TO THE MEMBERS OF JCT LIMITED'
We have audited financialstatements the accompanying of JCT Limited (the"Company") which comprise the Balance Sheet as at 31st March 2021and the Statement of
Profit and Loss (including Other Comprehensive Income) the Statement of Changes inEquity and the Statement of Cash Flows for the year then ended and notes to the financialstatements including a summary of the significant accounting policies and otherexplanatory information. In our opinion and to the best of our information and accordingto the explanations given to us the aforesaid financial statements give the informationrequired by the Companies Act 2013 (the Act') in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia of the state of affairs of the Company as at 31st March 2021 and itsprofit and total Comprehensive Income its changes in equity and its cash flows for theyear ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the
Act. Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India together with the ethical requirements that are relevantto our audit of the financial statements under the provisions of the Act and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficientand appropriate to provide a basis for our opinion.
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 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. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.
|Key Audit Matter ||Auditor's Response |
|Assessment of the Company's ability to continue as Going Concern ||Audit Procedure included but not limited to the followings: |
|(Refer to Notes No. 38.6) ||- Obtained an understanding of the management's process of assessment / evaluation of the going concern basis of accounting and evaluated and tested operating effectiveness of the controls around this process. |
|There are accumulated losses in the Company since earlier years and the same has resulted in the erosion of substantial net worth of the Company. The Company has profits during the current year however there are still some concerns due to accumulated losses and defaults in the repayment of its loans due to the financial crisis being faced by the Company. However the financial statements have been prepared on going concern basis based on management's assessment. The said management assessment involves making a judgement at a particular point of time about inherently uncertain future outcomes of events or conditions and the factors relevant to this judgement involves high degree of uncertainty and subsequent events may result in outcomes that are inconsistent with the judgments that were reasonable at the time they were made. As Auditor our responsibilities are to obtain sufficient appropriate audit evidence regarding and conclude on the appropriateness of mangements's use of the going concern basis however as the potential effects of inherent limitations on the auditor's ability to detect material misstatements are greater than for future events or conditions that may cause an entity to cease to continue as a going concern the Auditor cannot predict such future events or conditions and therefore the evaluation and assessment of the going concern basis of accounting as assessed by the management involved significant level financial support being / to be provided by them to the of subjectivity judgment and estimation as detailed above and therefore the same has been considered as Key Audit Matter by us during our audit. ||- Inquired the management as to its knowledge of events or conditions and related business risks beyond the period of assessment used by management that may cast doubts on the Company's ability to continue as going concern. |
| ||- Evaluated the information obtained in connection with going concern basis in conjunction with other information obtained throughout the audit that may impact our assessment of the appropriateness of the management's use of the going concern basis of accounting. |
| ||- Obtained information about management's plans to consider whether it is likely that the adverse effects will be mitigated for the foreseeable future and evaluated the likelihood of effective implementation of such plans. Considered the bases on which the plans have been prepared giving consideration as to whether they conform with facts already known and to available independent evidence which included the response of the bankers / lenders with respect to the Company. |
| ||Based on our above audit procedures we have not come across any circumstances that may require any further comments on the appropriateness of mangements' use of the going concern basis. |
|Property Plant & Equipment ||Audit Procedure included but not limited to the followings: |
|(Refer to Note No. 4 read with the Accounting Policy No. 3.1) ||- Obtained an understanding of the management's process and evaluated and tested operating effectiveness of the control around identification of the useful lives of the assets. |
|The property plant and equipment (except the land) are depreciated on straight line / written down value basis over their useful life as estimated by the management and the land is stated at its fair value. The asset's residual values and useful lives and land's fair value are reviewed at the end of each reporting period and necessary adjustments are made accordingly wherever required. The useful life of the assets and fair value of the land are estimated by the management based on usage pattern / trend technological developments and level of wear and tear etc. and based on the independent valuers' reports which involve high degree of the estimation and judgement and could affect their reported amounts in the financial statements in case of any improper estimation / valuation. Considering that the property plant & equipment comprise the substantial part of the total assets of the Company (68.62% of total assets) and any change in their reported amounts due to any improper estimations / valuation could result in substantial impact on the financial position of Company the same has been considered as Key Audit Matter by us during our audit. ||- Obtained the independent valuers' reports for fair value of the land and understanding of their process of the fair valuation. |
| ||- Review of the basic key assumptions and use / comparison of the same to the historic performance of the respective group of assets and approved estimates. |
| ||- Review and application of the key assumptions its usage with the impairment models and past history of the wear and tear levels and replacement life of the assets etc. |
| ||- Review of the actual level of performance of the assets and comparison thereof with the earlier estimates and actual results considering the technological changes / improvements etc. |
| ||Based on our above audit procedures we have not come across any circumstances that may require any material adjustments to the reported amounts of the property plant & equipment. |
|Inventory of Finished and Stock in Process ||Audit Procedure included but not limited to the followings: |
|(Refer to Note No. 10 read with the Accounting Policy No. 3.3.b) ||- Obtained an understanding of the Company's process of valuation of the stock which is done through the computer software. |
|The inventory of finished goods and stock in process is valued at the lower of cost and net realizable value and cost include cost of inputs conversion costs and other costs incurred in bringing finished goods and stock-in-process to their present location and condition. ||- Tested the software with respect to access and applications controls pertaining to the allocation of the raw-materials / inputs to various stages of productions. |
|This inventory comprises of diversified range and quality of yarn and cloth / fabrics and its costing / valuation depends on the cost of each of such quality of the item as per the specification received from the customers and its stage of manufacturing quality and date of purchase of the raw material and other inputs and efficiency of the manufacturing facility and due to highly complex process specially considering that the Company is running a composite textile mill; to fairly estimate the valuation of such stock it involves significant level of Company subjectivity with judgment the industry practices based on the substantial inventory of Finished Goods and Stock in Process (12.74% of total assets of the Company) and the valuation thereof involves significant judgment and estimation as detailed above the same has been considered as Key Audit Matter by us during our audit. ||- Performed substantive procedures to test the reasonableness of the cost allocation methods and basis for allocation of various conversion costs including the direct and indirect cost. |
| ||- Evaluated the process of ascertaining the realizable value of the inventory by comparing the actual sales of the same type of the material and its realisation etc. |
| ||- Review of the inventory valuation process of the details obtained in respect of the selected other textile companies functioning within the same technology and business norms / circumstances based on our levelabove of subjectivity audit procedures we have not come across any circumstances that may require any material adjustments to the reported amounts of the Inventory of Finished and Stock in Process. |
Information Other than the Financial Statements and Auditor's Report thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the Corporate Governance Report and Directors' Report includingannexures thereon but does not include the financial statements and our auditor's reportthereon. Our opinion on the financial statements does not cover the other information andwe do not express any form of assurance conclusion thereon.
In connection with our audit of the financial our responsibility is to read the otherinformation identified above 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 on the other information we conclude thatthere is a material misstatement of this other information we are required to report thatfact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
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 financialstatements that give atrue and fair view of the financialposition financial performance including othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards ("Ind AS") notified under
Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules2015 as amended.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the financial statements the Board of Directors is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessthe Board of Directors either intends to liquidate the Company or to cease operations orhas no realistic alternative but to do so. Those Board of Directors are also responsiblefor overseeing the Company's financial reporting 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. Reasonablestatementsassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis 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 control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theCompanies Act 2013 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 to continue as agoing concern. If we conclude that a material uncertainty exists we are required to drawattention in our auditor's report to the related disclosures in the financial statementsor if such disclosures are inadequate to modify our opinion. Our conclusions are basedon the audit evidence obtained up to the date of our auditor's report. However futureevents or conditions may cause the Company to cease to continue as a 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.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant any significant deficienciesidentify during our audit. We also provide those charged with governance with a statementthat we have 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.
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 period 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 the Companies (Auditor's Report)
Order 2016' ("the Order") issued by the Central Government of India interms of sub-section (11) of Section 143 of the Act we give in the Annexure-A' astatement on the matters specified in paragraph 3 and 4 of the Order.
2. As required by Section 143(3) of the Act we report that: a. we have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit. b. in our opinion proper books ofaccount as required by law have been kept by the Company so far as appears from ourexamination of those books. c. the Balance Sheet the Statement of Profit and Loss(including Other Comprehensive Income)
Statement of Changes in Equity and the Statement of Cash Flows dealt with by thisReport are in agreement with the books of account. d. in our opinion the aforesaidfinancial statements comply with the Indian Accounting Standards
("Ind AS") notified under Section 133 of the Act read with the Companies(Indian Accounting Standards) Rules 2015 as amended. e. on the basis of the writtenrepresentations received from the directors and taken on record by the Board of Directorsnone of the directors audit findings including is disqualified as on 31st March 2021from being internal control that we appointed as a director in terms of Section 164 (2) ofthe Act. f. with respect to the adequacy of the internal financial controls with referenceto financial statements of the Company and the operating effectiveness of such controlsrefer to our separate report in Annexure-B'; g. In our opinion the remunerationpaid by the Company to its Directors is in accordance with the provisions of Section 197of the Companies Act 2013; and h. with respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules2014 in our opinion and to the best of our information and according to the explanationsgiven to us: i. The Company has disclosed the impact of pending litigations on itsfinancial position in its financial statements Refer Note 38.1 to the financialstatements; ii. The Company has not entered into any long-term contracts includingderivative contracts. iii. There has been no amount required to be transferred to theInvestor Education and Protection Fund by the Company.
ANNEXURE-A' TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements' section of the independent auditors' report of even date on the financialstatements of JCT Limited for the year ended 31st March 2021)
(i) In respect of its property plant and equipments;
a. The Company has maintained proper records showing full particulars includingquantitative details and situation of the property plant and equipments.
b. As explained to us the property plant and equipments are physically verified bythe management once in a period of three years which in our opinion is reasonable havingregard to the size of the Company and nature of its property plant and equipments. Nomaterial discrepancies were noticed on such physical verification.
c. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties asdisclosed in Note 4 on property plant and equipments to the financial statements areheld in the name of the Company.
(ii) As explained to us inventories except those lying with third parties have beenphysically verified by the management at regular intervals during the year. Thediscrepancies noticed on such physical verification as compared to book records were notmaterial and have been appropriately dealt with in the books of accounts. (iii) TheCompany had not granted unsecured loans to companies covered in the Register maintainedunder Section 189 of the Companies Act 2013 hence this clause is not applicable. (iv) Inour opinion and according to the information and explanations given to us the Company inrespect of loans investments guarantees and security has complied with the provisionsof section 185 and 186 of the Act. (v) The Company has not accepted any deposits from thepublic within the meanings of Sections 73 to 76 of the Act and the rules framed thereunderto the extent notified.
(vi) Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under sub-section (1) of Section
148 of the Act in respect of its products. We have broadly reviewed the same andare of the opinion that prima facie the prescribed cost records have been made andmaintained. We have however not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.
(vii) In respect of statutory dues: a. According to the information and explanationsgiven to us and the records of the Company examined by us in our opinion the Company isgenerally regular in depositing undisputed statutory dues including Provident FundEmployees' State Insurance Income Tax Goods and Service Tax Duty of Customs Cess andother statutory dues as applicable with the appropriate authorities though there has beena delay in few cases. According to the information and explanations given to us noundisputed amounts payable in respect of the aforesaid dues were outstanding as at 31stMarch 2021 for a period of more than six months from the date they became payable. b. Thedisputed statutory dues aggregating to Rs. 5181.65 lakhs have not been deposited onaccount of matters pending in appeals before appropriate authorities are as under:
|Name of the Statute ||Nature of the dues ||Forum where dispute is pending ||Amount (Rs. in lakhs) |
|Central Excise Act 1944 and ||Excise Duty/ ||Upto Commissioner ||179.16 |
|Service Tax ||Service Tax ||Level CESTAT/ Tribunal ||1006.53 |
|Central Sales ||VAT/Entry ||Asst. ||359.81 |
|Tax VAT Act of various states ||Tax ||Commissioner Level Tribunal ||3403.08 |
|Custom Duty Act 1962 ||Custom Duty ||Commissioner of Customs ||186.05 |
|Rajasthan Land & Building Tax Act 1964 ||Municipal Taxes ||High Court Jodhpur ||47.02 |
|TOTAL || || ||5181.65 |
(viii) Based on the audit procedures and according to the information and explanationsgiven to us the Company has defaulted in the repayment of loans and borrowings to thefinancial institutions. The detail of the defaults have been given in the notes 21.4 and
21.5 to the financial statements.
(ix) The Company has not raised money by way of initial public offer or further publicoffer (including debt instruments) and term loans during the year.
(x) In our opinion and according to the information and explanations given to us nofraud by the Company or material fraud on the Company by its officers / employees has beennoticed or reported during the course of our audit.
(xi) The managerial remuneration paid/provided is within the limit and in compliance ofthe provisions of section 197 read with Schedule V to the Act.
(xii) The Company is not a Nidhi Company hence the requirement of this clause is notapplicable.
(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 section 177 and 188 of the Act where applicable. The details of suchtranscations have been disclosed in the financial statements as required by the Ind AS 24 Related Party Disclosures.
(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 fully or partly convertible debentures duringthe year.
(xv) In our opinion and according to the information and explanations given to us theCompany has not entered into any non-cash transactions with Directors or persons connectedwith them.
(xvi) As explained to us the Company is not required to be registered under section45-IA of the Reserve Bank of India Act 1934.
ANNEXURE-B' TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 2(f) under `Report on Other Legal and RegulatoryRequirements' section of the independent auditors' report of even date on the financialstatements of JCT Limited for the year ended
31st March 2021)
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of JCTLimited ("the Company") as of 31st March 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 Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the "Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting" (the "Guidance Note") issued by the Institute ofChartered Accountants of India ("ICAI"). These responsibilities include thedesign implementation and maintenance of adequate internal financial controls that wereoperating 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 Act.
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 Financial Reporting (the Guidance Note') and the
Standards on Auditing issued by the Institute of Chartered Accountants of India anddeemed to be prescribed under section 143(10) of the Act to the extent applicable to anaudit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform 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 includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors' judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the Company are being made only in accordance with authorisations ofmanagement and Directors of the
Company; and (3) provide reasonable assurance regarding prevention or timely detectionof unauthorised acquisition use or disposition of the Company's assets that could have amaterial 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.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects adequate internal financial controlswith reference to financial statements and such internal financial controls with referenceto financial statements were operating effectively as at 31st March 2021based on the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.
For NAVDEEP SINGH & CO.
Firm Regn. No. 008400N
(Navdeep Singh Choudhary)
M. No. 034979
UDI No. 21034979AAAABO1088