To the Members of
NEL Holdings Limited (Formerly known as Nitesh Estates Limited)
Report on the Audit of the Standalone Financial Statements Adverse Opinion
We have audited the standalone financial statements of NEL Holdings Ltd. (Formerlyknown as Nitesh Estates Limited and herein after referred as "the Company")which comprise the Balance Sheet as at 31st March 2020 the Statement of Profit and LossStateme nt of changes in Equity and Statement of Cash Flows for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us because of the reasons described in the basis for Adverse Opinion para belowthe aforesaid standalone financial statements do not give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2020 and its loss changes in equity and its cashflows for the year ended on that date.
Basis for Adverse Opinion
1. The Company has incurred losses over the years resulting in negative net worthnegative working capital and negative cash flows. The default in payment of dues to banksand financial institution and creditors etc are the identified events that individuallyor collectively may cast significant doubt on the Company's ability to continue as agoing concern.
In this financial scenario the management has no concrete plan to improve upon thesituation which indicates that a material uncertainty exists that may cast significantdoubt on the Company's ability to continue as a going concern. The standalone financialstatements do not adequately disclose this fact.
As the Company has not recognized this fact and has prepared the standalone financialstatements on going concern assumption basis without carrying out any adjustments in ouropinion the standalone financial statements may not give a true and fair view.
2. The Company has given unsecured advance amounting to Rs 1911.70 Lakhs to WinterLands Pvt. Ltd (Winter Lands) and Rs 3515.33 Lakhs to Boulevard Developers Pvt. Ltd foracquiring various immovable properties on behalf of the Company for which no JointDevelopment Agreements could be produced to us. We have been informed that these companiesare not in a position to honor their commitment and repay the advance. No provision hasbeen made by the Company with respect to these advances resulting in understatement ofloss and overstatement of the net worth by the said amount.
However in case of Winter Lands the Company has represented that they are in theprocess of taking appropriate measures to regularize and enter into the developmentagreements with the land owners & aggregators within next two quarters. [Refer Note No13(ii) of the standalone financial statements]
3. The Company had advanced Rs. 1227.98 Lakhs to Somerset Infra Projects PrivateLimited (Somerset) for acquiring immovable properties on behalf of the Company. Somersethas neither delivered any property to the Company as per the agreement nor refunded themoney. The Company has made full provision for the said advance and has entered into anagreement for assignment of claims against the party with another Company at asubstantially lower consideration which may result in substantial loss to the Company.
Considering these factors we are concerned about the manner in which the funds weregiven to Somerset and other companies without obtaining any security and the correspondingprovision made in the books without taking necessary legal action for recovery. [ReferNote No 13(i) of the standalone financial statements]
4. As stated in Note No 17 the Company has not accounted for the demand of penalinterest amounting to Rs. 2177 Lakhs by banks and financial institutions on creditfacilities resulting in the understatement of loss and overstatement of net worth by thesaid amount.
5. As stated in Note No 17 of the standalone financial statements the Company has madeshort provision of interest on debentures amounting to Rs 6966 Lakhs against the interestdemand of Rs 11812 Lakhs (includes interest plus penal interest) in respect of appealfiled by Debenture Trustee 'Investcorp Real Estate Yield Fund (Formerly known as IDFC RealEstate Yield Fund)' before the National Company Law Tribunal (NCLT) Bangalore resultingin the understatement of loss and overstatement of net worth by the said amount.
6. As stated in Note No 43 of the standalone financial statements the Company hascollected Rs 1414 Lakhs in earlier years as advance from customers for closed/suspendedresidential projects which have now been abandoned and the receipts are now in the natureof deemed deposits under rule 2(c ) (xii) (b) of the Companies Acceptance of deposit(Rules) 2014 and are also within the purview of sections 73 to 76 of the Companies Act2013 in respect of which proper disclosure has not been made in the books of accounts inthis respect.
7. The Company holds investments in its subsidiaries and also disbursed advances of Rs.9126 Lakhs as on the balance sheet date. The subsidiaries have reported consolidatednegative net worth as on 31st March 2020. The Company has provided for impairment loss onsuch investments due to negative net worth in its books of account but no adjustments havebeen made in respect of the advances given to such subsidiaries which are also doubtful ofrecovery. [Refer Note No 13(iv) of the standalone financial statements].
8. The Company has CWIP and Inventories relating to projects amounting to Rs 8835Lakhs and Rs 23232 Lakhs [Net "Payable to land owner for land under JointDevelopment Agreement JDA) respectively as on 31st March 2020. No impairment test hasbeen carried out to ascertain the realizable value of Rs 3492 Lakhs and Rs 19603 Lakhsrespectively as estimated by the management against these projects' assets. [Refer Note No4.2(i) and 8 of the standalone financial statements].
9. Year-end balance confirmation certificates in respect of trade receivables tradepayables advances and other advances have not been provided for our verification. Inabsence of adequate audit evidence we are unable to ascertain as to whether any provisionis required with respect to the carrying amounts of these balances as at reporting date.
10. As stated in Note No 19(a) of the standalone financial statements the Company hasneither ascertained nor accounted for component wise Deferred Tax Assets/ Liabilities ason balance sheet date and its corresponding adjustment in the Statement of profit &loss for the year.
11. The Company has not provided customer wise reconciled figures for the outstandingbalances for "Billing in excess of revenue" (Net of debit balance) of Rs 12600Lakhs (Refer Note No 20(ii) to the standalone financial statement). Due tonon-availability of the said details we are unable to verify the correctness of the same.
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of thestandalone financial statements section of our report. We are independent of the Companyin accordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thestandalone financial statements under the provisions of the Companies Act 2013 and theRules made thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence obtained by us is sufficient and appropriate to provide a basis for our adverseopinion on the standalone financial statements.
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 year.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. In addition to the matters described in the Basis forAdverse Opinion section of our report we have determined the matters described below tobe the key audit matters to be communicated in our report.
|Key Audit Matter ||Response to Key Audit Matter |
|1. Accuracy of recognition measurement presentation and disclosures of revenues and other related balances in view of adoption of Ind-AS 115 "Revenue from contracts with Customers". ||Principal Audit Procedure: |
| ||Our audit approach consisted testing of the design and operating effectiveness of internal controls and procedures as follows: |
| || |
| || |
|The revenue recognition by the Company in a particular contract is dependent on certain key judgments relating to identification of distinct performance obligations determination of transaction price of identified performance obligation and disclosures including presentations of balances in the Ind-AS standalone financial statements. ||a) We have assessed the application of the provisions of the Ind AS 115 in respect of the Company's revenue recognition and appropriateness of the estimated adjustments in the process. |
| ||b) Selected a sample of existing continuing contracts and new contracts and tested the operating effectiveness of the internal control relating to identification of the distinct performance obligations and determination of transaction price. |
|Refer Notes 23 and 42 to the standalone financial statements. ||c) Tested the relevant information accounting systems and change relating to contracts and related information used in recording and disclosing revenue in accordance with the new revenue accounting standard. |
| ||d) Performed analytical procedures and test of details for reasonableness and other related material items. |
| ||Conclusion: |
| ||Our procedures did not identify any material exceptions. |
|2. Contingent Liabilities ||Principal Audit Procedure: |
|Assessment of provisions and contingent liabilities in respect of certain litigations including direct and indirect taxes various claims filed by other parties not acknowledged as debt. ||Our audit was focused on analysing the facts of subject matter under consideration and judgements/ interpretation of relevant law. |
|There is high level of judgements required to estimate the level of provisioning. ||Our Audit approach involved: |
| ||a) Examining recent orders and/or communication received from various Tax authorities/ judicial forums and follow up action thereon. |
|The Company's assessment is supported by the facts of matter their own judgement past experience and advice from legal and independent tax consultant wherever considered necessary. Accordingly unexpected adverse outcomes may significantly impact the company's reported loss and net assets. Associated uncertainty relating to the outcome requires application of judgement in interpretation of law. || |
| ||b) Understanding the current status of the litigation/tax assessments. |
| || |
| ||c) Evaluating the merit of the subject matter under consideration with reference to the grounds presented therein and available independent legal / tax advice. |
|Refer Note 34 to the standalone Financial Statements. || |
| ||d) Review and analysis of the contentions of the company through discussion collection of details of the subject matter under consideration the likely outcome and consequent potential outflows on those issues. |
| ||Conclusion: |
| ||Our procedures did not identify any material exceptions. |
|3. Evaluation of Uncertain Tax Position ||Principal Audit Procedure: |
|The Company is subject to periodic challenges by local tax authorities on a range of tax matters during the normal course of business including direct and indirect tax matters. These involve significant management judgement to determine the possible outcome of the uncertain tax positions consequently having an impact on related accounting and disclosures in the standalone financial statements. ||Our audit procedures include the following substantive procedures: |
| ||a) Obtained understanding of key uncertain tax positions; and |
| ||b) We along with our internal tax experts - |
| ||> Read and analysed select key correspondences external legal opinions / consultations by management for key uncertain tax positions; |
| ||> Discussed with appropriate senior management and evaluated management's underlying key assumptions in estimating the tax provisions; and |
| ||> Assessed management's estimate of the possible outcome of the disputed cases. |
| ||Conclusion: |
| ||Our procedures did not identify any material exceptions. |
Information Other than the Financial Statements and Auditors' Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the draft Directors' Report includingannexures to Directors' Report which we obtained prior to the date of this auditors'report and other reports included in the Annual report which are expected to be madeavailable to us after that date but does not include the standalone financial statementsand our auditors' report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not and will 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 identified above and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained during the course of our audit or otherwise appears to bematerially misstated.
If based on the work we have performed on the other information that we obtained priorto the date of this auditors' report we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.
When we read the full Annual report which is expected to be made available to us afterthe date of this auditors' report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.
Responsibilities of the Management and Those Charged with Governance for the StandaloneFinancial 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 standalone financial statements that give a true and fair view of the financialposition financial performance changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theaccounting Standards specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgements and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatement 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 or to cease operations or has norealistic alternative 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 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 judgement andmaintain professional skepticism 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 control relevant to the audit inorder to 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 reasonablenessof accounting estimates and related disclosures made by the 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 auditors' 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 ourauditors' 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 financial statementsrepresent 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 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 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 them allrelationships and other matters that may reasonably be thought to bear on our independenceand 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 auditors' 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
Emphasis of Matter
1. The Company is holding Rs 20547 Lakhs in its 100% subsidiary companies asinvestment in equity and preference shares which has been impaired fully due to negativenet worth as on the balance sheet date [Refer Note no 28A of the standalone financialstatements].
2. We draw attention to Note 44 of the standalone financial statements which statesthe economic and social consequences/disruption that the entity is encountering as aresult of COVID-19 pandemic which is impacting supply chains consumer demand andpersonnel availability. The situation is still evolving and the management's assessment ofthe impact on the subsequent period is dependent on the circumstances as they evolve. Thismay further affect the Company's ability to carry out the business.
Our opinion is not modified in respect of these matters.
a) Prolonged lock-down of COVID-19 has caused significant challenges for audit of theCompany on deployment of our audit team at various locations due to travel restrictionsimposed by the State as well as Central Government of India. We have performed alternateaudit procedures and have obtained various documents and other audit information whichwere made available to us by the Company as sufficient appropriate audit evidence to issueour audit opinion on the standalone financial statements.
Our report is not modified in respect of these 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 of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the "Annexure - A" a statement on thematters specified in paragraphs 3 and 4 of the Order which is subject to the possibleeffect of the matters described in the 'Basis for Adverse Opinion' paragraph of our AuditReport and the material weakness described in 'Basis of Qualified Opinion' in our separatereport on t he Internal Financial Controls over Financial Reporting.
2. As required by Section 143(3) of the Act we report that:
a) Except for the effects of the matters described in the 'Basis for Adverse Opinion'section above we have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.
b) Except for the effects of the matters described in the 'Basis for Adverse Opinion'section above in our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including other comprehensiveincome statement of changes in equity and statement of cash flows dealt with by thisReport are in agreement with the books of account.
d) Based to the matters stated in the 'Basis for Adverse Opinion' section above in ouropinion the aforesaid standalone financial statements do not comply with the IndianAccounting Standards specified under Section 133 of the Act read with relevant rulesissued thereunder.
e) The matters stated in the 'Basis for Adverse Opinion' section above in our opinionmay have an adverse effect on the functioning of the Company.
f) On the basis of written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of directors is disqualifiedas on 31st March 2020 from being appointed as director in terms of Section 164(2) of the'Act'.
g) 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 a qualified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting for the reasons stated therein.
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 34;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT
"Annexure A" referred to in our report to the members of NEL Holdings Ltd.(Formerly known as NITESH ESTATES LIMITED) under the heading 'Report on Other Legal andRegulatory Requirements' of our report at even date.
We report that:
i. a) The Company has maintained proper records showing full particulars includingquantitative details and situations of fixed assets.
b) According to the information and explanation given to us some of the fixed assetshave been physically verified by the Management during the year in a phased program and nomaterial discrepancies were noticed on such verification. In our opinion the frequency ofsuch verification is reasonable having regard to the size of the company and the nature ofits assets.
c) According to information and explanation given to us no immovable properties areheld in the name of the company.
ii. The Company is engaged in the business of real estate development and relatedservices and holds inventories in the form of land developed and under development ofproperties. In our opinion and according to the information and explanations given to ushaving regard to the nature of inventories the procedures and frequency of the physicalverification by way of title deeds site visits by the management and certification ofwork completion are reasonable and adequate having regard to the size of the Company andthe nature of its business.
iii. According to the information and explanation given to us the Company has grantedunsecured loans to companies firms or other parties as listed in the register maintainedunder section 189 of the Companies Act 2013 (Refer to Note 38 to the standalone financialstatements). In our opinion and according to the information and explanations given to usthe terms and conditions of the loans are not prejudicial to the interest of the Company.
iv. According to the information and explanation given to us the Company has compliedwith the provisions of Section 185 and 186 of the Act with respect to loans andinvestments made except for a loan given by one of the subsidiary companies to theerstwhile director of the company amounting to Rs. 472 Lakhs during his tenure asdirector.
v. The Company has not accepted any deposits during the year. However the Company hascollected Rs 1414 Lakhs in earlier years as advance from customers for closed/suspendedresidential projects which have now been abandoned and the receipts are now in thenature of deemed deposits under rule 2(c) (xii) (b) Companies Acceptance of deposit(Rules) 2014 and are also within the purview of sections 73 to 76 of the Companies Act2013. The amount and disclosure requirements of deemed deposits which are required by therelevant act and directives issued by the Reserve Bank of India have not yet beenascertained. (Refer Note no. 43 to the standalone financial statements).
vi. The Central Government has prescribed for the maintenance of the cost records undersection 148(1) of the Companies Act 2013 in respect of the products of the Company.However since the Company's net revenue falls below the threshold no Cost Auditor wasappointed during the year ended on 31st March 2020.
vii. (a) According to the information and explanations given to us the Company is notregular in depositing with appropriate authorities undisputed statutory dues includingProvident fund Employees State Insurance Sales Tax Wealth Tax Cess Custom Duty andGST and other statutory dues applicable to it.
There are no undisputed amounts payables in respect of provident fund employees' stateinsurance income tax sales tax duty of customs duty of excise goods and service taxcess and any other statutory dues to the appropriate authorities except the followingwhich have been outstanding as at 31st March 2020 for a period more than sixmonths from the date they became due.
|Name of the statute ||Nature of the dues ||Amount (Rs in Lakhs) ||Period to which the amount relates ||Due date ||Date of payment ||Remarks if any |
|KVAT Act ||VAT ||41.20 ||2009-10 ||- ||Not paid || |
|KVAT Act ||VAT ||1267.31 ||2010-11 ||- ||Not paid || |
|Income Tax Act 1961 ||TDS ||133.85 ||April 2019 - September 2019 ||Various due dates ||Not paid || |
|Income Tax Act 1961 ||TDS ||82.51 ||Previous Years ||- ||Not paid || |
|CGST Act SGST Act & IGST Act 2017 ||GST ||6.91 ||April 2019 - September 2019 ||Various due dates ||Not paid || |
|CGST Act SGST Act & IGST Act 2017 ||GST ||41.71 ||Previous Years ||- ||Not paid || |
|Provident Fund & Misc. Provisions Act 1952 ||Provident Fund ||15.11 ||April 2019 - September 2019 ||Various due dates ||Not paid || |
|Provident Fund & Misc. Provisions Act 1952 ||Provident Fund ||11.37 || ||- ||Not paid || |
|KTPTCE Act 1976 ||Profession Tax ||0.81 || ||Various due dates ||Not paid || |
|KTPTCE Act 1976 ||Profession Tax ||0.25 ||Previous Years ||- ||Not paid || |
|ESI Act 1948 ||ESI ||1.37 ||April 2019 - September 2019 ||Various due dates ||Not paid || |
|ESI Act 1948 ||ESI ||0.45 ||Previous Years ||- ||Not paid || |
(b) According to the information and explanations given to us the following are thedisputed statutory dues which have not been deposited by the company as on 31stMarch 2020.
|Name of Statute ||Nature of Dues ||Period to which the amount relates || |
Amount (Rs. in Lakhs)
|Forum where Disputes is Pending |
|Income Tax Act 1961 ||Income tax ||AY 2009-10 || |
|CIT- Appeal |
| || ||AY 2011-12 || |
| || ||AY 2007-08 2008-09 & || |
|High Court |
| || ||2009-10 || || |
|KAVAT Act ||VAT ||AY 2009-10 || |
|DCCT - Appeal |
| || ||AY 2011-12 || |
| || ||AY 2014-15 || |
viii. According to the information and explanations given to us the company hasdefaulted in repayment of loans or borrowing to a banks financial institutions anddebenture holders as detailed below.
|Nature of Borrowings including debt securities ||Name of Lender ||Amount not paid on due date (Rs. in Lakhs) ||Whether Principal or Interest ||No. of days delay or unpaid ||Remarks if any |
|Term Loan ||Yes Bank Limited ||24646 ||Principal Rs. 21210 and Interest Rs. 3436 ||More than 180 days || |
|Loan ||HDFC Ltd. ||32926 ||Principal Rs. 25675 Interest Rs. 7251 ||More than 180 days || |
|Loan ||Sriram City Union Finance Ltd. ||1513 ||Principal Rs. 1380 Interest Rs. 133 ||More than 180 days || |
|Non-Convertible Debenture ||IDFC Real Estate Yield Fund ||10346 ||Principal Rs. 5500 Interest Rs. 4846 ||More than 180 days || |
The borrowings from the Banks have become Non-Performing Assets (NPA) as on the balancesheet date and the Banks and financial institutions have called upon the debt. Due tonon-repayment of debentures Debenture Trustee Investcorp Real Estate Yield Fund(Formerly known IDFC Real Estate Yield Fund) has filed the recovery petition with NationalCompany Law Tribunal (NCLT) Bangalore Branch. [Refer note 17 to the standalone financialstatements]. The Company has not taken any loans or borrowings from the government.
ix. The company has not raised money by way of initial public offer or further publicoffer (including debt instruments) and term loans were applied for the purposes for whichthose are raised.
x. According to the information and explanations given to us no fraud on or by thecompany has been noticed or reported during the year. Accordingly the provision of clause3(x) of the said order is not applicable.
xi. According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the provisions of section 197 read with Schedule V to theAct.
xii. The Company is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order isnot applicable.
xiii. According to the information and explanations given to us by the management alltransactions with the related parties are in compliance with Sections 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the standalonefinancial statements as required by the applicable Indian Accounting Standards.
xiv. The company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovision of clause 3(xiv) of the Order is not applicable.
xv. The company has not entered into any non-cash transactions with directors orpersons connected with them. Accordingly the provision of clause 3(xv) of the Order isnot applicable.
xvi. The company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934. Accordingly the provision of clause 3(xvi) of the Order is notapplicable.
| ||RAY & RAY |
| ||Chartered Accountants |
| ||(Firm's Registration No. 301072E) |
|Place: Bangalore ||(Mrinal Kanti Banerjee) |
|Date: 31st July 2020 ||Partner |
| ||Membership No. 051472 |
| ||UDIN 20051472AAAAAS8201 |
"Annexure-B" to the Independent Auditors' Report
Report on the Internal Financial Controls over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of NELHoldings Ltd. (Formerly known as Nitesh Estates Limited and herein after referred as"the Company") as of 31st March 2020 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India ('ICAI'). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.
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 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. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the Company's internal financial controls system overfinancial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanations givento us except for the effects/possible effects of the material weaknesses described in'Basis for Qualified Opinion' paragraph below on the achievement of the objectives of thecontrol criteria further improvement is required in designing the Documentation onInternal Financial Controls of the Company.
In respect of other matters the Company has maintained in general and adequateinternal financial controls over financial reporting established by the Companyconsidering the essential component of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.
Basis for Qualified Opinion
A 'material weakness' is a deficiency or a combination of deficiencies in internalfinancial control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the Company's annual or interim financial statements willnot be prevented or detected on a timely basis.
According to the information and explanations given to us and based on our audit thefollowing material weaknesses have been identified in the Company's internal financialcontrols over financial reporting as at 31st March 2020.
a) The Company did not have an appropriate internal control system relating to grantingof unsecured advances for acquiring various immovable properties. The credit worthiness ofthe parties exposure and experience in handling land procurement asset base forproviding security and guarantee etc. have not been verified at the time of authorizationand disbursement of said advances.
b) The Company did not have an adequate internal control system to ensure compliancewith the provision of the Companies Act with respect to refund of advances collected fromcustomers for closed/suspended residential projects which has been abandoned.
c) The Company did not have any system of obtaining year-end balance confirmationcertificates in respect of trade receivable trade payables advances and other advances.
d) The Company did not have an appropriate internal control system regardingascertaining and accounting of component wise Deferred Tax Asset/Liabilities as on thebalance sheet date.
We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the standalonefinancial statements of the Company for the year ended 31 March 2020 and these materialweaknesses have affected our opinion on the said standalone financial statements of theCompany and we have issued an adverse opinion on the standalone financial statements ofthe Company.
| ||RAY & RAY |
| ||Chartered Accountants |
| ||(Firm's Registration No. 301072E) |
|Place: Bangalore ||(Mrinal Kanti Banerjee) |
|Date: 31st July 2020 ||Partner |
| ||Membership No. 051472 |
| ||UDIN 20051472AAAAAS8201 |