To the Members of Ortel Communications Limited Report on the Standalone FinancialStatements Disclaimer of Opinion
We were engaged to audit the accompanying standalone financial statements of OrtelCommunications Limited ("the Company") which comprise the Balance Sheet as at31st March 2019 the Statement of Profit and Loss (including Other Comprehensive Income)the Statement of Changes in Equity and the Statement of Cash Flows for the year then endedand a summary of significant accounting policies and other explanatory information.
We do not express an opinion on the accompanying standalone financial statements of theCompany. Because of the significance of the matters described in the Basis forDisclaimer of Opinion section of our report we have not been able to obtainsufficient appropriate audit evidence to provide a basis for an audit opinion on thesestandalone financial statements.
Basis for Disclaimer of Opinion
a) As informed to us by the management the Company has issued Credit Notes amountingto Rs 6844.75 lakhs during the year ended 31st March 2019 towards disruption of services/deficient provision of services during the period 1st October 2016 to 31st December2018. Accordingly the Company has debited 'Provision for doubtful receivables' with Rs.6844. 75 lakhs and the related Service Tax/Goods and Services Tax ('GST')/ Entertainmenttax liability with Rs. 1205.76 lakhs and credited 'Trade Receivables' with Rs. 80S0.S1lakhs. However the Company has not provided to us sufficient appropriate audit evidenceregarding the appropriateness of issuance of such credit notes viz. the month wise /areawise /analog or digital wise breakup of Rs. 6844.7S lakhs the internal auditor's/anyother external expert's vetting regarding the due processes and checks and balances havingbeen followed etc. Hence we are unable to comment on the issuance of such credit notes bythe Company and it is not practicable to quantify the financial effects of the same ifany on the standalone financial statements.
b) The Company has not provided to us for our verification GST Returns relating to theyear ended 31st March 2019 and reconciliation of such Returns with the books of accountsalong with other related documents if any. Hence it is not practicable to quantify thefinancial effects of the same if any on the standalone financial statements.
c) As per the relevant GST Act/Rules where the recipient of goods/services fails topay to the suppliers of goods or services or both (other than the supplies on which tax ispayable on reverse charge basis) the amount towards the value of supply along with the taxpayable thereon within a period of one hundred and eighty days from the date of issue ofinvoice by the supplier an amount equal to the input tax credit availed by the recipientshall be added to his output tax liability along with interest thereon.
As at 31st March 2019 the Company has material amount of outstanding payables inrespect of supplies of goods and services which as informed to us by the managementincludes dues for a period of more than 180 days from the date of issue of invoices by therelevant suppliers. However the Company has not added to its GST output tax liability anyamount towards the input tax credit availed by it in respect of such invoices raised bythe relevant suppliers together with the applicable interest. Since the Company has notprovided to us the relevant details of supplies in respect of which the amount payable bythe Company is due for a period of more than 180 days it is not practicable to quantifythe financial effects of the same on the standalone financial statements.
d) The Company was having an outstanding loan of Rs. 9630.54 lakhs from a Non-BankingFinancial Company ('NBFC') as at 30th June 2018. Subsequently during July 2018 theCompany has accounted for a new loan of Rs. 9630.54 lakhs from the same NBFC against whichthe actual funds received by the Company from the NBFC was Rs. 1700 lakhs (used to pay offa part of the old loan) and the balance of old loan amounting to Rs. 7930.54 lakhs (i.e.Rs. 9630.54 lakhs - Rs. 1700 lakhs) was adjusted by the Company against the new loan byway of a book entry. No confirmation or any other relevant document in this regard fromthe NBFC evidencing the aforesaid 'adjustment' of old loan against the new loan has beenprovided to us by the Company. In absence of such a confirmation/relevant document we arenot in a position to comment on the aforesaid unilateral adjustment of loan accounted forby the Company in its books of accounts and it is not practicable to quantify thefinancial effects of the same if any on the standalone financial statements.
e) We observed from the Company's bank statement that during the year ended 31st March2019 the Company received Rs. 4000 lakhs from the NBFC referred to in (d) above in oneinstance and the amount went back to the NBFC on the same date. No accounting entry waspassed in the Company's books of accounts in this respect. However neither thetransaction has been explained to us nor any relevant documents/details in this regardhave been provided by the Company. Hence we are unable to comment on the said transactionand it is not practicable to quantify the financial effects of the same if any on thestandalone financial statements.
f) The Company took a loan of Rs. 1060 lakhs from its wholly-owned subsidiary OrtelBroadband Limited (OBL) in July 2018 and subsequently transferred the aforesaid loan tothe credit of the NBFC referred to in (d) above by way of an accounting entry in it'sbooks of accounts. As informed to us by the management based on an understanding betweenthe Company OBL and the NBFC the aforesaid loan amount along with outstanding interestneeds to be repaid by the Company to the NBFC and not to OBL. No confirmation or any otherrelevant documents from OBL or the NBFC has been provided to us for our verificationbased on which the loan amount along with outstanding interest stands transferred asaforesaid. In absence of such a confirmation/relevant documents we are not in a positionto comment on the aforesaid accounting entry made by the Company in its books of accountsand it is not practicable to quantify the financial effects of the same if any on thestandalone financial statements.
g) As mentioned in Note no. 57 to the standalone financial statements no impairmentassessment of Property Plant and Equipment Capital Work-in-Progress Goodwill and Stores& Spares in carrying values as at 31st March 2019 has been made by the Company.Therefore we are unable to comment on the consequential impairment if any that isrequired to be made in the carrying value of Property Plant and Equipment Capital Workin-Progress Goodwill and Stores a Spares.
h) In respect of Company's borrowings from banks and financial institutions aggregatingto Rs. 17524.90 lakhs and bank balances (current account and term deposits) aggregating RsS9.41 lakhs independent balance confirmations as at 31st March 2019 have not beenreceived.
i) As a part of Corporate Insolvency Resolution Process ('CIRP') creditors were calledupon to submit their claims. The process of submitting claims is still going on and it isalso under reconciliations with amounts as appearing in the books of accounts. Pendingreconciliations and final outcome of the CIRP no accounting impact in the books ofaccounts has been made in respect of excess short or non-receipts of claims foroperational and financial creditors. Hence it is not practicable to quantify thefinancial effects of the same if any on the standalone financial statements (refer NoteNo. S6 to the standalone financial statements.)
j) Attention is drawn to Note No. S2 to the standalone financial statements regardingnonrecognition of interest amounting to Rs. 1067.14 lakhs subsequent to InsolvencyCommencement Date i.e. 27th November 2018 on borrowing from banks and financialinstitutions and on non-convertible redeemable cumulative preference shares which is notin compliance with the requirements of Ind AS - 23 on "Borrowing Costs" readwith Ind AS -109 on "Financial Instruments". Had the aforesaid interest expensebeen recognised finance costs total expenses and loss for the year would have beenhigher by the said amount having consequential impact on other current financialliabilities and other equity.
k) We have been informed by the Resolution Professional that certain informationincluding the minutes of meetings of the Committee of Creditors are confidential in natureand cannot be shared with anyone other than the Committee of Creditors and NCLT.Accordingly it is not practicable to comment on the possible financial effects on thestandalone financial statements including on presentation and disclosures if any thatmay have arisen if we had been provided access to those information.
l) The Company has given advances for supplies/services and the amount outstandingthere against as at 31st March 2019 was Rs. 1927.51 lakhs. However we have been unableto obtain sufficient appropriate audit evidence regarding certain aspects of the aforesaidadvances viz. ageing analysis and the basis on which the same will be adjusted etc. Hencewe are unable to comment on the aforesaid advances and it is not practicable to quantifythe financial effects of the same if any on the standalone financial statements.
m) As at 31st March 2019 the Company is having liabilities against 'Creditors forCapital Goods' and 'Liability for Operating Expenses' amounting to Rs. 6933.23 lakhs andRs. 3450.64 lakhs respectively. However we have been unable to obtain sufficientappropriate audit evidence regarding certain aspects of the aforesaid liabilities viz.ageing analysis and the basis on which the aforesaid liabilities will be settled etc.Hence we are unable to comment on the balances appearing under the aforesaid liabilitiesand it is not practicable to quantify the financial effects of the same if any on thestandalone financial statements.
n) The Company is having a non-current investment of Rs 211.28 lakhs in equity sharesof Odisha Television Limited as at 31st March 2019. In the absence of the fair valuationof the said investments as at 31st March 2019 we are unable to comment on theremeasurement gain/ loss if any on the said investment.
Material Uncertainty Related to Going Concern
We draw attention to Note No. S4 to the standalone financial statements which indicatesthat due to the events or conditions as mentioned in the said Note material uncertaintyexists that may cast significant doubt on the Company's ability to continue as a goingconcern and therefore it may be unable to realize its assets and discharge itsliabilities in the normal course of business. However the standalone financial statementshave been prepared on a going concern basis for the reasons stated in the said Note.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
The Hon'ble National Company Law Tribunal ('NCLT') New Delhi Bench admitted apetition for initiation of CIRP u/s 9 of the Insolvency and Bankruptcy Code 2016 ( IBC )filed by one of the operational creditors of the Company vide order dated 27th November2018 and appointed an Interim Resolution Professional (IRP) to manage the affairs of theCompany in accordance with the provisions of IBC. The Committee of Creditors ('CoC') inits meeting held on 07th January 2019 passed a resolution proposing to replace the IRPand appoint a Resolution Professional ('RP') which was confirmed by NCLT vide its orderdated 1st February 2019. In view of pendency of the CIRP and in view of suspension ofpowers of the Board of Directors and as explained to us the power of adoption of thestandalone financial statements of the Company for the year ended 31st March 2019 vestswith the RP (refer Note No. 1 to the standalone financial statements).
The Company's Board of Directors/RP is responsible for the matters stated in section134(5) of the Companies Act 2013 ('the Act') with respect to the preparation of thesestandalone financial statements that give a true and fair view of the financial positionfinancial performance including other comprehensive income changes in equity and cashflows of the Company in accordance with the Indian Accounting Standards ("IndAS") specified under section 133 of the Act read with Companies (Indian AccountingStandards) Rules 2015 as amended and other accounting principles generally accepted inIndia. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the standalone financial statements the Board of Directors/RP isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless the Board of Directors/RP either intends to liquidate theCompany or to cease operations or has no realistic alternative but to do so.
Those Board of Directors/RP is also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our responsibility is to conduct an audit of the Company's standalone financialstatements in accordance with Standards on Auditing issued by the Institute of CharteredAccountants of India ("1CAI") and to issue an auditor's report. However becauseof the matters described in the Basis for Disclaimer of Opinion section of our report wewere not able to obtain sufficient appropriate audit evidence to provide a basis for anaudit opinion on these standalone financial statements.
We are independent of the Company in accordance with the Code of Ethics issued by ICAIand provisions of the Act that are relevant to our audit of the standalone financialstatements in India under the Act and we have fulfilled our other ethicalresponsibilities in accordance with the Code of Ethics issued by ICAI and the requirementsunder the Act.
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 Act we give in "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
(2) As required by Section 143(3) of the Act we report that:
a. As described in the Basis for Disclaimer of Opinion paragraph we sought but wereunable to obtain all the information and explanations which to the best of our knowledgeand belief were necessary for the purposes of our audit;
b. Due to the possible effects of the matters described in the Basis for Disclaimer ofOpinion paragraph and para (vi) of Annexure 1 to this Independent Auditor's Report we areunable to state whether proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books;
c. The Balance Sheet the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Changes in Equity and the Statement of Cash Flows dealt with bythis Report are in agreement with the books of account;
d. Due to the possible effects of the matters described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether the aforesaid standalone financialstatements comply with the Indian Accounting Standards referred to in Section 133 of theAct read with the relevant rules issued there under;
e. The matters described under the Basis for Disclaimer of Opinion paragraph andMaterial Uncertainty Related to going concern paragraph as above in our opinion mayhave an adverse effect on the functioning of the Company;
f. We are unable to state whether any director is disqualified as on 31st March 2019from being appointed as a director under Section 164(2) of the Act as we have beenexplained that the Company has not received any written representation from any directorin this respect.;
g. Any qualification reservation or adverse remark relating to the maintenance ofaccounts and other matters connected therewith is as stated in the Basis for Disclaimer ofOpinion paragraph above;
h. With respect to the adequacy of the internal financial controls with reference tothe financial statements of the Company and the operating effectiveness of such controlswe give our separate Report in "Annexure 2".
i. 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 financial statements - Refer Note Nos. 38 and 47 to thestandalone financial statements;
(ii) The Company did not have any long-term contracts including derivative contractsfor which 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.
(3) As required by Section 197(16) of the Act we report that in our opinion and to thebest of our information and according to the explanations given to us the remunerationpaid by the Company to its directors during the year is in accordance with the provisionsof Section 197 of the Act.
|For Haribhakti a Co.LLP |
|Chartered Accountants |
|ICAI Firm Registration No. 103S23W/ W100048 |
|Anand Kumar Jhunjhunwala |
|Membership No.0S6613 |
|16th August 2019 |