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McNally Bharat Engineering Company Ltd.

BSE: 532629 Sector: Engineering
NSE: MBECL ISIN Code: INE748A01016
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VOLUME 294641
52-Week high 11.40
52-Week low 3.10
P/E
Mkt Cap.(Rs cr) 85
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

McNally Bharat Engineering Company Ltd. (MBECL) - Auditors Report

Company auditors report

To the Members of

McNally Bharat Engineering Company Limited

Report on the Audit of the Standalone Financial Statements

Adverse Opinion

We have audited the accompanying Standalone Financial Statements of McNally BharatEngineering Company Limited ("the Company") which comprise the StandaloneBalance Sheet as at 31st March 2022 the Standalone Statement of Profit and Loss(including Other Comprehensive Income) the Standalone Statement of Changes in Equity andthe Standalone Statement of Cash Flows for the year then ended and notes to theStandalone Financial Statements including a summary of significant accounting policies andother explanatory information (hereinafter referred to as "Standalone FinancialStatements").

In our opinion and to the best of our information and according to the explanationsgiven to us because of the significance of the matter described in the Basis for AdverseOpinion section of our report the aforesaid Standalone Financial Statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and do not give a true and fair view in conformity with the Indian AccountingStandards prescribed under section 133 of the Act read with the Companies (IndianAccounting Standards) Rules 2015 as amended (Ind As) and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at 31st March2022 its losses (including Other Comprehensive Income) the changes in equity and itscash flows for the year ended on that date.

Basis for Qualified Opinion

a) Non-recognition of Interest Expense

The Company has not recognised interest expense on Bank borrowing amounting to Rs95766.40 Lakhs and Inter-Corporate Borrowings amounting to Rs 706.40 Lakhs till thefinancial year ended 31st March 2022 as stated in Note 12(b)(ii) & 46 to theStandalone Financial Statements. Lenders/ Financial creditors have submitted theirrespective claims to the IRp amounting to Rs 575095.90 lakhs (including Interest) out ofwhich claims amounting to Rs 361281.37 lakhs (including Interest)have been provisionallyadmitted by IRP. As a result finance costs liability on account of interest and totalcomprehensive loss for the year ended 31st March 2022 are understated to that extent.

This constitutes a material departure from the requirements of Indian AccountingStandard 109 "Financial Instruments".

b) Trade Receivables and Other Current Assets

We draw attention to Note 50 to the Standalone Financial Statements regarding TradeReceivables Other Financial Assets and Other Current Assets being subject to confirmationand reconciliation from respective parties and consequential reconciliation outcomes ofpending arbitration/settlements of claims and adjustments arising therefrom if any.Adjustments/ Impacts with respect to these are currently not ascertainable and as suchcannot be commented upon by us.

We conducted our audit of the Standalone Financial Statements in accordance with theStandards on Auditing (SAs) specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India ("ICAI") together with theethical requirements that are relevant to our audit of the Standalone Financial Statementsunder the provisions of the Act and the Rules made thereunder and we have fulfilled ourother ethical responsibilities in accordance with these requirements and the ICAI's Codeof Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our adverse opinion on the Standalone FinancialStatements.

Material uncertainty related to Going Concern

We draw attention to Note 42 to the Standalone Financial Statements where the Companyhas reported a net loss in current year amounting to Rs. 7714 Lakhs (previous year Rs4985.83 Lakhs) and is unable to meet its financial commitments/covenants to lenders andvarious other stakeholders. These events and conditions indicate a material uncertaintywhich may cast a significant doubt on the Company's ability to continue as a goingconcern. The ability of the Company to continue as a going concern is dependent on theacceptance of the resolution plan by the Committee of Creditors.

We draw attention to Note 47 to the Standalone Financial Statements stating that theHon'ble Calcutta High Court by an order dated 2nd March 2022 has restrained the companyfrom dealing with the banks which has severely affected its operations. The company hasfiled a petition before the Hon'ble Calcutta High Court for withdrawal of the aboverestraining order since CIRP process has been initiated against the company.

Based on the management's assessment and expectation that the IRP/RP will make everyendeavour to protect and preserve the value of the property of the corporate debtor andmanage its operations as a going concern the financial statements of the company have beenprepared on going concern basis.

Emphasis of Matters

a) Appointment of Interim Resolution Professional

We draw attention to Note 41 to the Standalone Financial Statementsinforming that theHon'ble National Company Law

Independent Auditor's Report

Tr ibunal (NCLT) Kolkata Bench has admitted the Corporate Insolvency ResolutionProcess (CIRP) against the Company vide an order dated 29th April 2022. Pursuant to thisorder the powers of the Board of Directors have been suspended and are insteadexercisable by the Interim Resolution Professional Mr. Anuj Jain.

b) Non-Assessment of Pending Litigations

We draw attention to Note 43 to the Standalone Financial Statements pertaining to theCompany's receipts of regulatory Enquiries/ Notices/ Summons/ Show-Cause/ Demand/ Ordersfrom various Government authorities such as departments of Goods and Services Tax andIncome Tax. In view of Company's admission under CIRP all existing civil / legalproceedings will be kept in abeyance as moratorium is in force under section 14 of theInsolvency and Bankruptcy Code 2016 till the conclusion of CIRP. Therefore no impact hasbeen considered in the Statement as of now.

c) Recognition of Deferred Tax Assets

We draw attention to Note 7 to the Standalone Financial Statements stating that theCompany had recognised deferred tax assets of Rs. 51706.60 Lakhs upto 31st March 2018expecting adequate future taxable profits to the Company against which the deferred taxassets could be realized which is solely dependent on the acceptance of the resolutionplan. However the Company has not recognised further deferred tax assets for the year aswell as for the preceding years on prudent basis.

d) Non-adjustment of the Carrying Value of the Investments

We draw attention to Note 49 to the Standalone Financial Statements regardinginvocation of pledge over 2337211 Equity Shares of the Subsidiary Company McNallySayaji Engineering Limited held by the Company by the Lender Bank of the SubsidiaryCompany i.e. ICICI Bank Limited as per their letter dated 27th November 2020 at a valueof Re. 1/- against the Term Loan facility availed by the Subsidiary Company. The Companyhas objected to such invocation vide their letter dated 15th December 2020. The companyhas asked for compensation for such invocation at average cost price amounting to Rs 40.79Cr and as the said claim is under verification by the Resolution Professional of theSubsidiary Company the Company has not made any adjustment to the carrying value of itsinvestment in the Subsidiary Company.

e) Other Equity

We draw attention to Note 44 to the Standalone Financial Statements regarding otherequity which includes Rs 83804.25 lakhs (85148.70 lakhs as on 31st March 2021) of fairvaluation gain on account of deferred repayment of Inter Corporate Deposit amounting to Rs98592.94 lakhs considered as part of "Other Reserves" and Rs 14788.69 lakhs(13444.26 lakhs as on 31st March 2021) have been considered as "Long termborrowings" under the head Non-Current Borrowings.

Key Audit Matters

Key Audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Financial Statements of the current period.These matters were addressed in the context of our audit of the Standalone FinancialStatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. In addition to the matters described in the Basis forAdverse Opinion section and Emphasis of Matters section of our report we have determinedthe matters described below to be the key audit matters to be communicated in our Report.

Sr.No. Key Audit Matters Auditors' Response to Key Audit Matters
1 Estimated Cost to complete the Project:

Our audit approach was combination oftest of internal controls and substantive procedures which includes the following:

(Refer note 1(d) to the Standalone Financial Statements)

1. Tested the design implementation and operating effectiveness of the controls surrounding determination and approval of estimated cost.

The Company recognises revenue under percentage of completion method as specified under Indian Accounting Standard 115 "Revenue from Contract with Customers".

2. Verified the contracts with customers on test check basis including the actual cost incurred and terms and conditions related to the variation of the cost.

Recognition of revenue requires estimation of total contract cost which comprises of the actual cost incurred till date and estimated cost further to be incurred to complete the projects.Estimation of the cost to complete involves exercise of significant judgement by management including assessment of technical data and hence identified as Key Audit Matter.
3. Discussed with the project management teams for certain selected projects to assess the reasonableness of the estimated cost to be incurred for completing the respective projects.
4. Obtained and relied on the Independent Chartered Engineer's Certificate for supporting the accuracy of the estimate of the total cost of the project for selected contracts on test check basis.
Sr.No. Key Audit Matters Auditors' Response to Key Audit Matters
2. Impairment of Investments in Subsidiaries:

Our audit approach was combination oftest of internal controls and substantive procedures which includes the following: 1. Tested the design implementation and operating effectiveness of the controls surrounding management review type controls on assessment of impairment of Investments in subsidiaries.

(Refer note 5 to the Standalone Financial Statements) Investments in Subsidiaries are measured at cost net of impairment provision if any as per the requirements of Indian Accounting Standard 36 "Impairment of Assets".
Impairment indicators were noted in one of the Subsidiary Companies McNally Sayaji Engineering Limited resulted in an assessment of impairment of the Investments in the Subsidiary. 2. Verified the appropriateness of the cash flows projection of the Subsidiary including key assumptions considered as part of the impairment assessment.
This area was considered to be of Key Audit Matter for the following reasons:
•The magnitude of the balance of the Investments in the subsidiary with a carrying value of Rs 17933.67 Lakhs ; and
•The carrying value is supported by future forecasted operating cash flows of the subsidiary which are judgmental in nature and are dependent on number of factors including volume and margin expectations.
3. Provisions and Contingent Liabilities

Our audit approach was combination oftest of internal controls and substantive procedures which includes the following:

(Refer note 29(a) to the Standalone Financial Statements)

1. Assessing the appropriateness of the design and implementation of the Company's controls over the assessment of litigations and completeness of disclosures.

The Company is involved in various taxes and other disputes for which final outcomes cannot be easily predicted and which could potentially result in significant liabilities.The assessment of the risks associated with the litigations is based on complex assumptions which require the use of judgements and such judgements relates primarily to the assessment of the uncertainties connected to the prediction of the outcome of the proceedings and to the adequacy of the disclosures in the Standalone Financial Statements. Because of the judgement required the materiality of such litigations and the complexity of the assessment process the area is a key matter for our audit.
2. Testing the supporting documentation for the positions taken by the management conducting meetings with inhouse legal counsel and/or legal team and reviewing the minutes of the Board and the Sub-committee to confirm the operating effectiveness of these controls.
3. Assessment of assumptions used in the evaluation of potential risk and tax risks performed by the legal and tax department of the Company considering the legal precedence and other rulings in similar cases.
4. Involving our direct and indirect tax specialists to assess relevant historical and recent judgments passed by the appropriate authorities in order to challenge the basis used for the accounting treatment and resulting disclosures.

Information Other than the Standalone Financial Statements and Auditor's Report Thereon

In view of ongoing Corporate Insolvency Resolution Process (CIRP) the InterimResolution Professional (IRP) is responsible for the preparation of the other information.The other information comprises of the information included in the Management Discussionand Analysis Management's Report including Annexures to Management's Report andShareholders Information but does not include the Standalone Financial Statements and ourAuditor's Report thereon. The Annual Report is expected to be made available to us afterthe date of this Auditor's Report.

Our opinion on the Standalone Financial Statements does not cover the other informationand we do not express any form of assurance or conclusion thereon.

In connection with our audit of the Standalone Financial Statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the Standalone Financial Statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.

When after reading the Annual Report we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.

Responsibilities of Management for the Standalone Financial Statements

In view of ongoing Corporate Insolvency Resolution process ('CIRP') the InterimResolution Professional ('IRP') is responsible for the preparation of these StandaloneFinancial Statements that give a true and fair view of the financial position financialperformance including total comprehensive loss changes in equity and cash flows of theCompany in accordance with the accounting principles generally accepted in India includingthe Indian Accounting Standards prescribed under Section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the Standalone FinancialStatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the Standalone Financial Statements the management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessthe management either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the StandaloneFinancial Statements as a whole are free from material misstatement whether due to fraudor error and to issue an Auditor's Report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these Standalone Financial Statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the StandaloneFinancial Statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances but not for the purposesof expressing an opinion on the effectiveness of the Company's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by the Board of Directors andrespective management under the IRP.

• Conclude on the appropriateness of Board of Directors and respective managementunder the IRP's use of the going concern basis of accounting and based on the auditevidence obtained whether a material uncertainty exists related to events or conditionsthat may cast significant doubt on the Company's ability to continue as a going concern.If we conclude that a material uncertainty exists we are required to draw attention inour Auditor's Report to the related disclosures in the Standalone Financial Statements orif such disclosures are inadequate to modify our opinion. Our conclusions are based onthe audit evidence obtained up to the date of our Auditor's Report. However future eventsor conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of the StandaloneFinancial Statements including the disclosures and whether the Standalone FinancialStatements represent the underlying transactions and events in a manner that achieves fairpresentation.

Materiality is the magnitude of misstatements in the Standalone Financial Statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the Standalone Financial Statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the Standalone Financial Statements.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit. We alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the Standalone Financial Statementsof the current period and are therefore the key audit matters. We describe these mattersin our Auditor's Report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication. Report onOther Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2020 ("the Order")issued by the Central Government in terms of section 143(11) of the Act we give in the"Annexure A" a statement on the matters specified in the paragraphs 3 and 4 ofthe 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 explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit of FinancialStatements;

b) except for the possible effects of the matter described in the Basis for AdverseOpinion Section above in our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books andreturns;

c) the Standalone Balance Sheet the Standalone Statement of Profit and Loss (includingthe Statement of Other Comprehensive Income) the Standalone Statement of Changes inEquity and the Standalone Statement of Cash Flows dealt with by this Report are inagreement with the books of account;

d) considering the significance of the matter describedin the Basis for Adverse OpinionSection abovein our opinion the aforesaid Standalone Financial Statements do not complywith the Indian Accounting Standards specified under Section 133 of the Act;

e) on the basis of the written representations received from the directors of thecompany as on 31st March 2022 and taken on record by the Interim Resolution Professionalnone of the directors is disqualified as on 31st March 2022 from being appointed as adirector in terms of section 164(2) of the Act. However in view of corporate insolvencyresolution process ("CIRP") starting from 29th April 2022 the powers of Boardof Directors stand suspended as per section 17 of the code and such powers are exercisedby the Interim Resolution Professional during the year;

f) with respect to the adequacy of the internal financial controls over financialreporting of the Company with reference to these Standalone Financial Statements and theoperating effectiveness of such controls refer to our separate report in "AnnexureB".

g) with respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of Section 197(16) of the Act as amended in our opinionand to the best of our information and according to the explanations given to us theremuneration paid/payable by the Company to its director is in accordance with therequirements of Section 197 of the Act.

h) with respect to the other matters to be included in the Auditor's Report inaccordance with Rulell of the Companies

(Audit and Auditors) Rules 2014 as amended in our opinion and to the best of ourinformation and according to the

explanations given to us:

i. except for the possible effect of the matter described in the Basis for AdverseOpinion section above the Company has disclosed the impact of pending litigations on itsfinancial position in the Standalone Financial Statements (Refer Note 29(a) to theStandalone Financial Statements);

ii. the Company did not have any long term contract including derivative contract forwhich there were any material foreseeable losses.

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection

Fund by the Company.

iv. (a) The management has represented to the best of its knowledge and belief nofunds have been advanced

or loaned or invested (either from borrowed funds or share premium or any other sourcesor kind of funds) by the company to or in any other person or entity including foreignentities ("Intermediaries") with the understanding whether recorded in writingor otherwise that the Intermediary shall whether directly or indirectly lend or investin other persons or entities identified in any manner whatsoever by or on behalf of thecompany ("Ultimate Beneficiaries") or provide any guarantee security or thelike on behalf of the Ultimate Beneficiaries;

(b) The management has represented to the best of its knowledge and belief no fundshave been received by the company from any person or entity including foreign entities("Funding Parties") with the understanding whether recorded in writing orotherwise that the company shall whether directly or indirectly lend or invest inother persons or entities identified in any manner whatsoever by or on behalf of theFunding Party ("Ultimate Beneficiaries") or provide any guarantee security orthe like on behalf of the Ultimate Beneficiaries; and

(c) Based on our audit procedure that has been considered reasonable and appropriate inthe circumstances nothing has come to our notice that has caused us to believe that therepresentations under sub-clause(a) or

(b) contain any material misstatement.

v. The company has not declared or paid any dividend during the financial year.

For V. Singhi & Associates

Chartered Accountants Firm Registration No. 311017E

(V. K. SINGHI)
Place: Kolkata Partner
Date:30th May 2022 Membership No. 050051 UDIN: 22050051AJYAIL9533

Referred to in Paragraph-1 on Other Legal and Regulatory Requirements of our Report ofeven date to the members of

McNally Bharat Engineering Company Limited on the Standalone Financial Statements forthe year ended 31st March 2022

(i) (a) (A) The Company is maintaining proper records showing full particularsincluding quantitative details and situation

of Property Plant and Equipment and relevant details of right-of-use assets.

(B) The Company does not have any intangible assets. Accordingly this clause of theorder is not Applicable.

(b) The Company has a program of physical verification of Property Plant and Equipmentto cover all the items in a phased manner over a period of three years which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. However Property Plant and Equipment have not been physically verified by theManagement during the year.

(c) The Company does not own any immovable property as disclosed in Note 3 on PropertyPlant &Equipment to the Standalone Financial Statements. Accordingly clause 3(i)(c)of the Order is not applicable.

(d) The Company has not revalued any of its Property Plant and Equipment (includingright-of-use-assets) and intangible assets during the year.

(e) No proceedings have been initiated during the year or are pending against theCompany as at March 31 2022 for holding any benami property under the Benami Transactions(Prohibition) Act 1988 (as amended in 2016) and rules made thereunder.

(ii) (a) The inventories (excluding stocks with third parties) have been physicallyverified during the year by the Management

at reasonable intervals and no discrepancies of 10% or more in aggregate for each classof inventory were noticed. In respect of inventory lying with third parties these havesubstantially been confirmed by them. Keeping in view the nature of operations in ouropinion the procedure for physical verification of inventory followed by the managementis reasonable and adequate in relation to the size of the company and nature of itsbusiness.

(b) As disclosed in Note 46 of the financial statements the Company has beensanctioned working capital limit in excess of Rupees Five crores in aggregate from bankwhich are secured on the basis of security of current assets and all the loans taken bycompany fall under Non-Performing-Assets So the Company has not filed quarterly returnswith the banks.

(iii) (a) During the year the company has not made investments in granted any loans oradvances in the nature of loans

secured or unsecured to companies firms LLP or any other parties except guaranteeprovided:

Particulars Guarantees Loan
Aggregate amount during the year
Subsidiary MBE Coal & Mineral TechnologyIndia Private Limited 150 Lakhs -
Balance outstanding as at balance sheet date
Vedica Sanjeevani Projects Private Limited - 1744.38 Lakhs

(b) The Company has not given any security or granted any advances in the nature ofloans during the year. In our opinion and according to the information and explanationsgiven to us the investments made guarantees provided and terms and conditions of thegrant of all loans are prima facie not prejudicial to the interest of the Company.

(c) In case of loans given where there is no stipulation of schedule of eitherrepayment of principal or payment of interest we are unable to comment on the regularityof repayment of principal and payment of interest.

(d) In case of loans given the schedule for repayment of principal or payment ofinterest have not been stipulated and accordingly we are unable to comment on the amountoverdue for more than ninety days.

(e) No loan granted by the Company which has fallen due during the year has beenrenewed or extended or fresh loans granted to settle the over dues of existing loan givento the same parties.

(f) The Company has not granted any loans or advances in the nature of loans eitherrepayable on demand or without specifying any terms or period of repayment during theyear. Hence reporting under clause (iii)(f) is not applicable.

iv) The Company has complied with the provisions of sections 185 and 186 of the Act inrespect of loans investments

guarantees and security as applicable.

v) The Company has not accepted any deposit or amounts deemed to be deposits from thepublic during the year within the meaning of directives issued by the Reserve Bank ofIndia under sections 73 to 76 of the Act and the rules framed there under to the extentnotified. Accordingly clause 3(v) of the Order is not applicable.

vi) The maintenance of cost records has been specified by the Central Government underSection 148(1) of the Act. We have broadly reviewed the same as maintained by the Companypursuant to the Companies (Cost Records and Audit) Rules 2014 as amended prescribed bythe Central Government under sub-section (1) of Section 148 of the Act and are of theopinion that prima facie the prescribedcost records have been made and maintained. Wehave however not made a detailed examination of the cost records with a view todetermine whether the same are accurate or complete.

vii) According to the information and explanations given to us in respect of statutorydues:

a) The dues of Income Tax have not been regularly deposited during the year with theIncome tax authorities. The Company has generally been regular in depositing otherundisputed statutory dues including Provident Fund and other material statutory duesapplicable to it to the appropriate authorities. There were arrears in undisputed amountspayable in respect of Income Tax as at 31st March 2022 for a period of more than sixmonths from the date the same became payable are as follow:

Name of the Statute

Nature of Dues

Amount

Period to which the amount Relates

Due Date

(Rs. in Lakhs)
Income Tax Act 1961

TDS U/s 194A

7.15 November2017 7th December 2017
13.59 December2017 7th January 2018
6.61 January 2018 7th February 2018
14.3 February 2018 7th March 2018
43.05 March 2018 7th April 2018
41.21 March 2019 7th April 2019

TDS U/s 194J

7.5 December 2017 7th January 2018
25 March 2018 30th April 2018

b) Details of dues of Sales Tax Value Added Tax Service Tax Goods and Service TaxCustoms Duty and Income Tax which have not been deposited as on 31st March 2022 onaccount of disputes are given below:

Name of the Statute

Forum where dispute is pending

Nature of Dues

Financial year to which the amount relates Amount involved (Rs. in Lakhs)
Income Tax Act 1961 CIT (Appeal)

Income Tax

2015-16 4776.28

TDS

2014-15 111.87

TDS

2015-16 302.82
AO(TDS)

TCS

2015-16 6.35
AO(TDS)

TDS

2016-17 322.10
Income Tax Appellate Tribunal (ITAT)

Income Tax

2016-17 2370.85
Sales Tax/Value Added Tax Acts Assistant Commissioner/ Additional Commissioner/ Deputy Commissioner/ Commissioner

Sales Tax and VAT

2008-09 to 2017-18 11993.53
Appellate Tribunal andRevisional Board

Sales Tax and VAT

2006-07 to 2017-18 5739.17
Supreme Court/ High Court

Sales Tax and VAT

2005-06 to 2017-18 21054.25
The Central Excise Act 1944 Custom Excise and Service Tax Appellate Tribunal

Central Excise

2018-2020 300.77
High Court

Central Excise

2016-2017 25.00
Name of the Statute Forum where dispute is pending Nature of Dues

Financial year to which the amount relates

Amount involved (Rs. in Lakhs)
The Finance Act 1994 Custom Excise and Service Tax Appellate Tribunal Service Tax

2003-04 to 2011-12

1810.53
Entry Tax Act. High Court Supreme Court Appellate Tribunal Commissioner Appeal Entry Tax

2005-08 2010-11 to 2017-18

711.24
Goods and Service Tax Act 2017 Audit Cell Telangana GST

2017-18 to 2019-20

339.61
Audit Cell Tamil Nadu GST

2017-18 to 2019-20

324.61

(viii) There were no transactions relating to previously unrecorded income that havebeen surrendered or disclosed as income during the year in the tax assessments under theIncome Tax Act 1961 Accordingly clause 3(viii) of the Order is not applicable.

(ix) a) (i) The Company has defaulted in repayment of loans and borrowings to Banks andthe details of continuing default in repayment of loans or payment of interest as providedto us are as below:

Nature of borrowing including debt securities

Name of the Lender

Amount not paid on due date (Rs in Lakhs)

No. of days of delay or unpaid

Remarks if any
Principal Interest Principal Interest

The lender has filed the claim to IRP/RP which is provisionally admitted.

External Commercial Borrowing ICICI Bank 502.04 218.26 1195 1097
Working Capital Demand Loan Axis Bank Limited 12660.40 5570.57 1100 1100
Standard Chartered Bank 3415.90 1504.66 1156 1067
Cash Credit from Banks Indian Bank (Formerly known as Allahabad Bank) 8471.50 3777.44 1086 1086
Axis Bank Limited 20449.79 9148.73 1100 1100
Bank of Baroda 4165.21 1852.27 1097 1097
Bank of India 44844.57 18952.49 1073 1073
Canara Bank 2385.85 1322.34 1065 1065
DCB Bank 292.11 130.10 731 731
ICICI Bank 18405.66 11717.34 1158 1158
IDBI Bank 17262.94 7708.58 1097 1097
Karur Vysya Bank 8596.24 5156.42 1162 1162
Lakshmi Vilas Bank 96.06 58.64 521 521
Punjab National Bank (Formerly known as Oriental Bank of Commerce) 1077.28 514.32 1109 1109
Punjab National Bank 14966.19 8426.92 1091 1091
Standard Chartered Bank 2571.24 1631.76 1067 1067
State Bank Of India 25468.29 11257.67 1039 1039
UCO Bank 485.69 435.12 731 731
Union Bank 15073.17 6348.31 1067 1067
Punjab National Bank (Formerly known as United Bank of India) 53.54 34.79 944 944

(ii) According to the information and explanations given to us the loans and interestthereon that have been demanded for repayment by the other lenders during the year isprovided below:

Nature of Borrowing including debt securities

Name of the Lender

Amount not paid on due date (Rs in Lakhs)

No. of days of delay or unpaid

Principal Interest Principal Interest
Inter Corporate Borrowings Other Lenders 1905 4476.15 - -

In addition to the above the Company has also defaulted in payment of interestamounting to Rs 706.40 Lakhs (unrecognized) on the above borrowings for the year ended31st March 2022.

The Company has not taken any loan from the Financial Institution or Government norissued any debentures during the year.

b) The Company has not been declared wilful defaulter by any bank or financialinstitution or other Lender.

c) The Company has not taken any term loan during the year and there are no unutilizedterm loans at the beginning of the

year and hence reporting under clause 3(ix)(c) of the Order is not applicable to theCompany.

d) On an overall examination of the financial statements the Company has not raisedany funds on short-term basis during

the year. Accordingly clause 3(ix)(d) of the order is not applicable.

e) The company has not taken any funds from any entity or person on account of or tomeet the obligations of its

subsidiaries associates and joint ventures. Accordingly clause 3(ix)(e) of the orderis not applicable.

f) The company has not raised any loans during the year on the pledge of securitiesheld in its subsidiaries joint ventures

or associate companies. Accordingly clause 3(ix)(f) of the order is not applicable.

x. (a) The Company has not raised moneys by way of initial public offer or furtherpublic offer (including debt instruments)

during the year. Accordingly clause 3(x)(a) of the Order is not applicable.

(b) The company has not made any preferential allotment or private placement of sharesor convertible debentures (fully partially or optionally convertible) during the year.Accordingly clause 3(x)(b) of the Order is not applicable.

xi. (a) Based on our examination of the books and records of the Company and accordingto the information and explanations

given to us no case of frauds by the Company or on the Company has been noticed orreported during the year.

(b) During the year no report under sub- section (12) of section 143 of the CompaniesAct has been filed in Form ADT-4 as prescribed under Rule 13 of Companies (Audit andAuditors) Rules 2014 withthe Central Government during the year.

(c) As represented to us by the management there are no whistle blower complaintsreceived by the Company during the year.

xii. The Company is not a Nidhi Company. Accordingly clause 3(xii)(a)(b) and (c) ofthe Order is not applicable.

xiii. According to the information and explanations given to us and based on ourexamination of the books and records we report that the Company are in compliance withSections 177 and 188 of the Act where applicable for transactions with the relatedparties and the details of related party transactions have been disclosed in theStandalone Financial Statements as required by the applicable accounting standards.

xiv. (a) According to the information and explanations given to us and based on ourexamination the company has an internal

audit system commensurate with the size and nature of its business.

(b) We have considered the reports of the Internal Auditors for the period under Audit.

xv. According to the information and explanations given to us and based on ourexamination of records the Company has not entered into any non-cash transactionsspecified under section 192 of the Act withdirectors or persons connected with directorsduring the year. Accordingly Clause 3(xv) of the Order is not applicable.

xvi. (a) The Company is not required to be registered under section 45- IA of theReserve Bank of India Act 1934. Accordingly

reporting under clause 3(xvi)(a)(b)(c) and (d) of the Order is not applicable.

xvii. Based on the examination of record the Company has incurred cash losses of Rs7061.99 Lakhs in the financial year 202122 and Rs 4311.93 Lakhs in the immediatelyfinancial year 2020-21.

xviii. There has been no resignation of the Statutory Auditors of the Company duringthe year and accordingly clause 3(xviii) of the order is not applicable.

xix. On the basis of the financial ratios ageing and expected dates of realization offinancial assets and payment of financial liabilities other information accompanying thefinancial statements our knowledge of the Board of Directors and Management plans andbased on our examination of the evidence supporting the assumptions indicate thatmaterial uncertainty exists that may cast a significant doubt on the Company's ability tocontinue as a going concern. We further state that our reporting is based on the facts upto the date of the audit report and we neither give any guarantee nor any assurance thatall the liabilities falling due within a period of one year from the balance sheet datewill get discharged by the Company as and when they fall due.

xx. Based on our examination of records of the Company and information and explanationsgiven to us due to losses incurred during the year and earlier years the conditions andrequirements of section 135 of the Act is not applicable. Hence paragraph 3(xx) (a) and(xx) (b) of the Order is not applicable.

For V. Singhi & Associates

Chartered Accountants Firm Registration No. 311017E

(V. K. SINGHI)
Place: Kolkata Partner
Date: 30th May 2022 Membership No. 050051 UDIN: 22050051AJYAIL9533

Referred to in Paragraph 2(h) on Other Legal and Regulatory Requirements of our Reportof even date to the members of McNally Bharat Engineering Company Limited on theStandalone Financial Statements for the year ended 31st March 2022

Report on the Internal Financial Controls with reference to the aforesaid standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013 ("the Act")

In connection with our audit of the Standalone Financial Statements of McNally BharatEngineering Company Limited ("the Company") as of and for the year ended 31stMarch 2022 we have audited the internal financial controls with reference to StandaloneFinancial Statements the Company.

Management's Responsibility for Internal Financial Controls

The respective management under Corporate Insolvency Resolution Process (CIRP) of theCompany is responsible for establishing and maintaining internal financial controls basedon the internal financial controls with reference to financial statements criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to Company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Act.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by the ICAI anddeemed to be prescribed under section 143(10) of the Act to the extent applicable to anaudit of internal financial controls with reference to financial statements. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls with reference to financial statements were established and maintainedand whether such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the Standalone Financial Statements whether due to fraud orerror.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to financial statements.

Meaning of Internal Financial Controls with reference to Standalone FinancialStatements

A Company's internal financial controls over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles.

A Company's internal financial controls over financial reporting includes thosepolicies and procedures that (1) pertain to the maintenance of records in reasonabledetail accurately and fairly reflect the transactions and dispositions of the assets ofthe Company; (2) provide reasonable assurance that transactions are recorded as necessaryto permit preparation of the Financial Statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the Company are being madeonly in accordance with authorisations of management and directors of the Company; and (3)provide reasonable

assurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the Company's assets that could have a material effect on the FinancialStatements.

Inherent Limitations of Internal Financial Controls with reference to StandaloneFinancial Statements

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to fraud or error may occur and not be detected.Also projections of any evaluation of the internal financial controls with reference tofinancial statements of future periods are subject to the risk that the internal financialcontrols with reference to financial statements may become inadequate because of changesin conditions or that the degree of compliance with the policies or procedures maydeteriorate.

Opinion

In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting and such internal financial controls over financialreporting were operating effectively as at 31st March 2022 based on the criteria forinternal financial control over financial reporting established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls over Financial Reporting issued by the ICAI.

For V. Singhi & Associates

Chartered Accountants Firm Registration No. 311017E

(V. K. SINGHI)
Place: Kolkata Partner
Date: 30th May 2022 Membership No. 050051 UDIN: 22050051AJYAIL9533

.