesaid amount the Company is in process of filing a petition for recovery of the saidamount. It is therefore our opinion that ICD amount of Rs 323.78 Cr is likely to berealised.
4. An amount of advance paid to a vendor has been reported by Management to the Board.The Board is of the opinion that further investigation is required and hence we do notwish to comment further in the matter.
Material Uncertainty Related to Going Concern
The Company is currently in discussion with the lenders for carrying out a debtrestructuring proposal. The ability of the Company to continue as a going concern issolely dependent on the acceptance of the debt restructuring proposal / finalisation andapproval of the resolution plan which is not wholly within the control of the Company.
The Company has accordingly prepared these Standalone Financial Statements on goingconcern basis based on assessment of the successful outcome of the restructuring proposal/ finalisation and approval of the resolution plan.
Qualification on Consolidated Financial Statements :
1. Note 13 (a) relating to deferred tax asset amounting to Rs. 242.99 Crores as atMarch 31 2019 recognised by the Company in earlier years. The same is being retained asthe Company is in the process of finalising resolution plan which if approved andimplemented is likely to generate enough profits in subsequent years which can set-offdeferred tax asset
2. Interest has been recognised only upto 15th October 2018 in line with therestructuring plan which is currently under discussion with the lenders. In therestructuring plan the Company is proposing for waiver of Interest and accordingly thesame has not been recognised in the books
3. Based on the forensic report by Independent agency which has been able to trace thesaid amount the Company is in process of filing a petition for recovery of the saidamount. It is therefore our opinion that ICD amount of Rs 323.78 Cr is likely to berealised
4. Transaction of advance to vendor has been reported by Management to the Auditors andto the Board. The Board is of the opinion that further investigation is required and hencewe do not wish to comment further in the matter.
(b) Cost Auditors :
In terms of the provisions of the Section 148 of the Companies Act 2013 read with theCompanies (Cost Records and Audit) Rules 2014 as amended Company maintains cost recordsand accounts in respect of the Roads and other infrastructure projects
The Board of Directors on the recommendation of Audit Committee appointed NarasimhaMurthy& Co as the Cost Auditors of the Company for FY 2019 for conducting the CostAudit of the Company at a remuneration of Rs.500000/- was approved by the Members at theTwenty Ninth AGM of the Company held on September 17 2018. The Cost Auditors submitedtheir report for FY 2019 to the Board of Directors.
Further on the recommendation of Audit Committee the Board of Directors in itsMeeting held on May 16 2019 reappointed Narasimha Murthy & Co Cost Accountants asthe Cost Auditors of the Company for FY 2020 at a remuneration as may be determined by theAudit Committee in consultation with the Auditors. Necessary resolution for ratificationof their remuneration in terms of the provisions of the Companies Act 2013 read withRules made there under is included in the Notice of AGM for the approval of the Members
(c) Secretarial Auditor :
In terms of the provisions of Section 204 of the Companies Act 2013 the Board ofDirectors had appointed RPR & Associates Company Secretaries to conduct theSecretarial Audit for FY 2019. The Secretarial Audit Report for the Financial Year EndedMarch 31 2019 is enclosed as Annexure 3 to this report. The Secretarial AuditReport contains the following qualifications and the replies thereon given below;
|Qualification ||Reply |
|Non Submission of Financial Results for Q2 Q3 and Year ended March 31 2019 ||Being complied |
The Board of Directors of the Company had in its Meeting held on May 16 2019re-appointed RPR & Associates Company Secretaries as the Secretarial Auditor of theCompany for FY 2020
(XVI) CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES :
It is the endeavor of the Company to enter its contracts/arrangements/ transactionswith the related parties in the ordinary course of business and on arms' length basis. Interms of the provisions of Section 188 of the Companies Act 2013 read with Rules madethereunder all transactions with Related Parties were in ordinary course of business andon arm's length basis. Accordingly details of related party transactions as per section188 of Companies Act 2013 in Form AOC-2 is not required. All contracts / arrangements /transactions entered by the Company were in compliance with the applicable provisions ofthe Companies Act 2013 and Listing Regulations
The Company had framed Related Party Transaction Policy for the purpose of approval andidentification of Related Party Transactions. All Related Party Transactions entered intoby the Company in terms of the Policy were placed before the Audit Committee for itsreview and approval from time to time. The Related Party Transaction Policy approved bythe Board of Directors is uploaded on the website of the Company at www.ilfsengg.com.
XVII. EMPLOYEE STOCK OPTION SCHEME :
The Company's Employee Stock Option Scheme 2018 (ESOP Scheme 2018) had not beenimplemented as on date and hence no Certificate from the Statutory Auditors of the Companyis required to be obtained for the FY 2019 as required by the SEBI Guidelines and theresolution passed by the Members.
XVIII. MANAGEMENT DISCUSSION AND ANALYSIS :
A separate section titled "Management Discussion and Analysis" consisting ofdetails as required under Regulation 34 read with Schedule V of the Listing Regulationsforms part of this Annual Report.
XIX. CORPORATE GOVERNANCE:
A separate section titled "Report on Corporate Governance" including acertificate from confirming compliance with the conditions of Corporate Governance asstipulated under Listing Regulations is enclosed to the Report on Corporate Governance andforms part of this Annual Report
Further the declaration signed by the Chief Executive Officer affirming the compliancewith Code of Conduct for Board Directors and Senior Management Personnel is also enclosedto the Report on Corporate Governance
XX) DISCLOSURES :
(a) Extract of Annual Return :
The extract of Annual Return as per Section 92(3) of the Companies Act 2013 and Rule12 (1) of the Companies (Management and Administration) Rules 2014 is enclosed as Annexure4 to this Report
(b) Vigil Mechanism :
In terms of the provisions of the Section 177 of the Companies Act 2013 and ListingRegulations the Company had established a Vigil Mechanism through its Whistle BlowerPolicy for directors and employees to report concerns about unethical behavioractual/suspected frauds and violation of Company's Code of Conduct. Please refer to theCorporate Governance section of the Annual Report for further details
(c) Policy on Prevention of Sexual Harassment :
In terms of the provisions of The Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 the Company had formulated and implemented a policyfor Prevention of Sexual Harassment of Women at workplace.
The Company from time to time conducts workshops or awareness programmes against sexualharassment at workplace The Company had also constituted an Internal Committee comprisingof employees of the Company and an Independent NGO representative. The scope of theInternal Committee encompasses all incidents / occurrences of sexual harassment which takeplace at the workplace and where either of the party (aggrieved / accused) is an employeeof the Company. During the year under review the Company has not received any complaintsunder the policy
Further the Company has many systems processes and policies to ensure professionalethics and harmonious working environment. The Company follows Zero Tolerance towardsCorruption and unethical conduct. These are ensured through Whistle Blower Policy SexualHarassment Policy and Redressal Guidelines
(d) Particulars of Loans guarantees or investments under Section 186 :
Your Company is into the business of providing Infrastructure Facilities. Accordinglythe provisions of Section 186 pertaining to providing Loan or Guarantee to othercorporates are exempted. All information regarding Loans Guarantees and Investments arementioned in the notes to financial statements for FY 2018 which are self-explanatory
(e) Particulars of employees and related disclosures :
The disclosures relating ratio of remuneration of each directors to the medianemployee's remuneration and other details as per Section 197 (12) of the Companies Act2013 read with Rule 5 (1) of the Companies (Appointment and remuneration of ManagerialPersonnel) Rules 2014 is enclosed as Annexure 5 to this Report The disclosurepertaining to remuneration and other details as required under Section 197 (12) of the Actread with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is enclosed as Annexure 6 to this Report
(f) Material changes and comments if any affecting the financial position of theCompany : Due to the latest developments in the IL&FS Group and the Company thedebt burden has increased in a manner that is not commensurate with the size of itsoperations and there has been severe stress in terms of cash flows.
(g) Reporting of Fraud : The Auditors of the Company have not reported anyinstances of fraud committed against the Company by its officers or employees as specifiedunder section 143(12) of the Companies Act 2013.
(h) Details of significant and material orders passed by the regulators or courts ortribunals impacting the going concern status of the Company : During the year theNational Company Law Appellate Tribunal ("NCLAT") by way of its order on October15 2018 ("Interim Order") in the Company Appeal (AT) 346 of 2018 after takinginto consideration the nature of the case larger public interest and economy of thenation and interest of IL&FS and its group companies (including IECCL) has stayedcertain coercive and precipitate actions against IL&FS and its group companiesincluding IECCL.
IL&FS and its group companies are currently undergoing resolution process under theaegis of the NCLAT and NCLT which will impact the going concern status of the Company.
(i) Details in respect of adequacy of internal financial controls : The details ofinternal financial controls and their adequacy is given in Management Discussion andAnalysis Report
XIX. ACKNOWLEDGMENTS :
Your Directors place on record their gratitude to the Bankers Media FinancialInstitutions various agencies of the State and the Central Government AuthoritiesClients Consultants Suppliers Sub-Contractors Members and the Employees for theirvaluable support and co-operation and look forward to continued enriched relationships inthe years to come.
| ||By order of the Board |
| ||For IL&FS Engineering and Construction Company Ltd |
| ||Sd/- |
| ||Chandra Shekar Rajan |
|Place: Mumbai ||Chairman |
|Date: November 19 2019 ||DIN: 000126063 |