To the members
M/s. MIC ELECTRONICS LIMITED
Corporate Insolvency Proceedings as per Insolvency and Bankruptcy Code 2016:
The company has been under the corporate insolvency resolution process under theprovisions of the Insolvency and Bankruptcy Code 2016 ("the Code") NationalCompany Law Tribunal order dated March 13 2018. The powers of the Board of Directorsstand suspended as per Section 17 of the Code and such powers were exercised by theResolution professional appointed by the honourable National Company Law Tribunal(Hyderabad bench) by the said order under the provisions of the code. Thereafterhonourable NCLT has passed an order dated 31st July 2019 approving the Resolution Plansubmitted by the Resolution applicant. Consequently new Board of Directors have beenappointed by the company. Report on the Audit of Financial Statements:
We have audited the accompanying financial statements of M/s. MIC ELECTRONICS LIMITED("the Company") which comprise the Balance Sheet as on 31stMarch 2021 and theStatement of Profit and Loss (including other Comprehensive Income) statement of changesin equity and statement of cash flows for the year ended 31st March 2021 and notes to thefinancial statements including a summary of significant accounting policies and otherexplanatory information (hereinafter referred to as "the financial statements").
In our opinion and to the best of our information and according to the explanationgiven to us the accompanying standalone 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 Indian Accounting Standards prescribed under Section 133 of the Actread with the Companies Accounting Standard Rules 2015 as amended (IndAS) and otheraccounting principles generally accepted in India of the state of affairs of the companyas at 31st March 2021 and its loss total comprehensive income its cash flows itschanges in equity for the year ended on that date.
Basis of Qualified Opinion
We refer to the following notes to stand alone financial statements.
a. Note 2.25 to the standalone financial statements in connection with write off ofassets/expenses/write back off liability/provision has been carried out in the books ofaccounts of the company and the balancing figure has been adjusted in the capital reserveas per the NCLT order dated 31st July 2019 approving the resolution plan. In this regardwe are of the opinion that the company should make these adjustments by crediting thebalancing figure of Rs.138.53 crores to the profit and loss account in conformity with theIndian Accounting Standards. Had the company credited this amount to the profit and lossaccount the profit would have been increased by the said amount and capital reserve wouldhave been decreased by the said amount.
b. Note 2.42 to the standalone financial statements in connection with tradereceivables security deposits loans and advances other financial and current assetsaggregating to Rs. 7.43 crores. There is existence of material uncertainties over therealisability of these amounts due to various factors such as disputes age of theseassets etc. There is also non-availability of confirmation of various trade receivablesetc. In absence of alternative corroborative evidence we are unable to comment on theextent to which such balances are recoverable.
a. We draw attention to Note No.2.44 as regards to the management evaluation ofCOVID-19 impact on the future performance of the company. Our opinion is not modified inrespect of this matter.
b. Section 203 of the Companies Act read with rule 8A of the companies (Appointmentand remuneration of Managerial Personnel) Amendment rules 2014 In respect of appointmentof CFO as per the said provisions the Board should fill the vacancy of CFO within 6months from the date of such vacancy. However in the present case such six months havealready been elapsed from the date of such vacancy.
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 we have determined the matters described below to bethe key audit matters to be communicated in our report.
|Key Audit Matters ||Auditor's Response |
|Revenue Recognition : ||Principal audit procedures : |
|The Company recognizes revenue from products based on the terms and conditions of transactions which varies with different customers. ||We obtained an understanding of the revenue recognition process and tested the company's controls around the timely and accurate recording of sales transactions. |
|For sale transactions in a certain period of time around the Balance Sheet date it is essential to ensure that the control of goods have transferred to the customers. As revenue recognition is subject to management's judgement on whether the control of the goods have been transferred we consider cut-off of revenue as a key audit matter. ||We have obtained an understanding of a sample of customer contracts. |
| ||We tested the access and change management controls of the relevant information technology system in which shipments are recorded. |
| ||Our test of revenue samples focused on sales recorded immediately before the year - end obtaining evidence to support the appropriate timing of revenue recognition based on terms and conditions set out in sales contracts and delivery documents. |
Information other than the financial statements and Auditor's report there on:
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisBoard's Report including Annexures to Board's Report Report on Corporate Governance andBusiness Responsibility Report but does not include the consolidated financialstatements standalone financial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do 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 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.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Management's responsibility for the standalone financial 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 financial statements that give a true and fairview of the financial positionfinancial performance in accordance with the accounting principles generally accepted inIndia including the accounting Standards specified under section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of 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 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 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.
Identify and assess the risks of material misstatement of the standalone 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 financial 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 expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on statements including the disclosures and whetherthe standalone financial statements represent the underlying transactions and events in amanner that achieves fair presentation.
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 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 withthose charged with governance we determine those matters that were of most significancein the
audit of the standalone financial statements of the current period and are thereforethe key audit matters. We describe these matters in our auditor's report unless law orregulation precludes public disclosure about the matter or when in extremely rarecircumstances we determine that a matter should not be communicated in our report becausethe adverse consequences of doing so would reasonably be expected to outweigh the publicinterest 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 subsection (11) of section 143 ofthe Companies Act 2013 we give in the Annexure a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
2. As required by Section 143(3) of the Act we report that:
a. Except for possible effects of the matters as described in the "Basis ofqualified opinion" paragraph we have sought and obtained the information andexplanations which to the best of our knowledge and belief were necessary for the purposesof our audit.
b. Except for possible effects of the matters as described in the "Basis ofqualified opinion" paragraph in our opinion proper books of account as required bylaw have been kept by the Company so far as it appears from our examination of those books
c. The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) Statement of changes in equity and the Cash Flow Statement dealt with by thisReport are in agreement with the books of accounts.
d. Due to the matters as described in the "Basis of qualified opinion"paragraph in our opinion the aforesaid standalone financial statements do not complywith the Accounting Standards specified under Section 133 of the Act read with Rule 7 ofthe Companies (Accounts) Rules 2014.
e. The matter described in the "Basis of qualified opinion" may not have anadverse effect on the functioning of the company.
f. On the basis of written representations received from the directors as on March 312021 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2021 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 of qualified opinion" paragraphabove;
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 "AnnexureB". Our report expresses a qualified opinion on theCompany's internal financial controls over financial reporting.
i. 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:
i. The company has disclosed the impact of pending litigations on its financialposition to the extent ascertained in its standalone financial statements;
ii. Except for the possible effects of the matters described under "Basis ofqualified opinion" paragraph the company has made a provision as required under theapplicable law or accounting standards for material foreseeable losses if any onlongterm contracts. The company did not have any derivative contracts.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
"Annexure A" to the Independent Auditors' Report
Referred to in paragraph 1 under the heading 'Report on Other Legal & RegulatoryRequirement' of our report of even date to the financial statements of the Company for theyear ended March 31 2021:
1. (a) the Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets;
(b) Some of the fixed assets were physically verified during the year by the Managementin accordance with a programme of verification which in our opinion provides for physicalverification of all the fixed assets at reasonable intervals. According to the informationand explanations given to us no material discrepancies were noticed on such verification.
(c) According to the information and explanations given to us and the records examinedby us and based on the examination of the registered sale deed on property provided to uswe report that the title deeds comprising all the immovable properties of land andbuildings which are freehold are held in the name of the Company as at the Balance Sheetdate.
2. As explained to us the inventories were physically verified during the year by theManagement at reasonable intervals and no material discrepancies were noticed on physicalverification.
3. The Company has not granted interest free unsecured loan to a company covered in theRegister maintained under section 189 of the Act during the year.
4. In our opinion and according to the information and explanations given to us thecompany has complied with the provisions of section 185 and 186 of the Companies Act 2013in respect of loans investments guarantees and security.
5. The Company has not accepted any deposits from the public and hence the directivesissued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any otherrelevant provisions of the Act and the Companies (Acceptance of Deposit) Rules 2015 withregard to the deposits accepted from the public are not applicable.
6. Pursuant to the rules made by the Central Government under sub-section (1) ofSection 148 of the Act the maintenance of cost records is not applicable for the company.
7. (a) According to information and explanations given to us and on the basis of ourexamination of the books of account and records the Company has not been regular indepositing undisputed statutory dues including Provident Fund Employees State InsuranceIncome- Tax Sales tax Service Tax Duty of Customs Duty of Excise Value added TaxCess and any other statutory dues with the appropriate authorities. There have beensignificant delays in a large number of cases in depositing these dues with theappropriate authorities.
According to the information and explanations given to us and records of the companyexamined by us the following are the undisputed amounts payable in respect of ProvidentFund Income Tax Wealth Tax Service Tax Sales Tax Duty of Customs Excise Duty Valueadded tax and Other material statutory dues were in arrears as at March 31 2021 for aperiod of more than six months from the date they became payable. However as per the NCLTorder dated 31.07.2019 the company is of the opinion the statutory dues before date ofadmission of CIRP are not required to be paid.
|Name of the statue ||Nature of the dues ||Amount ||Period to which the amount relates ||Due date ||date of payment |
|Finance Act 1994 ||Service Tax ||10092802 ||From 2011 onwards ||Various dates ||Nil |
|Employees Provident Fund & Miscellaneous provisions act 1952 ||Provident Fund ||22927953 ||From 2009 onwards ||Various dates ||Nil |
|Employees State Insurance Act 1948 ||Employee State Insurance ||3402597 ||From 2011 onwards ||Various dates ||Nil |
|APPT Act 1987 ||Professional Tax ||1556260 ||From 2011 onwards ||Various dates ||Nil |
|Income Tax Act 1961 ||TDS ||23162102 ||From 2012 onwards ||Various dates ||Nil |
|AP Value Added Tax Act 2005 & The Central Sales Tax Act 1956 ||VAT / CST ||29175577 ||From 2013 onwards ||Various dates ||Nil |
|Goods and services Tax Act ||GST ||1904966 ||From 2017 onwards ||Various dates ||Nil |
|T.S.Municipalities Act 1965 ||Property Tax ||6667372 ||From 2013 onwards ||Various dates ||Nil |
|Income Tax Act 1961 ||Income Tax ||6897374 ||From 2017 onwards ||Various dates ||Nil |
|Central Excise Act 1944 ||Excise Duty ||37839 ||From 2019 onwards ||Various dates ||Nil |
According to the information and explanations given to us and records of the companyexamined by us the following are disputed dues relating to Wealth tax Duty of Customsand Cess which have not been deposited with the appropriate authorities on account of anydispute. However as per the NCLT order dated 31.07.2019 the company is of the opinionthe statutory dues before date of admission of CIRP are not required to be paid.
|Name of the Statue ||Nature of the Dispute ||Amount (Rs) ||Period to which the amounts relate (F.Y) ||Forum where the dispute is pending and amount deposited |
|Central Excise Act 1944 ||E xcise Duty ||3896982/- ||2008-2009 ||Customs Excise & Service Tax Appelate tribunal south zonal bench Bangalore vide appeal no.C/2303 of 2010 Amt.deposited : Rs.2896982/- |
|Customs Act 1962 ||Customs Duty ||1801111/- ||2008-2009 ||O/o. The Commissioner of Customs Central Excise and Service Tax Hyderabad III Commissionerate vide Appeal No.C/2302 of 2010 |
|The A.P.VAT Act 2005 ||APVAT ||840705/- ||2008-2009 ||Appelate Deputy Commissioner (CT) Secunderabad Division vide Appeal No.S/23/09-10/V Amt. deposited :Rs. 840705/- |
|The A.P.VAT Act 2005 ||APVAT ||545677/- ||2007-2008 ||Appelate Deputy Commissioner (CT) Secunderabad Division Amt. deposited : Rs.545677/- |
|The A.P.VAT Act 2005 ||APVAT ||1809145/- ||2005-2006 ||WP No.14764/2009 filed with High Court AP Amt.deposited : Rs.1809145/- |
8. In our opinion and according to the information and explanations given to us theCompany has not defaulted in the repayment of loans or borrowings to banks. The Companyhas not issued any debentures. The Company has not taken any loans and borrowings fromfinancial institutions and government.
9. Based upon the audit procedures performed and the information and explanations givenby the management the company has not raised moneys by way of initial public offer orfurther public offer including debt instruments and term Loans. Accordingly theprovisions of clause 3 (ix) of the Order are not applicable to the Company and hence notcommented upon.
10. Based upon the audit procedures performed and the information and explanationsgiven by the management we report that no fraud by the Company or on the company by itsofficers or employees has been noticed or reported during the year.
11. Based upon the audit procedures performed and the information and explanationsgiven by the management the managerial remuneration has been paid or provided inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Companies Act;
12. In our opinion and according to the information and explanation given to us theCompany is not a Nidhi Company. Therefore the provisions of clause 4 (xii) of the Orderare not applicable to the Company.
13. In our opinion all transactions with the related parties are in compliance withsection 177 and 188 of Companies Act 2013 and the details have been disclosed in theFinancial Statements as required by the applicable accounting standards.
14. Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not made preferential allotment or privateplacement of shares during the year under review according to the requirement of Sec 42 ofthe Companies Act 2013 and the amount raised have been used for the purposes for which thefunds were raised.
15. Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not entered into any non-cash transactions withdirectors or persons connected with him. Accordingly the provisions of clause 3 (xv) ofthe Order are not applicable to the Company and hence not commented upon.
16. In our opinion the company is not required to be registered under section 45 IA ofthe Reserve Bank of India Act 1934 and accordingly the provisions of clause 3 (xvi) ofthe Order are not applicable to the Company and hence not commented upon.
"Annexure B" to the Independent Auditor's Report of even date on theFinancial Statements of MIC ELECTRONICS LIMITED Report on the Internal Financial Controlsunder Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls over financial reporting of MICELECTRONICS LIMITED ("the Company") as of March 31 2021 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.
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 responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.
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 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 ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such 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 auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
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 systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
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 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 authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the 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 in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2021 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 Institute of CharteredAccountants of India.
| ||For PAVULURI & Co. |
| ||Chartered Accountants |
| ||Firm Reg. No:012194S |
| ||(CA N. RAJESH) |
| ||PARTNER |
|Place : Hyderabad ||M.No : 223169 |
|Date : 30.06.2021 ||UDIN # 21223169AAAAET4633 |