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Naraingarh Sugar Mills Ltd.

BSE: 531457 Sector: Agri and agri inputs
NSE: N.A. ISIN Code: INE491E01015
BSE 05:30 | 01 Jan Naraingarh Sugar Mills Ltd
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Naraingarh Sugar Mills Ltd. (NARAINGARHSUGAR) - Auditors Report

Company auditors report

The Members

Naraingarh Sugar Mills Limited.

1. Opinion

We have audited the accompanying financial statements of Naraingarh Sugar Mills Limitedwhich comprise the Balance Sheet as at 31st March 2020 the Statement of Profit &Loss (including other Comprehensive Income) Statement of Changes in Equity and Cash FlowStatement for the year then ended and notes to the financial statements including asummary of significant accounting policies and other explanatory information.

Subject to paragraph 7 & 8 below in our opinion and to the best of our informationand according to the explanations given to us the aforesaid financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India including the IndAS of the state of affairs of the Company as at 31st March 2020 and its loss totalcomprehensive loss changes in equity and its cash flows for the year ended on that date.

2. Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder Section 143(10) of the Act. Our responsibilities under those (SAs) are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial StatementsSection of our report. We are independent of the Company in accordance with the Code ofEthics issued 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 ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.

3. Key Audit Matters

Key Audit Matters are those matters that in our professional judgement 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 considered the matters described below to be the key audit matters for incorporationin our report.

Key Audit Matter How our audit addressed the Key Audit Matter
Valuation of inventory of sugar:
As on 31st March 2020 the Company has inventory of sugar with a carrying valueRs. 8.55 crores. The inventory of sugar is valued at the lower of cost and net realisable value. We considered the value of the inventory of sugar as a key audit matter given the relative value of inventory in the financial statements and significant judgement involved in the consideration of factors such as minimum sale price monthly quota fluctuation in selling prices and the related notifications of the Government in valuation We understood and tested the design and operating effectiveness of controls as established by the management in determination of cost of production and net realisable value of inventory of sugar. We considered various factors including the prevailing selling price during and subsequent to the year end minimum selling price & monthly quota and other notifications of the Government of India initiatives taken by the government with respect with to sugar industry as a whole.
of net realisable value. Based on the above procedure performed the management's determination of the net realisable value of the inventory of sugar as at year-end and comparison with cost for valuation of inventory is considered to be reasonable.
Impact of Government Policies/Notifications on recognition of subsidy accruals/claims and their recoverability:
During the year the Company has recognised / received subsidy claims aggregating toRs. 8.87 crores in terms of Schemes notified by the State Government to offset the cane cost for sugar season 2018-2019 and 2019-20. We understood and tested the design and operating effectiveness of controls as established by management in recognition and assessment of the recoverability of the claims. We evaluated the management's assessment regarding reasonable certainty for complying with the relevant conditions
We considered this as a key audit matter because recognition of subsidy claim is subject to satisfaction of certain conditions mentioned in the related notification. Assessment of recoverability of the claim is subject to significant judgement of the management including certainty with respect to the satisfaction of conditions specified in the as specified in the notification/policies and collections. We considered the relevant notifications/policies issued by various authorities to ascertain the appropriateness of the recognition of accruals/claims adjustments to claims already recognised pursuant to changes in the rates and basis for determination of claims.
Based on the above procedures performed the management's estimates related to recognition of subsidy accruals/claim and their recoverability are considered to be reasonable.
Contingent Liabilities:
There are a number of litigations before various forums against the Company and management's judgement is required for estimating the amount to be disclosed as contingent liability. We have obtained an understanding of the Company's internal instructions and procedures in respect of estimation of contingent liabilities and adopted the following audit procedures:
We identified this as a key audit matter because the estimates on which these amounts are based involve a significant degree of management judgement in - understood and tested the design and operating effectiveness of controls as established by the management for obtaining all relevant information for pending litigation cases;
interpreting the cases and it may be subject to management bias. - discussed with management any material developments and latest status of legal matters;
- read various correspondences and related documents pertaining to litigation cases produced by the management and relevant external legal opinions obtained by the management and performed substantive procedures on calculations supporting the disclosure of contingent liabilities; examining management's judgements and assessment of whether provisions are required; considering the management assessments of those matters that are not disclosed as the probability of material outflow is considered to be remote;
- reviewed the adequacy and completeness of disclosures;
Based on the above procedures performed the estimation and disclosures of contingent liabilities are considered to be adequate and reasonable.

4. 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 ManagementDiscussion and Analysis Report Board's Report including Annexures to the Board's ReportCorporate Governance Report but does not include the financial statements and ourauditor's report thereon.

Our report 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.

5. Management's Responsibility for Financial Statements

The Company's Management & Board of Directors are responsible for the mattersstated in Section 134(5) of the Companies Act 2013 with respect to the preparation ofthese Ind AS financial statements that give a true and fair view of the financialposition financial performance including other comprehensive income changes in equityand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the Indian Accounting Standards (Ind AS) specified underSection 133 of the Act. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgement andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial 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.

Board of Directors is also responsible for overseeing the Company's financial reportingprocess.

6. 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 judgement andmaintain professional skepticism throughout the audit. We also:

a) 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.

b) 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 theCompanies Act 2013 we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls reference to financial statement in placeand the operating effectiveness of such controls.

c) Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

d) 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. Ourconclusions are based on the audit evidence obtained up to the date of our auditors'report. However future events or conditions may cause the Company to cease to continue asa going concern.

e) Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions 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 standalone 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 any significant deficiencies ininternal 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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditors' report unless law or regulation precludes public disclosure about the matter orwhen 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.

7. Attention is invited to the following points of NoteRs.4' of the financialstatements.

i) Note 4.1 - regarding confirmation of attachment of Fixed Assets of the Company underthe Prevention of Money Laundering Act 2002 by the Adjudicating Authority.

ii) Note 4.3 - regarding calls in arrears and redeemable preference shares.

8. Net-worth of the Company has completely eroded; the management is of the opinionthat the Company shall carry

on its business as usual hence the financial statements of the Company have beenprepared on a going concern

basis; the appropriateness of the said basis is inter-alia dependent upon futureperformance and profitability and

presently we are unable to express an opinion on the same.

9. Report on Other Legal and Regulatory Requirements

A) As required by the Companies (Auditor's Report) Order 2016 issued by the CentralGovernment of India in terms of sub-section (11) of Section 143 of the Act we give in the"Annexure A" a statement on the matters specified in the paragraph 3 and 4 ofthe Order.

B) 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 & Loss (including othercomprehensive income) Statement of Changes in Equity and the Cash Flow Statement dealtwith by this report are in agreement with the books of account;

(d) in our opinion the aforesaid Ind AS financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act;

(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 terms of Section164(2) of the Act;

(f) with respect to the adequacy of internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B"; and

(g) 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 4.14.2 & 4.7);

ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and

iii. there were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

C) 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 director during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.

For K D & ASSOCIATES CHARTERED ACCOUNTANTS Firm Registration No. - 024293N

(DEEPAK GARG) PARTNER

Membership No. - 507959

Date: 08/09/2020 Place: Chandigarh

"ANNEXURE A" TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 9 of our report of even date on accounts of Naraingarh SugarMills Limited for the year ended 31st March 2020).

i. a) The Company has maintained proper records showing full particulars includingquantitative details and

situation of fixed assets.

b) The Company has a regular programme of physical verification of its fixed assets bywhich all fixed assets are verified in a phased manner over a period of three years. Inour opinion the periodicity of physical verification is reasonable having regard to thesize of the Company and nature of its assets. No material discrepancies were noticed onsuch 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. As explained to us the inventories were physically verified during the year by theManagement at

reasonable intervals and no material discrepancies were noticed on physicalverification.

i ii. According to the information and explanations given to us the Company has notgranted any loans secured or

unsecured to Companies Firms Limited Liability Partnerships or other parties coveredin the register maintained under Section 189 of the Companies Act 2013.

Accordingly paragraph 3(iii)(a)(b) and (c) of the Order is not applicable and hencenot commented upon.

iv. According to the information and explanations given to us the Company has notgranted any loans or provided any

guarantees or security to the parties covered under Section 185 of the Companies Act2013.

Corporate Guarantee given by the Company to the Bank for the loans given to the CaneFarmers & Investments made by the Company are not in conformity with the provisionsof Section 186 of the Companies Act 2013.

v. According to the information and explanations given to us the Company has compliedwith the provision of Sections 73 to 76 or any other relevant provisions of the Act andthe rules framed thereunder.

vi. We have broadly reviewed the books of account maintained by the Company pursuant tothe Companies (Cost Records and Audit) Amendment Rules 2014 made by the CentralGovernment for the maintenance of cost records under Section 148 of the Companies Act2013 and are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained.

However we have not made a detailed examination of the records with a view todetermine whether they are accurate & complete.

vii. a) According to the information & explanations given to us and on the basis ofour examination of all records of

the Company amounts deducted/accrued in the books of account in respect of undisputedstatutory dues including Provident Fund Goods & Services Tax (GST) Income Tax Dutyof Customs Cess and other material statutory dues have been regularly deposited with theappropriate authorities during the year.

According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Income Tax GST Duty of Customs and other materialstatutory dues (except cane purchase tax -Rs. 1532062/- for the financial year 2016-2017andRs. 857728/- for the month of April 2017) were in arrears as on 31st March 2020for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us there are no dues ofIncome Tax Duty of Customs and GST which have not been deposited with appropriateauthorities on account of any dispute except as mentioned below:

Name of the Statue Nature of dues Amount Involved Amount deposited under protest Financial Year/Period Forum where dispute is pending
i Income Tax Act 1961 Penalty u/s 271(1)(c) 545644 Nil 2007-2008 Income Tax Appellate Tribunal New Delhi
ii Central Excise Act 1944 Excise Duty (inc. Penalty) 3726986 248500 March 2015 to March2016 CESTAT New Delhi
iii Finance Act 1994 Service Tax (inc. Penalty) 3084762 471738 2010-2011 CESTAT New Delhi
iv Punjab Sugarcane Act 1953 Cane Purchase Tax 20233831 Nil 1996-2002 Punjab & Haryana High Court Chandigarh

viii. According to the information & explanations given to us and on the basis ofverification of records The Company has defaulted in repayment of dues i.e. Principalamount -Rs. 19559000/- & Interest -Rs. 131821118/- for the period from June 2019to March 2020 to Financial Institution (IREDA) and Principal amount -Rs. 563133403/-& Interest -Rs. 73253783/- to The Ambala Central Cooperative Bank Ltd. for theperiod from June 2019 to March 2020 & for the period from September 2019 to March2020. The Company during the year has not borrowed/raised Loans from Government and hasnot issued any debentures [Refer note 4.4].

ix. According to the information & explanations given to us the Company did notraise any money by way of initial public offer or further public offer (including debtinstruments) during the year.

Term loans availed by the Company were prima-facie applied by the Company for thepurposes for which loans were obtained.

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 the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule-V to the Act.

xii. According to the information & explanations given to us the Company is not aNidhi Company. 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 in compliance with Sections 177 and188 of the Act where applicable and details of such transactions have been disclosed inthe Ind AS financial

statements as required by the applicable Ind AS.

xiv. According to the information and explanations given to us the Company has notmade any preferential allotment or private placement of shares or fully or partlyconvertible debentures during the year. Accordingly paragraph 3(xiv) of the Order is notapplicable.

xv. According to the information and explanations given to us during the year theCompany has not entered into any non-cash transactions with its Directors or personsconnected to its Directors and hence provisions of Section 192 of the Companies Act 2013are not applicable.

Accordingly paragraph 3(xv) of the Order is not applicable.

xvi. According to the information & explanations given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.

For K D & ASSOCIATES CHARTERED ACCOUNTANTS Firm Registration No. - 024293N

(DEEPAK GARG) PARTNER

Membership No. - 507959

Date: 08/09/2019 Place: Chandigarh

"ANNEXURE B" TO THE INDEPENDENT AUDITORS' REPORT

Report on the Internal Financial Controls under Clause (i) of Sub Section 3 of Section143 of the Companies Act 2013.

Opinion

We have audited the internal financial controls over financial reporting of NaraingarhSugar Mills Limited as of 31st March 2020 in conjunction with our audit of the financialstatements of the Company for the year ended on that date.

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 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (the "Guidance Note").

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 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 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 Reportingand the Standards on Auditing issued by ICAI and deemed to be prescribed under Section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls both applicable to an audit of Internal Financial Controls and bothissued by the Institute of Chartered Accountants of India. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively 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 judgement 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 generally accepted accounting principles. A Company's internalfinancial control over financial reporting includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect 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 withauthorisations of management and Directors of the Company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised 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.

For K D & ASSOCIATES CHARTERED ACCOUNTANTS Firm Registration No. - 024293N

(DEEPAK GARG) PARTNER

Membership No. - 507959

Date: 08/09/2019

Place: Chandigarh

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