To the members of Interworld Digital Ltd
Thursday 30 July 2020
We have audited the accompanying standalone IndAS financial statements of InterworldDigital Limited ("Interworld" or" Company") which comprise theBalance Sheet as at 31 March 2020 the Statement of Profit & Loss (including OtherComprehensive Income) the Statement of Changes in Equity and the Cash Flow Statementfor the year then ended and a summary of the Significant Accounting Policies and otherexplanatory information ( hereinafter referred to as "Standalone Statements"or "Financial Statements ).
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effect of the matters described in the "Basis forQualified Opinion" section below the aforesaid Standalone 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 Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at 31 March2020the Loss and total comprehensive income changes in equity and its cash flows forthe year ended on that date.
Basis for Qualified Opinion
(xxii) The past MD Mr Manmohan Gupta had fraudulently shifted the entire business ofthe company including its Intellectual Property to his own entity; consequently there isno revenue from operations during the year. The Company is making efforts to get back thisbusiness.
(xxiii) The Company had increased its authorised capital from _. 21 cr to _.70 cr in FY 2010-11 but did not deposit the fee with RoC ; in the meanwhile thefee structure was revised by the Companies Act 2013 and the applicable fee increasedsubstantially.
The company's writ petition challenging the revision in fees on the ground that thecapital was increased prior to the 2013 Amendment is pending in the Delhi High Court.
The amount payable _. 55.97 lacs (calculated as per Companies Act 1956) appears as"other current liabilities" (note 19); no provision has been made for anyinterest or fines payable thereon.
(xxiv) Statutory overdues of service tax / TDS / Professional Tax aggregating to Rs.1.91 crore are outstanding since F. Y. 2009-10; service tax returns have not been filedfrom FY 2011-12 onwards.
No provision has been made for interest / penalties payable on the defaulted amounts.
(xxv) Due to default in repayment of instalments / loans Bank of India has classifiedthe company's debt of Rs. 47.55 lacs as an NPA in October-2018; no provision has been madefor interest / penal interest and other charges thereon from the date of NPA till 31 March2020. It is not known if the Bank has initiated any debt recovery proceedings.
We conducted our audit of the financial statements in accordance with the Standards onAuditing (SAs) specified under section 143(10) of the Companies Act 2013. Ourresponsibilities under those Standards are further described in the "Auditor'sResponsibility for the Audit of the Financial Statements" section of our report.We are independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India (ICAI) together with the independencerequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified opinion on the financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.
In addition to the matters described in the Basis for Qualified Opinion sectionabove we have determined the matters described below to be the key audit matters to becommunicated in our report.
1. Capital work in progress_. 4.32 cr- being carried as WIP since many years; we are therefore unable to comment on the impairment loss if any.
2. Trade Receivables Note 8 : the entire amount of _. 23.85 cr isover due outstanding since more than 3 years ; as no balance confirmations have beenobtained we are unable to comment on the extent of doubtful / bad debts if any to beprovided for.
3. Bombay Stock Exchange on directions from SEBI initiated punitive actionagainst Interworld as a "shell company" & placed restrictions on saleof shares by the promoters; Interworld vide its letter dated 15.01.2018 responded to theobservations raised by the forensic auditor appointed by BSE.
4. Long term loans & advances _. 105 cr :These advances are outstandingsince almost 7 years and are subject to confirmation by the parties ; we are unable toascertain the extent of doubtfulk debts if any.
We obtained from the Company's management details of the status as of 31 March 2020concerning tax assessments and demands for current as well as past years. We assessed themanagement's underlying assumptions in estimating the tax provision and the possibleoutcome of the disputes to evaluate whether any change was required to management'sposition on these uncertainties.
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 included 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 financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained during thecourse 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 Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act2013 ("the Act") with respect to the preparation ofthese Financial Statements that give a true and fair view of the financial positionfinancial performance total comprehensive income changes in equity and cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards (Ind AS) prescribed under Section 133 of theAct read with Rule 7 of the Companies (Accounts) Rules 2015.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe Financial Statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
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.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibility 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 SAs 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 financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the 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 abasis 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 inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Companies Act 2013 we are also responsible for expressing our opinionon whether the company has adequate internal financial controls system in place and theoperating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting 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 statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. 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 findings 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 withthose charged with governance we determine those matters that were of most significancein the audit of the financial statements of the current period and are therefore the keyaudit matters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
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) of the Act we give in "AnnexureA" a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act based on our audit we report that: a) Wehave sought and obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes 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 Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the relevant books of account.
d) In our opinion the aforesaid financial statements comply with the Ind AS specifiedunder 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 ason 31March 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March2020 from being appointed as a director in terms of Section 164(2) of the Act.
f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls please refer toour separate Report in "Annexure B".Our report expresses an unmodifiedopinion on the adequacy and operating effectiveness of the Company's internal financialcontrols over financial reporting.
g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of Section 197(16) of the Act as amended: In our opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe 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 financialposition in its financial statements.
ii. There are no long term contracts including derivative contracts.
iii. There has been no delay in transferring amounts if any required to betransferred to the Investor Education and Protection Fund by the Company.
For Nemani Garg Agarwal & Co.
Firm Reg. No. 010192N
Sd/- SK Nemani Partner Membership no. 037222 UDIN: 20037222AAAAFD7805
Place : New Delhi Date : 30th July 2020
ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1 under "Report on other Legal and Regulatoryrequirements" section in our Report of even date)
1) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets have been physically verified by the management in a phasedmanner designed to cover all the items over a period of three years which in ouropinion is reasonable having regard to the size of the company and nature of itsbusiness. Pursuant to the program a portion of fixed asset has been physically verifiedby the management during the year and no material discrepancies between the book-recordsand physical fixed assets have been noticed.
(c) The title deeds of immovable properties is not held in the name of the company.
2) There is no inventory in the company and therefore there is no question of physicalverification of inventory.
3) The Company has not granted any loans secured or unsecured to the companiesfirms Limited Liability Partnerships or other parties covered in the Register maintainedunder Section 189 of the Act. Accordingly the provisions of clause 3 (iii) (a) to (c) ofthe order are not applicable to the company.
4) In our opinion and according to the information and explanations given to us thecompany has complied with the provisions of section 185 and 186 of the Companies Act 2013in respect of loans investments guarantees and security.
5) The Company has not accepted any deposits from the public and hence the directivesissued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any otherrelevant provisions of the Act and the Companies (Acceptance of Deposits) Rules 2015 withregard to the deposits accepted from the public are not applicable.
6) The Central Government has not prescribed the maintenance of cost records undersection 148(1) of the Companies Act 2013. Therefore the provisions of this clause do notapply.
7) (a) According to the information and explanations given to us and on the basis ofour examination of the books of account of Company undisputed statutory dues includingprovident fund employees state insurance income-tax service tax duty of customs dutyof excise value added tax cess and other material statutory dues have generally beenregularly deposited with the appropriate authorities except the following:-
|Sr. No. Nature of Statutory Dues ||Amount Payable for more than 6 months |
|1. Service tax ||17852685 |
|2. TDS u/s 192 ||1391315 |
(b) According to the information and explanation given to us the following amount hasnot been deposited- see note 2 above under the section "Basis for QualifiedOpinion" of this Report :
|Sr. No. Nature of Statutory Dues ||Amount Payable under Dispute |
|1. ROC fee for increase of authorized share capital ||Rs. 5597309 |
According to the information and explanations given to us the company has defaulted inrepayment of dues (8) to the following financial institution / Bank.
|Sr. No. Name of Financial Institution / Bank ||Type of credit Facility ||Amount in Rs. outstanding as on 31.03.2018 ||Nature and amount of Default |
|1. Kotak Mohindra Prime Ltd ||Car Loan ||459625 ||4 installments of Rs. 110600 each are overdue. |
|2. Bank of India ||Cash credit ||4754615 ||Account is NPA since October 2018. |
(9) Based upon the audit procedures performed and the information and explanation givenby the management the company has not raised moneys during the year by way of initialpublic offer or further public offer including debt instruments and term loans.Accordingly the provisions of clause 3 (ix) of the Order are not applicable to thecompany and hence not commented upon.
10) Based upon the audit procedures performed and the information and explanation givenby 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.
11) Based upon the audit procedures performed and the information and explanation givenby the management no managerial remuneration has been paid or provided ;accordingly theprovisions of section 197 read with Schedule V to the Companies Act are not applicable.
12) The Company is not a Nidhi Company. Therefore the provisions of clause 3 (xii) ofthe Order are not applicable to the Company.
13) In our opinion transactions with related parties are in compliance with section177 and 188 of the Companies Act 2013 and the details have been disclosed in theFinancial Statements as required by the applicable accounting standards.
14) Based upon the audit procedures performed and the information and explanation givenby 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.
15) Based upon the audit procedures performed and the information and explanation givenby the management the company has not entered into any non-cash transactions withdirectors or persons connected with them. Accordingly the provisions of clause 3 (xv) ofthe Order are not applicable to the company.
16) In our opinion the company is not required to be registered under section 45-IA ofthe Reserve Bank of India Act 1934 and accordingly provisions of clause 3 (xvi) of theOrder are not applicable to the company.
For Nemani Garg Agarwal & Co.
Firm Reg. No. 010192N Sd/- SK Nemani Partner Membership no. 037222 UDIN:20037222AAAAFD7805
Place : New Delhi Date : 30th July 2020
ANNEXURE "B" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1(f) under "Report on Other Legal and RegulatoryRequirements" section of our report of even date)
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 INTERWORLDDIGITAL LIMITED ("the Company") as of March 31 2019 in conjunction with ouraudit of the IND AS Financial Statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
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 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 inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under section 143 (10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls.
Those Standards and the Guidance Note require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether adequateinternal financial controls over financial reporting was established and maintained and ifsuch 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 included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgement including the assessment of the risks of materialmisstatement 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 financial reporting includes those policiesand procedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany ; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company ; and(3) provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the company's assets that could have a material effecton 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 sconditions 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 at31 March 2020 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 Nemani Garg Agarwal & Co.
Firm Reg. No. 010192N
Sd/- SK Nemani Partner Membership no. 037222
Place : New Delhi
Date : 30th July 2020