To the Members of Mohota Industries Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Mohota IndustriesLimited ("the Company") which comprise the Balance Sheet as at March 312020the Statement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year ended on that date and asummary of the significant accounting policies and other explanatory information(hereinafter referred to as "the standalone 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 paragraph of our report the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 312020the Loss (including other comprehensive income) changes in equity and its cash flows forthe year ended on that date.
Basis for Qualified Opinion
a) The Company has invested Rs. 15.52 crores in a partnership firm. The financialstatements of the said partnership firm for the year ended March 312020 were notavailable; hence the impact on the profit/ (loss) and corresponding impact on the carryingamount of investment is not ascertainable.
b) The Company has not performed impairment testing with respect to the investment in apartnership firm as required by Indian Accounting Standard (Ind AS 36) Impairment ofassets'; hence the impact on the carrying amount of investment is not ascertainable.
c) Balances of trade receivables trade payables loans and advances given/ taken aresubject to confirmations reconciliations and consequent adjustments.
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the independencerequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the standalone financial statements.
Material Uncertainty related to Going Concern
We draw attention to Note -- in the standalone financial statements that the Companyhas incurred net loss during the year and the current liabilities have exceeded thecurrent assets. Further the Company has defaulted in repayment of principal dues andinterest payable to banks. These events indicate that a material uncertainty exists thatmay cast significant doubt on the Company's ability to continue as a going concern. Ouropinion is not modified in respect of this matter.
Emphasis of Matter
We draw attention to Note in the standalone financial results that the Companyhas defaulted in repayment of principal dues and interest payable to banks. The Companyhas provided interest liability based on last available sanction letter on the principaloutstanding and is actively in discussion with the lenders for debt restructuring. Pendingthe final outcome of the restructuring with the bankers no further adjustment have beenmade in the standalone financial results in respect of the principal amount of loan andinterest provided thereon. Our opinion is not qualified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
I. Provisions for Contingencies and Litigations and disclosure of Contingentliabilities
Description of Key Audit Matter:
At March 312020 the Company held provisions in respect of Maharashtra Municipal Taxand has disclosed total contingent liabilities of Rs 247.73_ 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.
Refer Note of financial statements and accounting policies for contingentliabilities provisions and related disclosures.
We evaluated the design and tested the operating effectiveness of controls inrespect of the determination of the provisions. We determined that the operation of thecontrols provided us with evidence over the completeness accuracy and valuation of theprovisions.
We read the summary of litigation matters provided by management and helddiscussions with the management and their legal counsels. We requested legal letters fromsome of the Company's external legal advisors with respect to the matters included in theaforesaid disclosures. Where appropriate we examined correspondence connected with thecases.
For litigation provisions we tested the calculation of the provisions assessedthe assumptions against third party data where available and assessed the estimatesagainst historical trends.
We considered management's judgements on the level of provisioning anddisclosures in respect of the aforesaid matters which we considered to be appropriate.
Information Other than the Standalone 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 standalone financial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course 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.
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 standalone financial statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding 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 standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company orto cease operations or has norealistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone 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 standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(1) 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 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 standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually 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.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when 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
1. As required by the Companies (Auditor's Report) Order 2016 (theOrder") issued by the Central Government in terms of Section 143(11) of the Act wegive in "Annexure A" a statement on the matters specified in paragraphs 3 and 4of the Order.
2. As required by Section 143(3) of the Act based on our audit 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 Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the relevant books of account.
d) In our opinion the aforesaid standalone 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 March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 312020 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 ourseparate Report in "Annexure B". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
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 director during the year is inaccordance 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 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements (refer note --)
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There are no amounts required to be transferred to the Investor Education andProtection Fund by the Company.
For Harshil Shah & COMPNAY
ICAI Firm Reg. No.141179W
ICAI UDIN: 20124146AAACV5378
Place : Mumbai
Date : 28th August 2020
Annexure -Ato the Auditors' Report
(referred to in paragraph 1 under' Report on Other Legal and regulatory requirements'section of our report to the members of the Company of even date)
The Annexure referred to in Independent Auditors' Report to the members of the Companyon the financial statements for the year ended 31 March 2020 we report that:
i. a) According to the information and explanations given to us the Company hasmaintained proper records showing full particulars including quantitative details andsituation of Fixed Assets.
b) According to the information and explanations given to us the Company has a regularprogramme of physical verification of its fixed assets by which all fixed assets areverified in a phased manner over a period of three years. In our opinion the periodicityof physical verification is reasonable having regard to the size of the Company and thenature of its assets. Pursuant to the programme certain fixed assets were physicallyverified during the year and no material discrepancies were observed on such verification.
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 stores andspares once at the year end which in our opinion is reasonable. No material discrepancieswere 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 broadly reviewedthe books of account maintained by the company pursuant to the Rules made by the CentralGovernment for the maintenance of cost records under section 148 of the Act related tothe manufacture of yarn & fabrics and are of the opinion that prima-facie thespecified accounts and records have been made and maintained. We have not however made adetailed 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 2020 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 of octroiand property tax that have not been deposited by the Company on account of disputes aregiven below:.
|Name of the Statute ||Nature of dues ||Period to which it relates ||Amount (Rs 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. Based on our audit procedures and as per the information and explanations givenby the management we are of the opinion that the Company has defaulted in repayment ofloans to Banks. There are no outstanding loans or borrowings from any financialinstitutions Government and debenture holders. The details of default are given below:
| || || || ||(Amount in Lakhs |
|Name of lenders ||Nature of Loan ||Particulars ||Amount of default as at Balance Sheet date ||Period of default |
|State Bank of India ||Cash Credit ||Principal ||3425.25 ||November 2019 |
|State Bank of India ||Term Loan ||Principal ||279.96 ||November 2019 |
|Bank of India ||Cash Credit ||Principal ||1782.77 ||November 2019 |
|Bank of India ||C/C Pledge ||Principal ||458.30 ||November 2019 |
|Indusind Bank Ltd ||Credit Card ||Principal ||18.71 ||November 2019 |
|ICICI Bank ||Credit Card ||Principal ||292.17 ||November 2019 |
|India Infoline Finance Ltd ||Business Loan ||Principal ||22.03 ||November 2019 |
|IVL Finance Ltd. ||Business Loan ||Principal ||20.09 ||November 2019 |
|Jain Sons Fin lease Ltd ||Business Loan ||Principal ||183.86 ||November 2019 |
|Magma Fincorp Ltd ||Business Loan ||Principal ||24.31 ||November 2019 |
|Neo Growth ||Business Loan ||Principal ||16.81 ||November 2019 |
|Tata Capital Finance ||Business Loan ||Principal ||17.7 ||November 2019 |
|Aditya Birla finance ||Business Loan ||Principal ||23.13 ||November 2019 |
|Shriram City Union Finance ||Business Loan ||Principal ||33.22 ||November 2019 |
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 explanation 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 standalone Financial Statements as required by theapplicable Indian Accounting Standards.
xiv. According to the information and explanations given 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 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-IAof the ReserveBank of India Act 1934.
For Harshil Shah & COMPNAY
ICAI Firm Reg. No.141179W
ICAI UDIN: 20124146AAACV5378
Place : Mumbai
Date : 28th August 2020
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 2020 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 Companies Act 2013 to the extentapplicable to an Audit of Internal Financial Controls both applicable to an Audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain Reasonable Assurance about whetheradequate Internal Financial Controls over Financial Reporting was established andmaintained and if such controls 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 procedureselected depend on the Auditor's Judgment including the assessment of the risks ofmaterial misstatement of the Ind AS 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. Acompany'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) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and
(3) Provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial 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 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 March 312020 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 Harshil Shah & COMPNAY
ICAI Firm Reg. No.141179W
ICAI UDIN: 20124146AAACV5378
Place : Mumbai
Date : 28th August 2020