METALYST FORGINGS LIMITED
Report on the Audit of the Standalone Financial statements
We have audited the accompanying Standalone Financial Statements of METALYSTFORGINGSLTD.("the Company") which comprise the Balance Sheet as at March 312019 and the Statement of Profit and Loss (including other comprehensive income) theStatement of cash flows and the statement of changes in equity for the yearthen ended andnotes to accounts including a summary of significant accounting policies and otherexplanatory information (herein after referred to as "Standalone FinancialStatements").
In our opinion and to the best of our information and according to the explanationsgiven to usexcept for the effects of the matters described in Basis for Qualified Opinionsection of our reportthe standalone Ind AS financial statements give the informationrequired by the Companies Act 2013 in the manner so required and give a true and fair viewin conformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at 31 March 2019 and its Profit and Loss (including othercomprehensive income) Cash Flow Statement and its statement of changes in equityfor theyear ended.
Basis for Qualified 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 Auditors Responsibilities for the Audit oftheFinancial Statements section of our report. We are independent of the entity inaccordance with the ethical requirements that are relevant to our audit of the financialstatements in India in terms of the Code of Ethics issued by the Institute of CharteredAccountants of India and the relevant provisions of the Companies Act 2013 and we havefulfilled our other ethical responsibilities in accordance with these requirements. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our qualified opinion.
As per"Indian Accounting Standard 36" which talks about impairment ofasset if the carrying amount of the asset is more than recoverable amount then asset needto be impaired and as per "Indian Accounting Standard 109" on financialinstruments which also contains provisions of impairment of financials assets throughexpected credit loss method basis these provisions we were required to seek for anyimpairment obligations from management but since the corporate debtors is still under theprocess CIRP and resolution professional and committee of creditors are in the process offinalization successful resolution applicant and the management has not determined valuein use thus impairment of Fixed Assets including Capital Work In Progress (Rs. 239624.81Lacs) Old Trade Receivables which have been standing in the books of account beforeinitiation of CIRP process accordingly we are unable to ascertain the effectof the sameon the Financial statements.
As per "Indian Accounting Standard 109" company was required to getthe Investment (Rs. 34706.70 Lacs) at fair value but the same has not been done by thecompany accordingly we are unbale to ascertain the effect of the same on the Financialstatements.
Emphasis of Matter
We draw attention to the following:
1. Note No. 1 regarding Corporate Insolvency Resolution Process(CIRP) initiated underInsolvency and Bankruptcy Code 2016 (the Code) and the outcome of the CIRP issubject to decision of APEX Court/ NCLT.
2. The Company has been continuously making losses consequently its net worth isnegative and the Companys total liabilities exceeded its total assets. Thisindicates the existence of material uncertainty that may cast significant doubt on theCompanys ability to continue as a going concern. However in view of the CIRP inrespect of the Company which is in progress the accounts have been prepared on a goingconcern basis [Refer Note 2.1 to notes to accounts of financial statements];
3. Considering the current operating levels of the Company and the ongoing corporateinsolvency resolution process company has not made any Impairment in the value of Toolsand Dies accordingly we are unable to comment upon the effect of the same on theFinancial Statements.
4. Considering the ongoing corporate insolvency resolution process (as mentioned inNote No 1 & 2.1) the certainty as to the realization of unused tax losses and MATcredit available cannot be ascertained at this stage. Consequently adjustment to deferredtax (net) and MAT credit available have not been given effect to. (Refer Note 2.9 to notesto accounts of financial statements)
5. As per the code the RP has to receive collate and reconcile all the claimssubmitted by the creditors of the company. Such claims can be admitted to the RP duringthe CIRP till the approval of a resolution plan by the CoC. The RP has verified andadmitted the claims submitted by the creditors against the company as per the Code.Pending finalization of resolution plan the impact of such claims if any that may alsohave not been considered in the preparation of the financial statements. Further intereston the financial debt from the date of commencement of CIRP (i.e. from 15th December 2017till 31st March 2019) has not been provided in the books of accounts andcharged to the Profit and Loss account.
6. In respect of unclaimed dividend outstanding in the books pertains to financial year2011-12 to 2013-14. On expiry of the stipulated period the same will be transferred toInvestors Education and Protection Fund.
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 financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.
Except for the matters described in the Basis for qualified opinion we have determinedthat there are no other key audit matters to communicate in our report
Information other than the financial statements and Auditors Report thereon
The Companys Board of Directors is responsible for the other information. Theother information comprises the information included in the Annual Report but does notinclude the financial statements and our auditors report thereon. Our opinion on thefinancial statements does not cover the other information and we do not express any formof assurance conclusion thereon. In connection with our audit of the financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.
Management and Those Charged with Governances Responsibility for the StandaloneInd AS financial statements
The Management and board of directors of the company are responsible for the mattersstated in Section 134(5) of the Companies Act 2013 (the act) with respect tothe preparation of these standalone financial statements that give a true and fair view ofthe financial position financial performance and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the AccountingStandards specified under Section 133 of the Act read with Companies (Indian AccountingStandards) Rules 2015.
The company has gone into Corporate Insolvency Resolution Process ("CIRP")vide order of the National Company Law Tribunal Chandigarh Bench ("NCLT") datedDecember 15 2017 under the provision of the Insolvency & Bankruptcy Code 2016("Code"). Pursuant to the Order the powers of the Board of Directors standsuspended and such powers are exercisable by Mr. Dinker T. Venkatasubramanian who hasbeen appointed as Resolution Professional ("RP") by NCLT vide order datedDecember 15 2017 and was consequently confirmed as Resolution Professional (RP) by theCommittee of Creditors (COC) in its meeting held on January 12 2018. The members of theCOC (vide the meeting held 18 May 2018) authorised RP to file an application to NCLT forextension of CIRP period by 90 days (i.e. from 180 days to 270 days) as per the Code.
Accordingly Mr. Dinker T. Venkatasubramanian took control of management and operationsof the company. As the powers of the Board of Directors had been suspended the financialstatements have not been adopted by Board of Directors however the same have been signedby Mr. Shekhar Gupta (whole time director) Mr. Yogesh Kapur (Director) Mr. Arun Maiti(CFO) and Mr. Pawan Kumar Mishra (CS) of Company confirming accuracy and completeness ofthe results. These Standalone Ind AS financial statements have not been signed but takenon record by the RP on June 7 2019.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompanys ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concernbasis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
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 auditors report that includes our opinion. Reasonable assurance is ahigh level of assurance but is not a guarantee that an audit conducted in accordance withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.
As part of an audit in accordance with Standards on Auditing we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the Act we are also responsible for explaining our opinion on whether the Companyhas adequate internal financial controls system in place and the operating effectivenessof such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of managements use of the going concernbasis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events orconditions that may cast significant doubt on theCompanys 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 financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditors report. However future events or conditions may cause theCompany to cease to continue as a going concern.
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.
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 also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships 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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditors 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 on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection143 of the Act we give in the Annexure A statement on the matters Specified inparagraphs 3 and 4 of the Order.
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 auditexcept forthematters described in the Basis for Qualified opinion Paragraph.
b) Except for the effects of the matters described in the Basis for Qualified opinionParagraph in our opinion proper books of account as required by law have been kept bythe company so far as it appears from our examination of those books.
c) The Balance Sheet Statement of Profit and loss including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisreport are in agreement with the books of account.
d) Except for the matters described in the Basis for Qualified opinion Paragraph theaforesaid standalone IND AS financial statements comply with the Indian AccountingStandards specified under section 133 of the Act read with the relevant rules thereunder.
e) The matter described in the Basis for Qualified Opinion paragraph abovemay have an adverse effect on the functioning of the Company.
f) On the basis of written representations received from the directors as on March 312019 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164(2) of theAct.
g) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph above; and
h) 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 B". Our report expresses aqualified opinion on theadequacy and the operating effectiveness of the companys internal financial controlsover financial reporting; and internal audit has also not been taken placed by company.
i) In our opinion and to the best of our information and according to the explanationsgiven to us we report as under with respect to other matters to be included in theAuditors Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014:
i. The company has disclosed the impact of pending litigations on its financialposition in its standalone IND AS financial statements [Refer Note no. 26]
ii. The Company did not have any long-term contracts including derivative contracts; assuch the question of commenting on any material foreseeable losses thereon does not arise.
iii. There has not been an occasion in case of the Company during the year under reportto transfer any sums to the Investor Education and Protection Fund. The question of delayin transferring such sums does not arise.
| ||For Raj Gupta & Co. |
| ||Chartered Accountants |
| ||FRN: 000203N |
| ||CA Raj Kumar Gupta |
|Place : New Delhi ||(Partner) |
|Date : 07/06/2019 ||Membership No: 017039 |
ANNEXURE A TO THE INDEPENDENT AUDITORS REPORT
On the basis of such checks as we considered appropriate and according to theinformation and explanations given to us during the course of our audit we report that:
I. In respect of fixed assets:
a) According to the information and explanation given to us and on the basis ofexamination of books and records the Company hasmaintained the records however the samewas not showing full particulars including quantitative details and situation of fixedassets and as informed the company is in the process of updating the same.
b) According to the information and explanation given to us the company has a regularprogram of physical verification of fixed assets on selective basis.
c) According to the information and explanations given to us and on the basis of ourexamination of the records of the company the title deeds of immovable properties areheld in the name of the company. However none is made available to us as they are pledgedwith the financial institutions.
II. In respect of Inventories: -We have been informed by the management that theinventories are physically verified by external agency during the period appointed by thecompany at each quarter end and no major discrepancies have been pointed out by them.Thevaluation of inventory has been certified by the management.
III. The company during the year has not granted any loans secured or unsecured tocompanies firms Limited Liability Partnerships or other parties covered in theregistermaintained under section 189 of the Companies Act 2013 (the Act).Accordingly paragraph 3(iii) of the Order is not applicable to the company IV. In ouropinion and according to the information and explanations given to us the company hascomplied with the provisions of section 185 and 186 of the Act with respect to the loansinvestments guarantees and security during the year.
V. In our opinion and according to the information and explanations given to us thecompany has not accepted any deposit from the public covered under Section 73 to 76 of theCompanies Act 2013.
Therefore the provisions of the clause 3 (v) of the Order are not applicable to theCompany. VI. As informed company have maintained cost records pursuant to the rulesprescribed by the central government for maintenance of cost records under sub-section (l)of section 148 of the act but we have not been provided with the same . Moreover asinformed cost audit is under process.
VII. According to the information and explanations given to us and based on the recordsof the company examined by us the company is regular in depositing the undisputedstatutory dues including Provident Fund Employees State Insurance Income-taxSales-tax Service Tax Custom Duty Excise Duty and other material statutory dues asapplicable with the appropriate authorities in India.
According to the information and explanation given to us and based on the records ofthe company examined by us there are no dues of Provident Fund Employees StateInsurance Income-tax Sales-tax Service Tax Custom Duty Excise Duty and other materialstatutory dues which have not been deposited on account of any disputes VIII. Based on ouraudit procedures performed for the purpose of reporting the true and fair view of thefinancial statements and according to information and explanations given by themanagement A corporate insolvency resolution process ("CIRP") has beeninitiated against the company vide an order of Chandigarh bench of the National CompanyLaw Tribunal (NCLT) dated December 15 2017 under the provisions of the insolvency andbankruptcy code 2016 (Code). Pursuant to the order the power of the Board of directorsstands suspended and are exercisable by Mr. Dinkar T. Venkatasubramanian who wasappointed as interim resolution professional (IRP) by the NCLT vide order dated December15 2017 and was consequently confirmed as Resolution Professional (RP) by the Committeeof Creditors (CoC) in its meeting held on January 12 2018.
IX. The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year. Accordinglyparagraph 3 (ix) of the Order is not applicable. X. To the best of our knowledge andaccording to the information and explanations given to us no fraud by the Company or nomaterial fraud on the Company by its officers or employees has been noticed or reportedduring the year.
XI. 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 Act.
XII. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.
XIII. In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 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 as required by theapplicable accounting standards.
XIV. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly paid convertible debentures and hence reportingunder clause 3 (xiv) of the Order is not applicable to the Company.
XV. In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsDirectors or persons connected to its directors and hence provisions of section 192 of theCompanies Act 2013 are not applicable to the Company.
XVI. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
Annexure B to Independent Auditors Report
(Referred to in our report of even date)
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act") We have audited the internalfinancial controls over financial reporting of METALYST FORGINGSLIMITED as of 31st March2019 in conjunction with our audit of the standalone Ind AS financial statements of theCompany for the year ended on that date.
Managements Responsibility for Internal Financial Controls
The Companys 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 (ICAI).
These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to companys policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Companys 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 ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia.
Those Standards and the Guidance Note require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether adequateinternal financial controls over financial reporting was established and maintained and ifsuch controls 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 auditors judgment including the assessment of the risks ofmaterial misstatement of the standalone Ind AS financial statements whether due to fraudor error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Companys internal financial controlssystem over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A companys internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of standalone Ind AS financial statements for external purposes inaccordance with generally accepted accounting principles. A companys internalfinancial control over financial reporting includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation ofstandalone Ind AS financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with Authorizations of management and directors of the company; and (3) providereasonable Assurance regarding prevention or timely detection of unauthorized acquisitionuse or disposition of the companys assets that could have a material effect on thestandalone Ind AS financial statements.
Inherent 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 to the best of our information and according to the explanations givento us the company has except for the matters as described in basis for qualifiedopinion emphasis of matter other points reported in the Companies (AuditorsReport) order2016 and under section 143(3) in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st March 2019 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 Raj Gupta & Co. |
| ||Chartered Accountants |
| ||FRN: 000203N |
| ||CA Raj Kumar Gupta |
|Place : New Delhi ||(Partner) |
|Date : 07/06/2019 ||Membership No: 017039 |