THE MEMBERS OF JAYASWAL NECO INDUSTRIES LIMITED
Report on the Audit of the Financial Statements Qualified
We have audited the accompanying Financial Statements of JAYASWAL NECO INDUSTRIESLIMITED ("the Company") which comprise the Balance Sheet as at 31stMarch 2019 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and statement of Cash Flows for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand 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 possible effects of the matter described in the Basisfor Qualified Opinion' para below the aforesaid Financial Statements give the informationrequired by the Companies Act 2013 ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the Company as at 31st March 2019and its loss including other comprehensive income changes in equity and its cash flowsfor the year ended on that date.
Basis for Qualified Opinion
As mentioned in Note No.18.10 to the Financial Statements Non Current Borrowingsinclude an amount of Rs. 230954.89 Lakhs due to certain banks and Assets ReconstructionCompany. During the year banks holding 94.20% (by value) of the total principal debtequivalent to Rs. 339353.50 Lakhs assigned all their rights title and interests infinancial assistances granted by them to the Company in favour of Assets Care &Reconstruction Enterprise Limited acting in its capacity as Trustee of eight differentTrusts (ACRE). Until the revised terms and condition will be agreed between the Companyand ACRE the arrangement with those banks are valid and as per the arrangements withthose banks the Company is required to comply with certain covenants as referred in thesaid note and non-compliance with these covenants may give rights to the banks/ACRE todemand repayment of the loans. As at 31st March 2019 the Company has not complied withcertain covenants and they have not been provided with any confirmation from those lendersfor extension of time to comply with these covenants. The Company has not classified theseliabilities as current liabilities as required by Indian Accounting Standards (Ind AS) 1-"Presentation of Financial Statements".
We conducted our audit in accordance with Standards on Auditing (SAs) specified undersection 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (ICAI) together with theethical requirements that are relevant to our audit of the Financial Statements under theprovisions of the Act and the rules thereunder and we have fulfilled responsibilities inaccordance with these requirements and the ICAI's Code of Ethics. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for ourqualified opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note No. 36 to the Financial Statements regarding preparation ofFinancial Statements of the Company on going concern basis notwithstanding the fact thatthe Company continue to incurred cash losses it's net worth has been eroded as on 31stMarch 2019 loans have been called back by few of the secured lenders application hasbeen made to National Company Law Tribunal (NCLT) Mumbai under section 7 of theInsolvency and Bankruptcy Code 2016 (IBC) by State Bank of India the erstwhile leadsecured lender which has been contested by the Company for the reasons stated in thesaid note. These conditions indicate the existence of a material uncertainty that may castsignificant doubt on the Company's ability to continue as going concern. During the yearBanks holding 94.20% (by value) of the total principal debt equivalent to Rs. 339353.50Lakhs assigned all their rights title and interests granted by them to the Company infavour of Assets Care & Reconstruction Enterprise Limited acting in its capacity asTrustee of eight different Trusts (ACRE). The appropriateness of assumption of goingconcern is critically dependent upon the Company's ability to raise requisite finances andgenerate cash flows in future to meet its obligations and to restructure its borrowingwith the lenders.
Our opinion is not modified in respect of this matter.
Emphasis of Matter
We draw your attention to the:
Note No. 2.08 to the Financial Statements regarding the attachment of the properties ofthe Company to the extent of Rs. 30758.39 lakhs by the Directorate of Enforcement whichhas been contested by the Company.
Our opinion is not modified in respect of this matter.
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 year. These matters were addressed in the contextof our audit of the Financial Statements as a whole and in forming our opinion thereonand we do not provide a separate opinion on these matters.
|Key Audit Matter ||How our audit addressed the key audit matter |
|1) Carrying value of property plant and equipment (PPE) Capital Work in Progress (CWIP) Intangible Assets under development || |
|As at 31st March 2019 carrying value of PPE CWIP and Intangible Assets under development is Rs. 511828.61 lakhs which constitutes 76.22% of the total assets of the Company. ||Our audit procedure included among others: |
| ||Updating our understanding of management's annual impairment testing process. |
|As per Ind AS 36 "Impairment of Assets" in assessing whether there is any indication that assets may be impaired an entity shall consider as a minimum the external and internal sources of information any other indication or evidences from internal reporting that indicates that the assets may be impaired. ||Assessing internal controls designed for identification of impairment indicators. |
|The existence of an impairment indicator is significantly influenced the Company has been incurring cash losses its net worth has been eroded as on 31st March 2019 loans have been called back by few of the secured lenders and an application has been made to National Company Law Tribunal (NCLT). ||Ensuring that the methodology of the impairment exercise continues to comply with the requirements of Ind AS as adopted including evaluating management's assessment of indicators of impairment against indicators of impairment specified within Ind AS 36. |
|Management concluded that the recoverable amount of PPE CWIP and Intangible assets under development were higher than their carrying values such that no impairment provision was required. These conclusions are dependent upon significant management judgement including in respect of: ||Assessing the appropriateness of the Company's valuation methodology applied in determining the recoverable amount. In making this assessment it took into consideration the valuation report of the specialist involved by the Company. It also required evaluating the objectivity independence and competency of specialists involved in the valuation process. |
| ||Assessing the assumptions around the key drivers of the cash flow forecasts including growth rate and discount rate. |
| Estimated utilisation disposal values and discount rates applied to future cash flows; and ||Testing the arithmetical accuracy of the impairment model prepared by the management. |
| Estimated resale values provided by an independent external valuer. We considered this matter as key audit matter due to the significance of the carrying value of the assets being assessed and due to the level of management judgement required in the assumptions impacting the impairment assessment and the sensitivity of the impairment model. ||Verifying the completeness of disclosure in the financial statements as per Ind AS 36. |
|The main assumptions impacting the assessment and sensitivity of the model are future cash flows growth rates applied to cash flows and discount rates. These assumptions are subjective and subject to management judgement about the future results of the business. Refer Note no. 2 and 3 to the Financial Statements. || |
|2) Inventories || |
|As of 31st March 2019 inventories appear in the Financial Statements for an amount of Rs. 83417.42 lakhs constitutes 12.42% of the total assets of the Company. Inventories are valued at the lower of cost and net realizable value (Refer note no. 1(C)(VI) and 7 to the Financial Statements). ||Our audit procedure included among others: |
| ||Reviewing the Company's process and procedure for physical verification of the Inventories at the year end and accounting for the same. |
|The Company may recognize an inventory allowance if inventory items are damaged if the selling price has declined or if the estimated costs to completion or to be incurred to make the sale have increased. ||Obtaining the physical inventory count reports of the Management which were conducted in the presence of internal auditors of the Company and discussing with the internal auditors about the Control checks performed by the internal auditors. |
|We considered this matter as key audit matter due to the: ||Assessing the methods used to value inventories and ensuring the consistency of accounting methods. |
|Significance of the inventories balance. || |
|Complexities involve in determining inventory quantities on hand due to the number location and diversity of inventory storage locations. ||Testing by sampling the effectiveness of the controls set up by Management to prevent or detect possible errors in valuation of inventories. |
|Valuation procedure including of obsolete inventories. ||Reviewing the reported acquisition cost on a sample basis. |
| ||Analyzing the company's assessment of net realizable value as well as reviewing the assumptions and calculations for stock obsolescence. |
| ||Verifying the completeness of disclosure in the Financial Statements as per Ind AS 2. |
|3) Revenue Recognition || |
|Revenue is recognized net of discounts & rebates earned by the customers on the Company's sales. The estimation of discounts & rebates recognized based on sales made during the year is considered to be complex and judgmental. ||Our audit procedure included among others: |
| ||Assessing the Company's processes and controls for recognizing revenue as part of our audit. Our audit approach included testing of the controls and substantive audit procedures including: |
|Revenue is recognized when control of the underlying products has been transferred along with satisfaction of performance obligation. ||- Performing detailed transaction testing by agreeing a sample of individual revenue items from order to sales invoices evidence of delivery and subsequent cash receipt; |
|The application of the new revenue accounting standard involves certain key judgments relating to identification of distinct performance obligations and determination of transaction price of the identifiedperformance obligations. ||- Performing sales cut-off testing immediately before and after the year end by testing sales invoices to evidence of delivery to ensure that revenue had been recognised in the correct accounting period; |
|Further customer's incentive rebate / discounts represent a material reduction in sales and process for calculating and recording the above involves significant manual process. ||With regard to the expected impact of the initial application of Ind AS 115 from the financial year 2018 onward our audit approach included among other items: |
|Additionally new revenue accounting standard contains disclosures which involve collection of information in respect of disaggregated revenue. ||Assessing the process to identify the impact of adoption of the new revenue accounting standards. |
|Accordingly it has been determined as a key audit matter. ||Verifying the completeness of disclosure in the Financial Statements as per Ind AS 115. |
|Refer Note no. 1(C)(XV) and 27 to the Financial Statements. || |
|4) Provision of Finance Costs on Borrowings from Banks and Financial Institutions (FI's) and receipt of loan recall notice from secured lenders. || |
|The Company has recognised the interest expenses on borrowings from the secured lenders amounts to Rs. 68417.64 lakhs control about recognition of based on the interest rates provided in the agreements between the secured lenders and the Company. ||Our audit procedure included among others: |
| ||Updating our understanding of Company's procedure and financial finance costs. |
|Due to various reasons mentioned in note no. 18.01 18.10 & 36 to the Financial Statements the secured lenders have classified the Company's accounts as Non-performing ||Verifying on test check basis the computation of interest with reference to principal amount rate of interest additional or penal interest as per the agreements as applicable. |
|Asset (NPA) for nonpayment of monthly installments and stopped recognizing the interest income in their books of account hence accordingly not confirmed the amount of interest due from the Company. The Company has received the loan recall notice from few secured lenders. ||Verifying the monthly bank statements on test check basis. |
|We considered this matter as key audit matter due to significant amount of finance costs incurred which comprises 15.18% of the total expenditure of the Company. ||Obtaining direct balance confirmation of principal amount due from the selected lenders as at March 31 2019. |
| ||Ensuring the completeness of disclosure and presentation of borrowings and borrowing costs as per applicable Ind AS. |
|5) Litigation and Regulatory Claims || |
|The Company is subject to number of significant litigations. ||Our audit procedure included the following : |
|Major risks identified by the Company in that area related to ||Assessing the procedures implemented by the Company to identify and gather the risks it is exposed to. |
|Energy Development Cess Attachment of the Company's || |
|property by the Directorate of Enforcement Application || |
|filedby a lender to NCLT under IBC for the recovery of loan || |
|Arbitration with the vendors / suppliers etc. The amount of litigation may be significant and estimates of the amounts of provisions or contingent liabilities are subject to significant Management judgment. (Refer Note No. 2.06 2.07 2.08 22.04 26.01 35 and 36 to the Financial Statements) ||Discussion with the management on the development in these litigations during the year. Enquiring from the company's legal counsel (internal/external) and study the responses as received from them. |
|Due to complexity involved in these litigation and regulatory claims management's judgment regarding recognition and measurement of provisions for these legal proceedings is inherently uncertain and might change over time as the outcomes of the legal cases are determined. Accordingly it has been considered as a key matter. ||Verifying that the accounting and / or disclosure as the case may be in the financial statements made by the Company is in accordance with the assessment of legal counsel / management based on the information currently available to the Company. |
| ||Obtaining representation letter from the management on the assessment of these matters as per SA 580 (revised) Written representations. |
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the Management Discussion & Analysis and Director's Reportincluded in the Annual Report but does not include the Financial Statements and ourAuditor'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 in theaudit 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 state of affairs (financial position) loss (financialperformance including other comprehensive income) cash flows and the statement of changesin equity of the Company in accordance with the accounting principles generally acceptedin India including Indian Accounting Standards (Ind AS') prescribed under Section133 of the Act read with relevant rules issued thereunder.
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 Statementsmanagement is responsible for assessing the Company's ability to continue as a goingconcern disclosing as applicable matters related to going concern and using the goingconcern basis of accounting unless management either intends to liquidate the Company orto cease operations or has no realistic alternative but to do so. Those Board ofDirectors are also responsible for overseeing the Company's financial reporting process.
Auditors' Responsibility 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 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 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 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 ability ofthe Company to continue as a going concern. If we conclude that a material uncertaintyexists we are required to draw attention in our Auditor's Report to the relateddisclosures in the Financial Statements or if such disclosures are inadequate to modifyour opinion. Our conclusions are based on the audit evidence obtained up to the date ofour Auditor's Report. However future events or conditions may cause the Company to ceaseto continue as a 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.
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 with those charged with governance we determine thosematters that were of most significance in the audit of the Financial Statements of thecurrent year and are therefore the key audit matters. We describe these matters in ourAuditor's Report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143 (3) of the Act we report that:
a. We have sought and obtained all the information and explanations which to the bestof our knowledge 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) the Cash Flow Statement and the Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account;
d. In our opinion except the matter described in the "Basis for QualifiedOpinion" paragraph above the aforesaid Financial Statements comply with the IndianAccounting Standards prescribed under Section 133 of the Act read with relevant rulesthereunder;
e. The going concern matter described in "Material Uncertainty Related to GoingConcern" paragraph above in our opinion may have an adverse effect on thefunctioning of the Company.
f. On the basis of the written representations received from the directors as on 31stMarch 2019 and taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in termsof Section 164 (2) of the Act.
g. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A". h. With respect to the other matters tobe included in the Auditor's Report in accordance with the requirements of section 197(16)of the Act as amended: In our opinion and to the best of our information and according tothe explanations given to us the remuneration paid by the Company to its directors duringthe year is in accordance with the provisions of section 197 of the Act.
i. 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 as referred to in Note No. 2.06 2.07 2.08 22.0426.01 35 and 36 to the Financial Statements;
ii. The Company has made provisions as required under the applicable law or Ind ASfor material foreseeable losses if any on long term contracts including derivativecontracts; iii. There were no amounts which were required to be transferred to theInvestor Education and Protection Fund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016 (the Order) issued bythe Central Government of India in terms of Section 143(11) of the Act we give in "AnnexureB" hereto a statement on the matters specified in paragraphs 3 and 4 of theOrder.
ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT (Referred to in paragraph 1(g) under Report on Other Legal and Regulatory Requirements' of our report of evendate to the members of Jayaswal Neco Industries Limited on the financial statements forthe year ended 31st March 2019) Report on the Internal Financial Controls OverFinancial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act2013 ("the Act")
We have audited the internal financial controls over financial reporting of JAYASWALNECO INDUSTRIES LIMITED (the Company') as of 31st March 2019 inconjunction with our audit of the financial statements of the Company for the year endedon 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 Reporting(the Guidance Note') issued by the Institute of Chartered Accountants of India(ICAI). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information 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 in accordancewith the Guidance Note issued by the ICAI and the Standards of Auditing prescribed underSection 143(10) of the Companies Act 2013 to the extent applicable to an audit ofinternal financial controls. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial established and maintained and if such controlsoperated 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 reporting included obtaining an understanding ofinternal financial controls over financial reporting assessing a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements 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 financialcontrolssystem .reporting overfinancial
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 financialthose policies and procedures that (1) pertain to the maintenance of records that inreasonable detail accurately and fairly reflect the transactions and dispositions of theassets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted principles and that receipts and expenditures of the company are being made onlyin accordance with authorizations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition use or disposition of the company's assets that could have a material effecton 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.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material financial reporting and such internal financialcontrols over respectsanadequateinternalfinancial financial reporting were operatingeffectively as at 31st March 2019 based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note issued by the ICAI.
ANNEXURE "B" TO INDEPENDENT AUDITORS' REPORT (Referred to in paragraph 2under the heading "Report on Other Legal and Regulatory Requirements" of ourreport of even date to the members of Jayaswal Neco Industries Limited on the FinancialStatements for the year ended 31st March 2019)
i. In respect of its fixed assets:
a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets on the basis of available information.
b. As explained to us the Company has physically verified certain assets inaccordance with a phased program of verification which in our opinion is reasonablehaving regard to the size of the Company and the nature of its assets. No materialdiscrepancies were noticed on such physical verification as compared with the availablerecords.
c. According to the information and explanations given to us the title deeds ofimmovable properties are generally in the name of the Company except in respect of 5immovable properties at Raipur having the aggregate value of Rs. 31 lakhs in respect ofwhich the documents are not registered in the name of the company with the concernedGovernment Authority and also in case of properties acquired by the entities or unit thathave since been amalgamated/merged with the Company in pursuance to the scheme ofamalgamation / demerger / arrangement approved by Hon'ble High Court and details of whichare as under.:
| || || || ||(Rs. in lakhs) |
|Sr. No. ||Particulars of the Land and Building ||Leasehold/ Freehold Land /Building ||Net Block as at 31st March 2019 ||Remarks (give reasons for the exception) |
|1 ||4 immovable properties land at Raipur (1 agreement pledged with the lender) ||Leasehold Land ||1820.26 ||2 title deeds are in the name of Corporate Ispat Alloys Limited from where the unit demerged and acquired by the Company and 2 title deeds are in the name of Nagpur Alloy Castings Limited erstwhile Company that was amalgamated with the Company under the Companies Act 1956 |
|2 ||7 immovable properties (land / building) at Raipur / Nagpur / Kolkata (4 agreements equitable mortgage with the lenders) ||Free hold land / building ||66.06 ||The title deeds are in the name of Jayaswals Neco Limited (earlier known as Jayaswal Chemical Private limited) erstwhile Company that was amalgamated with the Company under the Companies Act 1956 |
As informed to us in respect of 59 immovable properties having the aggregate value ofRs. 682.64 Lakhs the original title deeds have been deposited with the lenders assecurity we have been produced photocopies of documents for those immovable propertiesand based on such documents the title deeds are held in the name of the Company except 5immovable properties as disclosed above. ii. In respect of its inventories:
As explained to us inventories have been physically verified during the year by themanagement except for inventories in transit / with job worker for which managementconfirmation has been received. In our opinion the frequency of verification isreasonable. Discrepancies noticed on physical verification of the inventories between thephysical inventories and book records were not material having regard to the size of theoperations of the Company and the same have been properly dealt with. iii. In respect ofloans secured or unsecured granted by the Company to companies firms Limited liabilitypartnerships or other parties covered in the register maintained under section 189 of theAct:
a. In the earlier years the Company had granted unsecured loan to one such Company andthe terms and conditions on which the loan had been granted were not prima facieprejudicial to the interest of the Company.
b. The terms of repayment of principal and payment of interest have been stipulated andduring the year the principal and interest were due for payment but due to the financialcrisis the party has not paid the same.
c. The amount is overdue and the Company has considered the said loan and interestreceivables as doubtful and has been fully provided for. iv. In our opinion and accordingto the information and explanations given to us the Company has complied with theprovisions of section 185 and 186 of the Act in respect of grant of loans makinginvestments and providing securities.
v. According to the information and explanations given to us the Company has notaccepted any deposits from the public. Therefore the provisions of clause (v) ofparagraph 3 of the Order are not applicable to the Company.
vi. We have broadly reviewed the cost records maintained by the Company pursuant to theCompanies (Cost Records and Audit) Rules 2014 prescribed by the Central Government underSection 148(1) (d) of the Act as applicable and are of the opinion that prima facie theprescribed accounts and records have been maintained. We have however not made adetailed examination of the cost records with a view to determine whether they areaccurate or complete.
vii. According to the information and explanations given to us in respect of statutorydues:
a. The Company has generally been regular in depositing undisputed statutory duesincluding Provident Fund Employees' State Insurance Customs Duty Cess and any otherstatutory dues with the appropriate authorities during the year however delays have beennoticed in respect of Income Tax and Goods and Service Tax. According to the informationand explanations given to us no undisputed amounts payable in respect of such statutorydues were outstanding as at 31st March 2019 for a period of more than sixmonths from the date they became payable.
b. Details of dues of Duty of Custom Duty of Excise Service Tax Sales Tax and ValueAdded Tax aggregating to Rs. 1923.38 Lakhs that have not been deposited on accountof disputed matters pending before appropriate authorities are as under:
| || || || ||(Rs. in Lakhs) |
|Name of the Statutes ||Nature of the Dues ||Period to which it relates ||Amounts (Rs. in lakhs) (*) ||Forum where the dispute is pending |
|The Customs Act 1962 ||Custom Duty ||2014-16 ||78.56 ||CESTAT |
| || ||2004-05 ||100.00 ||Commissioner |
|The Central Excise Act 1944 ||Excise Duty ||2009-16 ||132.83 ||CESTAT |
|Finance Act 1994 ||Service Tax ||2005-09 2015-18 & 2010-11 ||312.53 ||CESTAT |
| || ||2009-10 & 2015-18 ||72.78 ||Commissioner |
|The Central Sales Tax Act 1956 and Sales Tax Acts of various states ||Sales Tax / ||2008-09 ||9.40 ||High Court |
| ||VAT ||2007-08 2009-10 ||297.46 ||Tribunal |
| || ||2011-12 and 2013-15 || || |
| || ||2011-122012-14 and ||803.40 ||Additional Commissioner |
| || ||2015-17 || || |
| || ||2012-15 ||97.74 ||Joint Commissioner |
| || ||1996-97 ||18.68 ||Deputy Commissioner |
| || ||2002-03 and 2013-14 || || |
| || ||Total ||1923.38 || |
(*) Net of amount deposited under protest viii. Based on our audit procedures andaccording to the information and explanations given by the management we are of theopinion that as on 31st March 2019 the Company has defaulted in repayment ofdues to banks aggregating to Rs. 194164.40 Lakhs. Lender wise details of suchdefault is as under
| || || ||(Rs. in Lakhs) |
|Banks ||Total Default ||Below 90 days ||Above 90 days |
|ACRE-54-Trust (State Bank of India ||58205.79 ||4471.53 ||53734.26 |
|ACRE-59-Trust (Union Bank of India ) ||27334.95 ||2158.64 ||25176.31 |
|ACRE-63-Trust (Indian Overseas Bank ) ||8525.87 ||591.45 ||7934.42 |
|ACRE-64-Trust (Punjab National Bank ) ||47528.00 ||3170.67 ||44357.33 |
|ACRE-68-Trust (IDBI Bank) ||14317.46 ||1023.92 ||13293.54 |
|ACRE-69-Trust ( Central Bank of India ) ||14656.78 ||1697.73 ||12959.05 |
|ACRE-70-Trust (Oriental Bank of Commerce ) ||8325.49 ||216.17 ||8109.32 |
|ACRE-76-Trust (Bank of India) ||4948.24 ||145.70 ||4802.54 |
|Bank of Maharashtra ||6127.06 ||474.17 ||5652.89 |
|Andhra Bank ||2457.81 ||229.55 ||2228.26 |
|UCO Bank ||1736.95 ||297.01 ||1439.94 |
|Total ||194164.40 ||14476.54 ||179687.86 |
According to the information and explanations given to us the following banks haveclassified the credit facilities given to the Company as Non Performing Asset (NPA) as on31st March 2019 in their Books of Account.
| || || || ||(Rs. in lakhs) |
|Sr. No. ||Bank ||Term Loan Principal ||Fund Based Working Capital ||Total |
|1 ||Bank of Maharashtra ||9266.94 ||- ||9266.94 |
|2 ||Andhra Bank ||4815.61 ||- ||4815.61 |
|3 ||UCO Bank ||1529.18 ||- ||1529.18 |
|4 ||ICICI Bank ||- ||5264.14 ||5264.14 |
| ||Total ||15611.73 ||5264.14 ||20875.87 |
ix. According to the information and explanations given to us during the year theCompany has not raised any money by way of initial public offer or further public offer(including debt instruments). The term loans raised by the Company have prima facie beenapplied for the purpose for which they are raised.
x. Based on our audit procedures performed for the purpose of reporting the true andfair view of the Financial Statements and on the basis of information and explanationsgiven by the management no fraud by the Company or on the Company by its officers oremployees has been noticed or reported during the year.
xi. In our opinion according to the information and explanations given to us theCompany has paid or provided managerial remuneration in accordance with the provisions ofrequisite approvals mandated by the provision of section 197 read with Schedule V to theAct.
xii. In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Therefore the provisions of clause (xii) of paragraph 3of the Order are not applicable to the 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 applicableIndian accounting standards.
xiv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or debentures during the year. Therefore theprovisions of clause (xiv) of paragraph 3 of the order are not applicable to the Company.
xv. According to the information and explanations given to us during the year theCompany has not entered into non-cash transactions with directors or persons connectedwith him. Therefore the provisions of clause (xv) of paragraph 3 of the Order are notapplicable to the Company.
xvi. In our opinion and according to information and explanations provided to us theCompany is not required to be registered under section 45-IA of the Reserve Bank of IndiaAct 1934.
|For Pathak H. D. & Associates ||For Naresh Patadia & Co. |
|Chartered Accountants ||Chartered Accountants |
|Firm Reg. No. 107783W ||Firm Reg. No. 106936W |
|Mukesh Mehta ||Naresh Patadia |
|Partner ||Proprietor |
|Membership No. 43495 ||Membership No. 35620 |
|Mumbai ||Nagpur |
|Date: 22nd May 2019 ||Date: 22nd May 2019 |