|BSE: 530773||Sector: Infrastructure|
|NSE: IVRCLINFRA||ISIN Code: INE875A01025|
|BSE 00:00 | 30 Aug||IVRCL Ltd|
|NSE 05:30 | 01 Jan||IVRCL Ltd|
|BSE: 530773||Sector: Infrastructure|
|NSE: IVRCLINFRA||ISIN Code: INE875A01025|
|BSE 00:00 | 30 Aug||IVRCL Ltd|
|NSE 05:30 | 01 Jan||IVRCL Ltd|
To the Members of IVRCL Limited
Report on the Audit of the standalone Financial Statements Disclaimerof
We were engaged to audit the accompanying standalone financialstatements of IVRCL Limited ("the Company") which comprise the Balance Sheet asat March 31 2021 and the Statement of Profit and Loss (including Other ComprehensiveIncome) Statement of Changes in Equity and Statement of Cash Flows for the year thenended and notes to the standalone financial statements including a summary ofsignificant accounting policies and other explanatory information for the year then endedin which are incorporated the unaudited returns of all the branches of the Company for theyear ended on that date. We do not express an opinion on the accompanying standalonefinancial statements of the Company. Because of the significance of the matters describedin the Basis for Disclaimer of Opinion section of our report we have not been able toobtain sufficient appropriate audit evidence to provide a basis for an audit opinion onthese standalone financial statements.
Basis for Disclaimer of Opinion
We refer to following notes to standalone financial statements:
a.Note 38 to the standalone financial statements in respect ofpreparation of financial statements of the Company has incurred a net loss of Rs 27953.07Million resulting in to accumulated losses of Rs 105276.17 Million as at March 31 2021and erosion of its Net worth. The Company has obligations towards fund- based borrowingsaggregating to Rs 123399.78 Million and non-fund based exposure aggregating to Rs6013.79 Million subject to reconciliation/verification as stated in Note 43 below thathave been demanded/recalled by the financial/operating creditors pursuant to ongoingLiquidation process as going concern obligations pertaining to operations includingunpaid creditors and statutory dues as at March 31 2021. The Company's ability tocontinue as going concern is dependent upon many factors including continued support fromthe financial creditors operational creditors and submission of a viable revival plan bythe prospective investor/bidder. As the company initiated second E-auction process forsale of the company as a going concern in the opinion of the management the company willcontinue its operations and the financial statement have been prepared on the basis thatthe Company is Going Concern and however the Company may be unable to realize its assetsand discharge its liabilities in the normal course of business. The ultimate outcome ofthese matters is at present not ascertainable. Accordingly we are unable to comment onthe consequential impact if any on the accompanying the Statement.
b. Note 39 to the standalone financial statements in respect ofrecognition of deferred tax asset on account of carry forward unused tax losses and othertaxable temporary differences aggregating to ' 9570.59 million and initiated secondE-auction process for sale of the company as a going concern the management of thecompany is confident that sufficient future taxable income will be available against whichsuch deferred tax asset will be realized. However in our opinion in absence ofconvincing evidence that sufficient future taxable income will be available against whichsuch deferred tax assets can be realized such recognition is not in accordance withIndian Accounting Standard 12 "Income Taxes" (Ind AS 12). Had the aforesaiddeferred tax assets not been recognised loss after tax for the year ended March 31 2021would have been higher by Rs 9570.59 Million and other equity would have been lower by Rs9570.59 Million.
c.Note 40 to the standalone financial statements in connection withthe existence of material uncertainties over the realizability of bank guarantees encashedby customers unbilled revenue trade receivables and withheld amount aggregating to Rs14120.59 Million included in financial and other assets which are past due/subjectmatters of various disputes /arbitration proceedings/ negotiations with the customers andcontractors due to termination / foreclosure of contracts and other disputes. Themanagement is yet to assess the change in risk of default and resultant expected creditloss allowance on such assets. Had the aforesaid assets been provided for impairment lossafter tax for the year ended on March 31 2021 would have been higher by Rs 14120.59Million other equity would have been lower by Rs 14120.59 Million.
d. Note 41 to the standalone financial statements in respect ofinvestment of Rs 18344.31 Million in subsidiaries engaged in BOT and other projectswhich are under disputes with the concessionaire and other subsidiaries that havesignificant accumulated losses as at March 31 2021. In absence of fair valuation of theseInvestments we are unable to comment upon the carrying value these investments and theconsequential impact if any on the accompanying standalone financial statements.
e. Note 42 to the standalone financial statements in respect of loansand advances of Rs 7425.36 Million given to subsidiary Companies associate netreceivable against development rights various sub-contractors vendors and other parties.These advances having regard to financial position of such subsidiary companies and ageof such advances in our opinion are doubtful of recovery. The management is yet toassess the change in risk of default and resultant expected credit loss allowance on suchloans and advances. Had the aforesaid assets been provided for impairment loss after taxfor the year ended on March 31 2021 would have been higher by Rs 7425.36 Million otherequity would have been lower by Rs 7425.36 Million.
f. Note 38 and 43 to the standalone financial statements in respect ofvarious claims submitted by the financial creditors (including claims towards fund basedand non-fund based exposure and claims on behalf of subsidiary companies and otherparties) operational creditors workmen or employee and authorized representative ofworkmen and employees of the
Company to the Liquidator pursuant to the Insolvency and BankruptcyBoard of India (Insolvency Resolution Process for Corporate Persons) Regulation 2016 thatare currently under consideration/reconciliation. Pending reconciliation/admission of suchclaims by the Liquidator we are unable to comment on the consequential impact if any onthe accompanying statement;
g. Note 45 to the standalone financial statements in respect ofnon-availability of confirmations of bank balances trade receivables including retentionloans and advances borrowings trade payable and other payables. In absence ofalternative corroborative evidence we unable to comment on the extent to which suchbalances are recoverable.
h. Note 46 to the standalone financial statements in respect ofnon-availability of physical verification reports of fixed assets and inventoriesaggregating to Rs 1291.76 million (Written down value as at March 31 2021) and Rs 513.30Million respectively as at March 31 2021 and no provision for impairment has been madefor the reasons stated therein. In absence of any alternative corroborative evidence weare unable to comment on the recoverability of the same.
i. Note 47 to the standalone financial statements in respect ofbalances available with statutory authorities and input credits aggregating to Rs 1928.89Million that are subject to reconciliation filing of return and admission by therespective statutory authorities and no provision has been made thus we are unable tocomment whether any provision for impairment in the value of advances is required.
j. Note 23 to the standalone financial statement in respect of periodsof default in repayment of borrowing and interest have not been provided to compliance theminimum presentation and disclosure requirement as per the schedule III of the CompaniesAct 2013.
k. In view of the matters stated above except paraj of Basis forDisclaimer of Opinion' we are unable to obtain sufficient appropriate auditevidences regarding the extent of the loss allowance/impairment or potential liability tobe recognised if any and the consequential impact on the standalone financial statementsas at and for the year ended March 31 2021. The matter stated above in parak ofBasis for Disclaimer of Opinion' give rise to the inappropriateness of use ofgenerally accepted accounting principles that are applicable to the minimum presentationand disclosure requirement as per the schedule III of the Companies Act 2013.Accordingly we form a basis of disclaimer of opinion.
Emphasis of matters
Attention is invited to:
a. Note 48 to the standalone financial statements in respect of noticereceived by the company U/s 276 (B) of the Income tax Act 1961 and by certain banks andcustomers of the company U/s 226(3) of the Income Tax Act 1961 regarding failure todeposit the tax deducted at source for the financial year 2016-17 and 2017-18 aggregatingto Rs 292.52 million.
b. Note 49 to the standalone financial statements in respect of summonreceived by the company of levy of damages U/s 14 B of the Employees' Provident Fundsand Miscellaneous Provisions Act 1952 aggregating to Rs 61.27 million for the period from10/1999 to 02/2009 and 07/2009 to 03/2015 and the matter is presently sub- judice.
Our opinion is not qualified in respect of these matters Key AuditMatters
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 standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
Information Other than the Financial Statements and Auditor'sReport Thereon
In view of ongoing Liquidation process the Liquidator is responsiblefor the preparation of the other information. The other information comprises theinformation included in the Management Discussion and Analysis Board's Reportincluding Annexures to Board's Report
Business Responsibility Report Corporate Governance andShareholder's Information but does not include the financial statements and ourauditor's report thereon. These reports could not be expected to be made available tous because of Board are not in existence.
Our opinion on the financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
Management's Responsibility for the Standalone FinancialStatements
The Hon'ble National Company Law Tribunal Hyderabad Bench("NCLT") has passed its Order dated July 26 2019 read with corrigendum orderissued on July 31 2019 for Liquidation of M/s IVRCL Limited "as going concern"and the Resolution professional (RP) for the Company has been appointed as the Liquidator.The Liquidator shall exercise the powers and duties as enumerated in sections 35 to 50 52to 54 of the Insolvency and Bankruptcy Code 2016 read with Insolvency and BankruptcyBoard of India (Liquidation Process) Regulations 2016.
The Hon'ble National Company Law Appellate Tribunal New Delhi("NCLAT") has passed its order dated September 06 2019 for admission of thecase on 17th October 2019. Also orders that the Liquidator will ensure that thecompany remains a going concern and the liquidator will not sell or transfer or alienatemovable or immovable property of the corporate debtor without prior approval of theAppellate Tribunal. The said order is vacated by the Hon'ble National Company LawAppellate Tribunal New Delhi ("NCLAT") vide its order dated 29th May2020 and upholds the Order of NCLT Hyderabad dated July 26th 2019 withcorrigendum order dated July 31 2019.
In view of ongoing liquidation process The Liquidator is responsiblefor the matters stated in Section 134(5) of the Companies Act 2013 ("the Act")with respect to the preparation and presentation of these standalone financial statementsthat give a true and fair view of the financial position financial performance (includingother comprehensive income) cash flows and changes in equity of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards specified under Section 133 of the Act read with relevant Rulesissued thereunder. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and 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 forassessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the company or to ceaseoperations or has no realistic alternative but to do so. Under in sections 35 to 50 52to 54 of the Insolvency and Bankruptcy Code 2016 read with Insolvency and BankruptcyBoard of India (Liquidation Process) Regulations 2016 it is incumbent upon liquidator tomanage the operations of the Company as a going concern and the statements have beenprepared on going concern basis.
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 SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal financial controls relevantto the audit in order to design audit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of the Act we are also responsible for expressingour opinion on whether the Company has adequate internal financial controls system inplace and the operating 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 thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditionsmay cause the Company 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.
Materiality is the magnitude of misstatements in the financialstatements that individually or in aggregate makes it probable that the economicdecisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.
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.
a. We did not audit the separate financial statements of 3 jointventures included in standalone financial statements whose financial results reflectscompany's share in net Loss of joint venture aggregating to Rs 1.12 million for theyear ended March 31 2021. 29 joint ventures were not considered in standalone financialstatement. In our opinion and according to the information and explanations given to us bythe Management these financial statements /financials information in aggregate are notmaterial to the Company and have not been subjected to audit hence we are unable tocomment on the consequential impact if any on the accompanying statements.
b. We did not audit the financial statements/information of allbranches included in the Standalone financial statements of the company whose financialstatements/financial information reflects total assets of Rs 792.90 Million as at March31 2021 and total revenue is NIL for the year ended on that date as considered instandalone financial statements.
Our opinion is not qualified in respect of these matters
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016("the Order") as amended issued by the Central Government of India in terms ofsection 143 (11) of the Act we give in the "Annexure A" a statement on thematters specified in paragraphs 3 and 4 of the Order.
2. As required by section 143 (3) of the Act we report that:
a) We have sought all the information and explanations which to thebest of our knowledge and belief were necessary for the purposes of our audit. However asdescribed in the Basis for Disclaimer of Opinion paragraph we are unable to obtain allthe information and explanations which to the best of our knowledge and belief werenecessary for the audit;
b) Due to the effects/possible effects of the matters described in theBasis for Disclaimer of Opinion paragraph we are unable to state whether proper books ofaccount as required by law have been kept by the Company so far as it appears from ourexamination of those books and unaudited accounts/returns adequate for the purpose of ouraudit have been received from the branches not visited by us.
c) The Balance Sheet the Statement of Profit and Loss (including othercomprehensive income) the Cash Flow Statement and the Statement of Changes in Equitydealt with by this Report are in agreement with the books of account and the unauditedaccounts/returns of the branches not visited by us.
d) Due to the effects/possible effects of the matters described in theBasis for Disclaimer of Opinion paragraph we are unable to state whether the aforesaidstandalone financial statements comply with the Accounting Standards specified underSection 133 of the Act.
e) Due to the effects/possible effects of the matters described in theBasis for Disclaimer of Opinion paragraph we are unable to state whether they have anyadverse effect on the functioning of the Company;
f) In the term of section 17 (1) (b) of the Insolvency and BankruptcyCode 2016 ("the Code") the powers of the board of directors have beensuspended and be exercised by the Liquidator of the Company. Hence written representationfrom directors have not been taken on record by the Board of Directors. Accordingly weare unable to comment whether none of the director is disqualified as on March 31 2021from being appointed as a director in the terms of Section 164 (2) of the Act.
g) The qualification relating to the maintenance of accounts and othermatters connected there with are as stated in the Basis for Qualified Opinion paragraph;
h) 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". Our report expresses a qualified opinionon the adequacy and operating effectiveness of the Company's internal financialcontrol over financial reporting.
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 theinformation and explanations given to us:
i. The Company has disclosed the impact of pending litigations on itsfinancial position to the extent ascertained in its standalone financial statements(Refer note 35);
iii. There has been no delay in transferring the amounts that were dueto be transferred to the Investor Education and Protection Fund by the Company during theyear ended March 31 2021;
ii. Except for the effects/possible effects of matters described underbasis of qualified opinion paragraph the Company has made provision as required underthe applicable law or accounting standards for material foreseeable losses if any onlong-term contracts and on derivative contracts if any;
iv. In our opinion and according to the information and explanationgiven to us the Company has not paid remuneration during the current year. Accordinglythe provisions of Section 197 of the Act are not applicable. The Ministry of CorporateAffairs has not prescribed other details under Section 197(16) which are required to becommented upon by us
"Annexure A" to the Independent Auditors' Report
Referred to in paragraph 1 under the heading Report on OtherLegal & Regulatory Requirement' of our report of even date to the standalonefinancial statements of the Company for the year ended March 31 2021:
I (a) Subject to our comments in parai (b) below the Company hasmaintained proper records showing full particulars including quantitative details andsituation of fixed assets;
(b) Fixed assets have not been physically verified during the year bythe Management in accordance with a regular program of verification. We are unable tocomment on discrepancies that might be arose on such physical verification of fixed assetsthat are lying on all locations where physical verification could not be performed.
(c) According to the information and explanation given to us titledeeds of the immovable properties have been mortgaged as security with lenders i. e.banks financial institutions and others for security of the borrowings raised by theCompany.
On the basis of our examination of the records of the Company and thecopies of the title deeds available with the Company the title deeds of immovableproperties are held in the name of the Company except for the details given in Appendix-1;
ii. According to the information and explanations given to us physicalverification of inventory has not been conducted at reasonable intervals by themanagement. We are unable to comment on the discrepancies that may arise on the physicalverification of inventories that are lying on locations where physical verification couldnot be performed.
iii. The company has granted interest free unsecured loans to Companiescovered in the register maintained under section 189 of the Act in respect of such loans;
(a) In our opinion the terms and conditions of the loans granted bythe Company to 8 subsidiaries aggregating to Rs 6197.75 million as at March 312021having regard to the cost of funds to the company are prejudicial to the interest of thecompany.
(b) In respect of one company the schedule of repayment of theprincipal amount aggregating to Rs 581.40 million has been stipulated and the repaymentcommences in the year 2026-27. In case of interest free unsecured loan to 7 companiesaggregating to Rs 5616.07 million the schedule of repayment is not stipulated andconsidered by the Company as repayable on demand hence we are unable to comment as towhether repayments are regular.
(c) In case of interest free unsecured loan to one company aggregatingto Rs 581.40 million no amount is overdue. In case of interest free unsecured loan to 7companies aggregating to Rs 5616.97 million the schedule of repayment is not stipulatedand considered by the Company as repayable on demand we are unable to comment whether anyamount is overdue and whether reasonable steps have been taken by the company for recoveryof the principal.
Iv According to information and explanation given to us and havingregard to the legal opinion obtained by the company in an earlier year that the companybeing a company engaged in the business of providing infrastructure facilities in terms ofSection 186 the company has complied with the provisions of section 185 and 186 of theCompanies Act 2013 in respect of grant of loans making investments and providingguarantees and security as applicable.
V According to the information and explanations given to us theCompany has not accepted any deposits during the year within the meaning of Sections 73 to76 of the Companies Act 2013 and the rules framed there under to the extent notified.
Vi We have broadly reviewed the cost records maintained by the Companypursuant to the Rules made by the Central Government under sub-section (1) of Section 148of the Companies Act 2013 and are of the opinion that prima facie the prescribedaccounts and records have been made and maintained. We have however not made a detailedexamination of these records with a view to determining whether they are accurate orcomplete.
Vii (a) According to information and explanations given to us andrecords of the Company examined by us the Company has not been regular in depositingundisputed statutory dues in respect of provident fund employee's state insuranceincome-tax GST Cess and any other statutory dues with the appropriate authorities. Therehave been significant delays in a large number of cases in depositing these dues with theappropriate authorities. Further no undisputed amounts payable in respect of thesestatutory dues were outstanding as on March 312021 for a period of more than six monthsfrom the date they became payable except as given in Appendix -2 to this report.
(b) According to the information and explanations given to us andrecords of the Company examined by us particulars of dues outstanding in respect ofincome tax GST Cess and any other statutory dues which have not been deposited onaccount of any dispute are given in Appendix-3 to this report.
Viii As matters described in Note 23 to the financial statement andpursuance of repayment schedule stipulated in the sanction letter the entire amount ofborrowing including interest are overdue and continuing default as on March 31 2021therefore we are unable to provided periods of default. Details of defaults in repaymentof borrowing and interest are given below;
Rs in Million'
Ix According to the information and explanations given to us theCompany has not raised moneys by way of initial public offer or further public offer(including debt instruments) and term loans. According clause ix of the Order are notapplicable to the Company.
X According to the information and explanations given to us no fraudby the Company or on the Company by its officers or employees have been noticed orreported during the year.
Xi According to the information and explanations given to us and basedon the audit procedures conducted by us Managerial Remuneration has not been paid orprovided. According clause Xi of the Order are not applicable to the Company.
Xii In our opinion and according to the information and explanationgiven to us the Company is not a Nidhi Company. Therefore the provisions of Para 3 (xii)of the Order are not applicable to the Company.
Xiii In our opinion and according to the information and explanationsgiven to us we are unable to obtain sufficient and appropriate audit evidence to commentwhether all transactions with the related parties as disclosed in Note 68 to the financialstatements are in compliance with section 177 and 188 of Companies Act 2013. Furtherwhere applicable the details have been disclosed in the Financial Statements as requiredby the applicable accounting standards.
Xiv According to the information and explanations given to us theCompany has not made any preferential allotment. Accordingly provisions of para 3 (xiv)of the order are not applicable to the Company.
Xv According to the information and explanations given to us thecompany has not entered into any non-cash transactions with directors or persons connectedwith them. The provisions of clause 3 (XV) of the Order are not applicable to the company.
Xvi In our opinion the Company is not required to be registered undersection 45 IA of the Reserve Bank of India Act 1934.
Annexure "B" to the Independent Auditors' Report of evendate on the Standalone
Financial Statements of IVRCL Limited
Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financialreporting of IVRCL Limited ("the Company") as of March 31 2021 in conjunctionwith our audit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting 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 safeguardingof its 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 internalfinancial controls 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") and the Standards on Auditing to the extentapplicable to an audit of internal financial controls both issued by the Institute ofChartered Accountants of India. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness.
Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our qualified audit opinion on the Company'sinternal financial controls system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and 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 asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and
(3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assets thatcould have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over FinancialReporting
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
Basis for Qualified Opinion
In our opinion and according to the information and explanations givento us and based on our audit the following material weaknesses have been identified as atMarch 31 2021:
The Company did not have appropriate internal financial controls over
(a) Assessment of recoverability of deferred tax assets
(b) Assessment of expected credit loss/loss allowance of bankguarantees encashed by customers trade receivables and withheld amounts which are subjectmatters of various disputes /arbitration proceedings/ negotiations with the customers andcontractors due to termination / foreclosure of contracts and other disputes.
(c) Assessment of expected cash shortfall and resultant loss allowancethat may be required in respect of invocation of corporate guarantees and demand againstthe Company in respect of such guarantees extended / executed for its subsidiaries andother parties in favour of the lender
(d) Assessment of impairment in value of long term equity investmentand assessment of impairment in value of loans and advances to various subsidiarycompanies and other parties.
(e) Control over reconciliation of sub-contractors work bills with thework bills submitted to the clients and physical progress of works completed which couldpotentially result into inaccurate estimation of percentage of work completed.
(f) Controls over projects costs estimation and review of balance coststo complete in respect of work projects which could potentially result into inaccurateestimation of foreseeable losses on works contracts.
(g) physical verification of fixed assets and inventories. Further thecompany did not have any internal audit system during the year.
The inadequate supervisory and review control over Company'sprocess in respect of aforesaid assessment in accordance with the accounting principlesgenerally accepted in India could potentially result in a material misstatement inpreparation and presentation of financial statement including the profit/loss after tax.
A material weakness' is a deficiency or a combination ofdeficiencies in internal financial control over financial reporting such that there is areasonable possibility that a material misstatement of the company's annual or interimfinancial statements will not be prevented or detected on a timely basis.
In our opinion except for the possible effects of material weaknessesdescribed in "basis of qualified opinion" paragraph above the Company has inall material respects an adequate internal financial controls system over financialreporting and such internal financial controls over financial reporting were operatingeffectively as at March 31 2021 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.
We have considered the material weaknesses identified and reportedabove in determining the nature timing and extent of audit tests applied in our audit ofthe standalone financial statements of the Company for the year ended on March 31 2021and these material weaknesses have affected our opinion on the standalone financialstatements of the Company and we have issued a qualified opinion on the standalonefinancial statements.
Appendix-1 As referred to in para i(c) of the Annexure A to theIndependent Auditors Report
*Title deeds not in the name of Company
A neither title deeds nor confirmation from the lender isavailable
# copies of title deed is available however lender confirmation formortgage of title deed is not available $ copies of title deed is not available howeverlender confirmation for mortgage of title deed is available.
Appendix-2 As referred to in para vii (a) of the Annexure A to theIndependent Auditor's Report
# Interest on all statutory dues could not be identified. TDS andInterest on TDS
Appendix-3 as referred to para vii (b) of the annexure A to theIndependent Auditor's Report
* Indicated Pre Security Deposits with respective authorities.