The Members of
Kamat Hotels (India) Limited
Report on the standalone financial statements
We have audited the accompanying standalone financial statements of Kamat Hotels(India) Limited (the Company') which comprise the Balance Sheet as at 31stMarch 2020 the Statement of Profit and Loss (including other comprehensive income) theStatement of Changes in Equity and the Cash Flow Statement for the year then ended and asummary of the significant accounting policies and other explanatory information (togetherreferred to as standalone financial statements).
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in Indiaincluding the Ind AS of the financial position of the Company as at 31st March2020 and its profit (including other comprehensive income) the changes in equity and itscash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing ("SAs")specified under section 143(10) of the Act. Our responsibilities under those Standards arefurther described in the Auditor's Responsibilities for the Audit of the standalonefinancial statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia ("ICAI") together with the ethical requirements that are relevant to ouraudit of the standalone financial statements under the provisions of the Act and the Rulesthereunder and we have fulfilled our ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
Reference is invited to note 54 of the standalone financial statements. There areaccumulated losses in the Company and current liabilities exceed the current assets as on31st March 2020 and 31st March 2019. Further in respect of loansthere are delays in repayment of principal and payment of interest; and instalments of Rs.1934.00 lakhs are due and unpaid as at 31st March 2020. In the opinion of themanagement considering the future business prospects management's action to mitigate theimpact of COVID-19 as described in note 55 of the standalone financial statementsmanagement's request for seeking extension of the loan dues as stated in note 26.7(b) ofthe standalone financial statements (also refer para (b) in Emphasis of matter paragraphbelow) and the fact that the fair values of the assets of the Company are significantlyhigher than the borrowings/debts these standalone financial statements have been preparedon a going concern basis which contemplates realisation of assets and settlement ofliabilities in the normal course of Company's business.
Our opinion is not modified in respect of this matter. Further the materialuncertainty related to going concern para was also reported in our independent auditreport for financial year 2018-2019 dated 27th May 2019 and financial year2017-2018 dated 28th May 2018 and our opinion was not modified in the previousyears also.
Emphasis of matter
(a) Attention is invited to note 26.5(b) & 43.1 of the standalone financialstatements. During the current year the Company has written back loan amounting to Rs.2369.28 lakhs on account of allocation between the principal amount of loan and interestin respect of installments to be paid by the Company in accordance with modified terms andconditions of the loan as per letter dated 29th January 2020 issued by alender. Further the effective interest rate (EIR) has been recomputed based on therevised principal amount. The management is of the view that the de-recognition andconsequent the write back of loan and re-computation of EIR has been done in accordancewith the qualitative parameters permitted in Ind AS 109 - Financial Instruments' onthe basis of opinion obtained from an expert and its ability to make prepayment of loan.This being a subjective matter we have relied on the management's view for the abovede-recognition and reversal of liability. The write back of loan is disclosed asexceptional item.
(b) Attention is invited to note 26.7(b) of the standalone financial statements. Duringthe current year there are delays in repayment of principal payment of interest andthere are unpaid instalments amounting to Rs.1934.00 lakhs which were due/overdue as on31st March 2020. The Company has requested all lenders in the month of March2020 for the extension of the dues considering the impact on account of COVID-19. We areinformed that though written confirmation from all the lenders for extension are awaitedall lenders have agreed for the extension either verbally or has given in principleapproval. In view of the above in the opinion of the management event of default is nottriggered in any case and therefore there is no other accounting implications andreclassification of non-current borrowings to current liabilities is not required as at 31stMarch 2020.
(c) Attention is invited to note 46.5 of the standalone financial statements. TheCompany has paid remuneration to its executive chairman and managing director for thefinancial year ended 31st March 2020 which is in excess of the limits prescribed undersection 197 of the Act (read with Schedule V of the Act) by Rs. 41.94 lakhs; the saidexcess managerial remuneration is subject to approval of shareholders at the upcominggeneral meeting.
(d) Reference is invited to note 55 of the standalone financial statements in respectof the possible effect of uncertainties relating to COVID-19 pandemic on the Company'sfinancial performance as assessed by the management.
Our opinion is not modified in respect of above matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current year.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. In addition to the matter described in theMaterial Uncertainty Related to Going Concern' and Emphasis of matter'paragraph section above we have determined the matters described below to be the keyaudit matters to be communicated in our report:
|Key Audit Matter ||How our audit addressed the Key Audit Matter |
|Corporate guarantee given on behalf of wholly owned subsidiary and joint venture entity - accounting treatment ||This matter is discussed with the management. We have relied on the explanations given by the management that with respect to wholly owned subsidiary company in view of the financial condition of the Company and ongoing discussion with the lenders of the subsidiary no liability would arise on the Company on account of this guarantee. With respect to the joint venture entity (JV) considering settlement of loan with the lender and expected improvement in financial position of the JV it would be able to refinance the outstanding debt and meet the debt obligations as and when they fall due. Hence management is not expecting any obligation required to be accounted out of the financial guarantee given by the Company. This matter has been disclosed in the standalone financial statements as contingent liability. |
|Refer note 2.4(x) and 44.3(ii) (a) and (c) of notes to standalone financial statement. The Company has given corporate guarantee on behalf of subsidiary and joint venture entity towards loan facilities from banks. || |
|Write back of loan amounting to Rs. 2369.28 lakhs and disclosed as exceptional item and recomputation of effective interest rate (EIR): ||This matter is discussed with the management. We have verified the letter given by the lender for allocation between the principal amount of loan and interest. The management is of the view that the de-recognition and consequent the write back of loan and re-computation of EIR has been done in accordance with the qualitative parameters permitted in Ind AS 109 - Financial Instruments' on the basis of opinion obtained from an expert and its ability to make prepayment of loan. We have received the copy of the opinion of the expert. This being a subjective matter we have relied on the management's view and expert opinion for the above de-recognition and reversal of liability. We have drawn reference of the matter in para (a) of Emphasis of Matter' above. |
|Refer note 26.5(b) & 43.1 of the standalone financial statements. During the current year the Company has written back loan amounting to Rs. 2369.28 lakhs recomputed EIR on account of allocation between the principal amount of loan and interest in respect of installments to be paid by the Company in accordance with modified terms and conditions of the loan as per letter dated 29th January 2020 issued by a lender. || |
Due to COVID-19 related lockdown we could not be present during physical verificationof inventories carried out by management. We have relied on the details provided by themanagement same and performed alternate procedures to audit the existence of inventory asat year end.
Our opinion is not modified in respect of the matter above.
Information other than the standalone financial statements and auditor's report thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisBoard's Report including Annexures to Board's Report Corporate Governance andShareholder's Information but does not include the standalone financial statements andour auditor's report thereon. These reports are expected to be made available to us afterthe date of this auditor's report.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information identified above when it becomes available and in doingso consider whether the other information is materially inconsistent with the standalonefinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
When we read the other information if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance and make other appropriate reporting as prescribed.
Responsibilities of management and those charged with governance for the standalonefinancial 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 standalone financial statementsthat give a true and fair view of the financial position financial performance changesin equity and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the Indian Accounting Standards (Ind AS) prescribedunder Section 133 of the Act read with the Companies (Indian Accounting Standard) Rules2015 as amended from time to time.
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 standalonefinancial statement that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the standalone financial statements management 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 unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
The Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's responsibilities for the audit of the standalone financial statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone 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 standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the standalone financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of standalone financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when 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 in terms of Section 143(11) of the Act we give in"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
2. 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 Statement of Changes in Equityand the Cash Flow Statement and dealt with by this Report are in agreement with the booksof account.
d) In our opinion the aforesaid standalone financial statements comply with the IndianAccounting Standards prescribed under section 133 of the Act read with relevant rulesissued thereunder.
e) The matter described in Material uncertainty related to going concern' andmatters described in para (b) and (d) in Emphasis of matter paragraph in ouropinion may have an adverse impact on the functioning of the Company.
f) On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors aredisqualified as on 31st March 2020 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 B".
h) In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its executive chairman and managingdirector for the financial year ended 31st March 2020 which is in excess of thelimits prescribed under section 197 of the Act (read with Schedule V of the Act) byRs.41.94 lakhs; the said excess managerial remuneration is subject to approval ofshareholders at the upcoming general meeting [also refer para (c) in Emphasis of matterparagraph above].
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 if any on itsfinancial position in its standalone financial statements - Refer note 15.1 and 44.3(i)ofthe standalone financial statements.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
Annexure A to the Independent Auditor's Report for the year ended 31st March 2020
[Referred to in paragraph 1 under the heading "Report on other legal andregulatory requirements" of our report of even date]
i. In respect to fixed assets:
a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b) The fixed assets were physically verified by the management subsequent to yearend which in our opinion provides for physical verification of all the fixed assets atreasonable intervals. According to the information and explanation given to us nomaterial discrepancies were noticed on such physical verification.
c) According to the information and explanations given to us and the recordsexamined by us and based on the examination of the registered sale deed / transfer deedand conveyance deed we report that the title deeds comprising all the immovableproperties of land and building which are free hold are held in the name of the Companyas at the balance sheet date except with respect to freehold land situated at Nagpurhaving gross block of Rs. 134.40 lakhs same is in the name of the Chairman and executivedirector of the Company. In respect of title deeds which are deposited with lenders wehave verified the title from photocopies of those agreements and we have relied oncertificate provided by the trustees/lenders
The Company also holds immovable properties ("buildings") that have beenbuilt on land taken on lease which are disclosed as a part of the property plant andequipment and investment property of the Company in the standalone financial statements.The lease agreements in these cases are in the name of the Company.
ii. In our opinion physical verification of inventories has been conducted by themanagement at reasonable intervals. The discrepancies noticed on such verification by themanagement were not material and have been properly dealt with in the books of account.
iii. According to the information and explanation given to us the Company has notgranted loans secured or unsecured to firms limited liability partnership and otherparties. The Company has granted unsecured loan to companies covered in the registermaintained under section 189 of the Act in earlier years. In respect of such loans
(a) With respect to terms and conditions for loans granted to wholly owned subsidiarycompanies [Orchid Hotels Pune Private Limited (OHPPL) and Mahodadhi Palace Private Limited(MPPL)] due to adverse factors which have affected the financial position of theseentities interest is waived off by the Company till the financial position of theseentities improves. Further in view of these developments the aforesaid loans andoutstanding interest thereon had been classified by the Company as doubtful of recoveryand provision had been made in the accounts in earlier years. In our opinion in view ofthe above the terms and conditions of the above loans are prejudicial to the interest ofthe Company.
(b) As mentioned above interest is waived off by the Company. The terms of thearrangements stipulate that the principal is refundable as and when funds are availablewith the borrowers. Since the refund of principal is dependent on availability of fundswith the borrower question of our comment on regularity of receipt of principal does notarise.
(c) As stated above interest is waived off by the Company and considering the terms ofrepayment of principal no amounts were dues. Therefore the question of our comment onthe overdue amount for more than ninety days does not arise.
iv. According to the information and explanation given to us the Company has notgranted any loan or given any guarantee or provided any security to any of its directorsor any person connected to directors which attracts the provisions of section 185 of theAct from the date when it became effective. The Company has not granted any loan madeinvestment given any guarantee or provided securities from the date when this sectionbecome effective for which compliance u/s 186 of the Act is required. In view of theabove our comment on compliance of Section 185 and 186 of the Act is not required.
v. In our opinion and according to the information and explanation given to us theCompany has not accepted any deposits from the public within the meaning of provisions ofSection 73 to 76 of the Act and the rules framed there under. We have been informed thatno order relating to Company has been passed by the Company Law Board or National CompanyLaw Tribunal or Reserve Bank of India or any Court or any other Tribunal.
vi. The Central Government has not prescribed maintenance of cost records undersection 148(1) of the Act. Accordingly clause (vi) of paragraph 3 the Order is notapplicable to the Company.
vii. In respect of statutory dues:
(a) According to the information and explanations given to us and on the basis of ourexamination of records of the Company in respect of amounts deducted / accrued in thebooks of accounts the Company has been generally regular in depositing undisputedstatutory dues including provident fund employees' state insurance income tax salestax service tax duty of customs duty of excise cess and any other material statutorydues as applicable to the Company during the period with the appropriate authoritiesexcept minor delays in payment of professional tax and significant delays in MaharashtraValue Added Tax (MVAT) and Goods and Service Tax (GST). According to the information andexplanation given to us there are no undisputed amounts payable in respect of statutorydues outstanding for more than six months from the date they become payable.
(b) According to the records of the Company and information and explanations given tous there are no dues of income tax sales tax service tax GST customs duty exciseduty or cess which have not been deposited with appropriate authorities on account of anydispute except as tabulated under:
|Name of the Statute ||Nature of the dues ||Amount (Rupees in lakhs)* ||Period to which it pertains ||Forum where dispute is pending |
|Maharashtra Value Added Tax Act 2002 ||MVAT ||15.64 ||2006-07 ||Joint Commissioner of Sales Tax (Appeals) |
|MVAT ||12.42 ||2007-08 ||Joint Commissioner of Sales Tax (Appeals) |
|MVAT ||13.95 ||2008-09 ||Joint Commissioner of Sales Tax (Appeals) |
|MVAT ||6.91 ||2010-11 ||Joint Commissioner of Sales Tax (Appeals) |
|MVAT ||274.97 ||2011-12 ||Joint Commissioner of Sales Tax (Appeals) |
|MVAT ||37.09 ||2012-13 ||Joint Commissioner of Sales Tax (Appeals) |
|MVAT ||5.01 ||2013-14 ||Joint Commissioner of Sales Tax (Appeals) |
|Maharashtra Tax on Luxuries Act 1987 ||Luxury Tax ||1.11 ||2011-12 ||Joint Commissioner of Sales Tax (Appeals) |
|Luxury Tax ||13.90 ||2012-13 ||Joint Commissioner of Sales Tax (LTU 4) |
|Luxury Tax ||14.58 ||2013-14 ||Joint Commissioner of Sales Tax (LTU 4) |
|Finance Act 1994 ||Service Tax ||0.67 ||2012-13 ||Commissioner of Service Tax (Appeals) |
|Service Tax ||0.43 ||2013-14 ||Commissioner of Service Tax (Appeals) |
|Service Tax ||77.54 ||2014-15 ||CESTAT West Zonal Bench - Mumbai |
|Service Tax ||2.68 ||2014-15 ||CESTAT West Zonal Bench - Mumbai |
|Service Tax ||28.98 ||2015-16 ||Deputy Commissioner Service Tax |
|Service Tax ||30.40 ||2016-17 ||Assistant Commissioner Service Tax |
|Service Tax ||3.41 ||2017-18 ||Assistant Commissioner Service Tax |
|Income - Tax Act 1961 ||Income Tax ||5453.27 ||2016-17 ||Commissioner of Income Tax - Appeal |
* Net of amount paid under protest of Rs. 22.22 lakhs.
viii. In our opinion and according to the information and explanations given to usthe Company has defaulted in payment of interest and repayment of principal to banks andfinancial institution during the year as tabulated below:
|Sr. No. ||Name of the lender (**) ||Amount of default- (Rs. in lakhs) ||Period of delay ||Remarks |
|1 ||Phoenix ARC Private Limited (Assigned by Allahabad Bank)(*) ||398.00 ||1 to 96 Days ||Principal |
|125.37 ||1 to 32 Days ||Interest |
|2 ||Asset Reconstruction Company Enterprise Limited (Assigned by Andhra Bank)(*) ||362.00 ||1 to 92 Days ||Principal |
|138.00 ||1 to 92 Days ||Interest |
|3 ||India SME Asset Reconstruction Company Limited (Assigned by Dena Bank) ||276.00 ||1 to 80 Days ||Principal |
|4 ||Edelweiss Asset Reconstruction Limited (Assigned by Larsen & Toubro Infrastructure Finance Company Limited) ||572.00 ||1 to 58 Days ||Principal |
|5 ||Asset Reconstruction Company Enterprise Limited (Assigned by State Bank of India)(*) ||1260.00 ||1 to 92 Days ||Principal |
|615.00 ||1 to 92 Days ||Interest |
|6 ||India SME Asset Reconstruction Company Limited (Assigned by Syndicate Bank) ||262.00 ||1 to 81 Days ||Principal |
|7 ||Asset Reconstruction Company Enterprise Limited (Assigned by Tourism Finance Corporation of India)(*) ||242.00 ||1 to 92 Days ||Principal |
|133.00 ||1 to 92 Days ||Interest |
|8 ||Invent Assets Securitisation & Reconstruction Private Limited (Assigned by Vijaya Bank) ||55.00 ||1 to 40 Days ||Principal |
Notes: (*) Repayment schedule of these loans have been restructured / rescheduledduring the year. (**) The Company has requested all the lenders in the month of March 2020for the extension of the dues considering the impact on account of COVID-19.
The Company has not borrowed any money from the Government or by way of issue ofdebentures.
ix. The Company has neither raised money by way of initial public offer or furtherpublic offer [including debt instruments] & term loans during the year nor does ithave opening balance hence clause (ix) of paragraph 3 of the Order is not applicable.
x. During the course of our examination of the books of account and records of theCompany carried out in accordance with generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyincidence of fraud by the Company or any fraud on the Company by its employees / officersnor have been informed of any such case by the management.
xi. In our opinion and according to information and explanation given to us theremuneration paid by the Company to its executive chairman and managing director for thefinancial year ended 3151 March 2020 which is in excess of the limitsprescribed under section 197 of the Act (read with Schedule V of the Act) by Rs. 41.94lakhs; the said excess managerial remuneration is subject to approval of shareholders atthe upcoming general meeting. Also refer note 46.5 of the standalone financial statements.
xii. In our opinion the Company is not a Nidhi company. Therefore clause (xii) ofparagraph 3 of the Order is not applicable.
xiii. According to the information and explanations given to us and on the basis ofour examination of records of the Company transaction with related parties are incompliance with Section 177 and 188 of the Act where applicable and details have beendisclosed in the standalone financial statements as required under Ind AS 24 RelatedParty Disclosure specified under section 133 of the Act [Also refer note 46 of standalonefinancial statements] read with Rule 7 of the Companies (Accounts) Rules 2014.
xiv. The Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year. Therefore question ofour comment on compliance with provisions of Section 42 of the Act does not arise.
xv. In our opinion and according to the information and explanations given to usthe Company has not entered into any non-cash transaction with directors or personconnected with director. Therefore question of our comment on compliance with provisionsof Section 192 of the Act does not arise.
xvi. In our opinion and according to the information and explanations given to usthe Company is not required to be registered under Section 45-IA of the Reserve Bank ofIndia Act 1934.
Annexure B to the Independent Auditor's Report for the year ended 31st March2020
[Referred to in paragraph 2(f) under the heading "Report on other legal andregulatory requirements" of our report of even date]
Report on the Internal Financial Controls under section 143(3)(i) of the Companies Act2013 (the Act')
We have audited the internal financial controls over financial reporting of KamatHotels (India) Limited ("the Company") as of 31st March 2020 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st March 2020based 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 ICAI.
Responsibilities of management and those charged with governance for Internal FinancialControls over Financial Reporting
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 (ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to Company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the 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 ICAI and deemedto be prescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the ICAI. 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 controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence 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 auditor's judgment including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.
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
The Company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of standalone financial statements for external purposes in accordance withgenerally accepted accounting principles. The Company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the Company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of standalonefinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the Company are being made only in accordance withauthorizations of management and directors of the Company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the Company's assets that could have a material effect on the standalonefinancial 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.
| ||For N. A. Shah Associates LLP |
| ||Chartered Accountants |
| ||Firm Registration No.: 116560W/W100149 |
| ||Sandeep Shah |
| ||Partner |
| ||Membership No. 37381 |
| ||UDIN : 20037381AAAACO3991 |
|Place: Mumbai || |
|Date: 30th July 2020 || |