The Members of
Report on the Standalonelnd AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of KwalityLimited ("the Company") which comprise the Balance Sheet as at March 312018the Statement of Profit and Loss (including Other Comprehensive Income) the Statement ofCash Flow and the Statement of Changes in Equity for the year then ended and a summary ofsignificant accounting policies and other explanatory information.
Management's Responsibility for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalonelnd AS financial statements that give a true and fair view of the state ofaffairs (financial position) profit or loss (financial performance including othercomprehensive income) cash flows and changes in equity of the Company in accordance withthe Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act readwith Rule 7 of the Companies (Accounts) Rules 2014 and the Companies (Indian AccountingStandards) Rules 2015 as amended and the accounting principles generally accepted inIndia.
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 standalonelndAS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
Our responsibility is to express an opinion on these standalonel nd AS financialstatements based onouraudit.
We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.
We conducted our audit of the standalonelnd AS financial statements in accordance withthe Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the standalonelnd AS financial statements are free frommaterial misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the standalonelnd AS financial statements. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the standalone Ind AS financial statements whether due to fraud or error.In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the standalonelnd AS financial statements thatgive a true and fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Company'sDirectors as well as evaluating the overall presentation of the standalonelnd ASfinancial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone Ind AS financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Ind AS financial statements give the information required bythe Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India including the Ind AS of the state ofaffairs (financial position) of the Company as at March 312018 and its profit (financialperformance including other comprehensive income) its cash flows and the changes inequity for theyear ended on that date.
Emphasis of Matters
We draw attention to the following matters in the Notes to the standalone Ind ASfinancial statements:
a) Note 46 of the financial statement regarding delays in payment of direct taxes asper requirements of Income Tax Act 1961. Tax amounting to INR 17929.09 lakhs includesincome tax payable for earlier years (Also refer clause VI 1(a) of Annexure B to thisreport).The amounts along with interest have been fully provided in the books of accountsof the Company.
b) Note 47 of the financial statement regarding foreign currency receivables andpayable outstanding over the respective time limit prescribed under the Foreign ExchangeManagement Act (FEMA) 1999. The Company is currently in process of initiating settlementproceedings in respect of such dues. Pending outcome of such proceedings we are unable tocomment on itsimpacton thefinancial statements.
c) Note 48 of the financial statement regarding proceedings initiated under section 132of Income Tax Act 1961 on the Company and some Directors. As part of routine process theCompany has received notices under section 153 and section 148. Since the assessmentproceedings have not yet started the Company currently is not in a position to evaluateconsequential impact if any of possible tax adjustments.
Ouropinion is notqualified in respect of these matters.
The standalone Ind AS financial statements of the Company for the year ended March312017 were audited by another auditor whose report dated May 262017 expressed anunmodified opinion on those financial statements.
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 forthe purposes of ouraudit.
(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 the Statement of Cash Flow andthe Statement of Changes in Equity dealt with by this Report are in agreement with thebooks of account.
(d) lnouropiniontheaforesaidstandalonelnd AS financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014 and the Companies (Indian Accounting Standards) Rules2015as amended.
(e) The matters described in Annexure A to this report under 'Material Weaknesses'paragraph in our opinion may have an adverse effect on the functioning of the Company.
(f) On the basis of the written representations received from the directors as on March312018 taken on record by the Board of Directors none of the directors is disqualifiedas on March 312018 from being appointed as a director in terms of Section 164 (2) of theAct.
(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 to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements-Refer Note 38 and 48 to thestandalonelnd AS financial statements.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection
Fund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of sub-section 11 of section 143 of the Act wegive in the 'Annexure B' a statement on the matters specified in paragraphs 3 and 4 ofthe Order.
For MSKA & Associates
Firm Registration No. 105047W Sd/
Membership No. 094518
Place : New Delhi
Date : May 282018
ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL
STATEMENTS OF KWALITY LIMITED
[Referred to in paragraph 1 (g) under 'Report on Other Legal and RegulatoryRequirements' in the Independent Auditors' Report]
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 KwalityLimited ("the Company") as of March 312018 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI) (the "GuidanceNote"). 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 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 and the Standards on Auditing issued by ICAI and deemed to beprescribed under section 143(10) of the Act 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 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 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 authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
According to the information and explanations given to us and based on our audit thefollowing material weaknesses have been identified as at March 312018:
a) The Company did not have a mechanism to reconcile the 'cheque receipt and depositregister' with bank book. In the absence of such reconciliation actual date of receipt ofcheques cannot be ascertained (Cut Off). We have verified the date of receipt of chequefrom date of posting in the bank book further their subsequent clearance verified frombank statement.
b) Debit/credit note pertaining to procurement of material recording of trading salesand journal entries are not authorised in the automated system. Further no competitivequotations are obtained for purchase of fixed assets. Absence of above controls may havean impact on the accuracy of relevant account balance. Absence of comparative quotationmay have impact on the purchase price. We have performed other corroborative proceduressuch as verification of manual authorisation along with necessary supporting documentbesides obtaining independent year end balance confirmation from select vendors.
A 'material weakness' is a deficiency or a combination of deficiencies in internalfinancial control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the company's annual or interim financial statements willnot be prevented or detected on a timely basis.
In our opinion except for the possible effects of the material weaknesses describedabove on the achievement of the objectives of the control criteria the Company hasmaintained in all material respects adequate internal financial controls over financialreporting and such internal financial controls over financial reporting were operatingeffectively as of March 312018 based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note.
We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audittests applied in our audit of the March 312018standalone financial statements of the Company and these material weaknesses does notaffect our opinion on the standalone financial statements of the Company.
For MSKA & Associates
Chartered Accountants Firm
Registration No. 105047W
Membership No. 094518
Place : New Delhi
Date : May 282018
ANNEXURE B TO INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE
FINANCIAL STATEMENTS OF KWALITY LIMITED FOR THE YEAR ENDED MARCH 31 2018
[Referred to in paragraph 2 under 'Report on Other Legal and Regulatory Requirements'in the Independent Auditors' Report]
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets except assets were not tagged with anyunique identification number.
(b) The Management has verified fixed assets during the year as per the regular programof verification which in our opinion is reasonable having regard to the size of theCompany and the nature of its assets. No material discrepancies were noticed on suchverification.
(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 areheld in the name of the Company.
ii. The inventory has been physically verified during theyear by the management. In ouropinion the frequency of verification is reasonable. No material discrepancies werenoticed on verification between the physical stockand the book records.
iii. The Company has not granted any loans secured or unsecured to Companies FirmsLimited Liability Partnerships (LLP) or other parties covered in the register maintainedunder section 189 of the Companies Act 2013 ('the Act'). Accordingly the provisionsstated in paragraph 3 (iii)(a)3 (iii)(b) and 3 (iii)(c) of the Order are not applicableto the Company.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act in respect ofloans investments guarantees and security made.
v. In our opinion and according to the information and explanations given to us thereare no amounts outstanding which are in the nature of deposits as on March 312018 and theCompany has not accepted any deposits during theyear.
vi. We have broadly reviewed the books of account relating to materials labour andother items of cost maintained by the Company pursuant as specified by the CentralGovernment for the maintenance of cost records under sub-section (1) of section 148 of theAct and we are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained. We have not however made a detailed examination of the recordswith a view to determine whether they are accurate or complete
vii. (a) According to the information and explanations given to us and the records ofthe Company examined by us in our opinion undisputed statutory dues including providentfund employees' state insurance service tax duty of customs duty of excise valueadded tax cess have been regularly deposited with the appropriate authorities. TheCompany has been generally regular in payment of goods and service tax. Further there areserious delays in payment of withholding tax Income tax during the year.
Undisputed statutory dues outstanding as at March 312018 for a period of more than sixmonths from the date they became payable are given below. Also refer paragraph (a) underparagraph "Emphasis of Matters" of our Independent Auditor's report.
(Amount in Lakhs)
|Name of the statue ||Name of the dues ||Net amount payable ||Period to which the amount relates (financial year) ||Due Date ||Date of Payment ||Remarks if any |
|Income tax act 1961 ||Income tax ||4255.79 ||2015-16 ||November 302016 ||Not Paid ||Refer Note 1 |
|Income tax act 1961 ||Income tax ||4902.93 ||2016-17 ||November 302017 ||Not Paid ||Refer Note 1 |
|Income tax act 1961 ||Payment of Advance tax ||2854.50 ||2017-18 ||Represents advance tax payable till September 15 2017. ||Not Paid ||Net tax payable for the year INR 6343.32 lakhs. Also refer Note 1 |
|Income tax act 1961 ||Interest on Income Tax ||47.45 ||2014-15 ||March 07 2018 ||Not Paid ||Rectification application under section 154 has been filed on April 12 2018. |
Note 1 :Excludesintereston unpaid income taxamounting to INR2379.60 Lakhs
(b) According to the information and explanation given to us and examination of recordsof the Company the outstanding dues of income-tax sales-tax service tax customs dutyexcise duty and value added tax dues on account of any dispute are as follows: (Amount inLakhs)
|Name of the statue ||Name of the dues ||Amount (Note 1) ||Period to which the amount relates ||Forum where dispute is pending ||Remarks if any |
|Uttar Pradesh VAT ||VAT ||5.00 ||2012-13 ||Addl. Comm. (Appeal) Ghaziabad || |
|Uttar Pradesh VAT ||VAT & CST ||53.06 ||2013-14 ||Joint commissioner (Appeal) Bulandshahar || |
|Uttar Pradesh VAT ||VAT ||30.11 ||2014-15 ||Tribunal (2nd Appeal) Aligarh || |
|Haryan VAT ||VAT ||0.44 ||2012-13 ||DETC Cum Assessing Authority Palwal || |
|Haryan VAT ||VAT ||340.86 ||2013-14 ||Appellate Authority Palwal || |
|Rajasthan VAT ||VAT ||18.45 ||2014-15 ||Appellate Authority Jaipur || |
|Delhi VAT ||VAT ||10.87 ||2012-13 ||Commissioner (VAT) Appeals Delhi || |
|Punjab VAT ||VAT ||16.08 ||2012-13 ||DETC(Appeals) cum JD (Appeals) Patiala || |
|Punjab VAT ||VAT ||5.96 ||2012-13 ||DETC(Appeals) cum JD (Appeals) Patiala || |
|Punjab VAT ||VAT ||7.85 ||2016-17 ||AETC Mobile Wing Amritsar || |
Note 1:The above amount exclude impact of amount paid under protest amounting to INR72.74 lakhs.
viii. In our opinion and according to the information and explanations given to us theCompany has not defaulted in repayment of dues to the financial institution bankordebenture holders.
ix) In our opinion according to the information explanation provided to us moneyraised by way of term loans during the year have been applied for the purpose for whichthey were raised. The Company has not raised any money by way of initial public offer orfurther public offer (including debt instruments) during the year.
x. During the course of our audit examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employees.
xi. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/ provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Act.
xii. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly the provisions stated in paragraph 3(xii) ofthe 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 applicableaccounting standards.
xiv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has made preferential allotment ofshares during the year under the 'Employee Stock Option Plan 2014'. Further the Companyhas not made any private placement of Shares or allotted any partly or fully convertibledebenture during the year. Accordingly requirements of Section 42 of the Act are notapplicable to the Company.
xv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly provisions statedin paragraph 3(xv) of the Order are not applicable to the Company.
xvi. In our opinion the Company is not required to be registered under section 45 IAof the Reserve Bank of India Act 1934 and accordingly the provisions stated in paragraphclause 3 (xvi) of the Order are not applicable to the Company.
For MSKA & Associates
Chartered Accountants Firm Registration No. 105047W
Membership No. 094518
Place : New Delhi
Date : May 28 2018