|BSE: 526801||Sector: Metals & Mining|
|NSE: PSL||ISIN Code: INE474B01017|
|BSE 00:00 | 12 Oct||PSL Ltd|
|NSE 05:30 | 01 Jan||PSL Ltd|
|BSE: 526801||Sector: Metals & Mining|
|NSE: PSL||ISIN Code: INE474B01017|
|BSE 00:00 | 12 Oct||PSL Ltd|
|NSE 05:30 | 01 Jan||PSL Ltd|
PSL LIMITED MUMBAI
Report on the Audit of the Standalone Ind AS financial statements
Corporate insolvency Resolution Process ("CIRP")
The Hon'ble National Company Law Tribunal Ahmedabad("NCLT") by an order dated 15th February 2019 admitted the Corporate insolvencyResolution Process ("CIRP") consequent upon an application filed by PSL Limitedu/s 10 of IBC Code and appointed Mr. Nilesh Sharma as the Interim Resolution Professional("IRP") and subsequently by virtue of NCLT order dated 29th August 2019 Mr.Nitin Jain as Resolution Professional ("RP") in term of the Insolvency andBankruptcy Code 2016 ("Code") to manage the affairs of the Company as per theprovisions of the Code. The CIRP is ongoing.
The NCLT order also provided for a moratorium with effect from Feb15.02.2019 till the completion of the Corporate Insolvency Resolution process (CIRP) oruntil it approves the resolution plan under section 31(1) or passes an order forliquidation of the company under section 33 whichever is earlier. Recently Committee ofCreditors took a decision to file an application for initiation of Liquidation Process ofthe Company in CIRP.
We have audited the accompanying standalone financial statements of PSLLIMITED ("the Company") which comprise the Balance Sheet as at March 312020 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and the Statement of Cash Flows for the year ended on thatdate and a summary of the significant accounting policies and other explanatoryinformation (hereinafter referred to as "the standalone financial statements").
Except the matters described in Emphasis of matters which may have anadverse effect on the functioning of the Company In our opinion and to the best ofour information and according to the explanations given to us the aforesaid standalonefinancial statements give the information required by the Companies Act 2013 ("theAct") in the manner so required and give a true and fair view in conformity with theAccounting Standards specified under Section 133 of the Act and other accountingprinciples generally accepted in India of the state of affairs of the Company as at 31stMatch 2020 and its loss and its cash flows
for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements inaccordance with the Standards on Auditing specified under section 143(10) of the Act(SAs). Our responsibilities under those Standards are further described in theAuditor's Responsibilities for the Audit of the Standalone 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 (ICAI) together with theindependence requirements that are relevant to our audit of the standalone financialstatements under the provisions of the Act and the Rules made thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theICAI's Code of Ethics. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our audit opinion on the standalonefinancial statements.
Material Uncertainty Related to Going Concern
In spite of negative net worth of the Company the standalone financialstatements of the Company have been prepared on a going concern basis for the reasonsstated in Note No. 41 and 42 of the standalone financialstatements.
Our opinion is not modified in respect of the same.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the financial statements for the financial yearended March 312020. These matters were addressed in the context of our audit of thefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. For each matter below our description of how ouraudit addressed the matter is provided in thatcontext.
We have determined the matters described below to be the key auditmatters to be communicated in our report. We have fulfilled the responsibilities describedin the Auditor's responsibilities for the audit of the financial statements sectionof our report including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the financial statements. The results of audit procedures performed by usincluding those procedures performed to address the matters below provide the basis forour audit opinion on the accompanying financial statements.
Emphasis of matter
i. As a consequence to acute financial stress being faced by theCompany in recent years the Company's net worth has been eroded due to accumulatedlosses. Keeping in view the current status of company's operations it is likely thatthe accumulated losses are further enhanced creating a further adverse impact on it'snet worth.
ii. The Company is undergoing Corporate Insolvency ResolutionProcess(CIRP) under the provisions of Insolvency & bankruptcy Code 2016 (InsolvencyCode) in terms of Order dated. 15th February 2019 passed by Hon'ble NCLT AhmedabadBench. In terms of Section 20 of Insolvency code the management and operations of theCompany are being managed by Resolution Professional (RP).
iii. The financial statements have been prepared on a going concernbasis although consequent upon severe financial crises faced by the company its net worthis eroded. Moreover due to the
said reason Company is unable to procure adequate fresh orders whichin-turn has resulted into reduced income and profitability. Servicing of companies'debts has also accordingly been adversely affected.
iv. These events cast significant doubt on the ability of the Companyto continue as a going concern under the present circumstances. The appropriateness of thesaid basis is inter-alia dependent on the Company's ability to infuse requisite fundsfor meeting its obligations (including statutory liabilities and those in respect ofcontracts entered into for purchase of goods and assets) rescheduling of debt/otherliabilities and resuming normal operations.
v. Attention is invited to Note No. 43 to the accompanied financialstatements which describes the uncertainties and potential impact of the Covid-19pandemic on the Company's operations and results as assessed by the management. Theactual results may differ from such estimates depending on future
vi. The company has not carried out detailed assessment of the usefullife of Company's assets and hence depreciation has not been adjusted as per thenotification to Schedule II of the Companies Act 2013. We are therefore unable to commenton the impact on statement of Profit & LossAccount.
vii. It has been observed that the Company is unable to deposit theprovident fund amount with PF authorities in time as a result of which Rs. 13742 lacs isthe amount which yet to be deposited.
viii. Actuarial valuation certificate has not been obtained forgratuity and other post-employment benefits.
ix. The Company has reported a Net Loss of Rs. 9682.27 lacs for theyear ended on 31st March 2020 as against the net loss of Rs. 9808.50 lacs for theprevious year ended on 31st March 2019. The loss is largely due to the depreciation.
x. Since most of the banks which had extended financial facilities tothe company have already treated the outstanding from the company as "Non-PerformingAssets" they as a usual practice have discontinued making provisions of interest onsuch loss as accrued income in their books. In order to achieve the desired congruency onthis issue the Company has also not provided for any interest amounting to Rs. 43573 lacson such outstanding facilities for the year ended 31st March 2020 due to various banks.Had the said interest been provided in the books in the normal course the current yearlosses of Rs. 9682.27 lacs would have raised to Rs. 53255.27 lacs.
xi. The agreement with Kandla Port Trust had not renewed w.e.f.31.072007 onwards for different plots at Kandla leased by them to the company due tonon-payment of their heavy invoices for bills for compensation and possession of the samewas taken over by Kandla Port Trust on 31st March 2015. PSL Limited has filed appealbefore the District Court Gandhidham for the same. The matter is pending at GandhidhamDistrict Court.
The closing inventory as on 31st March 2020 of Rs.1630.79 lacs(valued at realizable value) excludes disputed Working In Progress of a Building atCoimbatore for Rs.1707 lacs which is currently in arbitration stage.
xii. Operations Maintenance and Management Agreement with JindalTubular (India) Limited.
a. Although company's three plants earlier handed over to JindalTubular (India) Limited (JTIL) in mid 2015 were returned to the company during Septemberto November 2016 JTIL has yet to return to the company one Pipe Mill having capacity of75000MT one IPC plant having capacity of 18000Sqr Meter and other spares and consumableshifted by it contrary to the provisions of their agreement with the company.
b. As per the advice of Edelweiss JTIL is transferring Rs 9.80 lacsafter deducting tax of Rs 0.20 lacs every month to Company's bank account thoughthere was no agreement for the same.
c. Jindal Tubular (India) Limited has claimed Non legacy and legacypayment from PSL amounting to Rs. 437 lacs. The Company has not accepted their claim andthe accounts are under reconciliations.
d. The Excise Department has issued following notices to the companydirecting to show cause as to why the Cenvat credit taken on the capital goods andmachineries removed from the factory premises of notices under the provisions of
Rule 3(5A)(a) Rule 2 and Rule 4(5)(a)(ii) of Cenvat Credit Rules2004 should not be demanded and recovered under Section 11A with interest u/s 11AA andpenalty u/s 11AC of the Central Excise Act 1944 read with Rule 14 of the Cenvat CreditRules 2004
The Company has submitted that the allegations made in the show causenotices are not correct in law as well on facts. The matter is pending before theappellant authority.
xiv. Settlement with JSW
The Company has created pari passu charge with respect to some of theimmovable and movable properties of the Company in favour of JSW and CDR lenders by way ofmortgage by deposit of title deeds in favour of IDBI Trusteeship Services Limited inpursuance of the Bombay High Court Order.
xv. Lender Banks' Balance Confirmation as on 31st March 2020
We have been informed by the officials of the company that although thecompany has requested its various bankers to issue their confirmation letters confirmingthe balances with respect to various Bank Accounts/Bank Guarantee/Letter of Credit/Corporate Guarantee given by company for its subsidiaries company as on 31st March 2020but the same have not yet been received the said confirmations. Pending the receipt ofbalance confirmations book balances as on 31st March 2020 have been taken in theaccounts of the Company.
xv. Sundry Debtors
a. The break up of Company's Sundry Debtors amounting to Rs.381.38 lacs as on 31st March 2020 is as follows: -
b. The Company has not produced confirmation of balances from sundrydebtors confirming the amount outstanding as on 31st March 2020. In the absence ofadequate evidence and information made available to us supporting the recoverability ofthis amount we are further unable to comment on the financial impact of this matter onthe profit / loss for the year ended 31st March 2020.
xvi. Trade payable & Loans and Advances:
In the absence of pending confirmation of balances from Trade PayablesTrade receivable and Other Loans & Advances as on 31.03.2020 provision for anyadverse variation in the balances is not quantified.
xvii. Impairment of Assets: The Management has not carried outevaluation of impairment of assets and no provision for impairment has been recorded asrequired by Indian Accounting Standard.
xviii. Investment in Subsidiaries:
A. Foreign Subsidiaries:
i) PSL FZE (Sharjah) (Step down Subsidiary of Pipeline Systems LimitedMauritius(Subsidiary of the Company)).
a) The Company had invested Rs. 14163 lacs in a wholly owned'subsidiary namely Pipeline Systems
Limited Mauritius which in turn had invested AED 150000 in PSL FZEbeing it's subsidiary. However due to cumulative losses in the subsidiary theaforesaid investment is eroded.
The Company has not provided for the diminution in the value ofinvestment as per Indian Accounting Standard issued by institute of Chartered Accountantsof India.
PSL Limited has also not provided for amounts due from PSL FZE beingdoubtful of recovery on account of losses incurred by PSL FZE.
b) The shareholding of PSL FZE Sharjah held by PSL Limited indirectlythrough the above said Company amounting to 100% of the Equity Share Capital of theCompany have been pledged in favour of National Bank of Oman S.A.O.G. acting as SecurityAgent of ICICI Bank Limited Bahrain.
c) During the year PSL FZE has incurred loss of 22.626 Million AED. TheCompany was not able to make the payment on due date of installment due to the banks. Thebank balance confirmations were not available.
d) PSL FZE has executed a project received from SWCC. Bank of Barodahas given guarantee in favour of State Bank of India Bahrain to issue performanceguarantee in favour of the client to the extent of USD 4.5 million. This is contingentliability of PSL FZE as on 31-3-2020.
e) A creditor namely Petromac Abudhabi-UAE has filed a suit for hisdues of USD 2.26 million. The matter is sub-judice.
f) PSL has given Corporate Guarantee covering facilities sanctioned bylender bankers for working capital outstanding of 114.96 Million AED against Plant&Machinery assignment of receivable and inventory as the security and thesubordination of unsecured loans advances by PSL Ltd. and assets on pari passu basis withone of the banker.
g) Term Loan 154.89 million AED - The Term Loan due to ICICI BankBahrain is secured by charge on the fixed asset of PSL FZE and Corporate Guarantee issuedby PSL Limited.
ii) PSL USA INC (USA) PSL NA LLC (USA) (Step down
a) The Company had invested Rs. 13034 lacs in a wholly ownedsubsidiary namely PSL USA Inc. Due to cumulative losses in the stepdown subsidiary thevalue of investment iseroded.
b) Due to continuous losses suffered by the company's step-downsubsidiary namely PSL North America LLC it was directly affecting the financial positionof PSL USA Inc. (the holding Company of PsL North America LLC). The Company voluntarypetitioned for relief under chapter XI of the Title 11 of United States code were filed inUnited States Bankruptcy court for the district of Delaware.
B. Indian Subsidiaries:
i) PSL Infrastructure and Ports PrivateLimited
- Total investment in PSL Infrastructure and Ports Private Limited isRs. 2821 lacs.
- The company was awarded the construction of Jetty
at Kandla Port. Till date the company has incurred constructionExpenses of Rs. 6511 lacs.
- Due to restrictions imposed by CDR package of PSL Ltd the parentcompany could not inject/ contribute funds for the construction of the jetty.
- The Kandla Port authorities have given notice for the cancellation ofthe agreement.The matter is in dispute and under Arbitration. At present projectisincomplete.
ii) PSL Corrosion Control Services Limited.
The total Revenue for the year stood at Rs. 11915 lacs againstprevious year of Rs. 10833 lacs. The Net Profit before tax is Rs. 828 lacs againstprevious year of Rs. 751 lacs.
In our opinion and explanation given to us the Guarantees given by theCompany for Loan taken by its subsidiaries from banks / financial institution and theterms and conditions of such guarantees are not prejudicial to the interests of theCompany.
iii) PSL Gas Distribution Private Limited
The company was incorporated on 31st December 2010 and has notcommenced any business activity.
xix. Legal Matters:
a. Initially five complaints were filed by two banks Syndicate Bank andKotak Mahindra Bank Ltd. under the relevant provisions of Negotiable Instruments Act butafter the order of Addl. Sessions Court of Bombay one complaint has been scrapped withrespect to some of the Directors and matters are now pending for disposal. These mattersare still pending in 16th/63rd MM Court Andheri Mumbai and the next date of hearingarefixed.
Next date of Syndicate Bank hearing on 0709.2020 & Kotak MahindraBank is on 0708.2020.
b. Petitions have been filed before the High Court of Gujarat atAhmedabad challenging the order issued by Kandla Port Trust (KPT) in respect of evacuationof five plots of land of PCD-I unit located in East of NH No. 08A Kandla Road Gandhidhamand two plots of land of PCD-II in Plot No. 5&6 in Block D Sector 12 Gandhidham. Thematters are pending at High Court.
c. Company's petition against Andhra Pradesh IndustrialInfrastructure Corporation (APIIC).
Having felt aggrieved by the decision of APIIC to resume the possessionof two plots earlier allotted by it to the company has filed writ petitions in HyderabadHigh Court challenging APIIC's decision. While the Hon'ble High Court havingexamined the company's grievance has granted a stay in company's favour thematter is still pending for final adjudication.
Information Other than the Standalone financial statements andAuditor's Report Thereon
The Company's Board of Directors is responsible for thepreparation of the other information. The other information comprises the informationincluded in the Management Discussion and Analysis Board's Report includingAnnexures to Board's Report but does not include the standalone financial statementsand our auditor's report thereon.
Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statementsour responsibility is to read the other information 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 we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.
Management's Responsibility for the Standalone financialstatements
The Company's Board of Directors is responsible for the matters insection 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation of these standalone financial statements that give a true and fair view of thefinancial position financial performance and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act.. This responsibility also includes the maintenanceof adequate accounting records in accordance with the provision of the Act forsafeguarding of the assets of the Company and for preventing and detecting the frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of internal financial control that were operating effectively for ensuringthe accuracy and completeness of the accounting records relevant to the preparation andpresentation of the standalone financial statements that give a true and fair view and arefree from material misstatement whether due to fraud or error.
In preparing the standalone financial statements management 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 management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The Board of Directors are responsible for overseeing theCompany's financial reporting process.
Auditor's Responsibility for the Audit of the Standalone financialstatements
Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
- Obtain an understanding of internal financial controls relevant tothe audit in order to design audit procedures that are appropriate in the circumstances.Under section 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls system in
place and the operating effectiveness of such controls.
- Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditionsmay cause the Company to cease to continue as a goingconcern.
- Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
Materiality is the magnitude of misstatements in the standalonefinancial statements that individually or in aggregate makes it probable that theeconomic decisions of areasonably knowledgeable user of the standalone financialstatements may be influenced. We consider quantitative materiality and qualitative factorsin (i) planning the scope of our audit work and in evaluating the results of our work; and(ii) to evaluate the effect of any identified misstatements in the standalone financialstatements.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters if any that were of most significance in the audit of thestandalone financial statements of the current period and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits 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 of the act we give in the Annexure A a statement on the mattersspecified in paragraphs 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 explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.
b) in our opinion proper books of account as required by law have beenkept by the Company so far as appears from our
examination of those books.
c) The standalone Balance Sheet the standalone Statement of Profit andLoss including the Statement of Other Comprehensive Income the standalone Cash FlowStatement and standalone Statement of Changes in Equity dealt with by this Report are inagreement with the books of account;
d) Except the matters described in Emphasis of Matters Paragraphs (i)to (xx) and annexure A Para No. vii(a) in our opinion may have an adverse effect on thefunctioning of the Company the aforesaid standalone financial statements comply with theIndian Accounting Standards specified under Section 133 of the Act read with Rule 7 ofthe Companies (Accounts) Rules 2014.
e) on the basis of written representations received from the directorsas on 31st March 2020 taken on record by the Board of Directors none of the directorsis disqualified as on 31St March 2020 from being appointed as a director in terms ofSection 164(2) of the Act.
f) With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls referto our separate Report in Annexure B'.' Our report expresses an unmodifiedopinion on the adequacy and operating effectiveness of the Company's internalfinancial controls over financial reporting.
g) With respect to the other matters to be included in theAuditor's Report in accordance with the requirements of section 197(16) of the Actas amended:
In our opinion and to the best of our information and according
to the explanations given to us the Company has not paid/ provided formanagerial remuneration during the year.
h) with respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rule 2014 in our opinion and to the best of our information and according to theexplanations given to us :
i. the Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements - Refer Notes to the financialstatements;
ii. the Company has made provision as required under the applicablelaw or accounting standards for material foreseeable losses.
iii. unpaid dividend which is required to be transferred to theInvestor Education and Protection Fund by the Company however the same has not beentransferred by the Company.
ANNEXURE-A to the Auditor's Report
The Annexure referred to in Independent Auditor's Report to themembers of the Company on the standalone financial statements for the year ended 31stMarch 2020 we report that:
(i) (a) The Company has maintained Fixed Assets Register.
However the fixed assets register is not updated properly.
(b) During the year physical verification was done by the managementof all the factory units of the Company. As the Asset Register is not updated the fullparticulars including total quantitative details could not be ascertained. Pendingcompletion of reconciliations which has not been completed discrepancies if any cannot beascertainable. Pending updating of records and reconciliation books balances as at31-3-2020 have been adopted.
(c) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of theimmovable properties are held in the name of the Company.
(ii) (a) Subject to our remark in point No. (xii) in "Emphasis of
Matter' the physical verification of inventory has been conductedat reasonable intervals by the management; and the procedures of physical verification ofinventory followed by the management is reasonable and adequate in relation to the size ofthe Company and nature of its business. The stock is maintained on Excel Sheets. On linepackage is not installed and not integrated with books of accounts.
In our opinion and according to the explanations given to us theprocedures for physical verification of inventories followed by the Management arereasonable and adequate in relation to the size of the Company and nature of its business.
In our opinion and according to the explanations given to us theCompany has maintained proper records of its inventories and no material discrepancieswere observed during the course of physical verification.
(iii) (iii) The Company has not granted loans secured/unsecured
to companies firms or other parties covered in the register maintainedunder section 189 of the Companies Act.
(iv) In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of section 185 and 186 of theAct with respect to the loans and investments made.
(v) The Company has not accepted any deposits from the public.
(vi) We have broadly reviewed the books of account maintained by theCompany pursuant to the rules made by the Central Government of India regarding themaintenance of cost records under subsection (1) of Section 148 of the Act and are of theopinion that prima facie the prescribed accounts and records have been maintained. Wehave however not made a detailed examination of the records with a view to determinewhether they are accurate or complete. The cost audit is completed up to the year ended31st March 2018. The Cost Audit Report is mandatory u/s 148(1) of the Companies Act 2013.
(vii) a. According to the records of the Company the Company is
generally regular in depositing undisputed Statutory dues includingProvident Fund Employees State Insurance Income Tax Sales Tax Service Tax Duty ofExcise valued added tax Cess and any other statutory dues with the appropriateauthorities however there is some delay in depositing Govt. dues due to financialdifficulties. According to the information and explanations given to us no undisputedamounts payable in respect of Income Tax Sales Tax Customs Duty Service Tax ExciseDuty and Cess were outstanding at the financial reporting period ending on 31st March2020 for a period of more than six months from the date they became payable. Except theamount of provident fund payable of Rs. 137.42lacs.
b. As on 31st March 2020 according to the records of the Company thefollowing are the particulars of disputed dues on account of Excise duty Customs/DGFTService Tax Sales Tax and Civil Cases have not been deposited/adjusted:-
Under Income Tax Laws also appeals at various Income Tax Authoritiesare pending however the amounts of disputes have been adjusted against the refund ofother years.
# includes amount of interest and penalty.
- According to information and explanation given to us by themanagement there are numerous Civil and Criminal cases are pending against the Company.
The Company has taken 3 Advance Licences and one Annual Advance Licencefrom DGFT. The Company has already done the export obligation and submitted the relevantpapers to DGFT. However the above Licences are not closed and the matter is pending withDGFT. The Company has shown contingent liability of Rs. 402.71Lacs.
(viii) In our opinion and according to information and explanationgiven to us The Company has defaulted in repayment of loan and borrowings to financialinstitution banks. The lenders balance confirmations were not available.
(ix) The Company did not raise any money by way of initial public offeror further public offer term loan (including debt instruments) during the year.
(x) According to the information and explanations given to us nomaterial fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the course of our audit.
(xi) According to the information and explanations give to us and basedon our examination of the records of the Company the Company has not paid/provided formanagerial remuneration during theyear.
(xii) In our opinion and according to the information and explanationsgiven to us The Company is not a Nidhi Company and hence reporting under clause 3 (xii)of the Order is not applicable to the Company.
(xiii) According to the information and explanations given to us andbased on our examination of the records of the Company transactions with the relatedparties are in compliance with sections 177 and 188 of the Act where applicable anddetails of such transactions have been disclosed in the financial statements as requiredby the applicable accounting standards.
(xiv) According to the information and explanations give to us andbased on our examination of the records of the Company During the year the Company hasnot made any preferential allotment
or private placement of shares or fully or partly paid convertibledebentures and hence reporting under clause 3 (xiv) of the Order is not applicable to theCompany.
(xv) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has not entered intonon-cash transactions with directors or persons connected with him. Accordingly reportingunder clause 3 (xv) of the Order is not applicable to the Company.
(xvi) The Company is not required to be registered under section 45-IAof the Reserve Bank of India Act 1934.
ANNEXURE-B to the Auditor's Report
Report on the Internal Financial Controls under Clause (i) ofSubsection 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financialreporting of PSL LIMITED ("the company") as of 31st March 2020 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India(ICAI'). 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 tocompany's policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act2013.
Our responsibility is to express an opinion on the Company'sinternal financial controls over financial reporting 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 Companies Act 2013 tothe extent applicable to an audit of internal financial controls both applicable to anaudit of Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate 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 aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of the standalone Ind AS financial statements whether dueto fraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting isa process 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 controlover financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of standalone financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could havea material effect on the standalone financial statements.
Inherent Limitations of Internal Financial Controls Over FinancialReporting
Because of the inherent limitations of internal financial controls overfinancial reporting 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 overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at 31st March 2020 basedon the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India. However such internal financial controls over financialreporting need to be improve and strengthened further in future.