To the Members of Pradip Overseas Limited
Report on the Audit of the Financial Statements Qualified
We have audited the financial statements of Pradip Overseas Limited ("thecompany") which comprise the Balance Sheet as at 31st March 2019 theStatement of Profit and Loss (including Other Comprehensive Income) Statement of changesin equity and Statement of cash flows for the year then ended and notes to the financialstatements including a summary of significant accounting policies and other explanatoryinformation.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis for QualifiedOpinion section of our report the aforesaid financial statements give the information asrequired by the Companies Act 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at 31stMarch 2019 its profit (including other comprehensive income) its cash flows and thechanges in equity for the year ended on that date.
Basis for Qualified Opinion
Due to defaults in payment of bank loans the Company's accounts have been classifiedas Non Performing Assets (NPA) by the banks. Most of the banks have not charged intereston the Company's borrowings / loans. During the period under audit no provision has beenmade for such interest in the books of accounts of the company and to that extent bank'sloan liability and total loss is understated by Rs 9.40 Cr.
We conducted our audit in accordance with Standards on Auditing (SAs) specified undersection 143(10) of the Act. Our responsibilities under those Standards 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 made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the code of ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our qualified opinion.
Material Uncertainty Related to Going Concern
We draw your attention to Note no. 15.1.3 to the financial statements in respect ofapplication filed by the State Bank of India and the Standard Chartered bank (financialcreditors) at NCLT for initiation of Corporate Insolvency Resolution Process underInsolvency & Bankruptcy Code and the matter is sub-judice. The appropriateness ofassumption of going concern is critically dependent upon the debt resolution of thecompany which is under process the company's ability to raise requisite finance generatecash flows in future to meet its obligations and to earn profits in future. Theseconditions indicate the existence of a material uncertainty that may cast significantdoubt on the company's ability to continue as going concern. Adequate disclosures relatingto going concern have been made in Note no. 15.1.4 to the financial statements.
Our opinion is not modified in respect of this matter.
Emphasis of Matter
We draw attention to the following matters in the notes to the financial statements: a)Note no. 15.1.1 to the financial statements in respect of failure of approved CDR package.b) Note no. 15.1.2 to the financial statements in respect of assignment of debts of someof the banks to Invent Assets Securitisation & Reconstruction Pvt. Ltd.("Invent") and One Time Settlement with Invent for the repayment of debts ofthree banks.
Our opinion is not modified in respect of these matters
Key Audit Matters
Key audit matters are those matters that in our professional judgment 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. Inaddition to the matter described in the Basis for Qualified Opinion section and MaterialUncertainty Related to Going Concern section we have determined the matters describedbelow to be the key audit matters to be communicated in our report.
|The Key audit matters ||How the matter was addressed in our audit |
|Revenue recognition || |
|The application and transition of the new revenue accounting standard i.e. Revenue from Contracts with Customers ('Ind AS 115') is complex and is an area of focus in the audit. The revenue standard establishes a comprehensive framework for determining whether how much and when revenue is recognized. This involves certain key judgments relating to identification of distinct performance obligations determination of transaction price of identified performance obligation the appropriateness of the basis used to measure revenue recognized over a period. ||Our audit procedures included : |
| || We evaluated the design and implementation of the processes and internal controls relating to implementation of the new revenue accounting standard; |
| || We assessed manual journals posted to revenue to identify unusual items. |
| || We evaluated the detailed analysis performed by management on revenue streams by selecting samples for the existing contracts with customers and considered revenue recognition policy in the current period in respect of those revenue streams. |
| || We evaluated the appropriateness of the disclosures provided under the new revenue standard and assessed the completeness and mathematical accuracy of the relevant disclosures. |
| || We performed cut-off testing for samples of revenue transactions recorded before and after the financial year end date by comparing with relevant underlying documentation which included goods dispatch notes and shipping documents to assess whether the revenue was recognized in the correct period. |
| || We inspected on a sample basis key customer contracts to identify terms and conditions relating to goods acceptance and rebates and assessing the Company's revenue recognition policies with reference to the requirements of the applicable accounting standards. |
Information Other than the Financial Statements and Auditor's Report thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Company's annual report but doesnot include the financial statements and our auditor's report thereon.
Our opinion 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 ismateriallyinconsistent with the financial statements or our knowledge obtained during thecourse of our audit or otherwise appears to be materially misstated. If based on the workwe have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance (including othercomprehensive income) cash flows and changes in equity of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards specified in the Companies (Indian Accounting Standards) Rules 2015 (asamended) under Section 133 of the
Act. This responsibility also includes the maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets of the Companyand 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 financial statements that give a true and fair view and are free from materialmisstatement 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.
The 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 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 judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls with reference to financial statementsin place andthe operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatementsincluding the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
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 with reference to financial statements thatwe 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 ourauditor's 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.
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 A" a statement on the matters specified inparagraphs 3 and 4 of the 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. Except for the effects of the matter described in the Basis for Qualified Opinionparagraph above in our opinion proper books of account as required by law have been keptby 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) the Cash Flow Statement and the Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account.
d. Except for the effects of the matter described in the Basis for Qualified Opinionparagraph above in our opinion the aforesaid financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended.
e. The matter described in the Basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company.
f. On the basis of written representations received from the directors as on 31stMarch 2019 and taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director interms of Section 164(2) of the Act.
g. The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph above.
h. With respect to the adequacy of the internal financial controls with reference tofinancial statements of the company and operating effectiveness of such controls refer toour separate report in "Annexure B". Our report expresses an unmodified opinionon the adequacy and operating effectiveness of the Company's internal financial controlswith reference to financial statements.
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. TheCompany has disclosed the impact of pending litigations on its financial position in itsfinancial statements - Refer note 31.1 to the financial statements;
ii. The Company did not have any long-term contracts including derivative contractsduring the year ended on 31st March 2019 for which there were any materialforeseeable losses;
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
3. With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended In our opinionand according to the information and explanations given to us the remuneration paidduring the current year by the company to its directors is in accordance with theprovisions of section 197 of the Act. The remuneration paid to any director by the companyis not 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
ANNEXURE "A" TO INDEPENDENT AUDITOR'S REPORT
Referred to in Paragraph 1 under the heading of "report on other legal andregulatory requirements" of our report of even date
(i) In respect of its Property Plant & Equipment:
a. The Company has maintained proper records showing full particulars includingquantitative details and situation of the fixed assets.
b. As explained to us all the fixed assets have been physically verified by themanagement in a phased periodical manner which in our opinion is reasonable havingregard to the size of the Company and nature of its assets. No material discrepancies werenoticed on such physical verification. c. According to the information and explanationgiven to us and on the basis of our examination of the records of the Company the titledeeds of immovable properties are held in the name of the Company.
(ii) In respect of its inventories: As explained to us the inventories have beenphysically verified at reasonable intervals during the year by the management. In ouropinion the frequency of verification is reasonable. The discrepancies noticed onverification between the physical stocks and the book records were not material. Thediscrepancies have been properly dealt with in the books of accounts.
(iii) According to the information and explanations given to us the Company has notgranted loans secured or unsecured to any Companies Firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theAct. Accordingly the provisions of clause (iii) (a) (iii) (b) & (iii) (c) ofparagraph 3 of the Order are not applicable to the Company.
(iv) The company has not given any loans investments guarantees or securities coveredunder section 185 and section 186 of the Act. Hence the provisions of Clause (iv) ofparagraph 3 of the Order are not applicable to the Company.
(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits. Therefore the provisions of Clause (v) ofparagraph 3 of the Order are not applicable to the Company. We are informed that no orderrelating to the Company has been passed by the Company Law Board or National Company LawTribunal or Reserve Bank of India or any court or any other tribunal.
(vi) We have broadly reviewed the cost records maintained by the Company pursuant tothe Companies (Cost Records and Audit) Rules 2014 read with Companies (Cost Records andAudit) Amendment Rules 2014 prescribed by the Central Government under Section 148 of theAct and are of the opinion that prima facie the prescribed cost records have been madeand maintained. We have however not made a detailed examination of the cost records witha view to determine whether they are accurate or complete.
(vii) According to the information and explanations given to us in respect of statutorydues:
a) The Company has generally been regular in depositing undisputed statutory duesincluding provident fund employees' state insurance income-tax goods and services taxcess and any other statutory dues as applicable to the Company during the year with theappropriate authorities. There are no undisputed statutory dues in arrears as on 31stMarch 2019 for a period of more than six months from the date they became payable.
b) There are no amounts payable in respect of income tax service tax sales tax dutyof customs goods and services tax duty of excise or value added tax or cess which havenot been deposited on account of disputes.
(viii) According to the records of the Company examined by us and the information andexplanation given to us the Company has defaulted in repayment of loans or borrowings tobanks as at the balance sheet date.
Details of which are as below:
| || ||(Rs in Cr.) |
|Bank Name ||Amount of Default as on 31/03/2019* ||Default From |
|Standard Chartered Bank ||71.78 ||March 2013 |
|State Bank of Patiala ||68.87 ||May 2012 |
|Laxmi Vilas Bank ||20.85 ||October 2012 |
*The above table does not include the interest which bank has not provided after theaccount has been classified as Non Performing Assets and the amount which has beenassigned /settled by the bankers. The Company does not have any outstanding dues fromfinancial institutions government and has not issued any debentures.
(ix) During the year the Company did not raise any money by way of initial publicoffer or further public offer (including debt instruments) and term loans. In our opinionthe term loans outstanding at the beginning of the year have been applied for the purposesfor which they were raised.
(x) To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the company or any fraud on the company by its officers oremployees has been noticed or reported during the course of our audit that causes thefinancial statements to be materially misstated.
(xi) According to the information and explanations given to us and based on ourexamination of the records the Company has paid / provided for Managerial remuneration inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Act.
(xii) The company is not a Nidhi Company hence the provisions of clause (xii) ofparagraph 3 of the Order are not applicable to the Company.
(xiii) Based upon the audit procedures performed and according to the information andexplanations given to us all transactions with related parties are in compliance withsections 177 and 188 of the Act where applicable and the details have been disclosed inthe financial statements as required by the applicable Indian Accounting Standards (IndAS) 24 Related Party Disclosures specified under section 133 of the Act.
(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 the provisions of clause (xiv) ofparagraph 3 of the Order are not applicable to the Company. (xv) In our opinion andaccording to the information and explanations given to us the company has not enteredinto any non-cash transactions with directors or persons connected with him. Thereforethe provisions of clause (xv) of paragraph 3 of the Order are not applicable to theCompany.
(xvi) The company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
ANNEXURE "B" TO INDEPENDENT AUDITOR'S REPORT
Referred to in paragraph 2(h) under Report on Other Legal and RegulatoryRequirements' of our report of even date
Report on the Internal Financial Controls with reference to financial statements undersection 143(3)(i) of the Companies Act 2013 ("the Act")
We have audited the internal financial controls with reference to financial statementsof Pradip Overseas Limited ("the Company") as of 31st March 2019 inconjunction with our audit of the financial statements of the Company for the year endedon 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 financial controls with reference to financialstatements criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India. These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence to thecompany'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 under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to the financial statements based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the "Guidance Note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143(10) of the Act 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 with reference to financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with reference to financial statementsand theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statementsincluded obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements 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 systemwith reference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
A company's internal financial control with reference to financial statementsis aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control withreference to financial statementsincludes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the Company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the Company are being made only in accordance with authorisations ofmanagement and directors of the Company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of theCompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls with reference to financialstatements
Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statementsto future periods are subject to the risk that theinternal financial control with reference to financial statementsmay become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem with reference to financial statementsand such internal financial controls withreference to financial statements were operating effectively as at 31st March2019 based on the internal control with reference to financial statementscriteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note issued by the Institute of Chartered Accountants of India.
| ||For Vijay Moondra & Co. |
| ||Chartered Accountants |
| ||(Registration No. 112308W) |
| ||Sd/- |
| ||(CA Vinit Moondra) |
|Place : Ahmedabad ||Partner |
|Date : May 28 2019 ||Membership No. 119398 |