To the Members of
MELSTAR INFORMATION TECHNOLOGIES LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of MELSTAR INFORMATION TECHNOLOGIESLIMITED ("the Company") which comprise the Balance Sheet as at March 31 2020and the Statement of Profit and Loss Statement of changes in Equity and Statement of Cashflows for the year then ended and notes to the financial statements including a summaryof significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2020 and profit changes in equity and its cash flows for the year endedon that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty in relation to Going Concern
Further as mentioned in Note No. 17.1 21.1 and 28(j) to the standalone financialstatements the Company has been referred to National Company Law Tribunal under theInsolvency and Bankruptcy Code 2016 and there are persistent severe strains on theworking capital and there is considerable decline in level of operations of the Companyand net worth of the Company as on the reporting date is negative and it continues toincur losses. Since Corporate Insolvency Resolution Process (CIRP) is currently inprogress as per the Code it is required that the Company be managed as going concernduring CIRP. Accordingly the standalone financial statements are continued to be preparedon going concern basis. However there exists a material uncertainty about the ability ofthe Company to continue as a "Going Concern". The same is dependent upon theresolution plan to be approved by NCLT. The appropriateness of the preparation ofstandalone financial statements on a going concern basis is critically dependent upon CIRPas specified in the Code. necessary adjustments required on the carrying amount of assetsand liabilities are not ascertainable at this stage.
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the Preparation of the OtherInformation. The Other Information comprises the Information included in the Board Reportincluding Annexures to the Boards Report Management Discussions and Analysis Report onCorporate Governance Shareholders Information and Other Information in Annual Report butdoes not include the Standalone Financial Statements and our auditors' report thereon.
The information to the extent available relating to the Standalone Financial Statementswhich will be included in the Management discussion and analysis and Financial PerformanceHighlights have been made available to us prior to the date of this Auditors' Report andwe have not observed any misstatement.
The Other Information to the extent not made available to us as of the date of theSigning this report is expected to be made available to us after the date of thisAuditors' Report.
Our opinion on the Standalone Financial Statements does not cover the other informationand we will not express any form of assurance conclusion thereon.
In Connection with our audit of the Standalone Financial Statements our responsibilityis to read the Other information and identified above when it becomes available and indoing so consider whether the other information is materially inconsistent with theStandalone Financial Statements or our knowledge obtained in the audit or otherwiseappears to be materially misstated.
When we read the Other information if we conclude that there is material misstatementtherein we are required to communicate the matter to those charged with Governance.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theaccounting Standards specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation 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 financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
In preparing the financial statements the Board of Directors 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 Board of Directors either intends to liquidate the Company or to cease operations orhas no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theCompanies Act 2013 we are also responsible for expressing our opinion on whether thecompany has an adequate internal financial controls system in place and the operatingeffectiveness of such controls.
3. Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management
4. Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtainedwhether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the Company's abilityto continue as a going concern. If we conclude that a material uncertainty exists we arerequired to draw attention in our auditor's report to the related disclosures in thefinancial statements or if such disclosures are inadequate to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
5. Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of the standalone financial statements that individuallyor in aggregate makes it possible that the economic decision of a reasonablyknowledgeable user of the financial statements may be influenced. We consider quantitativemateriality and qualitative factors in (i) planning the scope of our audit work andevaluating the results of our work.; and (ii) to evaluate the effect of any identifiedmisstatements in the financial statements.
We communicate with those charged to governance regarding among other matters theplanned scope and timing of the audit and significant audit finding including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance regarding with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour Independence and where applicable related safeguards.
From tha matters communicated with those charged to governance we determine thosematters that were most significant in the audit of standalone financial statements for thecurrent period and therefore the key audit matters. We describe these matters in theauditor's report unless the law or regulation precludes public disclosure about the matteror when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reanaby beexpected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the "Annexure 1" a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.
1. As required by Section 143(3) of the Act we report that: a. We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit.
b. In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
c. The Balance Sheet the Statement of Profit and Loss the Statement of Changes inEquity and the Cash Flow Statement dealt with by this Report are in agreement with thebooks of account.
d. In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
e. On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164(2) of theAct.
f. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure 2".
g. In our opinion the managerial remuneration for the year ended March 31 2020 hasbeen paid/provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act;
h. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
- The Company has disclosed the impact of pending litigations on its financial positionin its financial statements Refer Note 37(f) to the financial statements;
- The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long term contracts includingderivative contracts;
- There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.
|For SARDA & PAREEK |
|Chartered Accountants |
|FRN no. 109262W |
|Gaurav Sarda |
|Membership No. 110208 |
|Mumbai December 08 2020. |
ANNEXURE 1 TO THE INDEPENDENT AUDITORS' REPORT
Annexure referred to in Independent Auditors' Report of even date to the members ofMELSTAR INFORMATION TECHNOLOGIES LIMITED on the standalone financial statements for theyear ended March 31 2020.
1. Fixed Assets
a. Maintenance of Records
- The Company has generally maintaining proper records showing full particularsincluding quantitative details and situation of Property Plant and Equipment (PPE);
b. Physical verification
There is a regular programme of physical verification of all fixed assets which inour opinion is reasonable having regard to the size of the Company and the nature of itsassets. In our opinion and as per the information given by the Management thediscrepancies observed were not material and have been appropriately accounted in thebooks.
c. Title Deeds
According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the company does not hold any property andhence this clause is not applicable.
The Company is in the business of rendering services and consequently does not have anyinventories during the year. Consequently clause 3(ii) of the order is not applicable tothe company.
3. Investment Made Loans or Advances Given.
The company has granted interest free loan of Rs. 178.55 lakhs to Birla Power Solutioncovered in register maintained under section 189 of the companies Act 2013. No recoverieshave been made and company has provided for Rs. 178.55 lakhs as doubtful recoveries.
4. Loans Investments Guarantees or Securities falling under Section 185 and186 of the Companies Act.
In our opinion and according to information and explanation given to us in respect ofloans investments guarantees and security the Company has complied with the provisionsof sections 185 and section 186 of the Companies Act 2013.
5. Deposits Accepted
In our opinion and according to the information and explanations given to us theCompany has complied with the directives issued by the Reserve Bank of India and theprovisions of Section 73 to 76 or any other relevant provisions of the Companies Act 2013and rules made thereunder with regard to the deposits accepted from the public. Accordingto the information and explanations given to us no Order has been passed by the CompanyLaw Board or National Company Law Tribunal or Reserve Bank of India or any Court or anyother Tribunal on the company in respect of the aforesaid deposits.
6. Maintenance of Cost Records
According to the information and explanations given to us the central government hasnot prescribed maintenance of cost records under sub section (1) of section 148 of thecompanies act 2013.
7. Depositing Statutory Dues a. The company is irregular in depositingundisputed statutory dues including Provident Fund Employee's state insurance Incometax Goods and Service Tax Value added tax Cess and other material statutory duesapplicable to it with the appropriate authorities. Details of outstanding undisputedstatutory dues at the year end and outstanding for more than six months are as under.months are as under.
| || ||(Amount in Lakhs) |
|Particulars ||Dues as on March 31 2020 ||Outstanding for more than 6 months as on March 31 2020 |
|Service Tax ||155.81 ||155.81 |
|VAT ||2.18 ||2.18 |
|ESIC- Salary ||6.01 ||6.01 |
|PF ||47.60 ||38.58 |
|PT ||5.39 ||5.06 |
|TDS ||52.09 ||39.08 |
|GST ||175.03 ||76.88 |
b. The details of dues of statutory dues which have not been deposited on account ofany dispute are given in the Annexure to this report.
|Name of the statute ||Nature of Dues ||Amount (Rs in Lakhs) ||Period ||Forum where dispute is pending |
|ESIC Act 1948 ||ESIC Liability ||1.36 ||FY 2005-06 ||ESIC Authority |
8. Default in Repayment of Loan or Other Borrowings
In our opinion and according to the information and explanations given to us theCompany has not defaulted in repayment of the loans or other borrowings or in the paymentof interest thereon to any lender. In view of the above reporting under clause (ix) (b)(c) (d) (e) and (f) is not applicable.
9. Moneys Raised
During the year the company has not raised money through initial public offer orfurther public offer (including debt instruments) hence this clause is not applicable.
10. Fraud Reported or Noticed
As represented to us by the management and based on our examination of the books andrecords of the Company in accordance with the generally accepted auditing practices inIndia we have neither come across any material fraud on or by the Company noticed orreported during the year nor we have been informed of any such case by the management thatcauses the financial statements to be materially misstated.
11. Managerial Remuneration
In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the CompaniesAct 2013.
12. Nidhi Company
In our opinion and according to the information and explanations given to us theCompany is not a nidhi company and therefore the reporting under clause (xiii) is notapplicable.
13. Transaction with Related Parties
In our opinion and according to the information and explanations given to us theCompany is in compliance with Sections 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the standalone financial statements etc. as requiredby the applicable Indian accounting standards.
14. Preferential Allotment / Private Placement
According to the information and explanations given to us and based on our examinationof the records of the company the company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the year.Accordingly reporting under clause (xiv) of the order is not applicable.
15. Non-Cash Transactions
In our opinion and according to the information and explanations given to us duringthe year the Company has not entered into any non-cash transactions with its directors ordirectors of its holding subsidiary or associate company or persons connected with themand hence provisions of Section 192 of the Companies Act 2013 and reporting under clause(xv) is not applicable.
16. Applicability of Section 45-IA of Reserve Bank of India Act 1934
In our opinion and according to the information and explanations given to us Companyis not required to register under Section 45 IA of the Reserve Bank of India Act 1934.Hence Clause 3 (xvi) of the Order is not applicable to the Company
|For SARDA & PAREEK |
|Chartered Accountants |
|FRN no. 109262W |
|Gaurav Sarda |
|Membership No. 110208 |
|Mumbai December 08 2020 |
ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT
Annexure Referred to in Independent Auditors' Report on the Standalone FinancialStatements of Even date to the members of MELSTAR INFORMATION TECHNOLOGIES LIMITEDfor the year ended March 31 2020.
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of MELSTARINFORMATION TECHNOLOGIES LIMITED ("the Company") as of March 31 2020 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India. 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 Companies Act 2013.
Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. 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 over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the Company's internal financial controls system overfinancial reporting
Meaning of Internal Financial Control over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1)Pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2)Provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company;(3)Provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2020 based on theinternal control over financial reporting criteria 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 Institute of CharteredAccountants of India.
|For SARDA & PAREEK |
|Chartered Accountants |
|FRN no. 109262W |
|Gaurav Sarda |
|Membership No. 110208 |
|Mumbai December 08 2020. |