|BSE: 531882||Sector: Agri and agri inputs|
|NSE: KWALITY||ISIN Code: INE775B01025|
|BSE 00:00 | 23 Feb||Kwality Ltd|
|NSE 05:30 | 01 Jan||Kwality Ltd|
|BSE: 531882||Sector: Agri and agri inputs|
|NSE: KWALITY||ISIN Code: INE775B01025|
|BSE 00:00 | 23 Feb||Kwality Ltd|
|NSE 05:30 | 01 Jan||Kwality Ltd|
Presentation on Twenty Eighth Annual Report of the Company together with AuditedFinancial Statements of the Company for the financial year ended March 312020 is herebysubmitted as under:
INITIATION OF CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP)
The National Company Law Tribunal ("NCLT") New Delhi Bench vide order datedDecember 11 2018 ("Insolvency Commencement Order") has initiated corporateinsolvency resolution process ("CIRP") based on application filed by KKR IndiaFinancial Services Private Limited against Kwality Limited ("the Company")under the provisions of the Insolvency and Bankruptcy Code 2016 ("the Code").Mr. Shailendra Ajmera IP Registration No. IBBI/IPA-001/IP-P00304/2017-18/10568 wasappointed as Interim Resolution Professional ("IRP") to manage affairs of theCompany in accordance with the provisions of the Code and thereafter continued andappointed as the Resolution Professional ("RP") by the committee of creditors("CoC") of the Company in the meeting held on January 11 2019 under theprovisions of the Code . Pursuant to the Hon'ble NCLT Order for commencement of the CIRPand in accordance with Section 17 & 20 of the Code the power of the Board ofDirectors stood suspended and vested with the RP and is being exercised by RP.The CIRPperiod was extended from 180 days to 330 days from the insolvency commencement date videorders dated 24 May 2019 and 6 September 2019 .
In terms of the process prescribed under the Code the Resolution Plan dated 17 October2019 read with Addendum 1 & Addendum 2 submitted by a Consortium of Haldiram SnacksPvt . Ltd. and Pioneer Securities Pvt . Ltd. ("Resolution Applicant") for theCompany was not approved by the CoC in terms of the requirement of Section 30(4) of theCode . Subsequently the Resolution Applicant also submitted unsolicited Addendum 3 dated4 November 2019 to their Resolution Plan offering more value which was not considered bythe CoC . Based on the decision of the CoC the RP on 8 November 2019 filed anapplication with the NCLT to pass such order or direction as it considers fit and properin the facts and circumstances of the case.
In the meantime the Resolution Applicant filed an application with the NCLT on 6November 2019 seeking extension of the CIRP period and a direction against the RP to placethe revised offer vide Addendum 3 submitted by the Resolution Applicant before the CoCfor consideration . Pursuant to interim order dated 14 November 2019 passed by the NCLTthe Resolution Plan dated 17 October 2019 read with Addendum 12 3 and 4 was consideredby the CoC and was not approved in terms of the requirement of Section 30(4) of the Code .RP filed a progress report appraising the same to the NCLT on 6 December 2019 .
The Resolution Applicant on 7 December 2019 filed another application with the NCLTseeking a direction against the CoC to approve the Resolution Plan and make it binding onthe Corporate Debtor and other stakeholders with immediate effect and keeping theapplication for liquidation of the Corporate Debtor filed by RP in abeyance until the saidapplication is decided by the NCLT.
On account of Government Advisory in the wake of Coronavirus (COVID - 19) and thenotice dated 15 March 2020 issued by the President NCLT based on such advisory hearingson only urgent case is taking place before the NCLT since 15 March 2020. RP is continuingto manage and operate the Company as a going concern in terms of the Code .
Since the Company is undergoing the Corporate Insolvency Resolution Process (CIRP)under the Code as per Section 17 of the Code:
the management of the affairs of the Company vests with the ResolutionProfessional
the powers of the Board of Directors of the Company stands suspended and arebeing exercised by the Resolution Professional
the Financial Institutions maintaining accounts of the Company are mandated toact on the instructions of the Resolution Professional in relation to such accounts andfurnish all information relating to the Company available with them to the ResolutionProfessional .
1. FINANCIAL HIGHLIGHTS
2. COMPANY PERFORMANCE
The Company's Standalone turnover for the current financial year is Rs 150.57 crores ascompared to Rs 2089.23 crores in previous financial year. Loss before Tax is Rs . 128.74crores for current financial year as compared to that of Loss before tax for previousfinancial year of Rs . 2948.45 crores . Loss after Tax for the current financial yearstood at Rs . 128.74 crores as compared to Loss before tax Rs . 2947 58 crores in theprevious financial year
The Company's Consolidated turnover for the current financial year is Rs 150.57 croresas compared to Rs 2129.88 crores in previous financial year. Loss before Tax is Rs .144.43crores for current financial year as compared to that of previous financial year of Lossbefore Tax of Rs . 3217.02 Crores . Loss after Tax for the current financial year stood atRs . 144.43 crores as compared to Loss after tax Rs . 3216.15 crores in the previousfinancial year.
3. CONSOLIDATED FINANCIAL STATEMENTS
As per Regulation 33 of the Securities and Exchange Board of India (Listing Obligationsand Disclosure Requirements) Regulations 2015 (hereinafter referred to as "ListingRegulations") and applicable provisions of the Companies Act 2013 read with theRules issued thereunder the Consolidated Financial Statements of the Company for thefinancial year 2019-20 have been prepared in compliance with applicable AccountingStandards and on the basis of audited financial statements of the Company and itssubsidiary.
The Consolidated Financial Statements together with the Auditors' Report form part ofthis Annual Report.
A separate statement containing the salient features of financial statements of allsubsidiaries of the Company forms a part of consolidated financial statements incompliance with Section 129 and other applicable provisions if any of the Companies Act2013 . In accordance with Section 136 of the Companies Act 2013 the financial statementsof the subsidiary and associate companies are available for inspection by the members atthe Registered Office of the Company during business hours on all days except SaturdaysSundays and public holidays upto the date of the Annual General Meeting ('AGM') .Thefinancial statements including the consolidated financial statements financial statementsof subsidiaries and all other documents required to be attached to this report have beenuploaded on the website of the Company (www.kwality. com) . The Company has formulated apolicy for determining material subsidiaries. The policy may be accessed on the website ofthe Company (www.kwality. com)
Your Company has a wholly owned subsidiary under the name and style of "KwalityDairy Products - FZE" ("KDPF") in free trade zone of United Arab Emirates.Your Company has prepared Consolidated Financial Statements in accordance with Section129(3) of the Companies Act 2013 Regulation 33 of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 and Accounting Standard as specified underSection 133 of Companies Act 2013 read with Rule 7 of Companies (Accounts) Rules 2014 .
The trading license of KDPF which has discontinued the business during the previousfinancial year w. e . f. July 112018 has expired on 30 October 2019 . Consequently KDPFwill no longer be able to carry out any business activities .
In view of continuing default in payment of dues by KDPF certain lenders have sentnotices / letters towards recovery of their loans and further issued legal notices as wellas filed appropriate applications for recovery of their dues .
Kwality Dairy Products FZE (subsidiary of Kwality Limited) has been issued notice bythe Dubai Court in execution of a Suit No. 2589/2018 filed by Bank of Baroda on 15.11.2018 and registered on 10.12.2018 for recovery of dues .
Kwality Limited has given corporate guarantee to Bank of Baroda in respect of loansavailed by the KDPF which has been invoked by vide notice dated 19.09.2018. Bank of Barodahas already filled the claim with RP for recovery of the dues arise on account ofinvocation of the corporate guarantee the same has been admitted and voting shareassigned to Bank of Baroda in respect thereof in the CoC.
The RP has replied to Bank of Baroda that the action taken by them is violation of theorder of moratorium and amounts to seeking recovery of dues by pursuing individualrecovery proceedings for recovery of debt in respect of which claim has been admitted bythe RP under the IBC. Bank of Baroda has been requested to forthwith withdraw the saidexecution and all step and actions arising therefrom or related thereto.
In view of losses incurred during the period under review the Company does notrecommend any dividend on the equity shares for the financial year ended as on March312020.
6. CHANGE IN NATURE OF BUSINESS
There has been no change in the nature of business of the Company
7. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Loans Guarantees and Investments covered under section 186 of the Companies Act 2013form part of the notes to the financial statements provided in the Annual Report
8. TRANSFER TO RESERVE
Pursuant to section 123 of the Companies Act 2013 the company is not mandatorilyrequired to transfer any amount to the reserves . Accordingly the company has nottransferred any amount to the reserves during the year.
9. PREFERNTIAL ISSUE AND PRIVATE PLACEMENT
During the period under review the company has not made any preferential issue andprivate placement.
10. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND AUTHORITY
Pursuant to the applicable provisions of the Companies Act 2013 read with the InvestorEducation and Protection Fund Authority (Accounting Audit Transfer and Refund) Rules2016 ("IEPF Authority") all unpaid or unclaimed dividends are required to betransferred by the company to the IEPF established by the Government of India aftercompletion of seven years . Further according to
the rules the shares on which dividend has not been paid or claimed by theshareholders for seven consecutive years or more shall be transferred to the Demat accountof the IEPF Authority.
During the year 2019-20 unclaimed Dividend for financial year 2011-12 of Rs .551665.90/- were transferred to the Investor Education and Protection Fund("IEPF") as required under the Investor Education and Protection Fund Authority(Accounting Audit Transfer and Refund) Rules 2016 ("IEPF Authority"). Further39666 equity shares in respect of which dividend has not been claimed for the finaldividend declared in financial year 2011-12 were transferred to the IEPF Authoritypursuant to the provisions of Section 124(6) of the Companies Act 2013 and the rulesthereunder.
11. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES
Particulars of contracts or arrangements with related parties referred to in Section188(1) of the Companies Act 2013 in the prescribed Form AOC-2 is appended as Annexure 1to the Board's report.
12. MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN THE END OFTHE FINANCIAL YEAR AND DATE OF REPORT
There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year of the Company towhich the financial statements relate and the date of the report .
13. INSPECTION BY CENTRAL BUREAU OF INVESTIGATION
On September 212020 the officers of the Central Bureau of Investigation("CBI") inspected the registered office cum corporate office and other businesslocations of the Company for the purpose of the investigation under Case RC 2232020A0005of CBI/AC-V registered on September 10 2020 under the provisions of the Prevention ofCorruption Act 1988.The above case is stated to have been registered for the offences offraud and wrongful loss of public money. The investigation is being carried out pursuantto a complaint filed by the Financial Creditor who has already filed an application undersection 7 of the Insolvency & Bankruptcy Code 2016 ("Code").
14. CORPORATE SOCIAL RESPONSIBILITY (CSR)
During the year under review the Company is undergoing the Corporate InsolvencyResolution Process (CIRP) under the Code . Prior to commencement of Corporate InsolvencyResolution Process the Company had a duly constituted Corporate Social Responsibility(CSR) Committee which was responsible for fulfilling the CSR objectives of the Company.However the same was not in operation due to CIRP.
During the year under review the Company was not required to spend any amount on CSRactivities/programs as the Company did not have positive average net profits calculated interms of the provisions of section 135 read with section 198 of the Act.
The Annual Report on CSR activities in accordance with the Companies (Corporate SocialResponsibility Policy) Rules 2014 is set out herewith as "Annexure 2" to thisReport.
15. CREDIT RATING
Brickwork Ratings was received in the month of September 2018 with Rating Outlookdowngraded for Fund Based Long Term rating as "BWR D (Downgrade)" for bank loanfacilities for an amount of Rs 1463 crores Non-Fund Based Short Term rating as "BWRD (Downgrade)" for an amount of Rs 30 crores and assigned "BWR D(Downgrade)" for issue of Non-Convertible Debentures of Rs 94.45 crores.Subsequently the CIRP was initiated on an application filed by KKR India FinancialServices Private Limited against the Company which was admitted vide an Order dated 11thDecember 2018 of the Hon'ble National Company Law Tribunal ("NCLT") New DelhiBench under the provisions of the Code . Currently the rating for Long Term & Shortterm Bank loan for an amount of Rs . 1463 crores & 30 crores has been withdrawn.
16. CASH FLOW STATEMENT
In conformity with the provisions of Regulation 34(2) (c) of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Cash Flow Statement forthe year ended on March 312020 is attached as a part of the Financial Statement of theCompany.
17. MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis forms an integral part of this report and givesdetailed review of operations performance and future outlook of the company during thefinancial year 2019-20.
18. DIRECTORS AND KEY MANAGERIAL PERSONNELS (KMP)#:
The Key Managerial Persons of the Company as at March 312020 are:
# Currently suspended during CIRP under the provisions of Insolvency & BankruptcyCode 2016 DIRECTORS
INDUCTIONS RETIRE BY ROTATION AND RESIGNATIONS
During the financial year 2019-20 there is no addition in the Board of Director of theCompany.
As at March 312020 the Board of your Company is constituted of three Directorscomprising of Dr. Rattan Sagar Khanna Chairman and Non-Executive Independent Director andMr. Sanjay Dhingra Managing Director. During the year under review Ms. Swati Chaturvedihas tendered resignation from the post of Women Independent Director w. e .f July 012019which was disapproved by the Committee of Creditors of the Company in their meeting heldon July 15 2019 . However the director suo-moto filed requisite form for resignation w. e. f. from July 012019 (as per MCA portal) with MCA .
Mr. Sanjay Dhingra (DIN: 00025376) Managing Director was liable to retire by rotationin the Annual General Meeting as per section 152 of the Companies Act 2013 but due to thefact that the Company is undergoing CIRP the power of the Board of Directors standssuspended and any change in the Management of the Company would have required approval ofthe Committee of the Creditors no change has been given effect to .
19. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 134(3) (c) of the Companies Act 2013 thestatement is required from the Board of Directors of the company and the power of theBoard of Directors has been suspended after the initiation of CIRP.
Your company has not raised any public deposit during the period under review.Therefore there was no public deposit outstanding as at the beginning or at the end ofthe period.
21. INTERNAL FINANCIAL CONTROL SYSTEM
The Company has adopted the policies and procedures for ensuring the orderly andefficient conduct of its business including adherence to Company's policies thesafeguarding 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 .
Internal Control System has designed to provide reasonable assurance with regard torecording and providing reliable financial and operational information complying withapplicable Accounting Standards .The internal financial controls with reference to thefinancial statements were adequate and operating effectively
22. RISK MANAGEMENT
The Company has well defined process in place to ensure appropriate identification andtreatment of risks . The identification of risk is done at strategic businessoperational and process levels. All significant risks are well integrated with thefunctional and business plans and are reviewed on a regular basis.
Further details form part of Corporate Governance Report.
23. AUDITORS STATUTORY AUDITORS
At the Annual General Meeting held on November 29 2019 M/s B. Rattan &Associates Chartered Accountants (ICAI Firm Registration No . 011798N) has been appointedas auditor of the Company to hold office till the conclusion of the Annual General Meeting("AGM") to be held in the year 2024.
The Auditors' Report for the financial year ended March 312020 on the financialstatements of the Company is a part of this Annual Report .The Comments on thequalification in the Auditor's Report on the Financial year 2019-20 are as provided in the"Statement on Impact of Audit Qualification" forms part of annual report.
M/s . M K Jha & Co. Cost Accountants (Firm Registration No . 101333) has beenappointed as the Cost Auditor of the Company to conduct the audit of cost records for thefinancial year 2020-21 .The remuneration proposed to be paid to the Cost Auditor subjectto ratification by the shareholders of the Company at the ensuing 28th AGM would notexceed Rs. 30000 (Rupees Thirty Thousand only) excluding taxes and out of pocket expensesif any.
The Company has received consent from M/s . MK Jha & Co . Cost Accountants to actas the Cost Auditor for conducting audit of the cost records for the financial year2020-21 along with a certificate confirming their independence and arm's lengthrelationship.
M/s . Mukun Vivek & Company Company Secretaries were appointed to conduct thesecretarial audit of the Company for the financial year 2019-20 as required under Section204 of the Companies Act 2013 and Rules made thereunder. The secretarial audit report forFY 2019-20 forms part of the Annual Report as Annexure 3 to the Board's Report.
24. EXTRACT OF ANNUAL RETURN
In accordance with Section 134(3)(a) of the Companies (Amendment) Act 2017 the copyof annual return in the prescribed form has been placed at our website www.kwality. com.
25. SECRETARIAL STANDARDS OF ICSI
Your Company complies with the Secretarial Standards as specified by the Institute ofCompany Secretaries of India on Meetings of the Board of Directors (SS-1) and GeneralMeetings (SS-2) and notified by Ministry of Corporate Affairs .
The equity shares of the Company continue to be listed on the BSE Limited (BSE) andNational Stock Exchange of India Limited (NSE). The annual listing fees for the currentyear have been paid to the BSE Limited (BSE) and National Stock Exchange of India Limited(NSE).
27. PARTICULARS OF REMUNERATION OF DIRECTORS# KMPs AND EMPLOYEES
The table containing the names and other particulars of employees in accordance withthe provisions of Section 197(12) of the Companies Act 2013 read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is appendedas Annexure 4 to the Board's Report.
Details of employees employed for the whole year and are in receipt of remuneration ofRs . 10200000/- or more or if employed for the part of the year and in receipt of Rs .850000/- or more a month under rule 5(2) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 .
* Currently suspended during CIRP under the provisions of the Insolvency &Bankruptcy Code 2016
28. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION
The Remuneration Compensation and Nomination Committee has framed a policy forselection and appointment of Directors including determining qualifications andindependence of a Director Key Managerial Personnel Senior Management Personnel andtheir remuneration and other matters provided under Section 178(3) of the Companies Act2013 and Regulation 19 of the Listing Regulation (including any statutory modification(s)or re-enactment(s) thereof for the time being in force) . However the same is noteffective since the commencement of CIRP under the Code .
The Nomination and Remuneration Policy can be accessed on the website of the Company(www.kwality.com) .
29. DECLARATION BY INDEPENDENT DIRECTORS
The Company is in CIRP and accordingly power of the board has been suspended pursuantto imitation of CIRP. Therefore no declaration is received from independent directorunder section 149(7) of Companies Act 2013 and Regulation 25 of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 . Further the company had received thedeclaration from the independent director on April 012019 .
30. PERFORMANCE EVALUTION OF THE BOARD
Pursuant to applicable provisions of the Companies Act 2013 and the ListingRegulations prior to commencement of CIRP the Board in consultation with itsRemuneration Compensation and Nomination Committee has formulated a framework containinginter- alia the criteria for performance evaluation of the entire Board of the Companyits Committees and individual Directors including Independent Directors.
Since the initiation of CIRP evaluation of Board its Committees and individualdirectors has not taken place for the year 2019-20.
31. NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS
During the year under review no board meetings were held during the year ended on 31stMarch 2020 since the powers of the Board of Directors were suspended due to commencementof corporate insolvency resolution process and the same vest in the ResolutionProfessional. However five meetings were held which were chaired by ResolutionProfessional (RP) along with the Key Managerial Persons (KMP) of the Company in accordancewith the Section 17 and 23 of Insolvency and Bankruptcy Code 2016 during the financialyear 2019-20.The date of meetings are 30th May 2019 19th August 2019 01st October2019 21st November 2019 and 14th February 2020
32. "KWALITY EMPLOYEE STOCK OPTION PLAN 2014" ("ESOP 2014")
The details of the grants allotted under KWALITY EMPLOYEE STOCK OPTION PLAN 2014"("ESOP 2014") and also the disclosures in compliance with SEBI (Share BasedEmployee Benefits) Regulations 2014 and Section 62 (1) (b) read with Rule 12(9) of theCompanies (Share Capital & Debentures) Rules 2014 is as follow:
33. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Information required under Section 134(3)(m) of the Companies Act 2013 read with theRule 8 of the Companies (Accounts) Rules 2014 is set out in an Annexure 5 to this report.
34. CORPORATE GOVERNANCE
A separate section on Corporate Governance and a certificate from the statutoryauditors of the Company regarding compliance with the conditions of Corporate Governanceas stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 forms part of this Annual Report .
35. POLICY TO PREVENT SEXUAL HARASSMENT AT WORK PLACE
As required under the provisions of Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 the Company has constituted a SexualHarassment Policy. We follow a gender neutral approach in handling complaints of sexualharassment all employees are of equal value with no discrimination between individuals atany point on the basis of race colour gender religion political opinion nationalextraction social origin sexual orientation or age .The Company is committed toproviding a safe and conducive work environment to all its employees and associates. Nocomplaints was pending in the beginning of the year and none was received by the Companyduring the year under review.
36. SIGNIFICANT AND MATERIAL ORDERS
The following significant and material orders have been passed by the Regulators orCourts or Tribunals: The Order dated December 112018 passed by the Hon'ble NationalCompany Law Tribunal New Delhi Bench initiating corporate insolvency resolution processfor the company with effect from December 112018 . Except the above no other significantor material orders were passed by any of the Regulators or Courts or Tribunals .
37. GREEN INITIATIVES
Electronic copies of the Annual Report 2019-20 and the Notice of the 28th AnnualGeneral Meeting are sent to all the members whose email addresses are registered with theCompany/ depository participant(s) . For members whose email address is not registered andholding shares in dematerialized mode have been requested to register their email addresswith their depository participants .Those holding shares in physical mode have beenrequested to furnish their email address with the Company's RTA at beetalrta@gmail. com .
The Board of Directors (currently powers are suspended during CIRP under the provisionsof the Code) wish to place their deep appreciation for the support and co-operation of theCommittee of Creditors various departments of State and Central GovernmentBanks/Financial Institutions employees and other stakeholders .The Board also commend thecontinuing commitment and dedication of the employees at all levels .