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Modern Steels Ltd.

BSE: 513303 Sector: Metals & Mining
NSE: N.A. ISIN Code: INE001F01019
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OPEN 3.80
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VOLUME 80
52-Week high 4.80
52-Week low 2.72
P/E
Mkt Cap.(Rs cr) 5
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Modern Steels Ltd. (MODERNSTEELS) - Auditors Report

Company auditors report

To

THE MEMBERS OF MODERN STEELS LIMITED

REPORT ON THE FINANCIAL STATEMENTS

We have audited the accompanying financial statements of Modern Steels Limited whichcomprise the Balance Sheet as at March 31 2020 the Statement of Profit and Loss(including Other Comprehensive Income) the Statement of Changes in Equity and

Statement of Cash Flows for the year ended and a summary of significant explanatoryinformation.

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 of these standalone financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income changes in equity and cash flows of the Companyaccordance with the Indian Accounting Standards

(Ind AS) prescribed under section 133 of the Act read with the Companies (IndianAccounting Standards)

Rules 2015 as amended and other accounting principles generally accepted in India.

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.

AUDITORS' RESPONSIBILITY

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 performingprocedures to obtain audit evidence about the amounts and the disclosures in the financialstatements. The procedures selected depend on the auditor's judgment including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error. In making those risk assessments the auditor considers internalfinancial control relevant to the Company's preparation accounting policies and other ofthe financialstatements 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 auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion on the standalone financial statements.

OPINION

We have audited the standalone financial statements of Modern Steels Limited ("theCompany") which comprise the balance sheet as at March 31 2020 and the statementof Profit and Loss (statement of changes in equity) and the statement of cash flows forthe year then ended and notes to the financial statements including a summary ofsignificant 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 these quarterly financialresults as well as the year to end results are presented in accordance with requirementsof Regulation 33 of the SEBI (listing obligation and disclosure requirement) Regulations

2015 in this regard and give a true and fair view of total comprehensive incomecomprising of net profit and other comprehensive income and financial information for thequarter ended 31st March 2020 and for the year ended March 31st2020.

BASIS FOR QUALIFIED OPINION

1. Director's remuneration is not admissible as prescribed in Sec-197 ofcompanies Act 2013 except in accordance with the provision of Schedule V and if it is notable to comply with 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 (Managing Director)amounting to Rs. 1783328 and Mr. R.K Sinha (Director) amounting to Rs. 3515350. Apartfrom the managerial remuneration for year ended 31st March 2020 as mentionedabove the company has paid director remuneration of Rs. 16656048 till 31st March2019 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 Financial

Statements section of our report. We are independent of the Company in accordance withthe Code of Ethics issued by the Institute of Chartered Accountants of India together withthe ethical requirements that are relevant to our audit of the financial statements underthe provisions of the Companies Act 2013 and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified opinion.

EMPHASIS OF MATTER

(A) Assignment of debt of SBI and Canara Bank to ARC

Two lender banks of the company viz. State Bank of India (SBI) and Canara Bank haveassigned their loans and other facilities along with underlying financial documentstogether with all the rights title and interest to Edelweiss Asset Reconstruction

Company Limited acting in its capacity as trustee of the EARC Trust- SC 306 for thebenefits of the holders of the Security Receipts issued by the trustee there under.

During the reporting period there has been no written agreement between the Companyand Edelweiss Asset Reconstruction Company

Limited to crystalize the amount payable and interest thereon to them hence the saiddebt till then is continued to be shown as payable to SBI and Canara Bank instead ofEdelweiss Asset

Reconstruction Company Limited.

(B) One Time Settlement (OTS) with PNB

Punjab National Bank had approved One Time Settlement for its credit facilitiesthe terms of which the company had failed to comply hence the OTS stands failed. Theinterest provided on the OTS amount for the period ended 31st March 2020amount to Rs. 1.71 Crore and for the period ended

31st March 2019 amount to Rs. 1.38 Crore has been reversed inquarter ending 31st March 2020. As regards the interest on theoutstanding amount the same has not been provided in accordance with the reasons asspecified inPoint C below.

(C) Interest provisioning on facilities from Consortium banks: The Company'svarious credit facilities have been declared "Non-Performing Assets" by itsrespective banks. There is a usual practice that banks discontinue to account for as"income" in respect to the accrued interest on such assets subsequent to thedeclaration of these as "Non-performing assets". The bankers of the company toohave not accounted as "income" in respect to the interest subsequent to NPAdeclaration date. In order to achieve the desired congruency on this issue &uncertainty of the amount liable to be paid the management of the company has notprovided for such interest i.e. interest on credit facilities (including on assigned debtsof SBI and Canara Bank) subsequent to the date of declaration of theses credit facilitiesas non-performing. Such interest amounts to Rs. 30.93 Crores for year ended 31stMarch 2020 which has resulted in the understatement of current liabilities and lossesto that extent. Even though the debts of SBI and Canara Bank have been assigned toEdelweiss Asset Reconstruction

Company Limited in absence of any express agreement between the company and Edelweiss

Asset Reconstruction Company Limited no interest has been accounted for in thisrespect. This interest is not recorded in Profit & Loss Account.

(D) Material Uncertainty related to Going-Concern The preparation of the financialstatements is done on going concern basis consequently assets and liabilities are beingcarried at their book value. We draw attention to the financial statements whichindicates that the company had accumulated losses and has also incurred losses during thefinancial year ended 31st March 2020. As on date the

Company's current liabilities exceeded its current assets and the Company's net worthhas also been eroded. There are negative operating cash flows indicated by historicalfinancial statements adverse key financial ratios and inability to comply with the termloan agreements. These conditions indicate the existence of a material uncertainty thatmay cast doubt about the company's ability to continue as a going concern.

(E) Provision for Doubtful Debts

The audit committee in its meeting dated 14-10-2020 and the board of directors in itsmeeting dated 14-10-2020 approved to make a provision for doubtful debts in books ofaccounts for a total amount of Rs.241928882

(Rupees Twenty Four Crore Nineteen Lacks Twenty Eight Thousand Eight Hundred and EightTwo) considering the uncertainty of the recoverability due to respectivecircumstances of each recoverables (Refer note- 2.12).

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 andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit; b. In our opinion proper books ofaccount as required by law have been kept by the Company so far as appears from ourexamination of those books. c. The Balance Sheet the Statement of Profit and Lossincluding Other Comprehensive Income

Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Reportare in agreement with the books of account. d. In our opinion the aforesaid standalonefinancial statements comply with the Indian Accounting Standards prescribed under section133 of the Act. e. On the basis of the written representations received from the directorsas on March 31 2020 taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2020 being appointed as a director in terms of Section

164(2) of the 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 opinion and to the best of our information and according to theexplanations given to us:

The Company has disclosed the impact of pending litigations on its financial positionin 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 to theInvestor Education and Protection Fund by the Company.

For AARYAA & ASSOCIATES

Chartered Accountants

CA Harsharanjit Singh Chahal (Partner)

Membership No. 091689

(Firm Registration No. 015935N)

UDIN: 20091689AAAAKS9465

Place: Chandigarh Date: 14th October 2020

ANNEXURE TO THE AUDITORS' REPORT

The Annexure referred to in our report to the members of the company for the year ended31 March 2020. To the best of our knowledge and belief and information & explanationgiven to us we further report that: 1.

a) The company has maintained proper records to show full particulars includingquantitative details & situation of its fixed assets.

b) As explained to us the fixed been physically verified by the management atreasonable intervals which in our opinion is appropriate having regards to size of thecompany and nature of its assets. No material discrepancies have been noticed during theyear.

c) The title deeds of immovable properties are held in the name of the Company.

2. a) The inventory of the company has been physically verified by the management atreasonable intervals during the year. b) No material discrepancies were noticed.

3. The company has not granted loans secured or unsecured to Companies Firms or otherparties covered in the Register maintained u/s 189 of the Company Act 2013 during theyear.

4. In respect of loans investments guarantee and security the provisions of section185 and 186 of the Companies Act 2013 have been complied with.

5. The company has accepted loans from directors amounting to Rs. 1.00 crore. Thecompany has complied with the directives issued by the Reserve

Bank of India & with the provisions of Section 73 to

76 of the Companies Act 2013 and the rules framed there under with regard to thedeposits accepted from the public. No order has been passed by the

Company Law Board or National Company Law

Tribunal or Reserve Bank of India or any court or any other Tribunal.

6. On the basis of records produced to us we are of the opinion that prima facie thecost records prescribed by the Central Government of India under section 148(1) of the Acthave been made & maintained & also cost audit will be conducted in due course oftime. We have not carried out any detailed examination of such Account & records.

7. (a) According to the books and records as produced and examined by us in accordancewith generally accepted auditing practices in India and also based on Managementrepresentations undisputed statutory dues in respect of Provident Fund Employee's StateInsurance dues Investor Education and Protection Fund Income Tax Service Tax CessGoods and Services Tax and other material statutory dues have generally been regularlydeposited by the Company during the year with the appropriate authorities in India andthere were no arrear outstanding in respect of above for a period of more than six monthas on

31.03.2020.

(b) According to the records of the Company examined by us and the information andexplanations given to us there are no dues of Goods and Service Tax sales tax incometax customs duty service tax excise duty and cess which have not been deposited onaccount of any dispute other than the following amounting to Rs.1.03 crore. The detailsare as under:

NATURE OF DUES/NAME OF STATUTES EXCISE DUTY FORUM WHERE DISPUTE IS PENDING YEAR DISPUTED AMOUNT Rs. ( )
CENTRAL EXCISE ACT 1944 COMMISSIONER (APPEALS) CHANDIGARH 2007-08 256533
CENTRAL EXCISE ACT 1944 COMMISSIONER (APPEALS) CHANDIGARH 2007-08 to 2008-09 259085
CENTRAL EXCISE ACT 1944 COMMISSIONER (APPEALS) CHANDIGARH 2004-05 to 2006-07 8956212
CENTRAL EXCISE ACT 1944 CHANDIGARH 2008-09 to 2009-10 850927

8. During the year ended 31 March 2020 the Company has defaulted on timely payment ofprincipal and payment of interest on term loans and cash credits. During the currentfinancial year 2019-

20 The Company has not provided any provision for interest payable in the books ofaccounts. The lender wise details with respect to interest and principal in default as on31.03.2020 is as under:

S.No Particulars Amount in lakhs Nature of Due Date of Default
1. State Bank of India 12080 Principal 01/02/2016
31 Interest
2. Punjab Na- tional Bank 4110 Principal 01/04/2016
219 Interest
3. Canara Bank 1890 Principal 30/09/2016
24 Interest

*It does not include Interest amounting to Rs.10361 lakhs not provided for inbooks  The debts of SBI and Canara has however been assigned to ARC i.eEdelweiss Asset

Reconstruction Company Limited as there is no written agreement between the company andARC therefore the above debts has been recorded in books with respective banks.

The Company did not raise money by way of initial public offer or further public offer(including debt instruments and term loans during the year).

9. As per the information and explanation given to us and on the basis of examinationof records no material fraud on or by the Company was noticed during the course of ouraudit.

10. The Company has not paid managerial remuneration in accordance with the requisiteapproval mandated by the provisions of section 197 read with schedule V to the CompaniesAct. The details of the same have been mentioned in the Basis of Qualified opinion sectionof Audit

Report.

11. 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.

12. All transactions with related parties are in accordance with section 177 and 188 ofthe Companies Act 2013 and details have been disclosed in the financial statements asrequired by the applicable accounting standards.

13. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review.

14. The Company has not entered into any non cash transactions with directors orpersons connected with him during the year under review.

15. The Company is not required to be registered under section 45-IA of the ReserveBank of India 1934.

For Aaryaa Associates

Chartered Accountants Firm Registration No. 015935N

CA Harsharanjit Singh Chahal

Partner M. No.091689

Place: Chandigarh Dated: 14th October 2020

ANNEXURE 2

Annexure to the Independent Auditor's Report of even date to the members of ModernSteels Limited on the financial statements for the year ended 31st March 2020Independent Auditor's report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

1. In conjunction with our audit of the financial statements of Modern Steels Limited("the Company") as of and for the year ended 31st March 2020 we have auditedthe internal financial controls over financial reporting (IFCoFR) of the company of as ofthat date.

Management's Responsibility for Internal Financial Controls

2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by 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 thecompany's business including adherence to company's policies the safeguarding of itsassets the prevention and detection of frauds and errors the accuracy and completenessof the accounting records and the timely preparation of reliable financial informationas required under the Act.

Auditors' Responsibility

3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit.

We conducted our audit in accordance with the

Standards on Auditing issued by the Institute of

Chartered Accountants of India (ICAI) and deemed to be prescribed under Section 143(10)of the Act to the extent applicable to an audit of IFCoFR and the Guidance Note on Auditof Internal Financial

Controls Over Financial Reporting (the "Guidance Note") issued by the ICAI.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate IFCoFRwere established and maintained and if such controls operated effectively in all materialrespects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR included obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's IFCoFR.

Meaning of Internal Financial Controls over Financial Reporting

6. A Company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with Generally Accepted Accounting Principles. A Company'sIFCoFR 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

7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.

Opinion

8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at 31st March 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls over Financial Reporting issued by the Institute of CharteredAccountants of India.

For AARYAA & ASSOCIATES

Chartered Accountants

(Firm Registration No. 015935N)

CA HARSHARANJIT SINGH CHAHAL

 

Place: Chandigarh (Partner)
Date: 14th October 2020 Membership No. 091689

.