THE MEMBERS OF
MONNET ISPAT AND ENERGY LIMITED
Report on the Standalone Ind AS Financial Statements
We have audited the accompanying Standalone Ind AS financial statements of MONNET ISPATAND ENERGY LIMITED ("the Company") which comprise the Balance Sheet as at 31March 2018 and the Statement of Profit and Loss (including Other Comprehensive Income)the Cash Flow Statement and the Statement of Changes in Equity for the year then endedand a summary of the significant accounting policies and other explanatory information.
Management's Responsibility for the Standalone Ind AS Financial Statements
The Company's Board of Directors and the Resolution Professional (appointed by NationalCompany Law Tribunal with effect from 18th July 2017 under Insolvency and Bankruptcy Code2016) are responsible for the matters stated in Section 134(5) of the Companies Act 2013("the Act") with respect to the preparation of these Standalone Ind AS financialstatements that give a true and fair view of the state of affairs (financial position)profit or loss (financial performance including other comprehensive income) cash flowsand changes in equity of the Company in accordance with the accounting principlesgenerally accepted in India including the Indian Accounting Standards (Ind AS) prescribedunder Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules2015 as amended. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe Standalone Ind AS financial statements that give a true and fair view and are freefrom material misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these Standalone Ind AS financialstatements based on our audit. We have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions of the Act and the Rules made there under. We conductedour audit of the Standalone Ind AS financial statements in accordance with the Standardson Auditing specified under Section 143(10) of the Act. Those Standards require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the Standalone Ind AS financial statements are free from materialmisstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the Standalone Ind AS financial statements. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the Standalone Ind AS financial statements whether due to fraud or error.In making those risk assessments the auditor considers internal financial controlsrelevant to the Company's preparation of the Standalone Ind AS financial statements thatgive a true and fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Company'sDirectors as well as evaluating the overall presentation of the Ind AS financialstatements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Standalone Ind AS financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Ind AS financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India including the Ind AS of thestate of affairs (financial position) of the Company as at 31 March 2018 and its loss(financial performance including other comprehensive income) its cash flows and thechanges in equity for the year ended on that date.
The audit of standalone financial statements for the year ended 31 March 2017 wascarried out and reported by O.P. Bagla & Co. vide their unmodified audit report dated30May 2017 whose report has been furnished to us by the management and which has beenrelied upon by us for the purpose of our audit of the standalone financial statements. Ouropinion is not modified in respect of above matter.
Emphasis of Matter
i) We draw attention to the following matters in the Notes to the financial statements:
(a) Note no. 47 regarding cancellation of coal blocks of the Company impact whereof onthe financial statements is uncertain.
(b) Note no. 48 in the financial statements which indicates that the Company hasaccumulated losses resulting in erosion of net worth and has incurred net cash losses inthe current and immediately preceding financial year. The current liabilities of theCompany exceeded its current assets as at the balance sheet date. Upon application filedby the lenders Corporate Insolvency Resolution Process (CIRP) has been initiated inrespect of the Company under the provisions of the Insolvency and Bankruptcy Code 2016('Code') by an Orderofthe National Company Law Tribunal (NCLT) with effect from 18th July2017. The proceedings are still underway and final order or NCLT is pending. Theseconditions may cast doubt about the Company's ability to continue as a going concern.However the financial statements of the Company have been prepared on a going concernbasis for the reasons stated in the said Note.
c. The Company had pledged some shares out of its investment in Monnet Power CompanyLtd (MPCL) to Lenders of MPCL. These shares were invoked by the Lenders. As per legalopinion the ownership of these shares still vests with the Company. Pendingappropriation these shares having a carrying value of Rs.504.22 crores continue to beclassified as non current investment in the financial statements. The Company has alsogiven loans & advances amounting to Rs. 117.55 crores to MPCL. MPCL has been admittedfor the Corporate Insolvency Resolution Process (CIRP) under the provisions of theInsolvency and Bankruptcy Code 2016 ('Code') by the Hon'ble National Company LawTribunal Mumbai with effect from 23rd February 2018. These circumstances may lead touncertainty regarding the recovery of the abovementioned amounts.
Ouropinion is not modified in respect of above matters.
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 in terms of Section 143(11) of the Act and on the basisof such checks of the books and records of the Company as we considered appropriate andaccording to the information and explanations given to us we give in "AnnexureI" a statement on the matters specified in paragraphs 3 and 4 of the said Order.
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 the OtherComprehensive Income) the Cash Flow Statement and the Statement of Changes in Equitydealt with by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid Standalone Ind AS financial statements comply withthe Indian Accounting Standards prescribed under Section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended.
(e) The going concern matter described in sub- paragraph (b) under the Emphasis ofMatters paragraph above in our opinion may have an adverse effect on the functioning ofthe Company.
(f) On the basis of the written representations received from the directors as on31stMarch 2018 taken on record by the Board of Directors none of the directors isdisqualified as on 31stMarch 2018 from being appointed as a director in terms of Section164 (2) of the Act.
(g) We are enclosing herewith a report in Annexure II for our opinion on adequacy ofinternal financial controls system in place in the company and the operating effectivenessof such controls.
(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 Standalone Ind AS financial statements. Refer Note 36 to the financialstatements.
ii. In our opinion and as per the information and explanations provided to us theCompany has made appropriate provision regarding longterm contracts including derivativecontracts requiring provision under applicable laws or accounting standards for materialforeseeable losses during the year.
iii. There has been no delay in transferring amounts required to be transferred duringthe year to the Investor Education and Protection Fund by the Company.
iv. The disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause isnotapplicable.
| ||For APAS & CO. |
| ||CHARTERED ACCOUNTANTS |
| ||Firm Regn No. 000340C |
|PLACE : NEW DELHI || |
|DATED : 30th May 2018 ||(RAJEEV RANJAN) |
| ||PARTNER |
| ||M No. 535395 |
ANNEXURE-1 TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements'section of our report of even date)
Based on the audit procedures performed forthe purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:
i) In respect of its fixed assets:
a) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b) As explained to us fixed assets have been physically verified by the management ina phased periodical manner which in our opinion is reasonable having regard to the sizeof the Company and nature of its assets. As in informed to us no material discrepancieswere noticed on such physical verification.
c) Title deeds In respect of all immovable properties are held in the name of thecompany.
ii) Physical verification has been conducted by the management at reasonable intervalsin respect of finished goods stores spare parts and raw materials except ores &coal. We were informed that physical verification of the same was difficult due to itsvolume and loose nature. The physical verification of ores and coal was made on the basisof volume and density. As informed to us discrepancies noticed on physical verificationwherever material were duly dealt with in the books of account.
iii) As informed to us the company has granted unsecured loans to companies covered inthe register maintained under sectionl89 of the Companies Act 2013. In respect of suchloans we have been informed that:
a) the terms and conditions of the grant of such loans are not prejudicial to thecompany's interest.
b) the schedule of repayment of principal and payment of interest is not stipulated.Therefore no comments are offered on whether the repayments or receipts are regular.
c) no amount is overdue as at the end of the year.
iv) According to the information and explanations given to us the company has compliedwith the provisions of Section 185 and 186 wherever applicable in respect of loansinvestments guarantees and security given by the company except that no interest wascharged on some loans due to financial constraints faced by the borrower companies.
v) According to the information and explanations given to us the company has notaccepted any deposits in terms of the directives issued by the Reserve Bank of India andthe provisions of sections 73 to 76 or any other relevant provisions of the Companies Act2013 and the rules framed thereunder.
vi) The central government has prescribed the maintenance of cost records undersub-section (I) of section 148 of the Companies Act 2013 read with Rules framedthereunder in respect of the manufacturing activities of the Company. We have broadlyreviewed the accounts and records of the Company in this connection and are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. We have not however carried out a detailed examination of thesame.
vii) a) As per information and explanations given to us the company is regular indepositing undisputed statutory dues including provident fund employees' state insuranceincome-tax sales-tax service tax duty of customs duty of excise value added tax cessand any other statutory dues with the appropriate authorities. However in some casesthere have been delays in deposit of statutory dues. As informed to us there are nooutstanding statutory dues in arrears as at the last day of the financial year concernedfor a period of more than six months from the date they became payable.
b) We have been informed that following disputed demands in respect of Income TaxExcise Duty Sales Tax and Entry Tax have not been deposited on account of pending appealsas per details given below:-
|Nature of Demand ||Unpaid Amount* (Rs. In Crores) ||Forum where appeal is pending |
|1. Sales Tax/VAT ||1.38 ||Deputy Commissioner of Sales Tax (Appeals) |
|2. Entry Tax ||30.87 ||Deputy Commissioner of Sales Tax (Appeals) |
|3. Entry Tax ||0.49 ||High Court |
|4. Central Excise/ Service Tax ||7.20 ||Commissioner Appeals (Central Excise) |
|5. Central Excise ||4.87 ||CESTAT |
|6. Central Excise ||0.06 ||High Court |
|7. Income Tax ||0.50 ||Commissioner Income Tax (Appeals) |
|8. Income Tax ||235.70 ||ITAT order passed and matter restored to AO |
|9. Income Tax ||2.60 ||ITAT |
* Basic amount excluding interest if any.
viii) Based on our audit procedures and on the basis of information and explanationsgiven to us by the management there is a default in repayment of loans to the banksfinancial institutions / repayment of dues to debenture holders as at the year end as perdetail below :-
|Particulars ||Amount ||Period of default |
|Repayment of Principal to banks/ financial institutions ||2611.72 Crores ||Zero to Thirty Three months |
|Repayment of dues ||625.00 Crores ||Zero to Thirty |
|to Debenture Holders || ||Three months |
|Interest Accrued and due on borrowings ||2344.53 Crores ||Zero to Thirty Three months |
ix) As explained to us no term loans have been obtained during the year. The companyhas not raised any money during the year by way initial or further public offer.
x) Based upon the audit procedures performed and information and explanations given bythe management we report that no fraud by the Company or on the company by its officersor employees has been noticed or reported during the course of our audit for the yearended 31.03.2018.
xi) According to information and explanations given to us no managerial remunerationhas been paid or provided by the company during the year.
xii) The provisions of clause (xii) of the Order are not applicable as the company isnot a Nidhi Company as specified in the clause.
xiii) According to information and explanations given to us we are of the opinion thatall related party transactions are in compliance with the Section 177 and 188 of CompaniesAct 2013. Necessary disclosures has been made in the financial statements as required bythe applicable accounting Standards.
xiv) According to information and explanations given to us the company has not made anypreferential allotment or private placement of shares or debentures during the year.
xv) According to information and explanations given to us the Company has not enteredinto any non-cash transaction with the director or any person connected with him duringtheyear.
xvi) In our opinion in view of its business activities the company is not required tobe registered under section 451A of Reserve Bank of India Act 1934.
| ||For APAS & CO. |
| ||CHARTERED ACCOUNTANTS |
|PLACE : NEW DELHI ||Firm Regn No. 000340C |
|DATED : 30th May 2018 ||(RAJEEV RANJAN) |
| ||PARTNER |
| ||M No. 535395 |
ANNEXURE- II TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 2(f) under 'Report on Other Legal and RegulatoryRequirements' section of our report of even date)
We have audited the internal financial controls over financial reporting of MONNETISPAT AND ENERGY LIMITED ("the Company") as of 31st March 2018 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of
Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India. These responsibilities include the design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required underthe Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note 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 auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness.
Our audit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error. We believe thatthe audit evidence l/we have obtained is sufficient and appropriate to provide a basis forour audit opinion on the Company's internal financial controls system overfinancialreporting.
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) 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 authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised 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 31st March 2018 based on theinternal control overfinancial 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 ofChartered Accountants of India.
For APAS & CO.
Firm Regn No. 000340C
M No. 535395
PLACE : NEW DELHI
DATED : 30th May 2018