To the members of Modern Insulators Limited
Report on the Audit of the Financial Statements Qualified
We have audited the financial statements of Modern Insulators Limited (the 'Company')which comprise the Balance Sheet as at 31 March 2019 the Statement of Profit and Loss(including Other Comprehensive Income) the Statement of Cash Flows and the Statement ofChanges in Equity for the year then ended and notes to the financial statementsincluding a summary of the significant accounting policies and other explanatoryinformation.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effect of the matters described in "Basis for QualifiedOpinion" section of our report the aforesaid financial statements give theinformation required by the Companies Act 2013 (the 'Act') in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India including Indian Accounting Standards (Ind AS) specified under section 133 of theAct of the state of affairs of the Company as at 31 March 2019 its profit (includingOther Comprehensive Income) its cash flows and the changes in equity for the year endedon that date.
Basis for Qualified Opinion
Provision for taxation including interest estimated at Rs.1134.51 Lacs for the yearended 31 March 2019 (Previous Year Rs.475.71 Lacs; upto the year Rs.1610.22 Lacs) has notbeen made in accounts in view of the proposed amalgamation under the provisions ofCompanies Act 2013. (Refer note no. 34 (iv)).
We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the "Auditor's Responsibilities for the Audit of the FinancialStatements" section of our report. We are independent of the Company in accordancewith the Code of Ethics issued by the Institute of Chartered Accountants of India ('ICAI')together with the ethical requirements that are relevant to our audit of the financialstatements under the provisions of the Act and the rules made thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theCode of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our qualified opinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.
In addition to what has been stated in the "Basis for Qualified Opinion"section we have determined the matters described below to be the key audit matters to becommunicated in our report.
|Key Audit Matters ||How our audit addressed the Key Audit Matter |
|1. Impairment of Property Plant & Equipment (PPE) ||Our audit procedure included: |
| The Company has significant balances of PPE as on 31st March 2019. The Company has a policy to review PPE to assess impairment in the carrying amount of PPE if any. || Reviewed the PPE schedule and analyzed the management's assessment for impairment in carrying amount of PPE in accordance with Ind AS. |
| Evaluation of impairment involves significant management judgement to estimate recoverable amount of PPE. || Assessed the reliability of management's judgement used to estimate recoverable amount of PPE. |
| Refer note no. 1 Significant Accounting Policies note no. 1A Significant Accounting Judgements Estimates & Assumptions and note no. 2 Property Plant & Equipment. || On sample basis physically verified the PPE to assess whether they are operating and are in good condition. |
| Given the judgement required to estimate the recoverable amount and impairment of PPE this is considered as key audit matter. || Discussed with the management the future plans for the assets not operating. |
|2. Accuracy of Recognition Measurement Presentation & Disclosure of Revenue & and other related balances on adoption of Ind AS 115 "Revenue from Contracts with Customers" ||Our audit procedure included: |
| || Reviewed the design of internal control relating to the implementation of new Ind AS. |
| The application of new Ind AS involves key judgements relating to identification of contract with customer identification of distinct performance obligations determination of transaction price w.r.t identified performance obligation appropriateness of the basis used to measure revenue recognized and when the control of goods and services are being transferred. || On sample basis inspected key customer contracts to identify terms and conditions relating to sales to customers and inspected sales invoices of customers. |
| || Read analyzed and identified the distinct performance obligation w.r.t contracts with customers. |
| Refer note no. 1 Significant Accounting Policies note no. 1A Significant Accounting Judgements Estimates & Assumptions and note no. 26 Revenue from Operations. || Considered the terms of the contracts to determine the transaction price. |
| || Performed substantive testing by selecting sample of revenue transactions recorded during the year by verifying the underlying documents. |
| Given the judgement required to identify contract with customer distinct performance obligations transaction price and control of goods and services being transferred this is considered as key audit matter. || Performed analytical procedures for reasonableness of revenue disclosed. |
Information other than the Financial Statements and Auditor's Report thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Company's annual report but doesnot include the financial statements and our auditor's 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 statements our responsibility is to readthe other information and in doing so consider whether such other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance changes in equityand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the Ind AS 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 management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so. Those Board of Directors are also responsible for overseeing theCompany's financial reporting 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 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 inaccordance with Standards on Auditing we exercise professional judgment and maintainprofessional 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 Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting 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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained upto the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa 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 them allrelationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen 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
As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of section 143(11) of the CompaniesAct 2013 and on the basis of such checks of the books and records of the company as weconsidered appropriate and according to the information and explanations given to us wegive in the Annexure A a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.
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 it appears from our examination of those books;
c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Statement of Changes in Equity and the Statement of Cash Flows dealt with bythis Report are in agreement with the books of account;
d) Except for the effects of the matter described in the "Basis for QualifiedOpinion" section in our opinion the aforesaid financial statements comply with theInd AS specified under section 133 of the Act;
e) On the basis of written representations received from the directors as on 31 March2019 and taken on record by the Board of Directors none of the directors is disqualifiedas on 31 March 2019 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 ourreport in Annexure B;
g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act in our opinion and to thebest of our information and according to the explanations given to us the remunerationpaid by the Company to its directors is in accordance with the provisions of section 197of 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:
i) The Company has disclosed the impact of pending litigations on its financialposition in its financial statements (Refer note no.40).
ii) The Company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
ANNEXURE A FORMING PART OF THE INDEPENDENT AUDITORS' REPORT
Referred to in the report of even date of the Auditors to members of Modern InsulatorsLimited
(i) (a) The company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets except furniture & fixtures forwhich detailed records are not maintained.
(b) According to the information and explanations given to us most of the fixed assetshave been physically verified during the year by the management in accordance with aphased programme of verification at reasonable intervals and no material discrepancieswere noticed on such verification.
(c) According to the information and explanations given to us the title deeds ofimmovable properties are held in the name of the Company or its division.
(ii) According to the information and explanations given to us the inventories havebeen physically verified during the year by the management. In our opinion the frequencyof verification is reasonable and no material discrepancies were noticed on physicalverification during the year.
(iii) (a) The Company had granted interest free unsecured loan to a Company covered inthe register maintained under section 189 of the Companies Act 2013 in view of proposedamalgamation under the provisions of Companies Act 2013. According to the information andexplanations given to us since the amount paid is in connection to proposed amalgamationno terms have been specified for repayment of loan and interest. In view of likelyadvantage to the Company on such amalgamation granting of such loan is not prejudicial tothe interest of the Company (Refer note no. 46).
(b) The Company has also granted unsecured loan to another Company covered in theregister maintained under section 189 of the Companies Act 2013 which is payable ondemand. We are informed that the Company has received the amount demanded from the partyand thus there is no default during the year. Interest on such loan has been paid /provided during the year. In our opinion the terms and conditions of grant of such loanare not prima facie prejudicial to the interest of the Company. (Refer note no. 12).
(iv) According to the information and explanations given to us the Company hascomplied with the provisions of section 185 and 186 of the Companies Act 2013 in respectof loans investments guarantees and security.
(v) According to the information and explanations given to us the Company has notaccepted any deposits from the public during the year and therefore this clause is notapplicable.
(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 undersection 148(1) of the Companies Act 2013 for the products of the company and are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. We had not however carried out detailed examination of the same to determinewhether they are accurate and complete.
(vii) (a) According to the information and explanations given to us and based on ourexamination of the records the company is generally regular in depositing withappropriate authorities undisputed statutory dues including provident fund employees'state insurance income tax goods and service tax sales tax service tax duty ofcustoms duty of excise value added tax cess and other statutory dues applicable to itand no undisputed statutory dues as noted above is outstanding for a period of more thansix months from the date it became payable.
(b) According to the information and explanations given to us and based on ourexamination of the records the particulars of dues of sales tax value added tax duty ofexcise and service tax etc. as applicable as at 31 March 2019 which have not beendeposited on account of dispute are as follows:
|Name of the Statute ||Nature of dues ||Amount (Rs. in lacs) ||Period to which the amount relates ||Forum where the dispute is pending |
|Central Excise Act 1944 ||Excise Duty & Service Tax ||45.76 ||Various years from 2005-06 to 2010-11 ||Central Excise and Service Tax Appellate Tribunal Delhi |
| || ||42.56 ||2012-13 & 2016-17 ||Commissioner Central Excise (Appeals) Jaipur |
| || ||167.66 ||2004-05 to 2018-19 ||Departmental authorities at various places |
(viii) According to the information and explanations given to us and based on ourexamination of the records the company has not defaulted in repayment of dues to bankduring the year. The company does not have any dues to debenture holders and loans fromfinancial institutions/government.
(ix) The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) and term loans during the year and therefore thisclause is not applicable.
(x) According to the information and explanations given to us and based on ourexamination of the records we have neither come across any instance of material fraud bythe Company or any fraud on the company by the officers or employees noticed or reportedduring the year nor we have been informed of any such fraud by the Management.
(xi) The managerial remuneration has been paid or provided in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theCompanies Act 2013.
(xii) The company is not a Nidhi Company and therefore this clause is not applicable.
(xiii) According to the information and explanations given to us all transactions withthe related parties are in compliance with sections 177 and 188 of Companies Act 2013where applicable and the details of such transactions have been disclosed in the FinancialStatements as required by the applicable Indian Accounting Standards.
(xiv) According to the information and explanations given to us the company has notmade any preferential allotment or private placement of shares or fully or partlyconvertible debentures during the year and therefore this clause is not applicable.
(xv) According to the information and explanations given to us the company has notentered into any non-cash transactions with directors or persons connected with them andtherefore this clause is not applicable.
(xvi) The company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934 and therefore this clause is not applicable.
ANNEXURE B FORMING PART OF THE INDEPENDENT AUDITORS' REPORT
Referred to in the report of even date of the Auditors to members of Modern InsulatorsLimited
Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of ModernInsulators Limited ("the Company") as of 31 March 2019 in conjunction with ouraudit of the Ind AS financial statements of the Company for the year 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 Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India.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 company's 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 Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note issued by the Institute of Chartered Accountants of India andStandards on Auditing prescribed under section 143(10) of the Companies Act 2013 to theextent applicable to an audit of internal financial control. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting were established and maintained and if such controls operatedeffectively 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 judgement 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 Controls 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; 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 and to the best of our information and according to the explanationsgiven to us the Company has in all material respects an adequate internal financialcontrols system over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at 31 March 2019 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls over Financial Reporting issued by the Institute of CharteredAccountants of India.
| ||For R B Verma & Associates |
| ||Chartered Accountants |
| ||Firm Registration No.012650C |
| ||Rajesh Verma |
|Place : Abu Road ||Partner |
|Date : 30th May 2019 ||Membership No.404029 |