To the Members of McLeod Russel India Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying Standalone financial statements ofMcLeod Russel India Limited (hereinafter referred to as the "Company") whichcomprise the balance sheet as at March 31 2020 the statement of profit and Lossstatement of changes in equity and the statement of cash flows for the year then endedand notes to the financial statements including a summary of significant accountingpolicies (hereinafter referred to as the "financial statements").
In our opinion and to the best of our information and according to theexplanations given to us due to the significance of the matters described in the Basisfor Adverse Opinion section below the aforesaid financial statements do not give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and also does not give a true and fair view in conformity with the IndianAccounting Standards prescribed under section 133 of the Act ('Ind AS') and otheraccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2020 and it's profit other comprehensive Income cash flow and thechanges in equity for the year ended on that date.
Basis for Adverse Opinion
Attention is invited to the following notes of the financial statements
a) Note no. 57(a) dealing with Inter Corporate Deposits (ICDs)aggregating Rs. 286946.44 lakhs as on March 31 2020 (including Interest of Rs. 2336.78lakhs accrued till March 31 2019) are doubtful of recovery. These loans are in excess ofthe limit specified in Section 186 of the Companies Act 2013 and pending such compliancesand considering recoverability etc. are prejudicial to the interest of the company. Inabsence of provision there against the profit for the year is overstated to that extent.Impact in this respect have not been ascertained by the management and recognised in thefinancial statements.
b) The Company had given advance in earlier year to a body corporateaggregating to Rs. 1400 lakhs (included under Advances to Suppliers Service Providersetc. under Note no. 18) which are outstanding as on March 31 2020. In absence ofappropriate audit evidence and status thereof we are unable to comment on the validityand recoverability of such advances.
c) Note No. 36.2 regarding non-recognition of Interest of Rs. 2182.40lakhs on Inter Corporate Deposits taken by the company and thereby the profit for the yearis overstated to that extent. Further as stated in Note no. 58(b) penal/compoundinterest and other adjustments in respect of borrowings from banks/financial institutionhave not been recognised and amount payable to banks and financial institutions asrecognised in this respect are subject to confirmation from respective parties andconsequential reconciliation. Pending final determination of amount in this respectadjustments and impacts arising therefrom have not been ascertained and as such cannot becommented upon by us;
d) Note no 59 regarding non reconciliation of certain debit and creditbalances with individual details and confirmations etc. Adjustments/ Impacts with respectto these are currently not ascertainable and as such cannot be commented upon by us;
e) As stated in Note no. 57(b) of the financial statements thepredecessor auditor in respect of loans included under paragraph (a) above have reportedthese to be in excess of the limit specified in Section 186 of the Companies Act 2013 andas stated these include amounts given to group companies whereby applicability of Section185 could not be ascertained and commented upon by them. They have not been able toascertain if the aforesaid promoter companies could in substance be deemed to be relatedparties to the Company in accordance with paragraph 10 of Ind AS-24 "Related PartyDisclosures". Further certain ICDs as reported were in nature of book entries and/ orare prejudicial to the interest of the company. These amounts are outstanding as on thisdate and status thereof have remained unchanged and uncertainty and related concernsincluding being prejudicial to the interest of the company are valid for current yearalso. As represented by the management the parties involved are not related partiesrequiring disclosure in terms of said accounting standard and provisions of Companies act2013 and concerns expressed as above are not relevant and as such inconsequential to thecompany. The matter as reported is under examination and pending before regulatoryauthorities. Further as stated in Note no. 58(c) forensic audit undertaken including atthe behest of lenders with respect to utilisation of funds borrowed by the company is alsounder progress. Pending final outcome of the matter under examination we are unable toascertain the impact of non-compliances and comment on the consequential impact thereof.
We conducted our audit in accordance with Standards on Auditing (SAs)specified under section 143(10) of the Companies Act 2013. Our responsibilities underthose Standards are further described in the Auditors' Responsibilities for the Audit ofthe Financial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics and provisions of the Companies Act 2013 that arerelevant to our audit of the financial statements in India under the Companies Act 2013and we have fulfilled our other ethical responsibilities in accordance with the Code ofEthics and the requirements under the Companies act 2013. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our adverseopinion.
Material Uncertainty Related to Going Concern
Attention is drawn to Note no. 58(a) of the financial statementsdealing with going concern assumption for preparation of the accounts of the Company. TheCompany's current liabilities exceeded its current assets. The matters forming part of anddealt with under Basis for Adverse Opinion Section of our report may have significantimpact on the net worth of the company. Funds obtained by borrowing and utilized forproviding funds to other companies have become unserviceable primarily due to nonrepaymentof outstanding amounts by those companies. This has resulted in insufficiency of company'sresources for meeting its obligations. These conditions indicate the existence of amaterial uncertainty about the Company's ability to continue as a going concern. Howeverthe financial statement of the Company due to the reasons stated in the said Note has beenprepared by management on going concern basis based on the management's assessment of theexpected successful outcome of the steps and measures including those concerningrationalization of costs restructuring/reduction of borrowings and interest thereon interms of resolution plan under considerations of lenders and restructuring of outstandingloans receivables in sync with said plan and other proposals under evaluation as on thisdate. In the event of the said plan not being approved and the management's expectationand estimation etc. becoming inconsistent possible impact on carrying value of tangibleand intangible assets even though expected to be material as such presently cannot beascertained and commented upon by us. Our opinion is not modified in respect of thismatter.
Emphasis of Matter
Attention is drawn to Note no. 56 of the financial statements dealingwith the management's evaluation of impact of COVID-19 and uncertainty thereof on theassumptions and estimates concerning the financial statement as well as future performanceof the company. Our opinion is not modified in respect of the above matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters. In addition to the matter described in the Basis for Adverse Opinionsection of our report we have determined the matters described below to be the key auditmatters to be communicated in our report.
|Key Audit Matters ||Addressing the key audit matters |
|Valuation of Biological Assets and Agricultural produce (Note 4(e) of the Standalone financial statements) || |
|Biological assets of the Company include unharvested green tea leaves and the agricultural produce comprising of harvested green leaves. These are valued at fair value less cost to sell at the point of harvest. ||Our Audit procedures based on which we arrived at the conclusion regarding reasonableness of valuation includes the following: |
|Finished goods produced from agricultural produce i.e. Black Tea are valued at lower of cost arrived at by adding the cost of conversion to the fair value of agricultural produce and the net realisable value. || Obtaining an understanding of the fair value measurement methodologies used and assessing the reasonableness and consistency of the significant assumptions used in the valuation; |
|For harvested or unharvested green leaves since there is no active market for own leaves estimates are used by management in determining the valuation. || Evaluating the design and implementation of Company's controls concerning the valuation of biological assets and agricultural produce; |
|The principal assumptions and estimates in the determination of the fair value include assumptions about the yields prices of green leaf purchased from third party suppliers and the stage of transformation. These assumptions and estimates require careful evaluation by management. || Assessing the basis reasonableness and accuracy of adjustments made to prices of green leaves purchased from outside suppliers considering the quality differential of the Company's production. |
|Given the nature of Industry these assets and valuation thereof are significant to the operation of the company. || Assessing the yields to analyse the stage of transformation considered for the fair valuation of biological assets; |
| || Assessed the Impact of lockdown amidst COVID-19 resulting in unusable Green Leaves being discarded and becoming unusable for production of Black Tea; |
| || Due to lock-down amidst COVID-19 it was not possible to participate in the physical verification of inventory and therefore the following alternate procedures confirming the year end determination of Inventory were applied: |
| ||- In respect of the stock of Black Tea held at tea estates which have been subsequently dispatched to third party warehouses etc. roll back procedures have been performed; |
| ||- For stocks held at third party warehouses and own warehouses such stock were verified through subsequent dispatches and applying roll back procedure for arriving at the stock as at the year end; and |
| ||- Reliance has been placed on management's representation and evidences provided for subsequent dispatches and collections there against. |
| || Due recognition of principle of materiality considering the current volume of inventory. |
|Impairment of Property Plant and Equipment (PPE) Capital Work in Progress (CWIP) and Intangible Assets (Note no. 4(a) of the Standalone financial statements) || |
|Evaluation of the impairment involves assessment of value in use of the Cash Generating Units (CGUs) and requires significant judgements and assumptions about the forecast for cash flows production volume of operations prices and discount rate. This exercise has gained significant considering the available indicators under the current situation and circumstances amidst management's expected outcome of the resolution plan under consideration of the lenders and other conditions under which the company is operating. ||Our Audit procedures based on which we arrived at the conclusion regarding reasonableness of Impairment includes the following: |
| || Critical evaluation of internal and external factors impacting the entity and indicators of impairment (or reversal thereof) in line with Ind AS 38; |
| || Reviewing the valuation report by an independent technical consultant for arriving at value in use and fair value of various tea estates and other assets less cost to sale and this being a technical matter reliance has been placed on management's contention and technical advices in this respect; |
| || Review of impairment valuation models used in relation to CGU to determine the recoverable amount by analysing the key assumptions used by management in this respect including: |
| ||- Management's contention for restructuring the debt to make it sustainable and recoverability/restructuring of amount of loan given to various companies; |
| ||- Consistency with respect to forecast for arriving at the valuation and assessing the potential impact of any variances; |
| ||- Price assumptions used in the models; and |
| ||- The assumptions/estimations for the weighted average cost of capital and rate of discount for arriving at the value in use. |
| || Reliance has been placed on management's assumptions for possible outcome vis-a-vis resolution plan under consideration of lenders. |
|Recognition of Deferred Tax Assets (Note no. 23.1of the Standalone financial statements) || |
|Deferred tax Asset include MAT Credit Entitlement of Rs. 5154.45lakhs (including Rs. 2091.08 lakhs recognised during the year) being carried forward in the Standalone financial statements as at March 31 2020. ||Our Audit procedures based on which we arrived at the conclusion regarding reasonableness of the accounting effect and disclosures of the Deferred Tax Assets include the following: |
|Further Deferred Tax Assets relating to unabsorbed losses amounting to Rs. 4010.68 lakhs have not been recognized in the Standalone financial statements. || Utilisation of Deferred tax assets have been tested on the basis of internal forecasts prepared by the Company and probability of future taxable income; |
| || Critical review of the underlying assumptions for consistency for arriving at reasonable degree of probability on the matters; |
| || Due consideration of principle of prudence especially amidst the Debt restructuring process and other group level restructuring and related uncertainties; and |
| || Requirement of Ind AS 12 "Income Taxes" and application thereof and disclosures made in the financial statements for ensuring the compliances on the matter. |
|Going Concern Assumption (Note no. 58 of the Standalone financial statements) || |
|The Company's current liabilities have exceeded current assets by Rs. 230259.61 lakhs as on March 31 2020. Funds obtained by borrowing and utilized for providing funds to other companies have become unserviceable primarily due to non-repayment of outstanding amounts by those companies. Further adjustments arising in respect of the matters dealt with under Basis for Adverse Opinion Section may have significant impact on the net worth of the company. The Company was unable to discharge its obligations for repayment of loans and settlement of financial and other liabilities. ||Our audit procedures included testing management's assumptions on the appropriateness of the going concern assumptions and reasonableness of the assumptions used focusing in particular the business projections of Company restructuring of borrowings and ICD's given by the company and other sources of funding and among others following procedures were applied in this respect: |
|The availability of sufficient fund and the testing of company's ability to continue meeting it's obligations under the financing covenants and otherwise as and when falling due for payment are important for the going concern assumption and as such are significant aspects of our audit. || Review of the Debt Restructuring process and steps so far taken by lenders in this respect which inter-alia includes appointment of professional for Techno Economic Viability (TEV) study Valuations of the company for working out and recommending a resolution plan. This includes review of: |
| ||- Core operations of the company and management expectation of sustainability thereof; |
| ||- Minutes of the meetings of the Company with the consortium of lenders; |
| ||- Compliances vis-a-vis debt covenants associated with loans obtained; |
| ||- Consistency with respect to the possible valuation of the business and tea estates and system and operating results and efficiencies and management's forecast and outlook in this respect; and |
| ||- Management's report to gain an understanding of the inputs and related costs and realisations supporting the cash flow projections of the company and sustainability thereof. |
| || Placing reliance on management's assumptions and expectation of possible outcome of resolution plan under consideration of lenders; and |
| || Review of disclosures made by the management in the financial statement to ensure compliances in this respect. |
Information Other than the Standalone Financial Statements andAuditors' Report Thereon
The Company's Board of Directors is responsible for the otherinformation. The other information comprises the Report of the Directors and the annexuresthereto (namely Management Discussion and Analysis Corporate Governance Report annualReport on CSR Activities Business Responsibility Report Form MGT - 9 Conservation ofenergy technology absorption foreign exchange earnings and outgo and remuneration andother specified particulars of employees) but does not include the Standalone financialstatements and our auditors' report thereon. The other information as stated above isexpected to be made available to us after the date of this Auditors' Report.
Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statementsour responsibility is to read the other information identified above when it becomesavailable and in doing so consider whether the other information is materiallyinconsistent with the standalone financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated.
Responsibilities of Management and Those Charged with Governance forthe Standalone Financial Statements
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 thepreparation of these standalone financial statements that give a true and fair view of thestate of affairs (financial position) Total Comprehensive Income (financial performancecomprising of Profit/Loss and other comprehensive income) changes in equity and cashflows of the Company in accordance with the accounting principles generally accepted inIndia including the accounting Standards specified under section 133 of the Act.
This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statement that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
In preparing the standalone financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The Company's Board of Directors are also responsible for overseeingthe Company's financial reporting process.
Auditors' Responsibilities for the Audit of the Standalone FinancialStatements
Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditors' report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control;
Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3) (i) of the Companies Act 2013 we are also responsible for expressing ouropinion on whether the company has adequate internal financial controls system withreference to financial statements in place and the operating effectiveness of suchcontrols;
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management;
Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditors' report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditors' report.
However future events or conditions may cause the Company to cease tocontinue as a going concern; and
Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the financialstatements that individually or in aggregate makes it probable that the economicdecisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.
We communicate with those chsarged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditors' report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.
a) We did not audit the financial statement/ information of oneoverseas office included in the financial results of the Company whose financialresults/financial information comprising of expenses to the extent of Rs. 2.68 lakhs hasbeen incorporated therein based on Statement of Accounts audited by an Independent firm ofChartered Accountants. The impact in this respect is not material and reflect total assetsof Rs. 8.95 lakhs as at March 31 2020 and the total revenue of Rs. Nil for the year endedon that date. Our opinion in so far as it relates to the amounts and disclosures includedin respect of said office is based solely on the report of Chartered Accountant.
b) The comparative financial information of the Company for the yearended March 31 2019 have been taken from the standalone financial statements for the yearended on that date which were audited by the predecessor auditor who expressed an adverseopinion on these financial statements. The matters dealt with under Basis for AdverseOpinion Section of our report include matters stated in Para (e) of said section of thisreport . We have placed reliance on the report dated June 29 2019 given by thepredecessor auditor for the purpose of these standalone financial statement and our reportthereupon.
Report on Other Legal and Regulatory Requirements
1. As regards to the matters to be inquired by the auditors in terms ofSection 143(1) of the Act we report that Inter corporate Deposits as stated in Para a ofBasis for Our Adverse Opinion Section of this report due to reasons stated therein areprejudicial to the interest of the company. This includes:
a) ICDs aggregating to Rs. 77575.00 Lakhs (included under Para (e) ofBasis for Adverse Opinion) as reported by predecessor auditor which were initially givenas capital advances in the previous year and were subsequently converted to ICDs and hadbeen considered by them to be in the nature of book entries and prejudicial to theinterest of the company. These amounts are outstanding as on March 31 2020. The matter asstated in Para (e) of Basis for Adverse Opinion Section of this report is underexamination by relevant authorities and final outcome thereof is awaited as on this date.
2. As required by Section 143(3) of the Act based on our audit wereport to the extent applicable that:
a) We have sought and except for the effects/ possible effects of thematters described in the Basis for Adverse Opinion section above and matter reported underPara vii(a) of Annexure "B" to this report regarding nonavailability ofinformation from certain tea estates sold by the Company obtained all the information andexplanations which to the best of our knowledge and belief were necessary for the purposesof our audit of the aforesaid financial statements;
b) Except for the effects/ possible effects of the matters described inthe Basis for Adverse Opinion section above in our opinion proper books of account asrequired by law have been kept by the Company so far as it appears from our examination ofthose books returns and the reports of the other auditors;
c) The Balance Sheet the Statement of Profit and Loss including OtherComprehensive Loss the Cash Flow Statement and the Statement of Changes in Equity dealtwith by this Report are in agreement with the relevant books of account maintained for thepurpose of preparation of the financial statements;
d) Due to the significance of the matters described in the Basis forAdverse Opinion section above in our opinion the aforesaid financial statements do notcomply with the requirement and provisions of Ind AS specified under Section 133 of theAct;
e) The matters described in the Basis for Adverse Opinion section aboveespecially that relating to non-provision of intercorporate deposits as stated in Para(a)and (e) of that sectionprovision for interest on borrowings as the basis stated in Para(c) of Basis for Adverse Opinion section of this report pending confirmation of lendersand Material Uncertainty Related to Going Concern assumption pending approval ofresolution plan in our opinion may have an adverse effect on the functioning of theCompany;
f) On the basis of the written representations received from thedirectors as on March 31 2020 taken on record by the Board of Directors of the Companynone of the directors of the Company are disqualified as on March 31 2020 from beingappointed as a director in terms of Section 164 (2) of the Act;
g) The adverse remarks relating to the maintenance of accounts andother matters connected therewith are as stated in the Basis for Adverse Opinion sectionabove; and
h) With respect to the adequacy of the internal financial controls withreference to financial statements and the operating effectiveness of such controls referto our separate Report in "Annexure A". Our report expresses qualified opinionon the adequacy and operating effectiveness of internal financial controls with referenceto financial statements of the Company's internal financial controls with reference tofinancial statements.
3. As required by the Companies (Auditors' Report) Order 2016("the Order") issued by the Central Government of India in terms of sub-section(11) of section 143 of the Companies Act 2013 we give in the "Annexure B" astatement on the matters specified in paragraphs 3 and 4 of the Order to the extentapplicable which is subject to the possible effect of the matters
described in the Basis for Adverse Opinion paragraph of our AuditReport and the material weakness described in Basis for Qualified Opinion in our separateReport on the Internal Financial Controls with reference to financial statements.
4. With respect to the other matters to be included in the Auditors'Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 inour opinion and to the best of our information and according to the explanations given tous:
i. The financial statements has disclosed the impact of pendinglitigations on its financial position of the Company - Refer Note no. 43 to the financialstatements;
ii. The Company has made provision as required under the applicablelaw or accounting standards for material foreseeable losses if any on long-termcontracts including derivative contracts - Refer Note no. 48 to the financial statements;and
iii. There were no amounts which were required to be transferred to theInvestor Education and Protection Fund by the Company.
5. With respect to the other matters to be included in the Auditors'Report in accordance with the requirements of section 197(16) of the Act as amended inour opinion and to the best of our information and according to the explanations given tous the remuneration paid by the Company to its directors is within the limit andprovisions of Section 197 of the Act except in case of remuneration paid to ManagingDirector as given in Note no. 9.1 being in excess of the limit has been held by him underTrust.
ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 2(h) under 'Report on Other Legal andRegulatory Requirements' of our report of even date)
Report on the Internal Financial Controls with reference to Standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013 ("the Act")
In conjunction with our audit of the Standalone financial statements ofthe Company as of and for the year ended March 31 2020 we have audited the internalfinancial controls with reference to financial statements of McLeod Russel India Limited(hereinafter referred to as "the Company") as of that date.
Management's Responsibility for Internal Financial Controls
The Board of Directors of the Company is responsible for establishingand maintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India ("the ICAI"). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to the Company's policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under theCompanies Act 2013.
Our responsibility is to express an opinion on the Company's internalfinancial controls with reference to financial statements based on our audit. We conductedour audit in accordance with the Guidance Note and the Standards on Auditing prescribedunder Section 143(10) of the Companies Act 2013 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 with reference to financial statementswas established and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system with reference to financialstatements and their operating effectiveness. Our audit of internal financial controlswith reference to financial statements included obtaining an understanding of internalfinancial controls with reference to financial statements assessing the risk that amaterial weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditors' judgement including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internal financialcontrols system with reference to financial statements.
Meaning of Internal Financial Controls with reference to financialstatements
A company's internal financial control with reference to financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A company's internalfinancial control with reference to financial statements includes those policies andprocedures that
(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and
(3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assets thatcould have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls with reference tofinancial statements
Because of the inherent limitations of internal financial controls withreference to financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to financial statements to future periods are subject to the riskthat the internal financial control with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.
Basis for Qualified Opinion
According to the information and explanations given to us and based onour audit the following material weaknesses have been identified in the Company'sinternal financial controls over financial reporting with reference to financialstatements as at March 31 2020:
The Company did not have an appropriate internal control systemin relation to the granting of loans and advances/ other advances to promoter groupcompanies and/or other companies including ascertaining economic substance and businessrationale of the transactions establishing segregation of duties and determiningcredentials of the counter parties;
With respect to inter Corporate Deposits (ICDs) the Company didnot have appropriate system to evaluate the credit worthiness of the parties andrecoverability of monies given including interest thereon and also ensuring thecompliances with respect to provisions of the Companies Act 2013 so that these notconsidered to be prejudicial to the interest of the Company;
Certain individual details of debit and credit balances andreconciliation thereof with control balances of receivable/ payable/stock includingsupporting evidences for movement thereof as given in Note no. 59 of the Standalonefinancial statement were not available. IT Control systems and procedures needsstrengthening in terms of framework for Internal Control over financial reporting withreference to financial statements taking into account related controls and procedures asstated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India so that to facilitaterequired reconciliations and provide details for documentation with respect to internalfinancial controls in the respective areas.
A 'material weakness' is a deficiency or a combination ofdeficiencies in internal financial control over financial reporting with reference tofinancial statements such that there is a reasonable possibility that a materialmisstatement of the company's annual or interim financial statements will not be preventedor detected on a timely basis.
In our opinion to the best of our information and according to theexplanations given to us except for the effects/possible effects of the materialweaknesses described in Basis for Qualified Opinion Section above on the achievement ofthe objectives of the control criteria the Company has maintained in all materialrespects adequate and effective internal financial controls with reference to thefinancial statements as of March 31 2020 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India'.
We have considered the material weaknesses identified and reportedabove in determining the nature timing and extent of audit tests applied in our audit ofthe financial statements of the Company for the year ended March 31 2020 and thesematerial weaknesses have affected our opinion on the said financial statements of theCompany and we have issued an adverse opinion on the financial statements of the Company.
| ||For Lodha & Co |
| ||Chartered Accountants |
| ||Firm's ICAI Registration No.:301051E |
|Place: Kolkata ||R. P. Singh |
|Date: July 31 2020 ||Partner |
| ||Membership No: 52438 |
| ||UDIN: 20052438AAAACB8356 |
ANNEXURE "B" TO THE AUDITORS' REPORT OF EVEN DATE:
(Referred to in paragraph 3 under 'Report on Other Legal and RegulatoryRequirements' section of our report of even date and except for the effects / possibleeffects of the matters described in the Basis for Adverse Opinion Section of our AuditReport and the material weaknesses described in the Basis for Qualified Opinion in ourseparate Report on the Internal financial Controls with reference to financial statement)
i) a. The Company has maintained proper records showing fullparticulars including quantitative details and situations of fixed assets.
b. The Company has a program of verification of property plant andequipment to cover all the items in a phased manner over a period of three years which inour opinion is reasonable having regard to the size of the Company and the nature of itsassets. The said verification even though carried out to certain extent along withinternal auditor could not be completed amidst lock down due to COVID-19 pandemic so thatto cover all the assets as per the said programme of verification. We have been informedthat the said programme will be revised to cover for all the assets including those whichcould not be verified as above will be revised to cover in due course of time. Accordingto the information and explanations given to us no material discrepancies were noticed onsuch verification.
c. According to the information and explanations given to us and therecords examined by us and based on the examination of the registered sale deed / transferdeed / conveyance deed / court orders approving schemes of arrangements / amalgamationsand other documents provided to us we report that the title deeds comprising all theimmovable properties of land and buildings which are freehold are held in the name of theCompany as at the balance sheet date.
In respect of immovable properties of land that have been taken onlease including in respect of tea estates of the company according to the information andexplanations given to us and the records examined by us and based on the examination ofthe court orders approving schemes of arrangements/ amalgamations and other documentsprovided to us we report that the lease agreements and/or other documents confirmingsuch arrangement are in the name of the respective tea estates of the company and/or inthe name of the Company where the Company is the lessee.
In respect of Immovable properties of land and buildings (includingleasehold properties) whose title deeds have been pledged as security for loansguarantees etc. the above verification has been based on the confirmations directlyreceived by us from lenders.
ii) As informed the physical verification of inventories of storesfinished goods were carried out at reasonable intervals at tea estates of the companyduring the year. However no such verification at the tea estates as well as at company'swarehouses and those lying with third parties could be undertaken at the year end due tolock down amidst COVID-19 pandemic. The Inventories as on March 31 2020 have been arrivedat by rolling back the receipts issues and dispatches subsequent to the year end andverifying these with evidences relating to subsequent receipts issues dispatches andcollections thereagainst. The inventory of finished goods and stores at the subsequentdate with respect to which year-end stock were arrived were not material. Thediscrepancies noticed on physical verification between the physical stock of stores andfinished goods and book stock of these inventories to the extent verified during the yearwere not material and the same have been properly dealt with in the books of account.
iii) Keeping in view the effects / possible effects of the mattersdescribed in paragraph (e) of the Basis for Adverse Opinion section of our report we areunable to comment whether the Company has granted unsecured loans to parties covered inthe register maintained under section 189 of the Companies Act 2013. Accordingly termsand conditions status with respect to repayment of principal and payment of interest assuch cannot be commented upon by us.
iv) In our opinion and according to the information and explanationsgiven to us and as described in paragraph (a) and (e) of the Basis for Adverse Opinionsection of our Audit Report the Company has not complied with the provisions of section186 of the Companies Act 2013 in respect of granting of loans making investments andproviding guarantees and securities as applicable. Further in view of the matterdescribed in paragraph (e) of Basis for Adverse Opinion section of our Audit Report it isnot possible to ascertain and comment on the compliance of Section 185 of the CompaniesAct 2013.
v) The Company has not accepted any deposits during the year and doesnot have any unclaimed deposits as at March 31 2020 from public covered under Sections 73to 76 or any other relevant provisions of the Act and rules framed thereunder andtherefore the provisions of clause 3(v) of the Order is not applicable to the company
vi) We have broadly reviewed the books of account maintained by thecompany pursuant to the Rules made by the Central Government for the maintenance of costrecords under Section 148(1) of the Act in respect of the Company's products to which thesaid rules are made applicable and are of the opinion that prima facie the prescribedrecords have been maintained. We have however not made a detailed examination of the saidrecords with a view to determine whether they are accurate or complete.
vii) a. According to the information and explanations given to usduring the year there were certain delays in depositing with appropriate authoritiesundisputed statutory dues including Provident Fund Income Tax Goods and Service Tax asapplicable to it. There were no such delays in respect of amount payable towards InvestorEducation Protection fund Employees' State Insurance Sales Tax Wealth Tax Service taxCustom Duty Excise Duty Value Added Tax Cess and other material statutory dues asapplicable to it. However the required information in this respect were not available forthe tea estates sold during the year (as stated in Note no. 53(a)) and as such we areunable to comment.
b. There were no undisputed amounts payable in respec of ProvidentFund Investor Education Protection fund Employees' State Insurance Income Tax Sales TaxGoods and Service Tax Wealth Tax Service tax Custom Duty Excise Duty Value Added TaxCess and othe material statutory dues in arrear as at March 31 2020 for a period of morethan six months from the date they become payable except as detailed below:
|Name of the Statute ||Nature of Dues ||Amount (Rs. In Lakhs) ||Period to which they relates |
|Income Tax Act' 1961 ||Corporate Dividend Tax (Refer Note no. 29.1 of the Standalone financial Statements) ||344.77 ||2005-2006 to 2007-2008 |
c. According to the information and explanations given to us thedetails of disputed dues of sales tax income tax customs duty wealth tax excise dutyservice tax and Cess as applicable as at March 31 2020 are as follows:
|Name of the Statute ||Nature of Dues ||Amount (Rs. in lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act' 1961 ||Tax Deducted at Source ||4578.00 ||2008-2009 ||Commissioner of Income Tax (Appeals) |
|Finance Act' 1944 ||Service Tax ||131.61 ||2004-2005 to 2007-2008 ||Commissioner (Appeals)/ CESTAT |
|Finance Act' 1944 ||Service Tax ||373.72 ||2008-2009 to 2012-2013 ||Principal Commissioner of Service Tax |
|Central Excise Act' 1944 ||Excise Duty ||42.30 ||1999 to 2003 ||Commissioner (Appeals) |
viii) In our opinion and on the basis of information and explanationsgiven to us by the management the Company has defaulted in repayment of dues to thefollowing banks and financial institutions:
|Name of the Bank/ Financial Institution ||Principal ||Interest ||Period of Default |
|Term Loans from Banks || || || |
|ICICI Bank Limited ||- ||949.96 ||June 2019 to March 31 2020 |
|HDFC Bank Limited ||3800.00 ||575.00 ||June 2019 to March 31 2020 |
|RBL Bank Limited ||3000.00 ||558.49 ||July 2019 to March 31 2020 |
|Yes Bank Limited ||4375.00 ||424.57 ||March 2019 to March 2020 |
|Term Loan from Others || || || |
|Housing Development Finance Corporation Limited ||321.09 ||250.02 ||January to March 2020 |
|Short Term Loan from Banks || || || |
|Axis Bank Limited ||25000.00 ||2666.76 ||July 2019 to March 31 2020 |
|RBL Bank Limited ||23500.00 ||2707.13 ||July 2019 to March 31 2020 |
|HDFC Bank Limited ||17901.97 ||1570.74 ||May 2019 to March 2020 |
|Name of the Bank/ Financial Institution ||Principal ||Interest ||Period of Default |
|Standard Chartered Bank ||4010.30 ||272.93 ||November 2019 to March 2020 |
|IndusInd Bank Limited ||13050.00 ||1232.22 ||December 2019 to March 2020 |
|Yes Bank Limited ||33026.61 ||3368.67 ||May 2019 to March 2020 |
|Short Term Loan from Others || || || |
|Techno Electric and Engineering Company Limited ||10000.00 ||- ||March 2019 to March 2020 |
|Aditya Birla Finance Limited ||550.00 ||- ||June 2019 to March 31 2020 |
|Ragini Finance Limited ||1000.00 ||- ||October 2019 to March 2020 |
|Digvijay Finlease Limited ||2000.00 ||- ||October 2019 to March 2020 |
|P D K Impex Private Limited ||1000.00 ||- ||March 2020 |
|Gloster Limited ||1500.00 ||- ||December 2019 to March 2020 |
|Cash Credit || || || |
|Axis Bank Limited ||2464.27 ||- ||October 2019 to March 2020 |
|HDFC Bank Limited ||7760.41 ||- ||May 2019 to March 2020 |
|State Bank of India Limited ||11944.63 ||- ||June 2019 to March 31 2020 |
|United Bank of India ||9498.62 ||- ||February 2020 to March 2020 |
|ICICI Bank Limited ||4544.66 ||- ||June 2019 to March 31 2020 |
The above amount has been disclosed on the basis as described in Noteno. 58(b) of the financial statement. The above default are however subject to theresolution plan under consideration by lenders (Refer Note no. 58(a))
ix) The money raised during the year by way of loan have also beengiven as ICDS under short term arrangements. As described in paragraphs (e) of the Basisfor Adverse Opinion section of our report in respect of we are unable to comment onwhether the money raised by way of term loans were applied by the Company for the purposesfor which they were raised. The Company has not raised moneys by way of initial publicoffer or further public offer (including debt instruments) during the year.
x) During the course of our examination of books of account carried outin accordance with generally accepted auditing practices in India we report that nomaterial fraud by the Company or no fraud on the Company by the officers and employees ofthe company has been noticed or reported during the year.
In respect of matters involving fraud suspected by predecessor auditorin the earlier years and reported upon by them final outcome of inspection or othercourse of action by regulatory authorities as stated in Para (e) of Basis for AdverseOpinion Section is awaited and as such cannot be commented upon by us.
xi) According to the information and explanations given to us and basedon our examination of the records of the Company the Company has paid/provided forremuneration to the managing director (as given in Note no. 9.1) which is in excess of thelimit laid down in accordance with the provisions of section 197 read with Schedule V tothe Act. Such amount to the extent of Rs. 597.33 lakhs being in excess has been held in astrust by him. In respect of other directors the same is in accordance with the provisionsof section 197 read with Schedule V to the Act.
xii) The Company is not a Nidhi company and hence reporting underparagraph 3(xii) of the Order is not applicable to the Company.
xiii) Due to the effects/ possible effects of the matters described inparagraph (e) of the Basis for Adverse Opinion Section of our report we are unable tostate whether the Company is in compliance with Sections 177 and 188 of the Companies Act2013 where applicable for all transactions with the related parties and the completeness/ correctness of the disclosures / details of related party transactions in the standalonefinancial statements as required by the applicable Indian Accounting Standards.
xiv) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year. Accordingly clause 3(xiv) of the Order is not applicable tothe Company.
xv) According to the information and explanations given to us and asrepresented to us by the management and based on our examination of the records of theCompany the Company has not entered into non-cash transactions with directors or personsconnected with him. Accordingly paragraph 3(xv) of the Order is not applicable.
xvi) The Company is not required to be registered under section 45-IAof the Reserve Bank of India Act 1934.
| ||For Lodha & Co |
| ||Chartered Accountants |
| ||Firm's ICAI Registration No.:301051E |
| ||R. P. Singh |
| ||Partner |
|Place: Kolkata ||Membership No: 52438 |
|Date: July 31 2020 ||UDIN: 20052438AAAACB8356 |