To the Members of Mohota Industries Limited
(formerly known as The Rai Saheb Rekhchand Mohota Spg. & Wvg. Mills Limited) Reporton the Audit of Financial Statements Opinion
We have audited the accompanying financial statements of Mohota Industries Limited(formerly known as The Rai Saheb Rekhchand Mohota Spg. & Wvg. Mills Limited)(theCompany') which comprise the balance sheet as at 31 March 2019 the statement of profitand loss (including other comprehensive income) the statement of cash flows and thestatement of changes in equity for the year then ended and a summary of the significantaccounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 ("the Act") in the manner so required and give a true andfair view in conformity with the Indian Accounting Standards prescribed under section 133of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended("Ind AS") and other accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2019 the profit and total comprehensiveincome changes in equity and its cash flows for the year ended on that date.
Basis for Qualified Opinion
The company has invested Rs 11 Crore in partnership firm. The financial statement ofthe said partnership firm for the year ended 31st March 2019 were not available hence theimpact on the profit and corresponding impact on the carrying amount of investment is notascertainable.
Except for the effects of the matter described in Basis for Qualified Opinion paragraphabove in our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India including the Ind AS of the state of affairs ofthe Company as at 31 March 2019 and its profit including other comprehensive income itscash flows and the changes in equity for the year ended on that date.
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. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.
i. Provisions for Contingencies and Litigations and disclosure of Contingentliabilities
Description of Key Audit Matter:
At March 31 2019 the Company held no provisions in respect of Maharashtra MunicipalTaxand has disclosed total contingent liabilities of Rs.180.91 lakhs. These provisions arebased on judgements and accounting estimates made by management in determining thelikelihood and magnitude of claims. Accordingly unexpected adverse outcomes couldsignificantly impact the Company's reported loss and balance sheet position.
Note. 35 of financial statements for contingent liabilities and related disclosures.
We evaluated the design and tested the operating effectiveness of controls in respectof the determination of the provisions. We determined that the operation of the controlsprovided us with evidence over the completeness accuracy and valuation of the provisions.
We read the summary of litigation matters provided by management and held discussionswith the management and their legal counsels. We requested legal letters from some of theCompany's external legal advisors with respect to the matters included in the aforesaiddisclosures. Where appropriate we examined correspondence connected with the cases.
For litigation provisions we tested the calculation of the provisions assessed theassumptions against third party data where available and assessed the estimates againsthistorical trends.
We considered management's judgements on the level of provisioning and disclosures inrespect of the aforesaid matters which we considered to be appropriate.
ii. First time adoption of Ind AS 115 " Revenue from Contracts withCustomers"
Description of Key Audit Matter:
The application of the new revenue accounting standard involves certain key judgementsrelating to identification of distinct performance obligations determination oftransaction price of the identified performance obligations the appropriateness of thebasis used to measure revenue recognised over a period.
Refer note 2 (i) and note 22 of the financial statements for accounting policies forrevenue recognition and revenue recognised during year under various heads.
Our audit approach consisted testing of the design and operating effectiveness of theinternal controls and substantive testing on test check basis based on selected samples ofcontracts with customers.
We assessed the Company's process to identify the impact of adoption of the new revenueaccounting standard.
We selected a sample of continuing and new contracts and tested the operatingeffectiveness of the internal control and substantive testing relating to identificationof the distinct performance obligations and determination of transaction price.
We selected sample documents relating to delivery of goods and documentation ofperformance of service including customer acceptances to verify the transfer of control(either point in time' or over time') for revenue recognition.
We considered the terms of the contracts to determine the transaction price to verifythe transaction price used to compute revenue.
In respect of samples relating to fixed price contracts progress towards satisfactionof performance obligation used to compute recorded revenue was verified with actual andestimated efforts from the time recording and budgeting systems.
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the financial statements and our auditor's report thereon.
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 during thecourse of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information; we are required to report that fact. We havenothing to report in this regard.
Responsibility of Management for Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the accounting Standardsspecified under section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statement that give a true and fair view andare free from material misstatement whether due to fraud or error.
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 the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the 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 scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial controls relevant to the audit in orderto design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such 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 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 up to 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 financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
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 section 43(11) of the Act we givein the Annexure A a statement on the matters as specified in the paragraph 3 and 4 of theorder.
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 it appears from our examination of those books;
(c) the balance sheet the statement of profit and loss including other comprehensiveincome the statement of cash flows and the statement of changes in equity dealt with bythis Report are in agreement with the books of account;
(d) in our opinion the aforesaid financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act read with relevant rule issuedthere under;
(e) on the basis of the written representations received from the directors as on 31March 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2019 from being appointed as a director in terms of Section164 (2) of the Act;
(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 ourseparate report 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 as amended:
In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year underreview is in accordance with the provisions of section 197 of 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
35 to the financial statements;
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. there were no amount which were required to be transferred to the InvestorEducation and Protection Fund by the
As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
|For M M Parikh & Co |
|Firm Reg. No.: 107557W |
|K.M. PARIKH |
|Membership No: 31110 |
|Place: Hinganghat |
Annexure - A to the Auditors' Report
The Annexure referred to in Independent Auditors' Report to the members of the Companyon the financial statements for the year ended 31 March 2019 we report that: (i) (a)According to the information and explanations given to us the Company has maintainedproper records showing full particulars including quantitative details and situation offixed assets.
(b) According to the information and explanations given to us the Company has aregular programme of physical verification of its fixed assets by which all fixed assetsare verified in a phased manner over a period of three years. In our opinion theperiodicity of physical verification is reasonable having regard to the size of theCompany and the nature of its assets. Pursuant to the programme certain fixed assets werephysically verified during the year and no material discrepancies were observed on suchverification.
(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.
(ii) The Management has conducted physical verification of the inventories of storesand spares once at the year end which in our opinion is reasonable. No materialdiscrepancies were noted on such physical verification.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to Companies Firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act. Accordingly paragraph 3(iii) (a) (b) and (c) of the Order are notapplicable to the Company.
(iv) According to the information and explanations given to us the Company has notgiven any loans or made any investments or provided any guarantee or security asspecified under Section 185 and 186 of the Companies Act 2013. Accordingly paragraph3(iv) of the Order is not applicable.
(v) According to information and explanations given to us the Company has not acceptedany deposits from the public in accordance with the provisions of section 73 to 76 or anyrelevant provisions of the Act and rules framed thereunder.
(vi) According to the information and explanations given to us we have broadlyreviewed the books of account maintained by the company pursuant to the Rules made by theCentral Government for the maintenance of cost records under section 148 of the Actrelated to the manufacture of yarn & fabrics and are of the opinion that prima-faciethe specified accounts and records have been made and maintained. We have not howevermade a detailed examination of the same.
(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including provident fund income-taxemployees' state insurance duty of excise sales tax value added tax duty of customsservice tax Goods and service tax cess and other material statutory dues have beenregularly deposited during the year by the Company with the appropriate authorities.
According to the information and explanations given to us no undisputed amountspayable in respect of provident fund income tax sales tax value added tax duty ofcustoms service tax Goods and service tax cess and other material statutory dues werein arrears as at 31 March 2019 for a period of more than six months from the date theybecame payable.
(b) According to the information and explanations given to us outstanding dues ofoctroi and property tax that have not been deposited by the Company on account of disputesare given below:
|Name of the Statute ||Nature of dues ||Period to which it relates ||Amount ( in lakhs) ||Forum where the Dispute is pending |
|Maharashtra Municipalities Act 1965 ||Octroi on Grey Fabrics ||May'95 to Nov'97 ||151.61 ||Honorable High Court Nagpur Bench. |
|Maharashtra Municipalities Act 1965 ||Octroi on Grey Fabrics ||Nov' 97 to April'99 ||20.58 ||Honorable High Court Nagpur Bench. |
|Maharashtra Municipalities Act 1965 ||Octroi on Grey Fabrics ||Dec' 94 to May' 95 ||14.12 ||Honorable High Court Nagpur Bench. |
|Maharashtra Municipalities Act 1965 ||Property Tax ||2012-13 to 2014-15 ||61.42 ||Supreme Court Delhi |
(viii) According to the information and explanations given to us based on our auditprocedures the Company has not defaulted in repayment of dues to any bank. The Companydid not have any outstanding dues in respect of loans or borrowings from any financialinstitution government or debenture holders during the year.
(ix) According to the information and explanations given to us the Company did notraise any money by way of initial public offer or further 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 material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit.
(xi) According to the information and explanations given to us the Company has paid /provided for managerial remuneration in accordance with requisite approvals mandated bythe provisions of Section 197 read with Schedule V to the Act.
(xii) According to the information and explanations given to us in our opinion andaccording to the information and explanations given to us the Company is not a nidhicompany. Accordingly paragraph 3(xii) of the Order is not applicable.
(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 applicableaccounting standards.
(xiv) According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has allotted 117647 Equity Sharesof Rs 10/- each at a premium of Rs 415/- per Equity Share on 7th July 2018 onpreferential basis to promoter of the Company.
(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.
(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
|For M M Parikh & Co |
|Firm Reg. No.: 107557W |
|K.M. PARIKH |
|Membership No: 31110 |
|Place: Hinganghat |
Annexure - B to the Auditors' Report
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 over financial reporting of MohotaIndustries Limited (formerly known as The Rai Saheb Rekhchand Mohota Spg. & Wvg. MillsLimited)("the Company") as of 31 March 2019 in conjunction with our audit ofthe 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'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial 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 of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) Provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.
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 the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2019 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 ICAI.
| ||FOR M. M. PARIKH & CO |
| ||Chartered Accountants |
| ||Firm Registration Number 107557W |
| ||Sd/- |
| ||Kishor Parikh |
|Place : Hinganghat ||Partner |
|Dated: 30/05/2019 ||Membership No. 031110 |