The Members of Modern Dairies Limited
Report on the Financial Statements
We have audited the accompanying financial statements of Modern Dairies Limited whichcomprise the Balance Sheet as at March 31 2019 the Statement of Profit and Loss(including Other Comprehensive Income) the Statement of Changes in Equity and Statementof Cash Flows for the year ended and a summary of significant accounting policies andother explanatory information.
We have audited the standalone financial statements of Modern Dairies Limited("the Company") which comprise the balance sheet as at March 31 2019 and thestatement of Profit and Loss (statement of changes in equity) and the 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 except for the effects of the matter described in the Basis for QualifiedOpinion section of our report and Emphasis of Matters the aforesaid financialstatements give a true and fair view in conformity with the accounting principles of thestate of affairs of the Company as at March 312019 and profit/loss (changes in equity)and its cash flows for the year ended on that date.
Basis for Qualified Opinion
I. Director's remuneration is not admissible as prescribed in Sec-197 of Companies Act2013 except in accordance with the provision of Schedule V and if it is not able to complywith such provisions the prior approval of lenders is required.
The Company is not eligible to pay director remuneration for non-compliance ofconditions prescribed in schedule V of the Companies Act 2013. During the year theCompany has given the director remuneration to Mr. Krishan Kumar Goyal (Chairman &Managing Director) amounting to Rs. 3000000 and Mr. Ashwani Kumar Goyal(Executive Director) amounting to Rs. 2662358.
Apart from the managerial remuneration for year ended 31st March 2019 asmentioned above the company has paid director remuneration of Rs. 5548884 till 31stMarch 2018 without complying the provisions of Schedule V of the Companies Act 2013.
We conducted our audit in accordance with Standards on Auditing (SAs) specified undersection 143(10) of the Companies Act 2013. Our responsibilities under those Standards arefurther described in the Auditor's Responsibilities for the Audit of the FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the financial statements under theprovisions of the Companies Act 2013 and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our qualified opinion.
EMPHASIS OF MATTER
(A) Assignment of SBI debt to ARC
A lender bank of the company viz. State Bank of India (SBI) has assigned its loans andother facilities along with underlying financial documents together with all the rightstitle and interest to Edelweiss Asset Reconstruction Company Limited acting in itscapacity as trustee of the EARC Trust- SC 306 for the benefits of the holders of theSecurity Receipts issued by the trustee thereunder.
During the reporting period there has been no written agreement between the Company andEdelweiss Asset Reconstruction Company Limited to crystalise the amount payable andinterest thereon to them hence the said debt till then is continued to be shown aspayable to SBI instead of Edelweiss Asset Reconstruction Company Limited.
(B) One Time Settlement (OTS) with PNB
The company had proposed their OTS offer to Punjab National Bank (PNB). The bank hasapproved the same. The company has however requested to the bank for extension of theperiod of repayment of OTS amount.
(C) Interest provisioning on facilities from Consortium Banks & OptionallyConvertible Debentures:
The Company's various credit facilities including Optionally Convertible Debentureshave been declared "Non-Performing Assets"/ recalled by its respective banks.There is a usual practice that banks discontinue to account for as "income" inrespect to the accrued interest on such assets subsequent to the declaration of these as"Non-Performing Assets". The Bankers of the Company too have not accounted as"income" in respect to the interest subsequent to NPA declaration date. In orderto achieve the desired congruency on this issue & uncertainty of the amount liable tobe paid the management of the company has not provided for such interest i.e. interest oncredit facilities subsequent to the date of declaration of theses credit facilities asnon-performing. Such interest amounts to Rs. 24.55 Crores (including on the assigned debtsof SBI) which has resulted in the understatement of current liabilities and losses by Rs.24.55 Crores. Even though the debts of SBI have been assigned to Edelweiss AssetReconstruction Company Limited in absence of any express agreement between the companyand Edelweiss Asset Reconstruction Company Limited no interest has been accounted for inthis respect.
MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 with respect to the preparation and presentation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance including other comprehensive income changes in equityand cash flows of the Company in accordance with the Indian Accounting Standards (Ind AS)prescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended and other accounting principles generally accepted inIndia.
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; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
Our responsibility is to express an opinion on these standalone financial statementsbased on our audit. We have taken into account the provisions of the Act the accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made there under.
We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Companies Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances but not for the purpose of expressing anopinion on whether the Company has in place an adequate internal financial controls systemover financial reporting and the operating effectiveness of such controls. An audit alsoincludes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.
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 Act we give in the Annexure a statement on the matters specified in the paragraph 3and 4 of the 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;
b. In our opinion proper books of account as required by law have been kept by theCompany so far as 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 Statement of Cash Flow dealt with by thisReport are in agreement with the books of account.
d. In our opinion the aforesaid standalone financial statements comply with the IndianAccounting Standards prescribed under section 133 of the Act.
e. On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualified
as on March 312019 from being appointed as a director in terms of Section 164(2) ofthe Act.
f. 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 financialposition in its financial statements;
The Company has made provision as required under the applicable law or Indianaccounting standards for material foreseeable losses if any on long-term contractsincluding derivative contracts;
There has been no delay in transferring amounts required to be transferred tothe
Investor Education and Protection Fund by the Company.
| ||FOR AARYAA & ASSOCIATES |
| ||Chartered Accountants |
| ||(Firm Registration No. 015935N) |
| || |
| ||CA Harsharanjit Singh Chahal |
|Place : Chandigarh ||Partner |
|Date: 30th May 2019 ||Membership No. 091689 |
ANNEXURE TO THE AUDITORS' REPORT
The Annexure referred to in our report to the members of the company for the year ended3181 March 2019. To the best of our knowledge and belief and information &explanation given to us we further report that:-
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of its fixed assetsunder which fixed assets are verified in a phased manner over a period of three yearswhich in our opinion is reasonable having regard to the size of the Company and thenature of its assets. In accordance with this program certain fixed assets were verifiedduring the year and no material discrepancies were noticed on such verification.
(c) According to information and explanations given to us the title deeds of all theimmovable properties (which are included under the head "fixed assets") aremortgaged with banks from which borrowings are obtained by the Company. The Company hasmaintained certified copies of the title deeds. Based on our examination of these recordsand other sufficient appropriate audit evidences in our opinion the title deeds of allthe immovable properties (which are included under the head fixed assets') are heldin the name of the Company.
(ii) The inventory of the company has been physically verified by the management atreasonable intervals during the year. No material discrepancies were noticed.
(iii) The company has not granted loans secured or unsecured to Companies Firms orother parties covered in the Register maintained u/s 189 of the Company Act 2013 duringthe year.
(iv) In our opinion the Company has not entered into any transaction covered underSections 185 and 186 of the Act. Accordingly the provisions of clause 3(iv) of the Orderare not applicable.
(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the Rules made by the Central Government for the maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's products/services andare of the opinion that prima facie the prescribed accounts and records have been madeand maintained. However we have not made a detailed examination of the cost records witha view to determine whether they are accurate or complete.
(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax duty of customs duty of excise valueadded tax good and service tax cess and other material statutory dues as applicablehave generally been regularly deposited to the appropriate authorities. Further noundisputed amounts payable in respect thereof were outstanding at the year-end for aperiod of more than six months from the date they became payable.
(b) The dues outstanding in respect of income-tax sales-tax service tax duty ofcustoms duty of excise goods and service tax and value added tax on account of anydispute are as follows:
Statement of Disputed Dues
|Name of the statute ||Nature of dues ||Amount (D) in lakhs ||Amount paid under protest (D) in lakhs ||Period to which the amount relates ||Forum where dispute is pending |
|The Haryana Murrah Buffalo and Other Milk Animal Breed(Preser- vation and Development of Animal Husbandry and Dairy Development Sector)Act 2001 ||Milk Cess ||1776.01 ||591.00 ||2001-02 to 2016-17 ||Hon'ble Supreme Court of India |
|The Haryana Murrah Buffalo and Other Milk Animal Breed(Preser- vation and Development of Animal Husbandry and Dairy Development Sector)Act 2001 ||Interest on milk cess ||2539.34 || ||2001-02 to 2016-17 ||Hon'ble Supreme Court of India |
|Central Excise Act 1944 ||CENVAT credit interest ||77.21 ||77.21 ||2005- 06 2006- 07 ||Custom Excise and Service Tax Appellate Tribunal. |
|Central Excise Act 1944 ||CENVAT credit interest ||178.85 ||15 ||2007-08 to 2009-10 ||Custom Excise and Service Tax Appellate Tribunal. |
|Customs Act 1962 ||Penalty and redemption fine ||10.6 ||10.6 ||2011-12 ||Commissioner of Customs (Appeals) |
|Haryana Tax on Entry of Goods into Local Areas Act 2003 ||Entry Tax ||164.58 ||- ||2007-08 to 2018-19 ||Hon'ble Supreme Court of India |
(viii) During the year ended 31 March 2019 the Company has defaulted on timely paymentof principal and interest on term loans and cash credits and The lender wise details withrespect to amount outstanding as on 31.03.2019 is as under:
|Sr. No. Name of the bank ||Amount of default (in Lakhs) ||Date of default |
|1 Punjab National Bank ||10269.57 ||30.11.2015 |
|2 State Bank of India ||3995.51 ||30.11.2015 |
|3 Canara Bank ||2194.51 ||31.10.2015 |
*It doesn't include interest of Rs. 6217.96 lacs not provided in books regardingvarious loans and non- convertible debentures till 31st March 2019.
(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments and term loans during the year).
(x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.
(xi) The Company has not obtained the requisite approval mandated by the provisions ofsection 197 read with schedule V to the Companies Act for the payment of managerialremuneration. The details of the same have been mentioned in the "Basis of QualifiedOpinion" section of Audit Report.
(xii) In our opinion considering the nature of activities carried on by the Companyduring the year the provisions of any special/statute applicable to Nidhi Company are notapplicable to it.
(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable Ind-AS.
(xiv) During the year under review the Company has not made any preferential allotmentor private placement of shares or fully or partly convertible debentures.
(xv) In our opinion the Company has not entered into any non-cash transactions withthe Directors or persons connected with them covered under Section 192 of the Act.
(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
| ||For AARYAA & ASSOCIATES |
| ||Chartered Accountants |
| ||Firm Registration No. 0015935N |
| ||CA Harsharanjit Singh Chahal |
|Place: Chandigarh ||Partner |
|Dated: 30th May 2019 ||Membership No. 091689 |