To the members of Kwality Limited
(A Company under Corporate Insolvency resolution process vide NCLTorder)
1. Report on the Standalone Ind AS Financial Statements
The Hon'ble National Company Law Tribunal (NCLT) Delhi Bench by anorder dated 11December 2018 admitted the Corporate Insolvency Resolution Process (CIRP)application filedagainst Kwality Limited ("the company") and appointed Mr.Shailendra Ajmera asthe Interim Resolution Professional ("IRP") in terms of theInsolvency andBankruptcy Code 2016 ("the Code") to manage the affairs of theCompany as perthe provisions of the Code. Further the Committee of Creditors constitutedduring the CIRPof the Company in its meeting dated 11 January 2019 confirmed the IRP asthe ResolutionProfessional ("RP") for the Company. In view of pendency of theCIRP themanagement of affairs of the Company and power of Board of Directors are nowvested withRP. These Standalone Financial Statements have been prepared by the managementof theCompany and Certified by Mr. Sanjay Dhingra who is the Managing Director of thesuspendedboard Mr. Sharad Bhandari Chief Financial Officer and approved byResolutionProfessional.
We have audited the accompanying standalone Ind AS financial statementsof KwalityLimited ('the Company) which comprise the Balance Sheet as at 31 March 2019the Statementof Profit and Loss (including Other Comprehensive Income) the Statement ofCash Flow andthe Statement of Changes in Equity for the year then ended notes to the IndAS financialstatements and a summary of significant accounting policies and otherexplanatoryinformation. (hereinafter referred to as "the Standalone FinancialStatements")
3. Qualified Opinion:
In our opinion except for the effects of the matters described in theBasis ofQualified Opinion paragraph 4 below the aforesaid financial statements givetheinformation required by the Act in the manner so required and give a true and fair viewinconformity with the accounting principles generally accepted in India of the stateofaffairs of the company as at 31 March 2019 and its loss on the said date.
4. Basis for Qualified Opinion:
We have conducted our audit in accordance with the Standards onAuditing (SAs) specifiedunder Section 143(10) of the Companies Act 2013. Ourresponsibilities under thosestandards are further described in the AuditorsResponsibilities for the Audit of IND ASfinancial statements section of our report. Weare independent of the company in accordancewith the Code of Ethics issued by theInstitute of Chartered Accountants together with theethical requirements that arerelevant to our audit of the IND AS financial statementsunder the provisions of TheCompanies Act 2013 and the Rules thereunder and we havefulfilled our other ethicalresponsibilities in accordance with these requirements and theCode of ethics. We believethat the audit evidence we have obtained is sufficient andappropriate to provide a basisfor our qualified opinion.
a. The Company has incurred a Net loss of INR 294757.95 lakhsresulting into netaccumulated losses of INR 184070.61 lakhs and erosion of its Net worthas at 31 March2019. The company has obligations towards lenders creditors and otheragencies wherereconciliation/ verification is in process pursuant to ongoing CorporateInsolvencyResolution Process (CIRP). These conditions may indicate the existence of amaterialuncertainty that may cast significant doubt on the Company's ability to continueas goingconcern and therefore the Company may be unable to realize its assets anddischarge itsliabilities in the normal course of business. The ultimate outcome of thesematters is atpresent not ascertainable. Accordingly we are unable to comment on theconsequentialimpact if any on the accompanying standalone financial statements.
b. We draw attention to note 45 to the statement in respect of variousclaimssubmitted by the financial creditors operational creditors workmen or employeeandauthorized representative of workmen and employees of the Company toResolutionProfessional that are currently not fully admitted/ accepted by theResolutionProfessional. No provision of such excess claims has been made in the books ofaccountsand no accounting effect is given in respect of such claims. Therefore we areunable tocomment on the consequential impact if any on the accompanying statement.Furthercompany had given Corporate guarantee in favor of its subsidiary "KwalityDairyProducts FZE" against which banks have submitted the claims to RP amounting toINR12200.71 lakhs. RP has admitted these claims but company has not made any provisioninits books of accounts in respect of the same.
c. We draw attention to note 48 to the statement the Company hasprovided for Doubtfuldebts to the tune of INR 159719.70 lakhs (including exportreceivables amounting INR13829.48 lakhs - Note 50) during the year ended 31 March 2019towards nonrecovery of longpending over dues. The remaining trade receivables amountingto INR 2567.15 lakhsoutstanding for more than 120 days is also having an unascertainablefinancial impact.
5. EMPHASIS OF MATTER
We draw attention to the following matters in the IND AS Financialstatements:
a. We draw attention to note 49 of the statement the Company hasissued Non-ConvertibleDebentures (NCDs) to KKR Capital Markets India Private Limited KKRIndia Debt Fund I KKRIndia Debt Opportunity Fund III and BOI AXA Credit Risk Fund('Debenture Holders')aggregating INR 10000.00 lakhs during June 2016. Per Section 71 ofthe Companies Act 2013is required to create Debenture Redemption Reserve and invest ordeposit amounts as per theRule 18 of Companies (Share Capital and Debentures) Rules2014. The Company has notcomplied with the requirements of Debenture Redemption Reservedue to stressed financialcondition. Subsequently on commencement of CIRP the DebentureHolders have filed theirclaims in Form C and the same will be dealt with as per theprovisions for the Code.
b. We draw attention to note 48 of the statement the Company hasmadeprovisions/written off having total impact of INR 275107.96 lakhs (Bad debts Writtenoffamounting to INR 10251.16 Lakhs Provision for Doubtful Trade Receivables amountingtoINR 159719.70 lakhs Provision in respect of diminution for entire value ofinvestmentamounting to INR 1902.75 lakhs appearing in Financial Statements due todiscontinuationof business operations of its subsidiary "Kwality Dairy ProductsFZE" Writtenoff Property Plant & Equipment amounting to INR 6655.01 lakhsDiscarded packingmaterial amounting to INR 212.87 lakhs and Written off advances made onaccount ofpurchase of AMCUs amounting to INR 20281.86 lakhs to be adjusted against futurepurchaseof milk as there will be no supply in future). In addition to above the companyhasincurred INR 76084.61 lakhs towards Scheme/ Discount during the year ended 31 March2019.
c. We draw attention to note 47 to the standalone financial statementsthe carryingvalue of tangible assets (including capital work in progress of INR 662.16lakhs) andintangible assets as at 31 March 2019 amounting to INR 31820.59 lakhs and INR95.95 lakhsrespectively. The CIRP is not yet concluded and hence the final outcome isyet to beascertained. The Company has not taken into consideration any impact on thevalue of thetangible and intangible assets if any in preparation of financial resultsas required byInd-AS 10 on "Events after the reporting period". Further theCompany has alsonot made full assessment of impairment as required by Ind-AS 36 onImpairment of Assets ifany as at 31 March 2019 in the value of tangible and intangibleassets.
d. We draw attention to note 46 to the statement the tax payable(including interest)amounting to INR 18814.68 lakhs under the Income Tax Act of 1961 forthe assessment years2016-17 2017-18 and 2018-19 which has not been paid by the Company.The Company in theprior years invested in development of new manufacturing facility forproduction of 'ValueAdded Products' at Plant Softa (Palwal). In view of the saidexpansion and to part fund theworking capital requirements there have been delays inpayment of income-tax dues. TheCompany has received orders from the income taxauthorities under Section 279(1) read withSection 276C (2) for the assessment years2016-17 and 2017-18 for prosecution due to non -payment of such taxes. Interest upto theinsolvency commencement date has been provided inthe books of accounts of the Company. Atthis stage no penalty has been imposed by incometax department therefore it is notpossible to predict the outcome in future. Furtherassessment proceedings under Section132 under the Income Tax Act of 1961 have beeninitiated the Company currently is not ina position to ascertain the consequentialimpact if any. It may be noted that the incometax department has already filed a claim(i.e. Form B) under the Insolvency and BankruptcyCode 2016 aggregating INR 10488.44lakhs which includes claim towards tax payable forthe assessment years 2016-17 and2017-18.
Further the Company has not paid the income tax for the assessmentyear 2018-19amounting to INR 7187.81 lakhs. Consequently the Company was unable to filetheelectronic return to the Income Tax Department. The Company have submitted to theincometax department the manual return in hard copy which was duly acknowledged.
There is an outstanding TDS of INR 493.49 lakhs (includes INR 417.11lakhs outstandingas on insolvency commencement date) payable as on 31 March 2019.Interest payable on theoutstanding TDS is estimated at INR 48.85 lakhs (includes INR42.58 lakhs with respect todues outstanding as on insolvency commencement date) whichhas not been recognised in thebooks of account. It may be noted that the Income TaxAuthorities have filed a claim of INR452.60 lakhs (includes interest of INR 42.12 lakhs)as on insolvency commencement datewhich will be dealt basis the resolution plan if anyapproved by the NCLT going forward.
e. The Company has not recognized interest payable on loans andborrowings afterDecember 11 2018 the same is not quantified by the company so we'reunable to comment onthe financial impact of the same on loss for the year.
f. Our opinion is not modified in respect of above matters
6. Key Audit Matters
Except for the matter described in the 'Basis for Qualified Opinion andEmphasis ofMatter' section of our report we have determined that there are no key auditmatters tocommunicate in our report.
7. Responsibilities of Management/ Board of Directors/ RP for the INDAS FinancialStatements
The Company's Board of Directors is responsible for the matters statedin Section 134(5)of The Companies Act 2013(the Act) with respect to the preparation ofthese standalonefinancial statements that give a true and fair view of the financialposition financialperformance including other comprehensive income cash flows andchanges in equity of theCompany in accordance with the accounting principles generallyaccepted in India includingthe Indian Accounting Standards ('Ind AS') prescribed underSection 133 of The Act readwith relevant rules there under. This responsibility alsoincludes the maintenance ofadequate accounting records in accordance with the provisionsof this Act for safeguardingthe assets of the company and for preventing and detectingfrauds and other irregularities;selection and application of appropriate accountingpolicies; making judgements andestimates that are reasonable and prudent; and designimplementation and maintenance ofadequate internal financial controls that wereoperating effectively for ensuring theaccuracy and completeness of the accountingrecords relevant to the preparation andpresentation of the IND AS financial statementsthat give a true and fair view and are freefrom material statement whether due to fraudand error.
In preparing the Ind AS financial statements management is responsiblefor assessingthe Companies' ability to continue as a going concern disclosing asapplicable mattersrelated to going concern basis of accounting unless the managementeither intends toliquidate the company or to cease operations or has no realisticalternative but to do so.
The management is also responsible for overseeing the company'sfinancial reportingprocess.
Pursuant to ongoing Corporate Insolvency Resolution Process (CIRP)powers of the Boardof Directors have been suspended and these powers are now vested withResolutionProfessional (RP).
8. Auditor's Responsibility for the Audit of the Ind AS financialstatements
Our objectives are to obtain reasonable assurance about whether the INDAS financialstatements as a whole are free from material misstatements whether due tofraud or errorand to issue an auditors' report that includes our opinion. Reasonableassurance is a highlevel of assurance but is not a guarantee that an audit conducted inaccordance with SAswill always detect a material misstatement when it exists.Misstatements can arise fromfraud or error and are considered material if individuallyor in the aggregate they couldreasonably be expected to influence the economic decisionsof users taken on the basis ofthese IND AS financial statements.
As part of our audit in accordance with SAs we exercise professionaljudgement andmaintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of theIND AS financialstatements whether due to fraud or error design and perform auditprocedures responsive tothose risks and obtain audit evidence that is sufficient andappropriate to provide a basisfor our opinion. The risk of not detecting a materialmisstatement resulting from fraud ishigher than one resulting from error as fraud mayinvolve collusion forgery intentionalomissions misrepresentations or the override ofinternal control.
Obtain an understanding of internal control relevant to theaudit in order todesign audit procedures that are appropriate in the circumstances. UnderSection 143(3)(i)of The Companies Act 2013 we are also responsible for expressing anopinion on whether thecompany has adequate internal financial control system in place andthe operatingeffectiveness of such controls.
Evaluate the appropriateness of the accounting policies used andthereasonableness of the accounting estimates and related disclosures made bythemanagement/directors/ RP.
Conclude on the appropriateness of the managements use of goingconcern basis ofaccounting and based on the audit evidence obtained whether a materialuncertainty existsrelated to events or conditions that may cast a significant doubt onthe company's abilityto continue as a going concern. If we conclude that a materialuncertainty exists we arerequired to draw attention in our auditors report to therelated disclosures in the IND ASfinancial statements or if such disclosures areinadequate to modify our opinion. Ourconclusions are based on the audit evidenceobtained up to the date of our auditors report.However future events or conditions maycause the company to cease to continue as a goingconcern.
Evaluate the overall presentation structure and content of theIND AS financialstatements including the disclosures and whether the IND AS financialstatementsrepresent the underlying transactions and events in a manner that achievesfairpresentation.
We communicate with those charged with governance regarding amongstother matters theplanned scope and timing of the audit and significant audit findingsincluding anysignificant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave compliedwith relevant ethical requirements regarding independence and tocommunicate with them allrelationships and other matters that may reasonable be thoughtto bear on our independenceand where applicable related safeguards.
9. Other Matters:
The standalone Ind AS financial statements of the Company for the yearended 31 March2018 were audited by another auditor whose report dated May 28 2018expressed anunmodified opinion on those financial statements.
10. Report on Other Legal and Regulatory Requirements:
(1) As required by The Companies (Auditors Report) Order 2016 (TheOrder) issued bythe Central Government of India in terms of sub section 11 of section143 of The CompaniesAct 2013 we give in the Annexure "A" a statement on thematters specified inparagraphs 3 and 4 of the Order to the extent applicable.
(2) As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanationswhich to the bestof our knowledge and belief were necessary for the purposes of ouraudit.
(b) In our opinion proper books of account as required by law havebeen kept by thecompany so far as it appears from our examination of those books
(c) There are no branch offices of the company having separate BranchAuditors.
(d) The Balance Sheet the Statement of Profit and Loss (includingother comprehensiveincome) the Cash Flow Statement and the Statement of Changes inEquity dealt with by thisReport are in agreement with the books of account
(e) Except for the possible effects of matters described in the Basisfor QualifiedOpinion paragraph above in our opinion the aforesaid IND AS financialstatements complywith the Accounting Standards specified under Section 133 of the Actread with Rule 7 ofthe Companies (Accounts) Rules 2014.
(f) On the basis of the written representations received from themanagement as on 31March 2019 taken on record by the Board of Directors/RP none of thedirectors isdisqualified as on 31 March 2019 from being appointed as a director in termsof Section 164(2) of the Act.
(g) The matters described in the Basis for Qualified Opinion paragraphabove andmatters described in paragraphs above under the Emphasis of Matters. In ouropinion mayhave an adverse impact on the functioning of the company.
(h) With respect to the adequacy of the internal financial controlsover financialreporting of the company and the operating effectiveness of such controlsrefer to ourseparate Report in "Annexure B".
(i) The qualifications to maintenance of accounts and other mattersconnected therewithare as stated in the Basis for Qualified Opinion paragraph above.
(j) With respect to the other matters to be included in the Auditor'sReport inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 inour opinionand to the best of our information and according to the explanations given tous:
(i) The company has a lot of pending litigations and as detailed inNote No 38 to thestandalone financial statements has disclosed the impact of pendinglitigations on itsfinancial position.
(ii) The company has no foreseeable losses on long-term contractsincluding derivativecontracts.
(iii) There has been no delay in transferring amounts required to betransferred tothe Investor Education and Protection Fund by the Company
For B. RATTAN & ASSOCIATES
Chartered Accountants (FRN: 011798N)
Ashish Kumar Partner (MN: 182021)
Date: 31 May 2019
ANNEXURE "A" TO INDEPENDENT AUDITORS REPORT
REPORT AS PER THE COMPANIES (AUDITORS REPORT) ORDER 2016
Referred to in Point No. 1 of "Report on Other Legal andRegulatoryRequirements" of the Independent Auditors Report of even date to the INDAS financialstatements of Kwality Limited for the year ended 31 March 2019.
i. (a) The company has maintained proper records showing fullparticulars includingquantitative details and situation of fixed
assets on the basis of available information except assets were nottagged with anyunique identification number.
(b) As explained to us the fixed assets have been physically verifiedby management atperiodical intervals and no material discrepancies were noticed on suchverification.
ii. As explained by management there is a system of physicalverification of inventoryat year end only which is adequate to the size of the companyand the nature of itsbusiness. No material discrepancies were noticed on physicalverification between physicalstock and books of accounts.
iii. As per the information and explanations provided to us thecompany has not grantedany loans secured or unsecured to companies firms limitedliability partnerships orother parties covered in the register maintained under section189 of the Companies Act2013.
iv As per the information and explanations provided to us compliancewith Section 185and 186 of the Companies Act 2013 in respect of the loans investmentsguarantees andsecurity are not applicable.
v. As per the information and explanations given to us the company hasnot accepted anydeposits under the directives issued by the Reserve Bank of India and theprovisions ofsection 73 to 76 or any other relevant provisions of the Companies Act 2013and the rulesframed thereunder.
vi. As per information and explanations received from the managementthe company hasmaintained the cost records as prescribed by the Central Government underSection 148(1) ofthe Companies Act 2013.
vii. (a) The company is generally regular in depositing undisputedstatutory duesincluding customs duty and any other statutory
dues with the appropriate authorities except Income tax providentfund employees stateinsurance and Tax Deducted at Source. According to the informationand explanations givento us undisputed amounts payable for above statutory dues areoutstanding as on the lastday of the financial year for a period of six months from thedate they became payable.
Amount in INR 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 ||5444.76* ||2015-16 ||30 Nov 2016 ||Not Paid || |
|Income Tax act 1961 ||Income Tax ||6195.96* ||2016-17 ||30 Nov 2017 ||Not Paid || |
|Income Tax act 1961 ||Income Tax ||7187.72 ||2017-18 ||30 Nov 2018 ||Not Paid || |
|Income Tax act 1961 ||TDS ||94.95* ||2017-18 || ||Not Paid || |
|Income Tax act 1961 ||TDS ||302.48* ||2018-19 || ||Not Paid || |
|Employees' Provident Fund Organisation ||EPF ||2.73 ||2018-19 || ||Not Paid || |
|Employees' State Insurance ||ESIC ||0.94 ||2018-19 || ||Not Paid || |
*Amount has been claimed under the Insolvency and Bankruptcy Code 2016
(b) According to the explanations and information given to us thereare disputedamounts in respect of government dues not deposited with appropriateauthorities.
(Amount in Lakhs)
|Name of the Statue ||Name of the dues ||Amount ||Period to which the amount relates ||Forum where dispute is pending ||Remarks if any |
|Uttar Pradesh VAT ||VAT ||5.00 ||2013-14 ||Addl. Comm. (Appeal) Bulandshahar || |
|Uttar Pradesh VAT ||VAT ||33.80 ||2014-15 ||Tribunal (2nd Appeal) Aligarh || |
|Uttar Pradesh VAT ||VAT ||3.38 ||2014-15 ||Allahabad High Court || |
|Uttar Pradesh VAT ||VAT ||17.54 ||2015-16 ||Addl. Comm. (Appeal) Bulandshahar || |
|Haryana VAT ||VAT ||0.44* ||2012-13 ||DETC Cum Assessing Authority Palwal || |
|Haryana VAT ||VAT ||386.90* ||2015-16 ||ETO cum Assessing Authority HARYANA || |
|Haryana VAT ||VAT ||340.86* ||2013-14 ||DETC (ST) Cum Assessing Authority Palwal || |
|Haryana VAT ||VAT ||758.49* ||2014-15 ||DETC (ST) Cum Assessing Authority Palwal || |
|Haryana VAT ||Service Tax ||6.36 ||2015- 16 & 2016- 17 ||Superintendent (Audit) Audit Circle-6 Faridabad || |
|Rajasthan VAT ||VAT ||18.46 ||2014-15 ||Appellate Authority Appeals III 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 || |
|Rajasthan VAT ||VAT ||0.02* ||2016-17 ||CTO Jaipur 1 Special III || |
|Income Tax ||Income Tax ||463.98* ||2010-11 ||DCIT Cen. Cir 2(3) Kolkata || |
|Income Tax ||Income Tax ||41.60* ||2014-15 ||DCIT Cen. Cir 2(3) Kolkata || |
|Customs Excise & Service Tax ||DEPB Credit ||69.44 ||2012-13 ||Customs and Service Tax Appellate Mumbai || |
*Amount has been claimed under the Insolvency and Bankruptcy Code 2016
(viii) According to the records of the company examined by us and theinformation andexplanations given to us the company has defaulted in repayment of loansand borrowingsincluding debentures during the year. Pursuant to the continuing defaultsof the Company acorporate insolvency resolution process ("CIRP") under theInsolvency andBankruptcy Code 2016 was initiated against the Company vide an order ofthe Delhi Bench ofthe National Company Law Tribunal ("NCLT"). Owing to theinitiation of CIRP theborrowings are considered as currently payable. Also refer Note 45for further details.
(ix) In our opinion according to the information explanation providedto us moneyraised by way of term loans during the year have been applied for the purposefor whichthey were raised. The Company has not raised any money by way of initial publicoffer orfurther public offer (including debt instruments) during the year.
(x) During the course of our examination of the books and records ofthe company carried out in accordance with the generally accepted accounting practicesin India andaccording to the information and explanations given to us we have neithercome across anyinstances of material fraud by the company by its officers and employeesnoticed orreported during the year nor have we been informed of any such case by themanagement/RP.
(xi) According to the information and explanations given by themanagement themanagerial remuneration has been paid / provided in accordance with therequisite approvalsmandated by the provisions of section 197 read with Schedule V to theCompanies Act 2013.
(xii) As the company is not a Nidhi company the Nidhi Rules 2014 arenot applicable tothe company.
(xiii) According to the information and explanations given to us thecompany has madedisclosure as regards related party relationship in accordance with thenotified"Indian Accounting Standard -24 Related Party Disclosure".
(xiv) The company does not deal with if any preferential allotment orprivateplacement of shares or fully or partly convertible debentures during the yearunder review.Accordingly the provisions of Clause 3 (xiv) of the Order are notapplicable to thecompany.
(xv) According to the information and explanations given to us thecompany does notdeal with if any non-cash transactions with any of its directors orpersons connectedwith him.
(xvi) According to the information and explanations given to us thecompany is notrequired to be registered under Section 45 IA of The Reserve Bank of IndiaAct 1934.
For B RATTAN & ASSOCIATES
Chartered Accountants (FRN: 011798N)
Ashish Kumar Partner (MN: 182021)
DATE: 31 May 2019
ANNEXURE "B" TO INDEPENDENT AUDITORS REPORT
(REPORT ON INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING)
(Referred to paragraph 2(h) of 'Report on Other Legal and RegulatoryRequirements' ofthe Independent Auditors Report of even date on the IND AS financialstatements of KwalityLimited.
Report on the Internal Financial Controls under Clause(i) of SubSection 3 of Section143 of the Companies Act 2013 (The Act).
1. We have audited the internal financial controls over financialreporting of KwalityLimited as on 31 March 2019 in conjunction with our audit of IND ASfinancial statements ofthe company for the year ended on that date.
Managements Responsibility for Internal Financial controls
2. The Board of Directors of the Company are responsible forestablishing andmaintaining internal financial controls based on the internal controlover financialreporting criteria established by the company considering the essentialcomponents ofinternal control stated in the Guidance Note on Audit of Internal FinancialControls overfinancial reporting issued by The Institute of Chartered Accountants ofIndia (ICAI). Theseresponsibilities include the design implementation and maintenance ofadequate internalfinancial controls that were operating effectively for ensuring theorderly and efficientconduct of its business including adherence to companies policiesthe safeguarding of itsassets the prevention and detection of frauds and errors theaccuracy and completeness ofthe accounting records and the timely preparation ofreliable financial information asrequired under the Act.
3. Our responsibility is to express an opinion on the company'sinternal financialcontrols over financial reporting based on our audit. We conducted ouraudit in accordancewith Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the" Guidance Note") and the Standards on Auditing asspecified under Section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls. bothapplicable to an audit of internal financial controlsand both issued by ICAI. ThoseStandards and Guidance Notes require that we comply withethical requirements and plan andperform the audit to obtain reasonable assurance aboutwhether adequate internal financialcontrols over financial reporting was established andmaintained if such controls operatedeffectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidenceabout the adequacyof the internal financial controls system over financial reporting andtheir operatingeffectiveness. Our audit of internal financial controls over financialreporting includeobtaining an understanding of internal financial controls over financialreportingassessing a risk that a material weakness exists and testing and evaluatingthe design andoperating effectiveness of internal control based on assessed risk. Theprocedures selecteddepend on the auditors judgement including the assessment of therisks of materialmisstatement of the IND AS financial statements whether due to fraud orerror.
5. We believe that the audit evidence we have obtained is sufficientand appropriate toprovide a basis for our audit opinion on the internal financial controlsystem overfinancial reporting.
Meaning of Internal Financial Controls over Financial Reporting
6. A company's internal financial controls over financial reporting isa processdesigned to provide reasonable assurance regarding the reliability of financialreportingand the preparation of IND AS financial statements for external purposes inaccordance withgenerally accepted accounting principles. A company's internal financialcontrols overfinancial reporting includes those policies and procedures that (1) pertainto themaintenance of records that in reasonable detail accurately and fairly reflectthetransactions and dispositions of the assets of the company (2) providereasonableassurance that transactions are recorded as necessary to permit preparation ofIND ASfinancial statements in accordance with generally accepted accounting principlesand thatreceipts and expenditures of the company are being made only in accordancewithauthorisations of management directors and RP of the company and (3) providereasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the INDASfinancial statements.
Inherent Limitations of Internal Financial Controls over FinancialReporting
7. Because of the inherent limitations of internal financial controlsover financialreporting including the possibility of collusion or improper managementoverride ofcontrols material misstatements due to fraud or error may occur and not bedetected. Alsoprojections of any evaluation of the internal financial controls overfinancial reportingto future periods are subject to the risk that the internal financialcontrols overfinancial reporting may become inadequate because of changes in conditionsor that thedegree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to theexplanations givento us the Company has in all material aspects an adequate internalfinancial controlssystem over financial reporting and such internal financial controlsover financialreporting were operating effectively as on 31 March 2019 based on theinternal controlover financial reporting criteria established by the company consideringthe essentialcomponents of internal control stated in the Guidance Note issued by ICAI.
For B. RATTAN & ASSOCIATES
Ashish Kumar Partner (MN: 182021)
DATE: 31 May 2019