Modern Threads (I) Ltd.
|BSE: 500282||Sector: Industrials|
|NSE: MODTHREAD||ISIN Code: INE794W01014|
|BSE 05:30 | 01 Jan||Modern Threads (I) Ltd|
|NSE 05:30 | 01 Jan||Modern Threads (I) Ltd|
|BSE: 500282||Sector: Industrials|
|NSE: MODTHREAD||ISIN Code: INE794W01014|
|BSE 05:30 | 01 Jan||Modern Threads (I) Ltd|
|NSE 05:30 | 01 Jan||Modern Threads (I) Ltd|
TO THE MEMBERS OF
MODERN THREADS INDIA LIMITED
Report on the Audit of the Financial Statements
We have audited the financial statements of MODERN THREADS INDIA LIMITED ( the Company) which comprise the Balance Sheet as at 31st March 2020 and the Statement ofProfit and Loss (including other comprehensive income) Statement of Changes in Equity andthe Statement of Cash Flows for the year then ended and notes to the financialstatements including a summary of significant accounting policies and other explanatoryinformation (hereinafter referred to as the financial statements ).
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 the aforesaid financial statements give the informationrequired by the Companies Act 2013 ( the Act ) in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ( Ind-AS ) and other accounting principles generally accepted in India of thestate of affairs of the Company as at 31st March 2020 and its profit(including other comprehensive income) changes in equity and its cash flows for the yearended on that date.
Basis for Qualified Opinion
(i) The company has not provided for Dividend on cumulative redeemable preferenceshares amounting to Rs. 68.25 lakhs for the year (Rs. 1638.18 lakhs up to 31.03.2020).(Note No.17.3b) (ii) Balances of trade payables and trade receivables are subject toconfirmation and consequential adjustments if any. (Note No. 16.1 and 9.2 ) Had theimpact of above qualification in Para
(i) without considering Para
(ii) for which impact could not be determined been considered the total comprehensiveincome for the year would have been Rs. 2470.59 lakhs as against reported totalcomprehensive income of Rs. 2538.84 lakhs and other equity would have been Rs. (-)17234.97 lakhs as against the reported figure of Rs. (-)15596.79 lakhs and Other Currentfinancial liabilities would have been Rs.4197.75 lakhs as against reported figure of Rs.2559.57 lakhs.
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder Section 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor s Responsibilities for the Audit of the Financial Statements sectionof our report. We are independent of the Company in accordance with the Code of Ethicsissued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder 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.
Material Uncertainty related to Going Concern
We draw attention to Note 29 in the financial statements where the company had made areference to The Board of Industrial and Financial Reconstruction (BIFR) based on auditedaccounts for the financial ended 31st March 2004 and BIFR in the hearing held on 12thDecember 2005 had declared the company as sick industrial company u/s 3(1)(o) of the SICAAct. Consequent to abatement of Sick Industrial Companies (Special Provision) Act 1985the company has not filed rehabilitation/ revival scheme to NCLT under Insolvency andBankruptcy Code. The company has accumulated losses with its net worth continuing to standfully eroded and the financial statements of the company have been prepared on goingconcern as the Debentures term loan and accrued interest has been settled and onlybalance Rs. 75 Lakhs is payable till 31st March 2021. The company is expectingcompliance of term of settlement and liability will be written back on discharge of fullpayment.
Our opinion is not modified in this matter.
Emphasis of Matters
We draw attention to: Note 39 to the accompanying Statement which describes theeffects of uncertainties relating to COVID-19 pandemic outbreak on the Company'soperations and management's evaluation of its impact on the accompanying Statement as atthe balance sheet date the extent of which is significantly dependent on futuredevelopments.
Our opinion is not modified in this matter.
Key Audit Matters
Key audit matters ( KAM ) are those matters that in our professional judgment were ofmost significance in our audit of the financial statements of the current period. Thesematters were addressed in the context of our audit of the financial statements as a wholeand in forming our opinion thereon and we do not provide a separate opinion on thesematters. Except for the matters described in the
Basis for Qualified Opinion and Material Uncertainty related to Going Concern sectionwe have determined that there are no key audit matters to be communicated in our report.
Information Other than the Standalone Financial Statements and Auditor s report thereon
The Company s management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company sannual report but does not include the financial statements and our auditors reportthereon. The annual report is expected to be made available to us after the date of thisauditor s report.
Our opinion on the financial statements does not cover the other information and we donot express any form of 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 the 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.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
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 (including othercomprehensive income) changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under Section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation 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 and Board of Directors areresponsible for assessing the Company s ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so. Those Board of Directors is alsoresponsible for overseeing the Company 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 with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also: Identify and assess therisks of material misstatement of the financial statements whether due to fraud or errordesign and perform audit procedures responsive to those risks and obtain audit evidencethat is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resultingfrom error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of theAct 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 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 exists we are required to draw attention inour auditor s report to the related disclosures in the financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditors report. However future events orconditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards. From the matters communicated withthose charged with governance we determine those matters that were of most significancein the audit of the financial statements of the current period and are therefore the keyaudit matters. We describe these matters in our auditors report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order 2016 ( the Order ) issued bythe Central Government of India in terms of Section 143(11) of the Act we give inAnnexure A a statement on the matters specified in paragraphs 3 and 4 of the Order to theextent 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. Except for the effects of the matters described in the basis for qualified opinionparagraph above in our opinion proper books of account as required by law have been keptby 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) 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 matters described in the basis for qualified opinionparagraph above in our opinion the aforesaid financial statements comply with the Ind ASspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.
e. On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2020 from being appointed as a director in termsof Section 164(2) of the Act.
f. The qualification relating to the maintenance of account and other matters connectedthere with are as stated in the Basis for Qualified Opinion paragraph.
g. With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in Annexure B . Our report expresses a modified opinion onthe adequacy and operating effectiveness of the Company s internal financial controls withreference to financial statements.
h. With respect to the matter to be included in the Auditors Report under section197(16): In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of Section 197 of the Act.
i. With respect to the other matters to be included in the Auditors 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 as at 31stMarch 2020 on its financial position in its financial statements - Refer Note 32 to thefinancial statements;
ii. The Company did not have any long term contracts including derivative contractsfor which there were any material foreseeable losses;
iii. There is no default in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the company during the year ended on 31st March2020. (Refer Note17)
For Goyal D. Kumar & Co.
Chartered Accountants (FRN. 007817C)
Membership No. 076713
UDIN : 20076713AAAAIQ8981
ANNEXURE - A FORMING PART OF THE INDEPENDENT AUDITOR S REPORT OF Modern Threads (India)Limited
Referred to in paragraph under the heading of Report on other Legal & RegulatoryRequirements of our report of even date to the Members of Modern Threads (India) Limitedon the Ind AS financial statement for the year ended March 31st 2020;
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed Assets other than furniture & fixtures forwhich detailed records are not maintained.
(b) As explained to us the company has a phased program for physical verification offixed assets. In our opinion the frequency of verification is reasonable considering thesize of the company and nature of its fixed assets. Pursuant to the program of thephysical verification of fixed assets physical verification of the assets has beencarried out during the year and no material discrepancies have been noticed on suchverification except for furniture & fixtures for which detailed records are notmaintained.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company except for two cases of free hold land amounting to Rs.12.66 Lakhs for which title documents were not available for our verification.
(ii) The inventories have been physically verified by the management at reasonableintervals during the year except for goods in transit and that lying with third parties.The discrepancies noticed on verification between physical stocks and the books recordswere not material and the same have been properly dealt with in the books of accounts.
(iii) The company has not granted any loans secured and unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained underSection 189 of the Companies Act 2013 hence clauses (iii) (a) (iii) (b) and (iii) (c) ofthe order are not applicable. iv) In our opinion and according to the information andexplanations given to us the Company has complied with the provisions of section 185 and186 of the Companies Act 2013 with respect to the loans investments and guaranteesmade as applicable.
(v) As per information and explanations given to us the company has not accepted anyfresh deposits during the year. However Public fixed deposits accepted in earlier yearswhich were repayable upto FY 2000-01 have been settled at principal amount of Rs. 549.59Lakhs and repaid during the year. Interest has been Waived off by respective depositholders and credited to Other Income.
(vi) We have broadly reviewed the books of account maintained by the Company in respectof products where the maintenance of cost records has been specified by the CentralGovernment under sub-section (1) of Section 148 of the Act and the rules framed thereunder and we are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained.
(vii)(a) According to the records of the company produced for our verification thecompany is generally regular in depositing undisputed statutory dues including providentfund employees state insurance income tax sales tax service tax customs duty exciseduty value added tax goods and service tax cess and any other statutory dues withappropriate authorities except the dues pertaining to Thread Division of the company whichwas lying closed upto 19.12.2016 and the dues are outstanding for more than 6 months fromthe date of becoming payable : Textiles Committee Cess Rs. 7.32 Lakhs Excise Duty Rs.12.17 Lakhs
(b) According to the information and explanation given to us the dues in respect ofIncome Tax Sales Tax Service Tax Custom duty Excise duty Value added Tax Goods andService Tax that have not been deposited on account of dispute and amount involved andforum where dispute is pending are as under:
(viii) According to the records of the Company and information given to us the companyis now regular in repayment of its settled loans or borrowings and dues to debentureholder.
(ix) The company has not raised any money by way of public offer (including debtinstruments) and term loans during the year. Accordingly paragraph 3 (ix) of the order isnot applicable.
(x) According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees has been noticed or reported during thecourse of our audit.
(xi) According to the information and explanations given to us and based on ourexamination of records of the company the company has paid/provided managerialremuneration in accordance with requisite approvals mandated by the provisions of section197 read with schedule V of the Companies Act 2013.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableIndian accounting standards.
(xiv) According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
(xv) According to the information and explanation given to us and based on ourexamination of records of the company the company has not entered into any non cashtransaction with the directors or person connected with them. Accordingly paragraph 3(xv)of the Order is not applicable.
(xvi) The company is not required to be registered under Section 45IA of the ReserveBank of India Act 1934.
Annexure B to the Independent Auditor s Report on Financial Statements of ModernThreads (India) Limited
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls with reference to financial statementsof Modern Threads (India) Limited ( the Company ) as of 31st March 2020 in conjunctionwith our audit of the 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 Reportingissued by the Institute of Chartered Accountants of India (ICAI). 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.
Auditor s Responsibility
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 deemed to beprescribed under section 143(10) of the Companies Act 2013 to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols 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 qualified audit opinion on the Company s internal financialcontrols system over financial 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 unauthorized 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 in adequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
Basis of Qualified Opinion
According to the information and explanation given to us and based on our audit thefollowing material weakness has been identified as at March 31 2020: 1. The company sinternal financial controls were not operating effectively in respect of balanceconfirmation of trade payables and trade receivables. Material weakness is a deficiencyor a combination of deficiencies in internal financial control over financial reportingsuch that there is a reasonable possibility that a material misstatement of the Company sannual financial statements will not be prevented or detected on a timely basis.
In our opinion except for the possible effects of the material weakness describedabove and on the achievement of the objectives of control criteria the Company has inall material respects an adequate internal financial controls system over financialreporting and such internal financial controls over financial reporting were operatingeffectively as at March 31 2020 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 the ICAI. We have considered the material weaknesses identified andreported above in determining the nature timing and extent of audit tests applied in ouraudit of the financial statements of the Company for the year ended March 31 2020 andthese material weaknesses have affected our opinion on the financial statements of theCompany and we have issued a qualified opinion on the financial statements.