THE MEMBERS OF JAIN STUDIOS LIMITED
Report on the Audit of the Financial Statements Qualified
We have audited the accompanying financial statements of Jain Studios Limited("the Company") which comprise the Balance Sheet as at March 31 2019 theStatement of Profit and Loss the Statement of Changes in Equity and the Statement of CashFlows for the year ended on that date and a summary of the significant accountingpolicies and other explanatory information (hereinafter referred to as "the financialstatements").
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter(s) described in the Basis for QualifiedOpinion section of our report the aforesaid financial statements give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 312019 the profit changes in equity and itscash flows for the year ended on that date.
Basis for Qualified Opinion
i. We refer to refer note no. 2.3 of the financial statements in respect of custom dutysaved Rs. 351.48 Lakhs during earlier years as per EPCG Scheme against which thecompany's funds amount Rs 274.21 Lakhs are laying deposited with the custom departmentwhich has been shown as Deposits with custom department.
Attention is invited that no provision has been made for the custom duty saved andinterest thereon and the penal consequences which may arise out of this (impactunascertained). The Management has considered and disclosed the liability of Rs. 351.48Lakhs as not acknowledged as debts under "Contingent Liabilities" (refer noteno. 2.24 of the financial statements).
ii. We refer to refer note no. 2.3 of the financial statements in respect of partpayment of Rs. 105.00 Lakhs made under protest towards Monthly use and occupation chargesclaimed by Scindia Potteries and Services Ltd against the decretal amount of Rs. 1213.94Lakhs (up to 31.03.2019) as directed by the High Court Delhi High Court vide its orderdated 01.08.2018.
Attention is invited that no provision has been made in respect of liability of theremaining decretal amount of Rs. 1108.94 Lakhs. The Management has considered anddisclosed the liability of Rs. 1108.94 Lakhs as not acknowledged as debts under"Contingent Liabilities" (refer note no. 2.24 of the financial statements).Keeping in view the pendency of the matter before the court we express our inability tocomment on the matter and quantify the liability including penal consequences (liabilityunascertained)which may arise due to not depositing the decretal amount as directed by theDelhi High Court vide its order dated 01.08.2018.
iii. We refer to note no. 2.4 of the financial statements in respect of MAT creditentitlement amounting to Rs 26.45 Lakhs recognized and carried over based on managementperception in respect of availability of sufficient taxable income in coming years againstwhich such credit can be set off and our inability to comment thereon.
iv. We refer to note no. 2.8 of the financial statements in respect of recognition andcarryover of deferred tax assets (net) amounting to Rs. 965.46 Lakhs based on managementperception in respect of availability of sufficient taxable income in coming years againstwhich such assets can be realized and our inability to comment thereon.
v. We refer note no. 2.12 in respect of one time settlement (OTS) arrived at with SASFwhich SASF vide its letter dated 12th February 2015 and 5th March 2015 respectivelyrevoked the OTS including reversal of waiver of dues and restoration of the originalliability as per the terms of loan agreement and adjustment of payment received by SASFfrom the company towards the dues. The Company had received a show cause notice dated09.12.2016 from Debt Recovery Tribunal (DRT-1 Delhi) for the application filed by SASFu/s 19 of the Recovery of the Debts due to Banks and Financial institutions Act 1993 forrecovery of its debt of Rs. 308.22 crores. Besides SASF has also moved an application u/s7 of I & B Code 2016 on 03.01.2019 for recovery of Rs. 445.39 crore claim. In theinterim the company has further sent a letter dated 30.01.2019 to SASF wherein thecompany has asked SASF to come for discussion for settlement of dues. SASF vide itsletter (LOA) dated 02.03.2019 has agreed for fresh One Time Settlement (OTS) of duessubject to certain terms and conditions and upon payment of Rs. 750.00 Lakhs (as perAppendix) within 240 days from the date of acceptance of OTS. However the company has yetnot made the first tranche payment of Rs. 50.00 Lakhs as per payment schedule due forpayment on or before 02.04.2019.
Attention is invited that necessary accounting entries in respect of provision of freshOTS of Rs 750.00 Lakhs has not been made in the books of accounts of the company. Furtherthe Management has considered and disclosed the liability of Rs. 308.22 crores raised bySASF in respect of previous OTS revoked as not acknowledged as debts under"Contingent Liabilities" (refer note no. 2.24 of the financial statements). Weexpress our inability to comment on the matter and quantify the liability in view of nonfulfillment of payment commitment by the company as agreed with SASF and pendency of thematter.
vi. We refer to note no. 2.13 of the financial statements in respect of dues to microenterprises and small enterprises. In absence of records confirmation and documentationwe report that the company has not identified its MSME creditors and their respectiveoutstanding dues and has not disclosed the outstanding dues to MSME creditors as requiredto be disclosed in terms of Section 22 of Micro Small and Medium Enterprises DevelopmentAct 2006 read with notification dated 02nd November 2018 and has not providedfor the penal interest (amount unascertained) on delayed payments to MSME creditors.
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. Inaddition to the matter described in the Basis for Qualified Opinion section we havedetermined the matters described below to be the key audit matters to be communicated inour report.
|S.No. ||Key Audit Matters ||Auditor's Response |
|1 ||Assessment of litigations and related disclosure of contingent liabilities. Refer to Note 2.24 to the Financial Statements- Contingent liabilities not provided for. ||Our audit procedures included the following - We understood assessed and tested the design and operating effectiveness of key controls surrounding assessment of litigations relating to the relevant laws and regulations; |
| ||As at March 31 2019 the Company has exposures towards litigations relating to various matters as set out in the aforesaid Notes. ||- We discussed with management the recent developments and the status of the material litigations which were reviewed by the audit committee; |
| ||Significant management judgement is required to assess such matters to determine the probability of occurrence of material outflow of economic resources and whether a provision should be recognised or a disclosure should be made. ||- We performed our assessment on a test basis on the underlying calculations supporting the contingent liabilities / other significant litigations made in the Financial Statements |
| ||The management judgement is also supported with legal advice in certain cases as considered appropriate. As the ultimate outcome of the matters are uncertain and the positions taken by the management are based on the application of their best judgement related legal advice including those relating to interpretation of laws/regulations it is considered to be a Key Audit Matter. ||- We evaluated management's assessments by understanding precedents set in similar cases and assessed the reliability of the management's past estimates / judgements; |
| || ||- We evaluated management's assessment around those matters that are not disclosed or not considered as contingent liability as the probability of material outflow is considered to be remote by the management; and |
| || ||- We assessed the adequacy of the Company's disclosures. Based on the above work performed management's assessment in respect of litigations and related disclosures relating to contingent nancial Statements are considered to be reasonable. |
| || ||Our audit procedures included the following |
|2 ||Assessment for provision for impairment in value of investment in Company in Corporate Insolvency Resolution Process (CIRP). Refer to Note 2.2 to the Financial Statements - Investments in Equity Instruments (unquoted- fully paid up) of Noida Software Technology Park Limited. ||- We discussed with management the recent developments and the status of the insolvency proceedings which were reviewed by the audit committee; |
| || || |
| ||As at March 31 2019 the Company has shown investment in Equity shares of company admitted into CIRP. ||- We evaluated management's assessments by understanding precedents set in similar cases and assessed the reliability of the management's estimates / judgements; and |
| ||Significant management judgement is required to assess such matters to determine the probable impact of the insolvency proceedings and outcome to assess the requirement and quantum of provision for impairment in the value of investment in Company in CIRP. ||- We assessed the adequacy of the Company's disclosures. Based on the above work performed management's assessment in respect of non provision for impairment in the value of investment due to pendency of the insolvency proceedings and subject to the approval of NCLT the related disclosures in the Financial Statements are considered to be reasonable. |
| ||The extent of impairment may or may not have been ascertained depending upon the stage of the resolution process. As the insolvency proceedings are in process and the ultimate outcome is uncertain and the positions taken by the management are based on the application of their best judgement related legal advice including those relating to interpretation of laws/regulations it is considered to be a Key Audit Matter. || |
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation along with the financial statements. The other information comprises theinformation included in the Management Discussion and Analysis Board's Report includingAnnexures to Board's Report Business Responsibility Report Corporate Governance andShareholder's Information but does not include our auditor's report on the financialstatements.
Our opinion on the financial statements does not cover the other information and wedo not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is toread the other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained duringthe course 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 Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance changes in equityand cash flows of the Company in accordance with the Ind AS and other accountingprinciples generally accepted in India. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement 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 financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
-Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
-Obtain an understanding of internal financial controls relevant to the audit in orderto design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
-Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
-Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial 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 financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions 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.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of subsection (11) of section 143 ofthe Companies Act 2013 we give in the "Annexure A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
As required by Section 143(3) of the Act based on our audit we report that:
a) We have sought and except for the mattere described under 'Basis for QualifiedOpinion' paragraph have obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) Except for the effects of matters described under 'Basis for Qualified Opinion'paragraph in our opinion proper books of account as required by law have been kept bythe Company so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss Statement of Changes in Equityand the Statement of Cash Flow dealt with by this Report are in agreement with therelevant books of account.
d) In our opinion except for the effects of matters described under 'Basis forQualified Opinion' paragraph the aforesaid financial statements comply with the Ind ASspecified under 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 as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct.
f) The qualification relating to the maintenance of account and other matters connectedthere with are as stated in the 'Basis for Qualified Opinion' paragraph.
g) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the oper ating effectiveness of such controls refer to ourseparate Report in "Annexure B". Our report expresses a modified opinion on theadequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
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 (refer Note 2.24).
ii. Except for the effects of mattere described under 'Basis for Qualified Opinion'paragraph the Company has made provision as required under the applicable law oraccounting standards for material foreseeable losses if any on longterm contractsincluding derivative contracts.
iii. There has been no delay in transferring amount required to be transferred to theInvestor Education and protection Fund by the Company during the year.
iv. With respect to the matter to be included in the Auditors' report under Section197 in our opinion and according to the information and explanation given to us theremuneration paid during the current year by the Company is in accordance with theprovisions of Schedule V of the Act.
| ||For VIKAS DAHIYA & CO. |
| ||Chartered Accountants . |
| ||FRN : 026025N |
|Date: ||CA Vikas Dahiya |
|Place: New Delhi ||M.No. 516598 |
ANNEXURE 'A' TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 2 under 'Report on Other Legal and Regulatory Requirements'section of our report to the Members of JAIN STUDIOS LIMITED of even date).
i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets have not been physically verified during the year by themanagement.
(c) According to information and explanation given to us the title deeds of theimmovable property have been mortgaged with the banks/ Financial Institutions etc. forsecuring the borrowings and loan raised by the Company.
ii. The Company is a service company primarily rendering news media services.Accordingly it does not hold any physical inventories. Thus paragraph 3(ii) of the Orderis not applicable to the Company.
iii. According to explanation and information given to us and on examination ofrecords during the year the company has not granted any loans secured or unsecured tocompanies firms or other parties covered in the register maintained under section 189 ofthe companies Act. Thus paragraph 3(iii) of the Order is not applicable to the Company.
iv. In our opinion and according to information and explanation 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 provided by the company.
v. In our opinion and on the basis of audit procedures and according to informationand explanation given to us the company has not accepted any deposits from publichowever the company has not filed Form DPT-3 with the ROC New Delhi.
vi. In our opinion maintenance of cost records under section 148(1) is not applicableto the company.
vii. (a) According to our information and explanation given to us and from examinationof records of the company the company is not regular in depositing undisputed statutorydues including provident fund employees' state insurance income tax duty of customsservice tax value added tax cess and any other statutory dues with the appropriateauthorities and there are undisputed statutory dues which remain in arrear for a period ofmore than six month as on 31st March 2019.
|NATURE OF DUES ||AMOUNT OF DUES (Rs. in Lakhs) |
|Central sales tax (UP) ||11.73 |
|TDS ||27.20 |
|Bonus Payable ||14.84 |
|Service Tax ||89.75 |
|EPF ||15.30 |
|ESI ||0.24 |
(b) According to the information and explanations given to us there are no materialdues of duty of customs which have not been deposited with the appropriate authorities onaccount of any dispute except as reported at serial no. i. "Basis of qualifiedopinion". However according to information and explanations given to us thefollowing dues of income tax sales tax duty of excise service tax and value added taxhave not been deposited by the Company on account of disputes.
|Name of the Statue ||Nature of Dues ||Amount Involved (Rs.) ||Forum where dispute is pending |
|The Income Tax Act 1961 ||Matter in Appeal for A.Y. 2012-13. (u/s 271(1)(c) of the Act) ||2157124/- ||Income Tax Commissioner (Appeals)-5 (Delhi) |
|The Income Tax Act 1961 ||Matter in Appeal for A.Y. 2013-14. (u/s 271(1)(c) of the Act) ||630311/- ||Income Tax Commissioner (Appeals)-5 (Delhi) |
viii. The Company does not have any loans or borrowings from any financial institutionbanks government or debenture holders during the year except Debts not acknowledged asdebts against the company amounting to Rs. 308.22 crores considered as ContingentLiabilities (refer note 2.24 of the financial statements).
ix. According to our information and explanation given to us and from examination ofrecords the company has not raised any moneys by way of Initial Public Offer (IPO) orfurther public offer (including debt instruments).
x. According to information and explanation given to us no material fraud on or by thecompany has been noticed or reported during the year.
xi. During the year the Company has paid / provided for managerial remunerationamounting to Rs. 23.60 Lakhs to its Managing Director as per the provisions of section 197read with Schedule V to the Act.
xii. The company is not a Nidhi Company.
xiii. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting.
xiv. According to information and explanation given to us the company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year under review.
xv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.
xvi. In our opinion and on the basis of our audit procedures and according toinformation and explanation given to us the company do not require registration undersection 45-IA of the Reserve Bank of India Act 1934.
| ||For VIKAS DAHIYA & CO. |
| ||Chartered Accountants |
| ||FRN : 026025N |
|Date: ||CA Vikas Dahiya |
|Place: New Delhi ||M.No. 516598 |
ANNEXURE B' TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in Independent Auditor's Report of even date to the members of JAINSTUDIOS LIMITED ("the Company") on the financial statements for the yearended March 31 2019)
Report on the Internal Financial Controls over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of JAINSTUDIOS LIMITED ("the Company") as of March 312019 in conjunction with ouraudit 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 and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adquate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe 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 in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Fni ancial Reporting(the "Guidance Note") and the Standards on Auditing issued issued by ICAI anddeemed to be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both issued by the Institute ofChartered Accountants of India and applicable to an audit of internal financial controls.TTiose Standards and the Guidance Note require that we comply with ethical requirementsandperform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols 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 andoperatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment 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 he 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 for external purposes inaccordance with generally accepted accounting principles. A company's internal financialcontrol over financial reporting includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and and dispositionsof the assets of the Company;(2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles and that receipts and expenditures of theCompany are being made only in accordance with authorisations of management and directorsof the Company; 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 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 conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
Basis of qualified opinion
The Company did not have appropriate internal financial controlsin respect of controlover process of compliance of Ind As-12"Income Tax" and atutory returns underincome tax GST and company laws. The inadequate internal controls over financialreporting in respect of aforesaid matters have effect on the reported profit for the year.
In our opinion and according to the information and explanations given to us exceptfor the effects of matters described in "Basis of qualified opinion" paragraphabove the Company has in all material respects an adeq^te internal financial rontrolssystem over finanaal reporting and such internal financial controls over financialreporting were operating effectively as at March 312019 based on the internal controlover financial reporting criteria established by the Company considering the essentialconponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
We have considered matters reported in "Basis of qualified opinion" paragraphin determining the nature timing and extent of audit tests applied in our audit of theStandalone financial statements of the Company for the March 31 2019.
| ||For VIKAS DAHIYA & CO. |
| ||Chartered Accountants |
| ||FRN: 026025N |
|Date: 10th August 2019 ||CA Vikas Dahiya |
|Place: New Delhi ||M.No. 516598 |